September 30, 2016 Top Story

Expert Allowed to Offer Opinion Based on Undisclosed Sources

Proffer of expert opinion based on private data raises strategic suggestions

Adam E. Lyons

Private, undisclosed information can provide the basis for an admissible expert opinion according to the recent decision in Henkel v. Wagner. The Henkel decision gives important lessons on the strategy involved in attacking expert testimony according to ABA Section of Litigation leaders.

Determining Compensation

In Henkel, the plaintiff brought a legal malpractice suit against her former attorney for his handling of her employment lawsuit. The plaintiff, as part of her claim, was required to demonstrate the amount of compensation she would have received had she been successful in her prior lawsuit. Her appropriate compensation was not easily determined because she had been a highly compensated executive recruiter whose income was dependent on the value she returned to her employer. To provide the necessary damages evidence, the plaintiff turned to expert testimony.

In support of her theory that she was entitled to significantly more compensation than she had received, the plaintiff introduced the testimony of an expert witness on executive compensation. The expert's opinion was based on "'independent research[,] first-hand experience within the search industry, and information which [he] obtained from industry contracts, [sic] who have provided insights into compensation practices at top tier recruiting firms.'" This information was not publicly available and, other than unnamed industry sources, the plaintiff was the sole individual with whom the expert spoke. He specifically discounted reliance on published information, stating that none was available due to the confidential nature of the executive search industry.

The Defendants' Attempt to Exclude

The defendants sought to exclude the expert's testimony, alleging a lack of sufficient data and an unreliable methodology. The defendants first alleged the existence of published reports regarding executive compensation, and the expert's failure to examine those reports made his testimony insufficient. As to methodology, the defendants "provide[d] a laundry list of alleged flaws in how [the expert] arrived at his estimation . . . including that he relied upon [the plaintiff's] representations . . . and failed to properly assess the revenues that [the former employer] collected from her work." The defendants also identified, as a counter expert, an economist who intended to attack the expert's methodology, but who did not provide an alternate opinion on appropriate compensation.

The U.S. District Court for the Southern District of New York rejected both attacks. The court found a sufficient basis existed for the expert's opinions. Specifically, the defendants did not challenge the expert's experience or his reliance on industry contacts. The court considered the expert's personal experience and data the expert personally observed as sufficient bases for his testimony, regardless of his lack of published data, because Federal Rule of Evidence 702 allows an expert to rely on personal experience and data personally observed. The court also found the issues with the expert's methodology went to the weight, not the admissibility, of the evidence.

Even Without Exclusion, a Motion to Exclude Retains Value

"Two of the hallmarks of a reliable methodology are that the methodology is verifiable and repeatable. These concepts are at the core of peer review," and any expert opinion based on an analysis that is not "repeatable and verifiable" raises concern under Daubert and Kuhmo Tire, offers Matthew F. Prewitt, Chicago, IL, cochair of the Section of Litigation's Expert Witnesses Committee. The Henkel decision acknowledged those precedents and the requirements of the Federal Rules of Evidence, but nonetheless allowed the testimony. In doing so, "the Henkel court was simply observing that in practice those requirements are met more often than not. It certainly did not hold that there is something like a rebuttable presumption in favor of admissibility," observes Blanca F. Young, San Francisco, CA, cochair of the Section's Trial Evidence Committee.

As Henkel acknowledges, rather than a motion to exclude, "[c]ross-examination 'is the appropriate way of attacking weak expert testimony. . . .'" A motion to exclude, however, retains value because "such a motion requires the other side to explain the foundation for their expert's opinion and their expert's methodology, which can expose weaknesses that can then be exploited on cross-examination if the testimony is not excluded," explains Young.

In fact, the Henkel court referred to the testimony as "weak" in light of the defendants' motion. Because even an unsuccessful motion may have value, whether to file a motion to exclude becomes a strategic decision, best made on a case-by-case basis, according to Meaghan G. Boyd, Atlanta, GA, cochair of the Section's Expert Witnesses Committee. Such a motion may be particularly effective in a jury trial, and practitioners may find it useful to "both file the motion and have a counter-expert who is as qualified as the opposing side's and is relying on unpublished data that leads to the contrary conclusion," notes Boyd. In that case, "maybe the court takes a harder look at the methodology in using unnamed sources," potentially resulting in an exclusion that would not otherwise be obtained, Boyd concludes.

Adam E. Lyons is an assocaite editor for Litigation News.

Keywords:  expert, exclude, Daubert, Kuhmo, Henkel 

Related Resources

Copyright © 2017, American Bar Association. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. The views expressed in this article are those of the author(s) and do not necessarily reflect the positions or policies of the American Bar Association, the Section of Litigation, this committee, or the employer(s) of the author(s).