Gossip rags and the New York Times alike have been covering the lawsuits exchanged between It Ends With Us co-stars Blake Lively and Justin Baldoni (along with Wayfarer Studios and others). Lively claims Baldoni et al. orchestrated a retaliatory smear campaign against her after she raised concerns about a hostile work environment, including allegations of sexual harassment and misconduct on the set of It Ends With Us.
The lawsuit alleges that Baldoni and his team engaged in “social manipulation” tactics, including planting negative stories, suppressing allegations against him, and attempting to destroy Lively’s reputation through a coordinated digital and media attack. (Baldoni and team have brought action of their own against Lively and her husband, Ryan Reynolds. Counsel has thrown a $400 million dart at a wall, seeking primarily punitive damages.)
Fame has economic value. Although Lively has several business ventures of her own, when you are dealing with a celebrity of that caliber, her Lively-hood operates much like a business. Among other things, Lively is seeking:
[A] money judgment representing compensatory damages including consequential damages, lost wages, earnings, and all other sums of money, together with interest.
I wanted to take a closer look at the compensatory damages the Lively team has posed in their Prayer for Relief and provide insight into what they may recover with the right economic damages expert.
Fair Market Value – Which Approach for Reputational Damages?
Much like valuing a business, in a case like this, we can compute the fair market value of the economic harm—with interest.
When quantifying reputational damages, the income approach is the most direct method for assessing lost earnings and long-term financial harm. This method projects the income an individual would have earned had the reputational damage not occurred, then discounts those future earnings to present value.
Lost Wages
Lost wages are actual, quantifiable income lost, in this case, due to reputational harm, such as a canceled film role or endorsement. I wanted to draw your attention to a line from paragraph 215 of the initial complaint:
For example, Ms. Lively cancelled a critical Target corporate event for her haircare company, and she backed out of her scheduled role to host the premier episode of the 50th anniversary season of Saturday Night Live in September 2024.
Hosting Saturday Night Live has been rumored to pay around $5,000 – a meager sum for Ms. Lively. Sure, there may be some legal recourse for her to obtain lost wages. However, the complaint doesn’t showcase any compelling evidence that external pressure or contractual breach would have forced her to step away from the engagement; rather, she stepped away on her own accord.
In fact, the complaint does not explicitly allege that Ms. Lively suffered lost wages as a direct result of the smear campaign. Its relevance lies more in the broader discussion of reputational harm and its potential long-term effects on future opportunities, in particular, the loss of earnings capacity.
Loss of Earnings Capacity
In the complaint served to Baldoni and the studio responsible for It Ends With Us,
Based on internal sales projections, the sudden and unexpected negative media campaign launched against Ms. Lively depressed retail sales of Blake Brown products by 56%–78%. This dramatic drop was entirely at odds with the high satisfaction scores that Blake Brown products received in the significant consumer testing performed before launch or its initial success after launch.
Much like lost wages, there is an argument to be made about the loss of potential earnings. However, since the timeline suggests that the campaign against Lively formally started in late July 2024, and the Blake Brown product line launched at Target in August, they have no historical sales data. Pre-operational forecasts are often overly optimistic, and actual performance frequently falls flat.
Again, I’m not a lawyer, nor do I pretend to be. Still, as an economic damages expert hired for litigation, attempting to obtain significant compensatory damages for this failed product launch with no historical financials is not a slam dunk.
Long-Term Damage to Earnings Power
Beyond this immediate claimed business loss, the greater financial impact lies in the damage to Ms. Lively’s long-term earnings power, which stems from her name, reputation, and marketability.
Think of it this way: established stars such as Lively can endorse more products than marginal celebrities, benefiting from 7-to-8-figure brand deals. When reputational harm occurs, it reduces their commercial appeal, making them less desirable to advertisers and studios.
While some celebrities recover from reputational harm within a few years, others never fully regain their previous market value. The loss of earnings capacity is not typically computed in perpetuity—instead, it is usually projected over a finite period, with the idea of recovering their earning potential within a few years.
The Secret Weapon: Celebrity Goodwill Impairment
Depending on the jurisdiction, compensatory damages can include injury to goodwill. In valuation, goodwill is often considered the intangible value of a business or individual that cannot be directly attributed to financial assets, commercial intangible assets, or intellectual property. This applies to a celebrity’s brand, often called professional or celebrity goodwill.
Goodwill is not simply the ability to generate income, it is an asset that enhances earning potential. When a celebrity’s reputation is damaged, their goodwill is diminished, impacting their ability to secure brand deals, launch successful products (such as Blake Brown), and maintain public appeal.
The goodwill impairment could be significant for a celebrity of her earning power (pre-event). Multiples of earnings (around 3x–5x) are commonly used to reflect goodwill’s impact, which could be a major driver of her compensatory damages claim.
In cases like this, where an alleged smear campaign has led to financial and reputational harm, economic damages experts such as us play a critical role in translating the financial impact for the triers of fact. A jury trial has been requested, and I look forward to seeing the numbers – and whether counsel will stress the recovery of compensatory damages or the award of punitive damages.
As the legal battle between Baldoni and Lively unfolds, it’s becoming increasingly labyrinthine and litigious—one that will take significant time and money to untangle. This goes to show that reputations take years to build but just moments to break.
If you have a case that requires a financial expert, call our office. We can be reached at 646-661-3800 or by email – msgcpa@msgcpa.com