Subpoena Compliance is Hard: Business Valuation in Divorce

Why won’t family lawyers handling divorces issue subpoenas to businesses sooner and seek to enforce compliance well in advance of deadlines?

For CPE credit to view this presentation and others from this conference, click here: 2023 FORENSIC & VALUATION SERVICES CONFERENCE BUNDLE.

How experts can help with subpoenas

1. Drafting documents requested list, aka “the exhibit”
   1. Explain to lawyers power of the general ledger
   2. Explain to lawyers power of the personal financial statement given to credit facilities
2. Tailoring list of documents to particular matter/client needs
   1. Don’t just send general list, unless you need to
   2. Your guess is better than the attorney’s guess
3. Search secretary of state and online research for background information about the business (may already be part of the engagement). Who is the registered agent for service of process.  GET EXAMPLE
4. Remind attorney about document deadline and passing
   1. Really?
5. Assist with answering questions about recipient and legal entity
6. Offer to confer with recipient to narrow focus of requested documents
   1. Different terms mean the same things
   2. Same terms mean different things
      1. Like “order of protection”
   3. Offer to help with subpoena enforcement
      1. Affidavit of needed documents explaining SOP
      2. Assist with responding to motion to quash
      3. Appear live in court to explain to judge
      4. Remind attorney to ask for fees as a sanction
   4. Always recommend a subpoena to the business owner’s credit facility looking for the “holy grail” of divorce documents, the personal financial statement submitted as part of a loan application. Powell v. Powell – https://caselaw.findlaw.com/court/tn-court-of-appeals/1353118.html

Why the subpoena process is not more frequently used and quick enough.

1. Rules can be tricky. Lots of exceptions and pitfalls many attorneys and judges don’t have to deal with regularly.
2. Only confident lawyers regularly issue subpoenas because if there is a lack of enforcement by the Court, attorneys are afraid clients will lose confidence. Truth is, the value of the subpoena production often justifies the risk of non-production.  Always tough to explain to a client.  On top of that, sometimes judges get it wrong.
3. Truth is also, there are times getting the documents don’t require a subpoena, like requests for production of documents from a party. PRO TIP: Mason always recommends taking both routes.  Belt and suspenders. Travel both routes!

What has to happen on attorney’s end to get subpoenas in motion or justify it in the first place?

1. Is the business a third party defendant?
   1. If yes, the business may have separate counsel. Nail down opposing counsel who represents the business and serve him or her.
   2. If no, you must serve the registered agent or personal service of a member of management.
2. If there is a scheduling order with discovery deadlines, subpoenas are part of discovery.
3. If the attorney seeks informal discovery, then be damn sure the documents are flowing. If they are not, the informal production must be scrapped as soon as possible.  Subpoenas need to be considered, motions to compel discovery should be filed, and consider making the business entity a third-party defendant.  Don’t wait.
4. If the attorney chooses formal discovery, then usually the attorney will wait for non-production and seek to compel discovery through a motion.

Hidden Assets & Enhanced Financial Investigation: What “A List” Attorneys Know about Discovery Others Don’t. This presentation is for business valuation and forensic accounting expert witnesses.

Mason’s “Hidden Assets” presentation discusses: Experts must learn the legal process. When should experts stick their nose in? Why there is no line to worry about crossing. How subpoenas actually work. How experts can help with subpoenas. Why the subpoena process is not more frequently used and quick enough. Experiences that can expedite and move financial discovery forward. Why attorneys do things at the last minute. Why attorneys wait too late to hire the financial expert.

This video is an excerpt from Miles Mason, Sr., JD, CPA’s presentation at the 2023 Tennessee Society of CPA’s Forensic and Valuation Services Conference, Oct. 24, 2023, in Brentwood, Tennessee.

To learn more about divorce and forensic accounting, buy Mason’s The Forensic Accounting Deskbook published by the ABA Family Law Section. Forensic accounting can help family lawyers win cases while at the same time their clients are able to keep money which might otherwise be taken from them by the difficult and confusing divorce process. This updated edition of one the ABA’s most popular resources explains the practice of forensic accounting and business valuation and how to apply it in family law cases.