Litigation consultant

By Scott Davidson
Illustration: Mike Constable

What happens when your client needs more than just an expert witness in a dispute resolution process

If business valuator or forensic accountant can play a number of roles in financial litigation and dispute resolution, but the primary ones are litigation consultant and expert witness. While the two roles are very different, there are important areas of overlap. An examination of these roles and the attendant tasks is of interest to those who provide the services and to the in-house and external external counsel who manage them. Here we focus on the litigation consulting role as distinct from the giving of expert testimony and related report preparation.

The litigation consulting role is much more developed in the US than in Canada — in large part because it is usually only in very large cases where there is an efficient and effective role for both the litigation consultant and a separate expert witness or witnesses. In smaller cases, the business valuator or forensic accountant undertakes both roles to some degree. Over time, however, we expect there will be increasing demand for litigation consulting separate from expert testimony for a number of reasons including:

• increasingly, specific rather than generic expertise is being required of an admissible and credible expert;
• the experiential standard for expert witness work is simultaneously rising and narrowing;
• natural evolution is consistent with larger case experience;
• separation of the role of consultant and expert is needed because of increasing concern that if the same firm or individual is retained to act as both consultant and as an expert witness, the independence of the expert may be impaired should he or she be called at trial. 

Although we refer to the litigation process, the comments here pertain equally to any dispute resolution process.

Counsel is quarterback
Legal counsel is always the quarterback in litigation or potentially litigious matters. The selection of a litigation consultant and of expert witnesses is but one of many decisions that need to be made by counsel in the development of the case strategy and management.

Litigation consultant's tasks
The table on the following page summarizes the roles that might be played by the consultant/expert at different stages in the pre-litigation and litigation processes — document production, discovery, expert reports, mediation/settlement discussions and at trial.

Planning
This is the most important role. It spans the entirety of the engagement and hence the planning phase is shown as a continuous loop. It involves:

• the distillation and clarification of financial and other issues to assist counsel in understanding certain issues and as a catalyst for counsel's broader responsibilities; and thinking outside the box to ensure the breadth of relevant perspectives have been canvassed, including financial, income tax and related risks;
• "go to end" early on to ensure focus; developing a roadmap of the evidence to be marshaled, key tasks and the expert opinion to be given;
• re-examining the roadmap to continuously improve and refine it as evidence unfolds and understanding sharpens;
• assisting with document production, the discovery process, retention of industry and other experts, research and analysis — all aligned with the roadmap; and
• monitoring of costs and prioritization of tasks aligned with the roadmap.

Gathering information
In this step, the consultant assists in gathering the information to facilitate a proper assessment by counsel and the client. Generally, this information provides a platform for a more extensive assembly if the matter proceeds to litigation.

Assess financial exposure
Here the consultant assists counsel and the client with various aspects of planning — including a preliminary determination of the nature of the case, the key questions and issues to be addressed and the road- map; and assists in the preliminary assessment of financial exposure including:

• making a ballpark quantification of the loss or other amounts at issue;
• providing bookend-type analysis (i.e., the possible low and high outcomes under the worst and best scenarios);
• considering appropriate mitigation strategies;
• assessing defendant's ability to pay because the case is of no value if the judgment cannot be collected; and
• conducting a risk analysis and probability weighing the outcomes. With the benefit of this knowledge, the client and counsel can make the appropriate business and strategic decisions;
• assessment of the opportunity cost of going forward, including not only legal fees and the probability of success, but most importantly the emotional and financial and perhaps strategic distraction from the client's core business.

The deliverables at the end of this phase should include a review of the four planning perspectives — albeit on a preliminary basis.

Consideration of tasks one to three in the pre-litigation phase will not only ensure a more efficient and better focused process, it will give counsel the opportunity to determine whether there is alignment between his or her expectations and the consultant's and expert's — ensuring the right horse for the right course.

Once litigation begins the consultant's and sometimes the expert's tasks include  assistance with document production, which means expanding the initial information gathering process to include:

• identify documentation and information that will be required by various parties;
• document management, including the organization of documents, maintenance of a data room, review and coding of the documents by theme and related query generation and, in complex cases, full text imaging and related electronic document organization;
• assistance with production of documents, what is relevant and why — particularly for financially oriented documents;
• review of documents produced by the opposing party to identify gaps in the information and documentation and further requests and clarifications that may be required.

Discovery
When the other side has the key documents that are required for a proper analysis of the issues, the consultant can be involved with counsel in the discovery process. This means:

• identifying required information and documentation;
• developing queries arising from review of the document productions;
• acquiring evidence to better assess and strengthen the expert's analysis — particularly in subjective areas and those likely to be scrutinized by the other side's expert and be the subject of cross-examination at trial;
• interpreting written interrogatories of your client; and
• at times attending examinations for discovery to provide live assistance.

Coordinate experts
Often the industry experts chosen by counsel will be long on industry experience but short on litigation process experience and related documentation and reporting requirements. The rigor required when preparing a report and to give evidence at trial may be in excess of an industry person's usual standard.

Sometimes the consultant will be asked to assist counsel in preparing experts for giving evidence in chief as well as for cross-examinations.

Expert reports and reply/critique reports
Under the guidance of counsel, the litigation consultant can help ensure the reports and testimony of the industry experts are appropriately focused, distilled and balanced. A discussion of the expert's report is beyond the scope of this article; however, we can observe a few points.

Too many expert reports read like mystery novels. Rather, the independent conclusion should be clearly stated and up front. It should be supported by a scope of review, the approaches considered and analysis undertaken in support of the conclusion. The expert's report is the expert's report alone. The expert must own it in its entirety and be the exclusive author. An effective report must achieve a number of objectives including (each suggests the indicated role):

• analyst — brings judgment and maturity to the issues. Naked calculations without context and meaning are of little value and most often misleading;
• historian — sets the stage and frames the calculations and conclusions, tells the relevant history and story of the company, industry or matter at hand;
• interpreter — explains what financial matters, calculations, market observations and the like mean, why they are relevant and how they impact on the analysis and conclusion;
• specialist — demonstrates specific expertise in a comprehensible, trustworthy and accessible fashion;
• teaching assistant — assists the court in understanding the approach and the various analyses relevant to the issues at hand, avoids jargon and advocacy;
• researcher/reporter — identifies, clarifies and highlights information, data and literature relevant to a proper analysis of the issues and reporting; and
• librarian — specifies documentation and other evidence reviewed in scope of work undertaken in coming to the stated conclusion and appropriately references it in working paper files.

Mediation and settlement discussions
Counsel may require different materials for a mediation and/or settlement discussion than for trial. Both the consultant and the expert appreciate the difference required in this forum versus that of the court and can provide counsel with that which is required — typically shorter, more pointed and more accommodating ranges, calculations and perspectives.

Trial
Detailed discussion concerning giving expert evidence is beyond the scope of this article. Suffice it to say that the expert's role at trial will likely include being examined in chief and cross-examined. There is no substitute for preparation and having fully canvassed the different points of view that might be brought to bear. Remember that once cross-examination has begun, the expert cannot confer with counsel or anyone else until the cross-examination is over.

The consultant and/or expert might be asked to assist counsel in the cross-examination of the other side's experts. This involves identifying the areas of critique and in some cases will require the preparation of exhibits that may be put to those experts on cross-examination, as well as assisting counsel with relevant references to literature and other sources of information and data.

The consultant will sometimes be asked by counsel to assist in the preparation of closing arguments. This can include the assembly of theme binders containing the relevant analysis of the issues and the relevant evidence (transcripts and exhibits) presented during the trial.

Summary
Successfully fulfilling the litigation consulting role requires not only genuine financial skills and an appreciation of the litigation context, but the ability to clearly communicate and coordinate with counsel and the client.

Distinguishing the breadth of the consulting role from the traditional expert witness role is essential — not only to ensure independence of the expert witness but to optimize the benefit to both counsel and client in an effective and cost efficient fashion.