iApparently, you don’t have to have experience with the specific rule, as long as you’re familiar with the whole rule book. At least that’s the way this Daubert opinion reads.
In a securities case before the Southern District of Florida, the court sheds some interesting light on expert qualification, the assistance of voir dire, and what really constitutes a legal conclusion. If you’re looking to qualify your expert on a sub-topic of her broad expertise or have her offer what you expect will be objected to as a “legal conclusion” on the interpretation of a regulation, you may want to cite this case.
Expert Without Experience
UBS Financial Services, Inc. v. Bounty Gain Enterprises, Case No. 14-81603 (S.D.Fla., Apr. 14, 2017) originated from a complaint filed by UBS seeking declaratory judgment that it not be required to submit to arbitration under Financial Industry Regulatory Authority (FINRA) because Bounty Gain was never a “customer” of UBS. Clearly, there was much ado over the word “customer” and its meaning under the FINRA rules, specifically Rule 12200. To speak on this topic, Bounty Gain brought in an industry expert, Gene Carasick, to discuss Rule 12200, his professional interpretation of the rule, and its application to the present case - specifically, whether Bounty Gain qualified as a “customer” of UBS under the rule. There was only one problem. Carasick had no experience with Rule 12200. Yet, he was considered an expert on it. Let’s walk through the court’s reasoning in denying UBS’s Daubert motion to preclude the defense’s expert with three enlightening take-aways:
1. Sub-topic Experience is Not Necessary
Your expert needs to have knowledge about the sub-topic, but not necessarily experience with it. For example, the defendant’s expert here, Carasick, had experience working at FINRA for eighteen years, prosecuting more than four hundred disciplinary actions relating to almost every aspect of FINRA and SEC rules and regulations. However, he never had direct involvement in handling the specific type of issue involved in the case at hand, i.e., whether Rule 12200 qualifies one a “customer” of a FINRA-regulated company and triggers mandatory arbitration. This type of proposition never having been asserted before didn’t stop the court’s decision to admit. Quoting a prior opinion from the Southern District of Florida, the court in UBS Financial Services noted “an expert may testify regarding narrow sub-topics within his broader expertise—notwithstanding a lack of specific experience with the narrower area—as long as his testimony would still assist a trier of fact.” Remingtom v. Newbridges Securities Corp., Case No. 13-60384 2014 WL 505153, *4 (S.D.Fla. Feb. 7, 2014).
Although the expert here had never testified on the specific rule at issue, had never prosecuted under that rule, and had no role in reviewing, approving, or implementing the rule, the court found his general work prosecuting FINRA cases for more than eighteen years provided a “reasonable basis” to allow Carasick to testify, for the first time, on a sub-topic with which he had no experience. UBS Financial Services, *5. Thus, if you are struggling to qualify an expert on a very specific sub-topic of which he or she has no direct experience, this opinion and a heavy focus on the expert’s general experience and work history in the industry may provide enough of a “reasonable basis” for testimony on the sub-topic.
2. Lack of Experience is Not Itself Disqualifying
While the court in UBS Financial Services found Carasick’s broad experience sufficient to allow his proposed testimony on the more specific topic of FINRA Rule 12200, it also provided additional support for its ruling in denying the motion to preclude: a chance for both parties to voir dire the expert at trial on his qualifications before actual testimony would be admitted. Specifically, the court stated on the record it would permit Bounty Gain to question its own expert, Mr. Carasick, on his qualifications and offer him as an expert witness at trial, at which time UBS would be permitted a voir dire examination of Mr. Carasick, if necessary, with the judge thereafter being the final arbiter of the admissibility of any expert testimony at trial. UBS Financial Services, *5. Now, it did help that this was a bench trial, without the incumbent fears of confusion or improper influence by an expert of the jury. However, if you seem to be fighting a losing battle over qualifications, you may want to pocket this one as a Hail Mary. “At the very least, your Honor, we would request you allow the parties to conduct a live, voir dire examination of Mr. Expert at trial so you can get a better understanding of his experience and the topic in person, before making your decision.” If you feel the court is about to shut the door on your expert, it’s at least worth a shot.
3. Regulatory Interpretation is Not a Legal Conclusion
In addition to the sub-topic experience rule and the Hail Mary voir dire, the court here also offered one more tool for your expert admissibility toolkit: a finding that an expert’s interpretation of an industry regulation is not a legal conclusion. UBS argued Carasick should not be permitted to testify as to the legal implications of the conduct at issue because the court should be the “sole source of applicable law.” Id. at *6. The court countered stating Carasick would merely be testifying as to his interpretation of the rule and how it applied to the facts of the case, an opinion which might be helpful to the court. In addition, the court cited its prior finding that “FINRA’s rules … are not law, but rather, the rules of a private organization, thus an expert’s interpretation of the rules does not encroach upon the Court’s domain.” Remington, 2014 WL 505153, *5. If you find yourself battling an objection from opposing counsel that your expert’s opinion about a regulation, rule, or other governing ordinance cannot be admitted as a “legal conclusion,” tell them it’s just a helpful “interpretation.” If you’re litigating a FINRA case, you can now argue FINRA rules are just that—rules, not the law -thanks to Judge Matthewman.
