Board of Contract Appeals General Services Administration Washington, D.C. 20405 THIS ORDER WAS INITIALLY ISSUED UNDER PROTECTIVE ORDER AND IS BEING RELEASED TO THE PUBLIC IN ITS ENTIRETY ON MARCH 16, 2000 _______________________________________________ MOTION TO DISQUALIFY EXPERT DENIED: March 10, 2000 _______________________________________________ GSBCA 14732 AT&T COMMUNICATIONS, Appellant, v. GENERAL SERVICES ADMINISTRATION, Respondent. Richard J. Conway, Robert J. Higgins, and J. Andrew Jackson of Dickstein Shapiro Morin & Oshinsky LLP, Washington, DC, counsel for Appellant. Robert H. Koehler, Michael J. Schaengold, James A. Hughes, Jr., William E. Slade, Norah V. Dabney, and Thomas Michael Guiffre of Patton Boggs LLP, Washington, DC, counsel for Respondent. BORWICK, Board Judge. The General Services Administration (respondent or GSA) moves to disqualify Pricewaterhouse Coopers, L.L.P. (PwC) as appellant's damages expert or consultant. Respondent argues that by virtue of having worked on telecommunications contracts for GSA and other federal agencies, and having performed general auditing work for GSA, PwC has obtained confidential information. GSA argues that PwC (and therefore AT&T) could use that information against GSA in this litigation. AT&T and PwC have instituted a protective wall which insulates the members of PwC's engagement team in this case from any confidential information other members of the firm of PwC might have received from GSA. The protective wall promises to be extensive and secure. Furthermore, GSA has not demonstrated that (1) PwC's work for GSA or other federal agencies involved confidential information, or (2) if the work involved confidential information, how that information could be used by PwC (and therefore AT&T) against GSA in this litigation. We therefore deny the motion. Background On January 11, 2000, appellant requested access to protected material under the Board's protective order of April 20, 1999, for the following employees of PwC: Ms. M. Isabel Marques, Mr. Shawn D. Card, Mr. Michael W. Savage, Mr. Stefano Vranca, Ms. Ewa S. Knapik, Mr. Michael J. Yachnik, Ms. Andrea L. Ford, and Mr. Joseph A. Barsalona. Each employee signed a non-disclosure agreement and represented in that non-disclosure agreement that his or her relationship with appellant and its personnel is "strictly one of assisting its outside legal counsel." Each employee represented that his or her relationship with appellant does not involve participation in appellant's pricing, the technical approach it proposes in response to solicitations, product design, or any other decisions involving the competitive structuring of appellant's proposals. Each employee represented that he or she does not play any role in appellant's competitive decisionmaking as defined in Matsushita Electric Industrial Co. v. United States, 929 F.2d 1577 (Fed. Cir. 1991) or United States Steel Corp. v. United States, 730 F.2d 1465 (Fed. Cir. 1984). These employees are known as "the AT&T FTS2000 Engagement Team" (engagement team). Additionally, in response to GSA's motion to disqualify PwC, each member of the engagement team has signed a declaration which provides in pertinent part: I do not now have and have not previously had involvement in performing auditing or other professional services performed for GSA, Treasury or IRS [the Internal Revenue Service]. [ ] [Foot # 1 ] I have not been a member of GSA audit teams, nor have I exchanged confidential information with members of GSA's audit teams. ****************** Footnote Begin ********** [Foot # 1 ] Appellant alleges damages arising from GSA's alleged failure to transition Department of the Treasury and Internal Revenue Service 1-800 service promptly and within the time frame contemplated by the contract. See Complaint, Counts I-IV. ****************** Footnote End ************ During previous engagements for PwC, I did not learn any confidential, privileged or proprietary information belonging to GSA, Treasury or the IRS that could be used by me or anyone at PwC to the detriment of GSA, Treasury or IRS. My participation in the present litigation engagement does not provide AT&T with any improper competitive advantage. See, e.g., Appellant's Opposition to Respondent's Motion to Disqualify Consultant (Appellant's Opposition), Exhibit 2 (Declaration of Shawn D. Card (Card Declaration) (Feb. 18, 2000) 7, 8). In addition, PwC has instituted the following screening procedures applicable to the engagement team: It is of vital importance to you, the Firm, and our client that all information which we receive from or relating to the General Services Administration and the FTS2000 Contract in connection with this engagement is maintained confidentially and is not shared, made available or otherwise transferred to any PwC or outside personnel who you have not confirmed has been assigned to this engagement. In connection with this engagement, we have established a dedicated [computer hard] drive which will only be accessible by members of the AT&T FTS2000 engagement team. All engagement related files should be maintained on this drive. By this agreement, I understand and agree that i) I will have no discussions or communications with any PwC person (other than a member of the AT&T FTS2000 engagement team) with respect to this engagement; ii) I will not request, seek, or accept access to any documents or information relating to services performed for the GSA from any PwC personnel other than a member of the AT&T FTS2000 engagement team; iii) I will not provide access to documents or information relating to representation of AT&T in the above matter to persons engaged in the performance of services to the GSA; iv) I understand that I am responsible for ensuring these restrictions on the flow of information; v) all documents received or created in connection with the engagement will be stored in secure locations and will remain in the possession of the AT&T FTS2000 engagement team members; and vi) all documents will be properly legended [sic]. Appellant's Opposition, Exhibit 2, Memorandum from Joseph Barsalona to Members of the AT&T FTS2000 Engagement Team (Feb. 11, 2000). Each member of the engagement team signed and dated the agreement, a portion of which is quoted above. Each member of the engagement team understands that "the obligations outlined above are prospective obligations and that each member of the engagement team "remain[s] under the control of these restrictions in perpetuity." E.g., Card Declaration 11. Respondent argues that "AT&T's utilization of PwC as its expert presents a significant conflict of interest due to prior work PwC has performed for the Government in substantially related matters." Respondent's Motion at 6. Respondent argues that: GSA and other government agencies have procured PwC's services on a considerable number of government contracts, including GSA Federal Telecommunications Service contracts and contracts to provide telecommunications-related services to the [IRS]. If PwC is permitted to serve as AT&T's expert and to obtain access to protected materials, GSA is at risk that PwC will utilize confidential information in the course of performing government contracts to GSA's disadvantage in this litigation. Respondent's Motion at 6-7. Relying on information from GSA's Federal Procurement Data Center, see Respondent's Motion, Exhibit 14, GSA argues that PwC and its predecessors had received awards of $150,000,000 in federal contracts in 1999, and that in 1999 alone, PwC performed or was performing six Federal Telecommunications Service contracts for GSA and nine contracts for the Department of the Treasury that relate to telecommunications services. Respondent's Motion at 9. Appellant and PwC reviewed Respondent's Exhibit 14 and noted that most of the contracts listed in that exhibit did not involve the parties to the FTS2000 contract. Appellant's Opposition, Exhibit 5 (Declaration of Arthur Nolan, PwC Partner at 2 (Nolan Declaration) (Feb. 22, 2000) ( 4)). Of those contracts mentioning GSA or GSA's Federal Telecommunications Service, the "purchase orders do not actually relate to services performed for GSA." Id. at 2 ( 5). Mr. Nolan states that those task orders deal with work for the United States Marine Corps and the Department of Defense and are not related to the FTS2000 contract. Id. Those contracts listing the Department of the Treasury, in the view of Mr. Nolan, have nothing to do with the FTS 2000 program. Many were task orders for the United States Customs Service. Nolan Declaration at 2 ( 6). For example, one task order for the United States Customs Service involved cost-benefit analysis training to managers and executives in the Customs Service. Id. at 3 ( 6g). Another order was for procurement assistance and advice on managing seized properties. Id. at 3 ( 6d). Two task orders required PwC to create a resource allocation model to assist the Customs Service in annual budgeting. Id. ( 6e). Another task order was to perform and cost-benefit analysis of the Customs Services' overtime scheduling system. Id. at 4 ( 6o). One task order for the United States Mint, another Treasury bureau, required one of PwC's predecessors, and later PwC, to assist the Mint in developing accounting controls and procedures. Nolan Declaration at 3 ( 6g, 6j). One task order for the Comptroller of the Currency involved review of the Department's Financial Services Control environment. Id. ( 6c). A third task order for the IRS involved development of a project management training course. Id. ( 6b). One major task order for the IRS involved PwC's reviewing "Y2K" compliance procedures used by the telecommunications and tax processing software systems. PwC did not test or work on the systems themselves. Id. at 4 ( 6k). In a supplemental filing of February 18, 2000, GSA argues that "[it] recently learned that PwC performed at least one FTS2000 contract for GSA. The enclosed declarations establish that Price Waterhouse, one of PwC's predecessor entities, performed a subcontract in which it assisted and/or developed the billing system by which Sprint and AT&T bill GSA for FTS 2000 services." Letter from Respondent to Board (Feb. 18, 2000). These statements are supported by the declarations of Mr. Robert R. Menna, an employee of Mitretek and its predecessor MITRE, and Mr. Roger Coney, a senior manager at Mitretek. Mr. Menna states that in 1990 or 1991 he worked on the FTS2000 project with GSA in his capacity as a MITRE contractor support employee. He was developing a technique to benchmark against market prices the Government's prices from its FTS2000 contractors AT&T and Sprint. He recalls that he had to work with another GSA contractor, Centel Corporation (Centel), which had the TAMS contract. Price Waterhouse was a subcontractor to Centel. Centel was developing sampling and statistical methods for selecting telephone calls from a Government database for use in the pricing exercises. Mr. Menna states that "I recall attending meetings over in Reston with both Price Waterhouse and Centel personnel, but my recollection is that Price Waterhouse was doing most of the substantive work there." Menna Declaration (Feb. 18, 2000). Mr. Coney recalls similar involvement with Price Waterhouse personnel in 1989 on FTS2000 benchmark pricing issues. Coney Declaration (Feb. 18, 2000). Neither declarant identifies the Price Waterhouse personnel who worked on the price benchmarking exercise. AT&T's response is that this alleged conflict is both too remote and too vague to merit disqualification of PwC from acting as appellant's damages expert or consultant in this case. Appellant's Opposition at 6. By letter dated February 16, 2000, received by the Board on February 28, GSA alleges that PwC has a disqualifying conflict of interest by virtue of PwC's acting as independent auditor of certain GSA accounts under the Chief Financial Officers Act of 1990, Pub. L. No. 101-576. GSA argues that: In the course of PwC's audits of GSA, PwC has had and continues to have access to privileged agency information, including financial statements and other records of the Federal Technology Service (formerly the Federal Telecommunications Service] and the Information Technology Fund. PwC also has had and continues to have special access to senior GSA management in connection with its audits for Fiscal Years 1998 and 1999. As it did in Grumman, [ ] [Foot # 2 ] the Board should disqualify PwC to preclude any possibility that confidential information acquired by PwC from GSA might be used to GSA's disadvantage in the present matter. ****************** Footnote Begin ********** [Foot # 2 ] GSA refers to the case of Grumman Data Systems v. Department of the Air Force, GSBCA 11939-P, 93-1 BCA 25,407 (1992). ****************** Footnote End ************ Respondent's Supplement at 2. [Foot # 3 ] GSA attached to its supplemental filing what it considered to be pertinent portions of GSA's 1998 Annual Audit Report and PwC's Report of Independent Accountants. ****************** Footnote Begin ********** [Foot # 3 ] In its supplement, GSA states that should PwC continue to serve as appellant's expert in this case, GSA will consider PwC disqualified for further audit work for GSA because of alleged lack of independence. Respondent's Supplement at 2. ****************** Footnote End ************ In its report, prepared under the auspices of the Office of the GSA Inspector General (OIG), PwC described its responsibilities: We have audited the accompanying balance sheets of the General Services Administration (GSA Consolidated), the FBF, the GSF, and the ITF [ ] [Foot # 4 ] as of September 30, 1998, and the related GSA Consolidated and individual fund statements of net cost and changes in net position, and GSA Combined and individual fund statements of budgetary resources and financing for the fiscal year then ended. Our responsibility is to express an opinion on these financial statements based on our audits. ****************** Footnote Begin ********** [Foot # 4 ] FBF is the Federal Buildings Fund, GSF is the General Supply Fund, and ITF is the Information Technology Fund. ****************** Footnote End ************ PwC made certain recommendations and tested management's assertions that GSA's financial systems complied with federal financial management systems standards. PwC found that as of September 30, 1998, GSA had effective internal controls over the funds, and that, save for two areas of non-conformance pertaining to OMB Circular A-130, GSA's financial management systems substantially complied with all other federal financial management systems requirements, applicable federal accounting standards, and the United States Government Standard General Ledger at the transaction level during fiscal year 1998. PwC also made certain recommendations as to the necessity for logical and physical access controls over GSA's information technology environment, and the advisability of controls over the FBF and inter-fund transfers. As to this activity, AT&T argues: "The truth is that PwC's general audit work does not have a substantial relation to the contract-specific damages work for which the engagement team has been retained; and that, in any event, no member of the engagement team has any knowledge of any of the particulars of PwC's audit work for GSA." Appellant's Opposition at 5. Discussion A court, or board, possesses the inherent power to disqualify experts; the inherent power stems from the tribunal's duty to preserve the fairness and integrity of judicial proceedings. United States ex rel., Cherry Hill Convalescent Center v. Healthcare Rehab Systems, Inc., 994 F. Supp. 244, 248 (D. N.J. 1997). The party seeking disqualification has the burden of establishing that disqualification is appropriate. Id. at 249; English Feedlot, Inc. v. Norden Laboratories, Inc., 833 F. Supp. 1498, 1501-02 (D. Colo. 1993). For a full explanation of the issues, we must discuss the differing ethical standards applicable to attorneys and accountants. To illustrate the ethical standards applicable to attorneys, in this case we focus on the rules of the District of Columbia Bar Association (D.C. Bar), since the Board and counsel representing the parties are located in Washington, D.C. Lawyers are bound to represent their clients zealously within the bounds of the law. See, e.g., D.C. Bar Rule 1.3. Consequently, D.C. Bar Rule 1.10 implements an imputed disqualification rule. When a lawyer becomes associated with a firm, the firm may not knowingly represent a person in a matter which is the same as, or substantially related to, a matter with respect to which the lawyer had previously represented a client whose interests are materially adverse to that person and from whom the lawyer has in fact acquired confidential information. D.C. Bar Rule 1.07(b) cmts. 3, 11; D.C. Bar Rule 1.10(b). [Foot # 5 ] ****************** Footnote Begin ********** [Foot # 5 ] The Rules of the District of Columbia Bar are found at the Bar's Website: www.dcbar.org. ****************** Footnote End ************ The ethical rules for accountants are different. An accountant is required, in the performance of any professional service, to maintain objectivity and integrity and be free of any conflict of interest. Rules of the American Institute of Certified Public Accountants (AICPA). The AICPA explains: The CPA as an expert witness has a role that differs from that of an attorney. The CPA is not presented as an advocate, but rather is presented to the trier of fact as someone with specialized knowledge, training and experience in a particular area and presents positions with objectivity. The function of the CPA as an expert witness is to assist the trier of fact in understanding complex or unfamiliar concepts. The CPA expert is not expected singlemindedly and one-sidedly to offer only evidence and opinions that help the client. The CPA is expected to offer an objective opinion, based on knowledge and experience of how the issues at hand should be interpreted by the trier of fact. AICPA Special Report 93-2, Conflict of Interest in Litigation Services Engagements (AICPA Handbook) 72.105.21. [Foot # 6 ] A conflict of interest is based on fact, rather than appearance. Id. 72.105.4. Consequently, under the AICPA ethical standards, if a tax CPA provides company A with tax advice and compliance reporting, it is not a violation of the AICPA ethical standards if a partner in the litigation services portion of the tax CPA's accounting firm assists company B in developing a damages case against company A, providing that the matter is totally separate from the tax engagement. If the damages expert has had no access to confidential information and establishes screening procedures to avoid a conflict, then the damages expert may serve without violating the AICPA's conflict rules. Id. 72.110.05.06. ****************** Footnote Begin ********** [Foot # 6 ] At the Board's request, counsel for AT&T provided relevant portions of the AICPA rules and handbook by submission of February 23. ****************** Footnote End ************ Federal courts have refused to apply the strict attorney conflict standard to experts because of the differing roles attorneys and experts (including accountants) play in the litigation. The federal courts recognize that attorneys are advocates of their clients' positions and thus owe a higher level of fiduciary duty to the client than do experts, who act as sources of information to educate the parties and the trier of fact as to the evidence. Cherry Hill Convalescent Center, 994 F. Supp. at 249; Cordy v. Sherwin-Williams Co., 156 F.R.D. 575, 579 (D. N.J. 1994); English Feedlot, Inc., 833 F. Supp. at 1501. Courts apply what is called a two-pronged test to determine if experts should be disqualified when they have "switched sides": (1) Was it objectively reasonable for the first party who retained the expert to believe that a confidential relationship existed? and (2) Did that party disclose confidential information to the expert? Cordy, 156 F.R.D. at 580. Confidential information is information that is (a) protected by an evidentiary privilege, (b) work product, or (c) not otherwise discoverable. Maron Construction Co. v. General Services Administration, GSBCA 13625, 98-1 BCA 29,496, at 146,352. In Cordy, a railroad crossing accident case, the court disqualified a forensics engineer from testifying for defendant, when the engineer had been earlier retained by the plaintiff and had been privy to plaintiff counsel's work product in that same litigation. 156 F.R.D. at 580-81. In Marvin Lumber & Cedar Co. v. Norton Co., 113 F.R.D. 588 (D. Minn. 1986), an independent testing laboratory had worked for plaintiff and sought to become a defendant's expert in litigation against the plaintiff. The court disqualified the expert, finding that the subject matter of the prior relationship clearly impinged on the litigation. Id. at 591. [Foot # 7 ] ****************** Footnote Begin ********** [Foot # 7 ] The court also stated that the standard for expert disqualification is similar to attorney disqualification in that experts may be disqualified "even without any predicate showing of actual breach." Marvin Lumber, 113 F.R.D. at 591. This aspect of the decision has been questioned by other courts and by this Board. Maron Construction Co., 98-1 BCA at 146,352 n. 1; Cherry Hill Convalescent Center, 994 F. Supp. at 250-51. ****************** Footnote End ************ Similarly, in Grumman Data Systems see supra note 2, this Board disqualified a consultant from assisting the Department of the Air Force in justifying its best value analysis, where the expert had analyzed the same product, in a different protest, for the protester's subcontractor, AT&T. We found that the consultant had gained confidential information in the previous protest about AT&T's attorney's work product and the views of other consultants regarding the evaluation of the product. 93-1 BCA at 126,595. Earlier, in LHL Realty Co., GSBCA 10651, 92-3 BCA 25,126, we had disqualified an appraiser from acting as the Government's consultant in critiquing a Government appraisal report, when the appraiser had conducted tax appraisals of the same property for appellant. We concluded that, by virtue of the tax appraisals, the appraiser had obtained from appellant confidential information about the building, and there was a possibility that information could be used to appellant's disadvantage. Id. at 125,277. There is a third prong to the test in the cases where the alleged conflict is more subtle: Has there been a showing that the expert has used or may use any confidential communications from the first client to the first client's disadvantage in the subsequent litigation? The court in Paul v. Rawlings Sporting Goods Co., 123 F.R.D. 271, 277 (S.D. Ohio 1988), posed this question in a case where an expert mechanical engineer had been tentatively engaged by Rawlings to test baseball helmets in response to liability suits against Rawlings claiming that the helmets' defective design resulted in head injuries to batters. The discussions between Rawlings and the expert went as far as the expert advising Rawlings' attorney how arterial injuries to the head might occur without the skull fracturing. Despite these contacts with Rawlings, the expert became an expert for a plaintiff who had sued Rawlings over a baseball injury. Rawlings moved to disqualify the expert, but the court refused disqualification on the ground that there was no showing that the expert would use information obtained from Rawlings to Rawlings' detriment in the litigation. Instead, the court concluded that the expert's report to plaintiff was based on the expert's previous experience in testing baseball helmets, not on confidential information obtained from Rawlings. Id. at 280. Similarly, in In re Ambassador Group, Inc., 879 F. Supp. 237 (E.D. N.Y. 1994), the court refused to disqualify an accountant from providing consultant services to counsel for defendant Coopers & Lybrand in litigation brought by a receiver. The accounting firm in which the accountant was a partner had provided and was providing accounting services to the receiver who had brought suit against Coopers & Lybrand. The receiver sought disqualification of the accounting partner because the accounting firm, by virtue of the continuing relationship with the receiver, knew the receiver's modus operandi, patterns of operations, and decision-making processes. The court concluded that "the receiver also fails to particularize how knowledge of the receiver's modus operandi would be prejudicial to it in the Ambassador litigation. Coopers & Lybrand's purported attempt to transfer liability to the receiver for the shortfall does not render the receiver's methodology confidential. The receiver's potential accountability for the Ambassador receivership is simply not germane." Id. at 245. In Cherry Hill Convalescent Center, 994 F. Supp. at 250-51, the court refused to disqualify an accountant who had performed general accounting services for a client and ended up as an expert in litigation against that client. The court concluded that the expert had not received confidential communications regarding the litigation from his first client, although he had received discoverable, but confidential business information about that client. In Maron Construction Co., GSBCA 13625, 98-1 BCA 29,496, we refused to disqualify a scheduling expert who allegedly switched sides because there was no showing that, when working for GSA, the expert had received any confidential information from GSA. The possibility of a transfer of confidential information may be obviated by a protective wall between the expert and members of the expert's firm possessing the confidential information. Panduit Corp. v. All States Plastic Manufacturing Co., 744 F.2d 1564, 1580 (Fed. Cir. 1984); In re Ambassador Group, Inc., 879 F. Supp. at 245. Here, each member of the PwC engagement team has stated that, during previous engagements for PwC, he or she did not learn any confidential, privileged or proprietary information belonging to GSA, Treasury or the IRS that could be used by the team member or anyone at PwC to the detriment of GSA, Treasury or IRS. PwC has put in place secure and effective screening mechanisms to separate the members of the PwC engagement team from other Government work PwC performs. Each member of the PwC engagement team i) will have no discussions or communications with any PwC person (other than a member of the AT&T FTS2000 engagement team) with respect to this engagement; ii) will not request, seek, or accept access to any documents or information relating to services performed for the GSA from any PwC personnel other than a member of the AT&T FTS2000 engagement team; iii) will not provide access to documents or information relating to representation of AT&T in the above matter to persons engaged in the performance of services to the GSA; iv) understands that he or she is responsible for ensuring these restrictions on the flow of information; v) understands that all documents received or created in connection with the engagement will be stored in secure locations and will remain in the possession of the AT&T FTS2000 engagement team members; and vi) understands that a proper legend will be applied to all documents. The dedicated computer hard drive provides an added measure of security. Furthermore, respondent has not demonstrated that any confidential information possessed by PwC resulting from PwC's previous work with GSA or with other federal agencies would be relevant to the purpose for which appellant hired PwC in this matter. PwC's role is limited and specific in this appeal: to provide expert opinion on those items listed in AT&T's Initial Disclosure Regarding Experts (Feb. 18, 2000) 1-3. Those items focus on appellant's alleged damages associated with AT&T's claims arising from GSA's alleged failure to transition Treasury and IRS 1-800 service promptly and within the time frame contemplated by the contract. See Complaint, Counts I-IV, alleged constructive change in Count V, and the Government's affirmative claim. Respondent argues generally that PwC has obtained confidential information on the FTS 2000 contract because, as a subcontractor to Centel, PwC personnel were working on cost benchmarking from 1989 to 1991. Respondent does not explain why that information was confidential, or why it is relevant to the transition of service effort and other performance of the FTS 2000 contract after the award of contract modification PS251 on December 1, 1995, see Appeal File, Exhibit 8. Finally, GSA notes that in 1998 and 1999, PwC audited GSA's financial statements. GSA argues that PwC also has had and continues to have special access to senior GSA management in connection with its audits for fiscal years 1998 and 1999. GSA does not explain what confidential information PwC may have gained from that special access, how, in light of the screening arrangement in place, members of the PwC engagement team would have knowledge of the confidential information, or how use of the information would be detrimental to GSA in light of PwC's limited scope of work in this litigation. [Foot # 8 ] ****************** Footnote Begin ********** [Foot # 8 ] We do not consider or comment on GSA's argument that PwC would be disqualified from further audit work for GSA if PwC continues to serve as AT&T's expert. See supra note 3. That is a matter between PwC and GSA, not for this Board. Our task is limited to deciding whether PwC must be disqualified from serving as AT&T's expert in this litigation. ****************** Footnote End ************ GSA's motion is without merit and is DENIED. __________________________ ANTHONY S. BORWICK Board Judge