United States District Court, D. South Carolina, Columbia Division
Accident Insurance Company, Inc., a South Carolina Corporation, Plaintiff,
v.
U.S. Bank National Association, Defendant. U.S. Bank National Association, Third Party Plaintiff,
v.
Southport Lane Advisors, Southport Specialty Finance, Administrative Agency Services, and Alexander Chatfield Burns, Third Party Defendants.
ORDER
Plaintiff
Accident Insurance Company, Inc. filed this action against
Defendant U.S. Bank National Association seeking monetary
damages for breach of contract, breach of fiduciary duty,
negligence/gross negligence, negligent misrepresentation, and
civil conspiracy regarding a trust agreement. (ECF No. 154 at
21 ¶ 116-25 ¶ 141.)
This
matter is before the court on Defendant's Motion in
Limine to Exclude Testimony of Plaintiff's Liability
Expert and Evidence Related to Government Investigations.
(ECF No. 177.) Specifically, Defendant moves the court for an
order excluding “(1) any testimony from Accident's
liability expert, Don Coker; (2) any evidence or argument
concerning government investigations; and (3) any evidence or
argument concerning U.S. Bank's alleged lack of BSA/AML
[‘Bank Secrecy Act/Anti-Money Laundering
compliance'] training.” (Id. at 1.) In
support of its Motion, Defendant asserts first that
Coker's Expert Report (ECF No. 177-1) consists of
impermissible legal conclusions regarding its alleged
breaches of fiduciary duty. (ECF No. 177 at 3 (citing,
e.g., United States v. McIver, 470 F.3d
550, 562 (4th Cir. 2006) (observing “that defendants
held a ‘fiduciary' relationship to
plaintiffs” as an example of “inadmissible
testimony”)).) Next, Defendant contends that Rules 408,
[1]
802, [2] 404(b), [3] 401, [4] and
403[5] of the Federal Rules of Evidence
prohibit admission of the following documents Plaintiff wants
to introduce into evidence: “(1) a 2015 Office of the
Comptroller of Currency Consent Order (the “OCC Consent
Order”) between the OCC and U.S. Bank; (2) a 2018
Deferred Prosecution Agreement (“DPA”) between
U.S. Bancorp and the Office of the U.S. Attorney for the
Southern District of New York; and (3) a 2018 Complaint filed
by the Securities and Exchange Commission against two of
Southport's principals, Alexander Chatfield Burns and
Andrew B. Scherr (the “SEC Complaint”), and the
Consent Judgment that Burns entered into to resolve the SEC
Complaint (the “SEC Consent Judgment”).”
(ECF No. 177 at 4-13 (referencing ECF Nos. 177-2, 177-3,
177-4, 177-5).) Finally, Defendant posits that it is
irrelevant under Federal Rule of Evidence 401 whether it
“enhanced or modified its BSA/AML training in light of
the OCC Consent Order and the DPA.” (ECF No. 177 at
13.)
Plaintiff
opposes the instant Motion arguing that (1) Coker's
testimony only informs the court “of banking industry
practice rather than attempting to supplant the [c]ourt's
role in determining USB's culpability, ” (2) the
Rules of Evidence cited by Defendant do not foreclose
Plaintiff from introducing the OCC Consent Order, the DPA,
the SEC Complaint, and the SEC Consent Judgment
(collectively, the “government investigation
documents”), and (3) the BSA/AML training is relevant
because Defendant's training failures led directly to
Plaintiff's losses. (ECF No. 190.)
I.
ANALYSIS
A.
Testimony of Plaintiff's Liability Expert Don
Coker
The
parties first dispute the admissibility of Coker's Expert
Report and trial testimony. Relevant to this inquiry, Federal
Rule of Evidence 704(a) provides that “[a]n opinion is
not objectionable just because it embraces an ultimate
issue.” Fed.R.Evid. 704(a). “However, opinion
testimony that states a legal standard or draws a legal
conclusion by applying law to the facts is generally
inadmissible.” McIver, 470 F.3d at 561-62
(citing United States v. Barile, 286 F.3d 749, 760
(4th Cir. 2002); Okland Oil Co. v. Conoco, Inc., 144
F.3d 1308, 1328 (10th Cir. 1998)).
The
court reviewed Coker's Report and found numerous
instances where he expressly opined regarding the existence
of fiduciary duties and the breach of those fiduciary duties
by Defendant. (E.g., ECF No. 177-1 at 2, 8
(“U.S. Bank was bound by the fiduciary duty of loyalty
. . . .”), 9-10, 12 (“The record in this case is
replete with breaches of fiduciary duty committed by U.S.
Bank . . . .”), 17 (“U.S. Bank breached its
inherent fiduciary duties . . . .”).) Therefore, the
court is persuaded that Coker's Report contains
impermissible opinion evidence on these issues.
E.g., Tessier v. Moffatt, C/A No. 98-0116,
2000 WL 35725886, at *1 (E.D. La. Feb. 25, 2000)
(“[T]estimony of an attorney expert concerning whether
there has been a breach of fiduciary duty offers a legal
opinion and, as such, is inadmissible.” (citing
Estate of Sowell v. United States, 198 F.3d 169, 171
(5th Cir. 1999)); Christiansen v. Nat'l Sav. &
Tr. Co., 683 F.2d 520, 529 (D.C. Cir. 1982) (“The
existence of fiduciary duties in the context of this case is
a legal conclusion. The duty to issue such conclusions
devolve on the courts and lay legal conclusions are
inadmissible in evidence.” (citation omitted)).
However, even though it agrees with Defendant that
Coker's impermissible “legal conclusions pervade
his [R]eport, ” the court is not persuaded that this
requires exclusion of the entirety of Coker's Report and
testimony.
The
court observes that Coker has “over thirty (30) years
of experience . . . in trust, investment and securities
services and in the customs, standards, and uses of trust and
investment services as they are rendered by financial
institutions” (ECF No. 177-1 at 3-4), and his knowledge
can possibly assist the court in making the legal
determinations at issue in the bench trial of this matter.
See Sun Yung Lee v. Clarendon, 453 Fed.Appx. 270,
278 (4th Cir. 2011) (“Whether an expert will assist the
factfinder is a question the trial court has ‘wide
discretion' to decide. This is true ‘particularly
when the court sits as the trier of fact, for [it] is then in
the best position to know whether expert testimony would help
[it] understand the case.'” (internal and external
citations omitted)); cf. Greenbrier Hotel Corp. v. Unite
Here Health, C/A No. 5:13-cv-11644, 2016 WL 9781805, at
*2 (S.D. W.Va. Mar. 14, 2016) (“As several courts have
found, there is little need ‘for the gatekeeper to keep
the gate when the gatekeeper is keeping the gate only for
himself.'” (citations omitted)).
Therefore,
the court grants Defendant's Motion in part and prohibits
Coker from opining or providing testimony in which he
expressly states any legal standards regarding the existence
of fiduciary duty and/or draws any legal conclusions
regarding the breach of fiduciary duty. If Coker begins to
testify to any opinion which Defendant believes is
impermissible opinion testimony, it may object to that
testimony during the trial. The court further reserves the
right to rule on the admissibility of specific opinions when
offered at trial, and to exclude or strike any testimony that
contains inadmissible legal standards and/or conclusions, or
questions that invite such testimony.
B.
Government Investigation Documents
The
parties' second dispute relates to the admissibility of
the government investigation documents.
Upon
its review, the court observes that cases addressing the
admissibility of such government investigation documents
generally have fallen into one of two categories, ultimately
determining either (1) that the documents in their entirety
are expressly inadmissible based on Rule 408's
prohibition against allowing into evidence statements and
conduct made in the course of compromise negotiations or (2)
that their factual findings and conclusions are admissible
under Rule 803(8)'s[6] “public records and
report” hearsay exception.[7] E.g.,
compare Option Res. Grp. v. Chambers Dev. Co., Inc.,
967 F.Supp. 846, 849 (W.D. Pa. 1996) (“Rule 408 does
not preclude the introduction of the SEC's findings,
including the opinions and conclusions, rendered in the
administrative proceedings, and while such findings and
conclusions may constitute hearsay under Rules 801 and 802,
they are plainly admissible under Rule 803(8)(C), the
‘Public records and reports' exception.”),
with Carpenters Health & Welfare Fund v. Coca-Cola
Co., C/A No. 1:00-cv-2838-WBH, 2008 WL 9358563, at *3,
*4 (N.D.Ga. Apr. 23, 2008) (disagreeing with Option
Res. finding that an “SEC Order falls squarely
into the class of evidence deemed inadmissible” and
that “Rule 803(8)[] is not a back door vehicle for the
introduction of evidence which is otherwise
inadmissible”); see also Wilson v. Parisi, No.
3:CV-04-1737, 2009 WL 151666, at *1 (M.D. Pa. Jan. 21, 2009)
(“Courts generally agree that Rule 408 applies to
consent decrees.” (citations omitted)). In trying to
determine which of the two categories is applicable to the
instant dispute, the court finds that it cannot ignore that
“Rule 408 exists to protect a party that settles one
claim from having that settlement used against it to
establish liability (or the extent of liability) of that same
party in another lawsuit for the same claim.”
S.E.C. v. Pentagon Capital Mgmt. PLC, No. 08 Civ.
3324, 2010 WL 985205, at *4 (S.D.N.Y. Mar. 17, 2010). In this
regard, even though Plaintiff does not expressly state that
the purpose for offering the government investigation
documents is to prove Defendant's liability based on the
similarity of conduct, it appears clear to the court that
Plaintiff seeks to introduce these documents to validate its
claims. (See ECF No. 190 at 7 (asserting that the
government investigation documents show how Defendant
“consistently failed to meet industry standards to
monitor and root out suspicious financial activity running
through its institution, knew its monitoring program was
deficient, failed to take reasonable steps to address the
deficiencies, and actively sought to conceal its misdeeds
from regulators”), 15 (“[T]he government
investigation documents are ‘direct evidence' on
AIC's fiduciary duty and negligence/gross negligence
claims.”)); e.g., Wilson, 2009 WL
151666, at *2 (“[S]ince Plaintiffs are attempting to
use the consent decrees entered into by the PK and Gibson
Defendants, and the corresponding orders, to prove liability
and not for some other purpose, the consent decrees and
orders are precluded by Federal Rule of Evidence Rule
408.”). Moreover, Rule 408's prohibition appears to
be applicable even if the entity invoking the rule is not a
party to the agreement at issue. E.g., Kennon v.
Slipstreamer, Inc., 794 F.2d 1067, 1069 (5th Cir. 1986)
(“Even where the evidence offered favors the settling
party and is objected to by a party not involved in the
settlement, Rule 408 bars the admission of such evidence
unless it is admissible for a purpose other than ‘to
prove liability for or invalidity of the claim or its
amount.'” (citation omitted)); see also
Buescher v. Baldwin Wallace Univ., 86 F.Supp.3d 789, 796
(N.D. Ohio 2015) (“[P]laintiffs contend that Rule 408
does not apply to non-parties, and because plaintiffs were
not parties to the Consent Agreement, it cannot be excluded.
But, plaintiffs cite no authority to support this argument.
Rather, cases have excluded consent agreements where
plaintiffs were not parties to the agreement.”
(citation omitted)).
As a
result of the foregoing, the court grants Defendant's
Motion and declares that the government investigation
documents are not admissible in this action pursuant to
Federal Rule of Evidence 408.[8]
C.
BSA ...