Beede et al v. Stiefel Laboratories, Inc. et al

Filing 118

MEMORANDUM-DECISION AND ORDER denying 81 Motion for Summary Judgment; granting in part and denying in part 86 Motion in Limine; granting in part and denying in part 89 Motion in Limine. After carefully reviewing the entire record in this mat ter, the parties' submissions and the applicable law, and for the above-stated reasons, the Court hereby ORDERS that Plaintiffs' motion for partial summary judgment (Dkt. No. 81) is DENIED; and the Court further ORDERS that Plaintiffs' motion in limine (Dkt. No. 86) is GRANTED in part and DENIED in part; and the Court further ORDERS that Defendants' motion in limine (Dkt. No. 89) is GRANTED in part and DENIED in part; and the Court further ORDERS that the Clerk of the Court shall serve a copy of this Memorandum-Decision and Order on all parties in accordance with the Local Rules. Signed by U.S. District Judge Mae A. D'Agostino on 3/7/2016 (bto)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
____________________________________________
CLIFFORD P. BEEDE, SHERRY E. HALLIGAN,
EILEEN MOTTL, and CATHERINE G. WEEKS,
Plaintiffs/Counter Defendants,
vs.

1:13-cv-120
(MAD/DJS)

STIEFEL LABORATORIES, INC. and CHARLES
W. STIEFEL,
Defendants/Counter Claimants.
____________________________________________
APPEARANCES:

OF COUNSEL:

FREEMAN HOWARD, PC
441 East Allen Street
P.O. Box 1328
Hudson, New York 12534
Attorneys for Plaintiffs/Counter
Defendants

MATTHEW J. GRIESEMER, ESQ.
PAUL M. FREEMAN, ESQ.

GREENBERG TRAURIG LLP
333 SE 2nd Avenue
Miami, Florida 33131
Attorneys for Defendants/Counter
Claimants

DAVID COULSON, ESQ.
HILARIE BASS, ESQ.
LINDSEY EDELMANN, ESQ.
TODD D. WOZNIAK, ESQ.
CYNTHIA E. NEIDL, ESQ.

SCHOEMAN, UPDIKE, KAUFMAN &
STERN, LLP
551 Fifth Avenue
New York, New York 10176
Attorneys for Defendants/Counter
Claimants

BETH L. KAUFMAN, ESQ.
PAULETTE J. MORGAN, ESQ.

Mae A. D'Agostino, U.S. District Judge:

MEMORANDUM-DECISION AND ORDER
I. INTRODUCTION
On January 13, 2013, Plaintiffs commenced this federal question action alleging securities
fraud, breach of fiduciary duty and violations of the Employee Retirement Income Security Act of
1974 ("ERISA"). See Dkt. No. 1. Pursuant to a stipulation of partial voluntary dismissal dated
January 21, 2015, Plaintiffs dismissed the following counts: (1) Count 2 alleging violations of
ERISA Section 404 (29 U.S.C. § 1104); (2) Count 3 alleging violations of ERISA Section 405(a)
(29 U.S.C. § 1105(a)); and (3) Count 4 alleging violations of ERISA Sections 406, 408 (29 U.S.C.
§§ 1106, 1108). See Dkt. No. 78. As a result of the stipulation of voluntary dismissal, Plaintiffs'
only remaining claim is one for securities fraud pursuant to 15 U.S.C. §§ 78j and 78t of the
Securities and Exchange Act of 1934 against Defendants Stiefel Laboratories, Inc. ("Stiefel Labs"
or "SLI") and Charles Stiefel. See id.; see also Dkt. No. 1 at ¶¶ 125-144.
Currently before the Court are the following motions: (1) Plaintiffs' motion for summary
judgment (Dkt. Nos. 81-85); (2) Plaintiffs' Daubert motion to exclude and preclude the testimony
of Defendants' purported experts, Lance T. Studdard and Chester Gougis (Dkt. No. 86); and (3)
Defendants' motion in limine to exclude the expert testimony of Daniel Reser (Dkt. No. 89).
II. BACKGROUND
A.

The parties
Defendant Stiefel Labs is a Delaware Corporation with its principal place for the

transaction of business located at 20 TW Alexander Drive, Research Triangle Park in the State of
North Carolina. See Dkt. No. 85 at ¶ 1. Prior to July 22, 2009, Stiefel Labs owned and
maintained a manufacturing facility in the Hamlet of Oak Hill, Town of Durham, County of
Greene, in the State of New York. See id. at ¶ 2. On April 20, 2009, British Company
2

GlaxoSmithKline, PLC ("GSK") executed an initial agreement to acquire Stiefel Labs, and the
acquisition closed on July 22, 2009. See id. at ¶ 3. Stiefel Labs is now an affiliate and whollyowned subsidiary of GSK. See id. at ¶ 4.
Prior to its acquisition by GSK, Stiefel Labs was the world's largest independent
pharmaceutical company specializing in dermatology with annual sales at its peak of over $900
million and thousands of employees. See id. at ¶ 5. Defendant Stiefel Labs had been privately
held, owned in large part by the Stiefel family, for its entire 162-year history, until it merged with
GSK in 2009. See id. at ¶ 6; but see Dkt. No. 101 at ¶ 6.
Prior to Stiefel Labs' acquisition by GSK, Defendant Charles W. Stiefel served as Stiefel
Labs' Chief Executive Officer, Chairman of the Board of Directors, a member of the Board's
compensation and executive committees, and had control over various aspects of Stiefel Labs.
See id. at ¶ 8. At the time of the merger with GSK, Defendant Charles Stiefel owned
approximately 10% of Stiefel Labs' outstanding common stock, and 90% of its Class B shares,
which empowered him to appoint six of the nine directors to SLI's Board. See id. at 9.
Prior to SLI's acquisition by GSK, Brent Stiefel served as SLI's Executive Vice
President, a member of the Board of Directors, and was a member of the Board's compensation
and executive committees. See id. at ¶ 10. Prior to SLI's merger with GSK, Todd Stiefel served
as SLI's Executive Vice President of Global Strategy, a member of the Board of Directors, and
was a member of the Board's compensation and executive committees. See id. at ¶ 11. Moreover,
prior to the merger, Stephen Karasick served as SLI's Senior Vice President of People and
Technology, while Michael Cornelius served as SLI's Chief Financial Officer and Matt S. Pattullo
served as SLI's Senior Vice President and was responsible for Human Resources. See id. at ¶¶ 1214.
3

Until his termination from employment, Plaintiff Clifford Beede was employed by
Defendant SLI and then by GSK at Oak Hill for more than thirty (30) years, most recently serving
as Senior Scientist. See Dkt. No. 85 at ¶ 15. Plaintiff Beede was terminated as an employee of
GSK on June 28, 2011. See id. at ¶ 16.
Until her termination from employment, Plaintiff Sherry Halligan was employed by SLI
and then by GSK at Oak Hill for more than twenty-three (23) years, most recently serving as a
Senior Associate. See id. at ¶ 17. Plaintiff Halligan was terminated as an employee of GSK on
December 7, 2011. See id. at ¶ 18.
Until her termination from employment, Plaintiff Eileen Mottl was employed by SLI and
then by GSK at Oak Hill for more than thirteen (13) years, most recently serving as Scientist. See
id. at ¶ 19. Plaintiff Mottl was terminated as an employee of GSK in July of 2012. See id. at ¶ 20.
Until her termination from employment, Plaintiff Catherine Weeks was employed by SLI
and then by GSK at Oak Hill for twenty-six (26) years, most recently serving as a personal Grade
8 Employee. See id. at ¶ 21. Plaintiff Weeks was terminated as an employee on December 30,
2011. See id. at ¶ 22.
B.

The Blackstone Transaction
On July 31, 2007, Blackstone Healthcare Partners, LLC ("Blackstone") made an offer to

purchase an interest in SLI. See Dkt. No. 84-1 at Ex. 95. On August 7, 2007, Defendant Charles
Stiefel consented to a transaction with Blackstone for an investment of $500,000,000 by
Blackstone in which Blackstone would acquire new convertible preferred shares of SLI. See id.;
but see Dkt. No. 101 at ¶ 24. On August 9, 2007, Defendant Charles Stiefel announced the
Blackstone Transaction to SLI employees. See Dkt. No. 84-1, Ex. 98. In the email announcing
the transaction, Defendant Charles Stiefel stated as follows: "Stiefel will continue to be a privately
4

held company operating under my direction as Chairman, Chief Executive Officer, and President.
The Stiefel family will continue to hold a majority-share ownership in the company. Blackstone
will be a minority investor in Stiefel Laboratories and have one seat on the company's board of
directors." Id. Charles Stiefel also stated in a Frequently Asked Questions attachment that
"[t]here are currently no plans for Stiefel to become a publicly traded company. Blackstone will
have a defined exit arrangement with Stiefel at the end of eight years." Dkt. No. 84-1, Ex. 98 at
SLI-8-000724.
C.

The SLI Employee Stock Bonus Plan ("ESBP")
SLI established an Employee Stock Bonus Plan ("ESBP" or the "Plan") in 1975, through

which the company annually provided shares of SLI common stock and/or cash to its employees
as part of their compensation and for their retirement. See Dkt. No. 85 at ¶ 27. The ESBP was
managed by a Trustee and a Plan Committee. See id. at ¶ 28. Pursuant to Section 9.1 of the Plan
titled "The Committee," the Committee was provided with the following powers:
The exclusive responsibility and authority to control and manage
the operation and administration of the Plan, except to the extent
such responsibility and authority are otherwise specifically (i)
allocated to the Disability Review Board, the Company or the
Trustee under the Plan or the Trust Agreement, (ii) delegated to
other persons by the Committee or (iii) allocated to other parties by
operation of law, shall be vested in the Committee. The Committee
also shall be the "plan administrator" within the meaning of ERISA.
Dkt. No. 85 at ¶ 28.
Defendant Charles Stiefel served as the Plan Trustee from August 13, 2001 until October
22, 2008. See id. at ¶ 29. He also served on the ESBP Committee during the time he served as
Plan Trustee. See id. Stephen Karasick replaced Charles Stiefel as successor Trustee to the Plan
on October 20, 2008. See id. at ¶ 30; see also Dkt. No. 84-1, Ex. 38 at SLI-2-000487-488.
5

Charles Stiefel continued to serve on the ESBP Committee and continued as CEO of SLI after
Stephen Karasick became Trustee to the Plan. See id.
Between 2000 and 2008, Stiefel Labs contributed both shares of stock and cash into their
employees ESBP accounts. See Dkt. No. 83-3 at 12-16. In 2008, SLI contributed only cash to the
ESBP. See id. at 13. Employees of SLI were sent annual valuation statements of their ESBP
account, which would include the value of the shares. See id. at 12-16. Every year, Stiefel Labs
hired an independent appraiser to appraise the value of company shares. See id. at 14. When an
employee would put his shares back to the company, SLI was required to pay the appraised value
of the stock. See id. SLI's fiscal year ends on March 31, and the appraised value of the company
shares would not be available until sometime in October or November. See id. Participants in the
Plan were unable to get a distribution from their account until SLI received the appraised value of
the company shares. See id. at 15.
The price per share of the ESBP was typically announced by Charles Stiefel in an email to
all United States employees of Stiefel Labs. See Dkt. No. 85 at ¶ 32. The appraiser who set the
stock price in 2008 was named Terrence Bogush of the firm Bogush & Grady, LLP. See id. at ¶
33; see also Dkt. No. 83-3 at 14, 31. On August 31, 2008, Mr. Bogush issued his report valuing
the ESBP shares as of March 31, 2008 in the amount of $16,469 per share. See id. at ¶ 34. On
October 14, 2008, Defendant Charles Stiefel announced to SLI employees the share price for the
ESBP of $16,469 per share. See id. at ¶ 35.
The Plan provided certain "put" rights to its participants. See id. at ¶ 36. Pursuant to § 7.6
of the Plan, titled "Option to Have Company Purchase Bonus Stock," a qualifying participant
"shall have the right to require the Company to purchase the Bonus Stock for its current fair
market value (as determined pursuant to Treas. Reg. Section 54.4975-11(d)(5))." Id. Prior to
6

November 2008, an eligible Plan participant could, upon the occurrence of a "qualifying event" as
set forth in Section 7 of the Plan, request a distribution of the stock held in their ESBP account
under the terms of the ESBP. See id. at ¶ 37; see also Dkt. No. 84-1, Ex. 32 at SLI-2-000199.
Qualifying events included death, termination of employment, or retirement. See id.
On April 17, 2008, Defendant Charles Stiefel agreed to amend the Plan to merge the
401(k) with the ESBP and to limit the windows for participants to elect diversification (the "First
Plan Amendment"). See Dkt. No. 85 at ¶ 38; Dkt. No. 84-1, Ex. 102 at SLI-11-018497. On May
29, 2008, the SLI Board of Directors approved the First Plan Amendment, effective June 1, 2008.
See id. at ¶ 39;1 Dkt. No. 84-1, Ex. 32 at SLI-2-000226.
On September 26, 2008, the Company made a second amendment to the Plan, effective
October 1, 2008, that would "give the Committee the discretion to grant additional diversification
rights under the Plan[.]" Dkt. No. 85 at ¶ 40. The Second Plan Amendment added a new Section
7.13 to the Plan, which read as follows:
The Committee may, in addition to the diversification rights
provided under Section 7.12 in accordance with Code Section
401(a)(28), permit Participants to elect, in such amounts and upon
such other terms and conditions as the Committee may establish
from time to time in its sole discretion, to invest their Bonus Stock
Account in one or more investment options designated by the
Committee (other than Bonus Stock). The Committee may, to the
extent it deems necessary or appropriate to comply with any
applicable limits or otherwise, apply any diversification limits or

In their response to Plaintiffs' statement of material facts, "Defendants object to this
statement on the ground that it is not supported by the evidence cited." Dkt. No. 101 at ¶ 39.
Upon review of the record cited, it is clear that Plaintiffs' statement is in fact supported by the
evidence cited. See Dkt. No. 84-1, Ex. 32 at SLI-2-000226-000228. Defendants have repeatedly
objected to statements of fact on this ground, yet provide no citation to the record in support of
their objection, in violation of Local Rule 7.1(a)(3). Rule 7.1 specifically provides that "[e]ach
denial shall set forth a specific citation to the record where the factual issue arises." N.D.N.Y.
L.R. 7.1(a)(3).
1

7

rights established under this Section on a pro-rata or other
reasonable nondiscriminatory basis.
Id. For the first time in SLI history, the Second Plan Amendment afforded eligible Plan
participants (those who had vested) a new opportunity called "optional diversification" that
allowed eligible participants to elect a distribution of the stock held in the ESBP accounts without
a qualifying event. See id. at ¶ 41.
On October 29, 2008, Defendant Charles Stiefel emailed all SLI employees with the
opening line "'[i]t was the best of times, it was the worst of times,' wrote Charles Dickens, and it
seems that this applies pretty well to the current success of Stiefel amidst the immense economic
challenges grabbing media headlines." Id. at ¶ 42.2 Charles Stiefel further stated that SLI is "very
healthy right now" and that it is "only prudent for us to take measured steps to protect our future
while continuing to invest and grow in our company. . . . I look forward to . . . working with each
of you to make sure that the next three years are as successful and responsible as the past three."
Id. On November 19, 2008, Defendant Charles Stiefel emailed employees announcing a
temporary austerity program and noted that "our future continues to look extremely bright." Id. at
¶ 43.
On November 19, 2008, Gary Jellum released an email communication to SLI employees
and Plan participants encouraging them to review "vitally important and time sensitive
information" relating to the merger of the 401(k) and the ESBP and a new Optional
Diversification opportunity to give employees "more control, flexibility, and opportunity." Id. at ¶

Again, "Defendants object to the first sentence in this paragraph because it is not
supported by a citation to record evidence required by Local Rule 7.1(a)(3)." Dkt. No. 101 at ¶
42. Following the second sentence in this paragraph, Plaintiffs provided a citation to record
evidence that supports both the first and second sentence of this numbered paragraph. See Dkt.
No. 85 at ¶ 42.
2

8

44. Mr. Jellum's email explained that, "for the first time ever," Plan participants would have an
opportunity to request diversification of all or a portion of the Company stock in the ESBP
accounts. See id. at ¶ 45. On November 21, 2008, Mr. Jellum sent a packet to all ESBP
participants announcing to employees that the shares of Company stock selected to diversify will
be sold to the Company based on the most recent stock price of $16,469 per share. See id. at ¶ 46.
Mr. Jellum stated in his communication that "Stiefel is providing employees with a broad array of
investment options for long-term financial security and ensuring that employees have greater
flexibility and access to their ESBP account." Id. Mr. Jellum also announced that the first
diversification window would be open from February 1, 2009 through March 1, 2009, and
expressly cautioned that "[d]iversification requests will be pro-rated based on all requests and
available funds." Id.
On December 19, 2008, Mr. Jellum announced to Plan participants that the diversification
window would be moved up to January 12, 2009 through February 2, 2009 to "maximize
fulfillment potential." Id. at ¶ 47. On January 2, 2009, packets were mailed to ESBP participants
eligible for optional diversification with a cover letter stating that the window to submit a
diversification request is from January 12, 2009 through February 2, 2009. See id. at ¶ 48.
Participants were also notified and expressly warned that
[a]ll requests made during the diversification window will be
reviewed at the end of the diversification period. This is done to
ensure that the total amount requested doesn't exceed the amount
available for diversification. There is always a possibility that
diversification requests cannot be fulfilled or that they will be
fulfilled at some percentage of what was requested. If the requests
exceed the limits available, all participants who submitted
diversification requests will be notified of the reduced or denied
election.
Id. at ¶ 49.
9

On January 11, 2009, Defendant Charles Stiefel allocated $10,000,000 for the purpose of
undertaking ESBP share repurchases, which included $2,000,000 earmarked specifically for
Optional Diversification share buy-backs. See id. at ¶ 50.3 On January 27, 2009, Gary Jellum
emailed ESBP participants eligible for optional diversification and indicated that diversification
requests must be received by February 2, 2009. See id. at ¶ 51. Additionally, Plan participants
were forewarned as follows: "Please be mindful diversification of company stock may be limited
within a plan year. Therefore, there is always a possibility that diversification requests cannot be
fulfilled or that they will be fulfilled at some percentage of what was requested. Any reduction is
proportionately applied across all requests." Id.
On November 26, 2008, the day before Thanksgiving and five days after optional
diversification was first announced to SLI employees, Charles W. Stiefel, Brent Stiefel and Todd
Stiefel held their annual family meeting to discuss SLI. See Dkt. No. 85 at ¶ 52; Dkt. No. 94, Ex.
110. Following the meeting Charles W. Stiefel emailed Anjan Mukherjee at Blackstone to ask
about "a concept that has always been taboo in the past – the concept of selling the company." Id.
Charles W. Stiefel asked Anjan Mukherjee what kind of price SLI would command. See id.
At 7:43pm on November 26, 2008, Charles Stiefel emailed Brent Stiefel and Todd Stiefel
following a phone call with Anjan Mukherjee at Blackstone stating that Blackstone advised that
SLI should be sold "right now or wait 5 years." Dkt. No. 85 at ¶ 53. Blackstone further advised
that the price Blackstone paid for its shares in 2007 ($60,407) would "serve as a floor." Id.
Charles Stiefel also notes that Blackstone "think[s] that it is possible that we could get someone to

The Court notes Defendants' objection to this statement and direct their attention to the
material Plaintiffs have cited, which fully supports their assertion. See Dkt. No. 85 at ¶ 50
(citations omitted).
3

10

pay 3-5 times sales." Id. At that time, annual sales at SLI were $907,574,139. See id. At
7:49pm, Brent Stiefel emailed Todd Stiefel and Charles Stiefel and stated, "I vote we move on
this right now as 5 years poses a fair amount of risk. . . . I am excited by this proposition. Could
you imagine getting 4-5 times sales?" Id. at ¶ 54. Charles Stiefel responded to Brent Stiefel and
Todd Stiefel and stated "it would be awesome." Id. At 7:57pm on November 26, 2008, Charles
Stiefel emailed Chinh Chu and Anjan Mukherjee at Blackstone to inform them that Todd Stiefel,
Brent Stiefel and Charles Stiefel are "ready to move forward exactly as you suggest." Id. at ¶ 55.
Charles Stiefel stated, "I forgot to mention one other factor that caused us to consider selling now.
I fear that the Obama administration will move to increase the tax rate on capital gains, so selling
before that happens would result in considerably more after-tax dollars." Id. At 8:08pm on
November 26, 2008, Todd Stiefel emailed Charles Stiefel and Brent Stiefel and stated, with
respect to the sale of the company, "I agree with BD [Brent Stiefel]. Let's start moving." Id. at ¶
56.
On December 8, 2008, Blackstone prepared and sent Charles W. Stiefel discussion
materials for a meeting between Blackstone and SLI about a sales process. Dkt. No. 85 at ¶ 57.
In the discussion materials, Blackstone indicated that it understands that SLI has begun to
consider a potential change-of-control transaction. Id. Blackstone estimated that the time to sign
a definitive agreement with an acquiror is three-to-four months. See id. Blackstone also included
a timeline which estimated that SLI will receive final bids, select a bidder and announce the
transaction by March 17, 2009. See id. The discussion materials include a tier of potential buyers
including Tier I (large cap dermatology) Sanofi Aventis and Tier II (large cap pharma) GSK. See
id. As a valuation consideration, Blackstone indicated that specialty pharmaceutical transactions

11

have historically been completed at an average last twelve months (LTM) revenue multiple of
3.6x. See id.
On December 8, 2008, after discussing figures sent by Blackstone with sale price ranges
from $2.25 to $4 billion, Brent D. Stiefel stated in an e-mail with Anjan Mukerjee of Blackstone
and Charles W. Stiefel that, "to me, we have a lot to offer and anything below $3 billion would
seem like we are selling at bargain prices." Id. at ¶ 58. Brent Stiefel reiterated in his deposition
that his belief at that time was that $3 billion was a "floor" sales price. See id. He also testified
that he never relayed this information to Stephen Karasick or to Terrence Bogush. See id.
Further, Brent Stiefel affirmed that in January and February of 2009, he would never have agreed
to sell SLI to an possible acquiror for $16,469 per share, the value SLI used to purchase ESBP
stock, because that price was too low. See id.4
On December 22, 2008, Charles Stiefel emailed Todd Stiefel and Brent Stiefel regarding a
meeting he had with Chris Viehbacher, CEO of Sanofi-Aventis that day. See Dkt. No. 85 at ¶ 59.
Charles Stiefel stated that Chris Viehbacher would be interested in exploring a purchase of SLI

Defendants again object to the last statement of this paragraph "because it misrepresents
Brent Stiefel's testimony and contains an improper valuation comparison." Dkt. No. 101 at ¶ 58.
During his deposition testimony, Brent Stiefel was asked the following question and provided the
following answer:
4

Q. Would you have considered selling the company for $16,469 a
share during that window?
A. I believe that's the same question you just asked me in a different
way. And the answer is no because there would have been no
money at all for any shareholders outside of Blackstone and there
would have been some money for our bankers, and everybody else
would have received zero.
Dkt. No. 83-1 at 7.
12

and further indicated that he was "excited to move forward." Id. On the same day, December 22,
2008, Todd, Brent and Charles Stiefel re-named the sales process "Project Jump," which was
previously referred to as "Project Knox." Id. On December 29, 2008, Todd Stiefel sent an email
to Brent and Charles Stiefel suggesting that they use the code name "Jupiter" when referring to
SLI for the Project Jump sales process "because we are about the biggest derm company money
can buy! It also implies they will have to pay a jumbo price tag." Id. at ¶ 60.
On January 1, 2009, SLI, through Defendant Charles Stiefel, retained Blackstone to
"provide financial advisory services to the Company in connection with a Transaction and [to]
assist the Company in analyzing, structuring, negotiating and effecting the Transaction[.]" Dkt.
No. 94, Ex. 121 at BX-Stiefel 0018358-0018364. Effective on the same day, three-year
employment contracts were awarded by the Compensation Committee to several SLI executives,
including Charles, Brent and Todd Stiefel. See Dkt. No. 94, Exs. 146-148.
On January 11, 2009, Charles Stiefel, acting in his capacity as CEO of SLI, approved
Stephen Karasick's request to allocate $2,000,000 for use in buying back employee stock under
Optional Diversification. See Dkt. No. 85 at ¶ 62. On January 21, 2009, Charles Stiefel signed a
confidentiality agreement with Sanofi-Aventis regarding information transmitted pertaining to a
potential purchase of Stiefel. See id. at ¶ 65; Dkt. No. 95, Ex. 205. On January 29, 2009, Charles
Stiefel signed a confidentiality agreement with Johnson & Johnson regarding information
transmitted pertaining to a potential purchase of Stiefel. See id. at ¶ 66; Dkt. No. 94, Ex. 230.
Plaintiffs Beede, Halligan, Mottl and Weeks were all SLI employees and Plan participants
with vested shares in the Plan at the time of SLI's first-ever Optional Diversification period in
early 2009. See Dkt. No. 85 at ¶ 67. Unaware of Project Jump, on or about January 25, 2009,
Plaintiff Mottl requested diversification of 1.765627 of her shares of ESBP stock. See id. at ¶ 68.
13

Also unaware of Project Jump, on or about January 26, 2009, Plaintiff Weeks requested
diversification of 14.837672 of her shares of ESBP stock. See id. at ¶ 70. Similarly, on or about
January 28, 2009, Plaintiff Beede requested diversification of 19 of his shares of ESBP stock and
on January 29, 2009, Plaintiff Halligan requested diversification of 3 of her shares of ESBP stock.
See id. at ¶¶ 72, 74.
On January 30, 2009, Matt Pattullo emailed Stephen Karasick and Michael Cornelius and
recommended satisfying up to 100% of the additional requests for optional diversification, which
totaled approximately $5.4 million, with the total for distributions and diversifications at $13
million. See Dkt. No. 85 at ¶ 76; Dkt. No. 101 at ¶ 76; Dkt. No. 94, Ex. 69 at SLI-18-0046. That
same day, Charles Stiefel, as CEO of SLI, agreed to settle all Optional Diversification requests
and emailed Stephen Karasick approving the allocation of an additional sum of money, bringing
the total to approximately $14,000,000 to settle all diversification requests. See id. at ¶ 78; Dkt.
No. 94, Ex. 40 at SLI-18-0038–0041. Also on January 30, 2009, Michael Cornelius emailed Todd
Stiefel that the recommendation to max out all requests is "caveated due to jump" but could not let
Matt Pattullo or Stephen Karasick know because they were unaware of Project Jump at the time.
See id. at ¶ 80; Dkt. No. 101 at ¶ 80. Michael Cornelius asked if Todd Stiefel would get approval
from Charles Stiefel to max out and accept all requests for optional diversifications. See id. As of
February 2, 2009, Charles Stiefel, Todd Stiefel, Brent Stiefel, Bill Humphries, Gavin Corcoran,
Michael Cornelius, Robin Vandekreeke, Martin Floreani, Devin Buckley, Stephen Karasick and
Matt Pattullo knew about Project Jump. See id. at ¶ 81.
On February 3, 2009, Charles W. Stiefel signed a confidentiality agreement with Allergan
pertaining to any information regarding its potential purchase of SLI. See id. at ¶ 82.

14

On February 5, 2009, Charles Stiefel emailed Brent Stiefel and Todd Stiefel about
increasing his compensation and stated:
I don't think we should do this at this time because of Project Jump.
It would look really bad to have my 2 sons award me a whole bunch
of additional stock right before a sale of the company at a stock
price many times the price used to calculate my stock. This might
be a windfall for me, but none of us need or want the potential
scrutiny or maybe even lawsuits.
Dkt. No. 85 at ¶ 83.
On February 5, 2009 at 4:36pm, Charles Stiefel responded to an email request to put a
communication plan in place regarding Project Jump in the event there is a public "leak," which
provided as follows: (1) "not announce anything to our employees and unnecessarily scare them
unless and until we enter into a binding contract;" (2) "If someone hears a rumor and inquires
about it, we respond: a) companies have been expressing interest in acquiring us for decades. b)
we like being private and independent. c) If a company makes a compelling offer, however, we
have a fiduciary duty to our shareholders to at least listen to the offer. d) In 162 years of business,
no one has yet made an offer that the family wanted to accept." Id. at ¶ 84.
On February 6, 2009, Todd Stiefel provided "tiers" of candidates for Project Jump and
stated that the top candidates for Project Jump include Sanofi-Aventis and GSK, the ultimate
purchaser. See id. at ¶ 85. On February 10, 2009, at the request of Brent Stiefel, Whit Knier from
Blackstone emailed Brent Stiefel a copy of the latest timeline and work plan prepared by
Blackstone which provided that initial bids would be received by mid-March and that the
expected execution of a definitive agreement with selected acquiror would likely occur in April of
2009. See Dkt. No. 85 at ¶ 86.

15

On February 12, 2009, Matt Pattullo emailed the "final tally" for the ESBP changes. See
id. at ¶ 87. Pattullo noted a "5.1% reduction in outstanding shares and a 31.4% reduction in ESBP
holdings." Id. On February 13, 2009, Charles Stiefel emailed Todd and Brent Stiefel and stated
that hopefully by mid-May 2009 "we will either have closed or be just awaiting FTC approval."
Id. at ¶ 88.
On February 13, 2009, Todd Stiefel emailed all that knew about Project Jump providing
the following "Rumor Response":
We have heard that there is a rumor in the banking community that
Stiefel is for sale. If you are asked about anyone in banking, derm
or our company, here is the response you should give:
-blow it off as if it is not an issue or as if it is plain silly
- say there are [sic] have been such rumors for really as long
as we can remember
- say that there is probably just confusion because we are
shopping around a bunch of pipeline projects that are not
core focuses for us that we gained in the Barrier acquisition
and that we are also shopping around some current brands
that are not a commercial focus.
Dkt. No. 85 at ¶ 89. Todd Stiefel continued by saying that, "if push comes to shove . . . flatly
deny if necessary." Id.
On or about February 13, 2009, Plaintiff Beede received $16,469 per share of the 19 shares
of ESBP stock from SLI for which he requested optional diversification from SLI. See id. at ¶ 90.
On or about February 13, 2009, Plaintiff Halligan received $16,469 per share of the 3 shares of
ESBP stock from SLI for which she requested optional diversification from SLI. See id. at ¶ 91.
On or about February 13, 2009, Plaintiff Mottl received $16,469 per share of the 1.765627 shares
of ESBP stock from SLI for which she requested optional diversification from SLI. See id. at ¶
16

92. On or about February 13, 2009, Plaintiff Weeks received $16,469 per share of the 7 shares of
ESBP stock from SLI for which she requested optional diversification from SLI. See id. at ¶ 93.
On February 14, 2009, one day after the payments were made to ESBP participants who
elected optional diversification, Brent Stiefel prepared a payout schedule showing how much
money Charles, Brent and Todd Stiefel, and Brent and Todd's children could receive as a result of
the sale of the company. See id. at ¶ 94.5 On February 17, 2009, Brent Stiefel emailed
representatives at Blackstone asking for the latest timeline. See id. at ¶ 96. Blackstone provided
the timeline, and Brent Stiefel forwarded it to Todd and Charles Stiefel confirming that the sale
process was still on schedule. Id. With the exception of a one-month delay, the sales process
schedule remained consistent throughout Project Jump. See id.
On February 18, 2009, Brent Stiefel emailed Todd and Charles Stiefel with an updated
payout schedule of what Charles, Brent and Todd Stiefel would receive as a result of a sale of the
company. See Dkt. No. 85 at ¶ 97. Again, the payout schedule specifically included a potential
sale price of $3.5 billion. See id. On February 20, 2009, Brent Stiefel calculated and sent to Todd
and Charles Stiefel a third version of the payout schedule showing the difference between what
Charles, Todd and Brent Stiefel as well as Todd and Brent Stiefel's children would receive
pre-ESBP buyback and post-ESBP buyback on a spreadsheet with a per share price of $68,000 per
share. See id. at ¶ 98. Brent Stiefel stated that "[i]t is nice to see the $ go up for all of us!" Id.
On the same day, February 20, 2009, Brent Stiefel emailed those who knew about Project Jump a
"cover story" to use "if we get questions or push-back." Id. at ¶ 99.

The Court notes that Defendants assert that this "chart was created to determine at what
price point Blackstone's veto right would be eliminated." Dkt. No. 101 at ¶ 94.
5

17

Following management presentations attended by Charles Stiefel, Bill Humphries, Todd
Stiefel, Brent Stiefel, Gavin Corcoran, Mike Cornelius and Devin Buckley on behalf of SLI and
GSK and Sanofi-Aventis held on February 17, 2009, Blackstone submitted acquisition proposals
to GSK and Sanofi-Aventis, bids being due March 24, 2009. See id. at ¶ 100; Dkt. No. 94, Exs.
136-137, 225.
On March 19, 2009, SLI executives became aware of a Wall Street Journal Article
expected to come out on March 20, 2009, announcing that SLI is for sale. See Dkt. No. 85 at ¶
101; Dkt. No. 94, Ex. 185. In an email exchange on March 19, 2009 regarding the expected
article, Todd Stiefel noted that "[o]ur employees will be getting calls from random friends, and
again we want them all to have heard from us beforehand so that they are not blindsided." Dkt.
No. 85 at ¶ 102. As anticipated, on March 20, 2009, the Wall Street Journal announced that SLI
was considering selling itself. See id. at ¶ 103.
On March 24, 2009, Sanofi-Aventis submitted a proposal to acquire Stiefel Labs for an
enterprise value of $3.2 billion, while GSK submitted a proposal to acquire Stiefel Labs for an
enterprise value of $3.5 billion. See id. at ¶ 104. On April 16, 2009, GSK submitted a second
proposal to acquire Stiefel Labs for a value of up to $3.6 billion. See id. at ¶ 105.
On April 20, 2009, for the first time, Charles Stiefel announced to employees, including
Plaintiffs, that SLI had agreed to be acquired by GSK in a cash transaction valued at up to $3.6
billion expected to be completed within six (6) months upon United States and European Union
regulatory approval. See Dkt. No. 85 at ¶ 106. On December 16, 2009, SLI updated its March 31,
2009 ESBP stock valuation from $16,469 per share to $48,402 per share. See id. at ¶ 107.
On January 13, 2013, Plaintiffs commenced this federal question action alleging securities
fraud, breach of fiduciary duty and violations of the Employee Retirement Income Security Act of
18

1974 ("ERISA"). See Dkt. No. 1. Pursuant to a stipulation of partial voluntary dismissal dated
January 21, 2015, Plaintiffs dismissed the following counts: (1) Court 2 alleging violations of
ERISA Section 404 (29 U.S.C. § 1104); (2) Count 3 alleging violations of ERISA Section 405(a)
(29 U.S.C. § 1105(a)); and (3) Count 4 alleging violations of ERISA Sections 406, 408 (29 U.S.C.
§§ 1106, 1108)). See Dkt. No. 78. As a result of the stipulation of voluntary dismissal, Plaintiffs'
only remaining claim is one for securities fraud pursuant to 15 U.S.C. §§ 78j and 78t of the
Securities and Exchange Act of 1934 against Defendants Stiefel Laboratories, Inc. and Charles
Stiefel. See id.; see also Dkt. No. 1 at ¶¶ 125-144. In a September 30, 2015 MemorandumDecision and Order, the Court granted Plaintiffs' motion for partial summary judgment,
dismissing Defendants' counterclaims alleging breach of contract and unjust enrichment. See Dkt.
No. 117. Further, the Court denied Defendants' motion for partial summary judgment, rejecting
Defendants' arguments that the claims against them are precluded because of General Lease
Agreements Plaintiffs executed upon their termination from employment. See id.
Currently before the Court are the following motions: (1) Plaintiffs' motion for summary
judgment (Dkt. Nos. 81-85); (2) Plaintiffs' Daubert motion to exclude and preclude the testimony
of Defendants' purported experts, Lance T. Studdard and Chester Gougis (Dkt. No. 86); and (3)
Defendants' motion in limine to exclude the expert testimony of Daniel Reser (Dkt. No. 89).
III. DISCUSSION
A.

Plaintiffs' motion for summary judgment
In their motion for summary judgment, Plaintiffs argue that they are entitled to summary

judgment on the issue of whether Defendants Charles Stiefel and SLI made a false statement or
omission of a material fact by failing to update Plaintiffs regarding the ongoing merger/sale
negotiations. See Dkt. No. 81-1 at 10-22. Specifically, Plaintiffs contend that the issue has
19

already been fully and fairly litigated in an action brought in the Southern District of Florida and,
therefore, collateral estoppel should preclude Defendants from re-litigating this issue. See id.
(citing Finnerty v. Stiefel Laboratories, Inc., 756 F.3d 1310 (11th Cir. 2014)). Similarly,
Plaintiffs contend that they are entitled to summary judgment on the issue of whether Defendants
acted "knowingly" when they failed to update Plaintiffs regarding the ongoing merger/sale
because the issue was already decided in the Finnerty action. See id. at 22-24. Plaintiffs also
argue that collateral estoppel applies to the issue of whether they justifiably relied on Defendants
false representations of material fact when they elected to "put" their shares to SLI. See id. at 2426. Finally, Plaintiffs assert that they are entitled to partial summary judgment on the issue of
whether Defendants had a duty to disclose the material information regarding the potential sale of
SLI at the time of Plaintiffs' election to sell their ESBP shares or, at a minimum, to abstain from
purchasing those shares
1. Standard of review
A court may grant a motion for summary judgment only if it determines that there is no
genuine issue of material fact to be tried and that the facts as to which there is no such issue
warrant judgment for the movant as a matter of law. See Chambers v. TRM Copy Ctrs. Corp., 43
F.3d 29, 36 (2d Cir. 1994) (citations omitted). When analyzing a summary judgment motion, the
court "cannot try issues of fact; it can only determine whether there are issues to be tried." Id. at
36-37 (quotation and other citation omitted). Moreover, it is well-settled that a party opposing a
motion for summary judgment may not simply rely on the assertions in its pleading. See Celotex
Corp. v. Catrett, 477 U.S. 317, 324 (1986) (quoting Fed. R. Civ. P. 56(c), (e)).
In assessing the record to determine whether any such issues of material fact exist, the
court is required to resolve all ambiguities and draw all reasonable inferences in favor of the
20

nonmoving party. See Chambers, 43 F.3d at 36 (citing Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 255 (1986)) (other citations omitted). Where the non-movant either does not respond to the
motion or fails to dispute the movant's statement of material facts, the court must be satisfied that
the citations to evidence in the record support the movant's assertions. See Giannullo v. City of
N.Y., 322 F.3d 139, 143 n.5 (2d Cir. 2003) (holding that not verifying in the record the assertions
in the motion for summary judgment "would derogate the truth-finding functions of the judicial
process by substituting convenience for facts").
2. Collateral estoppel
"The doctrine of collateral estoppel prevents a plaintiff from relitigating in a subsequent
proceeding an issue of fact or law that was fully and fairly litigated in a prior proceeding." Purdy
v. Zeldes, 337 F.3d 253, 258 (2d Cir. 2003) (citing Marvel Characters, Inc. v. Simon, 310 F.3d
280, 288 (2d Cir. 2002)). Collateral estoppel is permitted if "(1) the identical issue was raised in a
previous proceeding; (2) the issue was actually litigated and decided in the previous proceeding;
(3) the party had a full and fair opportunity to litigate the issue; and (4) the resolution of the issue
was necessary to support a valid and final judgment on the merits." Interoceanica Corp. v. Sound
Pilots, Inc., 107 F.3d 86, 91 (2d Cir. 1997) (internal quotation marks omitted). Importantly,
"[t]hese four factors are required but not sufficient." Bear, Stearns & Co. Inc. v. 1109580
Ontario, Inc., 409 F.3d 87, 91 (2d Cir. 2005).
Additionally, where, as here, the plaintiff seeks to employ collateral estoppel offensively,
the court must also "satisfy itself that application of the doctrine is fair." Id. (citing Parklane
Hosiery Co. v. Shore, 439 U.S. 322, 331, 99 S. Ct. 645, 58 L. Ed. 2d 552 (1979)). "'Allowing
offensive collateral estoppel may . . . be unfair to a defendant if the judgment relied upon as a
basis for the estoppel is itself inconsistent with one or more previous judgments in favor of the
21

defendant.'" Bear Stearns, 409 F.3d at 91 (quotation omitted). "An instructive hypothetical is
propounded in Parklane Hosiery: if a railway accident injured 50 people, and the first 25 people
who sued the railroad lost, and the 26th person won, the remaining plaintiffs ought not be able to
win by estoppel." Id. (citing Parklane Hosiery, 439 U.S. at 330 n.14, 99 S. Ct. 645) (other
citation omitted). "If 'application of offensive estoppel would be unfair to a defendant,' for this or
several other reasons, the doctrine should not be applied." Id. (quoting Parklane Hosiery, 439
U.S. at 331, 99 S. Ct. 645).
3. Elements of claims under Section 10(b) and Rule 10b-5
"Section 10(b) of the Exchange Act prohibits any person from using or employing 'any
manipulative or deceptive device or contrivance in contravention' of SEC rules." In re Fannie
Mae 2008 Securities Litig., 891 F. Supp. 2d 458, 469 (S.D.N.Y. 2012) (quoting 15 U.S.C. §
78j(b)). "Rule 10b-5 prohibits 'any device, scheme, or artifice to defraud' and 'any untrue
statement of a material fact or to omit to state a material fact necessary in order to make the
statements made . . . not misleading. . . .'" Id. (quoting 17 C.F.R. § 240.10b-5). To set forth a
claim under Rule 10b-5, the plaintiffs must establish that the defendants "'(1) made misstatements
or omissions of material fact; (2) with scienter; (3) in connection with the purchase or sale of
securities; (4) upon which plaintiffs relied; and (5) that plaintiffs' reliance was the proximate
cause of their injury.'" Id. at 469-70 (quoting Lentell v. Merrill Lynch & Co., 396 F.3d 161, 172
(2d Cir. 2005)).
A claim brought under Rule 10b-5 must fail if it relies on statements or omissions "that a
reasonable investor would [not] have considered significant in making investment decisions."
Ganino v. Citizens Utils. Co., 228 F.3d 154, 161 (2d Cir. 2000). "'[T]here must be a substantial
likelihood that the disclosure of the omitted fact would have been viewed by the reasonable
22

investor as having significantly altered the "total mix" of information made available.'" Basic Inc.
v. Levinson, 485 U.S. 224, 231-32 (1988) (quoting TSC Indus., Inc. v. Northway, Inc., 426 U.S.
438, 449 (1976)). "An omitted fact may be immaterial if the information is trivial, . . . or is so
basic that any investor could be expected to know it." Ganino, 228 F.3d at 162 (internal citations
omitted). "Therefore, whether an alleged misrepresentation or omission is material necessarily
depends on all relevant circumstances of the particular case." Id. As such, materiality is a mixed
question of law and fact. See id.
a. False statement or omission of material fact
In their motion for summary judgment, Plaintiffs contend that collateral estoppel applies to
the issue of whether Defendants Charles Stiefel and SLI made a false statement or omission of
material fact by failing to disclose the merger/sale negotiations to Plaintiffs in light of the
following: "(A) the issue is identical to the Finnerty Case; and (B) the issue was necessary to
support a valid and final judgment and was actually decided in the Finnerty Case after Defendants'
full and fair opportunity to litigate therein on the merits." Dkt. No. 81-1 at 10. Defendants,
however, contend that, while there is some overlap between the facts tried in Finnerty and the
allegations in the present matter, Plaintiffs have failed to demonstrate that the issues tried in
Finnerty are identical to the issues in each of their individual claims. See Dkt. No. 100 at 17-18.
Further, Defendants argue that Plaintiffs failed to carry their burden of establishing that any
particular alleged misrepresentation or omission was necessarily determined in Finnerty in light of
the multiple theories of liability presented and the fact that the jury returned a "general verdict."
Id. at 18-21.
In Finnerty v. Stiefel Laboratories, Inc., 756 F.3d 1310 (11th Cir. 2014), the plaintiff
worked as a sales representative for SLI from 1986 until he was terminated on August 29, 2008,
23

along with numerous others in a reduction of force. See Finnerty, 756 F.3d at 1315. Although the
plaintiff was entitled for his vested ESBP benefits after his termination, he initially elected to
defer the distribution. See id. In November of 2008, the plaintiff received a letter from SLI
announcing major changes to their ESBP and another letter shortly thereafter reminding him of
his opportunity to take a distribution. See id. "Concerned about the impending changes, on
January 6, 2009, Finnerty executed a form irrevocably electing to receive his distribution of SLI
stock and to 'put' the stock to SLI at the then-effective fair market value of $16,469 per share. SLI
completed this transaction on February 13, 2009." Id. The plaintiff brought suit alleging
violations of, among other things, section 10(b) of the Securities Exchange Act of 1934. See id. at
1316. In May of 2012, the securities fraud count was tried on the theory that SLI had a duty to
disclose to the plaintiff information relating to its merger negotiations with Sanofi-Aventis but
failed to do so. See id. The jury returned a verdict in the plaintiff's favor. See id.
On appeal, SLI argued that the plaintiff failed to provide sufficient evidence to permit a
reasonable jury to find that its merger talks with Sanofi-Aventis were material as required by Rule
10-b. See id. at 1321. Rejecting this argument, the Eleventh Circuit held that "SLI's discussions
with Sanofi-Aventis were sufficiently advanced by January 6, 2009, when Finnerty exercised his
'put' option, for a jury to find them material. By January of 2009, Charles Stiefel had met with the
chief executive officer of Sanofi-Aventis to discuss the strategic fit between the two companies,
and SLI had engaged Blackstone Advisory Services to facilitate a possible sale." Id. Further, the
court noted that "valuation analysis conducted by Blackstone Advisory Services had shown that
the potential acquisition price could be in the range of 2.5 to 4.5 times revenue, which would be of
considerable magnitude for SLI shareholders." Id. As such, the court concluded that the jury

24

reasonably found that knowledge of the undisclosed merger negotiations would have affected the
plaintiff's decision to sell. See id. at 1321 n.8.
In opposition to Plaintiffs' motion for summary judgment, Defendants argue that because
the jury returned a general verdict, there is no way to know whether the issues decided were
"identical" to the those in dispute in the present matter. See Dkt. No. 100 at 17-18. For example,
Defendants contend that "the Finnerty jury could have found that Charlie's and Bill Humphries'
alleged representations to Finnerty during the 2008 national sales meeting were the basis for its
finding of liability. It is undisputed that none of the Plaintiffs [in the instant case] attended this
2008 meeting or heard the statements allegedly made during this meeting." Id. at 18.
The Court agrees with Defendants that collateral estoppel is inappropriate in the present
matter. In Martinolich v. Stiefel Laboratories, Inc., No. 12-cv-24212 (S.D. Fla.), in their motion
for summary judgment, the plaintiffs argued that issue preclusion or collateral estoppel should be
applied to the materiality and scienter elements of their Rule 10b-5(b) claim, relying on the
Finnerty verdict and subsequent decision on appeal. See Dkt. No. 102-13 at 3. Denying the
plaintiffs' motion, the court found that the plaintiffs "have not shown the issues decided in
Finnerty – presented in the disjunctive as they were on a general verdict form – are identical to
those the three Plaintiffs present here on their securities fraud claim." Id. The court noted that the
general verdict in Finnerty "consisted of affirmative responses to the following questions asked as
to Stiefel and Charles: whether 'Defendant's conduct in connection with Plaintiff's sale of his stock
to Stiefel Labs violated Rule 10b-5(b) by making a false representation of material fact, or
omitting a material fact (as explained in the Court's instructions)?'" Id. at 5 (quotation omitted).
The Martinolich court further noted that the Finnerty jury was "never asked to identify what 'false

25

representation of a material fact' or omission of a material fact, it was determining Defendants to
be guilty of." Id.
Moreover, the court noted that the plaintiff in Finnerty presented to the jury the fact that
the Werner Stiefel told him during his first day of training class that "'he was proud to have a
family-owned company, and he planned to keep it that way[.]'" Id. at 6 (quotation omitted).
Further, the Martinolich decision noted that Finnerty testified that company representatives
discussed the fact that SLI was privately held "'in virtually every meeting, every national meeting
when we had the whole sales force there.'" Id. (quotation omitted). Although the court
acknowledged that there were many similarities between the two cases, the court nevertheless
denied summary judgment because "[n]ot all of the present Plaintiffs heard or read the same
information as the others, nor did they hear or read the same information Finnerty did. Similarity
in the general culture of the company and its statements over time and in different settings of its
intention to remain privately held do not translate into a finding, at summary judgment, that the
issue or issues decided by the Finnerty jury are identical to those presented here. . . . As
Defendants emphasize, it may have been representations made to Finnerty at a 2008 national sales
meeting that formed the basis of the jury’s finding of liability; it is not clear which, if any of the
present Plaintiffs attended that meeting or heard those statements." Id. at 8-9 (internal citations
omitted).
As the Court found in Martinolich, while there are considerable similarities between the
facts and issues in dispute in Finnerty and the present matter, it is clear that not all of the present
Plaintiffs were privy to the same information as the others, nor were they privy to all of the
information as the plaintiff in Finnerty. Moreover, Plaintiffs are asking the Court to distill special
findings from the general verdict in Finnerty concerning whether it was material
26

misrepresentations, omissions, or both that form the basis for the jury's affirmative responses to
the materiality and scienter questions on the verdict form. See Dkt. No. 102-13 at 8.
In Finnerty, the jury was instructed as to what constitutes actionable misrepresentations
and omissions for purposes of the plaintiff's Rule 10b-5(b) claims. The instructions did not limit
the jury's consideration of the evidence to any specific theory of liability. Instead, the jury was
instructed that it was required to determine whether the defendants' "conduct in connection with
[Finnerty's] sale of his stock to Stiefel Labs violated Rule 10b-5(b) by making a false
representation of material fact or omitting a material fact." Dkt. No. 101 at ¶ 135. Following
deliberations, the Finnerty jury returned a general verdict against the defendants that did not
contain any specific findings as to whether the verdict was based on a misrepresentation or
omission, much less which one(s). See id. Since there is no basis for ascertaining which, if any,
of the facts upon which Plaintiffs' rely were in fact found by the Finnerty jury to support the
verdict, they are not entitled to summary judgment on this ground.
In Dodge v. Cotter Corp., 203 F.3d 1190 (10th Cir. 2000), the district court tried a
bellwether case involving eight plaintiffs, which resulted in a general verdict finding the
defendant negligent. See id. at 1194-95. The next group of plaintiffs sought summary judgment
on the ground that the defendant was collaterally estopped from relitigating the issues decided in
the first trial. See id. at 1196. The district court agreed and ruled that the defendant's negligence
"had been decided and would not be relitigated." Id. at 1197. Reversing the district court, the
Tenth Circuit looked to the jury instructions as the "blueprint for determining the parameters of
the first jury's verdict," and held that the instructions "sabotage[d] the existence" of the first
collateral estoppel element, i.e., that the issue sought to be precluded was actually decided in the

27

first trial. See id. at 1198. Considering the jury instructions and the verdict form, the court
explained that the
complaint contained eleven specific allegations of negligence,
providing detail to the preceding three paragraphs alleging Cotter's
duty, breach of the duty, and "negligent acts and/or omissions of the
Defendants, including but not limited to" the catalog of specific
negligent acts. Nonetheless, the first jury was simply instructed, in
part, "negligence means a failure to do an act which a reasonably
careful person or company would do. . . ." The jury was not
instructed on the specific duty allegedly breached. Nor did the
verdict form specify what negligent act formed the basis of the
general finding of negligence. . . .
Nonetheless, our concern is not that the jury did not find negligence
on one or more specific allegations, but that the general finding
under the negligence instruction fails to identify what the jury found
sustained by the evidence. Thus, we cannot say as a matter of law
the issue decided by the first jury is identical to the issue in
controversy in this case. To attempt to cure that defect by labeling
the first trial a "bellwether," or citing the pretrial order is to no avail.
The . . . jury's verdict does not assure an unassailable finding that
plaintiffs met their burden of proof that [the defendant] breached a
specific duty.
Id. at 1198-99 (footnote omitted).
In the present matter, as in Dodge, the Finnerty jury was instructed that Defendants could
be liable to the plaintiff if they found that the defendants made a number of alleged material
misrepresentation(s) or omission(s) of fact in connection with the stock transaction. See Dkt. No.
101 at ¶¶ 134-135. The Finnerty jury was not instructed on the specific misrepresentations or
omissions allegedly made by the defendants and made no specific finding as to which alleged
misrepresentation(s) or omission(s) formed the basis of its verdict.
Based on the foregoing, the Court denies this portion of Plaintiffs' motion for summary
judgment.
b. Scienter
28

In this motion, Plaintiffs argue that they are entitled to summary judgment on the issue of
whether Defendants knowingly failed to update them regarding the ongoing merger/sale
negotiations. See Dkt. No. 81-1 at 22-24.
As noted, the general verdict form and evidence presented in the Friedman case do not
permit the Court to determine which alleged misrepresentation(s) or omission(s) the jury found to
be material. Similarly, the Court is unable to determine which misrepresentation(s) or omission(s)
of fact the jury found to have been done knowingly. Accordingly, Plaintiffs' motion for summary
judgment on this ground is denied.
c. Justifiable reliance
In their motion, Plaintiffs argue that they are entitled to summary judgment on the issue of
whether they justifiably relied on Defendants' false representations of material fact when electing
to "put" their shares to SLI. See Dkt. No. 81-1 at 24-26. Having denied Plaintiffs' motion as to
the false statement or omission element of their claim, it would be inappropriate to grant
Plaintiffs' motion as to the justifiable reliance element. Accordingly, the Court denies this portion
of Plaintiffs' motion for summary judgment.
4. Duty to disclose the potential sale as of January of 2009 or abstain from purchasing
In their motion, Plaintiffs contend that, in addition to their entitlement to summary
judgment on the grounds of collateral estoppel, Plaintiffs are also entitled to partial summary
judgment on Defendants' duty to disclose the potential sale of SLI at the time of Plaintiffs' put
elections in January of 2009 or, at a minimum, abstain from purchasing Plaintiffs' ESBP shares.
See Dkt. No. 81-1 at 26-29. Defendants, however, argue that the Court should deny this request
because "(1) it requires a finding that information relating to Project Jump was material at the
time of Plaintiffs' January 2009 put elections and Plaintiffs cannot establish that there are no
29

genuine issues of material fact as to the materiality of this information; and (2) it improperly relies
on the insider trading 'disclose or abstain' rule, which is inapplicable to Plaintiffs' Rule 10b-5(b)
claims, which are the only remaining claims Plaintiffs have asserted against Defendants." Dkt.
No. 100 at 23. In their reply, Plaintiffs contend that Defendants mistakenly assert that Plaintiffs
claims arise only under Rule 10b-5(b) when, in fact, their complaint asserts claims under all three
subparagraphs of Rule 10b-5. See Dkt. No. 110 at 12. Further, Plaintiffs argue that "even if this
Court should find that Plaintiffs' Complaint does not assert a claim under all three subparagraphs
of 10b-5 – which it does – the 'disclose or abstain' rule is applicable to the claims asserted herein
as held by the Second Circuit." Id. (citation omitted). Finally, Plaintiffs assert that "Defendants'
argument that any insider trading claim would fail as a matter of law because Plaintiffs cannot
establish[ ] that Charles Stiefel purchased [P]laintiffs' stock or SLI avoided any loss or gained any
profit is misplaced." Id. at 13.
a. Plaintiffs' Rule 10b-5 claim
Defendants contend that Plaintiffs' motion must be denied because the "disclose or
abstain" rule is inapplicable to Plaintiffs' Rule 10b-5(b) claim, and Plaintiffs have not alleged an
insider trading claim under the other subsections of Rule 10b-5. See Dkt. No. 100 at 27-29. The
Court disagrees.
In Martinolich v. Stiefel Laboratories, Inc., No. 12-cv-24212 (S.D. Fla.), the defendants
argued in their motion for summary judgment that "where the premise of a Rule 10b-5 securities
law claim consists of alleged misrepresentations and/or omissions, as here, it must be raised under
Rule 10b-5(b). . . ." Dkt. No. 110-4 at 10. As such, the defendants argued that they were entitled
to summary judgment on the plaintiffs' Rule 10b-5(a) and Rule 10b-5(c) claims. See id. The
plaintiffs responded that the defendants' motion "'rests on the inaccurate premise that Plaintiffs'
30

claims are based entirely on Defendants' omissions, ignoring the fact that Plaintiffs' claims are
also based on Defendants' misconduct in repurchasing Plaintiffs' shares based on material, nonpublic information, i.e., Defendants' insider-trading.'" Id. at 10-11.
Rejecting the defendants' arguments, the court first found that the plaintiffs adequately
alleged claims arising under all three subparagraphs of Rule 10b-5. See id. at 12. In their
complaint, the plaintiffs set forth the following allegations, which tracked the language of all three
subparagraphs of Rule 10b-5:
The Company and Charles Stiefel each: (a) employed devices,
schemes, and artifices to defraud; (b) made untrue statements of
material fact and/or omitted to state material facts necessary to
make the statements not misleading; and (c) engaged in acts,
practices, and a course of business that operated as a fraud and
deceit upon the Plaintiff [sic] in violation of Section 10(b) of the
Securities and Exchange Act and Rule 10b-5.
Id. The Martinolich court found this sufficient to set forth claims pursuant to all three
subparagraphs of Rule 10b-5.
In the present matter, in Count One of their complaint, Plaintiffs alleged as follows:
Defendant, Stiefel Labs and Defendant, Charles Stiefel, each: (a)
employed devices, schemes, and artifices to defraud; (b) made
untrue statements of material fact and omitted to state material facts
necessary to make the statements not misleading; and (c) engaged in
acts, practices and a course of business that operated as a fraud and
deceit upon the Plaintiffs in an effort to maintain artificially low
prices for Stiefel Labs' securities in violation of Section 10(b) of the
Exchange Act and SEC Rule 10b-5.
Dkt. No. 1 at ¶ 128. This language, which is nearly identical to the language set forth in the
Martinolich amended complaint, is sufficient to set forth claims under all three subparagraphs of
Rule 10b-5.

31

Defendants further argue that any insider trading claim is subject to dismissal because
Plaintiffs "cannot establish that (1) Charlie purchased Plaintiffs' stock (or anyone else's stock),
which would require the dismissal of any such claim against him . . .; or (2) SLI avoided any 'loss'
or gained any 'profit' as a result of Plaintiffs' stock transactions, which would require dismissal of
any such claim against it, because the stock acquired from Plaintiffs was cancelled and converted
into treasury shares and these treasury shares were subsequently cancelled without the payment of
any consideration to SLI in connection with the GSK merger." Dkt. No. 100 at 29. Contrary to
Defendants' contentions, Plaintiffs have plausibly alleged these facts and supported these
allegations with admissible evidence. First, Defendant Charles Stiefel is "sued as a person in
control of the Company under Section 20(a) of the Exchange Act." Dkt. No. 1 at ¶ 126. Plaintiffs
also allege various ways in which Defendant Charles Stiefel caused the alleged improper conduct
to occur. See, e.g., Dkt. No. 1 at ¶ 143. Under 15 U.S.C. § 78t(a), "controlling persons" are
jointly and severally liable as follows:
Every person who, directly or indirectly, controls any person liable
under any provision of this chapter or of any rule or regulation
thereunder shall also be liable jointly and severally with and to the
same extent as such controlled person to any person to whom such
controlled person is liable . . . , unless the controlling person acted
in good faith and did not directly or indirectly induce the act or acts
constituting the violation or cause of action.
15 U.S.C. § 78t(a). Defendants do not point to any relevant authority indicating that Defendant
Charles Stiefel, who was the Company's President, Chairman and CEO during the relevant time
period, does not fit within the "broad" definition that the Second Circuit has applied to this term.
See S.E.C. v. Management Dynamics, Inc., 515 F.2d 801, 812 (2d Cir. 1975) ("Control was
defined in a broad fashion . . . to reach prospective wrongdoers, rather than to permit the escape of
those who would otherwise be responsible for the acts of their employees"); see also Poptech,
32

L.P. v. Stewardship Credit Arbitrage Fund, LLC, 792 F. Supp. 2d 328, 336 (D. Conn. 2011)
("'Corporate officers are usually presumed to possess the requisite power to control the actions of
their employees and are often held accountable as controlling persons'") (quotation omitted).
As to Defendants' second argument, Plaintiffs allege that Defendants repeatedly concealed
material information concerning the fair market value of the stock and "increased their efforts to
reduce outstanding shares beginning in 2008 by terminating employees and offering remaining
ESOP participants, including Plaintiffs, the 'optional diversification opportunity' to sell their
shares to the Company at the artificially low 2008 Bogush Valuation." Dkt. No. 1 at ¶¶ 129-131.
Further, Plaintiffs allege that the percentage and value of SLI's stock owned by Defendant
"Charles Stiefel, his family and entities that he controls, increased significantly as a result of the
repurchase of shares of Company stock from the ESOP participants including, but not limited to,
Plaintiffs." Id. at ¶ 143. In fact, "[o]n February 20, 2009, Brent Stiefel calculated and sent to
Todd Stiefel and Charles Stiefel a third version of the payout schedule showing the difference
between what Charles, Todd and Brent Stiefel as well as Todd and Brent Stiefel's children
[would] receive pre-ESBP buyback and post-ESBP buyback on a spreadsheet with a per share
price of $68,000 . . . Brent Stiefel stated, 'It is nice to see the $ go up for all of us!'" Dkt. No. 85
at ¶ 98 (citations omitted); see also Dkt. No. 94, Exs. 132-132A.
Based on the foregoing, the Court finds Defendants' arguments entirely without merit.
b. Defendants' duty to disclose material, nonpublic information or abstain
Plaintiffs move for partial summary judgment on Defendants' duty to disclose material,
nonpublic information. See Dkt. No. 81-1 at 26-29. Specifically, Plaintiffs contend that they are
entitled to "partial summary judgment on the duty of Defendants, Charles and Stiefel Labs, to

33

disclose the potential sale of SLI when Plaintiffs' ESBP 'put' elections in January of 2009 or, at a
minimum, abstain from purchasing Plaintiffs' ESBP shares." Id. at 26.
"[W]here the issue is whether an individual's relationship to information imposed upon
him a duty to disclose, the inquiry as to his duty is quite distinct from the inquiry as to the
information's materiality." In re Time Warner Inc. Sec. Litig., 9 F.3d 259, 267 (2d Cir. 1993)
(citing Dirks v. S.E.C., 463 U.S. 646, 103 S. Ct. 3255, 77 L. Ed. 2d 911 (1983)). "On the other
hand, where the disclosure duty arises from the combination of a prior statement and a subsequent
event, which, if not disclosed, renders the prior statement false or misleading, the inquiries as to
duty and materiality coalesce. The undisclosed information is material if there is 'a substantial
likelihood that the disclosure of the omitted fact would have been viewed by the reasonable
investor as having significantly altered the "total mix" of information available.'" Id. at 267-68
(quoting TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438, 449, 96 S. Ct. 2126, 2132, 48 L.
Ed. 2d 757 (1976)); see also Castellano v. Young & Rubicam, Inc., 257 F.3d 171, 179 (2d Cir.
2001).
The question posed by Plaintiffs' motion would require the Court to decide an issue of law
entirely independent of the question of materiality, which is undeniably a disputed issue of
material fact, as well as an issue on which the very duty to disclose or abstain depends. The Court
declines to decide this issue of law in a vacuum on summary judgment. Rather, the question of
SLI's duty to disclose or abstain will be addressed as it relates to the instructions to be given to the
jury.
Accordingly, the Court denies Plaintiffs' motion for partial summary judgment.

34

B.

Plaintiffs' Daubert motion to exclude expert testimony6
In their motion, Plaintiffs seek to preclude the expert witness testimony of Lance T.

Studdard and Chester A. Gougis. See Dkt. No. 86-1. First, Plaintiffs argue that the testimony of
each expert witness is precluded "as violative of the scope and intent of the 'Stipulation by the
Parties and Counsel to Streamline the Issues and Claims' entered into between the parties in this
action on January 12, 2015[.]" Id. at 1. Further, Plaintiffs contend that Studdard and Gougis are
not qualified to testify in this securities fraud case. See id. Next, Plaintiffs argue that Defendants
cannot establish that either Mr. Studdard or Mr. Gougis are qualified to be experts in this case, nor
can they establish that the opinions that they intend to offer are based upon reliable data and
methodology, or that their opinions will assist the trier of fact to decide any disputed issues in this
securities fraud case. See id. at 1-2. Finally, Plaintiffs contend that "a careful reading of Mr.
Studdard's Report reveals that he does not set forth a single industry standard upon which he bases
or supports his opinions. Instead, he simply generically refers to 'industry customs and standards'
without providing detail or support for such statements." Id. at 2. As such, Plaintiffs claim that
Mr. Studdard's opinions "are nothing more than legal conclusions that directly conflict with [the]
Eleventh Circuit's decision in Finnerty v. Stiefel Laboratories, Inc., 765 F.3d 1310 (11th Cir.
2014), . . . which he obstinately refuses to accept." Id.
1. Standard
The admissibility of expert testimony is governed by Rule 702 of the Federal Rules of
Evidence. That Rule provides as follows:

The Court notes that the plaintiffs in several of the other related actions pending in
Florida and Georgia made substantially similar motions to exclude the testimony of Defendants'
expert witnesses, which were denied. See, e.g., Fried v. Stiefel Laboratories, Inc., No. 11-cv20853, Dkt. No. 114 (S.D. Fla.).
6

35

If scientific, technical, or other specialized knowledge will assist the
trier of fact to understand the evidence or 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.
Fed. R. Evid. 702.
In reviewing the admissibility of expert testimony, "the district court has a 'gatekeeping'
function under Rule 702 – it is 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.'" Amorgianos v. Nat'l R.R.
Passenger Corp., 303 F.3d 256, 265 (2d Cir. 2002) (quoting Daubert v. Merrell Dow
Pharmaceuticals, Inc., 509 U.S. 579, 597, 113 S. Ct. 2786 (1993)). The rule set forth in Daubert
applies to scientific knowledge, as well as technical or other specialized knowledge. See Kumho
Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 141 (1999).
As the Second Circuit has explained,
[i]n fulfilling this gatekeeping role, the trial court should look to the
standards of Rule 401 in analyzing whether proffered expert
testimony is relevant, i.e., whether it has any tendency to make the
existence of any fact that is of consequence to the determination of
the action more probable or less probable than it would be without
the evidence. Next, the district court must determine whether the
proffered testimony has a sufficiently reliable foundation to permit
it to be considered. In this inquiry, the district court should consider
the indicia of reliability identified in Rule 702, namely, (1) that the
testimony is grounded on sufficient facts or data; (2) that the
testimony is the product of reliable principles and methods; and (3)
that the witness has applied the principles and methods reliably to
the facts of the case. In short, the district court must make certain
that an expert, whether basing testimony upon professional studies
or personal experience, employs in the courtroom the same level of
intellectual rigor that characterizes the practice of an expert in the
relevant field.
36

Amorgianos, 303 F.3d at 265 (internal alterations, quotations, and citations omitted). The court
must also consider the fact that "experience in conjunction with other knowledge, skill, training or
education . . . [may] provide a sufficient foundation for expert testimony," and "[i]n certain fields,
experience is the predominant, if not sole, basis for a great deal of reliable expert testimony."
Advisory Committee Notes, 2000 Amendments, Fed. R. Evid. 702; see also Kumho Tire, 526
U.S. at 156 ("[N]o one denies that an expert might draw a conclusion from a set of observations
based on extensive and specialized experience").
"In undertaking this flexible inquiry, the district court must focus on the principles and
methodology employed by the expert, without regard to the conclusions the expert has reached or
the district court's belief as to the correctness of those conclusions." Amorgianos, 303 F.3d at 266
(citation omitted). "In deciding whether a step in an expert's analysis is unreliable, the district
court should undertake a rigorous examination of the facts on which the expert relies, the method
by which the expert draws an opinion from those facts, and how the expert applies the facts and
methods to the case at hand." Id. "A minor flaw in an expert's reasoning or a slight modification
of an otherwise reliable method will not render an expert's opinion per se inadmissible." Id.
"'The judge should only exclude the evidence if the flaw is large enough that the expert lacks good
grounds for his or her conclusions.'" Id. (quotation and other citation omitted).
As the courts and Advisory Committee have made clear, "the rejection of expert testimony
is the exception rather than the rule." Fed. R. Evid. 702, Advisory Committee's Note; see also
E.E.O.C. v. Morgan Stanley & Co., 324 F. Supp. 2d 451, 456 (S.D.N.Y. 2004); U.S. Info. Sys.,
Inc. v. Int'l Bhd. of Elec. Workers Local Union No. 3, 313 F. Supp. 2d 213, 226 (S.D.N.Y. 2004).
"This principle is based on the recognition that 'our adversary system provides the necessary tools

37

for challenging reliable, albeit debatable, expert testimony.'" Melini, 2009 WL 413608, at *5
(quoting Amorgianos, 303 F.3d at 267).
However, "when an expert opinion is based on data, methodology, or studies that are
simply inadequate to support the conclusions reached, Daubert and Rule 702 mandate the
exclusion of that unreliable opinion testimony." Amorgianos, 303 F.3d at 266; accord Ruggiero
v. Warner-Lambert Co., 424 F.3d 249, 253 (2d Cir. 2005). Furthermore, "it is critical that an
expert's analysis be reliable at every step." Amorgianos, 303 F.3d at 267. Of course, "the district
court must focus on the principles and methodology employed by the expert, without regard to the
conclusions the expert has reached or the district court's belief as to the correctness of those
conclusions." Id. at 266 (citing Daubert, 509 U.S. at 595). Nevertheless, "conclusions and
methodology are not entirely distinct from one another." Gen. Elec. Co. v. Joiner, 522 U.S. 136,
146 (1997). Accordingly, "[a] court may conclude that there is simply too great an analytical gap
between the data and the opinion proffered." Joiner, 522 U.S. at 146.
2. Chester A. Gougis
Mr. Gougis obtained his bachelors degree in economics from Harvard University in 1974
and a master's degree in business administration from the University of Chicago in 1976. See Dkt.
No. 91-6 at ¶ 3. He has over thirty-five years of experience in the financial services industry,
focused on providing valuation and other financial advisory services to public and privately
owned companies. See id. at ¶ 2. Since 2006, Mr. Gougis has been the Managing Partner of
Cognitive Capital Partners, a private equity investment firm. See id. at ¶ 4. Moreover, since
2009, he has been the President and Chief Executive Officer of Cognient Group, LLC, a valuation
and financial advisory consulting firm. See id. Prior to founding Cognitive Capital Partners and
Cognient Group, he was employed for twenty-eight years by Duff & Phelps, an investment
38

banking firm that specializes in providing merger and acquisition, valuation, and financial opinion
services. See id. at ¶ 5. During this time, he was "personally involved in performing hundreds of
stock valuations involving ESOPs and employee stock bonus plans[.]" Id.
In his report, Mr. Gougis explains a number of stock valuation concepts, which
Defendants claim will help the jury in understanding Plaintiffs' claim that "Bogush's valuations
relied on improper methods and were known by Defendants to be too low." Id. at ¶¶ 27-51; see
also Dkt. No. 103 at 9. Mr. Gougis also discusses why Plaintiffs' "attempts to rely on both the
convertible preferred stock investment proposals and the GSK merger price to establish the fair
market value of the ESBP stock is invalid and contrary to accepted valuation principles." Dkt.
No. 103 at 9. Moreover, Mr. Gougis discusses a number of factors that Plaintiffs ignore, which he
claims undermines Plaintiffs' argument that a merger with GSK was a foregone conclusion as
early as November 26, 2008. See Dkt. No. 91-6 at ¶ 58. According to Mr. Gougis, the following
factors make it speculative in January and February of 2009 that SLI would find any buyer willing
to acquire it, much less at a price approaching GSK's ultimate purchase price: (1) the worsening
economic condition in the United States and worldwide in late 2008 and early 2009; (2) SLI's own
deteriorating financial performance; (3) Blackstone's ownership of the convertible preferred stock;
(4) the fact that SLI was still primarily a family-owned business; and (5) Project Jump was still in
its infancy when Plaintiffs exercised their stock distribution and put rights. See id. at ¶¶ 59-67.
3. Lance Studdard
Mr. Studdard received his bachelors degree and juris doctor from the University of
Alabama and his Accredited Investment Fiduciary Designation from the Center for Fiduciary
Studies at the University of Pittsburgh. See Dkt. No. 91-7 at 2-3. Mr. Studdard has over fifteen
years of experience as a professional fiduciary providing trustee and other fiduciary services to
39

employee retirement benefit plans governed by ERISA, including ESOPs. See id. at 2. He is
currently a Senior Vice President at Benefit Trust Company, an independent trust company that
provides fiduciary and investment services to ESOPs. See id. Prior to that, Mr. Studdard worked
at Reliance Trust Company, where he was responsible for making fiduciary decisions for clients,
including ESOPs, providing advice to clients who served as inside fiduciaries, determining best
practices, following industry standards, and writing compliance policies. See id. at 2-3. Before
Reliance, Mr. Studdard worked for Insperity Retirement Service, where he built the policies and
practices to ensure that Insperity was following industry standards and best practices for
approximately 2,000 ERISA-governed benefit plans for which Mr. Studdard also served as an
inside fiduciary. See id. at 3.
During the last decade, Mr. Studdard has provided fiduciary services to over 100 ERISAgoverned retirement benefit plans, including ESOPs. He has been involved in fiduciary decision
making on behalf of institutional trustees in more than seventy transactions involving ESOPowned companies, including over a dozen where Mr. Studdard personally functioned as the
trustee for an ESOP whose corporate plan sponsor was sold. See id.
According to Defendants, "Plaintiffs have recently tried to inject into this case arguments
that Defendants should have somehow suspended or refused to honor ESBP participants' Planmandated stock distribution and put rights." Dkt. No. 103 at 12. Defendants contend that,
although Plaintiff should be precluded from offering such arguments and evidence, Mr. Studdard
"has been identified by Defendants as an expert on ESOP industry practices and how a fiduciary
would go about analyzing Plaintiffs' suggested alternatives to disclosure and the practical
implications of taking one or more of those suggested alternative courses of action." Id. (citation
omitted).
40

In his first, second and fourth opinions, Mr. Studdard responds to Plaintiffs' arguments as
to how SLI could have refused to honor their exercised "put" rights. See Dkt. No. 91-7 at 16-24.
In his first opinion, Mr. Studdard discusses the fact that "[i]ndustry standards dictate that
fiduciaries follow and not substantially deviate from established procedures and schedules unless
they determine that the failure to do so will result in a breach of fiduciary duty or other violation
of law." Id. at 16-17. In his second opinion, Mr. Studdard concludes that, "[a]t the time of
Plaintiffs' irrevocable stock put elections, and even at the time of payment on February 13, 2009,
there was no information or state of events which would have suggested to a fiduciary acting in
conformity with industry standards that the established procedures and schedules under which the
ESBP operated should be altered or otherwise deviated from." Id. at 18. Finally, in his fourth
opinion, Mr. Studdard opines that the Plan fiduciaries "acted consistent with industry standards by
not suspending, delaying, or otherwise deferring Plan participants' rights in late 2008 and 2009."
Id. at 21-24. Mr. Studdard claims that the imposition of a blackout period for reasons other than
purely administrative purposes is extremely rare and that, "[i]n the context of a possible merger or
acquisition involving the plan sponsor, a fiduciary acting in accordance with industry standards
does not consider imposing a blackout period until there is an executed contract between the plan
sponsor and the acquiring or selling company." Id. at 22.
4. Qualifications to provide their respective expert opinions
First, Plaintiffs contend that Defendants' proffered expert witnesses should be excluded
from trial because they are not qualified to testify as experts in this case. See Dkt. No. 86-1 at 812. Plaintiffs argue that Mr. Studdard is not qualified to testify as an expert on securities fraud
claims, since his sole purported area of expertise is ERISA, not securities fraud. See id. at 9-11.
Similarly, Plaintiffs claim Mr. Gougis' opinions do not relate to or address issues present in this
41

securities fraud action. See id. at 11-12. According to Plaintiffs, "[a] review of the Gougis Report
reveals that Mr. Gougis' education, training and work experience have been limited to the field of
securities within the financial services industry and as consultant regarding company valuations to
buyers and sellers in mergers and [acquisitions]. . . . In particular, Mr. Gougis' opinions in his
report focus on the March 31, 2008 valuation of the Stiefel ESBP shares." Id. at 11. Since the
issues related to the March 31, 2008 valuation were expressly addressed in the parties' Stipulation
and because Plaintiffs have conceded that they will neither challenge the Bogush valuation, nor
argue that a later valuation should have been conducted, Plaintiffs contend that Mr. Gougis'
testimony is irrelevant and will not assist the jury in otherwise arriving at a commonsense
determination of the facts of this case. See id. at 11-12.
In the present matter, both proffered experts have relevant post-graduation education and
extensive experience in their respective fields and they provide opinions that will assist the jury in
understand matters at issue in this case. Specifically, Mr. Gougis' investment banking opinions
will assist the jury in understanding the process that merger negotiations go through and support
Defendants' position that a merger at any price is speculative until certain milestones are reached,
such as a purchase offer with price and terms specified. Similarly, Mr. Studdard's opinions are
offered to counter Plaintiffs' arguments that Defendants/the Plan fiduciaries should have deviated
from the normal schedules and operations set forth in the Plan. Further, as Defendants contend,
these opinions will aid the jury "in understanding that Plaintiffs' proposed alternatives to
disclosing Project Jump are actually more harmful than disclosure, which Plaintiffs concede
would likely have killed any merger discussions." Dkt. No. 103 at 8. Mr. Studdard's opinions are
relevant to the scienter and causation elements of Plaintiffs' Rule 10b-5(b) claim.
5. The expert opinions are supported and reliable
42

Although Plaintiffs do not contend that Mr. Gougis' opinions are not reliably based on
well-established and widely accepted principles, they argue that Mr. Studdard failed to "explain
how [his] experience supports and leads to the conclusion he reaches." Dkt. No. 86-1 at 17.
Contrary to Plaintiffs' assertions, Mr. Studdard did connect his training and experience as an
ESOP fiduciary with his testimony about the standards of the ESOP industry and how ESOP
fiduciaries actually act. For example, in response to Plaintiffs' suggestion that a blackout period
could have been imposed in January or February of 2009, Mr. Studdard notes that such an action
would have almost certainly led to the disclosure of Project Jump and that, in the more than
seventy transactions he has been apart of involving ESOP-owned companies, he has never seen a
blackout period used in the way Plaintiffs suggest it should have been used. See Dkt. No. 91-7 at
22. Further, Mr. Studdard explained that he has "provided fiduciary services in dozens of
situations in which a company plan sponsor was considering a potential merger, acquisition, or
sale of some or all of the plan sponsor's assets." Id. at 19. Mr. Studdard explained that, in his
experience, "a professional fiduciary is not normally advised of a contingent corporate event until
such time as the company's shareholders are advised of the event." Id. As Defendants correctly
contend, this type of experience, explicitly connected to the opinions being offered, is sufficient
grounds for the admission of Mr. Studdard's opinions. See Pension Comm. of Univ. of Montreal
Pension Plan v. Banc of Am. Secs., LLC, 691 F. Supp. 2d 448, 464-65 (S.D.N.Y. 2010).
Plaintiffs also contend that Mr. Studdard's testimony should be excluded because he "fails
to cite to a single document, rule, code, manual, text, treatise or regulation from any governing
body, association or national group that provides a basis or support for his assertions regarding the
'industry standards' for ERISA plans." Dkt. No. 86-1 at 16. The Court finds Plaintiffs' arguments
unpersuasive. The Advisory Committee Notes to Rule 702 provide as follows: "Nothing in this
43

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." Even if Mr. Studdard's extensive education,
training, and experience were insufficient to support his opinions, during his deposition Mr.
Studdard identified publications from both the National Center for Employee Ownership and the
ESOP Association in support of his opinions in this case. See Dkt. No. 104-2 at 82-83, 90-92, 97.
Accordingly, the Court denies Plaintiffs' motion on this ground.
6. Relevance and helpfulness to the jury
a. Mr. Studdard
As to Mr. Studdard, Plaintiffs contend that Mr. Studdard should not be permitted to opine
"that ERISA-based fiduciary standards are even relevant to Defendants' decision to not abstain
from purchasing Plaintiffs' stock[.]" Dkt. No. 86-1 at 21. Plaintiffs argue that the jury will not be
charged on ERISA, and the jury will not be asked to make any findings of ERISA violations. See
id. at 20. Rather, Plaintiffs contend that the jury will be charged on the elements of securities
fraud and introducing ERISA industry standards into the case will do nothing but "confuse and
perplex the jury." Id. at 20-21. Defendants, however, contend that Mr. Studdard's opinions are
directly relevant to Plaintiffs' more recent assertions "that various alternatives existed to following
the terms of the Plan and honoring Plaintiffs' stock put rights." Dkt. No. 103 at 23. According to
Defendants, "[t]hose suggestions necessarily implicate the ESBP fiduciaries as they involve (1)
violating the terms of the ESBP, (2) possibly causing a Plan disqualification or other legal issue
for which the fiduciaries would be liable, and (3) the practicalities of ESOP administration
44

Studdard merely explains how fiduciaries in the ESOP industry evaluate these kinds of suggested
courses of action, and concludes that none of Plaintiffs' proposed alternatives is practical." Id.
(citation omitted). Moreover, Defendants contend that Mr. Studdard's opinions on Defendants'
compliance with ESOP industry standards is relevant to the scienter element of Plaintiffs'
securities fraud claim. See id. at 23-24.
In the present matter, the Court agrees with Defendants that Mr. Studdard's testimony is
relevant to the extent that Plaintiffs intend to present evidence and testimony as to alternative
actions Defendants could have taken. This testimony will help the jury in evaluating the
feasibility and practicality of these proposed alternatives. Further, although proof that Defendants
failed to comply with industry standards would be insufficient, by itself, to "constitute strong
circumstantial evidence of conscious misbehavior or recklessness," In re JP Morgan Auction Rate
Sec. (ARS) Marketing Litig., 867 F. Supp. 2d 407, 424-25 (S.D.N.Y. 2012) (citations omitted),
such evidence is nonetheless relevant to establishing the requisite scienter, when considered in the
context of Defendants' other alleged actions and statements. See S.E.C. v. Sky Way Global, LLC,
No. 8:09-cv-455, 2010 WL 5058509, *4 (M.D. Fla. Dec. 6, 2010) (citations omitted).
Moreover, in a securities fraud case, the plaintiff may establish scienter by either "(1)
showing the defendants' motive and opportunity to perpetrate fraud, or (2) alleging 'strong
circumstantial evidence of conscious misbehavior or recklessness.'" Iowa Public Employee's
Retirement System v. Deloitte & Touche LLP, 919 F. Supp. 2d 321, 331 (S.D.N.Y. 2013)
(quotation and other citation omitted). When a plaintiff seeks to establish scienter through
conscious misbehavior or recklessness, the alleged reckless conduct must be behavior that is "'at
the least, conduct which is highly unreasonable and which represents an extreme departure from
the standards of ordinary care to the extent that the danger was either known to the defendant or
45

so obvious that the defendant must have been aware of it.'" Id. (quoting Kalnit, 264 F.3d at 142)
(other quotations omitted). "In the case of securities fraud, the Second Circuit has noted on
multiple occasions that plaintiffs' allegations 'suffice[ ] to state a claim based on recklessness
when they . . . specifically allege[ ] defendants' knowledge of facts or access to information
contradicting their public statements.'" Id. (quotation and other citation omitted).
In the present matter, Plaintiffs seek to establish the scienter requirement through both
Defendants' motive and opportunity, as well as through their alleged recklessness. Testimony
regarding industry practices and the relevant standards of ordinary care is undoubtedly relevant to
Defendants' contentions that they acted in an objectively reasonable manner. It is important to
note that Defendants claim that they are not using Mr. Studdard's opinions to support an argument
that compliance with ESOP industry standards is a "shield" to liability under the securities laws.
See Dkt. No. 103 at 23. Rather, Defendants' position is simply that compliance with these
industry standards is relevant to the scienter element of Plaintiffs' securities fraud claim. See id. at
23-24. As discussed, the Court agrees that such opinion testimony is relevant and will be helpful
to the jury.
Accordingly, Plaintiffs' motion to preclude on this ground is denied as to Mr. Studdard's
testimony.
b. Mr. Gougis
Plaintiffs contend that the jury in this case will only be asked to decide the issue of liability
in this securities fraud case since the parties have fixed any damages through stipulation. See Dkt.
No. 97 at 23. Further, Plaintiffs assert that, with respect to the March 31, 2008 Bogush valuation,
they "will neither challenge the Bogush valuation, nor argue that a later valuation should have
been conducted." Id. Therefore, since two of the three opinions proffered by Mr. Gougis relate to
46

valuation, the opinions are now moot. See id. With respect to the second opinion, Plaintiffs claim
that Mr. Gougis "speculates that 'a fiduciary would not have had any reason to find the Bogush
valuation conclusions to be unreasonable'" and opines that "'a fiduciary would reasonably have
relied on these valuations as an indicator that valuation conclusions reached by Bogush were
reasonable.'" Id. Plaintiffs contend that this "testimony would likewise be both confusing to the
jury, and usurp their unique role as the fact finder in a trial of this matter. In essence, Gougis is
proffering an opinion solely to attempt to bolster Charles Stiefel's decision to accept the lower
Bogush valuation at face value." Id. at 23-24.
Defendants contend that, in the stipulation, "the parties agreed not to submit expert
opinions on the proper measure of damages for Plaintiffs' Rule 10b-5(b) claims, and Plaintiffs
agreed not to argue that any Defendant should have caused a valuation of the ESBP stock at any
time after March 31, 2008." Dkt. No. 103 at 21 (emphasis in original). As such, Defendants
argue that, "[c]ontrary to Plaintiffs' assertion, . . . . this does not resolve every valuation issue in
the case or render Gougis's opinions irrelevant." Id. For example, Defendants argue that
Plaintiffs have not "stipulated that Bogush's valuations were the 'correct' fair market value for the
ESBP stock." Id. Further, Defendants contend that "Gougis's opinions are relevant to [the
securities fraud] claim, as he explains the valuation concepts necessary for the jury to understand
and evaluate Bogush's valuations, the reasonableness of Defendants' conduct with regard to those
valuations, and Plaintiffs' argument that Defendants committed securities fraud when SLI
purchased Plaintiffs' stock based on the March 31, 2008 Bogush valuation." Id. As such, they
claim that Mr. Gougis' opinions are relevant to the issue of scienter. See id. Additionally,
Defendants assert that Mr. Gougis' opinions are relevant to the issue of scienter, as Plaintiffs have

47

alleged not only that the stock was undervalued, but that Defendants knew that it was
undervalued. See id.
Contrary to Defendants' arguments, the Court finds that Mr. Gougis' expert report and
testimony is irrelevant to the remaining issues in this case. The opinions in Mr. Gougis' report
and testimony focus almost exclusively on the 2008 Bogush valuation of the ESBP shares. As
discussed, Plaintiffs acknowledge that they "will neither challenge the Bogush valuation, nor
argue that a later valuation should have been conducted." Dkt. No. 97 at 23. As to the issue of
scienter, the Court fails to see how this testimony is helpful or relevant. The 2008 Bogush
Valuation, which was issued on August 31, 2008, determined the value of the ESBP stock as of
March 31, 2008. The evidence in the record suggests that Defendants did not actively consider
selling the company until in or around November of 2008. As such, the value of the company
before Defendants had seriously considered selling is inapposite.
Further, to the extent that Defendants contend that Mr. Gougis' testimony/report are
necessary to explain the difference between a company's enterprise value and a company's goingconcern value, the Court finds the arguments unpersuasive. A careful reading of Mr. Gougis'
report leads to the conclusion that he never rendered any opinion regarding the two concepts. For
example, the Gougis Report contains no opinions regarding the five enterprise valuations secured
by Stiefel Laboratories when it was seeking bids from private equity firms looking to invest in the
company in 2006. Although he eludes to these enterprise values in his recitation of the factual
background of the case, he renders no opinion related thereto. See Dkt. No. 91-3. Rather, the
opinions relate solely to the validity, methodology and accuracy of the 2008 Bogush Valuation.
See id.

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Based on the foregoing, the Court grants Plaintiffs' motion in limine insofar as it seeks to
preclude the report and testimony of Mr. Gougis.7

7. Legal conclusions
Federal Rule of Evidence 704(a) specifically permits an expert to proffer testimony that
"embraces an ultimate issue to be decided by the trier of fact." Fed. R. Evid. 704(a). "Indeed, 'if a
witness (especially an expert) provides a solid foundation and explanation on an issue for which
the factfinder needs assistance, the factfinder might be left hanging if the witness cannot cap off
the testimony with a conclusion about the ultimate issue to which the expert is testifying.'" Krys v.
Aaron, 112 F. Supp. 3d 181, 192 (D.N.J. 2015) (quoting 3 Stephen A. Saltzburg, Michael M.
Martin & Daniel J. Capra, Federal Rules of Evidence Manual § 704.02[1] (9th ed. 2006)). In fact,
"testimony that amounts to 'less than a full narrative . . . is like the joke without the punchline, the
mystery without the last page,' particularly with respect to experts, where 'a conclusion on the
ultimate issue often ties the witness' testimony together into a coherent whole.'" Id. (quotation
omitted). "Nevertheless, the ultimate issue rule does not enable an expert to 'merely tell the jury
what result to reach.'" Id. (quoting Fed. R. Evid. 704 advisory committee's notes (1972)). Thus,
an expert may not render any ultimate opinion concerning, for example, whether a specific party
had "'capacity to make a will,'" but may offer an opinion concerning whether that party had
"'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.'" Id. (quotation and other citation

At the time of trial, if Defendants believe that Mr. Gougis' testimony has become relevant
because of the testimony or evidence presented, the Court will entertain arguments as to
reconsideration of this ruling.
7

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omitted). In other words, under Rule 704, an expert may not make a conclusory statement on a
party's capacity, but may provide testimony that touches the underlying issues relevant to a
determination of capacity.
Plaintiffs argue that Mr. Studdard's opinions are impermissible legal conclusions. See Dkt.
No. 86-1 at 17-18. Specifically, Plaintiffs contend that "the only authorities Mr. Studdard cites in
his report for the so-called 'industry standards' that he claims to apply, are the ERISA statute and
its associated regulations. . . . When an industry's standards or practices 'are coextensive with the
legal constraints placed on it,' as Mr. Studdard claims the fiduciary industry's standards are,
testimony about the industry's standards and practices constitutes an impermissible legal opinion."
Id. at 17 (citing Hamilton v. Am. Corrective Counseling Servs., Inc., No. 3:05-CV-434RM, 2006
WL 2873622, at *2 (N.D. Ind. Oct. 4, 2006)). Further, Plaintiffs note that Mr. Studdard's first
opinion is that industry standards dictate that fiduciaries follow established procedures and
schedules "'unless they determine that the failure to do so will result in a breach of fiduciary duty
or other violation of law." Id. (emphasis in original). According to Plaintiffs, Mr. Studdard's
"second, third, and fourth opinions, which claim that Defendants' conduct conformed to industry
standards by not deviating from established procedures, thus necessarily opine that Defendants'
conduct did not violate the law." Id.
In Berckeley Inv. Grp., Ltd. v. Colkitt, 455 F.3d 195, 217 (3d Cir. 2006), the Third Circuit
Court of Appeals acknowledged that "the 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. Nevertheless, the Court of Appeals concluded that an opinion on the issue of whether a
party complied with and/or violated "legal duties" constitutes an impermissible legal opinion,
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even if offered by a well-qualified expert. See id. at 217-18 (precluding an "experienced" former
Securities and Exchange Commission attorney from offering these types of opinions).
These authorities therefore instruct that any qualified expert, including Mr. Studdard, may
provide an opinion on whether a party's conduct or actions meet underlying bases for an ultimate
issue in a case (by, for example, testifying 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).8 See Krys, 112 F. Supp. 3d at 193
(footnote omitted). This distinction, albeit a fine one, saves Mr. Studdard's report from being
struck in its entirety. With appropriate redactions, Mr. Studdard's proposed testimony will be
helpful to the jury in assessing the underlying conduct in this case. Nevertheless, the Court will
exclude Mr. Studdard's report and testimony to the extent that he reaches the specific conclusion
that any Defendant or person acted in compliance with and/or in violation of applicable legal
duties or industry standards.
When stripped of these improper and ultimate legal conclusions, however, the Court
cannot ignore that Mr. Studdard's report provides contextual information on common customs and
practices in the securities industry during the relevant period. These issues remain plainly
relevant and this background information may prove helpful to the jury in unpacking the
intricacies of this complex litigation. See Berckeley Inv. Grp., 455 F.3d at 218.
Moreover, to the extent that Mr. Studdard's report simply rehashes otherwise admissible
evidence about which he has no personal knowledge, such evidence taken on its own is

This distinction applies equally to all testimony discussed in this Memorandum-Decision
and Order that will be excluded on these bases.
8

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inadmissible. 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 Prod. Liab. Litig.,
309 F. Supp. 2d 531, 551 (S.D.N.Y. 2004) (rejecting portions of the plaintiffs' expert's testimony
that was "a narrative reciting selected regulatory events" because "[s]uch material, to the extent
admissible, is properly presented through percipient witnesses and documentary evidence")
(citation omitted); see also Highland Capital Mgmt., L.P. v. Schneider, 379 F. Supp. 2d 461, 46869 (S.D.N.Y. 2005) (citations omitted). As such, Defendants are precluded from offering the
background section of Mr. Studdard's report, which is simply a narrative of the facts that will be
provided by other witnesses with first-hand knowledge.
Based on the foregoing, Plaintiffs' motion as to Mr. Studdard is granted in part and denied
in part, without prejudice to Plaintiffs' right to voice any appropriate objections during Mr.
Studdard's testimony.
C.

Defendants' motion to exclude opinions and testimony of Plaintiffs' rebuttal expert
According to Defendants, Plaintiffs intend to proffer the rebuttal expert report and

testimony of Daniel Reser to support an argument that Defendants Charles Stiefel and SLI should
have either "(1) disclosed, prior to February 1, 2009, the details of 'Project Jump' to Plaintiffs and
all 500-600 other participants in the SLI [ESBP]; or (2) suspended or refused to honor Plaintiffs'
and other participants' stock distribution and put rights under the Plan and ERISA." Dkt. No. 89-1
at 1 (internal footnote omitted). Defendants contend that Mr. Reser's report and testimony should
be excluded because "(1) the vast majority of his opinions are irrelevant to any issue remaining in
this case and a number of the opinions violate the Parties' January 12, 2015 Stipulation to
Streamline Issues and Claims ("Stipulation"); (2) Reser's opinions go beyond the scope of
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permissible rebuttal testimony; (3) Reser is unqualified to offer many of the proffered opinions;
(4) Reser's opinions largely consist of legal conclusions; and (5) Reser does not utilize any reliable
methodology in reaching his conclusions." Id. at 1-2.
For the same reasons the Court has precluded the report and testimony of Mr. Gougis and
portions of the Studdard Report, most of the Reser Report must be excluded as well. First, as
with the Studdard Report, Mr. Reser's report rehashes a significant amount of background
information that would be inappropriate to present to the jury. See In re Rezulin Prod. Liab.
Litig., 309 F. Supp. 2d at 551 (citations omitted). Further, to the extent that Mr. Reser discusses
alleged "Factual Inaccuracies, Omissions and/or Contradictions in the Studdard Report," this
information is now irrelevant in light of the Court's decision to preclude the introduction of this
section of the Studdard Report. See Dkt. No. 91-3 at 24-30.
Further, the Court finds that many of the Reser Report's opinions relate to whether the
2008 Bogush Valuation relied on proper methodologies and whether it undervalued the company.
See, e.g., Dkt. No. 91-3 at 33-36. As discussed, Plaintiffs have indicated that they do not intend to
challenge the 2008 Bogush Valuation and the Court has granted Plaintiffs' motion in limine as it
relates to Mr. Gougis. Accordingly, such testimony is irrelevant. With nearly all of the opinions
tied to the fact that Mr. Reser believes that it was improper for Defendants to rely on the Bogush
Valuation, which he deems to be premised on faulty procedures and methodologies, the opinions
are entirely irrelevant and will lead to juror confusion.
Moreover, in his report, Mr. Reser offers at least a dozen opinions on how the ESBP
fiduciaries violated their ERISA fiduciary duties of prudence and loyalty to Plaintiffs and other
Plan participants. See Dkt. No. 91-3 at 30-36. Many of these opinions again relate to the fact that
it was improper to rely on the Bogush Valuation. See id. Since the ERISA claims have been
53

dismissed from this action, these opinions are mostly irrelevant to the remaining causes of action
and would lead to juror confusion.
The only portion of the Reser Report that the Court finds relevant is the rebuttal to the
third opinion in the Studdard Report. See Dkt. No. 91-3 at 44-45; Dkt. No. 91-4 at 1-3. This is
the only portion of the Reser Report that is not inextricably entwined with an attack on the
accuracy of the Bogush Valuation and whether it was reasonable for Defendants to rely on that
report. Further, this section directly rebuts the portion of the Studdard Report that the Court has
found admissible. Moreover, as with the corresponding portion of the Studdard Report, this
opinion goes directly to the scienter element of the securities fraud claim. However, portions of
this section do still discuss perceived deficiencies with reliability and methodologies used in the
Bogush Valuation. See Dkt. No. 91-3 at 45. As such, these statements shall be redacted from the
Report.
Finally, contrary to Defendants arguments, the Court finds that Mr. Reser is qualified to
testify as an expert. Mr. Reser received his juris doctor and bachelors of science from Southern
Methodist University. See Dkt. No. 91-4 at 37. From 1981 through 1984, he worked at the Bank
of the Southwest NA as a Trust Officer and Supervisor. See id. Thereafter, he worked for several
different banks, holding various positions relating to trusts and employee benefits. See id. at 3637. From 2000 through April of 2003, Mr. Reser served as Vice President of Corporate Client
Services for the Wilmington Trust Company. See id. at 36. In this position, he was responsible
for "Corporate Finance, Custody and Retirement Plan Services business development and
relationship management." Id. Finally, from April 2003 to current day, Mr. Reser has served as
President of Fiduciary Services, Inc. See id. In this role, he serves as an "[i]ndependent trustee or
fiduciary for corporate retirement plans specializing in plans with employer stock where capital
54

change transaction is anticipated." Id. Mr. Reser's education and past experience make him
qualified to offer the opinions the Court has found admissible.
Based on the foregoing, the Court grants in part and denies in part Defendants' motion in
limine.
IV. CONCLUSION
After carefully reviewing the entire record in this matter, the parties' submissions and the
applicable law, and for the above-stated reasons, the Court hereby
ORDERS that Plaintiffs' motion for summary judgment (Dkt. No. 81) is DENIED; and
the Court further
ORDERS that Plaintiffs' motion in limine (Dkt. No. 86) is GRANTED in part and
DENIED in part; and the Court further
ORDERS that Defendants' motion in limine (Dkt. No. 89) is GRANTED in part and
DENIED in part; and the Court further
ORDERS that the Clerk of the Court shall serve a copy of this Memorandum-Decision
and Order on all parties in accordance with the Local Rules.
IT IS SO ORDERED.
Dated: March 7, 2016
Albany, New York

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