Highland Capital Management, L.P. v. Schneider

Page 173

551 F.Supp.2d 173

HIGHLAND CAPITAL MANAGEMENT, L.P., Plaintiff, v. Leonard SCHNEIDER, Leslie Schneider, Scott Schneider, and Susan Schneider, Defendants.

Leonard Schneider, Leslie Schneider, Scott Schneider, and Susan Schneider, Third-Party Plaintiffs, v. RBC Capital Markets Corporation f/k/a/RBC Dominion Securities Corporation, Third-Party Defendant and Third-Party Counterclaimant.

No. 02 Civ. 8098(PKL).

United States District Court, S.D. New York.

January 31, 2008.

COPYRIGHT MATERIAL OMITTED

Lackey Hershman, L.L.P., Paul B. Lackey, Esq., Jamie R. Welton, Esq., Dallas, TX, for Plaintiff.

Troutman Sanders L.L.P., Alvin M. Stein, Esq., Katherine C. Ash, Esq., New York, NY, for Defendants/Third-Party Plaintiffs.

Seward & Kissel L.L.P., Jack Yoskowitz, Esq., Michael J. McNamara, Esq., New York, NY, for Third-Party Defendant/Third-Party Counterclaimant.

OPINION AND ORDER

LEISURE, District Judge.

Plaintiff Highland Capital Management, L.P. ("Highland") brings this action to recover in contract from the defendants, Leonard Schneider, Leslie Schneider Scott Schneider, and Susan Schneider (collectively, "the Schneiders") for their refusal to sell certain promissory notes, valued at $69 million, to Highland and third-party-defendant and counterclaimant, RBC Capital Markets Corporation, formerly known as RBC Dominion Securities Corporation ("RBC"). The parties have filed multiple motions in limine in anticipation of trial.

BACKGROUND

The factual and procedural background of this case is explained in detail in the Court's recent summary judgment Opinion, dated January 16, 2008, familiarity with which is assumed. See Highland Capital Mgmt., L.P. v. Schneider, No. 02 Civ. 8098, 2008 WL 152778, 2008 U.S. Dist. LEXIS 3235 (S.D.N.Y. Jan.16, 2008). Any additional relevant facts are included in the discussion.

DISCUSSION

I. Motions in Limine and Federal Rules of Evidence

A district court's inherent authority to manage the course of its trials encompasses the right to rule on motions in limine. See Luce v. United States, 469 U.S. 38, 41 n. 4, 105 S.Ct. 460, 83 L.Ed.2d 443 (1984). Indeed, "[t]he purpose of an in limine motion is to aid the trial process by enabling the Court to rule in advance of trial on the relevance of certain forecasted evidence, as to issues that are definitely set for trial, without lengthy argument at, or interruption of, the trial." Palmieri v. Defaria, 88 F.3d 136, 141 (2d Cir.1996) (internal quotation marks omitted); see also Commerce Funding Corp. v. Comprehensive Habilitation Servs., Inc., No. 01 Civ. 3796, 2005 WL 1026515, at *3, 2005 U.S. Dist. LEXIS 7902, at *9 (S.D.N.Y. May 2, 2005) (Leisure, J.) ("The purpose of a motion in limine is to allow the trial court to rule in advance of trial on the admissibility and relevance of certain forecasted evidence."). "The court's ruling regarding a motion in limine is `subject to change when the case unfolds.'" Id., 2005 WL 1026515, at *4, 2005 U.S. Dist. LEXIS 7902, at *11 (quoting Luce, 469 U.S. at 41, 105 S.Ct. 460). Accordingly, this Opinion and Order constitutes a preliminary determination subject to change.

Rule 402 of the Federal Rules of Evidence provides that "[a]ll relevant evidence is admissible, except as otherwise provided by ... Act of Congress, [or] by these rules.... Evidence which is not relevant is not admissible." Fed.R.Evid. 402. The "standard of relevance established by the Federal Rules of Evidence is not high." United States v. Southland Corp., 760 F.2d 1366, 1375 (2d Cir.1985) (Friendly, J.). Evidence "having any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence" is relevant. Fed.R.Evid. 401.

Under Rule 403 of the Federal Rules of Evidence, the trial court has "broad discretion to exclude even relevant evidence if its probative value is substantially outweighed by the danger of confusion of the issues or if it would be needlessly cumulative." United States v. Beech-Nut Nutrition Corp., 871 F.2d 1181, 1193 (2d Cir.1989) (citing Fed.R.Evid. 403; United States v. Carter, 801 F.2d 78, 83 (2d Cir.1986); United States v. Martinez, 775 F.2d 31, 37 (2d Cir.1985)). Rule 403 also provides for the exclusion of relevant evidence if "its probative value is substantially outweighed by the danger of unfair prejudice." Fed.R.Evid. 403. Evidence is prejudicial under Rule 403 if it "involves some adverse effect ... beyond tending to prove the fact or issue that justified its admission into evidence." United States v. Gelzer, 50 F.3d 1133, 1139 (2d Cir.1995). The Court will exclude such evidence if it has "an undue tendency to suggest decision on an improper basis, commonly, though not necessarily, an emotional one." Fed.R.Evid. 403, advisory committee's notes. Because Rule 403 excludes relevant evidence, "it is an extraordinary remedy that must be used sparingly." George v. Celotex Corp., 914 F.2d 26, 31 (2d Cir. 1990). The "district court retains broad discretion to balance the evidence's potential prejudice ... against its probative value." United States v. Downing, 297 F.3d 52, 59 (2d Cir.2002).

II. Highland's Objections to Magistrate's Opinion and Order Striking Expert Testimony of Sean F. O'Shea

On July 19, 2005, Magistrate Judge Gabriel W. Gorenstein issued an Opinion and Order granting the Schneiders' Motion to Exclude Proposed Expert Testimony of Sean O'Shea and denying Highland's request to supplement the O'Shea Report (the "Gorenstein Order"). See Highland Capital Mgmt., L.P. v. Schneider, 379 F.Supp.2d 461 (S.D.N.Y.2005). On July 29, 2005, Highland objected to Magistrate Gorenstein's Opinion and Order. The Schneiders responded on August 10, 2005. The Court stayed ruling on Highland's objection because of the Court's dismissal of the case on July 25, 2005. However, in light of the Second Circuit's decision in this case, and the forthcoming trial, the Court now addresses Highland's objection. For the reasons that follow, Highland's objection is DENIED.

Rule 72(a) of the Federal Rules of Civil Procedure governs the Court's review of objections to a magistrate judge's nondispositive pre-trial order. Rule 72(a) states that "[t]he district judge in the case must consider timely objections and modify or set aside any part of the order that is clearly erroneous or is contrary to law." Fed.R.Civ.P. 72(a).

A district court is justified in finding a magistrate judge's ruling "clearly erroneous" where, "`although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.'" Labarge v. Chase Manhattan Bank, No. 95 Civ. 173, 1997 WL 583122, at *1, 1997 U.S. Dist. LEXIS 13803, at *3 (N.D.N.Y. Sept. 3, 1997) (quoting United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 92 L.Ed. 746 (1948)); accord Am, Rock Salt Co., LLC v. Norfolk S. Corp., 371 F.Supp.2d 358, 360 (W.D.N.Y.2005) ("[R]eversal is warranted only if the reviewing court is `left with the definite and firm conviction that a mistake has been committed.' " (quoting Easley v. Cromartie, 532 U.S. 234, 242, 121 S.Ct. 1452, 149 L.Ed.2d 430 (2001))); United Parcel Sen', of Am., Inc. v. The Net, Inc., 222 F.R.D. 69, 70-71 (E.D.N.Y.2004) ("An order is `clearly erroneous' only when `the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.'" (quoting Thompson v. Keane, No. 95 Civ. 2442, 1996 WL 229887, at *1 (S.D.N.Y. May 6, 1996))). Consequently, "parties seeking to overturn the Magistrate's discovery rulings `bear a heavy burden.'" Citicorp v. Interbank Card Ass'n, 87 F.R.D. 43, 46 (S.D.N.Y. 1980); accord, Com-Tech Assocs. v. Computer Assocs. Int'l, Inc., 753 F.Supp. 1078, 1099 (E.D.N.Y.1990) (same); 12 Charles Alan Wright, Arthur R. Miller, & Richard L. Marcus, Federal Practice and Procedure § 3069, at 350-51 (2d ed. 1997) ("[I]t is extremely difficult to justify alteration of the magistrate judge's nondispositive actions by the district judge."). Given such a highly deferential standard of review, magistrate judges are afforded broad discretion and "reversal is appropriate only if that discretion is abused." Commodity Futures Trading Com'n v. Standard Forex, Inc., 882 F.Supp. 40, 42 (E.D.N.Y. 1995); accord Doe v. Marsh, 899 F.Supp. 933, 934 (N.D.N.Y.1995) (stating abuse-ofdiscretion standard applies).

The Court has reviewed the Gorenstein Order and finds no clear error. In considering expert testimony, the Court must determine whether the testimony would "usurp either the role of the trial judge in instructing the' jury as to the applicable law or the role of the jury in applying that law to the facts before it." United States v. Lumpkin, 192 F.3d 280, 289 (2d Cir.1999) (quoting United States v. Duncan, 42 F.3d 97, 101 (2d Cir.1994)) (internal quotation marks omitted). Magistrate Judge Gorenstein fairly and appropriately applied the law in this Circuit. He considered each section of the O'Shea Report in turn and found each section to be inadmissible. It was not clear error for Magistrate Judge Gorenstein to hold that O'Shea's testimony would impermissibly impinge upon the province of both the fact finder, Highland Capital Mgmt, 379 F.Supp.2d at 469-70, and the Court, id. at 470-72, and is not relevant or necessary to assist the jury, id. at 473.

Additionally, Magistrate Judge Gorenstein's denial of Highland's request to defer consideration of the motion and supplement the report was appropriate. "Preclusion of testimony is an entirely appropriate measure when, as at present, the testimony a party seeks to present is simply inadmissible." Taylor v. Evans, No. 94 Civ. 8425, 1997 WL 154010, at *2 (S.D.N.Y. April, 1997). Furthermore, the "curative measures" put forth by Highland would not have "alleviate[d] the underlying defects" in O'Shea's proffered testimony. Id....