Supreme Court Watch: Is Nacchio Expert Ruling Cert-Worthy? (Part I)

Petition raises question when a motion to exclude an expert is filed, what obligations do the parties hold on the admissibility of the expert testimony, in Nacchio v. United States (No. 08-1172)

Will the Supreme Court decide to consider the application and responsibilities of the parties and trial court concerning the admission of expert testimony during the next term? Defendant Joseph Nacchio hopes the Court will vacate his conviction or remand his case after considering the exclusion of his expert’s testimony.

As background, a jury convicted defendant Joseph Nacchio, who was CEO of Qwest Communications International, Inc., on nineteen counts of insider trading and acquitted him on twenty-three counts. He received a 72-month sentence, was fined $19 million, and ordered to forfeit $52 million. Divided panels of the Tenth Circuit reviewed his conviction. On March 17, 2008, a split three-judge panel vacated the conviction. The majority concluded that the trial court erred in excluding the defendant’s expert witness who would have testified about whether economic diversification better explained the pattern of defendant’s stock trades than his insider information. See United States v. Nacchio, 519 F.3d 1140 (10th Cir. 2008). On February 25, 2009, the Tenth Circuit en banc, in a 5 to 4 ruling, reinstated his conviction. See United States v. Nacchio, 535 F.3d 1234 (10th Cir. 2009). The en banc majority concluded that “the exclusion was the obligatory result of Mr. Nacchio’s failure to meet his requisite burden under FRE 702 despite serial opportunities to do so.” Nacchio, 535 F.3d at 1250. Defendant Nacchio was originally ordered to begin serving his prison sentence on March 23, 2009, but received a last-minute stay by the district court based, in part, on his petition for review before the Supreme Court. See Nacchio's Surrender Date Postponed; Nacchio Wins Go-To-Prison Reprieve.

Defendant Nacchio now has asked the Supreme Court to consider his case. His certiorari petition presents the following three issues:

“Joseph P. Nacchio, the former CEO of Qwest Communications, was convicted of insider trading for selling Qwest stock while knowing internal Qwest predictions and interim operating results allegedly placing Qwest at risk of missing its year-end 2001 public revenue projections eight to twelve months in the future. The Tenth Circuit panel and en banc opinions affirming that conviction conflict with holdings of other circuits and raise several questions meriting review.

  1. “Whether the defendant is entitled to acquittal or a new trial because the Tenth Circuit, in conflict with the standards applied in other circuits, erred by upholding the jury instructions bearing on the materiality of the type of information at issue, and by holding that there was sufficient evidence that the defendant failed to disclose material information and knew it.
  2. Whether the judgment must be reversed and remanded for a new trial because the Tenth Circuit approved the use of impermissible procedures for the exclusion of expert testimony under Rule 702 that conflict with decisions of other circuits.
  3. Whether the Tenth Circuit’s decision should be summarily reversed because it misapplied decisions of this Court, mischaracterized the district court’s reasoning, failed to resolve all the issues presented, and held that Nacchio failed to address an issue that was a principal focus of his brief.”

Petition for A Writ Of Certiorari.

With regard to the second issue, the case essentially concerns the obligations of the proponent to demonstrate the admissibility of expert testimony. The petitioner seeks to frame the issue as requiring the trial court to permit the proponent further opportunity to satisfy its burden:

“Of course Nacchio bore the ultimate burden of laying a sufficient foundation for admissibility at trial. But when a litigant moves in limine to exclude evidence the movant bears the burden of producing facts sufficient to require a hearing or exclusion. The posture is like summary judgment, where the movant has the prima facie burden to prove the absence of a triable dispute. Such motions should be denied without a hearing if the movant relies only on the opponent’s ultimate burden of proof. A motion to exclude certainly cannot be granted on such a thin basis. The government never made even a prima facie showing of unreliability; it simply argued that Fischel’s methodology was undisclosed. The district court could have accelerated Nacchio’s burden by clearly ordering him to proffer the grounds for Fischel’s admissibility in writing. Contrary to the en banc court’s reasoning, however, the mere filing of a motion pointing out that the foundation has not yet been laid does not alert the defendant that he may be precluded from laying that foundation at the usual time—on the stand.

“Commentators agree that Kumho Tire and basic evidentiary principles require a movant seeking to exclude expert testimony to establish serious reasons for doubting its reliability, on an adequate evidentiary record. This is an important and recurring issue on which the lower courts are divided.”

Petition for A Writ Of Certiorari, at 28-29, 31 (citations omitted, footnote omitted). The en banc majority rejected this argument after concluding that the defendant essentially had sufficient opportunity to meet it burden.

Nacchio also suggested "that the trial court was obligated to allow the defendant to make a further showing before ruling on the admissibility of the expert evidence before trial. The petitioner contends that the trial court abused its discretion by disallowing “without permitting argument, voir dire, or a hearing.” Petition for A Writ Of Certiorari, at 14, 32.

However, the Supreme Court has held that the trial court may exercise its discretion in how the “gatekeeping” role is fulfilled. See, e.g., Kumho Tire Co. v. Carmichael, 526 U.S. 137, 152 (1999)(“The trial court must have the same kind of latitude in deciding how to test an expert’s reliability, and to decide whether or when special briefing or other proceedings are needed to investigate reliability, as it enjoys when it decides whether that expert’s relevant testimony is reliable.”) (emphasis in original).

Nacchio also argued that the en banc majority conflated the pretrial expert discovery standards with the showing required to admit expert testimony under FRE 702:

“The Tenth Circuit’s decision also transforms criminal expert practice. Criminal defendants have no obligation under Rule 16 to offer disclosures sufficient to justify the admissibility of an expert’s testimony under Daubert, and ordinarily may establish the reliability of expert testimony by questioning the witness. But the Tenth Circuit has now held that the government can force defendants to supply such disclosures -- the equivalent of a civil expert report and “all available arguments for the testimony’s admissibility,” -- simply by filing a motion pointing out that the defendant has not yet disclosed what the rules did not require him to disclose. The government will exploit this loophole in every case, collapsing the civil and criminal expert rules and threatening the constitutional principle that a defendant cannot be forced to prematurely disclose his defense. The consequences for the administration of justice merit review.”

Petition for A Writ Of Certiorari, at 31-32 (appendices pages omitted).

It has been ten years since the last of the so-called trilogy of landmark cases of the Supreme Court concerning expert testimony. See Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999) (extending Daubert to technical and other specialized expert testimony); General Electric Co. v. Joiner, 522 U.S. 136, 141 (1997) (holding "that abuse of discretion is the proper standard by which to review a district court's decision to admit or exclude scientific evidence"); Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 589 (1993) (holding that the trial court’s function as a “gatekeeper” is to “ensure that any and all scientific testimony or evidence admitted is not only relevant, but reliable” to assist the trier of fact). It remains to be seen whether this case is cert-worthy for the Supreme Court to clarify the role of the trial court in ruling on expert testimony, the burden on the proponent of expert testimony, and whether the trial court abused its discretion in excluding the defense expert? The Solicitor General’s response to the petition is due by April 22, 2009. See Case Docket.

For prior posts on the Nacchio case, see:

For other cases addressing the discretion of a trial court to hold a Daubert hearing, see:

Federal Rules of Evidence