Sjunde Ap-Fonden and The Cleveland Bakers and Teamsters Pension Fund, individually and on behalf of all others similarly situated, v. General Electric Company, et al.

Filing 413

OPINION AND ORDER re: 373 MOTION to Preclude Motion to Exclude the Testimony of Daniel R. Fischel. filed by Cleveland Bakers and Teamsters Pension Fund, Sjunde Ap-Fonden, 345 MOTION for Summary Judgment . filed by Jeff rey S. Bornstein, General Electric Company, 369 MOTION to Preclude Motion to Exclude Certain Testimony of Christopher J. Russo. filed by Cleveland Bakers and Teamsters Pension Fund, Sjunde Ap-Fonden, 377 MOTION to Strike < i>the Declaration of Daniel R. Fischel. filed by Cleveland Bakers and Teamsters Pension Fund, Sjunde Ap-Fonden, 346 MOTION to Preclude / Motion to Exclude the Expert Testimony of S.P. Kothari. filed by Jeffrey S. Bornstein, Ge neral Electric Company, 347 MOTION to Preclude / Motion to Exclude the Expert Testimony of David I. Tabak. filed by Jeffrey S. Bornstein, General Electric Company. For the foregoing reasons, Defendants' motion for summary judgme nt is GRANTED as to Plaintiffs' claims arising from the alleged corrective disclosures between November 2017 and January 2018 and otherwise DENIED; the parties Daubert motions are GRANTED in part and DENIED in part; and Plaintiffs' motio n to strike is GRANTED. The parties filed a number of letter-motions to seal portions of their motion papers. ECF Nos. 348, 364, 386, 388, 394. The Court granted these letter-motions, in most cases only temporarily, pending its decision on the un derlying motions. ECF Nos. 361, 387, 389, 407. It is well established that filings that are "relevant to the performance of the judicial function and useful in the judicial process" are considered "judicial documents" to which a presumption in favor of public access attaches. Lugosch, 435 F.3d at 119. Significantly, assessment of whether the presumption in favor of public access is overcome must be made on a document-by-document basis. See, e.g., Brown v. Maxwell, 929 F.3d 41, 48 (2d Cir. 2019). And the mere fact that information is sealed or redacted by agreement of the parties is not a valid basis to overcome the presumption. See, e.g., United States v. Wells Fargo Bank N.A., No. 12-CV-7527 (JMF), 2015 WL 3999074, at *4 (S.D.N.Y. June 30, 2015). In light of this Opinion and Order, and to facilitate the Courts review of the parties' requests, the parties shall, no later than three weeks from the date of this Opinion and Order, submit a joint le tter with a single chart listing each and every document that any party or third party believes should remain under seal or in redacted form (with a hyperlinked reference to the docket number of the document), the party who seeks to keep the docum ent under seal, a succinct (i.e., two-or three-word) justification for the request, and a hyperlink reference to any prior letter-motion that addresses the document. For the sake of completeness, the parties should include in the chart any documen t that the Court has already determined should be kept under seal permanently and include a hyperlinked reference to the Court's prior ruling in the chart. To the extent that the parties agree that a document previously filed under seal or i n redacted form can or should be filed publicly, the parties should include that in the letter, with a hyperlinked reference to the relevant document. Finally, unless and until the Court orders otherwise, the parties shall submit a proposed Joint P retrial Order and associated materials (in accordance with Section 5 of the Court's Individual Rules and Practices in Civil Cases, available at https://www.nysd.uscourts.gov/hon-jesse-m-furman) within sixty days of the date of this Opinion and Order. The Court will schedule a trial date - or a conference to discuss a trial date - after reviewing the parties' submissions. In the meantime, the Court is of the view that the parties should try to settle this case without the need for a trial that would be expensive and risky for both sides. To that end, the Court directs the parties to confer immediately about the prospect of settlement and conducting a settlement conference before the assigned Magistrate Judge, a mediator appoin ted by the Court, or a mediator retained privately. If the parties agree that a settlement conference would be appropriate, they should promptly advise the Court and, if needed, seek an appropriate referral and extension of the pretrial deadlines. The Clerk of Court is directed to terminate ECF Nos. 345, 346, 347, 369, 373, and 377. SO ORDERED. (Signed by Judge Jesse M. Furman on 9/28/2023) (tg)

Case 1:17-cv-08457-JMF Document 413 Filed 09/28/23 Page 1 of 47

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
---------------------------------------------------------------------- X
:
SJUNDE AP-FONDEN et al.,
:
:
Plaintiffs,
:
:
-v:
:
GENERAL ELECTRIC COMPANY et al.,
:
:
Defendants.
:
:
---------------------------------------------------------------------- X

17-CV-8457 (JMF)
OPINION AND ORDER

JESSE M. FURMAN, United States District Judge:
In this securities-fraud class action, Lead Plaintiff Sjunde AP-Fonden and Plaintiff the
Cleveland Bakers and Teamsters Pension Fund (together, “Plaintiffs”), two pension funds, bring
claims against General Electric Co. (“GE”) and its former Chief Financial Officer, Jeffrey S.
Bornstein (together, “Defendants”). Plaintiffs allege violations of Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. §§ 78j(b), 78t(a), as well
as Securities and Exchange Commission (“SEC”) Rule 10b-5, 17 C.F.R. § 240.10b-5. In earlier
rulings, familiarity with which is presumed, the Court substantially narrowed Plaintiffs’ claims.
See Sjunde AP-Fonden v. Gen. Elec. Co. (“Sjunde I”), 417 F. Supp. 3d 379 (S.D.N.Y. 2019)
(ECF No. 185); Sjunde AP-Fonden v. Gen. Elec. Co. (“Sjunde II”), No. 17-CV-8457 (JMF),
2021 WL 311003 (S.D.N.Y. Jan. 29, 2021). Thereafter, the Court granted Plaintiffs’ motions to
certify a class and to file a Sixth Amended Complaint (the “Complaint”). See Sjunde AP-Fonden
v. Gen. Elec. Co. (“Sjunde Class Certification”), 341 F.R.D. 542 (S.D.N.Y. 2022) (ECF No.
314). See ECF No. 327 (“Compl.”). What remains are claims arising from, and relating to, GE’s
representations regarding the “factoring” of long-term receivables by its power division, GE
Power, between February 29, 2016, and January 23, 2018 (the “Class Period”).

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Defendants now move, pursuant to Rule 56 of the Federal Rules of Civil Procedure, for
summary judgment on all remaining claims. Each side also moves to exclude some or all of the
testimony of the other side’s experts, and Plaintiffs move to strike a declaration of one defense
expert. For the reasons that follow, Defendants’ motion for summary judgment is GRANTED in
part and DENIED in part, the parties’ motions to preclude are GRANTED in part and DENIED
in part, and Plaintiffs’ motion to strike is GRANTED.
BACKGROUND
The following facts, relevant to Plaintiffs’ remaining claims, are drawn from admissible
materials submitted by the parties and are either undisputed or viewed in the light most favorable
to Plaintiffs. See, e.g., Costello v. City of Burlington, 632 F.3d 41, 45 (2d Cir. 2011).
GE is an industrial conglomerate founded in 1892 with a diverse portfolio of business
lines, including, as relevant here, power generation and financial services. ECF No. 383 (“Defs.’
SOF”), ¶¶ 1, 4-5. Bornstein served as Senior Vice President and Chief Financial Officer of GE
for most of the Class Period, until he was replaced by Jamie Miller in late 2017. Compl. ¶¶ 4647. Plaintiffs’ fraud claims relate to long-term service agreements (“LTSAs”) for heavy-duty
gas-powered turbines sold by GE Power and how GE managed the cash flows from those
agreements. A division of GE Power called GE Power Services offered customers LTSAs,
typically multi-year or multi-decade contracts, to maintain and service their turbines. Defs.’ SOF
¶¶ 28, 36-38. Under these contracts, GE was generally paid either at specific milestones or
variably as customers utilized the turbines. Id. ¶ 53.
A. GE’s Use of Factoring
“Factoring” involves the sale of accounts receivables to another party in exchange for
cash. Id. ¶ 63. Factoring can allow a business, such as GE Power, that incurs costs before

2

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receiving the associated cash from a customer to shorten the gap between those two events. Id.
¶¶ 90-94, 147. In the fourth quarter of 2015, GE Power began factoring LTSA accounts
receivable due more than a year later, referred to as long-term or “LT” factoring (or “deferred
monetization”). Id. ¶¶ 63, 89. GE Power conducted these transactions with GE’s financial
services division, GE Capital. See id. ¶¶ 65, 70. In exchange for more immediate cash, GE
Power would factor its receivables to GE Capital at a cost. See id. ¶¶ 74-76.
Factoring was not without risks. In May 2015, GE “engaged McKinsey & Co., to assess
GE’s cash flow performance and to identify opportunities for improving GE’s overall free cash
flow [] conversion.” ECF No. 404 (“Pls.’ 56.1 Statement”), ¶ 20. 1 On or about September 1,
2015, McKinsey prepared a slide deck titled “Accelerating Free Cash Flow Conversion.” which
was sent to Puneet Mahajan, the Vice President of Financial Planning and Analysis for all of GE,
and presented to Bornstein. Id. ¶¶ 28-29. The slide deck repeatedly discussed factoring,
including one slide that was titled “Recent [Accounts Receivables] performance may be partially
explained by incentives to treat factored receivables differently.” ECF No. 385-17, at 10. The
slide explained that “interviews indicate that businesses are incentivized to treat factored
receivables differently from non-factored receivables” and stated that “‘[w]e extend terms if we
are sure we can factor’ and that ‘[f]actoring distorts accountability on receivables.’” Id.
McKinsey provided “[o]ptions to align incentives,” including “[i]ncreas[ing] the charge of

1

ECF No. 404 and other documents cited in this Opinion and Order are currently filed
under seal (although in most, if not all, instances there is a redacted version of the document that
is docketed publicly). To the extent that this Opinion and Order relies upon or quotes any
materials the parties have filed under seal, the Court finds that the presumption of public access
to judicial documents outweighs any interest in confidentiality with respect to those portions of
the sealed materials. See Lugosch v. Pyramid Co. of Onondaga, 435 F.3d 110, 119-20 (2d Cir.
2006). As discussed below, the Court reserves judgment on whether the parties’ filings may
otherwise remain sealed or redacted.
3

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factoring, “[e]xclud[ing] factoring from all business metrics . . . ,” “[l]imit[ing] increases in
monetization,” and “[s]top[ping] all internal factoring.” Id.
As GE Power’s factoring increased, concerns over the downsides increased. In one
colorful exchange in February 2016, for example, Mahajan wrote that “[t]he submission from
Power shows the interest cost increasing from 230MM to 390MM. As I said this morning, this is
an unbelievable amount. To put it in perspective . . . [i]t is 10% of the CFOA [or cash from
operating activities] generated by Power?” ECF No. 385-5, at 2. GE Power’s Global Financial
Planning and Analysis Leader, Michael Eshoo, responded: “I completely get it. . . . deferred
factoring . . . is ridiculously expensive but we all agreed to go do given [the deferred balance]
commitment and cash needs. We factored 150MM deferred in 4Q which cost us $15MM. Plan
for 2016 is to do $1BN.” Id. Mahajan responded: “Not sure I like 1B cash at 10% cost to get it
. . . Fucking ridiculous . . . .” Id. at 1. Eshoo responded: “I completely agree. We have work to
do here to understand if this program is a viable solution or not now that we understand the
implications on the financials . . . . Doing nothing, would obviously be a drag on cash
conversion and also the [deferred balance] commitment we have with the board.” Id. LT
factoring, however, was considered necessary to hit GE Power’s CFOA targets. See ECF No.
385-7, at 125 (“Q: So Power Services was conveying that it needed to do more deferred
monetization in 2017 than it did in 2016 in order to achieve its CFOA target, right? A. Yes.”).
Evidence also makes plain that Jeffrey Immelt, GE’s CEO at the time, and Bornstein
were aware of the increased reliance on factoring. In July 2016, for example, Steve Bolze, the
former President and CEO of GE Power, emailed Immelt, providing GE Power’s second quarter
performance and third quarter goals. ECF No. 395-112, at 1. Immelt, in turn, marked up the
materials and circled the cash section, which included a bullet point stating that the “deferred

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monetization pipeline [was] challenged.” Id. at 5. Additionally, the then-CFO of GE Power,
Lynn Calpeter, testified that Immelt was aware of plans to conduct billions of dollars of
additional LT factoring. See ECF No. 385-23, at 203 (“Q. Okay. So at least in the discussion
with Mr. Immelt in November of 2016 as with respect to the view for 2017, Power was planning
and disclosed to Mr. Immelt that it would do — or aim to do about 2 and a half billion of
deferred monetization; is that right? A. Yes.”); see also ECF No. 385-122, at 1, 20 (containing a
presentation sent in December 2016 from Mahajan to Immelt, Bornstein, and others explaining
plans to achieve GE Power’s free cash flow target and containing a bullet point stating “Deferred
. . . $2.5B monetization in plan”). And in a July 2017 email, Robert Green, the new CFO for GE
Power, described a call with Bornstein, in which Bornstein “reminded me of the need to generate
more cash and the 95% conversion next year . . . . I reminded him with severance and the drag
from monetization this is highly unlikely.” ECF No. 385-107, at 1.
Additionally, internal presentations explained the reasons GE Power engaged in LT
factoring and raised alarms about the growing risks. For example:
● A presentation sent in February 2017 explained under the heading “Deferred
Monetization” that GE Power “[n]eed[s] $3B to hit number,” even though “there is $1B
risk to this” because of “described drivers (pullins, pipeline getting tougher?)”; and stated
that even “[i]f we hit $3B, creates 1.2B hole in ‘18 . . . need to think through this model.”
ECF No. 385-101, at 3. 2
● A “2017 Cash plan” presentation sent by Eshoo stated that there was a “[b]illings gap —
2017 core billings includes ~$480MM of billings pressure due to invoices monetized in
prior periods,” that “[l]ife to date monetization through 4Q’16 + $3B of 2017
monetization will create billings pressure of $1.2B in 2018 and $1.78 in 2019,” and
concluded that the “pipeline” was weak as the “‘[l]ow hanging fruit’ has been picked . . .
transactions are getting tougher”). ECF No. 385-118, at 8.
● A presentation sent in September 2017 from Eshoo to Bornstein, Mahajan, Green, and
others stated “current business model delivering ~55-60% cash conversion ex def’d
2

Citations to ECF Nos. 385-101, 385-118, 385-33, 385-90 are to the page numbers
automatically generated by the Court’s Electronic Case Filing (ECF) system.
5

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monetization” and warned that “[m]onetized $2.0B [contractual service agreement] cash
flows in 2016 to deliver 89% conversion . . . [was] not sustainable.” ECF No. 385-97, at
1, 7.
● A presentation sent in January 2017 explained “[w]hy . . . we do deferred monetization,”
stating that it aided “Wall Street perception of GE earnings quality” and noting “[r]ecent
pressure from Wall Street on GE stock price due to perception of poor earnings quality
based on” free cash flow as a percent of net income. ECF No. 385-33, at 8.
In April 2017, Bornstein warned others at GE that “[t]he Cash issue is huge for us. I am
really nervous that we have a structural issue in services that has been building over the last few
years. I am not sure how we are going to explain using cash as a company. . . . This is an
existential issue for the Company.” ECF No. 385-90, at 3. Green responded that “three key
factors” are “coinciding,” including “market shift to geographies and customers that are cash
constrained (eg. middle east, Africa), long-term service agreements with mix to more deferred
revenue, and the use of capital markets factoring / monetization to accelerate cash.” Id. at 2.
Matt Cribbins, a Vice President of GE Investor Communications, then responded, referencing an
attached analyst note: “Cash is the single biggest issue for our shareholders.” Id.
B. GE’s Disclosures About Factoring
On February 26, 2016, GE filed its Form 10-K for 2015. Pls.’ 56.1 Statement
¶ 196. According to Plaintiffs, GE did not disclose in the Form 10-K that GE Power had
factored long-term receivables to GE Capital — and, more specifically, did not disclose
that it had engaged in LT factoring to “offset its dwindling cash flows and the growing
gap between its revenues and cash collections.” Id. ¶¶ 197, 200.
On January 20, 2017, GE held an earnings call for the fourth quarter of 2016. On the
call, an analyst asked Bornstein about the cash situation in general and about “factoring this
quarter from GE Capital into GE industrial” in particular. Bornstein responded:
So within that accounts receivable performance you asked about factoring. For
the total year, factoring with GE Capital was a $1.6 billion change for the year. It
6

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was $1.7 billion last year, so actually year-to-year it was $100 million less of a
benefit in the year between what we did with GE Capital around factoring. And
in the fourth quarter importantly, and you see it because our receivables improved
$500 million, is from the third to fourth quarter of 2015, the benefit was $2.3
billion, the benefit going from this past third quarter to this quarter was $700
million. So it was actually down $1.6 billion year-to-year between third and
fourth quarter each of those years. So there’s very good underlying performance
here. It’s not just about, it’s actually very little to do with GE Capital factoring.
ECF No. 384-19, at 12. On February 24, 2017, about a month later, GE filed its Form
10-K for 2016. Pls.’ 56.1 Statement ¶ 203. Plaintiffs allege that this disclosure suffered
from the same deficiencies as GE’s Form 10-K for 2015. Id. ¶ 204.
On April 21, 2017, GE announced its results for the first quarter of 2017 and
disclosed a $1 billion shortfall in Industrial CFOA. Id. ¶ 291. Following this
announcement, GE’s stock price “experienced a [c]ompany-specific decline of $1.46 per
share.” Id. ¶ 293. On July 21, 2017, GE reported its results for the second quarter of
2017, including a $1 billion reduction in GE Power’s 2017 CFOA target. Id. ¶ 296.
Following this announcement, GE’s stock price experienced “a [c]ompany-specific
decline of $1.20 per share.” Id. ¶ 297. On October 2, 2017, Immelt resigned as GE’s
Chairman; four days later, Bornstein resigned as GE’s CFO. Id. ¶¶ 301-02. On October
20, 2017, the company announced its third quarter earnings, which revised its 2017
Industrial CFOA guidance downward. Id. ¶ 303. Following this announcement, its stock
price experienced “a [c]ompany-specific decline of $1.85 per share.” Id. ¶ 304.
On January 24, 2018, during GE’s fourth quarter 2017 earnings call, new-CEO
John Flannery disclosed that GE “had been notified by the SEC that they are
investigating the process leading to the insurance reserve increase and the fourth-quarter
charge as well as GE’s revenue recognition and controls for long-term service
agreements.” Id. ¶ 381. On February 24, 2018, GE filed its 2017 Form 10-K. Id. ¶ 383.
7

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In that form, the company disclosed — for the first time, Plaintiffs allege — that “GE
may sell . . . long-term receivables to GE Capital to manage short-term liquidity and fund
growth.” Id. It further explained that “[t]he effect of cash generated from the sale of
these long-term receivables with GE Capital increased GE’s CFOA by $0.3 billion, $1.6
billion and $ 0.1 billion in 2017, 2016 and 2015, respectively.” Id.
C. Plaintiffs Sue
In November 2017, following Immelt and Bornstein’s resignations, Plaintiffs filed this
class action. See ECF No. 1. Four of Plaintiffs’ claims remain. First, Plaintiffs allege that
Defendants violated Item 303 of Regulation S-K, which requires disclosure of a trend or event
“reasonably likely to result” in a material change in GE’s liquidity, by failing to disclose GE’s
factoring. See Sjunde I, 417 F. Supp. 3d at 408-09 (quoting 17 C.F.R. § 229.303(a)(1), (a)(3));
Sjunde II, 2021 WL 311003, at *11. More specifically, Plaintiffs allege that GE “was factoring
‘everything’” in its Power division. Sjunde I, 417 F. Supp. 3d at 388, 408-09 (citing ECF No.
179 (“FAC”), ¶¶ 290-94, 297); see Compl. ¶¶ 319, 398. “Yet ‘the existing number of LTSAs
available to monetize was finite,’ and due to slackening demand for new turbines (and thus new
LTSAs), GE would not be able to continue factoring receivables indefinitely.” Sjunde I, 417 F.
Supp. 3d at 409 (citing FAC ¶ 297). In addition, Plaintiffs allege that (1) GE omitted from its
2016 Form 10-K that one of the reasons it factored GE Power’s account receivables was to
inflate the division’s operating cash flow; (2) Bornstein misrepresented during a January 20,
2017 earnings call the extent of GE’s factoring; and (3) Bornstein is liable for GE’s
misrepresentations as a “controlling person.” See Sjunde II, 2021 WL 311003 at *14; Sjunde
Class Certification, 341 F.R.D. at 551-53.

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DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
The Court begins with Defendants’ summary judgment motion. Summary judgment is
appropriate where the admissible evidence and pleadings demonstrate “no genuine dispute as to
any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(a); see also Johnson v. Killian, 680 F.3d 234, 236 (2d Cir. 2012) (per curiam). A dispute over
an issue of material fact qualifies as genuine “if the evidence is such that a reasonable jury could
return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). “In moving for summary judgment against a party who will bear the ultimate burden of
proof at trial, the movant’s burden will be satisfied if he can point to an absence of evidence to
support an essential element of the nonmoving party’s claim.” Goenaga v. March of Dimes
Birth Defects Found., 51 F.3d 14, 18 (2d Cir. 1995) (citing Celotex Corp. v. Catrett, 477 U.S.
317, 322-23 (1986)).
Critically, however, in ruling on a motion for summary judgment, a court must view all
evidence “in the light most favorable to the non-moving party,” Overton v. N.Y. State Div. of
Military & Naval Affairs, 373 F.3d 83, 89 (2d Cir. 2004), and must “resolve all ambiguities and
draw all permissible factual inferences in favor of the party against whom summary judgment is
sought,” Sec. Ins. Co. of Hartford v. Old Dominion Freight Line, Inc., 391 F.3d 77, 83 (2d Cir.
2004). To defeat a motion for summary judgment, the non-moving party must advance more
than a “scintilla of evidence,” Anderson, 477 U.S. at 252, and demonstrate more than “some
metaphysical doubt as to the material facts,” Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 586 (1986). The non-moving party “cannot defeat the motion by relying on the
allegations in [its] pleading, or on conclusory statements, or on mere assertions that affidavits

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supporting the motion are not credible.” Gottlieb v. County of Orange, 84 F.3d 511, 518 (2d Cir.
1996) (citation omitted).
As noted, Plaintiffs bring claims under Sections 10(b) and 20(a) of the Exchange Act as
well as SEC Rule 10b-5. To establish a claim under Section 10(b) and SEC Rule 10b-5,
Plaintiffs must prove “(1) the defendant made a material misrepresentation or omission; (2) with
scienter; (3) in connection with the purchase or sale of a security; (4) reliance; (5) economic loss;
and (6) loss causation.” IBEW Local Union No. 58 Pension Tr. Fund & Annuity Fund v. Royal
Bank of Scot. Grp., PLC, 783 F.3d 383, 389 (2d Cir. 2015); see also Atlantica Holdings, Inc. v.
Sovereign Wealth Fund Samruk-Kazyna JSC, 2022 WL 151302, at *2 (2d Cir. Jan. 18, 2022)
(summary order); Gross v. CFI Grp., Inc., 784 F. App’x 27, 29 (2d Cir. 2019) (summary order).
Relatedly, to prove a claim for controlling-person liability under Rule 20(a), Plaintiffs must, at a
minimum, establish a “primary violation” of Section 10(b). See, e.g., SEC v. First Jersey Sec.,
Inc., 101 F.3d 1450, 1472 (2d Cir. 1996); Atlantica Holdings, Inc. v. Sovereign Wealth Fund
Samruk-Kazyna JSC, 477 F. Supp. 3d 88, 100 (S.D.N.Y. 2020), aff’d, 2022 WL 151302.
Defendants make four principal arguments for summary judgment. First, they contend
that Plaintiffs’ Item 303 claim fails because, among other things, the factoring was solely intracompany and had no effect on the overall liquidity of GE. ECF No. 360 (“Defs.’ Mem.”), at 4247. Second, they dispute that the 2016 Form 10-K and Bornstein’s January 20, 2017 earnings
call contained misrepresentations. Id. at 47-50. Third, they assert that Plaintiffs cannot prove
scienter. Id. at 37-42. And finally, they insist that Plaintiffs fail to prove loss causation. Id. at
20-37. 3 The Court will address each argument in turn.

3

Defendants do not separately challenge the “control person” claim against Bornstein
under Section 20(a) except to argue in passing that Plaintiffs fail to establish that Bornstein
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A. Item 303
Item 303 requires a “registrant” (1) to “[i]dentify any known trends or any known
demands, commitments, events or uncertainties that will result in or that are reasonably likely to
result in the registrant’s liquidity increasing or decreasing in any material way”; and (2) to
“[d]escribe any known trends or uncertainties that have had or that are reasonably likely to have
a material favorable or unfavorable impact on . . . revenues . . . from continuing operations.” 17
C.F.R. § 229.303(b)(1)-(2). 4 The regulation provides that “[t]he discussion and analysis must
focus specifically on material events and uncertainties known to management that are reasonably
likely to cause reported financial information not to be necessarily indicative of future operating
results or of future financial condition.” Id. § 229.303(a); see Stratte-McClure v. Morgan
Stanley, 776 F.3d 94, 101 (2d Cir. 2015) (holding that Item 303 requires disclosure “where a
trend, demand, commitment, event or uncertainty is both presently known to management and
reasonably likely to have material effects on the registrant’s financial conditions or results of
operations”). Significantly, “registrant” is defined to “mean the registrant and its subsidiaries
consolidated.” 17 C.F.R. § 229.303(b), instruction 7; see also id. § 229.303(b)(1)(i) (requiring
disclosure of trends or uncertainties that are “likely to result in the registrant’s liquidity
increasing or decreasing in a material way” (emphasis added)); id. § 229.303(b)(2)(ii) (same, but
for revenues); see also Stratte-McClure, 776 F.3d at 105 (“Item 303 requires disclosure of a
himself participated in any fraud. See Defs.’ Mem. 50. The discussion that follows makes plain
that resolution of that question turns on disputed issues of fact.
4

Some courts have read Item 303 to distinguish between the types of information that must
be reported for liquidity-related disclosures and revenues-related disclosures. But because any
such differences are immaterial for purposes of this case, the Court “declines to parse the
difference between” the different terms. In re Ply Gem Holdings, Inc. Sec. Litig., 135 F. Supp.
3d 145, 151 n.1 (S.D.N.Y. 2015). Additionally, and for ease of reading, the Court will refer to
the types of information for which Item 303 mandates disclosure collectively as “trends.”
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known trend and the manner in which it might reasonably be expected to materially impact a
company’s overall financial position.” (internal quotation marks omitted) (emphasis added)).
Defendants contend that Plaintiffs’ Item 303 claim falls short of these standards in three
principal respects. First and foremost, Defendants argue that “because the LT factoring
transactions were intercompany transactions (i.e., involving sales of LT receivables by GE
Power to GE Capital), they ha[d] no net impact on the consolidated liquidity of GE.” Defs.’
Mem. 44. Second, Defendants assert that the factoring was not reasonably likely to have
material effects on GE’s financial condition. Id. at 45-47. And third, they contend that Plaintiffs
cannot show that otherwise disclosable trends were known to management. Id. at 45. For the
reasons that follow, each of these contentions falls short.
1. Impact at the Registrant Level
GE’s first argument is that its factoring had no impact at the registrant level because it
was entirely within the company — that is, between one division of GE (GE Power) and another
(GE Capital). That argument has some superficial appeal, but it falls short for at least two
reasons. 5 First, the lack of disclosure here did, in fact, conceal from investors what GE itself
recognized: that the reported amount of cash was inflated by unsustainable LT factoring. See,
e.g., ECF No. 385-118, at 3, 8 (a “2017 Cash plan” explaining that there is a “[b]illings gap —
2017 core billings includes ~$480MM of billings pressure due to invoices monetized in prior

5

Arguably GE’s intercompany transactions also were of potential significance to investors
because loans and purchases of future receivables can be viewed as an asset for a financial arm
like GE Capital, and additional cash is also an asset for GE Power. Thus, any decrease in GE
Capital’s cash from factoring was offset on its books by an asset likely to yield a future return,
while the increase in cash received by GE Power appeared entirely positive. In other words, the
positive impression that GE Power’s increase in cash from LT factoring gave to investors was
not fully offset by the impression created by GE Capital’s decrease in cash.

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periods,” and that “[l]ife to date monetization through 4Q’16 + $3B of 2017 monetization will
create billings pressure of $1.2B in 2018 and $1.78 in 2019,” that this factoring led to costs
including “LTAR discounts for 2017 estimated $180MM,” and “$200MM Interest expense
(below op profit) pressure from monetization,” leading to “GE profit eliminated” and that the
“pipeline” was weak as the “‘[l]ow hanging fruit’ has been picked . . . transactions are getting
tougher”); see also ECF No. 385-10, ECF No. 385-101 (detailing use of LT factoring to solve
cash issues). Notably, “[a]nalyst reports issued after the April 21, 2017 announcement indicate
that the market did not know that GE had been monetizing billions of dollars in deferred assets
over the previous two years, which, in turn, indicates that the market was not yet fully aware of
what GE’s ‘normalized’ cash-flow performance looked like.” ECF No. 355-12 (“Tabak Rep.”),
¶ 43. As one Deutsche Bank report explained: “[W]ouldn’t GE also just be trading future cash
flows for a near-term (financially engineered) ‘stop gap’ — arguably detracting from the long
term investment thesis?” Id.
As Plaintiffs’ expert David Tabak (discussed below) testified, GE’s failure to disclose the
extent of its deferred monetization “would affect the market’s evaluation of GE’s future
liquidity,” ECF No. 355-20 (“Tabak Tr.”), at 26, because “the reported industrial CFOA . . . was
not known by the market to include substantial amounts of cash flow from future periods. Thus,
when GE gets to those future periods, some of the cash flow has already . . . been accounted for
and recorded earlier. So it’s not there in the future. Therefore, there is less cash flow in the
future and less liquidity in the future.” Id. When pushed to explain why “a transaction that has a
net neutral impact on the overall company’s cash balance reasonably likely to have a material
impact on GE’s liquidity,” Tabak explained that “if cash flows are treated as operating when
actually they are not, the market will misunderstand the source of the cash flows and, therefore,

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can misunderstand what the future cash flow potentials are.” Id. at 29. 6 This conclusion is
supported by GE’s own internal communications. See, e.g., ECF No. 385-102, at 2 (text
messages between GE employees explaining that the “official guidance” was to stop factoring
now “to avoid the incremental drag” in future years “and align with economics”); ECF No. 38593, at 8 (GE PowerPoint explaining that “[m]onetization of future billings in [Power Services]
creates factoring ‘gap’ in future years, estimating a $500 million gap in 2017”).
Notably, Plaintiffs’ theory is not only supported by the evidence, but it is also more
consistent than Defendants’ theory with the stated objective of Item 303 that disclosures “must
focus” on trends that are “reasonably likely to cause reported financial information not to be
necessarily indicative of future operating results or of future financial condition” and are
“expected to better allow investors to view the registrant from management’s perspective.” Id.
§ 229.303(a). Take, for example, a company whose customers had entirely ceased making new
purchases. Such a company would have no future, and investors would plainly flee if aware of
the news. If that information was covered up for a few quarters by pulling cash from already-due
future billings on past purchases through deferred monetization with a financial arm within the
same company that had a reserve of cash, investors might be mollified instead of running for the
exits — at least until the coverup was revealed or the cash hole became too large to hide. To
hold, as Defendants suggest, that such a company’s actions were immune from scrutiny under

6

In addition, the failure to disclose GE’s LT factoring could have misled investors about
the company’s effectiveness in converting customer contracts into actual cash. See, e.g., ECF
No. 385-97, at 1, 7 (a presentation sent in September 2017 from Eshoo to Bornstein, Mahajan,
Green, and other, stating: “current business model delivering ~55-60% cash conversion ex def’d
monetization” and warning that “[m]onetized $2.0B [contractual service agreement] cash flows
in 2016 to deliver 89% conversion . . . [was] not sustainable”); ECF No. 385-107, at 1 (July 2017
email from Green, stating that Bornstein “reminded me of the need to generate more cash and the
95% conversion next year . . . . I reminded him with severance and the drag from monetization
this is highly unlikely”).
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Item 303 because they involved only intracompany transactions would undermine the goal of
giving investors the information needed to make better predictions of a company’s future
financial condition.
Second, and in any event, GE’s LT factoring did have a negative effect beyond the
misleading picture it painted for investors. GE Power repeatedly offered discounts to customers
to convince them to modify their contracts to facilitate LT factoring, leading to a decrease in
overall cash. See ECF No. 385-22, at 66-67 (“Q. If Power agreed with a discount with a
customer in order to facilitate deferred factoring, would that discount reduce Power’s earnings?
A. Yeah, the net effect of the renegotiation would result in some CMR adjustment. Q. And
would that reduce GE’s earnings as well? A. The impact from CMR adjustments flows through
earnings.”); ECF No. 385-65, at 31-32 (“[W]e often had to renegotiate some of the contract
terms with our customers in order to ensure that the contract cash flows would be eligible for the
program. . . . they would owe us less under the new contractual terms than they would have
under the old contractual terms.”); id. at 32 (“Q. So GE would give up some of its — some of the
cash flows that it, otherwise, would have been entitled to in order to make the cash flows eligible
for its deferred monetization program, correct? A. Correct.”). These discounts meant that the
result of LT factoring was not just more money in GE Power’s hands and less in GE Capital’s
hands — GE as a whole received less cash flow because it was giving discounts to customers in
the push to make more contracts eligible for LT factoring.
2. Materiality
Next, there is sufficient evidence for a jury to conclude that the extent of GE’s factoring
was material. Determining materiality requires a fact-specific inquiry. Basic Inc. v. Levinson,
485 U.S. 224, 240 (1988). The materiality of a misstatement depends on whether “‘there is a

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substantial likelihood that a reasonable shareholder would consider it important in deciding how
to [act].’” Id. at 231-32 (quoting TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976)).
In other words, a statement 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 made available.” Id. (cleaned up).
LT factoring and the attendant cashflow issues were critical pieces of financial
information that a reasonable investor would consider important, and GE insiders were well
aware of that fact. Indeed, insiders repeatedly sounded the alarm. As Bornstein explained in an
email in April 2017, “[t]he Cash issue is huge for us. I am really nervous that we have a
structural issue in services that has been building over the last few years. I am not sure how we
are going to explain using cash as a company. . . . This is an existential issue for the Company.”
ECF No. 385-90, at 3. In response, Green explicitly pointed the finger in part at factoring,
explaining that “three key factors” are “coinciding,” including “market shift to geographies and
customers that are cash constrained (eg. middle east, Africa), long-term service agreements with
mix to more deferred revenue, and the use of capital markets factoring / monetization to
accelerate cash.” Id. at 2. A Vice President of Investor Communications responded to the group
and asked that they “[p]lease read the attached [analyst note]. This is what we are up against.
Cash is the single biggest issue for our shareholders.” Id.
Citing authority for the proposition that the “anticipated magnitude” of an event should
be assessed “in light of the totality of the company activity,” see, e.g., Basic, 485 U.S. at 238,
Defendants argue that “LT factoring’s impact on CFOA was quantitatively immaterial to GE”
because Plaintiffs have not demonstrated that it “comprised over 5% of GE’s CFOA,” ECF No.
406 (“Defs.’ Reply”), at 22. But this argument ignores Plaintiffs’ theory, supported by the

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evidence, that LT factoring was creating an ever-widening cash shortfall. Defendants calculate a
“Net CFOA Impact from LT Factoring” in 2017 of “$0.054 billion” and calculate GE’s CFOA as
a whole as $11.0 billion. Defs.’ Mem. 46. In that context, LT factoring was not immaterial, as it
hid a substantial cash hole. See, e.g., ECF No. 385-101, at 3 (describing “$3B” goal for 2017
under deferred monetization and noting that even “[i]f we hit $3B, creates 1.2B hole in ‘18 . . .
need to think through this model); ECF No. 385-118, at 3, 8 (a “2017 Cash plan” explaining that
there is a “[b]illings gap — 2017 core billings includes ~$480MM of billings pressure due to
invoices monetized in prior periods,” and that “[l]ife to date monetization through 4Q’16 + $3B
of 2017 monetization will create billings pressure of $1.2B in 2018 and $1.78 in 2019”). The
evidence in the record demonstrates that the pressures created by LT factoring built over time
into an amount significant even to GE as a whole.
In any event, the Second Circuit has “consistently rejected a formulaic approach to
assessing the materiality of an alleged misrepresentation.” Ganino v. Citizens Utils. Co., 228
F.3d 154, 162 (2d Cir. 2000). Especially relevant qualitative factors include “whether the
misstatement masks a change in earnings or other trends” and “whether the misstatement hides a
failure to meet analysts’ consensus expectations for the enterprise.” Id. at 163. These factors are
especially pertinent here, as LT factoring masked a trend in declining cash flow. In addition,
analyst reactions to the disclosure of LT factoring support a finding of materiality. See, e.g.,
ECF No. 384-39, at 1 (analyst report stating that “[r]eceivables factoring, among other
instruments, is a key building block . . . the enhanced disclosure around ‘long term receivables’
factoring was most interesting[.] . . . All in, adjusting 2016 and 2017 for receivables factoring
we now know of, as well as ongoing investing cash flow headwinds, we . . . see a miss on
EBITDA guidance”).

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3. Knowledge
Finally, there is sufficient evidence in the record for a jury to find that Defendants knew a
trend of declining cash flow was reasonably likely to occur and have a material effect. In
particular, management-level employees of GE repeatedly demonstrated knowledge both that
cash was key to the company and its investors and that GE Power’s use of factoring to accelerate
cash was contributing to a cash problem. See, e.g., In re Marsh & Mclennan Cos., Inc. Sec.
Litig., 501 F. Supp. 2d 452, 481 (S.D.N.Y. 2006) (“While there is no simple formula for how
senior an employee must be in order to serve as a proxy for corporate scienter, courts have
readily attributed the scienter of management-level employees to corporate defendants.”). The
April 2017 exchange discussed above, in which Bornstein described the “Cash issue” as “huge”
and Green responded that one of the “key factors” causing the company’s cash issue was
“factoring / monetization to accelerate cash,” ECF No. 385-90, at 2-3, is especially noteworthy.
But there are other examples in the record. For example, the exchange between Mahajan and
Eshoo in February 2016 demonstrates that executives knew of the “unbelievable” costs of
factoring (that Mahajan described as “fucking ridiculous”), that “cash was the “key indicator of
the health of a business,” and that “deferred factoring” was “ridiculously expensive.” ECF No.
385-5, at 3. Additionally, in July 2016, Immelt circled a “cash” bullet point on a slide about GE
Power’s goals that explained that the “deferred monetization pipeline [was] challenged.” ECF
No. 385-112, at 6. And Calpeter testified that Immelt was aware of plans to conduct billions of
additional LT factoring. See ECF No. 385-23, at 203 (“Q. Okay. So at least in the discussion
with Mr. Immelt in November of 2016 as with respect to the view for 2017, Power was planning
and disclosed to Mr. Immelt that it would do — or aim to do about 2 and a half billion of
deferred monetization; is that right? A. Yes.”). Finally, an email from Green in July 2017

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described a call with Bornstein, in which Bornstein “reminded [Green] of the need to generate
more cash and the 95% conversion next year . . . [Green] reminded him with severance and the
drag from monetization this is highly unlikely.” ECF No. 385-107, at 1.
Defendants reason that “[i]t is no surprise that GE employees and executives tracked and
discussed the cash performance of GE and its businesses, and none of these conversations reflect
awareness of an Item 303 trend requiring disclosure.” Defs.’ Reply 23. But the evidence reveals
more than “tracking” and “discussing” the cash performance of GE and its businesses — it
demonstrates a clear awareness by management-level employees of the trend of LT factoring and
the impact of that business practice on cash flow and the ability to meet liquidity projections.
B. 2016 Form 10-K and January 20, 2017 Misrepresentations
Next, Defendants briefly argue that GE’s Form 10-K for 2016 and Bornstein’s January
20, 2017 earnings call remarks were not false or misleading. Defs.’ Mem. 47-50. These
arguments can be swiftly rejected. The Court has twice rejected Defendants’ arguments
concerning the 2016 Form 10-K, and Defendants provide no basis to revisit those conclusions.
See Sjunde I, 417 F. Supp. 3d at 413 (“[A] reasonable investor could read the 2016 Form 10-K
and conclude that GE factored LTSA receivables only to reduce its credit exposure while, in
reality, as Plaintiffs plausibly and specifically allege, GE was also factoring to shore up its
dwindling cash flow and mask the growing gap between contract assets and actual cash being
generated in the Industrials group, including from LTSAs. By suggesting otherwise, Defendants
‘omit[ted] to state a material fact necessary’ to make the statements ‘not misleading.’” (quoting
17 C.F.R. § 240.10b-5)); Sjunde II, 2021 WL 311003 at *13 (explaining that the Court
“previously concluded that” the 2016 Form 10-K could have been misleading and that
Defendants’ arguments “provide no reason for reconsideration”). Meanwhile, there is sufficient

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evidence in the record to support Plaintiffs’ arguments that (1) Bornstein was aware of contrary
data in his January 20, 2017 statements and (2) that he then attempted to align the 10-K
disclosures with his misstatements. See Pls.’ 56.1 Statement ¶¶ 305-56; see also Sjunde Class
Certification, 341 F.R.D. at 551 (explaining that Defendants’ “argument misrepresents Plaintiffs’
. . . alleg[ation] that Bornstein misrepresented the change in factoring between 2015 and 2016”
and noting Bornstein’s arguably contradictory deposition testimony). Defendants’ argument that
there is no “‘smoking gun’ document,” Defs.’ Reply 25, refutes itself — such a document is not
required because a jury may properly draw sufficient inferences from circumstantial evidence
that, when viewed as a whole, support Plaintiffs’ claim. 7
C. Scienter
Next, Defendants contend that Plaintiffs cannot prove scienter. Defs.’ Mem 37-42.
Significantly, “[t]he Second Circuit has been lenient in allowing scienter issues to withstand
summary judgment based on fairly tenuous inferences” because such issues are “appropriate for
resolution by the trier of fact.” Press v. Chem. Inv. Servs. Corp., 166 F.3d 529, 538 (2d Cir.
1999); S.E.C. v. Cole, No. 12-CV-8167 (RJS), 2015 WL 5737275, at *5 (S.D.N.Y. Sept. 19,
2015) (Sullivan, J.) (“[T]he Second Circuit has left no doubt that scienter issues are seldom
appropriate for resolution at the summary judgment stage.”). On a motion for summary
judgment, “plaintiffs need only offer evidence from which a jury could infer scienter — indeed,
it is the rare defendant who admits to having had fraudulent intent.” Abu Dhabi Com. Bank v.
Morgan Stanley & Co. Inc., 888 F. Supp. 2d 431, 458-59 (S.D.N.Y. 2012) (emphasis in original)

7

Similarly, because the Court concludes that Bornstein had sufficient knowledge that the
“real facts [were] otherwise,” Defs.’ Reply 25, Bornstein’s statements that “there’s very good
underlying performance here” and that “it’s actually very little to do with GE Capital factoring,”
ECF No. 384-19, at 12, are also actionable.
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(citation omitted). More specifically, the scienter requirement is met if a defendant “(1)
benefitted in a concrete and personal way from the purported fraud; (2) engaged in deliberately
illegal behavior; (3) knew facts or had access to information suggesting that their public
statements were not accurate; or (4) failed to check information they had a duty to monitor.”
Novak v. Kasaks, 216 F.3d 300, 311 (2d Cir. 2000).
Here, a reasonable jury could infer that management-level employees whose knowledge
is imputable to GE as a whole knew facts or had access to information suggesting that GE’s
public statements were inaccurate. As discussed, management-level employees knew that LT
factoring was substantial and posed serious future risks. Yet these critical facts were not
reflected in GE’s disclosures. See Pls.’ 56.1 Statement ¶¶ 196-204. Additionally, a reasonable
jury could find that Bornstein’s response to the analyst question about factoring during the
January 20, 2017 earnings call was knowingly misleading. In particular, Plaintiffs marshal
evidence from which a jury could infer that Bornstein had access to documents showing that
GE’s factoring — and its impact on Industrial CFOA — was higher than he disclosed. ECF No.
382 (“Pls.’ Opp’n”), at 31; Pls.’ 56.1 Statement ¶¶ 205-212. Plaintiffs also point to
communications among Bornstein, Mahajan, and other GE employees in the aftermath of
Bornstein’s remarks —and revisions to planned disclosures of GE’s LT factoring in GE’s 2016
Form 10-K (filed about a month later, on February 24, 2017) — that arguably show that
Bornstein attempted to cover up the impact of his misstatement. Id. ¶¶ 305-31. To be sure,
Defendants vigorously dispute those inferences and point to evidence that could reasonably
support other conclusions. Defs.’ Mem. 40. To accept Defendants’ position, however, would
require the Court to decide disputed issues of fact and improperly draw exculpatory inferences in
favor of Defendants based on denials by self-interested witnesses, which it may not do.

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The fact that GE’s Disclosure Committee was involved in at least some of the disclosures
at issue is not dispositive, as Defendants suggest. Defs.’ Mem. 40. Defendants cite, and the
Court has found, no authority for the proposition that such a committee can cleanse otherwise
sufficient evidence management-level executives’ knowledge that disclosures were misleading.
Moreover, as Plaintiffs’ note, whether the Disclosure Committee was provided with — and
considered all material facts about — GE’s deferred monetization practices and whether
Mahajan and others misled the Disclosure Committee through knowingly false statements that
GE was discontinuing deferred monetization are disputed factual questions. Pls.’ Opp’n 29.
In their reply, Defendants stress that Bornstein had no motive and argue that Plaintiffs’
theory therefore makes “no economic sense.” Defs.’ Reply 16-17. But this argument falls short
as a matter of both law and fact. As a matter of law, evidence that a defendant benefitted in a
concrete and personal way from a purported fraud is one way to prove scienter, but it “is not
required.” Gruber v. Gilbertson, No. 16-CV-9727 (WHP), 2021 WL 2482109, at *13 (S.D.N.Y.
June 17, 2021). Defendants respond by citing a Supreme Court decision from the antitrust
context for the proposition that “if the factual context renders respondents’ claim implausible —
if the claim is one that simply makes no economic sense — respondents must come forward with
more persuasive evidence to support their claim than would otherwise be necessary.” Matsushita
Elec. Indus. Co., 475 U.S. at 587; see Defs.’ Reply 17. But that principle’s application in the
securities-fraud context — at least where there is other evidence that Defendants “knew facts or
had access to information suggesting that their public statements were not accurate,” Novak, 216
F.3d at 311 — is dubious. And in any event, the evidence of scienter here is more persuasive
than in the mine-run securities-fraud case.

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Second, as a matter of fact, a rational jury could infer that Bornstein and other executives
benefitted in a concrete and personal way from the purported fraud because an incentive program
tied executive bonuses to cash performance. Pls.’ 56.1 Statement ¶¶ 267-80. Notably,
Defendants all but concede as much. See Defs.’ Reply 16 n.23 (“Plaintiffs assert Mr. Bornstein
received ‘over $30 million in compensation,’ but ignore that much of it would have been earned
regardless of any LT factoring” (emphasis added) (internal citation omitted)). Nevertheless, they
argue that Bornstein lacked a motive because he held a significant number of GE shares and
options throughout the Class Period and sold none, thus sustaining losses when the truth came
out. See id. at 16. Plaintiffs dispute the accuracy and admissibility of some of this evidence,
Defs.’ SOF ¶¶ 218, 221, 223, but even assuming Defendants are correct it does not necessarily
negate evidence of Bornstein’s (or other executives’) motive. There are plausible reasons why
an executive might not sell stock despite knowing that its value is inflated, from a desire to
demonstrate belief in the company’s future to a desire to avoid criminal liability by trading on
material non-public information. More importantly, the question is not whether Bornstein did
everything he could to profit from the alleged fraud, but rather whether the alleged fraud
provided him a financial benefit. The answer is that it did, as Defendants themselves all but
concede.
Moreover, Plaintiffs need not show that Bornstein’s actual compensation exceeded what
it would have been with full disclosure because such a comparison “confuses expected with
realized benefits.” Makor Issues & Rts., Ltd. v. Tellabs Inc., 513 F.3d 702, 710 (7th Cir. 2008).
That is, Defendants “may have thought that there was a chance that the situation . . . would right
itself. If so, the benefits of concealment might exceed the costs . . . . The fact that a gamble —
concealing bad news in the hope that it will be overtaken by good news — fails is not

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inconsistent with its having been a considered, though because of the risk a reckless, gamble.”
Id. Put differently, Defendants here could have been attempting to cover a cash hole with LT
factoring in the short-term in the hopes that an uptick in cash inflow from customers would later
fix the problem, allowing Bornstein and others to avoid a hit to GE’s share price while also
benefiting from the additional bonuses they had earned. Instead, the cash hole continued to
grow, and the unsustainability of LT factoring became impossible to hide. That Defendants’
purported plan failed does not mean that a jury could not properly infer a financial motive from
the evidence. See Indiana Pub. Ret. Sys. v. SAIC, Inc., 818 F.3d 85, 97 (2d Cir. 2016)
(explaining that “it is ‘cogent and at least as compelling as any opposing inference of
nonfraudulent intent,’ to infer that at the time it filed its 10–K in March 2011, [Defendant]
believed it had more time” before the scheme was uncovered and that then the benefits of
concealment would have outweighed the costs (quoting Tellabs, Inc. v. Makor Issues & Rights,
Ltd., 551 U.S. 308, 314 (2007)).
D. Loss Causation
Finally, Defendants argue that Plaintiffs cannot prove “loss causation” — i.e., a “causal
link between the alleged misconduct and the economic harm ultimately suffered by the plaintiff.”
Lattanzio v. Deloitte & Touche LLP, 476 F.3d 147, 157 (2d Cir. 2007) (internal quotation marks
omitted). A misrepresentation “is the proximate cause of an investment loss if the risk that
caused the loss was within the zone of risk concealed by the misrepresentations [or omissions]
alleged by a disappointed investor.” Id. (cleaned up). The loss causation requirement “exists
because private securities fraud actions are ‘available, not to provide investors with broad
insurance against market losses, but to protect them against those economic losses that

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misrepresentations actually cause.’” In re Omnicom Grp., Inc. Sec. Litig., 597 F.3d 501, 510 (2d
Cir. 2010) (quoting Dura Pharms., Inc. v. Broudo, 544 U.S. 336, 345 (2005)).
To establish loss causation, a plaintiff must prove that the concealed information later
reached the market and caused a loss. The Second Circuit has articulated several methods for
showing loss causation, the two most common being the “corrective disclosure” theory and the
“materialization of the risk” theory. See id. at 511. Under the former, a plaintiff must show that
“the market reacted negatively to a ‘corrective disclosure,’ which revealed an alleged
misstatement’s falsity or disclosed that allegedly material information had been omitted.” In re
AOL Time Warner, Inc. Sec. Litig., 503 F. Supp. 2d 666, 677 (S.D.N.Y. 2007). Under the latter,
the plaintiff must show that “the alleged misstatement conceals a condition or event which then
occurs and causes the plaintiff’s loss.” In re Initial Pub. Offering Sec. Litig., 544 F. Supp. 2d
277, 289 (S.D.N.Y. 2008). Under both theories, plaintiffs must show more than “an inflated
purchase price.” Dura Pharms., 544 U.S. at 342. They must “disaggregate” losses caused by
“disclosures of the truth behind the alleged misstatements” from losses caused by other factors,
including “changed economic circumstances, changed investor expectations, new industryspecific or firm-specific facts, conditions, [and] other events.” In re Flag Telecom Holdings,
Ltd. Sec. Litig., 574 F.3d 29, 36 (2d Cir. 2009) (quoting Dura Pharms., 544 U.S. at 342-43).
Here, Defendants challenge Plaintiffs’ evidence of loss causation — which comes
primarily from their expert, Tabak — on two broadly applicable grounds. First, they argue that
Plaintiffs fail to establish a causal link between disclosure and loss — contending instead that the
“undisputed evidence shows . . . that GE Power’s failure to meet internal LT factoring targets in
2017 was not a result of allegedly undisclosed prior-period LT factoring, and instead reflected
the effects of a massive and unexpected downturn in the global power market.” Defs.’ Mem. 22.

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Second, they contend that “Plaintiffs fail to advance a viable method of disaggregating the tangle
of confounding factors and new information that adversely impacted GE’s stock price following
each of the Alleged Corrective Disclosures.” Id. In addition, Defendants challenge loss
causation as to particular statements and disclosures — namely, the alleged misrepresentations in
the 2016 Form 10-K and the January 20, 2017 earnings call and certain alleged corrective
disclosures, including those made on July 21 and October 20, 2017. Id. at 34-36.
The Court will address each of these arguments in turn.
1. Causal Link
Defendants’ first argument is that Plaintiffs have not proved a causal link between any
alleged fraud and loss — and more specifically, that any losses are attributable to a global
downturn in the power market. Defs.’ Mem. 20-29. Defendants’ arguments on these fronts are
not without force, but they cannot be resolved on summary judgment. Put simply, Plaintiffs’
evidence — much of which is discussed above — raises a permissible inference that GE’s
undisclosed factoring led to a massive gap in cash flow that materialized in 2017. See, e.g., ECF
No. 385-10; ECF No. 385-101; ECF No. 385-118; ECF No. 385-28, at GE_SDNY01013921-22;
ECF No. 385-64; ECF No. 385-118; ECF No. 384-39. The strength of this evidence
distinguishes this case from Atlantica Holdings, in which the Court concluded that any risk
related to Plaintiffs’ allegations would only have potentially “materialize[d] in the long-term”
and was therefore too attenuated from the actual losses. 477 F. Supp. 3d at 110. This, as well as
other evidence from 2017 cited by Plaintiffs, see Pls.’ Opp’n 40-41, also casts doubt on
Defendants’ contention that the power downturn was the cause of cash shortfalls in 2017. So too
does the fact that at least some internal discussions of the cash shortfall pointed the finger at
factoring and made no mention of the global downturn in the power sector. See, e.g., ECF No.

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385-90, at 1-2. Ultimately, whether the decline in share prices was attributable to the
materialization of risks identified by Plaintiffs or to some other cause, including the global power
sector downturn, is “a matter of proof at trial.” Emergent Cap. Inv. Mgmt. LLC v. Stonepath
Grp., Inc., 343 F.3d 189, 197 (2d Cir. 2013).
In a related vein, Defendants also argue that Plaintiffs have “concocted a new ‘true
financial condition’ theory” about “true” or “organic” cash flow that cannot be found in Tabak’s
report or elsewhere in the evidence. Defs.’ Reply 5; see also Defs.’ Mem. 27-28 & n.18. Not so.
Tabak’s report explains that “[a]nalyst reports issued after the April 21, 2017 announcement
indicate that the market did not know that GE had been monetizing billions of dollars in deferred
assets over the previous two years, which, in turn, indicates that the market was not yet fully
aware of what GE’s ‘normalized’ cash-flow performance looked like.” Tabak Rep. ¶¶ 22-24, 3537, 43, 66, 77 (emphasis added). 8 Moreover, evidence indicates that analysts and employees
alike had a common-sense understanding of the distinction between cash flow generated by
financing compared to “organic” cash flow from customers. See, e.g., ECF No. 384-39 (a J.P.
Morgan analyst report stating that “[t]he evidence here now points to the systemic use of GE
Capital as the grease for the machine. Receivables factoring, among other instruments, is a key
building block . . . receivables activity inflated cash in 2016 even more than we had previously
expected, for which 2017 is beginning to come down, but is far from ‘normal’”); ECF No. 385102, at 2 (text messages between GE employees explaining that the “official guidance” was to
8

To illustrate the point, Tabak proffers a company that typically receives $100 in cash
flow every year from customers. Tabak Rep. ¶ 15. If its yearly cash flow falls to $90 each year,
but the company factors $10 dollars from the next year to hide the $10 reduction in cash flow
from investors, it will need to factor $20 in the following year to plug the hole (because it
already took $10 from that year during the prior year). This trend would continue until the
company faces a substantial shortfall. See id. ¶¶ 15-16. And that scenario does not even include
additional losses from, for example, discounts given to customers to enable factoring.
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stop factoring now “to avoid the incremental drag” in future years “and align with economics”);
ECF No. 385-33, at 8 (January 2017 presentation on deferred monetization including a slide
titled “Why do we do deferred monetization?” and noting “[r]ecent pressure from Wall Street on
GE stock price due to perception of poor earnings quality based on” free cash flow as a percent
of net income).
2. Disaggregation
Second, and somewhat relatedly, Defendants argue that Plaintiffs have not disaggregated
their losses. Defs.’ Mem. 28. To demonstrate loss causation, Plaintiffs must “disaggregate”
losses caused by “disclosures of the truth behind the alleged misstatements” from losses caused
by other factors, including “changed economic circumstances, changed investor expectations,
new industry-specific or firm-specific facts, conditions, and other events.” In re Flag Telecom
Holdings, 574 F.3d at 36 (cleaned up). At the same time, securities-fraud “plaintiffs need not
prove the amount of loss caused by each misstatement with complete mathematical precision.”
In re Vivendi Universal, S.A. Sec. Litig., 765 F. Supp. 2d 512, 562 (S.D.N.Y. 2011), aff’d sub
nom. In re Vivendi, S.A. Sec. Litig., 838 F.3d 223 (2d Cir. 2016); see also Lattanzio, 476 F.3d at
158 (requiring plaintiffs to produce sufficient evidence for the fact finder to “ascribe some rough
proportion of the whole loss” to defendant’s fraud).
Once again, Defendants’ arguments — as forceful as they are — cannot be resolved on
summary judgment. Tabak’s report does disaggregate losses resulting from LT factoring from
other causes — including by using an event study to disaggregate industry- or market-wide
trends; using an earnings-response coefficient (“ERC”) analysis to exclude earnings surprise
information; and analyzing analyst reports to help calculate the amount of loss attributable to LT
factoring. Tabak Rep. ¶¶ 35-37, 50-71, 75-78. Indeed, as Plaintiffs note, “Tabak not only

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conducted a disaggregation analysis for the April, July, and October disclosure dates,” but “he
attributed most of GE’s total stock price decline on those dates to factors unrelated to the alleged
fraud” and where he “was unable to conduct a reliable disaggregation analysis — as is the case
for GE’s November 2017 and January 2018 disclosures — he did not attribute any artificial
inflation to those disclosures.” Pls.’ Opp’n. 42. Defendants’ arguments to the contrary, see, e.g.,
Defs.’ Reply 12 n.17, raise factual disputes for trial. Moreover, on this record, a jury could
reasonably “ascribe some rough proportion of the whole loss” to GE’s LT factoring even if
Plaintiffs were unable to establish complete disaggregation. See Lattanzio, 476 F.3d at 158.
3. Loss Causation with Respect to Particular Statements and Disclosures
Finally, Defendants take more specific issue with loss causation as to particular
statements and disclosures. Two of those arguments are easily rejected. First, Tabak opined that
the alleged misrepresentations in the January 20, 2017 earnings call and GE’s 2016 Form 10-K
maintained the same inflation that existed as a result of the Item 303 claim. See Tabak Rep.
¶ 13; Tabak Supp. Rep. ¶ 3(c). The Court concludes that these alleged misrepresentations
concealed the same facts (that is, that GE Power’s LT factoring hid a cash shortfall), despite
Defendants’ attempts to differentiate the claims. See Defs.’ Mem 34-36. Second, Defendants
argue that GE’s Form 10-Q for the first quarter of 2017 contained a disclosure that informed
investors about GE Power’s LT factoring transactions. Defs.’ Mem. 37. The disclosure read:
“GE leverages GE Capital for its expertise in structuring long-term financing arrangements with
certain Power and Renewable Energy customers for the purchase of equipment, upgrades and
long-term service contracts. . . . In relation to these arrangements, GE Capital had approximately
$1.9 billion of long-term financing receivables outstanding.” ECF No. 384-36, at 43. Contrary
to Defendants’ assertions, however, this statement does not unambiguously disclose GE Power’s

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use of LT factoring to cover a cash shortfall; indeed, it could reasonably be read to disclose GE
Capital financing arrangements with customers of GE Power, not with GE Power itself. As
Plaintiffs note, “Defendants have cited no evidence indicating that the market understood this
vague disclosure to reveal GE’s use of deferred factoring to generate CFOA,” and analyst reports
indicate that analysts did not absorb this as disclosure of factoring with GE Power for that
purpose. Pls.’ Opp’n 49. At best, this is an argument for Defendants to make at trial.
By contrast, Defendants are correct in asserting that Plaintiffs fail altogether to
demonstrate loss causation for disclosures between November 2017 and January 2018. Defs.’
Mem 36-37. For starters, Tabak admitted that he was unable to quantify the fraud-related
portions of the stock price declines on the November 13, 2017 and January 24, 2018 corrective
disclosure dates. Id. at 36. It follows that Plaintiffs cannot establish loss causation for those
dates — a conclusion that Plaintiffs do not even appear to contest. Plaintiffs do argue that there
is one January disclosure for which “no such disaggregation should be required given the
circumstances of this case.” Pls.’ Opp’n 50. Specifically, Plaintiffs point to an SEC statement
expressing concern about “information bundling” — i.e., “releasing confounding news along
with bad news” to “obfuscate[] what portion of the stock drop resulted from news related to its
potential SEC violations versus other significant issues.” Id. (quoting Statement Regarding
Information Bundling and Corporate Penalties, available at https://www.sec.gov/news/publicstatement/crewnshawinformation-bundling-2021-09-03). But Plaintiffs cite, and the Court has
found, no authority for the proposition that this theory waives the loss causation requirement.
Moreover, Plaintiffs cite no evidence to support their conclusory assertion that GE intentionally
bundled multiple disclosures together. Thus, the Court declines to adopt Plaintiffs’ novel theory.
*

*

*

30

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In sum, Defendants’ motion for summary judgment is DENIED, except as to claims
arising from the alleged corrective disclosures between November 2017 and January 2018, for
which Plaintiffs lack evidence of loss causation.
MOTIONS TO EXCLUDE EXPERT TESTIMONY AND TO STRIKE
Next, Defendants move to exclude the testimony of plaintiff experts S.P. Kothari and
David Tabak, ECF Nos. 346-47, and Plaintiffs move to exclude the testimony of defense experts
Christopher Russo and Daniel Fischel, ECF Nos. 369, 373. In addition, Plaintiffs move to strike
a declaration from Fischel submitted by Defendants. ECF No. 377.
The admissibility of expert testimony is governed by Rule 702 of the Federal Rules of
Evidence, which provides that “[a] witness who is qualified as an expert by knowledge, skill,
experience, training, or education may testify” to his or her opinion if:
(a) the expert’s scientific, technical, or other specialized knowledge will help the trier of fact
to understand the evidence or to determine a fact in issue;
(b) the testimony is based on sufficient facts or data;
(c) the testimony is the product of reliable principles and methods; and
(d) the expert has reliably applied the principles and methods to the facts of the case.
Fed. R. Evid. 702. In Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579 (1993), the Supreme
Court emphasized the “gatekeeping role” of district courts with respect to expert testimony,
declaring that “the Rules of Evidence — especially Rule 702 — . . . assign to the trial judge the
task of ensuring that an expert’s testimony both rests on a reliable foundation and is relevant to
the task at hand.” Id. at 597; see also Troublé v. Wet Seal, Inc., 179 F. Supp. 2d 291, 302
(S.D.N.Y. 2001) (“[The] proffered testimony . . . must not only have a reliable foundation but
also be relevant in that it ‘fits’ the facts of this case.”). “The Rule 702 inquiry is a flexible one
that depends upon the particular circumstances of the particular case at issue.” In re Gen. Motors
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LLC Ignition Switch Litig., No. 14-MD-2543 (JMF), 2016 WL 4077117, at *2 (S.D.N.Y. Aug. 1,
2016) (internal quotation marks omitted); see also Kumho Tire Co. v. Carmichael, 526 U.S. 137,
150-52 (1999) (explaining that because “there are many different kinds of experts, and many
different kinds of expertise,” a court must be granted “considerable leeway in deciding in a
particular case how to go about determining whether particular expert testimony is reliable”).
The focus of the Court’s analysis “must be solely on principles and methodology, not on
the conclusions that they generate.” Daubert, 509 U.S. at 595. Ultimately, “expert testimony
should be excluded if it is speculative or conjectural . . . or if it is based on assumptions that are
so unrealistic and contradictory as to suggest bad faith, or to be in essence an apples and oranges
comparison.” Boucher v. U.S. Suzuki Motor Corp., 73 F.3d 18, 21 (2d Cir. 1996) (internal
quotation marks omitted). The Court should not “admit opinion evidence that is connected to
existing data only by the ipse dixit of the expert.” Gen. Elec. Co. v. Joiner, 522 U.S. 136, 146
(1997). Nor should an expert be permitted to “supplant the role of counsel in making argument
at trial,” In re Rezulin Prods. Liab. Litig., 309 F. Supp. 2d 531, 541 (S.D.N.Y. 2004), or be
permitted to merely “construct[] a factual narrative based upon record evidence,” Anderson
News, L.L.C. v. Am. Media, Inc., No. 09-CV-2227 (PAC), 2015 WL 5003528, at *2 (S.D.N.Y.
Aug. 20, 2015), aff’d, 899 F.3d 87 (2d Cir. 2018). Relatedly, expert testimony regarding “an
ultimate determination that [is] exclusively within [the jury’s] province,” must be precluded,
Nimely v. City of New York, 414 F.3d 381, 398 (2d Cir. 2005), as must an expert’s testimony “on
issues of law,” United States v. Bilzerian, 926 F.2d 1285, 1294 (2d Cir. 1991).
By contrast, “other contentions that the assumptions are unfounded go to the weight, not
the admissibility, of the testimony.” Boucher, 73 F.3d at 21 (internal quotation marks omitted);
see McCullock v. H.B. Fuller Co., 61 F.3d 1038, 1044 (2d Cir. 1995) (“Disputes as to the

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strength of [an expert’s] credentials, faults in his use of different etiology as a methodology, or
lack of textual authority for his opinion, go to the weight, not the admissibility, of his
testimony.”). “[T]he traditional and appropriate means of attacking shaky but admissible
evidence” are not exclusion, but rather “[v]igorous cross-examination, presentation of contrary
evidence, and careful instruction on the burden of proof.” Daubert, 509 U.S. at 596. Moreover,
“[a]lthough a district court should admit expert testimony only where it is offered by a qualified
expert and is relevant and reliable, exclusion remains the exception rather than the rule.” In re
Gen. Motors, 2016 WL 4077117, at *2 (internal quotation marks omitted); see Fed. R. Evid. 702,
advisory committee note (noting that “the rejection of expert testimony is the exception rather
than the rule”); see also, e.g., Nimely, 414 F.3d at 395 (“Rule 702 embodies a liberal standard of
admissibility for expert opinions . . . .”); Borawick v. Shay, 68 F.3d 597, 610 (2d Cir. 1995)
(observing that courts assessing the reliability of expert testimony should be mindful of the
“presumption of admissibility of evidence”).
With these principles in mind, the Court will address each of the experts at issue.
A. David Tabak
Tabak is an economist with degrees from the Massachusetts Institute of Technology and
Harvard who has published on subjects including stock price movements and loss causation.
Tabak Rep. ¶ 4. On March 11, 2022, he issued a report describing his primary opinions,
including the following:
● The information “allegedly misstated and omitted from GE’s public disclosures was
economically material. Shareholders would have considered that information in
evaluating the price of GE’s stock and in deciding whether to purchase or sell shares
at a given stock price.”
● “[I]f the problem with cash flows is a long-term issue, the drag discussed above will
keep increasing until the company eventually decides to stop hiding the new, lower
long-term trend in cash flows. At that point, as it reduces its factoring in order to
reduce the drag that previous factoring created, its cash flow will decline.”
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● GE’s disclosures on April 21, 2017, July 21, 2017, and October 20, 2017, served as
partial disclosures or partial corrective disclosures which triggered share price
declines, a portion of which related to LT factoring. Tabak then calculated the loss
amount per share caused by these corrective disclosures.
● An earnings-response coefficient (“ERC”) analysis can be used to “account for the
effect of GE’s positive earnings surprise on the stock-price movement” and
disaggregate earnings surprises from information related to LT factoring.
● A standard event study can disaggregate the corrective information from broader
“industry and market” effects.
Tabak Rep. ¶¶ 2, 17, 28, 30. Tabak also issued a supplemental report after the Court’s April
2022 Opinion and Order granting Plaintiffs’ motion for class certification. ECF No. 355-14
(“Tabak Supp. Rep.”). That supplemental report addressed the change in operative dates in the
Class Period — now starting on February 29, 2015, rather than March 2, 2015 — and added an
opinion related to the January 20, 2017 alleged misrepresentations. Id. at 2.
Defendants make four arguments for exclusion of Tabak’s testimony: first, that there is
no causal link between the previously undisclosed LT factoring and the 2017 LT factoring
shortfalls; second, that Tabak’s disaggregation analysis — specifically, his ERC analysis — is
flawed; third, that Tabak’s constant-dollar inflation methodology is inappropriate; and fourth,
that his opinions about materiality are improper legal conclusions. ECF No. 400 (“Defs.’ Tabak
Reply”), at 1-2. 9 The Court will examine each argument in turn.
First, Tabak establishes a sufficient causal link between the alleged fraud and the
disclosed industrial CFOA deficits. Plaintiffs’ theory is that LT factoring concealed an everwidening hole in GE’s cash position. Tabak assessed losses by looking to GE’s misses in its
2017 goals for LT factoring to cover the Industrial CFOA shortfall. ECF No. 366 (“Pls.’ Tabak

9

Some of Defendants’ objections rely on Fischel’s declaration that, for the reasons
explained below, must be stricken. Nevertheless, the Court addresses Defendants’ objections as
consideration of Fischel’s declaration does not affect the Court’s conclusions.
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Opp’n”), at 10. Defendants argue that Tabak never proves — and in fact admits — that prior LT
factoring did not necessarily cause the 2017 miss in LT factoring. But Defendants fail to grasp
the key thrust of Tabak’s theory — that “there was an underlying trend of deferred monetization
that was hiding an underlying trend of organic cash flow performance.” Tabak Tr. 97. GE had
to plan for ever more aggressive LT factoring in 2017 to hide this widening cash deficit and,
when it was unable to meet those targets — whether because of the global power downturn, as
Defendants argue; because prior LT factoring made further factoring unsustainable, as Kothari
opines; or because the goals were simply unrealistic — GE could not use LT factoring to hide
the cash shortfall and was forced to report it to the market. Therefore, Tabak’s use of the miss in
LT factoring effectively captures the gap between what GE’s cash flow position looked like
when unsustainably inflated by LT factoring and when some of that crutch was removed.
Second, Tabak’s disaggregation methodology is sufficient. The Court has already
addressed many of Defendants’ objections in discussing loss causation. Only two therefore
warrant discussion here. In arguing that Tabak’s ERC analysis is novel, Defs.’ Tabak Reply 4,
Defendants fail to meaningfully dispute Plaintiffs’ academic citations supporting their argument
that “ERC regression models have been used by economists for over 50 years to measure stock
price reactions to earnings surprises.” Pls.’ Tabak Opp’n 13 n.9. Defendants also argue that the
ERC analysis is statistically weak and incorrectly predicts the direction of stock price responses
to earnings surprises. Defs.’ Tabak Reply 5. But Plaintiffs’ point to statements by GE
executives and analyst reports supporting their position that cash was critical to stock price
moves, not earnings. Pls.’ Tabak Opp’n 15. Additionally, Tabak’s use of a three-day window in
part of his event study is not grounds for exclusion as “[a] two-to three-day window is common
in event studies,” Carpenters Pension Tr. Fund of St. Louis v. Barclays PLC, 310 F.R.D. 69, 96

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(S.D.N.Y. 2015). Defendants are wrong in contending that Tabak’s use of a three-day event
window for the October 2017 corrective disclosure is unexplained. See Defs.’ Tabak Reply 9.
Tabak provides a full explanation for that window based on an unusually positive price reaction
on the announcement day followed by a statistically significant two-day decline. Tabak Rep.
¶¶ 73-74. Defendants’ quarrel with that explanation is fodder for cross-examination, not
exclusion.
Third, Tabak’s constant-dollar inflation methodology is sufficiently reliable. For starters,
courts commonly accept the constant-dollar inflation method. See, e.g., Baker v. SeaWorld Ent.,
Inc., 423 F. Supp. 3d 878, 908 (S.D. Cal. 2019) (“[T]he constant dollar inflation method is
commonly used to calculate 10b-5 damages.”). And, as in Baker, because “the jury is ultimately
responsible for deciding whether [constant-dollar inflation], or another calculation, is a
reasonable measurement of damages,” Tabak’s “decision to use the [constant-dollar inflation]
method in this case is sufficiently reliable for purposes of Daubert.” Id. Plaintiffs argue that
Tabak’s analysis is accurate because “the record supports Dr. Tabak’s assertion [that] the
magnitude of the fraud remained constant throughout the Class Period.” Pls.’ Tabak Opp’n 23.
To the extent that Defendants contend that there is evidence in the record to the contrary, see
Defs.’ Tabak Reply 10, the remedy is not exclusion, but “[v]igorous cross-examination,
presentation of contrary evidence, and careful instruction on the burden of proof.” Daubert, 509
U.S. at 596.
By contrast, Defendants’ final contention — that Tabak’s opinion that the information at
issue was “material” is an impermissible legal conclusion — has merit. See, e.g., S.E.C. v.
Tourre, 950 F. Supp. 2d 666, 678 (S.D.N.Y. 2013) (“No party would doubt — one hopes — that
an expert cannot testify as to whether the specific information at issue in a case is or is not

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‘material.’”); accord Feinberg v. Katz, No. 01-CV-2739 (CSH), 2007 WL 4562930, at *8-9
(S.D.N.Y. Dec. 21, 2007). That Tabak adds the word “economically” before “material” does
“not does not somehow transform what is a legal proposition and a finding of fact into an
admissible opinion.” Tourre, 950 F. Supp. 2d at 678. 10 Thus, Tabak may not offer an opinion
that the information at issue was “material” or “economically material.” That said, he may
provide testimony that puts LT factoring into economic context. At trial, the Court can and will,
through rulings on objections and appropriate curative instructions, ensure that Tabak does not
“usurp the trial judge’s function of instructing the jury on the law [or] tell the jury what result to
reach on the facts.” Feinberg, 2007 WL 4562930, at *8-9.
B. Daniel Fischel
Fischel is President and Chairman of Compass Lexecon, a consulting firm that
“specializes in the application of economics to a variety of legal and regulatory issues”; he
previously held academic positions at the University of Chicago and Northwestern University.
ECF No. 355-16 (“Fischel Rep.”), at 1. Offered by Defendants as a rebuttal witness, Fischel
offers three primary opinions: first, that “Tabak fails to demonstrate any connection between the
purported corrective disclosures and the remaining claims”; second, that “Tabak’s principal
disaggregation method is unreliable, rendering his entire disaggregation analysis unreliable, and
he does not establish that his subsidiary disaggregation methods are reliable”; and third, that
10

Plaintiffs’ reliance on Ge Dandong v. Pinnacle Performance Ltd., No. 10-CV-8086
(JMF), 2013 WL 5658790, at *14 (S.D.N.Y. Oct. 17, 2013), is misplaced. At issue there was
class certification, and the Court explained that “[w]hether the omitted information and
misrepresentations were material is an issue for the factfinder at trial, and is not before the Court
at this stage of the litigation.” Id. Indeed, the Court cautioned that “if [the expert witness] were
to testify regarding materiality at trial, the Court might well instruct him to ‘recast his testimony
by using terminology that does not express legal conclusions.’” Id. (quoting Crown Cork & Seal
Co., Inc. Master Ret. Trust v. Credit Suisse First Bos. Corp., No. 12-CV-5803 (JLG), 2013 WL
978980, at *8 (S.D.N.Y. Mar. 12, 2013).
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“Tabak ignores that the behavior of GE and its officers contradicts Plaintiffs’ claims and his
conclusion that GE’s stock price was artificially inflated during the Class Period.” Id. at 16-17.
On this last score, Fischel offers that “[i]f Defendants and GE’s other officers believed that the
Company’s stock price was artificially inflated during the Class Period due to allegedly
fraudulently concealed business practices . . . they would have had a strong economic incentive
to dispose of their GE shares . . . . Instead, they did the opposite.” Id. at 40.
Plaintiffs’ challenges to Fischel’s first two opinions require little discussion. They
amount to little more than an argument that Tabak has the better of the experts’ disputes and do
not come close to providing a reason for exclusion of the two opinions. See, e.g., ECF No. 375
(“Pls.’ Fischel Mem.”), at 7 (contending that Fischel cannot effectively offer a definition of
certain key terms because “Tabak has thoroughly explained these concepts in his reports”).
Fischel’s third opinion is a different story. For one thing, to the extent that it involves testimony
about Bornstein and other employees’ beliefs, it is improper. See Scott v. Chipotle Mexican
Grill, Inc., 315 F.R.D. 33, 45 (S.D.N.Y. 2016) (“[E]xperts may not offer opinions regarding the
intent or motive of parties as part of their analysis.”); In re Rezulin Prods. Liab. Litig., 309 F.
Supp. 2d at 547 (“Inferences about the intent or motive of parties or others lie outside the bounds
of expert testimony.”). 11 Defendants’ response that “[e]conomics involves, at its core, the study
of incentives and behavior,” sweeps too far. Fischel may indeed testify about economic
incentives generally, such as whether a company’s employees have an economic incentive to sell
the company’s stock if the price is inflated; but he may not go further to offer testimony about
the state of mind of Bornstein or any other employee. See Scott, 315 F.R.D. at 46 (holding that
11

Notably, Defendants explain that Fischel “disavowed at his deposition that he was
‘expressing any opinion on [] what belief GE had.’” ECF No. 405 (“Defs.’ Fischel Opp’n”), at
18.
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an expert may “not assign [the defendant company’s] motivation or intent behind its business
model”). Additionally, to the extent that Fischel proposes to apply his theory to Bornstein and
other employees and opine that their decisions to hold stock was at odds with the requisite state
of mind, see, e.g., Fischel Rep. 40 (introducing his opinions on this question with the title “the
behavior of GE and its officers contradicts Plaintiffs’ claims” (cleaned up)), such testimony is
unnecessary and would improperly invade the province of the jury. See, e.g., Nimely, 414 F.3d
at 398 (holding that an expert’s testimony that “he ‘rejected’ the possibility that [two officers]
had lied, and explained various reasons why police officers have no incentive to give false
statements in excessive force cases . . . essentially instructed the jury as to an ultimate
determination that was exclusively within its province” and did “not ‘assist the trier of fact ” but
“attempt[ed] to substitute the expert’s judgment for the jury’s” (cleaned up)); see also United
States v. Mulder, 273 F.3d 91, 101 (2d Cir. 2001) (“[A] district court should not admit testimony
that is ‘directed solely to lay matters which a jury is capable of understanding and deciding
without the expert’s help.’” (quoting United States v. Castillo, 924 F.2d 1227, 1232 (2d Cir.
1991)). A jury does not require expert testimony to assess whether Bornstein’s decision not to
sell his stock was consistent with a finding of scienter.
Finally, the Court concludes that Fischel’s declaration — disclosed for the first time in
conjunction with Defendants’ motion for summary judgment — must be stricken. The deadline
for all expert discovery was July 8, 2022. See ECF No. 313. In Tabak’s initial report, he
explained, in reference to his ERC analysis, that “the market tends to expect GE to beat analyst
estimates slightly, such that just meeting analyst estimates would be a little disappointing to the
market.” Tabak Rep. ¶ 33 n.15. Fischel’s report then erroneously reasoned that Tabak
“incorrectly assumes the relationship between earnings per share (‘EPS’) surprises and stock

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price movements is always linear, i.e., a positive (negative) surprise will always beget a GE
stock price increase (decrease).” Fischel Rep. 27. At his deposition, Fischel was asked if there
was anything in his report that he would like to change, to which he responded: “No. . . . I
wouldn’t say there’s anything I want to add to the report.” ECF No. 385-157, at 16-17. He did
also note that “work is ongoing as new information becomes available,” but when pressed
(repeatedly) for when this new work would be finished, he demurred. Id. at 17-26. On
September 6, 2022, Defendants move for summary judgment. Attached as an exhibit to their
motion was a declaration of Fischel, in which he attempted to account for the constant term in
Tabak’s ERC analysis, the inclusion of which meant that a positive earnings surprise did not
always cause a stock price increase, as Fischel had previously assumed erroneously. ECF No.
355-24 (“Tabak Decl.”), at 4. Defendants did not seek, let alone obtain, leave of Court to
disclose an untimely expert report.
In determining whether to exclude evidence or information based on a party’s failure to
comply with discovery orders, a court must consider “(1) the party’s explanation for the failure
to comply with the discovery order; (2) the importance of the testimony of the precluded witness;
(3) the prejudice suffered by the opposing party as a result of having to prepare to meet the new
testimony; and (4) the possibility of a continuance.” Softel, Inc. v. Dragon Med. & Sci.
Commc’ns, Inc., 118 F.3d 955, 961 (2d Cir. 1997). Here, all four factors favor exclusion. First,
Defendants’ have no persuasive explanation for their failure to produce Fischel’s declaration (in
the form of a supplemental report) before the close of expert discovery. Second, Fischel is an
important witness, but striking his untimely declaration does not preclude him from testifying, as
much of his analysis remains intact. Third, the untimely disclosure plainly caused Plaintiffs
prejudice because it prevented them from deposing Fischel about the material and because

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Defendants were able to prepare for summary judgment knowing they had an undisclosed “ace in
the hole.” This prejudice goes to the heart of the “purpose of the rule,” which “is to prevent the
practice of ‘sandbagging’ an opposing party with new evidence.” Ebewo v. Martinez, 309 F.
Supp. 2d 600, 607 (S.D.N.Y. 2004). The sandbagging here is especially noteworthy given that
Defendants’ counsel were on notice about Plaintiffs’ desire for any new work from Fischel at his
deposition. Fourth, the availability of a continuance cuts against Defendants. This case has
already been pending for six years. And it would have been difficult in a case of this complexity
to re-open expert discovery and resolve the knock-on effects on the motion for summary
judgment. In addition, Defendants had months to request any relief — whether it was an
extension of the expert discovery deadlines along with a short extension of the motion for
summary judgment deadline — or a continuance. But Defendants did nothing.
Nor is there any merit to Defendants’ assertion that Fischel’s untimely declaration is
“within the scope” of his prior work. Defs.’ Fischel Opp’n 19-20. Put simply, the belated
declaration materially alters Fischel’s prior analysis by fixing a significant error. Specifically, it
changed Fischel’s analysis by correcting his prior mistaken assumption that Tabak’s model
assumed that an earnings report that exceeded analyst expectations had a simple, always positive
correlation with an increase in stock price, and then proceeded to test the significant of Tabak’s
constant term through statistical analysis. This analysis changed Fischel’s approach and findings
and thus “exceed[ed] the bounds of [his earlier] report.” Atlantica Holdings, 477 F. Supp. 3d at
111 (cleaned up). And finally, Defendants’ contention that the declaration is admissible under
Rule 26(e) of the Federal Rules of Civil Procedure “because it completes Prof. Fischel’s
testimony by providing the final results of an analysis he previewed at his deposition” is
unpersuasive. Defs.’ Fischel Opp’n 21 (quoting Fed. R. Civ. P. 26(e)(1)(A), (2)). Yes, a party is

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obligated under Rule 23(e) to “supplement or correct” a disclosure “if the party learns that in
some material respect the disclosure or response is incomplete or incorrect” and, in the case of an
expert, that duty “extends both to information included in the report and to information given
during the expert’s deposition.” Fed. R. Civ. P. 26(e)(1)(A), (2). But the Rule provides that the
supplemental disclosure must itself be “timely,” Fed. R. Civ. P. 26(e)(1)(A), and, in the case of
an expert, “must be disclosed by the time the party’s pretrial disclosures under Rule 26(a)(3) are
due,” Fed. R. Civ. P. 26(e)(2). So the duty to supplement is not the escape hatch that Defendants
suppose. Moreover, to hold otherwise would introduce a gaping loophole in the deadlines for
expert disclosures. An expert could hint at further work in his deposition, refuse to supply the
details or timeline of that work, and then invoke the duty to supplement to justify filing a new
expert opinion after the close of expert discovery. In short, because Fischel’s “declaration was
drafted and filed after the close of discovery” and “exceeds the bounds of [his] report,” it must
be and is excluded. Atlantica Holdings, 477 F. Supp. 3d at 111 (cleaned up). 12
C. S.P. Kothari
Kothari is a Professor of Accounting and Finance at the MIT Sloan School of
Management. ECF No. 358-22 (“Kothari Rep.”), at 1. His primary opinions are as follows:
● “GE Power used factoring to report substantial financing activity between GE Power and
GE Capital as Industrial CFOA for GE. Information regarding the source of CFOA
would have been material to investors”; and
● “GE’s reliance on GE Power’s factoring and deferred monetization practices masked
underlying weakness in GE Power’s ability to collect cash directly from its customers,

12

Contrary to Plaintiffs’ assertions, see Pls.’ Fischel Mem. 11, striking Fischel’s declaration
does not render his original testimony concerning Tabak’s ERC analysis so unreliable that it
must be excluded. That said, his failure to incorporate a constant term into his analysis is
certainly fodder for cross-examination, and he may not rely on his untimely declaration or the
statistical analysis contained therein to rebut any such questions.
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created a substantial drag on future cash flows, and was unsustainable. These facts would
have been material to investors.”
Kothari Rep. 1-3. Just as Tabak may not opine on the materiality of the information, Kothari
may not either. Nor, as Plaintiffs suggest, see ECF No. 368 (“Pls.’ Kothari Opp’n”), at 18-19,
can he merely substitute the word “important” for “material,” see, e.g., United States v.
Tomasetta, No. 10-CR-1205 (PAC), 2011 WL 6382562, at *2 (S.D.N.Y. Dec. 12, 2011)
(“[T]estimony that the misstatements about the options not being in-the-money would not have
significantly altered the total mix of information and that truthful disclosures would not have
been important to a reasonable investor, is improper because it invades the province of the Court
in defining materiality and the province of the jury in determining whether the misstatements
were material.”). That said, Kothari may testify about “the concepts of CFOA and [cash flow
conversion rate]” and opine “as to why these metrics are important for a company like GE,
particularly where it has chosen to report Industrial CFOA (a non-GAAP metric) and GE’s cash
conversion rates,” as well as “the economic importance of LT factoring, how it was used to mask
underlying weakness in cash flows and how it was not sustainable, without seeking to offer an
opinion as to the materiality of the alleged false statements themselves.” Pls.’ Kothari Opp’n 18.
The Court can and will police the appropriate line through rulings on objections and curative
instructions at trial.
Defendants’ other objections to Kothari’s testimony are without merit. First, his
testimony is not impermissibly “narrative.” For example, he synthesizes complex financial
information from various sources of evidence and applies his academic expertise to conclude
why LT factoring was not sustainable. Kothari Rep. 1-5. So too, the opinion in his supplemental
report that “Bornstein’s January 20, 2017 statement indicated that GE’s factoring was declining
at a time when: (i) factoring was actually increasing as part of GE’s plan to generate CFOA and
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CFCR and to meet cash flow targets, and a primary driver in GE Power’s CFOA generation in
2016, and (ii) GE was factoring at unsustainable levels,” also relies upon an application of his
expert knowledge to the facts. ECF No. 355-13, at 6. Second, the mere fact that Kothari’s
opinion on “monetization drag” relies in part on certain “internal GE documents,” ECF No. 398
(“Defs.’ Kothari Reply”), at 8, does not mean that it is inadmissible, as Kothari does not simply
regurgitate these documents but analyzes them and uses his expert knowledge to opine about
monetization drag. Third, Kothari may testify that LT factoring constituted “financing,” not
“operating,” activities, Defs.’ Kothari Reply 9, as he plans to explain a non-accounting
distinction between “organic” cash flow from customers and financial cash flow from LT
factoring. Defendants’ remaining arguments go to the weight of Kothari’s testimony, not its
admissibility.
D. Christopher Russo
Finally, Defendants offer Russo as a rebuttal expert to Tabak and Kothari. He is an
industry expert who offers three primary opinions. First, he opines that “factoring of receivables
is a common business practice in the power industry” and that “use of factoring was congruent
with GE Power’s business goals, and enabled it to manage its working capital, grow its business,
and serve its customers.” ECF No. 355-15 (“Russo Rep.”), at 4. Russo next opines that Kothari
and Tabak are wrong because they fail to recognize that “GE Power’s underperformance was
caused by a sudden, unforeseen, and exogenous downturn in the global gas power market, which
affected its ability to sell equipment, upgrades, and services.” Id. at 5. Finally, Russo opines
that GE Power’s LT factoring was sustainable. Id. at 6-7.
Russo’s testimony is admissible. Plaintiffs contend that Russo failed to “analyze GE’s
actual CFOA and deferred monetization performance in 2017 and identify the factors that

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actually drove its failure to hit its CFOA and deferred monetization targets.” ECF No. 409
(“Pls.’ Russo Reply”), at 4. This may be true — but it does not render Russo’s testimony
inadmissible. Russo attacked the question of what caused GE’s performance from a different
angle, examining statements from customers of GE, GE’s reports and disclosures, evidence of
what happened to GE’s competitors, and other sources. Russo Rep. 22-44. The fact that Russo
may not have examined GE’s internal data does not render his testimony inadmissible, just as
Tabak and Kothari’s lack of detailed analysis of the global power downturn does not render their
testimony inadmissible. All of their testimony provides insights on GE’s performance from
different sources that a fact-finder could use to better understand the question. Plaintiffs’
remaining arguments — for example, that Russo’s sustainability evidence should be given less
weight because he did not examine certain pieces of evidence, see Pls.’ Russo Reply 8 — also go
to weight, not admissibility.
CONCLUSION
For the foregoing reasons, Defendants’ motion for summary judgment is GRANTED as
to Plaintiffs’ claims arising from the alleged corrective disclosures between November 2017 and
January 2018 and otherwise DENIED; the parties’ Daubert motions are GRANTED in part and
DENIED in part; and Plaintiffs’ motion to strike is GRANTED.
The parties filed a number of letter-motions to seal portions of their motion papers. ECF
Nos. 348, 364, 386, 388, 394. The Court granted these letter-motions, in most cases only
temporarily, pending its decision on the underlying motions. ECF Nos. 361, 387, 389, 407. It is
well established that filings that are “relevant to the performance of the judicial function and
useful in the judicial process” are considered “judicial documents” to which a presumption in
favor of public access attaches. Lugosch, 435 F.3d at 119. Significantly, assessment of whether

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the presumption in favor of public access is overcome must be made on a document-bydocument basis. See, e.g., Brown v. Maxwell, 929 F.3d 41, 48 (2d Cir. 2019). And the mere fact
that information is sealed or redacted by agreement of the parties is not a valid basis to overcome
the presumption. See, e.g., United States v. Wells Fargo Bank N.A., No. 12-CV-7527 (JMF),
2015 WL 3999074, at *4 (S.D.N.Y. June 30, 2015). In light of this Opinion and Order, and to
facilitate the Court’s review of the parties’ requests, the parties shall, no later than three weeks
from the date of this Opinion and Order, submit a joint letter with a single chart listing each
and every document that any party or third party believes should remain under seal or in redacted
form (with a hyperlinked reference to the docket number of the document), the party who seeks
to keep the document under seal, a succinct (i.e., two- or three-word) justification for the request,
and a hyperlink reference to any prior letter-motion that addresses the document. For the sake of
completeness, the parties should include in the chart any document that the Court has already
determined should be kept under seal permanently and include a hyperlinked reference to the
Court’s prior ruling in the chart. To the extent that the parties agree that a document previously
filed under seal or in redacted form can or should be filed publicly, the parties should include
that in the letter, with a hyperlinked reference to the relevant document.
Finally, unless and until the Court orders otherwise, the parties shall submit a proposed
Joint Pretrial Order and associated materials (in accordance with Section 5 of the Court’s
Individual Rules and Practices in Civil Cases, available at https://www.nysd.uscourts.gov/honjesse-m-furman) within sixty days of the date of this Opinion and Order. The Court will
schedule a trial date — or a conference to discuss a trial date — after reviewing the parties’
submissions. In the meantime, the Court is of the view that the parties should try to settle this
case without the need for a trial that would be expensive and risky for both sides. To that end, the

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Court directs the parties to confer immediately about the prospect of settlement and conducting
a settlement conference before the assigned Magistrate Judge, a mediator appointed by the Court,
or a mediator retained privately. If the parties agree that a settlement conference would be
appropriate, they should promptly advise the Court and, if needed, seek an appropriate referral
and extension of the pretrial deadlines.
The Clerk of Court is directed to terminate ECF Nos. 345, 346, 347, 369, 373, and 377.
SO ORDERED.
Dated: September 28, 2023
New York, New York

__________________________________
JESSE M. FURMAN
United States District Judge

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