Becoming a Fraud Expert Witness: The Updated 702 Rules

A Guide to Understanding Expert Testimony Standards

By:  Marcie Jones, CFE, CrFA

The Daubert Rules

The Daubert rules were established in 1993 following the U.S. Supreme Court decision in “Daubert v. Merrell Dow Pharmaceuticals, Inc.” These rules now serve as the standard for determining the admissibility of expert witness testimony in federal courts. The Federal Rules of Evidence Rule 702 was amended at the end of 2023 to align with the Daubert rules. While most states courts adhere to these rules, some, including California, Illinois, Minnesota, New York, Pennsylvania, Washington, and occasionally New Jersey, continue to use the older Frye method or a variation thereof.

Forensic accounting, economic damages, and business valuations often involve complex financial transactions, accounting principles, auditing standards, and forensic techniques. These topics may be beyond the common knowledge of the judge and jury, necessitating expert witnesses to explain the evidence and provide opinions on matters such as damages and fraud. Rule 702 sets criteria for the qualification and reliability of experts and assigns judges the role of gatekeepers in determining the admissibility of expert testimony.

The Daubert Rules: Evolution

Three cases have shaped the “Daubert Trilogy,” and have shaped how expert testimony is handled:

Case 1: Daubert v. Merrell Dow Pharmaceuticals, Inc. (1993)

In this case, the Supreme Court established a five-point test to determine an expert witness's qualifications:

1) Testability;

2) Peer review and publication;

3) Error rates;

4) Standards and guidelines ensuring uniform application;

5) General acceptance.

Case 2: General Electric Co. v. Joiner (1997)

This case allowed appellate courts to review whether a trial court misused its discretion in admitting expert

testimony, thereby increasing oversight.

Case 3: Kumho Tire Co. v. Carmichael (1999)

This case extended the Daubert rules to include non-scientific expert testimony, such as that from engineers and

mechanics, as long as their expertise is relevant and reliable.

Rule 702

Effective December 1, 2023, the revised Rule 702 of the Federal Rules of Evidence emphasizes the reliability and relevance of expert testimony. Experts qualified by knowledge, skill, experience, training, or education may testify if it is more likely than not that:

(a) Their specialized knowledge will assist in understanding the evidence or determining a fact in issue;

(b) Their testimony is based on sufficient facts or data;

(c) Their testimony results from reliable principles and methods;

(d) Their opinion reflects a reliable application of the principles and methods to the case facts.

Expert witnesses must demonstrate credible qualifications, rely on reliable data, apply sound methods relevant to the case, and clearly link their testimony to the facts. They should also be prepared to defend their testimony against challenges from opposing parties. The updated Rule 702 reinforces the judge's gatekeeping role for expert testimony by requiring the witness to establish all four reliability criteria by a preponderance of the evidence and ensuring a stronger connection between an expert’s opinions and their methods.

How This Plays Out in Court

Expert witnesses help judges and juries understand complex scientific or technical information. Under the Daubert rules and under Rule 702, an expert witness must prove their testimony is based on solid scientific principles. Judges act as gatekeepers to ensure evidence is credible. Experts must explain their conclusions, methods, and the reliability of those methods. This prevents biases and ensures courtroom discussions focus on facts.  By focusing on criteria like testability, peer reviews, error rates, operating standards, and community acceptance, the rules aim to ensure the reliability of expert testimony.

Contact Follow The Funds LLC today to find out how we can serve as expert witnesses in your cases.