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"Astronomically High" Expert Fees Stricken

By Lauren M. Gregory, Litigation News Contributing Editor – January 22, 2015

 

A contentious dispute over an expert witness’s bills serves as a cautionary tale for litigators seeking to avoid a last-minute avalanche of fees as trial nears. In Rothstein v. Harstad, the U.S. District Court for the District of New Jersey held that a lack of communication between counsel and their damages expert resulted in hugely inflated invoices, including $600 per hour charges for menial tasks such as burning CDs.


The court rejected the expert’s attempt to collect the fees, chastising him because he “remained silent on the astronomically high amounts of billings he was accruing.” However, the dispute might have been avoided altogether with better foresight and planning, says Darren M. VanPuymbrouck, Chicago, IL, cochair of the ABA Section of Litigation’s Expert Witnesses Committee.


Expert’s Fees More than Fifteen Times Estimated Amount
In Rothstein, a plaintiff class hired an expert to calculate damages in a lawsuit alleging class members had been charged much more than advertised for international telephone calls. In a letter outlining the terms of his engagement, the expert promised to provide monthly logs itemizing the time spent on the case. He also represented that he would “make efforts to keep expenses reasonable,” using undergraduate or graduate students for assistance “when it would save [the plaintiff class] money.”


The expert provided class counsel with a cost estimate of around $17,500 to $21,100 over the telephone before beginning the work. But within just a few months, he had billed a total of $164,604.79. Despite the fact that the expert had not provided monthly invoices as promised—and had not notified counsel in advance that the fees would be much higher than originally estimated—he was paid for the full amount billed. When the expert submitted more than $160,000 in additional bills, plaintiffs’ counsel finally objected, prompting the expert, in turn, to instruct counsel that they could not use any of his work product unless he received immediate payment.


The plaintiffs chose to walk away from the expert and engaged a statistical consulting company that was able to perform the requested work for $22,500. When the expert continued to press for payment, the plaintiffs sought a declaratory judgment that they did not owe him any additional compensation. The expert counterclaimed for breach of contract and unjust enrichment.


The court treated the expert’s take-it-or-leave-it approach as rescission of the contract and further refused to award damages on the basis that he had unclean hands given evidence of overbilling for work that his student assistants could have completed for much less money. The court also chastised the expert’s “haphazard” invoices, which it said were “plagued with his own mathematical errors.” Moreover, because the plaintiffs did not use any of his work, his unjust enrichment claim also failed.


“The lack of transparency in terms of the amount predicted to be billed and the amount actually billed clearly made [the court] angry, and [the court] was looking for a way to remedy that,” VanPuymbrouck explains.


Vetting the Expert
To avoid a similar fee dispute, VanPuymbrouck recommends extensive vetting of an expert prior to hiring. “There’s always the danger of using the same person over and over to the point where people think you are paying them to say what you want them to say,” VanPuymbrouck says. “At the same time, just accepting someone you don’t know is dangerous too. If you are using someone new, talk to other lawyers who have used him or her. That will go a long way in avoiding this problem,” he adds.


Matthew F. Prewitt, Chicago, IL, vice-chair of the Section of Litigation’s Expert Witnesses Committee, agrees. “I think it’s important, especially in a context where you may be using an independent expert, for counsel to explore what the expert’s expectations are,” says Prewitt.


Drafting the Expert Agreement
VanPuymbrouck believes the outcome of the Rothstein case is “a bit of a one-off,” as counsel will not necessarily be able to escape large expert bills in most cases. “I think the judge found a hook and used it,” he says.


That makes it all the more important to guard against what has become a very common problem for litigators, VanPuymbrouck adds. “Experts do regularly exceed estimates, and they do regularly say, ‘If you don’t pay me before trial, I won’t testify.’ I wouldn’t accept the expert’s engagement letter without inserting language that ensures transparency and accountability.”


VanPuymbrouck says Rothstein serves as a great reminder that expert engagement letters should include monthly billing as a material term, such that a delay in billing of even one or two months constitutes a material breach of the agreement. “It also may be worth including a term that requires the expert to notify counsel if he or she expects to exceed more than 10 percent of the estimated cost,” VanPuymbrouck suggests.


Of course, trial counsel should remain diligent and ensure that the expert is actually adhering to those provisions, Prewitt notes. “It’s important to remember that diligent inquiry by trial counsel can prevent a lot of problems down the line,” he advises.


Communicating with the Expert
To Prewitt, constant communication is important not only to rein in costs, but also to ensure that the expert is doing his or her job as efficiently and effectively as possible. “If work substantially exceeds the scope of the original agreement, maybe it’s an indication of a substantive issue. Maybe that expert has run into huge problems,” Prewitt suggests.


Brian P. Sullivan, Philadelphia, PA, chair of the Emerging Issues Subcommittee of the Section’s Expert Witnesses Committee, explains that “unanticipated issues can occur in litigation. For example, data may be provided in a format where significant work is required to use the information.”


While Sullivan believes the expert should “communicate issues to the client in a timely manner so they have a clear understanding of the specific circumstances,” he encourages attorneys to remain proactive as well. “It is helpful to have regular contact with the expert leading up to delivery of the report,” he says.


Keywords: expert witness, fee dispute, billing, transparency


 
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