Schatzki et al v. Weiser Capital Management, LLC et al

Filing 239

OPINION re 172 MOTION in Limine seeking the Court's permission to inquire into the professional sanctions against Plaintiffs' Pro-offered Expert, Edward Donnelly should the Daubert motion be denied: Given the reasoning above, Defendants' motion is denied. It is so ordered. (Signed by Judge Robert W. Sweet on 12/31/2013) (tn)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

-----------------------------------------x
DEBRA SCHATZKI and BPP WEALTH, INC.,
intiffs,
-against-

10 Civ. 4685

OPINION

WEISER CAPITAL MANAGEMENT, LLC,
WEISERMAZARS, LLP and HOITSZ (A/K/A
"CARIJN") MICHEL,
Defendants.

-----------------------------------------x
A P PEA RAN C E S:
Attorneys for Plaintiff
LAWLER MAHON & ROONEY LLP

36 West 44th Street, Suite 1400

New York, NY 10036

By: Albert K. Lawler, Esq.

Christopher S. Rooney, Esq.
James J. Mahon, Esq.
Attorneys for Defendants
STARK & STARK, P.C.

993 Lenox Drive

Lawrenceville, NJ 08543

By: Scott I. Unger, Esq.

Johnathan A. Scobie, Esq.

1

Sweet, D.J.

Defendants
WeiserMazars,
"Michel")
limine

Capital

("Weiser")

LLP

Weiser

and

Management,

Hoitsz

Michel

LLC

("WCM"),

("Carijn"

or

(collectively, the "Defendants ") have made a motion in

to

inquire

Plaintiffs'

Debra

into

certain

Schatzki

("BPP" )

(collectively,

C.P.A.,

(" Donnelly")

("Schatzki")

the
on

professional
and

"Plaintiffs")
his

sanctions
BPP

expert

cross-examination

against

Wealth,
Ed

Inc.

Donnelly,

pursuant

to

Federal Rules of Evidence 608(b). Based on the reasoning below,
Defendants' motion is denied.

I.

Prior Proceedings

This
16,

2010

action was

arising

out

of

initiated by the
the

termination

Plaintiffs on June
of

the

relationship

between the parties and a dispute over the use of the internet­
based management program, SmartOffice.

A motion

to

dismiss

the

First Amended Complaint was

denied on January 26, 2011. A Second Amended Complaint was filed
on

August

summary

4,

2011.

judgment

A motion
and

determined by opinion

a
on

by

the

Defendants

cross-motion
January

2

19,

by

2012

for

partial

Plaintiffs
(the

were

"January 2012

Opinion").

A motion to amend by the Plaintiffs was granted in

part and denied in part by opinion on June 30,
2012 Opinion").

A Third Amended Complaint

2012

("TAC")

(the "June

was

filed on

July 23, 2012.

The

magistrate

on

May

8,

2013

considered

discovery

complete except for one short deposition. A motion by Plaintiffs
to disqualify Defendants'
for

counsel and Defendants'

sanctions were denied and Plaintiffs'

cross motion

motion to limit

the

testimony of Thomas Giachetti was granted by opinion on November
26,

2013.

Plaintiffs'
opinion

on

motion

Defendants'

cross-motion for
November

26,

for

summary

judgment

and

summary judgment were resolved by

2013

(the

"November

2013

Summary

Judgment Opinion"). Several motions in limine were also resolved
via opinion on December 4,
The

instant

motion

was

2013

marked

(the "December 2013 Opinion").
fully

submitted on October

16,

2013.

II. Defendants' Motion to Inquire Into

Prior Professional Sanctions

Against Donnelly Is Denied

Defendants
conduct

and

seek

sanctions

cross-examination.

to

of

Donnelly,

inquire

Plaintiffs'

into

prior

in

his

a certified public accountant,

has

3

expert

professional

Donnelly

been identified by Plaintiffs as

a

valuation expert

for

claim of conversion. On March 1, 2013, Donnelly testi

their

ed in his

deposition that he was sanctioned in the past by the Office of
Professional

Discipline

of

the

New

York

State

Department

of

Education ("OPD") as well as the American Institute of Certified
Public Accountants
by

the

(" AICPA").

OPD and AICPA,

criminal

misdemeanor

government

official

government

agency

In December 1996, after a hearing

Donnelly pled guilty
for

without

18

under

to

the

charge

supplementing

the

receiving

the

permission

U.S.C.

209.

§

salary

(Pl.

Op.,

of
of
at

of
a

that

1.)

Donnelly received sanctions from the OPD and AICPA and was fined
by the OPD and suspended. The suspension was stayed at the time.
(Donnelly Deposition at 15:18-16:18 [hereinafter Donnelly Dep.];
Pl. Op., at 2.)

Donnelly explained the background to his sanctions in
his

deposition:

In or

around

1996,

Internal

$1, 000 when the

IRS

financial help."

{Donnelly Dep. at 13:18-14:15., In exchange for

$1,000,

the

IRS

unidentified project.

a.

"close personal

an

(" IRS")

employee

a

gave

Revenue Service

the

employee,

Donnelly

"repeatedly asked

employee

(Id.)

The Applicable Standard

4

worked

for

friend [] , "

[Donnelly]

Donnelly

on

for

an

Under Fed.

R.

Ev.

608 (b),

"extrinsic evidence is not

admissible to prove specific instances of a witness's conduct in
order

to

attack

truthfulness"

or

but

a

support
Court

the

may,

on

witness's
cross

character

examination,

for
allow

specific instances of a witness's conduct "to be inquired into
if

they

are

probative

untruthfulness of

of

the

(1)

.

character

for

the witness."

truthfulness

Fed.

R.

Ev.

or

608 (b).

Whether an act speaks to a witness's truthfulness depends on the
specific transgression.
witness'

truthfulness,

the witness'

"[AJ cts such as perjury reflect on the
acts such as communication of threats or

failure to pay debts do not." Davidson Pipe Co. v.

Laventhol and Horwath, 120 F.R.D. 455, 462 (S.D.N.Y. 1988).

b.

Donne11y ' s Past Cr~ina1 ~sdemeanor and Sanctions
Are Not Sufficient1y Probative of
His Character for Truthfu1ness

Defendants

seek

to

cross-examine

Donnelly

criminal misdemeanor and corresponding sanctions
17

years

ago.

However,

omission

of

the

issues

that
is

regarding
occurred
the

more

prudent course. The criminal charge was a misdemeanor and not a
more serious crime.
government

official

The charge was not the result of bribing a
pursuant

to

18

U.S.C.

§

201,

but

from

supplementing a government official's salary in violation of 18

5

§ 209.

U.S.C.
employee

There

is

provided

to

no

evidence

Donnelly

that

for

the

the

work

$1, 000

the

IRS

implicates

Donnelly I s character for truthfulness or that Donnelly provided
the

money

to

the

IRS

employee

for

an

improper

or

illegal

purpose. The criminal conviction and sanctions also occurred 17
years

ago,

and

the

probative

value

of

this

misdemeanor

is

weakened by its age. See, e.g., Pepe v. Jayne, 761 F. Supp. 338,
343

(D.N.J.

eleven

year

1991)
old

(finding

that

misdemeanor

"the

probative

conviction

for

value

filing

of

false

an
tax

returns was slight" under Fed. R. Ev. 609).

With regards to Donnelly's professional sanctions, the
sanctions

were

imposed

due

to

the

criminal

misdemeanor,

and

Donnelly received only a fine and had his CPA license suspended.
Donnelly's suspension was simultaneously stayed at the same time
it was

imposed.

punishment

That

from the

Donnelly did not
sanctions

receive

suggests that

a

the

more

serious

sanctions

and

his actions leading up to the sanctions were not egregious, and
they

are

inquiry.

not
In

sufficiently

addition,

serious

nothing

to

indicates

warrant
that

Rule
the

608(b)

sanctions

themsel ves were imposed as a result of Donnelly I s professional
competency or ability.

6

As noted in the reasoning above,

Donnelly's previous

criminal misdemeanor conviction and professional sanctions as a
result

of

Donnelly's

the

conviction

character

for

is

not

sufficiently

truthfulness

or

probative

of

untruthfulness

to

warrant the issues to be raised in cross-examination under Fed.
R.

Ev.

608.

sanctions
value .

are

Given

Donnelly's

Furthermore,

the

nature

unfairly prejudicial
such,

Defendants

professional

are

sanctions

Donnelly's cross-examination.

7

and

of

outweigh

barred
and

the

from

related

conviction
its

and

probative

inquiring
misdemeanor

into
in

;'"J

1:1:1:. Conclusion

Given

the

reasoning

above,

Defendants'

motion

denied.

It is

90

ordered.

Nfl... York, NY

ROBERT W.

8

SWEET

is