REPORTER'S RECORD TRIAL COURT CAUSE NO DCV-0235-B

Transcription

1 THERESA GAMEZ, PLAINTIFF V. REPORTER'S RECORD TRIAL COURT CAUSE NO. 0-DCV-0-B DILLON TRANSPORT, INC.; DILLON TRANSPORT, INC., IN ITS COMMON OR ASSUMED NAME; KENNETH EUGENE JENNINGS AND MIGUEL A. GARCIA, SR., DEFENDANTS ) ) ) ) ) ) ) ) ) ) ) ) ) IN THE DISTRICT COURT TH JUDICIAL DISTRICT NUECES COUNTY, TEXAS 0 TESTIMONY OF BETTY WINTROATH (CONTINUED) ROBERT JOHNSON AND DONALD WEINER 0 On the 0th day of December, 0, the following proceedings came on to be heard in the above-entitled and numbered cause before the HONORABLE SANDRA L. WATTS, Judge Presiding, held in Corpus Christi, Nueces County, Texas: Proceedings reported by Machine Shorthand.

2 0 0 APPEARANCES: MR. WILLIAM R. EDWARDS III SBOT NO. 000 ANGELINA BELTRAN SBOT NO. 000 The Edwards Law Firm Frost Bank Plaza 0 North Carancahua Street, Suite 00 Corpus Christi, Texas 0 Telephone: --00 ATTORNEYS FOR PLAINTIFF MR. ALEJANDRO BLANCO California Bar No. 0 The Blanco Law Firm, P.C. North Brand Boulevard, Suite 00 Glendale, California 0 Telephone: and MR. CRAIG S. SMITH SBOT NO. 0 Law Offices of Craig S. Smith SPID, Suite A, PMB 0 Corpus Christi, Texas Telephone: --0 ATTORNEYS FOR CROSS PLAINTIFF, MIGUEL A. GARCIA, SR. MR. LARRY D. WARREN SBOT NO. 00 Naman, Howell, Smith & Lee, PLLC 00 Reunion Place, Suite 00 San Antonio, Texas Telephone: 0--0 ATTORNEY FOR DEFENDANT, DILLON TRANSPORT, INC. MR. DOUGLAS CHAVES SBOT NO. 000 MR. AIDAN PERALES SBOT NO. 00 Chaves, Obregon & Perales, LLP 0 North Carancahua, Suite 00 Corpus Christi, Texas 0 Telephone: --00 ATTORNEYS FOR DEFENDANT KENNETH EUGENE JENNINGS

3 P R O C E E D I N G S (December 0, 0) (Afternoon Session) address the. MR. EDWARDS: Your Honor, we're ready to record. THE COURT: Okay. Let's do it on the Well, where's Mr. Warren? MR. CHAVES: MR. WARREN: He's right here. I'm hiding. 0 THE COURT: Oh, you're hiding, okay. Did we find what we -- all right. We've got a composite. You want to go ahead and admit it or want to admit it in front of the jury to show we corrected the problem. MR. BLANCO: I think that would be best, Your Honor. THE COURT: jury so we can undo -- MR. BLANCO: Let's submit it in front of the I'd like to show you what 0 we've done, that way it's clear on the record. showing the Court on the left side the old one. one has a stamp August th. THE COURT: Okay. Very good. We're The new MR. BLANCO: And it is -- the stamp is the information that we received this clean copy from the economist. The --

4 to white out that? THE COURT: MR. BLANCO: Do you want me to -- do we want No, I think it will bear, you know that's why I'm making the record. THE COURT: calculations on that one? MR. BLANCO: But did he make his That's what I was going to. 0 In auditing the original document it was found that it was a type -- it had some typos so Mr. Johnson and Ms. Wintroath audited it, reviewed it, and all calculations of Mr. Johnson's are based upon this clean updated report. THE COURT: Good. I was concerned that the next witness would have faulty numbers. MR. BLANCO: We were too, so this is -- THE COURT: You're gonna admit the entire document at that time, all five pages? MR. BLANCO: Correct. 0 THE COURT: All right. We'll do it on the record. Do we need to put Ms. Wintroath back on or -- MR. BLANCO: THE COURT: MR. SMITH: I think so, Judge. Okay, let's just do that. Clean it up. THE COURT: You can take -- yeah. You can the witness stand, Ms. Wintroath. We'll clean it up.

5 on time :0. All right. Let's bring in the jury. Right They're all here. Oh, hold on in bringing them in. Juror No., Vivian Brown approached Mr. Gallegos, and advised that she was leaving for lunch and she -- Manuel (sic) Garcia approached her in the elevator and said, "Are you a juror?" She said "Yes." And then he said, "Do you know what time we have to be back?" And she said, ":0," and that was the end of 0 the conversation. So I'm just advising you what has been relayed. There was no miscommunications or anything. We always say they can have casual greetings extended them a little longer, but please admonish Mr. Garcia not to even ask questions of our jurors. MR. EDWARDS: I will do so, Your Honor. THE COURT: All right. Very good. Now you can bring them in. (Jury enters courtroom.) THE COURT: You may be seated. And I'd 0 like to start by commending the jury. I've never had a jury that has been so timely at every time from the break, from the morning session, et cetera, and I thank you very much for that. All right. MR. BLANCO: Mr. Blanco, you may proceed. Thank you, Your Honor.

6 May I approach Ms. Wintroath? THE COURT: You may do so. CROSS-EXAMINATION (Continued) BY MR. BLANCO: Q. Ms. Wintroath, I'm showing you two pages of a document, and one ha got some handwritten notes on it and the other one has a date stamp that says, "Received August th, 0." A. Yes, sir. Do you notice that? 0 Q. And through Mr. Warren, we found that there was a typo. Did you determine, by looking at these two 0 documents, that you have corrected that typo in another document? A. Yes, sir. Q. And did you provide the corrected document to Mr. Johnson for his preparation and his economic analysis? A. I did. Q. Do you know how it is that we never got the corrected copy? A. My mistake. I must have sent you the wrong -- the wrong page, but this is the corrected copy, sir. Q. And in terms of the other exhibits, this is Exhibit, Cross Plaintiff Trial. In terms of the other exhibits, are -- can we rely that they are all

7 accurate and they are -- that they're the numbers that you obtained and they're accurately reflected on all those exhibits? A. Yes, sir. Q. Thank you. THE REPORTER: So what was that number, Mr. Blanco. court reporter. THE COURT: The numbers, please, for the 0 MR. BLANCO:. THE COURT: Was that the complete report or did we already admit three other pages? MR. BLANCO: Right. So, Your Honor, the all other exhibits that I mentioned to Ms. Wintroath just now are Cross Plaintiff Trial Exhibits,,, 0, and, which have been previously described on the record. THE COURT: All right. Any objections to the admission? 0 MR. CHAVES: MR. EDWARDS: THE COURT: No objection. No. Then I will admit those specific numbered cross plaintiff's documents. MR. BLANCO: THE COURT: Thank you, Your Honor. All right.

8 MR. BLANCO: THE COURT: That's all I have. And any -- any further redirect? MR. WARREN: THE COURT: No, Your Honor. Thank you very much, ma'am, for coming. THE WITNESS: You're welcome. My apologies to the Court. THE COURT: That's all right. No harm. 0 All right. Call your next witness, please. MR. BLANCO: Yes, Your Honor, Robert W. Johnson. you raise your right hand. THE COURT: Mr. Johnson, come on up. Would (The witness is sworn.) 0 THE WITNESS: THE COURT: THE WITNESS: MR. WARREN: quickly to Mr. Blanco? THE COURT: I do, ma'am. You may be seated. Thank you. May I mention something really Yes, you may do so. (Counsel conferring.) ROBERT JOHNSON, having been first duly sworn, testified as follows:

9 DIRECT EXAMINATION 0 BY MR. BLANCO: Q. Are you ready, Mr. Johnson? A. I am, sir. Q. Great. Would you please state your full name for our record? A. Sure. My name is Robert W. Johnson. Q. And, sir, what is your profession, what do you do? A. I am a forensic economist. Q. And what is forensic economics? A. Well, a forensic economist is an economist who uses the standard techniques of economic analysis, statistics, finance and accounting, all designed to assist the triers of fact, the jury, or the judge, when they go to place dollar values on various elements or parts of damages in a case. If I'm doing damages to a business, I talk about the value of the loss profits in the equipment, and of course, loss profits. When we're 0 doing damages to an individual, we're talking about the value of their lost wages, the value of the benefits they've lost, we're talking about the cost of future care of medical expenses. Basically, what we're tasked to do is convert economic harms into dollars and we do this according to the rules of law. The law tells me

10 0 this is in the calculation. is not in the calculation. The law also tells me this So using all of these statistical accounting/finance training that I have, my task is to quantify what the economic value of the harms are. Q. And Mr. Johnson, have you prepared a presentation to help you explain the answers that you're gonna be giving me? A. That is correct, sir. 0 MR. BLANCO: Your Honor, if we may have as demonstrative, Exhibit 00, starting on page. THE COURT: MR. BLANCO: You may do so. That would be again, Cross Plaintiff Miguel Garcia -- THE COURT: I understand. 0 MR. BLANCO: -- Exhibit 00. Page, please. Q. (BY MR. BLANCO) All right. Now, in terms of economic harms? Q. What type of economic harms do we -- do we convert into dollars? A. Well, in this specific case, we're gonna talk about the loss of future earnings, we're gonna talk about specifically the loss of in terms of the future

11 0 0 cost of care, what it's going to take in dollar terms to take care of Mr. Garcia as a result of the injuries he suffered, so we've got the loss of future earnings and we've got the loss and cost of future care. Q. And Mr. Johnson, is talking about the amount, the funding that we need in order to properly fuel or properly fund the long-term care, is that an appropriate way of looking at it from an economic point of view? A. It is, sir. Q. All right. You and I have worked together in previous trials? A. That's correct. Q. Do you have an idea how many we've done? A. Oh, we've done -- it's less than a dozen, but it's over half a dozen. Q. And do they always deal -- in your field of expertise, do these cases deal with converting dollars, losses of human beings in economic losses into dollars? A. Yes, they do, sir. Q. Do you have a special nomenclature, a special name for your reports when you prepare them? A. Well, we call them economic impact reports because it's the economic dollar value of the harm. Q. All right. Let's talk about a little bit what qualifies you. Are you a forensic economic expert?

12 A. Yes, I am. Q. And what makes you a forensic economic expert? A. Well, my academic training is I have a bachelor's degree in business administration from the Baruch College of the City University of New York. I have a master's degree in business administration from Stanford University Graduate School of Business, and post-graduate training with the Strategic Planning Institute and the American Management Association. I've 0 worked on Wall Street as an investment banker for the firm of Donaldson, Lufkin and Jenrette. were the top 00 financial institutions: Our clients Bank of America, Wells Fargo, the Texas/California State retirement system. I've always worked for a division of the Singer Corporation, HRB Singer. Our division -- we didn't do sewing machines. We did signal intelligence 0 work for various agencies of the Department of Defense. I was in charge of merges and acquisitions and I worked for FMC Defense Equipment Division in San Jose, California, we're probably best known for the Bradley fighting vehicle used throughout the world. It was a $ billion division. I was in charge what's called capital budgeting, which essentially means as a government contractor, anytime we bought a piece of equipment that costs over a million dollars, I had to do all of the

13 cost justification in terms of the government regulations so we could get adequately reimbursed. Q. Have you -- we've heard about peer review 0 literature in medicine so far. economics? Q. Have you published -- A. Yes -- Q. --articles? A. -- I have. Is there such a thing in 0 Q. How about any books or chapters in books? A. Yes, I've published articles in the American Bar Journal, the American Journal for Trial Advocacy. I've coauthored a book for Lawyers Co-Op Bancroft Whitney, I've been quoted in the New York Times, Washington Post, Washington Times, and CBS Good Morning America. Q. And I take it that this is not your first rodeo, you have testified before? A. Yes, I have. Q. Do you have an estimate of -- actually, do you have an estimate of what states you have testified before? A. Well, this is not my first time in Texas. I've had numerous trials in Texas. You got -- okay, my home

14 0 state of California, Alaska, Hawaii, Washington, Oregon, Idaho, Montana, North Dakota, South Dakota, Nevada, New Mexico, Arizona, Iowa, suffice to say I got 0 pins on the map, and pretty soon, I hope to have all 0 covered, plus two U.S. territories. Q. And in terms of what kinds of courts, do you at times also testify in federal court? A. Yes, I testify in both state courts like this and federal court. Q. Estimating what's wage losses, whether they be earning capacity or actual -- or, you know, loss of earnings. How many cases have you worked on? A. Oh, over the past 0 years, several thousand. Q. Do you have the Web site? A. Yes, I do, sir. Q. And there, do you list the trial -- the information regarding your cases there on that Web site? A. I can only put on the Web site the cases I get permission from my clients. So if my client says -- 0 even like in a case like today, it's a public trial. If they say, "Don't put it up there," I respect my client's wishes. Q. In terms of the work that you do in forensics, do you -- do you do work only for plaintiff? A. No. We do both plaintiff and defense. As the

15 cases first come into our office, slightly better than 0 percent of the time they're plaintiff versus defense. As they work their way through the litigation process and they start taking depositions, cases start to settle, so now the remaining cases are now percent plaintiff. As they continue on in litigation and get to 0 0 like where we are here today in trial, almost all of my defense cases wind up settling so now it's percent plaintiff, but I don't have any control over that. Q. Do -- have you ever been given permission to publish in your Web site by the defense the cases that you work on? A. None of my defense clients have allowed me to do that, sir. Q. How about the plaintiffs, have they given you permission? A. Most of them have. Q. In terms of fees, what is your fee for the work that you do, sir? A. I have an hourly fee, it's $00 per hour. Q. Okay. Do you do this differently -- and I know I've asked this question like three times already today -- if you are working for the plaintiff or the defense in terms of analyzing the economic impact on a human being?

16 A. No, we have one way we do our work and that doesn't change whether you hired me or the other gentleman hired me. Q. And in terms of, generally speaking, evaluating, let's talk just loss of wages. What type of 0 documents do you look at when you're going to do your work? A. Well, typically, like in this specific case, we had Mr. Garcia's W- forms, that's what the employer fills out and says this is what we've paid you over the year. We had tax returns going back to 00 up to 0. We had the life care plan from Ms. Betty Wintroath. had the vocational assessment of his ability or inability to work in the future from the vocational We assessment person, Ms. Donna Johnson. We had his, Mr. Garcia's file from ICI Services Company where he had actually worked for the past almost a decade. We had his answers to interrogatories and the original answer in cross complaints. We had fringe benefit data that we 0 reviewed from the U.S. Bureau of Labor Statistics, and we had information on interest rates, wage growth and inflation rates from the Bureau of Labor and Statistics as published in the Economic Report of the President that is produced by the counsel of economic advisors. Q. Now, do we need to explain some concepts in

17 economics, such as present value and net discount rate before we get into your final conclusions and analysis? A. Yes, we do, sir. Q. All right. So let's go first to present value. If I say that phrase, "present value," does that have meaning to you in economics? A. Yes, present value has a very specific in litigation to an economist. And what it means is how 0 much money needs to be set aside today to replace that which would have been earned in the future accounting for three factors. First thing I've got to account for is inflation. We all know a dollar today doesn't have 0 the same purchasing power as it did 0 years ago, so I've got to maintain that equivalent purchasing power. The second factor I have to account for is that there's wage growth in the United States, and so, since we're looking at over time, we have to account for wages changing. And the third factor I have to account for is the fact any money awarded today has a chance to earn interest and be prudently invested and earn interest, and I've got to account for that interest earnings capacity of the money because by task is to set aside just that amount of money today that would replace exactly what would have been earned in the future such

18 that when we get to one week before retirement, all that's supposed to be left in that bank account is the last week's paycheck. It has to go to zero. You can't have any left over but you can run out of money before the end of the damages period. So I've got to adjust for inflation, changes in wages, and the interest earnings capacity of money over time into the future. So that when we get to one week before retirement the only thing this's supposed to be left is that last 0 week's paycheck. It has to go to zero. 0 Q. Now, might not say that we are now at Exhibit -- page of 00 and it's up on the monitor. Does -- what does that mean? A. Well, this chart here -- excuse me. We had just talked about interest rates, wage growth and inflation and so the way we economists make these calculations is we look historically back to see how each one of these items has affected us over the past 0, 0 years. The red line is the inflation red line. You hear it on CNN or Fox News when they say inflation's gone up or percent. The black line in the change in wages or wage growth in the United States. The green -- light green line is the interest rate on U.S. Government bonds, safe, secure, prudent investment, and the dotted line is the medical inflation rate. And so what this

19 chart first tells me is an economist is that I can't take a short-term view. I can't say, well, the money is gonna go out 0 years, let me just look back 0 because the last 0 tell me what the next 0 will be. Well, we can look at the chart and see from 0 to '0, sure doesn't look like. '0 to '0, or '0 to '0. Ten years isn't good, let's double it to 0. But 0 to 0 '0 still doesn't look like '0 to '0, or '0 to 00. We need all of the economic cycles so we take all of this data together to look at what's happened with interest rates, wage growth and inflation. Can we go to the next chart, please. Q. Sure. Number, please. A. Sure. This chart titled The Decline and the Purchasing Power of $00 helps us understand the impact of inflation. So in 0 we started with $00 having the purchasing power of $00. And then each year we 0 shrunk that $00 by the actual inflation rate we've experienced here in the United States, such that when we get to 0, ', looks like we got about bucks worth of equivalent purchasing power. In real terms what that means is in 0, if you went into a grocery store with $00, you'd probably come out with four bags of grocery. Today you go into the same grocery store, they take your $00. Now you come out you got one bag. That bag's

20 0 probably not even gonna be full. You had the same amount of dollars. You didn't have the equivalent identical purchasing power. When we do present value, we must maintain that equivalent purchasing power. Q. And where is the data? Where do you obtain this information from? A. Well, the data is obtained specifically from the Bureau of Labor Statistics and the Economic Report of the President. They measure all of the statistics 0 0 you're seeing on the prior chart and on this chart our government statistics. Q. Is this the type of documentation and statistics that experts in your field use in order to estimate the purchasing power, historical trend of the dollar? A. That is correct. We almost always use these types of figures. Q. And do we have all of the information on the earnings in private non-agricultural industry information? Q. Can we go to slide. Is that the one that shows it? A. That's correct. So this -- Q. Help us understand what this means.

21 A. Sure. Well, the title technically, is Average Weekly Earnings in Private Non-Agriculture Industries, but this is the actual raw data that that goes into calculating changes in wage growth in the United States. In 0, the average weekly wage was 0 bucks a week. Due to worker productivity, a little bit of technology, that has increased to almost $00 per week. The nice thing about this chart is, first of all, the upward slope of wage growth is greater than that downward slope 0 of inflation. So on average, wages have outpaced inflation, not as much as we'd like, but on average, wages have gone up faster than inflation. Also, the chart shows, if you look at the last five or so years, we've been through some pretty tough economic times, but still you'll see slight increases in wages here in the United States. inflation. So wages are tending to outpace 0 Q. And the source is? A. Again, the source is the Economic Report of the President and the Bureau of Labor Statistics. Q. Okay. And in terms of medical expenses or medical -- accounting or funding the medical care costs, is there some information that we need to know historically as to medical? Medical costs are not regular costs,

22 they're special, so there's a special index called the Medical Inflation Index or the medical, the CPI is what we call it in economics, that measures what's happened to the cost of medical goods and services, so if we can go to the next chart that shows exactly what we've experienced since 0. And what happens is if you take $00 of medical goods and services in 0 to buy the same package of medical goods and services, you better bring 0 close to $,000 today. medical inflation is. That's how rapid the increase in So when I do a calculation for future medical costs in a life care plan, I've got to take that into consideration because medical expenses have been growing faster than the actual regular interest rates or regular wage growth rates, or regular inflation rates. And so what we economists have recognized over the years is that we haven't been really good in predicting what the next interest rate is going to be, inflation rate or wage growth rate. What we've 0 been real good is looking at the gaps between the two. And so, what we've said is, look, if we have the average interest rate on U.S. government bonds safe, secure, prudent investment is about., and the wage growth rate is. percent on average, my interest rate's greater than my wages. What that means to me as an

23 economist is that since the interest is growing faster than wage growth. If I owe somebody money in the future, I don't need to set aside 00 cents on the dollar today. I can set aside just a little bit less and then with the compounding effect of interest catch up. For example, let's say I owed my sister $0 a year from now and I found a magic bank that was gonna pay me 0 percent interest, that's why put magic 0 bank. I put my $00 of principal in, at the end of one year I have $0 in interest and I can pay her the $0. If she says to me she wants the present value of that $0 today, I could just hand her the money. She could put it in the bank and she would be made whole one year from now. mortgage. Present value is also very much like your You know you sign on the dotted line and it 0 feels you're gonna pay a million dollars over the next 0 years. You're very first payment, small sliver, that's your principal, the rest is interest to the bank. But over the course of a 0-year $0 payment mortgage, it reverses such that on that last glorious 0th payment day, that's small sliver, that's the interest, the rest is principal and it's all taken care of. So what we do in economics we look at that net gap and we say, okay, here we're real good at

24 measuring the gap between interest rates and everything else, that's all I need to do, take whatever I've got today, and then shrink it by that amount of how much the interest rate is above wages or how much the interest rate is above medical expenses. So what we've done is we said, look -- and it's called technically the net discount rate, net being the net difference between the two. So basically, my interest rate, historically,. percent, wage growth 0 rate.. I've got a negative four tenths of a percent. Q. Let me try to break that down just a little bit. 0 A. Sure. Q. So if we invest money in interest rates in certain areas we need less money in order to make up for or come up with the losses in that area? A. Yeah, in a specific area, but with this case wages. Q. Okay. A. Since my wages are growing not as fast as the interest rate, I can set aside a little bit less and let the compounding effect of interest catch up. Q. So what's what you're talking about, in terms of wages, we talk about negative discount rate? A. That's correct.

25 Q. Okay. A. Unfortunately, if we go to medical expenses -- Q. Right. Well, let me ask you this: Did you prepare the next slide in order to show what these are? A. Yes, I did. Q. Okay. May we have number, please. Okay. Now that we have that why is it not the same with medical inflation? I mean, why can't we 0 just put a little less money than what we are going to need, 0, 0, 0 years from now and let compound interest work its magic? A. It would be really nice if medical inflation only grew with regular inflation or wages. But you saw the two -- the prior chart, the blue chart, how it was skyrocketing up, how it went from 00 to almost $,000. That growth rate is about. percent which is greater than., so I can't set aside less. I've got to set aside a little bit more, almost a full percent more today so that I don't run out of money before the end of 0 the damages period. Because when we do a present value analysis, we can't have any left over, but we can't come up short. So we have to set aside just a smidgen more each year into the future so that we don't run out of money, so I've got to adjust the numbers positively because the medical inflation historically, and

26 0 0 continues, unfortunately, to outstrip the rate of return on U.S. government bonds. Q. So. percent, is that the rate of return on bonds? A. That's the historic average -- Q. Okay. A. -- on U.S. government bonds. Q. All right. And., is that the medical inflation index also historical? A. That's for the exact same time period over the last 0 years. Q. And, again, is that a year, so it's. a year that it goes up on -- A. Correct. Q. -- average? A. That's the average rate of increase. Q. And is that where you come with the -- no, but is that how you arrive and analyze the positive of. almost percent a year? A. Adjustment factor, that's correct. Q. Okay. All right. In terms of economic matters that are probably very normal to you, but maybe foreign to some of us, do we need to learn anything else before we dive into the materials that you reviewed? A. No, sir.

27 0 Q. Okay. So in terms of the earning capacity, the ability of Mr. Garcia to do work, do you rely upon the other experts for that determination? A. Yes, we did, in this case it was Ms. Donna Johnson -- Q. Okay. A. -- the vocational expert. Q. And I think she will be with us tomorrow, but what do you learn from her report or from her information that you rely upon in order to make the calculation that you did? A. Well, she talked about his employer, she talked about his work history, but the most important thing that I learned -- because I already had how much was being paid. I already had what his employer's fringe benefit package is, so I already had that. Q. Uh-huh. A. But for me, the most important thing was her conclusion from a vocational standpoint that is that 0 he's not gainfully employable in the future. In other words, he's not gonna be able to go out there and earn anymore money. Q. Okay. And did you -- did you -- did you calculate that, did you put that in any kind of assumption or reliance upon it?

28 A. We did, sir. Q. Okay. What elements of your economic damages analysis are based on Ms. Johnson's opinions? A. Well, that would be the lost earnings capacity. Q. Okay. And is that the difference what he could do before in terms of work and what he's able to do now? A. Yes, we basically break the analysis into two parts when we talk about loss of earnings. We have the: 0 Had the injury never occurred, what could this gentleman have had the capacity, and based on his actual work history, made in the future. The second part, we say, now, as a result of the injury, what's his earnings capacity, what would he be able to make. We have two numbers. One that says had the injury not occurred, we have a second number that says as a result of the injury. The difference between those two numbers, take the second number, subtract it from the first, that's our measure of damages and loss. So when we look at somebody, we look at their wages as two parts. First 0 there's the gross wages, what's on the paycheck, and second is what does the employer contribute in the terms of contribution to Social Security, contributions to a healthcare plan, contributions to a retirement plan, that's your total compensation, gross wages plus what your employer is contributing into your retirement,

29 health, or Social Security. That's your total compensation. And we take that out as long as that person would have had the capacity to work in the work force. Typically, that's to age, that's when most people can get full Social Security. Unfortunately, for Mr. Garcia, because he's so young, he won't be able to get it till, so we did two analysis. working once to or to. We took him 0 0 Q. Okay. And that's what I was gonna ask you. In terms of economic damages -- Q. -- do you rely upon any other expert to -- to make your economic damages determinations? A. No. Q. Okay. And in terms of medical economic damages, do you rely upon an expert? A. Yes, and that would be the life care planner Ms. Wintroath. Q. Okay. We figured out that there had been a typo and that -- did you figure out there was a typo before you started your calculations? A. Yeah. Q. Okay. A. Yeah, we looked at the original, saw that, oops, that's not a good number, that's a typo, went back

30 0 to Ms. Wintroath and she said, oh, yeah, she sent us the new corrected sheet and that's how we did our calculations based only on the corrected sheet. Q. We noticed that there was a red Bate stamp of date of August of 000. Is your office in the custom 0 0 and practice of dating everything that you receive for -- to make sure when you got it? A. That's it, that's our stamp. Q. To your knowledge, Mr. Johnson, have your -- all of your numbers been done with the corrected numbers? A. Only the corrected numbers, sir. Q. Only the corrected numbers. And do you have any reason to believe that your numbers are other than accurate? A. No, sir. Q. All right. So we have two in the slide number, we have two bullet points, one is Loss of Earnings Capacity and the other one is Future Life Care Plan Expenses? A. Correct. Q. Is that how we have to understand the categories of your -- of your plan? A. That is correct, sir. Q. All right. So if we may go to slide No. 0,

31 please. 0 I think you had already talked a little bit about it, but what is the reason that you have to age? I think you mentioned that something about Social Security, but why -- why to age? A. Well, people usually look at their work life up through the point -- since there's no mandatory retirement ages anymore, not even for judges, you can work as long as you want, but people view most -- usually sort of shut it down right around where they can get full Social Security. Typically in America, that meant age, but Congress has been fixing Social Security by shoving it out for people born after. So that is definitely Mr. Garcia. He won't be able to get his full Social Security till age, so we did two analyses as him in pre-injury capacity, one to age, one to age. That is compared with the post-injury 0 which is just he's unemployable. Q. And did you mean to say that you won't be able to get his Social Security to age? A. Well, he actually won't be able to get full Social Security till age. Q. How come? A. Well, Congress, the way they decided to fix Social Security is they pushed out the date when

32 0 everybody can start to get full Social Security. Q. All right. And what is a fair -- I'm sorry. You said that you had documentation in terms of earnings from ICI here in Corpus? A. Yeah. No, we had his W-s, we had his tax returns so we knew exactly what they had been paying him for pretty close to a decade. Q. And what -- what is your preference in terms of estimating the average or the number that you're going to use to calculate future earnings, losses, based upon actual W- information? A. Sure. Well, we like to look at the history to see what this person has had the capacity to make in dollar terms. And we also like to look at, well, what were they making in the year of their injury, and because we want to get a sense of work ethic on that part. So we looked at both and we chose the more 0 conservative of the two to make our calculations. Q. And is that reflected on slide of your presentation? A. It is, sir. Q. Here we have it. Explain to us, Mr. Johnson, what is this? A. Well, what we've listed here is Mr. Garcia's Pre-Injury Earnings History. This is what he made and

33 this is based solely on his W- tax forms as provided by his employer, ICI Services, that's where I get this data. And so you can see back in '0 it's $,0, and then by 00 it's worked it's way up to $,; 0,; 0 it drops a hair to,. In 0, though, for the time period he worked from January up through March, he made,. If he continued at that 0 pace for the rest of the year, his earnings would have been,. Q. Did you put that number on -- on a slide? A. No, I didn't put it on slide. We're gonna do the analysis based on the more conservative figure,, on that part. If you chose to use that rate that he was last doing, that's about a percent increase. Q. Okay. In terms of earnings -- loss of earnings, did you also add benefits? We added the benefits because that's what's on his pay stub. They had benefits that totaled approximately. percent. That breaks down into two 0 major components. First, you've got the federal minimum. I don't care if you're working at Taco Bell or McDonald's making minimum wage, and he wasn't making minimum wage. Your employer has to contribute into Social Security. It's federal law. That amounts to be about. percent in addition. Then, ICI had a 0K

34 match. The typical employer -- in other words, a 0K is kind of like a retirement plan, if you put some in, they're gonna put some in also to match it up to a certain level. The typical amount is an additional. percent, that's what we utilize in our calculation..,. gives us an average of. percent -- Q. Okay. A. -- that we added. So 0 0 Q. And did you -- did you estimate the work life period or what we call expectancy first to age? A. The first when we did is in the work force up to age. Q. So Mr. Johnson, as an economist, to a reasonable degree of economic probability, if you take those to be accurate that he was making per W-, $, a year, that he would have the fringe benefits as you described them amounting to about. percent a year, and that he works through age, do you have a conclusion, based upon your economic analysis of what is the present value of Mr. Garcia's loss of earnings? A. Yes, I do, and we've calculated that on the next slide. Q. Okay. And could you walk us through the number and then explain to us how you arrived at it? A. Sure. We have the average yearly earnings of

35 ,. That's what he made in 0. He's injured in 0. I didn't give him any increase. I just left him at that level. fringe benefits. We added the. percent in addition We took it out to age in the year 0 0. The present value -- now we shrunk these numbers by four tenths of a percent each year into the future. Present value of the lost earnings capacity stopping at age on his th birthday $,. Q. And the source for this information? A. Well, we have the ICI Services W- from 0, we have the benefits based on data from the Bureau of Labor Statistics and ICI itself, and our net discount rate comes from the federal government and the Bureau of Labor Statistics and the Economic Report of the President. Q. And I know I asked you this question, I just want the make sure the record is clear. Are these 0 numbers to age based upon the assumptions that I asked you to take that you established through the evidence to a reasonable degree of forensic economics probability? A. They are, sir. Q. And is this a summary that you have prepared for us to know what his losses would be as to earning capacity, loss of earnings to age?

36 A. That is correct, sir. MR. BLANCO: Your Honor, I move Exhibit 00- only page as a summary into evidence. MR. WARREN: THE COURT: No objection. Admitted. MR. BLANCO: I'm sorry, 00-. MR. CHAVES: Is that -- is that the first page? MR. BLANCO: That's the only page -- the 0 slide and the page that is in public view is what I'm moving. MR. CHAVES: That's fine. No objections. THE COURT: All right. Admitted. Q. (BY MR. BLANCO) Did I -- if we calculate his loss of earnings to the date where he is going to likely be receiving, first, Social Security, did you also do that calculation, so same numbers, yearly income of $,, benefits rates of. percent, changing the 0 work life period to age or 00. those numbers, sir? A. We did, sir. Did you calculate Q. Did you do them just like the prior question, with the same level of intellectual economic rigor? A. Yes, we did, sir. Q. To a reasonable degree of economics

37 probability? A. That is correct, sir. Q. And do you have a summary for us that we can take a look as to what those numbers are?, the one prior. MR. BLANCO: May I have slide, please. 0 Q. (BY MR. BLANCO) And Mr. Johnson, please tell us what the final number is net present value or and how you arrived at it? A. Sure. We went through the same calculations, we started off again at the same rate, $, per year, same fringe benefit, package. percent. This time we 0 just took it out to age in 00, the present value,0. Q. And again, does the slide or the page document your sources? A. It does, sir. Q. Again, ICI Corporation W- 0? A. That's correct. Q. And the benefits based on the U.S. Bureau of Labor Statistics? A. That's correct, sir. Q. And the discount rate of negative? A. Correct.

38 Q. Percent, I should have said negative percent? A. Four tenths of percent. Q. Right,.0? A. Correct, sir. MR. BLANCO: Your Honor, Cross Plaintiff Mike Garcia moves Exhibit 00- into evidence. THE COURT: MR. CHAVES: THE COURT: Any objection? No objection, Your Honor. Admitted. 0 Q. (BY MR. BLANCO) Mr. Johnson, in your final calculations, did you deduct any numbers from these two calculations that you did based upon future ability to earn income? A. Well, actually, there was nothing to deduct, because based on the vocational expert, he's not employable so everything's a zero. Zero is technically a number, but we didn't wind up deducting anything. MR. BLANCO: we have No., please. And so the next slide -- may 0 Q. (BY MR. BLANCO) Is this reflecting the fact that we are not taking any money out based upon the conclusions of Ms. Johnson that he is not employable in the future? A. That he is totally unemployable in the future, that is correct, sir, no deduction.

39 Q. All right. Let's move on, if you will, to the expenses, the funds that are needed in order to take care of the life care planner. analysis? A. Yes, we did, sir. Did you do that 0 Q. All right. And did you do it following the principles and the economic calculations that you explained prior? A. Yes, I did, sir. Q. And did you arrive at a what we call -- what we need today in order to be -- have enough money to pay in the future, the monies, the funding requirements for this long-term care plan? A. Yes, I did, sir. We calculated the future present value of the entire life care plan starting as of January st, 0. So we have not included anything that may have been incurred, any costs from date of injury up through today, even through the end of this year. We only started counting a future life care plan 0 as of January, 0. Q. All right. And in terms of, you know, payments, does forensic economics concern itself whose going to pay this? A. No, our task is to present what's the cost, not who pays.

40 0 Q. Okay. And going through the expenses, have you prepared -- actually, tell us how -- what -- how did you do? Because we know that Ms. Wintroath's plan has several tables. How do you go about in forensic economics estimating the actual money requirements to pay for those services? A. Well, we'll take the information in the life care plan and then we will create actually an Excel spreadsheet. Each year and each item in the plan 0 specifically delineated, so something is supposed to occur every five years, you'll see that expense every five years. We won't do well if it's $00. We'll do $0 a year for five years, no. The actual timing is important so that expense occurs once every five years, then once every five years will you see that expense. And we did that for every single item in her life care plan. And also, we also do our -- check our own 0 arithmetic. We check everybody's arithmetic. And so we went through and we spotted the typo, we got back in contact with her, she sent us the corrected page and that's what we utilized. Q. And after doing that, did you apply the different rates -- A. We applied the appropriate net discount rate for these medical expenses at nine-tenths of a percent

41 positive. Again, at the end of a life expectancy, one 0 day past that, there's not a penny in that bank account. It is all going to zero. Q. And the life expectancy that you talk about, do you use a particular number? A. Yes, we were given the life expectancy it's to age, that's the national figure for a -- a male. Q. And does that -- how many -- so is that is another -- that goes to 0? A. That will go to 0, that is correct, sir. Q. So whatever number that you have told us as we provided will run down to zero when all these expenses, medical expenses are accounted for at the end of 0, or at the beginning of 0? I do have a third 0 alternative, on his birthday. No. That was intended to be a joke. A. Actually, his statistical life expectancy ends just about December 0. Q. Okay. So having done other work, is the number -- did you arrive at a number? A. Yes, we did, sir. Q. And did you prepare a slide with a summary of that number? A. Yes, I did, sir. MR. BLANCO: Do we have 00-, please.

42 Q. (BY MR. BLANCO) Is this number what we need in order to properly fund, even all the variabilities that we've discussed, the combinations as listed and described by Ms. Wintroath? A. Well, that's the present value of all of the items she set forth in her life care plan, that $,,. I did not include the possible complications cost of an additional $,000. I just 0 took the straight numbers that she said would actually be in there, but she did mention there's another possibility of an additional,000. I didn't include it in there. So this is the present value of the life 0 care plan out to the end of his life expectancy. Q. And again, how did you arrive at this conclusion, based upon what we've been discussing? We reviewed her life care plan, we took each one of the items in the life care plan, we calculated them out specifically, verified the arithmetic, took it out to the year 0 in the sequence that she set forth, and then we adjusted each year into the future by the ninth-tenths of a percent adjustment factor all the way out such that at the end, age, 0. Starting in 0, it total $,,. Q. Mr. Johnson, out of this just short of. million, how much money of that goes to Mr. Garcia?

43 A. Not a penny. All -- every single item in the life care plan goes to a healthcare provider, goes to buy equipment, goes to buy medical services if there's any Medicaid. Everything goes to somebody else. There's not even a dollar in there to go to Red Box and get a video. Nothing, nothing goes to Mr. Garcia, it goes to everybody else. MR. BLANCO: Your Honor, Cross Plaintiff Garcia moves 00- into evidence. 0 MR. CHAVES: THE COURT: No objections. Admitted. Q. (BY MR. BLANCO) And finally, Mr. Johnson, did you prepare for us the table that shows us the actual combined numbers, both of them? A. Yes, I did. We did put together a summary that lists both the earnings capacity and the life care plan expenses, and what it basically says, if you assume we stopped counting his work life at age, we have the earnings capacity of $,, plus the life care plan 0 of $,,, for a grand total of $,,. On the other hand, if we have him working to age, when he would be able to get full Social Security, the earnings capacity loss is $,0, the life care plan remains the same at,,, for a new grand total of $,0,0.

44 0 Q. With regards to the possible complications that you did not include, if they happen to take place, make sure these plans that you put together, these two possibilities, or actually, I should say probabilities, they do not account for those incidentals? A. Correct, they're not in there. Q. Mr. Johnson, you mentioned just recently something about life expectancy? A. Yes, sir. Q. That is basically the average remain in years until each one of us has -- but in this case specifically, Mr. Garcia has 0 -- until 0 percent of the people with his same age, his same ethnic background and gender have died, right? A. That's correct. The way they calculate the life expectancy is they take a group of people and say, 0,000, same age, race, gender. They say how long does it take for this group of 0,000 to shrink to,000. When it reaches that point, half have passed, half are 0 still here. When it hits that 0/0 point that's when they call the end of the life expectancy. That group of people is not the folks who are gonna be in the next Olympics down in Brazil or the Senior Olympics, wherever they're going to be. It includes everybody. You name a mental, a physical, health infirmity issue, it's all in

45 there. So it's not the beautiful people, it's not the super healthy people you see on the magazine covers, it's all of us. So what we have to calculate a cost of care out to the end of the life expectancy, that's what we're talking about. So when we say the end of the life 0 0 expectancy, 0 percent of the people that pass, but 0 percent are still here. Q. So from an economic point of view to a reasonable degree of forensic economic probability, what's Mr. Garcia's chance of running out of money at the end of life expectancy? A. Oh, 0 percent, yeah. Q. And Mr. Johnson, if we only wanted to give Mr. Garcia percent chance of running out of money, what do we have to account for additionally? A. We add another $0,000 if you only want to give him a percent chance of running out of money. Q. So to the numbers, if we only want to give him percent chance of running out of money, we'd have to add another 00 and? A.,000. Q. What about if we only want to give him 0 percent chance of running out of money? A.,000.

46 0 0 Q. Do you have a tally of the amount of time that it has taken you and your office to put together the work of reviewing, of doing everything that you have done for us, and for our jury in terms of reviewing medical records, reviewing economic records, reviewing the life care plan, and putting together this information, without accounting for the time that you're spending with us today? A. About 0 hours, sir. Q. And are you -- are you and I up to date in terms of the numbers, I mean, the fees? A. My office doesn't let me show up unless we are, yeah. Q. Have you -- have you billed me yet for the time today? A. No, no, not today because I don't know how long I'm going to be here. Q. But it's still the same number, $00 an hour? A. No increase, sir, no increase. Q. How about portal, sometimes people like to ask you whether you charge portal to portal or office to office? A. I'd -- I don't do a -hour clock, I'm not charging people while I'm sleeping. There's travel time, there's -- there's here in court.

47 0 Q. Okay. A. That's it. Q. And talking about the other cases that we've done together, I don't remember more than three or four. Were they also all brain injury cases, sir? A. They were, sir. Q. And you remember some of those, the numbers? A. Yes, I do. Q. Some of them were very, very, very catastrophic, right? MR. CHAVES: totally obvious -- THE COURT: MR. CHAVES: MR. BLANCO: Honor, I won't do -- THE COURT: Excuse me, Your Honor, it's Legal objection? It's irrelevant. I think I was leading, Your Well, it wasn't, it was 0 relevancy and I'll sustain it on relevancy. Q. (BY MR. BLANCO) The numbers in the life care plan, you've seen larger number on these? MR. CHAVES: Same -- MR. CHAVES: THE COURT: MR. CHAVES: Same objection, Your Honor. Legal objection? Irrelevant, leading.

48 THE COURT: MR. BLANCO: I will say sustained. My apologies, Your Honor. All right, Mr. Johnson, before I get in more trouble, I'll just stop here. Pass the witness, Your Honor. MR. CHAVES: I have no questions, Your Honor. 0 THE COURT: MR. EDWARDS: MR. BLANCO: Mr. Edwards? I have no questions. Oh, Your Honor, my apologies. I realize that I have not moved into evidence 00-. THE COURT: MR. CHAVES: THE COURT: Questions? MR. WARREN: THE COURT: Any objection on that exhibit? No objection, Your Honor. That exhibit is admitted. I do, Your Honor. Yes, please. CROSS-EXAMINATION 0 BY MR. WARREN: Q. Good afternoon, Mr. Johnson, I'm Larry Warren. How are you? A. I'm doing fine, sir. How are you today? Q. Very well. The $. million in medical that you were describing, that not one dime goes to Mr. Garcia, it goes to all the medical providers; do you