1. 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.

2. Introduction What does a lawsuit mean? –Time –Money –Lost Opportunity –Publicity –Reputation –Morale

3. 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

4. Introduction: Litigation Outcomes Worst Outcome Better Outcome Best Outcome

5. Introduction Who can sue?

6. Introduction Who Gets Sued? The Conventional View vs. Reality (good accountants and bad accountants)

7. 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

8. 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

9. 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?

10. The Demand Letter: What To Do When to Contact Your Insurer Who should reply? Retention of defense counsel Retention of insurance coverage counsel

11. The Complaint and Service of Process What the complaint means Publicity / Public Record Contrast with Arbitration

12. 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

13. Experience Matters What is your [insurer-provided] defense counsel’s experience with AICPA Professional Standards? What is your defense counsel’s actual trial experience?

14. Selection of Consulting Expert “consulting expert” vs. “testifying expert” The role of the consulting expert (Cheerleaders need not apply) Written vs. oral reports

15. 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?

16. The Potential for Disputes With Your Insurance Company Duty To Defend and Reservations of Rights

17. 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

18. 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

19. 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

20. 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, e- mail, and overnight courier services, true or false?

21. 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.

22. 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.

23. Discovery: the Agony and The Ecstasy Disclosures Interrogatories Requests To Produce Requests To Admit Depositions

24. Dispositive Motions How Cases Get Thrown Out of Court Why Cases Don’t Get Thrown Out of Court

25. Gut Check: How and Why Attorney Fees Climb Expenses to this point Who pays? Recovery of Attorney Fees The Effect of Self- Liquidating Policy

26. 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?

27. 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?

28. Trial Jury Selection/ General Instructions Opening Statements Examination of Witnesses Presentation of Documents/ Use of Courtroom Technology The Importance of Theme

29. Trial (continued) What Life Is Like During Trial Trial to the Bench Jury Instructions The Verdict Post Trial Motions

30. Appeal How The Appeals Process Differs Post Trial Mediation The Record on Appeal Briefs Oral Argument The Decision: Permanent Publicity

31. 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?

32. 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

33. 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

34. 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

35. Extra Credit Areas

36. Bankruptcy Basics How adversary proceedings in bankruptcy compare/contrast with civil litigation The dual roles of a bankruptcy judge Jury trial?

37. 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