Five Keys to Minimize Daubert Exclusions of Your Financial Expert Witnesses

Posted by Arlin Crisco on Sep 2, 2014 9:38:03 AM

This graph, from PwC's Daubert Challenges to Financial Experts: A Yearly Study of Trends and Outcomes, shows exclusionssss. This graph, from PwC's 2013 edition of Daubert Challenges to Financial Experts: A Yearly Study of Trends and Outcomes, shows the exclusion rate of financial expert testimony by type, comparing 2013 to 14-year averages. Graph used by permission of PwC.

Financial expert witness testimony can be a critical component to your case, particularly in damage calculations. However, history shows that you face a significant risk of your expert’s testimony being excluded in federal court. In 14 years of courts' application of Daubert criteria to financial experts, 46% of the more than 1,500 challenges to financial experts in federal courts have been successful.

Fortunately, history also shows that you can minimize the chances your financial expert’s testimony will be excluded. Doug Branch and Saleema Damji, part of the team that develops the PricewaterhouseCoopers annual study detailing challenges to financial experts, say many exclusions are potentially preventable. The PwC study, Daubert Challenges to Financial Experts: A Yearly Study of Trends and Outcomes, has evaluated more than 1,500 published court opinions since 2000. The study and its statistics shed light on why expert witnesses are excluded and how to increase your chance of success against a Daubert challenge.

Here are five points to consider when using a financial expert witness:

1. Hire your experts early and allow them the proper time to prepare. Branch and Damji said attorneys may be tempted to hire experts as close to trial as possible, hoping to save money. However, rushed research and exclusions due to missed deadlines can have the opposite effect.

2. Ensure your witness’s methodology and studies are peer-tested and their results are supported by relevant statistics. From 2000-2013, reliability is the most common reason for excluding a financial expert witness. Reliability exclusions typically occur because of a lack of valid data, according to the PwC study's 2010 edition.

3. On the other hand, don’t push your financial witness into a conclusion outside the scope of their expertise. Relevance exclusions, which typically occur with testimony outside the expert’s role, have historically been the second-leading cause of exclusions. Branch attributes the high rate of these exclusions in part to overly aggressive attorneys that push financial expert witnesses outside their “comfort zone.”

4. Be especially vigilant and take extra time to prepare for a challenge if you’re trying a fraud or intellectual property case. In 2013, more than half of the challenges in each of these types of cases were successful. Moreover, Branch predicts that the rate of challenges in intellectual property cases will remain high because of the subjectivity in damage models.

5. Pay particular attention to appraisers’ testimony. Although accountants and economists tend to be more frequently challenged than appraisers, the exclusion rate for appraisers is higher. In 2013, appraisers’ testimony had a 45% exclusion rate, a dip from its historical average of 47%, but still high enough to take notice. By contrast, accountants faced a 29% exclusion rate in 2013, a significant drop from the study's historical average of 43%.

You can’t necessarily prevent a Daubert challenge to your expert witness. However, if you give your experts proper support and time to prepare without being too aggressive on the conclusions you want them to reach, you can minimize your chances of exclusion and deliver the strongest evidence to support your case.

Related Information

Read the 2013 edition of Daubert Challenges to Financial Experts: A Yearly Study of Trends and Outcomes.

Topics: Trial Techniques, Litigation Strategy