Another Twist in the Qwest Case

Just a month ago, lawyers representing former Quest Communications chief executive Joseph Nacchio persuaded the 10th U.S. Circuit Court of Appeals in Denver to overturn his conviction on 19 counts of insider trading and sent his case back for a new trial.

Not so fast! Today, the Department of Justice filed a brief seeking en banc review the 3-2 split decision. Prosecutors want the entire panel of judges who sit on the 10th Circuit to take another look at the case to see if they agree that a new trial is warranted.

In their brief, prosecutors argue that the majority opinion erroneously concluded that Nacchio deserved a new trial because the judge presiding over his case excluded testimony from the defense's economics expert, Daniel Fischel.

Fischel, the former dean of the University of Chicago Law School, was set to testify about the economic incentives that inside information would have given Nacchio, the statistical significance of the differences in his trading patterns, and the likelihood that economic diversification better explained the challenged sales than inside information.

But the judge found all of these things were in the "common knowledge of the jury," a notion that the majority rejected with a curt line. "Armchair economics is not the way to decide complex securities cases," it wrote.

But prosecutors say the ruling "not only departs from precedent, but threatens to restrict judges' traditional and important discretion to exclude unsupported expert opinion and unnecessary economic commentary."

The decision conflicts with "authoritative" precedent from the Third Circuit, according to the brief. Establishing a "per se rule of admissibility" for opinions like those of Fischel conflicts with settled Supreme Court law. Prosecutors add that "it is difficult to read" the majority opinion "any other way" than establishing a per se rule of admissibility.

Under the appellate rules, Maureen Mahoney, the star appellate litigator from Latham & Watkins, who won Nacchio's appeal with the three-judge panel, will wait to see if the 10th Circuit seeks to hear from the defense as it weighs whether the entire panel will take up review of the decision.

by Karen Donovan

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