September 23, 2019 | Valuations
Acosta v. Wilmington Trust
In an ongoing ESOP litigation, the defendant trustee’s effort to obtain information on the DOL expert’s prior valuation work for the government was thwarted. In denying the trustee’s motion to compel, the court found the information was protected under Rule 26 of the federal rules of civil procedure.
The U.S. Department of Labor (DOL) sued the trustee over its performance in an employee stock ownership plan (ESOP) transaction. The trustee, which was responsible for representing the interests of the ESOP, violated its fiduciary duties under ERISA when it caused the plan to purchase the outstanding stock in a graphite processing company (Graphite Sales Inc.) for more than fair market value, the DOL alleged.
At this stage in the proceedings, the parties fought over discovery issues. Among other things, the trustee asked the court to order the DOL to disclose information concerning the DOL expert’s valuation work for the government on other ESOP cases. Specifically, the trustee wanted to know how many times the expert had concluded that the ESOP appraiser had erred and how often the expert had concluded the ESOP had overpaid. The trustee maintained it was entitled to this information to show potential bias on the DOL expert’s part.
The DOL contended the trustee wanted information related to the expert’s work as a consulting expert. However, Rule 26(b)(4)(D) barred discovery of “facts known or opinions held by an expert … who is not expected to be called as a witness at trial.” Therefore, the court should deny the request.
The court allowed there was some ambiguity. While Rule 26(b)(4)(D) would “undoubtedly” apply if the expert did not testify in the instant case, it was not entirely clear whether this provision would protect the expert from disclosing facts or opinions in “other matters in which he did not testify,” the court said with emphasis.
But the court found this information was protected under the attorney-client privilege. The plaintiff was the holder of the privilege because the Secretary of Labor was the one who retained the expert in the past matters, the court explained. The court said its ruling aligned with Rule 26(b)’s overall aim: “to bar discovery of attorney communications and encourage frank attorney-expert consultation.”
The court denied the trustee’s motion as to this information and certain other information and documents requested.