A recent Forward Forensics article, “A Judge’s Opinion of Financial Experts’ Credibility,” offers an interesting glimpse of a federal judge’s take on several witnesses in a bench trial over which he presided. The article summarizes U.S. District Judge Peter G. Sheridan’s “159-page opus” on the trial with insights into what Judge Sheridan found persuasive and unconvincing on both sides of the case.
The case in question was Sivolella, et al v. AXA Equitable Funds Management, LLC, et al. The plaintiffs claimed that AXA, an investment advisor, “breached its fiduciary duty to stakeholders by charging excessive management and administrative fees.” Unlike the case we examined last week, in which the experts played a role but hard evidence swayed the final verdict, Judge Sheridan wrote that “the credibility of the other witnesses, particularly Plaintiffs’ experts, had a significant impact on the outcome of the case.”
That credibility, in short, wasn’t very strong. Judge Sheridan critiqued all four of the plaintiffs’ experts, largely for inconsistency. A CPA who was called on to provide testimony on the reasonableness of the mutual funds’ fees gave “evasive” answers that frequently contradicted his earlier deposition. Judge Sheridan mentioned four distinct instances where this occurred, which resulted in an assessment that “The Court gives his testimony little weight.”
Another expert on mutual funds received the same judgment due to “inconsistencies, oversimplifications, and his sarcastic demeanor.” The last comment warrants particular mention. Judge Sheridan lent the witness’ credibility less weight not only because of the content of his testimony, but how he delivered it. This is an excellent reminder that the quality of an expert witness is determined not just by his or her knowledge, but also personality – even in a bench trial, without a jury to impress.
The defense’s experts fared much better. The judge found all three credible, including another CPA, the dean of the Leventhal School of Accounting at the University of Southern California and a senior advisor at Cornerstone Research, whom he deemed “a reliable and credible witness.” His testimony was presumably more consistent, and less snarky.
In the end, the team with the stronger experts won the day. Judge Sheridan wrote that “most of the testimony from AXA employees did little to determine whether a breach of fiduciary duty had occurred,” so the experts played the deciding role. Due to the plaintiffs’ experts’ lack of credibility, the plaintiffs could not prove a breach of fiduciary duty or any actual damages, and the judge ruled in favor of the defense.
It’s enlightening to hear a judge provide so much detail on how and why he chose to trust or discredit each expert’s testimony. We all know that our choice of expert witnesses matters. This case is a great example of just how much impact it really has.