Snead v. Wright

• Court: District Court, D. Alaska
• Decided: September 7, 2022
• Docket: 3:19-cv-00092
• Status: Unknown

Opinion

1 IN THE UNITED STATES DISTRICT COURT

2 FOR THE DISTRICT OF ALASKA 3

4 MONIQUE R. SNEAD, Individually, 5 and as Personal Representative of the Case No. 3:19-cv-00092-JWS Estate of John H. Snead; et al., 3:19-cv-00209-JWS 6 CONSOLIDATED 7 Plaintiffs,

8 vs. ORDER 9 GUADALUPE C. WRIGHT; et al., 10 Defendants. 11

13 I. MOTION PRESENTED 14 15 At docket 134, Defendant Merrill Lynch, Pierce, Fenner & Smith 16 Incorporated (“Merrill Lynch”) filed a motion to exclude the proposed expert 17 testimony of Chris McConnell, the financial services industry expert for Plaintiffs 18 Monique R. Snead and John G. Snead (“Plaintiffs”). Plaintiffs filed an opposition at 19 20 docket 139. Merrill Lynch filed a reply at docket 142. Oral argument would not be of 21 assistance to the court. 22 II. BACKGROUND 23 24 This federal action involves a dispute involving certain Merrill Lynch 25 accounts held by John H. Snead, the father of Plaintiffs, who died in August 2017. 26 Plaintiffs allege that Defendant Guadalupe Wright (“Wright”), who had been in a long- 27 28 term relationship with John H. Snead up through his death and an employee of Merrill 1 Lynch, unlawfully transferred funds from John H. Snead’s trust accounts and 2 fraudulently made herself the beneficiary of his annuity. In addition to the claims 3 asserted against Defendant Wright, Plaintiffs also allege that Merrill Lynch facilitated 4 5 these transactions for the benefit of Wright and to the detriment of the decedent and 6 Plaintiffs. They bring multiple causes of action against Merrill Lynch, including 7 breach of fiduciary duty, negligence, and fraudulent nondisclosure. In furtherance of 8 9 these claim, Plaintiffs retained Chris McConnell (“McConnell”) as an expert in the 10 financial services industry. Merrill Lynch moves to exclude all testimony from 11 McConnell, arguing that his expert report improperly presents opinions on legal issues 12 and that his opinions are unreliable because they are “replete with speculation, 13 14 mischaracterizations of evidence, factual errors and unsupported assertions.”1 15 III. LEGAL STANDARDS 16 Federal Rule of Evidence 702 permits a witness qualified by 17 18 “knowledge, skill, experience, training, or education” to offer expert testimony where: 19 (1) the testimony will help the trier of fact understand the evidence or determine a fact 20 in issue; (2) the testimony is based on sufficient facts or data; (3) the testimony is the 21 22 product of reliable principles and methods; and (4) the expert has reliably applied the 23 principles and methods to the facts of the case.2 This rule helps the court perform its 24 mandatory gatekeeping function to “assure that the expert testimony ‘both rests on a 25 26 27

28 1 Docket 134 at 2. 2 Fed. R. Evid. 702. 1 reliable foundation and is relevant to the task at hand.’”3 “[T]estimony is relevant if 2 the knowledge underlying it has a valid connection to the pertinent inquiry.”4 3 Testimony is reliable if it is rooted in the “knowledge and experience of the relevant 4 5 discipline.”5 The court’s role in analyzing reliability “is to analyze not what the 6 experts say, but what basis they have for saying it.”6 That is, reliability is not to be 7 conflated with credibility. “Shaky but admissible evidence is to be attacked by cross 8 9 examination, contrary evidence, and attention to the burden of proof, not exclusion.”7 10 The court must act as gatekeeper for both scientific and non-scientific 11 expert testimony, although it has flexibility in structuring how it determines whether 12 expert testimony is reliable and relevant.8 For non-scientific testimony, such as 13 14 testimony about industry practices and standards, reliability often cannot be measured 15 by examining the methodology, theories, or technical framework supporting the 16 opinion. Rather, reliability is more dependent on the knowledge and experience of the 17 18 expert.9 Exclusion of expert testimony should be “the exception rather than the rule.”10 19 20 21 22 23 3 Primiano v. Cook, 598 F.3d 558, 564 (9th Cir. 2010) (quoting Daubert v. Merrell Dow 24 Pharm., Inc., 509 U.S. 579, 597 (1993)). 4 Id. at 565 (quoting United States v. Sandoval-Mendoza, 472 F.3d 645, 654 (9th Cir. 2006)). 25 5 Id. 26 6 Wendell v. GlaxcoSmithKline LLC, 858 F.3d 1227, 1232 (9th Cir. 2017) (quoting Daubert v. Merrell Dow Pharms., Inc., 43 F.3d 1311, 1316 (9th Cir. 1995)). 27 7 Primiano, 598 F.3d at 564. 8 United States v. Valencia-Lopez, 971 F.3d 891, 898 (9th Cir. 2020). 28 9 Hangarter v. Provident Life & Accident Ins. Co., 373 F.3d 998, 1017 (9th Cir. 2004). 10 Fed. R. Evid. 702 advisory committee’s note to 2000 amendment. 1 IV. DISCUSSION 2 McConnell’s qualifications to testify about matters specific to financial 3 services are not in question here. He possesses an undergraduate degree in economics, 4 5 as well as a master’s degree in business administration. He has a background as a 6 Certified Public Accountant. He worked in the financial planning and advising sector 7 for twenty years before becoming an Accredited Investment Fiduciary Analyst (AIFA) 8 9 in 2004. He has experience in consulting on matters related to the securities, banking, 10 and financial services industry, including regulatory and internal compliance, custom 11 and practices, supervision, and fiduciary duties. He claims experience in pre-claim, 12 litigation, and arbitration support in cases involving standard of care, custom and 13 14 practice, and liability. 15 Despite these unchallenged qualifications, Merrill Lynch argues his 16 testimony should be excluded in full because his expert report offers improper legal 17 18 opinions about the annuity and trust accounts at issue, including an opinion about how 19 Merrill Lynch breached a fiduciary duty—one of the ultimate legal issues in the case. 20 It also asserts that his opinions, legal or otherwise, are wholly conclusory, without 21 22 supporting explanation, and based upon speculation and mischaracterizations of the 23 evidence to such an extent that the court should deem any testimony from him an 24 “unreliable nonsense opinion” that should be withheld from the jury.11 25 26 27 11 See Alaska Rent-A-Car, Inc. v. Avis Budget Grp., Inc., 738 F.3d 960, 969 (9th Cir. 2013) 28 (“Basically, the judge is supposed to screen the jury from unreliable nonsense opinions, but not exclude opinions merely because they are impeachable.”). 1 A. Legal Opinions 2 McConnell’s expert report is centered around the applicable duties owed 3 by Merrill Lynch to John H. Snead and the beneficiaries of the applicable trusts, and 4 5 whether any of Merrill Lynch’s actions at issue in this case “violated any duty, 6 appliable laws, internal policies, or customary practices.”12 He offers an opinion in his 7 report that Merrill Lynch owed John H. Snead and Plaintiffs a fiduciary duty and that 8 9 it breached that duty. He also concludes Merrill Lynch violated various SEC and 10 FINRA rules and regulations. 11 McConnell’s inclusion of these legal issues in his report does not require 12 that he be outright excluded from testifying at trial.13 Testimony that touches upon or 13 14 embraces an ultimate issue is not automatically objectionable. Indeed, the Ninth 15 Circuit specifically has held that testimony regarding whether “[d]efendants failed to 16 comport with industry standards” may be properly admitted at trial.14 The testimony 17 18 only becomes excludable when it includes an opinion on what legal conclusion should 19 be reached by the trier of fact.15 20 After due consideration of McConnell’s report, the court declines to 21 22 exclude his proposed testimony wholesale. McConnell must refrain from offering the 23 opinion included in his report that Merrill Lynch breached its fiduciary duties, because 24 that is a legal conclusion that encroaches on the job of the fact finder. He may, 25 26 12 Docket 135-1 at 2–3. 27 13 Mukhtar v. Cal. State Univ., Hayward, 299 F.3d 1053, 1065 n.10 (9th Cir. 2002) (“It is well-established . . . that expert testimony concerning an ultimate issue is not per se improper.”). 28 14 Hangarter, 373 F.3d at 1016. 15 Id. 1 however, offer testimony at trial to the extent his testimony can be narrowed to focus 2 on explaining the applicable industry standards and best practices garnered from his 3 experience in the industry and how Merrill Lynch’s actions and decisions failed to 4 5 comport with these standards and practices. He may offer opinions that touch on 6 various financial regulations, as long as he can articulate his understanding of what 7 each regulation requires based on his experience and why actions taken by Merrill 8 9 Lynch fall short of these requirements and expectations. 10 To the extent Merrill Lynch requests that this court parse through 11 McConnell’s report and specifically identify which statements would and would not 12 be admissible, the court declines to do so. The “report is not evidence and, because 13 14 the objectionable character of some of his statements may simply be due to injudicious 15 phrasing, a pre-trial ruling on the admissibility of his testimony is premature.”16 16 Plaintiffs’ counsel, however, should caution McConnell that he cannot offer opinions 17 18 about the correct legal conclusion, nor can he opine as a legal expert. Additionally, 19 McConnell cannot testify, as his report suggests he might, about any potential money 20 laundering; any such testimony is beyond the scope of his expertise. His testimony 21 22 must be related to standards of care in the financial industry—based on custom, best 23 practices, company policies, or applicable regulations—as he understands them to 24 operate based on his years of experience. Any disagreement with his understanding of 25 those standards is the proper subject of cross-examination rather than exclusion. 26 27

28 16 Madrigal v. Allstate Indem. Co., CV-14-4242-SS, 2015 WL 12746232, at *5 (C.D. Cal. Oct. 29, 2015). 1 B. Reliability 2 Merrill Lynch also asserts that McConnell’s expert opinion testimony 3 should be excluded because it constitutes ipse dixit testimony—opinions offered 4 5 without supporting explanation and based upon speculation and mischaracterizations 6 of the evidence. In support, Merrill Lynch points to a dozen examples of statements 7 McConnell made in his report or deposition that it asserts are based on speculation or 8 9 erroneous facts, or are otherwise wholly conclusory opinions made without reference 10 to a specific policy, best practice, or regulation. After due consideration of Merrill 11 Lynch’s argument and McConnell’s report and deposition, the court cannot deem his 12 testimony wholly unreliable. As noted above, when testimony is not scientific or 13 14 technical, reliability rests less on an examination of the expert’s methodology or 15 application of relevant principals and more on consideration of the expert’s knowledge 16 and experience.17 McConnell has a sufficient foundation of knowledge and experience 17 18 to serve as an expert on standards of care in the financial services industry, and his 19 proposed testimony is not obviously wholly unreliable. To find that it is, the court 20 would have to conclude that his review of the evidence was erroneous or incomplete, 21 22 but questions about the facts supporting an expert’s opinions reflect on credibility, not 23 admissibility. That is, the court cannot decide whether McConnell’s opinions are 24 “right or wrong.”18 Rather, its task simply is to determine whether McConnell’s 25 26 27 17 Hangarter, 373 F.3d at 1017. 28 18 Elosu v. Middlefork Ranch Inc., 26 F.4th 1017, 1024 (9th Cir. 2022) (quoting Alaska Rent- A-Car, Inc., 738 F.3d at 969–70). 1 “testimony has substance such that it would be helpful to a jury.”19 Here, McConnell’s 2 qualifications are established and not challenged, and it is clear he reviewed the 3 evidentiary record. Therefore, his opinions about the applicable standards of care and 4 5 how they apply to the situation, which is included in his report to some extent, will be 6 helpful to the jury. 7 The court cautions, however, that McConnell may not testify solely to 8 9 construct a factual narrative for the jury.20 He may not simply present some theory of 10 the case favorable to Plaintiffs, particularly one that rests on speculation of malicious 11 motives and forgery. Any testimony that speculates as to motive, intent, or mental 12 state is not appropriate expert testimony and will be subject to objection and exclusion 13 14 at trial.21 Furthermore, for every opinion and conclusion offered about Merrill Lynch’s 15 conduct falling short of industry standards, McConnell must be able to identify and 16 explain the applicable industry standard. 17 18 V. CONCLUSION 19 Based on the preceding discussion, Merrill Lynch’s motion to exclude 20 the proposed expert testimony of Chris McConnell at docket 134 is DENIED. The 21 22 court will not exclude Chris McConnell from testifying under Rule 702 of the Federal 23 Rules of Evidence. Nothing in this order should be deemed a ruling on admissibility 24 of any specific statement contained in the report, and the court reserves the right to 25 26

27 19 Id. 20 Johns v. Bayer Corp., No. 09-cv-1935, 2013 WL 1498965, at *28 (S.D. Cal. Apr. 10, 2013). 28 21 See, e.g., Siring v. Oregon State Bd. of Higher Educ. ex rel. E. Oregon Univ., 927 F. Supp. 2d 1069, 1077–78 (D. Oregon 2013). 1 exclude his testimony in the course of trial that exceeds the proper scope of his 2 expertise or is shown to be irrelevant or otherwise inadmissible based on the evidence 3 as presented at trial. 4 5 IT IS SO ORDERED this 7th day of September, 2022, at Anchorage, 6 Alaska. 7

8 /s/ John W. Sedwick 9 JOHN W. SEDWICK Senior United States District Judge 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28