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Causation and Damages

We Help Defendants Defeat Inflated Non-Factual Damages

Today, the burden of proof is on the plaintiff to provide economic and causal justification for reported loss. More often than not, however, the defendant does not sufficiently challenge these arguments. This is where we can help.

 

At H.S. Grace & Company, Inc., we have an enviable track record of using our unique causation analyses for defendants, allowing them to defeat inflated non-factual damages.

 

We can identify the critical parts of the damage analyses that indicate the actual amount of loss, if any. We conduct comprehensive analyses to test the plaintiff’s damages and the implied causation in the plaintiff’s damage model. We examine outside influences as well as such as:

  •  Industry environment
  • Corporate culture
  • Risk management philosophy
  • Compensation strategy
  • Ability to manage change
  • Distribution
  • Activity-based costing
  • Operating and financial history
  • Profitability of strategic iitiatives
  • Product strengths and weaknesses
  • Strategic marketing efforts
  • Cost and revenue drivers
  • Management reporting systems
  • Effectiveness of policies and procedures

This unmatched competency, which combines experience with analytical insight, clarifies causation and helps “defeat” inflated non-factual damages. Working with HSG produces an extraordinary return on your investment.

Delivering Positive Outcomes for Clients

These cases demonstrate how HSG helps clients defeat inflated non-factual damages.     

Overview: Insurance companies paid a building owner for losses incurred due to a fire and then sued contractors who previously worked on the building for negligence.
HSG was retained by the contractor firms to determine whether their actions complied with normal and customary business practices and to review the opinions of certain experts engaged by the insurance companies.

HSG’s analyses established the cause of the fire was primarily attributable to the duties for which the building owner and certain of its advisors were responsible.

Result:  The case was favorably settled during trial.

Overview: The SEC alleged that a CEO of a company committed securities fraud through the revenue recognition of a contract that had yet to be approved by a customer’s board of directors and that the CEO did so to avoid busting debt covenants and to meet revenue expectations. If found guilty, the CEO would be prohibited from serving as an officer or director of a public company.

HSG’s assignment was to rebut an expert report that asserted the CEO’s primacy in the propriety and accuracy of company financial statements. HSG’s report demonstrated that management involved in directing and operating the finance function play a far more significant role in assuring the propriety and accuracy of the company’s financial statements; that the CEO and other senior management members are entitled to rely on internal and external advisors; and that a financial restatement is not tied to the certifying CEO’s personal acknowledgment. Shortly before trial, the judge questioned the SEC’s basis for a fraud suit.
Result: The matter settled with no suspension for the CEO and for a monetary amount of approximately fifty thousand dollars.

Overview: The matter filed involved more than a billion-dollar accounting restatement due to improper revenue recognition and allegations of tens of millions of dollars of insider trading by the three executives.
HSG addressed the allegations against the CEO and found that he was not responsible for the organization that made the decision of when revenue could be recognized, nor for the decisions made internally by the organization or its external auditors on when to recognize revenue.
HSG highlighted several important facts that helped dismiss the case against the CEO – that his tenure was only 11 months out of the 57 month restatement period; that the CEO was appointed during a time of a radical reduction in force of 60% of the employees, thus making him out as the hachet man; and importantly, that the prior CEO kept the role of chairman when he stepped aside from his role as CEO and maintained control over the final approval of the revenue recognition decisions through the entire restatement period and was the single member of the company’s Options Committee.
Result: The matter settled satisfactorily with the client being dismissed from the charges.

Overview: The management of a surviving corporation and its advisors had “engineered” a spin-off from a sister company to the detriment of the shareholders of the sister company which subsequently filed for bankruptcy.
Representing the bankrupt plaintiff, HSG assessed the roles and responsibilities of external accounting firms, legal counsel, financial advisors and senior management, and the process used and assumptions developed by the surviving company to determine the fairness of the valuation and separation of the spin-off company.
After a motion to exclude HSG was denied, HSG presented its determination that the spin-off process and the valuations created by the surviving company management and its advisors did not follow customary and ordinary business practices and that outside counsel and the public accountants had conflicts of interest. 

Result: Defendants jointly agreed to and funded a $165 million settlement.

Overview: HSG client (Plaintiff) was a wholesale electric supply company. Its principal competitor responded to client’s market penetration by undertaking a negative campaign to undermine client’s credibility. Competitor instituted litigation, the expense and settlement of which ultimately caused client to cease operation. The client’s insurance company (Defendant) failed to defend client in the stated litigation and client filed a lawsuit for recovery. HSG was retained to examine the business issues associated with the conflict, and to quantify client’s actual damages from insurance company’s failure to defend.
Result: Favorable out-of-court settlement for our client.

All Representative Cases

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