Finance expert witness partially admitted in Alabama
Participation loans are loans shared by a group of banks towards a single borrower. On January 27, 2014, the Alabama district court partially admitted a finance expert witness in one such participation loan scam trial (FNB Bank v. Park National Corp.) and rejected the portions of his testimony that offered legal conclusion and attempted to interpret contractual terms.
Particulars of the case
According to the complaint, non-party Vision Bank made a $5 million loan to non-party Marine Park for a real estate development project, secured and guaranteed by multiple guarantors. In March 2007, Vision sold a 100% participation interest in the loan to FNB Bank, the Plaintiff, with the parties’ obligations memorialized in a written agreement. Later the same month, Vision consummated a merger agreement with Defendant Park National Corporation, a bank holding company, and became Defendant’s subsidiary. However, after making numerous misstatements over the next two years and refusing to disclose important information, Vision, via Defendant Park, sold certain “good” assets to non-party Centennial Bank in February 2012 and merged itself into Defendant SE Property Holdings, LLC, a wholly owned subsidiary of Park. Among the “bad” assets retained by Vision and transferred to SEPH was the Loan, which matured without payment in January 2009. In January 2013, Plaintiff sent Defendants a letter identifying multiple defaults including (1) breach of contract (2) negligence (3) willful misconduct and (4) specific performance under the Agreement and demanding that the defaults be cured or its participation interest repurchased. Defendants neither cured nor repurchased.
Challenging the finance expert witness
Defendants presented testimony from a finance expert witness, whose report stated that his “background and experience include a significant amount of training in all areas of banking and mortgage banking including … participations” and that his “experience as a banking regulator included handling many development and construction loans and numerous loan participations.”
The Plaintiff challenged the finance expert on multiple grounds. Firstly, they argued that the finance expert witness was not qualified to render expert opinions regarding participation loans. Secondly they claimed the expert’s opinions were contrary to the evidence in the case. Thirdly, they asserted that an expert could not be used as a “vehicle for factual narrative.” Fourthly, they stated the expert could not testify as to its knowledge of certain facts. Fifthly, they added that the expert could not testify as to the subjective intent either as a fact (since he does not know Plaintiff’s mental state) or as an opinion (since he is not qualified to render such an opinion). Lastly, they asserted that an expert was barred from offering legal conclusions and interpreting the contract terms.
Opinion of the Court
From the list of evidence available, the Court found it was clear that Defendant’s finance expert witness had more than adequate experience with participation loans to offer expert testimony concerning them in this case. Plaintiff’s challenge to his qualification pressing on “specific experience” with participation loans was not supported by any authority for the proposition that such detail was a necessary predicate to admissibility, and it ignored its own failure to seek such information when it deposed the expert. So essentially Plaintiff’s challenge on qualifications ground was rejected.
Moving on to the testimony’s non-compliance with evidence, it was held that an expert opinion cannot be excluded on that basis alone.
About the factual testimony issue, the Court ruled that the few sentences in the expert’s report did not make him a narrator and rather provided the necessary factual underpinning for his opinions, without which his report would be subject to attack as noncompliant with Rule 26(a)(2)(B).
Regarding knowledge and intent, the next two issues, the Court again pointed to the dearth of authoritative precedent and rejected the motions to exclude on those grounds.
Finally, about the expert offering legal conclusions, the Court however, fully agreed, and decided that “[b]ecause the effect of a lien upon title would appear to constitute a legal conclusion, which the finance expert may not deliver, the motion in limine will be granted to this extent.” The Court also identified at least three instances in which the expert did reference contractual provisions, and stressed on the rule that “a witness may not testify to the legal implications of conduct; the court must be the jury’s only source of law.”
**Written for the web by the EWG Editorial Team