Another Set of Eyes: The Expert as Evaluator

The role of the outside legal expert has evolved well beyond serving as an adjunct to court sponsored alternative dispute resolution or jury selection.  Currently, expert counsel serves as an extra pair of eyes and as a valued resource in the prosecution or defense of litigation.  Although not typically part of a trial team, an outside legal expert may provide added heft in forming and developing trial strategy, including whether motions should be made, opposed or settled.  The outside expert may be particularly useful to in-house counsel in determining the likelihood of success.  See Own Capital, LLC v. Celebrity Suzuki of Rock Hill, LLC, 2011 U.S. Dist. LEXIS 56224, at *29, n.6 (E.D. Mich. May 25, 2011) (case recognizing that outside experts may possess substantive expertise that that the court may lack). 

As a third-party who is not part of the trial team, the expert may be used to evaluate the strength of contemplated legal positions, pleadings, motions and responses.  For example, where billions of dollars are on the line, a party’s insurer may be particularly interested in having the neutral expert evaluate where a case stands, and what the ramifications and outcomes may be if a particular strategy is pursued.

The strength of outside expert evaluation lies in its flexibility and confidentiality.  Outside legal evaluation can be used at any phase of a proceeding, for as large or as limited a role as may be required.  For example, an outside expert can be called to evaluate the strength of a contemplated motion to dismiss, the weaknesses or “holes” in a summary judgment motion or at the post-judgment phase of an action, where an appeal may be considered either a wise, calculated risk or a waste of a client’s hard earned resources.   

As for confidentiality, the expert’s advice is protected under the Federal Rules of Civil Procedure.  The fact that an expert legal advisor is not retained as trial counsel to a party does not, by itself, divest the expert’s opinion of such protection.  The disclosure requirements of the Federal Rules of Civil Procedure will generally shield the expert’s views because the expert legal evaluator will not be testifying at trial.

Under Rule 26(4)(D) of the Federal Rules of Civil Procedure, the opinions of a legal expert are generally accorded the protections given to attorney work product.  Rule 26(4)(D) provides in pertinent part:  “a party 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.” 

Still, it should be noted that under Rule 26(4)(D)(i), the expert’s work product is potentially obtainable “on showing exceptional circumstances under which it is impracticable for the party to obtain facts or opinions on the same subject by other means.”  This provision might influence parties to directly engage the expert to give rise to the more air-tight attorney-client relationship.  Obviously, the factors involved in a client opting for direct retention of an expert as counsel as opposed to a third-party adjunct warrant their own separate discussion.  

Similar to a court-attached early neutral evaluator, the expert evaluator should have expertise and experience commensurate with the task at hand.  An expert should possess the expertise and recognition necessary to make her opinions and evaluations taken seriously by the party and its counsel.  The expert’s strength depends on the confidence that others will have in her opinions.  Remember, the party already has a trial lawyer.

Using standards pertaining to court-attached neutral evaluation as a guide, the expert may be expected to have as much as 15 years of experience, and in no event less than four years.  Practically speaking, a paying client will be reluctant to make decisions on the basis of an attorney who is still learning the profession and the particular field of law.

The expert is most effective when called upon to evaluate and help formulate the next step in litigation.  One scenario that comes to mind is where an expert is called to analyze potential motions and assist in risk assessment for the purposes of giving comfort to an insurance carrier who was the ultimate “deep-pocket,” to provide the party with metrics for a contemplated and proposed settlement, and to sensitize both the party and its insurance carrier to the magnitude of a potential judgment.

Although court-affiliated early neutral evaluation (“ENE”) may provide some guidance to litigants in the context of retaining a legal expert, the process may not be tailored to the needs of a specific party insofar as it is designed to lighten a court’s burden.  The neutral evaluator has duties to the court and to the parties.  Moreover, ENE is dependent upon the cooperation of the adversary insofar as the adversary is expected to participate in ENE in good faith. 

The complexity of a case may also weigh in favor a party retaining its own expert evaluator.  In a bankruptcy, the ENE process may be complicated by multiple interests vying for what is likely to be a finite pot of gold.  The debtor, the unsecured creditors committee, secured creditors, bond holders and stock holders will likely come to the table with their respective versions of what is happening and their separate wish-lists.  Here, the expert evaluator may be capable of bringing more than just a modicum of clarity to a party as it moves forward, and point out how the moving parts of a bankruptcy may mesh over time.  This type of expertise is acquired over an entire career.

Ms. Cyganowski is a former Chief U.S. Bankruptcy Judge for the Eastern District of New York and is currently a member of Otterbourg, Steindler, Houston & Rosen, P.C., New York.  She is Chair of the Firm’s Insolvency Litigation & Fiduciary Appointments Group.  She regularly serves as an expert witness in cross-border and complex U.S. insolvencies, as an evaluation expert and as a mediator of complex Chapter 11 cases.  Ms. Cyganowski can be contacted on +1 212-905-3677 or by email at mcyganowski@oshr.com.    

Mr. Fiorillo is a partner in Otterbourg’s bankruptcy and creditors’ rights and finance departments.  He specializes in the representation of foreign and domestic banks, commercial finance and factoring companies, and hedge funds in the structuring and restructuring of financing transactions, including revolving credit facilities, term loans, forbearance and workout arrangements, acquisition financing, and Chapter 11 debtor-in-possession and “exit” financing facilities.  He also represents private equity groups, corporations and other institutional clients in connection with various financing and capital market transactions, as well as the acquisition and sale of the assets or businesses of financially distressed companies.  Mr. Frioillo can be contacted on +1 212-905-3616 or by email at dfiorillo@oshr.com. 

Mr. Green is of counsel in the Firm’s litigation department.  He can be contacted on +1 212-905-3620 or by email at lgreen@oshr.com.