The virtual reality of today’s legal meetings

During the pandemic, virtual meetings have been used widely for various legal purposes, including court hearings, depositions, settlement talks and M&A negotiations. This trend is expected to continue even after the pandemic ends. Here are some potential pitfalls and ways to avoid them when conducting virtual meetings or testifying remotely.

Working smarter

An important lesson learned in 2020 is that a physical presence may not necessarily be required in various legal situations. Working remotely has generally reduced travel costs and professional fees, while improving efficiency.

Instead of paying for plane tickets and lodging and transferring boxes of documents, financial experts may appear on a computer screen and look through documents with file-sharing tools. But transitioning from in-person to remote work arrangements may require experts to hone new technology and communication skills.

Avoiding pitfalls

The transition to virtual interactions hasn’t been seamless for legal professionals. Unexpected disruptions during virtual business meetings — such as rustling papers, crosstalk and faltering Internet connections — are common. However, people tend to be more forgiving in informal settings. Trials and depositions are more formal. There’s only one chance to make a good impression during a hearing, and distractions can quickly discredit an expert witness’s professionalism and credibility.

To avoid potential pitfalls, consider conducting test runs and using remote technology and collaboration tools during the pretrial phase to work out any kinks before the hearing begins. A general rule of thumb when using technology is: Expect the unexpected. Anticipate possible glitches and develop a backup plan. For example, you and your expert should have a secondary source of Internet service (like a hot spot on a cell phone), a backup battery (in case of power outages), and alternate hardware devices (such as laptops, tablets, smart phones, microphones and cameras) that can be powered up in a pinch.

Planning considerations

One way to retain the intangible aspects of in-person meetings and expert testimony is to use up-to-date videoconferencing technology, instead of telephone or audioconferences. High-definition videoconferencing equipment can, for example, detect slight physical changes, such as smirks, eyerolls, wrinkled brows and even beads of sweat. These nonverbal cues may be critical to assessing an expert’s honesty and reliability, especially during cross examination.

When preparing for a video presentation, encourage experts to maintain “eye contact” with the camera, rather than reading entirely from his or her notes. This means looking directly into the camera (not the computer screen) which can take some getting used to.

It’s also important to evaluate the background that will appear behind the expert as he or she testifies. The background should look professional, even if the expert works from a home office. Be sure it’s free from distractions, such as family pets, doorbells, clutter and personal items. Heavy backlighting and windows can become distracting, too.

In addition, the move to virtual testimony underscores the importance of having a comprehensive written report that explains how the expert arrived at his or her conclusions. A written report can supplement the expert’s verbal testimony and provide the trier of fact with a resource to refer to during deliberations, which, in larger cases, may occur days or weeks after the expert testifies.

Changing times

Going virtual offers many benefits that are expected to outlast the pandemic, such as lower costs and improved efficiency. Over the last year, attorneys and experts have been forced to learn how to use virtual tools and overcome potential downsides. Now that the legal community has transitioned from legacy operating practices to technology-driven practices, there may be no turning back. When choosing an expert witness, it’s critical to consider his or her comfort level with the latest virtual meeting tools.

Sidebar: Pandemic reminder: Recycled valuation reports can be perilous

Valuations generally deliver a conclusion of value for a specific purpose as of a specific date. So, unless you need to value an asset as of the same date and for the same purpose, reusing a previous valuation can lead to inaccurate results, not to mention admissibility problems in court.

This issue has been highlighted during the COVID-19 pandemic. The values of many businesses changed dramatically in 2020, causing previous valuation reports to become outdated and irrelevant.

For example, a New York City restaurant was valued at $500,000 as of June 30, 2019, for gift tax purposes. If the owner had used this value to settle her divorce a year later, it’s likely that the value of the business would have been overstated. Why? Market conditions had changed significantly from the 2019 valuation date. Specifically, the restaurant had incurred substantial debt during the pandemic. And its executive chef (a key person) relocated to Florida to take advantage of more-favorable market conditions.

Also be aware that the purpose of a valuation has a significant impact on value. For example, the value of a minority interest in a business for gift tax purposes is usually based on fair market value, often with discounts for lack of control and marketability. But the value of the same interest in a divorce is usually based on fair value, which is statutorily defined.

In light of these differences, reuse of a valuation report prepared for one purpose to value the same (or similar) business interest for another purpose isn’t recommended. An updated report can shed new light on the situation and improve the desired outcome.