Part 4: Beyond the Documents - Using Depositions and Interrogatories to Build Your Case
In our last post, we discussed the importance of financial records and getting the right ones requested at discovery. However, it’s important to note that financial records only tell part of the story… They rarely tell the whole story.
Documents show what was recorded. They do not always explain why. They do not always represent a complete or accurate record of activity. Documents capture transactions. They do not always provide the context that explains them. That is where depositions and interrogatories come in, and where a damages expert can add another layer of value that goes well beyond reviewing historical accounting records or spreadsheets.
The Deposition as a Financial Tool
Most attorneys think of depositions primarily as a legal tool. And they are. But for a damages expert, a well-conducted deposition is also one of the most valuable opportunities in the entire case for us to gather financial context, test assumptions, and build out the factual record before our analysis is ever finalized.
When a key fact witness is being deposed, a damages expert can help counsel approach it less like a legal examination and more like a management interview. Ideally, that witness is the individual who knows the business most intimately, who can speak to its financial history and performance, and the impact of the alleged harm on revenue and profitability. They can help us understand what steps were taken to mitigate losses, what projections existed before the damaging event occurred, and what the company's expectations were going forward at that time. These, and other questions, do not always make it onto a deposition outline, which can weaken the resulting analysis without a financial expert’s input.
Like document requests, it is also worth thinking beyond the parties themselves. Accountants, bookkeepers, bankers, and other third parties may hold critical pieces of the financial picture that do not show up in the produced documents. We can help counsel identify who else may need to be deposed to fill those gaps.
Getting the Financial Facts on the Record
One of the more valuable uses of a deposition from a damages expert's perspective is the opportunity to clarify financial assumptions that might otherwise remain ambiguous or open to interpretation later in the case. When a witness speaks to specific financial details on the record, those statements become part of the evidentiary foundation that the damages analysis can be built around. We can help counsel identify the right financial questions to ask so the record is as complete and clear as possible going into the analysis.
Deposing the Opposing Expert
When an opposing damages expert has been retained and has produced a report, their deposition becomes a different kind of opportunity. This is the chance to probe their methodology, test their assumptions, understand the data they relied on, and identify weaknesses in their analysis before trial. A damages expert can help counsel develop targeted questions that go after the right pressure points. We will get deeper into that process in Part 10.
Interrogatories Fill the Gaps
Interrogatories do not get as much attention as depositions but they can be a useful tool for filling in financial gaps that documents alone do not address. Unlike a deposition, where a witness can skirt around a question, claim they do not know, or give a vague answer in the moment, interrogatories require a written versus oral, on-the-fly response under oath. That makes them particularly effective for pinning down specific financial figures, clarifying the basis for a damages claim, or establishing facts about the business that the producing party might prefer to leave ambiguous. A damages expert can help identify the right interrogatories to serve based on what is missing from the document production and what the analysis still needs to be completed.
Consider a straightforward example: during document review, we notice that a company's cost of goods sold jumped by 40% in a single year with no corresponding increase in revenue. The financial statements do not explain it.
In deposition, we ask: "Can you walk us through what drove the increase in cost of goods sold in 2022? Was there a specific supplier change, a one-time purchase, or an operational issue that year?"
The witness explains it was a bulk inventory pre-purchase ahead of an anticipated supply chain disruption, which in fact was a one-time event, never repeated.
That answer matters enormously. Under the income approach in a valuation analysis, our goal is to identify the company's expected future maintainable earnings and the normalized, recurring earnings a hypothetical buyer would expect going forward. Without that deposition testimony, we might have treated that inflated cost year as representative of ongoing operations, understating the company's true earning power. With it, we can make a supportable adjustment and build our analysis on a foundation that reflects economic reality.
Up next: Once the documents are in and the depositions are done, the real evaluation begins. In Part 5, we will cover how a damages expert tests and validates the financial information they have been given before any of it goes into the analysis.