Anatomy of a Malpractice Lawsuit
Presented by: Gary H. Barnes, Esq.
Gary H. Barnes, Professional Association
Burlington, VT
N. Venice, FL
Insurance Coverage Counsel ● Accounting Firm Counsel
Neutral Arbitration and Mediation Services
Copyright 2011, Gary H. Barnes, P.A. All Rights Reserved.
Introduction
 What does a lawsuit mean?
– Time
– Money
– Lost Opportunity
– Publicity
– Reputation
– Morale
Introduction (cont.’d)
 Most Important, a lawsuit is a process
that determines whether the
government will require wealth-shifting
from the Defendants to the Plaintiff
Introduction: Litigation Outcomes
 Worst Outcome
 Better Outcome
 Best Outcome
Introduction
 Who can sue?
Introduction
Who Gets Sued?
The Conventional View vs. Reality
(good accountants and bad
accountants)
Where it all begins
 Client Acceptance
 Documentation of Expectations
 Self-Preservation 101: Put Your Job In
Writing
 Self-Preservation 102: Put Your
Clients’ Job In Writing
What To Do When You Discover Your
Own Mistake
 The dangers of informing the client
 The dangers of investigating – the “self-
evaluative privilege” vs. creating
evidence to be used against you.
 Attorney-client privilege
 Attorney work product privilege
POLLING QUESTION 1
 If you are threatened with a lawsuit you
should investigate the complaint and get
a written assessment of the claim's
validity, true or false?
The Demand Letter: What To Do
 When to Contact Your Insurer
 Who should reply?
 Retention of defense counsel
 Retention of insurance coverage
counsel
The Complaint and Service of
Process
 What the complaint means
 Publicity / Public Record
 Contrast with Arbitration
Selection of Defense Counsel
 Policyholder input on selection of
defense counsel
 Who is on your insurers “panel” of
defense counsel
 Your right to retain separate and
independent defense counsel, at your
expense
Experience Matters
 What is your [insurer-provided] defense
counsel’s experience with AICPA
Professional Standards?
 What is your defense counsel’s actual
trial experience?
Selection of Consulting Expert
 “consulting expert” vs. “testifying
expert”
 The role of the consulting expert
(Cheerleaders need not apply)
 Written vs. oral reports
Defense Counsel’s Initial Report
 Statement of facts: how accurate and
thorough?
 How clearly written?
 Settlement position?
 Risks of going forward with trial
 How the insurer uses defense
counsel’s initial report [reserves].
 Is Defense Counsel trying to obfuscate?
The Potential for Disputes With Your
Insurance Company
 Duty To Defend and Reservations of Rights
Jurisdiction: Why Am I Being Sued in
Oshkosh?
 In Personam Jurisdiction: sufficient
minimum contacts or personal
jurisdiction
 Examples: client in foreign state, web
pages, preparation of tax returns (state),
preparation of K-1
 Impact of a forum selection clause in
the engagement letter
Removal To Federal Court
 Advantages of removal to federal court
– Jury pool
– Caliber of judges and law clerks
– Caliber of appellate courts
– Different rules of evidence
– Different Rules of Civil Procedure
– Drawbacks of removal
But the Plaintiff Was Never my Client!
 Liability to non-client third parties
 Minimizing Exposure to Non-Clients
 Adopting and enforcing rules concerning staff
contact with third parties, even if client
consents
 Importance of engagement letter with known
third-party user of accountant work product –
define User’s responsibilities
POLLING QUESTION 2
 You can be sued in a state where you do not
maintain an office, if you regularly contact
clients in that state using the telephone, email, and overnight courier services, true or
false?
Preparing the Answer / Motion to
Dismiss
 Role of the Defendant; gathering
documents and identifying
witnesses
 Role of the Defense Counsel,
develop a strategy, develop a
theme, execute the plan.
Case Management By The Court
 Deadlines and ready for trial date
 Deadlines for motions to dismiss,
changes in pleadings, completion of
discovery, motions for summary
judgment, submission of pre-trial
paperwork, calendaring of trial dates,
mandatory dispute settlement talks.
Discovery: the Agony and The
Ecstasy
 Disclosures
 Interrogatories
 Requests To Produce
 Requests To Admit
 Depositions
Dispositive Motions
 How Cases Get Thrown Out of Court
 Why Cases Don’t Get Thrown Out of
Court
Gut Check: How and Why Attorney
Fees Climb
 Expenses to this point
 Who pays? Recovery of Attorney Fees
 The Effect of Self- Liquidating Policy
POLLING QUESTION 3
 True or false, your insurance policy may
reduce the amount of your coverage by the
amount of defense expenses, including
attorney and expert fees?
Mediation: What It’s All About
 Why Mediation?
 Setting Goals For Mediation
 Who Is the Mediator?
 Can you “win” in Mediation?
 Is the Mediator Your Friend?
 Who decides whether to settle?
Trial
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Jury Selection/ General Instructions
Opening Statements
Examination of Witnesses
Presentation of Documents/ Use of
Courtroom Technology
 The Importance of Theme
Trial (continued)
 What Life Is Like During Trial
 Trial to the Bench
 Jury Instructions
 The Verdict
 Post Trial Motions
Appeal
 How The Appeals Process Differs
 Post Trial Mediation
 The Record on Appeal
 Briefs
 Oral Argument
 The Decision: Permanent Publicity
Coverage Disputes
 When coverage disputes may become litigation
 Insurer’s right to seek reimbursement for excess
coverage provided.
 Against whom may the insurer seek to recoup its
losses?
 May subrogation be sought by the insurer against an
insured under any circumstances (example, if a
partner engages in fraudulent activity)
 What are the Policyholder’s duties in the event of
subrogation?
Recap: To Achieve Goals
 Present a Narrow Profile
– Selectivity in clients, engagements,
asset protection
 Document Creation and Destruction
Policies
 Maintain Your Insurance
– Know your duties, your right to
competent counsel
Recap
 Plan how and where
– Venue clause, arbitration clause
 Use Mediation Wisely
 Understand your exposure and take an
appropriate role in settlement
negotiations.
 Keep your eye on morale, reputation
issues
Questions?
 Key features of arbitration
 Consider retaining public relations
experts
 Remember impact on staff morale
 Have everyone prepared with “elevator
line”
 Prune your client list annually
Extra Credit Areas
Bankruptcy Basics
 How adversary proceedings in
bankruptcy compare/contrast with civil
litigation
 The dual roles of a bankruptcy judge
 Jury trial?
Asset Protection Basics
 Adequate insurance
 Current estate planning
 Minimal assets in the name of the
accounting professional
 Practice organized as a professional
Corporation (in good standing)
 All retirement funds in “qualified”
retirement plans