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Securities and Exchange Commission v. Warren D. Nadel

April 16, 2012

SECURITIES AND EXCHANGE COMMISSION, PLAINTIFF,
v.
WARREN D. NADEL, WARREN D. NADEL & CO., REGISTERED INVESTMENT ADVISERS, LLC, AND KATHERINE NADEL DEFENDANTS.



The opinion of the court was delivered by: A. Kathleen Tomlinson, Magistrate Judge:

ORDER

Pending before the Court are two motions: (1) Defendants' motion to compel the production of testimony and documents concerning the compensation received by the Plaintiff Securities and Exchange Commission's ("Plaintiff" or "SEC") expert witness, Dr. Robert Porter and (2) Defendants' motion to compel the production of certain interview notes created by non-attorneys discussed in a prior Order of this Court.

For the reasons set forth below, the Court DENIES, in part, Defendants' motion to compel the production of Dr. Porter's compensation information and DENIES Defendants' motion to compel the interview notes.

I. MOTION TO COMPEL DR.PORTER'S COMPENSATION INFORMATION

A. Background

Dr. Porter is an Assistant Professor of Finance at Iowa State University who is currently serving at the SEC's Division of Risk, Strategy and Financial Innovation pursuant to an Intergovernmental Personnel Act agreement awarded in June 2010. DE 46-1. Pursuant to the agreement, the SEC states that Dr. Porter receives his regular compensation from Iowa State University and there is no agreement between the SEC and Dr. Porter regarding any additional compensation. Id.

On January 23, 2012, Defendantsmoved to compel the production of Dr. Porter's employment agreement and related compensation information. DE 31. Plaintiff opposed the motion. DE 33. Later that week, on January 27, 2012, the parties submitted a joint letter stating that they had resolved "a discovery dispute that arose earlier this week" with respect to Dr. Porter. DE 35. In light of this statement, the Court denied Defendants' motion to compel as moot. See Electronic Order Dated January 30, 2012. Thereafter, counsel for Defendants contacted Chambers to inform the Court that the dispute referred to in the January 27, 2012 letter was not the motion to compel Dr. Porter's compensation information, but rather was a separate dispute that had not previously been brought to the Court's attention. Counsel was instructed to re-file the motion to compel if Defendants still sought judicial intervention.

On February 24, 2012, the Defendants re-filed their motion. DE 45. The SEC opposed the motion on the grounds that it was an untimely request for reconsideration of the Court's prior denial of the motion as moot. DE 46. In the alternative, Plaintiff requested that the Court consider its previously filed opposition which was re-filed as DE 46-1. In light of the fact that the Court denied the motion as moot based on an incorrect understanding that the issue was resolved, the Court will decide the motion on the merits and will consider Plaintiff's opposition.

Although the SEC acknowledged in its letter opposition that some of the issues raised by Defendants may be appropriate for counsel to explore at Dr. Porter's deposition, see DE 46-1 at 2, counsel for Defendants called the Court on March 7, 2012, during Dr. Porter's deposition. Defendants were seeking judicial intervention because Dr. Porter refused to answer any questions concerning his compensation. After hearing from counsel for both sides, I directed that Dr. Porter was not required to answer the questions posed until a ruling was issued on Defendants' motion to compel.

B. Discussion

The SEC objects to the disclosure of Dr. Porter's compensation information because such disclosure would "constitute an invasion of Dr. Porter's legitimate privacy concerns." DE 46-1 at 2. Defendants maintain that information such as the renewability of Dr. Porter's contract with the SEC and the possibility of continued employment or additional compensation may demonstrate bias and is relevant to Dr. Porter's credibility.

Federal Rule of Civil Procedure 26(a)(2) creates a distinction between experts who must provide a written report and those who need only provide a summary of their facts and opinions. An expert witness must provide a report if the witness is "retained or specially employed to provide expert testimony in the case or one whose duties as the party's employee regularly involve giving expert testimony." Fed. R. Civ. P. 26(a)(2)(B) (emphasis supplied). If an expert falls within these parameters, then the expert must include in his or her report "a statement of the compensation to be paid for the study and testimony in the case." Fed. R. Civ. P. 26(a)(2)(B)(iv).

The SEC does not contest the applicability of this section. As such, Dr. Porter would typically be required to provide a statement of the compensation paid for his study and testimony in the case. The Court accepts the representation that Dr. Porter is an "employee" faculty member of Iowa State University who provides services to the SEC via the intergovernmental agreement. Dr. Porter stated that he provided his opinion in this case "'as part of [his] regular employment with the SEC'" and received no compensation other than his "'regular salary.'" DE 45 at 1-2 (quoting Porter Nov. 10, 2011 Report at 2).

Several courts in other federal districts have ruled that in similar cases, where the expert is also an employee, Rule 26 does not require the disclosure of specific salary or benefit information. For example, in Morrow v. Greensouth Equip., Inc., No. 10-CV-137, 2010 WL 5094304, at ...


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