Economic Damages and Lost Profits Analysis After Online Defamation

At a glance

Type of work: Litigation economics and damages analysis
Client type: Local service business (confidential)
Location: Colorado
Lead economist: Guanyi Yang, PhD
Deliverable: Written damages report with exhibits and documented methods
Forum: State court proceeding (confidential details omitted)

The question we were asked to answer

A business experienced a sharp revenue decline after a wave of defamatory online statements. Counsel needed a damages analysis that answered two questions clearly:

1. What were the lost profits during the period of reputational harm?

2. What mitigation costs did the business incur to remove false content and repair reputation?

This kind of work lives or dies on documentation. The analysis must tie directly to business records and must show why the decline lines up with the event, not with unrelated factors.

What Focalize Solutions did

We built a damages model grounded in the company’s monthly financial statements. We then created a “but for” revenue forecast, meaning what revenue would have looked like absent the defamatory statements, using the business’s own historical patterns.

We used three forecasting approaches so the result did not hinge on one modeling choice:

• A regression forecast designed to capture trend and seasonality

• ARIMA as an independent time series check

• Holt-Winters as a second independent time series check

We also included outside context data to account for operational drivers that naturally affect this business. In this case, weather-related activity mattered, so we incorporated relevant regional hailstorm timing as context.

Data we relied on

• Monthly Profit and Loss statements over multiple years

• Documented timing of the defamatory posts and when removals occurred

• Business margin information needed to translate revenue loss into profit loss

• Context information that helps explain normal fluctuations

We focus on the records you can defend. If a number is not anchored to a source, we do not treat it as a fact.

How we built the damages estimate

1. Establish the baseline. We modeled historical revenue to capture growth and seasonality, then forecast forward into the damage period.

2. Measure the shortfall. We compared forecast revenue to actual revenue during the period tied to the defamatory activity.

3. Translate revenue loss into profit loss. We applied the company’s contribution margin so the profit calculation reflected saved variable costs.

4. Quantify mitigation efforts. We estimated conservative costs tied to removing false content and managing reputational repair.

What we delivered

We delivered a litigation ready damages report that included:

• A clear explanation of the damage period and why it was selected

• Forecast versus actual exhibits that show the revenue shortfall month by month

• A documented approach, including assumptions and reasonableness checks

• A conservative lost profits estimate and a separate estimate of mitigation costs

Outcome and hearing support

In addition to the written report, Dr. Guanyi Yang presented the findings at a court hearing and supported counsel through hearing preparation. The court ruled in our client’s favor.

Why this mattered

In defamation related business loss cases, the opposing side often argues the decline came from something else. Our work focused on causation evidence and on ruling out common alternative explanations with the available facts. We built a report designed to stand up to expert review and cross examination.

Confidentiality and work samples

Client specific details are not posted publicly. We can share a redacted sample damages exhibit and a sample methodology appendix upon request, and we can do that under NDA if needed.

Related service: Litigation support and expert testimony