Opinion ID: 1708276
Heading Depth: 1
Heading Rank: 7

Heading: Restrictions on the Defense

Text: McGladrey argues that the trial court erred in refusing to allow testimony by its expert and cross-examination of Lien's expert regarding damages. According to McGladrey, it was precluded from cross-examining Lien's expert regarding his knowledge of all the tax issues relating to the transaction, specifically, the flip side of the transaction whereby Lien received $48,680 and did not have to repay the $200,000 note and $56,120 in accrued interest. McGladrey also argues that if its expert would have been allowed to testify, his testimony would have demonstrated that Lien received benefits as a result of the issuance of the preferred stock which included dividends, and that, because Lien did not have to pay the tax until 1990, Lien's expert erred in failing to factor in the time value of money. [3] A review of the record indicates that McGladrey asked Lien's expert whether he had come across any information leading him to believe that Lien had a constructive dividend problem in 1982. Lien objected, the witness stated he did not have an opinion, and the trial court appeared to sustain the objection on the ground of relevance. Following a bench conference, McGladrey resumed questioning, but on a different topic. When McGladrey's expert was asked whether Lien's damage claim took into consideration everything that should be considered in assessing the damages, he testified that Lien received benefits as a result of the issuance of the preferred stock and the redemption of the stock in exchange for extinguishment of the note. Lien objected and moved to strike the entire answer, arguing that it was legally impermissible to attempt to tell the jury that they should consider other items of benefit to Lien or the corporation. The jury was excused and McGladrey was allowed to make an offer of proof. The offer of proof was that if McGladrey's expert was permitted to testify, he would testify that Lien received benefits from the issuance of the preferred stock including revenue, dividends, and compensation and that Lien's expert failed to consider these benefits and the time value of money in computing damages. The objection was sustained. Although the jury was accurately instructed to reduce the damage award by appropriate credit shown by the evidence, [4] the instruction was meaningless because McGladrey was denied the opportunity to present expert testimony or evidence to establish the appropriate credit. This was error. The data upon which an expert rests his opinion may be fully inquired into upon cross-examination. And the incorrectness or insufficiency of such data may be established by calling other expert witnesses and questioning them as to their opinion of the validity of the prior witness' grounds. 3A John Henry Wigmore, Evidence in Trials at Common Law § 992 (Chadbourn rev. 1970). While the precise scope of cross-examination of expert witnesses rests within the discretion of the trial court, this discretion should not be applied in a narrow or restricted manner, especially with respect to experts who deal in opinions as to matters truly not in the common knowledge and experience of laymen. 1 McCormick on Evidence § 13 (John William Strong et al. eds., 4th ed. 1992) ( citing Polk v. Ford Motor Co., 529 F.2d 259, 271 (8th Cir.1976), cert. denied, 426 U.S. 907, 96 S.Ct. 2229, 48 L.Ed.2d 832 ([T]he weakness in the underpinnings of [expert's] opinions may be developed upon cross-examination and such weakness goes to the weight and credibility of the testimony.)). On cross-examination in the process of probing the witness' qualifications, experience, bases, and assumptions opposing counsel may require the expert to disclose the facts, data, and opinions underlying the expert's opinion not previously disclosed. With respect to facts, data, or opinions forming the basis of the expert's opinion, disclosed on direct examination or during cross-examination, the cross-examiner may explore whether, and if so how, the non-existence of any fact, data, or opinion or the existence of a contrary version of the fact, data, or opinion supported by the evidence, would affect the expert's opinion. Similarly the expert may be cross-examined with respect to material reviewed by the expert but upon which the expert does not rely. Counsel is also permitted to test the knowledge, experience, and fairness of the expert by inquiring as to what changes of conditions would affect his opinion, and in conducting such an inquiry, subject to the requirements of Fed.R.Evid. 403, the cross-examiner is not limited to facts finding support in the record. 1 McCormick on Evidence § 13. In a professional negligence action, the appropriate measure of damages is the difference between what the taxpayer would have owed absent the negligence, and what they paid because of their accountant's negligence, plus incidental damages. Thomas, 768 P.2d at 1091-92 n. 5 (trial court erred in allowing taxpayer to recover as damages all taxes owed upon the corporate liquidation). Just as Lien's expert was permitted to testify regarding the damages incurred as a result of the negligent advice, so must McGladrey be allowed to elicit testimony discrediting Lien's computations and demonstrating the benefits which Lien received. See generally Wiggins Constr. Co. v. Joint Sch. Dist. No. 3, 35 Wis.2d 632, 151 N.W.2d 642, 647 (1967) (citation omitted) (expert opinions may be challenged by cross examination and defense testimony). Because we reverse and remand for a proper determination as to damages, we do not reach McGladrey's allegation that SDCL § 21-1-13.1 does not contemplate an award of prejudgment interest where the damages were highly uncertain as to amount and legal obligation.