FILED

UNITED STATES DISTRICT COURT MAR _ 8 2011

FOR THE DISTRICT OF COLUMBIA

Clerk, U.S. District & Bankruptcy
Courts for the District of Co|umbia

In re Fannie Mae Securities Cons0lidated Civil Action No. 04-1639
Litigation (RJL)
MEMORADUM ORDER

(March _7, 201 l)

Presently before the Court are Lead Plaintiffs’ Motion for a Protective Order
[#890], Fannie Mae’s Motion to Strike Expert Report and to Award Fees and Costs
[#891] and Individual Defendants’ Motion to Strike Expert Witness, or in the Alternative,
to Compel the Immediate Continuation of His Deposition [#892]. These motions arise
out of the deposition of former Securities and Exchange Commission ("SEC") Chairman,
Harvey Pitt, an expert designated by Lead Plaintiffs, which was scheduled for February
24 and 25, 201 l. Early on February 25, 2011, Mr. Pitt, together with Lead Plaintiffs’
counsel, made the decision not to proceed any further with his deposition, thereby
causing the present litigation. After reviewing the pleadings and hearing oral argument
relating to these motions, the Court DENIES Lead Plaintiffs’ motion for a protective
order and GRANTS defendants’ motions to strike. The Court will withhold judgment on
F annie Mae’s motion for fees and costs at this time.l

Lead Plaintiffs argue that the premature termination of Mr. Pitt’s deposition was

justified under Federal Rules of Civil Procedure 26(0) and 30(d). In particular, Rule

1 At the appropriate future time, the Court will invite full briefing and hear argument
regarding what costs shall be assessed in light of these most unfortunate events.

l

30(d) justifies a deponent’s decision to terminate his deposition in the limited
circumstance that the deposition was "being conducted in bad faith or in a manner that
unreasonably annoys, embarrasses, or oppresses the deponent." Fed. R. Civ. P. 30(d).
Under such a circumstance, the deposition is suspended in order to seek a protective
order under Rule 26(c). Id. Outside of such circumstance, however, Rule 37(d) allows
the court to order sanctions when a deposition is frustrated, even if the deposition is
objectionable Fed. R. Civ. P. 37(d).

Based on the representations of Lead Plaintiffs’ counsel during oral argument,
however, it turns out, unfortunately, that the deposition of Harvey Pitt was not actually
terminated because of the manner in which the deposition was being conducted by
defendants’ counsel. To the contrary, when Mr. Pitt learned for the first time on February
24, 2011 that the SEC’s former Chief Accountant, Donald Nicolaisen, had been deposed
in 2009 as a fact witness in this case, he was caught off guard and informed Lead
Plaintiffs’ counsel that evening that he was not willing to continue with his deposition the
next day. Thus, although Mr. Pitt had already opined months earlier about Mr.
Nicolaisen’s testimony before Congress in 2004, he was unwilling to go forward until he
reviewed Nicolaisen’s 2009 deposition testimony and all relevant documents related
thereto.

Of course, the repeated failure by Lead Plaintiffs’ counsel to provide Mr. Pitt with
Nicolaisen’s deposition transcript, both prior to the submission of his expert report and
prior to his deposition, is inexplicable and inexcusable! lndeed, it was Lead Plaintiffs’

counsel that had previously initiated the litigation before this Court that resulted in Mr.

2

Nicolaisen having to be deposed. Even worse, however, is the fact that Lead Plaintiffs’
counsel filed a Rule 26(c) motion for a protective order that was really nothing more than
an artful diversion intended to shift the Court’s attention from their two "mistakes" and
Mr. Pitt’s resulting unwillingness to go forward with the second day of questioning on
February 25. Filing such pleadings is an abuse of the litigation process and completely
unacceptable, especially when Lead Plaintiffs’ counsel summarily rejected defendants’
counsel’s repeated overtures to contact this Court to help resolve the impasse that had
occurred.

As a result, this Court finds that the prejudice to defendants caused by the
premature termination of Mr. Pitt’s deposition is substantial and not curable by simply
allowing the deposition to continue anew. At this point, Mr. Pitt has had over a week to
review new documents and reevaluate his earlier testimony and expert report, which by
his own admission on the morning of February 25, 2011, he could not disentangle from
the materials he had not yet received from Lead Plaintiffs’ counsel. Moreover, Mr. Pitt’s
refusal to proceed coupled with Lead Plaintiffs’ counsel’s misuse of the Rule 26(c)
protective order procedure are the type of abusive conduct that warrants a sanction of this
magnitude. Accordingly, pursuant to Rule 37(d), therefore, it is hereby

ORDERED that Lead Plaintiffs’ Motion for a Protective Order [#890] is
DENIED; and it is further

ORDERED that Fannie Mae’s Motion to Strike Harvey Pitt’s Expert Report

[#891] is GRANTED; and it is further

ORDERED that individual Defendants’ Motion to Strike Harvey Pitt as an Expert
Witness [#892] is GRANTED;Z and it is further

ORDERED that Lead Plaintiffs shall not offer Mr. Pitt as an expert on their
behalf.

so oRDERED. /

/r?vw»$o»».~l

RICHARD J.\I,EQ
United States District Judge

2 Individual Defendants’ alternative motion to compel the immediate continuation of Mr.
Pitt’s deposition is, therefore, denied as moot.

4

