Overview
Daubert criteria are applicable to all types of expert testimony in federal cases, including financial expert witness testimony.
In 1993, the US Supreme Court’s opinion in Daubert v. Merrell Dow Pharmaceuticals, Inc. addressed the admissibility of expert scientific testimony in federal trials, affirming a gatekeeping role for judges in determining the reliability and relevance of the testimony. In 1999, the Supreme Court’s decision in Kumho Tire Co. v. Carmichael clarified that the Daubert criteria were applicable to all types of expert testimony, not merely testimony relating to science.
The year 2006 marked the seventh anniversary of the Kumho Tire decision. This study analyzes post–Kumho Tire (2000–2006) challenges to financial expert witnesses under the Daubert standards, based on observable trends in the frequency and outcome of those challenges in federal and state courts. The study examines the challenges to provide insight into the reasons experts were challenged and excluded and categorizes the causes of exclusions in the context of Federal Rules of Evidence Rule 702 (“Testimony by Experts”), focusing on the qualifications of the expert and the relevance and reliability of the expert testimony. The study also summarizes the financial, statistical, economic, and valuation methods that courts have found inadmissible.
Key indicators:
1. Success rates vary widely depending on the jurisdiction. In the Ninth Circuit, 68 percent of financial expert witness testimony challenged under Daubert between 2000 and 2006 was excluded in whole or in part.
2. Although challenges to economists, accountants, and statisticians comprised 50 percent of all challenges to financial expert witnesses, all three were more likely to survive a Daubert challenge than other financial expert witnesses.
3. Lack of reliability has consistently been the top reason for exclusion of financial experts—cited in three out of four exclusions of financial expert testimony during 2000–2006.
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