In class actions, experts typically provide the necessary evidence of the damages. Those fees can get expensive. As reported in the American Bar Association's Litigation News, a U.S. District Court for the District of New Jersey recently denied recovery for inflated expert fees. In Rothstein v. Harstad, a plaintiff class' counsel contracted with an expert to calculate the damages, in an action lawsuit alleging that class members were charged more than advertised for international calls made through calling cards. The expert's responsibilities were to determine the amount the class members actually paid for international calls, basically requiring the expert to sift through call logs and compile data. The agreement provided that the expert would engage graduate and undergraduate students at a significantly lower hourly rate whenever feasible, and that the expert would provide monthly invoices. The expert provided an initial estimate of $17,000 to $21,000, but only submitted 13 invoices over a two-year period.
The fees sky rocketed. Counsel initially paid over $160,000 before two more invoices totaling another $160,000 were submitted. Eventually, after the expert threatened that none of his work could be used at trial without full payment, the class counsel hired a statistical analysis firm that was able to complete the work from scratch, for $22,500. As noted by the trial court, the firm's total billing was virtually the same as the expert's original estimate. Further, the expert's work product was riddled with miscalculations, including the final damage amount. According to the expert, the $12 million in damages was $40 million higher. His billing was no cleaner and demonstrated that he himself undertook menial tasks that could have been completed by graduate and undergraduate students, leading to a severely inflated bill.
That was the linchpin of the court's analysis. The expert rescinded the contract by holding his work for ransom when the dispute arose, and no unjust enrichment claim arose because the class counsel did not use any of the expert's work product when engaging the statistical analysis firm. Those are two very important considerations should a clean break from an expert during the trial process become necessary. The trial court basically offered the expert two choices, allow the class counsel to use the expert's work and then seek damages for breach of contract, or rescind the contract and withhold the work product. By choosing the latter, the expert foreclosed any possibility of fee recovery. The case is fact driven, but the ABA's reporting includes several recommendations for contracting and dealing with experts, such as including a periodic billing requirement in the expert's contract, that are worth reviewing.
