Experts and Hidden Compensation — Do We Really Know How Much Our Experts Are Being Compensated? Have We Disclosed It Accurately? - Joseph Hage Aaronson

Commercial Litigation and Arbitration

Commercial Litigation and Arbitration

Experts and Hidden Compensation — Do We Really Know How Much Our Experts Are Being Compensated? Have We Disclosed It Accurately?

In the past 24 hours I’ve received two calls, one from a friend at a preeminent Manhattan law firm and the other from an expert consulting firm that everyone uses, with the same message: Many academic and other experts that are retained through the blue chip consulting firms (Analysis Group, Charles River, Cornerstone, FTI, NERA, etc.) receive a percentage of the fees paid to the consulting firm in addition to their hourly rate. Some experts receive even more at the end of the year as a result of the relationship. The consulting firms evidently compete for experts with these kickers. There is nothing unethical or improper about them — these payments are not contingent on the outcome of any case — but they raise serious disclosure issues, particularly the percentage of the fees paid to the consulting firm on the same case and particularly if the expert has been paid separately from the consulting firm.

First, how many times has your expert, at deposition, responded to the question, “How much are you being paid for your services in this case?,” by simply reciting his or her hourly rate, and total compensation paid directly to him or her? Happens all the time. It may be inaccurate. It is inaccurate if they’ve also received, or will receive, percentage compensation. That could require fixing in pending cases.

Second, Fed.R.Civ.P. 26(a)(2)(B)(vi) requires that the expert report contain “a statement of the compensation to be paid for the study and testimony in the case.” I've always interpreted “the study” to include the consulting firm’s fees, to the extent that it is involved in the number crunching or other aspects of the analysis. A global number that includes the expert is safe and accurate. If, though, only the payments made to the expert directly were disclosed, there may a problem that must be addressed.

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