Key things testifying experts need to know

BVWireIssue #170-3
November 16, 2016

A number of great workshops at the recent AICPA FVS Conference in Nashville focused on the challenges financial professionals will encounter when serving as testifying experts.

Seth Fisher and Saleema Damji (PricewaterhouseCoopers) presented findings from an impressive 16-year PwC study that examined post-Kumho Tire cases involving attacks on financial expert testimony.

  • In 2015, accountants faced the highest number of Daubert challenges and had the highest exclusion rate. Appraisers and economists were in second and third place.
  • Plaintiff experts are challenged twice as often as defense experts, but defense experts are excluded at a slightly higher rate.
  • Most of the time, appeals courts affirm lower court rulings. (This is not surprising considering the high standard of review.) Interestingly, appeals courts are more likely to agree with the trial court when the trial court admitted the testimony than when it excluded the expert.
  • Failure to meet Daubert’s reliability requirement is the most common reason for excluding financial expert testimony. But how to assess reliability is a tricky question: Does an opinion qualify as reliable because the expert uses a generally accepted method or is it a matter of how the generally accepted method was applied?
  • Under Daubert’s generous admission standard, courts prefer to allow the expert to testify and leave it to cross-examination to test for reliability; courts also have been willing to allow experts a second bite at the apple.

Laurin Quiat (Baker Hostetler), Jason MacMorran (Postlethwaite & Netterville), and Jim Koerber (The Koerber Co. PA) provided strategic advice to experts working in the litigation arena in their presentation, “Responding to Challenged Opinions.”

  • A good expert report does not preclude a Daubert challenge.
  • It’s fair to assume attorneys know the applicable practice aids, professional standards, and other forensic and valuation guidance materials and want to know the expert they look to hire knows them.
  • Attorneys place value on an expert’s credentials and proof of continuing education.
  • The rise in Daubert challenges is partly a function of the attorneys’ increasing knowledge of what makes for good expert testimony and increasing comfort level about staging a Daubert challenge.
  • An expert needs to know the applicable case law. If a court’s ruling flies in the face of accepted valuation principles, prepare two valuations: one in compliance with the ruling and an alternate one in compliance with the valuation standards. A valuation that simply ignores case law may mean the expert never gets to testify.
  • Courts and litigation participants increasingly hire experts to review the work of the primary experts, particularly in complex cases. If you are the primary expert, consider this a nudge to up your game.
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