Selecting the Right Professional
On April 27, South Florida Legal Guide invited two Top Attorneys and three Top CPAs to participate in a roundtable discussion on "Litigation Support Strategies: Selecting the Right Professional" at The Bankers Club in downtown Miami. Publisher Jacob Safdeye introduced the panelists to an audience of legal, accounting and financial professionals, and editor Richard Westlund moderated the two-hour discussion. "All too frequently, attorneys, CPAs and other litigation support professionals fail to communicate effectively with each other," said Westlund in his introduction. "We hope this special event will help foster stronger connections among South Florida professionals."
| Top Attorneys • Alvin Davis, Squire Sanders & Dempsey • Leon Patricios, Zumpano Patricios Winker Top CPAs • Stanley Foodman, Foodman & Associates • Michael Kridel, Daszkal Bolton • Richard Pollack, Berkowitz Dick Pollack and Brant  |
Q. What factors are most important in choosing a litigation support professional?
Davis: We use forensic accountants, as well as scientific and technical experts quite frequently. The first factor to consider is knowledge – the experts have to know about the kinds of issues in the case. Experience is the next factor, since the expert has to understand what kinds of things can occur in litigation. Finally, experts also have to understand the needs of lawyers and be available when needed. I look for experts who will come in, learn about the case and suggest things to me.
Availability is another key factor. It doesn't help to have an expert who is testifying in Houston on the day you need them in court. You need to have that kind of understanding at the outset. Finally, I don't want a talking head; I want the expert to be involved in the case from the beginning alongside of me. I don't want someone who is picking up the file a week before the court appearance because in cross examination that person will be slaughtered. Those would be the principal factors that I would look for.
Patricios: From an attorney's perspective, you need to know your audience. When I'm looking for an expert, one of the principal things we consider is the forum. Are we going to be in bankruptcy court with an experienced judge? Will we be in arbitration with a knowledgeable expert? Or will we be in a jury trial in Miami, Orlando or in rural Florida?
If you have an equal choice between experts, sometimes the deciding factor could be whether this person will make a good impression on the judge or jury. Some experts may be comfortable in any forum, but it's something to discuss at the onset, because more and more cases are turning on that testimony. So, I would say know your audience in choosing an expert or in volunteering to be that expert.
Q. In addition to the expert's knowledge and experience, how important are factors like personality, likeability and being able to fit into the legal team?
Patricios: If you're in front of an arbitrator where most of the work will be presented on paper, I think the expert's personality is less important. But if the expert is going to be in front of a jury for two days, that expert had better be a likeable person. The expert should be able to handle a cross examination under fire and not come across as haughty. After all, you want the expert to appear as a "real person" who is being attacked by a bad lawyer on the other side.
Davis: After evaluating your forum and your presentation, you need to engage an expert who can communicate with that particular audience. It's not so much a matter of likeability – although that can be a factor. After all, I've seen experts who are so condescending that the jurors don't care whether they are right or not. In my experience, jurors take their duties seriously and they want to decide the case. The jurors appreciate it when your expert is really trying to communicate, helping them understand the key points so they can make a decision.
So, a testifying expert has to be able to break down a complex topic into terms a jury can understand. One of the biggest mistakes that I have observed is when the experts communicate in their lexicon and not in language that the jury can understand. In cases where you can't avoid technical terms, judges have allowed us to submit a glossary to the jury that both sides agree on. But the key is getting the expert to translate that expertise into everyday language the jury can understand and absorb and then utilize.
Q. Can you have a long-term relationship with an expert, or do you make your selections on a case-by-case basis?
Davis: Let me answer that question by saying that sitting in front of me is Laurie S. Holtz (a CPA and senior advisor at Marcum LLP). He has been a forensic accountant expert for me for 34 years, so the answer to that question is yes. Laurie will come in suggest things to me that will help our case. For instance, a principal issue in one case was resolved because a look at the footnotes to the annual financial audit revealed things that the other party was trying to conceal.
Q. At what point in a case do you realize that you need an expert?
Patricios: I think almost every civil case that involves damages is going to likely require an accounting expert. The exception might be a personal injury case that simply involves adding up the medical bills without an analysis of future income.
So, you should be thinking about experts before the case is filed. You should be thinking about engaging a consulting expert to discuss strategy and tactics, such as things you should ask for in discovery. Not every case requires an expert, and some clients can't afford that, though. But I'm a big believer in getting experts involved as early as possible.
When you get to the process of selecting an expert, it's going to depend on a number of factors: the issues in the case, the cost and client\'s budget, what needs to be done from a forensic perspective and what needs to be done from a testifying perspective. There is a lot of room for experts in cases. We've seen cases where both sides used multiple experts and others where the judges said no more than two experts.
Pollack: From a CPA's viewpoint, I think hiring the expert early in the case gives the attorney the opportunity to consult about getting the right documents, asking the right questions and framing interrogatories. If we get called in later in the case, the attorney may have already sent out a document request without asking for certain things that would occur to an accountant.
The other advantage to hiring the expert early in the case is that it gives the expert more credibility. An expert who is called a week before a discovery deadline is just not going to come across with the same credibility as an expert who's been working on the case for some time.
Q. Would you like to comment on e-discovery?
Davis: While this is a relatively new area of expertise, now you need to get your e-discovery experts on board the day the case starts. They need to know how to get into computers, find documents and understand the metadata – the words beyond the words. In my view, your forensic accountant is your partner who can help you frame the discovery, read the responses you get from the other side and help you follow up or find flaws in their production.
We just finished a lost profits case in Texas, where a company had come into the market and taken away our client's principal product supplier. Our requests for discovery included all the electronic documents, backups and metadata. The production we got was clearly insufficient, so we filed a motion to compel. In response, the company said the data had not been saved and that a key computer had melted. We brought in experts in data extraction and got the court to require the other side to produce its hard drives and did a forensic examination of those materials. As a result, we recovered about four gigabytes of data – several hundred thousand documents that they claimed had been deleted but could be recovered. Next, we did an analysis of the computer and determined the hard drive that they said had melted was not the hard drive that housed the original emails. So, we recovered a cornucopia of information that the company had claimed was lost and not retrievable.
In any case where you are going to be going after email – and I can't imagine a case where you wont –you need to have IT people involved. Our firm is fortunate that we, because of the size, have an internal department that can do all of that. But it needs to be done, and the day you start the case is when you hire the experts. To find that expert, you can get recommendations from other lawyers in your firm or in your market. I will ask for referrals if it's an area that's new to me. Your client is another potential source of experts who may be familiar with that kind of business.
Q. Do experts make mistakes that turn off attorneys?
Patricios: I don't want to use a professional who brags about himself or guarantees a result. A common mistake that I see is an expert who blabs about himself or herself. I would much rather get the references or case documentation that will help me make a decision.
Davis: What stops me in my tracks is when the expert comes in with a big team for the initial meeting. After all, I want to deal with the person who going to testify in court. My first thought when a phalanx of people comes swooping into my office is that I'm going to be dealing with a talking head. The team will do the work and the expert will show up at trial to testify. That doesn't work for me. I want an expert who will be my partner – someone who will help me find things to build my case. So, the principal thing that sends me looking for someone else is when the Vienna boys\' choir shows up in my office.
Q. Now we will swing over to our three CPA professionals. My first question is how can a litigation support professional add the most value to an attorney in a case?
Foodman: I'm known in the community mostly for criminal defense work, although I've been doing commercial work for years. As accountants, our job is to arm the attorney with information to put on the best case possible. The earlier we get into a matter, the better. We can help the attorney with the facts and analyze the facts from a financial perspective. I've had a number of attorneys tell me that if they wanted to be accountants, they wouldn't be attorneys. But it's important to understand that accountants and attorneys don't always look at things the same way. When we meet an attorney, we don't want to come in with a phalanx of people. As experts, we have to be able to bring ourselves to the battle. If we rely completely on our staffs to do everything, it's just not going to work and it's not going to get an effective result.
Kridel: I think that the primary role of an expert needs to be that of an educator, because ultimately you need to tell your story and make it understandable with no jargon, and minimal spreadsheets or charts. Education needs to take place at several levels – starting with the attorney who is your client. But ultimately you need to educate the opposing counsel and the trier of fact. At the end of the day, it's about how convincing you are, how simple you can make the issue and how believable you are. So, my primary role other than figuring out what the numbers mean is providing my education and experience so that the attorney gets the best possible result.
Pollack: I also think it depends upon the case and the circumstances. For instance, in some matters you will want to have a team available. For example, we are working on the [Scott] Rothstein case, which is something no one could handle by himself. One of my colleagues is sitting here and we have several other people from my firm that are working on that case.
Now, on a lost profits case, I'm going to be very much involved but I want to have somebody that's really smart assisting me. If I'm in there doing all the detailed work, I'm going to have a hard time taking a step back and looking at it objectively. It's a fine line between wanting to be involved, and reviewing the work of the competent people working with you.
Of course, you have to do your work with a high level of integrity, objectivity and professionalism – that goes without saying. After all, there will be another case tomorrow and you have to maintain your independence and credibility. I believe that it's very important that the expert's fee does not become contingent on the outcome of the case.
You also have to anticipate the needs of the attorney and know the deadlines. Don't let the attorney tell you "I need help with this deposition." Know ahead of time that these depositions are coming up, and know what questions are important. Checking your work, staying on top of the standards, writing skills, communication skills –all those things add value.
Q. How has technology changed the way you identify and analyze the key numbers, and has it made your job harder or easier?
Kridel: It's probably done both. Certainly, any forensic account needs to understand e-discovery, which varies by jurisdiction. The bottom line, though, is that no matter how much the courts resist it, e-discovery is inevitable. We've seen the volume of transactions going up, not down, and the complexity of transactions is growing, too.
A good forensic accountant needs to be able to mine the data, explore complex data files, and understand more than just metadata in the Microsoft Office product file. Sometimes, the metadata is the smoking gun in a case. A team of professionals can provide you with the product that will allow you to determine the financial results, what the acts were that led to those results and the consequences of those acts. That allows you to compile a report and compose your story, as well as educating people about the technology and what was done.
Some firms have forensic labs, but most rely on outside venders; that's what we do for the most part. Even though I have the skill set to do the forensics, I rely on a team. I want to be the ultimate consumer in terms of the technical forensics so I can make the decisions, interpret the findings, and educate the attorney and ultimately the trier of fact.
Q. Financial assets come in different varieties and locations. Tell us about the process you use for tracking them down on the forensics side.
Foodman: We live in an electronic world, so banking records and other sorts of documents are readily available today. The difficult part occurs when we start to get involved in international and cross-border transactions where there's a different set of rules for getting access to records. However, it is starting to become a flat world since the United States is now involved in creating all kinds of new treaties with countries. In my firm, we do a lot of international tax work, both in the criminal and civil areas. So understanding the rules and the laws in cross-border matters are very important. For years, Panama used to be considered a "black box" because a lot of folks didn't know how to open the lid get to the documents.
In the United States, it's much easier, even though some states like to style themselves as onshore, asset protection jurisdictions. I think that is almost laughable. I've been in court enough times to know that judges take the position that if "it walks like a duck and it quacks like a duck, it's a duck." You can go to a state like Nevada or Delaware and end up having absolutely zero protection for your assets. In fact, the whole world is becoming less protective.
There are no secrets any more. Everything can be discovered and found, and the banks are extremely helpful. Documents are now readily available online – even Internal Revenue Service records are available if you have the right authorization. So you can get entire transcripts of people for their whole lives – everything that they have filed. For attorneys, that data can be really useful in litigation involving individuals. It can also be very useful for impeaching testimonies.
Q. There may not be any more secrets, but there will always be disagreements when it comes to valuations, particularly in the area of real estate. How do you deal with calculating valuations and damages in a general sense? What makes one valuation more credible than another?
Pollack: I have three or four real estate cases right now where we are involved in calculating damages situations involving real estate. Obviously, you want to make sure you have an understanding of the industry and knowledge of the business and you are working with the right professionals.
It's not uncommon for a forensic accountant to suggest an industry expert who can bring additional credibility to the case. For example, I have a damages case right now, where the plaintiff is alleging that due to a professional's malpractice they were not able to sell all their condominium units. One of our defenses is going to be that this really isn't the fault of the professional because the real estate market in 2008 was falling apart. So, working with the right industry experts on a damage case and having an understanding of the industry is very important.
When preparing a business valuation, I try to look at as many different approaches as I can. That includes the asset approach, the market approach and the income approach. I consider what a buyer would pay and whether all the numbers make sense. I also go out to the business and interview management, and read their depositions. Finally, I'm going to try to be as objective as I can and follow the profession's standards in preparing my valuation.
Kridel: One of the errors I've seen on the part of other experts is when they rely upon another person's report, such as a real estate appraisal or an examiner's conclusions. I think it's incumbent upon a testifying expert to understand other experts' reports upon which they are relying. It's very easy for them to tear the expert apart in cross examination if he is relying on somebody else's work and doesn't understand it. And that issue extends to any sort of research or statistical data. You certainly need to understand how the data was generated or your expert may not have a good day in court.
Pollack: I think that's a great point. When you are applying the market approach, or getting the details or a transaction or calculating an earnings multiple without understanding that data, you are going to lose credibility. That's another reason to hire the expert early in the case and look at the expert's qualifications and credentials in a particular field, such as real estate.
Foodman: I think one other thing that needs to be emphasized. It's really important that if you plan to testify that you not be perceived as an advocate. Certainly, the rules prohibit it. That's one reason why an attorney might hire a second expert. A consultant can advocate, while the testifier must take a position and form an opinion, following all of the rules of the profession. And the expert needs to be completely knowledgeable in the area in which he is testifying. We all want to get as much work as we can, but no one can be all things to all people. It's really important for us to keep that in mind and for the attorneys that are hiring us to keep that in mind.
Davis: From an attorney's perspective, a flaw in the expert's knowledge should never come out in cross-examination. I cross-examine my own experts before they ever get near the trial. I want to know the basis for every opinion, and if they are relying on another report I want to know the basis for that reliance. Experts can trip themselves up if they rely on secondary information that they have not verified themselves. But it's a flaw in the part of the lawyer if he discovers the problem when the expert is being cross examined.
Foodman: Every attorney handles trial preparation a little differently. There are some attorneys who will spend hours prepping somebody for trial, and literally take the expert apart. It may hurt at the time but a trip to the woodshed never hurt anybody long term. Attorneys really have to be careful as to how much reliance they give that expert before putting them out in the public venue and allowing them to testify. We don't know what we are going to be asked, but the attorneys should have a good idea. Being cross examined before you testify is a really good experience.
Q. Along with not prepping experts before a trial, are there other common mistakes attorneys make with their experts?
Kridel: One question I start asking an attorney early is, "What's your theory of the case?" Litigators may not be able to readily answer that question, but I keep asking it because that's critical to me being able to do my job. And it's critical in maintaining the ability to be a non-advocate. I need to know the attorney's theory of the case is because ultimately that will determine the success or failure of my work. After all my conclusions developed without bias may not serve the attorney's theory. And knowing when to say no is critical to the reputation of an expert and certainly to the success of the attorney's case.
Pollack: Attorneys often fall in love with their liability portion of the case, and may not focus enough attention on the damages. They can have a great case in liability but not such a good case on damages. To avoid this mistake, hire the expert early if it involves damages. Another issue is giving the experts the documents they need. Sometimes attorneys will hold them back because they feel it might hurt their case. But you can bet that in the deposition or cross examination the other side's attorney is going to put those documents in front of that expert and that expert's not going to look very good. Also, there needs to be a lot of communication. That's more than talking to the expert once every couple of months or whenever you need something. But let the expert write the report and opinion. Don't over-edit those opinions and make changes that shouldn't be made.
A final point is the need for preparation, preparation and more preparation. Make sure that you have had those prep sessions with the expert. No matter how many times an expert has testified in a deposition, make sure that you go through the drill: When did you get hired? What documents did you rely on? What did you look at? What are your conclusions? What are your opinions?
Foodman: Although the volume of documents seems to be expanding exponentially, it's important for attorneys to go through the discovery themselves. Even if they don't fully grasp all the financial issues, at least they should be familiar with what they are giving to the expert. Otherwise, they are leaving it up to the expert to make decisions regarding the validity of things in the discovery. If the other side chooses to view the information differently, the attorney can be in for a big surprise down the road.
Davis: It is a partnership as I've said before. The attorney has to go through the same information the forensic accountant is reviewing. That's because there is going to be cross examination, and skillful lawyers on the other side are going to make inroads or appear to make inroads on your expert's testimony. You cannot rehabilitate your expert when you get up on redirect unless you understand the underlying documents and the underlying facts. If you don't have at least a minimal mastery of the underlying facts of the documents, you are leaving your expert exposed on the witness stand.
Pollack: The other mistake I've seen is that sometimes attorneys will tell the expert, "Here are the assumptions and what I want you to rely upon." It's the expert who needs to determine if those assumptions are reasonable.
Foodman: I'd like to add that an assumption in a vacuum has no basis for support. We are document-driven professionals, and we want support for an assumption.
Patricios: I think the topic of assumptions is one of the most important things you should cover with your expert because there are invariably going to be assumptions in the expert's testimony. I think it\'s the lawyer's job to arm the expert with every possible document and every possible piece of testimony to minimize the use of assumptions. Then you can have a discussion with the expert regarding the true assumptions in the case, which a good expert will admit to the jury: "I am assuming you will find this fact to be true. If so, then my report follows." I think this is a key credibility moment for an expert in front of a jury and it's is one of the most important conversations for an attorney to have with the expert.
Foodman: I do forensics, rather than valuations, and it's amazing to me how the numbers shift when there is a battle of experts. I wonder how can they be so far apart with the same set of facts? It may require a third look at the same data by another neutral party so you can disarm the other side. This is one of the areas where it's really important for the experts to work closely with attorneys.
Audience Questions and Responses
Arthur England: Something that Alvin Davis said triggered a question to both groups. Suppose that the attorney has selected the best possible expert. But after some significant involvement together, the answers coming from the expert are not the ones the client wants. How frequently does that happen and who handles the client?
Davis: Well if you've done your proper homework, preparation and evaluation hopefully that wont occur. After all, the expert needs to know your theory of the case and hopefully the work you do at the outset will prevent that from occurring. But that situation can and does occur. I've had a case where we got to a fine point and the expert said, "I can't support that position."
Now that raises an ethical issue as well. If you don't have support for that position, you cant just fire the expert and go looking for somebody who will support you. If it's a reasonable disagreement, then you may have to retain another expert who looks at the issue differently but is still supported by the facts. If so, you as a lawyer can ethically present that position. Because the lawyer selected the expert, the lawyer's obligation is to discuss the situation with the client. Now, there may be some indigestible fees as a result of the work. If the issue is something that couldn't possibly have been discovered until that time, that's a different situation. But if you don't discover this conflict until late in the case. I think you are going to be eating some fees at that point.
Patricios: I think experts can help manage client expectations. If you are on the plaintiff's side of a commercial case, the client is going to walk in the door and say, "I'm owed $500 million," and you say, "Great, let's go for it." When the expert gets involved and says it's really a $1.5 million case, you are going to have a client expectation problem. But you have an ally on your side, as long as you have a qualified expert. On the thornier issues, I agree with Alvin that you can face an ethical problem as to what to do. Can you go out and hire another expert? Will the judge allow you to bring in a new expert? Will your old expert's opinions somehow be used by the other side?
Kridel: I think that there's also a courage issue. It is very difficult to turn around and say to the attorney that this approach is not going to fly. There's a lot of risk to the accountant. It is very difficult for accountants to take a hard-line position with attorneys who refer business, but ultimately that's the sign of a professional. I think you need to know when to be candid and when to do the best thing for the client, even if it's not the best thing for you.
Pollack: I think the expert should read the complaint in the initial stages when the attorney is doing a conflict check and deciding whether to take the case or not. The expert can get a feel for the case and ask the right questions so that a conflict hopefully won't arise down the road.
Foodman: I was involved in a federal case that lasted ten years. At one point another expert was brought in to determine whether or not our results were accurate. The expert used a totally different approach, and the results turned out to be almost exactly the same. Now in the case where we have to give bad news, sometimes there is a courage issue. But that's what you were retained to do. And if you can\'t do that then you shouldn't be in this business. I've had discussions with attorneys who have asked me to manage their client's expectations. Others have said, "Do me a favor you tell the client the bad news." And I've had situations where the attorney said, "Don't worry about it. I'll handle everything." When you come to those crossroads, sometimes its good to see if there's another legitimate way of approaching your numbers Maybe a second look will resolve the issue. Otherwise you may have to withdraw if you come to loggerheads because we are not allowed to be advocates.
Alan Fiske: One area that hasn't been discussed today is mediation, where I've found that experts can be very valuable on both sides in helping to get a case settled.
Davis: We just did that two weeks ago where the experts on each side came up with fairly widely divergent conclusions. We ended up going before a knowledgeable mediator who has done a lot of securities and financial work. We didn't go through the drill of opening presentation where you each infuriate the other side for no good reason. We explained the general dispute and the experts presented their conclusions and were essentially cross-examined by the mediator. We did the same thing in a case involving a utility client. We hired a mediator who was very knowledgeable in utility matters and valuations, and then each side presented their proposals. I think having your expert talk directly to a person who really understands the basis for the opinions may be the most efficient and effective way of dealing with disputes of that kind.
Judy Korchin: In the situation where each side is presenting a position on the amount of damages to a mediator, is that person going to be like a judge, and provide his opinion on the correct amount of damages or the correct valuation?
Davis: Well, the person is mediating, not adjudicating. But the benefit of the process is that after listening to both sides, the mediator can say to both parties, these are the flaws in your theories and the weaknesses in your case. In the most recent instances, the cases settled at that point. That's how it worked.
Neal Sonnett: I would like to ask a question to the accountants. What portion of your practice is consulting for expert forensic testimony and what portion is without the expectation of testimonies? And in what ways, if any, does that affect your approach to the case and the way you work with the lawyer?
Foodman: For the last 20 or 30 years of my forensic practice has been geared towards my forensic testimony. More recently, I've been doing more consulting without necessarily testifying. But I still behave in the same way. I must still provide an objective opinion based on what I see in the documents. I have to maintain my independence, even when I'm not testifying, because if I don't, I could mislead the attorney or create misleading expectations with respect to the client. So from my perspective, I tend to work the same way and be as objective as I can to avoid any misleading expectations, conclusions or assumptions based upon an emotional involvement with the case.
Kridel: I would add that the methodology we would apply would be consistent regardless of our role. If the expectation is that I will not testify, particularly in certain types of criminal cases, my documentation internally may be a bit different because in theory it won't be discoverable. But if I am a testifying expert, I know everything is open. Recently, I got into an interesting discussion with one of the more prominent litigators in Palm Beach during my deposition where he looked at my file that said "notes" and it was empty. He asked me why there was nothing in there. I told him it was empty because if I had written something down, he would be able to see it.
Pollack: This came up at the recent American Bar Association (ABA) meeting on Miami Beach in discussions about the new Rule 26 [in the Federal Rules of Civil Procedure.] One thought is that there may be fewer cases that involve hiring both a consulting expert and a testifying expert. But this hasn't been tested yet because the rules are relatively new. If the client can afford to have two sets of experts and the case provides for that, you may still see two experts. We have seen that in receivership and fraud cases. We have been hired as a consultant to go out and try to recover assets. We recently worked on a fairly substantial fraud case as consultants and somebody else was used as the testifier and it has worked very well. When you know your role is strictly consultant, you may be a little bit more creative in working with the attorney, but again, it's going to depend on the facts and circumstances of the case.
Foodman: I think there is one other thing here and that is the venue. As I understand from my own experience, in federal civil trial and in state civil trial, the testifying expert is discoverable and can be deposed. In federal criminal court, there are no depositions, which puts the testifying expert in a different position. The attorney will proffer to the court the area of testimony of that expert. That limits the inquiry of that expert in cross-examination. In state court, everything is wide open.
Pollack: It depends on the case. In a criminal case it might make sense for the expert to be a client-protected consultant.
Patricios: I do have a different expectations for my testifying experts, as there are some strict rules that will apply, at least in federal cases. With my consulting experts, I expect the file is going to be thicker and more robust with alternative theories and research. But since Rule 26 is so new, who knows how it is going to be interpreted. We shall see what the future holds.
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