The Motion for Rehearing En Banc: Nacchio Responds

The Defense has replied to the Government's motion for a rehearing en banc. The brief makes a number of points (all opposing en banc reconsideration). The most salient argument seems to be the contention that the Defendant was denied an opportunity to provide evidence under the Daubert standard. As the brief noted:

• the petition repeatedly but incorrectly suggests that Nacchio had a full and fair opportunity to defend Fischel’s methodology under Daubert. Pet. 1, 4–5. As the Court explained, “the defense was never permitted to speak to the issue in court. When Professor Fischel was called, the district judge immediately announced that he was excluding the testimony. A defense lawyer asked to speak. The judge silenced him immediately, saying that once the court had ruled, the trial was ‘[n]ot … an interactive process where you get to argue later on.’ App. 3921. When the court does not allow a lawyer to present arguments, we will not penalize him for failing to present them.”

While it is true that there was no Daubert hearing, the issue was whether the Defense should have asked for one.  As the majority on the panel noted: 

• The defense had only one day to respond to the government's 63-page motion, and did not have clear notice that it had to present its Daubert defense at that time. . . Only then did the government file its lengthy motion, which combined an argument that Rule 16 requires disclosure of methodology with an attack on the witness's methodology under Daubert. The defendant may reasonably have interpreted the references to Daubert as arguments about Rule 16, as a request for a Daubert hearing, or perhaps as notice that the government intended to move for such a hearing. The defendant had no reason to think that the Daubert issue would be resolved on the basis of memoranda of law addressed to the Rule 16 issue, which is not the usual procedure.

In other words, the panel concluded that the defense was not on notice that Daubert was at issue and that there needed to be a hearing.  The dissent on the panel had an entirely different view of the matter.

• The district court's exclusion of Professor Fischel's testimony was about Daubert. True, the government first framed its challenge to Professor Fischel's proffered expert testimony as an objection to the sufficiency of Mr. Nacchio's Rule 16 disclosure. However, by the time the district court ruled to exclude Professor Fischel's testimony, it was clear that the court was asking about Daubert. 

• The district court had repeatedly questioned Professor Fischel's methodology--an issue that it must examine under Daubert, not Rule 16.  Thus, Mr. Nacchio should have known that he had to either make the requested showing or request a Daubert hearing. Furthermore, it was incumbent upon Mr. Nacchio, who was offering Professor Fischel as an expert witness, to demonstrate that his proffered expert was qualified to render an expert opinion. Thus, when the district court was asking about methodology, Mr. Nacchio was required to rise to meet his burden of demonstrating that the expert testimony was admissible.

• Mr. Nacchio was on notice that Professor Fischel's qualifications were at issue. As early as the government's first motion regarding Professor Fischel, the government argued that Rule 702 was implicated. Supp. App. at 39. At a March 22, 2007 hearing, both the government and the court raised the concern that there could be issues arising from the Daubert line of cases. Mr. Nacchio's counsel responded, "forewarned is forearmed."

• One week following this exchange, Mr. Nacchio provided his revised expert disclosure, and again, the government responded by raising Daubert concerns. The government filed a 63-page motion to exclude Professor Fischel's expert testimony based on deficiencies in the Rule 16 disclosure and based on Mr. Nacchio's failure to meet his burden to demonstrate that Professor Fischel's testimony was admissible. See App. at 363. The government argued that, in addition to Rule 16, there were numerous grounds for excluding Professor Fischel's testimony, including Rules 401, 403, 602, 702, and 703 of the Federal Rules of Evidence.  

• When Mr. Nacchio responded to this motion the next day, in substance, he addressed Daubert issues in discussing Rule 702 and Professor Fischel's qualifications. See App. at 463-68. Thus, as of his response on April 4, Mr. Nacchio was not only on notice that Daubert was in play, but he also had responded to the Daubert issues.

In other words, the Defense was on notice that Daubert was at issue and did not provide adequate written support for admissibility or request a hearing on the issue.  As Judge Holmes concluded, "The district court made a ruling excluding that testimony because Mr. Nacchio had not met his burden of demonstrating admissibility." 

This is a straight up dispute not about whether the Fischel testimony ultimately met the Daubert standard but whether the Defense met its burden of establishing admissibility.  Should the 10th Circuit hear the case en banc?  To leave the matter standing is to suggest the need for evidentiary hearings even when not requested by the relevant party.  It is a ruling that could potentially result in great inefficiency and interfere with the trial court's discretion. 

But mostly it should be heard because of the appearance of favoritism that exists in this case.  The panel put the government on an accelerated briefing schedule that benefited the Defendant.  The panel that heard the petition for bail pending appeal also kept the merit appeal, raising issues about the neutral assignment of the case.  The case could easily have been returned to the ordinary assignment process and randomly assigned to another panel.  Instead, the oral argument date was scheduled outside the ordinary schedule and the panel allowed to keep the case.  For a discussion of the case and panel assignment in the Tenth Circuit, see The Neutral Assignment of Judges at the Court of Appeals. 

Finally, one has to wonder whether the opinion would have come out the same way had a drug defendant argued for reversal despite having asked for a hearing on the relevant evidentiary issue.  It seems to be a case that provides particular deference to the type of economic analysis often applicable in white collar cases. 

The Defense has requested that if the case is reheard en banc, all of the issues on appeal should be reopened.  Specifically that: 

• it should review the entire case and not artificially limit its review to particular issues selected by the government. Mr. Nacchio’s arguments about the jury instructions, the sufficiency of the evidence, and the limitations on discovery and admissibility of certain classified information were rejected by the panel, but each is a substantial and “close” question, and each was entwined with the Court’s conclusion that the exclusion of Fischel was not harmless because “[t]he record does not otherwise contain ‘overwhelming evidence of guilt.’” Add. 30 (citation omitted). In the interests of justice, if the government’s petition for rehearing en banc is granted, Mr. Nacchio should have the opportunity to present this case in its entirety to the en banc Court.  For example, the panel considered it a “close question,” whether the “risk” of a shortfall in results more than eight months in the future was immaterial as a matter of law.

The Government and Defense briefs on the rehearhing en banc can be found at the DU Corporate Governance web site.