Part 3: The Difference Between a Good Discovery Request and a Great One
If there is one area where early expert involvement pays off most visibly, it is discovery.
Getting the right financial documents into the record is not as straightforward as it sounds. A vague or poorly worded document request often comes back with mountains of paper that do not contain what the expert actually needs, or worse, nothing useful at all. By the time that becomes clear, the window to fix things may have already closed, and you may have spent a lot of wasted money to have the expert dig through discovery that’s not helpful.
A damages expert can help make sure that does not happen.
Too Much of the Wrong Thing
There is a side to the discovery problem that does not get talked about enough. When it is decided not to involve a damages expert in crafting requests, we sometimes end up on the receiving end of productions that are enormous, disorganized, indecipherable, and largely irrelevant to the actual analysis.
Seven years of unnecessary bank statements. Thousands of pages of general ledger entries, sales invoices, or vendor statements with no context. Email threads that have nothing to do with the financial issues in the case. In essence, every document the producing party decided to include, rather than what the analysis actually requires.
Sorting through that kind of production takes time, and time costs money. More importantly, volume does not equal substance. Clients who skip expert involvement in crafting discovery requests often do so to save time and money on the front end, but the result is frequently the opposite: a massive dump of records that buries the relevant information under layers of noise, creating more work and more cost on the back end. Or sometimes even worse. The ask from counsel without expert assistance is so far out of bounds, vague or irrelevant that the other side just refuses to cooperate. A targeted, well-crafted production of the right documents is far more valuable to a damages expert than sheer volume. When we are involved in shaping the requests from the start, we can help ensure the production is focused enough to be useful without being so narrow that critical information gets left out.
The Problem with Vague Requests
Attorneys are skilled at crafting most discovery requests, but financial document requests require a level of specificity that goes beyond standard legal drafting. The difference between a request that gets us what we need and one that does not often comes down to the language.
Consider the difference between these two requests:
"Provide copies of the company's books and records."
versus
"Provide a backup copy of the company's QuickBooks as of January 1, 2024, along with the applicable username and password to access the backup file. If an online version of QuickBooks is used, provide accountant-level access to the online account."
The first request is easy to comply with in a way that produces almost nothing useful. The second is specific enough that there is no excuse for the responding party to hand over a few printed spreadsheets and call it done. That kind of precision comes from knowing what the financial records actually look like in practice and what form they need to be in to be useful to the analysis, which is where our expertise comes in.
Casting the Right Net
Our experts at Cogence Group bring an understanding of what financial records typically exist in a given type of business and what is actually needed to build a credible damages analysis.
We think through the full picture before requests go out: not just tax returns and profit and loss statements, but general ledgers, bank statements, payroll records, accounts receivable aging reports, sales data by customer or product line, budgets and forecasts, and any accounting software data that underlies the financial statements. Depending on the case, it might also mean requesting communications between management and their accountants, board materials, or loan documents that shed light on the financial condition of the business.
At Cogence Group, we are all CPAs with prior audit experience, and combined with our experience performing business valuations across a wide range of industries, this gives us additional advantages here. We have seen how businesses in very different industries keep their books, what records they typically maintain, and where the financial story is most likely to be found. That familiarity means we are not guessing at what exists. We have a pretty good idea before we ever ask.
Our goal is to cast a net that is wide enough to capture everything relevant to our analysis without being so broad that it creates unnecessary burden or invites objection. How targeted these requests need to be also depends on which party the expert is hired by, a dynamic we covered in Part 2.
What Happens When the Wrong Things Get Requested
When discovery requests miss the mark, the consequences ripple through the entire engagement. The expert may not have the data needed to build a complete analysis. Assumptions that could have been grounded in hard numbers have to be based on estimates instead. And gaps in the financial record become vulnerabilities that opposing counsel will use to challenge the reliability of the analysis.
In some cases, those gaps can be addressed through supplemental requests or depositions. This is the nature of requesting information and not knowing exactly what will be produced. But follow-up requests take time and money and are not always possible depending on where the case is in the litigation timeline. The cleaner approach is to get the discovery right (or closer to right) the first time by engaging us early.
Up next: Documents are only part of the picture. In Part 4, we will cover how depositions and interrogatories give a damages expert another critical tool for gathering the financial information that does not always show up in the accounting records.