Pearlstein v. Blackberry Limited

Nature of the decision

This was a decision on motions in limine—pretrial requests to restrict evidence or arguments at trial. The court ruled on motions filed by the plaintiffs and defendants in a securities class action. The decision addressed trial procedure and evidence; it did not decide the underlying liability issues.

Plaintiffs’ motions

1. Advice-of-counsel defense: Granted in substance. The court held that the defendants had waived any advice-of-counsel defense and could not present testimony or argument about that defense. The defendants could still show that lawyers attended meetings or reviewed disclosure documents as facts. They could argue that lawyers’ attendance supported good faith, but the jury would be instructed not to infer that the lawyers approved the decisions or disclosures or that the defendants relied on legal advice.

2. Class representatives Mary Dinzik and Todd Cox: Denied. The defendants could call the named plaintiffs as witnesses and could present evidence about whether they actually relied on market conditions in making trades. If Todd Cox’s testimony established that he made the trading decisions for both named plaintiffs, the defendants could not ask the jury to draw a negative inference from Mary Dinzik’s absence, because a civil plaintiff has no obligation to attend trial.

3. Aggregate damages, ability to pay, and effect of judgment: Granted, with an exception. If the number of outstanding shares was in evidence, the defendants could tell the jury the total amount of damages sought. They could not present evidence about the defendants’ ability to pay or the effect of a judgment on Blackberry Limited or the individual defendants.

4. Other judges’ rulings about the plaintiffs’ experts: Granted to the extent the motion sought to exclude the other judges’ rulings themselves. The defendants could not introduce rulings from other courts on other admissibility or expert-qualification proceedings. Experts could still be asked whether they had previously been offered as experts but not qualified to testify, and how often that occurred. The court left open whether particular instances in which an expert was criticized could be used for cross-examination. Jury verdicts against an expert’s client were not proper subjects for cross-examination.

5. Later changes to generally accepted accounting principles: Granted. The court excluded evidence or argument about changes announced eight months after the class period and scheduled to take effect four years later.

6. Character testimony: Granted in part and denied in part. Character testimony generally could not be used in this civil case to show that a person acted consistently with that character on a particular occasion. If the individual defendants’ truthfulness was attacked, they could offer evidence that they had a good reputation in their communities for truthfulness. A witness’s personal opinion that a defendant was truthful was not enough.

7. Securities and Exchange Commission inquiry and failure to bring charges: Granted. The court excluded evidence or argument about the agency’s inquiry into Blackberry’s revenue-recognition practices and its decision not to pursue charges. The court concluded that the agency’s inaction, without an explanation, had no useful evidentiary value and could encourage speculation. The court stated that an earlier contrary view was not a binding evidentiary ruling and reversed it.

8. Barbara Stymiest: Deemed withdrawn. The plaintiffs said the motion had been filed in error and should be withdrawn.

9. Earlier lawsuit against Research in Motion: Granted as unopposed. The court excluded evidence or argument concerning that lawsuit.

10. Dismissed claims, liability theories, and former named plaintiffs Cho and Ulug: Granted as unopposed. The court excluded evidence or argument concerning those matters.

Defendants’ motions

1. Analyst and media reports: The motion was not opposed. The parties disagreed about when and how often to instruct the jury that the reports were offered to show that information was available in the marketplace and known, or should have been known, to the defendants—not to prove that the reports’ contents were true. The court stated that it would control the timing and frequency of those instructions.

2. Arguments about Blackberry’s corporate status: Granted. The plaintiffs could not argue that Blackberry was bad merely because it was a corporation or urge the jury to protect individuals against a corporation based on that status. The court also stated that arguments portraying class-action lawyers or plaintiffs as bad because of what they do would not be allowed.

3. Deposition testimony from witnesses within the court’s subpoena power: The court explained that third-party witnesses within the subpoena power had to be subpoenaed to testify in court, while third-party witnesses outside that power could testify by deposition if they did not voluntarily appear. Party-witness deposition testimony could be used, but the same testimony could not be presented both live and by deposition. Depositions could still be used for impeachment or to refresh recollection.

4. Unrelated accounting-firm settlements and Public Company Accounting Oversight Board examinations: Decision reserved. The court stated that evidence from an examination could be admitted if it showed auditing deficiencies relevant to the lawsuit, and that other grounds for admissibility might exist.

5. Thorsten Heins’s later employment history: Granted. The court excluded testimony about Heins’s employment after the class period, while leaving open whether the subject could become relevant for impeachment during trial.

6. Witnesses Gelblum and Huff: Granted. The court found that Huff had not been disclosed before the deadline and that Gelblum had been removed from a witness list after the plaintiffs were directed to provide a more meaningful list. Neither witness could testify.

7. Non-party Rule 30(b)(6) testimony not based on personal knowledge: Moot. The deposition testimony of Dana Moorehead of AT&T was no longer being offered.

8. Attorney-client privileged communications: Granted. The plaintiffs could not seek to exclude an advice-of-counsel defense while questioning witnesses about privileged communications, including communications involving Blackberry’s general counsel.

9. Clients’ net worth: Granted, except to the extent the motion covered evidence about the individual defendants’ compensation from and stock ownership in Blackberry, which the court considered relevant to scienter, meaning knowledge or intent required for the securities claim. Evidence of the individual defendants’ overall net worth was excluded.

10. Executives who left Blackberry before the class period: Denied to the extent the motion sought to exclude evidence about the success or failure of earlier Blackberry products and the fact, if true, that several executives were fired for that reason. The court considered that evidence relevant background.

11. Employees who left Blackberry after the class period: Denied for the reasons given in the plaintiffs’ opposition brief.

12. Criminal proceedings involving James Dunham Jr.: Denied. The court stated that evidence concerning Dunham’s indictment and guilty plea, his dealings with Detwiler Fenton, and related deposition testimony could be presented. The plaintiffs could also introduce evidence of Detwiler’s guilty plea, including information from the plea proceeding if it was used to impeach Dunham’s testimony.

13. References to a duty to disclose trends in sell-through information and return rates: The court agreed that the plaintiffs could not argue that Blackberry violated Securities and Exchange Commission Item 303, because Blackberry was a Canadian entity and was not bound by that provision. But the plaintiffs could discuss sales trends because a trend might be material information that a reasonable investor would expect to be disclosed and could support a claim under Section 10(b) and Rule 10b-5.

14. Expert Dr. Feinstein’s testimony about materiality: Denied. Dr. Feinstein could not personally give an opinion on the ultimate question of materiality to a reasonable investor. He could testify about the economic effect of withheld information on Blackberry’s stock valuation and the timing of negative information and a significant stock-price decline. The plaintiffs could argue materiality to the jury.

15. Specified media articles: Moot. The plaintiffs withdrew the identified exhibits from their exhibit list.

16. Draft Applied Value PowerPoint or Applied Value Presentation: Denied.

17. Expert Thomas Lys’s opinions outside his report: Granted. Lys could not testify about Blackberry’s valuation of its own inventory, raw materials, and supply commitments because those matters were not covered by his expert report.

18. Expert Professor Tulin Erdem’s factual summaries and chronologies: Stricken as unnecessary. The court had already addressed the issue in its expert-evidence decision. Erdem could not summarize the plaintiffs’ case, but she could testify about Blackberry’s marketing history and competitors’ products as needed to explain her opinions.

19. Corporate knowledge and scienter: Denied. The defendants could not bar the plaintiffs from arguing that knowledge held by Blackberry senior executives other than the individual defendants could be attributed to the corporation for purposes of proving corporate scienter. The court relied on Second Circuit authority and prior reasoning by another judge. The court also stated that only a person who made a statement to the marketplace could be held liable for that statement under Section 10(b) and Rule 10b-5.

20. Statements the court had ruled were not actionable: Denied. Although the plaintiffs could not recover based on statements barred by the statute of repose, those statements could still have evidentiary value. They would not appear on the verdict sheet, and the jury would not formally decide their truth for purposes of liability.

21. Liability for statements not made by Thorsten Zipperstein or Brian Bidulka: Denied. The court concluded that this was not a proper motion in limine.

22. Deposition testimony involving documents and lack of personal knowledge: Denied. The court stated that it would decide individual objections under the evidence rule requiring personal knowledge. Lisa Portnoy could testify about what Blackberry made her aware of, and whether Ernst & Young was given information needed to issue opinions on Blackberry’s financial statements was relevant.

23. Documents unknown to the individual defendants: The court concluded that this was an improper motion in limine. It stated that many internal corporate emails would likely be admissible against Blackberry and that an individual defendant’s lack of memory generally went to the weight of the evidence—the importance the jury gave it—rather than admissibility.

24. Geraldo Barron and Paul Holtz’s opinions about Blackberry accounting judgments: Denied. The court treated the defendants’ objections as challenges to the weight, not admissibility, of the evidence.

25. Gerard Barron’s draft memorandum: Denied. The court found the memorandum relevant and treated it as a Blackberry business record. Its draft status and questions about Barron’s qualifications went to the weight of the evidence, not whether it could be admitted. The court also stated that Barron’s opinions could be admitted under the rule allowing lay opinions based on a witness’s firsthand perceptions and helpful knowledge.

26. Draft channel policy: Denied. The court declined to exclude references to the never-adopted draft policy.

27. December 2013 emails from John Chen: Denied.

28. Internal discussions about delaying Z10 shipments: Denied. The court declined to exclude testimony and argument about Blackberry’s discussions concerning whether to consent to AT&T’s request to delay shipments from the first to the third quarter of fiscal year 2014.

29. Events after the class period: Denied. The court declined to exclude evidence or argument about post-class-period events.

Disposition

The court issued the decision and order on March 11, 2022, and directed the clerk to remove the listed motions from the court’s list of open motions. Because this order concerned pretrial evidence and trial management rather than the merits of the securities claims, it is classified as a procedural order.