The Attorney-Expert Relationship in Matrimonial Matters
By Jesse LaGrossa, Manager, Business Valuation, Forensic & Litigation Support Services
Counsel has just been retained to represent one the spouses in a divorce matter. Due to nature of the issues needing resolution, counsel is in need of a forensic accountant to assist with the dissolution process. The forensic accountant practitioner can provide valuable advice and objective opinions with respect to the complex financial and tax implications of a marital dispute. Certified public accountants (CPAs), specifically those with specialized education, training and experience specific to forensic matters, are uniquely qualified to provide such advice and opinions. However, the forensic expert does not necessarily need to be a CPA as other qualified individuals – Certified Fraud Examiners and business valuation professionals among them – also have the expertise to assist counsel and clients, depending on the nature of the issues.
While the relationship between spouses has unfortunately deteriorated, inevitably bringing all parties involved to this point, the following appropriate steps can be taken to maintain the good working relationship between counsel, the forensic accountant and the spouses.
1. “Communication, Communication, Communication”
Anecdotally, the direct or indirect breakdown of any relationship can likely be traced to (a lack of) communication. The “Attorney-Expert” relationship is no exception. Establishing an understanding between counsel and the expert, with as much specificity as necessary, can alleviate last-minute surprises and result in a better quality work product.
Engaging the expert as early in the process as possible and regularly keeping in communication thereafter can avoid scheduling conflicts as the attorney and expert are likely juggling a number of matters with various competing timelines. Topics to address during these communications include:
- Status of the actual or potential litigation proceeding including motions, rulings, etc.;
- Understanding the CPA’s role (non-testifying consultant, testifying expert, etc.);
- Types of analysis needed from the expert (i.e., lifestyle analysis, hidden asset search, hidden income search, net worth analysis, business valuation(s), etc.);
- Relevant time periods with respect to the agreed-upon analyses;
- If performing a business valuation, determination of the valuation date and standard of value;
- Type and format of deliverables needed (expert report, privileged memorandum, business valuation report, etc.);
- Key dates established for the proceeding including, but not limited to, expert report due dates, discovery deadlines, scheduled depositions of fact and expert witnesses (…and availability of transcripts), alternative dispute resolution date(s), and trial date(s);
- Identification of documents needed for the expert to perform their analysis;
- Listing and review of documents produced in discovery to-date;
- Discovery tools available (subpoena, deposition, motion to compel, etc.) for obtaining needed documents for the expert’s analysis, if not already in the possession of Counsel’s client; and
- Status of and responsibility for expert’s fees. As a general rule (with some exceptions), CPAs are prohibited by professional standards from accepting contingent fee arrangements.
2. Role of the Forensic Accounting Expert
The forensic accountant can serve in a variety of roles in a marital proceeding. As noted above, counsel and the expert should maintain a clear understanding (in writing via an engagement letter) throughout the engagement as to the role of the expert, how such role might change, and the implications of serving in such role(s). These roles can include:
Consultant – engaged by counsel for one of the parties to provide advice regarding financial, tax, accounting, business valuation, or other areas where the CPA has expertise.
Expert Witness – although similar to the consultant role, an expert will likely provide a written expert report to assist the trier of fact as well as testify at deposition and trial as necessary (see “Discovery and Protection of Attorney-Client Privilege” below).
Mutually Agreed-Upon Expert – will provide an objective, credible report, or other form of work product, from which both parties can use to further resolution of the dispute. The form of communication and responsibility of the expert’s fees should be established before engaging the expert.
Court-Appointed Expert – similar to the mutually agreed-upon expert role, but the court-appointed expert will primarily be engaged to directly assist the trier-of-fact.
3. Discovery and Protection of Attorney-Client Privilege
If engaged in a consulting capacity, the CPA will provide advice to counsel, the CPA’s identity likely will not be disclosed to opposing counsel, and communications between the expert and counsel will likely remain privileged. However, it is possible for the consultant role to evolve into an expert witness role during the engagement. Once this occurs, all prior communications and work product could become discoverable.
It is generally not recommended for the existing accountant of the spouse(s) and/or business (if a business is being considered in the marital estate) to serve the role as the forensic expert. Such reasons this is not recommended include:
- Lack of attorney-client privilege because the accountant was not initially engaged for the purpose of assisting counsel in litigation.
- Not all accountants have the specialized education, training and experience to assist counsel and clients in forensic matters;
- CPAs and non-CPA accountants who are members of professional accounting organizations may be prohibited from providing forensic services due to the nature of other services previously provided by the accountant (see “Maintaining Objectivity” below);
- The accountant of the spouse(s) who has provided traditional tax and accounting services to the individuals and business involved in the dispute may have knowledge or access to information which would compromise their objectivity.
Understanding the venue including the discovery rules protecting communications between counsel and the expert, including draft expert reports, is significant. Counsel should be familiar with these rules as well as other nuances of the state laws where the divorce will be adjudicated. Counsel and the CPA should ensure a mutual understanding of these nuances – better to discuss than assume counsel and/or the CPA is already aware of the relevant divorce laws in the state.
4. Maintaining Objectivity
Counsel is an advocate for their client. The expert is an advocate for their professional opinions. The importance of this golden rule cannot be overstated. Matrimonial proceedings often have emotional ramifications which can possibly weigh on a reasonable person’s objectivity. The attorney and the expert should understand their respective roles in order for the expert to maintain their objectivity throughout the engagement.
As noted above, accountants engaged by the spouse(s) for traditional tax accounting services prior the contemplation of a divorce proceeding may have provided services which, by the nature of said services, create an advocacy threat, as the term is defined by professional CPA standards. In such a scenario, the accountant’s objectivity could be compromised.
Count on Marcum
As any professional who has been involved in a marital proceeding (or any litigation for that matter) knows, surprises and borderline demanding deadlines will inevitably occur. However, they do not need to be self-inflicted. By maintaining regular two-way communication between the attorney and expert, those surprises and difficult deadlines can be limited to only those out of one’s control. Most importantly, such communication and planning will result in a better quality work product from both counsel and the expert. Contact your Marcum advisor with any additional questions on this matter.