March 01, 2007
On Advocacy
This issue of E-Law addresses the issue of advocacy among business appraisers. I write this issue with some trepidation because it is almost certain that someone at some future date will attempt to use this against me. Nevertheless, it seems time to deal, at least partially, with the issue of advocacy. Readers will note that many of the tactics that attempt to paint experts as advocates are really efforts to undermine that expert's credibility.
This article can be described as providing some reflections based on nearly twenty years as a business valuation expert who has tried to be a non-advocate (except as defined below) in a legal system based on advocacy. Hopefully these reflections will offer helpful insights for other appraisers facing future trial or deposition appearances. I also hope that they will help attorneys understand what it is like for a non-attorney to participate in this system.
Lisa Doble, JD is Mercer Capital's Research Director. I have asked her to comment (in brackets below followed by her initials of LD) from a lawyer's perspective at points she thinks appropriate. I think take the liberty of responding to her comments (in brackets followed by my initials of ZCM).
THE FOLLOWING DEFINITIONS ARE FOUND IN THE NEW WEBSTER' S DICTIONARY AND THESAURUS
On the other hand, a lawyer is by definition an advocate for the client and must advocate the client's position as best he or she can within the ground rules established by the courts and by law. Most clients are justifiably advocative of their own positions, at least within the framework of their knowledge, beliefs and interests.
An independent business appraiser can be an advocate only of his or her independent opinions. Appraisers cannot be advocates of a lawyer's positions or of a client's positions and still maintain the title of INDEPENDENT business appraiser. Our readers should recognize that there are many engagements where appraisers are hired in a consulting capacity and not for the purpose of rendering independent opinions. It is critical that appraisers and clients make a clear distinction between independent business valuation services and consulting services which do not require independent opinions. This article addresses the role of the business appraiser providing independent appraisal services.
Unfortunately, our legal system seems to have an implicit assumption that appraisal experts (and perhaps all experts) are not independent in the rendering of their opinions. I make this statement based on experience as an expert witness dating back to 1981. Since then, I have experienced a number of challenges to my independence, either at trial or during depositions. Some examples of these challenges are described below:
For example, in a recent jury trial in Federal District Court, an attorney attempted to discredit my analysis of another expert's work by citing a report issued by that expert that, he implied, I had failed to analyze in my report. When I examined this report on the stand, it seemed to address some of my criticisms. But I was not allowed to make observations about the report from the witness stand. The questions posed to me severely limited my ability to respond to this attack on my credibility (and the implicit attack of advocacy for not having addressed the report). Fortunately, on re-direct, the attorney who retained me handed me a copy of the other expert's "new" report. He asked me to identify the date of the report. He then asked me to identify the date I issued my report, which was three months prior to the date of this "new" report which I had allegedly not considered in my analysis. I noticed two jurors rolling their eyes when it was apparent that I could not possibly have considered the "new" report in my analysis -- and it was also fairly apparent that the "new" analysis was prepared, at least partially, in response to my criticisms.
In that same trial, the cross-examining attorney made me "admit" that I had not even reviewed the transcripts of all three days of the other expert's deposition before rendering my report. Obviously, by implication, my analysis was even further incomplete and biased. In the same re-direct, the attorney who hired me asked me to refer to the page in my deposition in which I told the other side that I had reviewed two days of depositions. I further stated there that since the third day's deposition transcript was not available (it was given only a few days prior to mine) I had not reviewed it, but that I would when it became available. Interestingly, the attorney attempted to preclude my answering questions based on what was in that third day's deposition. Just another day in search of the truth!
The "rules of the game" were such that I could not, given the questions that were asked of me, refute the implications of incompleteness and apparent bias. Had the attorney who retained Mercer Capital not been on his toes, my credibility with the jury might have been destroyed.
There was not and will be no written opinion in this case, which settled while the jury was deliberating. I'd like to think that the attacks on my credibility were not successful, but have no way of knowing because the actual settlement is under a confidentiality order to which I am not a party. But, the opposing attorney has hired Mercer Capital in a subsequent litigation matter.
Another example comes to mind. I began appraising companies in 1978 after several years of related financial experience. In 1984, after nearly six years of full-time experience in business appraisal, I earned the Chartered Financial Analyst (CFA) designation. Just prior to receiving the certificate, but after having been notified that I had met all requirements for the designation, I was testifying in a matter in a Memphis Court.
In reviewing my qualifications, the opposing attorneys went to my resume, beginning with high school. His line of questioning went something like this: WHAT DID YOU LEARN IN HIGH SCHOOL THAT QUALIFIES YOU AS AN EXPERT IN THIS MATTER? He followed the same logic through college, graduate school, four years of military experience, a six month hiatus on my resume following the military when my wife and I traveled in Europe, my experience as assistant treasurer at a large bank holding company, my experience as a securities analyst and appraiser at an investment banking firm, and my experience at Mercer Capital in the years leading to 1984. The implication of his micro-examination of my credentials was obviously designed to suggest that I had no relevant experience.
His cross-examination was broken at the end of a day. Just prior to quitting time, he had asked me about being a CFA (Chartered Financial Analyst) Candidate. I told him that I was not yet a CFA, but had been notified that I had passed CFA Level III, the last hurdle, and that my designation would be finalized within a matter of weeks. The next day he accused me of lying. He said he had called the Institute of Chartered Financial Analysts (the former name of the Association for Investment Management and Research), and that they had said they had no record of me. When I pulled out the letter from the Institute confirming what I had said, the lawyer changed the direction of his cross-examination.
FURTHER THOUGHTS ON ADVOCACY AND CREDIBILITY
I tell everyone who interviews for an analyst's position at Mercer Capital that we are in a tough business. We are hired directly by clients or by attorneys (advocates) who represent our ultimate clients. Nevertheless, we must deliver independent opinions of value.
I also tell our analysts (and have written) that clients (or their attorneys) almost always tell us what answer they would like to have in an appraisal. Isn't that a natural thing for advocates? In my opinion, however, the mere telling of what a client desires should not taint an expert. Clients have a hard time NOT telling, either directly or indirectly, the result they would like to have. I have testified on numerous occasions that clients almost always tell what they want. Nevertheless, business appraisers are obligated to render independent opinions.
If a business appraiser is not smart enough to realize that his or her client would benefit from a higher or lower answer, chances are, he or she wouldn't be perceived as smart enough to be hired in the first place. But a qualified business appraiser must also realize that no one benefits from an unsupportable, illogical or unreasonable conclusion -- even if that conclusion might, in the short run, seems to satisfy a client's objective.
The independent business appraiser has a responsibility to his or her client to render independent opinions. In litigated matters that responsibility extends to the relevant Court. It is our job to provide rational, reasonable and credible economic and financial evidence to the Court.
So we might as well be blunt about the issue. Business appraisers are hired by advocates, yet they have a responsibility to remain independent. How we handle this fairly obvious conflict will determine, in the shorter run, how we maintain our credibility, and in the longer run, how we maintain clients and credibility. While a client may want a specific result in a specific circumstance, the client will know if the result was "made as instructed" and will often consider that fact in future hiring decisions.
In Hawaii, an interesting saying has developed. The original missionaries went to convert the natives to Christianity. Their families became involved in commerce there, and many became quite wealthy. The saying goes that: "The missionaries came to Hawaii to do good, and they did very well, indeed."
I believe that the situation with appraisers is analogous. The only route to doing "well" over the long term is by doing "good," i.e., by rendering independent decisions every time.
Let me conclude with the theme of this issue: An independent business appraiser can advocate only his or her independent opinions. Appraisers cannot be advocates of a lawyer's positions or of a client's positions and still maintain the title of INDEPENDENT business appraiser.
Reprinted from Mercer Capital's E-Law Newsletter 99-14, October 14, 1999.
This article can be described as providing some reflections based on nearly twenty years as a business valuation expert who has tried to be a non-advocate (except as defined below) in a legal system based on advocacy. Hopefully these reflections will offer helpful insights for other appraisers facing future trial or deposition appearances. I also hope that they will help attorneys understand what it is like for a non-attorney to participate in this system.
Lisa Doble, JD is Mercer Capital's Research Director. I have asked her to comment (in brackets below followed by her initials of LD) from a lawyer's perspective at points she thinks appropriate. I think take the liberty of responding to her comments (in brackets followed by my initials of ZCM).
THE FOLLOWING DEFINITIONS ARE FOUND IN THE NEW WEBSTER' S DICTIONARY AND THESAURUS
ADVOCATE n. A person who pleads on behalf of another, esp. in a court of law….a person who speaks or writes in support of some cause, argument or proposal. v.t. to plead on behalf of, use persuasion in support of.Based on the definitions above, an INDEPENDENT BUSINESS APPRAISER is an appraiser who is not influenced or controlled by others (attorneys or clients) in matters relating to his or her valuation opinions, and who renders opinions autonomously (unaffected by external influences).
Synonyms: supporter, defender, lawyer, justifier, champion, proponent, backer
INDEPENDENT 1. v.t. Free from the authority, control or influence of others, self governing….causally unconnected, these factors are independent of each other….2. n. an independent person or thing, esp. a person who acts and votes without being committed to a party.
Synonyms: one's own man, free-spirited, self-determined, inner-directed, self-sufficient, autonomous, neutral
On the other hand, a lawyer is by definition an advocate for the client and must advocate the client's position as best he or she can within the ground rules established by the courts and by law. Most clients are justifiably advocative of their own positions, at least within the framework of their knowledge, beliefs and interests.
An independent business appraiser can be an advocate only of his or her independent opinions. Appraisers cannot be advocates of a lawyer's positions or of a client's positions and still maintain the title of INDEPENDENT business appraiser. Our readers should recognize that there are many engagements where appraisers are hired in a consulting capacity and not for the purpose of rendering independent opinions. It is critical that appraisers and clients make a clear distinction between independent business valuation services and consulting services which do not require independent opinions. This article addresses the role of the business appraiser providing independent appraisal services.
Unfortunately, our legal system seems to have an implicit assumption that appraisal experts (and perhaps all experts) are not independent in the rendering of their opinions. I make this statement based on experience as an expert witness dating back to 1981. Since then, I have experienced a number of challenges to my independence, either at trial or during depositions. Some examples of these challenges are described below:
- One of the most frequent tactics used by lawyers is to challenge the consistency of positions taken in prior writings or speeches. I have been presented with carefully selected excerpts from articles or books I have written, from Mercer Capital's many newsletters, and from a prior report that Mercer Capital may have issued that was somehow available to the cross-examining attorney.
- Another approach is to ask questions about testimony in prior cases. On a number of occasions, I have been walked through the historical cases on my resume with the objective of "proving" that I work for plaintiffs or defendants most of the time. Interestingly, I don't care if an attorney is representing a plaintiff or a defendant. Mercer Capital's policy is to work with the first side in litigation that contacts us with whom: a) we have no real or perceived conflicts; b) we can issue an independent opinion; and c) we can work out a satisfactory financial arrangement that ensures that we will be paid for our work. On more than one occasion, these requirements have resulted in our being hired by the second side that contacted Mercer Capital. Our split in representation has been, over time, close to 50% for plaintiffs, and 50% for defendants.
- Still another approach is to plant landmines in depositions and then try to get me to contradict myself in testimony at trial. This technique almost always takes comments from depositions out of context and then attempts to apply them to slightly modified questions at trial.
- It gets interesting when attorneys try to use "blind quotes" in the entrapment phase, reading from an unspecified document and then asking questions that appear to point out "obvious" contradictions. The most frequent use of this technique occurs with a quote taken from a substantial piece of literature (something I've written or that someone else has written) with no context provided for the quote.
- Shortly after the publication of my first book, VALUING FINANCIAL INSTITUTIONS (Business One Irwin, 1992), an attorney pointed me to page 473 in the book and asked me to read two sentences at the end of a paragraph located past the middle of a chapter and at the beginning of a long section: "The objective of a deposition is to answer, fully and truthfully, the questions asked by opposing counsel. The objective of trial testimony is to present and to defend a valuation opinion." His follow-up question suggested that I meant it was not necessary to answer questions fully and truthfully at trial. I then pointed out that the quote was taken out of context, and if he had read the preceding eleven pages in the chapter and the remaining five pages, it should have been clear that he had set up a straw man. I don't believe that this line of questioning was a credible attack on my credibility.
- There must be a course in law school or continuing education sessions on how to ask questions that attack a witness's credibility in the asking. I can think of two non-technical examples of this technique. (1) Question: "Have you stopped beating your wife yet? Just answer 'yes' or 'no' and then you can explain." As an expert, just try to answer "yes" or "no". (2) Question: "Have you stopped drinking to excess?" Again, just try to answer that one with a "yes" or "no." ASKING questions of this nature is either a learned art or a gift. I just don't know. ANSWERING these questions is not a gift. An expert must often depend upon the discretion of the trial judge to provide proper explanation when answering such double-edged questions.
[Chris has hit the bull's-eye because there are numerous courses which train lawyers to effectively cross-examine a witness. The strategy Chris describes here is simply asking narrow questions to which the witness must answer a certain way. Essentially the attorney is trying to draw information from the opposing witness in a manner he is controlling so there can be no surprises. After an appraiser is subject to cross examination, the attorney with whom he is working will have a chance to re-direct. This should provide a forum for the appraiser to explain some of the information which might not have been fully explored on cross. - LD]
[Yes, Lisa, but it can certainly be frustrating for someone trying to convey a valuation rationale in a manner that is not misleading! - ZCM]
- For those with significant experience in testifying at trial, there is yet another technique. Online services make it easy to search for prior cases in which an expert has testified and for which there are written decisions. This technique has two sides. The first is for the opposing counsel to attempt to find a prior opinion that seems to contradict the current opinion. This approach is usually fairly weak because there are almost always differentiating facts and circumstances. The second aspect of the "written decision trick" is to find a case in which the trial judge did not exactly agree with the expert's opinion, or where the judge's comments could be interpreted as critical of the expert. If a judge somewhere under some set of circumstances said something that could be interpreted as critical, there must be a permanent taint on the expert, or at least, that is the intended impact of this technique.
- Another technique is to point out the occasional minor error or inconsistency in an opinion and talk about nothing else. It is not unusual for an appraisal to have hundreds or even thousands of calculations. If one looks hard enough and long enough, it is possible to find a minor error or inconsistency in almost anyone's work. The objective of this tactic is to leave the impression of sloppiness and/or bias that will color an otherwise well-reasoned and reasonable opinion.
- More recently, motions to exclude testimony under the DAUBERT doctrine are being made to show that an appraiser's work lacks scientific basis. Such motions often border on accusations of bias or advocacy. I am not, of course, being critical of the doctrine itself. Experts should have a reasonable basis for their opinions. Daubert attacks can be frontal or subtle, and may invoke questions about business valuation standards, as well.
[The recent expansion of Daubert beyond "scientific" expert testimony to all expert testimony in KUHMO TIRE v. CARMICHAEL provides an additional means of preventing an expert from rendering an opinion before the court. If factors exist which suggest an expert's opinion is "unreliable" based on factors defined in Daubert and KUHMO, the opposing attorney must question the admissibility of the opinion on behalf of his client. - LD]
[Again, I believe this is carried too far in some instances. The recent trend seems to be when one side cannot refute the other on economic grounds, then Daubert is raised, then the Business Valuation Standards, or something else. - ZCM]
[Chris has accurately described a number of tactics used by litigators to try to cast doubt on the evidence being presented by a witness. Attorneys are bound to represent their clients' interests to the best they are able within the confines of the system. When the system affords the opportunity to raise a question in the fact finder's mind regarding the abilities and/or perspectives of the witness or the validity of the information he is presenting (all contributing to the credibility of the witness), the attorney must do so. The question of independence is an easy one to raise given the seeming contradiction between the appraiser testifying on behalf of the plaintiff or defendant while remaining independent. Attorneys should anticipate and prepare their experts for these types of attacks as best they can. - LD]I have been the recipient of attacks to my credibility before judges and juries where opposing counsel tried one or more of the tactics noted above. Note that only two of the tactics mentioned thus far has dealt with the basic (external) credibility of the appraiser or with the accuracy, reasonableness or validity or his or her opinions.
[These attacks are coming. - ZCM]
For example, in a recent jury trial in Federal District Court, an attorney attempted to discredit my analysis of another expert's work by citing a report issued by that expert that, he implied, I had failed to analyze in my report. When I examined this report on the stand, it seemed to address some of my criticisms. But I was not allowed to make observations about the report from the witness stand. The questions posed to me severely limited my ability to respond to this attack on my credibility (and the implicit attack of advocacy for not having addressed the report). Fortunately, on re-direct, the attorney who retained me handed me a copy of the other expert's "new" report. He asked me to identify the date of the report. He then asked me to identify the date I issued my report, which was three months prior to the date of this "new" report which I had allegedly not considered in my analysis. I noticed two jurors rolling their eyes when it was apparent that I could not possibly have considered the "new" report in my analysis -- and it was also fairly apparent that the "new" analysis was prepared, at least partially, in response to my criticisms.
In that same trial, the cross-examining attorney made me "admit" that I had not even reviewed the transcripts of all three days of the other expert's deposition before rendering my report. Obviously, by implication, my analysis was even further incomplete and biased. In the same re-direct, the attorney who hired me asked me to refer to the page in my deposition in which I told the other side that I had reviewed two days of depositions. I further stated there that since the third day's deposition transcript was not available (it was given only a few days prior to mine) I had not reviewed it, but that I would when it became available. Interestingly, the attorney attempted to preclude my answering questions based on what was in that third day's deposition. Just another day in search of the truth!
The "rules of the game" were such that I could not, given the questions that were asked of me, refute the implications of incompleteness and apparent bias. Had the attorney who retained Mercer Capital not been on his toes, my credibility with the jury might have been destroyed.
There was not and will be no written opinion in this case, which settled while the jury was deliberating. I'd like to think that the attacks on my credibility were not successful, but have no way of knowing because the actual settlement is under a confidentiality order to which I am not a party. But, the opposing attorney has hired Mercer Capital in a subsequent litigation matter.
Another example comes to mind. I began appraising companies in 1978 after several years of related financial experience. In 1984, after nearly six years of full-time experience in business appraisal, I earned the Chartered Financial Analyst (CFA) designation. Just prior to receiving the certificate, but after having been notified that I had met all requirements for the designation, I was testifying in a matter in a Memphis Court.
In reviewing my qualifications, the opposing attorneys went to my resume, beginning with high school. His line of questioning went something like this: WHAT DID YOU LEARN IN HIGH SCHOOL THAT QUALIFIES YOU AS AN EXPERT IN THIS MATTER? He followed the same logic through college, graduate school, four years of military experience, a six month hiatus on my resume following the military when my wife and I traveled in Europe, my experience as assistant treasurer at a large bank holding company, my experience as a securities analyst and appraiser at an investment banking firm, and my experience at Mercer Capital in the years leading to 1984. The implication of his micro-examination of my credentials was obviously designed to suggest that I had no relevant experience.
His cross-examination was broken at the end of a day. Just prior to quitting time, he had asked me about being a CFA (Chartered Financial Analyst) Candidate. I told him that I was not yet a CFA, but had been notified that I had passed CFA Level III, the last hurdle, and that my designation would be finalized within a matter of weeks. The next day he accused me of lying. He said he had called the Institute of Chartered Financial Analysts (the former name of the Association for Investment Management and Research), and that they had said they had no record of me. When I pulled out the letter from the Institute confirming what I had said, the lawyer changed the direction of his cross-examination.
FURTHER THOUGHTS ON ADVOCACY AND CREDIBILITY
I tell everyone who interviews for an analyst's position at Mercer Capital that we are in a tough business. We are hired directly by clients or by attorneys (advocates) who represent our ultimate clients. Nevertheless, we must deliver independent opinions of value.
I also tell our analysts (and have written) that clients (or their attorneys) almost always tell us what answer they would like to have in an appraisal. Isn't that a natural thing for advocates? In my opinion, however, the mere telling of what a client desires should not taint an expert. Clients have a hard time NOT telling, either directly or indirectly, the result they would like to have. I have testified on numerous occasions that clients almost always tell what they want. Nevertheless, business appraisers are obligated to render independent opinions.
If a business appraiser is not smart enough to realize that his or her client would benefit from a higher or lower answer, chances are, he or she wouldn't be perceived as smart enough to be hired in the first place. But a qualified business appraiser must also realize that no one benefits from an unsupportable, illogical or unreasonable conclusion -- even if that conclusion might, in the short run, seems to satisfy a client's objective.
The independent business appraiser has a responsibility to his or her client to render independent opinions. In litigated matters that responsibility extends to the relevant Court. It is our job to provide rational, reasonable and credible economic and financial evidence to the Court.
So we might as well be blunt about the issue. Business appraisers are hired by advocates, yet they have a responsibility to remain independent. How we handle this fairly obvious conflict will determine, in the shorter run, how we maintain our credibility, and in the longer run, how we maintain clients and credibility. While a client may want a specific result in a specific circumstance, the client will know if the result was "made as instructed" and will often consider that fact in future hiring decisions.
In Hawaii, an interesting saying has developed. The original missionaries went to convert the natives to Christianity. Their families became involved in commerce there, and many became quite wealthy. The saying goes that: "The missionaries came to Hawaii to do good, and they did very well, indeed."
I believe that the situation with appraisers is analogous. The only route to doing "well" over the long term is by doing "good," i.e., by rendering independent decisions every time.
Let me conclude with the theme of this issue: An independent business appraiser can advocate only his or her independent opinions. Appraisers cannot be advocates of a lawyer's positions or of a client's positions and still maintain the title of INDEPENDENT business appraiser.
Reprinted from Mercer Capital's E-Law Newsletter 99-14, October 14, 1999.