OUR THOUGHTS ON:

"Draft" Reports No Longer a Dirty Word in Testifying Expert's Vocabulary

Business Advisors

By Frank Wisehart MBA

Congress is set to approve changes to the Federal Rules of Civil Procedure.1  Among the changes, Congress will adopt the “New Jersey Rule,”2 which extends work-product protection to an expert’s draft report and most communications between the attorney and the expert. These changes are expected to become effective December 1, 2010.3  Specifically excluded from nondiscovery are communications and evidence about an expert’s fees, assumptions relied upon as supplied by counsel and data, or other information considered by the expert in forming his/her opinions.4

These amendments are designed to address the issues interpreted under Rule 26 that allow discovery of all communications between counsel and expert witness and all draft reports for any witness offering expert testimony.5 The underlying conceptual nature of discovery about draft reports and expert/counsel communications relates to how much, and to what extent, retaining counsel may have (unduly) influenced the expert’s opinion. This is contrary to the rules of engagement to which most modern testifying experts must adhere. As members of credentialing societies, experts are generally required to exercise reasonable, adequate client control and independence in their respective fields of practice. For example, accounting experts must adhere to specific rules relating to maintaining independence, ensuring integrity, disallowing improper subordination of opinions and providing due professional care6 in the discourse of their engagement. Most other credentialing societies have and maintain similar rules for their members. Failing to adhere to these rules can result in censure of the expert by his or her credentialing community.

In response to the liberal Rule 26 interpretation, experts and counsel have resorted to creative and extreme measures to protect their drafts and communications from discovery. Experts have resorted to issuing only a single, final report, relying on their memory instead of taking notes, and implementing oral-only communication strategies in order to protect from discovery their interaction with counsel. Worse, some experts throw away, shred, or simply fail to disclose draft reports or records of communications with counsel. Miraculously, these communications cease to exist. Are we to believe that final reports containing substantial information and analysis were hatched through the osmosis of entirely independent evaluation of attorney or client provided documentation to the expert?

Neither the retaining nor the opposing party benefits from this practice. This fear of discovery inhibits important, meaningful communication between expert and counsel. Serious experts are not sound-bite, advocate echo boards for attorney positions. They want to form an appropriate, defensible professional opinion. The current zealous pursuit of the “undue” influence doctrine prevents thorough expert/client/attorney communication about the real issues: the facts, assumptions, data, merits and circumstances of the instant case.

Further, this practice has caused litigation costs to increase without adding any significant benefit to the parties. “Lawyers hire two sets of experts – one for consultation, to do the work and develop the opinions, and one to provide the testimony – to avoid creating a discoverable record of the collaborative interaction with the experts… These steps add to the costs and burdens of discovery, impede the efficient and proper use of experts by both sides, needlessly lengthen depositions, detract from cross-examination into the merits of the expert’s opinions, make some qualified individuals unwilling to serve as experts, and can reduce the quality of the experts’ work.”7

The Rules and Procedures Committee8 heard a wide range of comments from three primary sources in its consideration of these changes to Rule 26. This group included practicing attorneys, academics and expert witnesses.9 The adoption of these Rule 26 amendments enjoys wide support from the American Bar Association, the Council of the American Bar Association Section on Litigation, the American College of Trial Lawyers, the American Association for Justice, the Federal Magistrate Judges’ Association, the Lawyers for Civil Justice, the Federation of Defense & Corporate Counsel, the International Association of Defense Counsel, and theUnited States Department of Justice.10

The adoption of the Rule 26 amendments will allow experts the freedom to explore case issues and merits more thoroughly without the fear of improper influence by counsel. The results of this adoption will be tangible: a better understanding by experts of the facts, data and merits of the case, lowered costs of litigation, and a focus on the opinions offered by the expert.

Frank A. Wisehart, M.B.A., CPA/ABV CFE, CVA is the Director of Business Advisory Services at Schneider Downs, Columbus, Ohio, an audit, tax and advisory firm that has been in business since 1956. Frank Wisehart has 15 years of experience in business valuation, litigation support, forensic accounting, fraud investigation, transaction due diligence and expert testimony. He may be contacted at (614) 586-7118 or fwisehart@schneiderdowns.com.

 

 

1 Committee on Rules of Practice and Procedure of the Judicial Conference of the United States, Washington, D.C. 20544, Agenda E-19 (Appendix C) Rules, September 2009.
2 The State of New Jersey enacted similar legislation regarding nondiscovery of expert drafts and privileged communications between attorney and expert.
3 CFEs Will Be Directly Affected by U.S. Supreme Court Amendment to Rule 26.
4 Committee on Rules of Practice and Procedure of the Judicial Conference of the United States, Washington, D.C. 20544, Agenda E-19 (Appendix C) Rules, September 2009, Page 4.
5 Report of the Judicial Conference, Committee on Rules of Practice and Procedure, To the Chief Justice of the United States and Members of the Judicial Conference of the United States, Page 2.
6 American Institute of Certified Accountants, Code of Professional Conduct, Rule 101, Independence, Rule 102, Integrity and Objectivity and Rule 201, General Standards.

7 Excerpt From the Report of the Judicial Conference, Committee on Rules of Practice and Procedure, To the Chief Justice of the United States and Members of the Judicial Conference of the United States, Pages 2 and 3.
8 Committee on Rules of Practice and Procedure of the Judicial Conference of the United States.
9 Excerpt From the Report of the Judicial Conference, Committee on Rules of Practice and Procedure, To the Chief Justice of the United States and Members of the Judicial Conference of the United States, Page 1, “Approximately 90 witnesses testified at three public hearings on the proposed amendments to Rules 26 and 56.”
10 Excerpt From the Report of the Judicial Conference, Committee on Rules of Practice and Procedure, To the Chief Justice of the United States and Members of the Judicial Conference of the United States, Page 2.


 

 

 

 

 

Schneider Downs provides accountingtax, wealth management, technology and business advisory services through innovative thought leaders who deliver the expertise to meet the individual needs of each client. Our offices are located in Pittsburgh, PA and Columbus, OH. 

This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax-related matter.

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