# Granite Arc — Corrected Damages Analysis and Ten‑Day Action Plan

## Executive summary

| Measure | Amount |
|---|---|
| Plaintiff's claim | **$9,640,488** |
| Corrected total — attrition method | **$5,733,600** |
| Corrected total — enterprise-value method | **$6,433,600** |
| Overstatement — attrition method | **$3,906,888** |
| Overstatement — enterprise-value method | **$3,206,888** |

The report contains one arithmetic error, three separate instances of double counting, and one interest methodology error. Every correction below is derived from the report's own stated inputs. Unsupported inputs (the 60 percent ratio, the attrition assumptions, the capitalization model) are flagged separately rather than replaced with invented figures.

---

## 1. Lost-profit arithmetic

Stated inputs: lost revenue $8,400,000; avoided variable cost 60 percent; contribution margin 40 percent.

$8,400,000 × 40% = **$3,360,000**

Reported figure: $3,780,000. **Overstatement: $420,000.**

$3,780,000 ÷ $8,400,000 = 45 percent. The report applied a 45 percent margin while stating a 40 percent margin. Either the multiplication is wrong or the stated margin is wrong; on the report's own stated inputs the correct product is $3,360,000. This is not a disagreement about the margin — it is a computational failure that no substantive testimony can rehabilitate without amending the stated assumption.

Separately flagged (not corrected): the 60/40 split is unsupported without the general-ledger detail. Granite Arc does not substitute its own ratio; it identifies the input as untested.

---

## 2. Emergency freight

Stated inputs: freight $620,000; of which $200,000 was booked in the variable-cost ledger used to derive the 60 percent avoided-cost ratio.

Under the governing rule, mitigation expense is recoverable in addition to lost profit **only to the extent it was not already embedded in the cost inputs**. The $200,000 already reduced revenue through the 60 percent avoided-cost deduction. Claiming it again as a standalone line item recovers it twice.

Recoverable freight: $620,000 − $200,000 = **$420,000**. **Overstatement: $200,000.**

Note the alternative cure available to plaintiff: strip the $200,000 from the ledger, recompute the ratio, and claim the full $620,000. That path requires the GL detail (which has not been produced) and would move the margin only slightly. Plaintiff cannot have both the unadjusted ratio and the unadjusted freight claim.

---

## 3. Attrition and enterprise value — the same loss twice

The report claims $1,500,000 in future attrition profit **and** $2,200,000 in diminished enterprise value, and its own valuation section concedes that the enterprise-value figure "capitalizes the same projected attrition cash flows used in item 3."

These are alternative valuations of one future cash-flow stream. Adding them recovers the same lost future customers twice — once as annual profit, once as capitalized value. Plaintiff must elect.

- **Attrition method:** include $1,500,000; exclude $2,200,000.
- **Enterprise-value method:** include $2,200,000; exclude $1,500,000.

The election is plaintiff's to make, but it must be made and supported. Granite Arc's position: absent production of the enterprise-valuation model — including the capitalization rate, projection period, and terminal assumptions — the enterprise-value measure is untestable and should be excluded, capping future damages at $1,500,000. Plaintiff should not be permitted to select the larger figure while withholding the model that produces it.

---

## 4. Unabsorbed fixed overhead

Claimed: $480,000. The report defends it by noting that fixed overhead was **not** included in the 60 percent avoided-cost ratio. That note is the proof of duplication, not the answer to it.

Because only variable costs were deducted, the 40 percent contribution margin is by construction the amount available to cover fixed overhead and profit. The contribution figure already carries the overhead burden. Adding unabsorbed overhead as a sixth line item compensates the same continuing cost twice.

**Overhead recovery: $0. Overstatement: $480,000.**

---

## 5. Prejudgment interest

The report applied 6 percent **compound** interest for two years to the **entire** $8,580,000 subtotal: $8,580,000 × (1.06² − 1) = $8,580,000 × 0.1236 = $1,060,488.

Three defects:

1. **Method.** The governing rule specifies **simple** interest, not compound.
2. **Base.** Interest applies only to **past** damages. Future attrition profit and enterprise-value diminution are excluded entirely.
3. **Contaminated base.** The base included the duplicative overhead, the duplicated freight, and the inflated lost-profit figure, magnifying every underlying error.

Correct computation — past damages only:

| Component | Amount |
|---|---|
| Corrected lost profit | $3,360,000 |
| Recoverable freight | $420,000 |
| **Past damages base** | **$3,780,000** |

Period: midpoint April 1, 2024 → valuation date April 1, 2026 = 2.0 years.

$3,780,000 × 6% × 2 = **$453,600**

**Interest overstatement: $1,060,488 − $453,600 = $606,888.**

(Coincidence worth noting for cross-examination: the corrected past-damages base, $3,780,000, is numerically identical to the figure the report mislabeled as lost profit. The witness should be walked through both derivations to confirm the equality is accidental.)

---

## 6. Corrected totals

### Attrition method

| Component | Amount |
|---|---|
| Lost profit ($8.4M × 40%) | $3,360,000 |
| Emergency freight ($620K − $200K) | $420,000 |
| Future attrition profit | $1,500,000 |
| Enterprise-value diminution | $0 (duplicative) |
| Unabsorbed overhead | $0 (duplicative) |
| Simple interest ($3,780,000 × 6% × 2) | $453,600 |
| **Total** | **$5,733,600** |

### Enterprise-value method

| Component | Amount |
|---|---|
| Lost profit | $3,360,000 |
| Emergency freight | $420,000 |
| Future attrition profit | $0 (duplicative) |
| Enterprise-value diminution | $2,200,000 |
| Unabsorbed overhead | $0 (duplicative) |
| Simple interest | $453,600 |
| **Total** | **$6,433,600** |

---

## 7. Overstatement reconciliation

**Attrition method — $9,640,488 − $5,733,600 = $3,906,888**

| Error | Amount |
|---|---|
| Lost-profit multiplication (45% applied vs. 40% stated) | $420,000 |
| Freight already in variable-cost ratio | $200,000 |
| Enterprise value duplicating attrition | $2,200,000 |
| Fixed overhead already in contribution margin | $480,000 |
| Interest: compounding + improper base | $606,888 |
| **Total** | **$3,906,888** |

**Enterprise-value method — $9,640,488 − $6,433,600 = $3,206,888**

| Error | Amount |
|---|---|
| Lost-profit multiplication | $420,000 |
| Freight duplication | $200,000 |
| Attrition duplicating enterprise value | $1,500,000 |
| Fixed overhead duplication | $480,000 |
| Interest error | $606,888 |
| **Total** | **$3,206,888** |

Under either election, roughly one-third of the claim survives. Between 33 and 41 percent of the demand is arithmetic error and double counting — before any challenge to the substantive reasonableness of the inputs.

---

## 8. Workpapers to demand and what each tests

| Workpaper | What it tests |
|---|---|
| **Native margin workbook** (live formulas, not PDF) | Whether the 45 percent applied margin was a formula error or an undisclosed assumption change; whether the 40 percent narrative matches the cells |
| **GL detail behind the 60 percent variable-cost ratio** | Which cost accounts were classified variable vs. fixed; confirmation the $200,000 freight sits inside the ratio; whether other mitigation costs are similarly embedded; whether truly variable costs were misclassified as fixed to inflate the margin |
| **Customer-level lost-revenue schedules** | Whether $8,400,000 is bottom-up and causally tied to the interruption; whether revenue was recaptured after June 30, 2024; overlap with the customers driving the attrition claim |
| **Emergency-freight invoices and account coding** | Whether the split is exactly $200,000/$420,000; whether any freight predates or postdates the loss period; whether freight was reasonable mitigation or ordinary-course expense |
| **Attrition cash-flow model** | Which customers, what retention curve, what horizon, what margin applied to attrited revenue; whether the attrition margin is internally consistent with the 40 percent contribution margin |
| **Enterprise-valuation model** | The capitalization rate, projection period, and terminal value; **direct confirmation that the capitalized cash flows are the same streams as item 3**; whether the model double counts within itself |
| **Fixed-overhead schedule** | Which overhead accounts are claimed as unabsorbed; cross-tie to the GL classification to confirm those same costs were excluded from the 60 percent ratio and are therefore already covered by contribution margin |
| **Interest calculation** | Compounding vs. simple; the base actually used; the accrual period; whether future components were included |
| **Cross-tie / reconciliation schedule** | Whether any dollar appears in more than one damages line — the single most efficient exhibit for proving duplication |

Add two requests not on the withheld list:

- **All prior drafts and version history of the damages exhibit**, to establish whether the 40/45 percent discrepancy reflects a mid-course assumption change.
- **The expert's engagement letter and instruction memoranda**, to determine whether counsel directed the additive presentation of alternative measures.

---

## 9. Ten-day litigation sequence

**Days 1–2 — Targeted supplementation demand.**
Serve a written demand itemizing the nine workpaper categories above, each paired with the specific defect it tests. Do not send a generic "produce all workpapers" letter. Specificity converts this into a record of identified, material, unproduced material — which is what supports limitation if production fails. State the arithmetic corrections on the face of the letter so plaintiff cannot later claim surprise.

**Day 3 — Rule 26 conference.**
Confer on the record. Demand two commitments: (a) production of native files by the deadline, and (b) **plaintiff's election** between the attrition and enterprise-value measures. Memorialize refusals in a same-day confirming email.

**Days 3–5 — Draft the rebuttal report in parallel.**
Do not wait for production. The arithmetic error, both duplications, and the interest error are all provable from the four corners of the PDF and the report's own concessions. Build the corrected schedule with both alternative totals and the reconciliation tables above. Reserve a supplemental section for input-level critique once workpapers arrive.

**Days 5–7 — Prepare the motion to limit, held in reserve.**
Draft now; file only if production is deficient. Frame it in tiers rather than as an all-or-nothing exclusion request:
1. Strike the fixed-overhead line as duplicative on the report's own text.
2. Compel election between attrition and enterprise value, and strike the non-elected measure.
3. Correct lost profit to $3,360,000 and freight to $420,000 as computational corrections.
4. Recast interest as simple interest on past damages only.
5. Exclude the enterprise-value opinion entirely if the valuation model remains unproduced, since the capitalization rate and terminal assumptions cannot otherwise be tested.

**Days 8–9 — Assess production.**
If native files arrive: reconcile the GL classification against the overhead schedule and the freight coding, then finalize the rebuttal. If production is partial or absent: file the tiered motion with the demand letter, the conference confirmation, and the reconciliation exhibit attached.

**Day 10 — File and set the deposition.**
Serve the rebuttal report. Notice the expert's deposition with a document-based examination plan: first lock in the 40 percent margin as the stated assumption, then walk the multiplication; then read the valuation section's own concession that it capitalizes the item 3 cash flows; then read the contribution-margin section's own statement that overhead was excluded from the ratio; then confirm the interest base and compounding. The most damaging admissions are available from the report's own text before any workpaper is discussed.

**Do not simply argue the report is "inflated."** A generalized inflation argument invites a credibility contest between experts. A line-item reconciliation showing $3,906,888 of arithmetic error and duplication — each item traced to the report's own stated inputs and internal concessions — is the difference between a discounted verdict and a corrected number the court can actually adopt.