SuperCom Ltd. v. Sabby Volatility Warrant Master Fund Ltd.

Background

SuperCom alleged that Sabby initiated a cashless exercise involving 647,000 SuperCom shares without authorization and that Wedbush helped facilitate the transfer. The shares were returned the same day. SuperCom provided an expert report by Dr. Tal Mofkadi to support its damages theory. The opinion states that Wedbush’s motion to dismiss had been granted in a separate order, leaving Sabby as the only remaining defendant.

Sabby moved under Federal Rule of Civil Procedure 37 to prevent SuperCom from using Dr. Mofkadi’s report, arguing that SuperCom failed to comply with expert-disclosure requirements and court-ordered deadlines. SuperCom also moved to seal the report.

Expert-report requirements

Federal Rule of Civil Procedure 26 requires an expert report to give a complete statement of the opinions, the reasons and supporting facts or data, the expert’s qualifications, prior expert testimony, and compensation. Rule 37 permits exclusion of information not properly disclosed unless the failure was substantially justified or harmless. The court considered the explanation for the disclosure failure, the importance of the testimony, prejudice to the opposing party, and whether a continuance could address the problem.

Deficiencies in the report

The court found that the first two of Dr. Mofkadi’s three damages categories were insufficiently detailed. The report attributed increased borrowing costs and reduced company valuation to litigation and Sabby’s “various” or “inappropriate” actions, but it did not clearly identify which conduct caused the alleged losses, when the losses occurred, or how the calculations were tied to the alleged unauthorized share transfer. The report also did not identify supporting documents or testimony for statements about investment banks and potential investors rejecting SuperCom because of the litigation.

The court found the third damages category sufficiently detailed. Sabby could challenge that category through Dr. Mofkadi’s deposition or a rebuttal expert. The court also found that the report needed to identify the courts or jurisdictions where Dr. Mofkadi had previously testified as an expert; listing only the names of cases was not enough under the applicable case law.

Why the report was not precluded

The court held that preventing SuperCom from using the report was not warranted at that time. Although SuperCom did not provide a sufficient explanation for failing to meet its disclosure obligations, the testimony was important because of the complexity of the damages calculations. The court also found that Sabby would not suffer unique prejudice beyond delaying the final resolution of the case, and that the case was not yet scheduled for trial. Because the exclusion of expert evidence is a severe remedy, the court denied the motion to preclude without prejudice.

The court ordered SuperCom to serve one complete, updated report within 30 days. If the revised report remained deficient, Sabby could file a letter motion renewing its request within two weeks after receiving it. The court stated that it was unlikely to give SuperCom another opportunity to correct deficiencies.

Sealing request

The court denied SuperCom’s motion to seal Dr. Mofkadi’s report. It found that the report and the parties’ arguments relying on it were not judicial documents for purposes of the sealing motion, so the presumption of public access was limited. Even so, SuperCom did not identify confidential information, business-sensitive material, or a legitimate privacy or competitive interest that would be harmed by disclosure. The court therefore denied the motion to seal.

Disposition

The defendants’ motion to preclude Dr. Mofkadi’s expert report was DENIED without prejudice. SuperCom was ordered to provide an updated report within 30 days. SuperCom’s motion to seal the report was DENIED.