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A Joint Expert Could Be Just What the Court Ordered

A Joint Expert Could Be Just What the Court Ordered


There’s often a perception that financial expert witnesses are biased in favor of their clients’ financial interests. In reality, credentialed professionals must adhere to various ethical standards that require them to be independent and objective when serving as an expert witness in a litigation matter.

But sometimes experts aren’t given all of the relevant information, or they may hear only their client’s interpretation of financial results, which could skew their conclusions. When this happens, the parties’ experts are likely to reach widely divergent conclusions that often must be settled in court.

Wouldn’t it be more effective if the parties could openly share information — and expert witness fees? When disputing parties can set aside their differences and stipulate to certain key facts at the onset of their discussions, conditions could be right for the use of a joint expert. In some cases, a judge may even require that the parties jointly retain one expert.

The Benefits

The most obvious benefits of using a joint expert are lower costs, shorter resolution times and enhanced credibility. The parties split the fee for one expert, and the company’s operations are only observed (and interrupted) by one set of prying eyes, not two. Additionally, joint experts tend be more persuasive, because judges and juries perceive jointly-retained experts to be less biased than experts that are hired by one side.

A less obvious benefit is that joint appraisers can rebuild trust between injured parties, which can be beneficial if they plan to interact again in the future. For example, estranged spouses may need to co-parent children after settling their divorce. Or siblings may need to care for elderly parents after the family business files for bankruptcy. The use of a joint appraiser may be a small step toward future collaboration.

Detailed, Upfront Stipulations

Effective joint expert projects start with a detailed engagement letter that stipulates certain key facts from the get-go. For instance, when valuing a business interest for divorce, the parties might prescribe specific valuation discounts for lack of control and marketability — or identify adjustments the expert should make for discretionary spending, nonoperating assets, and contingent assets and liabilities.

Experienced financial experts know the customary points of contention for a particular type of case — be it a shareholder dispute, divorce or buyout — and can help the parties work through these problem areas in advance.

Because both sides typically share the expense of hiring a joint expert, they should agree on the scope of the engagement and the reporting format. For example, will the expert use management’s financial statement forecast, or will the expert create an independent forecast? Does a valuation assignment include forensic accounting procedures to verify account balances? And should the expert’s conclusion be reported orally or in a formal written report?

A joint expert’s engagement letter also typically contains a provision that requires the controlling shareholder to give the expert unlimited access to the company’s financial records and answer all of the expert’s questions.

Resistance to Joint Experts

Joint experts aren’t for everyone, however. For example, they’re less common in cases that involve litigants of disparate size and access to information, such as patent infringement claims. Large companies with deep pockets may be less cost sensitive and, therefore, less inclined to agree to using a joint expert.

Joint experts also tend to be less effective when the parties can’t overcome their distrust and animosity, a prerequisite to using a joint expert. When embittered litigants attempt to use a joint expert, there’s a chance that one party might question the expert’s conclusion, especially minority shareholders who might resent the expert for spending more time with the controlling shareholder.

Moreover, if a case is likely to wind up in court, the attorneys may decide to hire separate experts whose communications are protected under client-attorney privilege. All of the parties’ communications with a joint expert are generally discoverable.

Spotlight on Collaboration

Collaborative divorce is a growing trend that started in Minnesota during the 1990s. Today, it’s an increasingly popular way for divorcing spouses to lower costs, maintain control and minimize hard feelings. In a collaborative divorce, the parties contractually agree to:

  • Openly and honestly share information,
  • Negotiate in good faith, and
  • Settle their differences outside of court.

Both spouses hire their own attorneys, but they agree to share neutral financial experts and mental health advisers, who are paid out of community funds. The only court appearance in a collaborative divorce occurs when the judge approves the uncontested, self-imposed settlement agreement.

Collaborative divorce isn’t just for small marital estates. The wealthier a couple is, the more they stand to lose in lengthy courtroom battles and court-imposed settlements.

A Worthwhile Consideration

The next time you’re seeking a financial expert, consider using a joint expert to save time and money. You know best whether the parties to a lawsuit can realistically set aside their differences and work together towards a fair, objective conclusion.

For more information, contact Jane Ochsman Rowny via our online contact form.

Councilor, Buchanan & Mitchell (CBM) is a professional services firm delivering tax, accounting and business advisory expertise throughout the Mid-Atlantic region from offices in Bethesda, MD and Washington, DC

Contact Jane Ochsman Rowny, CPA, CFP®, CDFA®View Profile

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