Skatteforvaltningen v. The Stor Capital Consulting LLC 401K Plan

Background

Plaintiff Skatteforvaltningen moved under Rules 702 and 403 of the Federal Rules of Evidence to exclude proposed testimony from defense experts Michael S. Ross, C. Frederick Reish, and Kasper B. Pilgaard. Rule 702 governs expert testimony, while Rule 403 permits exclusion of evidence when its value is substantially outweighed by risks such as confusion. The court stated at the outset that the motion was granted in part and denied in part.

C. Frederick Reish

Reish’s proposed testimony concerned one-person pension plans, the requirements for a pension plan to be qualified under the Internal Revenue Code, the Internal Revenue Service’s authority to monitor and enforce those requirements, and whether certain defendant plans were legitimate rather than sham plans. He also proposed testifying that the Internal Revenue Service would not have disqualified those plans.

The court excluded Reish’s proposed testimony in its entirety. It reasoned that testimony about the legal requirements for plan qualification and the Internal Revenue Service’s authority would improperly instruct the jury about the law. Testimony that the plans were legitimate would intrude on the court’s role in determining the law and the jury’s role in applying facts to that law. The proposed testimony about what the Internal Revenue Service would have done was also speculative, irrelevant, and potentially confusing. The court stated that, if Skatteforvaltningen made an initial showing that defendants’ representations about the plans’ qualification were false, it would consider a jury instruction about the applicable qualification criteria.

Kasper Bech Pilgaard

Defendants proposed that Pilgaard testify about the structure and operations of the Danish government; the two systems used in Denmark during the relevant period to obtain refunds of dividend withholding tax; and securities-market practices involving dematerialization of shares, net settlement by custodians, securities lending, and short-selling.

The court excluded the testimony about the structure and operations of the Danish government because it was based on Danish legal authorities and therefore was not properly the subject of expert testimony. It also excluded the testimony about the Danish tax-refund systems because it was based almost entirely on Skatteforvaltningen forms and website instructions. The court explained that an expert may not simply read or repeat evidence that can be presented directly to the jury.

The court granted Skatteforvaltningen’s motion, at least for the present, as to the proposed testimony about the securities practices. It directed the parties to submit a joint proposed stipulation about those matters by October 1, 2024. If the parties could not agree, the defendants could seek reconsideration by identifying the specific testimony they still wished to present and the basis for admitting it, including Pilgaard’s qualifications.

Michael S. Ross

Ben-Jacob retained Ross, an attorney specializing in legal ethics, to respond to an opposing expert’s report about whether Ben-Jacob violated professional-conduct rules. Because Skatteforvaltningen no longer expected to call that opposing expert in its main case, Ben-Jacob stated that Ross would not testify about interpreting or applying those rules. The court treated the motion as moot to that extent.

Defendants nevertheless sought to offer Ross’s testimony about legal-industry customs and practices, including whether limited-scope or unwritten engagements are common and whether Ben-Jacob’s reliance on client representations and law-firm colleagues was consistent with industry practice. The court excluded this testimony in its entirety because Ross’s expert report did not adequately disclose those opinions. Federal Rule of Civil Procedure 26 requires an expert report to provide a complete statement of the opinions the witness will express and their bases and reasons. The court found that the report focused on professional-conduct rules and provided, at most, a meager basis for one of the proposed customs-and-practices topics and no basis for the others. The court also found that the omission was not justified or harmless because expert discovery had closed and the first trial was approaching.

The court stated that the ruling was without prejudice to defendants offering a revised report concerning this aspect of Ross’s proposed testimony, or to Skatteforvaltningen filing a renewed motion to exclude the testimony if defendants did so.

Disposition

The court granted in part and denied in part Skatteforvaltningen’s motion to exclude the proposed testimony of Ross, Reish, and Pilgaard. Judge Lewis A. Kaplan signed the order.