32nd annual acfe global fraud conference - covering your … · 2011. 5. 31. · 22nd annual acfe...

©2011

COVERING YOUR BASES:

RISK ASSESSMENT AND LEGAL ISSUES

WHEN ATTORNEYS ATTACK:

ANALYZING STRATEGIES FOR DEFEATING EXPERT TESTIMONY

Want to walk into trial prepared to withstand cross examination? This session will

analyze typical areas of examination covered by opposing counsel and will offer tips on how

to present your testimony in clear and concise language. This presentation will also provide

you with a typical attorney examination blueprint for expert witness examinations, as well as

useful techniques to help you endure aggressive counsel.

FRANK WISEHART, CFE, CPA, ABV, CVA

Director of Business Advisory Services

Schneider Downs, Inc.

Columbus, Ohio

Frank Wisehart M.B.A, CFE, CPA, ABV, CVA is the Director of Business Advisory

Services for Schneider Downs, Inc., a regional accounting firm servicing the Ohio Valley.

Frank specializes in forensic accounting, fraud, business valuations, economic damages,

family law, financial due diligence, bankruptcy, expert testimony, management consulting,

and general commercial litigation. He is an instructor for the National Association of

Certified Valuation Analysts, teaching Economic Losses, Business Valuation and the

Fundamentals of Litigation Consulting. Frank received the honor of “Instructor of

Great/Exceptional Distinction” every year from 2004 to 2009 for his service to NACVA.

Frank has been a featured lecturer for the Ohio State, Columbus, and Toledo Bar

Associations. Topics have included business valuation, fraud, expert witness selection, expert

testimony, daubert challenges, and other topics. Further, Frank has been a national speaker

for the Association of Certified Fraud Examiners, teaching expert witness preparation, report

writing, and testimony techniques. He has testified as an expert witness in both Federal and

State courts, offering expertise on a wide range of subjects including bankruptcy, fraud, and

lost profit damages.

Prior to Schneider Downs, Frank served as President for the past 11 years of Wisehart &

Wisehart, Inc., a CPA firm specializing locally and nationally in business valuations,

litigation support, and forensic accounting. Frank received his master of business

administration from Cornell University, Ithaca, New York and Queen‟s University, Kingston,

Ontario, Canada.

“Association of Certified Fraud Examiners,” “Certified Fraud Examiner,” “CFE,” “ACFE,” and the

ACFE Logo are trademarks owned by the Association of Certified Fraud Examiners, Inc.


22nd

Annual ACFE Fraud Conference and Exhibition ©2011 1

NOTES Introduction

In litigation, attorneys and judges follow two basic charges:

procedure and merits. Procedure relates to the steps

necessary to prosecute the case. This includes the order and

flow of testimony, admissibility of experts and evidence,

and the time frame in which the case will occur. Knowing

and understanding the gatekeepers, procedures, and

standards is an important aspect of expert witness work.

Merits relate to the case itself. These are the facts and

analysis that set forth the cause-and-effect arguments. Is the

plaintiff able to prove its case based on the facts? Or do the

facts get in the way of a good story?

As advocates, attorneys focus their attack initially on

disallowing damaging evidence from consideration by the

judge or jury. For example, failing to adhere to federal rules

might cause an expert‟s report to be rejected despite the

credible work product that was produced. New experts can

be caught in procedural issues by failing to understand

mandated timelines, discovery cutoff, and reporting

requirements. As an expert, it is important to understand

how and when you must submit your reports.

Only after passing through the maze of procedure and

standards can the merits of the case be heard. Attorneys

will frequently attack and alternatively defend four

principal areas of expert testimony: the evidence,

assumptions, methodology, and expert. Defending your

testimony relative to these four areas is critical to

establishing an expert‟s credibility.

Finally, there is no substitute for good preparation. Know

your report. Opposing counsel will have spent considerable

time dissecting its content. Know the case timeline. When

did you first become involved? When did you meet with


22nd


NOTES the client and attorney? What information was provided to

you? When did you form your opinion? These answers are

important to displaying the logical approach taken in the

assignment and orderly steps that lead to your opinion.

“Gatekeeping Obligations” in Federal Courts

Prior to the adoption of the Federal Rules of Evidence in

1975, the federal court system relied on case law and the

discretion of the court to decide matters of evidence and

expert witness. Common law evidence rules were not

uniform. Evidence laws varied from state to state and

district to district. The common law rules were harsh in

some instances and made little sense in others. A single,

comprehensive set of rules was necessary to eliminate this

rather complicated variance.

In 1965, U.S. Supreme Court Chief Justice Earl Warren

appointed an advisory committee of 15 to draft the new

rules. The committee was chaired by trial lawyer Albert E.

Jenner from Chicago. Other trial lawyers included David

Berger of Philadelphia; Hicks Epton of Wewoka,

Oklahoma; Egbert Haywood of Durham, North Carolina;

Frank Raichle of Buffalo, New York; Herman Selvin of

Los Angeles; Craig Spangenberg of Cleveland; and Edward

Bennett Williams of Washington, D.C. Members from legal

academia included Thomas F. Green, Jr. of the University

of Georgia Law School, Charles W. Joiner of the

University of Michigan Law School, Jack Weinstein of

Columbia Law School, and Edward W. Cleary of the

University of Illinois College of Law. Representing the

judiciary were U.S. Circuit Judge Simon E. Sobeloff of

Maryland, U.S. District Judge Joe E. Estes of Texas, and

U.S. District Judge Robert Van Pelt of Nebraska1.

1 http://en.wikipedia.org/wiki/Federal_Rules_of_Evidence

http://en.wikipedia.org/wiki/Earl_Warren

http://en.wikipedia.org/w/index.php?title=Albert_E._Jenner&action=edit

http://en.wikipedia.org/w/index.php?title=Albert_E._Jenner&action=edit

http://en.wikipedia.org/wiki/Chicago%2C_Illinois

http://en.wikipedia.org/w/index.php?title=David_Berger_%28lawyer%29&action=edit

http://en.wikipedia.org/w/index.php?title=David_Berger_%28lawyer%29&action=edit

http://en.wikipedia.org/wiki/Philadelphia%2C_Pennsylvania

http://en.wikipedia.org/w/index.php?title=Hicks_Epton&action=edit

http://en.wikipedia.org/wiki/Wewoka%2C_Oklahoma

http://en.wikipedia.org/wiki/Wewoka%2C_Oklahoma

http://en.wikipedia.org/w/index.php?title=Egbert_Haywood&action=edit

http://en.wikipedia.org/wiki/Durham%2C_North_Carolina

http://en.wikipedia.org/w/index.php?title=Frank_Raichle&action=edit

http://en.wikipedia.org/wiki/Buffalo%2C_New_York

http://en.wikipedia.org/w/index.php?title=Herman_Selvin&action=edit

http://en.wikipedia.org/wiki/Los_Angeles%2C_California

http://en.wikipedia.org/w/index.php?title=Craig_Spangenberg&action=edit

http://en.wikipedia.org/wiki/Cleveland%2C_Ohio

http://en.wikipedia.org/wiki/Edward_Bennett_Williams

http://en.wikipedia.org/wiki/Edward_Bennett_Williams

http://en.wikipedia.org/wiki/Washington%2C_D.C.

http://en.wikipedia.org/w/index.php?title=Thomas_F._Green%2C_Jr.&action=edit

http://en.wikipedia.org/wiki/University_of_Georgia_Law_School

http://en.wikipedia.org/wiki/University_of_Georgia_Law_School

http://en.wikipedia.org/w/index.php?title=Charles_W._Joiner&action=edit

http://en.wikipedia.org/wiki/University_of_Michigan_Law_School

http://en.wikipedia.org/wiki/Jack_Weinstein

http://en.wikipedia.org/wiki/Columbia_Law_School

http://en.wikipedia.org/w/index.php?title=Edward_W._Cleary&action=edit

http://en.wikipedia.org/w/index.php?title=University_of_Illinois_College_of_Law&action=edit

http://en.wikipedia.org/w/index.php?title=Simon_E._Sobeloff&action=edit

http://en.wikipedia.org/wiki/Maryland

http://en.wikipedia.org/w/index.php?title=Joe_E._Estes&action=edit

http://en.wikipedia.org/wiki/Texas

http://en.wikipedia.org/wiki/Robert_Van_Pelt

http://en.wikipedia.org/wiki/Nebraska


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NOTES The United States Supreme Court promulgated drafts of the

FRE in 1969, 1971, and 1972, but Congress then exercised

its right under the Rules Enabling Act to suspend

implementation of the FRE until it could study them

further. After a long delay blamed on the Watergate

scandal, Congress allowed the FRE to become federal law

in 1975, but only after enacting a series of modifications to

the rules proposed by the Supreme Court, particularly in the

area of privilege.2

As defined in FRE 102 Purpose and Construction, the

thrust of the FRE is to “secure fairness in administration,

elimination of unjustifiable expense and delay, and

promotion of growth and development of the law of

evidence to the end that the truth may be ascertained and

proceedings justly determined.”

An Overview of Selected Federal Rules of Evidence3

Rule 104 (Preliminary Questions)

A judge is assigned to preliminarily determine whether

or not to allow an expert‟s testimony.

Rule 401 (Definition of “Relevant Evidence”)

“Relevant evidence” means evidence having any

tendency to make the existence of any fact that is of

consequence to the determination of the action more

probable or less probable than it would be without the

evidence.4

2 http://en.wikipedia.org/wiki/Federal_Rules_of_Evidence

3 These summaries include text taken verbatim from the Federal Rules

of Evidence.

4 http://www.law.cornell.edu/rules/fre/rules.htm

http://en.wikipedia.org/wiki/United_States_Supreme_Court

http://en.wikipedia.org/wiki/United_States_Congress

http://en.wikipedia.org/wiki/Rules_Enabling_Act

http://en.wikipedia.org/wiki/Watergate_scandal

http://en.wikipedia.org/wiki/Watergate_scandal

http://en.wikipedia.org/wiki/Federal_law

http://en.wikipedia.org/wiki/Privilege_%28law%29

http://www.law.cornell.edu/rules/fre/rules.htm


22nd


NOTES Rule 402 (Relevant Evidence Generally Admissible;

Irrelevant Evidence Inadmissible)

All relevant evidence is admissible, except as otherwise

provided by the Constitution of the United States, by

Act of Congress, by these rules, or by other rules

prescribed by the Supreme Court pursuant to statutory

authority. Evidence that is not relevant is not

admissible.5

Rule 403 (Exclusion of Relevant Evidence on Growth

of Prejudice, Confusion, or Waste of Time)

A judge may exclude evidence if it is prejudicial, will

likely confuse or mislead a jury, or wastes time.

Rule 701 (Opinion Testimony by Lay Witnesses)

Opinion testimony is admissible by non-experts in the

form of opinions or inferences. Witnesses‟ rational

conclusions must prove useful in resolving issues and

must not be based in knowledge as defined in Rule 702.

Rule 702 (Testimony by Experts)

“If scientific, technical or other specialized knowledge

will assist the trier of fact to understand the evidence or

to determine a fact in issue, a witness qualified as an

expert by knowledge, skill, experience, training OR

education may testify thereto in the form of an opinion

or otherwise if (1) the testimony is sufficiently based

upon reliable facts or data, (2) the testimony is the

product of reliable principles and methods, and (3) the

witness has applied the principles and methods reliably

to the facts of the case.”

Testimony must be based on scientific, technical, or

other specialized knowledge and reliable methods:

5 http://www.law.cornell.edu/rules/fre/rules.htm

http://www.law.cornell.edu/rules/fre/rules.htm


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NOTES Rule focuses on “scientific” and “knowledge”

meaning “only inferences that are derived by the

scientific method can be offered as expert opinion

testimony.”6

Hypothesis testing: Process of deriving some

proposition (or hypothesis) about an observable

group of events from accepted scientific principles,

and then investigating whether, upon observation of

data regarding the group of events, the hypothesis

seems true.7

Error Rate: Likelihood of being wrong. Type I error

(level of confidence) is the test‟s propensity for

false positives, while Type II error regards false

negatives.

Testimony must assist in understanding evidence or

determining a fact in issue.

Witness must be qualified by knowledge, skill,

experience, training, or education beyond

understanding of laypersons.

The Notes of Advisory Committee elaborate on Rule

702

“The rule [FRE 702] is broadly phrased. The fields of

knowledge which may be drawn upon are not limited

merely to the „scientific‟ and „technical‟ but extend to

all „specialized‟ knowledge. Similarly, the expert is

viewed, not in a narrow sense, but as a person qualified

by „knowledge, skill, experience, training, or

education.‟ Thus within the scope of the rule are not

only experts in the strictest sense of the word, e.g.,

physicians, physicists and architects, but also the large

6 Mahle, Stephen. “Daubert and the Law and Science of Expert

Testimony in Business Litigation An Introduction to Daubert v. Merrell

Dow.” The Florida Bar Journal, April 1999.

7 Kmenta, Jan. Elements of Econometrics. (1971) Pg 112.


22nd


NOTES group sometimes called „skilled‟ witnesses, such as

bankers or landowners testifying to land values.

The common-law standard for expert qualifications is

typically even more general than the statement in Rule

702. The courts state that no exact standards are

possible for fixing the qualifications of an expert

witness. An expert is generally considered qualified if

he or she possesses special skill or knowledge

respecting the subject matter, superior to the average

person, to make the expert‟s opinion of probative

value.”8

“The multifaceted test for expert qualifications stated

by Rule 702 has significant practical benefits for

litigants . . . The ratification of experience as the basis

for qualification in the cases permits a qualified party or

an employee of a corporate party to be the expert in

many circumstances. The search for an expert witness

is limited only by the trial lawyer‟s ingenuity.”9

Rule 703 (Bases of Opinion Testimony by Experts)

“The facts or data in the particular case upon which an

expert bases an opinion or inference may be those

perceived by or made known to him at or before the

hearing. If of a type reasonably relied upon by experts

in the particular field in forming opinions or inferences

upon the subject, the facts or data need not be

admissible in evidence in order for the opinion or

inference to be admitted. Facts or data that are

otherwise inadmissible shall not be disclosed to the jury

by the proponent of the opinion or inference unless the

8 Dunn, Expert Witnesses –Law and Practice §2.2 (Lawpress 1997).

9 Dunn, Robert L. “Standards for Qualifications of Experts,” Recovery

of Damages for Lost Profits, Volume 2, (Westport, CT:Lawpress,

1998), 533.


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NOTES court determines that their probative value in assisting

the jury to evaluate the expert's opinion substantially

outweighs their prejudicial effect.”

Facts or data forming the basis of testimony may

include:

Firsthand observation,

Information presented at trial, and/or

Information received by the expert outside of court

and from outside sources.

Facts themselves need not be admitted if they are “of a

type reasonably relied upon by experts of a particular

field.”

Rule 705 (Disclosure of Facts or Data Underlying

Expert Opinion)

The expert may give his or her opinion before

disclosing the facts and data upon which the opinion is

based. The court may require the expert to reveal the

underlying facts or data during cross-examination.

Rule 1006 (Summaries)

The contents of voluminous writings, recordings, or

photographs that cannot conveniently be examined in

court may be presented in the form of a chart, summary,

or calculation. The originals, or duplicates, shall be

made available for examination or copying, or both, by

other parties at reasonable time and place. The court

may order that they be produced in court.

Frye v. United States

In 1923 in Frye v. United States, the court was faced with a

murder trial involving James Alfonzo Frye. Frye claimed

he was innocent of the charges and offered new, scientific

evidence to support his claim in the form of a blood


22nd


NOTES systolic pressure test. The court rejected this scientific

evidence because it had not been generally accepted by the

scientific community. This standard was adopted by courts

as the basis for including or excluding scientific evidence.

Interestingly, this proof of innocence test was relabeled as a

lie-detector test, and subsequently, gained general

acceptance among the scientific community.

General Electric Co. v. Joiner

The court‟s gatekeeping role was challenged as an “abuse

of discretion” in General Electric Co. v. Joiner. After

respondent Joiner was diagnosed with small-cell lung

cancer, in 1991 he sued in Georgia state court alleging his

disease was promoted by exposure to chemical toxins at his

place of work, General Electric Co. Petitioners removed the

case to federal court and moved for summary judgment.

Joiner responded with the depositions of expert witnesses,

who testified that exposure to the chemicals, PCBs, furans,

and dioxins was likely responsible for his cancer. The

District Court granted summary judgment based on the

testimony‟s failure to link exposure to PCBs and small-cell

lung cancer. The testimony was therefore inadmissible

because it did not rise above “subjective belief or

unsupported speculation.”

The Court of Appeals for the Eleventh Circuit reversed the

district court ruling. The Eleventh Circuit stated that the

Federal Rules of Evidence display a preference for

admissibility of expert testimony: “We apply a particularly

stringent standard of review to the trial judge‟s exclusion of

expert testimony.” In its ruling, the Eleventh Circuit cited

two District Court errors. First, it excluded the experts‟

testimony because it “drew different conclusions from the

research than did each of the experts.” The Court of

Appeals opined that a district court should limit its role to


22nd


NOTES determining the “legal reliability of proffered expert

testimony, leaving the jury to decide the correctness of

competing expert opinions.” Id. at 533. Second, the District

Court had held that there was no genuine issue of material

fact as to whether Joiner had been exposed to furans and

dioxins. This was also incorrect, said the Court of Appeals,

because testimony in the record supported the proposition

that there had been such exposure.

The Eleventh Circuit decision was appealed. The Supreme

Court affirmed that on appellate review of a district court‟s

decision to admit or to exclude expert testimony that it

would not initiate its own review of the basis for the court‟s

decision. Instead, appellate courts should leave in place the

trial judge‟s gatekeeper role to ensure that evidence is

relevant and reliable. Appellate courts were adjured to give

great deference to a trial court‟s admissibility decisions

unless it was an abuse of discretion. In other words, trial

judges may be quite arbitrary in ruling on expert

testimony.10

The Supreme Court affirmed that:

“Abuse of discretion” (standard ordinarily applied to

evidence review) is appropriate standard to review

district court‟s decision.

The trial judge is granted “gatekeeper” role in screening

expert testimony.

Daubert v. Merrell Dow Pharmaceuticals

Petitioners Jason Daubert and Eric Schuller are minor

children born with serious birth defects. They and their

parents sued, alleging that the birth defects were the result

of the mothers‟ ingestion of Benedectin, an antinausea drug

10

Slovenko, Ralph. “Daubert in Collapse.” International Journal of

Offender Therapy and Comparative Criminology. Vol. 2 No. 47, 2003.

pp. 240-243.


22nd


NOTES marketed by Merrell Dow Pharmaceuticals, Inc.

11 Plaintiffs

offered the testimony of eight experts who concluded that

Benedectin could cause birth defects. These experts cited

epidemiological evidence, including animal-cell studies,

live-animal studies, and chemical-structure analysis to

support their causation argument. Some of this analysis was

based on a reinterpretation of previously conducted studies

that concluded that Benedectin was not a cause of birth

defects.

Respondents employed Dr. Steven H. Lamm, a medical

expert, to refute the plaintiffs‟ claims. Dr. Lamm offered

testimony that there had been no published reports linking

Benedectin to malformations in fetuses. Dr. Lamm

concluded that, therefore, maternal use of Benedectin

during the first trimester of pregnancy had not been shown

to be a human birth defect risk factor. Based on Dr.

Lamm‟s affidavit, respondents moved for summary

judgment.

The District Court granted respondents motion for

summary judgment. The court relied upon the Frye

standard that scientific evidence is admissible only if the

principle upon which it is based is sufficiently established

to have “general acceptance in the field to which it

belongs.”12

Since the petitioners‟ studies were not

published and had not been subjected to peer review, the

court ruled that the evidence was inadmissible under the

general acceptance doctrine.

11

Daubert et ux., individually and as guardians As Litem For Daubert,

et al. v. Merrell Dow Pharmaceuticals, Inc., No. 92-102, United States

Supreme Court.

12 727 F. Supp. 570, 572 (SD Cal. 1989), quoting United States v.

Kilgus, 571 F. 2d508, 510 (CA9 1978)


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NOTES The plaintiffs appealed to the United States Court of

Appeals, Ninth Circuit. The appeals court confirmed the

district court‟s ruling. Plaintiffs appealed this decision to

the Supreme Court, which reversed the lower court rulings.

The Supreme Court decided that Frye‟s general acceptance

requirement was not necessarily a precondition to the

admissibility of scientific evidence under the Federal Rules

of Evidence. The court recognized that many well-founded

theories are too new or of too limited interest to meet the

general acceptance requirement. Additionally, the Supreme

Court affirmed a judge‟s role of scientific expert testimony

gatekeeper under Federal Rule 702. Scientific testimony

must be relevant and reliable and be the product of sound

scientific methodology. The Daubert decision formulated

relevant factors to be considered relative to the validity of

the scientific process, methodology, and conclusion. These

are not, however, rigid requirements and are to be flexibly

applied:

1. Proof of testing of the basic underlying hypothesis upon

which the technique rests;

2. Whether the method has been subjected to peer review

and publications;

3. What is the known or potential error rate;

4. Whether the method used is accepted methodology; and

5. The general acceptance of the technique used in the

scientific community.

Method v. Conclusion

In Daubert, the court had written that the “focus, of

course, must be solely on principles and methodology,

not on the conclusions they generate.”13

In Joiner v.

General Electric Co., the plaintiff charged the district

court of disagreeing with the conclusions of the

testimony rather than the methods from which the

13

509 U.S. at 595.


22nd


NOTES experts had drawn. The court responded in its first post-

Daubert decree: “[C]onclusions and methodology are

not entirely distinct from one another . . . A court may

conclude that there is simply too great an analytical gap

between the data and the opinion proffered.”14

Upholding a judge‟s right to exclude given expert

testimony on the basis of perceived analytical gaps in

the science is an unprecedented broadening of the

gatekeeper role.15

Joiner upheld a judge‟s right to exclude in the presence

of perceived analytical gaps between method and

outcome.

Peer Review

Peer review and the publication process are subject to

flaws and have their limitations. A former editor of the

Journal of the American Medical Association has

observed: “Peer review is far from being a „perfect

sausage machine for grinding out the truth‟ . . . Just

because peer review is about a review of scientific data

doesn‟t mean that it is itself a scientific process.”16

Reliability Requirement

In Kumho, the Supreme Court held that the trial judge‟s

gatekeeping obligation applies to “technical” and “other

specialized” knowledge. In addition, the court

recognized that “there is no clear line that divides the

one from the others.”17

14

118 S. Ct at 519.

15 Fridman, Daniel S. and J. Scott Janoe. “An Overview of Differing

Approaches to Judicial Gatekeeping in the United States.” Harvard

Law School, 1999 presented January 19, 1999 at State Supreme Court

Justices Conference in Washington D.C.

16 Giannelli and Imwinkleried from L.A. Times, May 22, 1989, pt. 11 at

3 (quoting Elizabeth Knoll).

17 119 S. Ct. at 1174.


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NOTES Once it was clear that the reliability requirement

applied to all expert testimony, the courts had to

determine whether “the factors cited in Daubert also

applied in this context.”18

While questioning how to

assess reliability within various forms of expertise, the

Court decided the test of reliability should be “flexible”

and Daubert‟s list of criteria must be used accordingly.

However, since “technical knowledge” involves the

application of well-established scientific principles and

procedures, it is unnecessary to subject it to the same

“full-scale reliability determination required for

scientific knowledge . . . Thus . . . its reliability may be

presumed.”19

In this way, the court effectively shifted

the burden of proof on the reliability requirement to the

opposing party.20

Rules of Thumb

An individual can qualify to render testimony in any

one of the five ways listed: knowledge, skill,

experience, training, or education (Knopf v. Skyrm, 993

F.2d 374, 377 (4th Cir. 1993)). An expert need not be

an “outstanding practitioner” in the field (United States

v. Barker, 553 F.2d 1013, 1024 (6th Cir. 1977)).

Qualification should be based on the nature and extent

of the witness‟s knowledge, not on the witness‟s “title”

(Jenkins v. United States, 307 F.2d 637, 643-44 (DC

Circuit 1962)).

18

Giannelli, Paul C. and Edward J. Imwinkleried, “Application of

Daubert to “Technical” Expert Evidence,” Scientific Evidence, Volume

1, (Charlottesville, VA: Lexis Law Publishing, 1999), 47.

19 State v. Fukusaku, 85 Haw. 462, 473, 946 P. 2d 32, 43 (1997).

20 Giannelli, Paul C. and Edward J. Imwinkleried, “Application of

Daubert to “Technical” Expert Evidence,” Scientific Evidence, Volume

1, (Charlottesville, VA: Lexis Law Publishing, 1999), 47.


22nd


NOTES Beyond Qualifications

Expert testimony must relate to subject matter in which

the expert has been qualified and no other area. Offers

to stipulate opposing counsel‟s expert qualifications are

often rejected. Stipulations can deprive juries of

material that causes the testimony to be more

persuasive. State v. Colwell 246 Kan. 382, 790 P.2d 430

(1990): When defense was forced to accept the

prosecution‟s stipulations of their counsel‟s

qualifications, the jury did not learn the credentials of

the expert who had a “national reputation” in the field.21

ACFE Litigation Engagement Professional Standards

Opposing counsel frequently question experts as to the

applicable standards for conducting litigation services. This

is a procedural issue. If you do not know your professional

standards, how can you properly prepare a professional

report? Expect this line of questioning if you do not know

your standards.

Standards of Professional Conduct

INTEGRITY AND OBJECTIVITY

Members shall conduct themselves with integrity,

knowing that public trust is founded on integrity.

Members shall not sacrifice integrity to serve the

client, their employer, or the public interest.

Prior to accepting the fraud examination, members

shall investigate for potential conflicts of interest.

21

Giannelli, Paul C. and Edward J. Imwinkleried, “Qualifications of

Experts,” Scientific Evidence, Volume 1, (Charlottesville, VA: Lexis

Law Publishing, 1999), 269.


22nd


NOTES Members shall disclose any potential conflicts of

interest to prospective clients who retain them or

their employer.

Members shall maintain objectivity in discharging

their professional responsibilities within the scope

of the engagement.

Members shall not commit discreditable acts, and

shall always conduct themselves in the best interests

of the reputation of the profession.

Members shall not knowingly make a false

statement when testifying in a court of law or other

dispute resolution forum. Members shall comply

with lawful orders of the courts or other dispute

resolution bodies. Members shall not commit

criminal acts or knowingly induce others to do so.

PROFESSIONAL COMPETENCE

Members shall be competent and shall not accept

assignments where this competence is lacking. In

some circumstances, it may be possible to meet the

requirement for professional competence by use of

consultation or referral.

DUE PROFESSIONAL CARE

Members shall exercise due professional care in the

performance of their services. Due professional care

requires diligence, critical analysis and professional

skepticism in discharging professional

responsibilities.

Conclusions shall be supported with evidence that is

relevant, competent, and sufficient.


22nd


NOTES Members‟ professional services shall be adequately

planned. Planning controls the performance of a

fraud examination from inception through

completion and involves developing strategies and

objectives for performing the services.

Work performed by assistants on a fraud

examination shall be adequately supervised. The

extent of supervision required varies depending on

the complexities of the work and the qualifications

of the assistants.

CONFIDENTIALITY

Members shall not disclose confidential or

privileged information obtained during the course of

the fraud examination without the express

permission of proper authority or order of a court.

This requirement does not preclude professional

practice or investigative body reviews as long as the

reviewing organization agrees to abide by the

confidentiality restrictions.

Standards of Reporting

GENERAL

Members‟ reports may be oral or written, including

fact witness and/or expert witness testimony, and

may take many different forms. There is no single

structure or format that is prescribed for a member‟s

report; however, the report should not be

misleading.

REPORT CONTENT

Members‟ reports shall contain only information

based on data that are sufficient and relevant to

support the facts, conclusions, opinions, and/or

recommendations related to the fraud examination.


22nd


NOTES The report shall be confined to subject matter,

principles, and methodologies within the member‟s

area of knowledge, skill, experience, training, or

education.

No opinion shall be expressed regarding the legal

guilt or innocence of any person or party.

AICPA Litigation Engagement Standards

The AICPA provides an excellent resource specifically for

litigation service engagements. Experts who are CPAs

should be familiar with these rules:

The Litigation Services and Applicable Professional

Standards publication 03-1 by the AICPA outlines its

expectations of professionals performing litigation services.

Specifically, AICPA publication 03-1 identifies the

following sections of the Code of Professional Conduct

applicable to members engaged in providing litigation

services:

Rule 101, Independence. The member should be

independent with respect to the parties.

Rule 102, Integrity and Objectivity (AICPA,

Professional Standards, vol. 2, ET sec. 102.01);

Rule 201, General Standards (AICPA, Professional

Standards, vol. 2, ET sec. 201.01);

Rule 202, Compliance With Standards (AICPA,


Rule 301, Confidential Client Information (AICPA,


Rule 302, Contingent Fees (AICPA, Professional

Standards, vol. 2, ET sec. 302.01); and,

Rule 501, Acts Discreditable (AICPA, Professional

Standards, vol. 2, ET sec. 501.01).


22nd


NOTES Of these aforementioned AICPA Codes of Conduct Rules,

102, 201, and 501 are particularly relevant. AICPA Code of

Professional Conduct Rule 102-6 provides guidance on

professional services involving client advocacy.

Specifically, 102-6 “requires (members to) maintain(ing)

objectivity and integrity and prohibits subordination of

judgment to others.”22

This is further discussed in the

Litigation Services and Applicable Professional Standards

publication 03-1 by the AICPA; “The expert does not serve

as an advocate for the client‟s position and, therefore

should not subordinate his or her judgment to the client.”23

“The expert‟s function is to assist the trier of fact in

understanding complex or unfamiliar concepts after having

applied reliable principles and methods to sufficient

relevant data.”24

Rule 201, General Standards, of the AICPA Code of

Professional Conduct requires that engagements be

conducted with due professional care using sufficient

relevant data. According to AICPA Publication 03-1, “Due

care requires diligence and critical analysis of all work

performed.”25

Furthermore, the AICPA requires that the

practitioner “obtain relevant data that is sufficient to

provide a reasonable basis for conclusions or

recommendations for any professional services

22

AICPA Code of Professional Conduct Rule 102-6, discussed in

§102.7, Page 4444.

23 Litigation Services and Applicable Professional Standards, American

Institute of Certified Public Accountants, Inc., Rule 102, Integrity and

Objectivity, Page 3, Paragraph 13.

24 [Litigation Services and Applicable Professional Standards,

American Institute of Certified Public Accountants, Inc., Rule 102,

Integrity and Objectivity, Page 3, Paragraph 13.



Objectivity, Page 4, Paragraph 18.


22nd


NOTES performed.”

26 “The practitioner should consider analyzing

key assumptions to determine whether they are reasonable.

In several recent cases, experts had their testimony

excluded because their opinions were based on assumptions

that were deemed not reasonable.”27

When considering whether or not data is sufficient and

relevant, accountants should consider whether by including

or excluding the data a risk of material financial

misstatement is likely. “The evidential matter obtained

should be sufficient for the auditor to form conclusions

concerning the validity of the individual assertions

embodied in the components of financial statements.”28

Rule 501-01, Acts Discreditable of the AICPA Code of

Professional Conduct states that, a “member shall not

commit an act discreditable to the profession.”29

Rule 501-

04 states that a member shall be considered to have

committed an act discreditable to the profession when, by

virtue of his or her negligence, the member “signs, or

permits or directs another to sign, a document containing

materially false and misleading information.”30

The Four Pillars of Expert Opinions

Experts rely on four primary legs to support their opinions.

They are the evidence, assumptions, methodology, and the

26

AICPA Code of Professional Conduct, 2005 Rule 102, discussed in

§201.06 D, Page 4561.



Objectivity, Page 5, Paragraph 24b.

28 AICPA Professional Standards Volume 1, U.S. Auditing Standards,

American Institute of Certified Public Accountants, Inc., 2002,

discussed in §326.13, Page 447.

29 AICPA Code of Professional Conduct, 2005, Rule 501, discussed in

§501.01, Page 4831.

30 AICPA Code of Professional Conduct, 2005 Rule 501, discussed in

§501.04, Page 4832.


22nd


NOTES expert him/herself. Each leg should be fundamentally solid.

The ability of the expert to defend and support each area

lends credibility to his/her testimony.

Evidence

Experts must consider many factors relating to

evidence. Who provided the evidence? Is the evidence

reliable? Is the evidence relevant? What did the expert

fail to consider? What was considered and ignored?

Attacking evidence can undermine an opinion‟s

foundation.

Proving the expert used the wrong information or failed

to consider new evidence can potentially have a

damaging effect on the expert‟s conclusion. Many

attorneys attempt to turn experts to their side based on

the consideration of altered facts or evidence. Experts

should be aware of all available data whether or not it

ultimately is used to support his or her conclusion.

Failing to arm an expert with all of the facts can harm

the expert under cross-examination.

Reliable evidence can be expressed on a continuum.

Unsupported facts and speculation are less reliable than

independent third-party facts.

Uncorroborated

Statements

Client Prepared

Financials/Tax

Returns

Audited Financials/

Bank Statements

More Reliable Less Reliable


22nd


NOTES The following additional case excluded testimony based

on inaccurate facts.31

In re Scrap Metal Antitrust Litig., 527 F.3d 517 (6th

Cir. 2008)

Concord Boat Corp. v. Brunswick Corp., 207 F.3d

1039 (8th Cir. 2000)

Relevant application of reliable facts to the instant case

is an important a factor in expert testimony. In Concord

Boat Corp. v. Brunswick Corp., 207 F.3d 1039 (8th

Cir.

2000), litigation was commenced over the alleged

behavior of Brunswick through acquisitions and

discount programs, which led to monopolization of the

stern drive engine market in Brunswick‟s favor.

Brunswick owned about 75% of the stern drive engine

market. The boat builders (Concord Boat Corp) took

exception to Brunswick‟s acquisition of US Marine

(Bayliner) and Ray Industries (Sea Ray). Further,

Brunswick offered discounts to boat builders that

purchased 60% or more of their stern engines from

Brunswick. The boat builders contended that these

practices constituted an antitrust violation and allowed

Brunswick to charge supracompetitive prices for its

engines and led to an unfair barrier of entry to other

market participants.

The boat builders hired Dr. Robert Hall as their expert.

Dr. Hall relied on the Cournot model of economic

theory that posits that a firm “maximizes its profits by

assuming the observed output of other firms as a given,

and then equating its own marginal cost and marginal

revenue on that assumption.”32

Dr. Hall concluded that

31

Case selections in this section were provided by Gerry Kowalski,

attorney, Cooper & Wolinski, LPA, Toledo Ohio.

32 Phillip E. Areeda et al., Antitrust Law: An Analysis of Antitrust

Principles and Their Application P925a (rev. ed. 1998).


22nd


NOTES any market share over 50% was evidence of

anticompetitive conduct. Further, he opined that the

discount program offered by Brunswick imposed a

“tax” on boat builders and dealers that chose to

purchase their stern engines from any firm other than

Brunswick.

Jury deliberations resulted in an award of $133,115,283

in favor of the boat builders. Brunswick appealed the

decision to the U.S. Court of Appeals for the Eighth

Circuit. The appeals court reversed and vacated the

$133M judgment. The appeals court reversed the jury

decision because Dr. Hall‟s expert opinion should not

have been admitted. Dr. Hall‟s analysis did not

incorporate all aspects of the economic reality of the

stern drive engine market and did not separate lawful

from unlawful conduct. These deficiencies led the court

to conclude that the expert‟s resulting conclusions were

“mere speculation.” Virgin Atlantic Airways Ltd. V.

British Airways PLC, 69 F. Supp. 2d 571, 580 (S.

D.N.Y. 1999) (summary judgment appropriate on

Section 1 and 2 claims because “an expert‟s opinion is

not a substitute for a plaintiff‟s obligation to provide

evidence of facts that support the applicability of the

expert‟s opinion to the case”) Expert testimony that is

speculative is not competent proof and contributes

“nothing to a „legally sufficient evidentiary basis‟”.

Weisgram v. Marley Co., U.S., 120 S. Ct 1011, 1015,

1020, 145 L. Ed 2d 958 (2000) (citing Brooke Group

Ltd. V. Brown & Williamson Tobacco Corp., 509 U.S.

209, 242, 125 L. Ed. 2d 168, 113, S. Ct. 2578 (1993)).

Although Brunswick did own more than 75% of the

stern engine market, this fact by itself did not lead to an

anticompetitive practices conclusion. Brunswick‟s

discount program was voluntary and could be


22nd


NOTES terminated by any boat builder at any time. Further,

when other stern engine manufacturers offered

competitive discounts for their engines, boat makers

switched from Brunswick engines despite the existence

of the discount offering. Since the jury award was based

on unsupported experts‟ facts, the Court of Appeals

reversed the jury award.

Brand Name Prescription Drugs Anti-Trust Litig.,

1999 U.S. Dist. LEXIS 550

In the nationwide class action suit, the class plaintiffs

allege a price-fixing conspiracy to keep name brand

prescription drugs artificially high to retail pharmacies,

in violation of Section 1 of the Sherman Act.

Plaintiffs allege that defendants stratified their pricing

policies by favoring hospitals, health maintenance

organizations, managed care facilities and mail-order

pharmacies with lower rates for brand name

prescription drugs while imposing upon retail

pharmacies an inflated pricing structure for the same

drugs.

Defendants argue that they gave discounts to the

plaintiffs in certain instances and that market conditions

were the primary consideration in whether or not they

offered discounts to any particular purchasing group.

Defendants further asserted that they gave preferential

pricing to buyers whom they felt were able to “move

market share.” Defendants asserted that customers such

as managed care organizations and hospitals created

formularies, in which a restrictive list of drugs is

created. The ability of managed care organizations and

hospitals to exclude an individual manufacturer‟s

products from its requisite formularies induced

defendants to offer the favored buying groups rebates


22nd


NOTES and discounts on brand name drugs. Pharmacies,

generally speaking, must carry a wide variety of

competing drugs. As a result, defendants argued that it

would be unethical for pharmacies to engage in steering

customers to one product over another by failing to

stock competing brands. Therefore, pharmacies do not

possess the same market power or the same ability to

include or exclude drugs based on a prescribed

formulary mix. Defendants argue that they treat

different customers differently, as any competitive

market would expect.

Plaintiffs offered the expert testimony of Dr. Robert

Lucas. In fact, the court noted Dr. Lucas‟s “eminent and

distinguished credentials. He is affiliated with the

University of Chicago, past recipient of the Nobel Prize

in Economics, an award without equal in recognition of

scholarship and contributions in his chosen discipline.”

Dr. Lucas testified that:

1. Retail pharmacies repeatedly applied to the defendant

drug manufacturers for discounted formulary pricing of

brand name prescription drugs;

2. Retail pharmacies had the same power to announce and

enforce formularies as any hospital, nursing home, or

mail-order pharmacy;

3. Retail pharmacies had the same ability as hospitals to

refuse to stock brand name prescription drugs;

4. No discounting of generic drugs to retail pharmacies

occurred;

5. Manufacturers refused to grant contract pricing options

to retail pharmacies;

6. This refusal was tantamount to collusion;

7. The formularies maintained by hospitals and HMOs

were not the reason manufacturers gave discounts to

those entities.


22nd


NOTES The court found that, “sad to say, Dr. Lucas‟ testimony

did not measure up to his unique qualifications.”

Among other things, the court found that:

1. Dr. Lucas was ignorant of the material testimony and

other evidence;

2. His opinions were not only not based on the evidence,

they were inconsistent with the evidence;

3. His opinions had no scientific basis.

In short, the court found that Dr. Lucas was “wrong in

his beliefs about every one of [his assertions]. Perhaps

even more disturbing than the fact that the evidence so

overwhelmingly established the opposite of what Dr.

Lucas thought was characteristic of the industry, was

his ignorance of that very evidence.” Dr. Lucas failed to

make any effort to investigate Plaintiffs‟ claims as to

whether any manufacturers had offered contract pricing

plans to retail pharmacies. If he had done so, he would

have found that thousands of discounts had been

offered to retail pharmacies. Further, Dr. Lucas did not

study why manufacturers gave discounts to HMOs and

hospitals. Dr. Lucas gave a conclusion, but nothing

more.

Plaintiffs were able to offer only an opportunity to

conspire, but failed to present actual evidence of a

conspiracy. Unsurprisingly, judgment was entered for

defendants.

Other cases of interest discussing the necessity of

accurate facts:

Avery Dennison Corp. v. Four Pillars Enterprise

Co., 45 Fed. Appx. 479 (6th

Cir. 2002)

Pirolozzi v. Stanbro, 2009 U.S. Dist. LEXIS 42575

(N.D. Ohio 2009)


22nd


NOTES Honeysett v. Williams, 2003 U.S. Dist. LEXIS

27595 (N.D. Ohio 2003)

United States v. Richard B. White – Fact Summary

Witnesses

Defendant Richard B. White was convicted by the

District Court of engaging in a complex scheme to

defraud Medicare of $7,290,202. Plaintiffs relied on

Federal Rule of Evidence 1006, and offered only fact

summary witnesses testimony. Under FRE 1006, an

expert witness may provide summary calculations when

the contents of the information are too voluminous to

be conveniently examined in court. Based on this

interpretation, the United States only produced

evidence before trial and did not list any expert

witnesses relative to the fact summary presentation.

These fact summary witnesses prepared summary

reports of the information, which pointed to the

defendant‟s fraudulent activity without offering any

opinions thereupon.

Defendants appealed the District Court‟s decision to the

United States Court of Appeals, Sixth Circuit, on the

basis that the expert, their testimony, and fact

summaries should have been subject to FRE 701 and

FRE 702 in the normal course of expert witness

examination.

The Court of Appeals denied the respondent‟s motion

and affirmed the lower court‟s decision to allow the fact

summary evidence in to the trial record. By offering

fact summary witness testimony, plaintiffs avoided

Daubert and other challenges normally afforded

respondents while allowing the jury to reach its own

conclusion based on the evidence, and not the expert‟s

opinion of the evidence.


22nd


NOTES Assumptions

Experts make important assumptions about key facts,

data, and interpretations of the same. The client and/or

clients‟ attorneys advocate their version of the events

and facts. As an expert, filtering this bias helps

establish independence in thought processes. This

independence helps establish the credibility of the

expert in the eyes of the trier of fact. Changing these

assumptions may produce different conclusion

outcomes. For example, an expert may make key

assumptions concerning recurring benefit streams,

company viability, appreciation rates, growth rates, etc.

The expert should be able to articulate the key

assumptions in his or her opinion and defend the same

as reasonable under the circumstances.

The following cases that excluded testimony based on

improper assumptions:

Concord Boat Corp. v. Brunswick Corp., 207 F.3d

1039 (8th

Cir. 2000)

Blue Dane Simmental Corp. v. American Simmental

Ass‟n, 178 F.3d 1035 (8th

Cir. 1999)

In re Brand Name Prescription Drugs Anti-Trust

Litig., 1999 U.S. Dist. LEXIS 550 (N.D. Ill. 1999)


Ass‟n, (ASA) 178 F.3d 1035 (8th

Cir. 1999) involved the

registration of “percentage” and “purebred” Simmental

cattle. The purebred designation, as defined by the

ASA, is cattle with slightly less than 100% Simmental

blood. Initially, the ASA did not recognize a difference

between purebred domestic animals and purebred

Simmental from the original herds of Austria, France,

Germany, or Switzerland. Some breeders sought

official acknowledgment that some animals were

original or from European herds. In response, the ASA


22nd


NOTES passed a foreign ancestry rule in 1988. As a result,

between 75,000 and 80,000 purebred animals were

given a foreign ancestry designation. Certain animals

that the ASA registered from defendant Risinger were

classified as full-blooded and purebred. Plaintiffs later

discovered that some of the Risinger cattle‟s pedigree

was 3% Angus, and the remaining 97% Simmental.

Plaintiffs sued to revoke the classification of the

Risinger animals as purebreds based on their layperson

definition that purebred cattle should be 100%

Simmental blooded.

Plaintiffs hired Dr. Alan Baquet, an agricultural

economist, who testified that following the inclusion of

the Risinger cattle as purebreds, both the Canadian and

American Simmental markets dropped by 26% and

53%, respectfully. Using a common damage method,

the before and after model, Dr. Baquet attributed 27%

of this market drop to the inclusion of the Risinger

cattle as purebreds.

The district court determined that Dr. Baquet‟s

testimony was not reliable. His assumption that the

market drop was attributable to the inclusion of the

Risinger cattle was not supported by the evidence. The

Risinger cattle made up only a tiny fraction of the

market, 19 out of 138,169 or 0.0138% of the total

Simmental head. Further, Dr. Baquet admitted that

various factors contribute to cattle breeds losing market

value and that generally, an economist would attempt to

identify and evaluate the various independent variables

affecting this change.

Accordingly, the district court ruled in favor of

defendants ASA and Risinger. Plaintiffs appealed. The


22nd


NOTES U.S. Court of Appeals for the Eighth Circuit affirmed

the lower court‟s ruling.

Other cases of interest on the issue of assumptions:

Pirolozzi v. Stanbro, 2009 U.S. Dist. LEXIS 42575

(N.D. Ohio 2009)

Bouchard v. Am. Home Prods. Corp., 2002 U.S.

Dist. LEXIS 27517 (N.D. Ohio 2002)

Experts make assumptions in two key areas: core issues

and expert assumptions. Core issues involve legal

assumptions. Did the defendants‟ actions cause the loss

in income? For example, assume in the above example

that the prized cattle were poisoned allegedly by

defendants‟ negligence. Experts may reasonably

assume these facts will be proven in the court

proceeding. Obviously, if this core issue is lost, the

underlying analysis that follows is irrelevant (because

defendants are not responsible for the loss).

Predicated upon the core assumptions are the experts‟

assumptions about the value of the lost income

opportunity. Would those lost cattle have been able to

produce valuable offspring? If so, how do you calculate

the same? What are the costs involved in replacing

these cattle? Expert assumptions should be reasonable

and apply to the facts of the case.

Methodology

There is typically more than one way to reach a

conclusion based on the facts of the case. The important

consideration for an expert is why they chose the

particular method(s) to arrive at his or her conclusion.

Were there other methods available that the expert did

not use? Did the expert consider the other methods? If


22nd


NOTES not, why? Although you need to know what you did do,

what you did not do may also be relevant.

Is the method used standard practice? In the famous

Daubert v. Merrell Dow Pharmaceuticals case, four

factors that district courts could take into account in

making the gatekeeping assessment are: whether a

theory has been tested, whether an idea has been

subjected to scientific peer review or published in

scientific journals, the rate of error involved in the

technique, and even general acceptance.33

If the expert

used a new theory in determining his or her conclusion,

this new science may be challenged under a Daubert

examination.

Cases that excluded testimony based on methodology:


Ass‟n, 178 F.3d 1035 (8th

Cir. 1999)

Virginia Vermiculite Ltd. v. W.R. Grace & Co. –

Conn., 98 F. Supp. 2d 729 (W.D. Va. 2000)

In Virginia Vermiculite Ltd. v. W.R. Grace & Co. –

Conn., 98 F. Supp. 2d 729 (W.D. Va. 2000), the expert

testimony of Seth Schwartz was not allowed. The court

found Schwartz‟s methodology to be unreliable. This

case involved the calculation of the vermiculate market

in an antitrust matter. Schwartz chose not to rely on

United States Geological Society (USGS) guideline

vermiculite calculations because he viewed these

statistics as “badly flawed” in the area of consumption

and production. Instead, Schwartz collected his own

data and opined that the other experts who relied on the

USGS were relying on improper data in forming their

definitions of a relevant market. Relying upon his

33

Daubert v. Merrell Dow Pharmaceuticals, Inc., 43 F.3d 1311 (9th

Cir. 1995).

http://en.wikipedia.org/w/index.php?title=Daubert_v._Merrell_Dow_Pharmaceuticals,_Inc.,_43_F.3d_1311_%289th_Cir._1995%29&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=Daubert_v._Merrell_Dow_Pharmaceuticals,_Inc.,_43_F.3d_1311_%289th_Cir._1995%29&action=edit&redlink=1


22nd


NOTES independently calculated vermiculite analysis in an

antitrust matter left substantial bias for error. Unlike

Schwartz‟s analysis, the USGS analysis provided

detailed surveys of the vermiculate industry. Further,

the USGS had substantial resources it employed to

calculate and observe the vermiculate industry.

Schwartz did not have, nor could he have employed,

similar resources to calculate the same. As such, the

court found Schwartz‟s methodology to be unreliable.

This fact combined with Schwartz‟s overall lack of

understanding of antitrust matters caused his testimony

and report to be excluded by the district court.

Other cases of interest on the issue of methodology:

Bouchard v. Am. Home Prods. Corp., 2002 U.S.

Dist. LEXIS 27517 (N.D. Ohio 2002)

McGarry v. Horlacher, 149 Ohio App.3d 33, (2nd

Dist. 2002)

Lewis v. Alfa Laval Separation, Inc., 128 Ohio

App.3d 200 (4th

Dist. 1998)

Expert

The final leg of expert testimony is the expert. Is the

expert qualified to form a meaningful, credible opinion?

Issues involved with the expert include:

What educational background does the expert have?

Is it enough? Should additional training

opportunities have been taken?

What credentials does the expert maintain? Has the

expert ever been disciplined by any of his or her

credentialing bodies?

Should the expert be certified in another more

suitable credential in order to better render his or

her opinion?


22nd


NOTES Has the expert embellished his accomplishments?

How many times has he or she testified about a

particular topic?

Is the expert consistent in rendering his or her

opinion? Does he or she flip sides on issues

depending upon who hires him or her?

Experts may be qualified by “knowledge, skill,

experience training or education.”34

The operative word

in this list is “or”; it is not necessary to possess all five

requisites. By possessing one, the expert may be

deemed qualified.

Cases that excluded testimony based on qualifications:

In re Independent Serv. Orgs. Antitrust Litig., 114

F. Supp. 2d 1070 (D. Kan. 2000)

Virginia Vermiculite Ltd. v. W.R. Grace & Co. –

Conn., 98 F. Supp. 2d 729 (W.D. Va. 2000)

Seatrax, Inc. v. Sonbeck Int‟l, Inc., 200 F.3d 358

(5th

Cir. 2000)

In Seatrax, Inc. v. Sonbeck Int‟l, Inc., 200 F.3d 358 (5th

Cir. 2000), plaintiff Seatrax proffered the expert

testimony of Douglas Campbelll, who testified about

lost profits Seatrax incurred pursuant to Sonbeck‟s

infringement on Seatrax‟s trademark. Campbell

possessed 15 years of experience in the marine crane

industry. Sonbeck moved to have Campbell‟s testimony

excluded. The district court granted Sonbeck‟s request,

citing Campbell‟s lack of formal or professional

training in accounting. Further, Campbell did not

conduct any independent examination of Sonbeck‟s

gross sales figures, which were provided by Seatrax‟s

attorneys. Campbell‟s lack of formal training or

education in accounting and his failure to conduct an

34

Federal Rules of Evidence 702


22nd


NOTES independent analysis of Sonbeck‟s sales figures were

insurmountable obstacles for Seatrax in its attempt to

qualify him as an expert.

The U.S. Court of Appeals for the Fifth Circuit upheld

the district court‟s ruling to exclude Campbell‟s

testimony.

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