Sixth Circuit Court of Appeals Discusses the Law of Lost Earning Capacity

"Lost earning capacity is not a difficult concept to understand, but our friends in the defense bar sometimes are able to confuse judges and juries about what it means.  The United States Court of Appeals for the Sixth Circuit confronted in issue recently in a case involving Ohio tort law, and got it right.

Andler received broken bones in her feet at an event in 2004 and brought a premises liability claim. Prior to her injury, Andler worked part-time at a childcare center and earned between $9,000 and $10,000 a year.  According to Andler, her injuries forced her to switch jobs and, in the years following the injury, she worked full-time as a manicurist and pedicurist; she earned approximately $10,000 in 2006 and $25,000 in 2008.

At the first trial, Andler offered expert testimony of accountant Daniel Selby, who testified, using Bureau of Labor Statistics (“BLS”) figures, as to Andler’s lost earning capacity due to the injury. Selby testified that, but for her injury, Andler could have earned approximately $17,600 a year as a full-time childcare worker; post-injury, her annual earning capacity as a full-time manicurist and pedicurist was approximately the same.  When factoring in the effects  of her work disability, such as increased likelihood of missed work or longer-term exit from the workforce, Selby concluded that Andler’s damages for lost earning capacity totaled $232,346. 

In the first trial, the jury awarded $148,000 for lost future damages- the jury did not break down whether the money was for loss of earning capacity or future medical expenses.

The jury verdict was reversed on a substantive law issue and remanded.  On remand, the district court excluded expert proof on the issue of lost earning capacity, claiming that it was speculative.

This time, the jury awarded only $10,000 in future economic losses.

In Andler v. Clear Channel Broadcasting, Nos. 10-3264/3266 (6th Cir. Feb. 29, 2012), the district judge was reversed.  The 6th Circuit determined that the expert testimony should have been admitted into evidence.  (Defendant sought reversal on liability grounds – those efforts were rejected.)

Andler argued that she should have been permitted to introduce expert testimony on loss of earning capacity.  Here is Ohio law on the issue:

A tort plaintiff can recover future economic damages for any loss of earning

capacity caused by her injury.  A plaintiff claiming lost earning capacity must offer sufficient proof of (1) “‘future impairment’” and (2) “‘the extent of prospective damages flowing from the impairment.’”    The measure of damages in the second step is “‘the difference between the amount which the plaintiff was capable of earning before his injury and that which he is capable of earning thereafter.’”    Because predictions about future earning potential are necessarily somewhat speculative, an exact calculation of what the plaintiff could have earned but for the injury is not required; a plaintiff must prove damages with “reasonable certainty.

The damages are awarded for loss of earning power, not simply loss of earnings.
The proper focus is thus what the injured plaintiff could have earned over the course of her working life without the injury versus what she will now earn, not what she earned or will earn in any given year.  See id. (plaintiff must show that “the amount of wages [he] will be capable of earning over his working life after his injury is less than the amount of wages he was capable of earning over his working life before his injury”). Accordingly, the fact that a plaintiff earns a higher annual salary after an injury than she did prior to the injury does not bar her from recovering for loss of earning capacity. … ‘[T[he jury may consider the earnings of the plaintiff at the time of the injury, but the jury is not bound to accept such earnings as conclusive of his future earning power.’

[Citations omitted.]

Tennessee law is very similar to Ohio law on this subject.

The accountant expert on loss of earning capacity was excluded because he testified that Andler’s pre-injury earning capacity was higher than her actual earning capacity.  This testimony was based on BLS statistics for people of Andler’s age, education and experience.  The district judge found the expert’s testimony to be unreliable.

The appeals court rejected this basis for exclusion of the testimony:

The concern with the use of BLS averages rather than Andler’s actual historical

earnings suggests a confusion of the concepts of lost earnings and lost earning capacity. As explained above, lost earning capacity does not necessarily rely on a plaintiff’s historical earnings.  What matters is what Andler would have earned over the course of her working life, not what she earned in any given year.  Andler’s historical earnings are relevant, but the fact that she did not meet her earning capacity in the two years prior to her injury does not necessarily render Selby’s projections inaccurate or even unreasonable.  Although Andler did not work full-time before her injury, Selby’s projection that she would work full-time is not “clearly contradicted by the evidence.”  Andler testified that she took the childcare job after her divorce because it was located in the district where her children attended school and she ‘wanted things to pretty much stay the same for my kids until they got out of elementary school.’  Working at the childcare center, she was able to ‘be[] there for them before and after school.’   This testimony suggests she may have changed jobs once her children were older. Moreover, Andler had attended massage school and had worked for a chiropractor before working at the childcare center, training that could position her for a switch in career.  Finally, Andler explained that her post-injury switch to cosmetology work was “what I was already wanting to do.”

[Citations omitted.]  
The above language included this footnote:
Andler’s situation is thus somewhat akin to the case of the injured homemaker, who can recover for lost earning capacity even if he or she had never worked outside of the home prior to the injury.  Cf. 29 Am. Jur. Proof of Facts 3d 259, § 8 (2005) (“The homemaker who has never worked outside the home a day in her married life . . . is entitled to damages for lost earning capacity, if she is injured by a tortfeasor and thereby becomes unable to seek or perform work outside the home.”); William Danne, Jr., Annotation, Admissibility and Sufficiency, in Personal Injury or Wrongful Death Action, of Evidence as to Earnings or Earning Capacity from Position or Field for Which Person Has Not Fulfilled Education, Training, or Like Eligibility Requirement, 7 A.L.R. 6th 1, § 2 (2005) (“[D]amages for loss or impairment of earning capacity may be awarded to . . . an injured housewife, even if she had left employment with the intention of confining her future activities to homemaking.”

Thus, concluded the 6th Circuit, a new trial was necessary on the issue of damages.

The 6th Circuit got this one right.  Loss of earning capacity is an important element of damages in personal injury litigation.  Expert testimony about such losses in the future always includes some degree of speculation (it is the future, after all) but the jury should be permitted to weigh the testimony and determine whether the evidence supports an award of these damages.