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Financial Products: What Supervision? What Notation? What Guarantees? (PDF)
Market Timing, Late Trading and Other Mutual Fund Abuse in the United States (PDF)
Compulsory Arbitration: Its Impact on the Efficiency of Markets (PDF)
The Role of the Expert Witness in Securities Arbitration (PDF)
In a past issue of CLL (Oct. '81), CFTC Chairman Philip McB. Johnson noted that the need for legal services in the commodities area has increased dramatically since the CFTC was formed in 1974 and that it is bound to increase still further. As the number of attorneys practicing in this area and the amount of litigation has grown, so too, has the need for expert testimony.
In this respect the use of expert witnesses in the commodities field only dramatizes a broader trend in the legal profession to employ experts with increasing frequency as the society itself, and the litigation it spawns, has grown increasingly complex and technical. Thus, what use there may be of expert witnesses in commodity litigation today is not only the result of the explosive growth in commodities trading, and the newness and unsettled nature of the law in this area, but is also a consequence of widely-felt trends in the general practice of law reaching back at least to the end of World War II.
In consequence, as the role of the expert witness has become more important, so too, have the controversies that have attached themselves to the use of an expert. On the one hand, the expert witness is supposed to be an aid to the court, if not the one who, through the application of scientific or industrial knowledge, ultimately determines the fact of a situation. His opinions carry weight with the judge or jury (or are supposed to) and his role is likened unto that of an eye witness to the scientific truth of a situation, or an expert juror whose role it is to impartially weigh the evidence before rendering his opinion.
On the other hand, such witnesses are often seen as partisan advocates beholden only to their clients and expected to function much as a lawyer in making the best case he can for the client. In this view, the expert and the lawyer differ only in the role they play in putting forward the plaintiff's or the defendant's case.
While it is not our role here to seek to resolve this controversy, we can offer the view that it will continue until the principle of the partisan witness is more fully accepted, or until courts make more use of their widely-acknowledged power to summon an expert of their own choosing in situations where the experts for the parties clash.
In my experience with commodities cases, I know of only one instance where a judge has actively solicited expert opinion for the court, although the idea has been considered in at least one other case in which I have participated (Smith v. Commissioner and Jacobson v. Commissioner, 78 T.e. No. 26). The practice of the court calling for its own witness is most frequently employed in child custody or criminal cases where the judge is seized of a more affirmative duty to gather or evaluate evidence. However, the power of the court to do so in other cases is widely accepted and specifically sanctioned by Rule 706 of the Federal Rules of Evidence, which spells out procedures for the calling and use of an expert.
In most cases, including those arising in the commodities field, the role of the expert witness is inevitably that of the party witness. This does not mean that he should lay aside his integrity; for the function of the expert witness is, of course, to tell the judge or jury the truth, as derived from his knowledge and personal experience. But it should also be remembered that the expert witness is not a judge, and for him to work only for the side which might initially seem to be "right" implies such a judgment.
In commodities cases, the issues range from those of industry-wide importance (like the commodity tax straddle case in which expert testimony was presented) to those affecting only the parties (e.g. the possible churning of an account). Whatever the origin of the case, commodities litigation generally involves broad questions of fact, various types of data, analysis of multiple transactions, and the results of many separate actions taken over time. Such evidence is frequently statistical and requires a detailed knowledge of the industry.
It follows that the expert should be from the industry and possess the ability to present statistical evidence. When the inevitable two sides to every question arise, he can bring forth the relevant facts in a manner that advances the truth of his client's case. This is particularly important in commodities litigation, where many standards of acceptable performance are not yet defined and the framework in which the facts are presented is often of paramount importance.
Specific Areas of Usefulness
An attorney who has not yet made use of an expert, or who wishes to broaden the use he has been making of experts, is likely to find the expert witness helpful in numerous ways. The indicated uses that follow are based on my experience as a witness and are organized around the trial process. They envision a role for the witness in which he interacts with and assists the attorney at each step of the process. Often the role of the witness involves much hard work, and not a mere cameo appearance.
It has been observed that choosing the right expert can make your case. In selecting an expert at least three factors are of considerable importance. The best expert witnesses are extremely detail conscious, know the commodity industry thoroughly, and are able to simplify and articulate complex subjects with ease. Also important is an ability to locate key sources of commodity-related data and, as previously noted, to act as a resource that can be relied upon for help in the preparation of testimony.
In cases involving more than one expert witness, an attorney should usually try for the smallest number of experts who can cover all the bases (which in itself suggests witnesses with broad industry experience), however, he also should be conscious of the beneficial effects resulting from the interplay between expert witnesses and should encourage this by arranging meetings at which the experts can meet and discuss their findings and the case. Many good ideas result in this way.
Of course, experts are first hired as consultants. Indeed, in some cases (e.g. defense of a damage claim where the appearance of any expert might dignify the other side's case) the consultant may never become a witness, but merely assist in examining evidence and helping to prepare for trial. In federal cases, when the expert is retained in anticipation of litigation or for preparation of trial, facts or opinions he developed will be permitted to be brought into evidence by the other side only upon a showing of exceptional circumstances resulting in an inability to develop similar facts or opinions on the same subject by other means. When it is not anticipated that an expert will testify, it is usually safe in most jurisdictions to give him free rein in uncovering material that is potentially detrimental to your client's case. Indeed, this is one way for the expert who ultimately determines that his testimony will not be favorable to leave the arena with his integrity intact and with no harm to his client.
Some Do's and Don'ts
If it is the kind of case in which the expert will testify, and in which reports are advisable, the witness should be encouraged to produce one or more interim reports. A second report is usually much better than a first, as the facts are more thoroughly digested and a mature view develops with time. In those commodity cases in which I have testified and reports were generated, I have found that the process of committing ideas to writing sharpened my perception of the issues, and helped make the resulting testimony both more to-the-point and polished. Also, ideas for courtroom graphics (charts, graphs, etc.) arise during the preparation of these reports.
If possible, the expert witness should attend those parts of the trial before his own appearance where material that is likely to be a basis of his later testimony will arise. This would normally include testimony about the transaction involved, if any, and the testimony of any other expert witnesses. Do not forget that as an expert your witness is permitted to testify about what he has heard in the courtroom, as well as to what he knows from familiarity with the subject matter and first hand observation. You should not bring your expert into town the day of his testimony and expect him to be brilliant and in context. The alternative of having transcripts prepared in order to allow the witness to review these as a substitute for live testimony fails when the stenographer does not prepare the transcripts in time. Also, the transcript alternative is unattractive when the dramatic emphasis of prior testimony may have been more important in shaping impressions in the courtroom than the actual spoken words.
Before testimony, questions should be committed to writing for review. As noted before, you must prepare the expert with your view of the case and what the other side will be trying to show, as well as indicating how they might attempt to demonstrate bias on his part or to otherwise impeach his testimony. The witness should be encouraged to become familiar with the relevant literature in the field, if any, as he may be cross-examined on it. Also, be sure to leave the witness time to read the writings of the other side's experts. I recently had the experience in a major commodity case in which I appeared of discovering a significant admission in an obscure report written by the other side's expert.
In the course of his testimony you should cover a full statement of your witness' qualifications, but watch out not to overdo it. A humble, but knowledgeable witness is usually best. The witness should also have a clear picture of the purpose of his testimony, and a disclaimer ready concerning issues he has not studied.
Do not hold back a part of your expert's evidence for rebuttal. I have learned from personal experience a judge may lose interest in statistics or other technical testimony and not let your witness testify a second time!
Your own expert can help you prepare to cross-examine the other side's expert. First, a good expert will ferret out your own mistaken perceptions, if any, concerning the technical aspects of the case. Also, while you are acquainting him with your legal theories, he should be helping you in the more technical aspects of his own testimony. This might include tutoring in any specialized areas such as statistics where you may feel uncertain of your knowledge. With such assistance it is not unrealistic in a case involving only a few key areas of knowledge for your own familiarity to rival that of the other side's expert by the time of the trial.
Of course, your own expert can be employed to review and analyze technical documents essential to the crossÂexamination of the opposing expert, and to generate draft questions to expose weaknesses that may exist in the other side's case. If present in the court room (as discussed earlier), your expert can also generate helpful information and questions from the testimony of the adverse expert.
As a general rule, most consultants of wide-spread knowledge and reputation in the commodities field earn $1000/day, or more, for their time. As with legal fees, this can mount quickly. With regard to such fees you often have to decide whether you want to win your case, or save the client money. This has been described as a situation involving a choice between effective versus efficient use of a witness.
Generally, however, more can be obtained for the same cost if preparation is started early, planned and worked-in with the witness' other activities, rather than leaving things to last-minute heroics. In my view, the greatest single difficulty in the effective use of an expert witness comes from the tendency on the part of many attorneys to wait until too late to call the witness in. Delay almost always causes fees to soar as a mad scramble ensues to get the expert's reports and testimony prepared in time.
If funds are limited, however, do not be coy. Say so at the outset, and solicit the expert's help in determining the most critical areas of testimony. Brainstorming on how decisive testimony can be developed can be helpful here. Also having the clients' own people do the work associated with the expert's preparation (under the supervision of the expert) is another way to affect savings where necessary. The offer alone often introduces a note of realism if the client feels that costs are high. Careful preparation for testimony often entails a great deal of work.
In using an expert witness, selection and preparation of the expert should be undertaken early in the case. Often, more can be obtained for the same cost by starting early, and corollary benefits from the development of his testimony can be more fully exploited as, say, when legislative efforts parallel courtroom activity or when expert study in response to litigation points up the need for internal reform. I have also seen cases where results useful in marketing the product of a company have resulted from the production of expert testimony.
The role of the expert witness in commodity litigation and that of the lawyer interact to a high degree. Given the opportunity to gain a thorough knowledge of the case, and to skillfully develop its technical or scientific facts, the expert witness can provide valuable assistance throughout the life of a case as well as being counted on at trial as a source of invaluable testimony.
Dr. Cornew is an MIT graduate and President of CSCI, Boston, Massachusetts. As a founder of Thomte & Co., Inc. (formerly Diversified Commodity Management Company, Inc.) he has been a commodity trading advisor and consultÂant in the commodities field since 1969. He has served as an expert witness in a number of important commodities cases including the SmithIJacobson tax straddle case recently decided in the United States Tax Court and has attended the sessions on examination of witnesses held by the National College of Advocacy of the Association of Trial Lawyers of America.
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