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MERRILL LYNCH & CO., INC. v. ALLEGHENY ENERGY

United States District Court, S.D. New York


April 12, 2005.

MERRILL LYNCH & CO., INC., MERRILL LYNCH CAPITAL SERVICES INC., and ML IBK POSITIONS, INC., Plaintiffs,
v.
ALLEGHENY ENERGY, INC., Defendant. ALLEGHENY ENERGY, INC., AND ALLEGHENY ENERGY SUPPLY CO., LLC., Counterclaim-Plaintiffs, v. MERRILL LYNCH & CO., INC., and MERRILL LYNCH CAPITAL SERVICES, INC., Counterclaim-Defendants.

The opinion of the court was delivered by: HAROLD BAER, JR., District Judge

OPINION & ORDER

Present before the Court are cross motions for summary judgment. Plaintiffs Merrill Lynch & Co., Inc., Merrill Lynch Capital Services Inc., and ML IBK Positions, Inc. (collectively "Merrill Lynch") move for summary judgment with respect to their breach of contract claims as well as defendants' counterclaims for breach of contract, fraud, negligent misrepresentation, and breach of fiduciary duty. Defendants and Counterclaim Plaintiffs Allegheny Energy, Inc., Allegheny Energy Supply Co., LLC. (collectively "Allegheny") move for partial summary judgment with respect to both their counterclaim for breach of contract and the Plaintiffs' breach of contract claim. For the reasons discussed herein, the motions are GRANTED in part and DENIED in part.

I. BACKGROUND

  The facts, prior proceedings, and history of this litigation are more fully set out in the prior decisions in this matter, familiarity with which is presumed. Merrill Lynch & Co., Inc. v. Allegheny Energy, Inc., 2003 U.S. Dist. LEXIS 21122 (S.D.N.Y. Nov. 25, 2003); Merrill Lynch, 2004 U.S. Dist. LEXIS 21543 (S.D.N.Y. Oct. 6, 2004). Briefly, this case arises out of Allegheny's purchase of Merrill Lynch's energy-commodities trading business known as Global Energy Markets ("GEM") for $490 million in cash and a 2% equity interest in Allegheny Supply ("Supply"). Merrill Lynch brought suit to enforce a provision in the Asset Contribution and Purchase Agreement ("Purchase Agreement") that provided that if Allegheny Energy Inc. ("Allegheny") did not contribute certain assets to Supply, Merrill Lynch had the right to "put" its equity position in Supply back to Allegheny Energy for $115 million plus interest. Allegheny brought counterclaims against Merrill Lynch for rescission, fraudulent inducement, breach of contract, and breach of fiduciary duty. These claims arose in connection with criminal charges brought against the former head of GEM, Daniel Gordon, for wire fraud, money laundering, and conspiracy to falsify books and records relating to his embezzlement of $43 million allegedly for premiums for what turned out to be a sham energy outage insurance contract (the "Falcon Energy" contract) he sold to GEM and which formed part of the Allegheny acquisition. Gordon has since pled guilty and admitted to knowledge that false financial documents were supplied to Allegheny before the sale. (Plea, U.S. v. Gordon, TR. 26:24-28:08) (03cv1494) (Dec. 19, 2003).

  Merrill Lynch moved to dismiss Allegheny's claims and on November 25, 2003 this Court (1) granted Merrill Lynch's motion to dismiss Allegheny's rescission claim, the punitive damages claim based upon fraudulent inducement, and the jury demand; and (2) denied Merrill Lynch's motion to dismiss the fraudulent inducement claim, the breach of contract claim, the breach of fiduciary duty claim, and the punitive damages claim based upon a breach of fiduciary duty. Merrill Lynch, 2003 U.S. Dist. LEXIS 21122 (S.D.N.Y. Nov. 25, 2003). Subsequently, Allegheny moved for leave to amend its counterclaims. On October 26, 2004, this Court granted Allegheny leave to amend but not with respect to any punitive damages on its fraud counterclaim or demand for a jury trial. This Court also denied on work product privilege grounds, production of two reports in connection with an internal investigation sought by Allegheny. Merrill Lynch, 2004 U.S. Dist. LEXIS 21543 (S.D.N.Y. Oct. 6, 2004).

  Present before the Court are cross summary judgment motions. Merrill Lynch seeks summary judgment against Allegheny for Merrill Lynch's breach of contract claim, and Allegheny's breach of contract, fraud, negligent misrepresentation, and breach of fiduciary duty counterclaims. Allegheny seeks partial summary judgment with respect to both breach of contract claims. For the reasons discussed herein, these motions are GRANTED in part and DENIED in part. II. LEGAL STANDARD

  A court will not grant a motion for summary judgment unless it determines that there is no genuine issue of material fact and the undisputed facts are sufficient to warrant judgment as a matter of law. Fed.R.Civ.P. 56; Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Anderson v. Liberty Lobby Inc., 477 U.S. 242, 250 (1986). The party opposing summary judgment "may not rest upon the mere allegations or denials of the adverse party's pleading, but . . . must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). In determining whether there is a genuine issue of material fact, the Court must resolve all ambiguities, and draw all inferences, against the moving party. United States v. Diebold, Inc., 369 U.S. 654, 655 (1962) (per curiam). When considering cross-motions for summary judgment, the same legal standards apply and a court "must evaluate each party's motion on its own merits, taking care in each instance to draw all reasonable inferences against the party whose motion is under consideration." Make The Road by Walking, Inc. v. Turner, 378 F.3d 133, 142 (2d Cir. 2004) (citations omitted); see also Morales v. Quintel Entm't, Inc., 249 F.3d 115, 121 (2d Cir. 2001) (holding that "each party's motion must be examined on its own merits, and in each case all reasonable inferences must be drawn against the party whose motion is under consideration").

  III. DISCUSSION

  A. Merrill Lynch's Breach of Contract Claim

  To establish a breach of contract claim under New York law, a plaintiff must prove: (1) the existence of the contract; (2) plaintiff's performance; (3) breach by the defendant, and (4) damages. Harsco Corp. v. Segui, 91 F.3d 337, 348 (2d Cir. 1996). Merrill Lynch claims that it is entitled to summary judgment on its breach of contract claim because Allegheny breached the Purchase Agreement when it failed to transfer specified generation assets in Supply and subsequently refused to honor the "put." (Purchase Agreement § 5.15.) Allegheny admits that it did not transfer the assets or pay Merrill Lynch for its equity stake, but argues it is entitled to summary judgment because it was effectively released from any contractual obligation through Merrill Lynch's various breaches of representations and warranties in the Purchase Agreement. Merrill Lynch argues that its performance under the contract was complete at the closing of the GEM sale and that the only remedy for a subsequent breach of contract claim lies in Allegheny's counterclaims for breach of contract and fraud, which would serve to offset the put payment. See Indu Craft, Inc. v. Bank of Baroda, 47 F.3d 490, 497-98 (2d Cir. 1995) (defendant's breach of loan documents did not excuse plaintiff's performance under the note; amount due defendant under line of credit was to be set off from the damages recoverable by plaintiff for defendant's breach of contract). Because Allegheny accepted the benefit of the GEM purchase for nearly two years, it cannot now retroactively rescind or void the contract. This Court has already held that rescission is not an available remedy. Merrill Lynch & Co., Inc. v. Allegheny Energy, Inc., 2003 U.S. Dist. LEXIS 21122 at *18 (S.D.N.Y. Nov. 25, 2003). At this point partial rescission is not an appropriate remedy either. The only way Allegheny can be excused from performance on the put is if Merrill Lynch failed to substantially perform. Wechsler v. Hunt Health Systems, Ltd., 330 F. Supp. 2d 383, 421 (S.D.N.Y. 2004) (performance is not excused if the other party substantially performed).

  It is clear that Merrill Lynch did perform in that as it delivered GEM to Allegheny. It is also clear that Allegheny breached the Purchase Agreement when it refused to honor the put. The issue is then whether Merrill Lynch's delivery of the company is enough to satisfy the requirements of substantial performance. See Id. at 421 (citing Hadden v. Consolidated Edison Co. of New York, Inc., 34 N.Y.2d 88, 96, 312 N.E.2d 445, (N.Y. 1974) ("it is not every breach of a constructive obligation which will excuse the other party from rendering its performance under the contract. . . . If the party in default has substantially performed, the other party's performance is not excused.")). If Merrill Lynch has substantially performed, then Allegheny must perform. F. Garofalo Elec. Co., Inc. v. New York University, 300 A.D.2d 186, 188-89, 754 N.Y.S.2d 227 (App.Div. 2002) (holding that if plaintiff "substantially performed its contractual obligations, then it would be entitled to the payment due under the contract less the cost of any correction of defects in its performance," even if the plaintiff breached the contract). Substantial performance is measured by several factors such as (1) whether any part of the contract is yet unfinished, (2) the nature of the default, and (3) the extent to which the aggrieved party has already received the substantial benefit of the performance. CSC Recovery Corp. v. Daido Steel Co., Ltd., 2000 U.S. Dist. LEXIS 1155 at *6 (S.D.N.Y. Feb. 4, 2000).

  Here, there is no performance left for Merrill Lynch. The nature of the default claimed by Allegheny is a breach of the representations and warranties in the agreement, not that Merrill Lynch has any performance to complete. If it breached the Purchase Agreement by misrepresenting what it was selling, the appropriate remedy for Allegheny is through its own breach of contract and fraud claims. Finally, Allegheny has derived the benefit of ownership of GEM for the past two years, and that was the primary purpose of the contract.

  Merrill Lynch also argues that § 9.02 of the Purchase Agreement bars Allegheny from denial of performance because it provides a "sole and exclusive remedy with respect to any and all claims relating to this Agreement and the transactions contemplated hereby (other than claims of, or causes of action arising from, fraud)" as indemnification for losses or damages "actually suffered or incurred." (Purchase Agreement § 9.02(b).) McCready v. Lindenborn, 65 N.E. 208, 211 (N.Y. 1902) (limitations on liability in contract provisions are enforceable by the court). Allegheny contends that this interpretation of the Purchase Agreement does not apply because it uses Merrill Lynch's breach as an affirmative defense and not to seek a remedy. However, the express carve-out for causes of action arising from fraud renders that provision meaningless to this action because the basis of Allegheny's claims is fraud.

  In light of the above, notwithstanding § 9.02 of the Purchase Agreement, it is proper to grant Merrill Lynch summary judgment on the liability issue with regard to its breach of contract claim. Damages should be offset against whatever judgment Allegheny obtains, if any, in its counterclaims against Merrill Lynch. However, for reasons discussed below, the Court cannot hold as a matter of law that Merrill Lynch's alleged misrepresentations do not constitute a fraud or material breach of the Purchase Agreement.

  b. Allegheny's Counterclaims

  Merrill Lynch moves for summary judgment on all of Allegheny's counterclaims and advances the argument that because Allegheny cannot prove that Merrill Lynch's alleged wrongdoing is the proximate cause of any injury to Allegheny, nor can Allegheny show damages with reasonable certainty in order to sustain its counterclaims. Allegheny asserts counterclaims for breach of contract, fraudulent inducement, negligent misrepresentation, and breach of fiduciary duty, all of which require a causal connection between the breach or harm and reasonably certain damages in order to prevail.

  i. Proximate Cause

  In both tort and contract law, causation is an essential element of damages and a plaintiff must prove that a defendant's breach directly and proximately caused his or her damages. Nat'l Mkt. Share, Inc. v. Sterling Nat'l Bank, 2004 U.S. App. LEXIS 26766 at **10-11; Wakeman v. Wheeler & Wilson Mfg. Co., 101 N.Y. 205, 209 (1886); Exxon Co. v. Sofec, Inc., 517 U.S. 830, 839-40 (1996) ("[A]lthough the principles of legal causation sometimes receive labels in contract analysis different from the `proximate causation' label most frequently employed in tort analysis, these principles nevertheless exist to restrict liability in contract as well."). In actions for fraud the concept of proximate cause (or loss causation) also requires a plaintiff to show a direct causal link between the wrongdoing complained of and the damages alleged. Emergent Capital Inv. Mgmt., LLC v. Stonepath Group, Inc., 343 F.3d 189, 197 (2d Cir. 2003).

  Allegheny states that because it is only seeking "general" damages for breach of warranty, it need only show that Merrill Lynch provided inaccurate information that caused Allegheny to pay an artificially inflated price and that no other causal link is required. Also, because it is not seeking "consequential" damages, Allegheny is not responsible to show damages directly traceable to the breach that are not the result of other intervening causes. As such, Allegheny contends it should be entitled to the damages it incurred measured by the difference between the price paid and the fair market value of the asset purchased. Sharma v. Skaarup Ship Mgmt. Corp., 916 F.2d 820, 825 (2d Cir. 1990) ("The fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of the relevant fact."). Allegheny measures its damages by that criteria at $565 million ($605 million as purchase price minus the market price as valued by its expert, $40 million).

  Merrill Lynch correctly questions Allegheny's expert for failing to provide any analysis that connects Merrill Lynch's wrongdoing to his calculations of damages. As for his calculation of the "good will" associated with the transaction (measured at $230 million in the Purchase Agreement, reduced to zero in his report), Allegheny's expert does not base his calculation on any misrepresentation or breach of Merrill Lynch, but rather on the fact that Dan Gordon sold a bogus insurance contract to GEM. Merrill Lynch also questions why Allegheny's expert chose not to consider any outside market forces, which arguably have substantial impact on companies involved in energy trade.

  In defense, Allegheny states that its expert's opinion is based on all the facts that Merrill Lynch either misrepresented or concealed in connection with the transaction. Because Merrill Lynch's own expert disagrees, summary judgment is not proper. In re WorldCom, Inc. Sec. Litig., 2005 WL 89395 at *25 (S.D.N.Y. 2005) (Where "there are conflicting expert reports presented, courts are wary of granting summary judgment."). Finally, Allegheny claims that its expert is not the exclusive source of its evidence to show proximate cause and that Allegheny's senior managers who negotiated the Purchase Agreement will provide testimony that shows the requisite causal nexus between breach or harm and damages. This meets the threshold of a tryable issue of fact to defeat a grant of summary judgment, but only just.

  ii. Allegheny's Claimed Damages

  Merrill Lynch argues that Allegheny's claimed damages are too speculative or uncertain. Damages "may not be merely speculative, possible or imaginary, but must be reasonably certain." Trademark Research Corp. v. Maxwell Online, Inc., 995 F.2d 326, 332 (2d Cir. 1993). Allegheny contends that Merrill Lynch should not be entitled to summary judgment merely because the Williams Contract is difficult to value. When it comes to calculating damages, mathematical precision is nether required nor expected. Aqua Dredge, Inc. v. Stony Point Marina & Yacht Club, Inc., 583 N.Y.S.2d 648, 650 (3d Dept. 1992). Again, there is a tryable issue of fact as to whether the damages set forth by Allegheny's expert are indeed too speculative or uncertain.

  c. Allegheny's Counterclaim for Breach of Contract

  Allegheny moves for partial summary judgment on liability for its breach of contract claim against Merrill Lynch. Allegheny claims that Merrill Lynch breached various contractual representations and warranties in the Purchase Agreement. For the reasons set forth below, as well as the Court's concerns about proof of proximate cause, summary judgment is not appropriate on this claim.

  In order to prevail on a claim for breach of a contractual warranty, a plaintiff must prove "(1) the existence of an express warranty, (2) material breach of the warranty, (3) damages proximately resulting from the material breach, and (4) justifiable reliance on the warranty." Metromedia Co. v. Fugazy, 983 F.2d 350, 360 (S.D.N.Y. 1992).

  i. § 3.12 of the Purchase Agreement

  In § 3.12(c) of the Purchase Agreement, Merrill Lynch represented that "[t]he books and accounts and other financial records of the Business [i.e., GEM] . . . are in all material respects true, complete, and accurate, and do not contain or reflect any material inaccuracies or discrepancies . . ." In § 3.12(b), the Purchase Agreement referred to a Schedule entitled "Business Selected Data." In that Schedule, Merrill Lynch represented that "[t]he Business Selected Data has been prepared in good faith by the management of the Business based upon the financial records of the Business . . ." Allegheny contends that both of these warranties were breached (1) through the financial statements provided by Merrill Lynch during negotiations and upon signing (the September 2000, October 2000, and January 2001 financial statements), and (2) because Merrill Lynch inflated the value of the Williams Contract, a long term energy agreement that both parties agree is a significant asset to GEM.

  There is no doubt that Allegheny received financial documents with inflated financial figures for GEM in the months leading up to the signing, probably supplied by Dan Gordon. What is not clear is whether the parties understood this representation to include those financial documents. Allegheny claims the parties contemplated all the financial data provided by Merrill Lynch, but Merrill Lynch argues it only applied to the January financials, which were the only ones provided from Merrill Lynch's Finance Department. The parties also disagree as to the accuracy of the January financial documents.

  Next, Allegheny argues that this warranty was breached through Merrill Lynch's valuation of the Williams Contract because it reflected increased value due to the sham Falcon Energy insurance contract sold to GEM by Dan Gordon. Merrill Lynch contends Allegheny knew that valuation of the contract was inherently subjective and speculative and specifically disclaimed any representation whatsoever to its value. (Purchase Agreement § 3.12.) there is a tryable issue of fact at least as to whether this valuation contained material inaccuracies, and if so, whether they caused any harm to Allegheny.

  ii. § 3.16 of the Purchase Agreement

  In § 3.16, the Purchase Agreement states in relevant part "[t]he information provided by the Sellers to the Purchasers, in the aggregate, includes all information known to the Sellers which in their reasonable judgment exercised in good faith, is appropriate for the Purchasers to evaluate the trading positions and trading operations of the Business." Allegheny claims Merrill Lynch breached this warranty by failing to disclose; (1) Gordon's violations of Merrill Lynch's credit policies in connection with the sham Falcon Energy insurance contract, (2) Williams' alleged "gaming" of the Williams Contract, and (3) the falsity of the financial statements provided to Allegheny in September and October 2000. Gordon's fraud coupled with Merrill Lynch's tolerance of his disregard for its internal credit policies casts doubt on its good faith and reasonable judgment in connection with this transaction. To this end Merrill Lynch would have the Court believe it, like Allegheny, was a victim of Mr. Gordon's fraud and abuse of discretion. In the end, proof of reasonable judgment and good faith negates summary judgment.

  d. Allegheny's Counterclaim for Fraud

  In its counterclaim, Allegheny alleges that Merrill Lynch misrepresented GEM's internal controls, its infrastructure, its historical revenues, its trading volume its growth rate, and the qualifications of Mr. Gordon. Merrill Lynch moves for summary judgment on Allegheny's fraud claim with a similar argument to the one advanced in its motion to dismiss. Merrill Lynch contends that these claims are all predicated on alleged misrepresentations that are extra-contractual, meaning they do not appear within § 3.16 of the Purchase Agreement. The Confidentiality Agreement provided that "neither party makes any representation or warranty as to the accuracy or completeness of the Evaluation Material and that only those representations and warranties made in a definitive agreement, if any shall have any legal effect." Because the Purchase Agreement also contained a merger clause that expressly excluded the Confidentiality Agreement, Merrill Lynch contends that the disclaimer in the Confidentiality Agreement forecloses any reliance on representations in the Purchase Agreement, which proves fatal to any claim for fraudulent inducement. Dyncorp v. GTE Corp., 215 F. Supp. 2d 308, 319 (S.D.N.Y. 2002) (a fraud claim cannot stand without justifiable reliance on the part of the buyer). Allegheny relies on the same defenses it advanced in its opposition to Merrill Lynch's motion to dismiss: First, they contend that § 3.16 of the Purchase Agreement contains a general non-specific disclaimer that does not bar a fraudulent inducement claim, and second, the matters misrepresented were peculiarly within Merrill Lynch's knowledge.

  With regard to Merrill Lynch's argument that there can be no justifiable reliance, this Court has already held that where there is tension between the disclaimer in the Confidentiality Agreement and the representation to provide information in good faith in the Purchase Agreement, the Purchase Agreement will control. Also, the broad disclaimer negotiated in § 3.16 shifts at least some of the burden back to Merrill Lynch with regard to its good faith and reasonable judgment.

  In general, sophisticated parties that have access to information and are on notice of the importance of that information in the transaction cannot justifiably rely if they fail to take advantage of this access or to include a representation. However, there is an exception when the seller has critical, material information to which the buyer had no access or notice. Banque Arabe et Internationale D'Investissement v. Md. Nat'l Bank, 57 F3d 146, 155 (2d Cir. 1995) ("an express waiver or disclaimer `will not be given effect where the facts are peculiarly within the knowledge of the party invoking it"). The issue here is whether Merrill Lynch fits within the peculiar knowledge exception. This exception can apply even when "the truth theoretically might have been discovered, though only with extraordinary effort or great difficulty," and even when parties are sophisticated. Dimon Inc. v. Folium, Inc., 48 F. Supp. 2d 359, 368, 372 (S.D.N.Y. 1999). But the more sophisticated the buyer, the less accessible the information must be to be considered within the seller's peculiar knowledge. Id. at 369 (citing Jackson v. New York, 210 A.D. 115, 205 N.Y.S. 658 (4th Dept. 1924).

  Merrill Lynch argues that Allegheny had unfettered access to its books and blames Allegheny for not `asking the right questions' in its diligence. Dyncorp, 215 F. Supp. 2d at 322 (a company disclaims reliance on representations made by the seller outside the contract when it is a sophisticated business, with resources to initiate due diligence). Allegheny claims it was misled by facts Merrill Lynch knew or had reason to know about the sham Falcon Insurance transaction and the performance of GEM. Here, unlike other peculiar knowledge cases, it is unclear whether Merrill Lynch did possess critical, material information about GEM and its finances. That the parties are probably at the highest level of sophistication and they conducted four months of due diligence using well regarded attorneys tends to cast doubt on Allegheny's lack of notice but there still remains at least a tryable issue of fact as to whether Allegheny had notice or should have discovered the truth of the alleged misrepresentations.

  e. Allegheny's Counterclaims for Breach of Fiduciary Duty and Negligent Misrepresentation

  Merrill Lynch provided a full range of financial and advisory services to Allegheny in the five years leading up to the GEM negotiations. In early 2000, Merrill Lynch began to advise Allegheny with respect to an acquisition of, or joint venture with, an energy trading operation. (Dailey at 46:5-50:19.) Merrill raised the possibility of Allegheny acquiring GEM in May and August 2000. At that time, Allegheny retained Salomon Smith Barney to replace Merrill Lynch as financial advisor. In September, Merrill Lynch, Allegheny, and Salomon Smith Barney met to discuss the GEM business, and negotiations began.

  Merrill Lynch argues the fiduciary duty and negligent misrepresentation claims should be decided in its favor because no fiduciary or special relationship existed at the time of the GEM sale. This Court agrees. Under New York law, there is no cause of action for breach of fiduciary duty or negligent misrepresentation in the absence of such a relationship of trust and confidence. Village of Canon v. Bankers Trust Co., 920 F. Supp. 520, 522-23 (S.D.N.Y. 1996); Banque Arabe v. Maryland Nat'l Bank, 819 F. Supp. 1282, 1293 (S.D.N.Y. 1993), aff'd 57 F.3d 146 (2d Cir. 1995). It is clear that there was at one time a fiduciary relationship between Merrill Lynch and Allegheny, but that relationship ended when the negotiations for the sale occurred. The engagement letters explicitly disclaim the fiduciary relationship. At that point the parties dealt at arms' length and Allegheny retained other advisors. While it is true that Merrill Lynch recommended GEM to Allegheny before the fiduciary relationship ended, the wrongdoing happened after that relationship was severed. This claim could only stand if Allegheny can show that Merrill Lynch made disclosures (or lack thereof) while it was still in the fiduciary capacity. Allegheny does not point to any fact or circumstance that shows Merrill Lynch made false representations about the business before September 1, 2000 when Salomon Smith Barney had taken on the role of advisor, and Merrill Lynch became an indifferent seller across the negotiations table.

  Likewise Allegheny's misrepresentation claim must be dismissed because there was no "special relationship" between Merrill Lynch and Allegheny at the time of the negotiations and sale of GEM. Dyncorp v. GTE Corp., 215 F. Supp. 2d 308 (S.D.N.Y. 2002).

  IV. EXPERT TESTIMONY

  Finally, Allegheny seeks to exclude from evidence certain portions of Merrill Lynch's expert report because it believes the rebuttal is improper and should have been presented along with Merrill Lynch's case in chief. The trial court's discretion is especially broad with respect to the admission or exclusion of expert evidence. See, e.g., Salem v. United States Lines Co., 370 U.S. 31, 35 (1962); Fed.R. Ed. 702. As an initial matter, it does not appear that this testimony would have been proper as part of Merrill Lynch's case in chief. As plaintiff, with single breach of contract claim, there is no place for this type of expert testimony. Generally, in bench trials like this one, I am loth to exclude expert testimony that I might find helpful, as it appears to be here. Moreover, any conceivable prejudice that might have resulted was cured when Allegheny had opportunity to depose Merrill Lynch's expert on the issues it now seeks to exclude. RMED Nat'l, Inc. v. Sloan's Supermarkets, Inc., 2002 U.S. Dist. LEXIS 23829 (S.D.N.Y. Dec. 11, 2002). Therefore, Merrill Lynch's entire expert report will be admitted into evidence at trial. I will also allow Allegheny's expert to respond to these opinions at trial. V. CONCLUSION

  For the reasons stated above, Merrill Lynch's motion for summary judgment is GRANTED on its breach of contract claim and with respect to Allegheny's negligent misrepresentation (Count III) and breach of fiduciary duty or aiding and abetting such a breach (Count IV) counterclaims. Summary judgment is DENIED with respect to Allegheny's fraud (Count I) and breach of contract (Count II) counterclaims.

  SO ORDERED.

20050412

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