Expert Witness Blog
Marketing expert witness Gabriele Goldaper describes a case she worked on and questions, “WHY DID THEY SETTLE?”
My first case was regarding a small clothing company who sued their bank claiming that when the bank did not agree to extend additional credit, the bank was responsible for the clothing company going out of business. My defense, in representing the bank, was that analyzing the books and financial history of the clothing company gave me enough evidence to state that the clothing company was already on the way out. The clothing company was not assigning appropriate markups when determining their wholesale selling prices. In addition, the company had not set any quality standards for their production contractors and thus received a lot of returns from the stores/customers, because of quality related issues.
These returns could not be resold so there was a direct hit to their profit margins. The selling and marketing expenses were far above the standards for the apparel industry. Furthermore, there had not been enough attention paid to their too high payroll and associated expenses and no attempt had been made to bring these costs to a more realistic level. Management appeared to be lacking at every level. I agreed with the bank that further loans would have been extra risky. The bank had no quantifiable information or assurance of any kind enabling them to extend additional credit.
To my surprise, the case settled.