Since its enactment in 1975, Rule 702 of the Federal Rules of Evidence has sought to redirect standards for the admission of expert testimony from a focus on “general acceptance in the profession” to one that places a greater emphasis on whether it is “scientifically valid and properly…applied to the facts at issue.”[1]  Amendments enacted in 2000 and 2011 have sought to clarify how judges are to assess the reliability of proffered testimony, either through the addition of factors to be considered (e.g., the Daubert standard, which also charged judges to serve as gatekeepers to exclude unreliable expert testimony) or by making the rule more easily understood and consistently applied.

Effective December 1, 2023, Rule 702 was amended to clarify its usage by incorporating two changes, which are underlined below:

A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if the proponent demonstrates to the court that it is more likely than not that:

(a) the expert’s scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue;

(b) the testimony is based on sufficient facts or data;

(c) the testimony is the product of reliable principles and methods; and

(d) the expert has reliably applied expert’s opinion reflects a reliable application of the principles and methods to the facts of the case.

The Advisory Committee on Evidence Rules of the Judicial Conference of the United States (the “Committee”) included the following commentary with regard to the changes incorporated in the rule:

  • First, the rule has been amended to clarify and emphasize that expert testimony may not be admitted unless the proponent demonstrates to the court that it is more likely than not that the proffered testimony meets the admissibility requirements set forth in the rule. See Rule 104(a)….But many courts have held that the critical questions of the sufficiency of an expert’s basis, and the application of the expert’s methodology, are questions of weight and not admissibility.  These rulings are an incorrect application of Rules 702 and 104(a)”. 
  • Rule 702 requires that the expert’s knowledge ‘help’ the trier of fact to understand the evidence or to determine a fact in issue. Unfortunately, some courts have required the expert’s testimony to ‘appreciably help’ the trier of fact. Applying a higher standard than helpfulness to otherwise reliable expert testimony is unnecessarily strict.
  • Rule 702(d) has also been amended to emphasize that each expert opinion must stay within the bounds of what can be concluded from a reliable application of the expert’s basis and methodology. Judicial gatekeeping is essential because just as jurors may be unable, due to lack of specialized knowledge, to evaluate meaningfully the reliability of scientific and other methods underlying expert opinion, jurors may also lack the specialized knowledge to determine whether the conclusions of an expert go beyond what the expert’s bas9is and methodology may reliably support.”
  • Nothing in the amendment imposes any new, specific procedures. Rather, the amendment is simply intended to clarify that Rule 104(a)’s requirement applies to expert opinions under Rule 702.  Similarly, nothing in the amendment requires the court to nitpick an expert’s opinion in order to reach a perfect expression of what the basis and methodology can support. The Rule 104(a) standard does not require perfection. On the other hand, it does not permit the expert to make claims that are unsupported by the expert’s basis and methodology.

Recent court rulings have included commentary regarding the exclusion of expert testimony that are consistent with the Committee’s objectives in crafting the recently enacted amendments to Rule 702:

  • In an Illinois breach of warranty action, the plaintiff engaged a Certified Fraud Examiner to calculate damages. The expert had no experience or knowledge in valuing the industrial equipment at issue, and the plaintiff did not show that the expert was qualified.  Thus, the defendant’s motion to exclude the expert’s testimony under FRE 702 and Daubert was granted.  In its ruling, the court also noted that the method used by the expert to estimate damages lacked “any of the usual indicia of reliability that courts typically consider.”[2]
  • In a Missouri breach of contract matter, the plaintiffs’ damages expert, a Master Analyst in Financial Forensics, calculated damages allegedly incurred by newspaper carriers who sought compensation for digital subscriptions sold to customers in their territory. The expert, despite having “access to a trove of profit and loss information that…could have been used to compare the financial performance of their respective territories before and after the alleged breach,” relied instead on the newspaper’s list of digital subscriptions without assessing the extent to which digital-only subscribers would have subscribed to the hardcopy newspaper in the absence of the digital option.  The court found that this approach by the expert “place[d] the carriers in a better position than they would have been in if there had been no breach – an approach expressly prohibited under Missouri contract law.”[3] 

We view these amendments as a positive development in expert testimony guidance.  They do not raise the bar for admissibility.  Rather, they reinforce the role of the court as a gatekeeper and will helpfully ensure a more consistent application of thoughtful and reliable inquiries as it relates to damages analyses proffered by expert witnesses.

About the Authors

David J. Ottenbreit is a Director with Chess Consulting LLC.  For over 25 years, Mr. Ottenbreit has analyzed business operations and financial conditions, determined appropriate damage theories, as well as addressed claims for lost sales and profits, increased costs, reasonable royalties, diminution of shareholder and business entity value, unjust enrichment, and lost wages and compensation.  He also has performed investigations of fraud allegations, including employee embezzlement and government contractor false claims allegations.  Mr. Ottenbreit has been retained as an expert in damages analysis in federal and state courts and arbitration. Mr. Ottenbreit earned a Master of Science degree in economics from Baylor University.  He also holds professional certifications in business valuation (Certified Valuation Analyst) and fraud examination (Certified Fraud Examiner).

Rodney Bosco is a Director with Chess Consulting LLC.  Over the past 40 years, he has conducted economic impact assessments and their underlying causes pursuant to disputes, investigations, business valuations, and regulatory proposals.  Measures of economic impact have included profits, cash flow, enterprise and shareholder value, personal and household earnings, royalties, out-of-pocket costs, over- and under-payments, and risk-adjusted present value conversions.  Mr. Bosco – whose work has been used to proffer expert testimony in federal and state courts, in arbitrations and before a subcommittee of the U.S. Congress – holds professional certifications in financial forensics, business valuation, and fraud examination.

[1] Daubert v. Merrell Dow Pharmaceuticals, 509 U.S. 579 (1993).

[2] A summary of this ruling was published in Issue #257-2 of BVWire, a publication of Business Valuation Resources LLC, on February 14, 2024.

[3] A summary of this ruling was published in Issue #146-1 of Business Valuation Law Alert, a publication of Business Valuation Resources LLC, on February 15, 2024.