1. Unintended Consequences Affecting Insurers & Expert Witnesses Presented by: Brian P. Henry, Esq., CFEI The Daubert Disaster

2. The Daubert Disaster: Unintended Consequences Presentation Premise: The Supreme Court’s Daubert decision was intended to provide minimal assurances that expert testimony was not based upon “junk science.” The practical effect of Daubert has been its over-usage by litigants as an offensive and defensive weapon to serve litigation interests, often without regard for the massive increases in cost.

3. The Daubert Disaster: Unintended Consequences I.Expert Preclusion Vehicles II.Daubert in Practice III.Expert Responses to Preclusion Efforts IV.Effect on Insurers

4. I. Expert Preclusion Vehicles Qualifications:F.R.E. 702 Introduction Relevancy:F.R.E. 702 Introduction Foundation:F.R.E. 702(1) or Frye Methodology:Daubert & F.R.E. 702(2) Application:F.R.E. 702(3)

5. I. Expert Preclusion Vehicles: Federal Rule of Evidence 702 “If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise, 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.” Relevancy Qualifications Foundation Methodology Application

6. I. Expert Preclusion Vehicles: Daubert Overview Pronounced “Dow-burt”, 43 Emory L.J. 867 (1994) 1993 federal court case in which plaintiff claimed that usage of drug Bendectin caused birth defects expert’s opinion was based on studies the utilization of which had not gained “general acceptance” in the field; opponent challenged admissibility under Frye test Court rejected strict “general acceptance” Frye standard, instead expanding admissible testimony to that which is based on a reliable methodology

7. I. Expert Preclusion Vehicles: Daubert Overview Federal Rule of Evidence 702 Relevancy Requirement Rule 702(1): Testimony Based on Sufficient Facts or Data? Rule 702(2): Testimony the Product of Reliable Principles and Methods? Rule 702(3): Reliable Application of Methodology to Facts and Data?

8. I. Expert Preclusion Vehicles: Daubert Overview Daubert focuses on Rule 702(2) → is the expert’s opinion the product of reliable principles & methods? Why? Because the usage of a reliable methodology by an expert indicates that the overall testimony is reliable Daubert does not concern itself with:  expert qualifications  sufficiency of facts or data relied upon [Rule 702(1)]  the application of the expert’s methodology to the facts of the case [Rule 702(3)] → but be aware of “fit” argument Daubert concerns the “relevancy” requirement of Rule 702 to a degree (“fit” requirement)

9. I. Expert Preclusion Vehicles: Daubert Overview Judge is gatekeeper: The task of “gate-keeping,” or assuring that scientific expert testimony truly proceeds from "scientific knowledge,” rests on the trial judge, not the jury as a matter of “weight of the evidence.” Scientific knowledge = scientific method/methodology: A conclusion will qualify as scientific knowledge if the proponent can demonstrate that it is the product of sound “scientific methodology”, meaning, derived from the scientific method. Methodology: The Court defined “scientific methodology” as the process of formulating hypotheses and then conducting experiments to prove or falsify the hypothesis.

10. I. Expert Preclusion Vehicles: Basic Daubert Information The Daubert Court also provided a non-dispositive, non-exclusive, “flexible” test for establishing its validity of expert opinions: (a)The theory/technique must be testable / falsifiable. (This does not mean that an expert must use the same test as an opponent, or must even test at all.) (b)The theory or technique must have been subjected to peer review and publication. (This does not mean that an expert’s opinion must be published or subjected to peer review.)

11. (c)Whether the theory or technique has a known or potential error rate (This factor rarely applies in most fire cases.) (d)The degree to which the theory or technique is generally accepted by a relevant scientific community (Frye standard). (e) Others (i.e., prepared for litigation) I. Expert Preclusion Vehicles: Basic Daubert Information

12. (1) Testability.  the theory must be capable of being tested  also known as “falsifiability”  Falsifiability = “capable of being proved false” U.S. v. Mitchell, 365 F.3d 215 (3d Cir. 2004)  expert need not have actually “tested” his theory  Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999)  LaBarge v. Joslyn Clark Controls, Inc., 2007 U.S. App. LEXIS 22728 (2d Circuit) overturned trial court decision imposing a “testing” requirement  “Failed to test” is a common improper Daubert challenge

13. I. Expert Preclusion Vehicles: Basic Daubert Information (2) Peer Review or Publication. Daubert court implied that the idea behind the “peer review or publication” factor is that a technique which is peer-reviewed or published is more likely to be reliable Much confusion in caselaw over WHAT must be peer-reviewed, with different courts identifying the following: Methodology (probably best answer) Conclusion Theory Testimony

14. I. Expert Preclusion Vehicles: Basic Daubert Information (3) Error Rate. Concept → if there can be a defined “error rate” to an analysis, that is an indicator that a reliable methodology was used to arrive at the ultimate conclusion The “error rate” factor has limited usefulness in assessing reliability  Daubert → “error rate” analysis appropriate when testing is being conducted to demonstrate “a particular scientific technique” Examples:  spectrographic voice identification techniques  handwriting analysis  DNA or blood sample analysis

15. I. Expert Preclusion Vehicles: Basic Daubert Information (4) General Acceptance. former Frye standard → expert testimony could not be admitted unless there was “general acceptance in the relevant scientific community” Daubert held that the Frye standard did not entirely comport with Rule 702 as it was too limited rather than abandoning Frye altogether, court relegated it to but one of the Daubert factors general idea is that if a method is “generally accepted in the relevant scientific community,” it is more likely to be reliable

16. I. Expert Preclusion Vehicles (4) General Acceptance, cont’d. Some caselaw confusion on whether methodology or opinion must be generally accepted, although not to same degree. Rager v. General Electric Co. (“[expert] employed a methodology... [that] is generally accepted.”) LaBarge v. Joslyn Clark Controls, Inc., 2006 U.S. Dist. LEXIS 69025 (W.D.N.Y.)(“whether the theory or method has been generally accepted) Correct Answer: Methodology  going back to Frye, “thing from which the deduction is made must be sufficiently established to have gained general acceptance”

17. II. Daubert in Practice a 2008 study by PriceWaterhouseCoopers examined 3,681 Daubert challenges asserted in federal and state courts between 2000-2007. the study indicated that the number of per year challenges rose from 251 in 2000 to 704 in 2007, an almost 300% increase. The number of Daubert challenges to all expert witnesses increased by more than one third between 2005 and 2006 – the second consecutive annual increase exceeding 30%.

18. II. Daubert in Practice although plaintiffs’ experts are the most frequent targets, once defendants’ experts are challenged, exclusions are in equal proportion (47% plaintiffs vs. 48% defendants). despite increases in the number of challenges and exclusions in the seven-year time period, the percentage of expert exclusions remained fairly consistent, at around 47%. of all the experts challenged during 2000-2007 (based on written court opinions addressing the issue), 46% were excluded in whole or in part and 50% were admitted.

19. II. Daubert in Practice

22. II. Daubert in Practice: Preclusion Effort Mechanics There are three components to the Preclusion Effort: 1)The Motion to Preclude 2)The Objection to Motion to Preclude 3)The Evidentiary Hearing (If Allowed)

23. II. Daubert in Practice: Preclusion Effort Mechanics Following the deposition of the expert, and up to the point of trial testimony (absence scheduling limitations), an opposing party will file a Motion to Preclude, a Motion to Exclude, or some other variety of preclusion motion related to the expert’s testimony. Such motions are often convoluted misstatements of F.R.E. 702 or Daubert and its progeny. Care must be taken to point out misstatements.  Ex.:“Opinions must be reliable” Qualifications Motion does not equal Daubert Motion Typically, a court will rule “on the papers” unless a specific request for a hearing on the matter is made. A hearing may or may not be granted. A court may set a motion hearing without testimony.

24. II. Daubert in Practice: Preclusion Effort Mechanics Attorneys should generally request a hearing to address the preclusion motion. Hearings are at the discretion of the Court, but if a Court orders a hearing, it may be assumed that the Court believes the preclusion motion to have some validity. Attorneys and experts must prepare for the preclusion hearing as if it is trial testimony. There is no “second chance” if you lose. Significantly, a ruling precluding an expert is not appealable by the expert witness. Only the parties have the right to appeal.

25. II. Daubert in Practice: Preclusion Effort Mechanics A Preclusion Effort win has one of three results, or some combination thereof:  The expert is deemed “qualified” by the court in a particular field of expertise  May have to “qualify” all over again in different courts or on different topics  The expert is deemed to have used a reliable methodology  This can be challenged from case-to-case  The expert’s testimony is deemed relevant  This can be challenged from case-to-case

26. II. Daubert in Practice: Preclusion Effort Mechanics A Preclusion Effort loss results in the opposite:  The expert is deemed “unqualified” by the court in a particular field of expertise  This may change in another case if the expert gets more credentials or knowledge (if the expert is ever hired again)  The expert is deemed to have used an unreliable methodology  This is usually easily fixed in the next case  The expert’s testimony is deemed irrelevant  This usually stems from a qualifications failure or a reliability failure; otherwise, a finding of irrelevancy would not likely affect other cases.

27. III. Expert Responses to Preclusion Efforts HOW ARE EXPERTS DEALING WITH THIS ISSUE?

28. III. Expert Responses to Preclusion Efforts There are two primary responses from the expert community to Preclusion Efforts: A. Enhanced assignment-retention-participation agreements and use of personal counsel B.Increases in billable time for investigation, report drafting, and testimony preparation

29. III. Expert Responses to Preclusion Efforts A. Client Retention Agreements CRA’s set forth the contractual terms of retention between the expert and the client. Experts have the right to negotiate terms of their retention. CRA’s often set forth a specific fee schedule. CRA’s often set forth a specific billing policy. CRA’s often set forth a Participation Agreement.

30. III. Expert Responses to Preclusion Efforts B. Participation Agreements Participation Agreements allow the expert to participate with litigation in the context of Preclusion Efforts. Participation Agreements generally include at least the following:  That the expert is to be advised upon the filing of a challenge to their credentials, the reliability of their methodology, or any other reason related to their testimony;  That the expert will be consulted, and his or her assistance will be utilized, in the formation of any response to a Motion to Preclude;

31. III. Expert Responses to Preclusion Efforts B. Participation Agreements, cont’d. That the expert will be allowed to retain private counsel to direct the Preclusion Effort defense.  Who pays for private counsel depends on the client/expert relationship  There may be significant “standing” issues or pro hac vice issues related to expert’s attorney that have to be addressed, and the Participation Agreement may require Client’s cooperation That the expert will be immediately notified of any decision on the Preclusion Effort

32. IV. Effect on Insurers This proliferation of Daubert challenges has a significant impact on litigation:  By creating more case uncertainty  By prompting substantial increased costs from experts  By creating potential fee issues with own counsel  Through interaction with expert’s counsel  By creating the potential for secondary litigation  Spoliation of Evidence  Breach of Contract (by expert against insurer or against counsel)  By creating potential appeal obligations

33. For More Information, Contact: Brian P. Henry, Esq., CFEI Robinson & Cole, LLP 280 Trumbull Street Hartford, CT 06103 P: (860) 275-8330 E: bhenry@rc.com www.rc.com