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June 1999 White-Collar Crime By Kathryn Keneally
Supreme Court Extends Trial Court Role for Nonscientific Experts The definition of white-collar criminal defense can be elusive. Often, a matter may begin and, with skill and luck, end as an administrative investigation or a civil lawsuit. Yet, to the lawyer and to the client, the risk of criminal prosecution and the strategies of criminal defense permeate the proceeding. There is one demarcation, however, between the lawyer who views himself or herself as a commercial litigator, and the lawyer who comes to a matter with the criminal defense mindset. The criminal defense lawyer, whether in the white collar arena or otherwise, instinctively anticipates the day of trial. That day may not come in a given case. Nonetheless, the lawyer views the client, the witnesses, the documents, and the appeals and limitations of the parties positions, as a jury someday may. The civil litigator begins a case with the federal rules of procedure, contemplating discovery mechanisms such as depositions, interrogatories, and document demands. The trial lawyer begins by considering what the jury charges will be. The recent Supreme Court case, Kumho Tire Company, Ltd., v. Carmichael,1 while squarely a case in the civil arena, is a case for all trial lawyers in all fields to consider. Building on the Supreme Court’s decision in Daubert v. Merrell Dow Pharmaceuticals,2 the court in Kumho Tire expanded the trial court’s role as the gatekeeper to expert testimony from the scientific evidence at issue in Daubert to testimony concerning “technical” and “other specialized” knowledge. Defense lawyers seeking to present evidence on issues ranging from accountancy to business practices to state of mind defenses will need to consider the Kumho Tire analysis. Daubert Standards Rule 702 of the Federal Rules of Evidence provides: “If scientific, technical, or other specialized knowledge will assist the trier of fact, to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise.” In Daubert, the Supreme Court determined that, “[f]aced with a proffer of expert scientific testimony, . . . the trial judge must determine at the outset . . . whether the expert is proposing to testify to (1) scientific knowledge that (2) will assist the trier of fact to understand or determine a fact in issue.”3 The Court then created what has come to be known as the gatekeeping function of the trial court concerning expert scientific testimony, by entrusting to the trial court a determination “of whether the reasoning or methodology underlying the testimony is scientifically valid and of whether that reasoning or methodology properly can be applied to the facts in issue.”4 The Court in Daubert began its articulation of the standards to be applied in this gatekeeping function by stating that “[m]any factors will bear on the inquiry, and we do not presume to set out a definitive checklist or test.”5 The Court then added, however, that “some general observations are appropriate,” and listed four factors that have been treated in lower court decisions as a checklist. The four factors listed in Daubert are: (1) whether the theory or technique “can be (and has been) tested”; (2) whether the theory or technique “has been subjected to peer review and publication”; (3) “the known or potential rate of error . . . and the existence and maintenance of standards controlling the technique’s operation”; and (4) whether the theory or technique has received “general acceptance” within a “relevant scientific community.”6 Kumho Tire Decision Clarifies, Extends Holding in Daubert Subsequent to the Daubert decision, the circuits split on the issue of whether Daubert applied only to “scientific” expert testimony, or whether it extended to other expert testimony offered under Rule 702. The decision in Kumho Tire resolved this issue. The expert testimony proffered in Kumho Tire, at least as it was summarized by the Supreme Court, certainly invited a gatekeeper to question its validity. The plaintiffs in Kumho Tire brought an action against the manufacturer and distributor of a tire that had blown out, causing a car accident, injury and death. The plaintiffs proffered an expert in tire failure analysis. The expert’s deposition testimony accepted as a given that the tire had traveled “far,” that the tread depth was substantially worn in some parts and bare in others, and that the tire had at least two punctures which had been inadequately repaired. Nonetheless, the expert testified that a tire’s carcass should not separate from the inner tread for a significant period after the tread depth had worn away, and that such separation had caused the blowout at issue. The expert also testified that unless the separation was caused by overdeflection, which was defined as underinflating or putting too much weight on a tire, then separation resulted from a manufacturing defect. The expert next identified four physical characteristics of the tire that he considers to determine whether overdeflection caused the separation.7 Finally, the expert testified at his deposition that he concluded that a manufacturing design or defect caused the separation when he does not find at least two of the four characteristics are present. The trial court, in excluding the expert testimony, concluded that none of four factors set out in Daubert were met, that it could not identify any countervailing factors in favor of admissibility which could outweigh the Daubert factors, and that the parties had offered no such factors for consideration.8 The Supreme Court noted that the Daubert decision “imposes a special obligation upon a trial judge to ‘ensure that any and all scientific testimony . . . is not only relevant, but reliable.’”9 The Court then identified as the threshold legal issue in Kumho Tire as “whether this basic gatekeeping obligation applies only to ‘scientific’ testimony or to all expert testimony.”10 The Court concluded that it did: “The trial judge’s effort to assure that the specialized testimony is reliable and relevant can help the jury evaluate that foreign experience, whether the testimony reflects scientific, technical, or other specialized knowledge.”11 The Court turned next to the more specific question of whether the trial court, in determining the admissibility of the testimony proffered in Kumho Tire, “may consider several more specific factors that Daubert said might ‘bear on’ a judge’s gatekeeping determination.” Having thus phrased the issue, the Court provided as its response: “Emphasizing the word ‘may’ in the question, we answer that question yes.”12 The Court in Kumho Tire repeatedly noted that the Daubert criteria were intended to be “‘flexible,’” that the four factors listed in Daubert were not a “‘definitive checklist or test,’” and that the Daubert factors “do not all necessarily apply even in every instance in which the reliability of scientific testimony is challenged.”13 Although the Court emphasized the flexibility of the specific criteria set out in Daubert, the Court made clear that it was extending the Daubert gatekeeping function to all testimony proffered under Rule 702, finding that the objective of the gatekeeping requirement is “to make certain that an expert, whether basing testimony upon professional studies or personal experience, employs in the courtroom the same level of intellectual rigor that characterizes the practice of an expert in the relevant field.”14 The decision in Daubert concerned scientific expert testimony, and Court viewed the proffered testimony in Kumho Tire as “technical” expertise. Rule 702 contemplates expert testimony based on “other specialized” knowledge as well; it is this third category that may well apply most frequently to the type of expert testimony presented in the defense of charges in white-collar criminal cases. Thus it is significant that the Court in Kumho Tire, as part of its analysis of the flexibility that may be required across the broad range of possible expert testimony, expressly recognized that, in some cases, “the relevant reliability concerns may focus upon personal knowledge or experience.”15 The Court summarized broadly: “The conclusion, in our view, is that we can neither rule out, nor rule in, for all case and for all time the applicability of the factors mentioned in Daubert, nor can we now do so for subsets of cases categorized by category of expert or by kind of evidence. Too much depends upon the particular circumstances of the particular case at issue.”16 Expert Testimony Can Be Used in Defending Against Specific Intent White-Collar Prosecutions One issue that routinely arises in cases involving financial crimes is the state of mind of the defendant. The Ninth Circuit en banc decision in United States v. Morales17 offers an illustration of the manner in which expert testimony can be used by the defense on this issue. The Ninth Circuit in Morales reversed the defendant’s conviction for willfully making false entries in a union ledger in violation of 29 U.S.C. Section 439(c). At trial, the defendant proffered expert testimony from a certified public accountant. Defense counsel represented that the witness would testify as to the defendant’s weak understanding of bookkeeping concepts. The testimony was expressly offered in rebuttal to government witnesses who had testified as to their observations and opinions concerning the defendant’s understanding of bookkeeping practices.18 The first issue considered by the court was not the test for expert testimony under Rule 702, but rather the proscription in Rule 704(b) against expert opinions “as to whether the defendant did or did not have the mental state or condition constituting an element of the crime charged . . . .”19 The court noted that the offense of conviction in Morales included as an element of the offense that the defendant be found to have acted willfully. The court defined the willfulness element as requiring proof that an act was done “knowingly and intentionally, not through ignorance, mistake or accident.”20 The court concluded that the expert testimony, as proffered, did not require the witness to state an opinion or to draw an inference that the defendant had not acted willfully. Rather, the court found that the proffered opinion addressed an issue that the court depicted as a “predicate matter,” specifically whether the defendant had a weak grasp of bookkeeping principles.21 The court recognized that the defendant “hoped, of course, that the jury would infer from [the expert’s] testimony that her errors were due to ignorant but innocent mistakes.”22 Nonetheless, because it remained for the jury to determine whether, regardless of the defendant’s bookkeeping acumen, she had still knowingly made the false entries, the Ninth Circuit concluded that the proffered expert testimony did not constitute an opinion or inference on the mens rea element.23 The court then turned to consideration of whether the expert testimony was admissible under Rule 702. The court found that expert testimony on bookkeeping and accountancy readily met the Rule 702’s criteria.24 In an earlier, but at least equally informative decision, the Eleventh Circuit in United States v. Lankford 25 addressed the use of expert testimony on the reasonableness of the defendant’s mistaken belief as to the proper tax treatment of funds received by him. The defendant in Lankford was a county sheriff. The prosecution offered evidence at trial that an inmate had been solicited to make a contribution to the defendant’s campaign, and that the defendant had instructed that the check be made payable to the defendant’s wife. The defendant, in contrast, testified that he had no direct involvement in obtaining the check, but that he had received the check from campaign workers. He testified that he had been told, and that he believed, that the check was a gift to help his family meet expenses while he was unemployed.26 The Eleventh Circuit determined that the trial court erred in excluding the defendant’s proffered expert testimony on the issue of the reasonableness of the defendant’s conclusion that the payment was a gift and not taxable income. The court noted that “a subjective ‘good-faith misunderstanding of the law or a good-faith belief that one is not violating the law’” can negate the element of willfulness, and that the issue of whether the defendant acted with a good faith belief that he was not violating the law was an issue for the jury to decide.27 The court also noted that the Supreme Court in Cheek v. United States had “recognized that ‘the more unreasonable the asserted beliefs or misunderstandings [of a defendant] are, the more likely the jury will consider them to be nothing more than simple disagreement with known legal duties imposed by the tax laws and will find that the Government has carried its burden of proving knowledge.’”28 The court further found that most jurors would lack the specialized knowledge, background, and experience necessary to evaluate the reasonableness of the defendant’s contention in Lankford that he could consider the funds to be a nontaxable gift rather than a campaign contribution. The court in Lankford broadly concluded that “[a]ny evidence concerning the reasonableness” of the defendant’s belief that he had treated the payment properly for tax purposes “is relevant to the determination of whether [the defendant] willfully violated the tax laws.”29 Thus the Eleventh Circuit held that, by excluding the expert testimony, the trial court had erroneously deprived the defendant of “highly relevant” evidence.30 Lessons for Trial Lawyers The decision in Kumho Tire, as in Daubert before it, can foremost be used by defense counsel to challenge the government’s ever-expanding efforts to lead the jury to unfair or overstated conclusions through the guise of so-called expert testimony. To this end, Kumho Tire should provide a basis to seek to have government witnesses held to meaningful standards on the soft-expert issues, in the manner that Daubert imposed a gatekeeping function for testimony based on scientific expertise. The decisions in Morales and Lankford offer a different perspective. In both cases, defense counsel focused on carefully drawn issues relevant to the particular charges and to the factual defenses. Thus the proffers of expert testimony were crafted to meet not only the criteria for sound expert opinion, but also to address the specific factual and legal issues in each case. Thus both cases reflect, as their common ground, the good thinking of trial lawyers. Notes 1. 1999 U.S. Lexis 2189 (March 23, 1999). At the time that this column was written, page citations to the reported decision were not available. Accordingly only page citations to the decision as reported by Lexis have been included. 2. 509 U.S. 579 (1993). 3. Id. at 592. 4. Id. at 592-93. The opinion in Daubert continued: “We are confident that federal judges possess the capacity to undertake this review.” Id. at 593. Later in the decision, however, the Court candidly acknowledged the risks and limitations in the standard that it had created, stating: “We recognize that, in practice, a gatekeeping role for the judge, no matter how flexible, inevitably on occasion will prevent the jury from learning or authentic insights and innovations.” Id. at 597. 5. Id. at 593. 6. Id. at 593-94. With the last factor, the Court incorporated as an element the standard of Frye v. United States, 293 F. 1013 (1923), which existed as the sole governing criteria prior to Daubert, but reduced it to only one of a number of criteria to be considered. 7. The four factors were: “(a) tread wear on the tire’s shoulder that is greater than the tread wear along the tire’s center, . . . (b) signs of a ‘bead groove,’ where the beads have been pushed too hard against the bead seat on the inside of the tire’s rim, . . . (c) sidewalls of the tire with physical signs of deterioration, such as discoloration, . . . and/or (d) marks on the tire’s rim flange.” 1999 U.S. Lexis at *13. 8. Id. at *32-33. The Supreme Court, in the concluding section of the Kumho Tire opinion, could not resist the temptation to attack the proffered expert testimony on the merits. Rather than limit its analysis to the legal issues presented, the Court examined in some detail the deposition transcripts, and found that the expert’s testimony itself “cast considerable doubt upon the reliability of both the explicit theory . . . and the implicit proposition” of the proffered conclusion. Id. at *30. 9. Id. at *17, quoting Daubert, 509 U.S. at 589. 10. Id. 11. Id. at *20-21. 12. Id. at *21-22. 13. Id. at *23-24, quoting Daubert, 509 U.S. at 593-94. 14. Id. at *25. 15. Id. at *22. 16. Id. at *23. 17. 108 F.3d 1031 (9th Cir. 1999). 18. Id. at 1039. 19. Rule 704(b), Fed. R. Evid. 20. 108 F.3d at 1037. 21. Id. 22. Id. 23. Id. 24. Id. at 1038-39. 25. 955 F.2d 1545 (11th Cir. 1992). 26. Id. at 1548. 27. Id. at 1550, quoting Cheek v. United States, 498 U.S. 192, 201 (1991). 28. Id. at 1550, quoting Cheek v. United States, 498 U.S. 192, 204 (1991). 29. Id. 30. Id. at 1551. | |||||||||
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National Association of Criminal Defense Lawyers (NACDL) 1660 L St., NW, 12th Floor, Washington, DC 20036 (202) 872-8600 • Fax (202) 872-8690 • assist@nacdl.org | |||||||||
