United States District Court, S.D. New York.
U.S. COMMODITY FUTURES TRADING COMMISSION, Plaintiff,
ERIC MONCADA; BES CAPITAL LLC; and SERDIKA LLC, Defendants.
OPINION AND ORDER STRIKING EXPERT REPORT OF STEVEN E. WOLLACK
COLLEEN McMAHON, District Judge.
In opposition to the motion for summary judgment made by the Plaintiff Commodity Futures Trading Commission ("CFTC"), the Defendant Eric Moncada has submitted a 12-page report prepared by purported expert Steven E. Wollack. The CFTC has moved to strike the expert report. That motion is granted.
In this action, the CFTC alleges that on October 6, 12, 14, 19, 26, 27, 29 and 30, 2009, Moncada attempted to manipulate the price of the December 2009 contract for CBOT #2 Soft Red Winter Wheat Futures, in violation of various sections of the Commodity Exchange Act, 7 U.S.C. §§9, 13b and 13(a)(2). The CFTC alleges in substance that Moncada repeatedly placed and then almost immediately cancelled orders for 200 lots or more of these futures, at or near the best bid or offer price, with the intent to create a misimpression of increasing liquidity in the market. At the same time, he was placing smaller lot orders on the opposite side of the market, with the intent of taking advantage of any price movements that might result from the misleading impression he was creating with his now-you-see-it-now-you-don't large-lot orders. The CFTC does not contend that Moncada always succeeded in achieving what it believes to have been his goal; the charge is attempted, not actual, manipulation, and all the Commission need prove is (1) intent to affect the market price of a commodity, and (2) some overt act in furtherance of that intent. CFTC v. Parnon Energy, Inc., 875 F.Supp.2d 233, 250 (S.D.N.Y. 2012).
The CFTC has also charged Moncada with engaging in fictitious sales and entering into non-competitive transactions on four trading dates in October 2009; those charges are not relevant to the expert report that is the subject of the pending motion.
The defendant offers in opposition to the CFTC's motion for summary judgment a report from Steven E. Wollack, who purports to be an expert in commodities trading. Mr. Wollack opines that Moncada's trading did not manipulate the market, and that that the fact that plaintiff cancelled a large number of orders in short periods of time does not, in and of itself, prove intent to manipulate the market. What is important, he says, is whether the trader was taking market risk; by contrast, he opines that traders who want to manipulate the market try to avoid risk. Because defendant did not use computer algorithms or engage in high speed trading, Wollack opines that Moncada was at great a risk of having trades in which he allegedly did not wish to engage actually execute. This fact, he says, negates intent to manipulate. Wollack also offers some opinions about particular orders that Moncada placed to illustrate what the defendant "might" have intended by his conduct, and opines that defendant's behavior failed to move the market-or to move it very much-which, in his view, is also evidence of defendant's lack of intent to move the market.
The CFTC moves to strike Wollack's report in whole or in substantial part prior to the court's consideration of the motion for summary judgment. That motion is granted.
For expert testimony to be admitted, the expert must be found to be qualified to render his opinion; his opinion must be reliable; his opinion must be relevant; and his opinion must not contain legal conclusions. FED. R. ED. 702. The court is the "gatekeeper" who must decide whether expert testimony meets these standards. Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 589-92 (1993); Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999).
An expert is someone who by virtue of skill, training, or experience can help enlighten the trier of fact about some esoteric field of knowledge not generally shared by the public at large. Experts need not be scientists, but when the proffered expert is offering experience-based expert testimony, the court must determine whether he "employs in the courtroom the same level of intellectual rigor that characterized the practice of an expert in the relevant field." Id. at 152.
In determining whether an expert's opinions are reliable, the court's focus must be on the expert's reasoning and methodology, not on his conclusions. General Electric Co v. Joiner, 522 U.S. 136, 146 (1997). Judges are not to "be deceived" by experts who offer their credentials in lieu of analysis; impressive and extensive experience does not equate to analysis. Primavera Familienstifung v. Askin, 130 F.Supp.2d 450, 529 (S.D.N.Y. 2001). For this reason, expert opinions that are not backed up with analysis, studies, or facts that support the conclusions do not meet the threshold test of reliability. Compania Embotelladora Del Pacifico v. Pepsi Cola Col., 650 F.Supp.2d 314, 319-20 (S.D.N.Y. 2009).
Even if the testimony of an expert is based on reliable methodology, a court must evaluate its relevance, by deciding whether the information provided "will assist the trier of fact to understand the evidence or determine a fact in issue." FED. R. CIV. 702. Expert testimony that is not probative of a key issue is irrelevant and inadmissible. Fashion Boutique of Short Hills, Inc. v. Fendi USA Inc., 314 F.3d 48, 60 (2d Cir. 2002).
Finally, expert testimony on issues of law is inadmissible. United States v. Bilzerian, 926 F.2d 1285, 1294 (2d Cir. 1991). The expert cannot tell the trier of fact what result to reach. While an expert can "make factual conclusions that embrace an ultimate issue to be decided by the fact-finder, the expert cannot give testimony stating ultimate legal conclusions based upon those facts." Highland Capital Mgmt L.P. v. Schneider, 551 F.Supp.2d 173, 182-83 (S.D.N.Y. 2008); Di Bella v. Hopkins, 403 F.3d 102, 121 (2d Cir. 2005).
(1) Wollack Is Not Unqualified to Render Expert Opinion Testimony.
The CFTC first moves to strike Wollack's Report on the ground that Wallack lacks the sort of qualifications that would be necessary to evaluate whether Moncada attempted to manipulate the December 2009 Wheat Futures Contract, or what impact Moncada's large-lot orders would have had on the market price of the December 2009 Wheat Futures Contract. I am unconvinced.
A witness may offer opinion testimony pursuant to Fed. R. Ev. 702 as long as he is qualified as an expert by virtue of his "knowledge, skill, experience, training or education" in a relevant area. The CFTC complains that Wallack lacks the academic credentials and teaching/publication history that it believes would be necessary to ...