Davis et al v. Connecticut Community Bank
ORDER Granting 250 Motion in Limine to Exclude Improper Opinions Given by Plaintiffs' Expert Steven L. Henning and 327 Motion to Strike Henning's Revised Expert Report; Order on Plaintiffs' Proffer of Evidence of CUTPA Violation [Levinson Dkt. 555; Davis Dkt. 346 ]. See attached Order. Signed by Judge Vanessa L. Bryant on 06/27/13. (Rock, K.)
UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
STEPHEN R. LEVINSON; RICHARD E.
LAYTON; AND DR. R. LAYTON P.A. 401(K)
: CIVIL ACTION No. 3:09cv269(VLB)
WESTPORT NATIONAL BANK;
AUDREY SHORT, INDIVIDUALLY AND
FAYE SHORT, INDIVIDUALLY AND AS
TRUSTEE FOR THE FAYE S. ALBERT
RETIREMENT PLAN, ALBERT RETIREMENT:
: CIVIL ACTION No.3:09-cv-1955(VLB)
CONNECTICUT COMMUNITY BANK, N.A.
SOL DAVIS, INDIVIDUALLY AND AS
TRUSTEE OF THE SOL DAVIS
RETIREMENT PLAN, ET AL.
: CIVIL ACTION No. 3:10cv261(VLB
CONNECTICUT COMMUNITY BANK, N.A.
JUNE 27, 2013
OWNER OF WESTPORT NATIONAL BANK :
ORDER GRANTING [DAVIS DKT. 250] MOTION IN LIMINE TO EXCLUDE
IMPROPER OPINIONS GIVEN BY PLAINTIFFS’ EXPERT STEVEN L. HENNING AND
[DAVIS DKT. 327] MOTION TO STRIKE HENNING’S REVISED EXPERT REPORT;
ORDER ON PLAINTIFFS’ PROFFER OF EVIDENCE OF CUTPA VIOLATION
[LEVINSON DKT. 555; DAVIS DKT. 346]
EXPERT REPORTS OF STEVEN L. HENNING
Defendant has moved in limine in Davis v. Connecticut Community Bank,
10-cv-261 (“Davis”) for this Court to preclude the Plaintiffs’ expert Steven L.
Henning (“Henning”) from offering testimony at trial on the basis that Henning’s
expert report impermissibly reaches legal conclusions, usurps the role of the
Court in instructing the jury, and usurps the role of the jury in interpreting the
governing custodial agreements. In response to the pending motion in limine,
the Plaintiffs submitted a revised expert report which the Defendant has moved to
strike on the same basis. For the following reasons, the Court GRANTS the
Defendant’s motion in limine and the motion to strike.
The Davis Plaintiffs were ordered to disclose their expert by June 21,
2012. [Davis Dkt. 111.] Federal Rule of Civil Procedure 26(a)(2)(B) requires that
expert disclosure be accompanied by a written report. The Davis Plaintiffs were
thus required to submit their expert reports by June 21, 2012. The Davis Plaintiffs
have produced three Henning reports. The first dated June 21, 2012, the second
dated April 19, 2013 [Levinson Dkt. 529], and the third dated April 22, 2013 [Davis
Dkt. 310]. The Plaintiffs explained that Henning’s latest revision reflects several
stipulations between the parties to exclude from trial evidence concerning the
OCC’s examinations of Westport National Bank (“WNB”), the FDIC’s
examinations of Westport Bank & Trust Company’s (“WBT”) prior custodial
services practices and all evidence of Pullman & Comley’s reviews of WBT’s prior
custodial services to exclude any reference in the report to such evidence. The
Plaintiffs also explained that they asked Henning to prepare a revised report to
“further clarify” that they do not intend to have him offer expert opinions
contrary to the Court’s ruling in Levinson on the scope of permissible expert
testimony, rather than redacting impermissible opinions in accordance with the
Court’s Order. Id.
On April 29, 2013, the Defendant moved to strike the revised expert report
dated April 22, 2013 arguing that the revised report still impermissibly reaches
legal conclusions and also improperly asserts new opinions. [Dkt. #310]. In
Henning’s revised expert report dated April 22, 2013, he has added several new
paragraphs of content. First, Henning added an entirely new discussion
regarding the various obligations that IRS Form 5305 imposes on custodians. Id.
at 2. Second, Henning added a paragraph identifying the content of the Bank’s1
December 2004 position description regarding the duties and responsibilities of a
custodial services manager. Id. at 2-3. Third, Henning elaborated on his
discussion of the Investment Advisers Act of 1940 by identifying Rule 206(4)-2 of
the Adviser’s Act and discussing in depth the responsibilities that the Rule
prescribes for custodians. Id. at 3. Fourth, Henning added new citations to
primary sources in support of the statements he had previously made in the
original version of the report such as several new references to OCC Bulletins
and the OCC Handbook on Custody Services. Id. at 1 n.2-3, 5 n.8-10, 6 n.15, 8
The Davis Plaintiffs only named Connecticut Community Bank, N.A. (“CCB”) as
a defendant in this action. However, these actions only concern the Plaintiffs’
relationship with WNB, a division of CCB. For simplicity, the Court will refer to
the Defendant as “the Bank” throughout this ruling.
n.20-21, 9 n.22. Lastly, Henning added throughout the expert report additional
statements about the necessity and propriety of using a SAS 70 report and the
Bank’s failure to conduct any audit of Bernard L. Madoff Investment Securities,
On April 19, 2013, the Plaintiffs filed exhibits to the Joint Trial Memorandum
which included a third version of Henning’s report dated April 19, 2013, which
slightly differed from the April 22, 2013 version as well as from the version dated
June 21, 2012.2 [Levinson dkt. #529, Ex. A to Joint Trial Memorandum]. It
appears that Plaintiffs are attempting to rely on at least two if not on all three
versions of Henning’s expert report at trial without clearly distinguishing between
the versions or citing authority that permits them to rely on multiple reports from
the same expert. As it is unclear whether the submission of the April 19, 2013
version was in error, the Court will analyze all three versions of the revised report
with respect to the pending motion to strike and the motion in limine.
In all three versions of the expert report, Henning gives various opinions in
which he concludes that the Bank did not fulfill its responsibility to maintain the
safety of the assets in custody in accordance with various standards in practice
at the time, that the Bank disregarded standards of care by failing to take any
steps to perform due diligence, and that the Bank breached the “well established
standards of conduct governing the custodial services industry.” (See April 22,
Notably, footnote 58 in the April 22, 2013 version of Henning’s report in which
Henning states that there is a dispute in this matter regarding whether the
handling of the custodial accounts constitutes a collective investment fund is
absent from the April 19, 2013 version.
2013 Version at 10-12; April 19, 2013 Version at 11-12, June 12, 2012 Version at 110, 2-4). Throughout all three versions of the report, Henning opines that the
Bank violated its custodial obligations and industry standards of conduct. See
(April 22, 2013 Version at 5-6, 12, 15-16; April 29, 2013 Version at 5-6, 12, 15-15;
June 21, 2012 Version at 1-10, 3-1, 2-11).
Federal Rule of Civil Procedure 26(a)(2)(D) requires parties to disclose
expert testimony by the deadline set by the Court, and in the absence of a court
order. Fed. R. Civ. P. 26(a)(2)(D). Absent a stipulation or court order, a party must
disclose its expert report within 90 days prior to trial. Id. Plaintiffs were ordered to
disclose their expert witnesses by June 21, 2012, and all discovery was to be
completed by September 10, 2012. [Davis Dkt. 111.] Leave was not sought, nor
granted, to file expert reports beyond the deadline set by the Court. Nor have the
Plaintiffs cited any facts constituting good cause for filing an expert report
beyond the deadline set by the Court. The court has not been informed of any
stipulations respecting expert disclosure, other than the parties’ stipulation to
exclude or redact certain matters. The Court has the authority to manage its
docket by, among other things, setting and enforcing deadlines. Cf. Hunt v. CNH
Am. LLC, No. 12-1301-cv, 2013 U.S. App. LEXIS 2533, at *5-6 (2d Cir. Feb. 6,
2013)(affirming the district court’s decision to exclude a late-filed supplemental
expert report that was disclosed “after the close of discovery and without any
request for an extension of the deadline.”); Derisme v. Hunt Leibert Jackson, P.C.,
3:10-cv-244, 2011 U.S. Dist. LEXIS 128844, at *4-5 (D. Conn. Nov. 8, 2011) (granting
motion to preclude party from identifying an expert after the expert discovery
deadline); A Slice of Pie Prods., LLC v. Wayans Bros. Entm’t, 487 F. Supp. 2d 33,
39 (D. Conn. 2007) (granting defendant’s motion to strike expert report where
plaintiffs failed to designate expert and serve report until eight months after
deadline for expert discovery, after the filing of motions for summary judgment,
and failed to articulate good cause for the delay).
“The purpose of an in limine motion is to aid the trial process by enabling
the Court to rule in advance of trial on the relevance of certain forecasted
evidence, as to issues that are definitely set for trial, without lengthy argument at,
or interruption of, the trial.” Palmieri v. Defaria, 88 F.3d 136, 141 (2d Cir. 1996)
(internal citations omitted). “A motion in limine to preclude evidence calls on the
court to make a preliminary determination on the admissibility of the evidence
under Rule 104 of the Federal Rules of Evidence.” Highland Capital Management,
L.P. v. Schneider, 379 F. Supp. 2d 461, 470 (S.D.N.Y. 2005) (internal citations
omitted). “Evidence should be excluded on a motion in limine only when the
evidence is clearly inadmissible on all potential grounds.” Id. “A district court's
in limine ruling ‘is subject to change when the case unfolds, particularly if the
actual testimony differs from what was contained in the . . . proffer.’” Id. (quoting
Luce v. United States, 469 U.S. 38, 41 (1984)).
Expert witness testimony is admissible only if: (1) “the expert's scientific,
technical, or other specialized knowledge will help the trier of fact to understand
the evidence or to determine a fact in issue;” (2) “the testimony is based upon
sufficient facts or data;” (3) “the testimony is the product of reliable principles
and methods;” and (4) “the expert has reliably applied the principles and
methods to the facts of the case.” Fed. R. Evid. 702. Although Rule 702
embodies a “liberal standard of admissibility for expert opinions,” Nimely v. City
of N.Y., 414 F.3d 381, 395 (2d Cir. 2005), it also “establishes a standard of
evidentiary reliability” for “all ‘scientific,’ ‘technical,’ or ‘other specialized’
matters within its scope,” Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 148
(1999). What constitutes “reasonable measures of reliability in a particular case
is a matter that the law grants the trial judge broad latitude to determine.” Id. at
In addition, the Second Circuit “requir[es] exclusion of expert testimony
that expresses a legal conclusion. . . . Whereas an expert may be uniquely
qualified by experience to assist the trier of fact, he is not qualified to compete
with the judge in the function of instructing the jury.” Hygh v. Jacobs, 961 F.2d
359, 363-64 (2d Cir. 1992). In Hygh, the Second Circuit “invoked the . . .
illuminating distinction between admissible and excludable versions of an
expert's opinion testimony” in the advisory committee’s note to Federal Rule of
Evidence 704. Id. at 363.
Under Rules 701 and 702, opinions must be helpful to the trier of fact, and
Rule 403 provides for exclusion of evidence which wastes time. These
provisions afford ample assurances against the admission of opinions
which would merely tell the jury what result to reach, somewhat in manner
of the oath-helpers of an earlier day. They also stand ready to exclude
opinions phrased in terms of inadequately explored legal criteria. Thus the
question, “Did T have capacity to make a will?” would be excluded, while
the question, “Did T have sufficient mental capacity to know the nature and
extent of his property and the natural objects of his bounty and to
formulate a rational scheme of distribution?” would be allowed.
Fed. R. Evid. 704 advisory committee's note, quoted in Hygh, 961 F.2d at 363-64.
“The distinction between fact and legal conclusions, however, is extremely
fine.” TC Systems Inc. v. Town of Colonie, 213 F. Supp. 2d 171, 181 (N.D.N.Y.
2002). An expert may testify about industry custom with respect to the inclusion
of certain contract terms, Nuvest, S. A. v. Gulf & Western Industries, Inc., 649 F.2d
943, 950 (2d Cir. 1981), industry standard practices, see Marx & Co., Inc. v. Diners'
Club Inc. (Marx), 550 F.2d 505, 509 (2d Cir. 1977), or a common industry specific
trade meaning or usage of a word or term, Moore v. Tristar Oil & Gas Corp., 528 F.
Supp. 296, 310 (S.D.N.Y. 1981). But an expert may not interpret a contract for the
jury, Marx, 550 F.2d at 509-10, nor may an expert testify about the meaning of
legal terms, Schneider, 379 F. Supp. 2d at 470.
Moreover, an expert may not “simply rehash otherwise admissible
evidence about which he has no personal knowledge. . . . While an expert must of
course rely on facts or data in formulating an expert opinion, see Fed. R. Evid.
703, an expert cannot be presented to the jury solely for the purpose of
constructing a factual narrative based upon record evidence. See [In re] Rezulin
[Prods. Liab. Litig.], 309 F. Supp.2d [531,] 551 [(S.D.N.Y. 2004)] (rejecting portions
of plaintiffs' expert's testimony that was ‘a narrative reciting selected regulatory
events’ because ‘[s]uch material, to the extent it is admissible, is properly
presented through percipient witnesses and documentary evidence’).” Schneider,
379 F. Supp. 2d at 468-69.
Both versions of Henning’s revised expert report dated April 22, 2013 and
April 19, 2013, respectively, improperly contain new content in violation of
Federal Rule of Civil Procedure 26(a). Rule 26(a)(2)(B)(i) provides that a written
expert report contain “a complete statement of all opinions the witness will
express and the basis and reasons for them[ ... ].” Fed. R. Civ. P. 26(a)(2)(B)(i).
Although an expert witness has an affirmative duty to supplement a report “in a
timely manner if the party learns that in some material respect the disclosure or
response is incomplete or incorrect, and if the additional or corrective
information has not otherwise been made known to the other parties during the
discovery process or in writing,” Fed. R. Civ. P. 26(e)(1)(A), “‘[Rule] 26(e) does not
grant a license to supplement a previously filed expert report because a party
wants to, but instead imposes an obligation to supplement the report when a
party discovers the information it has disclosed is incomplete or incorrect.’”
Lewis v. FMC Corp., 786 F.Supp.2d 690, 705 (W.D.N.Y. 2011) (quoting Coles v.
Perry, 217 F.R.D. 1, 3 (D.D.C. 2003)). “It should be assumed that at the time an
expert issues his report, that report reflects his full knowledge and complete
opinions on the issues for which his opinion has been sought” and therefore
courts have held that a “Plaintiff's duty to supplement its initial expert report
does not arise when plaintiff seeks to bolster its earlier submission, but rather,
arises only if the expert subsequently learns of information that was previously
unknown or unavailable, that renders information previously provided in an initial
report inaccurate or misleading because it was incomplete....” Innis Arden Golf
Club v. Pitney Bowes, Inc., Np.3:06CV1352(JBA), 2009 WL 5873112, at *3 (D.
Conn. Feb. 29, 2009) (internal quotation marks and citation omitted) (emphasis in
the original); see e.g., Cedar Petrochemicals, Inc. v. Dongbu Hannong Chem. Co.,
769 F.Supp.2d 269, 278 (S.D.N.Y.2011) (holding that “experts are not free to
continually bolster, strengthen, or improve their reports by endlessly researching
the issue they already opined upon, or to continually supplement their opinions.”)
(internal quotations & citation omitted); Lewis, 786 F.Supp.2d at 705 (“To
construe supplementation to apply whenever a party wants to bolster ... [its]
expert opinions would [wreak] havoc [on] docket control and amount to unlimited
expert opinion preparation.”) (internal quotation marks and citation omitted);
Great American Ins. Co. of NY v. Summit Works, LLC, No.3:10CV1669 (JGM), 2012
WL 459885, at *7 (D. Conn. Feb. 13, 2012) (same); Kovaco v. RockbestosSurprenant Cable Corp., No. 3:11CV377 (WWE), 2013 WL 1620141, at *2 (D. Conn.
April 15, 2013) (same).
Therefore, “[i]f an expert's report does not rely [on] any information that
was previously unknown or unavailable to him, it is not an appropriate
supplemental report under Rule 26.” Cedar, 769 F.Supp.2d at 278-79. Rule 37(c)
provides that a party who “fails to provide information or identify a witness as
required by Rule 26(a) or (e) ... is not allowed to use that information or witness to
supply evidence ... at a trial, unless the failure was substantially justified or is
harmless.” Fed.R.Civ.P. 37(c)(1). “The purpose of Rule 37(c)(1) is to prevent the
practice of ‘sandbagging’ an opposing party with new evidence.” Ebewo v.
Martinez, 309 F.Supp.2d 600, 607 (S.D.N.Y. 2004).
In assessing whether to preclude an expert's report, courts consider the
following factors: (1) the party's explanation for the failure to comply with the
discovery order; (2) the importance of the testimony of the precluded witness; (3)
the prejudice suffered by the opposing party as a result of having to prepare to
meet the new testimony; and (4) the possibility of a continuance. Softel, Inc. v.
Dragon Med. & Scientific Comm., Inc., 118 F.3d 955 (2d Cir.1997).
Applying the factors prescribed for determining whether to exclude an
expert’s opinion, the motion to preclude should be granted. As noted above, the
Plaintiff has given no justification for extending the Court’s filing deadline. Much
of the proposed testimony is conclusory and devoid of discernible analysis,
making it impossible to determine its importance. The new content Henning
added to both versions of his revised expert report dated April 22, 2013 and April
19, 2013, respectively, including his new discussions regarding IRS Form 5305
and Rule 206(4)-2 of the Adviser’s Act is clearly an attempt to bolster and improve
his prior submission. There is no evidence that the information he added was
previously unknown or unavailable to him and therefore it would not be
appropriate to allow him to supplement his original report now. Further, the
failure to include in his original report discussions of regulations, statutes and
regulatory guidance that are publically available cannot be substantially justified.
To permit Henning to add this new material now would not be harmless as the
Defendant would suffer prejudice in having to prepare to meet this new
testimony. Although the Plaintiffs contend that there would be no prejudice as
they would allow the Defendant to depose Henning on the newly added content,
the discovery period has long passed and it was not filed until the eve of trial, and
the trial is now underway.3 Accordingly, the Court finds it inappropriate to permit
Henning to supplement his report under Rule 26(e) to add such new content now
and also finds it appropriate to preclude him from offering either of his revised
expert reports under Rule 37. The Plaintiffs’ apparent reliance on the revised
version(s) of Henning’s expert report in addition to his original version of the
report is clearly an attempt to bolster Henning’s expert testimony. Lewis, 786
F.Supp.2d at 705. In addition, to permit the Plaintiffs to rely on one or both of the
revised versions and the original version of the expert report would “amount to
unlimited expert opinion preparation.” Id. The Court therefore GRANTS the
Defendant’s motion to strike the revised expert reports. The Plaintiffs could only
offer Henning’s testimony consistent with his original report dated June 21, 2012
at trial. This Order does not preclude the parties from excluding the introduction
of testimony included in the report were it admissible.
As the Court has precluded the Plaintiffs from relying on either of
Henning’s revised expert reports, the Court will only analyze the Defendant’s
motion in limine with respect to the original version of Henning’s report dated
June 21, 2012. As was the case in Levinson, Henning’s original report is replete
with impermissible legal opinions. For example, Henning gives the ultimate legal
conclusion that the Bank breached and violated its custodial obligations which
To the extent the Plaintiffs had a legal basis to object to the Defendant’s revised
expert report and chose not to do so, their decision not to object does not
constitute a legal basis for the Plaintiffs to disregard a Court Order by filing,
beyond the deadline set by the Court, a substantively modified expert report
under the guise of a report redacted to delete content which the Court has ruled
invades the roles of the Court and the role of the jury. (June 21, 2012 Version at
1-10, 2-4, 2-6, 2-11, 3-1).
Further, Henning does not meet the standard for admissibility of expert
testimony. His report inappropriately reaches conclusions about the Bank’s
duties, obligations, and requirements based on his recitation of selected
provisions of handbooks from the Office of the Comptroller of the Currency,
selected interpretations of the Internal Revenue Services (IRS) regulations and
IRS form 5305, the American Institute of Certified Public Accountants’
Codification of Statements on Auditing Standards, adopted after the custodian
agreement was entered into, as well as the Bank’s internal policies, which he
argues apply to this custodial relationship, without explaining the basis on which
he concluded that they are applicable. (See, e.g., June 21, 2012 Version at 2-3, 2-4,
1-1, 1-5). Throughout the opinion, Henning merely recites or paraphrases
provisions or handbooks and other material without stating that these are
generally accepted bank custodial principles, practices or procedures. Thus, his
conclusions are devoid of the context and content from which a jury could
discern whether his conclusions are credible and reliable. His opinions fail to
evince any specialized knowledge or experience, often fail to present sufficient
facts and data, fail to establish the reliability of principles applied and show the
analysis used to reach the conclusion and demonstrate that he reliably analyzed
all of the relevant facts as required by the Federal Rules of Evidence. As such his
opinions would not aid the jury and may confuse or mislead them. See Fed. R.
Evid. 702; Schneider, 379 F. Supp. 2d at 470-71 (“The [expert report] goes on to
apply . . . generic legal principles to the facts of the instant case, resulting in [the
expert’s] giving his opinion that the securities laws have in fact been violated. . . .
This type of expert testimony is not permitted. It is inadmissible because it
usurps the jury's role in finding the facts and applying those facts to the law as
instructed by the court.”) (citations omitted). The rules governing opinions on
ultimate issues do not forbid all testimony concerning ultimate issues. See, e.g.,
U.S. v. Feliciano, 223 F.3d 102, 121 (2d Cir. 2000) (citing Fe. R. Evid. 704(a)).
“Although opinion testimony, whether offered by a lay witness pursuant to Fed.
R. Evid. 701, or by an expert pursuant to Fed. R. Evid. 702, is not inadmissible
simply because it embraces an ultimate issue to be decided by the trier of fact, it
is not properly received merely to tell the jury what result to reach.” U.S. v.
Garcia, 413 F.3d 201, 210 (2d Cir. 2005) (quotations and citations omitted). Expert
testimony must be “carefully circumscribed to assure that the expert does not
usurp either the role of the trial judge in instructing the jury as to the applicable
law or the role of the jury in applying the law to the facts before it.” U.S. v.
Bilzerian, 926 F.2d 1285, 1294 (2d Cir. 1991) (citation omitted). While Henning
may testify about standard practices in the industry based on his experience, he
may not “merely  tell the jury what result to reach.” U.S. v. Garcia, 413 F.3d at
210 (quotation omitted).
Lastly, Henning may not proffer opinions which do not draw on his
expertise but merely restate otherwise properly admitted evidence such as his
recitation of the terms of the custodial agreement as well as the testimony of
WNB employees. See (June 21, 2012 Version at 2-4 through 2-6 through 2-8); See
Schneider, 379 F. Supp. 2d at 468-69. The Court therefore GRANTS the
Defendant’s motion in limine to exclude improper opinions given by Henning in
the original expert report dated June 21, 2012.
The Court has reviewed the Henning report in its entirety and finds it
inadmissible for the reasons stated above. Although the Court will not provide a
line-by-line evaluation of the deficiencies of the Henning report, the following
examples illustrate the sort of opinions offered in Henning’s June 21, 2012.
As noted above, the Rules of Evidence do not completely prohibit
Henning from offering an opinion as to the ultimate issue. However, he may not
simply tell the Jury what to decide, and his testimony must comport with Federal
Rule of Evidence 702. As an example, at the top of page 2-3 in the June 21, 2012
version, Henning writes: “Instead, in a clear violation of its custodial obligations,
WNB never undertook any action to independently ascertain the fair market value
of plaintiffs’ IRAs.” This statement does not conform to the requirement of
Federal Rule of Evidence 702, as it is not based on his specialized or technical
knowledge, nor does it have a sufficient basis in fact. This is merely one
example; it is by no means a comprehensive list of inadmissible opinions in
June 21, 2012 Version at 1-2 to 1-3: “However, individual account
owners never received any documentation from BLMIS, and WNB did not pass
along any of the BLMIS transaction information it had received to its individual
account holders.” This sentence is misleading because it suggests WNB had a
duty to send this information to the Plaintiffs, without citing a provision of the
custodial agreement requiring it to do so, or any industry practice that would
support an argument that WNB was required to do so.
June 21, 2012 Version at 1-8 through 1-10: Henning cites no facts,
law or industry practice to support his assertion that BLMIS was a “subcustodian” for WNB. The report does not define the term or identify why it is so
designated. Nor does he provide any analysis that could help the jury to
understand how it is relevant.
June 21, 2012 Version at 1-3: “The duties of a custodian are well
understood in the financial community. The Investment Advisers Act of 1940 (the
‘Advisers Act’) defines the custody of assets and discusses the requirement for
investment advisers to ensure the safekeeping of clients' assets, which may be
accomplished by a qualified custodian, such as a bank, maintaining the clients'
investments. The Advisers Act further details that those funds and securities
should be held ‘in a separate account for each client under that client's name’ and
that the client be provided with quarterly account statements.” This passage is
irrelevant because Henning does not establish that the Investment Advisers Act
of 1940 applies to the custodial relationship at issue here. It has not been
established that WNB is an investment advisor or subject to the Advisers Act.
The reference to the Advisers Act contains too much potential to confuse and
mislead the Jury.
June 21, 2012 Version at 1-5 through 1-8; 1-10; 2-11: Henning offers
no proof that “SAS 70” reports were customarily prepared by BLMIS or
businesses like BLMIS, nor does he cite to any authority for the bank to require
BLMIS to provide one. References to “SAS 70” reports are irrelevant,
insufficiently based in fact, and too potentially misleading and confusing to the
References to OCC handbooks, for example the reference on page 1-
6, found throughout Henning’s report. Henning offers opinions that are not based
upon his training or experience. Instead he simply cherry picks and restates
provisions of the OCC materials and draws conclusions unfounded in his
articulated experience or industry practice or other credible basis. His
methodology or analysis is not presented. The jury has no way to weigh the
reliability and credibility of his opinion. It simply tells the juror what to believe but
not why. Page 1 of the OCC Custody Services Handbook (January 2002)
expressly provides that the custodial relationship is contractual, acknowledging
that the terms of the custodial agreement and not the Handbook govern their
relationship. Yet, the opinions expressed neither mention this fact nor reconcile
how duties not included in the custodial agreement are imposed by the OCC
Similar deficiencies appear on pages 1-7 where no analysis is given nor
any attempt at reconciliation between the conflicting provisions of the custodial
agreement and the OCC Handbook or bulletin offered. The conclusion reached
on page 1-11 is conclusory and devoid of analysis and could be read to mean the
bank contracted to provide investment services. As it can find no properly
supported opinion in the report, the Court excludes the report in its entirety.
The Court notes that the original report also contains content that was the
subject of motions in limine, certain stipulations by the parties, or related to
claims and theories on which this Court has granted judgment as a matter of law.
For example, Henning opines on the Bank’s alleged breach of Paragraphs 3 and 7
of the Custodian Agreement by failing to return Plaintiffs’ funds, a claim on which
the Court granted summary judgment in favor of the Defendant. This content
should also be excluded from the original report dated June 21, 2012.
After the Court informed the parties of its intent to grant the Defendant’s
motion in limine and its rationale therefore, the Plaintiffs requested, and the Court
denied, an opportunity to make an “offer of proof” through the presentation of
additional evidence on the admissibility of the Henning report. The Court now
supplements its articulation of the reasons it denied Plaintiffs’ request to make an
offer of proof as unnecessary and improper.
As the Second Circuit found in Litras v. Long Island R.R., the introduction
of such evidence is unnecessary to create a record because there, as is the case
here, the question at issue was the subject of a motion in limine, to which
Plaintiffs had the opportunity to object. No. 06-2608-cv, 2007 U.S. App. LEXIS
6174, at *3 (2d Cir. Mar. 14, 2007) (finding no error in the District Court’s denial of
plaintiff’s offer of proof where “this proposed testimony was the subject of a
motion in limine, and thus the District Court was sufficiently aware of its content,
as [is the Second Circuit]”) (citing W.W.W. Pharm Co. v. Gillette, 984 F.2d 567, 575
n.4 (2d Cir. 1993)). It is well settled that the purpose of an offer of proof, after the
Court excludes evidence, is to put into the record the substance of the evidence
to be excluded. See Fed. R. Evid. 103(a). Here the excluded evidence is already
in the record. Plaintiffs’ attempt to introduce other evidence in opposition to the
motion in limine is not an offer of proof. Rather, it is effectively a motion for
Plaintiffs deny that they are seeking reconsideration, but if they conceded
that they were, the court would deny the request as Plaintiffs have articulated no
fact or controlling law presented which the Court overlooked or any intervening
fact or law which would alter the Court’s decision. See Bank of Am. Nat’l Ass’n v.
AIG Fin. Prods. Corp., No. 11-1189-cv, 2013 U.S. App. LEXIS 6866, at *7-8 (2d Cir.
Apr. 5, 2013) (“The standard for granting such a motion is strict, and
reconsideration will generally be denied unless the moving party can point to
controlling decisions or data that the court overlooked – matters, in other words,
that might reasonably be expected to alter the conclusion reached by the court.”)
(quoting Shrader v. CSX Transp., Inc., 70 F.3d 255, 227 (2d Cir. 1995)). “The major
grounds justifying reconsideration are an intervening change of controlling law,
the availability of new evidence, or the need to correct a clear error or prevent
manifest injustice." Space Hunters, Inc. v. United States, No. 11-3153-cv, 2012
U.S. App. LEXIS 21606, at *11 (2d Cir. Oct. 17, 2012)(quoting Virgin Atl. Airways,
Ltd. v. Nat'l Mediation Bd., 956 F.2d 1245, 1255 (2d Cir. 1992)). The Plaintiffs did
not contend that the Court failed to consider any law or fact which they presented
or which is intervening, nor do they assert that the Court’s ruling is clearly
erroneous or results in manifest injustice. Instead, they merely sought to "make
a record for appeal." Due to the gravity and complexity of the issue, the Court has
spent many hours reviewing, distinguishing between and analyzing the various
Henning reports, researching the applicable law, analyzing the issues briefed by
the parties, formulating its decision and drafting its ruling. Plaintiffs sought to
offer proof on the last day of the evidentiary phase of the liability stage of the
trial, weeks after the motion in limine was filed and only after learning of the
Court’s ruling. Allowing Plaintiffs to admit evidence to support their objection to
the Defendant’s motion in limine would in fairness necessitate allowing the
Defendant the same opportunity. Plaintiffs have shown no good cause for a
second opportunity to advocate for the admission of their expert’s opinion.
Moreover, the Defendant would be prejudiced both from a timing standpoint and
because the Plaintiffs have the benefit of the Court’s thought. The request to
make an offer of proof is denied as there is record for appeal; they have no
procedural entitlement to make it, and re-litigation of the issue is highly
prejudicial to the Defendant.
PLAINTIFFS’ CUTPA CLAIM
The Levinson and Davis plaintiffs have alleged that the Defendant violated
the Connecticut Unfair Trade Practices Act (“CUTPA”) by failing to comply with
federal banking regulations which require it to maintain adequate safeguards and
controls to protect the Plaintiffs’ funds held in what the Plaintiffs allege to be a
collective investment fund, in violation of 12 C.F.R. § 9.2. In its May 20, 2013
Order on Motions in Limine [Levinson dkt. 554; Davis dkt. 345; Short dkt. 218], the
Court granted the Defendant’s motion to preclude the Plaintiffs from offering
expert evidence regarding whether the BLMIS account in the Bank’s name
constitutes a collective investment fund and was held by the Bank in a fiduciary
capacity within the meaning of 12 C.F.R. §9.2. Specifically, the Court ruled that
Plaintiffs’ expert Rodgers may not offer an opinion as to collective investment
funds because he did not proffer an opinion on collective investment funds in his
expert report. [5/20/13 Order, p. 17]. Further, the Court ruled that Plaintiffs’
expert Henning could not offer testimony as to collective investment funds
because he had not opined “that the Bank’s account constituted a collective
investment fund but merely restate[d] the regulatory requirements which apply to
collective investment funds,” thereby making any potential testimony based on
his expert report not probative to the ultimate issue of whether the Bank’s
account constituted a collective investment fund. [Id. at pps. 17-18]. The Court
noted that Henning had “actually testified at his deposition that it was his opinion
that the custodial arrangement did not constitute a collective investment fund,”
therefore rendering any testimony Henning could offer at trial improper and in
direct contradiction to his prior disclosed opinion. [Id. at pps. 17-18].
Pursuant to subsequent inquiries from the Court as to what further
evidence Plaintiffs possess that supports their CUTPA claim, Plaintiffs have
submitted a Memorandum [Levinson dkt. 555; Davis dkt. 346] to which Defendant
has responded [Levinson dkt. 557; Davis dkt. 348].4 Plaintiffs cite to four pieces
of evidence that allegedly support their CUTPA claim, including (1) the June 21,
2012 Expert Report of Steven Henning, (2) Steven Henning’s deposition
testimony, (3) Steven Henning’s April 22, 2013 Revised Expert Report, and (4) the
deposition testimony of Defendant’s expert Edward E. Seifried. None of the
evidence to which Plaintiffs refer, however, offers an opinion that the BLMIS
account in the Bank’s name constituted a collective investment fund so as to
support Plaintiffs’ CUTPA claim. As the Plaintiffs have no evidence to support
their claim that the arrangement at issue was a collective investment fund, and in
light of the fact that Seifried’s and Henning’s testimony expressly refute that the
Bank’s arrangement constituted a collective investment fund, the Court will
preclude the Plaintiffs from introducing their CUTPA claim at trial.
Plaintiffs’ effort to direct the Court to Henning’s June 21, 2012 expert report
is misplaced. Plaintiffs claim that Henning in this report “expressly addressed
‘collective investment funds’ and defined a ‘collective investment fund,’” and that
he “further opined that, ‘[w]hen a national bank administers a common
investment fun, it must comply with 12 CFR §9.18” and must follow OCC
regulations. [Ps’ Memo, Levinson dkt. 555; Davis dkt. 346, pp. 1-2]. However, as
the Court held in the May 20 Order on the motions in limine, Henning did not posit
an opinion as to whether the arrangement at issue constituted a collective
The Plaintiffs in Short v. Connecticut Community Bank, 3:09-cv-1955(VLB) do
not have a CUTPA claim and so these documents have not been filed on the
investment fund, but merely recited law applicable to these arrangements that
constitute collective investment funds.
Further, as the Court noted in the May 20 Order, Henning subsequently
testified that the Bank did not operate a collective investment fund. Plaintiffs
contend that, on cross examination, “Henning clarified that the basis for his
response was Roberta Murphy’s testimony that the Bank had never established a
collective investment fund.” [Ps’ Memo at p. 3]. Plaintiffs’ argument is
problematic for two reasons. First, Dr. Henning’s testimony does not clearly
reflect that he based his opinion on Roberta Murphy’s testimony:
Q: And Roberta Murphy – you said to Mr. Merschman,
there was no collective investment fund here, right?
Q: And that’s because Roberta Murphy testified there
was no collective investment fund, right.
A: I recall that, yes.
It is not at all clear from the above testimony whether Henning was
conceding that he based his opinion as to the non-existence of a collective
investment fund on Roberta Murphy’s testimony, or whether Henning was merely
noting his recollection that Roberta Murphy had testified that a collective
investment fund did not exist. Furthermore, if Plaintiffs are correct that Henning
based his opinion that the Bank was not operating a collective investment fund
on Roberta Murphy’s testimony that the arrangement did not constitute a
collective investment fund (as opposed to on an evaluation of the relevant facts
and evidence in this matter), this opinion would be improper. Expert witness
testimony is admissible only if: (1) “the expert's scientific, technical, or other
specialized knowledge will help the trier of fact to understand the evidence or to
determine a fact in issue;” (2) “the testimony is based upon sufficient facts or
data;” (3) “the testimony is the product of reliable principles and methods;” and
(4) “the expert has reliably applied the principles and methods to the facts of the
case.” Fed. R. Evid. 702. Further, “[d]istrict courts have a gatekeeping role under
Federal Rule of Evidence 702 and are charged with the task of ensuring that an
expert’s testimony both rests on a reliable foundation and is relevant to the task
at hand.” Lynch v. Trek Bicycle Corp., 374 F. App’x 204, 206 (2d Cir. 2010)
(internal quotation marks and citation omitted). Henning had a duty to base his
opinions on an evaluation of the facts of this particular case as seen through the
lens of his own expertise; if Henning based his opinion solely on the ultimate
conclusion of lay witness Murphy, as Plaintiffs apparently contend, then such an
opinion is inadmissible as well as utterly unhelpful in assisting a jury in deciding
whether this arrangement constituted a collective investment fund.
Plaintiffs also proffer as evidence of their CUTPA claim a single footnote
from Henning’s April 22, 2013 Revised Expert Report. Even if this report had not
been stricken, it would not support the Plaintiff’s CUTPA claim. The entirety of
this Revised Report, though, is inadmissible as explained above. In addition,
although Plaintiffs argue that Henning “took note of the factual dispute in this
case between the Bank’s position . . . and plaintiffs’ position,” this footnote offers
no opinion whatsoever on the existence of a collective investment fund; rather, it
notes only that Henning is “aware that there is a dispute in this matter.” This
testimony therefore has no probative value and neither supports nor opposes
Plaintiffs’ CUTPA claim.
Plaintiffs’ reliance on the deposition testimony of Defendant’s expert
Edward E. Seifried is equally unavailing as his testimony lends no support to
their CUTPA claim. Seifried testified first that collective investment funds must
comply with the requirements of 12 C.F.R. §9.18 and second that, during his
career at the OCC, he encountered arrangements “similar in mechanics” to the
arrangement at issue in this case. [Ps’ Memo at p. 6]. Plaintiffs cite specifically
to the following testimony:
Q: In the years you spent as a bank examiner with the
OCC, did you encounter an arrangement similar to the
one at issue in this case which was not a common trust
fund or collective investment fund?
A: I did not, keeping in mind that I did trust exams so
that anything like that would have been set up as a
common fund. There would have been no reason to see
[Ps’ Memo at p. 6]. This testimony, however, does not support Plaintiffs’
contention that the arrangement at issue was a collective investment fund.
Rather, although Seifried testified that he had not encountered an arrangement
like the one at issue that was not a collective investment fund, he specifically
noted that he would have had no reason to see such an arrangement during his
time as a bank examiner, as Seifried did trust exams only. In addition and as
Defendant notes, Seifried explicitly testified in Davis that “the bank didn’t have
any, does not have any common [or] collective funds.” [D’s Opposition, Levinson
dkt. 557; Davis dkt. 348; at p. 5]. Similarly, Seifried testified in Levinson that the
arrangement at issue was not a collective investment fund because “there is no
trust establishing the fund. You need a bank with trust powers to establish a
trust because what it is, it’s called a collective trust. . . . You have to have a
governing document, and the accounts that participate in it have to exist for a
legitimate fiduciary purpose.” [Id. at Exh. 2]. Contrary to the Plaintiffs’
contention, Seifried’s testimony, then, does not support their CUTPA claim but
rather explicitly controverts it.
In sum, none of the evidence Plaintiffs cite supports their claim that the
arrangement at issue constituted a collective investment fund such that their
CUTPA claim could be viable. Rather, each of the foregoing pieces of purported
evidence either offer no opinion at all about the nature of the arrangement at
issue, or expressly conclude that the arrangement did not constitute a collective
investment fund. Plaintiffs are thus precluded from offering any expert testimony
at trial as to whether this arrangement constituted a collective investment fund.
The Plaintiffs’ CUTPA claim rests solely on their contention that the BLMIS
account in the Bank’s name constitutes a collective investment fund and was
held by the Bank in a fiduciary capacity within the meaning of 12 C.F.R. §9.2, thus
requiring the Defendant to maintain adequate safeguards and controls to protect
the Plaintiffs’ funds. Plaintiffs have not proffered any expert testimony as to
whether the arrangement constituted a collective investment fund, nor have they
cited to any other evidence that would support their contention that a collective
investment fund existed, discovery has long since closed, and the issue was not
raised until the eve of trial. As such, any amendment the Plaintiffs could make to
their complaint to allege a CUTPA claim on a new theory of liability would be
futile.5 Plaintiffs are thus barred from bringing their CUTPA claim at trial.
IT IS SO ORDERED.
Hon. Vanessa L. Bryant
United States District Judge
Dated at Hartford, Connecticut: June 27, 2013
The Second Circuit has “referred to the prejudice to the opposing party resulting
from a proposed amendment as among the ‘most important’ reasons to deny
leave to amend.” AEP Energy Servs. Gas Holding Co. v. Bank of America, N.A.,
626 F.3d 699, 725 (2d Cir. 2010) (citation omitted). “Amendment may be
prejudicial when, among other things, it would require the opponent to expend
significant additional resources to conduct discovery and prepare for trial or
significantly delay the resolution of the dispute.” Id. at 725–26 (internal quotation
marks and citation omitted). Courts have typically found amendments to be
prejudicial in circumstances where discovery has been completed and the case is
near or on the eve of trial. Ansam Assocs., Inc. v. Cola Petroleum, Ltd., 760 F.2d
442, 446 (2d Cir. 1985) (affirming denial of motion to amend as “especially
prejudicial given the fact that discovery had been completed and [the defendant]
had already filed a motion for summary judgment”); see also Krumme v.
WestPoint Stevens, Inc., 143 F.3d 71, 88 (2d Cir. 1998) (same where “case was
near resolution and discovery had been completed”); Juncewicz v. Patton, No.
01–cv–0519E(SR), 2002 WL 31654957, at *6 (W.D.N.Y. Oct. 8, 2002) (denying leave
to amend complaint on “eve of trial” as amendment would “unduly delay the final
disposition of this action”).
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