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Hiring a Business Valuation Expert in Potential Shareholder Dispute Litigation is Not a Do-It-Yourself Proposition

In my last post, I discussed several ways an experienced shareholder dispute attorney can help assess a pre-litigation offer for your shares, including helping you retain a business valuation expert. One critical reason never to retain such an expert on your own is to maintain communications with such an expert as privileged and non-discoverable.

In New Jersey, if an attorney hires the business valuation expert, communications with the expert usually become privileged and non-discoverable. However, if a litigant hires the expert directly, the same privilege may not apply. The privilege also extends to draft reports, which are not discoverable if provided to an attorney first.

The quest to maintain such communications as privileged should not be misinterpreted as in any way improper. There is simply no reason to make communications with one’s expert discoverable. And draft reports are critical to ensure that the expert properly understood the scope of the assignment, not to make changes that an attorney does not like.

In addition, the valuation date is often critical, and often not the date you may presume it to be. It would certainly be disheartening to come to an attorney’s office, proud you have already learned from an “expert” how much your shares are worth, only to discover that 1) your emails with that expert are discoverable by your co-shareholder, 2) the expert has no experience testifying in a courtroom setting, making you the “guinea pig” for testing his abilities, and 3) the expert used the wrong valuation date, meaning that a substantial part of the report must be redone.

If you can see the handwriting on the wall and know that a lawsuit with your business partner is looking more and more inevitable, consult a shareholder dispute attorney earlier in the process, rather than later. At the very least, you should ensure that the path you are headed down is the right one.