CHAPTER 1
A DISPUTE RESOLUTION PRIMER*

Elizabeth A. Evans

Daniel G. Lentz

Roman L. Weil

CONTENTS

1. 1.1 Introduction
   1. (a) Rationale for the Book
   2. (b) Expert Opinions and Admissibility: The Rules of the Road
   3. (c) Role of the Financial Expert in Litigation
   4. (d) Tasks Undertaken by Financial Experts
2. 1.2 The Civil Court System
   1. (a) General Process
   2. (b) Experts' Involvement in a Case
   3. (c) Federal District Court System
   4. (d) Federal Courts of Appeals
   5. (e) U.S. Supreme Court
   6. (f) Special Federal Courts
   7. (g) State Courts
   8. (h) Choice of Courts
   9. (i) Applicable Rules Governing Litigation
   10. (j) Alternative Dispute Resolution (ADR)
3. 1.3 The Legal Process
   1. (a) Overview of a Lawsuit
   2. (b) Legal Pleadings
   3. (c) Discovery-Introduction
   4. (d) Discovery-Written Reports
   5. (e) Discovery-Interrogatories
   6. (f) Discovery-Requests for Production of Documents
   7. (g) Discovery-Requests for Admissions
   8. (h) Discovery-Depositions
   9. (i) Discovery-Subpoenas
   10. (j) Trial
   11. (k) Types of Outcomes
   12. (l) Appeal
4. 1.4 The Alternative Dispute Resolution Process
   1. (a) Definition and Overview
   2. (b) Advantages and Disadvantages of ADR
5. 1.5 Forms of Alternative Dispute Resolution
   1. (a) Arbitration
   2. (b) Mediation
   3. (c) Other Forms of ADR
6. 1.6 Domestic ADR
   1. (a) Rules Governing the Use of ADR
   2. (b) The Neutral
   3. (c) The Role of Experts
7. 1.7 International Arbitration
   1. (a) Differences from Domestic Arbitration
   2. (b) Rules Governing International Arbitration
   3. (c) Arbitral Institutions
   4. (d) Arbitration with a State or Parastatal Entity
   5. (e) The Tribunal
   6. (f) The Role of Experts
8. 1.8 Conclusion
9. NOTES
10. REFERENCES

1.1 INTRODUCTION

(a) Rationale for the Book

Anyone who considers undertaking the role of an expert will find this book valuable. It will help novice and experienced practitioners stay abreast of current methods and case law and will guide them in other areas in which they can apply their experience.

This book is a current reference for certified public accountants (CPAs) and other experts involved in typical litigation cases and includes technical approaches and case-specific tools in use today. Although not exhaustive on any topic, it addresses the roles that experts play in litigation in commonly encountered cases. We incorporate advice from practitioners with extensive experience in litigation services.

(b) Expert Opinions and Admissibility: The Rules of the Road

Over time, the role of experts has expanded in the American legal system. Originally, courts allowed expert testimony only when the facts became too complex for an average juror to understand, and no expert could express an opinion on the ultimate issue. The Federal Rules of Evidence have liberalized this and other rules applying to experts, thereby increasing their roles. Rule 702, Testimony by Experts, states:

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.1

Rules 703 through 705 of the Federal Rules of Evidence also relate to expert testimony. Rule 703 allows experts in reaching their opinion to rely on otherwise inadmissible facts or data if they are "of a type reasonably relied upon by experts in the particular field in forming opinions or inferences upon the subject." Experts can, for example, rely on hearsay evidence, posing the risk that their testimony will expose jurors to evidence from which the Rules of Evidence aim to insulate them. For this reason, Rule 703 requires judges to guard against the expert acting as a "smuggler of hearsay" to the jury: "Facts or data that are otherwise inadmissible shall not be disclosed to the jury by the proponent of the opinion or inference unless the court determines that their probative value in assisting the jury to evaluate the expert's opinion substantially outweighs their prejudicial effect."

Rule 704 allows experts to give an opinion on the issue that the trier of fact will ultimately decide. (The only exception relates to an alleged criminal's mental state.) Thus, an expert can give an opinion on such issues as liability or the amount of damages.

The U.S. Supreme Court guided federal trial court judges as to the admissibility of expert testimony in Daubert v. Merrell Dow Pharmaceuticals, 113 S. Ct. 2796 (1993). The trial judge has broad discretion to act as a gatekeeper to forbid expert testimony based on mere subjective belief or unsupported speculation. Although the Court decided Daubert in the context of scientific expert testimony, the decision applies to any expert testimony, including financial, economic, and accounting testimony; the Court provided this clarity in Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999). For an in-depth discussion of the effects of the Daubert case, see Chapter 3.

Although Daubert and its progeny provide no exclusive list or set of tests that the expert's testimony must meet to be admissible-and thus survive the judge's gatekeeping function-one does well to consider the factors that the decision enumerates:

• Is the theory or technique testable? Has it been tested?
• Has it been subjected to peer review or publication?
• Is the potential rate of error known?
• Is it generally accepted within the relevant community of experts?

These Daubert-originated factors, bowing to the scientific method, reflect the scientific nature of the expert evidence at issue in that case. We reiterate that these are only examples; they are neither mandatory tests nor a checklist, and one's testimony can flunk a given test yet be judged admissible by the court. Similarly, a court will exclude testimony that meets all the factors if it lacks relevance, doesn't relate to the facts of the case, or otherwise proves unreliable. The Advisory Committee's Note to Amendment (to Rule 702) effective December 1, 2000, includes some bases for excluding testimony, as well as good standards to apply when evaluating one's own prospective testimony (Chapter 3 includes an extended discussion of this topic and related court cases):

• Whether testimony is based on research conducted independent of the litigation or was expressly undertaken for the purpose of the testimony;
• Whether the expert has unjustifiably extrapolated from an accepted premise to an unfounded conclusion;
• Whether the expert has adequately accounted for obvious alternative explanations;
• Whether the expert applies the same degree of intellectual rigor within the courtroom as without;
• Whether the field of expertise claimed by the expert is known to reach reliable results (for example, astrologers observe some principles generally accepted within their community but not accepted, per the Advisory Committee, within the courtroom).

Diligent, experienced attorneys with adequate time and funding will take the time and care needed to maximize the likelihood of the testimony's admissibility. Many cases lack such resources, and the experts must then apply care and thoughtfulness to avoid exclusion. In the short term, admissibility will avoid the prejudice to the client (and embarrassment to the expert) of a testimony's exclusion. Excluded testimony will also have long-run repercussions: The misfortune will become a topic of discussion in future depositions and voir dire2 proceedings. It will also require a "yes" answer to one of the first questions that most attorneys will ask an expert whom they consider retaining: "Has a court ever excluded your testimony?"

Before one can confront the perils of qualifying to testify in the courtroom, the court must allow the expert to enter. Federal Rules of Civil Procedure Rule 26(a)(2) provides the requirements for federal cases:

(2) Disclosure of Expert Testimony.

(A) In addition to the disclosures required by paragraph (1), a party shall disclose to other parties the identity of any person who may be used at trial to present evidence under Rules 702, 703, or 705 of the Federal Rules of Evidence.

(B) Except as otherwise...