Caught in the valuation crossfire, judges fire back with Rule 706 experts

It’s not unusual for a federal court to appoint a technical expert as an independent advisor pursuant to Rule 706 of the Federal Rules of Evidence. But now, in two high-pressure and high-profile legal settings, judges have taken the unusual step of appointing a 706 expert to testify specifically on valuation—in one case, to calculate damages directly for the jury.

In last month’s closely watched Oracle v. Google litigation, when Judge William Alsup couldn’t convince the parties to select (and pay for) an independent expert, he went ahead and appointed an economics professor to calculate damages—plus a lawyer to represent him. “Far from complicating the jury’s decision on damages,” the judge wrote, in defending his decision, “the testimony of a 706 expert would assist the jury by providing a neutral explanation and viewpoint,” particularly when—as in this case, “both sides have taken to such extreme and unreasonable positions regarding damages.” Patent litigators are concerned, however, that the case will turn into a “one witness trial,” as one recent blog reports. Plus—if the jury is aware of the appointment, the 706 expert’s testimony could carry a “powerful stamp of court approval and objectivity.”

Objectivity may be precisely the goal of appointing a 706 expert—and time will tell whether Alsup’s move was an aberration (and an attempt to force settlement) or an expanding trend. In federal bankruptcy cases, for instance, the judges are increasingly troubled by the “gangs of bankruptcy debt buyers” whose “abusive tactics” threaten to embroil the cases in valuation disputes and potentially erode the Chapter 11 process, says a bankruptcy blog.  At least one bankruptcy judge “has taken some unprecedented and unique actions to combat the problem of valuation wars,” and one of these weapons, “appointing valuation experts to cases, can be used across the nation.”