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IN RE INITIAL PUBLIC OFFERING SECURITIES LITIG.

November 7, 2001

IN RE INITIAL PUBLIC OFFERING SECURITIES LITIGATION.


The opinion of the court was delivered by: Scheindlin, District Judge.

OPINION AND ORDER

Over the last eleven months, plaintiffs have brought over 860 securities class actions against more than 200 companies and approximately 40 investment banks ("underwriters") alleging, in the broadest terms, that these defendants violated federal law by manipulating the prices of stocks that the companies had issued to the public. Because the hundreds of complaints share some common issues, Chief Judge Michael B. Mukasey ordered them consolidated for pretrial purposes and assigned the cases to this Court on August 9, 2001. See Order, In re Initial Public Offering Sec. Litig., 21 MC 92 (Aug. 9, 2001).

Many, but not all, of the underwriters have moved to recuse this Court for various reasons under 28 U.S.C. § 455 (the "moving defendants"). In support of their motion, the moving defendants have proffered the affidavits and declarations of Professors Geoffrey Hazard and Charles Wolfram as experts in judicial ethics. For the reasons that follow, these declarations must be precluded.*fn1

I. LEGAL STANDARD

"It is well-established that `the trial judge has broad discretion in the matter of the admission or exclusion of expert evidence.'" Boucher v. United States Suzuki Motor Corp., 73 F.3d 18, 21 (2d Cir. 1996) (quoting Salem v. United States Lines Co., 370 U.S. 31, 35, 82 S.Ct. 1119, 8 L.Ed.2d 313 (1962)). Nonetheless, "[i]n evaluating the admissibility of expert testimony, this Court requires the exclusion of testimony [that] states a legal conclusion." United States v. Feliciano, 223 F.3d 102, 121 (2d Cir. 2000) (quotation marks and citation omitted) (alteration in original); see also Marx & Co. v. Diners'. Club Inc., 550 F.2d 505, 510 (2d Cir. 1977). Indeed, "[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) (emphasis added).

II. BACKGROUND

At a conference held on September 26, liaison counsel*fn2 for the underwriters informed this Court that certain underwriters had decided to seek recusal based on this Court's purchases and sales of particular stocks. Over the next two weeks, the Court held several conferences to discuss the proposed recusal.

On October 3, without permission of the Court, the moving defendants submitted a fifteen-page declaration by Professor Geoffrey C. Hazard, Jr. According to the declaration, the moving defendants had asked Professor Hazard to "give [his] opinion concerning whether 28 U.S.C. § 455 requires recusal of the presiding district court judge, Honorable Shira A. Scheindlin." 10/3/01 Hazard Decl. ¶ 2. Throughout his nine-page opinion, Professor Hazard "relied upon the Statement of Facts prepared at [his] request by counsel for defendants in this action and attached hereto as Exhibit A," id. ¶ 3, which accounted for an additional six pages (single-spaced) of the declaration.

On Friday afternoon, October 12, the Court received a letter from the underwriter liaison firm requesting permission "to file a thirty-five page memorandum of law and an approximately forty-page supporting declaration from Charles W. Wolfram, the Charles Frank Reavis Sr. Professor Emeritus at the Cornell Law School." 10/12/01 Letter from Penny Shane of Sullivan & Cromwell. The letter further stated, "we also plan on submitting an affidavit attaching approximately twenty-five exhibits. . . ." Id. After considering the request, the Court issued the following order by email:

The page limit on the memorandum of law is extended to 35 pages. A 40-page declaration is excessive in length and will not be considered by the Court. Counsel should submit a list of the proposed exhibits. Until such list is reviewed by the Court, no exhibits will be considered.

After reviewing the e-mail, the liaison law firm contacted a law clerk by phone and asked whether there was some page number between zero and forty that the Court would accept. See 10/15/01 (11:00 a.m.) Tr. at 7. In response, the Court instructed the clerk to say it would allow fifteen pages to be submitted. See id. The Court also had the clerk notify the liaisons with the following email: "At the request of the counsel for the defendant-underwriters, the Court will accept a declaration from Professor Wolfram that is not to exceed 15-pages in length."

At the reconvened conference, the plaintiffs informed the Court that they had reviewed the declaration by Professor Wolfram and believed it was "nothing more than an attempt to camouflage what is clearly an opinion as a matter of law on a legal issue by just using some facts as background for his conclusion." 10/15/01 Tr. (5:35 p.m.) at 8. The Court then instructed the parties to submit letter-briefs ...


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