GRANDE VILLAGE LLC et al v. CIBC INC. et al
Filing
172
OPINION. Signed by Judge Noel L. Hillman on 6/22/2018. (dmr)
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
GRANDE VILLAGE LLC, GRANDE
PROPERTIES, LLC, WILLINGBORO
TOWN CENTER URBAN RENEWAL
NORTH, LLC, WILLINGBORO TOWN
CENTER NORTH MANAGER, LLC,
WILLIAM T. JULIANO, and
THOMAS E. JULIANO,
No. 1:14-cv-3495 (NLH/JS)
(consolidated)
OPINION
Plaintiffs,
v.
CIBC INC. and CANADIAN
IMPERIAL BANK OF COMMERCE,
NEW YORK AGENCY,
Defendants.
APPEARANCES:
DAVID L. BRAVERMAN
BENJAMIN ALEX GARBER
PETER J. LEYH
BRAVERMAN KASKEY, P.C.
ONE LIBERTY PLACE, 56TH FLOOR
1650 MARKET STREET
PHILADELPHIA, PA 19103
On behalf of the Juliano Parties
ADAM K. DERMAN
DAVID M. DUGAN
CHIESA SHAHINIAN & GIANTOMASI PC
THE OFFICES OF CRYSTAL LAKE
ONE BOLAND DRIVE
WEST ORANGE, NJ 07052
On behalf of CIBC
JEAN-MARIE L. ATAMIAN (admitted pro hac vice)
JORDAN SAGALOWSKY (admitted pro hac vice)
JAMES C. DUPONT (admitted pro hac vice)
MAYER BROWN LLP
1221 AVENUE OF THE AMERICAS
Page 1 of 18
NEW YORK, NY 10020
On behalf of CIBC
HILLMAN, District Judge
This is a breach of contract matter involving various loan
and mortgage documents arising out of real estate developments
in New Jersey.
The Court assumes the parties are familiar with
the background facts of this case and will not recite them here.
On March 30, 2018, the Court granted in part and denied in part
a motion for summary judgment.
The remaining claims will be
resolved at a bench trial before the undersigned. 1
On May 21,
2018, CIBC filed two motions in limine seeking to exclude the
expert testimony of Alan Fellheimer and Hal Michels.
For the
reasons that follow, the Court will deny both motions, which
seek total exclusion of the experts.
The Court will, however,
order restrictions on each expert’s testimony and guidelines for
what is permissible and what is not.
1
The Court has been contemplating the use of an advisory
jury in this matter. While the Juliano Parties have agreed to
the use of an advisory jury, CIBC has objected. Upon
considering the law, the parties’ arguments and preferences, and
what is required for this case to move efficiently through
trial, the Court has decided not to enlist the help of an
advisory jury. This case will proceed with a bench trial, with
the undersigned serving as trier of fact.
Page 2 of 18
I.
Federal Rule of Evidence 702 provides:
A witness who is qualified as an expert by knowledge,
skill, experience, training, or education may testify in
the form of an opinion or otherwise if:
(a)
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;
(b)
the testimony is based on sufficient facts or
data;
(c)
the testimony is the product
principles and methods; and
(d)
the expert has reliably applied the principles
and methods to the facts of the case.
of
reliable
The Third Circuit has described the requirements of Federal
Rule of Evidence 702 as a “trilogy of restrictions on expert
testimony: qualification, reliability and fit.”
Calhoun v.
Yamaha Motor Corp., 350 F.3d 316, 321 (3d Cir. 2003) (quoting
Schneider ex rel. Estate of Schneider v. Fried, 320 F.3d 396,
405 (3d Cir. 2003)).
“[T]he district court acts as a
gatekeeper, preventing opinion testimony that does not meet the
requirements of qualification, reliability and fit from reaching
the jury.”
Schneider, 320 F.3d at 404.
A. Qualified
A witness “must be qualified to testify as an expert.”
Calhoun, 350 F.3d at 321.
This “requires ‘that the witness
possess specialized expertise.’”
Id. (quoting Schneider, 320
Page 3 of 18
F.3d at 405).
However, the Third Circuit “interpret[s] this
requirement liberally,” and an expert can be qualified through
“a broad range of knowledge, skills, and training.”
Id.
(quoting In re Paoli R.R. Yard PCB Litig., 35 F.3d 717, 741 (3d
Cir. 1994)).
This “liberal policy of admissibility extends to
the substantive as well as the formal qualification of experts.”
In re Paoli, 35 F.3d at 741.
The Third Circuit has “eschewed
imposing overly rigorous requirements of expertise and ha[s]
been satisfied with more generalized qualifications.”
Id.
“[I]t is an abuse of discretion to exclude testimony simply
because the trial court does not deem the proposed expert to be
the best qualified or because the expert does not have the
specialization that the court considers most appropriate.”
Lauria v. AMTRAK, 145 F.3d 593, 598-99 (3d Cir. 1998) (quoting
Holbrook v. Lykes Bros. S.S. Co., 80 F.3d 777, 782 (3d Cir.
1996)).
Indeed, experts can be qualified “on the basis of
practical experience alone, and a formal degree, title, or
educational specialty is not required.”
Id.
“[I]nsistence on a
certain kind of degree or background is inconsistent” with Third
Circuit jurisprudence.
In re Paoli, 916 F.2d at 855.
B. Reliable
An expert witness’s “testimony must be reliable.” Calhoun,
350 F.3d at 321.
“To establish reliability, the testimony ‘must
be based on the methods and procedures of science rather than on
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subjective belief or unsupported speculation; the expert must
have good grounds for his . . . belief.’”
Furlan v. Schindler
Elevator Corp., 516 F. App’x 201, 205 (3d Cir. 2013) (quoting
Schneider, 320 F.3d at 404).
“In Daubert v. Merrell Dow
Pharmaceuticals, Inc., 509 U.S. 579, 113 S. Ct. 2786, 125 L. Ed.
2d 469 (1993), the Supreme Court charged trial judges with the
responsibility of acting as ‘gatekeepers’ to exclude unreliable
expert testimony.”
Calhoun, 350 F.3d at 320-21 (quoting
Daubert, 509 U.S. at 597).
Federal Rule of Evidence 703 provides:
An expert may base an opinion on facts or data in the
case that the expert has been aware of or personally
observed.
If experts in the particular field would
reasonably rely on those kinds of facts or data in
forming an opinion on the subject, they need not be
admissible for the opinion to be admitted. But if the
facts or data would otherwise be inadmissible, the
proponent of the opinion may disclose them to the jury
only if their probative value in helping the jury
evaluate the opinion substantially outweighs their
prejudicial effect.
“[E]xperts in various fields may rely properly on a wide variety
of sources and may employ a similarly wide choice of
methodologies in developing an expert opinion.”
Cooper v. Carl
A. Nelson & Co., 211 F.3d 1008, 1020 (7th Cir. 2000).
“[T]here may be some circumstances where one’s training and
experience will provide an adequate foundation to admit an
opinion and furnish the necessary reliability to allow a jury to
consider it . . . .”
Oddi v. Ford Motor Co., 234 F.3d 136, 158
Page 5 of 18
(3d Cir. 2000).
“Cases where courts have allowed testimony
based on the experience of the expert often involve testimony as
to custom and practice that has been acquired via such
experience.”
W. Am. Ins. Co. v. Jersey Cent. Power & Light Co.,
No. 03-6161, 2008 WL 5244232, at *8 (D.N.J. Dec. 15, 2008).
C. Fit
“As for fit, ‘the expert’s testimony must be relevant for
the purposes of the case and must assist the trier of fact.’”
Furlan, 516 F. App’x at 205 (quoting Schneider, 320 F.3d at
404).
This standard is not intended to be a high one, nor is
it to be applied in a manner that requires the plaintiffs
“to prove their case twice – they do not have to
demonstrate to the judge by a preponderance of the
evidence that the assessments of their experts are
correct,
they
only
have
to
demonstrate
by
a
preponderance of evidence that their opinions are
reliable.”
Oddi, 234 F.3d at 145 (quoting In re Paoli, 35 F.3d at 744).
II.
CIBC’s Motion in Limine to Exclude Testimony of Expert
Alan Fellheimer
CIBC asks the Court to exclude Fellheimer’s testimony in
its entirety.
The Court groups CIBC’s arguments into the
following broad categories: (1) Fellheimer improperly asserts
several legal conclusions and opines on intent and state of
mind; (2) he is unqualified, as he is more commercial litigator
than banker; and (3) his testimony is unreliable.
Page 6 of 18
A. Scope of Testimony
CIBC argues Fellheimer’s report contains legal conclusions,
for example that the Juliano Parties were never in default, that
CIBC violated the loan documents, and that CIBC acted in bad
faith.
They also argue Fellheimer repeatedly opines on the
state of mind of CIBC’s employees, such as stating that CBIC’s
only objective was to exit the loans, that CIBC was never
interested in a sale of the loans, and that CIBC never intended
to make financing available under the Subsequent Advance.
The
Juliano Parties appear to admit at least that Fellheimer’s
statement that CIBC acted in bad faith in its handling of the
loans is beyond the scope of expert testimony.
(Opp. Br. 23
(“Here, there are limited instances where Mr. Fellheimer’s
report may contain statements that is beyond the permissible
scope of Rule 704 – as, for instance, where he states that ‘CIBC
acted in bad faith toward the Juliano Parties in connection with
its handling of the Loans,’ in breach of the implied covenant of
good faith and fair dealing.”)).
The Court will not allow Fellheimer to draw legal
conclusions in his testimony before this Court.
Federal Rule of
Evidence 704(a) provides: “An opinion is not objectionable just
because it embraces an ultimate issue.”
“Although Federal Rule
of Evidence 704 permits an expert witness to give testimony that
‘embraces an ultimate issue to be decided by the trier of fact,’
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an expert witness is prohibited from rendering a legal opinion.”
Berckeley Inv. Grp., Ltd. v. Colkitt, 455 F.3d 195, 217 (3d Cir.
2006).
“[T]he line between admissible and inadmissible expert
testimony as to the customs and practices of a particular
industry often becomes blurred when the testimony concerns a
party’s compliance with customs and practices that implicate
legal duties.”
Id. at 218.
The Third Circuit has approved of the use of an expert
testifying as to bank customs and practices.
See First Nat’l
State Bank v. Reliance Elec. Co., 668 F.2d 725, 731 (3d Cir.
1981) (“[T]he trial judge permitted the testimony to provide the
jury with information on bank customs and to assist the trier of
fact with bank and industry practices.”).
While the district
court in that case allowed testimony as to “custom in the
banking industry,” it did not allow “opinion as to the legal
duties arising therefrom.”
Id.
[A]ny qualified expert . . . may provide an opinion on
whether a party’s conduct or actions meet the underlying
bases for an ultimate issue in a case (by, for example,
testifying concerning whether certain acts would in the
abstract be improper and/or inconsistent with a party’s
legal duties), but may not merely instruct the jury on
the result to reach based upon a party’s specific conduct
or actions (by, for example, stating that a party did
indeed violate an applicable duty through certain
actions).
Krys v. Aaron, 112 F. Supp. 3d 181, 193 (D.N.J. 2015).
Page 8 of 18
Here, Fellheimer’s proffered testimony consists not only of
opinions relating to sound banking customs, but crosses over to
make legal conclusions regarding breaches of the loan documents
by CIBC and to opine that CIBC acted in bad faith.
He also
improperly opines on CIBC’s collective state of mind in its
treatment of the loans.
See id. at 203 (“[E]xperts may not
provide testimony concerning ‘the state of mind’ or
‘culpability’ of Defendants.”).
It is this Court’s job to reach
legal conclusions and, as the trier of fact, to make findings of
fact regarding intent and state of mind.
To the extent
Fellheimer seeks to do so, such testimony will be excluded.
In
the same vein, Fellheimer is prohibited from relying on any
caselaw in his testimony.
B. Qualifications
CIBC argues Fellheimer is first and foremost a commercial
litigator.
The Court has acquainted itself with Fellheimer’s
background and experience in banking and is convinced he is
appropriately qualified to testify as an expert on sound banking
practices.
Fellheimer served as Chairman and CEO of
Pennsylvania Business Bank and Equimark Corporation, a NYSE Bank
Holding Company.
The Court is cognizant that Fellheimer also
has an equally extensive career in the law.
That banking is not
Fellheimer’s only area of expertise does not in and of itself
make his expert testimony in this case inappropriate.
Page 9 of 18
Fellheimer’s deposition makes clear that he has experience
in negotiating loan agreements with borrowers and his experience
is more expansive than CIBC makes it out to be.
The Court finds
Fellheimer has sufficient experience in banking to qualify him
as an expert in this matter.
The Court is not convinced that
Fellheimer’s legal background and experience as a commercial
litigator is an appropriate basis for excluding his testimony.
The Court concludes that cross-examination will provide
sufficient means for CIBC to question whether any opinion
offered by Fellheimer exceeds his qualifications.
The Court also notes that its impression of Fellheimer’s
reports was that they were more advocacy pieces than expert
reports.
The Juliano Parties, in their examination of
Fellheimer, are cautioned that his only role in this litigation
is as an expert witness and not as counsel to, or an advocate
for, the Juliano Parties.
His testimony must reflect this
important but limited role.
C. Reliability
The Court finds similarly with regard to CIBC’s argument
that Fellheimer’s testimony is based on an incomplete record.
The Juliano Parties admit that Fellheimer did not review all of
the materials in this matter, but argue he reviewed a
substantial amount.
The Court agrees that this is not a basis
to exclude Fellheimer’s testimony.
See Taylor v. Danek Med.,
Page 10 of 18
Inc., No. 95-7232, 1999 WL 310647, at *2 (E.D. Pa. May 10, 1999)
(“Defendants’ contentions that Dr. Shady did not review all of
the relevant medical records goes to the weight of his
testimony, rather than the admissibility.”).
As the Court noted
at its June 20, 2018 hearing, Federal Rule of Evidence 702
requires that expert testimony be “based on sufficient facts or
data.”
“Sufficient” implies that expert testimony can be based
on less than the entire universe of facts or data that could be
provided to the expert.
The Court is convinced Fellheimer has
considered sufficient facts and data and, to the extent CIBC
disagrees, it may probe what materials were not reviewed on
cross-examination. 2
To the extent Fellheimer might testify that
there is “no evidence” or “nothing in the record” to support a
conclusion, CIBC may challenge that assertion on crossexamination by referencing evidence that may not have been taken
into consideration.
CIBC also argues Fellheimer’s testimony relies on “severe
mischaracterizations of evidence.”
CIBC appears to be
identifying weaknesses in Fellheimer’s analysis and registering
disagreement with his conclusions, which are not bases for
2
To the extent CIBC argues certain documents were kept from
Fellheimer by the Juliano Parties, this can be assessed on
cross-examination as well. If CIBC believes review of such
documents would change Fellheimer’s opinions, cross-examination
allows CIBC the opportunity to provide such omitted documents
and elicit a potentially more informed opinion.
Page 11 of 18
excluding his testimony.
See, e.g., Int’l Adhesive Coating Co.
v. Bolton Emerson Int’l, Inc., 851 F.2d 540, 544 (1st Cir. 1988)
(“The burden is on opposing counsel through cross-examination to
explore and expose any weaknesses in the underpinnings of the
expert’s opinion.”); Medina v. Daimler Trucks N. Am., LLC, No.
10-623, 2015 WL 1472156, at *4 (D.N.J. Mar. 31, 2015) (“The
alleged weaknesses of [the expert]’s opinions are best left to
the consideration of the jury, presented through crossexamination and other appropriate evidence at trial.”).
As to CIBC’s argument that Fellheimer’s testimony lacks any
reliable methodology and identifiable standards, the Court finds
Fellheimer relies on an admittedly broad, but well-understood
and well-established standard of “sound banking practice.”
See
Oddi, 234 F.3d at 158; W. Am. Ins. Co., 2008 WL 5244232, at *8.
Lastly, the Court finds the accounting treatment of the
loans to be relevant and fit the issues of the case,
particularly in determining whether there was a breach of the
covenant of good faith and fair dealing with respect to the
transfer and treatment of the loans by Special Loans.
III. CIBC’s Motion in Limine to Exclude the Testimony of Hal
Michels
The Court groups CIBC’s arguments in support of excluding
Michels’s testimony into the following broad categories: (1)
Michels is not an independent and objective expert witness; (2)
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Michels exceeds the scope of permissible expert testimony; and
(3) his damages calculations are fundamentally flawed.
A. Independence and Objectivity
CIBC argues Michels’s testimony should be excluded because
of his longstanding business relationship with the Juliano
Parties.
They argue Michels has been providing personal
accounting services to the Juliano Parties for twenty years and
that they are one of his largest clients.
CIBC argues Michels’s
personal income is tied to his work for the Juliano Parties and,
thus, the outcome of this litigation will impact Michels’s
financial interests.
The Juliano Parties argue they are not
Michels’s largest clients and point to Michels’s deposition
testimony that he does not believe that a bad outcome at trial
would result in less work for his firm.
The Court finds that any financial interest Michels has in
the outcome of this litigation is not direct.
Rather, it is
based on the attenuated assumption that he will get less
business from the Juliano Parties if they are unsuccessful at
trial.
The Court does not find this an appropriate basis for
excluding Michels’s testimony.
Any financial interest Michels
may have can be parsed out on cross-examination and the Court
will weigh it in its assessment of the credibility of his
testimony as appropriate.
As this Court indicated at its June
20, 2018 hearing, while usually in the context of compensation,
Page 13 of 18
financial interests relevant to expert testimony at trial are
commonly reserved for cross-examination and not utilized as a
basis for exclusion of testimony in whole.
CIBC also argues Michels’s prior work is “inextricably
intertwined in his opinions” and that he prepared the majority
of the Juliano Parties’ personal financial statements, which are
at issue in this case.
The Court’s summary judgment opinion
determined that analysis of the December 31, 2013 financial
statement is relevant in determining whether there was a
material breach of the guarantees.
CIBC acknowledges that
Michels was not involved in the preparation of this particular
financial statement.
CIBC also argues Michels relies on the Juliano Parties’
representations on disputed fact issues, rather than the
evidence in the case.
Michels’s reliance on the Juliano
Parties’ representations can similarly be probed on crossexamination.
Stecyk v. Bell Helicopter Textron, Inc., 295 F.3d
408, 414 (3d Cir. 2002) (“Rule 703 places the burden of
exploring the facts and assumptions underlying the testimony of
an expert witness on opposing counsel during crossexamination.”); see also Keller v. Feasterville Family Health
Ctr., 557 F. Supp. 2d 671, 680 (E.D. Pa. 2008) (“As with any
factual dispute, the jury will exercise its traditional function
Page 14 of 18
of weighing all of the evidence and giving expert testimony
whatever weight, if any, it merits.”).
B. Scope of Testimony
CIBC argues Michels was only identified as a rebuttal
expert, and that he should not be permitted to offer independent
expert testimony outside the scope of rebuttal.
CIBC argues the
entirety of his testimony should be excluded because “the only
arguably relevant opinions in the Report are beyond the scope of
rebuttal testimony.”
While rebuttal reports and reply reports “may cite new
evidence and data so long as the new evidence and data
is offered to directly contradict or rebut the opposing
party’s expert . . . expert reports that simply address
the same general subject matter as a previouslysubmitted report, but do not directly contradict or
rebut the actual contents of that report, do not qualify
as proper rebuttal.”
Haskins v. First Am. Title Ins. Co., No. 10-5044, 2013 WL
5410531, at *2 (D.N.J. Sept. 25, 2013) (quoting Withrow v.
Spears, No. 12-06, 2013 WL 4510305, at *12 (D. Del. Aug. 22,
2013)).
The Court has reviewed both Michels’s rebuttal report and
Craig P. Casey, CPA’s expert report.
The Court finds Michels’s
conclusions as to the calculation of the Juliano Parties’
damages to be within the scope of rebuttal.
Casey states in his
report: “[T]he evidence demonstrates that the Juliano Parties
did not incur losses as a result of CIBC’s actions.”
Page 15 of 18
He then
identifies other factors that could have caused a loss for the
Juliano Parties, namely economic challenges and construction
delays.
Michels’s report both addresses these other factors and
calculates the losses of the Juliano Parties.
The Court finds
this to be within Michels’s permissible rebuttal of Casey’s
conclusion that the Juliano Parties “did not incur losses.” 3
To
the extent CIBC believes there to be other areas in which
Michels opines beyond the scope of rebuttal, those concerns may
be addressed at trial.
CIBC also argues Michels’s report contains legal
conclusions, such as stating that CIBC acted in bad faith and
breached the loan documents.
As with Fellheimer, the Court will
not allow Michels to testify as to legal conclusions in his
expert testimony.
Further, Michels’s statements that merely
echo the conclusions reached by Fellheimer or attempt to reach
beyond his accounting experience, such as what might or might
not constitute sound banking practice, will not be permitted.
C. Damages Calculations
The Court does not find any of CIBC’s arguments regarding
Michels’s calculation of damages to be convincing.
3
Broadly,
To the extent CIBC believes it is being prejudiced by the
Court allowing Michels to testify as to a calculation of the
Juliano Parties’ damages, CIBC may, if it chooses, file a letter
with this Court requesting leave to prepare and submit a
supplemental report from Casey limited solely to that aspect of
Michels’s rebuttal report.
Page 16 of 18
they argue that his calculations are “fundamentally flawed.”
Any such flaws in his calculations are ripe for crossexamination.
Many of CIBC’s arguments further appear to attack
the Juliano Parties’ theory on damages at trial more so than
whether Michels’s testimony is permissible, such as the
mitigation of damages issue.
These issues should also be
addressed at trial.
IV.
The Court will allow both Fellheimer and Michels to testify
at trial, with the limitations discussed above.
The Court is
reinforced in its decision to allow these experts to testify in
that this case is proceeding as a bench trial, in which the
undersigned is the trier of fact.
CIBC’s arguments for
excluding testimony carry substantially less weight when the
Court acts as fact-finder.
“[W]here the Court itself acts as
the ultimate trier of fact at a bench trial, the Court’s role as
a gatekeeper pursuant to Daubert is arguably less essential.”
Magistrini v. One Hour Martinizing Dry Cleaning, 180 F. Supp. 2d
584, 596 n.10 (D.N.J. Jan. 4, 2002); accord Warner Chilcott
Labs. Ir., Ltd. v. Impax Labs., Inc., Nos. 08-6304, 09-2073, 091233, 2012 WL 1551709, at *23 (D.N.J. Apr. 30, 2012) (“[T]he
gatekeeping function of the court is relaxed in the context of a
bench trial because a court is better equipped than a jury to
weigh the probative value of expert evidence.”); Alco Indus. v.
Page 17 of 18
Wachovia Corp., 527 F. Supp. 2d 399, 405 (E.D. Pa. 2007) (“In
the context of preparing for a bench trial, it is not necessary
to apply the Daubert standard with full force in advance of
trial.
Rather, the court has the flexibility to allow testimony
provisionally and revise its view once the testimony is taken.”
(citation omitted) (citing In re Salem, 465 F.3d 767, 777 (7th
Cir. 2006))); Gannon v. United States, 571 F. Supp. 2d 615, 616
(E.D. Pa. 2007) (“In a bench trial, th[e] Court’s ‘role as
gatekeeper pursuant to Daubert is arguably less essential’
because a judge rather than a jury is the fact finder.” (quoting
Clark v. Richman, 339 F. Supp. 2d 631, 648 (M.D. Pa. 2004))).
The Court will deny both motions in limine but will impose
those restrictions outlined above.
An appropriate Order will be
entered.
Date: June 22, 2018
At Camden, New Jersey
s/ Noel L. Hillman
NOEL L. HILLMAN, U.S.D.J.
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