United States District Court, S.D. New York
MICHAEL L. PASTERNAK, Plaintiff,
DOW KIM, Defendant
Decided: August 9, 2013.
Amended: August 14, 2013.
For Plaintiff: Thomas A. Holman, Esq., HOLMAN LAW, P.C., New York, NY; Kenneth F. McCallion, Esq., McCALLION & ASSOCIATES LLP, New York, NY.
For Defendant: Leo V. Leyva, Esq., Jed M. Weiss, Esq., COLE, SCHOTZ, MEISEL, FORMAN & LEONARD, P.A., New York, NY.
AMENDED MEMORANDUM DECISION[*]
DENNY CHIN, United States Circuit Judge.
Before the Court is defendant Dow Kim's motion to preclude plaintiff Michael L. Pasternak from calling Stephanie Plancich, Ph.D., as an expert witness at trial. Dr. Plancich would testify that Pasternak suffered lost income of some $8.65 million for the period from September 4, 2007 through September 30, 2011. (Plancich Report at 6). As calculated by Dr. Plancich, most of that amount -- $6.8 million (PX 168) -- consists of bonus compensation that Pasternak would have received over approximately four years, had he accepted an offer from Morgan Stanley Investment Inc. (" Morgan Stanley" ). (See PX 2).
Plancich assumed that Pasternak would have remained at Morgan Stanley for approximately 4.1 years, based on his prior work experience and the " typical experience of other Managing Directors in the Fixed Income Division at Morgan Stanley." (Plancich Report at 3). Plancich then assumed that Pasternak would receive bonus compensation in each of the four years equal to the bonus he would have received for the prior year (beginning with the bonus of $1.5 million guaranteed for the first year), adjusted upwards or downwards by a percentage drawn from the annual return of the Merrill Lynch U.S. High Yield Master II Index, which ranged from -26.4% to 57.5% from 2008-2011. In other words, for example, the index for 2008 was -26.4%; hence, to calculate
Pasternak's bonus for 2008, Plancich multiplied the prior year's bonus ($1.5 million) by 26.4% and deducted that amount ($396,000) from the prior year bonus ($1.5 million - $396,000 = $1,104,000). (See PX 168). To calculate the 2009 bonus, Plancich took the 2008 bonus ($1,104,000) and adjusted it by the annual return of the index for 2009 (57.5%) to calculate a bonus of $1,738,800. And so on.
I held a Daubert hearing on August 7, 2013. Plancich testified and explained the above calculations. She was unable to provide concrete support for her method of calculating Pasternak's anticipated bonus had he accepted Moran Stanley's offer -- taking the prior year's bonus and adjusting it upwards or downwards for that year in accordance with that year's performance of a general index of securities.
Kim's motion is granted, at least in part. I will not permit Plancich to testify to the above bonus calculation for both factual and legal reasons.
First, as a factual matter, Plancich's damages methodology is not based on a reliable foundation. To be admissible, expert testimony must be both relevant and reliable. Daubert v. Merrell Dow Pharms., Inc.,509 U.S. 579, 589, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993). As the Court explained in Daubert, the trial judge's task is to " ensur[e] that an expert's testimony both rests on a reliable foundation and is relevant to the task at hand." Id. at 597. Pasternak has not shown that Plancich's damages theory is " based on sufficient facts or data" or that it is " the product of reliable principles and methods." Fed.R.Evid. 702. Plancich has offered no support for the notion that in the investment banking field, the change in discretionary bonus compensation from year to year will track the change in annual performance of a particular fund or portfolio or, for that matter, a general index, starting with a base of a bonus guaranteed for the first year. Plancich has never been employed in ...