Expert Determinations
Parties sometimes choose to retain a joint neutral expert quickly to resolve a dispute about accounting or technical issues without resorting to litigation. For example, business sale agreements can require that an expert resolve disputes about the application of a purchase price adjustment clause that adjusts the purchase price of assets or a business up or down depending on changes in various accounting or other parameters.
Transactional lawyers and litigators do and should consider using this concept of “expert determinations” in connection with other, highly technical issues causing a dispute between their clients. Joint retention of a neutral expert to determine the cause of a delay in a construction project is another way in which expert determinations are used. In intellectual property disputes, the parties can agree to retain a joint expert to determine a royalty rate or value an intellectual property asset. Going even further, parties can build into the governance structure of a joint venture or collaboration in the pharmaceutical or health care field the use of a neutral expert to help make decisive calls on disputes concerning issues arising in these areas, such as whether a research or development milestone has been achieved triggering additional funding obligations or transition to the next phase. Such provisions can help collaborations run more smoothly and head off time-consuming, expensive litigation.
A caveat to this is that expert determinations are not afforded the deference and finality of an arbitration award even if the parties wanted them to be binding. The New York City Bar Association has issued a very useful report on the ins and outs of expert determinations (in the context of purchase price adjustment clauses but more broadly applicable).
In addition, the narrow focus on the resolution of a technical issue may not resolve other disputes, such as ongoing governance ambiguities or legal issues associated with patent law requirements. Of note, the International Chamber of Commerce has a process for proposing experts and further formal rules for appointing and administering an expert determination process. The World Intellectual Property Organization also has such procedures.
Creative Use of Experts in Mediation
There are a number of different ways that parties creatively use experts during the mediation process. Some examples are discussed below.
Mediator with Expertise
Using a mediator with expertise in a particular field, such as life sciences, can be very helpful in assessing industry custom or technical issues that might arise in connection with the mediation of a dispute in that field and reduce the amount of “bringing up to speed” the parties are required to do to educate the mediator about the context of a dispute. For example, in a dispute about the manufacturing of a pharmaceutical product, the mediator can help assess whether or not regulatory requirements were met and will not need hours of instruction about “good manufacturing practices” in the field.
Similarly, a mediator with expertise can assist in assessing how conflicting expert reports might be assessed by an adjudicator such as an arbitration tribunal or a court.
Use of Internal or External Experts Not Serving as the Mediator
There are a number of different types of experts who can facilitate case resolution. Counsel should not ignore the internal expertise available from their clients. Employees who were not involved in the immediate dispute (for example, the superiors of employees who are directly involved or internal experts in other parts of the company) can provide objectivity and will be familiar with business operations.
Parties can also consider retaining an independent expert solely for the purposes of mediation. That expert would not be available for either party if the case did not settle, and the parties could agree that any written report generated by that expert during the mediation process could not be used at trial. This method will take on the look and feel of an “expert determination” except that it would be nonbinding and would be facilitated and guided by the parties with the help of a mediator. The parties could agree on a joint list of questions to be submitted to the expert. The International Institute for Conflict Prevention and Resolution’s Mediation Procedure expressly encourages the parties to think about using this tool as an aid to resolving disputes in the context of mediation. The author recently was involved in a mediation in which the parties retained a joint expert to help them determine whether a particular substance had been used in connection with the development of a pharmaceutical product. A joint expert can also help assess any existing expert reports that have been prepared in the context of a lawsuit or arbitration.
Finally, if the parties have retained separate experts, the parties may choose to invite the experts to participate directly in the mediation, in addition to having a mediator look at the reports or instead of having an independent, jointly retained neutral evaluate the reports. This might ultimately take on the look and feel of “hot-tubbing” on specific issues (see below). A mediator with expertise in an industry could privately or jointly ask questions of the experts to test their theories, and this could be a helpful trial run for the experts if a mediation fails to result in a settlement.
Creative Use of Experts in Arbitration
Expert Tutorials
When disputes about technology or intellectual property are central to an arbitration—for example, the manufacturing process for a particular pharmaceutical or the biology involved in mRNA vaccines—it can be very helpful for a number of reasons for the parties, with the help of their experts, to present a tutorial to the tribunal, explaining the basic features of the process or scientific concepts underlying the technology. First, it helps ensure that the tribunal members are reasonably familiar with the information. Second, it often exposes key areas of disagreement between or among the parties that can be helpful to the tribunal in understanding the contours of the dispute and even assist the parties in finding ways to resolve their differences amicably.
Tutorials need not be limited to technical issues. Adopting a common practice in international arbitration, parties can use experts to explain complex areas of law in the form of a tutorial—for example, in connection with healthcare cases.
Avoiding a “Ships Passing in the Night” Problem
One of the most significant difficulties in assessing the testimony of experts is the “ships passing in the night” phenomenon—experts testifying on different days (often days or weeks apart), emphasizing different issues and using conflicting methodologies. There are several ways to assist the tribunal in this regard.
First, experts can testify by topic. The tribunal and the parties agree on a relatively detailed list of common topics, in a particular order, that will be the subject of testimony by the experts at the hearing. Experts can also testify by conference. Testimony by conference is often used in international arbitration. There are various forms, but in one format, the experts testifying about a particular topic are, after separate presentations that are subject to cross-examination, asked to testify at the same time in response to tribunal questions so that they are responding in real time to what their counterparty has said about a particular topic.
Another concept common in international arbitration is the retention by the tribunal of a neutral expert. This is sometimes done in addition to party-appointed experts.
Conclusion
Hopefully, this brief article inspires litigators to think more broadly about the use of experts to help resolve disputes, in addition to the familiar “hired gun” role they play in litigation.
