Daubert challenges to financial experts fall to a record low, but success rate climbs to six-year high, says annual PwC study

BVWireIssue #116-3
May 16, 2012

Remember how, back in high school, you used to gossip in the hallways after class? That’s what attorneys still do in the courthouse halls after their cases are done, which is why it can be the “kiss of death” for any financial expert to get excluded, says attorney Mark Sobel (Greenbaum Rowe Smith & Davis),who also presented at the AICPA/AAML biennial gathering in Vegas. Attorneys will talk about the exclusion and by the end of the day, that expert will be off of everyone’s referral list.

Over 11,000 challenges in 2011. Last year marked the 12th anniversary of the U.S. Supreme Court’s Kumho Tire decision, which expanded Daubert’s reach to financial experts and their opinion evidence. In 2011, alone, there were 11,262 cases citing Daubert or Kumho Tire, according to this year’s Daubert Challenges to Financial Experts by PricewaterhouseCoopers. Highlights of the current report include:

  • The number of challenges to financial experts rose every year from 2001 to 2009, but then fell off between 2010 and 2011 by a total of 40%.
  • The percentage of successful challenges has varied widely over the past 12 years, with a low of 29% in 2002 and a high of 59% in 2005. In 2011, 54% of all challenges to financial experts were successful in excluding their testimony in whole or in part, or well above the 12-year average of 45%.
  • In 2011 70% of all challenges targeted the plaintiff’s expert. Over the same time, however, just about the same number of experts from both sides were excluded, 46% for plaintiffs’ side and 48% for defendants’.
  • Challenges to economists, accountants, and appraisers are still the most frequent, last year accounting for 57% of all challenges to financial experts. Notably, accountants and appraisers were excluded much more frequently in 2011 (64% and 70%, respectively) compared with their 12-year average (51% and 46%).
  • Breach of contract actions saw the most Daubert challenges during the past 12 years, but once challenged, a higher percentage of fraud and IP experts were excluded (53% and 52%, respectively) than contract experts (44%) and a broad class of “others” (46%).
  • For the 12th consecutive year, lack of reliability was the top reason that courts excluded financial experts (7 out of 10 cases), most often due to the lack of valid data or analytical framework for the data. In 2011, alone, lack of reliability supported 76% of the exclusions.
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