U.S. Small Business Administration v. Feinsod

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

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U.S. SMALL BUSINESS ADMINISTRATION,

as Receiver of ELK ASSOCIATES FUNDING CORP.,

Plaintiff,

MEMORANDUM

AND ORDER

17-CV-03586 (JS) (JMW)

-against-

MICHAEL FEINSOD, SILVIA MULLENS, RICHARD

FEINSTEIN, GARY GRANOFF, STEVEN ETRA,

JOHN LAIRD, IVAN J. WOLPERT, HOWARD

SOMMER, MURRAY INDICK, ELLIOTT SINGER, and

PETER BOOCKVAR

Defendants.

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A P P E A R A N C E S:

Steven Weinberg

Kelsey Bilodeau

Gottesman Wolgel Flynn & Weinberg PC

11 Hanover Square

New York, NY 10005

Arlene M. Embrey

U.S. Small Business Administration

Office of General Counsel

409 3rd Street

Washington, DC 20416

Attorneys for Plaintiff

Justin Vaun Shur

Elizabeth Kathleen Clarke

Rayiner Hashem

Sara Ellen Margolis

MoloLamken LLP

600 New Hampshire Ave

Washington, D.C. 20037

Attorneys for Defendants

WICKS, Magistrate Judge:

Plaintiff U.S. Small Business Administration, as Receiver for Elk Associates Funding

Corp. (“Plaintiff” or “Receiver”) commenced this action on June 14, 2017 against, among

others,1 Michael Feinsod (“Feinsod”) and Richard Feinstein (“Feinstein”) (collectively,

“Defendants”) for: (1) breach of fiduciary duty; (2) ultra vires acts; (3) waste of corporate assets;

(4) conversion; (5) negligence; and (6) gross negligence based upon Defendants’ acts and

omissions in connection with the management and performance of their duties with respect to

Elk Associates Funding Corp. (See generally ECF No. 166.)

Presently before the Court, on referral from the Honorable Joanna Seybert (Electronic

Order dated 06/09/2025; see also Electronic Order dated 10/01/2024) are four motions in limine:

(i) Defendants’ motion to exclude the expert testimony of Jim Neal, Plaintiff’s expert offered to

opine on whether actions or inaction by Defendants at certain periods of time relevant to the

Complaint were consistent with corporate governance best practices, and whether their actions or

inaction posed a conflict of interest (see ECF No. 235); (ii) Defendants’ motion to exclude the

expert opinion of Adam Hanover, Plaintiff’s expert retained to opine as to whether Elk and Elk’s

parent company, Ameritrans, were solvent or insolvent at certain periods of time (see ECF No.

231); (iii) Defendants’ motion to exclude the expert testimony of Jeffrey Manning, Plaintiff’s

expert offered to assist in determining the likely recovery from the Elk and Ameritrans portfolio

of assets as of the measurement dates for solvency (see ECF No. 233); and (iv) Plaintiff’s motion

1 The original Defendants included: Michael Feinsod, Silvia Mullens, Richard Feinstein, Gary Granoff,

Steven Etra, John Laird, Ivan J. Wolpert, Howard Sommer, Murray Indick, Elliott Singer, and Peter

Boockvar. Since this action’s commencement, Defendants Mullens, Granoff, Etra, and Singer have been

dismissed following the Court entering Plaintiff’s Stipulations of Partial Dismissal against these parties.

(See Electronic Order dated 7/17/2020, ECF Nos. 132, 134, 157-158, 256-257.) Similarly, Defendants

Laird, Wolpert, Sommer, and Indick were all dismissed on March 9, 2023 following Judge Seybert “so-

ordering” Plaintiff’s Stipulation of Partial Dismissal against them. (ECF No. 253; Electronic Order dated

3/9/2023.)

to strike the expert report of Robert Lashway, an expert engaged by Defendants to rebut the

testimony of Jeffrey Manning, preclude Defendants from relying on Lashway’s opinions, strike

the expert report of Craig Jacobson and the expert rebuttal reports of Jacobson, James Howard,

and Clifford Wright, and preclude Defendants from relying on the testimony or reports of

Jacobson, Wright, or Howard. (See ECF No. 224.)

For the reasons set forth below, Defendants’ motions to preclude the opinions of

Plaintiff’s experts Jim Neal (ECF No. 235), Adam Hanover (ECF No. 231); and Jeffrey Manning

(ECF No. 233) are GRANTED. Plaintiff’s motion to strike (ECF No. 224) is GRANTED in

part and DENIED in part as detailed below.

FACTUAL BACKGROUND

A. The Parties

Elk Associates Funding Corp. (“Elk”) is a New York corporation that, on or about July

24, 1980, was licensed to do business as a Small Business Investment Company (“SBIC”)

pursuant to Section 301(d), and later Section 301(c) of the Small Business Administration Act

(the “Act”). (ECF No. 166 at ¶¶ 1, 10, 26.) As an SBIC, Elk was regulated by, and received

initial funding from, the U.S. Small Business Administration (“SBA”). (Id. at ¶¶ 33-36.)

Ameritrans Capital Corporation (“Ameritrans”), a Delaware corporation, is Elk's parent company

and sole shareholder. (Id. at ¶ 60.)

Feinsod is a New York resident who, from approximately 2005 through July 2013,

allegedly “held either all or one of the offices of President, Chief Executive Officer, Chief

Financial Officer, and director of Elk.” (Id. at ¶ 11.) During this time, Feinsod was allegedly

“also a 36% common shareholder and served as President, Chief Executive Officer and

Chairman of the Board, and Chief Compliance Officer of Ameritrans[.]” (Id.) Feinstein, a New

Jersey resident, served as the Chief Financial Officer of both Elk and Ameritrans from

approximately September 2010 through April 2013, and was a signatory on Elk's bank accounts.

(Id. at ¶ 13.)

B. Initial Relationship Between Elk, Ameritrans, and SBA

In connection with the funding noted above, Elk and SBA “entered into a security

agreement on September 9, 1993 (the “SBA Security Agreement”) pursuant to which Elk granted

a security interest to SBA in all of Elk's assets, including among other things, Elk's portfolio of

loans receivable, together with any guarantees thereon, and all other obligations owing to Elk, to

secure payment of Debentures and any other indebtedness or liability to SBA, including future

debentures which may be issued to or guaranteed by SBA.” (Id. at ¶ 37.) Also on September 9,

1993, Elk received funding from certain banks (the “Senior Lenders”), and Elk, the Senior

Lenders, and SBA “entered into an Intercreditor Agreement (the “Intercreditor Agreement”),

which provide[d] that the security interest of SBA rank[ed] junior in priority to the security

interests of the Senior Lenders.” (Id. at ¶¶ 38-39.) Elk, SBA, and the Senior Lenders also entered

into a Custodian Agreement with Israel Discount Bank (“IDB”), pursuant to which IDB “was

appointed custodian to hold all of Elk's assets for the benefit of the Senior Lenders and SBA.”

(Id. at ¶¶ 43-46.)

Under the Custodian Agreement, if Elk intended “to sell all or a portion of [Elk's] interest

in any note or other evidence of indebtedness,” it was required to provide IDB with “written

certification that the net proceeds from such sale [would] be utilized immediately to reduce

[Elk's] Senior Indebtedness.” (Id. at ¶ 49.) If Elk did not, however, “intend to utilize the proceeds

to repay the Senior Indebtedness,” it was required to provide written notice to “the SBA, the

[Senior Lenders] and the Custodian” of the amount that would not be used to pay back Elk's

debt, and could only consummate a proposed transaction “[i]f the SBA and the Banks d[id] not

object.” (Id.)

C. Elk’s Payment of Ameritrans’s Expenses

From approximately 2009 through April 2013, while under Defendants’ control,

“Ameritrans received over $14 million in funds from Elk.” (Id. at ¶ 60.) Based on both Elk's and

Ameritrans's accounting ledgers, “from June 2009 through April 2013, the total amount of

Ameritrans's expenses paid by Elk and allocated to Ameritrans, and the resulting liability from

Ameritrans to Elk increased yearly from $418,595 in 2009, to $590,199 in 2010, to $2,949,442

in 2011, to $10,901,847 in 2012, and finally to $14,271,038 by April 2013.” (Id. at ¶ 83.)

According to the Receiver, “[f]rom 2009 through 2013, the Defendants approved and/or caused

Elk to pay $7,491,139 of Ameritrans’ expenses and transferred $6,779,898 of Elk's cash to

Ameritrans for no consideration.” (Id. at ¶ 82.) “Elk's general ledger for the period ended March

31, 2013 shows the receivable due from Ameritrans was $12,339,926.76[,]” and “additional

expenses of Ameritrans of $1,931,111.24 that were paid by Elk ... were not recorded on

Ameritrans's books until after April 2013, were never reimbursed by Ameritrans and which debt,

to date, remains unpaid.” (Id.) Minutes from a May 26, 2009 special meeting of the Boards of

Directors of Ameritrans and Elk indicate that Ameritrans was, according to Feinsod, believed to

be “at a crossroads,” and without further funding or debt financing, would be “unlikely [to]

achieve any level of meaningful profitability.” (Id. at ¶¶ 84-85.) During that meeting, Feinsod

stated that “the Board had to determine whether Ameritrans was facing only a liquidation

scenario without SBA leverage [or funding].” (Id. at ¶ 88.)

Minutes from a September 23, 2009 meeting of the Boards of Directors of Ameritrans

and Elk reflect that Feinsod informed the Board that SBA “was amenable to approving Elk's

pending leverage application but that SBA was requesting some updated information.” (Id. at ¶

91.) In the following months, Defendants continued to propose and discuss ways to acquire

funding for Ameritrans, and became increasingly aware that “SBA Debenture funding was

critical if Ameritrans was to remain viable.” (Id. at ¶¶ 92-97.) According to Elk’s quarterly

statements filed with SBA, for fiscal years 2009 and 2010, Ameritrans’s outstanding expense

reimbursements owed to Elk were $418,595 and $590,199, respectively. (Id. at ¶¶ 101-104.) As

of December 31, 2010, Plaintiff contends that Elk was insolvent. (Id. at ¶ 105.) Throughout

March 2012, Elk received approximately $5.9 million from the sale of its investments in five

portfolios and, at the instruction of Feinsod, supposedly transferred nearly all of those funds to

Ameritrans. (Id. at ¶¶ 129-138.)

D. Transfer of Elk into Receivership

On April 24, 2012, a ruling was issued in favor of SBA and against Elk, and Elk was

immediately transferred to SBA's Office of Liquidation and placed into receivership. (Id. at ¶

139.) As part of the receivership, Elk's Board of Directors was required to notify SBA of any

external transfer of funds from Elk's accounts to the accounts of other entities, including

Ameritrans. (See id. at ¶ 140.) For the period of August 2012-April 2013, although Elk was in

receivership, Feinsod and Defendant Mullens directed approximately $10.9 million to be

transferred to an external bank account, without notifying SBA. (See id. at ¶¶ 140-154.) On or

about October 31, 2012, Elk and SBA entered into a settlement agreement which, if violated,

would permit SBA to seek appointment as Receiver for Elk's assets. (See id. at ¶ 3.)

On February 14, 2013, after Elk failed to meet the terms of the Settlement Agreement,

SBA filed a complaint seeking its appointment as Receiver of Elk. (Id. at ¶ 68.) On April 24,

2013, this Court appointed Plaintiff to serve as Receiver and entered judgment in favor of SBA

for the amount of its outstanding funding, “which at the time totaled over $20 million.” (Id. at ¶

69.) The Receiver was tasked with “liquidating all of Elk's assets and satisfying the claims of

creditors[.]” (Id. at ¶ 70.) On or about July 2, 2013, Ameritrans filed a notice with the Securities

and Exchange Commission, “which stated that [Feinsod] and the entire board of directors had

resigned en masse.” (Id. at ¶ 72.) “In its last quarterly financial statement filed with SBA for the

quarter ending June 30, 2012, Elk reported, as an asset, a “Due From Parent” (Ameritrans)

amount of $10,901,847. On May 15, 2013, Ameritrans filed a Form 10-Q with the SEC reporting

that Elk was due $14,271,038.” (Id. at ¶ 74.)

On or about October 2, 2015, Plaintiff “made demand upon Ameritrans for $12,339,927

to be paid on or before October 15, 2015,” but “Ameritrans failed to remit any payments on the

amount due Elk.” (Id. at ¶ 75.) Ameritrans did, however, “ma[ke] its documents, including

corporate minutes, available to the Receiver for inspection and production.” (Id. at ¶ 77.) After

reviewing these materials, Plaintiff “determined that from on or about 2009 through April 2013,

[Defendants] repeatedly and improperly used Elk's funds to operate and conduct business for the

benefit of Ameritrans and its shareholders.” (Id. at ¶ 78.) On October 5, 2016, Ameritrans filed

for bankruptcy in the United States Bankruptcy Court for the District of Massachusetts, and the

Receiver “was named as a creditor for $12,339,927 in Ameritrans's bankruptcy schedules.” (Id.

at ¶ 79.) Through a forensic analysis of the financial records of both Elk and Ameritrans from the

2008-2013 time period, the Receiver concluded “that another $1,931,111 of Elk funds was used

by Ameritrans to pay Ameritrans expenses for the nine-month period ending March 31, 2013,”

meaning the “total outstanding amount due Elk from Ameritrans is $14,271,038.” (Id. at ¶ 80.)

By letter dated January 6, 2016, Plaintiff made demands upon each of the Defendants for

the then-outstanding funds owed by Ameritrans to Elk, and gave each Defendant until February

16, 2016 “to remit payment or make financial arrangements with the Receiver.” (See id. at ¶¶

159-166.) The Receiver renewed its demand upon each Defendant by letter dated April 28, 2017,

and gave each Defendant until May 26, 2017 “to remit payment or make financial arrangements

with the Receiver.” (See id. at ¶¶ 167-176.) As of the date of this action’s commencement, no

payments or arrangements for repayment to the Receiver have been made. (Id. at ¶ 176.)

PROCEDURAL BACKGROUND

Plaintiff commenced this action against Defendants on June 14, 2017 alleging that

Defendants: (1) breached their fiduciary duties to Elk; (2) failed to act in accordance with the Elk

Articles of Incorporation, and applicable federal and state laws; (3) wasted and converted Elk's

corporate assets; (4) failed to exercise professional competence and care in the exercise of their

professional duties; (5) were negligent in their acts and omissions; (6) aided and abetted other

Defendants in breaching their own fiduciary duties; and (7) through their grossly negligent acts

and omissions, caused Elk to violate applicable laws and regulations. (See id. at ¶ 8.)

On September 30, 2018, then-District Judge Joseph F. Bianco issued an Order granting in

part and denying in part Defendants’ individual Motions to Dismiss. United States Small

Business Administration v. Feinsod, 347 F. Supp. 3d 147, 151 (E.D.N.Y. 2018). Judge Bianco

dismissed the Receiver’s claims for aiding and abetting breach of fiduciary duty, and conspiracy,

but allowed the Receiver’s other causes of action to survive. (See id.) Moreover, Judge Bianco

determined that Defendants owed a duty to Elk once it had been rendered insolvent. (Id. at 160)

(referencing Teras Int’l Corp. v. Gimbel, No. 13-CV-6788 (VEC), 2014 WL 7177972, at *11

(S.D.N.Y. Dec. 17, 2014) (citing Credit Agricole Indosuez v. Rossiyskiy Kredit Bank, 729 N.E.2d

683, 688 (N.Y. 2000) (“[O]nce a corporation is insolvent, corporate officers and directors owe a

fiduciary duty to preserve corporate assets for the benefit of creditors.”)). Similarly, the court

found “that, prior to December 31, 2010, [D]efendants owed fiduciary duties to Ameritrans” and

that whether Elk was insolvent following December 31, 2010 “is a question of fact that cannot be

resolved at [the motion to dismiss] stage.” (Id. at p. 161, n. 9.)

Beginning March 14, 2022, the parties began filing motions for pre-motion conference on

their anticipated motions for summary judgment and Daubert motions. (See ECF Nos. 205-214.)

Subsequent to these filings, Judge Seybert noted:

The Court is in receipt of pre-motion conference requests regarding anticipated

summary judgment motions by Plaintiff (ECF No. 205), the Independent Director

Defendants (ECF No. 206) . . . Defendant Feinsod (ECF No. 208), and Defendant

Feinstein (ECF No. 209). In addition to seeking leave to move for summary

judgment, the parties also intend to file Daubert motions.

Having reviewed the parties' letters and respective responses, the Court is

WAIVING its pre-motion conference requirement and GRANTING the parties

leave to file their motions. Counsel shall brief their Daubert motions in tandem with

their cross-motions for summary judgment. In so doing, Holland & Knight LLP

shall file a consolidated summary judgment motion, Daubert motion, and any

opposition brief on behalf of all Independent Director Defendants. Similarly,

MoloLamken LLP shall file consolidated motions and oppositions on behalf of

Defendants Feinsod and Feinstein. As a result, for all parties, the Court is sua sponte

expanding its page limitation to thirty (30) pages for memoranda of law in support

of and in opposition to summary judgment motions only.

Within two weeks, by August 29, 2022, counsel shall confer and submit a proposed

briefing schedule to the Court.

(Electronic Order dated August 15, 2022.)

Shortly thereafter, Judge Seybert adopted the parties briefing schedule indicating that all

Daubert motions and motions for summary judgment be filed on or before December 6, 2022,

oppositions be filed on or before January 24, 2023, and replies be filed on or before February 21,

2023. (Electronic Order dated November 19, 2022.)

In accordance with those directives, Defendants filed: (i) a motion to exclude the expert

opinion of Adam Hanover (ECF No. 231) which Plaintiff opposed (ECF No. 242) followed by

Defendants’ reply. (ECF No. 251); (ii) a motion to exclude the expert testimony of Plaintiff’s

expert Jim Neal (ECF No. 235) which Plaintiff opposed (ECF No. 246) followed by Defendants’

reply (ECF No. 249); and (iii) a motion to exclude the expert testimony of Plaintiff’s expert,

Jeffrey Manning (see ECF No. 233) which Plaintiff opposed (ECF No. 245) followed by

Defendants reply. (ECF No. 250.) Separately, Plaintiff filed one Daubert motion to strike the

expert report of Robert Lashway, preclude Defendants from relying on Lashway’s opinions,

strike the expert report of Craig Jacobson, strike the expert rebuttal reports of Jacobson, James

Howard, and Clifford Wright, and preclude Defendants from relying on the testimony or reports

of Jacobson, Wright, or Howard. (See ECF No. 224.) Defendants opposed (ECF No. 244) and

Plaintiff submitted a reply. (ECF No. 248.)

These collective motions were referred to the undersigned by the Hon. Joanna Seybert.

(See Electronic Orders dated 10/1, 2024 and 6/9/2025.)

MOTIONS IN LIMINE: THE LEGAL FRAMEWORK

Before trial, parties may seek in limine relief to exclude anticipated evidence that may be

inadmissible or irrelevant. See Jaquez v. Flores (In re Estate of Jaquez), No. 10-cv-2881 (KBF),

2016 U.S. Dist. LEXIS 34521, at *4 (S.D.N.Y. Mar. 17, 2016). “The purpose of an in limine

motion is to aid the trial process by enabling the Court to rule in advance of trial on the relevance

of certain forecasted evidence, as to issues that are definitely set for trial, without lengthy

argument at, or interruption of, the trial.” United States v. Ulbricht, 79 F. Supp. 3d 466, 478

(S.D.N.Y. 2015) (quoting Palmieri v. Defaria, 88 F.3d 136, 141 (2d Cir. 1996)). “Although the

Federal Rules of Evidence do not explicitly authorize in limine rulings, the practice 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 (2023); Rivera v. Inc. Vill. of Farmingdale, 29 F. Supp. 3d

121, 125 (E.D.N.Y. 2013) (“A motion in limine lies in this Court’s ‘inherent authority to manage

the course of its trials.”) (citation omitted).

ADMISSIBILITY OF EXPERT TESTIMONY: THE LEGAL FRAMEWORK

“The admission of expert testimony is governed primarily by the Federal Rules of

Evidence.” United States v. Walker, No. 18-3506, 2023 WL 3451419, at *1 (2d Cir. May 15,

2023). Rule 702 of the Federal Rules of Evidence was recently amended, and this new

Amendment took effect December 1, 2023. The rule now 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 the proponent

demonstrates to the court that it is more likely than not that: (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's opinion reflects a reliable application of the principles and methods to the facts

of the case.

Fed. R. Evid. 702.

“While the proponent of expert testimony has the burden of establishing by a

preponderance of the evidence that the admissibility requirements of Rule 702 are satisfied, ...

the district court is the ultimate gatekeeper.” United States v. Jones, 965 F.3d 149, 161 (2d Cir.

2020) (alteration in original) (quoting United States v. Williams, 506 F.3d 151, 160 (2d Cir.

2007)); see also Richardson v. Corr. Med. Care, Inc., No. 22-210, 2023 WL 3490904, at *2 (2d

Cir. May 17, 2023) (same); United States v. Farhane, 634 F.3d 127, 158 (2d Cir. 2011) (“The

law assigns district courts a ‘gatekeeping’ role in ensuring that expert testimony satisfies the

requirements of Rule 702.” (citations omitted)).

“Prior to permitting a person to testify as an expert under Rule 702, the court must make

the following findings: (1) the witness is qualified to be an expert; (2) the opinion is based upon

reliable data and methodology; and (3) the expert's testimony on a particular issue will ‘assist the

trier of fact.’” Silva v. Heil, Inc., 692 F. Supp. 3d 29, 35 (E.D.N.Y. 2023) (quoting Nimely v. City

of New York, 414 F.3d 381, 396–97 (2d Cir. 2005)); see also United States v. Napout, 963 F.3d

163, 187–88 (2d Cir. 2020) (explaining that the court is tasked with “ensuring that an expert's

testimony both rests on a reliable foundation and is relevant to the task at hand” (quoting

Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 597 (1993))); see Kumho Tire Co. v.

Carmichael, 526 U.S. 137, 149–50 (1999) (expanding Daubert’s holding to all expert testimony,

not just scientific testimony)).

Testimony is relevant where it has “any tendency” to make the existence of any fact that

is of consequence to the determination of the action “more or less probable than it would be

without the evidence . . . .” RVC Floor Décor, Ltd. v. Floor & Décor Outlets of Am., Inc., No. 18-

CV-6449 (JS) (ARL), 2023 WL 2838423, at *6 (E.D.N.Y. Apr. 7, 2023) (quoting Fed. R. Evid.

401). Moreover, in Daubert the Supreme Court set forth a list of factors, in addition to the

criteria set forth in Rule 702, that bear on the determination of reliability:

(1) whether a theory or technique has been or can be tested; (2) “whether the theory or

technique has been subjected to peer review and publication;” (3) the technique's “known

or potential rate of error” and “the existence and maintenance of standards controlling the

technique's operation;” and (4) whether a particular technique or theory has gained

general acceptance in the relevant scientific community.

509 U.S. at 593–94.

The Daubert inquiry for reliability is a “flexible one” and does not “constitute a definitive

checklist or test,” and thus, the Daubert factors “neither necessarily nor exclusively appl[y] to all

experts or in every case.” Kumho Tire, 526 U.S. at 141, 150 (internal quotation marks and

citation omitted); In re Mirena IUS Levonorgestrel-Related Prods. Liability Litigation (Mirena

II), 982 F.3d 113, 123 (2d Cir. 2020) (noting the Daubert inquiry is “fluid and will necessarily

vary from case to case”) (citation omitted).

The district court is afforded “the same broad latitude when it decides how to determine

reliability as it enjoys [with] respect to its ultimate reliability determination.” Williams, 506 F.3d

at 160 (emphasis omitted) (citing Kuhmo Tire, 526 U.S. at 142)); Kogut v. Cnty. of Nassau, 894

F. Supp. 2d 230, 239 (E.D.N.Y. 2012) (Seybert, J.) (“The decision whether to admit or exclude a

proposed expert's testimony is committed to the Court's broad discretion.”). Expert testimony

should be excluded if it is “speculative or conjectural.” Jones, 965 F.3d at 162 (quoting Boucher

v. U.S. Suzuki Motor Corp., 73 F.3d 18, 21 (2d Cir. 1996)). “[W]hen an expert's opinion is based

on data, a methodology, or studies that are simply inadequate to support the conclusions reached,

Daubert and Rule 702 mandate the exclusion of that unreliable opinion testimony.” Paruirigan v.

Prompt Nursing Employment Agency LLC, No. 17-cv-1302 (NG) (JO), 2019 WL 4647648, at *9

(E.D.N.Y. Sept. 24, 2019) (quoting Amorgianos v. Nat'l R.R. Passenger Corp., 303 F.3d 256, 266

(2d Cir. 2002)); see also Nimely, 414 F.3d at 396 (“[N]othing in either Daubert or the Federal

Rules of Evidence requires a district court to admit opinion evidence which is connected to

existing data only by the ipse dixit of the expert. A court may conclude that there is simply too

great an analytical gap between the data and the opinion proffered.” (alteration in original)

(quoting Gen. Elec., 522 U.S. at 146)).

“[I]n deciding whether a step in an expert’s analysis is unreliable, the district court should

undertake a rigorous examination of the facts on which the expert relies, the method by which

the expert draws an opinion from those facts, and how the expert applies the facts and methods to

the case at hand.” Mirena II, 982 F.3d at 123 (citation omitted). “In short, the district court must

‘make certain that an expert, whether basing testimony upon professional studies or personal

experience, employs in the courtroom the same level of intellectual rigor that characterizes the

practice of an expert in the relevant field.’” Amorgianos, 303 F.3d at 265-66 (quoting

Carmichael, 526 U.S. at 152). Nevertheless, “in accordance with the liberal admissibility

standards of the Federal Rules of Evidence, only serious flaws in reasoning or methodology will

warrant exclusion.” Hasemann v. Gerber Products Co., No. 15-cv-2995 (EK) (JAM), 2024 WL

1282368, at *8 (E.D.N.Y. Mar. 25, 2024) (citation omitted).

It is with this framework in mind that the undersigned analyzes each Daubert motion.

DISCUSSION

A. Defendants’ Motion to Preclude Expert Testimony of Jim Neal (ECF No. 235)

Defendants seek to exclude the opinions of Plaintiff’s expert, Jim Neal, the founder and

managing member of Agema LLC, who was “retained by Plaintiff to provide a written report as

to the effect of insolvency, as of a date certain, as to whether actions or inaction by the

Defendants at certain periods of time relevant to the complaint were consistent with corporate

governance best practices.” (ECF No. 223-61, Neal Decl. at ¶ 2.) Neal determined that:

Defendants did not act in a manner consistent with corporate governance best

practices, that Defendants failed to exercise duties owed to Elk to the detriment of

Elk’s creditors. Further, Defendants’ acts and inactions constituted a conflict of

interest between the fiduciary duties they owed to Ameritrans and the fiduciary

duties they owed to Elk and Elk’s creditors. Lastly, Defendants elevated the

interests of Ameritrans above the interest of creditors in Elk at a time when Elk was

insolvent and thereafter.

(Id. at ¶ 12.)

Defendants seek to specifically exclude those opinions regarding corporate governance

best practices, alleged regulatory violations, and those “laundering” fact testimony and

inferences about Defendants’ mental states through an expert, under Daubert and Rule 702. (ECF

No. 236 at p. 1.) Neal’s findings are memorialized in a report dated December 16, 2021 which

was amended on May 17, 2022.2 (See ECF No. 223-61, Neal Decl. at ¶ 5; see also ECF No. ECF

No. 237-38.)

i. Neal’s Opinions are Unreliable

Neal’s conclusions hinge on whether the directors, including Feinsod, acted in

accordance with “corporate governance best practices.” (See ECF No. 237-38, Neal Amended

Report at p. 38 (“Boards of directors that follow corporate governance best practices perform

best when they receive good quality reports that contain sufficient information to make well-

informed decisions.”); see also id. (“The Defendants did not act in a manner consistent with

corporate governance best practices by their failure to consider retaining an independent

financial advisor to render a solvency opinion to the Board of Ameritrans and Elk.”)).

Further, Neal contends that Feinsod’s dual roles at Ameritrans “raise[d] a red flag” in that

the “disproportionate amount of responsibility and power [he maintained] created a dynamic in

which the likelihood of abuses- actual or perceived- of his duties of care and loyalty to

Ameritrans and Elk and their stakeholders was heightened.” (Id. at p. 18.) “Such overlapping and

interconnected roles provided Mr. Feinsod with a degree of influence and control that, in my

opinion, were inconsistent with sound corporate governance best practices.” (Id.) Similarly, Neal

determined that Feinsod did not act as “a prudent person would have” by disregarding the

obligations Elk according to its Articles of Incorporation. (See ECF No. 237-38 at pp. 27-28.)

Notably, however, Neal fails to explain whether or how this “best practices” approach is

applied in the corporate governance field, how one determines what the subjective meaning of

“best” is, what makes one practice better than another, and whether this approach has been

criticized, published, tested, or reviewed. See Great White Bear, LLC v. Mervyns, LLC, No. 06

2 The amendments made were purely grammatical (e.g. correcting the spelling of words, removing

quotation marks, and adding or removing periods). (See ECF No. 223-61 at p. 2.)

Civ. 13358, 2008 WL 2220662, at *4 (S.D.N.Y. May 2, 2008) (excluding expert report for failing

to show how and why the expert arrived at the conclusions). Neal states that the basis of his

opinion regarding sound corporate governance practices was formed through his experience and

through reference to the sources cited in his opinion. (ECF No. 237-39, Neal Dep. at p. 151:5-

20.) A majority, if not all, of these sources, however, contain information relevant to large, S&P

500 companies. (ECF No. 237-38, Neal Amended Report at pp. 17-18 (relying on compiled data

from The Wall Street Journal which analyzed these dual positions in S&P 500 Companies to

determine that Feinsod’s role as President of Ameritrans and as Chairman of the Board of

Directors “has become more controversial in corporate governance circles over the past

decade”). Elk and Ameritrans, on the other hand, are small companies. Neal addressed this

distinction during his deposition (see ECF No. 223-39, Neal Dep. at p. 153:15-25 (“I don’t have

any particular opinion about corporate governance best practices and how they are . . . fungible

vis-à-vis the size of an organization”) before admitting that he “did [not] perform an analysis in

[his] report regarding how the size of Ameritrans or Elk affected the best practices.” (ECF No.

223-29, Neal Dep. at p. 154:12-15.)

Forming generalized conclusions based on a methodology tailored towards certain

companies that are inapposite to the size or industry of the company at issue renders the opinion

unreliable in the current context. See SLSJ, LLC v. Kleban, 277 F. Supp. 3d 258, 282 (D. Conn.

2017) (finding that corporate governance testimony “must be tailored to address that particular

form of business entity”) (citing Tindall v. H & S Homes, LLC, No. 5:10-CV-044 CAR, 2012 WL

3241885, at *10, 12 (M.D. Ga. Aug. 7, 2012) (excluding portions of expert's corporate

governance testimony because he did “not appear to rely upon any materials or publications

related to private, closely-held companies like those involved in this case” and thus rendered an

unreliable opinion)).

Furthermore, Neal admits to not considering the impact of the application of the business

judgment rule in his analysis, stating that the “business judgment rule wasn’t really relevant” in

forming his conclusions. (See ECF No. 237-39, Neal Dep. at p. 125:18-20, p. 126:2-4.) Likewise,

even though Elk is a New York corporation, Neal neglected to “look at New York law as part of

[his] analysis for [his] opinion.” (Id. at p. 222:4-9.) In this case, a juror’s eventual responsibility

will be to determine whether Defendants breached a legal duty under the standards prescribed by

New York law,3 not under theoretical, generalized “best practices” for large public companies.

See In re Al-Naji, 521 B.R. 65, 71 (W.D. Bankr. 2014) (concluding that because the corporation

at issue was a New York corporation, analyzing New York law for the controlling standard for

corporate officers and directors’ actions was appropriate, namely New York’s Business

Corporation Law). Notably, New York Business Corporation Law provides that “a director shall

perform his duties as a director, including his duties as a member of any committee of the board

upon which he may serve, in good faith and with that degree of care which an ordinarily prudent

person in a like position would use under similar circumstances.” N.Y. Bus. Corp. L. § 717(a), §

715(h) (applying the same standard to officers of a corporation). Failure to analyze Defendants

acts under these standards, while at the same time opining on an ambiguous “best practices”

standard, renders Neal’s opinion unreliable.

3 “[U]nder New York choice-of-law rules, the law of the state of incorporation controls in adjudicating a

corporation's "internal affairs," including the liability of directors and officers.” Solow v. Stone, 994 F.

Supp. 173, 177 (S.D.N.Y. 1998) (referencing Galef v. Alexander, 615 F.2d 51, 58 (2d Cir. 1980)); In re

Grumman Olson Industries, Inc., 329 B.R. 411, 427 (Bankr. S.D.N.Y. 2005) (“Grumman is a New York

corporation, and hence, the claim for breach of fiduciary duty is governed by New York law.”). Here, Elk

is incorporated in New York, thus New York law governs. (See ECF No. 223-11 (Elk Certificate of

Incorporation)).

Moreover, to the extent Neal relies on Hanover’s conclusion (see ECF No. 237-38 (“I

have accepted Mr. Hanover’s conclusion” relating to Elk and Ameritrans’s insolvency “as an

assumption in reaching conclusions in this analysis”), this does not weigh in favor of permitting

his opinions because, as detailed below, Hanover’s conclusions themselves were unreliable.

Indeed, an expert’s reliance on an unreliable report to generate its opinions is by itself unreliable

and thus inadmissible. See Brown v. Mermaid Plaza Assocs., LLC, No. 13 CV 760 (AMD)

(CLP), 2016 WL 5802779, at *9 (E.D.N.Y. July 20, 2016) (noting that an expert may rely on

another expert’s report so long as the other report is reliable) (citing Malletier v. Dooney &

Bourke, Inc., 525 F. Supp. 2d 558, 664 (S.D.N.Y. 2007)).

b. Neal’s Conclusions on the Ultimate Legal Conclusion Usurp the Role of the

Fact-Finder

Proffered expert testimony is generally found to be unhelpful to the trier of fact where it

states a legal opinion and thereby usurps the role of the trier of fact. Zaccaro v. Shah, 746 F.

Supp. 2d 508, 517 (S.D.N.Y. 2010) (referencing United States v. Duncan, 42 F.3d 97, 101 (2d

Cir. 1994)). Courts have found that although an expert may at times be permitted to opine about

an ultimate issue of fact, this does not extend to proposed testimony or opinions that effectively

tell the jury what legal result to reach. See Nimely, 414 F.3d at 397.

Here, Neal concludes that a conflict of interest existed (see ECF No. 237-39, Neal Dep.,

at p. 135:3-9 (“I certainly make a conclusion that a conflict of interest arose, yes”), an opinion

sprinkled throughout his report. For instance, Neal concluded that the dual roles served between

directors at Ameritrans and Elk “de facto subjected them to expanded duties and potential

conflicts of interest than would have been the case if Ameritrans and Elk had separate executive

officers and boards of directors.” (ECF No. 237-38, Neal Amended Report at p. 16.) Indeed, Neal

stated that Feinsod’s role as Ameritrans’ Chairman, President, CEO, CCO, and largest

shareholder “posed a conflict of interest” considering he had “more to lose than anyone inside or

outside the Board room should Ameritrans not secure funding for its operations.” (Id. at p. 37.)

Most notably, Neal ultimately concluded that “[Defendants’] acts and inactions constituted a

conflict of interest” between the fiduciary duties owed to both entities. (Id. at p. 39.)

Conclusions like these, that a conflict of interest exists, are ordinarily excluded because

they encroach upon a juror’s role to apply the facts to the law. See Kleban, 277 F. Supp. 3d at 285

(excluding the expert’s testimony that “[t]his was a clear conflict,” noting that the determination

as to whether the director failed to manage or disclose conflicts of interest are questions for the

jury). Neal elaborated on this conclusion when he noted that “in the face of such a conflict of

interest” none of the defendants called for an independent valuation “as was consistent with

corporate governance best practices,” nor did the independent directors “identify the conflict of

interest.” (ECF No. 237-38 at p. 37) (emphasis added). Au fond, not only did Neal conclude that

a conflict of interest existed, but he also determined that such a conflict meant Defendants

breached the “best practices” standard—another issue to be determined by the trier of fact. See

Kleban, 277 F. Supp. 3d at 285 (concluding the expert was precluded from testifying that the

investor’s “failure to disclose and to manage his obvious conflicts of interest constituted breaches

of fiduciary duty”).

Similarly, where experts opine as to the mental state or intent of the parties, such opinions

will be excluded on grounds that they usurp the role of the trial judge in instructing on the

applicable law and the jury’s role in applying the law to the facts. See In re Rezulin Products

Liability Litigation, 309 F. Supp. 2d 531, 547 (S.D.N.Y. 2004) (“[P]lainitffs are precluded from

offering expert opinion evidence . . . of the alleged motive, intent or state of mind of defendants

or others.”). Here, Neal opined that, despite being required to obtain consent from the SBA

before disposing of Elk’s assets to Ameritrans, “Defendants engaged knowingly in self-dealing

transactions” for Ameritrans’s benefit. (ECF No. 237-38, Neal Amended Report at p. 34

(emphasis added); see also ECF No. 223-61, Neal Decl. at ¶ 44 (“Defendants engaged

knowingly in conflict of interest transactions . . . .”). Neal’s opinions about the Defendants

mental state should, therefore, be excluded. See Kleban, 277 F. Supp. at 258 (noting the expert’s

opinion describing “the intention and mental processes” of the parties was “not an acceptable

subject for an expert witness’s opinion”).

The court in Billstein v. Goodman addressed circumstances strikingly similar to those

here. See No. 8-13415, 2012 WL 1048468, at *4 (E.D. Mich. Mar. 28, 2012). There, plaintiff’s

expert opined as to what the corporate “best practices” were with respect to corporate

governance practice and corporate fiduciary duties, rather than opine on what Michigan law

stood for in these areas. Id. Though “theoretical best practices” was her proposed standard, “that

is not the law in Michigan” and thus her opinion was deemed unhelpful because “Defendants’

liability will be assessed under Michigan law” and Michigan law is the law in which the jury will

be instructed. Id. As such, the court determined that “[the expert’s] testimony must be excluded

because it is irrelevant, because it invades the sole province of the Court, and because the

potential for confusion, misdirection and unfair prejudice to the Defendants greatly outweighs

any arguable relevance it might have.” Id.

The same potential concerns exist here. Neal attempts to submit “theoretical best

practices” in place for New York’s standards which, if permitted, would undoubtedly have the

potential to confuse and misdirect the jurors into applying the wrong standard when evaluating

Defendants’ conduct. Accordingly, Defendants’ motion to exclude the expert opinions of Jim

Neal is granted.

B. Defendants Motion to Preclude Adam Hanover (ECF No. 231)

Defendants seek to exclude the expert opinion of Adam Hanover, Plaintiff’s insolvency

expert who was retained to provide an opinion as to “whether [Elk] was insolvent or solvent as

of December 31, 2010 and whether Elk, and its parent, Ameritrans Capital Corporation, was

insolvent or solvent as of December 31, 2011.” (ECF No. 223-57, Hanover Decl. at ¶ 2.) He is a

Managing Director in CohnReznick LLP, a financial and accounting consulting firm, and

purports to have “extensive experience working with financially troubled companies, solvency

analyses, as well as forensic accounting matters, having advised debtors, trustees and creditors in

many chapter 11 matters.” (ECF No. 237-35, Hanover Report at p. 2.) Hanover utilized a

cashflow test to conclude that Elk was insolvent as of December 31, 2010 or, in the alternative

that Elk and Ameritrans were insolvent as of December 31, 2011 based on the cashflow test,

balance sheet test, and small capital test. (See id. at pp. 2, 23.)

i. Hanover Utilizes the Incorrect Approach to Measure Insolvency

under the Balance Sheet Test, Making his Opinions Unreliable

“There are two approaches to measuring insolvency: the balance sheet test and the cash

flow test.” SOL-MM III LLC v. JPMorgan Chase Bank, N.A., No. 23-cv-6479 (JGK), 2025 WL

936414, at *13 (S.D.N.Y. Mar. 27, 2025). A cashflow test is used to determine if the party can

pay their debts as they become due in the ordinary course of business. Id. The balance sheet test

is used to determine if the company’s assets, at fair value, exceeds their liabilities. Id. A third test,

the small capital test—which was also utilized by Hanover—is implemented to determine if the

company conducted their business with unreasonably small capital to the point that the company

is technically solvent but “doomed to fail.” In re Operations NY LLC, 490 B.R. 84, 98 (Bankr.

S.D.N.Y. 2013).

The solvency of a business is ordinarily calculated based on revenues that the business

“may generate as a going concern, and not based on the present liquidation value of its assets.”

Jalbert v. Flom (In re Bicomny, LLC), 633 B.R. 25, 46 (Bankr. S.D.N.Y. 2021); Graham v.

Serafis (In re Red Rest. Corp.), 2021 Bankr. LEXIS 2377, at *32 (Bankr. S.D.N.Y. Aug. 31,

2021) (same). A “going concern” is defined as “the value of a commercial enterprise’s assets as

an active business with future earning power.” Am. Greenfuels Rockwood Tenn., LLC v. Aik

Chuan Constr. PTE. Ltd., 702 F. Supp. 3d 217, 244 (S.D.N.Y. 2023) (quoting In re TransCare

Corp., 81 F.4th 37, 52 (2d Cir. 2023) (citation omitted)). Indeed, “[s]olvency should be measured

on a going concern basis unless the demise of the business is so clearly imminent that the

business is incapable of generating any ongoing revenues.” In re Bicomny, LLC, 633 B.R. at 46

(collecting cases where solvency is to be determined by the going concern, not the liquidation

value of a corporation’s assets less its liabilities, unless the business is on its “deathbed”).

In implementing the balance sheet test, Hanover relied on a liquidation valuation rather

than a going concern valuation. (See ECF No. 223-57, Hanover Decl. at ¶ 33; ECF No. 237-35,

Hanover Report at p. 16.) Specifically, in determining whether Elk and Ameritrans’ assets

exceeded the fair value under the balance sheet test, he based his analysis off “an orderly

liquidation [] of all its assets.” (ECF No. 237-35, Hanover Report at p. 16 (“I used orderly

liquidation values in my analysis”); id. at p. 20 (“As I did with Ameritrans, I used orderly

liquidation values in my analysis [for Elk].”) Importantly, Hanover concluded that “the orderly

liquidation of Elk’s assets was less than the value of its liabilities” and thus Elk was insolvent as

of December 31, 2011. (Id. at p. 21.) Similarly, Hanover determined, for Ameritrans, that “the

orderly liquidation value of Ameritrans’ individual assets is less than the amount of the value of

its liabilities.” (Id. at p. 18.)

The flaw with Hanover’s analysis is that he neglects to address, nor is it palpable from

review of the submissions, how Elk or Ameritrans were “on their deathbed” or were unable to

generate ongoing revenues—the set of circumstances warranting the use of a liquidation

valuation method over a going concern method. For instance, in April 2011, Columbus Nova

entered into an agreement to purchase $25-65 million of Ameritrans equity, thereby disproving

an assumption that Elk or Ameritrans was incapable of generating future revenues. Indeed, courts

have “consistently frowned upon the use of calculations that are based on liquidation values

rather than going concern values, unless the demise of a business is so clearly imminent that the

business is incapable of generating any further revenues.” In re HHE Choices Health Plan, LLC,

No. 15-11158, 2019 WL 6112679, at *5 (Bankr. S.D.N.Y. Nov. 15, 2019) (collecting cases); In re

Adler, Coleman Clearing Corp., 247 B.R. 51, 110 (Bankr. S.D.N.Y. 1999) (illustrating that only

where a company is on its “deathbed” will a court not give the assets a going concern value).

Utilizing the incorrect standard and method for determining insolvency renders Hanover’s

opinion unreliable considering the determination of insolvency under one test may in fact be the

opposite under another valuation method. See Amorgianos, 303 F.3d at 268-69 (affirming the

exclusion of an expert’s opinion as unreliable where he failed to apply the proper method of

calculation).

Furthermore, Hanover’s opinion and analysis relating to the balance sheet test suffers

from an additional flaw. Hanover made “several adjustments” to Elk and Ameritrans’ balance

sheets in connection with his solvency analysis. (ECF No. 237-35, Hanover Report at pp. 17,

20.) In conducting Elk’s solvency analysis under the balance sheet test, he “assumed that all of

Ameritrans Capital’s loans and investments resided at Elk, except for the life insurance

settlement contracts, which were maintained by Ameritrans” and subsequently used the higher

orderly liquidation value of these loans and investments based on the range Manning arrived at

in his report—the range from $5.5 million to $9.8 million. (Id. at p. 20.) Additionally, he

“assumed” that Elk’s $1.1 million of assets acquired in satisfaction of loans “would have an

orderly liquidation value of 80% of their net cost and therefore reduced that value by 20%.” (Id.)

Similarly, in conducting Ameritrans’ solvency analysis, Hanover “used the higher 40%

amount” of the orderly liquidation values of commercial loans being 20-40% of their net costs.

(Id. at pp. 17-18.) He also “assumed” that assets acquired in order to satisfy loans as of

December 31, 2011 “would have an orderly liquidation value of 80% of their net costs” and

Hanover “therefore reduced the value by 20%.” (Id. at p. 18.) Though Hanover states he arrived

at this range from relying on Manning’s report, Hanover’s basis for this assumption of using 80

percent is that it “was the highest value that Mr. Manning came up with for any asset . . . .”.

(ECF No. 237-32, Hanover Dep. at p. 218:2-6.) In making these aforementioned adjustments,

Hanover relied on the figures and amounts found in Manning’s report. (See ECF No. 237-35 at

pp. 17-18, 20-21; ECF No. 237-32, Hanover Dep., pp. 167-169.)

It is well settled that an expert may rely on the conclusions of another expert. United

States Bank Nat’l Ass’n v. PHL Variable Life Ins. Co., 112 F. Supp. 3d 122, 131 (S.D.N.Y. 2015)

(“One expert is permitted to rely on facts, opinions, and data not of the expert's own making —

including analyses performed or findings made by another expert in the case.”) Notwithstanding,

Hanover’s adjustments were made to the orderly liquidation value which, as detailed supra, is

problematic. Importantly, Hanover offers no explanation for why these adjustments were made,

why certain figures were assumed or chosen over others, and, crucially, whether acting as he did

was warranted under these circumstances and why. Indeed, an expert may not, like Hanover has

done, rely on certain figures to the exclusion of other figures without an explanation. See Stewart

v. Estate of Sugar Hill Music Pub. Ltd., 2013 WL 1405422, at *1 (S.D.N.Y. Apr. 8, 2013)

(granting a Daubert challenge and excluding testimony in part because the expert's testimony

was based on an “unexplained assumption”); see also Bank of America, N.A. v. Bear Stearns

Asset Mgmt., 969 F. Supp. 2d 339, 358 (S.D.N.Y. 2013) (“Because Dr. Bajaj's opinions were

premised upon an unfounded assumption, his conclusions will not be helpful to the finder of

fact.”). Therefore, Hanover’s determinations and opinions based on his balance sheet analysis are

rejected.

ii. Hanover Utilizes the Incorrect Approach under the Cash Flow Test,

Thereby Rendering his Opinions Unreliable

With respect to the cash flow test, Hanover determined that Ameritrans was insolvent

under this test because it “did not have the ability to pay its debts as they matured.” (ECF No.

237-35, Hanover Report at p. 19.) Similarly, Hanover concluded that Elk was insolvent under

this test largely based upon the fact that the SBA had the right to declare its loans “immediately

due and payable” and “Elk did not have the ability to cure the impairment or to immediately pay

the SBA the amount of its outstanding debt.”) (Id. at pp. 21-22.) Indeed, Hanover considered the

cash flow test to be a forward-looking test, (ECF No. 237-32, Hanover Dep. at p. 195:23-25)

(“[The cash flow test is] a forward-looking test), and admittedly applied this forward-looking

approach to his insolvency analysis. (See ECF No. 237-32, Hanover Dep., pp. 196-198, 204-

205.) A forward-looking approach like this used to determine solvency is not reliable because

this approach has been explicitly rejected by this Circuit. See In re Tribune Company Fraudulent

Conveyance Litigation, 10 F.4th 147, 166 (2d Cir. 2021) (following Second Circuit precedent to

conclude that a “forward-looking approach” that considers future debts as part of an insolvency

analysis is improper and should be rejected).

Additionally, Hanover’s insolvency conclusion from the cash flow test is dependent upon

his assumption that $21 million SBA debt was due and payable as of December 31, 2010. In

contrast, however, the SBA could have accelerated the debt at that time but did not do so until

2012. Hanover’s analysis is therefore founded in a hypothetical situation that did not occur

during the relevant solvency period, and, therefore, cannot form the basis for a reliable expert

report. See Buckley v. Deloitte & Touche USA LLP, 888 F. Supp. 2d 404, 413 (S.D.N.Y. 2012)

(excluding an expert’s report because it relied “on unfounded assumptions about what [plaintiff]

and lenders would have done if certain hypothetical events took place”). As such, Hanover’s cash

flow analysis is rejected as unreliable.

iii. The Small Capital Test Used by Hanover is Irrelevant and Unhelpful

to a Trier of Fact

The small capital test is simply not tied to the concept of insolvency. See Tronox Inc. v.

Kerr McGee Corp. (In re Tronox Inc.), 503 B.R. 239, 321 (Bankr. S.D.N.Y. 2013) (noting that

the small capital test pertains to financial difficulties “short of insolvency” but may led to

insolvency “at some time in the future”) (citation omitted); see also In re Omansky, No. 18-

13809 (LGB), 2022 WL 4281472, at *14 (Bankr. S.D.N.Y. Sept. 15, 2022) (“The applicable case

law supports an unreasonably small capital finding where the debtor is not insolvent at the time

of the transaction . . . .”). It follows, therefore, that for Hanover—the expert hired to opine as to

the solvency or insolvency of Elk and Ameritrans at two specified dates—to draw solvency

conclusions using a test that “denotes a financial condition short of equitable insolvency” or

whether “insolvency was inevitable in the reasonably foreseeable future” would not assist the

trier of fact in determining Elk or Ameritrans’ insolvency as of the relevant time periods. In re

Operations NY LLC., 490 B.R. 84, 98 (Bankr. S.D.N.Y. 2013); In re Adelphia Commc’ns Corp.,

652 F. App’x 19, 21 (2d Cir. 2016) (citation omitted).

Accordingly, Defendants’ motion to exclude Hanover’s opinions and testimony is

granted.

C. Defendants’ Motion to Preclude Expert Testimony of Jeffrey Manning (ECF No. 233)

Defendants next seek to exclude expert testimony from Jeffrey R. Manning under

Daubert and Federal Rule of Evidence 702. (ECF Nos. 233-234.) Manning is Plaintiff’s expert

hired in conjunction with Hanover to “evaluate and assess the most likely process, timeline, and

outcome relating to liquidating the associated loan portfolios” on December 31, 2010 and

December 31, 2011. (ECF No. 237-37 at p. 3.)

In Manning’s Original Report dated December 16, 2021, he concluded that “the

commercially reasonable liquidation process” of the investment portfolio based on the SEC

Forms 10-Q filed as of December 31, 2010 and 2011 “to third-party investors in an arms-length

transaction would require between 70 to 120+ days to complete and would result in approximate

recovery percentages between 20-40% of their net cost value.” (Id.) Manning determined that “a

process to sell the portfolio en bloc is the only practical business solution” because “[a]ny

attempt to monetize the Investment Portfolio on an asset-by-asset basis would be inefficient,

arduous, costly, and likely unsuccessful, leaving “orphans” investments behind with no viable

bids . . . .”. (ECF No. 237-37 at p. 4.) He arrived at this conclusion after considering “other

portfolio sales” he analyzed and executed (Id.)

On February 22, 2022, Manning submitted an Amended Report. The Amended Report

adds:

• Two footnotes that indicate that Manning included equity investments with net

costs from $4,000 to $700,000 whereas he previously excluded them (ECF No.

237-67, Manning Amended Report at p. 4 n.3, 5);

• A footnote naming the two prior “other portfolio sales” he previously analyzed

and executed (ECF No. 237-67, Manning Amended Report at p. 4, n.6);

• A footnote purporting to explain how he arrived at his conclusion that value

investors stand to receive roughly 20-40% returns (ECF No. 237-67, Manning

Amended Report at p. 5, n.7);

• An entire new section and opinion relating to Manning’s subsequent review of a

Financial Due Diligence Draft Report by Grant Thornton (“GT”)—a company

retained “to prepare and present a due diligence report related to Columbus

Nova’s proposed investment” into Ameritrans—from March of 2011 (ECF No.

237-67, Manning Amended Report at p. 8); and

• The Financial Due Diligence Draft Report by GT. (ECF No. 237-67, Manning

Amended Report at p. 9.)

In light of the Amended Report, the undersigned must first determine whether this Court

ought to accept and consider the newly added opinions and conclusions found in the Amended

Report, or whether the Court must engage in its analysis with reference solely to the Original

Report. See Alan L. Frank Law Assocs., P.C. v. OOO RM Invest, No. 17-CV-1338 (NGG) (ARL),

2021 WL 1906468, at *3 (E.D.N.Y. May 12, 2021) (noting that the question of whether to

consider the supplemental expert declaration “is logically prior” to the issues raised in the

Daubert motion “since the resolution of that question will determine whether the court may

consider that declaration in evaluating the admissibility of [the expert’s] other testimony.”)

i. Admissibility of Manning’s Amended Report

Rule 26(e)(2) clearly states: “[f]or an expert whose report must be disclosed under Rule

26(a)(2)(B), the party's duty to supplement extends both to information included in the report and

to information given during the expert's deposition. Any additions or changes to this information

must be disclosed by the time the party's pretrial disclosures under Rule 26(a)(3) are due.”

Notably, “[i]f a party fails to provide information or identify a witness as required by Rule 26(a)

or (e), the party is not allowed to use that information or witness to supply evidence on a motion,

at a hearing, or at a trial, unless the failure was substantially justified or is harmless.” Fed R.

Civ. P. 37(c)(1); see Design Strategy, Inc. v. Davis, 469 F.3d 284, 294 (2d Cir. 2006) (noting trial

courts “have discretion to determine whether or not a substantial justification exists and whether

or not the failure to disclose is harmless.”).

Following the conclusion of expert discovery, an expert’s supplemental report may be

submitted if it is “within the scope of the initial expert report.” Cedar Petrochemicals, Inc. v.

Dongbu Hannong Chemical Co., 769 F. Supp. 2d 269, 279–80 (S.D.N.Y. 2011) (allowing an

expert’s supplemental affidavit as it “provided evidentiary details for the conclusions originally

espoused in [the expert’s] report—which remain unchanged—and is thus properly within the

scope of that report.”); see also Washington v. Kellwood Co., No. 05-CV-10034 (SN), 2016 WL

3920348, at *19 (S.D.N.Y. July 15, 2016) (“Experts can update their conclusions after discovery,

but their updated conclusions must be consistent with the methods used in the expert report.”)

Conversely, courts “will not admit supplemental expert evidence following the close of

discovery when it expounds a wholly new and complex approach designed to fill a significant

and logical gap in the first report.” Cedar Petrochemicals, 769 F. Supp. 2d at 269 (internal

quotations and citation omitted). To allow such new evidence to be presented would undermine

the purpose of the discovery rules, circumvent the discovery schedule that was ordered by the

court, and prejudice a plaintiff. City of New York, 637 F. Supp. 2d at 108. “It is only if the expert

subsequently learns of information that was previously unknown or unavailable, that renders

information previously provided in an initial report inaccurate or misleading because it was

incomplete, that the duty to supplement arises.” Lidle v. Cirrus Design Corp., No. 08- Civ. 1253

(BSJ) (HPB), 2009 WL 4907201, at *6 (S.D.N.Y. Dec. 18, 2009).

Here, the deadline to submit expert-in-chief reports was December 22, 2021, and the

conclusion of all discovery, including expert discovery, was February 14, 2022. (See Electronic

Orders dated October 28, 2021 and December 2, 2021.) Manning’s Amended Report, filed on

February 22, 2022, was therefore submitted two months past expert report deadline, nine days

after his deposition, and eight days past close of discovery. Notably, Manning provides no

explanation, let alone good cause, nor can the Court ascertain how the information now included

in the Amended Report was “unknown or unavailable” to Manning. The added information

includes, inter alia, portfolio sales that Manning himself analyzed and executed in the past and

prior financial reports from March of 2011 relating to the Columbus Nova proposed transaction.

Further, Manning offers several new conclusions in his Amended Report. For example,

Manning’s Amended Report states that the GT Report confirmed his opinion that Ameritrans was

not a going concern as of 2010 or 2011. Nowhere in Manning’s Original Report does he make

this conclusion. Additionally, he also concludes that the “entities were clearly insolvent and

operating in the ‘Zone of Insolvency.’” Considering a determination of whether Elk and

Ameritrans were insolvent or solvent lies at the heart of this case, an amended report raising this

conclusion for the first time at this late stage is undoubtedly prejudicial and, thus, impermissible.

See Coene v. 3M Co., 303 F.R.D. 32, 42 (W.D.N.Y. 2014) (“Although Rule 26(e) does not itself

define the word supplement, common sense suggests (and numerous decisions confirm) that an

expert report that discloses new opinions is in no way a mere supplement to a prior request.”);

see also Williams v. East Meadow Union Free School District, No. 21-cv-3310 (NJC) (JMW),

2025 WL 218829, at *5 (E.D.N.Y. Jan. 16, 2025) (collecting cases); but see Alan L. Frank Law

Assocs., P.C., 2021 WL 1906468, at *3–4 (permitting supplemental expert evidence submitted

after discovery deadlines where the report contained “no new substantive evidence, analytical

approaches, or opinions,” but rather made general assertions intended to clarify certain

assumptions forming the basis of the initial report).

Accordingly, the Court will not consider Manning’s Amended Report and now proceeds

to determine whether the opinions and testimony of Manning meet Daubert and 702’s standard.

ii. Reliability of Manning’s Opinions and Testimony

Manning, in forming his Original Report, relied upon the conclusions drawn from

Hanover’s report. (See ECF No. 237-37 at p. 7 (“This report is based upon review and analysis of

Mr. Hanover’s Report and the Consolidated Statement of Investments found in the 10-Qs filed

by Ameritrans Capital as of December 31, 2010 and 2011. The accuracy of this report and the

findings therein are dependent upon the reliability and completeness of this information.”). The

Court opts not reiterate the issues with Hanover’s opinions but will briefly focus on how

Manning’s report and conclusions suffer from the same flaws. First, Manning does not use a

going concern analysis (see ECF No. 237-31, Manning Dep. at p. 61-62 (stating he did not offer

any opinion as to whether Elk or Ameritrans were going concerns)), nor does he provide a

comparable analysis of what the outcome would be during a liquidation sale or sold on a going

concern. (See ECF No. 237-31, Manning Dep. at p. 64:17-21.) Indeed, Manning formed his

conclusions based on the assumption that Elk and Ameritrans were insolvent—the conclusion

Hanover arrived at using, as noted above, incorrect methodologies and standards. (See ECF No.

237-31 at pp. 54-56 (indicating that Manning’s analysis was “clearly directed by the fact” that

the company was insolvent and the assumption that the company was technically insolvent “is

what’s underlying [Manning’s] assessment and [his] analysis in [his] expert report.”)).

Though Manning may rely on the opinions adduced from other experts, it runs contrary

to the principles underlying a Daubert analysis for Manning to use unreliable expert opinions

and conclusions in forming his own. PRCM Advisers LLC v. Two Harbors Inv. Corp., No. 20-

CV-5649 (LAK) (BCM), 2025 WL 1276513, at *19 (S.D.N.Y. May 2, 2025) (“[I]f one expert's

opinion is excluded by the court (for example, because that expert was inadequately qualified, or

her methodology was unreliable), any calculations, analyses, or conclusions reached by other

experts in reliance on the excluded opinion must themselves be excluded.”); see In re LIBOR-

Based Fin. Instruments Antitrust Litig., 299 F. Supp. 3d 340, 494 (S.D.N.Y. 2018) (concluding

the expert was not entitled to rely on another expert’s “unreliable opinions for support,”

especially when considering both expert’s opinions suffer from the same flaw). Manning’s

conclusions in reliance on Hanover, therefore, should be excluded.

iii. Qualifications of Manning as an Expert

Manning candidly admits that he is not a valuation expert or an accountant, rather he is

an investment banker with forty years’ experience in the corporate recovery industry and

practical application of principles of corporate turnaround and liquidation and recovery are the

basis of his report. (See ECF No. 223-39, Manning Decl., ¶ 23; see also ECF No. 237-31,

Manning Dep., p. 52:16-18.) When, like here, an expert's opinion is based on his experience,

courts will rely on the relationship between the cited experience and the opinion and determine

whether the opinion is rationally based on the experience. See Crowley v. Chait, 322 F. Supp. 2d

530, 538 (S.D.N.Y. 2004) (“An expert may indeed be excluded when his training and experience

is lacking in the particular area in which his testimony is offered.”).

Here, however, Manning fails to demonstrate how his specific experience in this industry

has led him to formulate the conclusions found in his Original Report. See SR Int’l Bus. Inc. Co.

v. World Trade Center Props. LLC, 467 F.3d 107, 113 (2d Cir. 2006). For example, in his

Original Report, Manning states that “[r]elative to other portfolio sales I have analyzed and

executed [certain] assets are extremely small and would be challenging to liquidate in both 2010

and 2011.”. (ECF No. 237-37 at p. 4.) He neglects to explain what these other portfolios were,

how they were similar to Elk and Ameritrans’s portfolios, how much experience he has with

similar portfolios, and whether he has arrived at similar conclusions in the past. Similarly, he

notes that “[t]o get a confident and accurate bid, the process needs to give bidders 45-60 days of

due diligence – shorter periods would likely yield increased uncertainty and lower yields.” (Id. at

p. 5.) Manning does not explain how common this practice is, under what circumstances bidders

may be given more or less than that range, or how “likely” there would be a higher or lower

yield.

Without more, this Court is left to speculate whether his forty years’ experience in the

broad “corporate recovery industry” renders him qualified to offer opinions in the current case.

See Hilaire v. DeWalt Indus. Tool Co., 54 F. Supp. 3d 223, 235-36 (E.D.N.Y. 2014) (“In

considering a witness' practical experience and educational background as criteria for

qualification, the threshold question is whether the expert's knowledge of the subject is such that

his opinion will likely assist the trier of fact in arriving at the truth.”) (internal citations omitted).

In addition, Manning did not discuss any academic literature employing his methodology used,

any professional standards that call for his employed methodology, whether his methodology

was known to be accurate, and what the potential error rate of this methodology was (see ECF

No. 237-31, Manning Decl. at p. 86:5-22), any one of which would provide the Court some

assurance that what Manning used here was consistent with what is done in the “corporate

recovery industry.”

The issue is not that Manning is inexperienced, but it is that he fails to demonstrate how

this experience applies to the opinions rendered in this case and how the experience was

formative in making his conclusions. As such, Defendants’ motion to preclude Manning’s

Original Report is granted.

D. Plaintiff’s Motion to Preclude Reports of Lashway, Jacobson, Wright, and Howard

(ECF No. 224)

Plaintiff moves pursuant to Fed. R. Evid. 702 and Daubert to:

(i) strike the rebuttal report of Robert Lashway, the expert engaged by Defendants as a

rebuttal expert to Manning;

(ii) preclude Defendants from offering or relying on Lashway’s opinion testimony;

(iii) strike the Original and Rebuttal report of Craig Jacobson, an insolvency expert

retained to review various financial and business records associated with Elk and

perform a solvency analysis, strike the Rebuttal Report of James Howard,

Defendants’ rebuttal expert for Manning, and striking the Rebuttal Report of Clifford

Wright, Defendants’ rebuttal expert for Neal; and

(iv) preclude Defendants from relying or offering the expert testimony or reports of

Jacobson, Wright, or Howard.

(See generally ECF No. 224-54.)

a. Expert Rebuttal Report of Robert Lashway

Lashway, an accounting and valuation expert, was retained by Defendants to respond to

certain opinions contained in Manning’s report, in addition to certain opinions in Hanover’s

report on which Manning relied upon. (ECF No. 237-36, Lashway Report at p. 2.) In doing so,

he relied upon numerous documents (see id., Exhibit A) and considered facts represented to him

by counsel. (See id.) Lashway reached the following four conclusions:

(i) Manning’s Report and his use of an orderly liquidation premise to estimate asset

values was inconsistent with valuation and accounting guidance, and Manning

and Hanover’s Reports rely on information (e.g. the assumption that the entire

$21,175,000 in SBA debenture was due and payable as of the measurement dates)

contradicts information that was “known or knowable” as of the measurement

dates;

(ii) Manning does not consider publicly available information as well as testimony

related to the SBA receivership process;

(iii) The values reported in the Forms 10-Q provide the Company’s contemporaneous

estimation of the value at which an orderly transaction to sell the Assets to market

participants would yield, in accordance with generally accepted accounting

principles; and

(iv) Manning Report’s assessment of the Assets values lacks detailed analysis, a

thorough discussion of the quantitative and qualitative factors considered, third-

party sources, as well as other common best practices in a valuation context.

(Id. at pp. 2-3.)

i. Whether Certain Conclusions and Opinions Were Drawn from

Lashway’s Communications with Counsel

Plaintiff avers that Lashway’s opinion as to valuation and accounting guidance should be

excluded because it is “solely based on his legal research and opinions of Defendants’ counsel,

not any specialized expertise of knowledge.” (ECF No. 224-54 at p. 6.) Lashway’s Report,

however, demonstrates that he considered far more than just statements made by counsel. He

first explains, and analyzes, the differences between going concern values and liquidation values,

referring to the “Business Valuation Standards published by the American Society of Appraisers .

. . .”. (ECF No 237-36, Lashway Report at p. 9.) He then concludes, “[b]ased on [his] research of

accepted accounting and valuation guidelines” that a going concern should be used unless the

debtor is “on its deathbed,” citing two cases in support as well. (See id. at p. 10.) Lashway

additionally reviewed the relevant financial statements to conclude that Ameritrans was not

incapable of generating any further revenues. (See id.) Only then did “counsel inform[] [him],

consistent with [his] research,” that going concern calculations are used for balance sheet

calculations. (Id.) (emphasis added).

Similarly, though Plaintiff argues that the “Information Regarding the SBA Process from

Counsel” portion of Lashway’s Report is inappropriate for the same reasons (see ECF No. 224-

54 at p. 8), his Report makes clear that because he was not an expert in the SBA lending process,

counsel provided him with SBA Regulations in addition to two depositions of former SBA

analysts and administrators. (See id.) Lashway then analyzed “[t]he depositions, together with

the public filings” to arrive at his conclusions. (See id.)

Likewise, Plaintiff contends that Lashway’s opinion that the SEC Filings provide the

company’s contemporaneous estimation of the value of its assets is inappropriate because is

“based entirely on Lashway’s communication with counsel and fails to include any independent

expert analysis.” (ECF No. 224-54 at p. 10.) This is false. In fact, Lashway explicitly stated that

he reviewed the company’s Forms 10-Qs as of the 2010 and 2011 measurement dates, provided

an extensive analysis based on this review pursuant to the generally accepted accounting

principles. (See id.) Lashway’s conversations with counsel—where he learned that “a public

accounting firm reviewed the Company’s valuation processes on at least a quarterly basis”—do

not affect the prior conclusions he formed from his extensive independent analysis.

Indeed, Lashway’s statements are reliable because he reached his conclusions following

his own review of the evidence and documents presented to him, only to then discuss—and

confirm—his findings with counsel after drawing conclusions from discernable methodologies.

Contra Caruso v. Bon Secours Charity Health Sys., No. 14 CV 4447, 2016 WL 8711396, at *6

(S.D.N.Y. Aug. 5, 2016) (“[The expert’s] testimony must be excluded as unreliable under

Daubert because she relies solely on facts that plaintiff's counsel chose to share with her and did

not conduct an independent review of evidence upon which her conclusions are based, and fails

to use or describe any discernible methodology.”).

The same does not hold true, however, for Lashway’s determination that Manning failed

to consider the SBA Receivership process. Lashway admits that he “is not an expert on the SBA

receivership process.” (ECF No. 237-36, Lashway Report at p. 15.) As a result, he asked counsel

for relevant information on the topic which he reviewed what counsel provided, discussed with

counsel, and formed his opinions based on these communications. (Id.) Though an expert need

not know all information pertaining to a certain topic, where the expert relies upon information

from a client or from counsel, the expert’s opinion should not rely solely on the information they

supply. See Rowe Entertainment, Inc. v. William Morris Agency, Inc., No. 98 Civ. 8272, 2003 WL

22124991, at *3 (S.D.N.Y. Sept. 15, 2003). Here, Lashway’s conclusion seems to be drawn

exclusively from his review of “relevant information on the topic” provided by counsel and

repeated discussions with counsel. (See ECF No. 237-36, Lashway Report p. 15.) Without an

explanation as to how Lashway took this information and conducted an independent analysis of

it before drawing his own conclusions, that opinion is excluded. See Caruso, 2016 WL 8711396,

at *6.

ii. Whether Lashway’s Remaining Opinions are Proper for Rebuttal

Reports

Plaintiff avers that Lashway’s opinion as to the “Facts Known of Knowable as of the

Measurement Dates” is improper because he is not an expert in insolvency or acceleration of

debentures. (ECF No. 224-54 at p. 7.) Here, however, Lashway states that an “important” tenet in

valuation of a corporation is information known or knowable at the time of the valuation date.

(See ECF No. 237-36, Lashway Rep. p. 11.) This is hardly a solvency opinion. Rather, he is

opining as to the information at his disposal and whether Manning and Hanover should have

known of certain information, including that the debentures were not accelerated until 2012, in

determining that the debentures were not due and payable. (See id. at p. 12.) Whether there

remains a dispute as to whether the debt was actually due and payable goes to the weight of the

testimony, not the admissibility of it.

Additionally, Lashway’s opinion regarding the lack of “detailed analysis” and “thorough

discussion” of certain factors is a quintessential opinion within a rebuttal report. “A rebuttal

expert, by nature, criticizes the methodology and/or opinions of another.” Luitpold

Pharmaceuticals, Inc. v. Ed. Geistlich Sohne A.G. Fur Chemische Industrie, No. 11-cv-681, 2015

WL 5459662, at *12 (S.D.N.Y. Sept. 16, 2015). Indeed, “[t]here is no requirement that a rebuttal

expert himself offer a competing analysis; his opinions may properly concern criticizing that

presented by another party.” Id. Lashway’s opinion points out the issues with Manning’s report

(see ECF No. 237-36, Lashway Report at pp. 18-19), includes a discussion of the assessments

Manning provides (see ECF No. 237-36, Lashway Report at p. 20), and draws his conclusions

from these observations and based on his own valuation experience. (ECF No. 237-36, Lashway

Report at p. 20.) Plaintiff argues that Lashway was required to offer what other standards or

analysis’ Manning should have provided (see ECF No. 224-54 at p. 12), but such is not a

requirement of an admissible rebuttal report. See Joffe v. King & Spalding LLP, No. 17 Civ.

3392, 2019 WL 4673554, at *14 (S.D.N.Y. Sept. 24, 2019) (“[A] rebuttal expert need not

identify alternative or better methodologies.”); see also Scott, 315 F.R.D. at 51 (“As a rebuttal

witness, [defendant’s expert] was under no obligation to create models or methods of his own.”).

Accordingly, Plaintiff’s motion to preclude the opinions of Lashway is denied, with the

exception that Lashway’s opinion that Manning did not consider publicly available information

as well as testimony related to the SBA receivership process, is to be precluded.

b. Expert Rebuttal Reports of Howard and Wright, and the Original and Rebuttal

Report of Jacobson

Plaintiff avers that because James Howard, Clifford Wright, and Craig Jacobson were all

experts engaged by Defendants Laird, Boockvar, Singer, Sommer, Indick, and Wolpert, who have

all since settled, these experts’ opinions are no longer before the Court. (ECF No. 224-54 at p. 1.)

Notwithstanding, Plaintiff argues that “to the extent Defendants [] seek to rely on the reports of .

. . Jacobson and Wright, those opinions should in the alternative, be precluded as they are based

solely on Defendants’ counsel’s statements and arguments, are expressly contradicted by the

undisputed facts, are unsupported, and/or are outside the scope of the expert’s experience and

qualifications.” (Id. at pp. 1-2.)

Merely because these experts were hired by parties who have since been dismissed does

not preclude reliance on these experts’ reports. See Carter-Wallace, Inc. v. Otte, 474 F.2d 529,

536 (2d Cir. 1972) (noting that courts maintain authority to compel prior expert testimony to be

used in a current proceeding, namely that it can require the expert to provide previously formed

opinions and conclusions). The key consideration when determining whether to consider an

expert’s testimony is whether the testimony “fits” with the facts of the case. Daubert, 509 U.S. at

591. “Fit” is a consideration of relevance, meaning that an expert's testimony must be

“sufficiently tied to the facts of the case that it will aid the jury in resolving a factual dispute.” Id.

As such, it is not the fact that the parties who retained the experts are no longer before the court,

it is whether the issues that the experts opine to remain before the court, which, as here, they do.

See In re Refco Inc. Securities Litigation, No. 07-md-1902 (JSR), 2012 WL 7007795, at *4

(S.D.N.Y Nov. 29, 2012) (collecting cases where only in situations where issues were dismissed

were the expert’s opinions relating to the dismissed claims deemed irrelevant).

For example, in DG&G, Inc. v. FlexSol Packaging Corp., the United States Court of

Appeals for the Eighth Circuit determined that reports generated by an expert retained by “a

settling party” could be relied upon by other parties for summary judgment purposes. 576 F.3d

820, 826 (8th Cir. 2009). There, plaintiff argued that because the expert was retained by a party

no longer in the action, coupled with the fact that the expert was not produced for a deposition,

the expert’s report should not be considered. Id. The court, however, determined that not only did

plaintiff have the opportunity to depose the expert “when the settling party identified him as a

retained expert,” but also that plaintiff offered “no authority prohibiting the use of another party’s

expert report for summary judgment purposes.” Id. at 826-827. Similarly, here, merely because

these experts were hired by now-settled parties does not automatically preclude their reports or

opinions where they may be relied upon for summary judgment purposes. Like in FlexSol,

Plaintiff offers “no authority” for its generalized, prohibitive position and, as such, should the

parties wish to consider the expert opinions and reports of James Howard, Clifford Wright, and

Craig Jacobson, they may do so subject to the limitations detailed below.

i. James Howard

In a footnote on page 11 of Plaintiff’s Memorandum of Law in support of its motion in

limine, Plaintiff sets forth its only argument for precluding Howard’s Report: “Howard’s Report

on the same subject matter also asserts that Manning should have followed a standard or

performed additional analysis; however, Howard did not identify such a standard, as the standard

is based on experience, nor did Howard perform any analysis.” (ECF No. 224-54 at p. 11, n.3).

As such, Plaintiff contends that Howard should be precluded on the same basis as Lashway’s

Rebuttal report. (Id.)

Courts in this Circuit overwhelmingly find that “arguments made only in footnotes need

not be considered by the Court.” Guerra v. Commissioner of Social Security, No. 16-CV-991

(MAT), 2018 WL 3751292, at *2, n.1 (W.D.N.Y. Aug. 7, 2018) (referencing F.T.C. v. Tax Club,

Inc., 994 F. Supp. 2d 461, 471 n.1 (S.D.N.Y. 2014) (“It is well settled ... that a court need not

consider arguments relegated to footnotes[.]”)); see Diesel v. Town of Lewisboro, 232 F.3d 92,

110 (2d Cir. 2000) (“We do not consider an argument mentioned only in a footnote to be

adequately raised or preserved for appellate review.”); see also Scott, 315 F.R.D. at 45

(“Arguments made only in a footnote are generally deemed to be waived.”). Even if this Court

were to consider the argument contained in the footnote, the undersigned reiterates that a rebuttal

report need not identify a particular standard or perform an independent analysis, contrary to

Plaintiff’s alleged justification for preclusion. See In re Aluminum Warehousing Antitrust

Litigation, 336 F.R.D. 5, 29-30 (S.D.N.Y. 2020) (collecting cases determining that a rebuttal

report may criticize the methodologies of another expert without offering a competing analysis,

methods, or theories). Accordingly, Plaintiff’s motion to strike the expert rebuttal report of James

Howard is denied.

ii. Clifford Wright

Wright, a rebuttal expert for Neal, determined that the standards that apply to officers and

directors of a corporation include the duty of care, duty of loyalty, and business judgment rule.

(ECF No. 224-51 at p. 6.) He formed this conclusion following his “decades of experience as an

officer, director, employee, member, and manager of entities” in varying industries. (Id. at p. 5.)

Wright concluded that Neal’s report suffers from the following flaws:

a. The Neal Report does not use a reliable methodology that is accepted as a

customary and ordinary standard for directors;

b. Mr. Neal has no experience as a [corporate] governance expert witness;

c. Mr. Neal does not differentiate between the actions of inside directors versus the

Outside Directors;

d. The Neal Report does not describe how each Director failed to perform his

customary and ordinary duty of care under the appropriate standard;

e. Mr. Neal infers, without evidentiary support, that directors of both a subsidiary

and a parent company have inherent conflicts of interest and have self-dealing

interests;

f. A conflict of interest addressed in the industry standards noted above applies to an

undisclosed interest to decision makers and where that undisclosed interest is a

financial interest;

g. Mr. Neal assumes Elk was insolvent as of December 31, 2010 and that Elk and

Ameritrans were insolvent as of December 31, 2011, as concluded by the Hanover

Report dated December 22, 2021;

h. Business Judgment Rule is not addressed;

i. Does not consider in his opinion material acts taken by the Board over the course

of 2011 to capitalize Ameritrans through the $65 million capital infusion with

Columbus Nova;

j. In alleging certain regulatory violations such as the late filings of certain SBA

Forms, Mr. Neal does not consider that while the Outside Directors approved the

content of various filings, filing timely was the responsibility of management; and

k. Mr. Neal incorrectly characterizes to the “Due From Parent” receivable as Elk

improperly “lending to its Parent”.

(ECF No. 224-51 at pp. 7-11.)

Plaintiff contends that Wright’s report should be precluded because he does not state why

Neal’s methodology was unreliable, nor does he identify how the National Association of

Corporate Directors (“NACD”) standards differ from Neal’s “best practices.” (ECF No. 224-54

at pp. 20-21.) Moreover, Plaintiff states that Wright’s opinion is unreliable because he “fails to

identify upon what other basis the NACD standards of care have been determined by this, or any,

Court to be exclusive standard applicable to officers and directors upon which an expert opinion

must be based.” (ECF No. 224-54 at p. 21.)

This argument misstates the principles underlying a Daubert analysis because to

determine the reliability of an expert’s opinion, a party needs to show that the method or standard

relied upon by the expert was used in the community (e.g. whether it was an industry standard)

and whether other experts would apply that same methodology. See Lickteig v. Cerberus Cap.

Mgmt., L.P., 589 F. Supp. 3d 202, 331-332 (S.D.N.Y 2022) (concluding proposed testimony

satisfied Daubert where the expert relied on “well-established industry standards” and “applied

such industry-standard valuation methodologies”). Wright’s report does just that. (See ECF No.

224-51, Wright Report, at p. 5 (noting Wright’s conclusion was based in part on the guidance of

the NACD which “comport with [his] own experience and knowledge of best practices in

corporate governance. The customary standards of care developed by NACD and published in

NACD Blue Ribbon Commission Reports have been derived through collaboration of top

individuals in their fields including business executives, general counsels, law professors,

accountants, bankers, and regulators.”) Indeed, Wright’s report offers more of a basis for how

and why his cited standard was used more so than Neal does with his “best practices” approach.

Additionally, Plaintiff misstates Wright’s conclusion about Neal having no experience as

a corporate governance expert. Plaintiff argues that this opinion “seems to be solely based on Mr.

Neal’s CV showing he has not been admitted as an expert before a Court.” (ECF No. 224-54 at p.

22.) Nowhere does Wright indicate this is the reasoning for his position. In contrast, Wright

arrived at his conclusion because his experience “spans more than 10 years with recent activity.”

(ECF No. 224-51, Wright Report, at p. 8.) The Court declines to entertain Plaintiff’s arguments

that “Wright’s opinion suggests that only those who have testified and been admitted as an expert

previously may be admitted as an expert” (ECF No. 224-54 at p. 23) when the record is silent as

to anything supporting this contention.

Nonetheless, after carefully analyzing each of Wright’s conclusions, Opinion 7 of

Wright’s report should be precluded. In Opinion 7, Wright determined: “Mr. Neal assumes Elk

was insolvent as of December 31, 2010 and that Elk and Ameritrans were insolvent as of

December 31, 2011, as concluded by the Hanover Report dated December 22, 2021. Although

outside the scope of my own report, I understand that this conclusion is disputed by Mr. Craig

Jacobson.” (ECF No. 224-51 at p. 9) (emphasis added). “Where an expert testifies outside the

scope of his discipline, the Court must exclude that portion of his testimony.” RVC Floor Décor,

Ltd., 2023 WL 2838423, at *6; see Davis v. Carroll, 937 F. Supp. 2d 390, 413 (S.D.N.Y. 2013)

(“[W]here an expert is admitted under Rule 702 and then purports to offer opinions beyond the

scope of his expertise, courts strike the extraneous testimony, as the admission of an expert does

not provide that individual with carte blanche to opine on every issue in the case.”) (emphasis in

original).

Accordingly, Plaintiff’s motion to preclude Wright’s Rebuttal Report is denied, with the

exception that Opinion 7 from Wright’s Rebuttal Report is precluded.

iii. Jacobson Original Report

Jacobson was retained to review various financial and business records associated with

Elk and perform a solvency analysis of Elk each quarter from December 31, 2010 until June 30,

2012. (ECF No. 224-49, Jacobson Report at p. 1.) In his Original Report, Jacobson determined

that Elk was solvent during each of these quarters, a conclusion reflecting that:

(i) The balance sheet of Elk at each of these dates showed assets that were greater

than liabilities. In other words, as of each of these dates, Elk could have sold its

assets and fully satisfied its obligations; and

(ii) While Elk was losing money and had a high level of debt as of these dates, these

factors do not speak to the Company’s solvency because Elk management under

the direction of the Board of Directors had sought and obtained equity financing

that, had the Small Business Administration not blocked it, would have

recapitalized the Company and allowed it to become profitable.

(Id. at p. 2.)

Jacobson formed his opinions based on his “review of the documents, the

financial and valuation analyses referred to in this report and contained in the attached

schedules, independent research and [his] past experience, education, training and

professional judgment, which techniques are regularly relied upon by experts in the fields

of financial analysis, forensic accounting, business valuation, and corporate finance.” (Id. at p.

1.)

He specifically utilized the balance sheet test based on Elk’s financials with no

adjustments made, an adjusted balance sheet test used by preparing “pro forma” financial

statements assuming that the expected $25 million equity investment by Columbus Nova actually

took place, a cash flow analysis based on this assumption, and finally a capital adequacy test

based on this assumption. (See id. at ¶¶ 33-66.) Plaintiff contends that Jacobson’s Report ought to

be excluded because he assumed that the Columbus Nova Transaction would be completed and

formed his solvency opinions based on this—an event that never occurred. (See ECF No. 224-54

at p. 14; see also ECF No. 244-71, Jacobson Dep. at p. 62:22-25 (answering “yes” when asked

whether Jacobson made the assumption that the CN financing was going to go through)).

It is undisputed that the Columbus Nova transaction never occurred. Jacobson’s

assumption that it did, and subsequent determination that Elk was solvent using three separate

tests assuming that the transaction occurred, will undoubtedly not assist the trier of fact in

determining whether Elk was solvent during the measurement dates. Contrary to Defendants’

arguments, Jacobson is doing more than “appropriately account[ing] for the possibility of Elk

obtaining an equity investment” through use of those pro forma financial statements. (ECF No.

243 at p. 18.) Jacobson is seeking to interpose a completely separate set of financial

circumstances into his testimony and then form opinions based on those altered facts.

Moreover, for example, Defendants contend that “[t]o the extent the cash-flow test

applies and is forward-looking, it properly considers all ‘reasonably anticipated’ sources of

funds.” (Id. at p. 17.) Such an argument cuts directly against Defendants positions with respect to

other experts, like Hanover (see infra), that the Second Circuit has explicitly declined a forward-

looking cash flow test. Defendants cannot have it both ways. Proving that Elk was able to obtain

future financing is one thing. It is an entirely separate situation to opine as to Elk’s solvency—a

key issue in this case—through changing the reality of a situation and accounting for a $25

million investment that never occurred. See Union Bank of Switz. v. Deutsche Fin. Servs. Corp.,

No. 98 Civ. 3251, 2000 WL 178278, at *10 (S.D.N.Y. Feb. 16, 2000) (finding an adjustment

improper where rather than “shed light on a fair and accurate assessment,” it “tend[ed] to change

the reality that existed on [the relevant solvency date]”).

To the extent Jacobson does not consider the Columbus Nova transaction in forming his

conclusions, which he does when conducting his “historical” (unadjusted) balance sheet analysis,

Jacobson details the unadjusted balance sheets from June 30, 2009 through June 30, 2009,

considers the current and long term assets and liabilities, and concludes Elk had a positive equity

value of each of the dates. His opinion in this context is both relevant and reliable. See In re

LATAM Airlines Group S.A., No. 20-11254, 2022 WL 2206829, at *17-18 (Bankr. S.D.N.Y. June

18, 2022) (accepting an expert’s conclusion based on his balance sheet analysis that compared

total liabilities and assets reflected in financial statements and balance sheets).

As such, Plaintiff’s motion seeking to preclude Jacobson’s Original Report is granted in

part and denied in part. To the extent Jacobson wishes to rely on his unadjusted balance sheet

analysis, he may do so, but Jacobson is precluded from relying on his “pro forma” conclusions

that assume the Columbus Nova transaction occurred.

iv. Jacobson Rebuttal Report

Jacobson also prepared a Rebuttal Report to Hanover’s report, opining that it was

“fundamentally incorrect” for Hanover to “not consider whether [Elk] and [Ameritrans] would

pass the Balance Sheet Test using a going-concern, and not a liquidation, premise of value.”

(ECF No. 224-49, Jacobson Rebuttal Report at ¶ 15.) Moreover, Jacobson avers that Hanover

failed to perform relevant or required analyses for his cash flow and capital adequacy test.

Plaintiff seeks to preclude Jacobson’s Rebuttal Report on the grounds that it is not based

on accurate data and should therefore be precluded under Rule 702. (ECF No. 224-54 at p. 13.)

Specifically, as Plaintiff avers, “Jacobson admits that he did not consider the ability of the

debentures to be accelerated at any time . . . .”. (Id. at pp. 18-19.) Such an argument fails to

account for the fact that Jacobson considered that the SBA could accelerate the debt, but such

acceleration did not occur until May of 2012. (See ECF No. 224-19, Jacobson Rebuttal Report at

¶ 15.) Similarly, the Court finds Plaintiff’s additional argument that “Jacobson’s allegations

throughout both [of] his Report[s] related to SBA are simply restatements of Defendants’

arguments and are not expert opinions . . . and are irrelevant to Jacobson’s insolvency analysis”

to be unpersuasive. (ECF No. 224-54 at p. 19.) Nowhere does Plaintiff pinpoint what arguments

or opinions it is referring to in this overarching, generalized argument.

Nonetheless, Jacobson’s Rebuttal Report details why Hanover’s balance sheet test was

inaccurate, points out the flawed analysis in Hanover’s cash flow and capital adequacy tests, and

raises how many unexplained conclusions are in Hanover’s report. As such, it is a proper rebuttal

report and should be admitted. See Scientific Components Corp. v. Sirenza Microdevices, No. 03

CV 1851 (NGG) (RML), 2008 WL 4911440, at *2 (E.D.N.Y. Nov. 13, 2008) (finding that a

rebuttal report arguing that another report’s flawed methodologies resulted in “unjustified

conclusions” was “archetypical rebuttal testimony: it identifies a flawed premise in an expert

report that casts doubt on both that report’s conclusions and its author’s experience”).

Plaintiff’s motion to preclude Jacobson’s Rebuttal Report, therefore, is denied.

CONCLUSION

For the foregoing reasons, the Court GRANTS Defendants’ motions to preclude the

opinions and testimony of Plaintiff’s experts Jim Neal (ECF No. 235), Adam Hanover (ECF No.

231), and Jeffrey Manning. (ECF No. 233.)

As for Plaintiff’s motion (ECF No. 224),

(i) Plaintiff’s motion to strike the expert rebuttal report of Robert Lashway is

GRANTED in part and DENIED in part in that all opinions formed by

Lashway are permitted with the exception that Lashway’s opinion that Manning

did not consider publicly available information as well as testimony related to the

SBA receivership process is to be precluded;

(ii) Plaintiff’s motion to strike the expert report of James Howard is DENIED;

(iii) Plaintiff’s motion to strike Clifford Wright’s rebuttal report is GRANTED in part

and GRANTED in part in that Wright’s Rebuttal Report is permitted, with the

exception that Opinion 7 from his Rebuttal Report is to be precluded; and

(iv) Plaintiff’s motion to strike the Original Report of Craig Jacobson is GRANTED

in part and DENIED in part in that to the extent Jacobson wishes to rely on his

unadjusted balance sheet analysis, he may do so, but Jacobson is precluded from

relying on his “pro forma” conclusions that assume the Columbus Nova

transaction occurred. In addition, Plaintiff’s motion to strike Jacobson’s Rebuttal

Report is DENIED.

Dated: Central Islip, New York.

June 13, 2025

SO ORDERED,

James M. Wicks

/S/

JAMES M. WICKS

United States Magistrate Judge