Broyles v. Cantor Fitzgerald & Co. et al
Filing
684
RULING denying #581 Motion in Limine. Signed by Judge James J. Brady on 6/7/2016. (SGO)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA
JOSEPH N. BROYLES, ET AL.
CIVIL ACTION
VERSUS
NO. 10-854-JJB-CBW
CANTOR FITZGERALD & CO., ET AL.
Consolidated with:
JOSEPH N. BROYLES, ET AL.
CIVIL ACTION
VERSUS
NO. 10-857-JJB-CBW
CANTOR FITZGERALD & CO., ET AL.
THIS APPLIES TO CIVIL ACTION NO. 3:10-857.
RULING
This matter is before the Court on a Motion in Limine (Doc. 581) brought by the
defendants, the S&Y Parties.1 The plaintiffs, the CA Funds,2 filed an opposition (Doc. 659). Oral
argument is unnecessary. For the reasons stated herein, the defendants’ Motion in Limine (Doc.
581) is DENIED.
The basic facts of this case have been outlined by this Court in several previous rulings,
and will not be reiterated herein. See, e.g., Doc. 274.
I.
DISCUSSION
The admission of expert testimony is governed by Federal Rule of Evidence 702 (“Rule
702” or “FRE 702”) and the Supreme Court’s decision in Daubert v. Merrell Dow
The “S&Y Parties” refers to: Stifel Financial Corporation (“Stifel Financial”); Stifel, Nicolaus & Company, Inc.
(“Stifel Nicolaus”); Stone & Youngberg, LLC (“S&Y”); and Anthony Guaimano. Defs.’ Supp. Mem. 1, Doc. 581-1.
2
The “CA Funds” refers to: CA High Yield Fund, LLC; CA High Yield Offshore Fund, Ltd.; CA Core Fixed Income
Fund, LLC; CA Core Fixed Income Offshore Fund, Ltd.; CA Strategic Equity Fund, LLC; CA Strategic Equity
Offshore Fund, Ltd.; Sand Spring Capital III, Ltd.; Sand Spring Capital III, LLC; and San Spring Capital III Master
Fund, LLC. Id. at 1 n.1.
1
1
Pharmaceuticals, Inc., 509 U.S. 579 (1993). Rule 702 establishes that expert testimony is
admissible only if: (a) the expert’s testimony will help the trier of fact to understand the evidence
or to determine a fact in issue; (b) the testimony is based on sufficient facts or data; (c) the
testimony is the product of reliable principles and methods; and (d) the expert has reliably applied
the principles and methods to the facts of the case. FED. R. EVID. 702. The proponent of expert
testimony bears the burden of establishing the admissibility of the testimony. See Moore v. Ashland
Chem. Inc., 151 F.3d 269, 276 (5th Cir. 1998) (en banc). The “gatekeeping obligation” that a
district court has under Rule 702 “applies to all expert testimony,” not just scientific testimony.
Kumho Tire Co. v. Carmichael, 526 U.S. 137, 147 (1999). Vigorous cross-examination,
presentation of contrary evidence, and careful instruction on the burden of proof at trial are the
traditional and appropriate means of attacking shaky but otherwise admissible evidence. Daubert,
509 U.S. at 596.
In the present motion, the defendants request this Court to exclude testimony of two
specific opinions offered by the plaintiffs’ proposed expert, Theodore Urban (“Urban”): (1) the
future value of S&Y; and (2) that regulatory investigations are predictors of civil litigation.
A.
S&Y’s Future Value
First, the defendants seek to exclude Urban’s opinion regarding S&Y’s future value.
Specifically, Urban testified during his deposition that S&Y may have increased in value in the
future had it not been acquired by Stifel Financial. See Urban Dep. 138:10–17, Doc. 581-2 (stating
that the acquisition of S&Y by Stifel Financial “den[ied] the opportunity for continued growth of
Stone & Youngberg, which might have provided a greater ability to meet the not just pending
claims in litigation but in other potential liabilities that Stone & Youngberg and Stifel knew, or
should have known, of at the time of the acquisition”). According to the defendants, this opinion
2
is inadmissible for three reasons: (1) the opinion was not disclosed in any of Urban’s reports; (2)
Urban is not qualified to opine on the subject; and (3) Urban did not perform any analysis to
support the opinion. Defs.’ Supp. Mem. 7–12, Doc. 581-1.
In response, the plaintiffs concede that the statement at issue is “outside the scope of Mr.
Urban’s opinions and report,” but point out that the statement was made in response to a question
asked by the defendants’ counsel during Urban’s deposition. Pls.’ Opp’n 3, Doc. 659. According
to the plaintiffs, Urban “does not intend to offer opinions at trial regarding the hypothetical future
value of S&Y.” Id. at 2. Based on these representations, the motion in limine, as it pertains to this
opinion, is DENIED as moot.
B.
Regulatory Investigations as Predictors of Civil Litigation
Second, the defendants seek to exclude Urban’s opinion that regulatory investigations are
predictors of civil litigation. A disputed issue in this case is whether Stifel Financial was aware, at
the time it acquired S&Y in 2011, of S&Y’s potential civil liability. Pls.’ Opp’n 3, Doc. 659. For
that reason, Stifel retained an expert who “opined that, while the S&Y Parties were aware of
regulatory exposure arising out of the SEC investigation, they did not know that it could also lead
to private civil litigation, such as this case.” Id. at 4 (citing Atkins Report 20–21, Doc. 659-5). In
response, Urban stated:
Atkins’s opinion is not reasonable or consistent with my experience in the industry.
It has been my experience that the existence of a significant regulatory investigation
involving transactions which caused or enabled significant customer losses is a
reasonable predictor of potential regulatory and/or civil liability, and that by 2011,
as set forth in my original report, the likelihood of the regulatory investigation
spawning such civil litigation was becoming apparent.
Urban Rebuttal Report 11, Doc. 581-4. In Urban’s deposition he further stated that, although he
does not know the statistics, based on his experience in the industry “if there is a significant
3
regulatory inquiry involving significant . . . violations of regulatory requirements, statutes, laws,
regulations, . . . particularly where it involves damage to customers, and loss of significant
customer funds, then, . . . a relatively high percentage ends up in civil litigation.” Urban Dep. 149–
150, Doc. 659-4. According to the defendants, Urban’s opinion is inadmissible because he did not
conduct an analysis to support the opinion, but merely relied on his experience. Defs.’ Supp. Mem.
13–15, Doc. 581-1. In response, the plaintiffs argue that experts can be qualified and state opinions
based solely on their experience in the field. Pls.’ Opp’n 4–5, Doc. 659.
Despite the requirements set forth in Daubert, a proffered expert’s experience may be used
to determine whether they are qualified as an expert under FRE 702. See Ayers Oil Co. v. Am. Bus.
Brokers, Inc., No. 2:09 CV 02 DDN, 2010 WL 2990113, *4–5 (E.D. Mo. July 27, 2010) (holding
that an expert was qualified based on his 25 years of experience in the field, even though there was
“no indication that his opinions [were] based on any objective testing or that they [had] been peer
reviewed”). When FRE 702 was amended to incorporate the requirements of Daubert, the advisory
committee stated:
Nothing in this amendment is intended to suggest that experience alone—or
experience in conjunction with other knowledge, skill, training or education—may
not provide a sufficient foundation for expert testimony. To the contrary, the text
of Rule 702 expressly contemplates that an expert may be qualified on the basis of
experience. In certain fields, experience is the predominant, if not sole, basis for a
great deal of reliable expert testimony.
If the witness is relying solely or primarily on experience, then the witness must
explain how that experience leads to the conclusion reached, why that experience
is a sufficient basis for the opinion, and how that experience is reliably applied to
the facts.
FED. R. EVID. 702 advisory committee’s notes to 2000 amendment (emphasis added) (citations
omitted). “As a general rule, questions relating to the bases and sources of an expert’s opinion
affect the weight to be assigned that opinion rather than its admissibility and should be left for the
4
jury’s consideration.” United States v. 14.38 Acres of Land, More or Less Situated in Leflore Cty.,
Miss., 80 F.3d 1074, 1077 (5th Cir. 1996) (citation omitted).
Here, Urban based his opinion on his years of experience in the field of securities
regulation. From 1984 until March of 2007, Urban was General Counsel of Ferris, Baker Watts,
Inc. (“FBW”), a regional broker-dealer and registered investment advisor. Urban Decl. ¶ 4, Doc.
659-1. As General Counsel, among other things, Urban managed the legal and compliance
departments; served on the Board of Directors; served on several securities industry committees;
and managed FBW’s cooperation with and responses to all regulatory investigations and litigation
matters to which FBW was subject. Id. at ¶ 4–5. As more thoroughly set forth in his declaration,
Urban also had years of experience in securities regulation prior to his time at FBW. See id. at ¶
2–3. Furthermore, Urban discusses the basis of his opinion in regards to his experience in the
industry. See Urban Dep. 148–151. Doc. 659-4.
Based on this experience, the Court finds that Urban’s opinion in sufficiently reliable; any
concerns regarding the basis for this opinion should be inquired into through “vigorous crossexamination.” See Daubert, 509 U.S. at 596. The defendants’ motion in limine is therefore
DENIED.
II.
CONCLUSION
For the reasons stated above, the defendants’ Motion in Limine (Doc. 581) is DENIED.
Signed in Baton Rouge, Louisiana, on June 7, 2016.
JUDGE JAMES J. BRADY
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA
5
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?