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November 16, 2016 Articles

Gatekeeping: U.S. Litigation vs. Arbitration

Practices and rules in various arbitration venues compared with Daubert or Frye proceedings used in domestic litigation.

Jennifer Vanderhart

As they do in U.S. domestic litigation, independent industry or valuation experts often play an important role in both U.S. domestic arbitration and international arbitral proceedings. However, there are critical differences depending on venue. In U.S. domestic arbitration, state or federal rules of civil procedure are often incorporated directly, or applied indirectly, and the expectations and treatment of experts are similar to those found in U.S. domestic court proceedings. In other instances, especially in international arbitral proceedings, the manner of dealing with experts is different from that to which U.S. litigators are accustomed.

Although an arbitral panel may appoint its own expert, as can judges in U.S. domestic courts, most expert witnesses are hired by the parties, resulting in the situation sometimes referred to as the “battle of the experts.”

The rules in international arbitration proceedings with respect to the admissibility of expert witness testimony place significant discretion in the hands of the tribunal. For example, article 23 of the AAA International Dispute Resolution Procedures states that “each party shall give the tribunal and the other parties the names and addresses of any witnesses it intends to present, the subject of their testimony, and the languages in which such witnesses will give their testimony”; however, ultimately, “[t]he tribunal shall determine the manner in which witnesses are examined and who shall be present during witness examination.” In addition, article 20 states that “[t]he tribunal may decide preliminary issues, bifurcate proceedings, direct the order of proof, exclude cumulative or irrelevant testimony or other evidence, and direct the parties to focus their presentations on issues whose resolution could dispose of all or part of the case,” and also that “[t]he tribunal shall determine the admissibility, relevance, materiality, and weight of the evidence.” Article 25 of the International Dispute Resolution Procedures does specify certain requirements for tribunal-appointed experts, including a written report that is sent to the parties and to which the parties are allowed to respond (also in writing).

The Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL),  adopted by the United Nations with regard to international trade disputes, contain similar wording in that they allow for expert witnesses to be appointed by the parties and subsequently allow the tribunal to “determine the admissibility, relevance, materiality and weight of the evidence offered” (article 27). Article 29 deals with experts appointed by the arbitral tribunal and is more specific in its requirements. It details how the expert is to declare his or her impartiality and independence, the manner by which the parties can object to a specific expert, the materials that must be provided to the tribunal-appointed expert, the requirement of a written report, and the ability of either party to interrogate the expert in a hearing.

Similarly, the Rules of Procedure for Arbitration Proceedings of the International Centre for Settlement of Investment Disputes (ICSID) have three sections that address experts. Rules 34 states, inter alia, that “[t]he Tribunal shall be the judge of the admissibility of any evidence adduced and of its probative value.” Rule 35 allows the experts to be examined, and also requires that before giving evidence, each expert declare the following: “I solemnly declare upon my honour and conscience that my statement will be in accordance with my sincere belief.” Rule 36 allows for the admission of evidence through a deposition and for the possibility of an examination of an expert other than before the tribunal.

Nowhere in international arbitration, however, is there a system like that which exists in U.S. domestic courts to challenge the admissibility of evidence presented by an expert. The evidentiary standards for federal and state courts may differ, but in both venues, there is an opportunity to exclude an expert prior to trial. In federal courts, the evidentiary standards are governed by the Federal Rules of Evidence. In addition to the Federal Rules of Evidence, evidentiary standards in federal court are affected by Supreme Court opinions. State courts vary in their adherence to federal evidentiary standards.

Broadly, in the United States, there are two standards that govern the admissibility of expert testimony. The Frye standard, which is still the standard in a minority of states, derives from Frye v. United States, a 1923 decision by the U.S. Supreme Court that addressed the admissibility of evidence from a polygraph test. In the Frye case, the Court stated that “while the courts will go a long way in admitting experimental testimony deduced from a well-recognized scientific principle or discovery, the thing from which the deduction is made must be sufficiently established to have gained general acceptance in the particular field in which it belongs.” The Federal Rules of Evidence are the standard for all federal cases and contain more specific requirements than those found in Frye. Rule 702 allows a qualified witness to testify to an opinion “if (1) the testimony is based upon sufficient 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.” Rule 703 allows an expert to use data that are not necessarily admissible in evidence in formulating an opinion if such data are “of a type” reasonably relied on by experts in a field.

Three cases clarified and expanded the scope of the Federal Rules of Evidence as they apply to expert witnesses. Together, these cases became known as the “Daubert trilogy.” In Daubert v. Merrell Dow Pharmaceuticals, Inc., the Supreme Court stated that general acceptance was not a necessary precondition to the admissibility of scientific evidence and that the trial judge was responsible for ensuring that an expert’s testimony was based on a reliable foundation and relevant. In 1999, the Supreme Court provided clarification of the Daubert standard with the decision in Kumho Tire Co., Ltd. v. Carmichael. Kumho extended the standards of Daubert to include not only expert testimony about matters that are scientific but also expert testimony based on technical and other specialized knowledge. The third decision, General Electric Co. v. Joiner, held that on appeal an “abuse of discretion” standard should be applied and that the courts should examine the reasoning behind an expert’s decision as well as the general methodology.

A recent survey done by the George Mason School of Law on the timing and disposition of Daubert motions in federal district courts showed that most Daubert motions were filed at the same time as motions for summary judgment, and almost half resulted in some limitation on expert testimony. Of the motions surveyed, 23 percent resulted in the courts completely striking an expert’s testimony. Most Daubert motions, 71 percent, were filed by defendants to exclude plaintiff experts. Of the cases in the sample, there was an average of 2.1 Daubert motions filed per case.

Almost 88 percent of the cases in the sample involved a request for a jury trial. This is notable as Daubert motions are treated differently when a judge is the trier of fact. For instance, in a bankruptcy case in New York, the court noted that the gatekeeping requirements of Daubert applied “with less force in the context of a bench trial.” The judge stated:

I can accept the evidence. And if I find that it’s not well grounded by experience and expertise in the witness, I can ignore that. The gatekeeping function that Daubert talks about is most pointedly at issue in a jury trial where a jury might be misled by an expert who doesn’t have sufficient qualifications. In re Maurice J. Salem, 465 F.3d 767, 777 (7th Cir. 2006).

On appeal, the Seventh Circuit agreed, observing that the gatekeeping role is “necessarily different” in a bench trial as compared with a jury trial. The Eighth Circuit found in a similar fashion, noting that a relaxed standard applied to Daubert gatekeeping if a trial was before a judge instead of a jury. David E. Watson, P.C. v. United States, F.3d (8th Cir. 2012).

This may explain, to some extent, why there is no equivalent to a Daubert motion in arbitral proceedings. Arbitral proceedings are determined by an arbitrator or a panel of arbitrators, which makes arbitral proceedings more akin to a bench trial than a jury trial. In drafting an award, an arbitrator or panel will often take issue with the reliability, relevance, or materiality of the evidence presented by the experts and may note which experts were helpful to the panel and which were not. Many arbitration proceedings, however, are confidential; therefore, most statements made by the trier or triers of fact will be known only to the participants. This differs from the situation in U.S. courts, where Daubert motions and their dispositions are public. There are even companies that gather and organize information on Daubert proceedings, such as the number of motions filed against each expert, information about the judge, and the type of case. To the extent than an expert may have been found to be consistently unreliable in arbitral proceedings, it may take longer for practitioners to become aware of that.

The gatekeeping system in U.S. litigation is a formalized process that has become more rigorous since the acceptance of standards based on Daubert. However, the U.S. courts seem less concerned about the information that is presented at a bench trial and most concerned about keeping potentially misleading information out of the hands of a jury. Because it is the judge who is the trier of fact in a bench trial and who would also be the one to rule on a Daubert motion, it seems reasonable that the judge’s opinion on the weight, if any, to give to the testimony of a given expert could be made just as easily at the time of trial as before. One benefit of an early decision that may accrue to the party accused of presenting the unreliable testimony is that that party may be able to prepare other witnesses to present certain of the testimony that the expert would have addressed. Also, to the extent that only certain portions of an expert’s testimony are stricken, the expert often has the opportunity to supplement his or her analysis prior to trial.

In arbitral proceedings, both domestic and international, the tribunal is the trier of fact and sits in a similar position to that of a judge at a bench trial. For that reason, the tribunal is able to accord its own weight to any evidence presented. Typically, prior to the hearing, any response to an expert’s opinion comes from the report of the opposing expert. However, opposing experts are unlikely to address certain issues that an attorney may want a tribunal to consider, such as the experience of an expert or previous opinions of an expert that may be inconsistent with the current opinion. In addition, timing can be very tight in arbitral proceedings, and an attorney will have to decide how much time to spend examining the qualifications and experience of an expert once a hearing is in process. If an attorney is successful in disqualifying an expert, and if the tribunal assigns little or no weight to the testimony of an expert, the hearing may have been streamlined by that decision made prior the hearing. However, the process of excluding an expert, or portions of an expert’s testimony, is time consuming and is likely to require an additional hearing. Parties that engage in arbitration often do so in order to find a less costly resolution to their dispute, so it may be that the process that exists in U.S. domestic litigation would be unwelcome in an arbitration setting,

Ultimately, the true gatekeeping function will be driven by the attorneys or others who retain experts. Experts who underperform will typically find that they are retained less and less, whether they are providing testimony in domestic litigation or in domestic or international arbitration. An expert who provides testimony on which a trier of fact can ultimately rely will likely be given more opportunities to do just that.

Keywords: litigation, expert witnesses, gatekeeping, Daubert, international arbitration, ICC, ICSID, AAA, Frye

Jennifer Vanderhart, PhD, is a principal at Analytics Research Group, LLC, in Washington, D.C. 

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