By Heidi Walker, CPA*ABV, ASA
“People, I just want to say, you know, can we all get along?” ~ Rodney King
Hiring a financial expert for a divorce engagement involves many decisions, one of which is determining whether the expert will be separately retained by each party, or whether the parties will jointly retain the expert. Utilizing a joint expert can have its rewards; however, it is not suitable for all cases. The success of using a jointly-retained expert depends on the relationship between the parties; the issues in the case and the attorneys’ strategies for dealing with them; and the skill of the expert to operate in this unique role.
In a divorce matter, generally, a single expert may be engaged by agreement of the parties; appointed by the court; or engaged as part of the collaborative process. We will begin by describing each of these options. Then, we’ll examine the economics of a joint engagement, as well as tips for making such an arrangement a success.
Circumstances of Joint Expert Retention
By Agreement of the Parties
When divorcing parties are involved in litigation, instinct may be for each to hire their own expert. In certain instances, this may be the appropriate course of action. In others, however, the parties may be on good enough terms and the attorneys’ strategies both suitable to jointly retain the expert via a joint engagement letter with the expert. This is usually done in hopes of saving time, fees, and the emotional drain that can result from dueling experts. Choosing this course does not preclude the parties from later hiring their own expert if they are unhappy with the joint expert’s results.
A joint expert may be appointed by the court. The parties may request the court to do so, or the court may appoint one on its own. From the court’s perspective, a jointly retained expert can enhance settlement opportunities, as well as avoid the contradictory evidence often submitted by dueling experts. However, some judges may not be in favor of a neutral expert, out of concern that it interferes with the adversarial process. The scope of work may be determined by the court or stipulated by the parties. As outlined in the Family Law Services Handbook, the order or engagement letter typically includes:
- Specifying the expert’s tasks
- Stating basic facts (e.g., marriage and separation dates)
- Defining compensation parameters
- Identifying financially responsible parties and funding source
- Addressing discovery protocol
- Detailing communication and reporting protocols
- Planning for possible expert withdrawal
- Clarifying case-specific items and terminology.
Likely, the most significant downside of a court-appointed expert is that the parties may not be vested in the joint process As such, these engagements can be as contentious (or more so) as if the parties had each hired their own expert. Further, while each party has the opportunity for cross-examination, there is no rebuttal expert to respond if one or both parties take issue with the jointly-retained expert’s conclusions.
Use of the collaborative process, whereby a “participation agreement” commits the parties to settle their issues without recourse to litigation, is rising in popularity in family law. This multidisciplinary approach often involves a financial professional, whose role is to gather all of the necessary financial information and synthesize it in such a way that it is useful to educate the parties about their options relating to settlement of their finances. For less complex cases, use of a single financial professional may be appropriate, while more complex cases may require multiple financial professionals, such as a business valuation professional, a Certified Divorce Financial Analyst, a tax professional, a real estate appraiser, a retirement specialist, or others.
In the collaborative process, if agreement cannot be reached, or if one or both parties elect litigation, the professionals on the team may not participate in the ensuing litigation. Each party must retain new counsel and other experts before having recourse in the courts. Thus, much of the effort put into the process must be redone, which can be a significant motivator for settlement, but is a risk not everyone is willing to take.
Does Jointly Retaining a Financial Expert Save Money?
Jointly retaining a financial expert can save time and fees over the traditional dueling expert approach, primarily by avoiding duplicative work, and also potentially by replacing a difficult discovery process with one that is more informal and harmonious. Obtaining information through a formal discovery process where experts have been separately retained can be extremely expensive. When the parties are at such odds that each and every document, question, and follow up question must be obtained via requests for production of documents, interrogatories, and depositions, professional fees can skyrocket. In one case, the in-spouse’s refusal to provide information requested for the business valuation was one factor which led to years of litigation involving several changes in the valuation date (fees), countless stops and starts on the project (fees), and significant time spent with discovery (and more fees). Expenses can potentially be contained with a jointly retained expert, as the parties may be more cooperative for an expert they believe to be genuinely neutral.
Another opportunity to save fees is upon completion of the analysis. The parties may agree that instead of the expert communicating their results via a full-length written report, the results may be expressed with schedules and/or a brief presentation by the expert. As an example, the expert may request the parties and counsel attend a meeting wherein the expert presents her work and requires the parties to provide comments within 10 days. This attempt to make sure everyone understands the expert’s analysis, and the inputs, can be very helpful in settling cases.
However, as much as both parties may be committed to using a single expert up front, one or both may disagree with that expert’s conclusions. Typically the joint engagement agreement will provide that one or both parties may retain their own, separate expert. When this happens, it can obviously wipe out any savings that may have been gained from using one expert.
Further, when the parties, or their attorneys, have substantive disagreements throughout the process and the financial expert is caught in the middle, it can be as expensive as hiring two experts. The expert’s role is to be sure that all parties are treated equally and that both sides are heard during the process. Just because everyone agrees to willingly share information does not mean they will agree on the foundation of that information, or on how much of it should be shared with the expert. We have seen cases where arguments about the correct underlying facts, or the two sides’ interpretation of them, volley back and forth between the attorneys and the parties, each rebutting the facts put forth by the other. In some cases, we have been left wondering if the parties are even talking about the same business! The expert handles this is by doing their own thorough investigation to determine the correct facts, but the more starkly different a picture eac side presents, the more time the expert has to take to determine the “truth”—a job that might be better left in the hands of the trier of fact.
Careful planning of a joint retention can help avoid the case potential pitfalls. With that, we turn to our observations about what has helped make them successful.
Tips for Making Joint Engagements a Success
Using a single expert can be an efficient way to gather facts, assess information, and obtain a financial analysis of the business, which both sides can use to evaluate the financial impact of their legal perspectives before trial. While this is an excellent concept in theory, without careful planning, these engagements can be more difficult to execute successfully. Here are a few tips on how to make joint engagements work.
Lay the ground rules up front
The most important factor for a successful joint engagement is laying the ground rules at the outset. Discovery, communication protocols, fees, timing and deadlines, and report delivery format should all be clarified up front in the engagement agreement to the extent possible to avoid missteps later in the process. It is helpful if the appraiser and both attorneys conference at the outset to iron out the details of the engagement. A clear discovery agreement that is then abided by is critical. Just as we have experienced cases where not being able to get enough information was problematic, there have been others where too much information was the problem.
Communication requires full disclosure
A joint retention involves continuing open communication between the expert and their clients (which may be the attorneys or the parties or the court). This is done with the intention of allowing all of the parties to feel included in the process and that they have “had their say”. Any verbal or written correspondence or documents should be shared with all parties, to address up front any issues the parties have with the information being provided.
A jointly retained expert considers the input of both parties throughout the engagement. They attempt to garner consensus during the process, and document it. There are cases where this works exactly as intended and others where it feels like a firestorm of discovery disputes. Thorough upfront planning, a very clear discovery agreement, and careful navigating on the part of the expert can guide even contentious parties through a joint retention in a relatively civil manner.
Attorneys and experts should be a team
Ideally, attorneys and experts will work as a team to guide the parties to successful completion of a joint engagement, setting clear expectations about how the process works. Some points to remember here are:
- If contrary legal positions are present, the expert may need to quantify multiple interpretations of the same facts.
- Keeping relevant facts from an expert is never a good idea, but it is an especially bad idea in joint retention, as it creates suspicion when the facts eventually come out (and they do come out).
- Experts will ideally obtain consensus regarding their inputs along the way.
If settlement is the end game, attorneys and experts who work as a team have the best chance at achieving that result.
Enhance fee collection
The engagement letters of many experts contain clauses for withdrawal for non-payment, or at the very least, a stop-work clause if fees are not up-to-date. In addition, many experts will not deliver the results of their analyses until all fees have been paid. If possible, establish a joint, community account, such as an attorney trust account, as a single payment source. This will increase the likelihood of the expert being paid in a timely manner, and allow the case to move forward as anticipated. It can also remove a potential source of future disagreement among the parties.
Recognize that some cases are not suited to a jointly retained expert
There are some cases that are simply not well-suited to the use of a single expert. As experts, we will recommend against joint retention if it appears from our initial conversations about the case that:
- Either of the attorneys seems unsupportive of a joint engagement.
- Excessive conflict between the parties and their attorneys is evident from the outset.
- One or both parties are representing themselves.
Use of a jointly retained financial expert can be an excellent tool for settling issues in a divorce case. They can save on expert and attorney time and fees, and provide the parties a less contentious environment in which to deal with often complex and difficult financial matters. However, carefully establishing expectations and rules of engagement upfront and then adhering to those throughout the process, as well as managing the parties’ emotions and expectations, are critical aspects of the success of these engagements.
Heidi Walker is a Senior Valuation Analyst at Fannon Valuation Group in Portland, Maine. She focuses on valuation in the context of divorce and shareholder disputes.
Posted with permission of the author.