Pearson v. Deutsche Bank AG

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF FLORIDA

Case No. 21-cv-22437-BLOOM/Otazo-Reyes

MICHAEL PEARSON, et al.,

Plaintiffs,

v.

DEUTSCHE BANK AG, et al.,

Defendants.

___________________________/

OMNIBUS ORDER ON DAUBERT MOTION AND MOTION TO STRIKE

THIS CAUSE is before the Court on Defendants’1 Motion to Exclude the Testimony of

Plaintiffs’ Proffered Experts Ian Ratner and Richard Fraher Pursuant to Federal Rule of Evidence

702, ECF No. [142] (the “Daubert Motion”), and Defendants’ Motion to Strike December 9, 2022

“Supplement” to Report of Plaintiffs’ Expert Ian Ratner, ECF No. [164] (“Motion to Strike”).

Plaintiffs2 filed a Response to the Daubert Motion, ECF No. [160], to which Defendants filed a

Reply, ECF No. [165]. Plaintiffs also filed a Response to the Motion to Strike, ECF No. [172], to

which Defendants filed a Reply, ECF No. [173]. The Court reviewed the Daubert Motion, the

Motion to Strike, all opposing and supporting submissions, the attached exhibits, the record in this

case, the applicable law, and is otherwise fully advised. For the reasons set forth below,

Defendants’ Daubert Motion is granted in part and denied in part, and Defendants’ Motion to

Strike is denied as moot.

1 The Defendants in this action are Deutsche Bank AG, Deutsche Bank Trust Company Americas,

Deutsche Bank Luxembourg S.A., and Deutsche Bank (Suisse) S.A. (collectively, the “Defendants”).

2 The Plaintiffs in this action are Michael Pearson, Andrew Childe, and Anna Silver.

I. BACKGROUND

Plaintiffs initiated the instant action on July 6, 2021, ECF No. [1], and they filed their

Amended Complaint on September 24, 2021, ECF No. [31] (“Amended Complaint”), alleging a

global Ponzi scheme resulting in hundreds of millions of dollars in losses and dozens of other

lawsuits, ECF No. [84].

The Court presumes the parties’ familiarity with the specific facts of this case and briefly

summarizes the allegations that are pertinent to the Daubert Motion and the Motion to Strike. As

alleged, the Ponzi scheme was perpetrated by four individuals—Roberto G. Cortes (“Roberto

Cortes”), Ernesto H. Weisson (“Weisson”), Juan Carlos Cortes, and Frank Chatburn (“Chatburn”)

(collectively, the “Individual Wrongdoers”)—as principals of two companies—South Bay

Holdings, LLC (“South Bay”) and Biscayne Capital International, LLC (“Biscayne”). ECF No.

[31] ¶ 3.3 South Bay purported to develop real estate in South Florida, and Biscayne helped raise

capital for the real estate developments. Id. ¶¶ 9-10.

The Ponzi scheme generally worked as follows. The Individual Wrongdoers used the Note

Issuers to sell notes to investors who believed that the notes were backed by South Bay’s real estate

assets. Id. ¶ 11. In truth, South Bay’s properties were heavily leveraged, rendering the security

interests worthless. Id. ¶¶ 12-13. The Individual Wrongdoers then

used the proceeds generated through the issuance of notes to offset

losses in real estate investments; cover liabilities incurred by other,

Biscayne-related entities; pay interest and principal on other notes;

enrich themselves, their relatives and associates . . . ; and fund

unrelated investments and entities that they never disclosed to the

innocent investors.

3 When citing to the parties’ memoranda of law, the Court cites to the page numbers created by the

parties. When citing to deposition transcripts, the Court cites to the page number of the underlying

transcripts. For all other sources, the Court cites to the page number generated by the CM/ECF filing system,

at the top of the page.

Id. ¶ 14.

In 2014, following an inquiry from the Securities and Exchange Commission, the

Individual Wrongdoers also formed Madison Asset, LLC (“Madison”), which steered investors

toward the Note Issuers to fund the scheme. Id. ¶¶ 97-99. Deutsche Bank, working with Gustavo

Trujillo (“Trujillo”), Madison’s Operations Manager at the time, “set up nearly three dozen sub-

accounts for various Note Issuers, Companies, and other entities related to the Individual

Wrongdoers and Biscayne.” Id. ¶¶ 101-107. According to Plaintiffs, Deutsche Bank played a role

in the fraudulent scheme through these subaccounts, including by instructing “Trujillo . . . [on]

how to circumvent Defendants’ anti-money laundering and ‘Know Your Customer’ rules.” Id. ¶¶

108-09.

Plaintiffs are foreign representatives4 and liquidators of 13 companies currently undergoing

liquidation in the Cayman Islands (collectively, the “Companies”). Id. ¶ 18.5 Five of the

Companies—Diversified Real Estate, GMS Global Market Step Up, Preferred Income, Sentinel

Investment, and SG Strategic (collectively, the “Note Issuers”)—were created by the Individual

Wrongdoers as special purpose vehicles to raise funds for South Bay. Id. ¶¶ 11, 19. On November

4 The Amended Complaint uses the term “foreign representative” as defined by the Bankruptcy

Code: “a person or body, including a person or body appointed on an interim basis, authorized in a foreign

proceeding to administer the reorganization or the liquidation of the debtor’s assets or affairs or to act as a

representative of such foreign proceeding.” Amend. Compl. at 7 n.4 (quoting 11 U.S.C.A. § 101(24)).

5 The Companies are (1) Biscayne Capital (B.V.I.) Ltd. (“Biscayne Capital (B.V.I.)”); (2) Biscayne

Capital Holdings Ltd. (“Biscayne Capital Holdings”); (3) Diversified Real Estate Development Ltd.

(“Diversified Real Estate”); (4) GMS Global Market Step Up Note Ltd (“Global Market Step Up”); (5)

North Pointe Holdings (B.V.I.) Ltd. (“North Pointe”); (6) Preferred Income Collateralized Interest Ltd.

(“Preferred Income”); (7) Sentinel Investment Fund SPC (“Sentinel Investment”); (8) Sentinel Mandate

and Escrow Ltd. (“Sentinel Mandate”); (9) SG Strategic Income Ltd. (“SG Strategic”); (10) Sports

Aficionados Ltd. (“Sports Aficionados”); (11) Spyglass Investment Management Ltd. (“Spyglass”); (12)

Vanguardia Group Inc. (“Vanguardia Group”); and (13) Vanguardia Holdings Ltd. (“Vanguardia

Holdings”). Amend. Compl. ¶ 18.

2, 2018, the liquidation proceedings of the Companies domiciled in the Cayman Islands were

placed under the supervision of the Grand Court of the Cayman Islands. Id. ¶ 23.

The Amended Complaint asserts eight Counts: Count I (Fraudulent Trading under Cayman

Islands Companies Law § 147 (by the Liquidators on behalf of Diversified Real Estate, Global

Market Step Up, Preferred Income, Sentinel Investment, SG Strategic, Sports Aficionados, and

Vanguardia Group against all Defendants)); Count II (Aiding and Abetting Breach of Fiduciary

Duty (against all Defendants)); Count III (Breach of Fiduciary Duty (by the Liquidators on behalf

of Diversified Real Estate, Global Market Step Up, Preferred Income, and SG Strategic against

Deutsche Bank)); Count IV (Aiding and Abetting Conversion (against all Defendants)); Count V

(Breach of Contract (by the Liquidators on behalf of Diversified Real Estate, Global Market Step

Up, Preferred Income, and SG Strategic against Deutsche Bank)); Count VI (Negligence (against

Deutsche Bank)); Count VII (Violation of the Florida Civil Remedies for Criminal Practices Act

(“Florida RICO Act”), Fla. Stat. §§ 772.101-772.19 (against all Defendants)); and Count VIII

(Violation of Florida’s Civil Remedy for Theft or Exploitation Statute (“Florida Civil Theft

Statute”), Fla. Stat. § 772.11 (against Deutsche Bank and Deutsche Bank Trust Companies)). ECF

No. [31] ¶¶ 373-461. Plaintiffs seek damages, including treble damages, contribution, prejudgment

interest and post-judgment interest, and attorneys’ fees and costs. ECF No. [31].

Defendants have filed their Daubert Motion seeking to exclude portions of the testimony

of Ian Ratner (“Ratner”) and Richard Fraher (“Fraher”) pursuant to Rule 702 of the Federal Rules

of Evidence. ECF No. [142] at 1. Specifically, as to Ratner, Defendants seek to exclude testimony

on the measure of damages due to the Individual Wrongdoers’ use of funds within Madison’s

Deutsche Bank Custody Accounts6 that are inconsistent with the Offering Documents7 of the Notes

Issuers’ notes and the intended use of the Deutsche Bank Custody Account. Defendants contend

that such testimony is unreliable and unhelpful to the jury. See generally ECF No. [142].

Defendants also seek to exclude Ratner’s testimony regarding damages incurred on account of the

Notes Issuers’ issuance of notes to investors as unreliable and unhelpful, and further seek to

exclude testimony on administrative expenses from the liquidation of the Companies as unreliable.

Id. Moreover, Defendants seek to exclude Ratner’s testimony on prejudgment interest because the

determination of prejudgment interest is a question of law not susceptible to expert opinion. Id.

Defendants also move to strike Ratner’s December 9, 2022 supplement to his report on the grounds

that the supplement is untimely and the late filing of the supplement is neither substantially

justified nor harmless. See generally ECF No. [164].

As to Fraher, Defendants seek to exclude his testimony in its entirety on the grounds that

he is unqualified. Id. Moreover, Defendants seek to exclude his opinion that Deutsche Bank

facilitated the Individual Wrongdoers’ Ponzi scheme by permitting Madison and the Biscayne

entities to misuse the DB Custody Accounts and misappropriate the Note Issuers’ funds in those

accounts, and by extending credit to Madison and the Biscayne entities in the form of overdrafts

that provided liquidity used to continue the fraud. Id.; see also ECF No. [142-2] at ¶¶ 35, 36.

II. LEGAL STANDARD

Federal Rule of Evidence 702 governs the admissibility of expert testimony. When a party

proffers the testimony of an expert under Rule 702, the party offering the expert testimony bears

6 “DB Custody Accounts” refer to the twelve subaccounts opened with Deutsche Bank by Madison

Asset, LLC (“Madison”). ECF No. [139-1] at 299, 301-02.

7 “Offering Documents” are defined as the Agency Agreements, ECF No. [31] ¶ 143, together with

the Offering Memoranda for each of the note issuances, id. ¶ 75. ECF No. [139-1] at 301 n.24.

the burden of laying the proper foundation, and that party must demonstrate admissibility by a

preponderance of the evidence. See Rink v. Cheminova, Inc., 400 F.3d 1286, 1291-92 (11th Cir.

2005); Allison v. McGhan Med. Corp., 184 F.3d 1300, 1306 (11th Cir. 1999). To determine

whether expert testimony or any report prepared by an expert may be admitted, the court must

engage in a three-part inquiry that: (1) the expert is qualified to testify competently regarding the

matters the expert intends to address; (2) the methodology by which the expert reaches his or her

conclusions is sufficiently reliable; and (3) the testimony assists the trier of fact, through the

application of scientific, technical, or specialized expertise, to understand the evidence or to

determine a fact in issue. See City of Tuscaloosa v. Harcros Chems., Inc., 158 F.3d 548, 562 (11th

Cir. 1998) (citing Daubert v. Merrill Dow Pharmaceuticals, Inc., 509 U.S. 579, 589 (1993)). The

Court of Appeals for the Eleventh Circuit refers to each of these requirements as the

“qualifications,” “reliability,” and “helpfulness” prongs. United States v. Frazier, 387 F.3d 1244,

1260 (11th Cir. 2004). While some overlap exists among those requirements, the court must

individually analyze each concept. See id.

As for the qualification prong, an expert may be qualified in the Eleventh Circuit “by

knowledge, skill, experience, training, or education.” J.G. v. Carnival Corp., No. 12-21089-CIV,

2013 WL 752697, at *3 (S.D. Fla. Feb. 27, 2013) (citing Furmanite Am., Inc. v. T.D. Williamson,

506 F. Supp. 2d 1126, 1129 (M.D. Fla. 2007); Fed. R. Evid. 702). “An expert is not necessarily

unqualified simply because [his] experience does not precisely match the matter at hand.” See id.

(citing Maiz v. Virani, 253 F.3d 641, 665 (11th Cir. 2001)). “[S]o long as the expert is minimally

qualified, objections to the level of the expert’s expertise go to credibility and weight, not

admissibility.” See Clena Invs., Inc. v. XL Specialty Ins. Co., 280 F.R.D. 653, 661 (S.D. Fla. 2012)

(citing Kilpatrick v. Breg, Inc., No. 08-10052-CIV, 2009 WL 2058384, at *1 (S.D. Fla. Jun. 25,

2009)). “After the district court undertakes a review of all of the relevant issues and of an expert’s

qualifications, the determination regarding qualification to testify rests within the district court’s

discretion.” J.G., 2013 WL 752697, at *3 (citing Berdeaux v. Gamble Alden Life Ins. Co., 528 F.2d

987, 990 (5th Cir. 1976)).

Next, when determining whether an expert’s testimony is reliable, “the trial judge must

assess whether the reasoning or methodology underlying the testimony is scientifically valid and

. . . whether that reasoning or methodology properly can be applied to the facts in issue.” Frazier,

387 F.3d at 1261-62 (citation omitted) (quotation marks omitted). To make this determination, the

district court typically examines: “(1) whether the expert’s theory can be and has been tested; (2)

whether the theory has been subjected to peer review and publication; (3) the known or potential

rate of error of the particular scientific technique; and (4) whether the technique is generally

accepted in the scientific community.” See id. (citing Quiet Tech. DC-8, Inc. v. Hurel-Dubois, UK

Ltd., 326 F.3d 1333, 1341 (11th Cir. 2003)). The Eleventh Circuit has emphasized that the four

factors above are not exhaustive, and a court may need to conduct an alternative analysis to

evaluate the reliability of an expert opinion. See id. at 1262 (“These factors are illustrative, not

exhaustive; not all of them will apply in every case, and in some cases other factors will be equally

important in evaluating the reliability of proffered expert opinion.”). Consequently, trial judges are

afforded “considerable leeway” in ascertaining whether a particular expert’s testimony is reliable.

See id. at 1258 (citing Kumho Tire Co. v. Carmichael, 526 U.S. 137, 152 (1999)).

The final element, helpfulness, turns on whether the proffered testimony “concern[s]

matters that are beyond the understanding of the average lay person.” Edwards v. Shanley, 580 F.

App’x 816, 823 (11th Cir. 2014) (quoting Frazier, 387 F.3d at 1262). “[A] trial court may exclude

expert testimony that is ‘imprecise and unspecific,’ or whose factual basis is not adequately

explained.” See id. (quoting Cook ex rel. Est. of Tessier v. Sheriff of Monroe Cnty., Fla., 402 F.3d

1092, 1111 (11th Cir. 2005)). To be appropriate, a “fit” must exist between the offered opinion

and the facts of the case. McDowell v. Brown, 392 F.3d 1283, 1299 (11th Cir. 2004) (citing

Daubert, 509 U.S. at 591). “For example, there is no fit where a large analytical leap must be made

between the facts and the opinion.” See id. (citing Gen. Elec. Co. v. Joiner, 522 U.S. 136 (1997)).

Under Daubert, a district court must take on the role of gatekeeper, but this role “is not

intended to supplant the adversary system or the role of the jury.” Quiet Tech., 326 F.3d at 1341

(citations and quotation marks omitted). Consistent with this function, the district court must

“ensure that speculative, unreliable expert testimony does not reach the jury.” McCorvey v. Baxter

Healthcare Corp., 298 F.3d 1253, 1256 (11th Cir. 2002). “[I]t is not the role of the district court

to make ultimate conclusions as to the persuasiveness of the proffered evidence.” Quiet Tech., 326

F.3d at 1341 (citations and quotation marks omitted). Thus, the district court cannot exclude an

expert based on a belief that the expert lacks personal credibility. See Rink, 400 F.3d at 1293 n.7.

On the contrary, “vigorous cross-examination, presentation of contrary evidence, and

careful instruction on the burden of proof are the traditional and appropriate means of attacking

shaky but admissible evidence.” Quiet Tech., 326 F.3d at 1341 (quoting Daubert, 509 U.S. at 596).

“Thus, ‘[o]n cross-examination, the opposing counsel is given the opportunity to ferret out the

opinion’s weaknesses to ensure the jury properly evaluates the testimony’s weight and

credibility.’” Vision I Homeowners Ass’n, Inc. v. Aspen Specialty Ins. Co., 674 F. Supp. 2d 1321,

1325 (S.D. Fla. 2009) (quoting Jones v. Otis Elevator Co., 861 F.2d 655, 662 (11th Cir. 1988)).

Ultimately, as noted, “a district court enjoys ‘considerable leeway’ in making” evidentiary

determinations such as these. Cook ex rel. Est. of Tessier, 402 F.3d at 1103 (quoting Frazier, 387

F.3d at 1258).

III. DISCUSSION

A. Ratner’s Proffered Expert Testimony

Ratner has formed the following opinions on damages:

1. Based on an analysis of the DB Custody Accounts and the documents produced in

this case, the Plaintiffs suffered damages totaling $192,159,847.

2. The Companies’ increased liabilities as of April 8, 2014 total $131,268,038.

Prejudgment interest on the increased liabilities through the date of the Report is

$50,937,838.48, and using the prevailing rates, per diem interest is $17,082.83.

Ratner Report ¶¶ 27, 28, ECF No. [139-1] at 308-10.

The Ratner Report explains that the “overall damages methodology was designed to

identify and to quantify the losses caused by the Defendants by opening the DB Custody Accounts

and allowing the Individual Wrongdoers to misappropriate funds from these accounts.” Ratner

Rep. ¶ 23, ECF No. [139-1] at 301. One of the categories of damages includes “[t]he funds

disbursed from the DB Custody Accounts that were inconsistent with the Note Issuers’ Offering

Documents[] and the intended use of the accounts.” Id.

Ratner conducted a “funds tracing analysis” to identify transactions into and out of the DB

Custody Accounts and the uses of that cash from April 2014 through on or around December 31,

2017. Ratner Rep. ¶ 24, ECF No. [139-1] at 302. As pertinent here, Ratner organized DB Custody

account transactions from April 2014 through December 2017 into categories to analyze and

summarize the sources and uses of funds for each of the 12 DB Custody Accounts. Ratner Rep.

App. 3, ¶ 1-2, ECF No. [142-3] at 100-01. In one of those categories, “Wires and Other Cash

Activity,” Ratner concluded that the net use of cash “was made in a manner that was inconsistent

with the Offering Documents and the intended use of the DB Custody Accounts.” Ratner Rep.

App. 3, ¶ 2, ECF No. [142-3] at 101. For other transactions, Ratner performed additional

procedures, including reviewing complaints associated with litigation against the Individual

Wrongdoers and “other related third parties,” conducting searches in the Reveal document

platform, and performing “Google searches.” Ratner Rep. App. 3, ¶ 3, ECF No. [142-3] at 101-02.

The purpose of those procedures was to “identify the nature of the transactions and/or gather

information to assist [Mr. Ratner] with evaluating the relationship of [a] payee (if any) to the

Individual Wrongdoers and the Companies in Liquidation.” Ratner Rep. App. 3, ¶ 3, ECF No.

[142-3] at 101-02.

Ratner identifies the following subcategories as being inconsistent with both the Offering

Documents and the intent of the DB Custody Accounts: (1) “Consultant- Atlantic Sky Consulting

Group, Ltd.,” (2) “Biscayne Entites [sic],” (3) “Madison Asset, LLC” and (4) “Wires and other

cash activity.” Ratner Rep. ¶ 25 tbl.6, ECF No. [139-1] at 303. Ratner justifies those categories by

explaining that “Consultant- Atlantic Sky Consulting Group, Ltd.” transactions were included

because the Offering Documents cite general consulting agreements between Atlantic Sky and

North Pointe Holdings Ltd. and Vanguardia Holdings Ltd. but Ratner does not cite agreements

between Atlantic Sky and other entities for whom the DB Custody Accounts were maintained.

Ratner Rep. ¶ 27, ECF No. [139-1] at 309. Ratner asserts, but does not explain why, the “Biscayne

Entit[ies]” transactions were “inconsistent with the Offering Documents and the intended use of

the DB Custody Accounts.” Ratner Rep. ¶ 27, ECF No. [139-1] at 309. The “Madison Asset, LLC”

transactions—438 cash transfers—were included in the damages analysis because “the cash

activity in the DB Custody Accounts was intended to be based on securities transactions only.”

Ratner Rep. ¶ 26, ECF No. [139-1] at 306 (citing August 3, 2022 Floris Vreedenburgh Dep. Tr.,

at 23:16-22). The “Wires and other cash activity” transactions were included in the damages

analysis because the funds in those transactions went to a host of other payees, including the

Individual Wrongdoers. Ratner Rep. ¶ 27, ECF No. [139-1] at 308.

Ratner also calculated damages as “the increase in liabilities that were allegedly caused by

the wrongful conduct of the Defendants,” which Ratner asserts totals $131,268,038.00. Ratner

Rep. ¶ 28, ECF No. [139-1] at 310. Ratner calculates the prejudgment interest on that amount to

be $50,937,838.00. Id. Ratner measures the damages by all note issuances after the DB Custody

Accounts were opened on April 8, 2014. Id.; see also id. Schedule 9, ECF No. [142-3] at 153

(tabulating dollar value of note issuances).

Defendants challenge Ratner’s proffered testimony on the grounds that his calculations of

two categories of damages—Inconsistent Use Damages, and Interest and Issuance Damages—are

unreliable and not helpful to the trier of fact. ECF No. [142]. Defendants also challenge his

calculations of the administrative costs of winding down the Companies as unreliable, and his

calculation of prejudgment interest because such a calculation is a question of law that is not

susceptible to expert testimony. Id. The Court addresses each argument in turn.

1. Ratner’s Calculations on “Inconsistent Use Damages”8

Defendants raise two arguments to exclude Ratner’s opinion on Inconsistent Use Damages.

First, Defendants submit that Mr. Ratner seeks to interpret the meaning of the Offering Documents

in order to offer an impermissible legal conclusion. ECF No. [142] at 5 n.3. Moreover, Defendants

8 “Inconsistent Use Damages” are defined as damages resulting from the net transfers from the “DB

Custody Accounts” that Ratner asserts were inconsistent with the Offering Documents and the intended use

of the DB Custody Accounts. ECF No. [139-1] 308-09. Ratner’s Report (“the Ratner Report”) does not

define “DB Custody Accounts” but explains that Plaintiffs’ losses were caused by Defendants’ opening of

these DB Custody Accounts “and allowing the Individual Wrongdoers to misappropriate funds from these

accounts.” Ratner Rep. ¶ 23, ECF No. [139-1] at 301. The Amended Complaint alleges that Madison,

through Trujillo, opened custodial accounts at Deutsche Bank in the name of each of the Note Issuers in

2014. ECF No. [31] ¶¶ 278, 290. The Ratner Report states that the DB Custody Accounts were opened in

April 2014. Ratner Rep. App. 3 ¶ 1, ECF No. [142-3] at 100. The Court assumes for the purposes of this

Order that the DB Custody Accounts refer to the custody accounts described in the Amended Complaint.

contend Ratner fails to explain his methodology for categorizing each transaction or category of

transaction as consistent or inconsistent either with the Offering Documents or the intended use of

the DB Custody Accounts. Id. at 5-9 (relying on Kallas v. Carnival Corp., 2009 WL 901507, at

*6 (S.D. Fla. Mar. 30, 2009)). In attacking Ratner’s methodology, Defendants refer the Court to

the November 4, 2022 expert report of David Alfaro (“Alfaro Report”), ECF No. [142-1], wherein

Alfaro argues Ratner did not consider the possibilities that transfers from DB Custody Accounts

to others ultimately were used in a manner consistent with the Offering Documents or the intended

use of the DB Custody Accounts, that the funds of those transfers ultimately may have been

transferred back to the DB Custody Accounts, or that some of the disbursements from DB Custody

Accounts may have been exchanged for reasonably equivalent value. Id. at 7 n.6.

Defendants further contend that Ratner’s opinion is based on insufficient facts or data. Id.

at 7 n.5 (relying on In re Sonic Corp. Customer Data Securities Breach Litigation, 2021 WL

5916743, at *5 (N.D. Ohio Dec. 15, 2021)).

Plaintiffs respond that Ratner does not seek to interpret the Offering Documents; Ratner’s

report quantifies “how much of the net uses of cash in the [DB Custody Accounts] was obviously

inconsistent with the stated purposes of the note issuances and accounts;” the Offering Documents

plainly are for “South Florida real estate development or investments in marketable securities;”

and that the DB Custody Accounts were intended to be used only for trading securities or

settlement activity. ECF No. [160] at 4-5. Plaintiffs contend that Defendants are free to point out

on cross examination that Ratner may have erroneously identified a transaction as inconsistent

with either the Offering Documents or the intended use of the DB Custody Accounts. Id. at 5-6.

Defendants reply that Ratner excluded transactions from his Inconsistent Use Damages

calculations that clearly were not made in connection with South Florida real estate development

or investment in marketable securities, and that his opinion should be excluded to the extent Ratner

misapplies his own standard in categorizing transactions. ECF No. [165] at 2.

The Court considers—in determining whether an expert’s opinion is reliable— (1) whether

the expert’s theory can be and has been tested; (2) whether the theory has been subjected to peer

review and publication; (3) the known or potential rate of error of the particular scientific

technique; and (4) whether the technique is generally accepted in the scientific community.

Frazier, 387 F.3d at 1261-62. Ratner’s analysis on Inconsistent Use damages fails the reliability

prong of Daubert because it is not supported by any data or analysis that has been provided. See

Kallas v. Carnival Corp., No. 06-20115-CIV, 2009 WL 901507, at *5 (S.D. Fla. Mar. 30, 2009).

In Kallas, an expert purported to testify that a child plaintiff’s loss—in the form of parental

training and guidance that was proximately caused by the death of her father due to the father’s

allegedly dying from a virus contracted on the defendants’ cruise ship—was measured by the

difference between the child’s earnings if she attended college and if she merely attended high

school. Id. at *1-2. The court concluded that the expert’s assumption that the child would attain a

high school education but not a college-level education, leading to a corresponding loss in lifetime

earnings, was not supported by the literature on which the expert relied or any scientific evidence

and was therefore highly speculative. Id. at *5. Since that assumption was unsupported, the court

held the expert’s assertion that the child would lose educational attainment on account of her

father’s death was the expert’s ipse dixit that the court need not admit and excluded the expert’s

opinion on that basis. Id.

Similarly, Ratner’s opinion that certain transactions in the DB Custody Accounts were

inconsistent with the Offering Documents and the intended use of the DB Custody Accounts is not

supported by analysis or sufficient data. To begin with, Ratner provides no peer-reviewed,

published, or scientific authority that supports his categorization of the DB Custody Account

transactions. In addition, only two of the four subcategories of Inconsistent Use damages—

“Consultant- Atlantic Sky Consulting Group, Ltd.” and “Madison Asset, LLC” transactions—are

supported by record evidence. Ratner asserts in conclusory fashion that the Biscayne Entities

transactions are inconsistent with the Offering Documents and the intended use of the Custody

Accounts without explaining why that is so or citing to record evidence in support. The evidence

for “Wires and other cash activity” transactions being inconsistent with the Offering Documents

or the intended use of DB Custody Accounts is that the transfers went to many payees, including

the Individual Wrongdoers, but Ratner does not explain why such transfers are inconsistent with

the Offering Documents and the intended use of the custody accounts.

This conclusion is further supported by Ratner’s deposition testimony, which does not

reveal whether Ratner applied any discernable reasoning or methodology in his analysis that is

based on scientifically valid principles; rather, Ratner’s method for categorizing DB Custody

Account transactions as consistent or inconsistent with the Offering Documents is based on his

assessment of which transactions are plainly fraudulent. For instance, when asked to clarify what

he meant when he wrote in his report that “the net use of cash” was “inconsistent with the offering

documents,” Ratner replied that, for example, “if SG Strategic [a Note Issuer] says it’s going to

invest in South bar or Florida real estate, but they’re wiring money to pay payroll or pay broker

commissions, that would” be inconsistent with the Offering Documents and the intended use of

the custody accounts. ECF No. [139-1] at 72:2-21. In another example, Ratner explained that a

transaction or transactions to an entity called Kingdom Trust was inconsistent because “we know

that that company was involved in some Ponzi scheme.” Id. at 73:2-6. When asked whether he was

offering an opinion on what the Offering Documents permitted, Ratner replied that he was not

offering a legal opinion but added that “it doesn’t matter because these accounts were not used

right.” Id. at 73:17-74:3. Ratner continued, “Not to be facetious, but certainly the offering

documents didn’t call for funds to pay a kickback or for money laundering, right? And we know

that some of the individuals that received these funds are indicated or pled guilty or whatever.” Id.

at 74:7-19. When asked whether the interpretation what the Offering Documents do or do not

permit would be a legal conclusion, Ratner replied that “I think it’s a combination of business

analysis, legal analysis. . . . I think it’s a combination or business analysis and a common sense

analysis.” Id. 75:21-76:14 (emphasis added).

To satisfy the reliability prong of the Daubert standard, Ratner’s assessment of what

transactions were or were not fraudulent must be based not on the expert’s “common sense” but

on the application of reliable scientific principles and methods. Ratner’s assessments of the DB

Custody Account transactions are thus ipse dixit if not based on his experience. To the extent

Ratner purports to apply his experience with “business analysis” of notes and their offering

documents, Ratner must explain how his experience leads to the conclusion he reached, why that

experience provides a sufficient basis for the opinion, and how that experience is reliably applied

to the facts. Frazier, 387 F.3d at 1261. Neither the Ratner Report not Ratner’s deposition indicates

such an explanation.

As such, Ratner’s calculation of Inconsistent Use damages is based on unsupported

assumptions that are Ratner’s ipse dixit. Accordingly, the Court will not permit Ratner’s opinion

on Inconsistent Use damages.

2. Interest Damages and Issuance Damages

Defendants contend that Ratner’s opinion on Interest Damages9 and Issuance Damages10

rest on assumptions—that (1) Deutsche Bank should have never opened the DB Custody Accounts

at all or should have almost immediately closed them and (2) all proceeds from note issuances

flowed through DB Custody Accounts—that are unsupported by any reasonable basis in evidence

and must be excluded for this reason. ECF No. [142] at 11-12 (citing Coquina Investments v.

Rothstein, 2011 WL 4949191, at *7 (S.D. Fla. Oct. 18, 2011)). Defendants further assert Ratner’s

opinion on Interest Damages is unhelpful to the trier of fact because his calculated Interest

Damages do not comport with amounts actually lost. Rather, his Interest Damages calculation does

not include as an offset payments the note issuers made to investors in the notes. ECF No. [142]

at 12. Likewise, Ratner’s Issuance Damages calculation fails to account for offsets from amounts

investors were already repaid via interest payments, repurchases of notes, or otherwise. Id. at 12-

13.

Plaintiffs do not address Defendants’ attack on Ratner’s opinion on Interest Damages and

Issuance Damages, and Defendants reply that Plaintiffs have abandoned their opinion on those

types of damages, ECF No. [165] at 4-5. In addition, Defendants contend that the Ratner Report

fails to satisfy any of the usual indicia of reliability that courts in the Eleventh Circuit consider

when evaluating an expert’s opinion. ECF No. [142] at 4 n.2, ECF No. [165] at 5 n.4; see also

Frazier, 387 F.3d at 1261-62.

9 Defendants define Interest Damages as “the interest on the Notes [that] would have been saved

had the Defendants closed the Note Issuers’ accounts on or before the first interest payment on May 30,

2014.” ECF No. [142] at 11 (quoting Ratner Rep. ¶ 27, ECF No. [139-1] at 308).

10 Defendants define Issuance Damages as the sum of “all of the Note issuances subsequent to the

date the DB Custody Accounts were opened” on April 18, 2014. Id. at 11 (quoting Ratner Rep. ¶ 28, ECF

No. [139-1] at 310).

Whenever a party fails to respond to an opposing party’s argument in a responsive brief,

that party has forfeited any arguments in response; as a result, the party has conceded the opposing

party’s argument. See Northstar Moving Holding Co., Inc. v. King David Van Lines, No. 0:19-CV-

62176, 2021 WL 9794593, at *6 (S.D. Fla. Oct. 15, 2021) (concluding that nonmoving party

abandoned affirmative defenses that were the subject of the moving party’s motion for summary

judgment). Because Plaintiffs failed to respond to Defendants’ arguments on the Ratner Reports’

Interest Damages and Issuance Damages calculations, Plaintiffs are deemed to have abandoned

that part of Ratner’s opinion. Ratner’s testimony is accordingly excluded to the extent he purports

to testify on Interest Damages or Issuance Damages.

3. Liquidation Expenses

Defendants argue that Ratner’s opinion on Plaintiffs’ administrative expenses of the

underlying liquidation proceedings is unhelpful to the trier of fact. ECF No. [142] at 13. Moreover,

Ratner’s opinion is unsupported by evidence that those expenses are losses that are attributable to

Deutsche Bank’s alleged misconduct since the Companies may have gone into liquidation

regardless of that misconduct. ECF No. [142] at 13. Defendants fault Ratner for failing to analyze

the administrative expenses in the liquidation proceeding and assert that this failure demonstrates

Ratner’s opinion on liquidation expenses is unreliable and not based on sufficient facts or data. Id.

at 14.

Plaintiffs first respond that Ratner is offering an opinion on the proper measure of damages,

not on Defendants’ liability, so he was not required to analyze whether Deutsche Bank’s

misconduct caused Plaintiffs’ administrative expenses in liquidation. ECF No. [160] at 9-10.

Plaintiffs explain that Ratner’s methodology is essentially a ‘but for’ approach” that “attempts to

put the Companies back in the position they would have been in but for the Defendants’ conduct.”

Id. at 7 n.5. Plaintiffs next respond that Defendants’ attacks on Ratners’ purported failure to

analyze the administrative expenses goes to the weight of his testimony and not its admissibility.

Id. at 10.

Ratner states “[b]ased on my review of the documents and evidence produced, and from

my analysis, education, past experience, and training, it is my opinion that the Companies in

Liquidation suffered damages in the amounts described in Tables 1 and 2.” Ratner Rep. ¶ 6, ECF

No. [139-1] at 296 (footnotes omitted). Table 1 purports to show that the total of “Administrative

Expenses of the Liquidation Proceedings” is $9,005,139. Ratner Rep. ¶ 6, ECF No. [139-1] at 296.

Ratner states that the entire amount of these expenses is “a component of damages.” Ratner Rep.

¶ 27, ECF No. [139-1] at 310.

Plaintiffs contend Ratner took a “but for” approach to damages—viz., but for Defendants’

wrongdoing, the Companies would not have gone into liquidation and not suffered administrative

costs—but the Ratner Report does not say as much. To the extent that Ratner bases his

administrative expenses calculation on a but for analysis, neither the report nor Plaintiffs’ briefing

cites to legal authority supporting the proposition that administrative expenses in a liquidation

proceeding are part of the measure of damages for any of Plaintiffs’ claims. See ECF No. [160] at

7 n.6 (not providing case law that administrative expenses in liquidation are a component of

damages under any of the claims Plaintiffs assert in this litigation). Without such authority,

Ratner’s testimony is inadmissible to the extent that testimony offers a legal conclusion that is

unhelpful to the trier of fact. See O’Malley v. Royal Caribbean Cruises, Ltd., No. 17-21225-CIV,

2018 WL 2970728, at *4 (S.D. Fla. June 13, 2018) (“Mr. Gras’ generic opinions are intertwined

with legal conclusions that Defendant was negligent and that the vessel’s personnel caused

Plaintiff’s injuries. Therefore, we conclude that Mr. Gras may not testify that Defendant was at

fault or that Defendant breached its duty of care.”). The Ratner Report is also factually infirm to

the extent that the Ratner’s opinion is premised on the proposition that Plaintiffs’ damages are the

amount necessary to put Plaintiffs in the position they would have been had the alleged misconduct

never occurred.11 This is because the Ratner Report cites to no support in the record that the

Companies would not have undergone liquidation but for Defendants’ wrongdoing. Without such

support, Ratner’s conclusion that liquidation expenses are “a component of damages” is ipse dixit

under the Daubert standard and thus unreliable. The Court therefore excludes Ratner’s testimony

on administrative expenses in liquidation.

4. Prejudgment Interest

Defendants argue that Ratner’s testimony on prejudgment interest should be excluded

because the applicability and amount of prejudgment interest is a question of law and proposed

expert testimony that offers a legal conclusion is inadmissible. ECF No. [142] at 14-15. Moreover,

Defendants contend that Ratner’s testimony on prejudgment interest would confuse the jury and

must be excluded under Rule 403 of the Federal Rules of Civil Procedure. Id. at 15 n.11.

Plaintiffs respond that Ratner’s prejudgment interest calculations would assist the Court in

calculating and awarding prejudgment interest after a verdict, and that an award of prejudgment

interest in this case is mandatory. ECF No. [160] at 10.

Although expert testimony that offers a legal conclusion is indeed inadmissible, In re

Lynch, 755 F. App’x 920, 925 (11th Cir. 2018) (citing Commodores Entm’t Corp. v. McClary, 879

F.3d 1114, 1128-29 (11th Cir. 2018)), Ratner is not purporting to testify as to whether Plaintiffs

are entitled to prejudgment interest (i.e., the applicability of prejudgment interest, in Defendants’

11 See, e.g., DFG Grp., LLC v. Heritage Manor of Memorial Park, Inc., 237 So. 3d 419, 422-23

(Fla. 4th DCA 2018) (“The goal of damages in tort actions is to restore the injured party to the position it

would have been in had the wrong not been committed.”) (internal quotation marks omitted).

terms), which is a question of law. See Wiand v. Lee, 753 F.3d 1194, 1204 (11th Cir. 2014)

(explaining that equitable factors guide a district court’s decision on whether to award prejudgment

interest or to reduce the amount of interest); Allapattah Servs., Inc. v. Exxon Corp., No. 91-0986-

CIV, 2006 WL 1132371, at *3 (S.D. Fla. Apr. 7, 2006) (explaining that the court concluded that

the class of plaintiffs was entitled to an award of prejudgment interest). Rather, Ratner proposes

to calculate the amount of prejudgment interest if Plaintiffs are entitled to prejudgment interest.

Ratner Rep. ¶ 27, ECF No. [139-1] at 310; see also Schedules 8a and 8b, ECF No. [142-3] at 147-

52 (purportedly calculating pre-judgment interest for different categories of damages). The legal

authorities on which Defendants rely do not hold that the amount of prejudgment interest is a

question of law. Without such support, Ratner’s opinion on prejudgment interest is not excludable

on the grounds that it offers a legal conclusion. Since the parties agree that prejudgment interest is

a matter for the Court to decide post-trial, Plaintiff’s argument that Ratners’ testimony would

confuse the jury is misplaced.

Accordingly, the Court denies Defendants’ Daubert Motion regarding Ratner’s testimony

on prejudgment interest.

5. Increased Liabilities

In a footnote, Defendants argue that the Ratner Report in its entirety is unreliable because

it “fails to satisfy any of the usual indicia of reliability set forth in” Hughes v. Kia Motors Corp.,

766 F.3d 1317, 1329 (11th Cir. 2014) (“(1) whether the methodology can be and has been tested,

(2) whether the theory or technique has been subjected to peer review, (3) the known or potential

rate of error of the methodology employed, and (4) whether the methodology is generally

accepted.”). ECF No. [142] at 4 n.2. As to Ratner’s opinion on Plaintiffs’ damages due to increases

in liability from note issuances after April 8, 2014, Plaintiffs respond that Ratner has applied a

straightforward and reliable methodology, specifically by calculating the total amount of the value

of note issuances that were executed by Deutsche Bank that Deutsche Bank then delivered to

Madison free of payment without a legal or contractual right to do so. ECF No. [160] at 2, 3.

Plaintiffs further explain that Mr. Ratner’s analysis supports a damages award based on a

“deepening insolvency” theory. Id.

The Eleventh Circuit has emphasized that the four factors set forth in Frazier are not

exhaustive, and a court may need to conduct an alternative analysis to evaluate the reliability of an

expert opinion. See Frazier, 387 F.3d. at 1262 (“These factors are illustrative, not exhaustive; not

all of them will apply in every case, and in some cases other factors will be equally important in

evaluating the reliability of proffered expert opinion.”). To the extent Ratner purports to testify on

damages calculations that are based on a deepening insolvency theory, that testimony would not

be automatically excluded on the basis of being unreliable, Kapila v. Warburg Pincus, LLC, No.

8:21-CV-2362-CEH, 2022 WL 4448604, at *13-14 (M.D. Fla. Sept. 23, 2022) (not excluding

expert testimony on damages based on deepening insolvency theory), and Ratner has testified he

intends to testify on damages under a deepening insolvency theory, ECF No. [139-1] 16:8-17:20

(“the second analysis is . . . looking at increasing the liabilities or kind of a deepening insolvency

methodology where . . . but for the defendant . . . not ceasing the operation, these additional

liabilities were incurred by . . . . the entities that are in liquidation.”). For this reason, the case that

Defendants cite, Seawell v. Brown, is inapplicable here. Seawell v. Brown, 2010 WL 11561287, at

*9 (S.D. Ohio Sept. 9, 2010). There, the court concluded that the expert eschewed statistical

analysis in calculating damages to use a method that the expert seemingly created solely for the

purposes of the litigation. Id. Here, Ratner seeks to testify on damages under a theory supported

by Florida case law. See In re Flagship Healthcare, Inc., 269 B.R. 721, 728 (Bankr. S.D. Fla.

2001) (“even if the Debtor may have been insolvent before the Greenleaf Valuation, the additional

debt incurred thereafter, and allegedly as a result of the Defendants’ negligence, may provide a

measure of damages recoverable by the Trustee”). Given that Defendants do not attack the

deepening insolvency methodology, the Court will not exclude Ratner’s alternative increased

liability damages opinion.

B. Fraher’s Proffered Expert Testimony

Defendants contend Fraher is not qualified to testify on Deutsche Bank’s customer on-

boarding, KYC, or transaction monitoring processes, or Deutsche Bank’s later attempts to

remediate its relationship with its customers. ECF No. [142] at 15-16.12 Alternatively, Defendants

contend Fraher’s opinion that Deutsche Bank facilitated the Ponzi scheme by “failing to remediate

issues related to the Madison accounts or terminate its relationship with Madison” is an attempt to

instruct the jury on how to decide. Fraher Rep. at 14, ECF No. [142-2] at 206.

Plaintiffs respond that Fraher has extensive experience with KYC and anti-money

compliance policy and procedures, and that his lack of employment experience with a commercial

bank does not make him unqualified to render his opinions. ECF No. [142] at 13-15. Plaintiffs

further respond that Fraher’s opinion is not objectionable simply because it embraces the ultimate

issue of whether Deutsche Bank facilitated the Ponzi scheme. ECF No. [160] at 16-17.

Defendants reply that Plaintiffs exaggerate Fraher’s experience with bank compliance

procedures and Fraher’s opinion improperly “tells the jury what result to reach.” ECF No. [165]

12 In his report (“the Fraher Report”), Fraher purports to testify on “the policies, procedures, due

diligence, operational controls, and risk management practices that a deposition institution such as Deutsche

Bank should follow to ensure (i) that its business is conducted with appropriate identification,

measurements, and management of risks and (ii) that appropriate controls are in place to prevent, detect,

and deter financial crimes such as fraud, money laundering, terrorist financing, and/or violations of federal

sanctions regimes.” Fraher Rep. ¶ 3, ECF No. [142-2] at 193-94. For convenience, the Court refers to the

subject area of Fraher’s testimony as “bank compliance procedures.”

at 8- 10. (citing AIM Recycling of Florida, LLC v. Metals USA, Inc., 2020 WL 209236 (S.D. Fla.

Jan. 14, 2020)).

1. Fraher’s Qualifications

Defendants argue that Fraher’s employment experience does not qualify him to render

opinions on the requirements of a KYC program, standard bank practices for onboarding new

customers, or the circumstances under which a bank must remediate or terminate an account

relationship. ECF No. [142] at 16. Defendants contend that Fraher’s experience is insufficient to

opine on such issues since Deutsche Bank is a “major financial institution” and Fraher has no

experience working in such a bank. Id. at 18.13

Plaintiffs respond that Fraher has sufficient experience to opine on bank compliance

procedures because his general expertise on the subject will assist the trier of fact. ECF No. [160]

at 14-15. Moreover, Plaintiffs contend that Defendants fail to demonstrate why Deutsche Bank’s

size and sophistication is relevant to whether Fraher is qualified to render an opinion in this case.

ECF No. [160] at 15-16.

The Court reiterates that an expert in this Circuit may be qualified “by knowledge, skill,

experience, training, or education.” J.G. v. Carnival Corp., No. 12-21089-CIV, 2013 WL 752697,

at *3 (S.D. Fla. Feb. 27, 2013) (citing Furmanite Am., Inc. v. T.D. Williamson, 506 F. Supp. 2d

13 Defendants contend that Fraher’s status as an attorney poses a heightened risk that the jury will

treat his testimony as an instruction on the legal effect of Defendants’ conduct. ECF No. [142] at 19 n.13

(citing Fed. R. Evid. 403 and In re Titanium Oxide Antitrust Litigation, 2013 WL 1855980, at *8 (D. M.D.

May 1, 2013)). Under Rule 403 of the Federal Rules of evidence, “[t]he court may exclude relevant evidence

if its probative value is substantially outweighed by a danger of . . . misleading the jury[.]” Fed. R. Evid.

403. The court in Titanium Oxide held that the expert testimony of a law professor had minimal probative

value because the law professor was not qualified to give economics testimony; as such, the court concluded

the danger of the professor misleading the jury because he was a law professor substantially outweighed

the probative value of his testimony, and the court excluded that testimony. In re Titanium Dioxide Antitrust

Litig., 2013 WL 1855980, at *7-8. Because the Court concludes Fraher is qualified to testify in this case

regarding Deutsche Bank’s compliance procedures, Titanium Dioxide does not compel the conclusion that

Fraher’s testimony is excludable merely because he is an attorney.

1126, 1129 (M.D. Fla. 2007); Fed. R. Evid. 702). “[S]o long as the expert is minimally qualified,

objections to the level of the expert’s expertise go to credibility and weight, not admissibility.” See

Clena Invs., Inc., 280 F.R.D. at 661 (citing Kilpatrick, 2009 WL 2058384, at *1). Where an expert

proffers non-scientific, experience-based testimony, a court has flexibility in assessing the relevant

factors relating to reliability. Frazier, 387 F.3d at 1262. This assessment “will depend . . . on the

nature of the issue, the expert’s particular expertise, and the subject of his testimony.” United

States v. Brown, 415 F.3d 1257, 1268 (11th Cir. 2005) (quoting Kumho Tire Co., 526 U.S. at 150).

An expert relying on his personal knowledge and experience—as opposed to scientific training or

certifications—may testify as long as he may reliably apply his experience to assist the trier of

fact. See Whelan v. Royal Caribbean Cruises, Ltd., 976 F. Supp. 2d 1328 (S.D. Fla. 2013) (citing

Frazier, 387 F.3d at 1261). Questions about the expert’s lack of specific knowledge regarding a

sub-topic within his industry are more appropriately considered as a challenge to the foundation

for his opinion, not his qualifications. The Court must ensure the witness has appropriately

explained how his experience leads to the conclusion he reached, why that experience provides a

sufficient basis for the opinion, and how that experience is reliably applied to the facts. Frazier,

387 F.3d at 1261. “An expert’s unexplained assurance that [his] opinions rest on accepted

principles” is not enough. Furmanite Am., Inc., 506 F. Supp. 2d at 1130 (citing McClain v.

Metabolife Int’l, Inc., 401 F.3d 1233, 1242 (11th Cir. 2005)). Further, an expert’s qualifications

need not be narrowly tailored to the precise circumstances of the case; merely “because [the

expert’s] experience does not precisely match the matter at hand” does not render him unqualified.

J.G., 2013 WL 752697, at *3 (citations omitted). An expert may “testify regarding narrow sub-

topics within his broader expertise—notwithstanding a lack of specific experience with the

narrower area—as long as his testimony would still assist a trier of fact.” See Remington v.

Newbridge Secs. Corp., No. 13-60384-CIV, 2014 WL 505153, at *4 (S.D. Fla. Feb. 7, 2014); see

also Maiz, 253 F.3d at 665 (affirming the district court’s decision to permit an economic expert to

testify on damages relating to real-estate fraud, even though the expert had no specific real-estate

experience, finding the issue of damages was sufficiently within the expert’s broader expertise).

Fraher was retained to provide an expert opinion on bank compliance procedures. Note 12,

supra; Fraher Rep. ¶ 3, ECF No. [142-2] at 193-94. Fraher offers the following opinions:

Opinion 1: Deutsche Bank fell short of the ordinary standard of care in the banking

industry when Deutsche Bank conducted its KYC process for onboarding and opening

custody accounts and subaccounts for Madison. Fraher Rep. at 5-10, ECF No. [142-2]

at 197-202.

Opinion 2: When Deutsche Bank employees raised concerns about Madison, standard

banking practice would have been either to remediate Madison’s misuse of the DB

Custody Accounts or to terminate Deutsche Bank’s relationship with Madison. Fraher

Rep. at 10, ECF No. [142-2] at 202. Because Deutsche Bank took neither of these

actions, Deutsche Bank fell short of the standard of ordinary care for a similarly situated

bank. Id. Had Deutsche Bank met this standard of ordinary care, Deutsche Bank either

could have prevented Madison from making payments from its DB Custody Accounts

that were unrelated to securities transactions and to stop running overdrafts either by

terminating its dealings with Madison or by imposing effective measures to stop

Madison from doing so. Id.

Opinion 3: Deutsche Bank facilitated the continuation and the cover up of the

Individual Wrongdoer’s Ponzi scheme by failing to follow standard banking practice

and either terminating its relationship with Madison or implementing effective

measures to prevent Madison’s misuse of the custody account. Fraher Rep. at 14, ECF

No. [142-2] at 206.

Fraher provides consulting services to financial institutions and “fintechs” on “legal

compliance questions presented by open banking.” Fraher Rep. ¶ 6, ECF No. [142-2] at 195. Fraher

testified that he was tasked with establishing “the initial policies, procedures and practices with

respect to standing up [the] [Office of Foreign Asset Control (OFAC)]/[Bank Secrecy Act

(BSA)]/[anti-money laundering (AML)], Know Your Customer [‘KYC’] program” when he

served in a bank compliance role while working on a system known as FedGlobal ACH as vice

president and counsel to the Retail Payments Office at the Atlanta Fed. ECF No. [153-1] at 12:1-

21. Fraher testified that the BSA requires “federal insured depository institutions” to have a

program that includes KYC policies and procedures, id. 15:24-16:9, and that the Atlanta Fed’s

“KYC piece” was aimed at the banks that used the Atlanta Fed’s services, id. at 47:7-21.14 Fraher

testified at length about his personal experience with KYC policies while working on running

FedGlobal ACH. See, e.g., id. at 55:25-56:13 (“And in the real world that just means when you do

the initial KYC, at least in my experience when we were running the FedGlobal ACH, we

demanded that the banks that were going to send us international payments, they give us a profile

of the businesses that they were running, either large customers’ worth, what their volumes were

intended to be, what business they were in.”). Fraher also testified about his experience with on-

boarding customers at the Atlanta Fed. Id. at 86:4-94:5. Fraher’s experience includes reviewing

14 31 U.S.C. §§ 5311, et seq.; see also United States v. Schwarzbaum, No. 18-CV-81147, 2020 WL

1316232, at *6 (S.D. Fla. Mar. 20, 2020) (“The primary purpose of the BSA was to require the making of

certain reports that ‘have a high degree of usefulness in criminal, tax, or regulatory investigations or

proceedings.’”). As amended, the Bank Secrecy Act requires every bank to adopt a customer identification

program (i.e., Know Your Customer (“KYC”)) as part of its Bank Secrecy Act compliance program. Matter

of Seizure & Search of Motor Yacht Tango, 597 F. Supp. 3d 149, 162 (D.D.C. 2022) (citing 12 C.F.R. §§

21.11, 21.21).

custody accounts, “fiduciary accounts,” and “trust accounts.” Id. at 112:9-113:9. In addition, Mr.

Fraher testified to his experience working on AML compliance policies. Id. at 29:20-31:13, 12:1-

21.

The Court concludes that Fraher’s background and experience meet the “minimum

qualifications” necessary to permit him to testify in this case. See J.G., 2013 WL 752697, at *3

(“an expert must satisfy a relatively low threshold, beyond which qualification becomes a

credibility issue for the jury”) (citing Martinez v. Altec Indus., Inc., 2005 WL 1862677, at *3 (M.D.

Fla. Aug. 3, 2005)). Defendants have not explained why Fraher’s experience at the Atlanta Fed

working on bank compliance procedures is insufficient to allow him to opine on bank compliance

procedures at a large and sophisticated bank like Deutsche Bank. Further, this Court finds that

Fraher’s ability to assess a bank’s compliance with the requirements of the Bank Secrecy Act is

sufficiently within his expertise. See Martinez, 2005 WL 1862677, at *3 (explaining that once

there exists “reasonable indication of qualifications,” those qualifications then “become an issue

for the trier of fact rather than for the court in its gate-keeping capacity”) (citation omitted).15

15 In their Reply, Defendants argue that Fraher cannot “appropriately explain[] how his experience

leads to the conclusions he reached, why that experience provides a sufficient basis for the opinion, and

how that experience is reliably applied to the facts.” ECF No. [165] at 9 (citing AIM Recycling, 2020 WL

209236, at *6). But that critique is a challenge to the reliability of his opinions, not his qualifications. See

Frazier, 387 F.3d at 1264 (affirming exclusion of qualified expert where expert’s opinions were not

methodologically reliable or sound). Because Defendants did not challenge Fraher’s opinion on reliability

grounds in their opening brief, the Court declines to do so here. See Herring v. Secretary, Dep’t of

Corrections, 397 F.3d 1338, 1342 (11th Cir. 2005) (“As we have repeatedly admonished, arguments raised

for the first time in a reply brief are not properly before a reviewing court.”); Lovett v. Ray, 327 F.3d 1181,

1183 (11th Cir. 2003) (“Because he raises that argument for the first time in his reply brief, it is not properly

before us.”); F.T.C. v. IAB Mktg. Associates, LP, 972 F. Supp. 2d 1307, 1311 (S.D. Fla. 2013) (“[T]hese

arguments are forfeited because they were raised for the first time in a reply brief.”); Foley v. Wells Fargo

Bank, N.A., 849 F. Supp. 2d 1345, 1349 (S.D. Fla. 2012) (“Because it is improper for Defendant to raise

this new argument in its Reply brief, the argument will not be considered.”); Willis v. DHL Global Customer

Solutions (USA), Inc., 2011 WL 4737909, at *3 (S.D. Fla. Oct. 07, 2011) (collecting cases stating that it is

inappropriate to raise new arguments in a reply brief and stating that courts in this district generally do not

consider these arguments); Park City Water Authority, Inc. v. North Fork Apartments, L.P., 2009 WL

4898354, at *1 n. 2 (S.D. Ala. Dec. 14, 2009) (citing cases from 2009 in over 40 districts in which courts

Thus, the Court concludes that Defendants’ arguments regarding Fraher’s qualifications

are insufficient to render his opinions inadmissible. Such arguments are more appropriately

considered as a challenge to the weight that should be given to his opinions and not to their

admissibility.

2. Mr. Fraher’s Opinion 3

Defendants contend that Fraher’s Opinion 3 that Defendants “facilitated the continuation

and cover up of the fraud,” Fraher Rep. at 14, ECF No. [142-2] at 206, is not helpful because

whether Defendants facilitated the Individual Wrongdoers’ fraud is a question ultimately for the

trier of fact, ECF No. [142] at 18-19. Plaintiffs respond that Fraher may testify as to his opinion

on an issue of fact and that opinion would help the jury understand how Deutsche Bank’s services

were of substantial assistance to the Individual Wrongdoers’ scheme by allowing unlimited wiring

activity and artificial liquidity. ECF No. [160] at 17.

An expert may testify as to his opinion on an ultimate issue of fact but may not tell the jury

what result to reach. Montgomery v. Aetna Cas. & Sur. Co., 898 F.2d 1537, 1541 (11th Cir. 1990)

(citing Fed. R. Evid. 704). “[A]n expert’s opinion on an ultimate issue must be helpful to the jury

and also must be based on adequately explored legal criteria.” Hanson v. Waller, 888 F.2d 806,

812 (11th Cir. 1989).

Here, Fraher opines that Deutsche Bank helped cover up the fraud and facilitated its

continuation by not prohibiting Madison’s misuse of the funds in the DB Custody Accounts and

by effectively providing liquidity to the scheme by allowing overdrafts. Fraher Rep. ¶ 36, ECF No.

[142-2] at 206. That opinion would help the jury determine whether Deutsche Bank provided

“substantial assistance” to the scheme. See Perlman v. Wells Fargo Bank, N.A., 559 F. App’x 988,

acknowledged the rule that arguments raised for the first time in a reply brief are ordinarily not considered).

933 (11th Cir. 2014) (explaining that an aiding and abetting claim requires that the plaintiff show

that a defendant substantially assisted an underlying tort). Fraher does not conclude that Deutsche

Bank provided substantial assistance. As such, Opinion 3 is not excludable on the grounds that it

reaches an ultimate issue for the jury.

Defendants’ arguments regarding Fraher’s opinions are more appropriately considered as

a challenge to the weight that should be given to his opinion and not to its admissibility.

For the reasons discussed above, Defendants’ Daubert Motion is granted in part and denied

in part.

C. Defendants’ Motion to Strike December 9, 2022 Supplement to Ratner Report

Defendants move to strike Ratner’s December 9, 2022 supplement to the Ratner Report,

ECF No. 158-5 (“Ratner Supplement”). ECF No. [164] (“Motion to Strike”). Defendants argue

Ratner did not properly supplement the Ratner Report under Rule 26(e) of the Federal Rules of

Civil Procedure because that supplement is neither based on new evidence or information

previously not available to the expert, nor designed purely to address inadvertent errors in the

Ratner Report. ECF No. [164] at 1, 6. Defendants further argue that because the Ratner Supplement

is not proper supplementation under Rule 26(e), that supplement may be excluded under Rule

37(c) of the Federal Rules of Civil Procedure because the Ratner Supplement is untimely, and its

late filing was neither substantially justified nor harmless. Id. at 6-7.

Plaintiffs respond that Ratner disclosed relatively minor corrections to his calculations

based on the Alfaro Report. ECF No. [172] at 1. Plaintiffs also respond that the Ratner Supplement

includes another calculation that merely shows damages if Defendants’ liability terminated in July

2016, when the FBI asked Deutsche Bank to keep the DB Custody Accounts open for the FBI’s

investigation. Id. at 2. Plaintiffs stress that the Ratner Supplement does not change Ratner’s

Case No. 21-cv-22437-BLOOM/Otazo-Reyes

methodology and note that Ratner’s supplemental calculations do not affect Ratner’s deepening

insolvency methodology. /d. at 1, 2, 5.

Because the Court has concluded that Ratner may not testify on Inconsistent Use Damages,

Defendant’s Motion to Strike is moot because the Ratner Supplement modifies calculations are

not based on a reliable methodology for categorizing DB Custody Account transactions.

IV. CONCLUSION

Accordingly, it is ORDERED AND ADJUDGED as follows:

1. Defendants’ Daubert Motion, ECF No. [142], is GRANTED IN PART AND

DENIED IN PART.

a. Ratner may testify regarding his opinions on to Plaintiffs’ increased

liabilities damages and may testify on preyudgment interest.

b. Ratner may not testify on Inconsistent Use Damages, Issuance Damages,

Interest Damages, or administrative expenses in Liquidation.

c. Fraher’s opinion is not excluded.

2. Defendant’s Motion to Strike, ECF No. [164], is DENIED AS MOOT.

DONE AND ORDERED in Chambers at Miami, Florida, on March 23, 2023.

BETHBLOOM i ists

UNITED STATES DISTRICT JUDGE

ce: Counsel of Record

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