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June 2020

Financial Services Industry Company Wins Major Appellate Victory

United States - Minnesota

A financial services industry company won a victory in the Minnesota Court of Appeals, securing a unanimous opinion in its favor holding that attorneys who serve as expert witnesses are subject to the same expert-disqualification standard as all other expert witnesses. Faegre Drinker represented the financial services industry company in the appeal.

The appeal arose out of a class action in which the plaintiffs alleged that the financial services industry company had violated various Minnesota statutes and was negligent in failing to detect a Ponzi scheme. To support their case, the plaintiffs secured an attorney as an expert witness to opine that the financial services industry company’s procedures for reviewing and monitoring independent sales and behavior were inconsistent with industry standards. The problem was, the attorney had previously served as outside counsel for the financial services industry company and had advised it on those very same procedures.

The financial services industry company moved to disqualify the attorney based on the prior representation, and because of its concern that the testimony would necessarily involve the use of attorney-client privileged information. A Minnesota state trial court denied the motion and would have allowed the attorney to testify against the company. Its reasoning was that attorneys who serve as experts are subject to a different, and lower, disqualification standard found in attorney ethics rules. It rejected the company’s argument that attorneys who serve as experts should be subject to the same disqualification standard as all other experts.

At that point, Faegre Drinker appellate attorneys sought an immediate, discretionary appeal in the interest of justice, which the Minnesota Court of Appeals granted because of the “public interest in the sanctity of the attorney-client privilege.” Faegre Drinker then argued that Minnesota should apply the same rule applied in all other jurisdictions: that an attorney who serves as an expert witness should be disqualified from offering testimony against a party with whom the attorney had a prior relationship if (1) it is objectively reasonable for the adverse party to believe that it had a confidential relationship with the attorney, and (2) the adverse party disclosed to the attorney confidential information regarding the same subject matter or directly related to the subject matter about which the attorney proposes to testify.

The Minnesota Court of Appeals issued an opinion that unanimously agreed with Faegre Drinker’s argument, ruling for the financial services industry company, and reversing the lower court.

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