Phoenix Light SF Limited v. The Bank of New York Mellon Corporation

Background

Investors in residential mortgage-backed securities trusts sued The Bank of New York Mellon, as trustee, for breach of contract, breach of fiduciary obligations, negligence, and violations of the Trust Indenture Act. The court had previously granted the defendant’s summary-judgment motion in part and denied it in part. After claims involving seven trusts were voluntarily dismissed, claims involving ten trusts for breach of contract and Trust Indenture Act violations remained.

The parties completed fact and expert discovery and filed omnibus motions under Daubert, the standard governing the admissibility of expert testimony. In opposing the defendant’s Daubert motion, the plaintiffs submitted declarations from experts Ingrid Beckles, Richard Bitner, Mark Adelson, Joseph Mason, and Bruce Spencer. With the court’s permission, the defendant moved under Federal Rule of Civil Procedure 37(c)(1) to strike portions of those declarations or, alternatively, to question the experts again.

Legal standard

Rule 26 requires expert reports to disclose the expert’s opinions, the bases and reasons for them, the facts or data considered, and the expert’s qualifications. Rule 37(c)(1) generally bars use of information that was not timely disclosed unless the failure was substantially justified or harmless. The court considered the explanation for the delay, the importance of the new evidence, possible prejudice, and whether a continuance would be more appropriate.

The court explained that a declaration responding to a Daubert motion may provide additional details or support for opinions already disclosed. It must be excluded, however, if it presents a wholly new and complex approach that fills a significant gap in the original report. The central question was whether each declaration stayed within the scope of the expert’s initial report without unfairly surprising the opposing party.

Court’s analysis

Ingrid Beckles. The court declined to strike Beckles’s declaration. It concluded that the declaration did not contradict her report concerning government-sponsored-entity servicing standards, added examples based on experience that she had already identified, and properly responded to the defendant’s challenge to her methodology. The court also denied the request to reopen Beckles’s deposition, reasoning that the defendant could have explored her experience during the original deposition.

Richard Bitner. The court declined to strike most of Bitner’s challenged statements because they explained or calculated matters already disclosed in his report or deposition. This included a calculation based on Bureau of Labor Statistics data, his position concerning that data, his explanation of qualifications, and information about his team’s loan re-underwriting work. The court did strike paragraph twenty-nine because it improperly used the expert declaration to cite deposition testimony in response to the defendant’s legal argument; the court said that task belonged in the attorneys’ brief.

Mark Adelson. The court declined to strike Adelson’s discussion of two past events—the National Century Financial Enterprise fraud disclosure and the Conseco Financial bankruptcy—because they supplied evidentiary details supporting an opinion already expressed in his report. The court did strike Part I.A of the declaration because it largely copied material from the report and improperly circumvented the court’s page limits for briefing.

Joseph Mason. The court declined to strike most of Mason’s challenged statements. It found that his declaration explained how his damages model accounted for the Countrywide Settlement and further explained how his modeling assumptions fit the plaintiffs’ liability theory without changing his method or assumptions. The court struck paragraph twelve because of the same page-limit problem discussed with Adelson.

Bruce Spencer. The court declined to strike Spencer’s challenged statements. It found no contradiction between his declaration and deposition testimony concerning the selection of control-group data, and it rejected the defendant’s argument that other rebuttal opinions were necessarily new merely because they were not stated word-for-word in his reports.

Disposition

The court’s order states that the defendant’s motion to strike was granted in part and denied in part. The court struck Part I.A of the Adelson Declaration, paragraph twenty-nine of the Bitner Declaration, and paragraph twelve of the Mason Declaration. It denied the defendant’s alternative request to question the plaintiffs’ experts again. Briefing on the defendant’s omnibus Daubert motion was ordered to resume, with the defendant’s reply due December 12, 2019.