JPMorgan Chase Bank, N.A. v. Winget et al

Filing 207

MEMORANDUM and ORDER granting in part and denying in part 200 Plaintiff's Motion to Strike Testimony. Signed by District Judge Avern Cohn. (JOwe)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

JP MORGAN CHASE BANK, NA.,
Plaintiff,
Case No. 08-13845
HON. AVERN COHN

-vsLARRY J. WINGET and the
LARRY J. WINGET LIVING TRUST,
Defendants.
/

MEMORANDUM AND ORDER
GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION TO STRIKE TESTIMONY (Doc. 200)
I. Introduction
A.
This is a commercial finance dispute. The background and nature of the case is
described in the following documents:
Amended Memorandum And Order Denying Defendants’
Amended Motion For Judgment On The Pleadings As To
Count I (Doc. 29)
and
Memorandum And Order Granting Defendants’ Motion For
Leave To Amend Answer and Denying Without Prejudice
Defendants’ Motion To Compel and Denying Without
Prejudice Plaintiff’s Motion For Summary Judgment On
Count I and Denying As Moot Defendants’ Motion To Stay
(Doc. 40)
Briefly, plaintiff JPMorgan Chase Bank, N.A. (Agent) is the Administrative Agent
for a group of lenders (Lenders) that extended credit to Venture Holdings Company,
LLC (Venture) under a Credit Agreement. The Agent is suing defendants Larry Winget

(Winget) and the Larry Winget Living Trust (Winget Trust) to enforce a guaranty and two
pledge agreements entered into by Winget and the Winget Trust in 2002 in which they
guaranteed the obligations of Venture, a company owned and controlled by Winget
and/or the Winget Trust.
B.
Before the Court are cross-motions for summary judgment on the issue of the
Winget Trust’s liability. (Doc. 186 and Doc. 191). In conjunction with the summary
judgment motions, defendants’ papers include what they characterize as expert reports
by
C

Stephen Carl Arch - professor and chairperson, Department of English,
Michigan State University (Arch)

C

George F. Bearup - a lawyer (Bearup)

C

Robert D. Mollhagen - a lawyer (Mollhagen)

C

Daniel W. Terpsma - a former bank executive (Terpsma)

Defendants have also included in their motion papers the affidavit of J.T. Atkins (Atkins),
a former financial analyst and advisor to Larry J. Winget.
C.
The Agent has moved to strike the testimony of Arch, Bearup, Mollhagen,
Terpsma and Atkins on the grounds that
C

Defendants have not sought to have Arch, Bearup, Mollhagen or Terpsma
qualified as experts

C

Arch, Bearup, Mollhagen and Terpsma possess no scientific, technical or
other specialized knowledge that qualifies their opinions as admissible
evidence
The testimony of Arch, Bearup, Mollhagen and Terpsma is unhelpful and
unreliable

C

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C

The testimony of Atkins is irrelevant and prejudicial

For the reasons which follow, the Court will disregard the testimony of Arch,
Bearup and Mollhagen, and will deny the motion as to the testimony of Terpsma and the
affidavit of Atkins.
II. Discussion
A.
As an initial matter, the criteria for admission of expert testimony is wellestablished and need not be repeated in detail here. See Daubert v. Merrell Dow
Pharm., Inc., 509 U.S. 579 (1993).1 Moreover, because the motions for summary
judgment have not yet been decided, it is not clear as to the extent to which the Court
will consider the opinion of Terpsma or the affidavit of Atkins in deciding the motions.
Should the case proceed to trial, the Court will consider such opinion and testimony.
The weight to be given the opinion and testimony is another matter.
B.
With regard to Arch, he states in his report, was engaged to “analyze the
meaning of a single sentence in [the guaranty].” The sentence reads:
Notwithstanding anything herein or elsewhere to the
contrary, no action will be brought for the repayment of the

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Under Daubert and its progeny, district courts must exercise a gatekeeping role
in screening the reliability of expert testimony. Consistent with this directive, Federal
Rule of Evidence 702 provides that:
If scientific, technical, or other specialized knowledge will assist the trier of fact to
... determine a fact in issue, a witness qualified as an expert by knowledge, skill,
experience, training, or education, may testify thereto in the form of an opinion or
otherwise, if (1) the testimony is based upon sufficient facts or data, (2) the
testimony is the product of reliable principles and methods, and (3) the witness
has applied the principles and methods reliably to the facts of the case.
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Guaranteed Obligations under this Guaranty and no
judgment therefor (sic) will be obtained or enforced against
Larry Winget other than with respect to the Pledged Stock in
accordance with the provisions of the related pledge
agreements, provided that the Guarantor shall be fully and
personally liable for any damages arising from any violations
of any of the agreements of the Guarantor herein in favor of
the lenders.
In Thomas Noe, Inc. v. Homestead Ins. Co., 173 F.3d 581, 583-84 (1999), the
Sixth Circuit said:
The plaintiff contends that the trial court erred in failing to
consider the affidavit of an expert witness, Professor Beth
Eisler of the University of Toledo College of Law. Professor
Eisler’s affidavit opines that both of the exclusionary clauses
in question here are ambiguous, and it suggests that
“reasonable minds ay differ as to whether Mr. Noe was
‘actually in or upon’ the vehicle or was ‘attending’ the
vehicle.”
Given our conclusion that Exclusionary Clause 5.D is
unambiguous, it is clear that evidence of a law professor’s
contrary conclusion is inadmissible. See North Am.
Specialty Ins. Co. v. Myers, 111 F.3d 1273, 1280-81 (6th Cir.
1997) (holding a report of an “expert in the interpretation of
insurance contracts” inadmissible to defeat summary
judgment where there were no ambiguous provisions or
technical terms in the relevant portion of the insurance policy
in question). Professor Eisler’s affidavit offers an opinion on
a legal matter – the proper interpretation of an insurance
policy – that is well within the competence of the court. See
Id. The district court did not err in disregarding the affidavit.
In the Amended Memorandum And Order Denying Defendants’ Amended Motion For
Judgment On The Pleadings As To Count I (Doc. 29), the Court said:
The “last paragraph of Section 3 is unambiguous. It names
Winget, and Winget alone, in connection with limited liability
under the Guarantee to the Pledged Stock.
Thus, the Court has already opined on the language of Section 3, finding it
unambiguous. This is why on the counterclaim Winget and the Winget Trust ask for the
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following as relief:
(i) Reformation of the Guaranty to reflect the actual intent of
the parties that the liability of Winget and the Trust, if any,
under the Guaranty and the Pledge Agreements is limited to
recourse against the stock pledged under the Pledge
Agreements and that Chase has no rights against the [sic]
Winget or the Trust under the Guaranty until it has complied
with the “reasonable efforts” and “last resort” conditions of
the Pledge Agreements.
Given the Court’s finding, Arch’s contrary conclusion is not admissible.
C.
With regard to Bearup, the “Scope of Report” section of his report states:
I have been asked to examine the Eighth Amendment
Closing Documents (referred to for convenience as the
Eighth Amendment, Deposition Exhibit 18), the Trust
Agreement for the Larry J. Winget Revocable Living Trust
(also referred to for convenience as the Trust) as well as
related closing documents and testimony that reflect many of
the negotiations that preceded the execution of the Eighth
Amendment as to whether, based upon my experience as a
trust attorney, the actions of the parties to the Eighth
Amendment were consistent with a factual finding that they
intended that the Guaranty signed by the Trust impose an
unlimited undertaking upon the Trust as to the debt of the
obligor (emphasis in original)
This statement is self-declaration of inadmissability. It is the Court’s task to decide if
“the actions of the parties. . .were consistent with a factual finding that they intended
that the Guaranty signed by the Trust impose an unlimited undertaking upon the Trust
as to the debt of the obligor.” Bearup’s conclusions are not necessary to assist the
Court in its decision.
D.
Mollhagen’s opinion is of the same order as Bearup’s. His “Requested Opinion”:
You have requested that I provide my opinion (“Requested
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Opinion”) as to whether the Transaction Documents (as
defined below) taken as a whole are consistent with a factual
finding that the parties to the Transaction Documents
intended that the Guaranty impose unlimited liability on the
Larry J. Winget Trust (the “Trust”) as to the obligations of
the Borrower (as defined below) under the Transaction
Documents, but only limited liability on Larry J. Winget
(“Winget”)
also is a self-declaration of inadmissability. Mollhagen was also asked to do the Court’s
job: determine what the parties agreed to based on the evidentiary record.
E.
Terpsma’s opinion, however, is of a different order. He was asked, as he states
in his report, in light of his experience as a former bank executive with responsibility for
commercial loan portfolios which included many “Syndicated Credits” to express an
opinion as follows:
Engagement
I was engaged to render my opinion regarding whether or
not the actions and communications undertaken by JPM are
consistent with the conclusion that the Winget Trust provided
a guaranty for “unlimited” support for the obligations of the
Borrower, Venture Holdings Company, LLC.
In addition, I was engaged to render an opinion as to
whether or not a Guaranty, even if unsecured, with an
estimated value of $100 million to the Agent and Secured
Lenders, would be considered a material source of
repayment, and if so, whether it would be a subject of
Collateral Analysis undertaken by the Agent, and
communicated to senior lenders.
As defendants’ explain in the Corrected Defendants’ Brief In Opposition To
Plaintiff’s Motion To Strike Expert Testimony (Doc. 205):
[His] experience makes [his] testimony particularly reliable
and relevant on the issue of the standard practices and
customs Chase would have followed had it, in fact, secured
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for the syndicated lender an unlimited guarantee from the
Trust under the Eighth Amendment.
***
[His] experience allows him to authoritatively address the
standard commercial products of an administrative agent in
servicing a group of syndicated lenders. . . .
Permitting Terpsma’s opinion testimony on banking issues is consistent with the
Sixth Circuit’s decision in First Tennessee Bank National Ass’n v. Barreto, 268 F.3d 319
(6th Cir. 2001). In First Tennessee, a lender sued to compel the Small Business
Administration (SBA) to fulfil its obligation under a guaranty to repurchase a defaulted
loan. The district court’s decision that the SBA was not obligated to repurchase the loan
in light of the fact the lender was substantially negligent in servicing the loan was
affirmed on appeal. The SBA’s position was in large part dependent on the opinion
testimony of an expert witness, an experienced bank executive. In turning aside a
challenge to the admissibility of the expert’s testimony, the Sixth Circuit said:
After reviewing [the expert’s] trial testimony, we cannot say
that the district court abused its discretion by allowing him to
testify as an expert witness. In reaching this conclusion, we
find the Daubert reliability factors unhelpful in the present
case, which involves expert testimony derived largely from
[the expert’s] own practical experiences throughout forty
years in the banking industry. Opinions formed in such a
manner do not easily lend themselves to scholarly review or
to traditional scientific evaluation. . . . The fundamental
objective when considering the admissibility of “expert”
testimony is “to ensure the reliability and relevancy” of that
testimony. As set forth above, the district court possessed
an adequate basis for concluding that Iorlano’s testimony
was both reliable and relevant. Accordingly, we find no
abuse of discretion in the district court’s decision to admit his
testimony.
First Tennessee, 268 F.3d at 335.
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F.
Finally, Atkins’ testimony is admissible. He had personal knowledge of the
conduct of the parties after the signing of the Guaranty. As defendants point out,
Michigan common law on contracts permits a court to determine the parties’ intent not
only by considering the documents regarding the transaction at issue, the testimony
proffered by the parties, but also the post-formation conduct of the parties for evidence
of intent. Atkins’ statements are relevant and admissible on the issue of the parties’
intent.
III. Conclusion
Arch’s testimony, whatever his qualifications as a linguist, is irrelevant in light of
this Court’s finding of no ambiguity in the text of the Guaranty. The testimony of Bearup
and Mollhagen is irrelevant; it is the Court who will resolve the parties’ disagreements
as to the facts and the conclusion to be drawn from them. Terpsma’s expert opinion is
an aid to the Court’s decision. Atkins’ testimony is relevant. Accordingly, the Agent’s
Motion To Strike Testimony is GRANTED IN PART and DENIED IN PART.
SO ORDERED.

Dated: November 30, 2011

S/Avern Cohn
AVERN COHN
UNITED STATES DISTRICT JUDGE

I hereby certify that a copy of the foregoing document was mailed to the attorneys of
record on this date, November 30, 2011, by electronic and/or ordinary mail.

S/Julie Owens
Case Manager, [phone]
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