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January 29, 2021

NYS Appellate Court Orders Disclosure of Experts' Financial Compensation

In the recent decision Loiselle v. Progressive Cas. Ins. Co., the NYS Appellate Division, Third Department reversed a lower court’s order granting the defendants motion to quash a subpoena served by the plaintiff upon two expert physicians. The subpoena sought production of financial documentation evidencing the amount of compensation the physicians received for their services in the litigation. The Third Department held that documentation of the physicians’ compensation fell within the meaning of “material and necessary” matter set forth in CPLR 3101(a). The decision is significant in that it expands the scope of permissible expert discovery within the Third Department.

The court cited CPLR 3101(a)(4), which extends full disclosure of all matters material and necessary in the prosecution or defense of an action to nonparties. The court relied upon its prior opinion in Allen v. Crowell-Collier Pub, elaborating that the terms “material and necessary” are to be interpreted liberally to require disclosure, upon request, of any fact bearing on the controversy that will assist preparation for trial by sharpening the issues and reducing delay and prolixity. The test applied is one of usefulness and reason. Practically, subpoenas served upon a third-party expert may only be quashed where the futility of the process to uncover anything legitimate is inevitable or obvious.

Loiselle is significant, as it posed an issue of first impression in the Third Department at a time in which there is a split among the appellate divisions. In the First and Second Departments, courts have long held that these types of financial documents are not discoverable via subpoena even though the information may be elicited from the witness during trial. The Fourth Department has found that these types of financial records are subject to pretrial disclosure, as they may assist counsel in cross-examination at trial.  

Consequently, litigants in the Third and Fourth Departments should expect demands and nonparty subpoenas seeking disclosure of records of financial compensation of expert witnesses during the course of discovery. Accordingly, litigants should bear in mind any potential impact as to the credibility at trial of any retained expert witnesses and be prepared to disclose this type of financial information to parties upon demand.

If you have any questions regarding this alert, please contact Allen Light, associate, at alight@barclaydamon.com, or another member of the firm’s Torts & Products Liability Defense Practice Area.

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