Tuesday, October 30, 2012

10 Steps to Critiquing an Expert Report

Chartered Business Valuators (CBVs) support the business and legal communities in matters which include, but are not necessarily limited to, business valuation, value enhancement, exit planning and litigation support.

CBVs are frequently retained as independent experts in legal proceedings (e.g. commercial disputes, shareholder disputes, matrimonial disputes, etc.) to assist with a business valuation or an economic damages assessment.  This assistance can include the preparation of an independent expert report or the review of an opposing expert’s report.

Civil proceedings in the Superior Court are generally governed by the Rules of Civil Procedure.  The duty of an expert is discussed at Section 4.1 of the Rules of Civil Procedure, which stipulates that:
"It is the duty of every expert engaged by or on behalf of a party to provide evidence in relation to a proceeding under these rules,
  1. To provide opinion evidence that is fair, objective and non-partisan;
  2. To provide opinion evidence that is related only to matters that are within the expert’s area of expertise; and
  3. To provide such additional assistance as the court may reasonably require to determine a matter in issue."
It is quite clear that an expert’s role is to assist the court in an independent and objective fashion.  It is extremely important for both experts and litigators to be cognizant of this throughout the litigation process.

According to a March 2010 survey discussed in CA Magazine, 91% of litigators that had retained business valuators retained them to review opposing expert reports. [1]  When served with an expert report, it is beneficial for litigators (and their clients) to have an effective process for reviewing that expert report in an efficient manner.  This will help determine when it is appropriate to involve an expert and enable effective communication with the expert in order to manage costs for the client.

Here is a 10 step process for reviewing an expert report which quantifies economic damages in commercial disputes (e.g. breach of contract, breach of fiduciary duty, securities litigation, patent infringement, etc.):




Review the author’s credentials and qualifications.


Identify any scope limitations and qualifications on the conclusions.


Identify and assess the assumptions underlying the conclusions.


Ensure the conclusions represent the expert’s opinion and not simply calculations.


Identify and assess the damages approach adopted by the expert.


Identify and assess the damages period assumed in the report.


Identify future damages and ensure they have been appropriately discounted.


Ensure the contract was considered by the expert.


Ensure that mitigation was considered and addressed by the expert.


Retain a CBV for an independent perspective and to prepare a responding report.

This is the approach I take in reviewing and critiquing another expert’s report on damages.  Follow me over the coming weeks as I explore each of the above noted steps in more detail.
[1] Source: http://www.camagazine.com/expertwitnesses/default.aspx

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