business manThe break-up of a small business led to plenty of litigation over a number of issues. The California Court of Appeal reviewed the trial court’s decision to disqualify an attorney because the opposing party claimed to have conveyed confidential information to his expert witness on a prior matter. Dispute arose between a seafood business (“Seafood Company”) and a former director of the company (“Former Director”).  The lawsuit was over the ownership of a fish processing plant known as “Plant 2,” which both parties claimed ownership. The focal point of this action was the Former Director’s use of an industrial real estate expert witness who previously testified for the Seafood Company in an earlier part of the litigation.

Judge H. Walter Croskey of the California Court of Appeal, 2nd Appellate District, wrote that when a party moves to disqualify opposing counsel based on allegedly improper contact between opposing counsel and the movant’s expert witness, the party seeking disqualification has the burden to show that the expert possesses confidential information materially related to the proceedings before the court. Judge Croskey explained that an expert witness may be a consulting expert, retained only to assist counsel in the preparation of the case, or a testifying expert, retained only to give a professional opinion at trial. In many cases, an expert is retained both to consult and to testify.

Case Background

When the Former Director was with the Seafood Company, he was paid $30,000/month rent for Plant 2 for 15 years. He obtained an appraisal of Plant 2 in 2004 to determine its fair market rent, which turned out to be $45,453 per month with a minimum increase of 3% per year. Based on this, he increased the rent to $46,800 per month. The Seafood Company refused to pay.

The Seafood Company filed suit against the Former Director. It argued he held nominal title to Plant 2, and that he violated the corporate opportunity doctrine by taking title. The Seafood Company offered the expert testimony of LV, an industrial real estate broker. He testified to the unique qualities of Plant 2, its critical importance to the Seafood Company’s business, and that if the company had to build a similar facility, it would take two years, cost roughly $16 million, and wouldn’t be in an ideal location.

The trial court ruled in favor of the Seafood Company. On appeal, the Court of Appeals remanded for a retrial on the Former Director’s complaint for unlawful detainer. Because years passed, the Former Director re-inspected Plant 2 for the retrial. He told the Seafood Company that LV would be inspecting Plant 2 on his behalf. The Seafood Company objected because LV had been its expert witness and couldn’t switch sides during the litigation. The Former Director argued that his current counsel never spoke with LV during the initial proceedings.

The Seafood Company filed a motion to disqualify the Former Director’s attorney. This was supported by the Seafood Company’s attorney, who told LV that he was going to retain him as a consultant. The Seafood Company’s attorney made several phone calls to LV and “asked for [LV’s] advice, and consultation, concerning issues in the consolidated cases.” During those conversations, the attorney “also disclosed to [LV] some of [his] own impressions, conclusions, opinions and theories about certain issues in the consolidated cases.”  The Seafood Company’s counsel then brought in another attorney to assist in the litigation. It was the second attorney who decided to retain LV as a testifying expert witness in the prior matter. In addition, LV had been contacted directly by the Seafood Company previously, and had been “communicating with [the Seafood Company] personnel regarding [the Seafood Company ‘s business operations, need for facilities, etc.” In the course of his work for the Seafood Company, LV purportedly received confidential, proprietary information about the company’s business.

The Former Director submitted an opposing declaration from LV indicating that he had been retained as a testifying expert, not as a consulting expert. LV stated that, at his deposition prior to the earlier part of the case, he testified that he spoke with the Seafood Company’s attorney only once prior to being designated as an expert and had no recollection of any conversations where the Seafood Company’s attorney asked his advice. LV also stated that he had no recollection of any phone calls in which the Seafood Company’s attorney disclosed his impressions, conclusions, opinions, and theories. LV agreed to testify for the Former Director in the retrial because he was familiar with Plant 2 and his testimony would be the same regardless of who hired him. He said he did not share any of the Seafood Company’s attorney purported impressions, conclusions, opinions and theories about the case with the Former Director’s counsel—he could not have—because he never knew about that information.

Nonetheless, the trial court disqualified the Former Director’s counsel and specifically concluded the Seafood Company’s attorney conveyed confidential work product to LV. While the trial court recognized that the attorney-client privilege was waived with respect to the basis for LV’s opinions once it became certain that he would testify at trial, the court concluded that it was “both logical and reasonable that … [the Seafood Company’s attorney] imparted work product to … [LV] that went beyond the formation of an opinion.” It was work product, and the court also concluded that LV was not merely a consultant and trial expert, but had also been engaged privately by the Seafood Company, where he was privy to confidential information “both inside and outside of this litigation.” The trial court said that a rebuttable presumption arose that the Former Director’s counsel was also in possession of that information. The Former Director appealed.

Court of Appeal’s Response

Judge H. Walter Croskey of the California Court of Appeal, 2nd Appellate District, wrote in his majority opinion that there were three types of confidential information allegedly possessed by LV which formed the basis of the disqualification motion: (1) confidential information obtained by LV when employed by the Seafood Company prior to contact by the attorney; (2) confidential information obtained by LV when employed by the Seafood Company’s attorney as a consultant, but prior to his designation as a testifying expert; and (3) confidential information obtained by LV as a testifying expert.

Judge Croskey said the first category of information was not confidential, and the second and third categories could not be separated once LV was designated as a testifying expert. Once that happened, he explained, any confidentiality with respect to both categories of information was waived. Even if information in the second category was considered confidential and could provide a basis for a disqualification motion, the judge said that the information could only do so if it were materially related to the pending proceedings. The Seafood Company did not show this connection.

If the expert is solely retained as a consulting expert, the attorney-client privilege applies to communications made by the client or the attorney to the expert in order for the expert to properly advise counsel; the same would be true for a consulting expert’s report.

Judge Croskey said that the situation was different with a testifying expert. Generally, neither the attorney-client privilege nor the work product protection prevents disclosure of statements to, or reports from, a testifying expert. When a client calls that party’s attorney to testify at trial to information the attorney could have only learned through the attorney-client privilege, the privilege is waived. Similarly, when an expert witness is expected to testify, the expert’s report, which was subject to the conditional work product protection, becomes discoverable, as the mere fact that the expert is expected to testify generally establishes good cause for its disclosure.

However, the issue becomes more complex, Judge Croskey pointed out, when the expert is both a consulting and testifying expert. The expert usually is employed to form an opinion that he may later present as a witness in court.  The expert is also engaged as an adviser on trial preparation and tactics for the case and in the latter capacity serves as a professional consultant on technical and forensic aspects. When it becomes reasonably certain an expert will give his or her professional opinion as a witness on a material matter in dispute, then the opinion becomes a factor in the cause. Judge Croskey said that case law showed “a bright line at the point where it becomes reasonably certain that the expert will testify”—holding that the attorney-client privilege and work product protection apply prior to the point, but not subsequent to it.

However, Judge Croskey wrote that there was an exception when a party seeks pre-trial discovery of the written report of an expert which contains both: (1) information relevant to the opinion the expert will give as a testifying expert; and (2) the expert’s advice on trial preparation matters, conveyed as a consulting expert.

The judge wrote that an expert’s opinion regarding the subject matter about which the expert is a prospective testifying expert is discoverable, but the expert’s advice rendered to the attorney in an advisory capacity is still subject to conditional work product protection. In order to prevail on its disqualification motion, Judge Croskey held that the Seafood Company needed to establish that confidential information materially related to the pending proceedings was conveyed to LV. That was not the case. The Seafood Company and its attorney did not convey information to LV that enabled him to prepare the opinions to which he testified that constituted materially related confidential information.   As a result, the appellate court reversed the attorney disqualification order.

By:  Kurt R. Mattson, J.D., LLM

20+ Years of experience in the legal industry.

DeLuca v. State Fish Co., Inc., 217 Cal.App.4th 671, 158 Cal.Rptr.3d 761 (2013).