Work Product Protection For Communications Between Lawyers And Expert Witnesses Coming Next Month Under Revised Federal Rules of Civil Procedure

Until December 10, 2010, lawyers need to remain aware that, in cases pending in  federal court  their communications with their retained expert witnesses and any draft reports prepared by the expert are likely to be discoverable based on a request from opposing counsel.

The expert rule changes which become effective on December 10  will give work product protection to both items.  This will permit attorneys to have more involvement in the preparation of an expert's report without their involvement being subject to discovery. The new Rule also specifically exempts draft reports from any disclosure obligation.  

The limited exceptions to the work product protection specifically granted by new FRCP Rule 26(a)(4) (B) and (C) are contained in new FRCP Rule 26(a)(4)(C), and include:

  • communications regarding compensation to be paid to the expert,
  • "facts or data that the lawyer provided and that the expert considered in forming his opinion."
  • assumptions provided by the attorney upon which the expert relied in forming his opinion.

The former practice of dodging the need to disclose communications with an expert or the expert's draft reports, by  which lawyers limited written communications to their experts and may have encouraged their experts not to keep drafts of their reports, will no longer be necessary.  The revisors felt that the discoverability of draft reports and the written give and take between lawyers and their experts "inhibited robust communications" between them.

The rule remains unchanged in the North Carolina Rules of Civil Procedure.  The Business Court ruled in 2008 that there is no privilege between counsel and an expert witness, which had been the general approach in federal cases. So, communications between lawyers and their experts remain discoverable in state court litigation regardless of the December 10 changes.

According to the judge chairing the committee responsible for the revisions the "changes will reduce cost, focus discovery and trial on the merits of the experts’ opinions, and allow parties and their counsel to make better use of their experts."  An interview in which he discusses the changes is here.

There are also changes to Rule 56, which governs summary judgment.  As I read the revised Rule, it doesn't mark a change in how lawyers in North Carolina would approach a motion for summary judgment, but it is worth a read before you file or oppose a summary judgment motion in federal court after December 10.

Accountant Who Prepared Financial Statements Didn't Need To Be Designated As An Expert Witness In Order To Testify

An accountant who had prepared financial statements did not need to be designated as an expert witness in order to provide testimony regarding those financial statements, per the Business Court's ruling in A-1 Pavement Marking, LLC v. APMI Corporation, 2009 NCBC 15 (N.C. Super. Ct. June 26, 2009).  The opinion also discusses generally accepted accounting principles ("GAAP") relevant to financial statements of consolidated entities.

The issue in A-1 was Plaintiff's calculation of a bonus due one of the Defendants, which was to be based on Plaintiff's gross profits. The Plaintiff's consolidated financial statements had eliminated a significant receivable due from a subsidiary. The Defendant asserted that his bonus would have been substantially higher with the inclusion of that receivable in the gross profit calculation, and brought a claim under the North Carolina Wage and Hour Act.

The Plaintiff moved for summary judgment, relying on an affidavit from the accountant who had prepared the financial statements on which the calculation was based.  The Defendant objected to what it termed "improper opinion testimony," and argued that the accountant had never been designated as an expert witness.

Judge Diaz rejected the argument that the accountant was an undisclosed expert who shouldn't be allowed to testify, holding:  

The record shows that Plaintiff’s accountant personally prepared the relevant financial statements and arrived at the $5,000.00 bonus amount that A-1 paid Blount. As a result, Plaintiff’s accountant is not an expert witness, but is instead a fact witness, albeit one with specialized knowledge in accounting. Cf. Turner v. Duke University, 325 N.C. 152, 168, 381 S.E.2d 706, 716 (1989) (“Where a doctor is or was the [patient’s] treating physician and is called to testify not about the standard of the [patient’s] care but rather about the [patient’s] treatment and the doctor’s choice of surgical procedures, he is not an expert witness.”).

The Court furthermore didn't accept the argument that the consolidated financial statements had improperly excluded the intercompany receivable:

the accounting methodology used by Plaintiff's accountant to generate the consolidated financial statements . . . is entirely consistent with GAAP.  When a parent company prepares consolidated financial statements, GAAP requires the parent to eliminate certain transactions among the parent and its affiliates, including accounts receivable, to avoid counting revenue twice and to accurately portray the operating results of affiliated companies as a single economic unit. 

Plaintiff's motion for summary judgment was granted. 

There have been two other opinions from the Business Court in the A-1 case, one involving a claim for reformation of the asset purchase agreement at issue in the case; and the other denying a request for a preliminary injunction involving title to a motor vehicle.

Brief in Support of Motion for Partial Summary Judgment

Brief in Opposition to Motion for Partial Summary Judgment

Reply Brief in Support of Motion for Partial Summary Judgment

The photo at the top is from roboppy's photostream on Flickr.

Right To Discovery Regarding Expert Witness Trumps Attorney-Client Privilege

This short Order has a valuable nugget on the discoverability of communications between lawyers and their expert witnesses.

One of the Defendants moved to compel discovery from the Plaintiff to obtain documents exchanged between the Plaintiff's lawyers and their expert. 

The expert, however, was also the President of the client and the central fact witness.  Plaintiff resisted production on the grounds of attorney-client privilege. 

It made no difference to the Court that the expert was also the client.  It held:

"Plaintiff’s assertion of the attorney client privilege to shield discovery of any communications with counsel involving his expert opinions is misplaced. Expert witnesses are subject to specific rules of discovery under the North Carolina Rules of Civil Procedure. N.C.R. Civ. P. Rule 26(b). Generally, the facts known to and the opinions held by an expert are discoverable as well as the materials the expert relied upon in coming to his or her opinion. See id. at Rule 26(b)(4), 26(b)(1). If [the expert's] opinions are based upon any information supplied to him by counsel that information is discoverable and Plaintiff is required to make disclosures of that information."

There are no cases cited in the Court's Order, but Defendant's Brief contains references to a number of cases on the issue of discovery of communications between attorneys and their expert witnesses.

The earlier post on this case, Azalea Garden Board & Care v. Vanhoy, involved an issue of discoverability of settlement agreements.