Bank Brussels Lambert v. Chase Manhattan Bank, N.A.
1997 U.S. Dist. LEXIS 9270, 1997 WL 363823, 175 F.R.D. 34 (1997)
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Rule of Law:
Under Federal Rule of Civil Procedure 26(b)(4)(B), a party may depose a non-testifying expert retained by an opposing party only upon a showing of exceptional circumstances where it is impracticable for the party seeking discovery to obtain facts or opinions on the same subject by other means.
Facts:
- In 1990, a group of banks ('the Bank Group'), led by Chase Manhattan Bank, entered into a revolving credit agreement to fund AroChem Corporation.
- In late 1991, the Bank Group discovered a significant discrepancy between the actual value of AroChem’s inventories and the value reported in borrowing documents.
- In response, on December 24, 1991, AroChem's board formed a Special Committee which immediately hired the accounting firm Arthur Andersen & Co. ('Andersen') to investigate the inventory discrepancy and potential fraud.
- Andersen conducted an extensive investigation between December 1991 and June 1992, consuming approximately 10,000 hours.
- During this same period, numerous other parties, including law firms, government agencies, and other accountants, had unlimited and unmonitored access to all of AroChem's books and records.
- In October 1993, nearly two years after Andersen began its investigation, the AroChem files were removed and placed in a secure, supervised storage facility.
- Bank Paribas (Suisse) S.A. ('BPS') was not sued by the Bank Group in connection with the AroChem matter until October 1993 and February 1994.
Procedural Posture:
- The Bank Group filed suit against Bank Paribas (Suisse) S.A. ('BPS') and others in the U.S. District Court for the Southern District of New York.
- The case was consolidated with other related actions for discovery and pretrial proceedings.
- During discovery, BPS, a defendant, served a subpoena to depose Arthur Andersen & Co., a non-party expert retained by other parties.
- Andersen and The Chase Manhattan Bank objected to the deposition, asserting Andersen was protected as a non-testifying expert.
- BPS filed a motion in the district court to compel the deposition of Andersen.
- Andersen cross-moved for a protective order to prevent the deposition.
- The motions were referred to a United States Magistrate Judge for a decision.
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Issue:
Do exceptional circumstances exist under Federal Rule of Civil Procedure 26(b)(4)(B) that make it impracticable for Bank Paribas to obtain facts and opinions about AroChem's financial condition by other means, thereby permitting the deposition of the non-testifying expert, Arthur Andersen?
Opinions:
Majority - Ellis, United States Magistrate Judge
Yes. Exceptional circumstances exist permitting the deposition of Arthur Andersen because it is impracticable for Bank Paribas to obtain the same facts or opinions through other means. The court first determined that Andersen qualifies for protection as a non-testifying expert retained in anticipation of litigation under Rule 26(b)(4)(B). However, the court found that BPS met its burden of showing exceptional circumstances for two primary reasons. First, Andersen had the unique opportunity to observe and analyze AroChem's financial records immediately after the fraud was discovered, a condition that cannot be replicated because the documents were subject to unmonitored access by numerous parties for nearly two years before being secured. Second, even if reconstruction were possible, the cost would be 'judicially prohibitive,' as it would require BPS to duplicate an investigation that took Andersen's team 10,000 hours.
Analysis:
This order provides a significant application of the 'exceptional circumstances' exception for deposing non-testifying experts under FRCP 26(b)(4)(B). The decision clarifies that the 'impracticability' standard can be met not only when physical evidence is destroyed, but also when the state of complex financial records at a specific point in time has been compromised by the passage of time and uncontrolled access. The case establishes that a combination of a lost, unique opportunity to observe evidence and the prohibitive cost of recreating the expert's work can overcome the strong protections afforded to consulting experts. This precedent is particularly relevant in complex financial fraud litigation where the 'scene of the crime' is a collection of documents whose integrity and arrangement are critical and can degrade over time.
