Expert Article Library

Differing Methods of Calculating Financial Damages Admissible

Case Name: Parmenter v. Rollins Financial (unpublished)(Click here for the full text of the case)

Court: United States Court of Appeals for the 4th Circuit

Date: June 29, 2006

Expert: Financial Expert. F. John Hermann, Investment Advisor and Arbitrator

Issue: Whether Hermann’s damage calculation that started after Plaintiff’s portfolio had appreciated was admissible.

Summary of case: Plaintiff was a widow with little investment experience who hired Defendant as a financial manager. Defendant invested her money in high-growth, high-risk funds. The account grew in value more than 30% in a year, but had plummeted to less the half the original value after two years. Plaintiff alleged various charges against Defendant including breach of fiduciary duty, negligence, breach of contract, etc. The jury found for Plaintiff.

Role of the expert: Hermann testified as to within what range of values Plaintiff’s damages should fall.

Challenges to the Expert's testimony: Defendant alleged that Hermann’s expert testimony was unreliable because his method was not based on Plaintiff’s initial portfolio value. Instead he took “various points during a nine-month period when Hermann claimed Rollins could have taken such corrective action, Hermann identified different possible starting values for calculating damages.” The court held that Hermann’s testimony was reliable—especially since Hermann asserted that the most serious breach of duty Defendant committed was the failure to switch the portfolio to more conservative investments after it had increased in value, a breach that occurred after the account value had risen.

Summary prepared by C. Wood, Student, University of California, Hastings College of the Law