Pg 1 of 11 BAKER & HOSTETLER LLP 45 Rockefeller Plaza New York, New York 10111 Telephone: (212) 589-4200 Facsimile: (212) 589-4201 Attorneys for Irving H. Picard, Trustee for the Substantively Consolidated SIPA Liquidation of Bernard L. Madoff Investment Securities LLC and the Chapter 7 Estate of Bernard L. Madoff UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK SECURITIES INVESTOR PROTECTION CORPORATION, Plaintiff-Applicant, Adv. Pro. No. 08-01789 (SMB) SIPA Liquidation v. (Substantively Consolidated) BERNARD L. MADOFF INVESTMENT SECURITIES LLC, In re: BERNARD L. MADOFF, Defendant. Debtor. IRVING H. PICARD, Trustee for the Liquidation of Bernard L. Madoff Investment Securities LLC, Adv. Pro. No. 09-01182 (SMB) Plaintiff, v. J. EZRA MERKIN, GABRIEL CAPITAL, L.P., ARIEL FUND LTD., ASCOT PARTNERS, L.P., ASCOT FUND LTD., GABRIEL CAPITAL CORPORATION, Defendants. TRUSTEE S MEMORANDUM OF LAW IN OPPOSITION TO DEFENDANTS MOTION IN LIMINE TO EXCLUDE TESTIMONY OF MEAGHAN SCHMIDT
Pg 2 of 11 TABLE OF CONTENTS Page PRELIMINARY STATEMENT...1 ARGUMENT...2 I. THE TESTIMONY OF MEAGHAN SCHMIDT IS RELEVANT AND ADMISSIBLE TO AUTHENTICATE BLMIS S BOOKS AND RECORDS...2 II. THE TRUSTEE HAS AGREED TO RE-OPEN DISCOVERY FOR THE DEPOSITION OF MEAGHAN SCHMIDT TO PREVENT ANY POTENTIAL HARM TO DEFENDANTS AT TRIAL...6 CONCLUSION...7 i
Pg 3 of 11 Cases TABLE OF AUTHORITIES Page(s) Agence France Presse v. Morel, 293 F.R.D. 682 (S.D.N.Y. 2013)...6 Arista Records LLC v. Lime Grp. LLC, 784 F. Supp. 2d 398 (S.D.N.Y. 2011)...4 Ball v. Soundview Composite Ltd. (In re Soundview Elite Ltd.), 543 B.R. 78 (Bankr. S.D.N.Y. 2016)...2, 3 Bey v. Iaquinto, No. 12 Civ. 5875(JCF), 2015 WL 5786487 (S.D.N.Y. Sept. 30, 2015)...7 Curtis v. Perkins (In re Int l Mgmt. Assocs., LLC), 781 F.3d 1262 (11th Cir. 2015)...2, 3 Deutsche Bank A.G. London Branch v. Worldcom Inc. (In re Worldcom, Inc.), 357 B.R. 223 (S.D.N.Y. 2006)...5 Ebewo v. Martinez, 309 F. Supp. 2d 600 (S.D.N.Y. 2004)...6 John Paul Mitchell Sys. v. Quality King Distribs., Inc., 106 F. Supp. 2d 462 (S.D.N.Y. 2000)...3, 4 Lebewohl v. Heart Attack Grill LLC, 890 F. Supp. 2d 278 (S.D.N.Y. 2012)...5 U.S. Info. Sys., Inc. v. Int l Bhd. of Elec. Workers Local Union No. 3, No. 00 Civ. 4763 RMB JCF, 2006 WL 2136249 (S.D.N.Y. Aug. 1, 2006)...2, 3 United States v. Bagaric, 706 F.2d 42 (2d Cir. 1983)...4 United States v. Caldwell, 776 F.2d 989 (11th Cir. 1985)...3 United States v. Dhinsa, 243 F.3d 635 (2d Cir. 2001)...2, 3 United States v. Gagliardi, 506 F.3d 140 (2d Cir. 2007)...2 ii
Pg 4 of 11 TABLE OF AUTHORITIES (continued) Page(s) United States v. Vayner, 769 F.3d 125 (2d Cir. 2014)...3 Statutes 15 U.S.C. 78aaa et seq....1 Rules Fed. R. Civ. P. 26...1 Fed. R. Civ. P. 37...6 Fed. R. Evid. 901...2, 3, 4, 5 iii
Pg 5 of 11 Irving H. Picard, as trustee ( Trustee ) for the substantively consolidated liquidation of Bernard L. Madoff Investment Securities LLC ( BLMIS ) under the Securities Investor Protection Act, 15 U.S.C. 78aaa et seq., and the chapter 7 estate of Bernard L. Madoff ( Madoff ), respectfully submits this memorandum of law and the Declaration of Lan Hoang ( Hoang Opp n Decl. ) in opposition to Defendants Motion In Limine to Exclude the Testimony of Meaghan Schmidt. 1 For the reasons set forth herein, Defendants motion should be denied. PRELIMINARY STATEMENT The Trustee was appointed on December 15, 2008. Shortly after his appointment, he retained AlixPartners LLP ( Alix ), a consulting firm, to secure, inventory, and preserve the millions of documents located at BLMIS s office and storage facilities. The BLMIS books and records relevant to this case include: customer statements (as stored electronically on BLMIS s StorQM device, on reels of microfilm, and hard copies), trade confirmations, customer files, Portfolio Management Reports, Portfolio Management Transaction Reports, BLMIS bank records, electronically stored information, and the checkbook file. These documents concern, inter alia, customer account information, correspondence with customers, deposits to customer accounts, withdrawals from customer accounts, and transfers between customer accounts. In his supplemental disclosures pursuant to Federal Rule of Civil Procedure 26 (the Trustee s Supplemental Disclosures ), the Trustee identified Ms. Schmidt and disclosed that she is a witness with knowledge of the identification, preservation, and collection of BLMIS s books and records. 2 Ms. Schmidt is a Managing Director at Alix and was at BLMIS s offices beginning on December 12, 2008. Ms. Schmidt will testify about the extraordinary efforts taken 1 J. Ezra Merkin ( Merkin ), Gabriel Capital Corporation ( GCC ), Ascot Partners, L.P. ( Ascot Partners ), and Ascot Fund Ltd. ( Ascot Fund ) are referred to herein as Defendants. 2 Hoang Opp n Decl., Ex. 1 (Plaintiff s Supplemental Disclosures dated Nov. 22, 2013 ( Trustee s Supplemental Disclosures )) at 3.
Pg 6 of 11 by the government and the Trustee s agents to identify, locate, and preserve all of BLMIS s electronically stored information, paper documents, and physical materials. Ms. Schmidt will further testify to the specific location of data and information at BLMIS and its offsite storage and backup facilities, how the data and information was retrieved, and how the data and information has been preserved since Madoff s arrest. Defendants have not agreed to stipulate to the authenticity of the books and records of BLMIS. Accordingly, Ms. Schmidt s testimony is relevant and necessary at trial. ARGUMENT I. THE TESTIMONY OF MEAGHAN SCHMIDT IS RELEVANT AND ADMISSIBLE TO AUTHENTICATE BLMIS S BOOKS AND RECORDS Defendants incorrectly argue that Ms. Schmidt is being offered to testify regarding the contents of BLMIS s books and records. To the contrary, and as was clear from the Trustee s Supplemental Disclosures, she will testify regarding the efforts taken to identify, secure, and preserve those records. Federal Rule of Evidence 901(a) states that [t]o satisfy the requirement of authenticating or identifying an item of evidence, the proponent must produce evidence sufficient to support a finding that the item is what the proponent claims it is. Fed. R. Evid. 901(a). This Rule does not erect a particularly high hurdle. U.S. Info. Sys., Inc. v. Int l Bhd. of Elec. Workers Local Union No. 3, No. 00 Civ. 4763 RMB JCF, 2006 WL 2136249, at *5 (S.D.N.Y. Aug. 1, 2006) (quoting United States v. Dhinsa, 243 F.3d 635, 658 (2d Cir. 2001)); see also United States v. Gagliardi, 506 F.3d 140, 151 (2d Cir. 2007) ( The bar for authentication of evidence is not particularly high. ). A trustee s burden on authentication where, as here, he inherits the books and records of the debtor is a light one. Curtis v. Perkins (In re Int l Mgmt. Assocs., LLC), 781 F.3d 1262, 1267 (11th Cir. 2015); see also Ball v. Soundview Composite Ltd. (In re Soundview Elite Ltd.), 2
Pg 7 of 11 543 B.R. 78, 101 (Bankr. S.D.N.Y. 2016) (explaining that the trustee could authenticate documents through the trustee s counsel s declaration stating that he had received documents from the adversary). A trustee need only establish a prima facie case that the documents are what he claims them to be, and can meet this burden with circumstantial evidence of authenticity of the underlying documents through the testimony of a witness with knowledge of the documents. In re Int l Mgmt. Assocs., LLC, 781 F.3d at 1267 (citing Fed. R. Evid. 901(a)) (noting that where trustee established where records were found and that records substantially matched third-party records, the bankruptcy court could reasonably conclude that the business records were authentic); see also United States v. Caldwell, 776 F.2d 989, 1002 03 (11th Cir. 1985) (finding that circumstantial evidence in the form of two attorneys testimonies was sufficient to establish a prima facie case for admissibility). If in the court s judgment it seems reasonably probable that the evidence is what it purports to be, the command of Rule 901(a) is satisfied.... U.S. Info. Sys., Inc., 2006 WL 2136249, at *5 (quoting Dhinsa, 243 F.3d at 658); see In re Soundview Elite Ltd., 543 B.R. at 101 (permitting trustee to authenticate documents through counsel declaration). Moreover, it is not necessary under Fed. R. Evid. 901 for the Trustee to produce the author of each document in order to demonstrate its authenticity. See Fed. R. Evid. 901; United States v. Vayner, 769 F.3d 125, 130 (2d Cir. 2014) (noting Fed. R. Evid. 901(b) provides several examples of proper authentication techniques in different contexts, which are not intended as an exclusive enumeration of allowable methods but are meant to guide and suggest ). Testimony is not the sine qua non of authentication; circumstantial evidence may serve to demonstrate a document s authenticity. Such circumstantial evidence can include a document s appearance and content. John Paul Mitchell Sys. v. Quality King Distribs., Inc., 3
Pg 8 of 11 106 F. Supp. 2d 462, 472 (S.D.N.Y. 2000) (citing United States v. Bagaric, 706 F.2d 42, 67 (2d Cir. 1983)). For example, Fed. R. Evid. 901(b)(4) states that an item of evidence can be authenticated by its appearance, contents, substance, internal patterns, or other distinctive characteristics of the item, taken together with all the circumstances. Fed. R. Evid. 901(b)(4); see also John Paul Mitchell Sys., 106 F. Supp. at 472 ( A party could also satisfy the authentication requirement if the document s form and content, taken with other circumstances, indicate that the document is reliable. (citing Fed. R. Evid. 901(b)(4))); Arista Records LLC v. Lime Grp. LLC, 784 F. Supp. 2d 398, 419 20 (S.D.N.Y. 2011) (denying motion in limine to exclude disputed exhibits because the appearance, contents, substance and other contextual indicators satisfy the authentication requirement ). The mandates of Fed. R. Evid. 901 will be satisfied at trial. The Trustee was a stranger to BLMIS he had no firsthand knowledge of BLMIS s business or how BLMIS maintained its books and records. But, upon his appointment, the Trustee was obligated to secure the books and records of BLMIS. The Trustee, through his agents, did just that. Ms. Schmidt will testify based on her firsthand knowledge about the significant measures undertaken by the Trustee s agents to secure, inventory, and preserve the books and records of BLMIS. The fact that Ms. Schmidt is not a former employee of BLMIS is of no consequence. Contrary to Defendants arguments, Fed. R. Evid. 901 has no such requirement. Nor will Ms. Schmidt be testifying about information not within her personal knowledge she was present at BLMIS s office and its storage facilities, and undertook or supervised the efforts taken by Alix to secure, inventory, and preserve BLMIS s books and records. Ms. Schmidt s testimony regarding how the records the Trustee inherited from BLMIS were identified, located, and preserved, along with the distinctive characteristics and content present in these records, will allow the Court to 4
Pg 9 of 11 find with reasonable probability that the evidence is what the Trustee purports it to be the business records of BLMIS. See Deutsche Bank A.G. London Branch v. Worldcom Inc. (In re Worldcom, Inc.), 357 B.R. 223, 228 (S.D.N.Y. 2006) ( Authentication need not... be by someone with personal knowledge of the underlying events described in the document, the substance or accuracy of the document, and the methods of calculation. These concerns are properly addressed by evidentiary rules limiting the admissibility of hearsay; authentication only requires a showing that the document is what it purports to be. (citing Fed. R. Evid. 901)); see also Lebewohl v. Heart Attack Grill LLC, 890 F. Supp. 2d 278, 298 (S.D.N.Y. 2012) (holding affidavit of counsel as to printouts of certain websites, in conjunction with physical descriptions and markers on documents and internet domain addresses, was sufficient to authenticate printouts in a trademark infringement action). Defendants next argue that to the extent Ms. Schmidt may have obtained information relating to the authenticity of documents from information learned from others with personal knowledge, that testimony must be excluded as hearsay. However, Ms. Schmidt will not be testifying to information she learned from others in order to authenticate BLMIS s books and records. She will testify as to the efforts to identify, locate, and preserve all of BLMIS s ESI (electronically stored information), paper documents, and physical materials, a topic on which she has firsthand knowledge because of her work onsight at BLMIS s office and offsite locations beginning on December 12, 2008. 3 3 See Declaration of Judith A. Archer in Support of Defendants Motion in Limine to Exclude Testimony of Meaghan Schmidt, Ex. A (Correspondence from Brian W. Song to Mariel R. Bronen dated Mar. 30, 2017), ECF No. 342-1. 5
Pg 10 of 11 II. THE TRUSTEE HAS AGREED TO RE-OPEN DISCOVERY FOR THE DEPOSITION OF MEAGHAN SCHMIDT TO PREVENT ANY POTENTIAL HARM TO DEFENDANTS AT TRIAL In their March 24, 2017 correspondence, Defendants argue that Ms. Schmidt may not be called for the new and undisclosed purpose of authenticating BLMIS s books and records. 4 Accordingly, the Defendants argue that Ms. Schmidt s testimony is barred by Fed. R. Civ. P. 37, and, to the extent the Trustee is permitted to call her to testify at trial, Defendants should be afforded an opportunity to take her deposition. Defendants arguments are erroneous. Ms. Schmidt was disclosed to the Defendants as a witness with knowledge concerning the identification, preservation, and collection of BLMIS s books and records in the Trustee s Supplemental Disclosures on November 22, 2013. 5 The Defendants have been aware of the Trustee s intention to rely on the testimony of Ms. Schmidt since the disclosures were served in 2013 and cannot credibly claim now that Ms. Schmidt s proposed testimony encompasses a new and undisclosed purpose. Defendants dubious complaints aside, the purpose of Fed. R. Civ. P. 37(c)(1) is to prevent the practice of sandbagging an adversary with new evidence, Ebewo v. Martinez, 309 F. Supp. 2d 600, 607 (S.D.N.Y. 2004), not evidence that the Defendants overlooked or intentionally decided was not worth a deposition. Moreover, the exclusion of evidence or testimony under Fed. R. Civ. P. 37 is not appropriate where the failure was substantially justified or is harmless. Agence France Presse v. Morel, 293 F.R.D. 682, 685 (S.D.N.Y. 2013) (citing Fed. R. Evid. 37(c)(1)). Substantial justification means that reasonable parties could differ as to whether the disclosure was required, 4 See Hoang Opp n Decl., Ex. 11 (Correspondence from Mariel R. Bronen to Brian W. Song dated Mar. 24, 2017). 5 Trustee s Supplemental Disclosures at 3. 6
Pg 11 of 11 and harmless means that the party entitled to the disclosure has not been prejudiced. Bey v. Iaquinto, No. 12 Civ. 5875(JCF), 2015 WL 5786487, at *2 (S.D.N.Y. Sept. 30, 2015). In their March 24, 2017 correspondence, Defendants requested an opportunity to take the deposition of Ms. Schmidt, 6 and the Trustee subsequently agreed, even though Ms. Schmidt and the scope of her testimony were properly disclosed in 2013. 7 The Trustee is agreeing to produce Ms. Schmidt for a late deposition with the hope that the parties can stipulate to the authenticity of BLMIS s books and records and to avoid wasting the Court s time at trial. Absent that stipulation, Ms. Schmidt s testimony at trial should be permitted, particularly because it is relevant and will aid the Court in the consideration of this matter. CONCLUSION For the foregoing reasons, the Trustee respectfully requests that the Court enter an order denying Defendants motion in limine to exclude the testimony of Ms. Meaghan Schmidt. Dated: May 10, 2017 New York, New York BAKER & HOSTETLER LLP /s/ David J. Sheehan 45 Rockefeller Plaza New York, New York 10111 Telephone: (212) 589-4200 Facsimile: (212) 589-4201 David J. Sheehan Email: dsheehan@bakerlaw.com Lan Hoang Email: lhoang@bakerlaw.com Brian W. Song Email: bsong@bakerlaw.com Attorneys for Irving H. Picard, Trustee for the Substantively Consolidated SIPA Liquidation of Bernard L. Madoff Investment Securities LLC and the Chapter 7 Estate of Bernard L. Madoff 6 See Hoang Opp n Decl., Ex. 11 (Correspondence from Mariel R. Bronen to Brian W. Song dated Mar. 24, 2017). 7 See Hoang Opp n Decl., Ex. 12 (Correspondence from Brian W. Song to Sarah O Connell dated Apr. 6, 2017). 7