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United States v. Brooks


January 11, 2010


The opinion of the court was delivered by: Joanna Seybert, U.S.D.J.


SEYBERT, District Judge

Pending before this Court is Defendant David H. Brooks' ("Brooks") and Defendant Sandra Hatfield's ("Hatfield") (collectively, "Defendants") motions to preclude the expert testimony of John Paul Osborn and Professor Eric J. Pan. For the reasons stated below, Defendants' motions to preclude Osborn's testimony is DENIED, and Defendants' motions to preclude Professor Pan's testimony is DENIED in part and GRANTED in part.


On October 24, 2008, the Government provided notice that it intended to call Mr. Osborn and Professor Pan as expert witnesses, pursuant to Fed. R. Crim. P. 16(a)(1)(G) and Fed. R. Evid. 702, 703 and 705 ("Notice"). (Docket Entry 200). On December 15, 2009, Defendants moved in limine to exclude this testimony. (Docket Entry 641 and 638). The Notice indicates that Mr. Osborn will provide opinion testimony "concerning signature identification based upon on his comparison of the handwriting of the defendants Brooks and Hatfield" against a number of known exemplars. (Notice at 4). The Notice further indicates that Professor Pan will provide background testimony on numerous corporate governance issues, including: (1) the respective roles that shareholders, various corporate officers, the Board of Directors, Board committees, and independent auditors play in a publicly-held corporation; (2) a typical publicly-held corporation's management structure; (3) the SEC, OTC, NASDAQ, and AMEX rules applicable to such a corporation; (4) the fiduciary duties that directors and officers owe a publicly-held corporation; (5) a publicly-held corporation's disclosure and reporting obligations, including the public filings it must make; (6) corporate officers' responsibility to ensure that a corporation's public statements and disclosures are truthful, accurate, and complete; (7) the significance of GAAS and GAAP, and the independent audit function's scope and limitations; (8) SarbanesOxley's requirement that a publicly-held corporation's C.E.O. and C.F.O. certify the company's financial condition and results from operations; (9) a publicly-held corporation's compensation-related disclosure obligations; (10) SEC regulations concerning related party disclosures, and a description of what a "related party" transaction is; (11) the outside audit function's scope and limitations; (12) what a representation letter is, and the C.E.O.'s and C.F.O.'s responsibilities in signing such a letter; (13) the various definitions of numerous accounting terms; and (14) the role of professional stock analysts. (Notice at 1-3). On December 29, 2009, the Government filed a response brief to Defendants' in limine motions. (Docket Entry 680).


I. Standard of Law

District courts have "broad discretion in admitting expert testimony." Rochester Gas and Electric Corporation v. GPU, Inc., 09-CV-0482, 2009 U.S. App. LEXIS 26870, *8 (2d Cir. N.Y. December 10, 2009) (citing Zerega Ave. Realty Corp. v. Hornbeck Offshore Transp., LLC, 08-CV-0639, 571 F.3d 206, 213 (2d Cir. N.Y. 2009)). Indeed, it is a "well-accepted principle that Rule 702 embodies a liberal standard of admissibility for expert opinions." Nimely v. City of New York, 04-CV-3240, 414 F.3d 381, 396 (2d Cir. N.Y. 2005). Fed. R. Evid. 702, in pertinent part, states that if "scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise, if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case."

In Daubert v. Merrell Dow Pharmaceuticals, Inc., now codified in Fed. R. Evid. 702, the Supreme Court 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." 509 U.S. 579, 589 113 S.Ct. 2786, 125 L.Ed. 2d 469 (1993). As such, the Supreme Court set forth a four factor test to assist trial courts in determining the reliability of expert scientific testimony: (1) whether the theory or technique can be or has been tested; (2) whether the theory or technique has been subjected to peer review and publication; (3) the known or potential rate of error in the case of a particular scientific technique; and (4) whether the theory or technique is generally accepted within the relevant scientific community. Id. at 593-596.*fn1 The Supreme Court subsequently held "Daubert's general holding -- setting forth the trial judge's general 'gatekeeping' obligation -- applies not only to testimony based on 'scientific' knowledge, but also to testimony based on 'technical' and 'other specialized' knowledge" pursuant to Fed. R. Evid. 702. See Kumho Tire Co. v. Carmichael, 526 U.S. 137, 141, 119 S.Ct. 1167, 143 L.Ed. 2d 238 (1999). Furthermore, the Supreme Court in Kumho concluded that "a trial court may consider one or more of the more specific factors that Daubert mentioned when doing so will help determine that testimony's reliability . . . [b]ut, as the Court stated in Daubert, the test of reliability is 'flexible,' and Daubert's list of specific factors neither necessarily nor exclusively applies to all experts or in every case." Id. at 142. Indeed, the Supreme Court clearly stated that "the law grants a district court the same broad latitude when it decides how to determine reliability as it enjoys in respect to its ultimate reliability determination." Id.

Courts within the Second Circuit have liberally construed expert qualification requirements.*fn2 But, the use of expert testimony 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." United States v. Bilzerian, 89-CV-1502, 926 F.2d 1285, 1294 (2d Cir. 1991); see also United States v. Scop 87-CV-1255, 846 F.2d 135, 139-140 (2d Cir. 1988). Thus, while an "expert may opine on an issue of fact within the jury's province, he may not give testimony stating ultimate legal conclusions based on those facts." Id.

II. Mr. Osborn's Proposed Testimony

Defendants contend that Mr. Osborn's testimony should be precluded because handwriting expert testimony "amounts to little more than junk science," and is not the type of reliable testimony that Daubert requires. (Brooks Mot. at 6; Hatfield Mot. at 2). Defendants cite numerous cases to support their position. But these cases are not binding on this Court. And, Defendants ignore that the vast majority of cases, including circuit court cases and cases within the Second Circuit, have concluded the exact opposite. Indeed, the majority of circuit courts have "concluded that a properly admitted handwriting expert may offer an opinion regarding the authorship of a handwriting sample if the factors enumerated in Daubert are satisfied."*fn3

In addition, even though the district court in United States v. Oskowitz, 02-CR-1300, 294 F. Supp. 2d 379, 383-384 (E.D.N.Y. 2003) partially limited a handwriting expert's testimony, the Second Circuit has "never held that a handwriting expert may not offer an opinion on the ultimate question of authorship." A.V. by Versace, Inc., 2006 U.S. Dist. LEXIS 62193 at *269 fn.14. In fact, no Second Circuit district court has wholly excluded "the testimony of a handwriting expert based on a finding that forensic document examination does not pass the Daubert standard." Id. And, the Second Circuit itself has routinely alluded to expert handwriting analysis without expressing any discomfort as to its admissibility. See, e.g., United States v. Tin Yat Chin, 03-CR-1621, 371 F.3d 31, 39 (2d Cir. 2004) (referring to defendant's proffer of a handwriting expert); United States v. Badmus, 02-CR-1225, 325 F.3d 133, 138 (2d Cir. 2003) (discussing government's use of expert testimony to identify defendant's handwriting on series of documents).

This Court will not preclude Mr. Osborn's testimony. As discussed above, handwriting analysis is sufficiently reliable under Daubert and Fed. R. Evid. 702. And Mr. Osborn's education, experience and training as a forensic document examiner is sufficient to establish that he is a qualified expert and that his proffered testimony is sufficiently reliable. Furthermore, even though the Notice does not clearly describe Mr. Osborn's methodology, this lack of clarity does not preclude his testimony. See Orix Financial Services, 2005 U.S. Dist. LEXIS 41889 at *45 (concluding that a handwriting expert's affidavit will not be disregarded because even though it provided "no description of the specific methods and tools he used," it was "self-evident that the principal tool utilized by a handwriting expert is a visual comparison," and that "lack of a detailed description" of the expert's "methodology is not so severe a defect as to warrant the total disregard of the affidavit."). Therefore, Defendants' motion to preclude Mr. Osborn's testimony is DENIED.

III. Professor Pan's Proposed Testimony

Defendants argue that Professor Pan's expert testimony should be excluded because it is "rife" with legal conclusions, and thus would "usurp" the Court's function to instruct the jury on federal corporate governance laws and the jury's role in applying the relevant facts to these laws. (Brooks Mot. at 2-3, 11; Hatfield Mot. at 5). Likewise, Brooks contends that Pan's testimony should be excluded because he is not qualified to testify on corporate governance matters. (Brooks Mot. at 15). The Court disagrees.

Courts 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.*fn4 And, overwhelmingly, courts specifically preclude the expert from offering either legal conclusions or opinions that apply corporate governance concepts to the case's specific facts.*fn5 Thus, 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.

The expected testimony set forth in the Government's Notice (see supra at p. 3-4) fall entirely within the realm of acceptable corporate governance testimony. As per that notice, the Government intends solely to solicit background and explanatory information concerning corporate governance and accounting concepts, such as the nature of fiduciary duties, a publicly-held corporation's disclosure requirements, the independent and outside audit functions, and the importance of GAAP. Nothing in the notice indicates that the Government intends to solicit the expert's opinion as to Defendants' acts or DHB's practices. And, in responding to Defendants' motion in limine, the Government has reaffirmed that it "does not intend to elicit, during its case-in-chief, any such opinions from Professor Pan." (Gov. Resp. Br. at 11). The Court will hold the Government to its word.

Given Professor Pan's experience as an attorney, as the Director of the Samuel and Ronnie Heymen Center on Corporate Governance, and as a law professor at the Benjamin Cardozo School of Law, he is more than qualified to assist the jury in understanding general corporate governance principles. Accordingly, Professor Pan may testify about all the subjects discussed in the Notice. But Professor Pan may not offer any opinion regarding the conduct of DHB or its officers, including Defendants.


For the reasons discussed above, Defendants' motions to preclude Mr. Osborn's testimony is DENIED. Defendants' motion to preclude Pan's testimony is DENIED insofar as Professor Pan may testify about general corporate governance principles, including all the subjects specified in the Government's Notice. But Defendants' motion to preclude Professor Pan's testimony is GRANTED insofar as Professor Pan may not offer any opinions regarding the conduct of DHB or its officers (including Defendants), and may not state any legal conclusions. Furthermore, Defendant Brooks' request for a Daubert/Kumho hearing is DENIED.


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