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Assume a land development company hired an engineer and architecture firm to conduct a feasibility study on a potential land purchase. The report indicated that the land was suitable for development. Later, zoning requests are denied and the land development firm sues the engineer and architecture firm for negligence, breach of contract, restitution, and reliance.

A forensic accountant is hired to provide a valuation for losses and serve as an expert witness in court to support these findings. How would a forensic accountant demonstrate professional care, objectivity, and integrity in performance of the engagement? How might this impact the ability to obtain sufficient evidence or data to support his or her opinion?

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Hubert Koch
Hubert KochLv2
28 Sep 2019

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Forensic Accounting by Rufus, Miller and Hanh:

Page: 68: Problem 3-92:

Below I have the article: “Expert Witness Malpractice Actions:Emerging trend or Aberration?” published in The Practical Litigatorin March 2004. Prepare a summary of the article that addresses thefollowing questions:

What is the thesis of the article?

What is meant by a friendly expert?

How do cases summarized in the article illustrate expertnegligence?

Does the Mattco case support the author’s thesis?

What is the conclusion of this article?

How might the pre-engagement considerations discussed here, helpprevent a friendly expert negligence action?

ARTICLE:

Expert Witness Malpractice Actions: Emerging Trend orAberration?

FROM “AMUSEMENT PARKS” TO “ZOOLOGY,” the Technical AdvisoryService for Attorneys (TASA) Web site lists more than 9,500categories of experts. Large accounting firms and other forensicfirms perform litigation support services. And theMartindale-Hubbell directory contains more than 4,000 experts,ser
vices, suppliers, and consultants. In just a few decades, expertwitnesses in litigation have gone from a rarity to the commonplace,for both trial preparation and for actual trial testimony. Often,the expert testimony, especially on damages, is the main event ofthe case. As one court has noted, “[o]ften they play as great arole in
27
Laurie Strauch Weiss is a partner in the law firm of Orrick,Herrington & Sutcliffe LLP in New York, New York. The authorwould like to thank Yishai Boyarin, Orrick Summer Associate 2003,for his assistance with this article.
Laurie Strauch Weiss Expert witnesses have historically enjoyedbroad-ranging immunities. But the picture is changing.
Expert Witness Malpractice Actions: Emerging Trend orAberration?
the organization and shaping and evaluation of their client’s case,as do the lawyers.” Murphy v. A.A. Mathews, 841 S.W.2d 671, 682(Mo. 1992). The amount of time and money expended in this area issubstantial; and as every litigator knows, an expert can make orbreak a case. But what do you do if that expert performs his or herlitigation services work negligently and it results in a pooroutcome for your client? What liability does the expert face? What,if any, liability does the attorney who selected and retained theexpert face? Yes, it is true that an expert can make or break thecase. This article addresses the “break” side of theequation.
THE EROSION OF THE COMMON LAW DOCTRINE OF WITNESS IMMUNITY •Testimonial experts have traditionally been protected from lawsuitsarising out of their work by the doctrine of witness immunity.However, a theory of expert witness liability is emerging andseveral states have ruled that a retained expert witness, theso-called friendly expert witness who testifies voluntarily and whois compensated for his or her services, is no longer shielded fromnegligence in providing pretrial litigation services or trialtestimony. Compare Murphy v. A.A. Mathews, supra, at 680, n.7(limiting holding to pretrial litigation support services ratherthan trial testimony) with Marrogi v. Howard, 805 So.2d 1118, 1131(La. 2002) (holding that there was no immunity for either pretrialwork or trial testimony). These cases do not contemplate an actionin which a party sues an adverse expert witness hired by anopposing party.
The Traditional Rule Experts who participated in judicialproceedings traditionally were rewarded with the broad protectionof an absolute immunity privilege from subsequent liability forcommunications related to the action. Alongstanding doctrine, itaimed at allowing witnesses to be forth
right and candid in their opinions in judicial proceedings withoutthreat of a future defamation suit by an aggrieved party. Theprivilege applied to any communication “(1) made in judicial orquasi-judicial proceedings; (2) by litigants or other participantsauthorized by law; (3) to achieve the objects of the litigation;and (4) that had some connection or logical relation to theaction.” Mattco Forge, Inc. v. Arthur Young & Co., 6 Cal. Rptr.2d 781, 787 (Cal. Ct. App. 1992) (“Mattco I”). See also Restatement(Second) of Torts §588 cmt. a (1977) (“[t]he function of witnessesis of fundamental importance in the administration of justice. Thefinal judgment of the tribunal must be based upon the facts asshown by their testimony, and it is necessary therefore that a fulldisclosure not be hampered by fear of private suits fordefamation”). The policy of absolute witness immunity is groundedin concerns that without such protection, witnesses might befearful of testifying and conform the content of their testimony toprotect themselves from future suit. Although the doctrineoriginally arose in the context of protecting an expert witnessfrom subsequent defamation claims arising out of the expert’stestimony, some states, either by statute or common law,articulated broad pronouncements of the privilege. The situation ofa negligent “friendly” expert was not addressed. Thus, actions bythe parties who had retained the expert rarely were pursued. Now,however, that rule is beginning to meet resistance from severalcourts, a pattern that will be discussed below. See Eric G. Jensen,When “Hired Guns” Backfire: The Witness Immunity Doctrine and theNegligent Expert Witness, 62 UMKC L. Rev. 185, 194-95 (1993), for ahelpful discussion of the evolution of witness immunity.
Professional Liability Standards Adiscussion of expert witnessmalpractice requires reference to the general negligence
28 The Practical Litigator March 2004
Expert Malpractice 29
standard to which professionals are held. In California, forexample, “[t]he elements of a cause of action in tort forprofessional negligence are: (1) the duty of the professional touse such skill, prudence, and diligence as other members of hisprofession commonly possess and exercise; (2) a breach of thatduty; (3) a proximate causal connection between the negligentconduct and the resulting injury; and (4) actual loss or damageresulting from the professional’s negligence.” Mattco Forge, Inc.v. Arthur Young & Co., 60 Cal. Rptr. 2d 780, 788 (Cal. Ct. App.1997) (“Mattco III”) (citations omitted); see also Murphy v. A.A.Mathews, supra; LLMD of Michigan, Inc. v. Jackson-Cross Co., 740A.2d 186, 191 (Pa. 1999) (“[t]he judicial process will be enhancedonly by requiring that an expert witness render services to thedegree of care, skill and proficiency commonly exercised by theordinarily skillful, careful and prudent members of theirprofession”).
Legal and Policy Rationales The reasons for not extendingtraditional witness immunity to expert witnesses are generallysuccinct: experts should not be given special protection; if theymake a mistake that causes damage they should be held responsibleas are other professionals. (For a discussion of arguments for andagainst see Randall K. Hanson, Witness Immunity Under Attack:Disarming “Hired Guns,” 31 Wake Forest L. Rev. 497, 508-509(1996)). In addition, it has been argued that permittingmalpractice suits against expert witnesses will enhance theintegrity of their testimony and of the judicial system as a whole.See Carol Henderson Garcia, Expert Witness Malpractice: A Solutionto the Problem of the Negligent Expert Witness, 12 Miss. C. L. Rev.39, 71-72 (1991). Conversely there are numerous oft-cited policyreasons for not allowing such suits to proceed:
• Experts should be protected by the general rule of witnessimmunity because the threat of litigation would lead to skilledexperts being unwilling to testify; • The concern that the“one-time” university professor would be reluctant to testify as heor she would be unlikely to carry errors and omissions coverage; •The idea that the threat of liability would cause experts to changetheir testimony for fear of subsequent litigation; • The argumentthat the adversarial system, specifically the tool ofcross-examination (as well as Dauberthearings) addresses, to someextent, these concerns. Compare Jensen, supra, with Adam J. Myers,III, Misapplication of the Attorney Malpractice Paradigm toLitigation Services: “Suit within a Suit” Shortcomings CompelWitness Immunity for Experts, 25 Pepp. L. Rev. 1 (1997).
CASE LAW REVIEW • Currently, eight state courts have decided casesinvolving lawsuits against “friendly” expert witnesses. Theoverwhelming majority of courts, albeit a handful overall, thathave addressed the issue of negligent experts and witness immunityhave found professional witness malpractice an actionable claim.These cases all involve “friendly” experts (with the exception ofNew Jersey which allowed a suit against a court appointed expert),rather than adverse party experts. (For a recent case addressingthe adverse party issue in the context of a criminal defendant whosued the prosecutor’s expert witnesses for negligently performingtests, preparing for testimony and testifying, seeDavis v. Wallace,565 S.E.2d 386 (W. Va. 2002).)
Washington State: Witness Immunity Still Controls In Washington,the immunity doctrine still
protects friendly experts from subsequent liability for negligentacts. The case of Bruce v. ByrneStevens & Assocs. EngineersInc., 776 P.2d 666 (Wash. 1989) (en banc) is the most expansivestatement yet of expert witness immunity. In the underlying actionin Bruce, two parties sued an adjacent landowner to recover thecost of stabilizing their land due to a condition the landowner hadallegedly caused. Plaintiffs hired an engineering expert to providean opinion on damages and to testify at trial. Subsequent to thatsuit, the parties discovered that it would cost twice what theengineer had estimated and thereafter brought an action against theexpert witness alleging that he negligently tendered an opinion ondamages in prior litigation. The court below had held that as theengineer was a professional, with a financial motive fortestifying, the traditional doctrine should not provide immunity toa party’s own expert who was negligent in preparing and providingtestimony. The Washington Supreme Court disagreed and reversedholding that the engineer hired as an expert witness was entitledto immunity in a subsequent suit based on his testimony. The courtextended absolute witness immunity to the expert’s courtroomtestimony, as well as to acts and communications connected with thepreparation of his testimony. The court rejected the plaintiffs’argument that the witness immunity doctrine is narrow and shouldonly apply to defamation cases brought against an expert. The courtalso held that the fact that an expert is compensated for histestimony did not deprive him of witness immunity. Id. at 668.Finally, the court held that witness immunity extended to actionsforming the basis of the expert’s testimony reasoning “[a]nexpert’s courtroom testimony is the last act in a long, complexprocess of evaluation and consultation with the litigant.” Id. at672. The court distinguished the case where the expert’s work wasprepared separate from and prior to the initiation of litigationin
contrast to the case before it where the expert engineer was hiredspecifically for litigation purposes and the work performed formedthe basis of the testimony. The court went on to hold that “theimmunity of expert witnesses extends not only to their testimony,but also to acts and communications which occur in connection withthe preparation of that testimony.” Id. at 673. The Bruce court didnot find the fact that an expert witness was compensated for histestimony to affect the rationale for witness immunity. The courtset forth two reasons underlying its holding: • First, the courtnoted a concern about a loss of objectivity if the threat ofsubsequent liability existed; • Second, the court considered thepractical problem that the threat of liability would discourage“the 1-time expert—the university professor” from testifying whileencouraging the professional witness who could carry insurance toprotect against liability. Id. at 670. One justice vigorouslydissented arguing that there was no legal authority for theextension of immunity to shield otherwise actionable professionalmalpractice. The dissent argued that “[i]n reality, a distinctionmust be drawn between defamation and acts of professionalmalpractice subsequently published in the courtroom. Despite theprofessed reliance upon the policies underlying immunity, in theend the majority holds that immunity stems merely from taking ‘partin judicial proceedings.’ A simple analogy demonstrates theinvalidity of this holding: There is no question that an attorney’sdefamatory statement during a judicial proceeding is shielded fromsubsequent attack under the doctrine of immunity. However, the sameattorney remains liable to his or her own client for any acts ofmalpractice that occur in that very forum. Accordingly, from thisday forward under the majority’s new rule, professionals,particularly attorneys, are provided with a

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