Client of Dr. Phil Can’t Be Forced to Talk, Court Rules

A former Ernst & Young auditor can’t be questioned by Cendant Corp. lawyers in an accounting fraud case about private advice the auditor got from psychologist and TV talk show host Dr. Phil McGraw, a U.S. appeals court has ruled.

McGraw gave advice to auditor Simon Wood about pretrial testimony on whether Ernst & Young bears blame for accounting fraud at Cendant in 1998. Ernst & Young hired McGraw, who co-founded a business that helps firms prepare witnesses for trial, to help Wood.

Lawyers for Cendant, the world’s largest hotel franchiser, wanted to know what the two discussed. The appeals court, based in Philadelphia, agreed with Ernst & Young that those talks were entitled to confidentiality.

“Litigation consultants retained to aid in witness preparation may qualify as non-attorneys who are protected by the work-product doctrine,” a U.S. 3rd Circuit Court of Appeals panel ruled. “The work product of Dr. McGraw is privileged and subject only to limited discovery.”

Cendant and Ernst & Young have sued each other over accounting problems disclosed in April 1998 that caused Cendant stock to lose $14 billion in market value in one day. Cendant settled shareholder suits for $3.2 billion in cash and stock, and Ernst & Young, the former auditor, paid out $335 million.

Cendant lawyers wanted to ask Wood whether he rehearsed testimony with McGraw. Ernst & Young lawyers objected.

McGraw started Courtroom Sciences Inc. in 1989.

Talk show host Oprah Winfrey hired McGraw to help her after cattlemen sued her in 1996, claiming she defamed the beef industry on one of her shows. He now hosts his own show.

From Bloomberg News