Securities and Exchange Commission v. Rio Tinto PLC

Background

The Securities and Exchange Commission brought this enforcement action against Rio Tinto PLC, Rio Tinto Limited, Thomas Albanese, and Guy Robert Elliott. The SEC alleges that the defendants concealed the decline in value of a coal business acquired in Mozambique, misleading the company’s board, auditors, and the market and violating the securities laws.

A central issue is how the market reacted to Rio Tinto’s acquisition of the coal business and later disclosures about its impairment. The SEC retained Dr. Albert Metz first as a consulting expert and later as a testifying expert. In his consulting role, Dr. Metz performed regression analyses of Rio Tinto’s bond prices and summarized the work in memoranda to the SEC. In his testifying role, he prepared reports analyzing Rio Tinto American Depositary Receipt prices. His rebuttal report also addressed the opposing expert’s conclusions about Rio Tinto’s bond prices, although it did not disclose his earlier bond analyses.

The defendants learned about Dr. Metz’s consulting work during his deposition. They asked the court to require disclosure of the facts, data, results, and conclusions from his bond analyses and to review his memoranda privately to determine whether additional material should be produced. The SEC opposed the request, arguing that the consulting work concerned a separate subject and was protected from discovery as consulting-expert material or attorney work product.

Legal standards

Federal Rule of Civil Procedure 26 generally permits discovery of relevant, nonprivileged information. The work-product doctrine protects materials prepared in anticipation of litigation, subject to exceptions including a substantial need for otherwise discoverable material when its equivalent cannot be obtained without undue hardship.

A testifying expert must disclose the facts or data considered in forming the opinions the expert will offer. A consulting expert who will not testify is ordinarily protected from discovery, except in exceptional circumstances. A dual-capacity expert serves both roles. When the same expert acts as a consultant and a testifying witness, the party resisting disclosure must clearly establish that the expert did not consider the disputed materials in forming the testimony. If the expert’s role is ambiguous, courts resolve that uncertainty in favor of disclosure.

Court’s analysis

The court found substantial ambiguity about whether Dr. Metz considered his consulting bond work when preparing his testimonial opinions. His deposition testimony indicated that he had decided the earlier work was not relevant enough to include, but that did not clearly establish that he never considered it. The court explained that deciding not to include data or earlier work in a report can itself show that the expert considered it.

The court also relied on Dr. Metz’s rebuttal report, which stated that he had been instructed to review and respond to the opposing expert’s conclusions about Rio Tinto’s bond prices. Dr. Metz challenged at least one bond-price theory and testified that his own bond analysis was similar to the opposing expert’s work and reached a similar conclusion. The court therefore rejected the SEC’s blanket assertion that Dr. Metz had not considered his consulting work.

The close timing of Dr. Metz’s consulting and testifying engagements further supported disclosure. The court concluded that the SEC had not clearly shown that Dr. Metz maintained a firm separation between his two roles. As a result, the defendants were entitled to the data studied in the consulting analyses and the results of those analyses.

Ruling

The court held that the memoranda might also contain discoverable information if they preserved the results of Dr. Metz’s analyses and the defendants could not obtain that information elsewhere. It directed the SEC to review the memoranda and produce them in redacted form, if appropriate, to the extent necessary to provide the facts and data considered by Dr. Metz, the data and conclusions derived from his analyses, and any assumptions he relied on in forming resulting opinions.

If the SEC continued to claim that all or part of the memoranda was protected attorney work product, the court ordered it to submit unredacted copies for in camera review, meaning private review by the court.

In the conclusion, Judge Debra Freeman granted the defendants’ motion in its entirety. The SEC was ordered, within one week of the order, to disclose the specified information, produce the memoranda as necessary in redacted form, and submit any disputed portions in unredacted form for in camera review. The clerk was directed to close the motion on the docket.