The opinion of the court was delivered by: JOHN KEENAN, Senior District Judge
This is a fraud case that will be tried to a jury beginning on
April 7, 2005. Plaintiffs, Defendant Fahnestock and Defendant
pro se Vuono have moved in limine to exclude evidence.
Plaintiffs move to exclude the following: (1) evidence that
persons not on trial were not named as defendants in this action;
(2) evidence concerning tax deductions that Plaintiffs may have
taken for the investment losses they incurred as a result of
Defendants' allegedly fraudulent conduct; (3) evidence relating
to the September 1997 transactions between Defendant CSDesign,
Inc. and Momentum Investments Ltd.; (4) evidence relating to
Plaintiffs' assets; and (5) evidence concerning certain missing
audiotapes of former Plaintiff Terry Wilkinson. A. Persons Not Named As Defendants
Plaintiffs did not sue Meyer Feldman, Sydney Capland and
Jeffrey Mason, three Canadians who introduced Plaintiffs to
Rayvon, Inc. (Vuono's company). Plaintiffs claim that they did
not assert claims against these persons because of personal
jurisdiction and forum non conveniens concerns. (Pl. Mem.
in Supp. at 2). They move to exclude evidence relating to their
decision not to sue on Fed.R. Evid. 402 and 403 grounds.
Fahnestock argues that Plaintiffs' decision not to sue the three
Canadian promoters bears on the promoters' credibility because
they knew at depositions that they would be free from criminal or
civil charges. (Fahn. Mem. in Opp. at 1).
The Court agrees with Fahnestock. These witnesses appear on
Plaintiffs' witness list. (Pl. Prop. Pre-Trial Order, Exh. A).
The defendant's attorney is permitted to challenge the
credibility of the plaintiff's witness on cross-examination by
asking questions pertaining to the plaintiff's decision not to
bring suit against that witness.
B. Plaintiffs' Tax Deductions
Plaintiffs spend several pages of their memorandum pushing for
the exclusion of any evidence regarding tax deductions that they
may have taken for the investment losses that the allegedly
incurred as a result of Defendants' activities. Plaintiffs also
request that Defendants be precluded from arguing that the value of any such deductions should offset
any potential damages awarded to Plaintiffs. (Pl. Mem. in Supp.
at 3-9). Fahnestock correctly concedes the point on damages but
intends to prove on cross-examination that certain Plaintiffs
made representations about Rayvon to Canadian tax authorities
that were inconsistent with their current position. Fahnestock
notes that these representations were covered at length in
Plaintiffs' depositions. (Fahn. Mem. in Opp. at 4).
Fahnestock certainly may explore on cross-examination whether
Plaintiffs' representations to the Canadian tax authorities
contradict their current position. Furthermore, while disclosure
of tax returns is generally disfavored, evidence of Plaintiffs'
tax deductions is probative of investor sophistication and, by
extension, justifiable reliance. See Smith v. Bader,
83 F.R.D. 437 (S.D.N.Y. 1979) (Sweet, J.). These issues go to the heart of
C. The CSDesign-Momentum Transaction
Two years after Terry Wilkinson's investment in the alleged
fraudulent scheme, CSDesign (Wilkinson's company) sold the assets
at issue in this litigation shares of Rayvon Class B preferred
stock to another Wilkinson entity, Momentum Investments Ltd.
Plaintiffs seek exclusion of this evidence on Fed.R. Evid. 403
grounds. Defendants contend that Wilkinson's ownership of two
investment entities and the transaction between them undermines the notion that he is a neophyte investor and
tends to prove sophistication and experience in private financial
transactions, as well as access to lawyers and accounts. The
Court agrees. This subject clearly is a fertile area for
cross-examination, and the Court sees no danger of unfair
Plaintiffs make a Fed.R. Evid. 403 objection to the admission
of evidence concerning their wealth and assets. In a nutshell,
they claim that this evidence is not necessarily indicative of
investor sophistication. While Plaintiffs are correct that
wealth, by itself, does not necessarily equate to sophistication,
there is no Rule 403 problem here. Even if Fahnestock "has a long
list of examples of the plaintiffs' prior investment experience"
(Pl. Mem. in Supp. at 13), evidence of Plaintiffs' assets just
adds another stroke of color to the overall portrait. Plaintiffs
will have ample opportunity to paint their own picture. ...