It’s been 25 years since the U.S. Supreme Court decided Daubert. The case officially made federal district court judges the “gatekeepers” of expert evidence. This article summarizes Daubert and other relevant case law on the admissibility of expert witness testimony and explains the steps attorneys can take to help ensure that their experts will withstand Daubert challenges. A sidebar discusses a Daubert challenge that focused on an expert’s qualifications.
Daubert v. Merrell Dow Pharmaceuticals, Inc., 113 U.S. 2786 (1993)
General Electric Co. v. Joiner, 522 U.S. 136 (1997)
Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999)
Washington v. Kellwood Co., 105 F. Supp. 3d 293, S.D.N.Y. (2015)
Case Law Trilogy
In 1993, Daubert established a two-pronged test for admissibility. First, is the reasoning or methodology underlying the testimony scientifically valid? Second, can the reasoning or methodology properly be applied to the facts of the case? In other words, an expert’s methodology must be 1) reliable, and 2) relevant.
This landmark case also identified four non-exclusive factors to consider in determining reliability:
- Has the expert’s theory or technique been tested? Can it be tested?
- Has the theory or technique been subject to peer review or publication?
- What is the theory’s or technique’s known or potential error rate?
- Is the theory or technique generally accepted in the relevant scientific or technical community?
Since Daubert, the Supreme Court has decided two more cases that refined this framework. In General Electric, the Court directed appellate courts to defer to a district court’s ruling on the admissibility of expert testimony and reverse it only if it represents an abuse of discretion.
Then, in Kumho Tire, the Court clarified that the Daubert standard applies to non-scientific testimony. This case opened the door for Daubert challenges to financial experts, including accountants, economists, and business valuation professionals.
When financial experts are disqualified under Daubert, it’s usually on grounds of reliability. For example, an expert may be disqualified because he or she relied on insufficient data or used methods that aren’t generally accepted.
But some financial experts have been excluded on relevance grounds. For example, an expert’s testimony may be excluded if it’s outside of his or her area of expertise or wasn’t tied to the specific facts of the case.
Best Practices for Surviving a Daubert Challenge
To confront Daubert challenges, hire experts whose academic credentials, certifications, and experience correspond with the relevant issues of your case. For example, be aware of the different skill sets of liability and damages experts, and use them accordingly. Never ask an expert to testify outside of his or her area of expertise.
It’s particularly dangerous when financial experts venture into legal territory. For instance, while a forensic expert can safely testify about hidden assets or other evidence of fraud, he or she should avoid making any legal conclusions about whether fraud occurred.
Also, let experts work independently. Experts who rely too heavily on work done by others or on data furnished by others (say, an attorney or the client) run the risk of exclusion.
But don’t be afraid to question your expert’s methods and assumptions for reliability. Ask yourself: Will the expert’s analyses meet the four non-exclusive factors to consider in determining reliability? Many experts use multiple methods to arrive at their conclusions. That way, if one method fails a Daubert challenge, an alternative method may still pass muster.
In addition, be critical of whether your expert considered all of the relevant data to draw his or her conclusions. If unused data exists, ask if the expert needs to consider it before finalizing his or her report. Experts who ignore relevant data may be perceived as “hired guns,” especially if the data is unfavorable to the client’s financial interests.
Finally, discuss your theory (or theories) of recovery with your expert to ensure everyone’s on the same page. Experts are sometimes excluded because their damages evidence didn’t correspond with the theories of recovery pursued at trial.
Communication is Critical
If opposing counsel hits you with a Daubert challenge, start by reviewing case law involving similar experts. Doing so may alert you to other potential vulnerabilities in your expert’s qualifications and analyses.
Also, consider your expert’s communication skills. Even if an expert’s qualifications are unimpeachable and methods are beyond reproach, he or she must have the ability to communicate his or her opinions clearly and concisely. Work with your expert to ensure that he or she knows how to explain all relevant assumptions and variables to the court.
Daubert Challenge Targets Expert’s Qualifications
In Washington v. Kellwood Co., the plaintiff claimed that the defendant had breached a license agreement to manufacture, promote, and distribute sports apparel. The defendant brought a Daubert challenge against the plaintiff’s damages expert – a CPA with extensive business valuation and forensic accounting experience – arguing that he lacked expertise in the apparel industry and marketing.
However, the court decided that the expert was qualified to testify about the apparel industry. It noted that the defendant’s argument “would, in essence, disqualify all CPAs from conducting a damage assessment unless they first acquire ‘expertise’ in the specific industry in which they purport to opine on damages.”
But the court determined that the expert’s opinions about the defendant’s marketing practices were outside the scope of his expertise. The court ruled, “Neither [his] skill, experience, training, or education gives him specialized knowledge about what are or are not reasonable marketing practices.”