Expert Witness Fee Arrangement Bias Exposed
Money Talks: Exposing Bias Using Expert Witness Fee Arrangement
John F. Kuppens and Jessica Peters Goodfellow
January 2012
Expert witnesses play a more critical role than ever in the outcome of product liability litigation. Indeed, in many jurisdictions a sustainable opinion from a qualified expert witness is required to establish plaintiff's prima facie case. Therefore, it is increasingly important to explore issues that may challenge the credibility of an opposing party's expert witnesses. An important factor in assessing credibility is bias, and a source of bias that lawyers should carefully investigate is an opponent's expert witness fee arrangement.
Some forms of expert compensation, such as contingency fees, inherently reveal a conflict of-interest or an appearance of bias. For that reason, consider not only what an opponent's expert witness is paid, but also how the expert is paid. Uncovering an expert's financial stake in the outcome of litigation to expose bias can seriously undermine the witness's credibility.
Do your homework:
Before deposing an expert witness, learn what you can about the expert's business relationships and history of serving as an expert witness. Begin with informal research on the internet, including the expert's own website, blogs, or discussion board posts. Then speak with your own expert, who is often familiar with others in the field and may be aware of existing alternative fee arrangements. Also check the expert's professional association for disciplinary proceedings against the expert or records of professional misconduct which may be available on the internet.
Your firm's librarian can research cases in which the expert has previously worked, or research tools such as Daubert Tracker can be used to determine if the expert has ever been excluded or challenged for having a financial stake in the outcome of litigation. Your client's trade association might also track the use of experts and maintain a database of useful information about an expert witness.
Some jurisdictions and the Federal Rules of Civil Procedure require pre-deposition disclosures including a statement of an expert's compensation.1 Use this statement as a starting point to build questions to ask about the expert's method of payment during the deposition. In some cases, serving a subpoena duces tecum with the expert's deposition notice requesting all pertinent documents may be an appropriate first step in gathering expert bias evidence if the information is needed to prepare for a deposition, but has not been disclosed by the expert or hiring attorney.
Dig deep during the deposition:
During the deposition, vigorously question the expert regarding the terms of his fee agreement with opposing counsel. Specifically, inquire beyond the amount of compensation and determine the particular method used to calculate the expert's fee. An expert's compensation should never be conditioned upon, or measured by, the amount of the recovery in damages in the litigation. The presumption is, and research has proven,2 that such fees naturally compromise the integrity of the testimony of the witness.3
Note that contingent compensation can take many forms. The most obvious contingency fee is a percentage of the settlement or recovery from a lawsuit. But contingent fees may also consist of retrospective higher hourly rate payments for favorable outcomes, "success bonuses", fringe benefits, premiums, or any form of financial incentive or reward conditioned on the outcome of litigation. Another form is a split-fee arrangement whereby an expert agrees to accept a lower hourly rate than his normal rate, conditioned upon receiving a percentage of recovery in the event of successful resolution of the case.
Also explore fee agreements in place prior to litigation, as an expert's activity leading to testimony should not be compensated on a contingent basis. For example, experts may be retained in an advisory role prior to litigation, and then subsequently called upon to offer opinion testimony at trial. Even if a contingency fee arrangement is in place before an expert's involvement in a particular case, any opinions rendered specific to the litigation are tainted with bias.4
Financial advantages can extend beyond the compensation received for testifying in a particular case. The more extensive the financial relationship between a party and a witness, the more likely it is that the witness has a vested interest in that relationship continuing.5 An expert should neither lose nor gain financially as a result of the success of testimony given in litigation.
If an expert is uncooperative or untruthful in responding to deposition questions and providing information in response to initial discovery requests, a trial court has discretion to permit more comprehensive discovery into bias-related evidence and financial documentation.6 For example, in Noffke v. Perez,7 the Alaska Supreme Court required an expert to produce tax returns because the expert was a part owner of, and worked for, an independent medical evaluation company. The court required both the witness and his company to disclose records to ascertain if there is potential bias because, if there is a “plausible argument that the witness generates such a significant portion of his or her income from a particular side or particular attorney, the expert’s impartiality can be reasonably questioned.”
Hard work pays off:
Many jurisdictions exclude expert testimony that is subject to a fee arrangement which gives the expert a pecuniary interest in the outcome of the proceedings.8 In Straughter v. Raymond IV, for example, the U.S. District Court for the Central District of California noted favorably that courts have adopted a per se rule of excluding expert testimony “whose compensation is contingent on the outcome of the case" as void against public policy.9 Courts also note the “long established rule of law” that “a special contract to pay more than the regular witness fees in ordinary cases is void for want of consideration and as being against public policy.”10
Even in jurisdictions that do not expressly exclude testimony arising from contingency fees, the expert is still subject to impeachment through cross-examination at trial. Evidence that suggest a witness might have a financial incentive to color his testimony is, of course, classic evidence of bias, which is routinely permitted on cross-examination.11 An expert's relationships with the hiring party and its counsel are also proper subjects of cross-examination and the scope of expert cross-examination is generally "expansive" and "free-ranging."12
To circumvent these challenges to their credibility for having a stake in the outcome of litigation, some experts operate as "consulting companies" and accept contingency fees to analyze the strengths and weaknesses of a case, and then select from a panel of experts a witness for use at trial or depositions who enters into a separate, hourly fee arrangement. Several cases state that paying consulting firms involved in providing expert witnesses for litigants on a contingent-fee basis is improper, even if the expert witness himself is not directly involved in the different payment schemes of his affiliated company.13
In jurisdictions where the law is unclear, ethical rules governing lawyers might be a source of authority against outcome-determinative expert witness fee agreements. The American Bar Association Model Rules of Professional Conduct provide an evaluation tool. Rule 3.4(b) of the Model Rules provides that a lawyer shall not "counsel or assist a witness to testify falsely, or offer an inducement to a witness that is prohibited by law." Guidance on the meaning of this rule is contained in the comments section, which states:
[I]t is not improper to pay a witness's expenses or to compensate an expert witness on terms permitted by law. The common law rule in most jurisdictions is that it is improper to pay an occurrence witness any fee for testifying and that it is improper to pay an expert witness a contingent fee.
The purpose of Rule 3.4(b) is "to assure that a court and jury will hear the honest conclusions of the expert unvarnished by the temptation to share in the recovery."14 Rule 7-109(C) of the ABA's Model Code of Professional Responsibility is even more explicit, providing that "a lawyer shall not pay, offer to pay, or acquiesce in the payment of compensation to a witness contingent upon the content of his testimony or the outcome of the case."
In Formal Opinion 87-354, the ABA considered an arrangement whereby a medical-legal consulting firm would provide an initial report, medical consultation, assistance with depositions and trial, and make available expert witnesses for a percentage fee, but pay the expert witness a flat fee. The ABA noted issues in that the consultant retained too much authority over which and how many experts to use, and because the client may commit to pay the consultant part of the recovery before the lawyer even knows what the expert witnesses will say or who they will be. The ABA found problems under Model Rules of Professional Conduct 3.4(b) which forbids a lawyer from offering an "inducement" to a witness that is "prohibited by law", and 5.4(a), which forbids sharing fees with a non-lawyer, and 5.4(c), which requires the lawyer to exercise independent judgment on the client’s behalf, and 1.5, which requires a reasonable fee.
Further, the expert's professional association might publish ethical guidelines regarding fee arrangements and thus provide a source for impeachment of its member expert witness. For example, the American Medical Association Code of Medical Ethics states that "[p]hysician testimony must not be influenced by financial compensation" and that "it is unethical for a physician to accept compensation that is contingent upon the outcome of litigation."15 The American Society of Civil Engineers (ASCE) addresses expert fees in the ASCE Code of Ethics, Canon #5, item c: “Engineers may request, propose or accept professional commissions on a contingent basis only under circumstances in which their professional judgments would not be compromised.” The National Society of Professional Engineers Code of Ethics states “[e]ngineers shall not request, propose, or accept a commission on a contingent basis under circumstances in which their judgment may be compromised”16and the Society of Fire Protection Engineers (SFPE) Canon of Ethics provides a general reference to the need for members to, “… uphold and advance the honor and integrity of their profession . . . by being impartial . . .”
Conclusion
The obvious credibility issues arising from a witness's financial stake in the outcome of litigation warrants a close examination of your opponent's expert witness fee arrangements. Be prepared to dig deep to ascertain the true nature of an expert's fee. These fee arrangements are a valuable source of information that can be used to impeach, or even exclude, an expert witness.
1 FRCP 26(a)(2).
2 Daylian M. Cain et al., The Dirt on Coming Clean: Perverse Effects of Disclosing Conflicts of Interest, 34 J. LEGAL STUD. 1, 9, 14 (2005) (describing biasing effect of incentives when expert is paid according to value of fact finder's estimates).
3 Straughter v. Raymond IV, 2011 WL 1789987 at *3 (C.D. Cal.) (raising serious questions about the integrity of expert's testimony where the expert’s opinions were rendered when she had a direct financial interest in the outcome of the action).
4 Everett Cash Mutual Ins. Co. v. Bonnie Sue Gibble et al, 2004 WL 5149339, (Pa. Com. Pl.) (2004) (precluding a public adjuster initially retained in an advisory role from giving expert opinion because "preparation of the expert report followed the commencement of litigation" and he "will be entitled under the contingent fee agreement to a percentage of any damages awarded," therefore the opinion rendered in the report is “so undermined as to be deprived of any substantial value.”).
5 See Leslie I. Boden & David Ozonoff, Litigation Generated Science: Why Should We Care?, 116 ENVTL. HEALTH PERSP. 117, 118 (2008) (“Often it is not just the lump sum . . . that is the economic incentive. Future business or continued employment may be even more powerful.”).
6 See Primm v. Isaac, 127 S.W.3d 630, 639 (Ky. 2004) ("If, after taking the deposition, a party can demonstrate that additional information is necessary to undertake reasonable bias impeachment, it may seek leave of court to take additional discovery.").
7 178 P.3d 1141 (Alaska 2008).
8 See, e.g.,City & County of Denver, Colo. v. Bd. of Assessment Appeals of State of Colo., 947 P.2d 1373, 1374 (Colo. 1997) (person may not act as appraiser or expert witness and present expert testimony under contingent fee agreements); Cresswell v. Sullivan & Cromwell, 922 F.2d 60, 73 (2d Cir. 1990) (excluding an expert's testimony as a result of the fact that he had been retained by the plaintiff on a contingency fee basis); Farmer v. Ramsay, 159 F.Supp. 2d 873 (D. Md. 2001) (excluding an expert's report and testimony as a result of his improper contingency fee arrangement with the plaintiff).
9 2011 WL 1789987 at *3 (C.D. Cal.).
10 Belfonte v. Miller, 243 A.2d 150, 152 (Pa. Super. 1968); Swafford v. Harris, 967 S.W.2d 319 (Tenn. 1998) (contingent-fee contract for services of physician acting as medical-legal expert is void as against public policy).
11 Crowe v. Bolduc, 334 F.3d 124 (1st Cir. 2003) (“Where witnesses under contingent fee agreements are permitted to testify, examination on the contingent fee is considered vital.”); Wheeler v. United States, 351 F.2d 946, 947 (1st Cir.1965) (finding it is "clear that inquiry into the possible financial stake of a witness in a particular outcome of a case in which the witness is testifying is a proper subject for cross-examination").
12 Emergency Care Dynamics, Ltd. v. Superior Court, 932 P.2d 297, 300-01 (Az. Ct. App. 1997).
13 See First National Bank of Springfield v. Malpractice Research, Inc., 688 N.E.2d 1179 (Ill. 1997) (contingent-fee contract between plaintiffs and consulting firm they hired to find expert witnesses-who were to be paid flat flee-void as against public policy); Fla. Ethics Op. 98-1 (1998) (lawyer may not enter agreement with medical-legal consulting firm on contingent-fee basis to provide services and expert witness); Pa. Ethics Op. 2001-24 (2001) (lawyer should not have clients enter contingent-fee contract with physician who would help prepare negligence cases and procure experts to testify in matters, even though the experts who testified would not be paid on contingency); W. Va. Ethics Op. 97-2 (1997) (lawyer may not use services of entity that, for 15 percent contingent fee, provides medical expert who is paid non-contingent fee). Some courts do, however, permit contingent-fee arrangements between lawyers and expert "consultants" in limited circumstances. In Ojeda v. Sharp Cabrillo Hosp., 10 Cal. Rptr. 2d 230 (Ct. App. 1992), the court acknowledged the validity of a contingent-fee contract between a medical malpractice plaintiff and a medical legal consulting service, under which the service agreed to review relevant medical records and locate expert witnesses to testify, in exchange for 20 percent of any recovery received. Under the contract, any experts consulted in anticipation of trial were to be paid by the litigant on an hourly, flat basis, and would have been similarly compensated for testimony at trial. The court held that to the extent such a contract complied with the statutory limitations of reasonableness, the contract did not have the effect of impermissibly providing expert testimony for a contingent fee.
14 Penn. Ethics Op. 95-79 (1995); but see D.C. Ethics Op. 233 (1993) (as D.C.'s version of Rule 3.4 permits payments of contingent fees to expert witnesses as long as they are not based upon percentage of recovery, law firm may contract with non-lawyer consultants to share "success fee" that client pays law firm in event of favorable outcome of client's case)
15 AMA Code of Medical Ethics § 9.07 (2008-2009).
16 NSPE Part III Professional Obligations, Code of Ethics for Engineers #6(a).
SOURCE: http://www.nelsonmullins.com