The opinion of the court was delivered by: Pitman, United States Magistrate Judge:
Plaintiff moves in limine for an Order precluding the testimony of defendant's expert witness, Brad Cohen. For the reasons set forth below, the motion is granted in part and denied in part.
The facts giving rise to this action are set forth in the October 17, 2011 Memorandum and Order of the Honorable William H. Pauley, III, United States District Judge, granting in part and denying in part the parties' motions for summary judgment. LaSalle Bank N.A. v. CIBC Inc., 08 Civ. 8426 (WHP), 2011 WL 4943341 (S.D.N.Y. Oct. 17, 2011) ("October 17 Decision"). Familiarity with Judge Pauley's decision is assumed. I review the facts here only to the extent necessary for an understanding of the present dispute.
Plaintiff LaSalle Bank N.A. ("LaSalle") brings this action as the trustee of the J.P. Morgan Chase Commercial Mortgage Securities Trust 2007-CIBC 19 which was created pursuant to a pooling and servicing agreement dated June 14, 2007. LaSalle asserts claims for breach of contract and breach of warranty with respect to a Mortgage Loan Purchase Agreement ("MLPA") under which J.P. Morgan Chase Commercial Mortgage Securities Corp. ("J.P. Morgan") purchased from CIBC Inc. ("CIBC") in June 2007 a mortgage and note in the amount of $9.5 million on a mixed use real estate development in Massachusetts.
In 2007 and again in 2010, the mortgagor had difficulty making payments under the loan, and LaSalle claimed that CIBC had breached various representations and warranties set forth in the MLPA and demanded that CIBC either repurchase the mortgage and loan or provide a substitute loan to the trust. CIBC refused to cure and this action followed.
Judge Pauley's October 17 Decision significantly narrowed the issues. Relevant to the present dispute is LaSalle's claim that CIBC breached three representations contained in the MLPA. The MLPA provides that the breach of a representation is actionable only if it has a "material and adverse effect" on the property subject to the mortgage, the loan made by CIBC and sold to J.P. Morgan or the interests of the investors (collectively, the "Protected Interests").
The first representation in issue is Representation 6 which provides, in pertinent part, that the property subject to the mortgage is "free and clear of any liens, claims encumbrances, participation interests, pledges, charges or security interests . . ." and that "no Mortgage Loan is secured by the property which secures another mortgage loan other than one or more Mortgage Loans as shown on the Mortgage Loan Schedule" (Complaint ("Compl.") ¶ 41(a)). LaSalle claims that this Representation was breached because (1) as of the date of the MLPA, Beaver Brook Village LLC ("Beaver Brook") (the corporate owner of the property) had issued a second mortgage in favor of Gorman (the individual who controlled Beaver Brook) and (2) equitable liens had been granted in favor creditors of Beaver Brook and Gorman. In his October 17 Decision, Judge Pauley found that the issuance of the second mortgage in favor of Gorman constituted a breach of Representation 6, but that there were material issues of fact as to whether the Gorman mortgage materially and adversely effected any of the Protected Interests.
The second representation in issue is Representation 14 which provides, in pertinent part, that "[t]he value of the mortgaged property relative to the value reflected in the most recent appraisal thereof is not impaired by any improvements which have not been completed" (Compl. ¶ 41(d)). Plaintiff claims CIBC breached this representation because, among other things, costs associated with new paving in a parking lot were not included in the appraisal. The parties dispute whether the paving work constitutes a repair or an improvement and whether the purported breach had a material and adverse effect on any of the Protected Interests.
The last representation in issue, Representation 25, provides:
Each Mortgage Loan complied at origination, in all material respects, with all of the terms, conditions and requirements of [CIBC's] . . . underwriting standards applicable to such Mortgage Loan and since origination, the Mortgage Loan has been serviced in all material respects in a legal manner in conformance with [CIBC's] servicing standards. (Compl. ¶41(h)). LaSalle claims CIBC breached Representation 25 by, among other things, failing to speak with certain trade creditors, failing to adequately follow up with certain bank references, failing to uncover Gorman's 1991 bankruptcy, failing to obtain certain bank statements and underwriting the loan to debt service coverage ratio*fn1 ("DSCR") of at least 1.20.
CIBC retained Brad Cohen as an expert witness in this matter. Mr. Cohen holds a bachelor's degree in economics from Bucknell University. From 1982 through 2010, Mr. Cohen has held a number positions in the financial services industry and has several years' experience in commercial real estate financing. His former employers include European American Bank, Bank Leumi Company of New York and KPMG.
According to his May 19, 2010 Report, Mr. Cohen "was asked to review and analyze whether [CIBC] breached specific Representations and Warranties made by CIBC in selling a certain mortgage loan to . . . the J.P. Morgan Chase Commercial Mortgage Securities Trust 2007-CIBC" (Expert Report of Brad Cohen, dated May 19, 2010 ("Cohen Report"), at 3), annexed as Exhibit A to the Declaration of Robert C. Turner, dated May 19, 2011 ("Turner Decl.")(Docket Item 75)).
As I previously advised counsel, Mr. Cohen's report, on its face, suffers from a number of problems.
! First, it does not merely "embrace" an ultimate issue, see Fed.R.Evid. 704(a), it unabashedly repeatedly opines on whether CIBC breached its warranties in a manner that materially and adversely effects the relevant interests (Cohen Report at 4, 16, 17, 21 and 25, annexed as Exhibit A to Turner Decl.).
! Without any indication of an appropriate foundation, it speculates concerning what parties to the transaction knew. For example, Mr. Cohen states "The B-piece buyers and other certificate holders knew very well the risks involved in purchasing bonds in this or any other CMBS transaction." (Cohen Report at 12, annexed as Exhibit A to Turner Decl.).
! Despite the fact that he is not a lawyer, Mr. Cohen repeats and assumes the truth of legal opinions ex- pressed by CIBC's counsel. Mr. Cohen states "I have been advised by Winston and Strawn LLP that the second mortgage was unenforceable. Assuming that this is true, the mortgage, by definition, could not have a material adverse impact upon the Trust, and my analysis need go no further." (Cohen Report at 13 n.6, annexed as Exhibit A to Turner Decl.). ! It speculates on the intent of the parties to the MLPA.
Mr. Cohen states "it is my understanding that Representation 14, among others, was intended to . . . ." (Cohen Report at 16, annexed as Exhibit A to Turner Decl.) ! It contradicts CIBC's own documents with no basis given for Mr. Cohen's opinion. For example, Mr. Cohen states "It is clear that [CIBC's] Underwriting Manual itself is not meant to be a manual of ironclad rules requiring absolute adherence. . . . In addition, these guidelines are not inflexible 'rules' that must be applied in every circumstance regardless of actual conditions" (Cohen Report at 20, annexed as Exhibit A to Turner Decl.). CIBC's Underwriting Manual actually provides that it "establishes the minimum underwriting standards," that "[t]hese minimum standards must be adhered to," and that "CIBC expects full compliance with the specific requirements of th[e] Manual unless a written waiver has been granted" (Letter from Talcott J. Franklin, Esq. to the undersigned, dated Nov. 9, 2010 at 3 n.10).
Nevertheless, the Cohen Report does contain some information that would be helpful to a jury. For example, to the extent it describes the roles of the participants in commercial real estate financing transaction, it contains information that is well within Mr. Cohen's expertise and that is probably not within the knowledge of the average juror.
In an effort to try to separate the admissible from the inadmissible, I met with counsel on April 21, 2011, identified what I thought were some of the problems with the report and directed CIBC to identify the specific opinions it would seek to elicit from Mr. Cohen at trial. Plaintiff was also provided with an opportunity to respond to defendant's designations (Order, dated April 21, 2011 (Docket Item 64)).
Although CIBC did subsequently designate the specific matters from Mr. Cohen's May 19, 2010 report that it sought to offer, it also designated material from a "Rebuttal Expert Report" that Mr. Cohen prepared in response to an expert report submitted by plaintiff and authored Timothy Hallock (Rebuttal Expert Report of Brad Cohen, dated June 15, 2010 ("Cohen Rebuttal Report"), annexed as Exhibit B to the Turner Decl.). CIBC's attempt to offer material from the Cohen Rebuttal Report is odd. Mr. Cohen expressly states in his Rebuttal Report that he is "issuing this rebuttal report to address some of the issues specifically raised by [plaintiff's expert] Mr. Hallock," (Cohen Rebuttal Report at 2, annexed as Exhibit B to Turner Decl.). However, in October, 2010 plaintiff unconditionally withdrew Hallock as an expert witness and was precluded from offering a substitute expert (Order, dated Oct. 8, 2010 (Docket Item 30)).
Thus, as of October 2010, there was (and there still is today) no expert testimony for Mr. Cohen to rebut.*fn2
By letter dated February 6, 2012, CIBC has further limited the opinions it will attempt to elicit from Mr. Cohen to reflect the narrowing of the issues resulting from Judge Pauley's October 17, 2011 partial grant of summary judgment.
A. Admissibility of Expert
Testimony - Applicable Standards
In order to be admissible, expert testimony must meet both the substantive requirements and limitations of Article VII of the Federal Rules of Evidence and the procedural requirements of Fed.R.Civ.P. 26(a)(2).
Rule 702 of the Federal Rule of Evidence provides: A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if:
(a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue;
(b) the testimony is based on sufficient facts or data;
(c) the testimony is the product of reliable principles and methods; and
(d) the expert has reliably applied the principles and methods to the facts of the case.
The proponent of expert testimony bears the burden of establishing its admissibility by a preponderance of the evidence. Bourjaily v. United States, 483 U.S. 171, 175--76 (1987). However, "the rejection of expert testimony is the exception rather than the rule." Advisory Committee Notes to the 2000 Amendment to Fed.R.Evid. 702; Highland Capital Mgmt., L.P. v. Schneider, 551 F. Supp. 2d 173, 185 (S.D.N.Y. 2008) (Leisure, D.J.). "The admission of expert testimony is committed to the broad discretion of the District Court and will not be disturbed on review unless found to be 'manifestly erroneous.'" United States v. Wexler, 522 F.3d 194, 204 (2d Cir. 2008) (internal citation omitted); accord United States v. Commey, No. 10--3705 2011 WL 6157298 at *2 (2d Cir. Dec. 13, 2011).
"To be admissible, expert testimony must be both relevant and reliable." Feinberg v. Katz, 01 Civ. 2739 (CSH), 2007 WL 4562930 at *6 (S.D.N.Y. Dec. 21, 2007) (Haight, D.J.), citing Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 589 (1993).
As the Court explained in Daubert, the trial judge's task is to "ensure that an expert's testimony both rests on a reliable foundation and is relevant to the task at hand." Id. at 597. In its later opinion in Kumho Tire Co. v. Carmichael, 526 U.S. 137, 141 (1999), the Court characterized this task as "the trial judge's general 'gatekeeping' obligation." While Daubert set forth a non-exclusive checklist for trial courts to use in assessing the reliability of scientific expert testimony, Kumho held that these factors might also be applicable in assessing the reliability of non-scientific testimony, depending upon "the particular circumstances of the particular case at issue." 526 U.S. at 150.
In discharging its gatekeeping obligation, the trial judge . . . must first find that the proposed witness's "scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue,"
Fed.R.Evid. 702. If the court makes this finding, then "a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify in the form of an opinion, provided (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 principals and methods reliably to the facts of the case." Id.
Feinberg v. Katz, supra, 2007 WL 4562930 at *6-*7. See also S.E.C. v. Badian, 06 Civ. 2621 (LTS), 2011 WL 4526104 at *2 (S.D.N.Y. Sept. 29, 2011) (Swain, D.J.); CIT Group/Bus. Credit, Inc. v. Graco Fishing & Rental Tools, Inc., 09 Civ. 9861, 2011 WL 4431165 at *1-*2 (S.D.N.Y. Sept. 23, 2011) (Marrero, D.J.).
"Rule 702 is intended to ensure that the expert testimony is 'helpful to the jury in comprehending and deciding issues beyond the understanding of a layperson.'" Feinberg v. Katz, supra, 2007 WL 4562930 at *7, quoting DiBella v. Hopkins, 403 F.3d 102, 121 (2d Cir. 2005). To that end, expert testimony describing relevant background information, such as customary and industry practice in a given field, is frequently admissible if it will be helpful to the jury. See Marx & Co., v. Diners Club, Inc., 550 F.2d 505, 508-09 (2d Cir. 1977) (testimony about "step-by-step practices ordinarily followed . . . in shepherding a registration statement through the SEC" is admissible "under the same theory as testimony concerning the ordinary practices of physicians or concerning other trade customs: to enable the jury to evaluate the conduct of the parties against the standards of ordinary practice in the industry"); CIT Group/Bus. Credit, Inc. v. Graco Fishing & Rental Tools, Inc., supra, 2011 WL 4431165 at *3 ("[P]roposed testimony to establish prevailing customs and practices in the commercial lending industry is relevant and reliable and would be admissible for that purpose . . . ."); Media Sport & Arts s.r.l. v. Kinney Shoe Corp., 95 Civ. 3901 (PKL), 1999 WL 946354 at *3 (S.D.N.Y. Oct. 19, 1999) (Leisure, D.J.) (finding "customs and practices unique to the sports marketing industry" will be helpful to the jury). But see Marx & Co. v. Diners Club, Inc., supra, 550 F.2d at 509 n.11 ("Of course, expert testimony concerning the practices of a particular trade or business is not admissible if . . . only the jury's common understanding and not the customary practices or usages are relevant.").
However, expert testimony may not go beyond its proper role of assisting the jury. Although Rule 704(a) of the Federal Rules of Evidence provides that "[a]n opinion is not objectionable just because it embraces an ultimate issue of fact," this does not mean that an expert is free to give testimony that effectively tells the fact finder what conclusion to reach.
The reasoning behind Rule 704(a) is that if a witness (especially an expert) provides a solid foundation and explanation on an issue for which the fact-finder needs assistance, the factfinder might be left hanging if the witness cannot cap off the testimony with a conclusion about the ultimate issue to which the expert is testifying. Testimony is a narrative, and jurors can be upset and confused if a witness leaves them with testimony that is less than a full narrative -- it is like the joke without the punchline, the mystery without the last page. Particularly with respect to experts, a conclusion on the ultimate issue often ties the witness's testimony together into a coherent whole, and as such it will be more helpful to state the conclusion along with the rest of the opinion. The rule also recognizes that a distinction between ultimate and other issues is elusive, and that common-law decisions attempting to draw such a distinction were often arbitrary and unpredictable.
3 Stephen A. Saltzburg, Michael M. Martin & Daniel J. Capra, Federal Rules of Evidence Manual § 704.02 at 704-3 (10th ed. 2011). In Marx & Co., v. Diners Club, Inc., "the Second Circuit recognized that while an expert 'may testify to an ultimate fact, and to the practices and usages of a trade, we think care must be taken lest [the expert] be allowed to usurp the function of the judge [or the jury].'" Highland Capital Mgmt., L.P. v. Schneider, supra, 551 F. Supp. 2d at 176-77, quoting Marx & Co. v. Diners Club, Inc., supra, 550 F.2d at 511.
Trial courts must be careful to prevent experts from offering opinions that embody legal conclusions. See United States v. Scop, 846 F.2d 135, 139 (2d Cir. 1988). To allow such opinions would "trespass on the province of the jury and the trial court" by imposing the expert's view of what the law is. Fiataruolo v. United States, 8 F.3d 930, 941 (2d Cir. 1993). However, the Federal Rules of Evidence were amended over twenty years ago to allow expert witnesses to render opinions even if they "embrace an ultimate issue to be decided by the trier of fact." Fed.R.Evid. 704. This amendment provided trial courts with more latitude to allow experts to testify about issues that would help the jury understand concepts it needed to know to render a verdict despite the fact that the opinions may encroach on matters of law. Thus, the Second Circuit has held that "[e]xperts may testify on . . . mixed questions of fact and law." Fiataruolo, 8 F.3d at 941.
Cary Oil Co. v. MG Ref. & Mktg., Inc., 99 Civ. 1725 (VM), 2003 WL 1878246 at *5 (S.D.N.Y. Apr. 11, 2003) (Marrero, D.J.). See also United States v. Bilzerian, 926 F.2d 1285, 1294 (2d Cir. 1991) ("As a general rule, an expert's testimony on issues of law is inadmissible."); Feinberg v. Katz, supra, 2007 WL 4562930 at *7 ("An expert witness's opinion may not merely tell the jury what result to reach, and it may not usurp the trial judge's function of instructing the jury on the law." (internal quotation marks and citations omitted)); see also Marx & Co. v. Diners Club, Inc., supra, 550 F.2d at 511 n.17 ("The abolition of the ultimate issue rule does not lower the bars so as to admit all opinions. [Rules 701, 702, and 403] afford ample assurances against the admission of opinions which would merely tell the jury what result to reach . . . ." (citation omitted)).
In United States v. Scop, 846 F.2d 135 (2d Cir.), modified, 856 F.2d 5 (2d Cir. 1988), a criminal case in which the defendants were charged with fraudulent and manipulative securities practices, the Second Circuit endeavored to differentiate between expert testimony expressing ultimate factual conclusions, which would be admissible, and the expression of ultimate legal conclusions, which would be inadmissible:
Had [the expert] merely testified that controlled buying and selling of the kind alleged here can create artificial price levels to lure outside investors, no sustainable objection could have been made. Instead, [he] made no attempt to couch the opinion testimony at issue in even conclusory factual statements but drew directly upon the language of the statute and accompanying regulations concerning "manipulation" and "fraud". . . . In essence, his opinions were legal conclusions that were highly prejudicial and went well beyond his province as an expert in securities trading. Moreover, because his opinions were calculated to "invade the province of the court to determine the applicable law and to instruct the jury as to that law," FAA v. Landy, 705 F.2d 624, 632 (2d Cir.) . . . they could not have been helpful to the jury in carrying out its legitimate functions. "The admission of such testimony would give the appearance that the court was shifting to witnesses the responsibility to decide the case." Marx & Co. v. Diners' Club, Inc., 550 F.2d 505, 510 (2d Cir.) . . . . "It is not for witnesses to instruct the jury as to applicable principles of law, but for the judge." Id. at 509--10.
United States v. Scop, supra, 846 F.2d at 140.
Although the distinction between ultimate issues of fact and ultimate issues of law is "blurry at best in many cases," 3 Stephen A. Saltzburg, Michael M. Martin & Daniel J. Capra, Federal Rules of Evidence Manual § 704.02 at 704-6 (10th ed. 2011), certain parameters in expert testimony are clear. An expert may not (1) instruct the jury as to applicable principals of the law, Marx & Co. v. Diners Club, Inc., supra, 550 F.2d at 509-10, (2) go beyond the scope of the witness's expertise by rendering legal opinions interpreting contract terms at issue, Marx & Co. v. Diners Club, Inc., supra, 550 F.2d at 509-10, (3) state a legal conclusion as to issues of contract formation, Media Sport & Arts s.r.l. v. Kinney Shoe Corp., supra, 1999 WL 946354 at *3, (4) "opine as to whether certain events constituted a material breach of [a contract]," CIT Group/Bus. Credit, Inc. v. Graco Fishing and Rental Tools, Inc., supra, 2011 WL 4431165 at *3, or (5) state legal conclusions as to a party's culpability based on "inadequately explored legal criteria," 1972 Advisory Committee Notes to Fed.R.Evid. 704, or "inappropriately drawn conclusions regarding the legal significance of various facts," In re Blech Sec. Litig., 94 Civ. 7696 (RWS), 2003 WL 1610775 (S.D.N.Y. Mar. 26, 2005) (Sweet, D.J.). In addition, an expert witness may not offer testimony which merely rehashes the testimony of percipient witnesses. United States v. Amuso 21 F.3d 1251, 1263 (2d Cir. 1994) ("A district court may commit manifest error by admitting expert testimony where the evidence impermissibly mirrors the testimony offered by fact witnesses, or the subject matter of the expert's testimony is not beyond the ken of the average juror."); Arista Records LLC v. Usenet.com, Inc., 608 F. Supp. 2d 409, 424 (S.D.N.Y. 2009) (Katz, M.J.) ("An expert who simply regurgitates what a party has told him provides no assistance to the trier of fact through the application of specialized knowledge.")
Additionally, an expert may not testify as to facts not within his personal knowledge, and may not opine as to a party's state of mind, whether a party acted in bad faith, or as to the credibility of witnesses. See United States v. Scop, supra, 846 F.2d at 142; CIT Group/Bus. Credit, Inc. v. Graco Fishing & Rental Tools, Inc., supra, 2011 WL 4431165 at *3; Highland Capital Mgmt., L.P. v. Schneider, supra, 551 F. Supp. 2d at 180-81; Feinberg v. Katz, supra, 2007 WL 4562930 at *6-*7; see also In re Rezulin Prod. Liab. Litig., 309 F. Supp.2d. 531, 547 (S.D.N.Y. 2004 (Kaplan, D.J.) ("Inferences about the intent or motive of parties or others lie outside the bounds of expert testimony.").
An expert may (1) engage in a "factual discussion regarding the customs and practices of [an] industry, an analysis of whether the conduct of the parties . . . conformed to those customs, and whether such behavior evidences the parties' intent to be bound by contract," Media Sport & Arts s.r.l. v. Kinney Shoe Corp., supra, 1999 WL 946354 at *3, and (2) in cases involving a complex legal concept, such as veil-piercing, analyze the evidence and identify how such evidence may indicate that the relationship between the defendants "exceeded the control a parent ordinarily exercises over its subsidiary so as to justify veil-piercing," Cary Oil Co. v. MG Ref. & Mktg., Inc., supra, 2003 WL 1878246 at *5. Such an analysis would not "cross the boundaries into an opinion that would tell the jury what decision to reach." Cary Oil Co. v. MG Ref. & Mktg., Inc., supra, 2003 WL 1878246 at *5. One case has also held that an expert may testify concerning "what would have been customary for [a party] to expect or assume, [but] not what [the party] actually did expect or assume."
Pension Comm. of Univ. of Montreal Pension Plan v. Banc of America Secs., LLC, 691 F. Supp. 2d 448, 467 (S.D.N.Y. 2010) (Scheindlin, D.J.).
Finally, although it is generally true that "an expert's testimony on issues of law is inadmissible," United States v. Bilzerian, supra, 926 F.2d 1285 at 1294, the Second Circuit has found testimony on an ultimate legal issue to be admissible and proper in a very limited circumstance.
In [Fiataruolo v. United States], in which the plaintiffs sought a refund of tax penalties that had been assessed against them by the government, the Second Circuit held that the district court had not abused its discretion in allowing a certified public accountant to testify that one of the plaintiffs was not a "responsible person" under 26 U.S.C. § 6672, i.e. that he was not responsible for the payment of taxes. In so ruling, the Court of Appeals noted that
Expert Cohen went through and explained in some detail the payroll checks and bank account statements, providing factual explanations for those procedures that were being followed at C & C Security. Then he offered his opinion based on those procedures as to whether Fiataruolo was responsible under § 6672. Cohen's testimony gave the jury helpful information beyond a simple statement on how its verdict should read. He couched his opinion specifically "on the evidence that I looked at and the work that I did." Thus, unlike the impermissible statements in Scop, Cohen's opinion was not a simple bald assertion of the law and was not designed to invade the province of the trial court. Cf. Karns v. Emerson Elec. Co., 817 F.2d 1452, 1459 (10th Cir. 1987) (finding admissible testimony of expert who "explained the bases for his opinions in sufficient detail to permit the jury to independently evaluate his conclusions"); United States v. Milton, 555 F.2d 1198, 1204 (5th Cir. 1977) (finding admissible similar testimony that combined factual explanations and legal conclusions).
Id. at 942. Noting that the trial court admonished the jury that the expert's views were "not binding," the court stated that "the instruction adequately protected against the jury's giving undue weight to Cohen's opinion." Id.
Bausch & Lomb, Inc. v. Alcon Labs., Inc., 79 F. Supp. 2d 252, 257 (W.D.N.Y. Jan. 5, 2000), quoting Fiataruolo v. United States, 8 F.3d 930, 942 (2d Cir. 1993); see also Cary Oil Co. v. MG Ref. & Mktg., Inc., supra, 2003 WL 1878246 at *5.
In addition to the foregoing requirements, expert testimony is subject to certain procedural requirements.
Fed.R.Civ.P. 26(a)(2) provides that if a party that intends to call an expert at trial, the witness must be identified in a disclosure prior to trial and this disclosure must be accompanied by a written report -- prepared and signed by the witness -- if the witness is one retained or specially employed to provide expert testimony in the case . . . . The report must contain:
(i) a complete statement of all opinions the witness will express and the basis and reasons for them;
(ii) the facts or data considered by the witness in forming them;
(iii)any exhibits that will be used to summarize or support them . . .
The expert's report operates to limit the scope of the testimony that can be elicited from the expert. Opinions that are not disclosed in the expert's report cannot be offered.
An expert cannot testify on a matter not disclosed in his preliminary report. That report must state "the testimony the witness is expected to present during direct examination." 1993 Amendments to Fed.R.Civ.P. 26(a)(2) advisory committee's note. Were I to permit Wayburn to give background testimony which is not contained in his report, it would undermine the rationale for requiring the report in the first instance: to provide sufficient notice of an expert's testimony so that the opposing party may prepare for cross--examination or rebuttal. Id.
Taylor v. Evans, 94 Civ. 8425 (CSH), 1997 WL 154010 at *2 (S.D.N.Y. Apr. 1, 1997) (Haight, D.J.); accord Fund Comm. Serv. II, Inc. v. Westpac Banking Co., 93 Civ. 8298 (KTD)(RLE), 1996 WL 469660 at *3 (S.D.N.Y. Aug. 16, 1996) (Ellis, M.J.) (Rule 37(c)(1) requires preclusion of new expert opinions and bases for those opinions unless failure to disclose them is "harmless."); Dimensional Sound v. Rutgers Univ., 92 Civ. 2350 (DLC), 1996 WL 11244 at *6 (S.D.N.Y. Jan. 10, 1996) (Cote, D.J.); Ferriso v. Conway Org., 93 Civ. 7962 (KMW), 1995 WL 580197 at *2-*3 (S.D.N.Y. Oct. 3, 1995) (Wood, D.J.) (expert precluded from testifying beyond the scope of her report). See generally 2 Michael C. Silberberg, Edward M. Spiro & Judith L. Mogul, Civil Practice in the Southern District of New York § 15:9 at 15-35 (2d ed. 2010).
B. Application of the Foregoing
Principles to the Testimony
CIBC Seeks to Elicit from Mr. Cohen
As noted above, CIBC has submitted a letter dated February 6, 2012 identifying all the opinions it seeks to elicit from Mr. Cohen. At the outset of that letter, CIBC concedes that it will not elicit from Mr. Cohen: (1) ultimate issues; (2) legal conclusions; (3) statements of a party's knowledge, and (4) facts concerning CIBC's actions, the loan or underlying property at issue that are not already in evidence except facts of the type ordinarily relied upon by experts (Quigley Letter at 2). To the extent CIBC intends to elicit facts from Mr. Cohen which are not otherwise in evidence but are facts of the type ordinarily relied upon by experts, it is precluded from doing so. Although experts are permitted to rely on certain types of facts that are not in evidence, that does not make those facts admissible.
Fed.R.Evid. 703; 3 Stephen A. Saltzburg, Michael M. Martin & Daniel J. Capra, Federal Rules of Evidence Manual § 703.02 at 703-8 (10th ed. 2011). The last sentence of Fed.R.Evid. 703 provides that matters relied upon by an expert that are not in evidence "may [be] disclose[d] to the jury only if their probative value in helping the jury evaluate the opinion substantially outweighs their prejudicial effect." CIBC has not, however, offered any argument that would render such matters disclosable to the jury under this sentence.
In addition, Mr. Cohen is precluded from offering any testimony characterizing any of the putative breaches of the MLPA as being not material or not adverse. The meanings of these words are straightforward and well known: "material" means important or significant and "adverse" means unfavorable. No evidence has been offered that these are terms of art in the financial services industry or that they have meanings in that industry that are different from their ordinary meanings. Accordingly, there is no need for expert testimony as to their meanings. See United States v. Sanpedro, 352 F. App'x 482, 485 (2d Cir. 2009) (expert testimony appropriate where subject matter is beyond the ken of average juror); United States v. Tapia--Ortiz, 23 F.3d 738, 740 (2d Cir. 1994) (same). In addition, at his deposition, Mr. Cohen could not articulate a definition for either term.
Q: With respect to the last sentence of this paragraph you use the phrase "materially and adversely"?
Q. What does materially mean to you?
A. Materially means that something that -- that affects -- that would affect -- the value would affect the -- materially affect the value of the property would materially affect the ability for the -- the property to function with its cash flow; so it -- it's in the terms of what I'm talking about material ...