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American Manufacturers Mutual Insurance Co. v. Payton Lane Nursing Home

February 23, 2010


The opinion of the court was delivered by: A. Kathleen Tomlinson, Magistrate Judge


Before the Court are three motions in limine made by Defendant Perkins Eastman Architects, P.C. ("Perkins") seeking to preclude certain testimony by Plaintiffs' witnesses. Specifically, in these motions Perkins seeks to preclude Plaintiffs from offering: (1) Eric Schatz to provide opinion/expert testimony pursuant to Federal Rule of Evidence 701 [DE 225]; (2) any expert testimony, including that of two retained experts, in support of Plaintiffs' claim against Perkins [DE 226]; and (3) any proof with regard to certain industry customs and practices and the percentage of work completed on the Project [DE 227].

In opposition, Plaintiffs American Manufacturers Mutual Insurance Company and American Motorists Insurance Company ("Plaintiffs" or "Sureties") submitted a single Memorandum of Law addressing Perkins' motions. See DE 238. The Court presumes the parties' familiarity with the relevant facts which were discussed at length in the Court's decisions on the parties' summary judgment motions [DE 202, 203 and 213], and those facts will not be repeated here.


Perkins moves to preclude Eric Schatz ("Schatz") from offering any testimony, opinion or evidence, including documentary evidence, relating to: (1) the custom and practice in the industry for reviewing and certifying payment requisitions; (2) the process and methodology Perkins undertook in reviewing and certifying the contractor payment requisitions; (3) the scope of work included in the schedule of values; and (4) the percentage of the work completed. Schatz is a Project Consultant for Greyhawk North America ("Greyhawk"), which served as the Sureties' construction consultant and on-site authorized representative in connection with the construction of the Payton Lane Nursing Home Project. See Schatz Aff. in Supp. of Pls.' Mot. for Partial Summary Judgment ("Schatz Aff."), ¶ 1.

A. The Applicable Federal Rules of Evidence

Rule 701 of the Federal Rules of Civil Procedure which deals with opinion testimony by lay witnesses states as follows:

If the witness is not testifying as an expert, the witness' testimony in the form of opinions or inferences is limited to those opinions or inferences which are (a) rationally based on the perception of the witness, (b) helpful to a clear understanding of the witness' testimony or the determination of a fact in issue, and (c) not based on scientific, technical or other specialized knowledge within the scope of Rule 702.

Fed. R. Evid. 701; see also United States v. Kaplan, 490 F.3d 110, 118 (2d Cir. 2007); In re WorldCom, Inc. Secs. Litig., CV 02-3288, 2005 WL 675601, at *1 (S.D.N.Y. March 24, 2005). The Second Circuit has interpreted the scope of permissible testimony under Rule 701 broadly.

See United States v. Ferguson, No. 06-CR-137, 2007 WL 4556625, at *2 (D. Conn. Dec.20, 2007) (citation omitted). On the other hand, witnesses who testify to opinions "based on scientific technical, or other specialized knowledge" must be qualified as experts under Rule 702. Fed. R. Evid. 701, Advisory Committee Note (2000); United States v. Garcia, 413 F.3d 201, 211 (2d Cir. 2005). At the same time, however, Rule 701 "does not distinguish between expert and lay witnesses, but rather between expert and lay testimony." Fed. R. Evid. 701, Advisory Committee Note (2000).

B. The Anticipated Scope Of Schatz's Testimony

Relying upon Didzbalis v. Heridan Transportation Co., 00 Civ. 4329, 2002 WL 31619071 (S.D.N.Y. Nov. 19, 2002), Perkins asserts that Schatz should be precluded from offering any testimony or evidence with regard to the custom and practice of an architect's construction administration responsibilities, including reviewing, approving and certifying payment requisitions. Perkins argues that since Schatz was not present when the work was performed and reviewed by Perkins, he does not have any personal, first-hand knowledge about those matters and his testimony on those issues is therefore not permitted. Lightfood v. Union Carbide Corp., 110 F.3d 898, 911 (2d Cir. 1997).

In further support of its arguments, Perkins refers to certain questions and answers from Schatz's deposition. See Perkins Mem. at 4-7. Perkins maintains that the responses confirm Schatz has no first-hand knowledge regarding the scope of work encompassed in the various line items for the schedule of values used by IDI for its payment requisitions on the Project. Finally, Perkins argues that any testimony concerning stated percentages of completion of the work requires technical and specialized experience within the field design and construction.

In opposition, Plaintiffs assert that they are not producing Schatz as an expert witness. They maintain that Schatz's testimony will be limited to his observations on site and his comparison of those observations to the last IDI Payment Requisition, #22R, that was certified by Perkins. That information is reflected in two analyses prepared by Schatz which support Plaintiffs' claims, including Plaintiffs' assertion that the cost to complete the work far exceeded the balance remaining after Perkins' certifications. Plaintiffs further state that Schatz's testimony is directed to the breach of contract issues which underlie the Amended Complaint.

Lay opinion testimony is admissible when the inference is a conclusion drawn from a series of personal observations over time. See 4 Jack B. Weinstein & Margaret A. Berger, Weinstein's Federal Evidence § 701.03[1] (2d ed.2008); Searles v. First Fortis Life Ins. Co., 98 F. Supp. 2d 456, 461 (S.D.N.Y. May 24, 2000) (noting that conclusions based on "a series of personal observations over time" may constitute personal knowledge). Lay witnesses are permitted to testify "to their opinions when those opinions are based on a combination of their personal observations of the incident in question and background information they acquired through their personal observations." B&G Plastics, Inc. v. E. Creative Indus., Inc.,No. 98 Civ. 0084, 2008 WL 307276, at * 8 (S.D.N.Y. Feb. 18, 2004). In B&G Plastics, Inc., the court held that the president of the defendant company could present lay witness testimony regarding design modifications where the opinion was based on "both his observations of the product at issue and background information he has acquired about the industry from his experience." Id. (citing Securitron Magnalock Corp. v. Schnabolk, 65 F.3d 256, 265 (2d Cir. 1995)). The court further found that "a witness' experience and specialized knowledge obtained in his or her vocation should certainly be taken into consideration. The fact that the lay opinion testimony bears on the ultimate issue in the case does not render it inadmissible." B&G Plastics, Inc., 2008 WL 307276, at * 8.

Likewise, in United States v. Rigas, 490 F.3d 208, 225 (2d Cir. 2007), the Second Circuit held that a former company accountant could offer lay opinion testimony about the company's books, including the effects of allegedly fraudulent debt reclassifications on the company's relationship with other business entities. This Court finds the following reasoning in Rigas particularly apt as to the instant circumstances:

It is undisputed that DiBella had personal knowledge of Adelphia's books. Tatum Partners, the company for which DiBella worked, was retained by Adelphia in August 2002, after Defendants were indicted, "to assist in the restatement or correction of Adelphia financial statements." DiBella began working as a full-time Adelphia employee in September 2002. In the course of nearly twenty months at Adelphia, DiBella developed what he characterized as "fairly extensive knowledge of the debt area of Adelphia" by reviewing the Co-Borrowing Agreements, and other documents within the company, focusing on "several of the areas of related-party transactions with the Rigas family, including security purchases, margin loans, other transactions." He also familiarized himself with Adelphia's accounting system and the software used to generate reports. Using data collected by Adelphia's accounting system, DiBella created Government Exhibit 101, a chart that summarized the affiliate receivable transactions between Adelphia and certain Rigas entities from 1999 through April 2002.

DiBella testified, using Government Exhibit 101, about co-borrowing debt transferred from Adelphia's books to the ledgers of the RFEs. Brown had already testified that the purpose of the reclassifications was to mask the amount of money that the RFEs owed Adelphia. DiBella explained that these reclassifications involved (1) the reduction of debt in Adelphia's balance sheets; (2) a corresponding reduction in the amount owed to Adelphia by an RFE; and (3) the creation of a payable to the RFE from an Adelphia subsidiary. DiBella testified that Adelphia's ...

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