MBIA Insurance Corporation v. Patriarch Partners VIII, LLC et al, No. 1:2009cv03255 - Document 81 (S.D.N.Y. 2012)
Court Description: OPINION: For the reasons set forth in this Opinion: Plaintiff MBIA Insurance Corporation ("MBIA" or the "Plaintiff") and Defendants Patriarch Partners VIII, LLC and LD Investments, LLC (collectively, "Patriarch" or the & quot;Defendants") have filed various motions in limine with respect to certain anticipated evidence in the upcoming trial of this action, which is tentatively scheduled to begin on October 15, 2012. Based upon the conclusions set forth below, (1 ) evidence relating to MBIA's internal loss reserves will admitted, (2) the MBIA attorney-client privilege is waived with respect to testimony of MBIA witnesses as to MBIA's intent concerning provisions of the Master Agreement the Indenture , (3) evidence relating to the collateral for Zohar II and Zohar III and the Patriarch pitch-books will be admitted, (4) the admissibility of the Natixis Documents as business records will be determined at the time they are offered, depending on the purpose for which particular documents are offered and the practice of Natixis with respect to the offered documents, (5) discovery is reopened for the purpose of taking the depositions of Anthony McKiernan ("McKiernan"), Mitchell Sonkin (& quot;Sonkinn) and Ram Wertheim ("Wertheim"), (6) the expert testimony David Miller ("Miller") will be admitted and (7) the expert testimony of Joseph Mason ("Mason") will be admitted. The disposition above of the pending motions may raise additional issues. A pretrial conference will be held on September 18, 2012 at ten o'clock a.m. or at such other date and time convenient to counsel and the Court. The trial of this action will commence on October 15, 2012 at ten o'clock a.m. or on such other date and time suitable for counsel and the Court. Counsel will meet and confer with respect to these and any other items and advise the Court in writing by September 14 of any open items to be resolved at the pr etrial conference. Conclusion: The pending motions are determined as set forth above. A pretrial conference will be held September 18 with the trial to commence on October 15. It is so ordered. ( Jury Trial set for 10/15/2012 at 10:00 AM before Judge Robert W. Sweet. Pretrial Conference set for 9/18/2012 at 10:00 AM before Judge Robert W. Sweet.) (Signed by Judge Robert W. Sweet on 7/2/2012) (ja)
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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK --- - --X MBIA INSURANCE CORPORATION, 09 Civ. 3255 Plaintiff, OPINION -againstPATRIARCH PARTNERS VIII, LLC, a Delaware limited liability company, and LD INVESTMENTS, LLC, a Delaware limited liability company, ..--=..--.. . "' . " . . -~ De f endant s . ..".,~,.."" . .,. IUSDCSiJNY::::::-=::::::::=- -x DOCUMENT A P PEA RAN C E S: At BINGHAM MCCUTCHEN LLP 399 Park Avenue New York, NY 10022-4689 By: Jeffrey Q. Smith, Esq. Susan F. DiCicco, Esq. Kevin J. ron, Esq. At for Defendants BRUNE & RICHARD LLP One Battery Park Plaza New York, NY 10004 By: Charles A. Michael, David Elbaum, Esq. llary Richard, Esq. ELECTRONICALLY FILE. DOC #: .. ",D DATE FiLE5·--::::;-~~- Sweet, D.J. Plaintiff MBIA Insurance Corporation ("MBIA" or the "Plaintiff H) and Defendants Patriarch Partners VIII, LLC and LD lectively, Investments, LLC "Patriarch H or t "DefendantsH) have filed various motions in limine with respect to certain upcoming trial of this action, which anticipated evidence in ly scheduled to begin on October IS, 2012. is tentat Ba upon the conclusions set forth below, (1) evidence relating to MBIA's internal loss reserves will admitted, attorney- (2) the MBIA ient privilege is waived with respect to testimony of MBIA witnesses as to MB the I Master Agreement collateral s intent concerning provisions of t ure, (3) evidence relating to the Zohar II and Zohar III and the Patriarch pitch books will be admitted, Documents as bus they are off (4) the admissibility of the Nat s records will be determined at the time , depending on the purpose for which particular documents are of red and the practice of Nat to the offered documents, s with respect (5) discovery is reopened for the purpose of taking the depositions of Anthony McKiernan ("McKiernan"), Mitchell Sonkin ("Sonkin") and Ram Wertheim ("Wertheim"), s (6) expert testimony David Miller ("Miller") will be admit and (7) the expert testimony of Joseph Mason ("Mason") will be admitted. Prior Proceedings In an opinion dated February 6, 2012 (the "February 6 Opinion"), Patriarch's motion for summary judgment and MBIA's mot summary judgment were determined. for part Ins. v. Patriarch Partners VIII 2012 WL 382921 (S.D.N.Y. . 6, 2012). set forth the prior proceedings See MBIA LLC, No. 09 Civ. 3255, The February 6 Opinion this action, and famili with those proceedings is assumed. Joint Pre ty al Order ("PTO") was submitted by the parties and signed by the Court on March 12, 2012. The instant motions were marked fully submitted on June 13, 2012. The Facts Famil ity with the ts as set forth in the February 6 Opinion and the PTO is assumed. A brief recapitulation of the complicated transactions at issue constitutes a background for conclusions set forth below. 2 Patriarch is an filiate of Pat arch Partners, LLC, an investment firm founded and managed by Lynn ("Tilton"), its chief executive officer. Pat arch Partners, LLC specialize lton Patriarch and the management distressed assets and manage funds that make investments in distressed businesses. Patriarch and its affiliates serve as collateral managers for collateralized debt obligation transactions or "CDOs." On November 13, 2003, Patriarch sponsored a new CDO, led Zohar CDO 2003-1, Limited, or "Zohar I.n Patriarch is the Collateral Manager of Zohar I under the Collateral Management Agreement among (i) the Issuer, (ii) Zohar CDO 2003 I, LLC, and (iii) Patriarch. As Collateral Manager of Zohar I, Patriarch is responsible for ecting and managing Zohar I's collate pool, meaning the assets underlying the security, in accordance with the transaction's governing documents, including the Indenture. The Class B Notes were issued as part of the Zohar I transaction. On November 13, 2003, MBIA, Patriarch and LDI also entered into the Master Agreement. 3 The Master Agreement sets forth Patriarch's obligation, subject to a number of conditions, to cause the transfer of up to 80%, or $120 million, of the face amount of the Class B Notes to one or more of certain CDOs insured by MBIA (the "Identified CDOs U) . Pat arch's contribution obligation was subject to several conditions, including, but not limited to, that the Class B Notes being transferred be rated "at least 'Baa3' by Moody's and 'BBB ' by Standard & Poor's as contemplated by Section 7.13(b) of the Indenture. /I Rat of "BBB-U or higher by S&P and "Baa3 U or higher by Moody's are considered "investment gradeU ratings. Master Agreement contained a provision that Pat arch, subject to, among other things, the condition that the Class B Notes reasonable rated stment grade, "use commercially forts" to contribute up to $120 million of the Class B Notes to the Identified CDOs as necessary to remediate expected shortfalls in those transactions. The Master Agreement so contained a provision that Patriarch: use commercially reasonable efforts to procure as soon as reasonably practicable the satisfaction of the condit specified [including conditions that the Class B Notes be rated investment grade] "' including without limitation consenting to and otherwise supporting 4 supplemental indentures/ amendments, waivers or other modifications to [the relevant documents] and taking such other action as may be necessary to effectuate the intention of and/or litate the performance of Patriarch VIII's obI ion to make Contributions hereunder. The Applicable Standard "The purpose of an in limine motion is to aid al process by enabling the Court to rule in advance of on the relevance that are certain forecasted evidence/ as to issues finitely set for trial, without lengthy argument at, or interruption of, the t Island Intellectual II LLC v. Deutsch Bank AG, No. 09 Civ. 2675 (KBF) , 2012 WL 526722, at *1 (S.D.N.Y. . 14, 2012) (quoting Palmieri v. Defaria, 88 F. 3d 136, 141 (2d Cir. 1996)) However, "[e]vidence should be excluded on a motion in limine only when the evidence is clearly inadmissible on all potential grounds. 3796 (PKL) , 2005 WL 1026515/ at *3 Baxter ~L_ ics ______ ~ (S.D.N.Y. May 2, 2005) Inc. v. Novatek Med. ________________________ 5520, 1998 WL 665138/ at *3 Further, Commerce Funding Corp. litation Servs. Inc./ No. 01 C v. __________ 1I ~ (citing Inc., No. 94 Civ. _ _ _ __ (S.D.N.Y. Sept. 25, 1998)). "[a] court considering a motion in limine may reserve judgment until trial/ so that the motion is pI appropriate factual context. /I Id. 5 (cit in the Nat'l Union Fire Ins. Co. v. L.E. Myers Co. Grp., 937 F. Supp. 276, 287 (S.D.N.Y. 1996) . Evidence Relating to MBIA's Loss Reserves Is Admissible MBIA has moved to precl at trial any Patriarch from introduc dence regarding MBIA's ernal loss reserves, accounting practices and discussions with its outside auditors as well as certain of Defendants' proposed trial MBIA contends consist of inadmissible hearsay_ ibits, which Accordi to MBIA, evidence concerning MBIA's reserving practices should excluded se it is irrelevant to the determination of this action, and, even if it were relevant, concerning MBIA's loss reserves should be excluded because the probat value of this evidence is outweighed by the danger of confusion of issues and MBIA also contends that certa 's exhibits, including a Patria fund, delay. rt by a of rd-party internal notes authored by MBIA's auditors and email communications authored by non-MBIA declarants, are inadmissible hearsay. For the reasons set forth rmitted to roduce evi present the chall low, Pat a is of MBIA's loss reserves and exhibits. 6 A. Evidence Concerning MBIA's Loss Reserves Is Relevant 1. The Evidence Addresses Disputed Communications Between MBIA And Patriarch A disputed issue in this trial concerns communications between MBIA and Patriarch. to 2008, "Pat MBIA has contended that from 2005 atedly refused to discuss the B Notes or arch Patriarch's plans for obtaining a rating on all or some of Notes." Pat B s disputed this claim. rch MBIA has moved to exclude 33 documents that incl reports to MBIA's loss reserve committee, excerpts from those reports and memos prepa by PriceWaterhouseCoopers ("PWC"), MBIA's auditors, concerning meetings of MBIA's loss reserve committee. quarter, MBIA's Insu Division made a presentation to MB Portfolio Management s loss reserve committee, which included a number of senior executives, regarding Z-l and Capt , the two COOs Class B Notes. MBIA hoped would be remediated using The loss reserve committee memos are said to show that each quarter from 2005 until 2008 the committee was told that "there has been no material change since last quarter." Similarly, PWC's memos are said to show 7 t MBIA's no material employees repeatedly told them "there has change since" the prior quarter. MBIA s contended that in the first quarter of 2006, when MBIA refused to insure Zohar III, Tilton retaliated by refusing to comply with the Master Agreement. contends that the reasonable Ti drawn that if rence can said she would not perform an Patriarch ement potent lly worth $120 million to MBIA, that information would have been to management in the above-described quarterly meetings. rted The absence of such statements in MBIA's loss reserve committee and PWC memos is s d to relevant to support Patriarch's position that Tilton did not refuse to comply with the Master Agreement. Because this evidence is probat to revealing the substance of the disputed communications between MBIA and Patriarch, the evidence is relevant and is admissible. 2. The Evidence Addresses The Scope Of The Parties' Obligations Under The Master Agreement A central issue for trial is "the scope of Patriarch's obligations under the Master Agreement." 2012 WL 382921, at *23. See MBIA has claimed that Patriarch was igated to seek a rating on the Class B Notes as soon as a 8 rated." "sizeable portion of the notes could disput that im. dence at The challenged loss reserve imed by Patria issue in this motion in limine is has Patri to be the scope of Patriarch's relevant to a determination obligation to seek a partial rating of the Class B Notes. MBIA has challenged 13 documents dated between July 15, 2002 and November 13, 2003, signed. e documents are relevant to the remediation transaction and to the Master Agreement. kground of the e parties' expectations under MBIA alleged in the Complaint that by 002, it recogni cert the Master Agreement was that it faced a risk insured COOs and approached Pat remediation strategy to min ze the losses on about a sk of loss. The pre- Master Agreement documents are relevant in that they concern internal discussion with MBIA about the potential losses amount of MBIA's reserves against those losses. MBIA has also lenged 33 documents dated after the Master Agreement was signed indicate that as the decline, MBIA increased November 2003 which allegedly rformance of Captiva and Z-l continued to e amount of Class B Notes that it assumed as a benefit in its loss reserve calculation. 9 According to Patr rch, that amount increased over t Patriarch cont Ilion. fail to about $90 that if it sought a rating and , or only a small portion of the Class B Notes were deemed ratable, then MBIA would have been forced to increase its reserves with additional cash to make up the short Following a rat not have ilure, it is contended that Patriarch would obligat s conti 11. to transfer the Class B Notes, and Class B Notes as an of et in its loss reserve calculations would have been invalid. Patriarch MB contends t use of t it can be inferred ed Patria e impos t MBIA would not have to take actions that would have the effect of a reserve liability on MBIA. Patriarch has submitted that such an inference counters MBIA's contention that Patriarch on an was obligated to seek a rati of the Class B Notes, and Patr reasonable manner when Zohar I rather t fined "si rch acted in a commer e portion" ally sought to build collateral value seek to ain a rati issue has been presented, and the Thus, a relevant dence is admissible. B. The Probative Value Of The Evidence Is Not Outweighed By Potential Prejudice MBIA contends relevant, its probat , even if certain evi is value is outweighed by potential 10 prejudice. The prejudice MBIA has identified is that presentation of this evidence would "needlessly waste the Court's, the parties' and the witnesses' time." In support of this argument, MBIA notes that "Defendants estimate trial will require a full week longer than MBIA estimate." As described above, the evidence at issue is probative with respect to several key issues. Although presenting additional evidence will extend the duration of the trial, it is the Court's responsibility to ensure that no relevant evidence is unjustifiably excluded. Notwithstanding MBIA's contentions, the relevance of the loss reserve evidence outweighs the potential prejudice, and the evidence will be admitted. C. The Exhibits Challenged On Hearsay Grounds Will Be Admitted MBIA contends that certain Patriarch exhibits, including internal notes authored by MBIA's auditors, a report by a third-party hedge fund and email communications authored by non-MBIA declarants, are inadmissible hearsay. With respect to the internal notes authored by MBIA's auditors, MBIA has challenged 11 documents prepared by PWC, MBIA's outside auditors, as inadmissible under Rule 801 (d) (2) (D) . However, auditors have been held to be agents of a party for purposes of 11 Rule 801 (d) (2) (D) and, there , st ements by auditors are deemed non-hearsay statements of a party opponent. See Trs. of Four Joint Bds Plastic, 864 F. Supp. 342, 352 n.14 (S.D.N.Y. 1994) statement by auditor admissible non-hears 801(d) (2) (D)). (finding under Rule There is no dispute that PWC served as MBIA's auditor, that the llenged documents were prepared during the course of the relationship and that the documents relate to matters within s Reinauer T (summariz of PWC's agency. See, e.g., Marcic v. 397 F.3d 120, 128-129 (2d Cir. 2005) elements of Rule 801 (d) (2) (D)). exhibits cont Accordingly, the ing PWC's internal notes and memoranda are admissible. MBIA has also challenged a report prepared by a hedge fund in December 2002 that criticized MBIA's business practices, by among other things, arguing that MBIA's reserves for COO losses were insuffic exposure on its port and that MBIA faced greater loss lio ins acknowledged in its public dis COOs than it had osures. stated that it does not intend to 0 However, Patriarch has that document for the truth of the matters asserted therein, but rather as background to the transactions with Patriarch. 12 Since the evidence is not being offered for the truth objection the matter asserted, no hears s been presented, and the exhibit is admissible. Finally, MBIA has objected to three documents prepared by Patriarch and sent to employees of MBIA. However, to the extent that MBIA contends that Tilton "recently fabricated" any testimony that could be corroborated by these three documents, these documents are prior consistent statements and admissible under Rule 801 (d) (1) (B). As such, t e email communications authored by non-MBIA employees are admissible as exh its at trial. MBIA's Attorney-Client Privilege Bas Been Waived As To Certain Documents The February 6 Opinion concluded that a fact issue for trial concerned the scope of Patriarch's obligations under the Master Agreement and the relationship between the Master Agreement and Section 7.13(b) of the Zohar I Indenture, as amended. In the PTO, MBIA has identified four witnesses whose testimony Patriarch anticipates will include extrinsic evidence on these issues. The witnesses MBIA has identified include Robert Chiperfield ("Chiperfield"), lead transactional counsel who negotiated the relevant documents, Ram Wertheim 13 ("Wertheim ("Murtagh U ), tos Amy Mauer U ) witnesses. MBIA has ral Counsel, and Michael Murtagh MBIA's Patria toS U ("Maue ), , in of contends two fact this aced its contracting intent and interpretation at issue and wa the at to lege that may have lient p attached to documents bearing on those issues. any waiver of privilege. MBIA objects to For the reasons described below, MB by placing at issue its contracting intent and interpretation of the Master Agreement, has waived attorney-client ivilege. A. Because MBIA Has Placed Its Intent And Understanding Of The Master Agreement "At Issue," The Attorney-Client Privilege Has Been Waived "It has long been recognized that attorney-client privilege constitutes an obstacle to the truth-finding process, the invocation of which should be cautiously observed to ensure that its application is consistent with its purpose. Henness (1980) 51 N.Y.2d 62, (inte is to t confidences will not later ). The a client to "confide fully and freely in his attorney, secure in the knowl embarrassment or 1 Priest v. 68, 431 N.Y.S.2d 511, 409 N.E.2d 983 quotation marks and citations omit purpose of the pri u that his exposed to public view to his 1 detriment. u 14 Id. Where a party uses this shield as a swo to the legal detriment of his litigation opponent, se , the purpose of the privilege is no longer , and t is impliedly waived. 1 ff & Chin v. ----------~~---- Co., P.C., No. 05 8360(NRB), 2008 WL 2073934, at *5 (S.D.N.Y. May 8, 2008) ("New York courts have held that an 'at issue' waiver occurs where a party affirmatively places the subject matter of its own pr litigation, so ion of the privilege is required to t determine the val asserting the pr ty of a claim or defense of the party lege, and application of the privilege would deprive the adversary of waiver doctrine reflects privilege is a ' leged communication at issue in ld' Courts have tal information. pr z under New York law "it is waives attorney-client and s an attorney's opinion s into issue, by calling otherwise." iple that the attorney-client must not be used as a 'sword.'"). well established that a pa work product privil Herrick Co. . The 'at issue' att as an expert witness or Inc. v. Vetta ts Ci v. 90 5 (R PP), 1 9 9 8 WL 637 4 68 , at * 1 ( S . D. N . Y. S Inc., No. 94 . 17, 1998) (citing United States v. Bilzerian, 926 F.2d 1285, 1292 Cir.), cert. denied, 502 U.S. 813, 112 S.Ct. 63, 116 L. (1991)). (2d .2d 39 MBIA, in rejecting Patriarch's argument that MBIA has 15 placed counsel's opinion" Deuts issue," s cited the case of Bank Trust Co. of Am. v. Tri ks Investment t, 43 --~--~--~------~----~--~----------------~~----------~--~~-- A.D.3d 56, 63, 837 N.Y.S.2d 15 (1st Dep't 2007) and cont its opposition brief party , in "'at issue' waiver occurs only when a asserted a claim or defense t he intends to prove by use of the privileged materials.'u However, notwithstanding MBTA's contentions, the Department Deutsche Bank privilege occurs where a rst that "'[a]t issue' waiver y affirmatively places the subject matter of its own privileged communication at issue in litigation, so that invasion determine validity of a asserting the privilege, and deprive the A.D.3d at 63. privilege-ho the privilege is required to or defense of the party lication of the privilege would rsary of vital information.u Deutsche Bank, 43 First Department held only r had not waived the s attorney-cl merely by asserting a claim against its insurer indemnification, and the privilege privilege r lder had not made any factual assertions that placed its state of mind at issue or otherwise implicated advice of counsel. 16 Td. at 64-65. The rst Department's statement in Deutsche Bank that rty "at issue waiver occurs when the defense that ed a claim or sass intends to prove by use of the privileged als," id. at 64 (quotations omit ), did not purport to identify the exclusive basis for "at issue" wa York law. As cribed above, the description of t r under New rst Department's "at issue" waiver was broader. Subsequent decisions of New York courts have not construed the Deutsche Bank decision in the manner that MBIA has suggested. ----------~~------------------~------~---- (GBD) (THK), 2010 WL 4983183, at *3 See, e.g., , No. 09 Civ. 8083 (S. D.N. Y. Dec. 6, 2010) ("Courts have recognized that a party need not explicitly rely upon advice of counsel to implicate privileged communications. Instead, advice of counsel may be aced in issue where, for example, a party's state of mind, such as his good ith belief in t lawfulness of his conduct, is relied upon in support of a claim") i Chin, 2008 WL 2073934, at *5 6. York law, there are no exclus impl Accordingly, under New requirements for finding an wa MBIA has also contended that after the Second Circuit's decision __________~________ , 546 F.3d 222 (2d Cir. 2008), there can only be an implied wa 17 r if a party af rmatively relies on privileged communications in support of a claim or defense. a s , Second t e and independent basis rcuit recognized r finding an at issue waiver which was not applicable in t case. reaffirmed the principle adopt in United States v. Bilzerian, 6 F.2d 1285 (2d Cir. 1991), t "an inquiry into state of mind . . . typically calls possibility of implied waiver of the attorney client 228-29. 1 In Bilzerian, the Se was waived even through t privileged communications. The Erie Court " Erie, 546 F.3d at Circuit found the privi ndant did not rely on any Bilzerian 926 F.2d at 12 -93; see also Leviton Mfg. Co., 2010 WL 4983183, at *3 (quoted ) The Erie Court went on to conclude that a finding of wa justified "when a privileged mater assertion." Erie the 546 F.3d at 229 (quoting John Doe Co. v. er Erie Circuit. nce ng its adversary access to ially capable of rebutt 1 United States, 350 F. recognize the r is rty uses an assertion of fact to inf the decisionmaker while . 299, 306 (2d Cir. 2003)). the Southern District has cont r waiver principles endor to by the Second No 06 Civ. In 5936(KMW), 2011 WL 1642434, at *2-3 (S.D.N.Y. 18 20, 2011), the Honorable Kimba M. Wood rejected the argument, similar to MBIA's here, that a party could present state of mind evi without waiving attorney ient privilege, so long as it refrained from relying on the observed that Erie "not in concluding privilege. a ce of counsel. that the Judge Wood lzerian court was correct" such assertions waive the attorney client "Further," the Court continued, "a decision issued er Erie rna s clear that: a party need not licitly rely on advice of counsel to implicate the privi communications. Instead, advice of counsel may be pIa in issue where, for le, a y's state of mind, as his good faith belief in the lness of s conduct, is relied upon in support of a claim of defense . [Because the] le 1 advice a party received may well demonstrate the Is y of its claim of good faith lief, waiver in these instances arises as a matter of irness. at *3 (quoting Leviton has contented 2010 WL 4983183, at *3). Patriarch's motion is sed on t test announced in Hearn v. Rhay, 68 F.R.D. 574 1975). However, while the court did noth MBIA superseded (E.D. Wash. Erie Court narrowed the Hearn test, to undermine the Bilzerian and subsequently endors 19 inciples adopted in by courts in this strict. MBIA demonstrated its intention to opinion of counsel at issue. ace the In opposing Patriarch's summary judgment motion, MBIA sought to introduce various affidavits reflecting its witnesses' intent and interpretation of the Master Agreement and Indenture. submit In one of affidavits MBIA with respect to the summary judgment motion, Mauer- Litos made factual assertions about what "MBIA expected Patriarch" to do pursuant to the Master Agreement, what she "believed" about relationship between Section 7.13(b) of Indenture and the Master Agreement, and what she "intended" when she signed the Third Supplemental Indenture. In another affidavit, Murtagh offered similar factual assertions about his intent and interpretation of the Master Agreement and Third Supplemental Indenture. Similar to Mauer- tos and Murtagh, Chiperfield has made factual assertions about his "understanding" of the Master Agreement as well as what was "intended" by the parties in the Agreement. As such, MBIA has placed the opinion of counsel at issue and impliedly waived the attorney-cl privilege. Disclosure of the documents withheld by MBIA as privileged will permit Patriarch a fair opportunity to assess and challenge MBIA's factual assertions at trial. See, e.g., Chin, 2008 WL 2073934, at *7 ("The [attorney-client] privi clients to mask important does not exist to 20 elements of their claims aga t third-part v. Credit Brussels s."); see also Bank Nos. 93 Civ. 6876 (KMW) , 94 Civ. 1317 (KMW) , 1995 WL 598971, at *6 (S.D.N.Y. 11, 1995) ("The [privileged] communications will enable the plaintiffs to verify or llenge fendants] assertion that its liability, if any, was caused by faulty advice of counsel. To deny the aintiffs this opportunity would result in a one- sided account and prej t ce the pIa iffs' ability to litigate aim.") . r B. As A Matter Of Fairness, Patriarch Is Entitled To Obtain Documents Capable Of Rebutting MBIA's Assertions Regarding The Master Agreement MBIA has contended that a select there has communications. select Patria disclosure MBIA has select irness princ les only ly disclosure of privileged has contended that there was a this instance. ly disclos Irre privileged in ctive of whet rmation, Patriarch, as a matter of fairness, is entitled to ain documents capable of rebutting MBIA's assertions regarding t Master Agreement. 21 r "Underlying any determination that a privilege should be forfeited is the notion of unfairness" that results when a party attempts to use the attorney client privilege as both a sword and a shi d. at 229; see also Pe Erie, 546 F. Ie v. Kozolski, 11 N.Y.3d 223, 246-47, 869 N.Y.S.2d 848, 898 N.E.2d 891 (2008) (extent to which privilege has been waived turns on considerations of irness) (citing John Doe Co. v. United States, 350 F.3d 299, 302 (2d Cir. 2003)). that a finding of waiver is justifi Our Circuit has held "when a party uses an assertion of fact to influence the decisionmaker while denying its adversary access to privileged material potentially capable of rebutting the assertion." Er , 546 F.3d at 229 (quoting John Doe Co., 350 F.3d at 306). Thus, "even if a party does not attempt to make use of a privileged communication he may waive the privilege if he asserts a ctual claim the truth of which can only be assessed by examination of a privileged communication." F.R.D. 465, 488 Bowne of N.Y. C Inc. v. AmBase Co ~~~--~------~~~~-=~~~~~~~~~~~ 150 (S.D.N.Y. 1993); see also One Beacon Ins. Co. v. Forman In'l, Ltd., No. 04 C (S.D.N.Y. Dec. IS, 2006) . 2271, 2006 WL 3771010, at *10 ("Fairness considerations may also corne into play where the party asserting the privilege makes factual assertions, the truthfulness of which may be assessed only by an examination of the privileged communications or documents.") 22 & Indem. Assoc (quoting Inc. v. Alcoa S.S. Co., 232 F.R.D. 191, 199 (S.D.N.Y. 2005)); see also e Partners v. Bear Stearns & Co. (S. D. N . Y. 1999) 184 F.R.D. 49, 55 ( "A privilege may be impliedly waived where a party makes assertion in the litigation or asserts a claim that in fairness requires examination of protected communications."). The Federal Court of Claims recently noted, [A] veritable Niagara of opinions have concluded that where a party affirmatively reserves the right to use parol evidence to bolster its interpretation of a contract, it may not, v the attorney-client privilege, withhold from discovery attorney- ient communications that also form the extrinsic context for the agreement, particularly those that occurred in negotiating or interpreting the agreement. In such circumstances, a waiver of the pri lege as to the latter communications is implied. Stovall v. United States, 85 Fed. Cl. 810, 816 & n.7 (2009) (collecting cases) . MBIA has stated that its witnesses will testify concerning their "intent and interpretation of the contracts." Accordingly, the waiver shall en that concern those subject matters. rced against all documents See, e.g., Tech., 497 F.3d 1360, 1372 (Fed. Cir. 2007) 23 ("The widely applied is that the r determining the scope of a wa standard waiver appl s to all other communications relating to the same subject matter. This broad scope is grounded in principles of rty from simultaneously fairness and serves to prevent a lege as both a sword and a shield[.]") using the pr (internal marks omitted); see also Stovall, 85 citations and quotat Fed. Cl. at 817 n.8. Patriarch is entitled to obtain all documents that are potent ally capable of rebutting MEIA's factual assertions with respect to the Master Agreement § 3.04 as contemplated Thi t Section 7.13(b) of the Zohar Indenture and Indenture Section 7.13(b) alte ng t deadline after the collateral balance exceeds $750 million. C. MBIA's Various Other Objections Are Without Merit MEIA the has notion First, MEIA show a this district present it has waiver has asserted is on have Zwirn, 276 F.R.D. 115, c waived that held other objections attorney-client the Patriarch. burden However, of proof the courts See, e.g., Gruss v. 31 (S.D.N.Y. 2011) ("The party ient pr rs the burden of est 24 to privil otherwise. iming either attorney- immunity a so various ege or work-product ishing that the to in privilege has not been waived.") (citing Allied Irish Banks v. Bank of Am., N.A., 240 F.R.D. 96, 103 (S.D.N.Y. 2007) party claiming ("[TJ privilege bears the burden of establi location of t that it has not been waived."). ing burden to MBIA is consistent with the long-standing rule that "the attorney-client privilege constitutes an obstacle to the truthfinding process" and should "cautiously observed to ensure that its application is consistent with 51 N.Y.2d at 68 s purpose." est, (internal quotation marks and citations omitted) . MBIA has also contended that it did not waive its attorney-client privilege because Defendants first placed intent at issue. However, Patriarch has contended that the Master Agreement was unambiguous as a matter of law. above, MBIA's decision to prof As described evidence of subjective intent to rebut Patriarch's contentions put the opi on of counsel "at issue" and waived the attorney-client privilege. MBIA has also claimed that Patriarch's motion to compel is untimely in view of the failure to raise the privilege issue with respect to the summary judgment submissions. However, it was not until MBIA submitted the three affidavits in 25 opposing summary judgment that MBIA waived the privilege. rendered moot had the Court issue would have privil granted Pat The arch's motion. After the February 6 Opinion and lege the completion of the PTO, Patriarch timely raised the issue. ressed above, MEIA has wa For the reasons attorne ient pri the lege with respect to any testimony of MEIA witnesses as to its intent with respect to t provisions of the Master Agreement and the Third Indenture submitted to counter Patriarch's contentions. If no such testimony will proffered, no waiver will be enfor The Evidence Relating To The Collateral For Zohar II, Zohar III And The Patriarch Pitch-Books Will Be Admitted Patriarch s moved all evidence relating to: could ot Patr limine to exclude from trial (i) certa collateral that Patriarch acquired for Zohar I, but instead acquired for two r COO transactions - Zohar II and Zohar III managed by rch's affiliates; and (ii) financial projections regarding the future cash flows from the Zohar I collateral that were contained in Patriarch's presentations (or "pitch-books") to 26 potential investors as "unfairly prejudic 1" as the term is used in Fed. R. Evid. 403. "Relevant evidence is admissible" unless the United States Constitution, a federal statute, the Federal Rules of Evidence or other rules prescribed by the United States Supreme Court provide otherwise. Fed. R. Evid. 402. To be relevant, (i) evidence must be probative of the proposition it is offered to prove and (ii) that proposition must be one that is of consequence to t determination of the action. v. Kaplan, 490 F.3d 110, 121 (2d Cir. 2007) States v. Diaz, 878 F.2d 608, 614 R. Evid. 401. (2d United States (citing United r. 1989)); see also Fed. Under Fed. R. Evid. 403, a court may exclude relevant evidence if its probative value is substantially outweighed by a danger of, inter alia, unfair prejudice. Fed. R. Evid. 403. MBIA has stated its intention to introduce evi trial showing that Patriarch bel nce at d the shortfalls in two of the Identified CDOs, Z-l and Captiva, would exceed $120 million; that Patriarch's obligation to use "commercially reasonable efforts to procure as soon as reasonably practicable" investment grade ratings required that Patriarch, inter alia, 27 (a) use "commercially reasonable efforts" to cause Zohar I to acquire suf cient collateral such that rating agencies would assign the ratings to the $120 million of remediate Z-l and Capt ass B Notes necess and (b) re st t to ratings from S&P and Moody's; that Patriarch breached the Master Agreement by not using "commercially reasonable efforts reasonably practicable ll . as soon as to cause Zohar I to acquire the appropriate amount of collateral to obt n the ratings; and if Patriarch had complied with the Master Agreement, Zohar I would have acqui increased t additional collateral, which would have amount of Class B Notes that would have received investment grade rat and been transfer to Z-l and Captiva. MBIA will seek to prove that Patriarch "commercially reasonable efforts ll amount of collateral by evidence t iled to use to acquire the appropriate t up to $141 Ilion of collateral acquired for Zohar II and Zohar III was eligible and could have been acquired for Zohar I; that Tilton controlled Patria and its af Patriarch's af Zohar III; liates and benefited from causing liates to place collateral into Zohar II and that if Patriarch had caus Zohar I to acquire a portion of the eligible collateral acquired for Zohar II and 28 Zohar III, S&P and Moody's likely would have assigned investment grade ratings to a greater amount of the Class B Notes. According to MBIA, evidence concerning the Zohar II and Zohar III collateral is directly relevant to Patriarch's all their they satisfi defenses, as stated in the PTO, obligations under the Master Agreement, that the conditions precedent to Patriarch's contribution obligation "were not, and could not have en, satisfied," and that MB s c ims are rred by the doctrines of impossibility and frustration. Patriarch has asserted that it could not obtain investment grade rat s on the Class B Notes based on the collateral that Patriarch actually acquired for Zohar I, and it was imposs e for Patriarch to acquire additional collateral for Zohar I such that the ratings could be achieved. MBIA seeks to introduce To rebut those allegations, evidence Patr rch moved to exclude. According to Patriarch, MBIA gave Pat to arch discretion cide which CDO to place eligible collateral into and authorized asset trans rs among the funds, and Patriarch owed fiduciary duties to each fund and was under no obligation to violate those duties by favoring Zohar I for the benefit of 29 MBIA. riarch's common According to Patriarch, it was ctice to allocate collateral among funds in a manner that, at its scretion, was fair to all funds. In addition, MBIA approved the Collateral Management Agreement of Zohar I, which expressly waived any "potential and actual conflicts of interest" that may exist as a result of Pat arch's role managing different funds, and MBIA approved transfers of assets from Zohar I to the other Patriarch-managed COOs. According to Patriarch, the indentures of Zohar II and Zohar III required Patriarch to use commercially reasonable efforts to build sufficient collateral in those funds as well. Relevant evidence is unfairly prejudicial under R. Evid. 403 only if it "involves 'some adverse effect . beyond tendi to prove the fact or issue that justified admission into evidence.'" 1133 , 113 9 ( 2 d Ci r. 1 9 9 5 ) s United States v. Gelzer, 50 F.3d (qu 0 ting Un i ted Stat e s v. F i 618 F.2d 934, 943 (2d Cir. 1980)). Evidence cannot be excluded under Fed. R. Evid. 403 on the basis that, due to its relevance, such evidence has a negative impact on a position. rty's litigation See, e.g., George v. Celotex Corp., 914 F.2d 26, 31 (2d Cir. 1990) ("Because Rule 403 permits the exclusion of probative evidence, it is an extrao 30 nary remedy that must be Any prejudice to [defendant] was derived used sparingly. from the [evidence's] probative force and thus it did not unfairly prejudice [defendant] ."); United States v. Muyet, 958 F. Supp. 136, 141 (S.D.N.Y. 1997) ("All evidence that tends to incriminate a defendant is prejudicial, in the sense that it is harmful to his case, but Rule 403 only precludes the admission of evidence that is unfairly prejudicial."). The admission of evidence regarding the Zohar II and Zohar III collateral presents a collateral by Patr rch. under Fed. R. Evid. 403. Shea v. to allocation of sputed issue with re 1 Enters. Such evidence should not be excluded See, e.g., George, 914 F.2d at 31; Inc. No. 09 Civ. 8709, 2011 WL 2436709, at *9 (S.D.N.Y. June 16, 2011) (" intiff's case may be harmed by references to [the evidence at issue], but such harm is not the 'unfair' prejudice that Federal Rule of Evidence 403 is intended to protect against."). With respect to the pitch-books, Patriarch contends that the pitch-books are irrelevant to valuing the Class B Notes, as the pitch-books presented numbers based on various assumptions, and the pitch-books themselves make clear that they were not to be relied upon as a valuation or analysis of the actual value of Zohar I's collateral. 31 For similar reasons, Patriarch contends that the hypothetical equity illustrations in Class B Notes the pitch-books are irrelevant to whether t rated investment grade, as these pitch-books do not could represent a reliable analysis or value estimation of the assets underlying Zohar I. Furthermore, Patriarch notes that rating agencies do not consider the value of equity holdings in their rating determinations of CDO securities, so the potential future value of any equity held by Zohar I would have been ignored by the rating agencies in deciding whether the Class B Notes were ratable. MBIA has asserted that during the t Pat period arch was obligated to use "commercial reasonable efforts ll to obtain the ratings on the Class B Notes, Patriarch was marketing a new fund and distributed "pitch-books II to potenti investors and business partners containing Patriarch's Zohar I projections. MBIA seeks to present testimony from its economic expert concerning the value of the Class B Notes and the amount of damages suffered by MBIA as a result of Patriarch's failure to transfer a portion of those notes to the other CDOs insured by MBIA. The expert's opinions are based, in part, on his projections of the future cash flows that will be generated by the Z r I collateral. According to MB 32 the projections the pitch-books represent contemporaneous evidence probat of the reasonableness of certain assumptions underlying the MBIA In addit rt's analysis. , Patriarch's Zohar I projections jections of the Zohar I cash flows during are relevant time period and, as such, are relevant to whether there was sufficient value in the Zohar I fund to submit any of B Notes for a rating. Class The weight given to the pitch-book projections is a triable issue, but, applying the Fed. R. Evid. 403 standard detailed above reveals the pitch-boo pit outwei the probative va any potential prejudice. -books, along with of Accordingly, dence concerning the collateral for Zohar II and Zohar III, are admiss leo Deter;mination Of The Admissibility Of The Natixis Business Records Is Premature Patriarch has moved in limine to preclude MBIA from introducing 83 documents produced by nonparty Natixis (the "Nati s Documents H ) as business records. challenged the authenticity or relevance of Documents, but has contended Patriarch has not Natixis the Natixis Documents are not business records within the meaning of Fed. R. Evid. 803(6). 33 Natixis North America LLC was retained to assist in structuring and arranging the Zohar I transaction. As the arranger of a COO transaction generally, Natixis coordinated the other parties, brought in investors and liaised with the rating agencies, among other duties. se Natixis was compensated for its ces as the arranger of Zohar I. the rating requirements applicab Natixis had knowledge of to the Zohar I transaction, and it was contemplated that Natixis would assist Patriarch in obtaining the ratings on the Class B Notes by, among other things, negotiating with the rating agencies and preparing the computer models used by the agencies to evaluate the credit quality of the Class B Notes. According to MBIA, Nati s periodically used computer models in 2004, 2005, and 2006 to assess whether the rating agencies would assign the ratings to all or a portion of the Class B Notes, and Kenneth Wormser ("Wormser"), the senior Natixis ban r on the engagement, informed Patriarch on various occasions that Natixis believed a portion of the Class B Notes could get the ratings. According to Fed. R. Evid. 803(6), "[a] record of an act, event, condition, opinion, or diagnosis" is admissible if "the record was kept in the course of a regularly conducted activity of a business, organization, occupation, or calling, 34 whether or not for profit." Fed. R. Evid. 803(6) (B); see also (2d Cir. 2006); Major United States v. Feliz, 467 F.3d 227, 234 Baseball ________ ~~~~~~~ Inc. v. Salvino __ L-~________________ 313-14 (2d Cir. 2008). interpreted ~ Inc. ______ 542 F.3d 290, Our Circuit and this Court have e 803(6) 1 rally, edly emphasizing that the rule "favors the admission of evidence rather than its exclusion if it has any probative value at all." See ------Uni States v. Kaiser, 609 F.3d 556, 574 (2d Cir. 2010); Phoenix Assocs. III v. Stone, 60 F.3d 95, 101 (2d Cir. 1995); S.E.C. v. Credit Banco No. 99 Civ. 11395, 2000 WL 968010, at *9 (S.D.N.Y. Aug. 8, 2000). Pat arch has contended that the documents were not made by Natixis as part of courts s "regular practice." the Second Circuit and elsewhere rout documents admissible as bus established they were regula However, ly find ss records where a witness has made and by the bus s, even where the specific words "regular practice" were not us See, e.g., Phoenix Assoc. III, 60 F.3d at 101 (hoI was improperly excluded because evidence t "in the course of a ng document document was made arly conducted business activity" and was not drafted in response to unusual or isolated events was sufficient to quali it as a bus 35 ss record); In re Bl Sec. ~~~--~~~~~ Litig., No. 94 Civ. 7696, 2003 WL 1610775, at *5 (S.D.N.Y. Mar. 26, 2003) (hoI ng memorandum was admissi e under Rule 803(6) re it was prepared "within [compliance director's] regular ty" and there was no indication of a "motive to business act lie") . Natixis Documents Patriarch has contended that were not created "as part of any s t emic t the Natixis Documents are not bus Nat s empl ss records because the - e s who created t iness activity," r Wormser, Ralph Inglese ("Inglese") or Lorraine Medvecky ("Medvecky") have not been shown to be under a "business duty" to report the information contained therein and that t cannot be admitted as business re Natixis Documents because Medvecky, Wormser and Inglese could not remember certain ils about those documents during their respective depositions. In ted States v. Ford 435 F.3d 204, 215 (2d Cir. 2006), the defendant obj to t introduction of a calendar as a business record because the calendar's creator could not remember when or why he made certa entries. The court found this ail to be irrelevant, reasoning that "[i]f a custodian of a business record not have personal knowledge of the actual creat of the document for it to be admiss 36 , the absence of a present recollection is no barrier to admission." Id. (internal quotation marks and citations omitted); see also United States v. Stewart, 433 F.3d 273, 316 (2d eir. 2006) (the "reliability and trustworthiness [of a business record] derive from the circumstances under which it was created, rather than the author's recollection"). Fed. R. Evid. 803(6) appl that s only to evi falls within the definition of hearsay set forth in Fed. R. Evid. 801, including that t evidence must be offered "to prove the truth of the matter asserted" therein. 801 (c) (2). Fed. R. Evid. MBIA has not yet offered the Natixis Documents for any purpose, and, according to MBIA, MBIA will of many of the Natixis Documents at trial for reasons other than to prove the truth of the matters asserted therein. Even if it is assumed, as contended by Patriarch, that certain of the Natixis Documents are hearsay, MBIA has included three Natixis employees Wormser, Medvecky and Adam True ("True") to testi on its witness list regarding the elements of Rule 803(6) which could thereby establish that the Natixis Documents are admissible business records. See Giannone v. Deutsche Bank Sec., Inc., No. 03 Civ. 9665(WHP), 2005 WL 3577134, at *4 2005) (S.D.N.Y. Dec. 30, (holding it premature to rule on admissibility of document 37 under business record exception p or to trial because party had not yet had opportunity to establi elements of exception with trial testimony). The rpose for which particular Natixis Documents of will be of has not yet been established, and compliance wi the requirements of Fed. R. Evid. 803(6) has not yet been offered with respect to any particular documents offered the truth of the matters contained there ture to excl there to meet It is the Natixis Documents as failing requirements of the Rule. Discovery Is Reopened To Permit The Depositions Of McKiernan, Sonkin and Wertheim Patriarch has moved, pursuant to and 37 (c) (1), for an order . R. Civ. P. 26(a) recting MBIA to produce three recently-identified trial witnesses for deposition or strike them from MBIA's trial witness list. se its Rule 26{a) i ten sent and former tial disclosures, and MBIA identifi oyees of MBIA "who may have discoverable information and/or defenses in this case." indi On July 10, 2009, MBIA MBIA may use to support its claims MBIA did not identify three duals who were recently listed as 38 ial trial witnesses in the PTa: McKiernan, Son n and Wertheim. Sonkin and McKiernan are the head and deputy head of the Insured Portfolio Management Division within MBIA, respectively, while Wertheim is MBIA's General Counsel. MBIA did not supplement its initial disclosures at any time before the parties exchanged witness lists for the PTa. MBIA's couns has stat that the decision to list the three recently identified witnesses the PTO arose solely from the possibility that Murtagh - MB s Rule 30 (b) (6) witness - might not be available to testify, and MBIA has acknowledged that it would not have identified these three witnesses but for its concern about the availability of Murtagh. MBIA declined Patriarch's request that these three witnesses be produced for depositions served advance of t a l . According to MBIA, when MBIA s initial disclosures, it had no reason to believe there was any mate testify at trial. al risk Murtagh might be unavailable to When MBIA determined that it might need to call the new witnesses at t aI, it disclosed that fact to Patriarch on its proposed witness list. MBIA contends that it has satisfied its obligations under Rule 26. See Fed. R. Civ. P. 26(a) (3) (A)i see also Fed. 39 R. Civ. P. 26(e) (1) (A); Fed. R. Civ. P. 26 Advisory Cmte. Notes, 2000 Amendment, Subdivision (a) (1) ("As case preparation continues, a party must supplement its sclosures when it determines that it may use a witness or document that it did not previously intend to use."). "Supplementations need not be made as each new item of information is learned but should be made at appropriate intervals during the special promptness as the t scovery period, and with al date approaches." R. Civ. P. 26 Advisory Cmte. Notes, 1993 Amendment, Subdivision (e). However, Patriarch should not be prejudiced by the changed ta rcumstances. This and other courts have adopted the ng of depositions as an appropriate mechanism to address late-disclosed witnesses. See, e.g., Lesser v. Wildwood, No. 01 Civ. 4209, 2003 WL 22228757, at *3 (S.D.N.Y. Sept. 29, 2003) ("Defendants are, however, under an obligation to cure any prejudice suffered by the plaintiffs as a re t of defendants' violation of their discovery obligations . [and] [d] iscovery 11 be reopened in order to provide plaintiffs an opportunity to depose [the undisclosed witnesses] .ff); McEne of ------~------~~-- N.Y., No. 03 Civ. 6307, 2007 WL 1574013, at *2 3 (S.D.N.Y. May 29, 2007) (concluding that plaintiff should be given opportunity to depose late identifi witnesses) . 40 sure of discovery generally "weighs While the strongly against the possibil of a continuance" of the trial to reopen discovery, Rienzi & Sons 2450(DLI) (JMA), 2011 WL 1239867, at *4 here the t produce McKiernan, Sonkin and Wertheim The Expert (E.D.N.Y. Mar. al will not be held until Oct these witnesses from Test~ony isi, No. 08 Civ. Inc. v. r. 30, 2011), MBIA will r deposition or strike witness list. Of Miller And Mason Will Be Admitted . R. Evid. 702 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) expert's scienti c, technical, or other speciali knowledge will help the trier of fact to understand the dence or to determine a fact issue; (b) the testimony is ed on suffi cts or data: (c) testimony is the product of reliable principles and methods; and (d) the expert has reliably appli the principles methods to the facts of the case. Fed. R. Evid. 702; see also No. 07 Civ. 8383, 2010 WL 3466370, at *5 6 (S.D.N.Y. Aug. 31, 2010): accord Pension . of Univ. of Montreal Pension Plan v. Banc of Am. Sec., LLC, 716 F. Supp. 2d 220, 223 24 41 (S.D.N.Y. 2010). dence favor the admissibility Federal Rules of of expert testimony and are applied with a "liberal thrust." rt v. Me 11 Dow Pharm. Inc., 509 U.S. 579, 588, 113 Juice ic Wonderful LLC v. S.Ct. 2786, 125 L.Ed2d 469 (1993) i No. 09 Civ. 4916(CM), 2011 WL 70562, at *12 (S.D.N.Y. Jan. 3, 2011). The Second Circuit's standard arke admissibility of expert testimony is "especially broad." 219 F. Supp. 2d 323, 332 (E.D.N.Y. 2002) cases). Where there is "suffi ent indi (collecting of reliability" to allow admission of expert testimony, "vigorous cross examinat , presentation of contrary evidence, and careful instruction on the burden of proof are the traditional and appropriate means" to attack the evidence. v. Perri Co., ---------~~---- 651 F. Supp. 2d 9, 28 Daubert, 509 U.S. at 596). Inde Rexall Sundown, Inc. (E.D.N.Y. 2009) (citing ,most objections to expert testimony are related only to the weight of the evidence, not its admissibility. __ ~_________ , See Olin . v. Certain Underwriters at --------~--------------------------------- 468 F.3d 120, 133-134 (2d "The Rules' liberal approa r. 2006). to the admission of expert testimony is particularly appropriate in a bench trial." Green Mountain 508 F. 42 Supp. 2d 295, 312 (D. Vt. 2007); accord _B____~_.__ v_.__ F_a_r___. E Source Corp., 23 Fed. Appx. 36, 39 (2d Cir. 2001). testimony is Ii " in the minds of a ly to hold "unique we jury, see =N=im~e=ld__~~~~_o_f__ N~._Y_. While expert 414 F.3d 381, 397 (2d Cir. 2005), courts are accustomed to evaluating the strengths and weaknesses of expert testimony. Supp. 2d at 312. admitt Thus," ler Green Mountain 508 F. Court can weigh the evidence without being unduly swayed by a witness's designation as an expert." Patriarch has moved in limine to exclude the expert testimony of Miller and Mason. was concluded that" In the February 6 Opinion, it ctual issues are presented by the experts' testimony, and their resolution is not appropriate in the context of [summary judgment]." 382921, at *32. MBIA Ins. " 2012 WL MBIA seeks to offer the expert report of Miller on the issue of whether, at the relevant times, the notes at issue would have purposes. opinion classified as debt for federal tax MBIA seeks to of r Mason to provide his expert th respect to the of particular dates. 43 Class B Notes as of Patr rch has contended that "Mr. Miller's opinion is a'" and that Miller "did on 'sufficient facts and not bas not consi issues." records of this case on the critical r the act A district court has con derable scretion both in deciding what factors to use in assessing reliability and expert testimony is, in fact, determining whether t re Co., Ltd. v. Ca Kumho reliable. chael, 526 U.S. 137, 153, 119 S.Ct. ----------------~--------------------- 1167, 143 L.Ed.2d 238 F. 381, 38 gives t (1999); Zuchowicz v. United States, 140 87 (2d Cir. 1998). district court "The f Ie Daubert inquiry discretion needed to ensure that the courtroom door remains closed to junk science while admitting reli Ie expert testimony that will assist the trier of fact." 256, 267 se , 303 F.3d (2d Cir. 2002). ous flaws an expert's rea warrant exclusion. Patr The law is well settled only or methodology will See, e.g., Arnorgianos, 303 F.3d at 2 rch has contended Miller's reports and testimony as unreliable by reference to the decision in Arnorgianos, 303 F.3d at 269. factors were est F.3d at 268-69. In ~~~l~'a~n~o~s, a set of several ished and articulated by the witness. 303 The expert in - - - - - - - - ' - - - - - - - chose not to consider Arno certain of the factors. Id. at 268 44 (uphol ng expert exclusion because "[a]lthough data on the additional variables was expert], he inexplicably 'did not find it available to [ necessary' to include them in opinion that a sure assessment' would take them into 'proper consideration. H) ¢ ation despite his stated s cal sented that Miller has Here, MBIA has set forth a set of recognized factors and undertook an assessment of each of Patriarch s also contended that "Mr. Miller's testimony boils down to the circular and unremarkab proposition that, if one s possesses ly assumes that the Class B Note features that courts and IRS regulations deem indicative of debt, then it could characte zed as debt.H Experts routinely employ assumptions as part of their analysis, and any contentions t the assumptions are unfounded go to the weight of the testimony, not its admissibil y. BIC Corp., 23 . Appx. at 38; ____________~~~__~~______~~~, 73 F.3d 18, 21 (2d Cir. 1996). Whether the ass ions Miller relies upon are supported by the record or the opinions of sses r expert not necessarily render the testimony unreliable, but rather goes to weight and credibility of the expert's testimony. Given both that the applicable s admissibility as well as the fact that the pendi 45 rds encourage trial will be conducted without a jury, Mil admitted. Mil r's expert testimony will be Patriarch will have the opportunity to question r's methods and conclusions on cross-examination. Patriarch has not challenged Mason's qualifications as an expert, but it has asserted that Mason us the wrong standard for valuation, that he did not properly apply a marketability discount, that he measu that he erred in anal ing the va the wrong asset and of the Class B Notes under the hypothetical scenario that Zohar I held certain additional assets. val The challenges to Mason's testimony may well have ty but go to the weight of his testimony rat s admissibility. than to Patriarch may appropriately contend that Mason's assessments do not support his conclusion, but those contentions will presented through cross examination and contrary evidence. See, e.g., Olin --------~--. 468 F. at 133-34 (arguments challenging an expert's support for his opinions go to weight, rather than admiss ility, of testimony) . The Patriarch motions in limine to exclude the expert testimony of Miller and Mason is denied, the issue raised going to weight rather than admissibility. 46 Further Proceedings The disposition above of the pending motions may raise additional issues. A pretrial conference will be held on September 18, 2012 at ten o'clock a.m. or at such other date and time convenient to counsel and the Court. The trial of this action will commence on October 15, 2012 at ten o'clock a.m. or on such other date and time suitable for counsel and the Court. Counsel will meet and confer with respect to these and any other items and advise the Court in writing by September 14 of any open items to be resolved at the pretrial conference. Conclusion The pending motions are determined as set forth above. A pretrial conference will be held September 18 with the trial to commence on October 15. It is so ordered. 8 New York, NY Z' 2012 U.S.D.J. 47
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