Key Factors In-House Counsel Need To Know When Selecting A Forensic Expert - Part II

Sunday, February 1, 2009 - 01:00

(Editor's note: This is the second part of a two-part article. The first part appeared in the January 2009 Issue.)

Background

Over the years, the case law defining the standards for admissibility of evidence and the trial judge's role in determining admissibility has evolved considerably. The 1923 Frye case formalized a common law rule requiring that there be "general acceptance" of the principles underlying scientific evidence in order for it to be admissible. In 1973, in Daubert v. Merrell Dow Pharmaceuticals, Inc., 1the Supreme Court ruled that the Federal Rules of Evidence took precedence over Frye 's common law rule. To the extent that the Rules allowed greater latitude in admitting "opinion" testimony, Daubert established the responsibility of the judge to act as "gatekeeper" in determining that evidence was both relevant and built on a reliable foundation.

The Supreme Court case of Kumho Tire Co. v. Carmichael 2in 1999 clarified that the trial judge's "gatekeeper" role extends to all expert testimony, embodying "scientific, technical, or other specialized knowledge" rather than being limited strictly to that classed as "scientific." Kumho does not specify procedures for resolving questions of relevance and reliability, but allows that determinative proceedings might be as extensive as is appropriate to the complexity of the issues. Daubert issues, then, may arise at a number of different points in the course of a litigation.

When Can A Testifying Expert Expect To Encounter Daubert Issues?

Pre-trial Conferences:

Your expert should be aware that it is quite possible his or her testimony and report may never make it into evidence. In fact, there is a possibility that the report may be ruled inadmissible before the trial even begins. At the outset of most civil actions in federal court, the judge is required to hold a scheduling conference. The Federal Rules expressly authorize the trial court judge to consider "limitations or restrictions on the use of testimony under Rule 702 of the Federal Rules of Evidence." At that time, the judge may consider Daubert factors in making his or her ruling. Therefore, it is important that your testifying expert work with counsel to ensure that his or her report will stand up to an early Daubert inquiry.

Submission of the Expert Report:

The Federal Rules of Civil Procedure, in particular Rule 26, require that each party disclose to other parties the identity of any person who may be used at trial to present evidence under Rule 702 of the Federal Rules of Evidence. Federal Rules of Civil Procedure 26(a)(2)(B) describes the disclosure requirements.

In summary, your expert witness should make sure that their report meets the requirements of Rule 26 and contains the following six items:

1. a "complete statement of all opinions to be expressed and the basis and reasons therefor";

2. all "data or other information" that the expert has "considered" in forming his or her opinions;

3. any exhibits to be used as a summary or support for the opinions;

4. the qualifications of the witness, including a list of all publications authored in the last ten years;

5. the compensation to be paid for "the study and the testimony"; and

6. a "listing" of any other "cases" in which the witness has testified as an expert "at trial or by deposition" within the previous four years.

The first item, namely a "complete statement of all opinions to be expressed and the basis and reasons therefor" (emphasis added) is intended to require that the expert supply the ingredients necessary for a Daubert analysis. As such, the testifying expert should be sure to include sufficient discussion, data and analyses to support his or her conclusion and methodology . Under a Daubert analysis , an expert's methodology is considered an integral part of his or her "basis and reasons."

Although there are no hard-and-fast rules to comply with that will assure admissibility under Daubert, your expert should consider including, at a minimum, a detailed discussion of the following:

• relevant professional standards;

• relevant professional literature;

generally accepted analytical methods;

• consideration of alternate methods;

• peer review of methodology;

• all significant analytical assumptions and variables; and

• testing of the conclusion for reasonableness.

Full disclosure becomes even more crucial in light of Federal Rules of Civil Procedure 37(c)(1), which provides sanctions for nondisclosure including prohibition against use of any undisclosed testimony at trial. The report does not have to contain all the information necessary for the judge to make a decision on admissibility but full and detailed disclosure is recommended. If the expert fails to disclose documents considered, analysis undertaken, research utilized, etc., he or she may not be able to use the evidence at trial. Not having this evidence at his or her disposal may hinder an expert during a Daubert challenge and possibly impeach his or her testimony through a motion to strike testimony.

Deposition Of The Expert Witness

In most civil cases involving expert testimony, the adversary will obtain further discovery through the use of a deposition, especially if a Daubert challenge is contemplated. Your expert should go into his or her deposition fully familiar with the Daubert requirements and be prepared to testify as to each.

Motions to Strike and "DaubertHearings"

Many federal civil cases that include expert testimony will also include a written motion challenging expert evidence under Daubert. These motions are presented in the form of a motion to strike. The moving party will usually request a Daubert hearing. In a Daubert hearing, the burden falls on the proponent of evidence to establish its admissibility. To meet his or her burden, the proponent must offer evidence sufficient to make out a prima facie case of admissibility. This will usually involve testimony from the experts themselves. Many times, if your expert took care to consider Daubert when preparing his or her report, the report itself may contain all the evidence necessary to meet this burden.

Once the prima facie case of admissibility has been satisfied, the judge will hear evidence regarding the proponent's burden of persuasion . Under this line of inquiry, the expert is not required to be able to rebut every methodological criticism that the opposition may raise in order to preserve the admissibility of his or her testimony. Instead the judge, in the classic gatekeeper role, will attempt to balance the Daubert factors with the flexible nature of the Federal Rules.

Conclusion

This article was intended to supply corporate counsel with a brief overview of the current Daubert regime and criteria for selecting an expert witness. Although experienced expert witnesses are quite familiar with the requirements of Daubert and the Federal Rules, it is important for corporate counsel to play an active role. This is of particular importance throughout the selection process.

Keep in mind one final thought. Your expert, in preparing his or her report, should provide full disclosure as to theories and methodology since there may not be an opportunity to supplement a report that provides too little at the onset. You should assess that your expert witness's report is thorough in disclosure. You may want to ask your expert whether, based upon his or her report, another expert in the same field could duplicate the expert's work. Finally, ask your expert to address the obvious objections by specifying reasons for rejecting competing techniques and ensure that your expert is thorough in disclosing all of the material considered, including why he or she did not rely on pertinent data proved that was deemed to be unhelpful to the analysis. 1Daubert v. Merrell Dow Pharmaceuticals, 509 U.S. 579 (1993).

2Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999).

John J. Scott is a Director in the Litigation Consulting and Valuation Services Group in RSM McGladrey's New York office. He brings over two decades of experience in financial services to his work as a consultant and/or expert witness in complex litigation cases. He has advised clients on matters related to intellectual property and intangible asset valuation; business valuation; oppressed minority shareholder disputes; lost profits and commercial damages; calculation of economic damages related to wrongful death/wrongful termination; construction claims; insurance claims related to business interruption, disability and personal injury; forensic accounting investigations related to business fraud, embezzlement, criminal tax cases and government programs; and business fraud. A Certified Public Accountant in New Jersey and New York, Mr. Scott is a member of the Institute of Business Appraisers (IBA) and the Association of Certified Fraud Examiners (ACFE). He is also accredited in Business Valuation (ASA) American Society of Appraisers, (ABV) by the American Institute of Certified Public Accountants. Mr. Scott received an M.B.A. from Fairleigh Dickinson University and a B.S. from Seton Hall University.

Hutch Hubbard is also a Director in the Litigation Consulting and Valuation Services Group in RSM McGladrey's New York office. He provides litigation consulting and support services to law firms and in-house counsel. Mr. Hubbard has worked on litigation consulting and support engagements in a range of industries, with an emphasis on the financial services sector. He is experienced in investigations involving securities such as debt and equity derivatives and some of the more complex strategies associated with these instruments. He has conducted damage analyses in a variety of contexts, from securities fraud to commercial litigation. Mr. Hubbard received a J.D. from Villanova University School of Law and a B.A. from Temple University.

Please email the authors at john.scott2@rsmi.com or hutch.hubbard@rsmi.com with questions about this article.