3V Capital Master Fund LTD v. Knight Libertas LLC et al
RULING and ORDER denying 303 Motion to Modify Scope of Rule 706 Order. Order extended deadlines re: Rule 706 order. Signed by Judge Stefan R. Underhill on 08/22/2011. (Wolf, S.)
UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
SV Special Situations Master Fund Ltd., et
No. 3:08cv1769 (SRU)
Knight Libertas, LLC, et al.,
Scott Stagg, Mark Focht, and
3V Capital Management, LLC,
RULING AND ORDER ON MOTION TO MODIFY SCOPE OF RULE 706 ORDER
On July 21, 2011, I entered a Ruling and Order Appointing Expert Witnesses Pursuant to
Federal Rule of Evidence 706. Doc. #289. Defendants have moved for modification of the order
to limit the scope of the expert witnesses’ duties to a so-called “quantitative” rather than
“qualitative” inquiry. Namely, defendants maintain that the I have no appropriate use for a court
appointed expert opinion on the value of the corporate defendants before and after the wrongful
receipt of $8,938,574.64 from plaintiff, 3V Capital Master Fund, Ltd. For the reasons that
follow, the motion is denied.
In their motion for modification defendants challenge the appointment of Thomas C.
Kaylor of Deloitte Financial Advisory Services, LLP, New York, New York. Mr. Kaylor has
been appointed as an expert witness to offer his opinion on the following questions:
a. Did the transfer of the $8,938,574.64 associated with the so-called Stelco and
Transport transfers artificially inflate the value of the Libertas entities?
b. If so, what would the Libertas entities have been worth at the time of the sale to
Knight Capital had the Stelco and Transport transfers not occurred?
Defendants argue that an opinion regarding the value of the Libertas entities before and after the
influx of the wrongly transferred funds would not help me resolve issues raised on summary
judgment. Although the initial use of the experts’ reports will be to help decide the summary
judgment motions, see Transcript of July 21, 2011 Telephone Conference (doc. # 301) at 8-9, I
have always intended that the reports also benefit the jury. See Transcript of May 5, 2011
Motion Hearing (doc. # 271) at 26; and Partial Ruling on Motions for Summary Judgment and
Order (doc. # 271) at pp. 18, 25.
The Federal Rules of Evidence make clear that expert witnesses may be utilized by the
court to assist the trier of fact in understanding the evidence. Here, defendants have generally
conceded liability with respect to the $8,938,574.64 associated with the so-called Stelco and
Transport transfers. Remaining unresolved, however, are questions concerning which defendant
or defendants are liable for the monies and what amount is attributable to each defendant, most
specifically in the context of plaintiffs’ unjust enrichment claim. One of the core determinations
to be made by the court at summary judgment and potentially by the trier of fact at trial is
whether and to what extent each defendant has benefitted from the transfers.
Although they cite no authority is support of their claim, defendants maintain that the
appointment of a valuation expert is inappropriate where the opinion rendered is “qualitative” in
nature and not intended to be utilized to assist the court in resolving the motions for summary
judgment. It is of no consequence that the opinion on valuation rendered by the court appointed
expert may not resolve at summary judgment all matters concerning the $8,938,574.64. Rather,
the only relevant inquiry is whether the appointed expert’s opinion will be of assistance to the
trier of fact in this case. Fed. R. Evid. 706. Because the parties have demonstrated an inability
to properly develop the record, and in light of the protracted history of the case and the
adversarial relationship of all involved, the assistance of an impartial expert witness on the
question of valuation is necessary to achieve an efficient and just resolution in this matter. See
generally Scott v. Spanjer Bros., Inc., 298 F.2d 928, 930-31 (2d Cir. 1962). Accordingly, even if
defendants are correct and the question of valuation is ultimately one for a jury, the use of a court
appointed expert to offer an opinion and “enlighten the jury . . . on issues which have become
confused because of partisanship in presentation”, i.e., benefit, value and increased worth of
defendants, remains appropriate in this case. The motion for modification of the order
appointing expert witnesses is DENIED.
The parties have reserved providing the appointed experts with the materials requested
pending the resolution of the motion to modify. Accordingly, it is further ordered that the
deadlines with respect to the appointed expert reports shall be extended and the order appointing
the expert witnesses (doc. # 289) be amended as follows:
13. Messrs. Weisman and Kaylor shall each prepare a written report and file it with the court
on or before October 19, 2011. The report shall set forth his opinion as to each of the
questions set out above and the basis for each of his opinions. A copy of each expert’s
resume shall also be attached to the report.
14. The parties will have ten days to review the report. If any party seeks to depose either
Mr. Weisman or Mr. Kaylor, the deposition shall be conducted between November 2,
2011 and November 16, 2011.
15. A final hearing on plaintiffs’ motion for summary judgment will be held on Friday,
November 21, 2011 at 2:00 p.m. Messrs. Weisman and Kaylor shall be present at that
time to present their reports and be subject to examination.
Dated at Bridgeport, Connecticut, this 22nd day of August 2011.
/s/ Stefan R. Underhill
Stefan R. Underhill
United States District Judge
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