Ema Financial, LLC v. Joey New York, Inc.

Background

EMA Financial, LLC sued Richard Chancis, Joey Chancis, Richard Roer, Joey New York, Inc., RAR Beauty, LLC, Labb, Inc., and Reflex Productions, Inc. The court considered EMA Financial’s motion in limine, a pretrial request asking the court to control what evidence or arguments could be presented at trial. The motion concerned the defendants’ amended pretrial statement and was filed before a five-day bench trial scheduled to begin on June 14, 2021.

EMA Financial asked the court to: (1) prevent Stephanie Csepke from testifying for the defendants; (2) exclude Exhibits 5 through 85 from use at trial; and (3) prevent the defendants from presenting their defense that EMA Financial violated securities laws by failing to register as a broker-dealer.

Stephanie Csepke’s Testimony

The parties agreed that the defendants had not previously disclosed Csepke as a potential witness. Under Federal Rule of Civil Procedure 26, parties generally must disclose people likely to have information supporting their claims or defenses. Rule 37 generally bars a party from using an undisclosed witness unless the failure to disclose was substantially justified or harmless.

The court applied four factors: the defendants’ explanation for the late disclosure, the importance of Csepke’s testimony, the prejudice to EMA Financial, and whether a continuance could cure the problem.

The court found that the defendants’ explanation was not compelling. The defendants blamed the conduct of their former attorney, Erica Doran, who represented them until the court allowed her to withdraw shortly before trial. The court stated that the defendants had been represented during discovery and other litigation and had opportunities to participate in the case or obtain different counsel.

The court also found that the defendants had not adequately explained the importance of Csepke’s testimony. They described her as a bookkeeper who oversaw some of Joey New York’s compliance with Securities and Exchange Commission regulations and filings, but their descriptions of the records and information she supposedly possessed were vague. The court found that allowing the new witness so shortly before trial would prejudice EMA Financial because it had not been able to question her in a deposition or seek the records at issue. The court also found that another delay was not appropriate after an earlier six-month trial delay.

The court therefore granted EMA Financial’s motion to preclude Csepke from testifying.

Exhibits 5 Through 85

The court applied the same disclosure rules to Exhibits 5 through 85, which the defendants first submitted with their amended pretrial statement on May 21, 2021. The defendants argued that their former attorney had made an error and that they had corrected it, and they also pointed to the greater procedural lenience sometimes given to people representing themselves.

The court rejected that explanation because the defendants had been represented by counsel through discovery, motion practice, and shortly before trial. It also found that the defendants had not meaningfully described the exhibits, explained their importance, or explained how they could be authenticated. Disclosing the exhibits less than a month before trial would prejudice EMA Financial, and the court would not grant another continuance.

The court granted EMA Financial’s motion to exclude Exhibits 5 through 85.

Broker-Dealer Defense

EMA Financial argued that the defendants had waived their defense that EMA Financial violated securities laws by failing to register as a broker-dealer because the defendants had not included that defense in their answer or amended answer. The court did not decide whether EMA Financial was required to register. Instead, it considered whether the defendants could make the argument at trial and in post-trial briefing.

The court found that EMA Financial had fair notice of the argument for at least two months and had shown that it was prepared to explain why the argument was wrong. Because there was essentially no risk of prejudice, and because the case would be tried to the court rather than a jury, Judge Vernon S. Broderick denied EMA Financial’s motion to prevent the defendants from making the broker-dealer argument.

Disposition

The court ordered that EMA Financial’s motion in limine was granted as to its first two requests and denied as to its third request. The court also directed the parties to contact Deputy Clerk Melissa Williams about videoconference trial logistics, confirmed the June 14, 2021 trial schedule, and directed the Clerk’s Office to terminate the open motion at Document 156.