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Litigation Services Handbook: The Role of the Financial Expert, 5th Edition

Book Description

Here's all the information you need to provide your clients with superior litigation support services. Get up to speed quickly, with the aid of top experts, on trial preparation and testimony presentation, deposition, direct examination, and cross-examination. Authoritative and highly practical, this is THE essential guide for any financial expert wanting to prosper in this lucrative new area, the lawyers who hire them, and litigants who benefit from their efforts.

"This work of amazing breadth and depth covers the central issues that arise in financial expert testimony. It is an essential reference for counsel and practitioners in the field."—Joseph A. Grundfest, The William A. Franke Professor of Law and Business, Stanford Law School; former commissioner, United States Securities and Exchange Commission.

Table of Contents

  1. Cover
  2. Title Page
  3. Copyright
  4. Preface
  5. About the Editors
  6. About the Contributors
  7. Part I: The Litigation Environment
    1. Chapter 1: A Dispute Resolution Primer
      1. 1.1 Introduction
      2. 1.2 The Civil Court System
      3. 1.3 The Legal Process
      4. 1.4 The Alternative Dispute Resolution Process
      5. 1.5 Forms of Alternative Dispute Resolution
      6. 1.6 Domestic ADR
      7. 1.7 International Arbitration
      8. 1.8 Conclusion
    2. Chapter 2: Serving as a Financial Expert in Litigation
      1. 2.1 Introduction
      2. 2.2 Financial Expert Services
      3. 2.3 Qualifications of Financial Experts
      4. 2.4 Professional Guidance and Standards
      5. 2.5 Logistics
      6. 2.6 Conclusion
  8. Part II: Developing A Damages Analysis
    1. Chapter 3: Causation Issues and Expert Testimony
      1. 3.1 Introduction
      2. 3.2 The Fundamentals of Causation
      3. 3.3 Expert Testimony on Causation Issues
      4. List of Cases
    2. Chapter 4: Developing Damages Theories and Models
      1. 4.1 Introduction
      2. 4.2 Legal Standards
      3. 4.3 Damages Theory
      4. 4.4 Modeling Considerations
      5. 4.5 Developing an Effective Damages Claim
      6. 4.6 Conclusion
      7. List of Cases
    3. Chapter 5: Ex Ante versus Ex Post Damages Calculations
      1. 5.1 Introduction
      2. 5.2 Expectancy versus Outcome Damages
      3. 5.3 Application of the Ex Ante Approach in Litigation
      4. 5.4 Application of the Ex Post Approach in Litigation
      5. 5.5 Hybrid Approach
      6. 5.6 The Book of Wisdom
      7. 5.7 The Wrongdoer's Rule
      8. 5.8 Conclusion
      9. Appendix Case Law Supporting Ex Ante and Ex Post Analyses
      10. Case Law Supporting Ex Ante Analyses
      11. Case Law Supporting Ex Post Analyses
      12. List of Cases
    4. Chapter 6: Use of Statistical Sampling in Litigation
      1. 6.1 Introduction
      2. 6.2 Sampling Theory
      3. 6.3 Use of Sampling by Courts
      4. List of Cases
    5. Chapter 7: Statistical Estimation of Incremental Cost from Accounting Data
      1. 7.1 Introduction
      2. 7.2 Basics
      3. 7.3 Illustrative Examples
      4. 7.4 Impediments to Incremental Cost Measurement Caused by Idiosyncrasies of Accounting Data
      5. 7.5 Measurement Issues Arising in Regression Analysis of Accounting Data
      6. 7.6 Detecting Flaws in a Regression Analysis of Accounting Data
      7. 7.7 Other Methods for Estimating Incremental Cost
      8. 7.8 Conclusion
      9. Appendix: Cost Terminology Distinctions among Terms Containing the Word Cost
    6. Chapter 8: Econometric Analysis
      1. 8.1 Introduction
      2. 8.2 The Role of Econometrics in Litigation
      3. 8.3 A Regression Model
      4. 8.4 Violation of Assumptions and Data Problems
      5. 8.5 Choice of Explanatory Variables
      6. 8.6 Choice of Functional Form
      7. 8.7 Sensitivity Testing of Estimated Results
      8. 8.8 Attributes of a Good Model
      9. 8.9 Choosing the Correct Significance Level
      10. 8.10 Statistical versus Practical Significance
      11. 8.11 R-Squared (R2)
      12. 8.12 Forecasting and Residual Analysis
      13. 8.13 Conclusion
      14. List of Cases
    7. Chapter 9: Estimating the Cost of Capital
      1. 9.1 Introduction
      2. 9.2 Opportunity Cost of Capital
      3. 9.3 Theoretical Models Used to Estimate the Equity Cost of Capital
      4. 9.4 Cost of Equity Capital, Sample Calculations
      5. 9.5 Conclusion
    8. Chapter 10: Business Valuation
      1. 10.1 Business Valuation in Litigation Matters
      2. 10.2 Business Valuation Standards
      3. 10.3 Understanding the Concept of Value
      4. 10.4 Valuation Date
      5. 10.5 Overview of Valuation Approaches
      6. 10.6 Income Approach
      7. 10.7 Market Approach
      8. 10.8 Asset-Based Approach
      9. 10.9 Valuation Adjustments
      10. 10.10 Specialty Certifications in Valuation
      11. Appendix: International Glossary of Business Valuation Terms
    9. Chapter 11: Business Interruption Insurance Claims
      1. 11.1 Introduction
      2. 11.2 Overview of Business Interruption Insurance
      3. 11.3 The Loss Adjustment and Claim Development Processes
      4. 11.4 Dispute Resolution in the Business Interruption Claim Process
      5. 11.5 Further Considerations for Experts
      6. 11.6 Common Areas of Disputes Addressed by Financial Experts
      7. 11.7 Unique Issues in the Litigated Claim
    10. Chapter 12: Lost Earnings of Persons
      1. 12.1 Introduction
      2. 12.2 Information Needed for Analysis
      3. 12.3 Components of a Claim
      4. 12.4 Mitigating Factors and Offsets
      5. 12.5 Other Considerations
      6. 12.6 Conclusion
      7. List of Cases
    11. Chapter 13: Expert Analysis of Class Certification Issues
      1. 13.1 Introduction
      2. 13.2 Rule 23 Requirements of a Class Action
      3. 13.3 Recent History of the Changing Threshold for Certification
      4. 13.4 Roles of an Expert Witness Related to Class Certification
      5. 13.5 Conclusion
      6. List of Cases
  9. Part III: Litigation Tools and Techniques
    1. Chapter 14: Data Management
      1. 14.1 Introduction
      2. 14.2 Data Preservation
      3. 14.3 Data Collection
      4. 14.4 Data Normalization and Processing
      5. 14.5 Analysis of Email and Electronic Documents
      6. 14.6 Analysis of Databases and Enterprise Applications
      7. 14.7 Productions
      8. 14.8 Final Steps
  10. Part IV: Ancillary Issues in Damages Matters
    1. Chapter 15: Prejudgment Interest
      1. 15.1 Introduction
      2. 15.2 The Problem
      3. 15.3 Which Interest Rate? The Defendant's Cost of Unsecured Borrowing
      4. 15.4 Awarding Prejudgment Interest at a Floating Interest Rate
      5. 15.5 Estimating the Defendant's Unsecured Floating Borrowing Rate
      6. 15.6 Computing the Multiplier
      7. 15.7 A Note on Delaware Law
      8. 15.8 Other Issues in the Calculation of Prejudgment Interest
      9. 15.9 Close Corporations and Individual Plaintiffs
      10. 15.10 Conclusion
      11. List of Cases
    2. Chapter 16: Punitive Damages
      1. 16.1 Introduction
      2. 16.2 Basic Issues Arising in a Punitive Damages Action
      3. 16.3 The Expert's Role
      4. 16.4 Legal Guidance on Punitive Damages
      5. 16.5 Conclusion
      6. List of Cases
    3. Chapter 17: Tax Treatment of Damages Awards
      1. 17.1 Introduction
      2. 17.2 Origin of the Claim Test
      3. 17.3 Types of Disputes
      4. 17.4 Substantiating Tax Treatment
      5. 17.5 Structured Settlements
      6. 17.6 Tax Treatment of Payments by Payor
      7. 17.7 Deduction of Legal Fees
      8. 17.8 Conclusion
      9. List of Cases
  11. Part V: Civil Litigation
    1. Intellectual Property
      1. Chapter 18. Economic Analysis of Nonpatent Intellectual Property Rights and Damages Measures
        1. 18.1 Introduction
        2. 18.2 Main Forms of Nonpatent Intellectual Property Rights
        3. 18.3 General Damages Measurement Issues in Nonpatent Intellectual Property Cases
        4. 18.4 How Nonpatent Intellectual Property Damages Differ from Patent Damages
        5. 18.5 Damages Issues Specific to Copyright Infringement
        6. 18.6 Damages Issues Specific to Trademark Infringement and False Advertising
        7. 18.7 Damages Issues Specific to Trade Secrets
        8. 18.8 Conclusion
        9. List of Cases
      2. Chapter 19: Patent Infringement Damages
        1. 19.1 Patents
        2. 19.2 Patent Damages
        3. 19.3 Causation
        4. 19.4 Current Patent Infringement Damages Environment
        5. 19.5 Lost Profits Damages
        6. 19.6 Reasonable Royalty
        7. 19.7 Royalty Base
        8. 19.8 Dual Awards
        9. 19.9 Process or Method Patents
        10. 19.10 Design Patents
        11. 19.11 Interest on Damages
        12. 19.12 Injunctive Relief
        13. 19.13 Guidance
        14. List of Cases
      3. Chapter 20: Royalty Examinations
        1. 20.1 Introduction
        2. 20.2 Benefits of Conducting Royalty Examinations
        3. 20.3 Conducting a Royalty Examination
        4. 20.4 The Settlement Process
        5. 20.5 Industry-Specific Complexities in Conducting Royalty Examinations
        6. 20.6 Conclusion
    2. Ownership and Business Failure
      1. Chapter 21: Merger and Acquisition Transaction Disputes
        1. 21.1 Introduction
        2. 21.2 Overview of the Merger and Acquisition Transaction Life Cycle
        3. 21.3 Current Transaction Market Perspectives
        4. 21.4 Contract Provisions with Potential Accounting, Financial Reporting, and Purchase Price Significance
        5. 21.5 Common Merger and Acquisition Transaction Disputes
        6. 21.6 Typical Dispute Resolution Process
        7. 21.7 Role of Accountants in Merger and Acquisition Transactions and Disputes
        8. 21.8 Conclusion
      2. Chapter 22: The Troubled Business and Bankruptcy
        1. 22.1 Introduction
        2. 22.2 Bankruptcy: An Overview from Beginning to End
        3. 22.3 Typical Roles of a Financial Expert in Bankruptcy Litigation
        4. 22.4 Bankruptcy Court Litigation versus Civil Litigation
        5. 22.5 Conclusion
      3. Chapter 23: Alter Ego
        1. 23.1 Definition of Alter Ego
        2. 23.2 Typical Scenarios Involving Alter Ego
        3. 23.3 Indicia of Alter Ego
        4. 23.4 Limited Liability Entities (Limited Liability Corporations and S Corporations)
        5. 23.5 Role of the Financial Expert in Alter Ego Analysis
        6. List of Cases
    3. Regulatory Litigation
      1. Chapter 24: Federal Securities Acts and Areas of Expert Analysis
        1. 24.1 Introduction
        2. 24.2 Federal Securities Acts
        3. 24.3 Alternative Damages Measures
        4. 24.4 The Expert's Role
        5. Appendix A: Statistical Approach to the Event Study
        6. Appendix B: Trading Model Discussion
        7. List of Cases
      2. Chapter 25: Economic Analysis in Securities Class Certification
        1. 25.1 Introduction
        2. 25.2 Predominance of Individual versus Common Issues
        3. 25.3 Intraclass Conflicts
        4. 25.4 Recent Supreme Court Decisions
        5. 25.5 Conclusion
        6. List of Cases
      3. Chapter 26: Antitrust
        1. 26.1 Introduction
        2. 26.2 Antitrust Statutes
        3. 26.3 Antitrust and Intellectual Property
        4. 26.4 Statutory Authority for Damages and Injunctions
        5. 26.5 Prerequisites for Antitrust Damages
        6. 26.6 Antitrust Injury
        7. 26.7 Quantifying Damages
        8. Appendix: Foundational Statutes and Case Law
        9. List of Cases
      4. Chapter 27: Federal Contract Disputes
        1. 27.1 Introduction
        2. 27.2 Federal Contracts and Nature of Disputes
        3. 27.3 Laws, Regulations, and Guidance
        4. 27.4 The Financial Expert
        5. 27.5 Protests and Pre-Award Disputes
        6. 27.6 Contractor Claims
        7. 27.7 Contract Pricing and Changes
        8. 27.8 False Claims Act
        9. 27.9 Qui Tam Actions
        10. 27.10 Financial Accounting Disputes
        11. 27.11 The Dispute and Litigation Process
        12. Appendix 27A: Selected Financial Acronyms
        13. Appendix 27B: Uniform Contract Format
        14. Appendix 27C: Contract Audit Reports
        15. List of Cases
    4. Construction and Real Property Disputes
      1. Chapter 28: Construction Claims
        1. 28.1 Introduction
        2. 28.2 Cost Pools
        3. 28.3 Damages Models
        4. 28.4 Delay Claim Calculations
        5. 28.5 Conclusion
        6. List of Cases
      2. Chapter 29: Real Estate Litigation
        1. 29.1 Introduction
        2. 29.2 Litigation Related to Economic Transitions
        3. 29.3 Damages Related to Economic Conditions
        4. 29.4 Damages Related to Environmental Disputes, Residential Market
        5. 29.5 Damages Related to Environmental Disputes, Commercial Real Estate
    5. Other Civil Litigation
      1. Chapter 30: Accountant Liability
        1. 30.1 Introduction
        2. 30.2 Types of Accounting Services
        3. 30.3 An Overview of the Law
        4. 30.4 The Evolving Trend of Accountant Liability
        5. 30.5 The Plaintiff's Strategies
        6. 30.6 The Strategies of the Defendant Auditor
        7. 30.7 The Role of the Financial Expert in Accountants’ Liability Litigation
      2. Chapter 31: Executive Compensation in the Litigation Setting
        1. 31.1 Introduction
        2. 31.2 Executive Compensation Issues in Disputes and Investigations
        3. 31.3 Executive and Director Compensation: Theory and Practice
        4. 31.4 Trends in Stock-Based Compensation Regulatory Reporting and Practice
        5. 31.5 Issues Regarding the Nature and Amount of Compensation
        6. 31.6 Challenges in Presenting Executive Compensation in Litigation Proceedings
        7. 31.7 Conclusion
      3. Chapter 32: Employment Litigation
        1. 32.1 Introduction
        2. 32.2 The Economics of Discrimination
        3. 32.3 Legal Background
        4. 32.4 Categories of Discrimination: Adverse Treatment and Disparate Impact
        5. 32.5 Statistical Background
        6. 32.6 Forms of Data Used in Employment Litigation
        7. 32.7 Recruitment and Hiring
        8. 32.8 Promotion Practices
        9. 32.9 Termination
        10. 32.10 Compensation and Pay
        11. 32.11 Wage and Hour Litigation
        12. 32.12 Conclusion
        13. List of Cases
      4. Chapter 33: Wage and Hour Litigation
        1. 33.1 Introduction
        2. 33.2 Misclassification Cases
        3. 33.3 Hourly Employee Cases
        4. 33.4 Class Action
        5. 33.5 Gathering Data
        6. 33.6 Role of the Expert at Class Certification
        7. 33.7 Mediation Support
        8. 33.8 Role of the Expert at Trial
        9. 33.9 Litigation Support Roles
        10. List of Cases
      5. Chapter 34: Financial Accounting Experts in Directors’ and Officers’ Litigation
        1. 34.1 Introduction
        2. 34.2 Legal Standards for Corporate Governance
        3. 34.3 The Role of the Financial Accounting Expert
        4. 34.4 Examples Reflecting Common Issues
        5. 34.5 Increasing Reliance on Clawbacks
        6. 34.6 A Case Study: Lehman and Repo 105
        7. Conclusion
        8. List of Cases
      6. Chapter 35: Bank Failures: Regulatory Actions and Litigation
        1. 35.1 Introduction
        2. 35.2 The Financial Crisis and Its Impact on U.S. Banks
        3. 35.3 Bank Regulation and Supervision during the Crisis
        4. 34.5 The Savings and Loan Crisis and Subsequent Litigation
        5. 35.5 The Role of the Financial Expert in Failed Bank Litigation
        6. Conclusion
  12. Part VI: Criminal Matters and Investigations
    1. Chapter 36: Tax Fraud: Criminal Cases
      1. 36.1 Avoidance versus Evasion and Civil versus Criminal
      2. 36.2 Four Most Common Tax Crimes
      3. 36.3 Proof beyond a Reasonable Doubt in a Tax Prosecution
      4. 36.4 Shorthand Formula for a Criminal Tax Case
      5. 36.5 Methods of Proving Tax Deficiency
      6. 36.6 Proving Intent: Badges of Fraud
      7. 36.7 Government's Sources for Criminal and Civil Tax Fraud Cases
      8. 36.8 Investigation by CI: Administrative versus Grand Jury Investigations
      9. 36.9 Government's Standard of Review for a Criminal Tax Case
      10. 36.10 Role of the Accountant
      11. 36.11 Conclusion: Parting Advice Regarding Criminal and Civil Tax Fraud
      12. List of Cases
    2. Chapter 37: Financial Statement Investigations
      1. 37.1 Introduction
      2. 37.2 What Is Fraud?
      3. 37.3 Sources and Triggers of Investigations
      4. 37.4 Investigation Life Cycle
      5. 37.5 Understanding Intent
      6. 37.6 Communicating
      7. 37.7 Recent Trends in Regulation
      8. 37.8 Selected Examples of Financial Statement Fraud
      9. List of Cases
    3. Chapter 38: International Investigations: Successful Planning and Execution
      1. 38.1 Introduction
      2. 38.2 Planning
      3. 38.3 Logistical Planning
      4. 38.4 Workspace and Environment
      5. 38.5 Gathering Electronic Evidence
      6. 38.6 Conducting Interviews
      7. 38.7 Reporting Findings
      8. 38.8 Conclusion
  13. Part VII: Family Law
    1. Chapter 39: Family Law Services
      1. 39.1 Introduction
      2. 39.2 Family Law Process
      3. 39.3 Support
      4. 39.4 Character of Property
      5. 39.5 Commingling, Tracing, and Apportionment
      6. 39.6 Tracing
      7. 39.7 Transmutations
      8. 39.8 Apportionment
      9. 39.9 Business Valuations
      10. List of Cases
  14. Index