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The Deceased Customer, His Estate, The Merrill Lynch Employee, The Trusts, The Annuity, the Expert, and the Lawsuit
September 14, 2022
The recent federal case of Monique R. Snead, Individually, and as Personal Representative of the Estate of John H. Snead; et al., Plaintiffs, v. Guadalupe C. Wright; et al., Defendants (Order, United States District court for the District of Alaska, 19-CV-00092 and -00209 (consolidated)
https://brokeandbroker.com/PDF/SneadOrdDAlaska220907.pdf involves a deceased customer, his estate, a Merrill Lynch employee, trust accounts, and an annuity. Frankly, they could make a movie out of this one. Until the movie is made, however, let's take note of the "Background" section of the District Court's Order [Ed: footnote omitted]:
This federal action involves a dispute involving certain Merrill Lynch accounts held by John H. Snead, the father of Plaintiffs, who died in August 2017. Plaintiffs allege that Defendant Guadalupe Wright ("Wright"), who had been in a long-term relationship with John H. Snead up through his death and an employee of Merrill Lynch, unlawfully transferred funds from John H. Snead's trust accounts and fraudulently made herself the beneficiary of his annuity. In addition to the claims asserted against Defendant Wright, Plaintiffs also allege that Merrill Lynch facilitated these transactions for the benefit of Wright and to the detriment of the decedent and Plaintiffs. They bring multiple causes of action against Merrill Lynch, including breach of fiduciary duty, negligence, and fraudulent nondisclosure. In furtherance of these claim, Plaintiffs retained Chris McConnell ("McConnell") as an expert in the financial services industry. Merrill Lynch moves to exclude all testimony from McConnell, arguing that his expert report improperly presents opinions on legal issues and that his opinions are unreliable because they are "replete with speculation, mischaracterizations of evidence, factual errors and unsupported assertions.
A Matter of Opinion (an Expert's)
Notwithstanding the somewhat lurid allegations, at this moment in time, the Court is considering a relatively mundane Motion to Exclude the Proposed Expert Testimony of Chris McConnell. In parsing its way through the parties' competing positions, the Court starts its analysis with:
Federal Rule of Evidence 702: Testimony by Expert WitnessesA witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if:(a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue;(b) the testimony is based on sufficient facts or data;(c) the testimony is the product of reliable principles and methods; and(d) the expert has reliably applied the principles and methods to the facts of the case.
As to expert McConnell's qualifications, the Court concedes that they "are not in question here" given his Master's Degree in Business Administration, his role as a Certified Public Accountant, and his 2004 achievement of becoming an Accredited Investment Fiduciary Analyst. Further, the Court notes that in addition to his certifications and degrees, McConnell has over two decades experience in the financial planning/advising sector including regulatory/compliance roles. at Page 4 of the Order. Notwithstanding McConnell's bona fides, Merrill Lynch argues that his proposed expert report offers [Ed: footnote omitted]:
improper legal opinions about the annuity and trust accounts at issue, including an opinion about how Merrill Lynch breached a fiduciary duty-one of the ultimate legal issues in the case. It also asserts that his opinions, legal or otherwise, are wholly conclusory, without supporting explanation, and based upon speculation and mischaracterizations of the evidence to such an extent that the court should deem any testimony from him an "unreliable nonsense opinion" that should be withheld from the jury.
at Page 4 of the Order
As to the nature of McConnell's report and its impact on a jury, the Court offers this characterization [Ed: footnotes omitted]:
McConnell's expert report is centered around the applicable duties owed by Merrill Lynch to John H. Snead and the beneficiaries of the applicable trusts, and whether any of Merrill Lynch's actions at issue in this case "violated any duty, appliable [sic] laws, internal policies, or customary practices." He offers an opinion in his report that Merrill Lynch owed John H. Snead and Plaintiffs a fiduciary duty and that it breached that duty. He also concludes Merrill Lynch violated various SEC and FINRA rules and regulations.McConnell's inclusion of these legal issues in his report does not require that he be outright excluded from testifying at trial. Testimony that touches upon or embraces an ultimate issue is not automatically objectionable. Indeed, the Ninth Circuit specifically has held that testimony regarding whether "[d]efendants failed to comport with industry standards" may be properly admitted at trial. testimony only becomes excludable when it includes an opinion on what legal conclusion should be reached by the trier of fact.
at Page 5 of the Order
Although the Court decided not to exclude McConnell's report, that door-opening was not without some qualifications:
[M]cConnell must refrain from offering the opinion included in his report that Merrill Lynch breached its fiduciary duties, because that is a legal conclusion that encroaches on the job of the fact finder. He may, however, offer testimony at trial to the extent his testimony can be narrowed to focus on explaining the applicable industry standards and best practices garnered from his experience in the industry and how Merrill Lynch's actions and decisions failed to comport with these standards and practices. He may offer opinions that touch on various financial regulations, as long as he can articulate his understanding of what each regulation requires based on his experience and why actions taken by Merrill Lynch fall short of these requirements and expectations.
at page 5 - 6 of the Order
The Report Is Not Disqualified
Merrill Lynch cited numerous examples in the report of what it characterized as statements based upon speculation or erroneous facts -- and further argued that some statements were nothing more than conclusory opinions that failed to cite specific policies, best practices, or regulation. In declining to disqualify the report for Merrill Lynch's reasons, in part, the Court explains that [Ed: footnotes omitted]:
[M]cConnell has a sufficient foundation of knowledge and experience to serve as an expert on standards of care in the financial services industry, and his proposed testimony is not obviously wholly unreliable. To find that it is, the court would have to conclude that his review of the evidence was erroneous or incomplete, but questions about the facts supporting an expert's opinions reflect on credibility, not admissibility. That is, the court cannot decide whether McConnell's opinions are "right or wrong." Rather, its task simply is to determine whether McConnell's testimony has substance such that it would be helpful to a jury." Here, McConnell's qualifications are established and not challenged, and it is clear he reviewed the evidentiary record. Therefore, his opinions about the applicable standards of care and how they apply to the situation, which is included in his report to some extent, will be helpful to the jury.The court cautions, however, that McConnell may not testify solely to construct a factual narrative for the jury. He may not simply present some theory of the case favorable to Plaintiffs, particularly one that rests on speculation of malicious motives and forgery. Any testimony that speculates as to motive, intent, or mental state is not appropriate expert testimony and will be subject to objection and exclusion at trial. Furthermore, for every opinion and conclusion offered about Merrill Lynch's conduct falling short of industry standards, McConnell must be able to identify and explain the applicable industry standard.
at Pages 7 - 8 of the Order
Accordingly, the Court denied Merrill Lynch's Motion to Exclude.
Bill Singer's Comment
Compliments to the Court on publishing a nice, tight Order replete with sufficient content and context so as to make the rationale compelling.
For those embroiled in an investment dispute, an expert's testimony (yours or theirs) is often a critical component in tipping the scales in favor of one side of the lawsuit or another. On Wall Street, some investments and some investment strategies are complex and tailored to the specific needs of a customer. In such cases, a jury may find it helpful to have someone patiently and convincingly establish what a given investment entails, how a specific strategy is designed, and whether so-called industry standards were satisfied. Obviously, it's important to really impress a jury with the background of your expert. On the other hand, just because someone has the credentials to testify about an esoteric investment or complicated strategy doesn't mean that that such a witness will have the courtroom demeanor necessary to win over a jury. Quite often what makes the really great litigators formidable opponents is their instincts -- particularly when it comes to choosing an expert capable of winning over a jury; or, in contrast, passing on someone with better credentials but likely to alienate jurors because of a imperious attitude.
The first skirmish between the parties is whether McConnell's expert report is based upon his expertise and the facts at hand; or, in contrast, as Merrill Lynch argues, he's just shootin' the breeze and trying to pass off his opinions as facts. The Court is willing to entertain an McConnell's testimony regarding whether "industry standards" were satisfied by the Defendants' conduct; however, McConnell will need to stick to the facts and avoid offering his opinion. Sometimes, that's easier said than done, which is probably what Merrill Lynch is worried about here. There's mere run-of-the-mill opinion. There's an expert's opinion. There's testimony. There's speculation. Then there's the judge in the robes who decides what's what.
The starting point for whether an expert should be allowed to testify is typically whether the proposed testimony is "helpful" to a jury. Yeah, I know, another bit of nuance as in what the hell is meant by "helpful." The tail-wind for the "helpful" analysis is whether the proposed expert has the background and experience with the likely issues involving his testimony. Preliminarily, the Court found that McConnell had the chops. The head-wind is whether an expert's testimony tackles the facts or strays into hypotheticals and what-ifs and becomes mere opinion.
Assuming that both parties will present their version of what did and didn't happen, the role of the jury is to digest the competing narratives, form their own opinion based upon such testimony as to what likely did or did happen and what should or should not have happened. As such, judges respect the juror's role in developing an opinion as a trier-of-fact. Courts don't tolerate efforts to strong-arm an expert's mere opinion in a manner that suggests it is an alternative to a juror's deliberations derived from the evidence at trial. All of which explains why the Court admonished that McConnell:
may not simply present some theory of the case favorable to Plaintiffs, particularly one that rests on speculation of malicious motives and forgery. Any testimony that speculates as to motive, intent, or mental state is not appropriate expert testimony and will be subject to objection and exclusion at trial. Furthermore, for every opinion and conclusion offered about Merrill Lynch's conduct falling short of industry standards, McConnell must be able to identify and explain the applicable industry standard.