Giuseppe Pampena v. Elon R.Musk

Background

Plaintiffs brought a securities class action alleging that, after Musk offered to purchase Twitter in April 2022, he made misrepresentations that artificially depressed Twitter’s stock price and pressured Twitter to lower the acquisition price.

Twitter had previously sued Musk in Delaware to enforce the merger agreement. That case settled, and Musk agreed to purchase Twitter at the original merger price. During the Delaware case, Twitter provided Musk with expert reports prepared by Cornerstone Research experts Professor John Coates, Professor Justin McCrary, and James Boland.

The parties in the current case entered into a discovery stipulation governing Musk’s production of materials from the Delaware case. The stipulation addressed discovery materials received from other parties and third parties and reserved the parties’ rights to take expert discovery.

Discovery Dispute

Plaintiffs sought the three Twitter expert reports from Musk. Musk argued that the stipulation barred the request because the reports were exchanged as part of the Delaware court’s expert-disclosure process, rather than produced in response to formal document requests or subpoenas.

Plaintiffs argued that the stipulation was intended to cover all exchanged discovery from the Delaware case. They also argued that the reports were relevant. Plaintiffs had separately sought the reports from the experts, but one expert’s motion to block the subpoena was denied without prejudice because the issue was not yet ready for decision, and Cornerstone Research indicated it might seek a protective order.

Court’s Analysis

The court found that the stipulation did not clearly exclude the expert reports. Although expert reports are ordinarily disclosed under Federal Rule of Civil Procedure 26(a)(2), other language in the stipulation required Musk to notify affected persons and entities when plaintiffs requested discovery they had provided. The court concluded that it would be inconsistent to require notice to the Twitter experts while allowing Musk to withhold the reports themselves.

Musk had the initial burden of showing that the stipulation applied as a protection against plaintiffs’ request. The court held that he had not shown that plaintiffs voluntarily, rather than inadvertently, gave up their right to seek the reports from him.

The court also rejected Musk’s argument that producing the reports would improperly avoid compensating the experts under Federal Rule of Civil Procedure 45. The court was skeptical that Rule 45 applied because plaintiffs were requesting documents from Musk, not subpoenaing a third party. The reports had already been prepared for Twitter, the experts had been compensated for that work, and the reports had been disclosed to Musk. The court noted that plaintiffs would have to compensate the experts if they later sought their deposition or trial testimony or retained them to provide additional opinions.

Ruling

The court found that plaintiffs had shown the reports were relevant and that Musk had not shown that the discovery stipulation barred their production or that producing them would impose a burden exceeding their likely benefit. The court granted plaintiffs’ motion to compel and ordered Musk to produce the Coates, McCrary, and Boland expert reports by May 16, 2025.