By John M. Naylor, Esq.
Introduction
For a variety of reasons, it is not unusual for an attorney to consider designating a client, whether an individual or an employee of a corporate client, as a non-retained, testifying expert. Doing so in state court litigation, however, poses the risk of having to disclose information that is otherwise protected by the attorney-client privilege, where the litigation is in the state court. Typically, under the Nevada discovery rules, all communications between a retained expert and the attorneys are discoverable. To what extent, if any, does that apply to non-retained experts? The issue is unresolved under Nevada law, but a recent Supreme Court of Nevada decision may offer some clues. Additionally, the proposed changes to the Nevada Rules of Civil Procedure will, if adopted, most likely make the analytical framework used by the federal courts to decide this issue far more relevant and applicable to state court cases.
Types of experts
Expert witnesses fall into one of two categories: retained experts and non-retained experts. NRCP 16.1 does not use those terms, but rather classifies those who are offering expert testimony into two groups, those that mu
st prepare comprehensive written reports (sometimes referred to in the caselaw as “reporting experts”) and those who do not (sometimes referred to as “non-reporting experts”).
Experts who must prepare reports are those who are “retained or specially employed to provide expert testimony in the case or whose duties as an employee of the party regularly involve giving expert testimony.” NRCP 16.1(a)(2)(B) (first paragraph). These types of experts are required to prepare a written report that contains (i) a complete statement of all opinions to be expressed and the basis and reasons for the opinion; (ii) the data or other information considered by the witness in forming the opinions; (iii) any exhibits to be used as a summary of or support for the opinions; (iv) the qualifications of the witness, including a list of all publications authored by the witness within the preceding 10 years; (v) the compensation to be paid for the study and testimony; (vi) and a listing of any other cases in which the witness has testified as an expert at trial or by deposition within the preceding four years. Id. While the federal rules have protected some communications between counsel and experts since 2010 (see FRCP 26(b)(4)), in state court, there is generally no dispute that communications between a testifying, retained expert and counsel must be produced and are not shielded by either the work product doctrine or the attorney-client privilege. Aaron Gruber and David Bones, Nevada Civil Practice Manual § 16.06[2] (2016); In re Christus Spohn Hosp. v. Kleberg, 22 S.W.3d 434, 441-44 (Tex. 2007) (reviewing cases and concluding that the general rule is that everything considered by an expert, including attorney-client privileged material, is subject to discovery).
Experts who do not have to produce reports include any witness providing expert testimony who does not meet the definition in the first paragraph of the rule. NRCP 16.1(a)(2)(B) (second paragraph). While these expert witnesses, traditionally called non-retained experts or non-reporting experts, do not have to produce a written report, there are still some disclosure requirements. Id.
Whether those disclosure requirements include materials that would normally be covered by the attorney-client privilege is an unsettled issue under Nevada law. Typically, this issue arises when a corporate entity designates one of its employees as a non-retained, expert witness. This can arise for various reasons, e.g., the client wants to save money or the witness is well suited to provide expert testimony due to his knowledge of the industry or facts.
The problem is particularly acute when the witness has participated in conversations or meetings with the attorneys to discuss the merits of claims or defenses, and discuss overall legal strategy. For example, what happens when the president of the company is offering expert testimony? Does that open the door to disclosure of all discussions that the president has had with attorneys regarding the lawsuit?
The case for disclosure
The case for disclosure centers on the NRCP 16.1(a)(2)(B)’s requirement that a retained expert witness must produce a report disclosing “the data or other information considered by the witness in forming the opinions.” Courts take a broad view of “considered,” generally holding that it is everything that the expert saw or talked to anyone about, regardless of whether it ultimately impacted the opinion that they rendered. Wright, Miller & Cane, 8 Fed. Prac. & Proc. Civ. § 2016.5 (3d ed. 2014) (citing Elm Grove Coal Co. v. Director, O.W.C.P., 480 F.3d 278 (4th Cir. 2007) and numerous other authorities). The source of this rule is that courts generally consider it important for a party to find out how an expert arrived at their opinion. Residential Constructors, LLC v. Ace Prop. & Cas. Ins. Co., Case No. 2:05-cv-01318-BES-GWF, 2006 WL 3149362, at *15 (D. Nev. Nov. 1, 2006).
Thus, the case could be made that designation of an employee waives the attorney-client privilege with respect to anything that the witness saw or heard during discussions or strategy sessions with the attorneys. Given the broad approach to what a witness may have “considered,” i.e., anything that they saw regardless of whether it impacted their opinions, it would be hard to find anything that was protected. Protecting information would require a party to prove that it was not “considered,” which would be an extremely difficult task.
The case for non-disclosure
The case for non-disclosure centers on the strict language of NRCP 16.1. The first paragraph of subsection (a)(2)(B), relating to retained experts, specifies that they must prepare a report that identifies everything that they considered. The second paragraph, which lists the required disclosures for non-retained experts, does not specifically include the language requiring the disclosure of “the data or other information considered by the witness in forming the opinions…” Thus, the intent of the drafters of the rule was to treat retained and non-retained experts differently with respect to this point. Requiring non-retained experts to make disclosures would essentially be adding the word “considered” to the rule, which a court may not do under the traditional rules of statutory construction. Berkson v. LePome, 126 Nev. 492, 502, 245 P.3d 560, 567 (2010) (courts may not read absent language into unambiguous statute).
Additionally, the plain language of NRCP 16.1 does not expressly create a waiver of the attorney-client privilege. NRS 49.385(1) states that the attorney-client privilege is waived if the holder (in this case the client) “voluntarily discloses or consents to disclosure of any significant part of the matter.” Generally, a “waiver requires the intentional relinquishment of a known right,” which essentially means that the waiver must be a voluntary and express act. Nevada Yellow Cab Corp. v. Dist. Ct., 123 Nev. 44, 49, 152 P.3d 737, 740 (2007). Thus, courts have held that the waiver of an important right such as the attorney-client privilege “must be a voluntary and knowing act done with sufficient awareness of the relevant circumstances and likely consequences.” Roberts v. Superior Court, 508 P.2d 309, 317 (Cal. 1973).
Thus, the argument is that nothing in NRCP 16.1 expressly requires the disclosure of attorney-client privileged materials with respect to non-retained experts, and a court cannot read such a requirement into the plain language of the rule. Without a specific waiver, attorney-client information remains protected even if considered by the witness.
The potential impact of Wynn Resorts
The Supreme Court’s decision in Wynn Resorts, Limited v. Eighth Judicial Dist. Ct., 133 Nev. Ad. Op. 52, 399 P.3d 334 (July 27, 2017) offers some clues as to how the issue might be resolved. In Wynn Resorts, the Supreme Court of Nevada looked at the issue of whether attorney-client privileged material must be disclosed when a party asserts the business judgment rule as a defense. The Board of Wynn Resorts had, over time, developed concerns about the suitability of one of its members, Kazuo Okada. Based on those concerns, the Board forced the redemption of Okada’s stock. Okada sued, and one of the Board’s defenses was the business judgment rule. Prior to making its decision, the Board commissioned the Freeh Group to investigate the activities of Okada and prepare a written report of its finding. Based on that report and the advice of two law firms, the Board made its decision to remove Okada.
Okada moved to compel the production of documents relating to the advice that the law firms had rendered. The district court granted the motion, and the Board filed a writ petition on the issue. The Supreme Court reversed that decision, reasoning that the business judgment rule prevented a court from looking into the substantive reasons for the decision at issue, holding that “[w]e agree that it is the existence of legal advice that is material to the question of whether the board acted with due care, not the substance of that advice.” Wynn Resorts, 133 Nev. Ad. Op. 52 at *18, 399 P.3d at 345 (citing In re Comverge, Inc., Shareholders Litig., No. 7368-VCP, 2013 WL 1455827, at *4 (Del. Ch. April 10, 2013)) (internal quotations removed).
The Supreme Court also looked at the issue of waiver and determined that nothing in the plain language of the business judgment rule, codified at NRS 78.138(2)-(3), indicated that there was a waiver of the attorney-client privilege. While the Supreme Court has previously held that the attorney-client privilege must be strictly construed, it was not willing to read a waiver into the business judgment rule. Whitehead v. Nevada Comm’n on Judicial Discipline, 110 Nev. 380, 415, 873 P.2d 946, 968 (1994). This would seem to suggest that NRCP 16.1 should be similarly construed, i.e., the rule does not contain an express waiver, and therefore, attorney-client privileged material should be protected with respect to non-testifying experts.
The Supreme Court noted, however, that the “at-issue doctrine” can result in a waiver. The at-issue doctrine holds that the attorney-client privilege is waived if a party places “at-issue the subject matter of privileged material” or “seeks an advantage in litigation by revealing part of a privileged communication.” Wardleigh v. Second Judicial Dist. Ct., 111 Nev. 345, 354, 891 P.2d 1180, 1186 (1995) (emphasis added). In other words, a party waives the attorney-client privilege by expressly or impliedly introducing his or her attorney’s advice into the case. Bertelsen v. Allstate Ins. Co., 796 N.W.2d 685, 703 (S.D. 2011). The Supreme Court recognized that the waiver was narrow and applied if the substance of one privileged document is disclosed. Wynn Resorts, 133 Nev. Ad. Op. 52 at 20, 399 P.3d at 345 (citing Texaco Puerto Rico, Inc. v. Dep’t of Consumer Affairs, 60 F.3d 867, 883-84 (1st Cir. 1995)); Wardleigh, 111 Nev. at 354-55, 891 P.2d at 1186.
Using Wynn Resorts as an analytical framework, it would seem that designating an employee as a non-testifying expert does not automatically result in a waiver of privilege. Wynn Resorts suggests that absent an express statutory or rule-based waiver, the privilege still applies in these situations. Depending on the nature of the testimony, however, the at-issue waiver may apply. It is worth noting that in Wynn Resorts, the Supreme Court held merely because a party asserts that it acted in good faith or denies acting in bad faith does not automatically implicate attorney advice and therefore does not result in the automatic waiver of the privilege. Wynn Resorts, 133 Nev. Ad. Op. 52 at *19, 399 P.3d at 345. Thus, the holding suggests that designating an employee as a non-retained expert, while not automatically resulting in a waiver, could result in one if the witness directly implicates attorney advice.
In any case, Wynn Resorts only offers clues and does not fully resolve the issue. Therefore, counsel should exercise caution when designating a client or client representative as a non-retained expert.
The potential impact of the proposed rule changes
In 2017, the Supreme Court created the Nevada Rules of Civil Procedure Committee to review possible changes to the rules. ADKT 0522. The proposed changes under consideration as of May 2018 cover certain aspects of NRCP 16.1, but do not address the issue of whether non-retained experts must disclose attorney-client privileged material.
Other proposed changes, however, bring NRCP 26 in line with FRCP 26. These proposed changes offer some clarification as to what must be disclosed when designating an expert, and they make consideration of federal case law, such as United States v. Sierra Pacific Indus., Case No. Civ. S-09-2445-KJM-EFB, 2011 WL 2119078 at *2 (E.D. Cal. May 26, 2011), more important to those practicing in state court.
Prior to the 2010 amendment of FRCP 26, federal courts generally agreed that this requirement to disclose all things considered by the witness included matters that would normally be protected by the attorney-client privilege. See, e.g., Ecuadorian Plaintiffs v. Chevron Corp., 619 F.3d 373, 378 (5th Cir. 2010), holding that designation of a witnesses as a testifying expert waives any privileges. This changed with the 2010 amendments. For example, Sierra Pacific recognized that the 2010 amendment to FRCP 26 “explicitly protects communications between a party’s attorney and reporting experts,” but did not do the same for non-retained experts. Sierra Pacific at *5. (citing 2010 Advisory Committee Note to FRCP 26).
Sierra Pacific’s focus was on a scenario that can crop up quite frequently, and that is the employee who is both a fact witness and a designated non-retained expert. While Sierra Pacific recognized that the 2010 amendment did not expressly protect non-retained experts, it also noted that the new rule did not abrogate any existing protections such as a federal common law attorney-client privilege. Id. at *7. The court went on to find that there was no blanket, bright-line rule that could be applied to all non-retained experts. Id. at *9 and *10. Instead, the court determined that each situation must be individually reviewed, looking at factors such as the extent to which the witness was a “hybrid fact and expert opinion” witness. Id. at *10.
Conclusion
If adopted as proposed, the changes to NRCP 26 will go a long way to help clarify the extent to which designating an employee as a non-reporting expert affects the attorney-client privilege. While Nevada courts regularly look to federal cases for interpreting the Nevada Rules of Civil Procedure, this has been one area where they are of little help. Adoption of the proposed rule changes will most likely change that, and therefore, counsel will need to be familiar with the analytical framework of the federal case law.
This article was originally published in the in Communiqué, the official publication of the Clark County Bar Association. (June/July 2018). Click here to view the full article.