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11 Hous. Bus. & Tax L.J. 1 (2011)

handle is hein.journals/houbtalj11 and id is 1 raw text is: MEASURING BUSINESS DAMAGES IN FRAUDULENT INDUCEMENT CASES By George P. Roach* I. SUM M ARY ............................................................................ 2 II. INTRODUCTION ................................................................... 3 III. SUMMARY CHARACTERISTICS OF FRAUDULENT INDUCEMENT ......................................... 7 A. Damage Preliminaries ............................................. 10 B. Fraudulent Inducement Widens the Plaintiff's R each ......................................................................... 12 IV. THE EVOLUTION OF DAMAGES LAW FOR FRAUDULENT INDUCEM ENT ..................................................................... 14 A. The Standard of Practice Since 1980 ........................ 17 B. Expectancy Damages .................................................. 19 C. Perry Equipm ent ....................................................... 22 D. Reliance Waivers and Class Actions ......................... 26 V. VALUE AS A DAMAGES METRIC ....................................... 27 A. Measuring Value ....................................................... 28 B. Valuation D ate ......................................................... 32 VI. LOST PROFITS As A DAMAGES METRIC ........................... 34 A . M itigation .................................................................. 39 B. Are Lost Profits Always Special Damages? ............... 41 C. Gross Not Net Profits ............................................... 42 D. Ex Post v. Ex Ante Evidence ...................................... 43 VII. BOB V. OOP APPROACHES To DIRECT DAMAGES ................ 44 A. Asset Transactions ................................................... 44 B. Service Contracts ...................................................... 48 C. Expectancy Claims In Business Acquisitions ............... 52 D . D isconnected Values ...................................................... 55 VIII. SPECIAL DAMAGES ........................................................... 58 IX. RELIANCE DAMAGES ....................................................... 63 X. EQUITABLE REMEDIES ...................................................... 67 XI. AVOIDING OR MINIMIZING THE MINEFIELD .......................... 71 X II. C ON CLU SIONS ...................................................................... 72 * George Roach practices damages law and provides consulting on litigation damages and valuation in Dallas, Texas. He is a Senior Adviser to the litigation consulting firm of Freeman & Mills, Inc. in Los Angeles. His background includes an M.B.A., J.D. and an A.B. in economics. See www.litigation-consultant.com for further information.