Privileged Communications With a Testifying Client/Expert

Shannon M. Warren | The Subrogation Strategist | April 30, 2019

In In re City of Dickinson, 568 S.W.3d 642 (Tex. 2019), the Supreme Court of Texas recently assessed whether a client’s emails with its counsel were subject to disclosure after the client was designated as a testifying expert witnessIn re City of Dickinson involved a coverage dispute between a policyholder and its insurer. The policyholder moved for summary judgment on the issue of causation, essentially alleging that its insurer did not pay all damages caused by Hurricane Ike. In responding to the motion, the insurer relied upon an affidavit by one of its employees, a claims examiner, that included both factual testimony and expert witness testimony.

The policyholder subsequently filed a motion to compel, seeking the production of emails between the claims examiner and the insurer’s counsel that were generated while the affidavit was being drafted. The emails contained numerous revisions of the affidavit. The insurer objected, asserting that the emails were protected by the attorney-client privilege and were generated in the course of the rendition of legal services.

The trial court granted the motion to compel, ordering production. Ultimately, after a series of appeals, the Supreme Court had to decide whether the documents in dispute were subject to discovery. In resolving this issue, the court examined the rules pertaining to expert disclosures. As noted by the court, the rules authorize the production of all documents provided to a testifying expert witness. Thus, the court was faced with determining if its rules required the disclosure of documents that are also subject to the attorney-client privilege.

The court, declining the opportunity to create a new exception, acknowledged that there are exceptions to the attorney-client privilege but found that none of the recognized exceptions applied. Instead, the court focused on the rules that govern the scope of discovery and the applicability of privileges.

In examining the rule governing expert disclosures, the court focused on the fact that the rule was permissive in nature, highlighting the word “may.” The court explained that the rule allows a party to request that an opposing party disclose materials, but does not require such disclosure. Additionally, the court noted that the rule governing expert disclosures does not address the disclosure of such materials that are otherwise protected by the attorney-client privilege. Thus, the court held that the general protections afforded by the privilege remained in effect.

The court made it clear that, in the context of expert disclosures, there is a significant distinction between information that is protected by the work product doctrine as opposed to information protected by the attorney-client privilege. The court noted that the rule governing the disclosure of expert materials explicitly states that work product is discoverable, but does not address materials subject to the attorney-client privilege. After examining numerous judicial decisions where courts upheld the attorney-client privilege in the context of expert disclosures, the In re City of Dickinson court, noting that the attorney-client privilege is “quintessentially imperative,” upheld the appellate court’s decision overruling the trial court’s order compelling disclosure.

The In re City of Dickinson case reminds us that, while not absolute, the attorney-client privilege provides powerful protections and can be asserted in situations when the materials sought are otherwise subject to disclosure. The case also exemplifies the importance of performing a critical analysis of the applicable rules to ensure compliance with the law, while maximizing a party’s position. Accordingly, it is a major benefit to involve counsel early in the case.

That’s Common Knowledge! Failure to Designate an Expert Witness in a Professional Negligence Case is Not Fatal Where “Common Knowledge” Exception Applies

Lyndsey Torp | Snell & Wilmer | May 16, 2019

In reversing summary judgment for defendants, the California Fourth District Court of Appeal recently held that homeowners suing their real estate broker for negligence did not need an expert witness to establish the elements of their causes of action. Ryan v. Real Estate of the Pacific, Inc. (2019) 32 Cal. App. 5th 637. Typically, expert witnesses are required to establish the standard of care in professional negligence cases. But in Ryan, the court of appeal held that the “common knowledge” exception applied despite this general rule, because the conduct required by the particular circumstance of the case was within the common knowledge of a layman. The conduct in question here? The broker’s failure to disclose to his client that the client’s neighbor told him that she planned extensive renovations that would obstruct the client’s property’s ocean views.

Ryan and Patricia Ryan (the Ryans) hired defendant Real Estate of the Pacific, Inc., doing business as Pacific Sotheby’s International Realty (Sotheby’s) and defendant real estate broker to sell their residence in La Jolla, California. During an open house at the residence, a neighbor informed the Ryan’s real estate broker that she planned extensive renovations at her home that would, among other things, permanently obstruct the Ryan’s westerly ocean views and take several years to complete. The real estate broker never informed the Ryans of this, nor the subsequent buyer. The subsequent buyer purchased the property for $3.86 million, and defendants received $96,500 as commission for the sale. The day after escrow closed, the buyers learned of the renovations, and sought to rescind the purchase. Based on advice of defendants, the Ryans refused, and the dispute proceeded to arbitration. The buyer obtained a rescission of the purchase, with the Ryans order to pay damages, interest, and attorneys’ fees and costs in excess of $1 million. The Ryans then sued Sotheby’s and the real estate broker to recover these amounts and damages caused by defendants’ alleged negligence.

Sotheby’s and the defendant real estate broker moved for summary judgment against the Ryans, arguing that the Ryans could not establish the existence of any cause of action without an expert witness. Because the Ryans did not designate an expert witness, defendants argued summary judgment was warranted. The trial court agreed and granted the motion. The court of appeal reversed.

The court of appeal first analyzed whether the Ryans had forfeited certain arguments by failing to raise them with the trial court. At the trial court level, the Ryans opposed summary judgment on the grounds that they did not need expert testimony because the findings of fact and conclusions of law regarding the standard of care in the arbitration with the buyers, and the arbitration award collaterally estopped defendants from relitigating the issue. The trial court rejected this argument, given that defendants were not a party to the arbitration. In their appeal, the Ryans instead advanced the “common knowledge” theory, which states that an expert witness is not needed to establish the standard of care in a professional negligence cause of action when the conduct required by the particular circumstances is within the common knowledge of a layman. The court of appeal found that the common knowledge theory presented a new question of law based upon undisputed facts, and the Ryans could make such an argument for the first time on appeal.

The court of appeal then analyzed the Ryans’ claims, noting that they were contingent on defendants having a duty to share the subject information. At the summary judgment stage, to satisfy their initial burden and shift the burden to the Ryans to prove the existence of a triable issue of material fact, defendants had to show that an expert witness was essential for the Ryans’ claims. To carry that burden, they needed to explain why the lack of an expert witness was fatal to the Ryans’ claims. The court of appeal found that defendants did not meet this burden.

California law does not require an expert witness to prove professional malpractice in all circumstances. One such exception is where the negligence is obvious to a layman. Defendants argued that this was not one of those cases, and instead attempted to limit to their duties to those set forth in California Civil Code section 2079(a), and that their duties of investigation and disclosure, as real estate brokers, were limited to the property being sold. The court of appeal disagreed that these were the real estate broker’s only source of duties. Rather, real estate brokers are subject to duties imposed by regulatory statutes, such as section 2079(a), but also those arising from the general law of agency. The court of appeal explained:

Here, the Ryans’ claims are not contingent on an expansion of the statutorily defined duties of a real estate broker. Instead, their claim is more elementary. If a real estate broker has information that will adversely affect the value of a property he or she is selling, does that broker have a duty to share that information with his or her client? The clear and uncontroversial answer to that question is yes.

The court of appeal concluded that because the Ryans alleged a cause of action for breach of fiduciary duty against defendants, the lack of an expert witness would not be an impediment to proving such a cause of action based upon the allegations in the complaint. In addition, defendants had not shown, for purposes of summary judgment, that an expert witness was necessary to establish the scope of a broker’s duty or a breach of that duty for professional negligence. Defendants possessed material information that impacted the value of the property. They did not need to engage in investigation to discover the information, but rather, they “simply chose to remain silent, collect their commission, and allow the Ryans to deal with the consequences.” The conduct required here was within the common knowledge of a layman. “Put differently, anyone who hired a real estate broker to sell her home, would expect that broker to share information that would adversely impact the value of the home.”

This case is interesting for a few reasons. First, the court of appeal rejected defendants’ forfeiture argument, and considered a new legal argument on appeal. Second, the case navigates an exception to the general rule requiring the designation of an expert to establish the standard of care in professional negligence cases. The conduct at issue here strikes a chord for anyone that has purchased or sold a home. Even so, assessing whether to designate an expert in a particular case requires close scrutiny, given that the wrong call could be fatal to the case.

Claim Denied? Why Picking the Wrong Expert Can Cost You

Ian Dankelman | Property Insurance Coverage Law Blog | June 2, 2019

Picking the right expert has never been more important when fighting an insurance company that has wrongfully denied an insurance claim. The rule for expert admissibility has just changed in Florida and the same concerns about experts apply everywhere.

Under the Frye test, a party seeking to introduce expert evidence had to prove the general acceptance of the underlying scientific principles and methodology that the expert employed when advancing new or novel scientific testimony. Now, Florida has adopted the Daubert  standard, which requires the trial judge to ensure that “any and all scientific testimony or evidence admitted is not only relevant, but reliable.”1 In reaching this decision, the Supreme Court emphasized that the amendments would reduce forum shopping and harmonize Florida’s standard with the standard employed by federal courts.

However, in dissent, Justice Labarga cautioned that “Daubert and its progeny drastically expand[] the type of expert testimony subject to challenge.”2 One concern over the amendment the dissent highlighted was that the new standard would undermine the constitutional right to a jury trial by authorizing judges “to exclude from consideration the legitimate but competing opinion testimony of experts.”3 Another was that the new expert testimony standard would overburden the courts, impede the ability of parties to prove their cases on the merits, and increase litigation costs.

So what does this mean for policyholders? On one hand, Daubert is the well-established standard in federal court, and there is clear direction in federal case law that state judges can follow to reach reasoned rulings. It is likewise conceivable that the number of cases removed from state court to federal court will be reduced based on the amendments to the evidence code. The new standard will also give policyholders a new ability to challenge the insurers’ experts when their work does not meet the requirements demanded by the Daubert standard. On the other, policyholders’ cases may be delayed while Florida courts deal with increasing numbers of challenges to expert opinion testimony. Policyholders will likely face additional hearings on the admissibility of expert testimony that will require intense preparation.

It remains to be seen how judges will tackle the increase in challenges to expert testimony in Florida’s courts. Only one thing is certain: the amendment to the evidence code will have important ramifications on all litigation in Florida.
1 In re: Amendments to the Florida Evidence Code, No. SC19-107 (Fla. May 23, 2019).
2 Id. at 13 (Labarga, J., dissenting).
2 Id. at 15-16.

Fire Consultants Cannot Base Opinions on Speculation

Christopher Konzelmann | The Subrogation Strategist | April 3, 2019

Larsen v. 401 Main St. Inc., 302 Neb. 454 (2019), involved a fire originating in the basement of the Quart House Pub (Pub) in Plattsmouth, Nebraska that spread to and damaged Plattsmouth Chiropractic Center, Inc., a neighboring business. Fire investigators could not enter the building because the structure was unsafe and demolished. The chiropractic center nevertheless sued the Pub alleging that its failure to maintain and replace basement mechanical equipment caused ignition.

To prove its claim, the plaintiff retained a mechanical engineer who reviewed documents and concluded that the fire “originated from a failure of one of the items of mechanical equipment located in the area of the [basement] boiler.” Importantly, however, the consultant could not determine the root cause of the fire, could not eliminate the possibility that the fire originated in a compressor, and could not rule out the building’s electrical service as the ignition source because it was outside his area of expertise. The consultant nevertheless found that the fire most likely would not have occurred if the Pub had regularly serviced and replaced the equipment when needed.

The trial judge granted the Pub’s motion to strike the consultant’s opinion and dismissed the complaint. The court found that while the consultant was a qualified mechanical engineer, his testimony failed to satisfy the standard established in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993) and the state’s equivalent evidentiary rule, Neb. R. Evid. 702, because “the methodology could not be properly applied to the facts at issue.” Further, the consultant could not state that a mechanical failure caused the fire and it was mere speculation that regular inspections and maintenance would have prevented ignition.

The Nebraska Supreme Court, addressing both preclusion of the expert testimony and the grant of summary judgment, affirmed the trial court’s decision. The court found that the trial court did not abuse its discretion in excluding the expert’s testimony because the consultant could not form an opinion on which piece of equipment failed and caused the fire. The consultant, likewise, could not establish that the fire would not have occurred had the Pub performed inspections and maintenance. The Supreme Court found that the trial court properly granted summary judgment because there was insufficient proof, without engaging in “guess, speculation, conjecture, or choice of possibilities [sic], that a negligent failure to adequately maintain equipment caused the fire and resulting damage.”

Proving a fire loss claim premised on ignition, as opposed to spread or delayed detection, requires proof by a qualified consultant of origin and cause. A consultant’s inability to inspect a fire scene and evaluate relevant evidence because of dangerous conditions makes origin and cause determination tasks much more challenging and sometimes impossible. The Nebraska Supreme Court’s holding was a predictable result given the facts presented.

Application of Frye Test to Determine Admissibility of Expert

David Adelstein | Florida Construction Legal Updates | February 2, 2019

Florida went back to the Frye test/standard, instead of the Daubert test utilized in federal court, to determine the admissibility of expert testimony.  The Frye test is more favorable to plaintiffs because it applies when an expert renders an opinion based on new or novel scientific principles.  See D.R. Horton, Inc. v.  Heron’s Landing Condominium Ass’n of Jacksonville, Inc., 44 Fla.L.Weekly D109b (Fla. 1st DCA 2018) (“The supreme court has described the Frye test as one in which the results of mechanical or scientific testing are not admissible unless the testing has developed or improved to the point where the experts in the field widely share the view that the results are scientifically reliable as accurate. Stated differently, under Frye, the proponent of the evidence has the burden of establishing by a preponderance of the evidence with the general acceptance of the underlying scientific principles and methodology.  However, as stated, the Frye standard only applies when an expert attempts to render an opinion that is based upon new or novel scientific principles.”). 

In D.R. Horton, Inc., a condominium association sued the developer and general contractor (same entity) for construction defects that included claims in negligence, violation of building code, and breach of statutory warranties.  The developer/general contractor moved in limine / to strike the association’s experts under, at the time, a Daubert analysis, but which became a Frye analysis during the pendency of the appeal.  The expert opined as to construction defects and damage and the appropriate repairs – really, no different than any construction defect dispute, from what it appeared. The trial court denied the motion and during trial the experts testified and a sizable damages judgment was entered against the developer/contractor prompting the appeal.  One issue on appeal was the admissibility of the expert’s opinion.  The appellate court noted that a Frye analysis is not necessary because the experts used a scientifically reliable and peer-reviewed methodology.  

A smart tactic, and I mean SMART tactic, that the association’s counsel seemed to utilize was to engage a third-party engineer to testify during a hearing that the methodology used by the association’s experts was industry standard methodology and generally accepted. Thus, the opinions were not based on new or novel scientific principles and the appellate court affirmed the trial court’s denial of the contractor/developer’s motion in limine.