Cross-examining financial experts - a trial lawyer's perspective

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If you are going to engage in complex commercial trial work, one of the key issues that you will likely face is the cross-examination of the opponent’s financial experts.  Throughout my 28-year career as a complex commercial law trial attorney, I have conducted more than 50 business law trials through verdict, including jury trials, bench trials and arbitrations (including a 6-day jury trial and two 4-5 day bench trials in 2014 alone).  In the course of my trial practice, I have cross-examined dozens of experts, and have also observed opposing counsel’s cross exams of my experts.  Through this experience, I have identified five critical components for a successful cross examination of any financial expert witness:

1. Prepare, Prepare, Prepare.  Preparation is the key for any successful trial lawyer, but preparing for the examination of an adverse financial expert takes a special focus.  In particular, preparation must start with a road map, which identifies the main points of the expert’s anticipated testimony that will need to be attacked (you should already know exactly what the expert is going to say from their expert report and/or prior discovery deposition).  Once the key points to attack are identified, you need to know the discovery material backwards and forwards – the key documentary evidence, deposition testimony and/or opinion letters – that underlie the expert’s opinion, as well as the authoritative materials they have relied on to date.  Moreover, you must be ready if the expert tries to change his/her testimony from their deposition (or report) to the witness stand.  Know exactly where in the deposition transcript (or report) they testified one way, and when and if they deviate from that testimony at trial.  Finally, your cross-examination outline and supporting evidence must be simplified, with clear references to every exhibit you intend to reference during the exam. 

I typically create a single binder that contains both my exam outline, key pages of the expert’s report and deposition (for impeachment purposes), and copies of every trial exhibit I intend to reference (which exhibits should already have been introduced into the record).  A good cross examination must be smooth and polished. The Judge, Jury and/or the Arbitrator(s) (let alone your Client), needs to see that you are in control, not the opposing expert.

2. Attack The Weakest Point First.  When it comes to the substantive cross examination itself, it is best to identify the weakest point of the financial expert’s testimony and begin to attack and discredit the expert there.  The sooner you can convince the fact finder that the expert is not credible, or that there are “holes” in their opinions, the better.  When cross-examining financial experts you are not building to a big finish; you are looking to immediately discredit the witness so that the fact finder will discount what they just heard.  In a recent trial, I was able to pick up on the fact that other side’s real estate valuation expert had failed to actually inspect the commercial buildings on which he was opining as to value.  I quickly raised that failure at the outset of my cross examination and convinced the judge to disallow the expert’s testimony.1   Remember, the Judge, Jury and/or Arbitrator(s) has just listened to the witness give opinions that go directly adverse to your client’s position—the sooner you can begin to discredit all or portions of that presentation, the better. 

3. KISS: Keep It Simple Stupid.  Generally speaking, financial experts are highly educated and highly specialized (CPA’s, MBA’s, Real Estate Appraisers, Forensic Auditors, etc.); they frequently speak in their own vernacular and the concepts that they are discussing are often complex.  Juries, on the other hand, typically have little understanding of complex financial issues, including business or real estate valuation methodologies, understanding financial statements or complex tax returns, and damage calculations. After all, if the issues were simple, the parties wouldn’t need experts.  Given that the subject matter may be unfamiliar to the fact finder, you must figure out how to simplify the points you want to make on cross examination.  For example, if you are cross examining an expert on a business valuation issue, and they have used an overly-aggressive discount rate to support the value they are advocating (whether it is too high or too low), you must first make sure your fact finder understands what the discount rate is, and what happens if it goes up or down.  Even if the expert had previously testified on the issue, it is good to again remind the finder of fact of what the issue is and why it is important.  (For example, “so if I understand your testimony, if you increase the discount rate, and everything else remains the same, the valuation of the business goes down”). 

Simplifying complex financial issues is important no matter who your finder of fact is.  Remember, many trial court Judges do not come from the business side of the legal profession.  Even though they may have some familiarity with complex financial issues, you should not assume that every Judge is readily conversant on valuation and other topics that may be the subject of  expert testimony.  So, even when cross-examining a financial expert before a Judge sitting without a jury (or even an Arbitrator), make certain to keep the points of your cross-examination simple and directly relatable to the issues before the Court.  And, don’t assume the Judge, Jury or Arbitrator is familiar with jargon and uncommon acronyms (for example, I had to explain to a Judge that “ROI” stood for Return On Investment).

4. Get In And Get Out:  Given that the very nature of financial expert testimony is technical and often dry (unless you are also a financial geek—like me), piling on another half-day of cross-examination of a financial expert is unlikely to allow you to make the points that you need to make to the fact finder.  Rather, a pointed, punctuated cross-examination that focuses on the weakest points of the expert’s testimony is the best means of conveying the critical points you are trying to make. 
Focusing on the minutia is never a good idea—whether the case is being tried to a Judge, Jury or Arbitrator (such as debating whether the interest applied should be 5% v. 6%; or engaging in impeachment of an expert for having testified in only seven cases, instead of the nine cases in which your expert has testified—all mistakes I have witnessed in trial).  Instead, directly attack the expert’s weakest positions taken and which effectively support your case; and then, sit down.

5. Remain Flexible And Open Minded, Paying Attention To The Direct Examination:  For all the preparation that you will have to undertake to effectively cross-examine the opposing expert witness, you cannot lock into a script prior to hearing the witness’ actual testimony.  Pay close and careful attention to the expert’s direct exam to look for additional weaknesses that can be used to make key points on cross.  Did the expert recant some of his deposition testimony?  Has the expert conceded points that you have raised in trial? Has the expert’s testimony varied from the facts that have been put into evidence?  Any of the scenarios is possible and in fact, common, but you need to be listening closely to the direct testimony as it is introduced.  In fact, you may need to make adjustments to your cross-exam based on this testimony.  Keeping an open mind about the expert may also lead to unexpected opportunities.  For instance, has the adverse expert used a chart or other demonstrative exhibit that you could use to highlight one of his/her weaknesses?  If so, you can effectively use the expert’s own chart or demonstrative exhibit against them to highlight a key point in your case.  Again, these are often unexpected opportunities that you cannot plan for specifically.  Paying close attention to the direct examination and keeping an open mind for making last-minute changes to your cross examination, are critical to an effective cross-examination.

In conclusion, like all aspects of trial work, a successful cross-examination of the opposing party’s financial expert requires a lot of advance work and an ability to adjust your strategy depending on testimony that may not be expected in the direct examination.  However, unlike your approach for cross examination of the other party, or other key adverse fact witnesses, I suggest a “lethal strike” strategy is usually best for opposing experts.  If you follow these 5 guidelines, I predict you will have greater success in neutralizing the opposing financial expert. 

1In particular, when I started my cross I wasn’t sure if the expert had actually ever visited the buildings or not, so I started asking him to describe what he remembered about the physical characteristics of the buildings’ interiors.  When he admitted he didn’t “recall” for the third or fourth time, I asked him, somewhat rhetorically, if he’d ever been to any of the parcels?!  When he sheepishly admitted he had not, I immediately moved that his testimony be stricken.


 

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