Your business appraiser has a better chance of withstanding Daubert challenges than any one else

The newest PricewaterhouseCoopers’ survey, Daubert Challenges to Financial Experts, confirms that business valuators do better against Daubert challenges than any other type of financial expert.  Specific findings include:

• The number of challenges to financial expert witnesses rose to the highest level in the last 13 years, while the rate of successful challenges (45%) remained consistent with the historical average (46%).

• Challenges were concentrated in the 2nd, 5th, 6th, 7th, and 9th Circuits, which heard more than half (57%) of all challenges. The 2nd Circuit accounted for the highest percentage (15%) of the total challenges.

• In 2012, lack of relevance emerged as the most prevalent reason that a financial expert opinion was excluded. In the previous 12 years, lack of reliability was the top reason.

• Economists and accountants are the most frequently challenged financial expert witnesses. But in 2012, appraisers were the most likely to survive a challenge, while economists were the least likely to survive.

• Of all financial expert witnesses, intellectual property experts experience the highest exclusion rate.

• Exclusions more commonly result from the misuse of accepted methodologies than from the introduction of unusual or untested analytical methods.

The year 2012 marked the 13th anniversary of the U.S. Supreme Court’s Kumho Tire decision, which expanded Daubert’s reach to financial expert witnesses. The annual PwC study analyzes challenges to financial expert witnesses under the Daubert standards in the years followingKumho (2000-2012).