In November 2001, Judge Robert E. Payne of the U.S. District Court for the Eastern District of Virginia made a decision in Trigon Insurance Co. v. United States of America, 204 F.R.D. 277 (5th Cir. 2001) that may impact the way CPAs in California practice litigation consulting.
The
judge concluded that draft expert reports exchanged between the experts
and consultants working for counsel for the United States were required
to have been retained and produced to counsel for Trigon Insurance.
It
also was determined during the course of this dispute that draft expert
reports exchanged between experts for the United States and third
parties were not produced to Trigon's counsel and that such draft
expert reports had been deleted from the experts' hard drives and
network files.
The
judge directed computer forensics personnel from Deloitte & Touche
to search the network files and hard disks of the experts and
consultants for the United States to recover the draft reports that had
been exchanged to and from the experts. The judge also allowed Trigon
to recover the cost of this computer forensics work, $179,725, from the
defendant.
undefinedThe
United States had retained Analysis Group/Economics to perform
litigation consulting services to assist in defending against Trigon's
action to recover federal income taxes and interest assessed and
collected in prior years. In addition, certain "academic affiliates" of
AGE had been designated as testifying experts for the United States.
On
March 19, 2001, counsel for Trigon requested drafts of the reports from
the United States' testifying experts because they had not been
produced with the final reports, even though:
AGE's business -- litigation consulting -- requires it to know the requirements of Rule 26.
However,
by the time of Trigon's request, many of the draft reports had been
deleted as a result of AGE's document retention policy -- and the
document retention policies of the individual practices of the
testifying experts -- which did not call for the retention of draft
expert reports.
"AGE holds
itself out to have expertise in litigation consulting. AGE is the agent
of the United States in arranging for the expert testimony to be given
in their action on behalf of the United States. As such, AGE is charged
with knowing that materials reviewed by a testifying expert must be
preserved and eventually produced to the opposing party. The document
retention policies of AGE do not trump the Federal Rules of Civil
Procedure or requests by opposing counsel, even if the requests
primarily are informal. Moreover, AGE's execution of a document
retention policy that is at odds with the rules governing the conduct
of litigation does not protect the United States from a finding of
intentional destruction.
"In this case, documents and
communications were willfully and intentionally destroyed by the United
States' not-testifying experts. The documents destroyed should have
been produced and would have been admissible at trial for
cross-examination and Daubert purposes."
What Judge Payne Held
Although
the computer forensic team at Deloitte & Touche recovered many of
the deleted draft expert reports, Trigon asked the judge to foreclose
AGE from further communication with the experts or to preclude the
experts from further participation in the trial. On these issues, the
judge ruled:
"Although preclusion might well have been an
appropriate sanction for the conduct described above, it is not
appropriate in perspective of the remedial measures that recovered
significant segments of the spoliated (willful destruction of evidence
or the failure to preserve potential evidence for another's use in
pending or future litigation) evidence. Furthermore, this case is one
of first impression under a new statute that ought to be resolved on
its merits and that cannot be decided without expert evidence. Hence,
it would be necessary to allow the United States to retain new experts
if its current experts were precluded from testifying. Trigon asserts
that the delay, expense and tactical disadvantages that would ensue if
the United States were allowed to start over would constitute an even
greater prejudice than currently exists. Therefore, on the facts of
this case, preclusion of testimony is not an appropriate sanction.
"However,
it is appropriate to draw adverse inferences respecting the substantive
testimony and credibility of the experts. That will be done based on
the evidence presented at trial.
"Furthermore, it is necessary
to assure that AGE does not further complicate the process of
evaluating the expert evidence to be offered by the United States.
Considering the actions taken by AGE that caused the present spoliation
and its uncooperative attitude in attempting remediation when asked to
do so by Trigon, that result can be accomplished only by foreclosing
AGE's further participation in any aspect of the development and
presentation of the expert testimony to be offered by the United
States."
The Trigon case did not hold that experts are
required to retain and produce all drafts of their expert reports. In
fact, in a footnote to his opinion, the judge stated:
"There is
no need to decide in this case whether a testifying expert is required
to retain, and a party is required to disclose, the drafts prepared
solely by that expert while formulating the proper language in which to
articulate that experts' own, ultimate opinion arrived at by the
expert's own work or those working at the expert's personal direction.
There
are cogent reasons which militate against such a requirement, but the
issue is not presented here because the testifying experts worked, not
alone, but cooperatively with other experts and under the auspices of
AGE."
Will Trigon Apply to Expert Witnesses in California?
The Trigon
case is a federal case and does not apply to matters being tried in
California courts. Many California courts have recognized and not found
objectionable the practice of experts not keeping drafts as they are
superceded. In addition, the Trigon case is not in the same federal circuit as California and therefore may not be applied within the Ninth Circuit.
However,
federal judges in California may adopt Judge Payne's opinion. For
example, Judge William Alsup, a Ninth Circuit judge in San Francisco,
has adopted Case Management Orders that includes the following
language:
"Counsel shall preserve all drafts of expert reports
and evidence of communications with experts (or with any intermediaries
between counsel and the expert) on the subject of their actual or
potential testimony and shall instruct their experts and any
intermediaries to do likewise. All such materials shall be produced for
inspection and copying upon expert designation."
It should be
noted that it is Judge Alsup's practice to allow all parties to the
dispute to agree, in writing, that drafts of expert reports will not be
requested and they need not be retained.
Conclusion
AGE's
practice, and that of its academic affiliates, of not retaining copies
of draft expert reports that had been shared between them resulted in
decisions by the judge that were detrimental to its client and itself.
These included:
