Using Expert Witnesses to Increase (or Limit) Damages

Chuck Modell April 22nd, 2021

Expert witnesses are used, in franchise cases and otherwise, to help the trier of fact understand complicated non-legal issues that are best understood and explained by people with specialized training and experience in the area.  However, an expert witness can also have a significant impact on damages.  This is why accountants are commonly called as expert witnesses in cases involving business valuations and lost contract damages.  I would submit that a franchise lawyer expert, or experienced franchise consultant, can make a multi-fold difference in damages in a franchise case!

What I Know About Damages, I Learned From My Father

I am not a litigation attorney, nor am I a damage expert.  I represent franchisors in structuring their franchise programs, complying with legal requirements, and dealing with franchisees.  So, what do I know about proving damages?  To paraphrase some book titles, much of what I know about damages, I learned from my father.  And he was neither a lawyer nor an accountant.  Rather, in the 1960s, he did research that made him the preeminent authority in the world on drowning; specifically, the physical effects of being underwater for several minutes, and how to revive people who have been under water for an extended period.  After retiring from the full-time practice of medicine, he became a sought-after expert on these issues.  In cases where basic safety precautions had not been taken, he testified as to the ability to save people who had been under water for less than three minutes, compared to those who were under water longer due to the negligence of the defendant. (While well beyond the scope of this piece, for those interested, with proper techniques, the chance of saving someone who has been immersed for as much as five minutes is over 50%, while those immersed for ten minutes have less than a 10% survival rate.)  He also testified in excruciating detail as to what the victim went through before dying – and it is not pretty.  That additional testimony often made the difference between a jury award that amounted to a hard slap on the wrist for negligence and one that had an extra zero at the end for the plaintiff.

These lessons translate into the franchise context.  There will be franchise failures, and sometimes these failures are caused in part by the acts or omissions of the franchisor.  In these cases, the way the franchisor acted, and more importantly, the likely motive for the franchisor’s actions, can have a significant bearing on the mindset of an arbitrator, judge or jury in the award of damages. Were the franchisor’s actions or omissions typical of actions taken by most franchisors, or otherwise in the best interests of franchisees as a whole?   Or were they the result of a failure or refusal by the franchisor to provide services common in franchising, or worse, arbitrary and capricious actions perhaps intended to force a troublesome franchisee out of the system?  In cases in which the franchisor’s actions were in the best interest of the system, testimony to that effect can limit damages that might be awarded to an otherwise sympathetic plaintiff, while the converse, actions that seem arbitrary, or designed only to help the franchisor at the expense of franchisees, may increase those damages.  An experienced franchise consultant, or an attorney who has represented numerous franchise systems, can provide this testimony on behalf of a franchisor or franchisee.

This same concept applies to disclosures made in, or omitted from, the franchise disclosure document, which are cited as reasons to impose liability on franchisors for losses suffered by a franchisee.  Was the type of disclosures at issue required or prohibited in franchise disclosure documents?  Were they typical or atypical of disclosures found in the disclosure documents of other franchisors?  To the extent disclosures were missing that are typically given to prospective franchisees, the trier of fact may be more understanding of the franchisee’s position in assessing damages.  On the other hand, if omitted disclosures that would seem important to a lay person would have been unusual or even prohibited, a trier of fact who may still be sympathetic to the franchisee may be less inclined to award more than nominal damages to the franchisee.  A franchise lawyer who has prepared hundreds of franchise disclosure documents and is intimately familiar with the requirements for disclosure documents, can provide this testimony on behalf of either a franchisor or franchisee, thus helping persuade the trier of fact in assessing the appropriate damages in the case.