Zhu v. Li

Background

The court resolved two pretrial motions in limine, which are requests to decide before trial whether particular evidence may be presented. Plaintiff Jiajie Zhu moved to exclude the report and testimony of Defendants’ rebuttal expert, Edward Schenkein. Defendants moved to prevent Zhu from calling Yi Yao, one of Defendants’ lawyers, as a witness.

Schenkein’s Expert Report

Zhu argued that Schenkein’s report and testimony were inadmissible under Federal Rule of Evidence 702 and the reliability standards discussed in Daubert. Schenkein’s report valued Teetex at $1,080,000 as of December 31, 2015 and valued Zhu’s 70-percent interest at $756,100.

The court did not exclude Schenkein’s testimony because of his qualifications. Although information about his qualifications was limited, the court found that he appeared to have education and experience in a relevant field. The court instead found that the report lacked a reliable factual foundation and methodology. It did not identify the relevant facts supporting the conclusions, explain which valuation method was used, explain the adjustments to income and expenses, or explain the 30-percent marketability discount. The report also lacked industry or comparative analysis and gave inconsistent information about the usual range of the marketability discount.

The court treated these deficiencies as reliability problems rather than issues of credibility. It granted Zhu’s motion and excluded Schenkein’s report and testimony under Rule 702 and Daubert.

Yi Yao’s Proposed Testimony

Defendants argued that Zhu should be barred from calling Yao because Yao was Defendants’ counsel. The opinion states that Yao was involved in the events underlying the case, including negotiating the buyout, reviewing and revising the purchase and sale agreement, and communicating with Zhu’s lawyer, Christopher Lee, about the alleged breach of that agreement.

The court noted that a lawyer acting as both an advocate and a witness can create trial complications, so a party generally must meet a higher standard to call an opposing trial lawyer as a witness. The court found that Yao’s knowledge of the buyout process and the alleged breach was sufficiently relevant to Zhu’s claims. It also found that Yao appeared to be the only lawyer advising Defendant Chen during the buyout negotiations, meaning Zhu might be unable to present evidence about some parts of those negotiations without Yao’s testimony.

The court further concluded that not all of Yao’s expected testimony appeared to be protected by attorney-client privilege. It found that allowing Yao to testify would not create enough prejudice to bar the testimony. The decision did not require Yao to stop representing Defendants, although Yao and Defendants had to decide whether he could continue as trial counsel while also being called as a witness, including in light of the requirement for written client consent under the cited California rule. The court also noted that Defendants had other trial counsel, including Steven Soloway.

Disposition

Judge Jeffrey White granted Plaintiff’s second motion in limine to exclude Edward Schenkein’s rebuttal report and testimony. The court denied Defendants’ first motion in limine to preclude Plaintiff from calling Yi Yao to testify.