July 7, 2013
By Peter W. van der Schans
The Energy Bar Association’s (EBA) 2013 Spring quarterly newsletter, EBA Update, has an interesting article in the “Judge’s Corner” written by guest columnist, The Honorable Steven L. Sterner. His article, “Effectively Building a Record,” discusses how trial counsel can present their case before the Federal Energy Regulatory Commission (FERC) as effectively as possible. Judge Sterner is an administrative law judge with FERC and has served on the FERC bench for just over two years. Before joining the Commission, he served as an administrative law judge for the Office of Medicare Hearings and Appeals for five years.
Administrative law judges serve the Commission by working to resolve contested cases through hearings or negotiated settlements, conduct investigations, and perform other administrative duties related to disputes before the Commission. Judge Sterner also draws on his prior experience as assistant attorney general for the State of Ohio to discuss the importance of properly presenting evidence in a FERC hearing. His article uses a construction metaphor, the construction of a power transmission line, to explain how trial counsel should construct their case by effectively planning and executing the presentation of their case.
In the context of a FERC hearing, a construction expert’s role, such as that of Interface Consulting, oftentimes centers on evaluating the prudence of expenditures related to capital projects. The determination of prudence establishes whether a regulated company can include all of the costs of a capital project in the calculation of the rates that it charges the purchasers of the commodity. For example, if a utility company builds a power plant, the cost of the power plant can be spread across the usable life of the plant and incorporated into the unit rates for the power that is sold to the consumer. This is how regulated utilities recoup the costs of the project.
Judge Sterner proposes the following key guidelines for presenting evidence in a hearing:
- Think of the hearing room as a construction site; trial counsel are the architects and builders.
- Proper regard must be paid to preparing, marking, and introducing exhibits.
- Verify the accuracy of electronic and hard copy versions of exhibits.
- Assisting counsel plays a crucial role in tracking exhibits and having them ready for the judge, court reporter, or witness.
- Read the judge’s rules of procedure and use them as a blueprint for constructing the case.
- Master the laws of evidence and fundamentals of trial and appellate practice, as well as the art of direct and cross-examination of witnesses.
- Bring sufficient copies of exhibits to share with witnesses, the judge, law clerks, court reporters, and other participants.
- Make sure exhibits are properly marked, identified, and admitted.
- Take special care with handling privileged or critical energy infrastructure information documents throughout the case.
- Keep the record “clean” by ensuring use of the correct citations to exhibits, the hearing transcript, and the law.
- Inspect the exhibits to make sure they meet the Commission guidelines.
- Inspect the transcript for textual errors and to confirm that all exhibits were properly identified and admitted.
- Inspect the briefs to ensure they correctly point the judge to supporting material in the record.
Careful and thorough planning of a case includes carefully selecting and utilizing expert witnesses as well. For example, if the dispute includes a capital project construction component, it is advisable to retain a construction expert who has specialized knowledge in construction disputes. Preferably, the expert should have an engineering and business background, in order to effectively evaluate the technical, project management, cost, and schedule issues. Examples of ways to use expert witnesses effectively in FERC and other regulatory hearings include:
- Choose your experts carefully and analyze their qualifications from every angle. For example, an expert that appears qualified on paper may not be effective on the witness stand.
- Sometimes experts that have worked their whole life in an industry can make poor witnesses because they cannot communicate effectively with the trial participants, and/or they can fail under cross-examination.
- Retain the experts with sufficient time to properly evaluate the issues, and provide them with access to all necessary documentation.
- Have the expert evaluate project costs and schedules, including providing schedule delay analysis if applicable.
- Ask the experts to review contracting strategies as well as other elements of the project planning phase. The planning process of a project can be just as important in a prudence hearing as the execution of the project.
- Request that the experts evaluate project and construction management practices, as well as standards of care.
- Ensure that the experts provide proper citations to hearing exhibits that effectively support their conclusions.
Judge Sterner describes several guidelines specifically for examining expert witnesses during a hearing – an area in which Interface Consulting is heavily involved. These are:
- Using a barrage of documents in an attempt to confuse an expert witness during cross-examination is not effective.
- Opposing counsel should use the skills of a builder to identify precisely any unsteady points by exploring the weaknesses in an opposing party’s expert opinion.
- Counsel needs to cordon off problem areas to highlight their unsound nature and create a clean record for use in post-hearing briefs and in the initial decision.
- Cross-examination of an expert witness can change the entire tide of a case by revealing weaknesses and weaving counter testimony using properly marked exhibits.
Like a successful construction project, presenting a successful case in a FERC proceeding takes careful and thorough planning. The effective treatment of expert witnesses, as Judge Sterner states, can change the direction of a case. This applies to counsel’s own experts as well as opposing experts.
The importance of Judge Sterner’s advice cannot be underestimated. There is one person above all others that counsel needs on their good side, and that is the judge overseeing the proceeding. Like a construction project, effective management of a case requires proper preparation, thorough execution, and minimal errors.