United States District Court, D. Nebraska
GERALD J. KLEIN, on behalf of himself and all similarly situated; Plaintiff,
TD AMERITRADE HOLDING CORPORATION, TD AMERITRADE, INC., and FREDRIC TOMCZYK, Defendants.
MEMORANDUM AND ORDER
F. Bataillon Senior United States District Judge
matter is before the court on the defendants' motion in
limine to exclude the testimony of the plaintiff's
experts Haim Bodek and Shane Corwin under Daubert v.
Merrell Dow Pharms., 509 U.S. 579, 589 (1993), Filing
No. 195. This is a purported class action alleging wrongdoing
in connection with stock trades. In this action, the lead
plaintiff alleges violations of federal securities
laws in TD Ameritrade's alleged failure to route its
clients' equity orders for “best execution.”
defendants seek an order precluding consideration of the
opinions of plaintiff's experts Haim Bodek, a securities
consultant and former trader, and Shane Corwin, a finance
professor, in connection with the defendants' pending
motion for class certification, and barring the experts from
testifying at the class certification hearing which is
presently scheduled for March 27, 2018, before United States
Magistrate Judge Susan Bazis.
Bodek was retained to perform a data analysis of the trading
history of two representative TD Ameritrade clients and to
identify issues of economic harm. He will testify to a method
of proving economic loss by common proof that does not vary
by class member. He has created an algorithm and refined it
to provide a method to be applied across the class. Professor
Shane Corwin was retained to opine on whether Mr. Bodek's
analysis is capable of identifying economic harm arising from
a failure of best execution in line with academic and
argue that Bodek's methodology is novel and untested and
fails to meet the “peer review” and
“general acceptance” factors set forth by the
Supreme Court in Daubert. They next argue that
Professor Corwin's opinions should be excluded because he
did not conduct his own analyses, his opinions are
duplicative, and he is nothing more than a
“mouthpiece” for Bodek. Further, the defendants
attempt to exclude any opinions proffered by the two experts
that go to the merits of the plaintiff's case-that is,
the best execution issue. They also argue that Corwin offers
improper legal opinions.
opposition, the plaintiff argues that Bodek uses
industry-standard metrics that have been used by the
Securities Exchange Commission to identify economic harm, the
metrics are simple equations with discrete data as input, are
generally accepted in the industry, and have been used in
peer reviewed papers. Further, he argues that Bodek uses an
order book analysis to analyze depth of available liquidity
and has proposed exclusion of certain categories to avoid any
doubt concerning the harm attributable to defendant TD
Ameritrade. The plaintiff also disputes the defendants'
argument that Bodek has “changed” his methodology
in his rebuttal report, stating that Bodek employed a limited
order book analysis with certain exclusions in his initial
report and expanded on the analysis in his rebuttal report.
Rule of Evidence 702 governs the admissibility of expert
testimony and requires that: (1) the evidence must be based
on scientific, technical or other specialized knowledge that
is useful to the finder of fact in deciding the ultimate
issue of fact; (2) the witness must have sufficient expertise
to assist the trier of fact; and (3) the evidence must be
reliable or trustworthy. Kudabeck v. Kroger Co., 338
F.3d 856, 859 (8th Cir. 2003). Expert testimony assists the
trier of fact when it provides information beyond the common
knowledge of the trier of fact. Id. at 860. When
faced with a proffer of expert testimony, trial judges are
charged with the “gatekeeping” responsibility of
ensuring that all expert evidence admitted is both relevant
and reliable. Kumho Tire Co. v. Carmichael, 526 U.S.
137, 147 (1999); Daubert v. Merrell Dow Pharms., 509
U.S. 579, 589 (1993); United States v. Wintermute,
443 F.3d 993, 1000 (8th Cir. 2006). A trial court is given
wide latitude in determining whether an expert's
testimony is reliable. See Kumho Tire, 526
U.S. at 152.
expert testimony must meet three prerequisites in order to be
admitted under Rule 702: First, evidence based on scientific,
technical, or other specialized knowledge must be useful to
the finder of fact in deciding the ultimate issue of fact;
second, the proposed witness must be qualified to assist the
finder of fact; and third, the proposed evidence must be
reliable or trustworthy in an evidentiary sense. Lauzon
v. Senco Prods., Inc., 270 F.3d 681, 686 (8th Cir.
2001). Expert testimony assists the trier of fact when it
provides information beyond the common knowledge of the trier
of fact. Kudabeck, 338 F.3d at 860. The district
court's gatekeeper function applies to all expert
testimony, not just testimony based in science. Id.
Daubert, district courts apply a number of
nonexclusive factors in performing this role.
Lauzon, 270 F.3d at 686-87. These are: whether the
theory or technique can be and has been tested; whether the
theory or technique has been subjected to peer review and
publication; the known or potential rate of error; whether
the theory has been generally accepted; whether the expertise
was developed for litigation or naturally flowed from the
expert's research; whether the proposed expert ruled out
other alternative explanations; and whether the proposed
expert sufficiently connected the proposed testimony with the
facts of the case. Id. at 686-87. "This
evidentiary inquiry is meant to be flexible and fact
specific, and a court should use, adapt, or reject
Daubert factors as the particular case
demands." Unrein v. Timesavers, Inc., 394 F.3d
1008, 1011 (8th Cir. 2005).
proponent of expert testimony bears the burden of providing
admissibility by a preponderance of the evidence.
Lauzon, 270 F.3d at 686. When the application of a
scientific methodology is challenged as unreliable under
Daubert and the methodology itself is otherwise
sufficiently reliable, outright exclusion of the evidence is
"warranted only if the methodology was so altered by a
deficient application as to skew the methodology
itself." United States v. Gipson, 383 F.3d 689,
697 (8th Cir. 2004) (brackets omitted) (quoting United
States v. Martinez, 3 F.3d 1191, 1198 (8th Cir. 1993)).
Eighth Circuit, "cases are legion that, correctly under
Daubert, call for the liberal admission of expert
testimony." Johnson v. Mead Johnson & Co.,
LLC, 754 F.3d 557, 562 (8th Cir. 2014). District courts
are admonished "not to weigh or assess the correctness
of competing expert opinions." Id. Rather,
expert testimony should generally "be tested by the
adversary process with competing expert testimony and
cross-examination, rather than excluded by the court at the
outset." Id. Any doubts regarding expert
testimony “should generally be resolved in favor of
admissibility.” United States v. Finch, 630
F.3d 1057, 1062 (8th Cir. 2011) (quoting Sphere Drake
Ins. PLC v. Trisko, 226 F.3d 951, 954 (8th Cir. 2000)).
apply the more lenient “focused Daubert”
inquiry at the class certification stage. In re Zurn Pex
Plumbing Prod. Liab. Litig., 644 F.3d 604, 612 (8th Cir.
2011). “Expert disputes ‘concerning the factual
setting of the case' should be resolved at the class
certification stage only to the extent ‘necessary to
determine the nature of the evidence that would be
sufficient, if the plaintiff's general allegations were
true, to make out a prima facie case for the
class.'” Id. at 611 (quoting Blades v.
Monsanto Co.,400 F.3d 562, 567 (8th Cir. 2005). ...