Can I call an expert witness whose employer has a contingent fee interest in the outcome of my client's case?
Texas Ethics Opinion 553: An Expert Witness Whose Employer Has a Contingent Fee Interest
Short answer: Per the Committee, a lawyer may not use as an expert witness an employee of a business entity that has a contingent fee interest in the outcome of the case, because Rule 3.04(b) prohibits compensating a witness or other entity contingent on the testimony's content or the case's outcome.
Disclaimer: This is an advisory ethics opinion. Advisory opinions are not binding; they interpret the Texas Disciplinary Rules of Professional Conduct and are persuasive authority. This summary is for research purposes only and is not legal advice. Verify current rules before acting on any specific guidance.
About this page: The plain-English summary and Q&A below were written by Ezel based on the official opinion. The opinion text is reproduced at the bottom; the official source (linked) controls.
Plain-English summary
A property tax consulting company represents property owners in protesting ad valorem tax assessments. Its compensation agreement charges a flat fee plus a contingency: 12% of taxes saved at the protest stage, and if a lawsuit is filed, 50% of taxes saved through the lawsuit; the company pays all litigation expenses, including expert witness fees. The company tells the lawyer handling a property owner's lawsuit that one of its employees, a licensed real estate appraiser, can serve as an expert witness on the property's value. The question is whether the lawyer may offer that expert's testimony.
The Committee applies Rule 3.04(b), which bars a lawyer from paying or acquiescing in compensation to a witness or other entity contingent on the content of the testimony or the outcome of the case, while allowing reasonable expenses, compensation for lost time, and a reasonable expert fee. An expert paid a percentage of the recovery would have an obvious stake in the outcome, which is inconsistent with an expert's role of providing specialized knowledge to assist the trier of fact.
The Committee finds it does not matter that the contingent payment runs to the company rather than directly to the expert. Rule 3.04(b) expressly reaches compensation to "a witness or other entity," and a company that can be a witness only through an employee falls within the prohibition. So using the company's employee as an expert when the company holds a contingent fee interest violates Rule 3.04(b). The Committee notes this is consistent with Opinion 458 (1988), decided under predecessor Disciplinary Rule 7-109(C), and is even clearer under current Rule 3.04(b), which expressly extends the bar to an "other entity."
In practice
Under this opinion, and under the Texas rule as it stood at the time, a lawyer may not present an expert witness whose employer has a contingent fee interest in the outcome of the case. The Committee holds Rule 3.04(b) prohibits the arrangement because the rule reaches contingent compensation to a witness "or other entity," and routing the contingent payment through the expert's employer rather than to the expert directly does not cure the violation.
Common questions
Q: Can I use an expert whose company is paid a percentage of the tax savings or recovery?
A: Per Opinion 553, no. The Committee concludes Rule 3.04(b) bars using an expert witness whose employer holds a contingent fee interest in the case's outcome, because the rule prohibits compensating a witness or other entity contingent on the outcome.
Q: Does it help that the expert personally is not paid on contingency, only the employer?
A: No. The Committee says Rule 3.04(b) expressly reaches an "other entity," and because a company can testify only through an employee, paying the employer on contingency falls within the prohibition.
Q: Can an expert be paid anything?
A: Yes. The Committee notes Rule 3.04(b) allows reasonable expenses of attending or testifying, reasonable compensation for lost time, and a reasonable fee for an expert's professional services; what it bars is compensation contingent on the testimony or outcome.
Background and rules framework
The opinion interprets Texas Disciplinary Rule 3.04(b) (fairness in adjudication; compensation of witnesses, corresponding to ABA Model Rule 3.4), which prohibits paying or acquiescing in compensation to a witness or other entity contingent on the content of the testimony or the outcome of the case, while permitting reasonable expenses, lost-time compensation, and a reasonable expert fee. The analysis turns on the rule's reach to an "other entity" that employs the expert.
Citations and references
Rules of Professional Conduct:
- MR 3.4 (fairness to opposing party and counsel)
- Texas Disciplinary Rule 3.04(b), including 3.04(b)(1)-(3)
Other opinions cited:
- Texas Ethics Opinion 458 (March 1988): under predecessor Disciplinary Rule 7-109(C), paying a consulting firm a percentage of the recovery for providing expert testimony was improper
See also
Source
- Landing page: https://www.legalethicstexas.com/resources/opinions/opinion-553/
- Original PDF: https://tcle-web.s3.amazonaws.com/public/documents/Opinion_553.pdf
Original opinion text
Reproduced from the official source for research purposes. The linked source is authoritative.
QUESTION PRESENTED
Is a lawyer prohibited from offering the testimony of an expert witness whose employer has entered into a contingent fee contract with the lawyer's client regarding the subject matter of the litigation?
STATEMENT OF FACTS
A property tax consulting company (the "Company") represents owners of real property in protesting and appealing ad valorem tax assessments on their property. The contract entered into between the Company and a property owner provides that the Company will file a notice of protest and appeal of the tax assessment and prepare and present appeals to county appraisal district and administrative review boards. For this service the Company's written compensation agreement with property owners provides that it is to receive a fee of $500, plus a contingency fee in an amount equal to 12% of all property taxes saved by the property owner. If the protest is not successful or does not achieve an acceptable reduction in taxes, the property owner may agree with the Company to the filing of a lawsuit. If a lawsuit is filed, the property owner agrees to pay the Company a contingent fee in an amount equal to 50% of the property taxes saved as a result of the lawsuit. The Company agrees to pay all expenses associated with the litigation, including court costs, appraisals, engineering reports, expert witness fees and legal fees. The Company informs the lawyer handling the lawsuit on behalf of the property owner that one of the Company's employees, who is a licensed real estate appraiser, can serve as an expert witness to provide testimony in the case as to the value of the property for tax assessment purposes.
DISCUSSION
Rule 3.04 of the Texas Disciplinary Rules of Professional Conduct provides in pertinent part:
"A lawyer shall not:
...
(b) ... pay, offer to pay, or acquiesce in the offer or payment of compensation to a witness or other entity contingent upon the content of the testimony of the witness or the outcome of the case. But a lawyer may advance, guarantee, or acquiesce in the payment of:
(1) expenses reasonably incurred by a witness in attending or testifying;
(2) reasonable compensation to a witness for his loss of time in attending or testifying;
(3) a reasonable fee for the professional services of an expert witness."
It is clear under Rule 3.04(b) that a lawyer cannot acquiesce in the payment of compensation to a witness contingent upon the content of the witness's testimony or upon the outcome of the case. An expert witness can be paid a reasonable fee for his or her services under Rule 3.04(b)(3), but Rule 3.04(b) prohibits use of an expert witness who has a contingent interest in the outcome of the case. Experts provide specialized knowledge to assist the trier of fact in understanding the evidence or determining a fact in issue. An expert witness who is paid based on a percentage of the recovery in a litigated matter would have an obvious stake in the outcome of the litigation, which is inconsistent with an expert's role.
In the circumstances presented, the contingent payment is not made directly to the expert witness but rather is made to the Company, which is the employer of the expert witness. Rule 3.04(b) expressly prohibits a lawyer from paying, or acquiescing in the payment of, compensation to "... a witness or other entity contingent upon the content of the testimony of the witness or the outcome of the case." (emphasis added) The payment of a contingent fee to an entity that is the employer of an expert witness clearly comes within the prohibition of Rule 3.04(b), particularly in view of the fact that the employing entity could itself be a witness only through an employee or other agent. Accordingly, it would be a violation of Rule 3.04(b) for a lawyer to use an employee of the Company as an expert witness in the property owner's lawsuit when the Company has a contingent fee interest in the outcome of the case.
The result reached under Rule 3.04(b) is consistent with the result reached in Professional Ethics Committee Opinion 458 (March 1988), which was issued prior to the adoption of the current Texas Disciplinary Rules of Professional Conduct. In that opinion, a medical-legal consulting firm entered into contingent fee contracts with plaintiffs and, in return, provided services including expert testimony. The issue presented was whether a lawyer was prohibited from participating in or recommending that a client enter into such an agreement with the consulting firm. The Committee ruled, citing Disciplinary Rule 7-109(C) of the Texas Code of Professional Responsibility then in effect, that the payment of a fee based on a percentage of the recovery to a consulting firm providing expert witnesses would necessarily involve paying for testimony in violation of that rule. Disciplinary Rule 7-109(C) of the Texas Code of Professional Responsibility is the predecessor of the provisions of Rule 3.04(b) of the Texas Disciplinary Rules of Professional Conduct quoted above. It should be noted that the result that was reached under the old Texas Code of Professional Responsibility is even clearer under current Rule 3.04(b) because the current Rule makes explicit that the prohibition of the Rule applies to payments of contingent compensation to an "other entity" as well as directly to a witness.
CONCLUSION
It is a violation of the Texas Disciplinary Rules of Professional Conduct for a lawyer to use in a case as an expert witness an employee of a business entity that has a contingent fee interest in the outcome of the case.
Tex. Comm. On Professional Ethics, Op. 553 (2004)