Expert Witness Fees at Deposition — What Is “Manifest Injustice” under Rule 26(b)(4)(C)?

Federal Rule of Civil Procedure 26(b)(4)(C) provides:

(C) Payment. Unless manifest injustice would result, the court must require that the party seeking discovery:

(i) pay the expert a reasonable fee for time spent in responding to discovery under Rule 26(b)(4)(A) or (B); and

(ii) for discovery under (B), also pay the other party a fair portion of the fees and expenses it reasonably incurred in obtaining the expert’s facts and opinions.

The question in Nilssen v Osram Sylvania, Inc., 2008 U.S. App. LEXIS 12696 (Fed. Cir. June 17, 2008), was just what “manifest injustice” in Rule 26(b)(4)(C) means. The District Court denied the plaintiffs’ motion for expert fees under Rule 26(b)(4)(C) because of unrelated misbehavior that had produced significant expenses. On appeal, the plaintiffs contended that "manifest injustice" is an exception limited to cases in which the party taking discovery “is indigent or otherwise financially unable to pay the fee award,” and that, as a result, the District Court “committed legal error by focusing on [plaintiff] Nilssen's conduct, rather than [defendant] Osram's ability to pay the expert fee award.” The Federal Circuit disagreed:

There is little case law interpreting "manifest injustice" in Rule 26(b)(4)(C). See Reed v. Binder, 165 F.R.D. 424, 427 (D.N.J. 1996) (noting the lack of case law on this point). In support of their interpretation of the rule, appellants point to the Advisory Committee Notes to the 1970 amendments to the Federal Rule of Civil Procedure:

Even in cases where the court is directed to issue a protective order, it may decline to do so if it finds that manifest injustice would result. Thus, the court can protect, when necessary and appropriate, the interests of an indigent party. Fed. R. Civ. P. 26, Advisory Committee Notes to 1970 Amendments, 48 F.R.D. 487, 505.

Appellants argue that the Advisory Committee Notes limit the manifest injustice exception to cases in which indigent parties are subject to fee awards. While we agree with appellants that the Advisory Committee Notes explicitly encourage courts to reverse the presumption of expert fee payments under Rule 26(b)(4)(C) in cases involving an indigent party, it does not follow that the court's discretion in shifting fees is therefore limited to such cases. Indeed, elsewhere in the Advisory Committee Notes, when commenting on a separate rule containing the "manifest injustice" language, it is apparent that a district court's discretion in shifting fees was not meant to be as limited as appellants suggest:

[T]he words 'to prevent manifest injustice,' which appeared in the original rule, have been retained. They have the virtue of familiarity and adequately describe the restraint the trial judge should exercise.

Fed. R. Civ. P. 16, Advisory Committee Notes to 1983 Amendments. The Advisory Committee for the Federal Rules of Civil Procedure felt that the term "manifest injustice" was sufficiently familiar to be a useful guide for trial courts. There is nothing in the familiar understanding of the term "manifest injustice" to suggest that it applies only to indigent parties. Thus, it appears that the Advisory Committee intended "manifest injustice" to encompass traditional notions of trial court discretion. In this case, the court felt it to be manifestly unjust to award fees to appellants, whom the court determined had engaged in litigation misconduct and inequitable conduct. Absent our reversal of those findings, which we reject ..., there is nothing in the Federal Rules of Civil Procedure to suggest that the district court abused its discretion in refusing appellants' request for expert fees. We therefore affirm the denial of appellants' expert fees.

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