Abington Emerson Capital, LLC v. Adkins

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF OHIO

EASTERN DIVISION

ABINGTON EMERSON CAPITAL, LLC, Case No.: 2:17-cv-00143

Plaintiff,

Judge Sarah D. Morrison

vs. Magistrate Judge Kimberly Jolson

JASON ADKINS, et al.,

Defendants.

OPINION & ORDER

This matter is before the Court pursuant to multiple motions in limine and a

motion for bifurcation. Many of these motions could have been resolved without

Court intervention had counsel simply communicated with each other. The Court

and the parties are about to ask a jury to spend a month of its time on this matter;

trial will go more smoothly and efficiently if counsel act cooperatively and

professionally.

I. STANDARD OF REVIEW

A motion in limine is a pre-trial mechanism by which the Court can give the

parties advance notice of the evidence upon which they may or may not rely to prove

their theories of the case at trial. Although the Federal Rules of Evidence do not

explicitly authorize a court to rule on an evidentiary motion in limine, the United

States Supreme Court has noted that the practice of ruling on such motions “has

developed pursuant to the district court’s inherent authority to manage the course

of trials.” Luce v. United States, 469 U.S. 38, 41 n.4 (1984). The motions therefore

serve “to narrow the issues remaining for trial and to minimize disruptions at trial.”

United States v. Brawner, 173 F.3d 966, 970 (6th Cir. 1999).

To obtain the in limine exclusion of evidence, a party must prove that the

evidence is clearly inadmissible on all potential grounds. Luce, 469 U.S. at 41 n.4.

Any motion in limine ruling, however, is “no more than a preliminary, or advisory,

opinion that falls entirely within the discretion of the district court, and the district

court may change its ruling where sufficient facts have developed that warrant the

change.” United States v. Yannott, 42 F.3d 999, 1007 (6th Cir. 1994). The Court will

therefore entertain objections on individual proffers of evidence as they arise at

trial, even though the proffered evidence falls within the scope of a denied motion in

limine. United States v. Kistner, No. 2:11-cr-00283, 2013 U.S. Dist. LEXIS 2129, at

*4-5 (S.D. Ohio Jan. 7, 2013) (Frost, J.).

II. ABINGTON’S MOTIONS IN LIMINE

A. ECF No. 396: Motion in Limine No. 1 to Exclude Treble Damages

Abington asks the Court to preclude reference to the treble damage

provisions of 18 U.S.C. § 1964(c) and Ohio Rev. Code § 2923.34(E) at the jury trial

as irrelevant and unduly prejudicial under Fed. R. Evid. 401-403. XPO responds

that it does not intend to introduce treble damage evidence or argument as to the

federal RICO count, but that it must do so as to the state RICO claim. (ECF No.

423.) XPO is correct.

Unlike RICO’s treble damages provision, which permits

an award of treble damages when a claim is demonstrated

by a simple “preponderance of the evidence,” Ohio’s

Corrupt Activities Act sets forth a two-tier standard of

proof. Upon a showing of a violation by a “preponderance

of the evidence,” a plaintiff is entitled to equitable and

injunctive relief under R.C. 2923.34(C). Treble damages

will be awarded only upon a showing of a violation by

“clear and convincing evidence.” R.C. 2923.34(F).1

Because of this two-tier standard of proof, we find the

trial court did not abuse its discretion in providing the

jury with the treble damages instruction noted above.

Schweisberger v. Weiner, 5th Dist. Stark Nos. 1994 CA 00291, 1995 CA 00367, 1995

Ohio App. LEXIS 6101, *26-27 (Dec. 12, 1995); see also CSAHA/UHHS-Canton, Inc.

v. Aultman Health Found., 5th Dist. Stark No. 2010CA303, 2012-Ohio-897, ¶ 99

(holding “[t]reble damages will be awarded only upon a showing of a violation by

clear and convincing evidence.”).

Accordingly, Abington’s motion is to exclude treble damages is DENIED.

(ECF No. 396.)

B. ECF No. 397: Motion in Limine No. 2 to Exclude Baltagi

Investigation

Abington asks the Court to preclude “any argument or evidence at trial that

[XPO] conducted an investigation into Baltagi’s conduct or the operations of the

Houston facility.” (ECF No. 397, PageID 30749.) Abington argues such evidence

should be excluded because XPO did not produce it during discovery.

XPO concedes the documents were not produced and that it blocked the

testimony. It states that it will not be offering the testimony of Susan Santo, XPO’s

former in-house counsel, or of its then-Executive team regarding the scope and

result of XPO’s investigation. (ECF No. 424.) Consequently, Abington’s Motion to

1 R.C. 2923.34(E) is the current version of, and identical to, R.C. 2923.34(F).

Exclude privileged testimony and evidence about XPO’s investigation into Baltagi

and Houston is DENIED as MOOT. (ECF No. 397.)

C. ECF No. 398: Motion in Limine No. 3 to Limit Preemptory

Challenges

Abington named XPO Logistics, Inc. and XPO Global Forwarding, Inc. as

Defendants. Abington asks the Court to limit those defendants to a total of three

preemptory challenges. Abington further requests the Court prevent them from

duplicative arguments.

XPO replies that it will not seek more than three peremptory challenges and

that it will not make duplicative arguments. (ECF No. 425.) As a result, Abington’s

motion to limit peremptory challenges and prohibit duplicative case presentation is

DENIED as MOOT. (ECF No. 398.)

D. ECF No. 399: Motion in Limine No. 4 to Preclude Live Witnesses

Abington seeks an order precluding XPO from calling witnesses in its case-in-

chief unless XPO makes those witnesses available for Abington’s presentation.

(ECF No. 399.) XPO indicates that it is willing to work with Abington regarding the

presentation of live witnesses and represents that Abington has refused to discuss

the issue. (ECF No. 425.) This Motion is DENIED as MOOT. (ECF No. 399.)

E. ECF No. 400: Motion in Limine No. 5 to Preclude Lack of

Criminal Charges

Abington next argues that XPO should be precluded from introducing

evidence or testimony informing the jury that the Government has not instigated

criminal charges against XPO for XPO’s alleged conduct in this matter because such

evidence is irrelevant, unduly prejudicial, and hearsay under Fed. R. Evi. 401-403

and 801. (ECF No. 400.) XPO opposes exclusion, noting that Abington does not

explain how the evidence is irrelevant or unduly prejudicial and fails to sustain a

finding that the evidence would equate to hearsay. (ECF No. 426.)

The Government investigation and prosecution information could become

relevant if, as XPO asserts, one or both parties introduce evidence at trial regarding

Adkins’ criminal prosecution. Id. at PageID 31985. Doing so would open the door to

making the Government’s treatment of XPO relevant. Additionally, XPO is correct

that Abington does not argue why the evidence would be unduly prejudicial. The

Court will not fill that void. And, the phrasing of questions about this topic will

inform the Court as to whether hearsay concerns are present.

For these reasons, the Court DENIES the Motion. (ECF No. 400.)

F. ECF No. 401: Motion in Limine No. 6 to Exclude and Sequester

Witnesses

Utilizing Fed. R. Evid. 615, Abington wants witnesses excluded from the trial

except when they are testifying and sequestered before their testimony is complete.

(ECF No. 401.) XPO consents to each request as long as corporate representatives

may be present for the duration of the trial. (ECF No. 425.) The Motion (ECF No.

401) is GRANTED with XPO’s caveat. See Fed. R. Evid. 615(b).

G. ECF No. 402: Motion in Limine No. 7 to Exclude Expert Ozgur

Kan’s Opinion

One of XPO’s experts, Ozgar Kan, opines that Abington’s due diligence did

not satisfy industry standards. (ECF No. 427-1.) Abington seeks to exclude that

opinion under Fed. R. Evid. 702, arguing that Kan lacks the requisite knowledge

and employs the wrong methodology to so conclude. (ECF No. 402.)

1. Federal R. Evid. 702 states:

Rule 702 provides:

A witness who is qualified as an expert by knowledge,

skill, experience, training, or education may testify in the

form of an opinion or otherwise if:

(a) the expert’s scientific, technical, or other specialized

knowledge will help the trier of fact to understand the

evidence or to determine a fact in issue;

(b) the testimony is based on sufficient facts or data;

(c) the testimony is the product of reliable principles and

methods; and

(d) the expert has reliably applied the principles and

methods to the facts of the case.

The rule “imposes a special obligation upon a trial judge to ensure that scientific

testimony is not only relevant, but reliable.” Kumho Tire Co. v. Carmichael, 526

U.S. 137, 137 (1999) (citing Daubert v. Merrell Dow Pharms., 509 U.S. 579 (1993)).

This basic gatekeeping obligation applies to all expert testimony. Kumho Tire Co.,

526 U.S. at 147. But the gatekeeper role

is not intended to supplant the adversary system or the

role of the jury; rather, “[v]igorous 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.”

Daubert, 509 U.S. at 596. The judge’s role is simply to

keep unreliable and irrelevant information from the jury

because of its inability to assist in factual determinations,

its potential to create confusion, and its lack of probative

value. Wellman v. Norfolk and W. Ry. Co., 98 F. Supp. 2d

919, 923-24 (S.D. Ohio 2000) [Sargus, J.].

Ohio Oil Gathering Corp. III v. Welding, Inc., No. 2:09-cv-782, 2010 U.S. Dist.

LEXIS 136248, at *15-16 (S.D. Ohio Dec. 9, 2010) (Frost, J.). “[R]ejection of expert

testimony is the exception, rather than the rule.” In re Scrap Metal Antitrust Litig.,

527 F.3d 517, 530 (6th Cir. 2008) (citation omitted). Accordingly, “Rule 702 should

be broadly interpreted on the basis of whether the use of expert testimony will

assist the trier of fact.” Morales v. Am. Honda Motor Co., Inc., 151 F.3d 500, 516

(6th Cir. 1998) (citation omitted).

“[U]nder Daubert and its progeny, a party proffering expert testimony must

show by a ‘preponderance of proof’ that the expert whose testimony is being offered

is qualified and will testify to scientific knowledge that will assist the trier of fact in

understanding and disposing of relevant issues.” Decker v. GE Healthcare Inc., 770

F.3d 378, 391 (6th Cir. 2014) (citations omitted). “[T]he issue with regard to expert

testimony is not the qualifications of a witness in the abstract, but whether those

qualifications provide a foundation for a witness to answer a specific question.”

Berry v. City of Detroit, 25 F.3d 1342, 1351 (6th Cir. 1994). Exclusion is proper when

“the subject of the testimony lies outside the witness’ area of expertise.” 4

Weinstein’s Fed. Evid. § 702.06[1], at 702-52 (2000). “In other words, a party cannot

qualify as an expert generally by showing that the expert has specialized knowledge

or training which would qualify him or her to opine on some other issue.” CDA of

Am. Inc. v. Midland Life Ins. Co., No. 01-CV-837, 2006 U.S. Dist. LEXIS 97327, at

*8 (S.D. Ohio Mar. 27, 2006) (Marbley, J.) (citation omitted).

2. Knowledge and Experience

Abington spends considerable time on what Kan has not done. Namely, Kan

has not joined any professional associations, written any scholarly articles, or

become a member in relevant trade organizations regarding purchase order

financing, the type of loan at issue here. Nor has Kan taught any classes on the

purchase order financing or engaged in a purchase order financing deal during his

professional career. Abington therefore extrapolates that he “lacks the necessary

qualifications to provide expert opinions on the necessary due diligence steps in the

purchase order financing transaction at issue in this case.” (ECF No. 402, PageID

30772.)

Kan earned a PhD in finance. (ECF No. 427-1.) His professional career began

at QuantCast Capital, LLC where he was an Investment Strategy Research

Coordinator and Risk Manager. While there, he “[d]eveloped investment strategy

protocol for weekly profit-taking, stop-loss, exit, and re-entry points.” Id. Next, he

was an Assistant Professor of Finance at two different higher learning institutions

where he taught finance courses at the undergraduate and graduate level. He then

worked for Marshall and Stevens, where he performed valuations for asset

acquisitions and assessed public equity market acquisitions. He also worked for the

Law and Economics Consulting Group, where he structured and valued portfolios of

collateralized debt obligations, before going to Moody’s Consulting Group for five

years. At Moody’s, he: “built internal credit risk tools for banks and other financial

institutions of all sizes to assess the credit of their clients for origination,

underwriting, portfolio monitoring, portfolio management and workout purposes.

[He] also trained the underwriting staff and portfolio management teams of clients

about the use of the credit risk tools for the same purposes.” Id. at PageID 32001.

He left Moody’s to work for GE Capital, Americas, as a Head of Credit Methodology

function, a position he held for two years. In that capacity, he was a “company-wide

credit methodologies subject matter expert for activities including development of

internal credit models, training of underwriters and risk personnel, participation in

origination and underwriting of . . . asset-based loans . . . .” Id. at PageID 32066. He

also “[s]erved as member of daily deal calls team for structuring, quantifying, and

pricing of risk in . . . asset-based loans . . .” Id. He has been qualified as an expert in

both federal and state courts and was an expert in bankruptcy matters involving

due diligence red flags in Ponzi scheme/fraud cases. Id. at PageID 32062-32063.

Presently, Kan serves as Managing Director of Berkley Research Group’s

Credit Risk analytics, Financial Services, and Securities Practices. In this capacity,

he works on “credit analysis and assessments, credit ratings, credit modeling and

validation, . . . underwriting due diligence . . . .” (ECF No. 427-1, PageID 32058.)

He holds the Chartered Financial Analyst and Financial Risk Manager

designations. (ECF No. 427-1.)

Kan’s background establishes that he has extensive knowledge and

experience in asset-based lending; purchase-order financing is a type of asset-based

lending. (427-3, PageID 32156.) Accordingly, XPO has proven by a preponderance of

the evidence that Kan has sufficient knowledge and is qualified to testify about due

diligence in the realm of purchase-order financing. Any arguments about Kan’s

“knowledge gaps” go to weight rather than admissibility. Burke v. U-Haul Int’l, Inc.,

No. 3:03CV-32-H, 2006 U.S. Dist. LEXIS 78231, at *11 (W.D. Ky. Oct. 20, 2006).

3. Methodology

Having determined that Kan has the requisite knowledge and experience to

testify, the Court turns to whether his underlying methodology renders his opinion

reliable enough to warrant its presentation to the jury. In this regard, Abington

notes that Kan based his conclusion on the “Four Cs” of credit: character, capacity,

collateral, and covenants. (ECF No. 402, PageID 30773.) Abington then argues,

without support, that the 4Cs are not used in purchase-order financing such that

Kan’s methodology is unreliable and his opinion must be struck. Id. at PageID

30773-30776.

In so contending, Abington ignores Kan’s conclusion that specialty financiers

like Abington use the 4Cs and that Abington’s own employees used three of the four

“Cs” when underwriting the Landash deal. (ECF No. 427, PageID 31996) (citing

Urtel Dep.). As such, the Court holds that Kan’s testimony is the product of reliable

principles and methods and he has reliably applied those principles and methods to

the facts of the case.

Abington’s Motion to Exclude Kan’s Testimony (ECF No. 402) is DENIED.

H. ECF No. 403: Motion in Limine No. 8 to Exclude Expert Tom

Stephenson’s Opinion

Tom Stephenson is XPO’s OTR tire valuation expert. Relevantly, he opines as

to: (1) the value of the tires in 2015; (2) whether sales documentation should have

put Abington on alert for fraud; (3) Adkins’ untrustworthy reputation; and (4)

shipping arrangement for the deal. Arguing that Stephenson lacks the requisite

knowledge and employs the wrong methodology to so conclude, Abington seeks

exclusion of those opinions under Rule 702. (ECF No. 403.) Having previously

summarized the Rule 702 standard, the Court turns first to Abington’s attack on

Stephenson’s knowledge before addressing its reliability arguments.

1. Knowledge and Experience

Stephenson’s career in the OTR industry began in 1984. (ECF No. 428-1,

PageID 32190.) He started as a service technician at a tire dealer and repair shop at

Frank Allen Tyre Service. Id. Five years later, he became a Major Account Manager

at Firestone in New Zealand. Id. In that role, he worked with large fleets requiring

OTR tires. Id. In 1996, he purchased his own Firestone dealership supplying and

servicing mining clients. Id. He became Chairman of the Firestone Tyre and Rubber

Company of New Zealand National Dealer Council and won two Dealer of the Year

awards. Id.

He sold his dealership and started Tyre Innovations, Ltd. in 2006. Id. Tyre

Innovations “provides [p]rocurement services for hard to source tyres, . . . tyre

inspection and evaluation services . . . “ and still operates today. Id. Tyre

innovations consults with and manages an OTR port, and also “facilitates and over

sees all import transactions [another client makes] through [Stephenson’s]

international network.” Id. at 32190-32191.

In 2014, he began working for Carters Tyer [sic] Service as a National Sales

Manager for Goodyear OTR Tyres, a position he still has. Id. at 32190.

During his thirty five year career, he has participated in more than $250

million in sales of OTR tires. Id. at 32191. His position as a consultant enabled him

to have access to OTR tire costs on both the primary and gray market, the latter of

which is at issue in this case. Id. He has worked with more than twenty major

mining houses and has traveled throughout the world, including multiple trips to

the United States. Id. Most trips were to inspect OTR tires that were being

purchased. Id. He has served as a guest speaker at a OTR tire conference and at a

mining institute. Id. He has obtained three certifications for servicing OTR tires.

Against this backdrop, Stephenson opines that the February 17, 2015 Work

Order from Best One, the March 9, 2015 Letter of Intent, and March 16, 2015 Giant

Tyre purchase order were “suspicious” because they lacked serial numbers and an

inspection report for the OTR tires. Id. at PageID 32196. Abington argues this

opinion must be struck because Stephenson admitted that he is not a document

expert so he has insufficient knowledge for his opinion about whether those

documents should have put Abington on alert for fraud. (ECF No. 403, PageID

30785) (citing ECF No. 356, PageID 26362-26363.)

XPO counters that it does not offer Stepheson in that role; rather,

Stephenson is offered as an expert in the OTR tire industry in general and in OTR

tire transactions specifically. From this, XPO asserts that Stephenson’s “relevant

opinion is that work orders typically include serial numbers and contain an

inspection report, and that the work orders he reviewed in this case are missing of

what he typically expects to see on that type of document in a tire transaction.”

(ECF No. 428, PageID 32187.)

With that in mind, the Court concludes that Stepheson’s vast and

concentrated experience in the OTR Industry warrants him being designated as an

expert here. Furthermore, his opinions relate to issues of valuation and fraud which

are both at issue in this case. His specific knowledge will help the trier of fact to

understand the evidence or to determine a fact in question. Stephenson is qualified

to give expert testimony at trial on the topic of documentation and Abington’s

Motion to Exclude that testimony is DENIED. (ECF No. 403.)

2. Reliability

The next genesis for Abington’s Motion is that Stephenson’s highlighted

opinions are not the product of reliable principles and methods. This Rule 702(b)

argument equates to a reliability attack.

Daubert identifies several factors addressing a reliability determination,

including whether the expert’s sources and methods were subject to testing, peer

review, publication, known or potential rate of error, and general acceptance.

Daubert, 509 U.S. at 593-94. “The Daubert factors are neither definitive nor

exhaustive and may not apply in every case.” European Pensions Mgmt. v.

Columbus Life Ins. Co., No. 1:16-cv-542, 2017 U.S. Dist. LEXIS 167671, at *12-13

(S.D. Ohio Oct. 11, 2017) (Dlott, J.) (citing Mike’s Train House, Inc. v. Lionel, L.L.C.,

472 F.3d 398, 407 (6th Cir. 2006)). “Red flags that caution against certifying an

expert include reliance on anecdotal evidence, improper extrapolation, failure to

consider other possible causes, lack of testing, and subjectivity.” Newell

Rubbermaid, Inc. v. Raymond Corp., 676 F.3d 521, 527 (6th Cir. 2012). The

anecdotal evidence flag is the source of Abington’s contention that exclusion is

warranted.

a. Value of OTR Tires

Stephenson opines that the Landash deal’s OTR tires were worth between

$16,000 - $35,000 at the time of the deal, instead of the $90,000 value Abington and

Adkins assigned to them. (ECF No. 428-1, PageID 32194.) According to Abington,

this opinion must be precluded from admission at trial because Stephenson’s

experience has been only on the OTR domestic tire market in New Zealand since

December 2014, several months before the Abington deal transpired. (ECF No. 403,

PageID 30782.)

Stephenson’s deposition testimony reveals otherwise.

Q. What year was that that you started working only in

New Zealand?

[***]

A. I started working back in New Zealand full-time in

December of 2014.

Q. After December 14th, were you involved in the selling

or buying of tires in the OTR market in the United

States?

A. Yes, I was.

Q. In what capacity?

A. I was purchasing tires from the United States and

bringing them into New Zealand and moving them

into Australia. I also –

Q. So when you say -- a couple minutes ago when you said

something along the lines of when you stopped doing

internationally, what did you mean by that?

A. I stopped traveling internationally.

Q. Just the traveling part?

A. Yeah, correct. So instead -- yes, correct. So instead of

hopping on a plane and going -- working in Saudi

Arabia or working in U.S. or working in Mexico, I was

doing everything remotely from home.

(Stephenson Dep. II at 28-29.)

Abington next argues that the documentation upon which Stephenson relied

when reaching his value determination “is worthless” because the documents

“refer[] to sales prices after” the deal occurred, “deal[] with different types and

sizes” of OTR tires than those involved in the deal, and/or are good through 2012,

three years before the deal. (ECF No. 403, PageID 30783.) Even if true, these are

not grounds for exclusion. Stephenson’s thirty five years of industry experience

serve as adequate grounds for his valuation conclusion. And, mere “‘weaknesses in

the factual basis of an expert witness’ opinion . . . bear on the weight of the evidence

rather than on its admissibility.’” McLean v. 988011 Ontario, Ltd., 224 F.3d 797,

801 (6th Cir. 2000) (quoting United States v. L.E. Cooke Co., 991 F.2d 336, 342 (6th

Cir. 1993)). Abington’s Motion to Exclude Stephenson’s opinion as to the valuation

of the tires is DENIED. (ECF No. 403.)

b. Adkins’ Reputation

Stephenson opines that Adkins had a reputation for being untrustworthy and

fraudulent in the OTR tire industry around the time of the Landash deal. (ECF No.

ECF No. 428-1, PageID 32196.) Abington initially attacks this conclusion’s

admissibility as unreliable for lack of foundation. (ECF No. 403, PageID 30780.)

According to Fed. R. Evid. 703

[a]n expert may base an opinion on facts or data in the

case that the expert has been made aware of or personally

observed. If experts in the particular field would

reasonably rely on those kinds of facts or data in forming

an opinion on the subject, they need not be admissible for

the opinion to be admitted. But if the facts or data would

otherwise be inadmissible, the proponent of the opinion

may disclose them to the jury only if their probative value

in helping the jury evaluate the opinion substantially

outweighs their prejudicial effect.

Furthermore, an expert’s opinion may be based on “specialized” knowledge

stemming from sufficient field experience like what is present here. Because

sufficient foundation for the reputation opinion could be established at trial, the

Court finds this ground for exclusion unpersuasive.

Abington also argues Stephenson’s reputational opinion is unreliable and

subject to exclusion because Stephenson himself, and his company, engaged in

business transactions with Adkins after the Adkins deal. (ECF No. 403, PageID

30781.) This is a credibility issue reserved for the jury. Exclusion is therefore

improper on this topic, and Abington’s Motion to Exclude Stephenson’s opinion

about Adkins’ reputation in 2015 is DENIED. (ECF No. 403.)

c. Shipping

Lastly, Stephenson concludes that Abington should have been suspicious of

the fraudulent nature of the Adkins deal by the expedited nature of the transaction

and the circuitous shipping route it involved—that is, from California to Texas to

Australia. (ECF No. 428-1, PageID 32197.) Abington seeks an order excluding this

opinion based on Stephenson’s deposition testimony. (ECF No. 403, PageID 30786-

30787.)

Abington first contends this aspect of Stephenson’s report is unreliable

because Stephenson, himself, previously shipped skidder tires used in logging

machinery from Houston to New Zealand, even though California is closer to New

Zealand. (ECF No. 403, PageID 30786; ECF No. 356, PageID 236366.)

Abington also points to Stephenson’s testimony indicating that he was not

retained to opine on shipping matters and then to his subsequent testimony stating

that he did provide an opinion on shipping as evidence of a contradiction

warranting a finding of unreliability. (ECF No. 403, PageID 30787.) Abington is

mistaken. As XPO highlights,

Stephenson’s report makes it clear that, in his experience,

if OTR tires needed to be shipped quickly, the route

proposed by Adkins was at odds with industry practice.

Stephenson was correct that he is not providing general

opinions on “shipping” writ large. What he is opining on is

the fact that Adkins’ shipping proposal made no sense

given how the OTR tire industry generally operates and

Adkins’ representation that the tires were needed

urgently, and that that situation should have caused

Abington to investigate further. Stephenson, who has 35

years of experience in the OTR business, is qualified to

offer this opinion.

(ECF No. 428, PageID 32186.)

Inconsistencies are the bases of cross-examination, not exclusion. These

reasons for preclusion fail, and Abington’s Motion to Exclude Stepheson’s shipping

opinion is DENIED. (ECF No. 403.)

In sum, Abington’s Motion to Exclude Stephenson’s noted opinions is

DENIED. (ECF No. 403.)

III. XPO’S MOTIONS IN LIMINE

A. ECF No. 413: Motion in Limine No. 1 to Exclude Star Funding

“Evidence is relevant if: (a) it has any tendency to make a fact more or less

probable than it would be without the evidence; and (b) the fact is of consequence in

determining the action.” Fed. R. Evid. 401. However, relevant evidence becomes

excludable “if its probative value is substantially outweighed by a danger of one or

more of the following: unfair prejudice, confusing the issues, misleading the jury,

undue delay, wasting time, or needlessly presenting cumulative evidence.” Fed. R.

Evid. 403.

As set forth in the Court’s January 22, 2021 Opinion and Order:

Star Funding was a client of XPO. Star Funding engaged

in a similar deal with Adkins a year after Abington’s

Landash deal failed. Adkins also failed to repay Star

Funding’s loan. Star Funding’s twelve OTR tires were

also stored at XPO’s Houston location according to

documents Baltagi executed that were identical in all key

respects to the Warehouse Documents in this case. In

May 2016, eleven months after the Landash deal failed,

Star Funding complained to XPO that Baltagi had

released its tires to Adkins without its consent.[] Upon

receiving the complaint, XPO did not respond that Baltagi

lacked authority to authorize the storage of the tires or to

execute documents about the tires’ location and condition.

XPO did not audit [] Houston’s tire inventory. Rather, one

month after receiving the complaint, Baltagi resigned as

branch manager. (ECF Nos. 316-3, 316-12.) In July 2016

he became an independent contractor for XPO. Id.

(ECF No. 384, PageID 30605-30606.) XPO asks the Court to preclude evidence and

testimony regarding the May 2016 Star Funding deal on grounds of relevance or

juror confusion. (ECF No. 413.) Specifically, XPO contends that Star Funding

evidence is irrelevant to vicarious liability.

Abington disagrees, as does the Court. That evidence is relevant for at least

two reasons. First, a question for the jury is whether Baltagi had actual authority to

engage in the actions he did during the Abington deal; because Baltagi allegedly

engaged in similar activity in Star Funding, his conduct in Star Funding is

relevant. Second, as Abington points out, because XPO ratified Baltagi’s paperwork

in the Star Funding deal that mirrored documents he executed in the Landash deal,

and because XPO confirmed the tires’ presence in Houston for both deals, the Star

Funding evidence tends to make XPO’s ratification of Baltagi’s actions in the

Abington deal more likely.

Abington asserts other grounds supporting the relevance of the Star Funding

Transaction. Because XPO moves only to exclude Star Funding evidence on the

noted topics, the Court need not address Abington’s alternative relevance

arguments.

In sum, XPO’s Motion to Exclude Star Funding Evidence is DENIED. (ECF

No. 413.)

B. ECF No. 414: Motion in Limine No. 2 to Exclude Brad Jacobs

Brad Jacobs is Chairman and CEO of XPO Logistics, Inc. The Court

permitted him to be deposed in a related matter, Great Southland Limited v.

Landash Corporation, et al., 17cv-719, on the limited topic of an e-mail chain he was

copied on in May 2020 regarding Star Funding’s request for an update on the status

of its tires.2 (Great Southland, Case No. 17cv-719, ECF No. 192.) He testified that

he “did not recall” seeing or reading the e-mails. (ECF No. 414-3, PageID 31856,

31861.) He testified that he did not know if his assistant forwarded the e-mails to

him. Id. He said he did not remember asking anyone about the e-mails. Id. at

PageID 31860. In sum, he testified that he had “no recollection of any discussion

with anyone about this subject.” Id. at PageID 31862.

XPO wants an order precluding Jacobs from testifying at trial and preventing

his deposition from being read at trial because Jacobs knows nothing about Star

Funding or this matter. (ECF No. 414, PageID 31803.) Consequently, XPO asserts

that Jacobs will be unable to “provide information to assist the factfinder in

deciding whether XPO had knowledge of any particular facts.” Id.

Abington feels Jacobs’ testimony, whether live or read, is relevant to show a

“potential cover-up” by XPO. It is not. Because Jacobs testified he lacked knowledge

about the Star Funding deal, he has no information that has any tendency to make

2 XPO concedes that the e-mail string began in April 2015 but notes that an

incorrect e-mail address was used for Jacobs until May 2020. (ECF No. 414, PageID

31799.)

a cover-up more or less probable than it would be without the evidence. Fed. R.

Evid. 401.

Jacobs lacks relevant knowledge. Any testimony from him would therefore be

inadmissible. Fed. R. Evid. 402. XPO’s Motion to Preclude Abington from calling

him as a witness or introducing his deposition testimony is GRANTED. (ECF No.

414.)

C. ECF No. 415: Motion in Limine No. 3 to Exclude Legal Fees

XPO hired and paid for an attorney to represent Baltagi as to an October

2017 subpoena issued in this matter, before Abington filed its Second Amended

Complaint in this case in February 2018 detailing the alleged role of Baltagi and

naming him and XPO as defendants for the first time. After the Second Amended

Complaint was filed, XPO stopped paying Baltagi’s legal fees (which totaled $6,000

for the four-month period between October 2017 and February 2018). Less than two

months after the Second Amended Complaint’s filing, XPO terminated Baltagi’s

independent contractor status.

XPO contends evidence of the attorney fee’s paid for Baltagi is irrelevant

because such information “does not make it more or less probable that Abington

justifiably relied on Baltagi’s 2015 misrepresentations or that XPO should be held

vicariously liable for Baltagi’s 2015 actions.” (ECF No. 415, PageID 31875.)

Abington counters that such evidence is relevant to show XPO’s acknowledgement

of its “culpability for Baltagi’s conduct” in the realm of vicarious liability. (ECF No.

431, PageID 32289.)

Courts interpret relevancy under Rule 401 “generously.” Polypropylene

Hernia Mesh Prods. Liab. Litig. v. Bard (In re Davol, Inc.), No. 2:18-cv-01509, 2021

U.S. Dist. LEXIS 25442, at *26 (S.D. Ohio Feb. 10, 2021) (Sargus, J.).

The ‘relevance threshold’ is ‘very low,’ United States v.

Sumlin, 956 F.3d 879, 889 (6th Cir. 2020) (quoting United

States v. Whittington, 455 F.3d 736, 739 (6th Cir. 2006)),

and ‘extremely permissive,’ United States v. Pritchard,

964 F.3d 513, 526 (6th Cir. 2020) (quoting Wood v. Wal-

Mart Stores, E., LP, 576 F. App’x 470, 472 (6th Cir.

2014)). Evidence must simply have ‘the slightest

probative worth.’ United States v. Inzuna-Arenas, --- F.

App’x ----, No. 19-3830, 831 Fed. Appx. 778, 2020 U.S.

App. LEXIS 36658, 2020 WL 6821688, at *3 (6th Cir. Nov.

20, 2020) (quoting Whittington, 455 F.3d at 738-39)).

Id. Because whether XPO is vicariously liable for Baltagi’s actions is of consequence

in this case, and because the attorney fee evidence has any tendency to make XPO’s

liability more or less probable than it would be without the evidence, the attorney

fee evidence is relevant.

XPO then relies on Evidence Rule 403 to support exclusion. Specifically, it

argues that the attorney fee evidence is unduly prejudicial because it “could falsely

imply that XPO was sanctioning his conduct or protecting Baltagi” and because it

could group XPO with Baltagi, a “bad actor.” (ECF No. 415, PageID 31876.) “‘Unfair

prejudice,’ as used in Rule 403, . . . refers to evidence which tends to suggest

decision on an improper basis.” United States v. Sherrill, 972 F.3d 752, 765 (6th Cir.

2020) (citation omitted). In other words:

Rule 403 does not exclude evidence because it is strongly

persuasive or compellingly relevant -- the rule only

applies when it is likely that the jury will be moved by a

piece of evidence in a manner that is somehow unfair or

inappropriate. The truth may hurt, but Rule 403 does not

make it inadmissible on that account.

Polec v. Nw. Airlines (In re Air Crash Disaster), 86 F.3d 498, 538 (6th Cir. 1996).

Here, that XPO paid certain of Baltagi’s attorney’s fees may be unflattering,

but is not unduly prejudicial. XPO is free to introduce evidence showing its alleged

ignorance of Baltagi’s actions until after the Second Amended Complaint was filed

in this matter. No undue prejudice is present.

XPO’s last argument is based on judicial economy. (ECF No. 415, PageID

31877.) That is, XPO states it produced the attorney’s fee information “under

reservation of rights and to resolve many discovery disputes . . . .” (ECF No. 415,

PageID 31877.) As such, XPO argues, permitting the use of the information “would

serve to stifle informal resolution of discovery disputes and incentivize motions

practice as a means to create bargaining chips.” Id. Abington responds that

following that logic would make any information produced to an opposing party

inadmissible at trial. (ECF No. 431, PageID 32291.)

Absent privilege or malfeasance, the reason for production of evidence plays

no role in the Court’s later determination of relevance and admissibility of that

evidence. Evidence is relevant or it is not. Evidence is admissible or it is not. Here,

the attorney’s fees information is relevant and not unduly prejudicial. Its admission

at trial is not barred based upon the arguments presently made. XPO’s Motion to

Exclude Evidence Regarding Legal Fees is DENIED. (ECF No. 415.)

D. ECF No. 416: Motion in Limine No. 4 to Preclude Usuary Interest

As of April 2021, Abington estimated its compensatory damages to be

$9,695,956.66, which includes interest under the Landash deal at a rate of 78%.

(ECF No. 416-2.) Abington seeks $29,087,869.98 (including the calculation of

compensatory damages) in treble damages under federal and state RICO statutes.

(ECF No. 408, PageID 30801.) Abington also seeks $335,161.48 in pre-judgment

interest at the statutory rate of 3%. Id.

XPO asks for an order “precluding Abington from seeking as damages in this

matter from XPO the usuary and inflated Ponzi-scheme rate of return promised by

wrongdoer Jason Adkins in the agreement between Adkins and Abington.” (ECF

No. 416, PageID 31879.) Abington counters that it is entitled to such damages from

XPO by virtue of Abington’s fraud and RICO counts against XPO. (ECF No. 432.)

Ohio courts typically adhere to “the principles set forth in the Restatement

(Second) of Torts when discerning the propriety and amount of damages in fraud

cases.” Auto Chem Labs., Inc. v. Turtle Wax, Inc., No. 3:07cv156, 2010 U.S. Dist.

LEXIS 100677, at *21-23 (S.D. Ohio Sep. 24, 2010) (Rice, J.) (citing cases).

Restatement (Second) of Torts, § 549 (1977), entitled Measure of Damages for

Fraudulent Misrepresentation, provides:

(1) The recipient of a fraudulent misrepresentation is

entitled to recover as damages in an action of deceit

against the maker the pecuniary loss to him of which the

misrepresentation is a legal cause, including

(a) the difference between the value of what he has

received in the transaction and its purchase price

or other value given for it; and

(b) pecuniary loss suffered otherwise as a

consequence of the recipient’s reliance upon the

misrepresentation.

(2) The recipient of a fraudulent misrepresentation in a

business transaction is also entitled to recover additional

damages sufficient to give him the benefit of his contract

with the maker, if these damages are proved with

reasonable certainty.

“Damages awarded under paragraph (1) are referred to as ‘out-of-pocket’ damages,

while those awarded under paragraph (2) are ‘benefit-of-the-bargain’ damages. Auto

Chem Labs., 2010 U.S. Dist. LEXIS 100677, at *21-23 (citation omitted.)

There is no contract between Abington and XPO, so Abington’s potential

damages against XPO for fraud are limited to out-of-pocket damages. “Should the

Plaintiffs later prove that the Defendant is liable to them for fraud, but not based

on a valid contract, however, they are only entitled to the pecuniary loss of which

the fraudulent conduct was a legal cause or, in other words, to be compensated for

the loss they sustained and to be restored to their former position.” Id. at *27 (S.D.

Ohio Sep. 24, 2010) (citations omitted.) Thus, benefit-of-the-bargain damages, which

include the Landash deal’s interest rate, are not available to Abington for its fraud

claims against XPO. XPO’s Motion to Limit Abington from Seeking Usury Interest

from XPO on the fraud count is GRANTED. (ECF No. 416.)

That leaves Abington’s federal RICO claims against XPO.3 “Under 18 U.S.C.

§ 1964(c), prevailing plaintiffs are entitled to treble damages and costs of the RICO

3 Abington does not discuss its state RICO claims. (ECF No. 432, PageID

32297.)

suit, including reasonable attorney fees.” Brown v. Cassens Transp. Co., 675 F.3d

946, 966 (6th Cir. 2012), overruled on other grounds by Jackson v. Sedgwick Claims

Mgmt. Servs., Inc., 731 F.3d 556 (6th Cir. 2013). The Court holds above that

Abington cannot collect contractual interest from XPO on Abington’s fraud count.

Similarly, the base amount of potential RICO treble damages cannot contain

contractual interest.

Having rejected the lone basis for imposition of the interest rate in the

Adkins contract against XPO for the RICO count, the Court GRANTS XPO’s

Motion to Limit Abington from Seeking Usury Interest from XPO on that count.

(ECF No. 416.)

E. ECF No. 417: Motion in Limine No. 5 to Preclude Other Investors

XPO wants an order precluding evidence and testimony as to other

individuals Adkins scammed from being introduced at trial. (ECF No. 417.) XPO

argues Abington’s failure to timely and specifically identify Rob Schroder, Casey

Dunfee, Nick Lather, Amy Newlove, Jamie Edwards, Jan Shory, and Bruce Hann

(“Smaller Investors”) as witnesses precludes Abington from calling them as

witnesses and introducing related exhibits at trial. Id. at PageID 31925. Abington

asserts it timely and properly named the Smaller Investors. Id.

Turning first to the failure to identify issue, Abington argues its January

2019 Supplemental Initial Disclosures sufficiently identified the Smaller Investors

by referring to “all persons or entities identified as creditors or parties in interest

in” the Adkins and Landash Bankruptcies. (ECF No. 433, PageID 32307.) XPO

disagrees, contending that generic identification of “hundreds of litigants” is

insufficient under Fed. R. Civ. P. 26’s duty to supplement and therefore subject to

exclusion under Fed. R. Civ. P. 37. (ECF No. 417, PageID 31925, n.4.)

“The question before the Court is whether the Defendants supplemented

their discovery responses [with the specific names of the Smaller Investors] in a

‘timely manner’ under Rule 26(e)(1)(A) and, if they did not, whether that failure was

‘substantially justified’ or ‘harmless’ under Rule 37(c)(1).” Thomas v. McDowell, No.

2:10-cv-152, 2014 U.S. Dist. LEXIS 146914, at *6 (S.D. Ohio Oct. 15, 2014)

(Graham, J.). Abington has the burden of establishing timeliness as well as either

substantial justification or harmlessness. See Johnson v. Galen of Virginia, Inc., 325

F.3d 776, 782 (6th Cir. 2003).

Abington first provided its generic disclosure in January 2019. Abington did

not reveal its intention to call the Smaller Investors until August 2021, long after

the October 2019 discovery cut-off. (ECF Nos. 230, 408.) Abington’s specification

was certainly untimely.

Abington only argues that its untimely disclosure was harmless. “[A] failure

to supplement is ‘harmless’ where that failure ‘involves an honest mistake on the

part of a party coupled with sufficient knowledge on the part of the other party.’”

Thomas, 2014 U.S. Dist. LEXIS 146914, at *4 (quoting Sommer v. Davis, 317 F.3d

686, 692 (6th Cir. 2003) (citation omitted)). Abington does not indicate it made an

honest mistake; rather, Abington contends XPO should have known Abington would

call the Smaller Investors because “XPO was a party to the Landash and Adkins

bankruptcies, and it was represented by the same law firm representing XPO in

this litigation.” (ECF no. 433, PageID 32307.) But those facts do not excuse

Abington’s duty to timely supplement its witness disclosure in this case, especially

where, as here, its initial disclosure covered hundreds of creditors and other

litigants.

Abington failed to establish its burden. The Smaller Investors will not be

permitted to testify and any related exhibits will not presented to the jury. XPO’s

Motion to Exclude Evidence Related to Adkins[’] Other Ponzi Scheme Investors is

GRANTED. (ECF No. 417.)

F. ECF No. 418: Motion in Limine No. 6 to Preclude Reference to

Settlement

For this motion, XPO seeks an order precluding Abington from “referencing

XPO’s settlement of, or attempts to settle, any other litigation related to the Adkins

Ponzi scheme” as irrelevant under Rule 401, unduly prejudicial or confusing under

Rule 403, and/or precluded under Fed. R. Evi. 408. (ECF No. 418, PageID 31939.)

While agreeing that settlement discussions between Abington and XPO are properly

excludable, Abington argues that XPO’s attempts to resolve other related matters is

admissible

to rebut XPO’s argument that XPO Global Forwarding,

Inc. is the only proper party in this case as XPO Logistics,

Inc. the parent was almost certainly part of any

settlement agreement and almost certainly paid any

settlement proceeds. XPO Logistics Inc.’s control and

funding of the settlement is therefore relevant – and

admissible – to establish the relationship between the

parties and the identity of the properly responsible entity.

(ECF No. 434, PageID 33359.)

Assuming, arguendo, that evidence of settlement in related cases is relevant

here, the Court finds that its probative value is substantially outweighed by a

danger of unfair prejudice, confusing the issues, and misleading the jury. XPO’s

Motion in Limine to Preclude Abington from Referencing Settlement is GRANTED.

(ECF No. 418.).

IV. XPO’S MOTION TO BIFURCATE

Lastly, XPO seeks an order pursuant to Fed. R. Civ. P. 42(b), Rule 401, and

Rule 403 bifurcating the trial into an initial liability and compensatory damage

phase and a separate punitive damages phase only if liability is established during

the initial phase. (ECF No. 420.) XPO argues bifurcation is necessary to: (1) prevent

jury confusion via the presentation of irrelevant evidence, as the question of which

entity is responsible for Baltagi’s actions is for the jury to decide; (2) avoid

prejudice, as evidence regarding the “substantial net worth” of both Defendant XPO

entities could cause the jury to assume the companies’ net worth alone justifies

compensating Abington for its claimed damages; and (3) expedite and economize

trial presentation, because if only one Defendant XPO entity is found liable,

evidence as to the other’s net worth is irrelevant and unnecessarily time consuming.

Abington contends bifurcation based upon the financial condition of the XPO

Defendants is against “the interest of judicial economy” (ECF No. 437, PageID

33598) because such evidence is relevant to establish one of the reasons why

Abington decided to move forward with the Landash deal. Specifically, Abington

argues “[t]he fact that XPO is a publicly traded company and one of the largest

providers of transportation logistics services on the continent instilled confidence in

Abington to move forward with the transaction.” Abington offers that any potential

confusion could be mooted by a limiting jury instruction.

Rule 42(b) provides:

Separate Trials. For convenience, to avoid prejudice, or to

expedite and economize, the court may order a separate

trial of one or more separate issues, claims, crossclaims,

counterclaims, or third-party claims. When ordering a

separate trial, the court must preserve any federal right

to a jury trial.

XPO, as the party seeking bifurcation, “has the burden of showing that concerns

such as judicial economy and prejudice weigh in favor of granting the motion[,]”

Woods v. State Farm Fire & Cas. Co., No. 2:09-cv-482, 2010 U.S. Dist. LEXIS 35230,

2010 WL 1032018, at *1 (S.D. Ohio Mar. 16, 2010) (citing Wright & Miller, Federal

Practice and Procedure § 2388 (2d ed. 2006)), “but only one of the bifurcation

criteria from Rule 42 must be met in order to satisfy that burden.” Ohio Value

Physicians, Inc. v. Scottsdale Surplus Lines Ins. Co., No. 1:20-cv-453, 2021 U.S.

Dist. LEXIS 37134, at *5 (S.D. Ohio Mar. 1, 2021) (Litkovitz, M.J.) (citation

omitted). The Court has broad discretion when addressing bifurcation motions. See

Saxion v. Titan-C-Manufacturing, 86 F.3d 553, 556 (6th Cir. 1996) (district courts

have discretion); see also Wilson v. Morgan, 477 F.3d 326, 339 (6th Cir. 2007)

(decision to bifurcate reviewed for abuse of discretion).

XPO proves both criteria. Because only one XPO entity can be held liable

here, the presentation of financial evidence as to the other becomes irrelevant.

Bifurcation therefore serves judicial economy in that extraneous and irrelevant

evidence is not presented to the jury, therefore shortening trial time and also

eliminating juror confusion. Additionally, permitting the information’s admission

would yield undue prejudice to XPO. The Court finds significant weight in XPO’s

position that the “substantial net worth” of both Defendant XPO entities could

cause the jury to assume the companies’ net worth alone justifies compensating

Abington for its claimed injuries. As such, given the specific circumstances

presented here, XPO’s Motion to Bifurcate Trial Regarding Punitive Damages is

GRANTED. (ECF No. 420.) If the jury determines one XPO Defendant is liable,

then the presentation of evidence as to punitive damages shall immediately begin

before the same jury.

V. CONCLUSION

Abington’s Motion in Limine to Exclude Treble Damages is DENIED. (ECF

No. 396.)

Abington’s Motion in Limine No. 2 to Exclude Baltagi Investigation is

DENIED as MOOT. (ECF No. 397.)

Abington’s Motion in Limine No. 3 to Limit Preemptory Challenges is

DENIED as MOOT. (ECF No. 398.)

Abington’s Motion in Limine No. 4 to Preclude Live Witnesses is DENIED as

MOOT. (ECF No. 399.)

Abington’s Motion in Limine No. 5 to Preclude Lack of Criminal Charges is

DENIED. (ECF No. 400.)

Abington’s Motion in Limine No. 6 to Exclude and Sequester Witnesses is

GRANTED, with corporate representatives being present for the duration of the

trial. (ECF No. 401.)

Abington’s Motion in Limine No. 7 to Exclude Expert Ozgur Kan’s Opinion is

DENIED. (ECF No. 402.)

Abington’s Motion in Limine No. 8 to Exclude Expert Tom Stephenson’s

Opinion is fully DENIED. (ECF No. 403.)

XPO’s Motion in Limine No. 1 to Exclude Star Funding is DENIED. (ECF

No. 413.)

XPO’s Motion in Limine No. 2 to Exclude Brad Jacobs is GRANTED. (ECF

No. 414.)

XPO’s Motion in Limine No. 3 to Exclude Legal Fees is DENIED. (ECF No.

415.)

XPO’s Motion in Limine No. 4 to Preclude Usuary Interest is GRANTED.

(ECF No. 416.)

XPO’s Motion in Limine No. 5 to Preclude Other Investors is GRANTED

(ECF No. 417.)

XPO’s Motion in Limine No. 6 to Preclude Reference to Settlement is

GRANTED. (ECF No. 418.)

XPO’s Motion to Bifurcate is GRANTED. (ECF No. 420.)

Counsel shall be prepared to argue XPO’s Motion in Limine No. 7 to Preclude

Lisinski’s Testimony (ECF No. 419) as well as XPO’s Motion to Seal Document

(ECF No. 446) at the final pre-trial conference.

IT IS SO ORDERED.

s/Sarah D. Morrison

SARAH D. MORRISON

UNITED STATES DISTRICT JUDGE