Is a court-appointed, neutral expert immune from malpractice?

BVWireIssue #81-4
June 24, 2009

When a Minnesota couple filed for divorce back in 1996, they and their respective counsel agreed to have a neutral expert evaluate their interests in two home-building companies. The trial court provided a “list of neutrals,” but the parties’ first selection withdrew—due specifically to concerns about their lack of cooperation. A second neutral expert agreed to serve only if the court appointed him per Rule 706 of the local rules of evidence (which like many state versions, reads analogous to Rule 706 of the Federal Rules).

The parties agreed and their attorneys drafted a stipulation for his retention, which the court entered as an order. The wife retained a consulting CPA to review the neutral expert’s report, who pronounced his methodology “proper.” At no time did she object to the neutral’s appointment, and her attorney cross-examined him at trial. The trial court ultimately based its 50/50 allocation of the businesses on the expert’s valuation. 

Nearly 10 years later, the wife sued, alleging the appraiser (and his firm) breached their contract and committed malpractice. The trial court dismissed the claims on summary judgment, finding that the court-appointment gave the appraiser quasi-judicial immunity. The Minnesota Court of Appeals reversed, essentially concluding that the valuation expert served the clients, not the court. The appraiser took his claims to the State Supreme Court, which reversed again. Even though neither the parties’ stipulation nor the court order specifically cited Rule 706 or used the word “appointment,” the conduct of the neutral evaluator and the parties—plus public policy considerations—supported extending immunity to all experts appointed under local Rule 706.

The case is not binding authority on other jurisdictions, of course, but it does contain a nice “laundry list” of requirements that all 706 appointments should meet to comply with the rule, which might then support a granting of immunity in cases outside of Minnesota. Look for a full abstract of Peterka v. Dennis, 2009 WL 1228506 (Minn.)(May 7, 2009), in the August 2009 Business Valuation Update. In addition, the full text of both the Minn. Court of Appeals’ and Supreme Court’s decisions will be available to subscribers of BVLaw™.

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