Federal Courts Take on Experts with Dramatic Results

Kimberly McCall's article "Federal Courts Take on Experts with Dramatic Results" was recently published in the Attorney At Law Magazine. To view the digital copy of this article, please click on the link below:

http://digitaleditions.walsworthprintgroup.com/publication/?i=129845&p=6

Court's Orders:

http://dl.dropbox.com/u/6208298/file01.pdf

http://dl.dropbox.com/u/6208298/file02.pdf

http://dl.dropbox.com/u/6208298/file03.pdf

http://dl.dropbox.com/u/6208298/file04.pdf

http://dl.dropbox.com/u/6208298/file05.pdf

 

 

 



Case Cites

The case cites for the first and second trials in Children’s Broadcasting Corp. v. Walt Disney Co. referenced in the Attorney at Law Magazine article “5 Things You Need To Know About Economic Damages” by Kimberly McCall, CPA are as follows:

Children’s Broadcasting Corp. v. Walt Disney Co., 245 F.3d 1009 (8^th Cir. 2001), and

Children’s Broadcasting Corp. v. Walt Disney, Co. 357 F.3d 860 (8^th Cir. 2004).

5 Things You Need To Know About Economic Damages (click to enlarge)

Attorney At Law - May 2012 edition (click to enlarge)

5 Things You Need to Know About Your Receiver

Curtis G. Swarts, CPA

The ability to appoint a receiver is a powerful tool which a litigant may use to preserve and protect his or her interest in property. However, the appointment of a receiver is an extreme measure. As such, careful consideration of the relevant statutes and case law should be utilized to determine the appropriateness of a receiver.

Once the decision to petition for a receiver has been made, it is imperative to identify a receiver who is best qualified for these broad duties.

Valuable definitions of the role of a receiver are offered in the Nevada Supreme Court case, Jones v. Free, 83 Nev. 31, 422 p.2d 551 (1967). The court, citing Clark on Receivers states that a receiver appointed by the court is a person who by such appointment becomes an officer of the court to receive, collect, care for, administer and dispose of the property of another. A receiver appointed by the court is an arm of the court and thus a representative of the court. As such, the receiver is subject to the court’s directions and orders and in the discharge of his official duties is entitled to apply to the court for instructions. Id.

It is clear that the duties and powers of a receiver are vast and must be executed judiciously. The appointment of the “right” receiver is critical to the success of the receivership estate. Here are five criteria that should be evaluated when selecting a receiver:

1.      Does your receiver have the appropriate experience and professional credentials? Is your receiver knowledgeable about the duties and powers that are available to receivers under the law and which may be appropriate for your case?

2.      Does your receiver have the necessary technical competence and training? Does your receiver have sufficient knowledge of federal and district court rules regarding reporting requirements and other requisites of the position?

3.      Is your receiver qualified with respect to financial responsibility, integrity, and objectivity?

4.      How well can your receiver communicate with the parties as well as the court? Is your receiver experienced in managing and negotiating emotionally charged situations that occur frequently during the course of receiverships?

5.      Does your receiver have sufficient staff and resources at their disposal to fulfill their duties and manage the needs of the receivership estate in a timely and efficient manner?

The answers to these questions can be ascertained by gathering information about your potential receiver. Upon request, a potential receiver should provide his/her resume along with an up to date list of cases worked. Additional information can be gathered by talking with attorneys that have worked with the receiver.

In answering the first questions the parties should seek individuals who have sufficient expertise and experience in handling such matters. It is imperative that the receiver be well equipped to satisfy all of the obligations necessary in discharging his or her duties. In addition, the receiver must have actual knowledge and experience in the operations of a business.

The only language used by our Supreme Court in affirming the appointment of a receiver was the acknowledgement that the receiver was qualified both in respect to financial responsibility as well as integrity. Bowler v. Leonard, 70 Nev. 370, 269 P. 2d833.

The next question relates to the receivers technical competence and training. The receiver must have the knowledge and familiarity with the statutes and rules that govern his or her actions. Also, the receiver must be educated and competent in many business concepts including accounting, finance, and business operations.

The third criteria relates to the receiver’s financial responsibility, integrity, and objectivity. The receiver is considered to be an arm of the court, therefore the activities of the receiver are generally considered to be under the courts exclusive jurisdiction. Due to the receiver’s unique position, he or she essentially has fiduciary duties which run to the court, the owners/shareholders of the receivership estate, and its creditors. These duties must be discharged responsibly and with integrity. The receiver must act in an unbiased and impartial manner.

Next, the ability of the receiver to communicate with the parties as well as the court is vital to the success of the estate. The interaction a receiver has with litigants and counsel cannot be compared with any other area of the law. Generally in a receivership the receiver is not constrained by the prohibition of ex parte communication and has a good deal of open communication with the parties. Additionally, communication with the court is essential and required under statute. The court must be kept informed of the activities of the receivership. The receiver must know how and when to report to the court as well as recognize when to petition the court for direction. Without these essential communication skills, the effectiveness of the receiver is substantially diminished.

Finally, your receiver must have the necessary staff and resources to effectively manage the receivership estate. Each situation is different and requires careful consideration of all these factors. Time spent evaluating and identifying a receiver who meets each of these requirements will set your case on course for successful management and conservation of the estate. This practice area is complex and requires careful consideration as you identify your qualified receiver.

5 Things You Need To Know About Your Financial Expert

George C. Swarts, CPA
Kimberly McCall, CPA

Once an attorney and his/her client decide they need to retain a financial expert, the selection process begins by determining criteria to choose the professional that will ultimately be engaged.  Here are five questions that should be asked when evaluating a financial expert:

1.       Is your expert in fact a financial expert?

2.       Does your expert have sufficient experience and does he/she understand how to comply with the requirements for admissible testimony?

3.       Does your expert understand the assignment and the measure of damages that relates to your case?

4.       How well does your expert communicate?

5.       Does your expert have objectivity and integrity?

To answer the first question, you will need to gather some initial information regarding your potential financial expert.  Upon request, each expert should be able to provide you with a resume including a list of cases.  The standard hourly fees charged by the expert may be obtained at this time also.  The resumes you have collected should enable you to determine if the candidates for your financial expert meet with the Federal and state rules for testifying experts and if the expert has the type of experience your particular situation requires.  For instance, an economist may be a financial expert, but if your case requires analysis of tax issues or forensic accounting, a Certified Public Accountant would be a better choice to address and opine on those matters.  Your expert’s qualifications should demonstrate to the trier of fact that he/she has the knowledge, skill, experience, training or education to testify in compliance with the requirements of the Court.

The next question addresses the financial expert’s ability: to base their opinions and testimony on sufficient facts and data; to provide testimony that is the product of reliable principles and methods; and to apply the principles and methods reliably to the facts of the case.  These requirements were specifically cited and set forth in the Daubert Case (William Daubert, et ux., etc., et.al., v. Merrell Dow Pharmaceuticals, Inc., No. 92-102) to determine if an expert’s testimony is admissible; and, The Federal Rules of Evidence were amended based upon this Case.  A financial expert should have an understanding of the criteria for admissible testimony in order to formulate the opinions used as a basis for his/her testimony.

Once you have established your financial expert’s credentials and knowledge, it is time to consider if your financial expert is qualified to complete your specific assignment and address any damage calculations or rebuttal, if necessary.  For instance, does your expert know the difference between amounts due under contractual terms, and damages due from breach of the contract?  If the facts indicate an alternative calculation of damages is appropriate, does your expert know the alternative methods accepted by the Court that should be used in the calculation?  Your expert should also be able to assist you in requesting the necessary financial documents that will support your client’s claims for damages.  Insufficient supporting documentation combined with an inappropriate method used to measure damages can be a recipe for disaster in the courtroom.  Your client could end up with a disqualified expert and no damages calculation or understated damages and a lower recovery amount.

If you needed to defense another expert’s report of damages, is your expert sufficiently experienced to issue an effective rebuttal report and explain his/her position to the court?

Your financial expert may have experience and be technically competent, but does the expert have good communication skills.  An expert must be able to communicate through clear and concise written reports and verbally.  Even though your financial expert may produce an excellent written report, the expert should also be able to explain the results and opinion so the trier of fact and/or jury can easily understand the facts and methods used that support the conclusions.  Also, it is important your expert has the necessary communication skills to interact with your client since, in most cases, confidential and sometimes personal information must be exchanged when the financial expert is gathering the information need for the expert report. 

And, finally, an expert that just re-states your client’s position and prepares a report quickly without performing procedures may seem like a good low cost alternative.  However, a cross-examination by a skilled opposing attorney or a rebuttal report thoroughly prepared by their expert may kill any benefits derived from the cost savings initially experienced.  An expert who does not challenge the financial data and other information in evidence deprives counsel of opportunities to be informed of both the strengths and weaknesses of their client’s case.  The perspective of an ethical, objective expert can be invaluable in assisting counsel in addressing issues, so they are well-prepared when taking testimony or negotiating in settlement conferences.

5 Tax Planning Tips for Small Businesses

Curtis G. Swarts, CPA
Ty Anderson

Small business owners are faced with a multitude of challenges in these tough economic times.  Now, more than ever, owners must pay special attention to their accounting records to ensure they take advantage of every available deduction.  The following is a list of five basic tax planning tips for small businesses:

Tip 1 – Business Structure

Choosing the correct business structure is critical for operations, liability protection, and tax efficiency.  Special consideration must be given to the type of entity created under state law and then determining the entity classification for federal and state tax purposes. 

Tip 2 – Defer Income and Accelerate Expenses

Typically, a cash basis taxpayer will benefit from deferring income into the following year and accelerating expenses in the current year.  Taxpayers can delay year-end billings where cash flow permits and prepay certain expenses to minimize their taxable income in the current year. 

Tip 3 –Retirement Plan

Retirement plans are an excellent tax planning opportunity for the company while providing a great benefit for you and your employees.  There are a variety of allowable retirement plans to fit your specific needs.  Most plans provide a tax deduction in the current year while deferring the actual contribution into the latter part of the subsequent year.

Tip 4 –Purchase Equipment

Many taxpayers are eligible to take advantage of special bonus depreciation and expensing of capital expenditures.  Businesses that anticipate purchasing equipment in the near term should consider making those purchases in the current year to minimize taxable income.

Tip 5 –Tax Credits

Taxpayers should be aware of the various tax credits available to small businesses.  Tax credits are generally much more advantageous than a deduction in many cases because they provide a dollar for dollar offset against your tax liability.