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SLSJ, LLC v. Kleban

United States District Court, D. Connecticut

September 29, 2017

SLSJ, LLC, Plaintiff,
v.
ALBERT KLEBAN and THE LE RIVAGE LIMITED PARTNERSHIP, Defendants.

          RULING ON DEFENDANTS' MOTION IN LIMINE TO PRECLUDE EXPERT TESTIMONY [DOC. 65]

          CHARLES S. HAIGHT, JR. SENIOR UNITED STATES DISTRICT JUDGE

         This case arose from a dispute relating to a family-owned limited liability company, Sun Realty Associates ("Sun Realty"). The Defendants move in limine to preclude the proposed testimony of Professor Jonathan R. Macey, the liability expert of Plaintiff SLSJ, LLC ("SLSJ"). In connection with the motion, Defendants submit Macey's expert report, which was disclosed to them in accordance with Federal Rule of Civil Procedure 26(a)(2) and (b)(4). This Ruling resolves the motion.

         I. BACKGROUND

         Plaintiff SLSJ brings this action against an individual, Albert Kleban, and against Le Rivage Limited Partnership ("Le Rivage") (collectively "Defendants"), Plaintiffs' former partners in Sun Realty, alleging, inter alia, breach of fiduciary duty and fraud regarding the sale of Plaintiff's one-third interest in Sun Realty, including its sole asset, the Black Rock Shopping Center ("Black Rock"), a commercial property in Fairfield, Connecticut.[1] Plaintiff executed a "Membership Interest Purchase Agreement" ("Purchase Agreement") on June 27, 2013, agreeing to sell its 33.3333 percent membership interest in Sun Realty and outstanding promissory notes to Kleban and his successor-in-interest, Le Rivage, for the sum of $2, 020, 540.41.[2] Plaintiff thereafter executed an "Assignment" of its interest in Sun Realty to Le Rivage on July 29, 2013. Doc. 1, ¶ 47.

         In selling and assigning its interest in Sun Realty, Plaintiff allegedly relied upon Kleban's fraudulent statements and misrepresentations regarding the value of Black Rock.[3] In December 2013, within six months after that sale and assignment, Kleban Properties and Regency Centers Corporation ("Regency Centers") - "a real estate investment trust owning more than 300 retail properties [in] the United States with a total capitalization of $6.7 billion" - "publicly announced that they were entering into an agreement under which Regency Centers would acquire an 80% interest in a portfolio of three properties controlled by Kleban Properties, including Black Rock Shopping Center." Id., ¶ 44. On or about March 12, 2014, Kleban Properties and Regency Centers closed that transaction for a purchase price of $150 million.[4] Id., ¶ 56.

         II. PENDING MOTION

         Pending before the Court is Defendants' motion in limine for an Order excluding the proposed testimony of Plaintiff's expert, Professor Jonathan R. Macey, "for failure to satisfy the requirements of Fed.R.Evid. 702." Doc. 65, at 1. Plaintiff disclosed Macey's expert report to Defendants in compliance with Federal Rules 26(a)(2) and 26(b)(4) of Civil Procedure. Doc. 66, Ex. A. Defendants assert that in that report, Macey concludes and will testify at trial that "Defendants have breached certain legal duties owed to SLSJ." Doc. 65, at 1. Macey will also allegedly "endeavor[ ] to instruct the trier of fact on the 'legal rules' governing limited liability companies and privately held businesses." Id. Defendants argue that according to three decades of Second Circuit precedent, "each and every facet of this proffered testimony is inadmissible under the Federal Rules of Evidence." Id. (emphasis in original).

         Plaintiff objects to Defendants' motion, asserting, inter alia, that courts "generally permit expert corporate governance testimony" and "[t]his case presents no reason for the exception." Doc. 75, at 6 (citation and internal quotation marks omitted). Moreover, Macey's "proposed testimony seeks to explain [corporate governance] concepts in the context of the privately-held company at issue here." Id.

         III. DISCUSSION

         A. Legal Standard - Motion In Limine

         "A district court's inherent authority to manage the course of its trials encompasses the right to rule on motions in limine." Highland Capital Mgmt., L.P. v. Schneider, 551 F.Supp.2d 173, 176 Doc. 63, at 4. See also Doc. 1, ¶ 44. (S.D.N.Y. 2008) (citing Luce v. United States, 469 U.S. 38, 41 n.4 (1984)).[5] "The purpose of an in limine motion is to aid the trial process by enabling the Court to rule in advance of trial on the relevance of certain forecasted evidence, as to issues that are definitely set for trial, without lengthy argument at, or interruption of, the trial." Palmieri v. Defaria, 88 F.3d 136, 141 (2d Cir. 1996) (internal quotation marks omitted). In particular, a motion in limine "may be directed toward limiting the subjects about which testimony may be offered, or about which particular witnesses may testify, " including "expert witnesses." 3 Moore's Federal Practice, § 16.77[4][d][iii] (Matthew Bender 3d ed. 2009).

         In the case at bar, a preliminary ruling on the proffered expert testimony of Professor Macey is in the interests of justice. In particular, Defendants assert that if Macey's testimony is precluded in limine, Defendants may avoid "the substantial expense associated with deposing Professor Macey, who charges $875.00 per hour, " a fee Defendants would have to bear, as well as the expense of retaining a rebuttal witness regarding his testimony. Doc. 66, at 6 n.1. If, however, Macey's testimony is allowed, in whole or part, Defendants will have the opportunity to take discovery to prepare to rebut that testimony.

         B. Expert Testimony

         "The decision to admit expert testimony is left to the broad discretion of the trial judge and will be overturned only when manifestly erroneous." McCullock v. H.B. Fuller Co., 61 F.3d 1038, 1042 (2d Cir. 1995). See also SR Int'l Bus. Ins. Co. v. World Trade Ctr. Properties, LLC, 467 F.3d 107, 119 (2d Cir. 2006) (with respect to a district court's admission of expert testimony, the Second Circuit "review[s] a district court's evidentiary rulings under a deferential abuse of discretion standard, and will not disturb such rulings unless they are 'manifestly erroneous.'") (internal citations omitted); Amorgianos v. Nat'l R.R. Passenger Corp., 303 F.3d 256, 265 (2d Cir. 2002) ("A decision to admit or exclude expert scientific testimony is not an abuse of discretion unless it is 'manifestly erroneous.'") (quoting McCullock, 61 F.3d at 1042); Boucher v. U.S. Suzuki Motor Corp., 73 F.3d 18, 21 (2d Cir. 1996) ("It is well-established that 'the trial judge has broad discretion in the matter of the admission or exclusion of expert evidence, and his action is to be sustained unless manifestly erroneous.'") (quoting Salem v. United States Lines Co., 370 U.S. 31, 35 (1962)).

         "Significantly, the abuse of discretion standard 'applies as much to the trial court's decisions about how to determine reliability as to its ultimate conclusion.'" Amorgianos, 303 F.3d at 265 (emphasis in original) (quoting Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 152 (1999)). Consequently, when a district court analyzes the admissibility of expert evidence, it exercises broad discretion in determining the appropriate method for evaluating reliability under the circumstances of each case. Id.

         Furthermore, "[d]oubts about the usefulness of an expert's testimony, should be resolved in favor of admissibility." Canino v. HRP, Inc., 105 F.Supp.2d 21, 28 (N.D.N.Y. 2000) (quoting Marmol v. Biro Mfg. Co., No. 93-CV-2659(SJ), 1997 WL 88854, at *4 (E.D.N.Y. Feb. 24, 1997)). See also E.E.O.C. v. Beauty Enterprises, Inc., 361 F.Supp.2d 11, 20 (D. Conn. 2005) (citing Canino, 105 F.Supp.2d at 28, for "reasoning that doubts about the usefulness of an expert's testimony should be resolved in favor of admissibility"); Larabee v. M M & L Int'l Corp., 896 F.2d 1112, 1116 n. 6 (8th Cir.1990) ("[We] note that 'doubts about whether an expert's testimony will be useful should generally be resolved in favor of admissibility.'") (quoting J. Weinstein & M. Berger, Weinstein's Evidence, ¶ 702[02] at 702-30 (1988)).

         C. Permissible Scope of Expert Testimony

         The proper scope of an expert's testimony is delineated by Federal Rule of Evidence 702. That rule provides that "[a] witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if:

(a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue;
(b) the testimony is based on sufficient facts or data;
(c) the testimony is the product 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.

         Addressing scientific expert testimony - concerning the admissibility of data derived from scientific techniques or expert opinions - the United States Supreme Court held in Daubert v. Merrell Dow Pharmaceuticals, 509 U.S. 579 (1993), that the Federal Rules of Evidence have superseded the common law regarding the "proper standard for admission of expert testimony."[6] 509 U.S. at 585, 589-90. Courts thus apply Federal Rule of Evidence 702, "which clearly contemplates some degree of regulation of the subjects and theories about which an expert may testify." Id. at 589. "Per Daubert and its progeny, a court's Rule 702 inquiry involves the assessment of three issues: (1) the qualifications of the expert, (2) the reliability of the methodology and underlying data employed by the expert, and (3) the relevance of that about which the expert intends to testify." Washington v. Kellwood Co., 105 F.Supp.3d 293, 304 (S.D.N.Y. 2015). See also United States v. Tin Yat Chin, 371 F.3d 31, 40 (2d Cir. 2004)).

         Finally, expert testimony, although probative, may be excluded by Federal Rule of Evidence 403. Under Rule 403, the court may "exclude relevant evidence if its probative value is substantially outweighed by a danger of one or more of the following: unfair prejudice, confusing the issues, misleading the jury, undue delay, wasting time, or needlessly presenting cumulative evidence." Fed.R.Evid. 403. For example, federal courts have held that "Rule 403 bars expert testimony purporting to interpret the governing law, because such testimony will necessarily confuse the jury by providing competing interpretations of the law." CDX Liquidating Tr. ex rel. CDX Liquidating Trustee v. Venrock Assocs., 411 B.R. 571, 587 (N.D. Ill. 2009) (citation omitted). "Expert testimony about the governing law is barred under Rule 403 because 'it would be a waste of time if witnesses or counsel should duplicate the judge's statement of the law, and it would intolerably confound the jury to have it stated differently.'" Id. (quoting Specht v. Jensen, 853 F.2d 805, 807 (10th Cir.1988) (holding, en banc, that trial court erred in admitting expert testimony on the legality of warrantless searches, whether defendants had conducted a "search" and had received valid "consent"). See also United States v. Lumpkin, 192 F.3d 280, 289 (2d Cir.1999) ("[T]he Court must determine whether the [expert] testimony usurps . . . the role of the trial judge in instructing the jury as to the applicable law . . . .") (citation and internal quotation marks and punctuation omitted).

         D. Qualifications of Expert

         As to qualification of an expert, the trial judge has broad discretion to resolve that issue. See, e.g., United States v. Brown, 776 F.2d 397, 400 (2d Cir. 1985) ("[T]he trial judge has broad discretion in the matter of the admission or exclusion of expert evidence, and his action is to be sustained unless manifestly erroneous.") (citation omitted), cert. denied, 475 U.S. 1141 (1986); McGregor-Doniger Inc. v. Drizzle Inc., 599 F.2d 1126, 1138, n. 7 (2d Cir.1979) ("The broad discretion of the trial court to determine the qualifications of witnesses will not be disturbed unless its ruling was manifestly erroneous.") (citation and internal quotation marks omitted).

         Within the Second Circuit, courts have liberally construed expert qualification requirements. "Liberality and flexibility in evaluating qualifications should be the rule [and] the expert should not be required to satisfy an overly narrow test of his own qualifications." Lappe v. American Honda Motor Co., 857 F.Supp. 222, 226 (N.D.N.Y.1994), aff'd, 101 F.3d 682 (2d Cir.1996). See also Brown, 776 F.2d at 400 (noting that qualification requirements under Rule 702 "must be read in the light of the liberalizing purpose of the rule"). In general, "[t]o determine whether a witness qualifies as an expert, "courts compare the area in which the witness has superior knowledge, education, experience, or skill with the subject matter of the proffered testimony." Tin Yat Chin, 371 F.3d at 40 (citing United States v. Diallo, 40 F.3d 32, 34 (2d Cir.1994)).

         When considering an expert's "practical experience and educational background as criteria for qualification, the only matter the court should be concerned with is whether the expert's knowledge of the subject is such that his opinion will likely assist the trier of fact in arriving at the truth." Valentin v. New York City, No. 94-CV-3911 (CLP), 1997 WL 33323099, at *14 (E.D.N.Y. Sept. 9, 1997) (citing United States v. Barker, 553 F.2d 1013, 1024 (6th Cir.1977) (noting that expert need not have certificates of training nor memberships in professional organizations, nor be an outstanding practitioner in the field in which he professes expertise) and Mannino v. Int'l Mfg. Co., 650 F.2d 846, 850 (8th Cir. 1981) ("[T]he expert need not have complete knowledge about the field in question, and need not be certain. He need only be able to aid the jury in resolving a relevant issue.")).

         One may become qualified as an expert based on practical experience, so that professional education is not a prerequisite. United States v. Angelilli, 660 F.2d 23, 39-40 (2d Cir.1981) (holding that experienced auctioneers, buyers, and former marshals properly testified as experts on custom and practice at auctions of property), cert. denied, 455 U.S. 945 (1982). Alternatively, "formal education may also suffice to qualify a witness as an expert in a particular field, and the lack of extensive practical experience directly on point does not necessarily preclude the expert from testifying." Valentin, 1997 WL 33323099, at *15.

         E. Reliability of Evidence

         The United States Supreme Court has held that pursuant to the trial judge's "gatekeeping responsibility, " the Court "must ensure that any and all scientific testimony or evidence admitted is not only relevant, but reliable." Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 589 (1993). Expert testimony "must be supported by appropriate validation - i.e., good grounds, based on what is known." 509 U.S. at 590 (internal quotation marks omitted). In addition, "whether basing [his or her] testimony upon professional studies or personal experience, [an expert must] employ[ ] in the courtroom the same level of intellectual rigor that characterizes the practice of an expert in the relevant field." In re Mirena IUD Prod. Liab. Litig., 169 F.Supp.3d 396, 430 (S.D.N.Y. 2016) (quoting Kumho Tire Co. Ltd. v. Carmichael, 526 U.S. 137, 152 (1999)).

As to the "bases" of an expert's opinion, Federal Rule of Evidence 703 provides:
An expert may base an opinion on facts or data in the case that the expert has been made aware of or personally observed. If experts in the particular field would reasonably rely on those kinds of facts or data in forming an opinion on the subject, they need not be admissible for the opinion to be admitted. But if the facts or data would otherwise be inadmissible, the proponent of the opinion may disclose them to the jury only if their probative value in helping the jury evaluate the opinion substantially outweighs their prejudicial effect.

"[E]xpert testimony may be based on 'experience alone - or experience in conjunction with other knowledge, skill, training or education." In re Mirena IUD Prod. Liab. Litig., 169 F.Supp.3d at 413 (quoting Fed.R.Evid. 702 advisory committee's note). In certain fields of expertise, "experience is the predominant, if not sole, basis for a great deal of reliable expert testimony." Id. As with an expert's qualifications, the "test of reliability is flexible" so that "a district court has 'the same broad latitude when it decides how to determine reliability as it enjoys in respect to its ultimate reliability determination.'" Id. (quoting Kumho Tire Co. v. Carmichael, 526 U.S. 137, 141-42 (1999)).

         Regarding an expert's bases for testimony, the Second Circuit has clarified that "[a]lthough 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, other contentions that the assumptions are unfounded go to the weight, not the admissibility, of the testimony." Boucher v. U.S. Suzuki Motor Corp., 73 F.3d 18, 21 (2d Cir. 1996) (citations and internal quotation marks omitted). Generally, "[a] district court has discretion under Federal Rule of Evidence 703 'to determine whether the expert acted reasonably in making assumptions of fact upon which he would base his testimony.'" Id. (quoting Shatkin v. McDonnell Douglas Corp., 727 F.2d 202, 208 (2d Cir.1984)).

         F. Relevance - Opinions of Expert on Ultimate Issues

         After finding that an expert is qualified to testify and his or her testimony will be reliable, the district court must decide whether the expert's testimony will be relevant to the issues in the case. Specifically, with respect to relevance, Rule 702, Fed. R. Evid., requires the district court to decide whether the expert's testimony will "help the trier of fact." In re Mirena IUD Prod. Liab. Litig., 169 F.Supp.3d at 413.

         Expert testimony that "usurp[s] either the role of the trial judge in instructing the jury as to the applicable law or the role of the jury in applying that law to the facts before it, " United States v. Bilzerian, 926 F.2d 1285, 1294 (2d Cir.1991), [7] does not aid the jury in making a decision, In re Mirena IUD Prod. Liab. Litig., 169 F.Supp.3d at 413. Rather, such testimony "undertakes to tell the jury what result to reach, " and thereby "attempts to substitute the expert's judgment for the jury's, " United States v. Duncan, 42 F.3d 97, 101 (2d Cir.1994) (emphasis omitted).

         Courts have often barred expert witnesses from expressing opinions upon ultimate issues. See, e.g., United States v. Scop, 846 F.2d 135, 139-40 (2d Cir.1988) (holding that the expert's "repeated statements embodying legal conclusions exceeded the permissible scope of opinion testimony under the Federal Rules of Evidence"), on reh'g, 856 F.2d 5 (2d Cir. 1988). In other words, although an expert was allowed to "opine on an issue of fact within the jury's province, " he was barred from "giv[ing] testimony stating ultimate legal conclusions based on those facts." Scop, 846 F.2d at 139-40.

         Under the current Federal Rule of Evidence 704, however, an expert "opinion is not objectionable just because it embraces an ultimate issue." Nonetheless, as the Notes of the Advisory Committee recognize, the abolition of the "ultimate issue" rule does not render all legal opinions admissible. The Notes thus state:

The basic approach to opinions, lay and expert, in these rules is to admit them when helpful to the trier of fact. In order to render this approach fully effective and to allay any doubt on the subject, the so-called "ultimate issue" rule is specifically abolished by the instant rule.
The older cases often contained strictures against allowing witnesses to express opinions upon ultimate issues, as a particular aspect of the rule against opinions. The rule was unduly restrictive, difficult of application, and generally served only to deprive the trier of fact of useful information. 7 Wigmore §§ 1920, 1921; McCormick § 12. The basis usually assigned for the rule, to prevent the witness from "usurping the province of the jury, " is aptly characterized as "empty rhetoric." 7 Wigmore, § 1920, p. 17. Efforts to meet the felt needs of particular situations led to odd verbal circumlocutions which were said not to violate the rule. . . .
. . .
[Nonetheless, ] [t]he abolition of the ultimate issue rule does not lower the bars so as to admit all opinions. Under Rules 701 and 702, opinions must be helpful to the trier of fact, and Rule 403 provides for exclusion of evidence which wastes time. These provisions afford ample assurances against the admission of opinions which would merely tell the jury what result to reach, somewhat in the manner of the oath-helpers of an earlier day. They also stand ready to exclude opinions phrased in terms of inadequately explored legal criteria.

Fed. R. Evid. 704. advisory committee notes (emphasis added).

         The Second Circuit has stated that "[t]his circuit is in accord with other circuits in requiring exclusion of expert testimony that expresses a legal conclusion." Hygh v. Jacobs, 961 F.2d 359, 363 (2d Cir. 1992) (gathering cases). "While Rule 704 has abolished the common law 'ultimate issue' rule, however, it has not 'lower[ed] the bars so as to admit all opinions.'" Id. (quoting Fed.R.Evid. 704 advisory committee's note).[8]

         G. Corporate Governance Testimony

         As to the substance of expert testimony proffered, within the Second Circuit, "[c]ourts generally permit expert corporate governance testimony, " but "experts are restricted to explaining general corporate governance concepts, such as setting forth the respective roles of a corporation's directors and officers, the nature of an officer's fiduciary duties to the corporation, or the concept of parent-subsidiary corporate separateness." United States v. Brooks, No. 06-CR-550 (S1) (JS), 2010 WL 291769, at *3-4 (E.D.N.Y. Jan. 11, 2010). See also Pereira v. Cogan, 281 B.R. 194, 200 (S.D.N.Y. 2002) (permitting corporate governance expert to testify to "customary practices in a profession or industry, " even though the customs and practices are "based in good part on what others believe the law to require.").

         "As a general rule an expert's testimony on issues of law is inadmissable." United States v. Bilzerian, 926 F.2d 1285, 1294 (2d Cir. 1991)(citing, generally, Note, "Expert Legal Testimony, " 97 Harv. L. Rev. 797 (1984)). See also Brooks, 2010 WL 291769, at *4 ("[O]verwhelmingly, courts specifically preclude the expert from offering either legal conclusions or opinions that apply corporate governance concepts to the case's specific facts.").[9] As one court summarized in the context of securities litigation, "[w]hile the expert can make factual conclusions that embrace an ultimate issue to be decided by the fact-finder [under Fed.R.Evid. 704(a)], the expert cannot give testimony stating ultimate legal conclusions based upon those facts, nor can that testimony track the language of the statute or the law that the defendants are accused of violating." S.E.C. v. U.S. Envtl., Inc., No. 94-cv-6608(PKL)(AJP), 2002 WL 31323832, at *4 (S.D.N.Y. Oct. 16, 2002) (emphasis added).

         Within the Second Circuit, numerous courts have followed this distinction, allowing corporate governance expert testimony on factual conclusions that may embrace an ultimate issue but disallowing such testimony on ultimate legal conclusions. See, e.g., Scop, 846 F.2d at 139-40 (holding expert's repeated statements that defendants' conduct established a manipulative and fraudulent scheme within the meaning of the securities laws exceeded the permissible scope of opinion testimony); Marx & Co. v. Diners' Club, Inc., 550 F.2d 505, 509-10 (2d Cir. 1977) (Where the expert's testimony "did not concern practices in the securities business, on which [he] was qualified as an expert, but were rather legal opinions as to the meaning of the contract terms at issue, " his testimony fell outside his area of expertise and was an invasion of the court's authority to instruct the jury on the applicable law.), cert. denied, 434 U.S. 861 (1977); S.E.C. v. U.S. Envtl., Inc., No. 94-cv-6608 (PKL)(AJP), 2002 WL 31323832, at *4 (S.D.N.Y. Oct. 16, 2002) (noting that "[t]he Marx and Scop cases distinguish between factual conclusions embracing an ultimate issue to be decided by the trier of fact, which may be included in an expert's testimony, and opinions which embody legal conclusions that "encroach upon the court's duty to instruct on the law") (citing United States v. Bilzerian, 926 F.2d 1285, 1294 (2d Cir. 1991)). See also Red Rock Commodities, Ltd. v. Standard Chartered Bank, 140 F.3d 420, 424 (2d Cir. 1998) (holding expert testimony to determine whether a contract was ambiguous was inadmissible as "unnecessary and superfluous because of the special legal knowledge of the judge;" "[t]he district court did not need the experts' advice as to how the case should be decided.") (citing Marx, 550 F.2d at 510).

         As District Judge Seybert noted in Brooks, "overwhelmingly, courts specifically preclude the expert from offering either legal conclusions or opinions that apply corporate governance concepts to the case's specific facts." 2010 WL 291769, at *4. Therefore, "although a corporate governance expert can explain what a CEO does, and what a fiduciary duty is, the expert cannot opine as to whether a specific CEO's acts breached any fiduciary duty." Id. See also, e.g., CDX Liquidating Trust., 411 B.R. at 587 (holding corporate governance expert "cannot judge what Defendants did or did not do; nor whether they violated the law in that if he were to opine that (and to explain how) their conduct constituted a breach of fiduciary duty, he would necessarily be deeming Plaintiff's version of the facts to be the credible account, which is prohibited"); Floyd v. Hefner, 556 F.Supp.2d 617, 640 (S.D. Tex. 2008) (Plaintiff's corporate governance expert, an attorney with over 20 years of experience in corporate and securities matters, was allowed to "testify as to the standards of conduct applicable to directors in general, " but he was not permitted to "testify as to whether the Defendants' conduct comported with the actions of reasonably prudent individuals in the same or similar circumstances" because the latter was a conclusion that "must be determined by the trier of fact.").[10]

         For example, in a complex action regarding corporate or securities law, "expert testimony may help a jury understand unfamiliar terms and concepts;" but "[i]ts use must be carefully circumscribed to assure that the expert does not usurp either the role of the trial judge in instructing the jury as to the applicable law or the role of the jury in applying that law to the facts before it." Bilzerian, 926 F.2d at 1294. In discussing case precedent on expert testimony, the Second Circuit clarified that such cases "distinguish between factual conclusions that may be included in an expert's testimony - though they embrace an ultimate issue to be decided by the jury - and opinions embodying legal conclusions that encroach upon the court's duty to instruct on the law." Id. (citing United States v. Scop, 846 F.2d 135, 142 (2d Cir. 1988), [11] and Marx & Co., Inc. v. Diners' Club, Inc., 550 F.2d 505, 512 (2d Cir. 1977)[12]).[13]

         H. Proposed Expert Testimony of Professor Macey

         In the case at bar, Plaintiff has alleged that "through a series of misleading statements and omissions of material fact, " SLSJ was "induced" by Kleban to sell its interest in Sun Realty at an "unfair price." Doc. 1, ¶ 2. In its Complaint, Plaintiff asserts five causes of action: three claims against Kleban - breach of fiduciary duty, violations of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j(b), and fraud; and two actions against Le Rivage - "aiding and abetting breach of fiduciary duty" and "imposition of constructive trust." In order to assist in proving the elements of these claims, Plaintiff has hired Professor Macey, the Sam Harris Professor of Corporate Law, Corporate Finance and Securities Law at the Yale Law School and Professor at the Yale School of Management. Doc. 66 (Ex. A), ¶ 7.

         According to Macey, he is "an expert in corporate governance and in the relationship between LLCs and their members." Id., ¶ 8. His "expertise includes knowledge of the ordinary and customary business practices between and among LLCs and other forms of business organization and their investors." Id. Macey explains that he has been hired to "analyze, and to provide testimony about, the nature of the business relationship between SLSJ and Kleban as well as the economic and public policy implications of certain communications [that were] made and not made to SLSJ by Kleban." Id., ¶ 4. He has also been asked to "give testimony that will help the trier of fact to understand the organization and structure of a limited liability company or other privately held business firm in which there are active and passive investors, the ordinary and customary expectations, understandings, behavior, norms and arrangements among owners of privately-held firms (including with specific reference to the operating agreement at issue in this case), the relative roles and responsibilities of managers, active investors and passive investors in the management of the business and dissemination and acquisition of information concerning the business, as well as the underlying economic bases for such ordinary and custom organization, structure, expectations, understandings, behavior, norms and arrangements, and the resulting legal rules, including the duty of good faith and fair dealing members owe to each other and the fiduciary duties owed by a manager to members, including the duty to subordinate self-interest to the interest of the firm and its members, the duty to provide material information, and the particular manifestation of these duties that arise when a manager engages in a transaction with a member to whom the manager owes fiduciary duties." Id.

         With the aim of presenting all of the law, facts, and public policy regarding the case at hand, Macey has explicitly stated in his report that he has formulated three "principal opinions" regarding the merits of Plaintiff's claims based on a summary of facts provided by Plaintiff's counsel.[14] The opinions, as summarized by Professor Macey, are as follows:

Opinion 1: It is ordinary and customary behavior in a private enterprise in which there are both active investors and passive investors for the active investors to act in good faith and to subordinate their own private interests to the general goal of maximizing the returns of all investors, including the passive investors, and to disclose to passive investors information concerning the business that is material to their decisions concerning their investments. When engaging in self-dealing transactions with minority investors, and/or when specifically asked for such information, the expectation that the controlling majority will act fairly and in good faith is extremely acute. The investment relationship between SLSJ and Sun Realty was a typical arrangement in which a passive investor (SLSJ) reposed trust and confidence in an active investor (Kleban) to act as a faithful steward of its investment.
Opinion 2: Among the more flagrant ways that a controlling investor can breach its fiduciary duties to non-controlling investors such as Plaintiff is by freezing out and/or squeezing of their minority interests. Because controlling investors have a monopoly on information, they can skew the delivery of information to minority investors to make it appear that the condition of the business is worse than it really is. In addition, they can demand that minority investors lend or contribute additional capital to a firm, which forces such minority investors to choose between "throwing good money after bad" by continuing to invest and selling out their investment at bargain basement prices to the controlling investor, who can then often enjoy a greater degree of control and sell its new, larger interest at a premium or profit. In addition, even to the extent that capital calls are voluntary rather than mandatory, they can have a coercive effect on investors, and they can motivate investors to agree to the sale of their interests at "fire sale" prices. It is my opinion that Kleban's conduct in this matter constituted such a breach of the duties owed to the Plaintiff.
Opinion 3: The interest of Kleban were [sic] not aligned with the interests of the Plaintiff. Kleban's interests lay in buying SLSJ's interest for himself at the lowest possible price, particularly when he knew that there were other interested buyers of Black Rock Shopping Center at potentially higher prices. Plaintiff's interest was in receiving the highest return on its investment in Sun Realty Associates and, in the event of a sale, the highest price available anywhere in the market for SLSJ's interest. This was a clear conflict. It is ordinary and customary business behavior for investors such as Kleban to disclose and to manage such conflicts. Based on the facts provided to me, Kleban's failure to disclose and to manage his obvious conflicts of interest constituted breaches of fiduciary duty.

Doc. 66 (Exhibit A, "Expert Report of Jonathan R. Macey"), ¶¶ 10-12.

         In addition to his three opinions, Macey states that he will "tailor [his] testimony" and "provide context" designed to advance Plaintiff's theory of liability and emphasize Defendant's alleged wrong-doing. Id., ¶¶ 14-16. As to "context, " Macey plans to testify to the jury that a duty of care was created by Kleban's "expertise in real estate management and finance" and "repeated assurances to Plaintiff that he was keeping Plaintiff fully informed and was managing Sun Realty for the benefit of all investors." Id., ¶¶ 15, 28. He also proposes to "tailor [his] testimony to explain why SLSJ's employment of legal counsel does not alter the fiduciary duties owed to SLSJ." Id., ΒΆ 15 . As further "context, " he proposes to explain to the jury ways in which Defendants breached legal duties of care through "squeeze-outs, freeze-outs, " the disclosure of "asymmetric information, " and Kleban's "undisclosed" "dealings with third-parties" in an "effort to sell interests in Black Rock ...


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