Do Exclusive Contracts Give the Defense an Unfair Advantage

Lawyers Weekly USA

Most lawyers walk into a deposition assuming that the court reporter will be an impartial keeper of the record.

But thanks to “exclusive contracts” between court-reporting agencies and insurance companies, this may no longer be the case.

Over the last decade, an increasing number of insurance companies have entered into long-term agreements with court-reporting agencies which require their counsel to use a particular agency for any deposition they call. In return, the insurance company gets reduced fees.

Under some contracts, the court-reporting agency will also provide the insurance company with expedited transcript delivery, “deposition databases” to use in future cases and free deposition summaries.

But these contracts have encountered stiff opposition from plaintiffs’ lawyers, smaller reporting agencies and even some members of the defense bar.

Plaintiffs’ lawyers say that these arrangements put them at an unfair disadvantage by giving defendants what amounts to free litigation support services.

“I suspect [insurance companies] are getting their original transcript faster than I’m getting my copy,” says Fred Halstrom, a personal-injury lawyer who practices in Boston. As Halstrom explains, having an extra couple of days to look over a deposition transcript before a hearing or to incorporate it into a legal brief can make all the difference in the world.

Ross Gallen, a plaintiffs’ lawyer in San Antonio adds that these contracts compromise the court reporter’s appearance of impartiality. Doubts about a reporter’s impartiality can often be as harmful as actual bias, he says.

“When a client learns that the court-reporting firm is financially tethered to the insurance company, he feels that maybe he’s not getting the transcript he deserves,” says Gallen. “One thing we could always count on in the past was the integrity of the court reporter. I could always make that assurance to my client. But now I can’t vouch for something I don’t know.”

Similarly, many defense lawyers hate being told which court reporter they can use for a particular case. They’d rather pick the best one for the job instead of risking the shoddy, unreliable service they say accompanies the discounted rates.

“It’s a real reliability problem, especially when [the agency] sends a reporter who’s not local,” says a Pennsylvania insurance-defense lawyer who asked not to be identified in this article. “They get lost on the way, they don’t set things up in the right form and they don’t know the local litigation culture, which is very important. If a judge sees a transcript in an unfamiliar format, it really hurts the litigant.”

Meanwhile, smaller court-reporting agencies fear that these exclusive contracts threaten their existence and the affordable services they offer to small-scale litigants.

“A lot of small agencies have gone out of business,” says Stephanie Grossman, who runs a small agency in Palo Alto, Calif. “And if this keeps going forward as it’s happening, you’ll see only big agencies out there and the prices will go through the roof.”

Grossman adds that many plaintiffs’ lawyers aren’t aware that contracting agencies may be gouging them on transcript copy rates to make up for the discount they’ve given the insurance company.

“So the plaintiff is essentially subsidizing the other side’s litigation,” she says. “They’re cost-shifting.”

The larger agencies, however, insist that there’s nothing improper about these contracts.

“We’re merely providing a client what good court-reporting firms have done at the local level for years – quality service at a competitive price,” says Carol Hughes, a senior vice president with New York-based Esquire Communications Ltd., the nation’s largest court-reporting agency. “Large corporations and insurance companies are looking for value-added services and that’s what we’re giving them. . And whatever’s offered to one side is always offered to the other side at the same price.”

Hughes conceded, however, that the company does not provide the deposition databases to plaintiffs, but insists this is a minor point since the depositions are a matter of public record.

Woody Waga, vice-president of Veritext, a large agency in Basking Ridge, N.J., adds that these contracts have absolutely no bearing on a court reporter’s impartiality.

“Veritext agrees that the court reporter should be impartial,” says Waga, a past-president of the National Court Reporters Association. “But it also agrees that a client – whether a corporation, law firm or insurance company – should be entitled to a discount for large-volume discovery. This is all about business and we see nothing wrong with that.”

Nonetheless, concerns about these contracts have found a foothold among state legislators and court administrators across the country. Sixteen states have already passed legislation or court rules either banning these arrangements or requiring disclosure to the other side – and 10 more states are considering similar measures (see accompanying chart).

Additionally, the National Court Reporters Association, the Association of Trial Lawyers of America and the American Judges Association have all passed resolutions advocating that these agreements be banned.

Cost Shifting

One of the more serious accusations against contracting agencies is that they’re inflating plaintiffs’ copying fees to make up for the discounts given to defendants.

Grossman tells of a Louisiana-based court-reporting network that wanted her firm to cover some of its depositions in northern California for a company it had a contract with.

“They were to be paid very little on the copy rate,” says Grossman. “When I told her we don’t work for that little, she said, ‘Well then, we’ll have to make it up somewhere,’ because she’d given her client, who was calling the deposition, a very low rate. So they ended up charging the other side an outrageous amount.”

Grossman says the agency charged the other side $2.50 a page when the area going rate was between $1.75 and $2.00. She points out that this can really add up.

“If it’s a slip-and-fall, a deposition will go on for a few hours,” she says. “But I’ve done as much as 18 volumes for one witness. And some depositions go on for days and days. So you’re talking about a lot of money.”

Similar complaints have been fielded by the Court Reporters Board of California, a state consumer-protection agency, according to Rick Black, the agency’s executive officer. He notes that the board does not oppose quantity discounts for court-reporting services. But a problem arises when the opposing side is charged more than market value to make up for it, he says.

“It can really affect litigation,” he says. “The reporter is helping to support one side’s litigation at the expense of the other. It’s not fair to consumers because they have to pay to offset the discounts the other side is getting.”

Waga, the Veritext executive, says he’s unaware of this practice.

“We certainly do not shift costs to the other side,” he says. “If the other side purchases a copy, we charge a copy rate. And if the other side takes a deposition in a cross-deposition setting – meaning they wish to depose when the other side is finished – they’ll be charged the same amount of money. Or they can use their own court reporter and pay more.”

Hughes adds that “this may be happening in small, isolated cases, but it’s certainly not something Esquire does.”

Databanking

Another accusation is that insurance companies gain an advantage by having access to the deposition databases created by these large court reporting agencies.

In a September 1998 letter to the USAA insurance company, Esquire promises to develop and maintain a witness database which “will be extremely beneficial in analyzing and identifying witnesses that appear repeatedly on various cases.”

David Adkisson, a San Antonio plaintiffs’ lawyer, says this puts plaintiffs’ counsel at an extreme disadvantage.

“If they have a database of prior testimony of witnesses, primarily expert witnesses, and they’re providing that service to the defense, that’s an enormous informational advantage,” says Adkisson, who tried to have Esquire disqualified in one of his cases. “If we’re presenting an expert and they blindside him with prior testimony, how can we be ready for that? You can take all kinds of testimony out of context and use it against someone when, in context, it’s irrelevant.”

Hughes, however, says there’s nothing unfair about this because deposition transcripts are public record in many states.

But Adkisson counters that they’re not public record in Texas. In Texas, he says, they can be released only upon the consent of the parties involved in the underlying litigation.

And even in states where depositions are public record, he says the ease of access creates an advantage.

“Let’s put Mr. Defense Lawyer in the position of just being able to call up Esquire and get all the depositions on Dr. Smith in every case,” he says. “What would we have to do? We’d have to track down every transcript in every courthouse in every state and check every case. That’s really an onerous task.”

Although insurance companies are perfectly capable of creating deposition databases on their own, the idea of a neutral court officer performing litigation support for one side is troubling, according to Pam Pressley, a staff attorney for the Foundation for Taxpayer and Consumer Rights in Santa Monica, Calif.

“The court reporter is the person who’s supposed to be neutral and impartial,” says Pressley, who monitors the court-reporting industry for her organization. “The court reporter has traditionally never helped one side in its litigation.”

Speedy Delivery

Opponents also assert that agencies are delivering transcripts to parties with contracts long before the other side receives them.

“You have situations where the contracting attorney will ask the reporter to produce the transcript, give it to him on Wednesday and not give it to opposing counsel until Friday,” says veteran court reporter Irving Starkman of Philadelphia. “That’s totally against our code. All parties to litigation should receive their transcript at the same time.”

Some contracts call for the court reporting firm to provide the contracting party with an ASCII disk of the testimony, according to John Prout of Basking Ridge, N.J., a past president of the court reporters’ association. An ASCII disk is a digitized version of the deposition transcript which a party can download into their own computer and perform tasks like word-searches and incorporation into briefs that they couldn’t do from hard copies.

“That ASCII disk is made available [to the defendant] when the original is delivered or even before, but isn’t always made available to the other side unless there’s a specific request,” he says. “And we had a recent incident in my area where that request was not honored for a considerable period of time. [Plaintiff’s counsel] was preparing for trial and spent months trying to get a copy of the disk to help in his preparation. It really slowed him down.”

Halstrom, the Boston personal injury lawyer, agrees that this can be a big problem for plaintiffs’ lawyers.

“If you’re taking a lot of depositions in a case, you want the transcripts to be fast,” he says. “They’re getting an expedited copy free of charge whereas if we order it, we have to pay double per page. And no plaintiffs’ lawyer has more money than an insurance company to finance a lawsuit so, to a degree, they can price us out of a case.”

Quality Issues

Nor are exclusive court-reporting contracts a problem only for plaintiffs. Defense lawyers grumble that the contracts force them to bring in highly discounted but barely competent reporters to handle their depositions.

For example, the Pennsylvania insurance-defense lawyer recalls an agency that sent a stringer who lived 100 miles from the litigation site.

“This person had a five-hour commute every day and made all sorts of spelling errors and errors with names and places,” he says. “When we complained, a substitute was sent who also lived a long distance away.”Ultimately during this seven-week deposition, the agency sent three different reporters.

“So there was no continuity in terms of identifying names, locations and technical terms,” he says. “In addition, [transcripts] from each day’s deposition had to come from the out-of-state headquarters for the reporting agency. And they would never send them on a regular basis or in sequence. This service was charging the insurance carrier a per-page rate so low that you wonder whether any competent reporter could afford it, even on a volume basis. It was awful.”

Gallen, who spent 20 years as an insurance-defense lawyer before opening his plaintiffs’ practice, says he was “never satisfied” with the service he received when using contracting agencies.

“We’d have to use these megafirms with hundreds of reporters,” he says. “And what I’ve seen with some large contracting firms is that not all firms are equal. You’ll say, ‘Just a minute, I want the testimony read back,’ and what’s read back is not what you heard. It’s a version of what was said. Whether or not that’s enough to dirty up a record, I don’t know. But I can tell you there were some records where I was very uncomfortable.”

The Pennsylvania lawyer adds that insurance companies suffer from tunnel vision with respect to reporting contracts.

“They’re fixated on the bottom line,” he says. “It’s all cost, not quality. It’s very hard to explain to carriers who are very cost-conscious in terms of rates and expenses why this is so inefficient.”

For Appearance’s Sake

Although no one interviewed by Lawyers Weekly USA contended that a court reporter would fudge the record in favor of the insurance company, many said that the mere appearance of partiality is enough to cause discomfort.

“It’s no different from lawyers in terms of conflicts of interest,” says Adkisson. “If there’s anything to create an appearance of impropriety, that lawyer can’t be involved in the case. This also applies to judges and any officer of the court. And court reporters are officers of the court.”

Prout adds that there is no judge present during depositions.

“The only impartial person in that room is a court reporter,” he says. “So even if in fact the contract does not compromise the impartiality of a reporter, it certainly creates an appearance of partiality.”

Judge Ira J. Raab of the Nassau County District Court in New York agrees.

“Whenever you have someone paying for a special service the opponent does not or cannot have, it’s an impropriety as far as I’m concerned, not just an appearance,” says Raab, who prepared the American Judges Association’s resolution opposing exclusive contracts.

Hughes, the Esquire executive, contends that there is no appearance of impropriety.

“Is a court reporter really going to risk losing their license to be partial? Are they really going to do something special for one side’s attorney? They don’t know him from Adam,” she says. “If you have [an independent] court reporter who’s worked with one attorney for 20 years and they’re personal friends, it seems like that’s much more of a bonded relationship than a reporter who walks in and sees an attorney who happens to be there for an insurance company.”

Waga adds that his company has no objection to rules requiring disclosure of long-term contracts between reporting agencies and insurance companies.

“A more critical area is prohibition,” he says. “We won’t work in states where [these contracts] are prohibited.”

But prohibition is exactly what judges, trial lawyers and the court reporters’ association are pushing for.

“Disclosure is certainly better than nothing,” says Mark Golden, executive director of the court reporters’ association. “But it’s really not adequate to protect impartiality and the fairness of the system.”

The following is a list of states that have banned or otherwise restricted depositions taken by court reporters that have a long-term contractual relationship with one of the parties:

COMPLETE BAN: