Documents of Testifying Experts

Are My Draft Reports and Notes Discoverable?

The purpose of this article is to explain the author’s understanding of certain issues impacting the discoverability of documents of forensic accounting, economic damages, and business valuation expert witnesses. This article is not intended to provide legal opinions, advice, or conclusions. It merely reflects the author’s current understanding of certain legal issues relating to certain aspects of expert witness reports, e-mails, and notes. Experts should consult with retaining counsel regarding specific engagement rules.

Introduction

The purpose of this article is to explain the author’s understanding of certain issues impacting the discoverability of documents of forensic accounting, economic damages, and business valuation expert witnesses (hereafter “experts”). This article is not intended to provide legal opinions, advice, or conclusions. It merely reflects the author’s current understanding of certain legal issues relating to certain aspects of expert witness reports, e-mails, and notes. Experts should consult with retaining counsel regarding specific engagement rules.

Generally, (and practically) experts might wish to regard all of their documents as “discoverable”. An expert could consider it a “safe harbor” to treat everything prepared by and/or shared with the litigant, retaining counsel, and/or other experts as having to be disclosed; even if ultimately protected.

Federal Practice

In The Comprehensive Guide to Economic Damages Section 3.3[1] on Federal Practice and the expert’s file provides: “Spoliation claims, by definition, involve only discoverable evidence. A party cannot claim spoliation with respect to materials that he or she had no right to see. Thus, when considering how spoliation[2] relates to an expert’s file, there is an antecedent question: What parts of an expert’s file are discoverable?”

Section 3.3.1[3] of the same text also goes on to state: “On December 2010, a number of amendments to the Federal Rules of Civil Procedure went into effect, some broadening and some narrowing the disclosure obligations in respect to experts. Before the amendments, there was a difference of opinion with respect to whether experts were required to disclose all factual materials that they considered in forming their opinions or simply those on which they relied. An amendment to Rule 26(a)(2)(B) settled this difference The rule now requires that an expert provide a written report that ‘must contain’:

1. A complete statement of all opinions the witness will express and the basis and reasons for them;
2. The facts or data the witness considered in forming them;
3. Any exhibits that will be used to summarize or support them;
4. The witness’s qualifications, including a list of all publications written in the previous 10 years;
5. A list of all other cases in which, during the previous four years, the witness testified as an expert at trial or by deposition; and
6. A statement of the compensation to be paid for the study and testimony in the case.”

Section 3.3.1[4] of the same text continues to note that: “The refocus of disclosure on ‘facts or data’ is meant to limit disclosure to material of a factual nature by excluding theories or mental impressions of counsel. At the same time, the intention is that ‘facts or data’ be interpreted broadly to require disclosure of any material considered by the expert, from whatever source, that contains factual ingredients. The disclosure obligation extends to any facts or data ‘considered’ by the expert in forming the opinions to be expressed, not only those relied upon by the expert.”

Qualifying and Attacking Expert Witnesses,[5] a James Publishing text authored by David J. Galluzzo, noted that “Requiring the production of communications between attorneys and testifying experts resulted in the disclosure of strategy and theories that would reveal confidential and privileged information. To avoid discovery of documents, preliminary opinions, analyses and drafts, experts were reluctant to prepare written summaries of their positions, or share preliminary opinions. Attorneys were similarly reluctant to share their legal theories and mental impressions with experts.” Accordingly, the Federal Rule of Civil Procedure 26(b)(4)(B) was created, in part, in order to prevent “unwarranted inquiries into the files and mental impressions of attorneys” and protect the drafts of expert reports as work product.

Federal Rule of Civil Procedure 26(b)(4)(B) provides that Rules 26(b)(3)(A) and (B) protect drafts of any report or disclosure required under Rule 26(a)(2), regardless of the form in which the draft is recorded.[6] This language means that drafts of expert reports of required disclosures are protected from discovery as trial-preparation materials under Rule 26(b)(3), and that protection applies no matter what medium (written, electronic, etc.) the draft is in.

Federal Rule of Civil Procedure 26(b)(3)(A) and (B) protect communications between the party’s attorney and any witness required to provide a report under Rule 26(a)(2)(B), regardless of the form of the communications, except to the extent that the communications: (i) relate to compensation for the expert’s study or testimony; (ii) identify facts or data that the party’s attorney provided and that the expert considered in forming the opinions to be expressed; or (iii) identify assumptions that the party’s attorney provided and that the expert relied on in forming the opinions to be expressed.

Consulting Experts

A question then arises whether these rules apply to “consulting-only” experts (i.e., experts employed only for trial preparation)? The answer is that, generally, the documents of such non-testifying experts are not “discoverable” at all.

It is my understanding that, ordinarily, a litigant may not, by interrogatories or deposition, discover facts known or opinions held by an expert who has been retained or specially employed by another party in anticipation of litigation or to prepare for trial and who is not expected to be called as a witness at trial. If an expert is hired only to help prepare the case and is not expected to testify at trial, the opposing litigant generally cannot discover that expert’s opinions or the facts the expert knows, either through written questions or deposition.

The Three Exceptions

It is my understanding that in federal cases (or in jurisdictions that follow the Federal Rule regarding experts), drafts of expert reports or expert disclosures are protected from discovery, and that the protection applies no matter how the draft exists, including e-mails, handwritten notes, or electronic files. This then applies to most communications between a lawyer and a testifying expert which can generally not be discovered subject to only the three stated exceptions (discussed below).

In federal cases (or in jurisdictions that follow the Federal Rules regarding experts), communications can be discovered if they relate to how the expert is being paid, if they identify facts or data the lawyer gave the expert and the expert considered in forming opinions, or if they identify assumptions the lawyer provided that the expert relied on in forming opinions.

It is my understanding that courts have interpreted “facts or data” broadly to require disclosure of any material considered by the expert, from whatever source, that contains factual ingredients.[7] Experts should therefore exercise caution when communicating and endeavor to segregate protected communications from non-protected communications whenever possible. This can decrease the chances of producing privileged communication and reduce the cost of production by negating the need for multiple redactions.

Draft Reports

It is my understanding that courts continue to interpret other aspects of the Federal Rules. For example, courts need to know what constitutes as a draft report.[8] Generally, it appears that notes of experts or communications between experts, expert staff, or other non-attorneys will not be protected from discovery “as draft reports”[9] [10] [11] (this generalization is derived from cases that held that lists, outlines, notes, letters, and memos prepared by experts concerning draft report must be produced, but actual drafts need not)[12] [13].

State Cases

The next question then is whether draft expert reports are “discoverable” in state cases (for states that do not follow the Federal Rules regarding experts) and arbitral proceedings? It is my understanding that outside the federal courts, there is no single rule. What happens depends on state procedural rules, local case law, and the arbitration agreement or rules. The protections under Federal Rule 26 may apply fully, partially, or not at all.

Within state courts, many states largely mirror the federal approach and a majority of states have adopted rules that are similar to Federal Rule 26(b)(4), especially after the Federal Rules were amended to protect draft reports and most attorney-expert communications. In those states, draft expert reports along with most attorney-expert communications are generally protected. Consulting (non-testifying) experts are usually protected absent exceptional circumstances as well.

However, the wording and scope often differ, and state courts may interpret the protections more narrowly than federal courts. Some states are materially different and in certain states, draft reports may be discoverable, attorney-expert communications may be discoverable, and protections may exist only by case law, not by rule. Judges may have broad discretion to order production “in the interests of fairness”. In these jurisdictions, experts must often assume that e-mails with counsel may be discoverable along with earlier drafts, notes, and markups.

The judge’s discretion matters more as state trial judges often have more discretion than federal judges. Even where rules exist, judges may order limited disclosure, conduct “in camera”[14] reviews or apply balancing tests rather than categorical protection. The bottom line in state court is that experts must know the specific state’s rules and case law. Federal assumptions do not always safely carry over.

Arbitration

Arbitration is fundamentally different. Discovery of work product is contractual, not rule-based. In arbitration, discovery is governed by the arbitration agreement, the provider’s rules (AAA, JAMS, etc.) as well as the arbitrator’s discretion. There is no automatic protection equivalent to Rule 26 unless it is expressly adopted.

Arbitrators often allow broader expert discovery and common arbitration practices include the exchange of expert reports, limited depositions (sometimes none, sometimes one), or requests for materials the expert “considered”. However, some arbitrators allow discovery of draft reports, and attorney-expert communications and apply an “everything the expert reviewed” standard. Others track federal practice closely. It is my understanding there is no uniform rule.

Arbitrators primarily focus on fairness and often reason that if the expert relied on it, the other side should see it. As a result of this, drafts and e-mails may be ordered produced and assumptions and inputs are often discoverable. Privilege arguments are often weaker in arbitration unless clearly grounded in the agreement or governing rules.

Conclusion

Practical takeaways that are important for experts to keep in mind is that Federal Rule 26 protections are not universal and state court protections vary widely, arbitration protections depend almost entirely on the arbitrator, and experts should assume greater discoverability outside federal court.

Clearly labeling materials provided by counsel as assumptions or facts and asking at the engagement outset whether federal-style protections do or do not apply is in good practice. Also, the best practice for experts to conduct when not in federal court is to write e-mails assuming they may be read aloud in the deposition or in the courtroom and, therefore, limit written drafts, and separate billing and administrative communications.

[1] The Comprehensive Guide to Economic Damages, Vol. 1, 7^th Edition, Business Valuation Resources, LLC. Chapter 3, Section 3.3.

[2] Spoliation of evidence is the destruction, alteration, concealment, or failure to preset evidence that is relevant to pending or reasonably foreseeable litigation.

[3] The Comprehensive Guide to Economic Damages, Vol. 1, 7^th Edition, Business Valuation Resources, LLC. Chapter 3, Section 3.3.1.

[4] The Comprehensive Guide to Economic Damages, Vol. 1, 7^th Edition, Business Valuation Resources, LLC. Chapter 3, Section 3.3.1.

[5] Qualifying and Attacking Expert Witnesses, David J. Galluzzo, §241.

 

[7] Application of Republic of Ecuador v. Douglas, 153 F. Supp. 3d 484, 491 (D. Mass. 2015).

[8] Dongguk University v. Yale University, No.3:08-CV-00441,2011 WL 1935865, at *1 (D.Conn May 19, 2011).

[9] Wenk vs. O’Reilly, No. 2:12-CV-474, 2014 WL 1121920 at *1-7 (S.D. Ohio March 20, 2014).

[10] Republic of Ecuador v. Hinchee, 741 F3d 1185 1194-95 (11^th Cir. Dec. 18, 2013).

[11] Republic of Ecuador v. Bjorkman, No. 11-cv-01470, 2013 WL 50430, at *3 (D. Colo. Jan 3, 2013).

[12] Application of the Republic of Ecuador, 280 F.R.D 506, 412 (N.D. Cal. March 9, 2012).

[13] Pennenvironment & Sierra Club v. PPG Indus. Inc., No. 2:12-CV-00342, 2014 WL 12589147, at *2 (W.D. Pa. Oct. 7, 2014).

[14] An “in camera” review is a procedure in which a judge privately examines documents, records, or other evidence outside the presence of the parties and the public.

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Michael D. Pakter, CPA, CFF, CGMA, CFE, CVA, MAFF, CA, CIRA, CDBV, has more than 45 years of experience in forensic accounting, investigations, and litigation services, including more than 25 years of experience in economic damages and business valuations. State, federal, and bankruptcy courts have recognized him as an expert in forensic accounting, economic damages, business valuation, alter ego, marital dissolution, and bankruptcy core proceedings.

Mr. Pakter can be contacted at (773) 671-1950 or by e-mail to mpakter@litcpa.com.