April 17th, 2013 by Keith Hock
While the 2013 Masters ended with a dramatic playoff on Sunday, one of the bigger stories of the weekend happened off of the golf course. During Friday’s 2nd round, Tiger Woods’ shot to the 15th hole caromed off the flagstick and into a pond. Mr. Woods went from being in position for a likely birdie (and the lead at the time) to a bogey (or so he thought). After the round, tournament officials decided that Mr. Woods’ post-carom drop on the 15th hole was against the rules and assessed a two stroke penalty – dropping him 4 strokes behind the 2nd round leaders. Controversy ensued – including calls for Mr. Woods to withdraw from the tournament (more details about the situation are here).
So what does this golf story have to do with forensic accounting or economic damages? In a recent newsletter, my colleague, Rebekah Smith, wrote about a case that resulted in the disqualification of a damages expert. The Court was critical of the fact that two experts – utilizing the same method – arrived at vastly different conclusions. Setting aside the specifics of that case, I think that the situation at the Masters can provide some insight as to how this can happen.
Let’s assume that Mr. Woods did not make an illegal drop (as argued here); therefore, he was wrongly penalized. Mr. Woods then files suit against the Masters tournament to recover his lost earnings. Assuming he prevails, what are his damages? Mr. Woods finished the tournament tied for fourth and earned $352,000 – the winner received $1,440,000. If Mr. Woods would have won the tournament “but-for” the penalty, his damages might be more than $1 million. Is this reasonable – or pure speculation? How might damage experts assess the situation?
On the one hand, an expert could focus on Mr. Woods’ impressive career statistics – pointing out that Mr. Woods has won 36 of 46 tournaments when leading after the second round (although he would have been two strokes back in this one) and 52 of 56 tournaments (including 14 of 15 majors) when leading after three rounds. In the absence of the turmoil caused by the penalty, Mr. Woods may have recorded a better score on Saturday and put himself into position to win the Masters on Sunday.
On the other hand, it has been 5 years since Mr. Woods’ last major victory, he has never won a major when trailing going into the final round (and his one loss when leading after 3 rounds was the last time Mr. Woods was in that position) and he faltered in the weekend rounds of several majors last year.
My point is not that Mr. Woods would have won the Masters this year – nor is it to assess which data set is better. Rather, I find this situation illustrative of what damage experts often face – a myriad of facts that must be reviewed, analyzed and assessed to determine the appropriate bases for assumptions that need to be made in the course of preparing a damage calculation.
What do you think – would Mr. Woods have won the Masters “but-for” the penalty? Would he have any recourse – and a claim for damages – if the penalty was not appropriate? Please share your thoughts in the comment section below.