Opinion ID: 2260150
Heading Depth: 2
Heading Rank: 3

Heading: Formulas Suggested By Other Jurisdictions

Text: There are three significant approaches, traditional, middle ground, and evidentiary which the judiciary has adopted in considering the impact of future inflation and productivity on lost future earning capacity. 63 Va.L.Rev. at 128 n.155. The traditional approach ignores altogether the effects of future productivity and future inflation as being too speculative. This view was previously adhered to by this Commonwealth, but for reasons stated above, it is hereby rejected. The middle ground approach is anomalous in that it permits the factfinder to consider the effects of productivity and inflation on lost future earning capacity, but prohibits expert testimony on either of these issues. The proponents of this approach argue that expert testimony on future economic trends is speculative, yet acknowledge that such facts are within the common experience of all jurors and, therefore, jurors should not be prohibited from applying their common knowledge in reaching a verdict. Bach v. Penn Central Transportation Co., 502 F.2d 1117 (6th Cir. 1974), overruled by Morvant v. Construction Aggregates Corp., 570 F.2d 626 (6th Cir. 1978); and, Riha v. Jasper Blackburn Corp., 516 F.2d 840 (8th Cir. 1975). However, it has been consistently demonstrated that expert evidence is essential to accurate economic forecasting. Since it is apparent that the middle-ground approach contributes little to the accuracy or predictability of lost future earnings, and paradoxically allows a judge or jury to determine what an acknowledge expert cannot, we decline to adopt it. The evidentiary approach in its several variants allows the factfinder to consider productivity and inflation in awarding damages. Since we believe that there is a reasonable basis in fact to consider the impact of inflation and productivity on lost future earnings, we conclude that the evidentiary concept is the most valid method to compute lost future earnings. However, courts employing the evidentiary method differ on the factors to be considered in assessing lost productivity on the one hand and the method to calculate the inflation component in the final lost future earning award on the other. Recognizing that there are myriad of ways to incorporate such economic data [18] we find that there are two versions appropriate for our consideration. The first of these two variants of the evidentiary approach was developed by the court in Feldman v. Allegheny Airlines, 382 F.Supp. 1271 (D.Conn. 1974), aff'd, 524 F.2d 384 (1st Cir. 1975). In Feldman, a surviving husband brought a wrongful death action as the administrator of his wife's estate. The defendant airline stipulated as to its liability and the trial was confined to the issue of damages. The court assumed that recovery for lost future earnings included the victim's lost earning capacity. In order to demonstrate the bases for the court's conclusions relative to what course the deceased's life probably would have taken, the court extrapolated the evolving pattern of Mrs. Feldman's life. The court detailed the deceased's college grades, her employment history, the opinion of the deceased held by her fellow workers, the expressed employment goals of the deceased and the potential jobs for which the deceased was qualified. The court also examined the employment history of another individual who had remarkably similar credentials as the deceased. The defendant produced one witness who testified as to the decedent's employment prospects. Based upon the above factors, the court predicted the incremental salary (productivity) increases of the decedent over her work-life expectancy. [19] The court was then faced with the inflation component and the task of discounting the award to its present value. The court developed a formula known as the offset present value method in which it subtracted the estimated inflation rate from the discount rate to calculate the inflation adjusted or real rate of interest. Each year's earnings were then discounted to present value by this real discount rate. The real discount rate employed by the court was 1.5%. The court rationalized its formula: . . . on the basis of the evidence adduced at trial, the evidence judicially noticed and collated at the Appendix, and judicial notice of the continuing erratically inflationary behavior of the American economy, that 1.5 per cent per year is an appropriate figure by which to discount an award of damages based on the destruction of future earning capacity when that award has itself been computed without consideration of inflation affecting that amount subsequent to the date of the injury upon which the award is premised. Id. at 1294-1295 [20] The second variant of the evidentiary method was adopted by the Alaska Supreme Court in Beaulieu v. Elliott, 434 P.2d 665 (1967), and refined in State v. Guinn, 555 P.2d 530 (1976). Pursuant to this formula, the Alaska courts first calculate lost future earning capacity of the victim over his or her work-life expectancy. As to productivity, the Alaska court has stated: Automatic step increases keyed to the length of service are by their very nature certain and predictable at the time of trial and the court takes them into account when estimating the lost future earnings. State v. Guinn, 555 P.2d at 546. However, the court excluded as speculative evidence the non-scheduled salary increases and bonuses that are granted as one progresses in his chosen occupation in terms of skill, experience and value to the employer. Id. In order to account for the inflationary component's impact on lost future earnings and the effect of future interest rates on lump-sum payment, the Alaska court applied that total offset method. Under the total offset method, a court does not discount the award to its present value but assumes that the effect of the future inflation rate will completely offset the interest rate, thereby eliminating any need to discount the award to its present value.