Dr. William Golton, Board Member and retired Vice President of CECON, has written a series of articles and recorded a webinar for The American Chemical Society. Click on the link below to access Dr. Golton's webinar, "Success Factors for a Consulting Practice in Chemistry."
http://acswebinars.org/golton.
About The Presenter
Dr. William Golton retired from DuPont in 1994 prior to becoming a successful consultant. While at DuPont, Bill managed a large analytical and physical measurement group. He also started and managed the quality program for a $2 billion business. Later, Bill moved to the pharmaceutical business to run a highly visible corporate LIMS project. After DuPont, he joined The CECON Group, a broker for independent consultants in science and engineering, where he recently retired as Vice President of the company. Bill is a founder and the first Chairman of the Chemical Consultants Network, a volunteer organization supported by the Philadelphia Section of ACS, and by American Institute of Chemical Engineers. Bill holds a Ph.D. in Analytical Chemistry.
Thursday, October 7, 2010
Friday, April 23, 2010
Consultant Liability and What to do About it
by Michael DeLaurentis, Esq.
Every small business needs to consider all aspects of potential liability and how best to protect against it. Consultants usually are independent contractors, which means, among other things, that they face the possibility of unlimited liability for personal or property damage attributable to their negligence in providing advice or other services. This is just as much the case for consultants who obtain some or all of their work through one or more intermediary agencies. There are generally three ways to limit liability: buy insurance, provide for its limits in contracts, and operate through a limited liability entity. (A fourth way - personal asset and liability planning - is beyond the scope of this article.)
A consultant's engagement letter with clients and its agreements with vendors and others can specify which party will bear which liability, and set limits to the maximum liability. An engagement letter, for example, might provide that the consultant's liability is limited to the fees paid under the engagement, regardless of actual damages alleged to have been suffered as a result of consultant negligence or breach of contract. The extent to which such clauses are enforceable depends on the particular facts of each situation and the jurisdiction(s) involved. This may be especially troublesome in transnational engagements. Providing for arbitration or mediation may also limit costs of dispute resolution and provide a more streamlined and knowledgeable outcome.
There's insurance coverage for virtually any imaginable risk. Whether the cost of protection is affordable is another question. Disability buy-out insurance, for example, in the event of a co-owner's disability, is notoriously expensive. General liability [and "umbrella"] insurance will cover most aspects of personal or property damage resulting from alleged negligence, and property and casualty insurance can provide protection to property and assets. Business owners typically take care of life, key-man, health, and disability coverage, but may not consider professional liability (PL) --- or "errors and omissions" (E&O) - protection. Until comparatively recently, PL coverage was available only for licensed professionals: doctors, lawyers, architects, etc. Now, all sorts of service enterprises can find coverage for liability resulting from alleged failure to fulfill contract obligations or damages alleged to have resulted from negligent provision of contracted services. For unlicensed services groups, a trade association frequently will offer coverage tailored to the needs of the particular group. E&O coverage for chemists, for example, is offered by the American Chemical Society. Because trade association policies are tailored to a particular service group, they can be cheaper, more relevant, and provide better quality than comparable policies from commercial insurers. In today's competitive environment, many potential clients will require that a consultant have PL coverage.
Insurance protection and contractual limitations on liability, however, will not necessarily reach all areas of liability or liability in excess of policy amounts or contractual limits. Enter the limited liability entity. For more than a century, the corporation was the principal entity through which to operate a business for maximum protection against liability of owners and officers. In recent decades, the rise of the limited partnership and, more recently, the limited liability company ["LLC" and its professional variants] have caught up with and overtaken the corporation as a vehicle for limited liability. This change is largely attributable to greater flexibility, generally more favorable tax treatment, and lower start-up and maintenance costs of the newer entities by comparison with the corporation. For a service business like a consultancy, with a single owner and few hard assets, a subchapter S corporation may rival a LLC, and might even offer certain tax advantages [in limited circumstances, the possibility of labeling some distributions to owners "dividends," thereby reducing employment (FICA or SECA) taxation and local earned income taxes]. Advisers generally prefer LLCs, however, because of their much greater flexibility; their tax advantages [ease of withdrawing assets, terminating the business, adding new owners and owner tax basis for borrowings, among many others]; and better owner protection [in most jurisdictions, creditors of LLC owners who attach an LLC interest can generally recover only declared distributions]. There is now also much greater familiarity with LLCs, so that corporations no longer hold that advantage.
Should a consultant even bother to go through the trouble and incur the cost of forming an entity? Doesn't that require additional annual tax filings? The answer to both questions is "Not necessarily." If a consultant, after consultation with insurance, tax, and other advisers, concludes that his or her risk profile is very limited and to a large extent contractually manageable, the consultant may reasonably conclude there is no need to operate through an entity -- or even to obtain certain types of insurance, including PL coverage. If the consultant decides to operate through a LLC and is the sole owner, there will be no difference in tax reporting from operating as a sole proprietor: the consultant need only include a Schedule C with his or her annual tax return. A sole owner of a LLC, thus, has it all: maximum asset and personal liability protection - from the entity's and owner's creditors - simple tax reporting, maximum flexibility, and comparatively low formation and maintenance costs. The presumption should probably be that a LLC is the preferred mode of operation unless facts convincingly demonstrate a contrary course is preferable.
A final word of caution: any mode of liability protection has its limits. Entity protection requires that the owner and employees honor formalities and maintain strict separation of personal and business activities. Contractual protection requires strict compliance with its specific terms, which may not be fully enforceable if facts indicate bad faith. Insurance will not protect against events and circumstances specified in the policy, and few policies will protect against intentional harm, fraud, or recklessness [though even here, it may be possible to have employees bonded via fidelity insurance]. But even with these limitations, some form of liability protection is almost certainly significantly better than none.
Michael J DeLaurentis is a solo tax and business attorney located in Elkins Park, PA, just outside Philadelphia. He has more than 32 years experience in large and small law firms on both coasts, and has consulted as a sole practitioner since 1994. He has spoken at several ACS conferences. His clients include domestic and international businesses, nonprofits, and individuals. He welcomes follow-up questions to this article, and may be reached by email at mjdtax@comcast.net or by phone at (215)519-8076.
Every small business needs to consider all aspects of potential liability and how best to protect against it. Consultants usually are independent contractors, which means, among other things, that they face the possibility of unlimited liability for personal or property damage attributable to their negligence in providing advice or other services. This is just as much the case for consultants who obtain some or all of their work through one or more intermediary agencies. There are generally three ways to limit liability: buy insurance, provide for its limits in contracts, and operate through a limited liability entity. (A fourth way - personal asset and liability planning - is beyond the scope of this article.)
A consultant's engagement letter with clients and its agreements with vendors and others can specify which party will bear which liability, and set limits to the maximum liability. An engagement letter, for example, might provide that the consultant's liability is limited to the fees paid under the engagement, regardless of actual damages alleged to have been suffered as a result of consultant negligence or breach of contract. The extent to which such clauses are enforceable depends on the particular facts of each situation and the jurisdiction(s) involved. This may be especially troublesome in transnational engagements. Providing for arbitration or mediation may also limit costs of dispute resolution and provide a more streamlined and knowledgeable outcome.
There's insurance coverage for virtually any imaginable risk. Whether the cost of protection is affordable is another question. Disability buy-out insurance, for example, in the event of a co-owner's disability, is notoriously expensive. General liability [and "umbrella"] insurance will cover most aspects of personal or property damage resulting from alleged negligence, and property and casualty insurance can provide protection to property and assets. Business owners typically take care of life, key-man, health, and disability coverage, but may not consider professional liability (PL) --- or "errors and omissions" (E&O) - protection. Until comparatively recently, PL coverage was available only for licensed professionals: doctors, lawyers, architects, etc. Now, all sorts of service enterprises can find coverage for liability resulting from alleged failure to fulfill contract obligations or damages alleged to have resulted from negligent provision of contracted services. For unlicensed services groups, a trade association frequently will offer coverage tailored to the needs of the particular group. E&O coverage for chemists, for example, is offered by the American Chemical Society. Because trade association policies are tailored to a particular service group, they can be cheaper, more relevant, and provide better quality than comparable policies from commercial insurers. In today's competitive environment, many potential clients will require that a consultant have PL coverage.
Insurance protection and contractual limitations on liability, however, will not necessarily reach all areas of liability or liability in excess of policy amounts or contractual limits. Enter the limited liability entity. For more than a century, the corporation was the principal entity through which to operate a business for maximum protection against liability of owners and officers. In recent decades, the rise of the limited partnership and, more recently, the limited liability company ["LLC" and its professional variants] have caught up with and overtaken the corporation as a vehicle for limited liability. This change is largely attributable to greater flexibility, generally more favorable tax treatment, and lower start-up and maintenance costs of the newer entities by comparison with the corporation. For a service business like a consultancy, with a single owner and few hard assets, a subchapter S corporation may rival a LLC, and might even offer certain tax advantages [in limited circumstances, the possibility of labeling some distributions to owners "dividends," thereby reducing employment (FICA or SECA) taxation and local earned income taxes]. Advisers generally prefer LLCs, however, because of their much greater flexibility; their tax advantages [ease of withdrawing assets, terminating the business, adding new owners and owner tax basis for borrowings, among many others]; and better owner protection [in most jurisdictions, creditors of LLC owners who attach an LLC interest can generally recover only declared distributions]. There is now also much greater familiarity with LLCs, so that corporations no longer hold that advantage.
Should a consultant even bother to go through the trouble and incur the cost of forming an entity? Doesn't that require additional annual tax filings? The answer to both questions is "Not necessarily." If a consultant, after consultation with insurance, tax, and other advisers, concludes that his or her risk profile is very limited and to a large extent contractually manageable, the consultant may reasonably conclude there is no need to operate through an entity -- or even to obtain certain types of insurance, including PL coverage. If the consultant decides to operate through a LLC and is the sole owner, there will be no difference in tax reporting from operating as a sole proprietor: the consultant need only include a Schedule C with his or her annual tax return. A sole owner of a LLC, thus, has it all: maximum asset and personal liability protection - from the entity's and owner's creditors - simple tax reporting, maximum flexibility, and comparatively low formation and maintenance costs. The presumption should probably be that a LLC is the preferred mode of operation unless facts convincingly demonstrate a contrary course is preferable.
A final word of caution: any mode of liability protection has its limits. Entity protection requires that the owner and employees honor formalities and maintain strict separation of personal and business activities. Contractual protection requires strict compliance with its specific terms, which may not be fully enforceable if facts indicate bad faith. Insurance will not protect against events and circumstances specified in the policy, and few policies will protect against intentional harm, fraud, or recklessness [though even here, it may be possible to have employees bonded via fidelity insurance]. But even with these limitations, some form of liability protection is almost certainly significantly better than none.
Michael J DeLaurentis is a solo tax and business attorney located in Elkins Park, PA, just outside Philadelphia. He has more than 32 years experience in large and small law firms on both coasts, and has consulted as a sole practitioner since 1994. He has spoken at several ACS conferences. His clients include domestic and international businesses, nonprofits, and individuals. He welcomes follow-up questions to this article, and may be reached by email at mjdtax@comcast.net or by phone at (215)519-8076.
Friday, March 6, 2009
How to Be an Effective Expert Witness in Science & Technology Law Cases
By far the most important requirement for an expert witness is that you know the particular subject matter in which you are testifying. Then, you must be able to document your expertise through academic credentials, peer reviewed publications, and in-depth actual experience. Finally, you must look and sound as if you know your stuff – you must be convincing, presentable, credible and unshakable. A tall order.
Prevailing in technical law cases often depends almost as much on the quality of experts as on the skill of attorneys. By quality I mean not only technical knowledge and credibility, but also such factors as stage presence, articulation, self-control, creativity, and confidence. These characteristics are especially important in court appearances.
The opposing counsel can challenge your qualifications as an expert witness in order to reduce the impact of your report, deposition and testimony. This challenge can range from probing questions intended discredit your technical option and skills, or to embarrass you or throw you off your stride. Frequently opposing attorneys will ask challenging questions about your university grades and degrees, your professional licenses, your prior employment credibility or your past expert witness work. There is no end to the list of tactics the opposing council will employ to discredit your impact. You can't get impatient, you always must remain calm and courteous and sometimes you just have to have a thick skin.
Recently I sat through a five-hour deposition while five attorneys were trying to discredit my credibility and testimony. The first 90 minutes was a tedious review of my background, as well as irrelevant personal questions. This inquisition was clearly an attempt to show that I was a "hired gun" who could not be trusted. Later, they asked many questions related to the substance of the case in many different ways with the objective of finding contradictions.
You should testify only those cases in which, in good conscience, you can testify honestly and objectively. You should think of yourself as a teacher instead of an advocate for the party that retained you. You must always be honest and represent correctly the technical and circumstantial facts as you know them.
You must prepare yourself for writing a technical report, deposition, and trial. You should read everything thing your client attorney can provide about the case and ask any questions that may occur to you. Then, you should review everything you can find about the subject area involved in the case in order to be knowledgeable about recent developments or relevant reports. With your attorney, you should agree on key issues and the strategy of the case so you can support his/her arguments.
I can think of two cases in which extensive research and preparation made a big difference in the outcome of a case. While looking at the patented technology for a clothes deodorizer in a patent infringement suit, we found prior art in an out of-print book that was not picked up in the patent, academic, or trade literature. This facilitated a satisfactory settlement for the defense. Likewise, in a personal injury case, we unexpectedly found in the literature the probable presence of trace quantities of phosgene, a toxic chemical, when a commercial cleaner passed through an arcing electric appliance.
In a deposition, witnesses are questioned under oath by opposing counsel and their testimony is recorded and becomes part of the record of the case. In a trial, witnesses are questioned both by the opposing counsel and the counsel for whom they are appearing. It is most important that your trial testimony is consistent with your deposition testimony. At a trial you are usually appearing before a jury, so you must not only be careful of your spoken words but also your stage presence and believability. Jurors tend to base their opinions on which expert witness makes a better presentation and appearance, especially when the technology involved is complicated.
It is important to tell the truth. Answer questions concisely with a "yes" or "no" when called for unless the question is unclear, in which case you should ask for a clarification. Don't answer until the attorney has completed asking the question. Never appear hostile, arrogant, or unresponsive.
You should dress conservatively. You should stay calm. You should look the cross-examiner in the eye and sit upright with good posture.
By participating in the legal process as a technical expert witness, you are serving a client and a legal system which needs your expertise. The experience can be productive, individually stimulating and professionally satisfying. I recommend it.
What do you think?
- Have I emphasized the most important points for being a good technical expert witness?
- What other points would you emphasize?
- Do you think it is worth the effort to subject yourself to tough attorneys and the legal process to serve as an expert witness?
Dr. Stanley Tocker, the author of this blog spot, is the Executive Vice President of The CECON Group Inc. and a member of CECON's technical staff. Dr. Tocker is a highly qualified and experienced expert witness and was named to the Delaware Environmental Appeals Board by the Governor of Delaware. A graduate of Johns Hopkins, he received his Ph.D. in Organic Chemistry from
Friday, February 6, 2009
The CECON Group Blog Guidelines
PURPOSE
The purpose of the CECON BLOG is to stimulate and expand constructive discussion and social networking among scientists, engineers, and technical business specialists that engage in professional consulting.
GUIDELINES
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Blog posters are personally responsible for the content they publish on this blog site.
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Remember your postings are open to all: avoid private information, be courteous, constructive, and add to the social dialog. Protect your privacy and the privacy of others.
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Write in the first person and make it clear that you are speaking for yourself and not in behalf of another.
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Do not disclose proprietary or confidential information of your own, other individuals, companies, or institutions.
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Respect copyright, fair use, and financial disclosure laws.
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When possible and appropriate, link back to the source of your information.
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Use citations as necessary to give credit to others for their ideas and insights.
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Try to add value by providing worthwhile information and perspective.
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