Careful thought should be given at the outset of a case to what type of expert will best serve your client’s interests.
In some cases, an accounting expert may be appropriate. Accounting experts can help wade through voluminous financial reports and statements to draw conclusions from those documents. They can also calculate lost profits based on an entity’s historical performance and future projections.
In other cases, a party may want to consider engaging an economist. Economists can develop more complex models of market outcomes and “but for” scenarios that extend beyond a party’s own financial statements. Economists can also apply quantitative analysis to the facts of a case using methods like regression analysis and statistical sampling.
Engaging an economist may be necessary when the validity of a particular methodology is at issue. A forensic accountant may not be able to provide such an opinion if he or she lacks sufficient knowledge of economics or statistics. See, e.g., In re Genetically Modified Rice Litig., 666 F. Supp. 2d 1004, 1034 (E.D. Mo. 2009) (excluding testimony of forensic accounting experts concerning the validity of methodology used to determine economic damages, but permitting same experts to criticize the validity of the documentation used in calculating those damages). See also Alex Barnett, “Guidelines for Evaluating Whether You Need an Economic Expert,” Expert Witnesses, Feb. 25, 2019; David Bart, “Successful Use of Financial Experts,” Expert Witnesses, Oct. 31, 2018; Robert Kneuper & James Langenfeld, “The Role of the Economic Expert in Damages Analyses,” Expert Witnesses, Oct. 6, 2014.
Regardless of the type of expert, practitioners should aim to engage someone with sufficient experience, skills, and objectivity to render a reliable opinion. Specific industry experience and knowledge can be a significant benefit (or a necessity), particularly for areas involving unique market and regulatory structures.
Parties can consult an expert before putting pen to paper (or fingers to keys) to assist in devising theories of liability and framing claims in a complaint. In federal court, and in some state jurisdictions, consultation with non-testifying experts is largely protected from discovery. Such protections can provide freedom to explore the strengths and weaknesses of various theories without concern that communications and work product will harm your case down the road. Practitioners should always be careful to understand the full scope of the jurisdiction’s rules on such consultation, however—including whether the identity of consulting witnesses must be disclosed even if the underlying communications are protected. In federal court, for example, courts have split on this issue. See In re Welding Fume Prods. Liab. Litig., 534 F. Supp. 2d 761, 767–69 (N.D. Ohio 2008) (discussing split between Ager v. Stormont, 622 F.2d 496 (10th Cir. 1980), and Baki v. B.F. Diamond Constr. Co., 71 F.R.D. 179 (D. Md. 1976)).
The basic function of any damages expert, whether engaged before a complaint is filed or after, is to explain the extent to which the defendant’s alleged misconduct harmed the plaintiff. This analysis usually breaks down into issues of causation and quantification.
Establishing proximate causation in complex cases can be difficult, particularly when a plaintiff’s injury is traceable to two or more independently sufficient causes. Damages experts, and specifically economists, can cut through the confusion by building a narrative for counsel to use when arguing proximate causation. To do so, experts may create “before and after” models of economic behavior, look to comparable markets and industries to contrast with the market in question, or employ statistical analysis to separate the defendant’s acts from other potentially influencing factors. See, e.g., Conwood Co., L.P. v. U.S. Tobacco Co., 290 F.3d 768, 793 (6th Cir. 2002) (discussing all three methodologies in the context of antitrust claims).
The type of methodology that is appropriate for a particular case depends on the facts. When arguing for lost profits, for example, a business may or may not have sufficient historical data to use in a “before and after” review. A client’s litigation budget may also dictate strategy, particularly when certain methodologies would require an expert to employ support staff. And, of course, an expert’s work is almost always performed with an eye toward the anticipated response from opposing counsel and, potentially, the opposition’s own expert.
Experts should not be encouraged to stretch themselves beyond their expertise or to offer opinions that fail to stand up to reason. That may include asking hard questions about whether the data your client provides to an expert are reliable. See, e.g., Victory Records, Inc. v. Virgin Records Am., Inc., No. 08 C 3977, 2011 U.S. Dist. LEXIS 10337, at *2 (N.D. Ill. Feb. 3, 2011) (granting a motion in limine to exclude the expert testimony of Victory’s expert accountant, who proposed to opine on the impact of Virgin’s alleged interference in Victory’s contract with a rock band, because the expert “offered no basis . . . for concluding that Victory’s internal projections provide an acceptable foundation for an expert’s opinion in his field”).
The ideal expert is both book smart and courtroom savvy. Experts who testify at trial should be objective, credible, and able to distill complex financial and economic matters into easily understood stories.
While preparation for depositions can be lengthy and gruelingly detailed, preparation for trial adds the additional burden of making the expert’s message plain and concise. Experts should focus on conveying their story in ordinary language that can be readily understood, especially if the matter is being tried to a jury. Trial demonstratives, such as graphs and charts, may help fact finders follow the presentation.
Experts should also be prepared for difficult cross-examination. Practice sessions in which an attorney takes on the role of opposing counsel can help prepare an expert for the coming onslaught.
When used effectively, experts can provide significant advantage from the inception of a case to its completion. As in other aspects of litigation, careful planning and preparation are key to ensuring that the engagement of an expert provides your client with a valuable return on investment.
