The two roles

A consulting expert, sometimes called a non-testifying expert, is retained to assist counsel in evaluating the case, analyzing evidence, developing strategy, and preparing for the examination of opposing witnesses. A testifying expert is retained to provide opinions that will be disclosed to the opposing party and offered at trial. The same professional may serve in either capacity, but not without consequence: the role determines the scope of discovery to which the expert's work is exposed.

The federal framework

Federal Rule of Civil Procedure 26 draws the line. Under Rule 26(a)(2)(B), a witness retained to provide expert testimony must furnish a written report containing a complete statement of all opinions, the basis and reasons for them, the facts or data considered, exhibits, qualifications, a list of prior testimony, and a statement of compensation. The report and the expert's deposition are the primary vehicles through which the opposing party tests the opinions.

The 2010 amendments to Rule 26 narrowed the exposure of testifying experts in two respects. Rule 26(b)(4)(B) extends work-product protection to drafts of the expert's report, regardless of form. Rule 26(b)(4)(C) protects communications between the party's attorney and a reporting expert, except to the extent the communications relate to compensation, identify facts or data the attorney provided and the expert considered, or identify assumptions the attorney provided and the expert relied upon. Those three exceptions define what remains discoverable, and they should inform how counsel and the expert communicate from the first day of the engagement.

Consulting experts receive broader protection. Under Rule 26(b)(4)(D), a party ordinarily may not discover facts known or opinions held by an expert retained in anticipation of litigation who is not expected to testify, except upon a showing of exceptional circumstances under which it is impracticable to obtain the same facts or opinions by other means. The protection is substantial but not absolute, and it can be lost if the consulting expert's work is shared with a testifying expert who considers it in forming opinions.

Practical implications

Several consequences follow for the structure of a forensic accounting engagement.

  • Decide the role at the outset. Converting a consulting expert to a testifying expert mid-engagement exposes materials the expert considered, including analyses prepared under the assumption of confidentiality. Where testimony is a possibility, counsel should either retain the expert as a testifying expert from the start or maintain a clear separation between consulting and testifying workstreams.
  • Manage what the expert considers. Because facts, data, and assumptions provided by counsel and considered by a testifying expert are discoverable, counsel should transmit them deliberately and the expert should log them. Materials that are not intended to be considered should not be sent.
  • Segregate the workpapers. Consulting analyses, testifying analyses, and drafts should be maintained in separate files with a documented chain of custody. That discipline both preserves the applicable protections and allows the expert to answer precisely what was and was not relied upon.
  • Structure accountant engagements through counsel where privilege is a concern. Accountant-client communications are not privileged under federal law, but under the doctrine associated with United States v. Kovel, an accountant retained by counsel to assist in rendering legal advice may fall within the attorney-client privilege. The arrangement must be genuine and documented; counsel determines whether it is appropriate.

State practice and the standard for admissibility

State rules vary in their treatment of expert drafts, attorney-expert communications, and consulting experts, and some jurisdictions afford narrower protection than the federal rules. Counsel should confirm the applicable regime before the engagement is structured. Independently of discovery, the testifying expert's opinions must satisfy the admissibility standard of the forum: in federal court, Rule 702 as amended in December 2023, which requires the proponent to establish that the testimony is based on sufficient facts or data, is the product of reliable principles and methods, and reflects a reliable application of those methods to the facts of the case.

What this means for the engagement letter

The engagement letter should state the role, identify the retaining party as counsel where a Kovel-type arrangement is intended, describe how materials will be transmitted and logged, and specify the handling of drafts and workpapers. A short protocol agreed at the outset avoids disputes later about what the expert saw, when, and at whose direction. Support of counsel is the expert's function; the structure of that support is counsel's decision, and this note is not legal advice.