Spring v. Bradford (CA1 1/12/17)

On how to apply the rule of exclusion of witnesses

At trial of this medical malpractice case the parties invoked the rule but the defense prepared its experts (one standard-of-care, the other causation) by showing them transcripts of the plaintiff’s experts’ testimony. Plaintiff found out about this on cross and moved to exclude the defense experts. The trial court concluded that Defendant had violated the rule but found no prejudice because the defense experts hadn’t changed their pre-trial opinions. It refused to exclude the experts but did instruct the jury about what had happened. The jury gave a defense verdict; Plaintiff’s motion for new trial was denied; Plaintiff appealed.

“[W]e hold that, by its terms, Rule 615 does not automatically exempt expert witnesses from exclusion [but] the superior court may nevertheless exercise its discretion under the “essential” witness exemption of Rule 615(c) to allow an expert to listen to other testimony (or to review transcribed testimony).” An expert isn’t automatically “essential” but the trial court “may properly consider that the anti-fabrication purpose of Rule 615 applies principally to fact witnesses, that an expert may review other experts’ opinion reports and pretrial depositions, and that an expert’s opinion may properly be based on other witnesses’ trial testimony.” But Defendant hadn’t asked permission so he violated the rule.

Plaintiff argued that prejudice must be presumed from this, citing a Supreme Court criminal case dealing with fact witnesses. But the court feels that “[n]o presumption of prejudice is generally necessary in the context of purely expert witnesses because disclosure of their expert reports and pretrial depositions establish a basis for assessing actual prejudice in the form of altered opinions.” Plaintiff could show no such alteration.

The trial court’s remedy – an instruction rather than striking or excluding testimony — was within its discretion. The opinion mentions that the trial court found Defendant’s violation a mistake about the rule’s application, not an act of bad faith, but does not clarify what a lawyer’s motivation has to do with the question of whether experts changed their opinions.

For similar reasons the opinion affirms the new-trial ruling.

(Opinion: Spring v. Bradford)

Coulter v. Grant Thornton (CA1 1/3/17)

Concerning when accounting malpractice claims accrue.

Defendant set up various tax-avoidance mechanisms for Plaintiffs. The IRS eventually disapproved of them. Defendant assured Plaintiffs that they could beat the IRS in the Tax Court but, after lengthy litigation there, Plaintiffs ended up having to settle. They then sued Defendant for various torts but by that time more than three years had elapsed. The trial court granted Defendant’s motion to dismiss on the statutes of limitations. Plaintiffs appealed.

The Court of Appeals reverses. The trial court relied on precedent (CDT 2000) that the cause of action accrues from the time the taxing authority issues its final determination of a deficiency. This opinion distinguishes CDT because “it did not address the scenario in which, as here, the taxpayer continues to consult with the accountant . . . and . . . to rely on the accountant’s advice” even after the IRS determination. Some courts have ruled that this doesn’t change the accrual date, others that the accrual date becomes when the tax litigation is final. “We are persuaded,” the court says, “that neither bright-line rule adequately addresses discovery of a cause of action for accounting malpractice.” 

Having rejected both “bright-line” rules (“bright-line” in a discovery context being a bit of a contradiction) the court does not discuss the first one but, instead, two versions of the second. Accrual shouldn’t happen after the tax-court judgment but before appeal because that could force a taxpayer to decide whether to sue the accountants or accept their advice to appeal. Why that is an unreasonable or impermissible choice isn’t made clear except that a taxpayer and accountant can “reasonably continue to believe” that they are right even after a trial court tells them they’re wrong. (If the only argument against pre-appeal accrual is to deprecate the effect of a judgment then it can’t be as bad as it sounds.) The court says that accrual after appeal can’t be the rule either because by that time “a fact-finder could conclude” that the taxpayer already had knowledge of the accountants’ error. We’re not sure what that means; if it’s a bright-line rule then it’s a bright-line rule – the fact-finder is instructed that way (assuming the issue has become one of fact) and can’t “conclude” otherwise. (And so we won’t bother to point out that the court’s two hypothesized examples of post-appeal knowledge of error do nothing to distinguish that situation since both could occur pre-appeal as well.)

The court adopts a “fact-based approach” that it never really explains. What it appears to mean, though, is that judgments and appeals are simply facts to be considered, among all others in the case, to determine when the taxpayer should reasonably have known that the accountants’ advice was improper. The court relies on a bad-faith case in which the insurer didn’t know that its lawyers’ advice to deny coverage was wrong (the lawyers having overlooked the case on point) until it lost on summary judgment. But the court refers to it not as a summary judgment but simply as “a court ruling.” That means that knowledge of error can creep in anywhere along the way from any source including but not limited to appeal, judgment, or prior ruling. (Or maybe not even a ruling. If the insurer had seen a copy of the policyholders’ summary judgment opposition revealing the case on point, could that have been enough to trigger accrual? On the other hand, how can a ruling trigger anything since this court just told us that a litigant is entitled to keep an open mind even about a final judgment?)

This is what can happen in the lower fever-swamps of the discovery rule – the judgments of courts of law become no more important than miscellaneous happenstance and the “discovery” of facts becomes instead the development of attitudes and opinions.

The trial court also granted summary judgment on a couple of subsidiary points; the Court of Appeals reverses one, affirms another.

(Opinion: Coulter v. Grant Thornton L.L.P.)

Double AA Builders v. Preferred (CA1 12/30/16)

This concerns a narrow issue of contractors’ insurance coverage. For those interested in such things, though, it makes a couple of useful points so we will cover those briefly.

Contractor had to replace a roof that one of its subs had built badly. It then made a claim, as an Additional Insured on the sub’s policy, for the cost of the replacement. Insurer denied the claim; Contractor sued; the trial court granted it summary judgment; Insurer appealed.

The Court of Appeals reverses and remands with instructions to enter judgment for Insurer. The useful points are: (1) an Additional Insured is essentially in the position of the Named Insured, and (2) a contractor isn’t covered for the cost of its mistakes. Put that way the result makes sense but you can’t get there without weaving through several policy definitions. The court does so rather briskly and and then summarizes them a couple times for clarity.

(Opinion: Double AA Builders v.  Preferred Contractors’ Insurance)