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Privilege doesn't apply to litigation support services.

A California Court of Appeals ruled a negligent accounting expert is not protected by the California Civil Code's litigation privilege.

Forge, Inc., retained Arthur Young & Company (later Ernst & Young) to perform litigation support services--acting as damage consultant and expert witness-in a breach of contract action against General Electric. To calculate Mattco's lost profits, the accounting firm requested the original GE job cost estimate sheets, not all of which could be located. Mattco re-created some of the estimate sheets and told the accounting firm they were accurate re-creations of the originals.

The trial court ruled Mattco created and produced fraudulent cost sheets in an effort to inflate its claim against GE and weaken GE's counter-claim against Mattco for procurement fraud. The court ordered Mattco to pay GE $1.4 million in sanctions or face dismissal of its case. Mattco filed an action in state court against Ernst, alleging various negligent acts.

The accounting firm moved for summary judgment, citing section 47(b) of the California Civil Code, which says, "A privileged publication or broadcast is one made [in any] judicial proceeding." The trial court, noting the privilege applies to any publication required or permitted by law in the course of a judicial proceeding, granted Ernst's motion.

On appeal, the court reversed the trial court's summary judgment ruling. The appellate court found "the litigation privilege does not exist to protect one's own expert witness, but to protect adverse witnesses from suit by opposing parties after the lawsuit ends."

Since Mattco was bringing a malpractice action against its own expert, Ernst was not entitled to claim the privilege granted by section 47(b). (Mattco Forge, Inc. v. Arthur Young & Company, 92 Daily Journal D.A.R. 4874)
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Article Details
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Title Annotation:California
Publication:Journal of Accountancy
Article Type:Brief Article
Date:Jul 1, 1992
Words:284
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