Proving Loss of Earning Capacity for the Unconventional Worker


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How do you value a lifetime of hard work by a self-employed rancher? How do you value a college athlete’s lost opportunity to play in a professional league? And how do you get these valuations admitted into evidence?

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  • We’re here to talk about how to prove a loss of earning capacity.
  • Defensive linemanPlayed three full seasonsNumerous awardsPrior injuries and surgery in both shouldersNFL ambitions derailed by shoulder injury caused by faulty medical device
  • Brophy study shows that 53.7% of defensive lineman with prior shoulder injuries that attend the NFL Scouting Combine played in the NFL.
  • Even though the average was a career of approximately 5 years, we conservatively applied the 41.9% reduction and calculated our damages based upon a career of approximately 4 years.
  • Proving Loss of Earning Capacity for the Unconventional Worker

    2. 2. 2 ―It doesn't matter what I believe. It only matters what I can prove.‖ - Lt. Daniel Kaffee, A Few Good Men Overview
    3. 3. 3 1. What is earning capacity? 2. How do we prove a loss of earning capacity? – Admissibility of expert testimony – Two case studies Overview
    4. 4. 4 ―Loss of earning capacity is not the same as lost wages. Rather, earning capacity refers to a person's potential. Earning capacity is not necessarily determined by actual loss. While the plaintiff's earnings at the time of the accident may be relevant, such figures are not necessarily indicative of her past or future lost earning capacity.‖ Corbett v. Seamons, 904 P.2d 229, 233 n.2 (Utah Ct. App. 1995) Utah Law Recognizes Loss of Earning Capacity
    5. 5. 5 Lost earning capacity is not the same as lost earnings. Lost earning capacity means the lost potential to earn income. In determining lost earning capacity, you should consider: (1) Plaintiff‘s actual earnings; (2) his work before and after the injury; (3) what he was capable of earning had he not been injured; and (4) any other facts that relate to Plaintiff‘s employment. MUJI 2d CV2006
    6. 6. 6 A. The self-employed B. The ―closely‖ employed C. The under-employed D. The unemployed 1. Actual wages may not equal EARNING CAPACITY
    7. 7. 7 A. Unrecognized income B. Over-recognized costs 2. Business tax profits may not equal real profits
    8. 8. 8 A. Profit (loss) on other‘s labor B.Profit (loss) on capital 3. Real business profits may not equal the owner’s actual earnings
    9. 9. 9 (b) Scientific, technical, or other specialized knowledge may serve as the basis for expert testimony only if there is a threshold showing that the principles or methods that are underlying in the testimony (1) are reliable, (2) are based upon sufficient facts or data, and (3) have been reliably applied to the facts. Utah Rule of Evidence 702
    10. 10. 10 LOW THRESHOLD ―That ‗threshold‘ requires only a basic foundational showing of indicia of reliability for the testimony to be admissible, not that the opinion is indisputably correct. . . . Contrary and inconsistent opinions may simultaneously meet the threshold; it is for the fact finder to reconcile—or choose between—the different opinions.‖ Gunn Hill Dairy Properties, LLC v. Los Angeles Dept. of Water & Power, 2012 UT App 20, ¶33 Utah Rule of Evidence 702
    11. 11. 11 A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if: (a) the expert‘s scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue; (b) the testimony is based on sufficient facts or data; (c) the testimony is the product of reliable principles and methods; and (d) the expert has reliably applied the principles and methods to the facts of the case. Federal Rule of Evidence 702
    12. 12. 12 HIGHER THRESHOLD… but still just a threshold showing. Federal Rule of Evidence 702
    13. 13. 13 Case #1: Mild TBI to a Self-Employed Farmer
    14. 14. 14 Case #1: Plaintiff’s Annual Income as Shown on Tax Returns • 2001: $12,994 • 2002: $12,994 • 2003: $6,000 • 2004: $6,000 • 2005: $12,000 • 2006: $6,000 • 2007: $9,746 • 2009: $7,038 • 2010: $13,331 • 2011: $21,198 Accident occurred in April 2006
    15. 15. 15 Case #1: Plaintiff’s Verdict
    16. 16. 16 Case #1: The Method  Observe what plaintiff accomplished before the collision – Compare to market for that kind of labor  Observe what plaintiff accomplished after the collision – Compare to market for that kind of labor  Compare values of pre-collision and post- collision labor
    17. 17. 17 Case #1: Lessons Learned  Choose the right expert – Agricultural experience  Get your expert involved early – All the facts – Hands dirty  Lay foundation for expert‘s opinion through lay witness testimony – ―He‘s not like he was . . .‖
    18. 18. 18 Case #2: Shoulder Injury Alters a College Player’s NFL Trajectory
    19. 19. 19 Case #2: The Method 1. Estimate the probability of becoming an NFL player 2. Estimate the probable length of NFL career 3. Estimate the average annual earnings 4. Discount for position and injury history throughout
    20. 20. 20 Case #2: Foundation for Probability of Becoming an NFL Player  Assume attendance at NFL Scouting Combine – Powerful testimony from college coach  Look to published medical literature for probability of being drafted from the NFL Scouting Combine – Discount for position and injury history
    21. 21. 21 Case #2: Foundation for Probability of Becoming an NFL Player
    22. 22. 22 Case #2: Foundation for Length of Career  Average career length varies according to position and injury history – Brophy study  Comparison of two scenarios: – Drafted in rounds 1-3 – Drafted in rounds 4-7  Discounts for position and injury history
    23. 23. 23 Case #2: Foundation for Length of Career
    24. 24. 24 Case #2: Foundation for Average Earnings  Analyze total career earnings of 2004- 2005 draftees by position and draft round
    25. 25. 25 Case #2: Total Economic Damages
    26. 26. 26  Follow your gut and keep investigating.  Recognize the value of unique non- retained experts.  Be conservative. Apply discounts to bombproof your damages model. Case #2: Lessons Learned
    27. 27. 27  Mike Young – – 801.536.6963  Rich Mrazik – – 801.536.6931 THANK YOU