Abstract: More than 25 years after the U.S. Supreme Court affirmed judges’ roles to act as gatekeepers against “junk science,” hundreds of experts are still being challenged under Daubert each year. This article provides examples of how federal courts evaluate the expert’s qualifications, as well as his or her methodology based on four factors: testing, peer review, error rate and acceptability.
Daubert v. Merrell Dow Pharmaceuticals Inc., 113 S.Ct. 2786, June 28, 1993
Rover Pipeline LLC v. 10.55 Acres of Land, 2018 U.S. Dist., Case No. 5:17-CV-239, 2018 WL 4386024, Sept. 14, 2018
Applying the Daubert standard in federal cases
Under Rule 702 of the Federal Rules of Evidence, an expert witness may testify if scientific, technical or other specialized knowledge will help a judge or jury make sense of evidence or understand facts. A 1993 U.S. Supreme Court case — Daubert v. Merrell Dow Pharmaceuticals Inc. — put this rule to the test, affirming judges’ roles to act as gatekeepers against “junk science.”
More than 25 years later, hundreds of experts are still being challenged under Daubert each year. How can you help ensure that your expert’s opinion will be admitted into evidence?
Focus on reliability and relevance
Rather than addressing the accuracy of an expert’s opinion, the Daubert test focuses on the reliability and relevance of an expert’s analyses. It asks the following questions:
- Has the opinion been tested?
- Has it been peer reviewed by other practitioners?
- Has the methodology been published in professional journals?
- What’s its known error rate?
- Has the expert’s profession established standards to control its use? And, if so, has the expert complied with these standards?
- Is it generally accepted among members of the scientific community?
The Supreme Court intended courts to consider these questions with flexibility and consider the method’s replicability. For instance, a new method might pass muster if another expert can replicate the expert’s analyses — and if the expert can persuade the court that the method is appropriate for the case.
Daubert dealt specifically with medical testimony. So, the legal community initially questioned whether it applied to technical or specialized expert testimony. But in 1999, Kumho Tire Company v. Carmichael ended this debate, extending the scope of Daubert beyond scientific testimony to other academic disciplines, including accounting and finance.
Do your homework
When assessing an expert’s chances of withstanding a Daubert challenge, it’s important to look beyond education, professional designations, industry experience and reputation for qualities that could lead to exclusion during such a challenge. Make sure to review relevant Daubert case law when challenging opposing experts or defending your expert.
Think beyond mathematical errors and speculative analyses. In some cases, courts may disqualify financial experts for cherry-picking documents and data sets that support their side’s financial interests. For example, in the 2018 U.S. District Court case Rover Pipeline LLC v. 10.55 Acres of Land, a business valuation expert was harshly criticized, because, when building up the cost of equity, she “used the ‘generally accepted’ Duff & Phelps numbers when they raised her valuation but ignored the guide’s suggested number when it lowered her valuation.”
Further, courts expect a high level of due diligence concerning the company’s operating history and its financial projections. For instance, a disclaimer that the valuation expert accepted a company’s projections at face value (without assessing reasonableness) might raise a red flag during a Daubert hearing.
Other potential pitfalls to avoid include ongoing professional relationships and contingent fees that may impair a financial expert’s perceived objectivity. Reliable experts maintain independence and avoid acting as advocates for their clients. Additionally, an expert’s testimony shouldn’t extend beyond his or her area of expertise.
Assess the situation
An objective review by a third expert can help reveal both experts’ mistakes and weaknesses. Such a review could be helpful in the face of a Daubert challenge — or if you’re considering challenging the expert hired by the opposition. Be aware, however, that Daubert applies in federal cases. Some state and local jurisdictions may hold expert witnesses to different standards of admissibility.