Seven Best Practices to Achieve a Solid Damage Expert Opinion
By Serena Morones, CPA, ASA, ABV, CFE and Jennifer Murphy, CPA, CFF, CFE
Simply hiring a good damage expert does not guarantee a strong expert opinion. We encourage our attorney clients to use these best seven best practices for working with experts that we developed through experience with more than a thousand cases over nearly two decades.
1. Promptly hire an expert that fits the case
The first step in gaining a solid expert opinion is to timely retain the expert that best suits the case.
You may not be the only one who thinks a certain expert is the best, most appropriate fit for your case. If you wait too long to hire your ideal expert, the other side may get to them first.
Another benefit of bringing the expert into the case as early as possible is the fact that the expert is typically in the best position to identify the data required to complete their analysis. For example, CPA damage experts are familiar with the types of financial reporting available within businesses, and can assist the legal team in requesting the most helpful information during the early discovery phase.
The total cost of litigation can also be reduced by hiring an expert early because the expert can provide an initial evaluation of damages, which may facilitate early settlement or a more strategic focus on what it will take to reach a realistic outcome.
Aside from hiring the expert early, identifying the expert who is the right fit requires an analysis of the necessary subject matter and the complexity of the analysis. The subject matter knowledge and expertise of CPA experts can vary substantially between practitioners. Some focus only on one subject, such business valuation, while others conduct a spectrum of financial, accounting and data analyses. A sole practitioner may be a good fit for a less risky, straightforward case, but may not be a good fit for a high-risk, complex case, due to lack of diverse technical capacity and supporting staff.
Some types of damage cases require more than one expert to address different areas of opinion on a particular case. For example, in a lost wages case, attorneys will often hire a vocational expert to evaluate employability issues and a damage expert to testify on the resulting economic loss. In a lost profits case, the attorney may hire an industry expert to support lost revenues, and a damage expert to carry out the more complex damage calculations. It can be risky to have one expert cover all aspects involved with supporting the economic damages if any of the assumptions are outside of their expertise.
2. Give your expert full visibility to available data
Allow your expert full visibility of the universe of available data by giving them access, if possible, to an online database of coded, searchable documents as early in the process as possible.
We recently worked on a large case where the law firm was so busy they could not identify relevant documents to provide for our expert analysis. To avoid delaying our progress, the law firm gave us full access to the online document database and asked us to find our own relevant documents. These documents were already “OCRed”[1] and had some basic coding. This case ended up being one of our most successful expert projects.
The quality and depth of our expert analysis skyrocketed because our staff was able to research the case without the time delay of waiting for someone else to identify what was relevant to us. We were able to quickly and freely follow our nose through theories of the case, which allowed us to prepare a deeply supported report and also identify evidence to support the legal claims.
Law firms may want to limit the data given to the expert because they don’t want the expert to conduct unnecessary work reviewing irrelevant documents. A tip for keeping document review costs down is to provide your expert with a document index or load the OCRed documents into a database and code them before giving the expert access. It can be very expensive for experts to engage in review of large populations of documents that have not been OCRed or coded.
If a case is complex, you should hire an expert with a good intuition for what analyses may be important, and let them figure out what documents are responsive to those analyses. You’ll get a better final outcome by fully employing the expert’s mind and intuition and by allowing unfettered access to all case information.
3. Let your expert do their own work
Do not summarize documents (other than creating indexes) or tabulate data for the expert and expect your expert to merely validate your work. The expert has developed his or her own style of working and accumulating data and will end up re-doing your work.
In an effort to settle the case before hiring an expert, attorneys may have tabulated numbers from documents. While this tabulation may be a helpful first step to understanding the big picture of the case, don’t expect your summaries to save expert time and fees. A good expert must do their own work, including summarizing data from source documents, to make sure that their opinion is correct, complete and credible.
4. For lost profit cases, expend the most effort supporting lost revenues
For a case involving a claim of lost profits, damages hinge primarily on the credibility of lost revenues. Since there are many other elements to prove in a damage case, such as supporting expenses, developing a discount rate and evaluating mitigation, the legal and expert team may tend to focus evenly on collecting data for each element. However, in our experience, lost revenues is the most difficult to prove and the most material to proving a lost profit damage case.
To make the strongest case for lost revenues, consider hiring an industry expert to provide their expertise and knowledge about the performance of other comparable companies or products.
5. Review and challenge your expert’s work
The legal team should review and re-review the expert’s work. The legal team has more visibility to the broad facts and legal issues of the case and will be able to identify inconsistencies or incorrect assumptions if they exist in the expert’s report.
Find someone in the law firm with a strong aptitude for numbers and attention to detail, and comb through the expert’s draft reports and schedules. Extensive review by the attorneys will ensure that the expert has addressed each area of damage theory that the case requires before it is too late. Our most well supported expert testimony has been a result of extensive review between both the law firm and the expert firm.
On larger litigation matters, set periodic internal deadlines for case meetings with the experts to help the litigation team fully develop the damage case well in advance of any expert report deadlines. These frequent meetings also help the expert learn the case and receive updates on case developments as he or she talks through the analysis with the legal team several times. We have never regretted having too many case status meetings, although we have sometimes regretted having too few.
Ideally, the first draft of an expert report should be reviewed at least two weeks or more prior to the report due date. A final draft of the report should be reviewed a week before the report due date. These internal deadlines will allow the experts and the legal team to address all issues while there is still time to respond to them.
If a mistake is found in a published report, submit a supplemental corrected report as soon as possible. Credibility is enhanced when errors are readily admitted and corrected.
6. Practice testimony
Don’t shortcut the preparation of your expert. Expert testimony is always difficult. Practice direct and cross examination with your expert and quiz them on the facts of the case. Give them feedback on areas where they might need to provide clearer explanations to support their opinions.
Testimony preparation is also critical to the attorney’s preparation as it allows them to test questions they foresee wanting their expert to answer on the stand. Testimony preparation is particularly important when expert reports are not submitted in the case. Working through potential questions allows you to avoid a situation where the expert’s answer comes as a surprise to you, or where the expert does not know the answer.
7. Create simple demonstratives
If the case proceeds to expert testimony, the presentation will be greatly enhanced by simple demonstratives. The demonstrative should communicate a strong concept that aids verbal testimony.
Don’t rely on a complex demonstrative, such as a spreadsheet with hundreds of numbers, to communicate the expert’s opinions. The verbal testimony should stand on its own, with simplicity and clarity. A demonstrative is most effective when it clearly conveys a concept, not detailed conclusions.
Serena Morones, CPA, ASA, ABV, CFE and Jennifer Murphy, CPA, CFF, CFE practice through the firm of Morones Analytics.
[1] “OCRed” is a term for a document set that has been scanned with Optical Character Recognition technology, so that key word searches will reveal any words or numbers in the document.
