motion not to strike harvey pitt fannie

UNITED STATES DISTRICT COURT

DISTRICT OF COLUMBIA

In re Federal National Mortgage

Association Securities, Derivative, and

“ERISA” Litigation

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MDL No. 1668

In Re Fannie Mae Securities Litigation

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Consolidated Civil Action No.: 1:04-CV-01639

Judge Richard J. Leon

LEAD PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO (1) FANNIE MAE’S

MOTION TO STRIKE EXPERT REPORT AND AWARD FEES AND COSTS (DOC.

891) AND (2) DEFENDANTS’ MOTION TO STRIKE EXPERT WITNESS, OR IN THE

ALTERNATIVE, TO COMPEL THE IMMEDIATE CONTINUATION OF HIS

DEPOSITION (DOC. 892)

Harvey Pitt, former Chairman and General Counsel of the U.S. Securities and Exchange

Commission, is an expert witness for Lead Plaintiffs and his report offers significant support of

Lead Plaintiffs’ claims, particularly the claims against Defendant Franklin D. Raines, former

Chairman of the Board and Chief Executive Officer of Fannie Mae. Perhaps realizing the

damage that Mr. Pitt’s report did to his client’s defense, throughout the six-hour course of the

first day of Mr. Pitt’s deposition on February 24, 2011, counsel for Defendant Raines adopted a

strategy to intimidate, harass, and “annoy, embarrass and oppress” Mr. Pitt by repeatedly

interrupting him, mischaracterizing his testimony, and rebuking him for not providing answers

that counsel found satisfactory.1

Lead Plaintiffs’ counsel made numerous attempts throughout the six hours of Mr. Pitt’s

deposition to prevail upon Mr. Raines’ counsel to stop harassing Mr. Pitt and to allow Mr. Pitt to

actually respond to the questions posed without interruption. Since Mr. Raines’ counsel refused

to stop, this left counsel for Lead Plaintiffs with no choice but to suspend the deposition and seek

1 See Lead Plaintiffs’ Motion for a Protective Order (filed February 25, 2011) (Doc. #890), and memorandum in

support, for numerous examples of Mr. Raines’ counsel’s harassing conduct.

Case 1:04-cv-01639-RJL Document 897 Filed 03/02/11 of 10

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a protective order from the Court to prevent the misconduct from continuing throughout the

second day of deposition,2 which they promptly did on February 25, 2011 (Doc. #890).

Mr. Pitt made a statement on the record at the beginning of the second day of his

deposition, expressing concern about Mr. Raines’ counsel’s conduct: “Yesterday’s deposition

was troubling to me, because I was not able to finish a good portion of my sentences without

interruption, and as I indicated at various points on the record, I did consider that to be

disrespectful. I am not a partisan in this case. I am an expert, and I am testifying as to my

views.” Id. at 328:17-329:2. Mr. Pitt also advised Defendants that he had not been provided

with Mr. Nicolaisen’s deposition testimony from this case, about which defense counsel had

asked questions the day before, and that he wished to read Mr. Nicolaisen’s “deposition more

carefully and consider whether [he needed] to amend, supplement, or otherwise take steps with

respect to the expert report that [he] filed.”3 Mr. Pitt’s request to review Mr. Nicolaisen’s

testimony did not change the fact that Lead Plaintiffs’ counsel suspended the deposition to “file a

motion for (sic.) protective order under Rule 26, as a result of the – what we perceived to be

clear violations of that rule regarding the conduct of the examiner with respect to this witness.”

Id. at 329:14-330:13.

Contrary to Defendants’ unsupported suggestion, Lead Plaintiffs did not “conceal” Mr.

Nicolaisen’s testimony from Mr. Pitt. All counsel walk a fine line in assisting an expert witness

in preparing his expert report. On the one hand, counsel must be cognizant that the report must

reflect the expert’s (rather than counsel’s) views of the evidence. On the other hand, counsel

2 Paragraph 4 of Case Management Order No. 8 (Doc. 880) provides that expert depositions “shall not exceed two

days.” Defendants requested, and Plaintiffs agreed, to examine Mr. Pitt for two days of deposition – February 24

and 25. 3 Deposition of Harvey L. Pitt, February 25, 2011, at 328:17-329-2 (attached as Exhibit 1 to Lead Plaintiffs’ Motion

for a Protective Order (Doc. 890)).


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must provide the expert with reasonable access to the relevant evidence in the case with respect

to the topics being opined upon by the expert, so that the expert has had a proper opportunity to

make his evaluation and opinions. In this case, counsel for Lead Plaintiffs inadvertently failed to

provide Mr. Pitt with Mr. Nicolaisen’s deposition.4 Although counsel for Lead Plaintiffs believe

that nothing in Mr. Nicolaisen’s testimony conflicts with or in any way negatively impacts Mr.

Pitt’s opinions and conclusions in his report, once Defendants questioned Mr. Pitt about that

testimony and Lead Plaintiffs’ counsel were made aware that they had not provided Mr. Pitt with

Mr. Nicolaisen’s deposition testimony, they promptly provided Mr. Pitt with a copy of the

testimony. Under Rule 26(e) of the Federal Rules of Civil Procedure, Mr. Pitt has the absolute

right to review evidence he has not previously seen that Defendants seek to question him about

and to supplement his report in a timely manner if he believes that his report is incomplete or

incorrect in some material respect as a result of that evidence.

The deposition was suspended because the harassing and abusive method of questioning

Mr. Raines’ counsel employed throughout the six hours of Mr. Pitt’s first day of testimony was

not appropriate or permissible. Lead Plaintiffs properly suspended the deposition to move for a

protective order, to which they are entitled under the Federal Rules of Civil Procedure, to curtail

Mr. Raines’ counsel’s conduct, and to provide a proper atmosphere within which Defendants

could elicit appropriate testimony from Mr. Pitt.

LEGAL ARGUMENT

The not-so-subtle subtext of Defendants’ motion is that they recognize that (1) Mr. Pitt’s

deposition testimony damaged their case, and (2) Mr. Raines’ counsel’s conduct at Mr. Pitt’s

deposition violated Rule 30(d) of the Federal Rules of Civil Procedure; and, accordingly,

4 Defendants Raines, Howard and Spencer have pending a motion to strike a large portion of Mr. Nicolaisen’s

deposition testimony (Dkt. No. 838, filed Jan. 7, 2010).


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Defendants are attempting to shift the focus to minimize the damage. Based solely on the fact

that Mr. Pitt has indicated that he wants to review Mr. Nicolaisen’s deposition testimony that

Defendants questioned him about and have sought to exclude from the evidence in the case,

Defendants have moved to strike his entire report. This is an extreme sanction for what amounts

to an expert witness indicating that he needs to review a deposition transcript to ensure that his

report and previous testimony remain fully complete and accurate. B. Braun Melsungen AG v.

Terumo Medical Corp., C.A. No. 09-347, 2010 WL 4438041 (D. Del. Oct. 28, 2010) (noting that

excluding an expert report is an “extreme sanction, not normally to be imposed absent a showing

of willful deception or flagrant disregard . . . “).

Indeed, under Rule 26(e), Mr. Pitt “must supplement or correct” his expert report “in a

timely manner if [he] learns that in some material respect the disclosure or response is

incomplete or incorrect, and if the additional or corrective information has not otherwise been

made known” to the expert. See also Rule 26(e)(2) (noting that an expert witness’s “duty to

supplement extends both to information included in the report and to information given during

the expert’s deposition”). This is precisely what Mr. Pitt has proposed – an opportunity to

review this new evidence to determine whether or not it has any bearing on his expert report or

his previous testimony, nothing more and nothing less.

Courts will generally consider the following factors in determining whether to strike

expert reports: (1) the prejudice or surprise against whom the excluded witnesses would have

testified, (2) the ability of that party to cure the prejudice, (3) the extent to which allowing the

evidence would disrupt the trial, and (4) the non-disclosing party’s explanation for its failure to

disclose the evidence. Konstantopoulos v. Westvaco Corp., 112 F.3d 710, 719 (3d Cir. 1997).


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In this case, first, Defendants cannot demonstrate any prejudice in allowing Mr. Pitt to

simply review the requested deposition testimony and then conclude his second day of

deposition. They have already prepared and asked their deposition questions for Mr. Pitt on this

issue; Mr. Pitt has already admitted that he had not reviewed Mr. Nicolaisen’s deposition

testimony in drafting his report. Second, any perceived prejudice in this matter can easily be

cured by allowing Mr. Pitt to review Mr. Nicolaisen’s testimony and explain on the record

whether his review has caused him to amend, supplement or reject any of his previous opinions.

Third, Defendants cannot convincingly argue that allowing Mr. Pitt to review Mr. Nicolaisen’s

deposition testimony would disrupt a trial that has not yet been scheduled. And, fourth, Lead

Plaintiffs’ counsel have already admitted that failing to provide Mr. Pitt with Mr. Nicolaisen’s

deposition testimony was an unintentional oversight and that they promptly provided him with a

copy once it came to light. Under the Westvaco analysis, therefore, Defendants have failed to

demonstrate any legitimate basis for striking Mr. Pitt’s expert report.

A very recent decision from the Southern District of West Virginia is particularly

instructive in this context. Kanawha-Gauley Coal & Coke Co. v. Pittston Minerals Group, Inc.,

Case No. 2:09-cv-01278, 2011 WL 320909 (S.D.W.Va. Jan. 28, 2011). In that case, a

defendant’s expert sought to supplement his original expert report based on information

discussed in the expert’s deposition. Id. at *2. There, the expert “recognized [a] flaw in his

methodology, and after his deposition produced a new Exhibit 5 to his report.” Id. The plaintiff

moved to strike the supplement on the ground that it was an untimely “end-run around the

normal timetable for conducting discovery.” Id. The district court, however, disagreed, noting

that “[t]his is precisely the type of supplementation envisioned by Rule 26(e). An expert

witness, after being deposed by opposing counsel, supplemented his original disclosure to


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include an alternative calculation based on data already in the record. I FIND that the

defendant’s first supplemental disclosure is timely supplementation under Rule 26(e).” Id.

(emphasis in original).

If Mr. Pitt reviews Mr. Nicolaisen’s testimony and in fact determines that he needs to

supplement or amend his expert report, it would be no different than the Pittston Minerals expert

recognizing a flaw in his methodology and supplementing his report based on “data already in

the record” (i.e., Mr. Nicolaisen’s deposition testimony). See also In re Paoli R.R. Yard PCB

Litig., 35 F.3d 717, 791-92 (3d Cir. 1994) (noting that the district court abused its discretion in

excluding an expert witness’s supplemental opinions where there was no demonstrated

prejudice); B. Braun Melsungen AG, 2010 WL 4438041, at *10 (refusing to strike expert report

on the ground that the “Court is not persuaded that Braun is unduly prejudiced by the timing or

substance of the purportedly ‘new’ opinions”). Mr. Pitt was simply fulfilling his duty as an

expert and an officer of the court – ensuring that newly-discovered evidence did not alter his

previously recorded opinions and conclusions. And, Lead Plaintiffs are not, in any way,

suggesting that Defendants are not entitled to question him (in conformance with Rule 30(d))

regarding any review he undertakes. Accordingly, Defendants have offered no legitimate reason

for striking Mr. Pitt’s expert report or testimony.

Perhaps recognizing that they lack a reasonable legal basis for their motion to strike Mr.

Pitt’s expert report, Defendants alternatively request “that Mr. Pitt be required to complete his

deposition on March 3 and 4, 2011.” Defendants’ Memo., at 9. As an initial matter, Defendants

are not entitled to two additional days of testimony when Defendants have already questioned

Mr. Pitt for six hours of one day. At most, then, Defendants are entitled to one additional day of

eight hours to depose Mr. Pitt under Case Management Order #8, which provides that expert


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depositions “shall not exceed two days.”5 Moreover, Lead Plaintiffs should not be required to

reconvene the deposition until this Court rules on Lead Plaintiffs’ Motion for a Protective Order

– which sets forth the reasons for Lead Plaintiffs suspending Mr. Pitt’s deposition in the first

place. As soon as the Court has ruled on their Motion, Lead Plaintiffs will work with Defendants

to schedule a second deposition day for Mr. Pitt at a mutually agreeable time as soon as

possible.6 But, absent this Court’s ruling, Lead Plaintiffs should not be required to reconvene

Mr. Pitt’s deposition in light of Mr. Raines’ counsel’s conduct during Mr. Pitt’s first day of

deposition.

Finally, Fannie Mae’s request for costs is based on a false predicate – that “Lead Counsel

did not take adequate steps to ensure that Mr. Pitt was prepared for his deposition.” Fannie Mae

Memo., at 5. It bears repeating: Lead Plaintiffs suspended the deposition because of the

harassing and oppressive conduct of Mr. Raines’s counsel, which is plainly evident from a

review of the video excerpts from Mr. Pitt’s deposition filed as a supplement to Lead Plaintiffs’

Motion for a Protective Order (Doc. #890). Costs should be assessed only in extreme cases.

Review of the transcript and record shows that while Mr. Raines’ counsel’s conduct meets that

standard, Lead Plaintiffs’ efforts to stop that conduct does not. Moreover, it is misplaced to

suggest that Lead Plaintiffs should pay the costs, and thus condone, the Fannie Mae’s Defendants

continued wasteful spending in this case – including counsel for Franklin Raines sending four

attorneys to the deposition; Fannie Mae sending two attorneys to the deposition; and Timothy

Howard and Leanne Spencer sending one attorney each to the deposition.

5 The Amended Order Establishing Expert Discovery and Deposition Protocol (Dkt. # 649) specifically provides that

it does not apply to expert witness depositions, so those depositions are governed by Fed. R. Civ. P. 30(d)’s

requirements that depositions are limited to 7 hours per day.


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CONCLUSION

For the foregoing reasons, Lead Plaintiffs respectfully request that this Court deny Fannie

Mae’s Motion to Strike Expert Report and Award Fees and Costs (Doc. #891) and Defendants’

Motion to Strike Expert Witness, or in the Alternative, to Compel the Immediate Continuation of

his Deposition (Doc. #892).

Dated: March 2, 2011 Respectfully submitted,

ATTORNEY GENERAL FOR

THE STATE OF OHIO MIKE DEWINE

WAITE, SCHNEIDER, BAYLESS & CHESLEY CO.,

L.P.A.

s/ Stanley M. Chesley

Stanley M. Chesley

s/ James R. Cummins

James R. Cummins (D.C. Bar #OH0010)

Melanie S. Corwin

Christopher D. Stock

Francis P. Karam (Of Counsel)

1513 Fourth & Vine Tower

One West Fourth Street

Cincinnati, Ohio 45202

Telephone: (513) 621-0267

Facsimile: (513) 621-0262

E-mail: [email protected]

Special Counsel for the Attorney General of Ohio

and Lead Counsel for Lead Plaintiffs

BERNSTEIN LIEBHARD LLP

Jeffrey Lerner

10 East 40th Street

New York, New York 10016

Telephone: (212) 779-1414

Facsimile: (202) 298-7678


Special Counsel for the Attorney General of Ohio

and Co-Lead Counsel for Lead Plaintiffs

6 Lead Plaintiffs have already voluntarily agreed to postpone the depositions of two defense experts whose reports

Defendants claim relate to Mr. Pitt’s report.


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COHEN MILSTEIN SELLERS & TOLL PLLC

s/ Daniel S. Sommers

Daniel S. Sommers (DC Bar #416549)

Matthew K. Handley (DC Bar #489946)

1100 New York Avenue, N.W.

Washington, D.C. 20005

Telephone: (202) 408-4600

Facsimile: (202) 408-4699


Local Counsel for Lead Plaintiffs


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CERTIFICATE OF SERVICE

I certify that on March 2, 2011 (i) I electronically filed the foregoing with the Clerk of

Court using the CM/ECF system, which will send notification of such filing to counsel of record

in this matter who are registered on the CM/ECF, and (ii) service was accomplished on any

counsel of record not registered through the CM/ECF system via regular U.S. mail.

s/ James R. Cummins _

James R. Cummins (D.C. Bar #OH0010)


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