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ECD Investor Group v. Credit Suisse International

United States District Court, S.D. New York

August 28, 2017

ECD INVESTOR GROUP, et al., Plaintiffs,

          OPINION & ORDER

          SARAH NETBURN, United States Magistrate Judge

         On March 28, 2017, Defendants Credit Suisse International and Credit Suisse Securities USA (LLC) (jointly, “Credit Suisse”) filed a motion for summary judgment. ECF No. 156. This motion was supported by a declaration by counsel Christopher J. Clark seeking to introduce 119 exhibits. ECF No. 180. Plaintiffs object to and move to strike, in whole or in part, three such exhibits, the declarations of Deborah Burstein, ECF No. 180-116, Tobias Schraven, ECF No. 180-33, and Tucker Martin, ECF No. 180-34.[1] For the following reasons, Plaintiffs' motion to strike is GRANTED as to the Burstein Declaration and GRANTED in part and DENIED in part as to the Schraven and Martin Declarations. Credit Suisse is, however, granted leave to file an updated version of the Burstein Declaration by Wednesday, August 30, 2017.

         I. The Burstein Declaration

         Deborah Burstein is Director and Counsel at Credit Suisse Securities (USA) LLC. ECF No. 180-116 at ¶ 1. Her Declaration, which consists of three paragraphs, refers to a document bearing Bates number CS-ECD0000001 (“CS1”), a spreadsheet that contains a record of all sales of Energy Conversion Devices, Inc. (“ECD”) convertible notes and common stock “with or through” Credit Suisse during the Plaintiffs' proposed class period. Id. at ¶ 2. Burstein attests that “each and every purchase of ECD common stock effected with or through [Credit Suisse] during the [class period] can be found in CS1 and any subsequent sale of ECD common stock . . . can also be found in CS1. Therefore, if a particular client purchased ECD common stock through [Credit Suisse] . . . CS1 would reflect a common stock purchase into a specific account relating to the client. The common stock remained in that specific account . . . unless another transaction in CS1 shows the sale of common stock from that client's same account . . . .” Id. at ¶ 3.

         Plaintiffs advance two principal arguments in support of their motion to strike the Burstein Declaration. First, they contend that the Declaration should be stricken pursuant to Federal Rules of Civil Procedure 26(a)(1)(A) and 37(c)(1) because Burstein was never disclosed as a fact witness. According to Plaintiffs, Credit Suisse is using Burstein to “testify to new facts” five months after the close of fact discovery, and they have therefore not had the opportunity to test her assertions in discovery. ECF No. 174, Pls.' Br. at 6. Second, they argue that the Declaration is not based on Burstein's personal knowledge as required by Federal Rule of Civil Procedure 56(c)(4) because it fails to explain how Burstein, as an attorney, knows the content of the spreadsheet or the completeness of the trading data therein.

         A. Failure to Disclose Burstein as a Fact Witness

         Federal Rule of Civil Procedure 26(a)(1)(A) requires parties to designate all individuals “likely to have discoverable information-along with the subjects of that information-that the disclosing party may use to support its claims or defenses.” A party that has not complied with the initial disclosure rule may not “use that information or witness to supply evidence on a motion, at a hearing, or at a trial, unless the failure was substantially justified or harmless.” Fed.R.Civ.P. 37(c)(1).

         As Credit Suisse contends, however, Burstein, an attorney in Credit Suisse's litigation department who worked on this case, but did no work on the ECD offerings themselves, was not a fact witness “likely to have discoverable information.” Instead, it appears evident that the Declaration attempts to serve as a “vehicle[s] placing before the court, relevant admissible documents . . . in a cohesive manner.” New York v. Solvent Chem. Co., 218 F.Supp.2d 319, 331 (W.D.N.Y. 2002). Plaintiffs do not object to the admissibility of CS1, the underlying document that the Burstein Declaration seeks to introduce, and their expert's theory of liability concerning “excess short shares” sold by Credit Suisse expressly relies on CS1's data.

         Moreover, Plaintiffs read the Burstein Declaration to attest that CS1 reflects Credit Suisse's hedge fund clients' sales irrespective of whether or not they were executed through Credit Suisse. Plaintiffs argue that the admission of such statement-which would flatly contradict other witnesses' testimony in discovery and the assumptions of both parties' experts- would be tantamount to “sandbagging” them with new evidence at the eleventh hour.

         Plaintiffs appear to reach this conclusion by considering only the last sentence of the declaration, which states that common stock purchased by a client from Credit Suisse would remain in that customer's account unless another transaction in CS1 showed that it had been sold, therefore suggesting that CS1 could also track sales of common stock between Credit Suisse's clients and third parties. This is simply not a credible reading of the Declaration in its totality, which repeatedly states that CS1 records only transactions between Credit Suisse and its clients. No “new factual claim” is made in the Burstein Declaration. It merely asserts that CS1 is a full and accurate record of all transactions in ECD notes and stock made between Credit Suisse and its clients.

         Accordingly, Ms. Burstein was not an individual “likely to have discoverable information” subject to the initial disclosure provisions of Rule 26(a)(1)(A), and her Declaration is not excludable under Rule 37(c)(1).

         B. Personal Knowledge

         Federal Rule of Civil Procedure 56(c)(4) requires that an affidavit or declaration filed to support a summary judgment motion “must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant or declarant is competent to testify on the matters stated.” Declarations that do not comply with this requirement may be stricken from the record. Hollander v. Am. Cyanamid Co., 172 F.3d 192, 198 (2d Cir. 1999).

         The Burstein Declaration is sparse as to the basis of Burstein's knowledge of the integrity of the data contained in CS1, stating only that Burstein was “Director and Counsel” at Credit Suisse. In its briefing, Credit Suisse reveals that Burstein oversaw the collection of the data underlying CS1 that was produced in response to Plaintiffs' discovery requests, was intimately acquainted with the creation of the spreadsheet, and “reviewed the completeness of CS1 in her official capacity.” ECF No. 183, Defs.' Mem. at 8-9. While this would be a sufficient basis to admit the Declaration, these assertions appear for the first time in Credit Suisse's memorandum of law opposing the motion to strike and were never declared by Burstein herself. Accordingly, the Declaration submitted ...

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