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Birmingham Bar Association Bulletin

sum may reasonably be expected to earn in the future, will equal such earnings at the time in the future when these earnings would have been received.” However, the specific rate and methodology to use is not currently stipulated or defined. The below-market discount rate method for discounting to present value is to be used in Alabama FELA and Jones Act cases. INTEREST Just as economists discount future losses to their present value, economists may add interest to past losses. In Alabama, prejudgment interest may only be awarded when damages are certain. Since all damages in Alabama WD cases are punitive, courts believe it will be rare that prejudgment interest will be awarded in those cases. Economists have included prejudgment interest in Alabama FELA and admiralty-maritime cases. TAXES Lost earnings in PI and WD cases would otherwise—absent the tort—have been taxed, but any award for economic damages likely will not be. As a consequence, forensic economists may deduct projected income taxes from their measure of economic losses. Alabama law does not address whether income taxes should be incorporated. In some instances (in PI cases), Alabama courts have held that income taxes need not be deducted. However, federal guidance requires income taxes to be deducted from losses in FELA and Jones Act cases, and economists in these cases filed in Alabama courts have done so. CONCLUSIONS Alabama case law regularly notes errors made in calculating economic losses when an economist is not used. Nevertheless, an economics expert is not required in order to prove economic losses in Alabama courts. Since PI cases (and FELA and Jones Act WD cases) brought to Alabama courts may claim compensatory damages, an economist may be useful in calculating the present value of economic losses such as lost earnings. This is not true for other Alabama WD cases where only punitive damages are allowed. This paper summarizes common approaches used by economists to quantify lost earnings and benefits. Lawyers and forensic economists should follow Alabama court proceedings carefully to know which of these methods are admissible. G Charles L. Baum, II, is a Professor of Economics at Middle Tennessee State University and may be reached at (615) 556-9287, or baumeconomics@gmail.com. Tort LAw employment absent the tort. Alabama statutes mandate that life tables be provided regularly by the superintendent of insurance. These tables are to be used in court, but they are not necessarily considered conclusive. Alabama Pattern Jury Instructions imply the information these tables provide may be adjusted for a case’s particular circumstances, and supplemented with additional information, as illustrated in Alabama case law. An economist would likely recognize that remaining worklife expectancy is less than remaining life expectancy. MITIGATING FACTORS Forensic economists typically assume that those harmed take reasonable actions to limit damage and offset losses with mitigating factors. Alabama rules traditionally have made pecuniary benefits from collateral sources other than the defendant inadmissible. However, legislative tort reforms passed in 1987 currently require collateral medical (and hospital) benefits in cases involving medical expenses to be disclosed but not necessarily deducted from economic losses. Forensic economists may wish to refrain from deducting collateral medical benefits when a third-party has subrogation rights to receive reimbursement from the plaintiff in the event of an award. In Alabama FELA and Jones Act cases, the injured party has a duty to mitigate. However, if the plaintiff does not adequately attempt to mitigate, then it would be the defendant’s responsibility to establish that. PERSONAL MAINTENANCE EXPENDITURES In WD cases, but not PI cases, forensic economists may deduct an amount that the decedent is projected to have spent on their own consumption, had they lived, from the economic losses. Since only punitive damages are allowed in Alabama WD cases, neither Alabama statutes nor Alabama case law mention personal consumption deductions. Economists have deducted consumption expenditures in WD cases with federal guidelines. DISCOUNT RATE With rare exceptions, forensic economists discount future losses to their present value to identify the lump-sum payment— paid in the present—that will grow when invested to the amount lost earnings and benefits would have been in the future. When awarding future damages (e.g., front pay) in PI cases, Alabama courts are guided by the present value of future lost earnings. Alabama Pattern Jury Instructions state, “‘Present cash value’ means the sum of money needed now, which, when added to what the 16 Birmingham Bar Association


Birmingham Bar Association Bulletin
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