Rule 702, part of the Federal Rules of Evidence in effect since 2000, covers testimony by expert witnesses, including those who testify in valuation litigation. The rule states that “a witness who is qualified as an expert by knowledge, skill, experience, training or education may testify in the form of an opinion” by meeting several criteria.
Two court cases—Daubert v. Merrell Dow Pharmaceuticals and Kumho Tire v. Carmichael—established the baseline rules regarding expert qualification. Last year, the Federal Judiciary’s Advisory Committee on Evidence Rules approved a proposal to amend Rule 702 in two ways.
First, the “proponent of the expert testimony must show admissibility of the testimony by a preponderance of the evidence.” Expressly adding “preponderance of the evidence” as the standard clarifies that proponents have the burden of admissibility—they must actively demonstrate admissibility—and as gatekeepers, judges (not juries) must decide on admissibility based on this standard.
Second, the expert’s opinion must “reflect a reliable application of the principles and methods” relative to the facts of the case. This change dictates that judges determine whether the expert’s opinion is properly derived.
The rule changes were spurred by the idea that, over the years, the preponderance of evidence standards have been inconsistently applied by federal courts. A study by the nonprofit Lawyers for Civil Justice (LCJ) reviewed 1,059 federal court decisions in 2020 regarding expert testimony and found that only 35% of the opinions applied the preponderance of evidence standard, and in 65% of the cases, the judge didn’t mention the standard at all.
The LCJ also found that in 135 decisions, the court indicated a presumption of admissibility, but no such presumption exists.
The public comment period on the proposed changes is now closed, and it is expected that the new Rule 702 will take effect on December 1, 2023.
Disclaimer of Liability
Our firm provides the information in this article for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other competent advisors. Before making any decision or taking any action, you should consult a professional advisor who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this blog are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability and fitness for a particular purpose.