United States District Court, M.D. Louisiana
U.S. SECURITIES AND EXCHANGE COMMISSION
COMMONWEALTH ADVISORS, INC., ET AL
RULING ON DEFENDANTS' MOTION TO EXCLUDE EXPERT
TESTIMONY OF EDWIN D. WITHAM
W. deGRAVELLES JUDGE.
the Court is Defendants' Motion to Exclude Expert
Testimony of Edwin D. Witham (Doc. 299). The motion is
opposed. (Doc. 300.) While the briefing schedule allows for a
reply brief, the Court has carefully reviewed the motion and
supporting memorandum, the opposing memorandum as well as the
Court's prior rulings on the issues raised
herein and does not feel that a reply memorandum
would benefit the Court. For the reasons which follow, the
Court now rules, and the motion is DENIED.
challenge Witham's testimony on three grounds: first,
that it contains inadmissible legal conclusions, (Doc. 299-1
at 4-5); second, that "Defendants are not bound to the
CFA standards and therefore, Witham's testimony is
neither relevant nor reliable, " (Id., 5-11);
and third, because of his CFA opinions, "the Court
cannot allow the SEC to use an expert witness to mislead the
jury and change the law after the fact." (Id.,
at 11-12.) The Court will consider these in sequence but the
Court notes preliminarily that Plaintiff is correct in
arguing that most of the issues raised in this new motion
have previously been raised and ruled upon.
respect to Defendants' first argument regarding legal
conclusions, Defendants fail to mention in their motion or
memorandum the Court's prior ruling on this issue which
was made orally at the conclusion of a hearing on this very
THE COURT: All right. The title of this ruling is
["]what's sauce for the goose is sauce for the
gander. ["] And the ruling is identical to that which I
rendered with respect to Mr. Filler [Defendants' expert].
Mr. Witham is not going to be permitted to testify about
legal conclusions. Although, as I mentioned in the case law
that I cited and quoted says this, and the advisory rules - -
the note to 704 rules of evidence specifically says that
sometimes that line between what a legal conclusion is and
what isn't depends upon how the question is phrased, so
it's impossible in advance to say you can only ask these
questions and you can't ask these questions. It's
just going to have to be done on a question by question
basis, but, clearly, there are circumstances under which the
ultimate conclusion can be testified to by an expert but not
legal conclusions and where that line is, we'll just have
to wait for the trial." (Doc. 267-3 at 122-123.)
the Court (again) denies this portion of Defendants'
motion and defers until trial the issue of whether any given
question to either expert calls for a legal conclusion and
thus should not be allowed.
second issue raised by Defendants deals with Witham's
reliance on standards of the CFA. Defendants argue that
Witham's opinion that the standards "represent the
standard of conduct for the entire industry... is completely
false." (Doc. 299-1 at 5, 7-8.) "Although Morales
is a CFA, other employees and Commonwealth itself were
not." (Id. at 5) The CFA represents a higher
standard of conduct than that imposed by federal securities
laws (Id. at 6-7), and Witham was unable to opine as
to the number of hedge fund managers who are CFA chartered
and could not say whether the standards were adopted by state
or federal statute or formally adopted by any registered
investment advisor. (Id. at 8-9.) Defendants point
out that Witham admits the standards are not "synonymous
with fiduciary duties" but, rather, are "best
practices". (Id. at 9- 10.) Defendants conclude
by arguing that Witham's opinions are "neither
relevant nor reliable" and to allow the testimony would
"mislead the jury and change the law after the
fact." (Id. at 11-12.)
responds that Defendants' challenge is based upon
Witham's use of the CFA standards to support his opinions
in his December 1, 2016 expert report. (Doc. 300 at 3-4.)
Plaintiff points out that "[t]he Court has already
limited Mr. Witham's testimony and held that he may not
discuss the CFA standards during the SEC's case in chief
(Id. (citing Doc. 274 at 1, expressly granting Docs.
267 and 267-1).) "Consequently, there is no additional
relief to award; the defendants have already received what
they requested. The defendants' present motion should,
therefore, be denied as moot."
true that Defendants' present motion seems to be limited
to the opinions given in Witham's December 1, 2016
report, and it is true that the Court has already ruled that
he will not be allowed to testify as to the opinions given in
that report in the SEC's case in chief. (Doc. 274.)
Therefore, to that extent, Plaintiff is correct, and this
portion of Defendants' current motion is denied as moot.
the Court denied Defendants' earlier motion to strike
Witham's opinions given in his July 22, 2016 rebuttal
report since it had been timely filed. (Doc. 274.) While the
current motion does not seem to address the issues raised in
his July 22 report, the Court will nonetheless address the
Daubert challenge as it would apply to this report.
To the extent that his report and his most recent deposition
reference or rely upon CFA standards, and to the extent that
the Court's earlier ruling left this issued unresolved,
the Court denies the present motion. While the CFA standards
are not "the law" and are not legally binding even
on its members, they nonetheless are relevant. The issues
raised by the Defendants go to the weight of the testimony
and not the admissibility:
"As a general rule, questions related to the bases and
sources of an expert's opinions affect the weight to be
assigned that opinion rather than its admissibility and
should be left for the jury's consideration."
United States v. 14.3 Acres of Land More Or Less Situated
in Lefore County, Ms., 80 F.3d 1074, 1077 (5th Cir.
1996) (quoting Viterbo v. Dow Chemical Co., 826 F.2d
420, 422 (5th Cir. 1987)); see also Tyler v. Union Oil
Co. of Cal., 304 F.3d 379, 392-93 (5th Cir. 2002
(holding that a party's objection that the expert's
self-created database was unreliable did not affect
admissibility); Naquin v. Elevating Boats, LLC, No.
10-4320, 2012 WL 1664257, at*4(E.D. La. May \\, 20\2);St
Joseph Abbey v. Castille, No. 10-2717, 2011 WL 2182046,
at *1 (E.D. La. June 3, 2011) ('"The reliability of
data underlying an expert's opinion goes to the weight of
this evidence, but should not serve as a basis for its
exclusion." (quoting Gen. Elec. Capital Bus. Asset
Funding Corp. v. S.A.S.E. Military, Ltd., No. 03-189,
2004 WL 5495590, at *4 (W.D. Tex. Oct. 21, 2004));
Imperial Trading Co. v. Travelers Property and Casualty
Co. of America, No. 06-4262, 2009 WL 2356292, *3 (E.D.
La. July 28, 2009); Southwire Co. v. J.P. Morgan Chase
& Co., 258 F.Supp.2d 908, 935 (W.D. Wis. 2007)
(" the alleged errors and inconsistencies are grounds
for impeaching the credibility of the experts and the
reliability of their ultimate finding; however, mistakes and
miscalculations are not grounds for excluding evidence."
(citing Daubert, 509 U.S. at 596)).
Nkansah v. Martinez, No. 15-646, 2017 WL 2798520, at
*4 (M.D. La. June 28, 2017).
can raise the points mentioned in their briefing both on
cross examination and through their own expert. The
Defendants can also seek a limiting instruction from the
Court as to the role of expert testimony, the foundation for
the expert's opinion, and that jurors "are not
required to accept [the expert's] opinion" and can
"decide whether to rely on it."
Defendants' Motion to Exclude Expert Testimony of Edwin