Lev Breydo is a J.D. / M.B.A candidate at The University of Pennsylvania. In his submission, Lev examines the expert testimony industry in America, outlining the origins of current expert witness rules, the current state of the expert testimony industry, and the future of expert testimony as a private and independent legal service. Lev’s submission also examines the increasing accessibility of expert analysis in modern litigation, noting the more democratic access to data analysis provided by computer programs such as Microsoft Excel and more advanced tools like Stata and SAS.
The Expert Testimony Industry: Continuing Growth Coupled with Evolving Jurisprudence
Lev Breydo – University of Pennsylvania Law School
“No one will deny that the law should in some way effectively use expert knowledge wherever it will aid in settling disputes,” noted Judge Learned Hand in 1901.
Contemporary litigation appears to have internalized Judge Hand’s timeless insight. Expert witnesses have become increasingly common in American courtrooms; for some types of cases, they seem nearly as ubiquitous as judges and attorneys.
As the term suggests, expert witnesses – often, current or former academics – have deep knowledge of a complex field that is relevant to a case. Opposing counsel retain experts to provide the court with a fact-based assessment of nuanced technical or scientific matters. According to analysis by the New York Times, expert witnesses are most often used in cases regarding medical and mental health, engineering and process safety, and business and financial matters.
While only a small portion of the legal services market, expert testimony is a sizable and growing industry. According to a report by IBISWorld, between 2004 and 2014, the sector’s revenue grew from $210 million to $390 million. By 2019, it is expected to further increase to $534 million.
Because expert witnesses are retained by law firms, historical demand has been highly dependent on the hiring firm’s financial health. However, IBISWorld’s projections show a potential decoupling from the trend. Over the next five years, the expert testimony sector is expected to grow at 6.5% per year, compared to just 1.7% for law firms. Yet, some clouds linger over the American expert testimony system. Most significantly, longstanding uncertainties remain regarding admissibility standards – in other words, what counts for scientific evidence. The issue is particularly acute in the U.S., where the adversarial model extends to expert testimony. In contrast, many other nations, such as Germany, employ a judge driven model. At the same time, growth of expert testimony as an industry has begun to raise increasingly important questions for policymakers.
Unlike the law – which, some have advocated, “existed before any attempts to express it” – many technical disciplines, often crucial for expert testimony, are relatively modern. For instance, Franco Modigliani and Merton H. Miller’s foundational article, “The Cost of Capital, Corporation Finance and the Theory of Investment” was not published until 1958. The Black-Sholes Model for pricing options was not developed until 1973.
At the same time, quantitative analyses and statistics — previously themselves nearly expert fields — have become more accessible to increasing numbers of people. Data and statistics are essential for expert testimony because they can serve as a common baseline that presents factors and outcomes in standardized terms. As a consequence, the judge and jury need not master the intricacies of a particular scientific process or reaction to understand its importance and impact. Powerful software, such as Microsoft Excel and PowerPoint, has also helped democratize data analysis while sharply reducing costs. More advanced tools, such as Stata and SAS, have allowed experts to apply and develop increasingly robust approaches. The trend towards data accessibility is likely to continue, as new methods, including Tableau’s data visualization software, help experts and advocates bring dense findings to life.
As long as the expert’s underlying methodology is sound, empirical findings can be highly relevant factors for the court to consider.
While modern tools have facilitated the expansion of expert evidence, its practical value is rooted in objective quality. However, determining the soundness and scientific validity of expert evidence has proven to be challenging.
The standard for admissibility of scientific evidence was first addressed in the 1923 case, Frye v. United States. Frye held that expert testimony had to be rooted in information that had “general acceptance” within the field — commonly perceived as a highly accommodative standard. Some have argued that this overly low bar led to increasing “looseness of the qualifications establishing someone as an expert,” facilitating the proliferation of so-called junk science. Notably, other scholars have found such concerns to be potentially overstated.
In an extremely influential 1993 decision, Daubert v. Merrill Dow Pharmaceuticals, the Supreme Court established the modern doctrine for expert evidence – the Daubert Standard – to supersede Frye. Along with all federal courts, Daubert has been incorporated by most states. Initially, Daubert’s relative stringency was “vigorously debated.” However, subsequent case law forming the ‘Daubert Trilogy’ — Joiner v. General Electric Co. and Kumho Tire v. Carmichael – clarified a more limited set of parameters for admissibility. In 2000, the holdings of the ‘Daubert Trilogy’ were “codified” through Rule 702 of the Federal Rules of Evidence. Professor David Bernstein of George Mason described Rule 702 as “the strictest admissibility standard for expert testimony ever known to American jurisprudence.” Yet, Daubert has drawn significant criticism from practitioners and scholars. To a degree, the complexity of establishing a consensus set of standards may reflect the structure of U.S. litigation.
In theory, experts are not asked to provide normative positions. They assess descriptive factors and deduce findings based on reasonably accepted methods in the relevant field. In practice, however, such findings often rely on analyses that are sufficiently complex to incorporate subjective aspects while staying well within established methodology. In other words, experts can become more like advocates than objective analysts.
For example, to value a non-public asset, experts would typically apply the discounted cash flow model (DCF). Computationally, the DCF can — and, in some circumstances – perhaps reasonably should be tailored to illustrate a litigant’s position. For instance, if the two sides disagree regarding a company’s past accounting or performance projections, it may be reasonable for an expert to utilize her respective sides’ data. In such a circumstance, however, two honest experts could reasonably end up with completely different results. There is of course a fine but essential line between reasonable tailoring and manipulation. In practice, an adversarial system can create incentives for experts to “push the envelope.” However, powerful internal mechanisms can also push back against technically unsound or unethical conduct. Most importantly, credibility is essential to being an effective expert. Once an expert loses credibility (through a Daubert challenge, for example) it, and future employment in the field, may be hard to get back.
Potential Industry Worries
Along with concerns regarding the judgment of individual experts, the growth of the industry itself – and its evolving structure — may raise new questions for policy makers. Expert testimony remains a highly fragmented and competitive field, with no firm commanding more than 5% of the market share. However, unlike law firms — which cannot be owned by non-lawyers — firms providing expert testimony have no such restrictions. For instance, Charles River Associates and FTI are publically traded, while a public conglomerate owns NERA Economic Consulting.
Due to broader access to capital, expert testimony firms have more financial flexibility. But, the industry is also more capable of relatively rapid changes. Given the importance of expert witnesses to litigation, any potential risk to quality or objectivity presents an area for possible regulatory study. At the same time, there appears to be little intuitive rationale for protecting the independence of advocates, but not the experts. In the U.S., law firms are not allowed to take in private funds in order to safeguard “the lawyer’s professional independence of judgment”; this reasoning seems equally applicable with respect to expert witnesses.
Many jurisdictions have sidestepped the “dueling experts” dilemma common to complex U.S. litigation. For instance, much of Europe employs a model where the judge, rather than attorneys, are responsible for selecting and assessing expert testimony. In fact, as a legal scholar noted, visiting judges would be surprised that “we extend the sphere of partisan control to the selection and preparation of experts.”