Ten Things for an Expert to Consider

Expert witness do’s and don’ts

In this article, Ted Blodgett offers 10 do’s and don’ts to consider when serving as an expert witness.

Ten Things for an Expert to Consider

The original title to this article was going to be “The Top 10 Things for Expert Witness Testimony.” Then I thought about how irritating Top 10 lists can be. For example, recently there was an article that tried to list the Top 10 Heisman Trophy winners of all time. I found myself debating with the article as to why one player was listed at number 7, while another great player was excluded altogether. (Full disclosure, I’m a huge Oklahoma Sooner homer. So it hurts me to admit that the greatest Heisman winner was Barry Sanders from Oklahoma State, and the greatest player to not win the Heisman was Vince Young from Texas. How is that for some honesty?)

So, instead of a top 10 list, this is simply a list of 10 good things to consider when contemplating a role as an expert witness.

1. Know the purpose of the valuation engagement even if you start the engagement in a role other than that of an expert witness. This seems simple, but this step is often missed. Ask yourself how likely it is that you will eventually be asked to serve as an expert witness to support the valuation. Ask enough questions to understand the purpose and nature of the engagement and anticipate the possibility that your role may change. Don’t recklessly trust what the client or his or her attorney tells you. There have been many times when I have been told that my valuation will be used primarily for negotiation or settlement purposes. Then a few months later, I get the call that there is going to be a trial, and I will be called to testify.
2. Do your conflict checks. There is nothing worse than preparing a great valuation report, preparing for trial testimony (which means you have spent a ton of time and your client has spent a bunch of money), and then finding out that you have a conflict.
   If the valuation engagement is divorce litigation, pay special attention to potential conflicts with both spouses. The same goes for shareholder-partner dispute litigation. If your firm prepares tax returns for a married couple or for both shareholders, you need to ask yourself the tough conflict questions. If you have doubts, make a call to the other valuation professionals in your area and run it by them. If you are conflicted out, be careful about referring the case out. That can backfire on you. (You don’t want to be accused of favoring one party over the other).
3. Get to know your attorney. If you have worked with the attorney before, you will know his or her tendencies, how he or she prepares for trial, and what is expected from you. If this is the first time you have worked with this particular attorney, ask what his or her expectations are. Ask how he or she likes to prepare for trial. You may have to take the lead on this, especially if the attorney has only dealt with a business valuations a few times. Don’t be afraid to ask your peers about the attorney.
4. Get your money upfront. This should not be an issue, but we all know that it happens from time to time. If your client won’t pay your retainer, you need to ask yourself if you really want to be in the credit business. Trust your instincts on this, but generally clients are not in a better mood about paying your fees after the trial, regardless of the outcome. This is especially true in a divorce litigation engagement.
5. Draft your engagement letter correctly. Specifically explain your fee structure in your engagement letter. State that you don’t start work until you have your retainer check. Give yourself an out if the client is non-cooperative. Should you have an arbitration clause? What about an indemnification paragraph? Be sure you get the engagement letter signed by your client. (Otherwise, why bother?) Use your engagement letter checklist to be sure you are not missing something.
6. Don’t let your client’s problems become your problems. You were hired to do a job. That job was to value the subject business. You probably were not hired to listen to your client’s child support woes or other personal issues with the case. If you were hired on a flat fee, this is money out of your pocket. Set boundaries. Remember, you are the professional, not necessarily the client’s therapist or friend. In the end, your client will be grateful that you took this approach.
7. Don’t get bullied by your client or their attorney. Once you have determined your opinion of value, let your client and his or her attorney know that you will discuss the valuation conclusion with them, but tell them that the discussion is not a negotiation meeting. Again, set boundaries. Remember, things like capitalization rates, benefit stream adjustments, market comps, and any discounts used in your valuation conclusion are your numbers to support at the trial. Neither your client nor his or her attorney is going to be cross examined on the valuation methods and valuation conclusion. You will be the one asked to defend your opinion; that is, your valuation conclusion.
8. Remember that you are an advocate for your valuation conclusion, not an advocate for the client. Our firm takes the position that the report should be the same regardless of who the client is. If you are the expert in a case, ask yourself what your valuation conclusion would be if you were working for the other party.
   I struggle to find a reason that they would be different. Don’t fall into the mindset that the trier of fact will simply split the difference between your conclusion and the other expert’s conclusion. If both of the experts do their jobs correctly, the differences should be easily identifiable by the trier of fact.
9. Practice your testimony. I have done this several ways. Some attorneys will do a mock trial run with you so that both of you can have a script for direct testimony. If you have prepared a written report, this can serve as the outline for direct examination.
   I also like to practice cross examination. Try to think of the questions you would ask if you were working as the expert for the other side. If possible, I have the attorney help. If not, then I practice with our staff. The more you practice, the more comfortable you will be defending your valuation conclusion.
10. “Chill out.” In one of my first litigation engagement assignments, I found myself being cross examined by a very good attorney. I had prepared my valuation report well. My conclusions were sound, and I knew my stuff. Despite this, the opposing counsel still asked tough questions. As a rookie at expert testimony, I found this infuriating.
    During a break, the attorney I was working with handed me a note that said simply, “Chill out.” I still have that note in my office. Don’t get worked up about cross examination. The other side is just doing their job. If you have done your job with your valuation report and conclusion, you will be fine.

There you go… 10 good things to consider as an expert and in no particular order.

Ted Blodgett, CPA, CVA, ABV, JD, is a partner in Gray, Blodgett & Company located in Norman, Oklahoma. He and his firm provide business valuation, litigation, tax, and consulting services. Visit http://www.cpagray.com or call (405) 360-5533 for further information./span>