Opinion

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF NEW YORK

_____________________________________________

SOUTHWESTERN PAYROLL SERVICE, INC.,

and GRANITE SOLUTIONS GROUPE, INC.,

Plaintiffs/

Counter Defendants,

and 1:19-CV-1349

(MAD/PJE)

NATIONAL PAYMENT CORPORATION,

Intervenor Plaintiff/

Counter Defendant,

vs.

PIONEER BANCORP, INC., and PIONEER

BANK,

Defendants/

Counterclaimants.

_____________________________________________

APPEARANCES: OF COUNSEL:

COOPER ERVING & SAVAGE LLP MICHAEL A. KORNSTEIN, ESQ.

20 Corporate Woods Blvd., Suite 501

Albany, New York 12211

Attorney for Plaintiffs/Counter Defendants

JAYNE PETERS MCVICKER ANDREW JAYNE. ESQ.

BURKE ASKEW & PARKER

401 S. Boston Avenue - Suite 2000

Tulsa, Oklahoma 74103

Attorney for Plaintiffs/Counter Defendants

GREENBERG TRAURIG, LLP CYNTHIA E. NEIDL, ESQ.

54 State Street JENNIFER TOMSEN, ESQ.

6th Floor KENDYL T. HANKS, ESQ.

Albany, New York 12207 ROLAND GARCIA, ESQ.

Attorneys for Intervenor Plaintiff/

Counter Defendant

YOUNG/SOMMER LLC JULIE A. YEDOWITZ, ESQ.

500 Federal Street

5th Floor

Troy, New York 12180

Attorney for Intervenor Plaintiff/

Counter Defendant

DLA PIPER LLP (US) ROBERT J. ALESSI, ESQ.

1251 Avenue of the Americas BEN FABENS-LASSEN, ESQ.

Ste 27th Floor COURTNEY SALESKI, ESQ.

New York, New York 10020 JON MICHAEL REID, ESQ.

Attorneys for Defendants/ M. DAVID JOSEFOVITS, ESQ.

Counterclaimants STEVE M. ROSATO, ESQ.

HODGSON, RUSS LAW FIRM MICHAEL D. ZAHLER, ESQ.

677 Broadway - Suite 401

Albany, New York 12207

Attorneys for Defendants/

Counterclaimants

Mae A. D'Agostino, U.S. District Judge:

MEMORANDUM-DECISION AND ORDER

I. INTRODUCTION

This case is scheduled to proceed to trial on September 28, 2026. Plaintiffs Southwestern

Payroll Service, Inc. ("SWP") and Granite Solutions and Intervenor Plaintiff National Payment

Corporation ("NatPay") (collectively, "Plaintiffs") have sued Defendants Pioneer Bancorp, Inc.

and Pioneer Bank (collectively, "Defendants") for civil fraud and conspiracy related to

Defendants' seizure of over approximately $15 million, which allegedly belonged to Plaintiffs'

third-party clients for payroll tax purposes. See Dkt. No. 245. Defendants deny Plaintiffs' claims

and bring numerous counterclaims against Plaintiffs for fraud and conspiracy. See Dkt. No. 259.

The Court assumes the parties' familiarity with the factual allegations underlying the case and

refers the parties to Plaintiffs' third amended complaint, Defendants' answer and cross claims, and

the decision dated August 25, 2025, denying their motions for summary judgment. See Dkt. Nos.

245, 259, 393.1

Presently before the Court are nine separate motions to exclude expert opinions, also

known as Daubert motions. See Dkt. Nos. 423–32, 442–450. For the reasons that follow, the

parties' motions are granted in part and denied in part.

II. DISCUSSION2

A. Legal Standard

"The admissibility of expert [] testimony is governed by the Federal Rules of Evidence."

Rutledge v. Walgreen Co., 182 F.4th 168, 183 (2d Cir. 2026). Rule 702 sets forth the basic tenets

for an expert opinion, requiring as follows:

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.

1 Plaintiffs also brought claims against Michael T. Mann and companies he partially or fully

owned or controlled. Defendants brought cross claims against those same parties. Neither Mann

nor his companies have appeared in the action, and they are not parties to the pending motions.

2 Citations to the parties' filings are to the page numbers generated by CM/ECF in the header of

each page.

FED. R. EVID. 702. "This standard requires district courts to look carefully at the qualifications

and methodology of each expert." Rutledge, 182 F.4th at 184; see also Daubert v. Merrell Dow

Pharms., 509 U.S. 579, 598 (1993).

"Under Federal Rule of Evidence 703, an expert's opinion may be based on facts or data

that are not themselves admissible, so long as 'experts in the particular field would reasonably rely

on those kinds of facts or data in forming an opinion on the subject.'" United States v. Ray, 583 F.

Supp. 3d 518, 533 (S.D.N.Y. 2022) (quoting FED. R. EVID. 703). "The expert is not permitted to

simply transmit otherwise inadmissible facts to the jury but 'must form his own opinions by

"applying his extensive experience and a reliable methodology" to the inadmissible materials.'"

Id. (quoting United States v. Mejia, 545 F.3d 179, 197 (2d Cir. 2008)) (additional citation

omitted). "'[I]f the facts or data would otherwise be inadmissible, the proponent of the opinion

may disclose them to the jury only if their probative value in helping the jury evaluate the opinion

substantially outweighs their prejudicial effect.'" Id. (quoting FED. R. EVID. 703).

Further, "experts in civil cases may, while providing otherwise appropriate expert

opinions, speak to mental states, [and] provide ultimate-issue opinions . . . ." Waldman v.

Palestine Liberation Org., 171 F.4th 575, 597 (2d Cir. 2026). "Federal Rule of Evidence 704(a)

provides that '[a]n opinion is not objectionable just because it embraces an ultimate issue.'" Id.

"Rule 704(b) adds a caveat for opinions about mental states in criminal cases, but that 'exception

does not apply in civil cases.'" Id. (quoting Diaz v. United States, 602 U.S. 526, 534 (2024)).

"'The law assigns district courts a "gatekeeping" role in ensuring that expert testimony

satisfies the requirements of Rule 702.'" Id. (quoting United States v. Farhane, 634 F.3d 127, 158

(2d Cir. 2011)). "'To determine whether a witness qualifies as an expert, courts compare the area

in which the witness has superior knowledge, education, experience, or skill with the subject

matter of the proffered testimony.'" Rutledge, 182 F.4th at 184 (quoting United States v. Tin Yat

Chin, 371 F.3d 31, 40 (2d Cir. 2004)). "'Experts need not conduct studies of their own in order to

opine on a topic; a review of other studies and scientific literature can be enough to qualify

experts to testify and to make that proposed testimony reliable.'" Id. (quoting In re Mirena IUD

Prods. Liab. Litig., 169 F. Supp. 3d 396, 412 (S.D.N.Y. 2016)).

"To determine reliability, the district court may consider whether the expert's theory or

technique can and has been tested; whether it has been subjected to peer review and publication;

whether it has a known error rate or standards to control its operation; and its general acceptance

in the relevant scientific community." Id. (citation omitted). "The objective of this gatekeeping

requirement is 'to 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.'" Id. (quoting Kumho Tire Co. v.

Carmichael, 526 U.S. 137, 152 (1999)). "'In deciding whether a[n] . . . expert's analysis is

[]reliable, 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.'" Id. (quoting Amorgianos v. Nat'l R.R.

Passenger Corp., 303 F.3d 256, 267 (2d Cir. 2002)) (alteration in original).

"While the focus of [a] court's Daubert inquiry should be 'on principles and methodology,

not on the conclusions that they generate,' . . . 'conclusions and methodology are not entirely

distinct from one another . . . .'" Id. (citations omitted). "Accordingly, 'nothing in either Daubert

or the Federal Rules of Evidence requires a district court to admit opinion evidence that is

connected to existing data only by the ipse dixit of the expert.'" Id. (citation omitted).3

"Consequently, 'when an expert 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.'" Id. (quoting Ruggiero v. Warner-Lambert Co.,

424 F.3d 249, 255 (2d Cir. 2005)).

"As the Rules Committee has explained, '[i]t will often occur that experts come to

different conclusions based on contested sets of facts. Where that is so[, Rule 702] does not

necessarily require exclusion of either side's experts.'" Id. at 184-85 (quoting FED. R. CIV. P. 702

committee note to 2023 amendment) (alterations in original). "That is because a party 'do[es] not

have to demonstrate to the judge by a preponderance of the evidence that the assessments of their

experts are correct, they only have to demonstrate by a preponderance of the evidence that their

opinions are reliable.'" Id. (citation omitted). "The evidentiary standard of reliability is lower

than the merits standard of correctness." Id. (citation and quotation marks omitted).

"In deciding whether expert testimony will be helpful to the fact-finder, the Court must

determine whether the testimony 'usurp[s] either the role of the trial judge in instructing the jury

as to the applicable law or the role of the jury in applying that law to the facts before it.'" Scott v.

Chipotle Mexican Grill, Inc., 315 F.R.D. 33, 48 (S.D.N.Y. 2016) (quoting United States v.

Lumpkin, 192 F.3d 280, 289 (2d Cir. 1999)). "While an expert 'may opine on an issue of fact

within the jury's province,' an expert 'may not give testimony stating ultimate legal conclusions

3 "Ipse dixit is a Latin term that translates to 'he himself said it.' In legal contexts, it refers to an

assertion or statement made by an individual based solely on their own authority, without any

supporting evidence or proof. It is often used to criticize arguments or claims that rely solely on

the speaker's authority, rather than objective evidence or reasoning." Ipse Dixit, Legal

Information Institution, Cornell Law School, https://www.law.cornell.edu/wex/ipse_dixit, (last

visited Sept. 2, 2026).

based on those facts.'" Id. (quoting United States v. Bilzerian, 926 F.2d 1285, 1294 (2d Cir.

1991)). "Relatedly, no expert may 'supplant the role of counsel in making argument at trial, and

the role of the jury [in] interpreting the evidence.'" Id. (quoting Primavera Familienstifung v.

Askin, 130 F. Supp. 2d 450, 529 (S.D.N.Y. 2001)). In other words, "'[a]n expert should not be

permitted to express an opinion that is merely an interpretation of federal statutes or regulations,

as that is the sole province of the Court.'" Jones v. Midland Funding, LLC, 616 F. Supp. 2d 224,

227 (D. Conn. 2009) (citation omitted); see United States v. Feliciano, 223 F.3d 102, 121 (2d Cir.

2000). Additionally, "'[i]nferences about the intent or motive of parties or others lie outside the

bounds of expert testimony.'" In re Payment Card Interchange Fee & Merch. Disc. Antitrust

Litig., No. 05-MD-1720, 2022 WL 15044626, *16 (E.D.N.Y. Oct. 26, 2022) (quoting In re

Rezulin Prods. Liab. Litig., 309 F. Supp. 2d 531, 547 (S.D.N.Y. 2004)). "'Experts may, however,

offer testimony discussing "ordinary practices and usages" in a particular industry.'" Id. (quoting

Scott, 315 F.R.D. at 46).

Finally, "'[t]he scope of a rebuttal is limited to the same subject matter encompassed in the

opposing party's expert report, but district courts have been reluctant to narrowly construe the

phrase same subject matter beyond its plain language.'" Liberty Mut. Ins. Co. v. Day to Day

Imports Inc., No. 22-CV-2181, 2025 WL 2117897, *7 (S.D.N.Y. July 29, 2025), on

reconsideration in part, 2025 WL 2531478 (S.D.N.Y. Sept. 3, 2025) (quoting Scott, 315 F.R.D. at

44). "[R]ebuttal reports 'must meet Daubert's threshold standards regarding the qualifications of

the expert, sufficiency of the data, reliability of the methodology and relevance of the testimony.'"

Id. (citation omitted). "Like any expert report, rebuttal reports may not usurp the court's role in

instructing the jury on the law." Id. (citing Sec. & Exch. Comm'n v. Lek Sec. Corp., No. 17-CV-

1789, 2019 WL 1304452, *3-4 (S.D.N.Y. Mar. 21, 2019)). "'Nor may the rebuttal expert witness

usurp the role of the trial court to act as gatekeepers to ensure the relevance and reliability of all

expert testimony.'" Id. (quoting Capri Sun GmbH v. Am. Beverage Corp., 595 F. Supp. 3d 83,

139 (S.D.N.Y. 2022)).

"A rebuttal report could be excluded while the initial report is admitted, . . . or a rebuttal

report may be admitted while the initial report is excluded[.]" Id. (citing City of New York v.

FedEx Ground Package Sys., Inc., No. 13-CV-9173, 2018 WL 4961455, *5 (S.D.N.Y. Oct. 15,

2018); Allen v. Koenigsmann, No. 19-CV-8173, 2023 WL 11803060, *6 (S.D.N.Y. Mar. 30,

2023)). "However, because rebuttal reports often involve similar opinions from the same experts

and face very similar requirements, they often meet the same or nearly the same fate as the initial

report from the corresponding expert." Id. (citation omitted).

"[W]hile '[a] rebuttal expert report is not the proper place for presenting new legal

arguments, unless presenting those arguments is substantially justified and causes no prejudice,' . .

. '[r]ebuttal evidence is properly admissible when it will explain, repel, counteract or disprove the

evidence of the adverse party[.]'" Better Holdco, Inc. v. Beeline Loans, Inc., 666 F. Supp. 3d 328,

354 (S.D.N.Y. 2023) (quoting Ebbert v. Nassau Cnty., No. 05-CV-5445, 2008 WL 4443238, *13

(E.D.N.Y. Sept. 26, 2008); Scott, 315 F.R.D. at 44). "'[A] rebuttal expert need not use the same

methodology as the affirmative expert to stay within the "same subject matter."'" Id. (citation

omitted).

B. Analysis

1. Individual Experts

a. David Payne

David Payne was retained by Plaintiffs "to evaluate and consider the financial results

subsequent to April 30, 2021[.]" Dkt. No. 423-4 at 4. He engaged in an "[a]ssessment of the

revenues, operating costs and net profits . . . available to [SWP] both prior and subsequent to the

alleged wrongful acts of" Defendants. Id. at 3. He identified "customer tax funds . . . affected by

the alleged wrongful acts" and assessed "customer composition and retention . . . both prior to and

subsequrnt to the alleged wrongful acts." Id. Payne opines on "the actual and projected economic

results and profits" of SWP as well as SWP's damages as a result of Defendants' alleged

wrongdoing. Id. He concludes that SWP lost approximately $1.5 million in profits as a result of

Defendants' conduct. See id. at 9. Payne states that SWP's business loss value is approximately

$1,770,000. See id. at 10-11.

Defendants seek to exclude Payne's opinion, arguing that his accounting background is

insufficient to permit him to testify about payroll accounts, he inappropriately relies on hearsay

and evaluates the credibility of witnesses to support his opinions, and he failed to consider

alternative explanations for why SWP lost clients. See Dkt. No. 423-1 at 6-7.

Plaintiffs argue that Payne is well-qualified to testify about the value of businesses

because of this thirty-five years of experience in the accounting industry, and that "[c]onsistent

with well-established valuation methodology employed in cases where there has been financial

harm to a company, Mr. Payne calculated damages Southwestern Payroll may be entitled to

through the 'but for' method, looking at the resulting diminution in value of Southwestern Payroll

that could be contributed to Pioneer's wrongful actions." Dkt. No. 446 at 5.

The Court agrees that Payne is qualified to testify about a company's valuation and

damages. The Court also agrees that his opinion rests on questionable proper methodology. The

Court will not permit him to present his opinions to the jury unless he can lay a proper foundation.

It is appropriate for an expert to assume certain facts and conclusions in calculating

damages, such as who is at fault. See AngioDynamics, Inc. v. C.R. Bard, Inc., 537 F. Supp. 3d

273, 331 (N.D.N.Y. 2021) ("[A]s an expert on causation and damages rather than liability, it was

appropriate for [the expert] to do what he did here, i.e. assume a finding that [the defendants]

adopted a coercive tying policy, and then perform an analysis of the separate question of whether

that coercive policy actually caused [the plaintiff] to lose any [] sales that it otherwise would have

made"). However, Payne does not discuss only the amount of SWP's damages as a result of

Defendant's alleged wrongdoing. He opines that because of Defendant's presumed wrongdoing,

SWP clients stopped working with SWP, and then calculates SWP's losses as a result. Payne has

not provided any support for his conclusions that the loss of SWP's clientele was because of

Defendants' conduct. See AngioDynamics, 537 F. Supp. 3d at 331 (excluding the expert's

damages opinion "because it does little more than summarize record evidence (including sales and

market share data and documents produced in this litigation) and lend [] expert credentials to [the

plaintiff's] interpretation of that evidence. Dr. Frankel offers no specialized economic analysis

that would assist a fact-finder in interpreting the record evidence he relies on").

For example, Payne explains in his report that "[t]he 'but for' analysis consisted of

estimating the Company's income generating capacity assuming that the alleged wrongful acts

had not occurred." Dkt. No. 423-4 at 8. However, as Defendants point out, that calculation

assumes that SWP lost clients only because of Defendants' conduct, and that had Defendants'

conduct not occurred, SWP would never have lost a single client. See Dkt. No. 423-1 at 24-25.

Plaintiffs argue in their response that "Payne considered a plethora of records and

documents that go beyond just conversations with Southwestern Payroll's president and receiver.

Overall, Mr. Payne's report lists eighty-seven categories of documents and data considered in

forming his opinions . . . ." Dkt. No. 446 at 9. It is true that Payne reviewed a plethora of

information, including third-party client engagement records, financial agreements, escrow

account statements, tax returns, income statements, and transaction reports. See Dkt. No. 423-4 at

14-15. However, none of that information provides Payne with evidence supporting his

assumption that SWP lost some of its clients because of Defendants' conduct.

During his deposition, Defendants' counsel stated that it appeared Payne did not "look at

whether clients may have left because they felt that [SWP] had done something wrong." Dkt. No.

423-3 at 48. Payne responded that he relied on "what the plaintiff asserts." Dkt. No. 423-3 at 48-

49 (emphasis added). Defendants' attorney asked, "Am I correct that you are relying on the

assertions of Southwestern Payroll in stating in this report this causal link between actions of

Pioneer and loss of business for Southwestern Payroll?" Id. at 49. Payne stated in response that

in many of his fiduciary duties, if he "had funds on deposit" that were frozen, he "would seriously

consider and probable move [his] account" but that he is "relying on the plaintiff." Id. at 49-50.

He then testified that Plaintiffs "listed" the account that "they claim were lost because of"

Defendants' actions. Id. at 50.

Plaintiffs argue that "[i]t does not convert the expert into an impermissible hearsay conduit

so long as the expert applies independent expertise to the material relied upon, rather than simply

repeating an unverified conclusion." Dkt. No. 446 at 12-13. However, the latter appears to be

what Payne has done; he has repeated an unverified conclusion. SWP concluded that specific

clients stopped working with SWP because of Defendants' conduct. They listed those clients in a

report, gave that report to Payne, and asked Payne to provide an opinion about the amount of

money SWP lost from those clients leaving. That is not, by itself, permissible expert testimony.

See Fashion Boutique of Short Hills, Inc. v. Fendi USA, Inc., 314 F.3d 48, 59 (2d Cir. 2002)

(excluding expert testimony because "[t]o permit Fashion Boutique to present evidence of the

value of the entire business in the absence of evidence of widespread dissemination would invite

the jury to award damages based on speculation").

Plaintiffs compare Pioneer's arguments about Payne to their own objections to one of

Defendants' damages experts, Scott Carnahan. First, SWP did not make a motion to exclude

Carnahan as an expert witness. Second, Carnaharn's assumptions appear to be based on the

amount of money Defendants issued to Michael Mann and the entities he owned as lines of credit.

See Dkt. No. 446-3. Those assumptions do not require Carnahan to rely on Pioneer's statements

regarding third parties' reasons for taking certain actions. Rather, Carnahan's report assumes only

that SWP and NatPay knew about Mann's fraud, making them liable to Pioneer for the amount of

money Mann drew down as lines of credit from Pioneer and never repaid. Plaintiffs are, of

course, permitted to cross-examine Carnahan about his conclusions at trial, but Plaintiffs'

arguments do not save the errors identified in Payne's opinion. Rather, the Court will not permit

Payne to testify unless Plaintiffs present appropriate foundation for the conclusions that certain

third-party clients stopped working with SWP because of Defendants' actions.

b. Joseph Sova and Daniel Wood

Joseph Sova has been offered by Plaintiffs as a rebuttal expert to Defendants' experts,

Nicholas Pirrung and Daniel Wood. Because Sova is proffered as a rebuttal expert, the Court will

address Pirrung and Wood, first. Plaintiffs have not moved to preclude Pirrung from testifying or

sought exclusion of any portion of his report. They do, however, move to exclude Wood's

opinions. See Dkt. No. 429-4.

Wood is a licensed attorney who worked as an assistant attorney general at the Texas

Department of Banking on matters concerning money services businesses, including money

transmitters. See Dkt. No. 429-2 at 3. Subsequently, and to today, he has been practicing at a law

firm where he advises "businesses with respect to the regulation of [money services businesses],

including money transmitters under both state and federal law." Id. Wood was retained by

Defendants "to develop an opinion and prepare this report with respect to the question of whether

[SWP, NatPay, Cloud Payroll, and/or MyPayroll] were required to be licensed as a money

transmitter by any state regulatory authorities pursuant to relevant state laws." Id. at 4. After

reviewing and discussing the laws of Arkansas, Connecticut, Idaho, Oklahoma, and Texas, Wood

opines that "each of the Mann Payroll Companies was required to obtain and maintain at least one

state money transmission license during the relevant time period based on the payroll activities

described herein." Id. at 27.

Plaintiffs move to exclude Wood's testimony, arguing that his opinion is an improper legal

conclusion which "rests on an unreliable foundation that would not be helpful to the jury . . . ."

Dkt. No. 429-4 at 6-7. Specifically, Plaintiffs contend Wood cannot explain to the jury what the

law requires regarding money transmitters nor can he conclude that Plaintiffs meet those legal

definitions. Plaintiffs also argue that Wood's opinion is irrelevant because he "ignored the one

relevant state—New York." Id. at 15 (emphasis omitted). Plaintiffs state that "Wood's opinion

about Plaintiffs' licensure status in random states is not relevant because it is neither sufficiently

tied or the facts of the case nor consequence in determining the action." Id. Plaintiffs emphasize

that "Wood has regulatory experience in exactly one state—Texas . . . ." Id. at 16 (emphasis

omitted). They assert that this means "Wood is in no way qualified to speak generally about 'state

money transmission laws' or specifically about the laws of states where he has neither practiced as

a lawyer, is not licensed as a lawyer, nor has ever been employed." Id. at 17.

Defendants argue in response that (1) Wood is qualified to testify about money

transmitters because of his years of experience in the banking industry dealing directly with

money transmission; (2) he is allowed to testify about a complex issue that is not common

knowledge; and (3) New York is not the only relevant state. See Dkt. No. 442.

Defendants have a counterclaim against Plaintiffs for a civil RICO claim. See Dkt. Nos.

259, 332. Defendants allege that "[t]he numerous acts of financial institution/bank fraud, wire

fraud, and operating as illegal money transmitting businesses set forth above constitute a pattern

of racketeering activity pursuant to 18 U.S.C. § 1961(5)." Id. at ¶ 230.

In their summary judgment motion, Defendants argued that "[e]ven were the Court to find

a factual dispute as to whether the exception applies to Mann's conduct, SWP's felonious

operation as an unlicensed money transmitter and Alred's intentional concealment of information

about its handling of employer-client funds alone warrant application of the in pari delicto

doctrine4 []." Dkt. No. 341-1 at 19 n.2. Therefore, pursuant to Defendants' theory of the case,

they cannot be held liable for the harm alleged by Plaintiffs because Plaintiffs are "money

transmitters" but failed to have a "money transmitter" license, which is illegal.

In Judge Scullin's summary judgment decision from August of 2025, he explained that

"Defendant Pioneer [] asserts that separate, unconnected, alleged misconduct by Plaintiff

Southwestern Payroll alone warrants the application of the in pari delicto doctrine []." Dkt. No.

393 at 9 n.8 (citation omitted). Judge Scullin noted that "Defendant Pioneer argues that Plaintiff

Southwestern Payroll conducted business feloniously by operating as an unlicensed money

4 "The doctrine of in pari delicto, a term meaning 'of equal fault,' reflects the principle that a

plaintiff who has participated in wrongdoing equally with another person may not recover from

that other person damages resulting from the wrongdoing." Republic of Iraq v. ABB AG, 768 F.3d

145, 160 (2d Cir. 2014). "Not only must the plaintiff 'be an active, voluntary participant in the

unlawful activity that is the subject of the suit,' but it is necessary that 'the degrees of fault [be]

essentially indistinguishable or the plaintiff's responsibility [be] clearly greater.'" Id. (citation

omitted).

transmitter and, through its representative [Jeffery Darin] Alred,5 intentionally concealed

information." Id. Additionally, "Defendant Pioneer argues that Intervenor Plaintiff NatPay

conducted business feloniously by operating as an unlicensed money transmitter and, through its

business relationship with Defendant Mann, assisted in Defendant Mann's fraud." Id. at 23. And

"Intervenor-Plaintiff NatPay argues that these assertions of wrongful conduct in operating

business with Defendant Mann are disputed, and Defendant Pioneer's claim that NatPay operated

as an unlicensed money transmitter is irrelevant." Id. Judge Scullin found "that there remains an

issue of fact as to whether Intervenor-Plaintiff NatPay's conduct triggers the doctrine of in pari

delicto and bars Intervenor-Plaintiff NatPay's claims." Id.

To permit an expert to tell the jury that Plaintiffs meet the legal definition of "money

transmitter" would usurp the jury's role. See In re Term Commodities Cotton Futures Litig., No.

12-CV-5126, 2020 WL 5849142, *13 (S.D.N.Y. Sept. 30, 2020) ("Mr. Marshall is not testifying

that Defendants' conduct was not a 'bona fide hedging transaction' within the definition of CFTC

regulations; but instead he is commenting on whether Defendants' market actions resemble those

of a hedger or speculator. Such expert commentary is admissible").

That does not mean that Wood must be entirely precluded from testifying. The concept of

a "money transmitter" and the existence of licensing requirements is not a subject matter that is

commonly known. It will aid the jury to hear testimony explaining the concept of money

transmission, but the Court will not permit Wood to go so far as to conclude that SWP meets the

legal definition of a "money transmitter." Wood may testify to, and be questioned about, whether

the federal government and certain states require a money transmitter to be licensed. He may also

5 Alred was the sole owner of SWP prior to Mann's purchase of 51% of SWP's outstanding stock

in 2017. See Dkt. No. 245 at ¶¶ 82-83.

testify as to whether SWP or NatPay were licensed as such. The Court will not permit Wood to

testify about what the laws in various states require and whether NatPay or SWP meet those

various states' legal requirements. The Court is the sole instructor on the law, and the jury must

decide whether the evidence meets the law given by the Court.

Because the Court is excluding Wood's testimony insofar as he opines that Plaintiffs are is

"money transmitters," SWP's rebuttal witness, Sova, will not be permitted to testify to the

contrary.

As to Sova, the Court recognizes Defendants many other challenges to his testimony and

finds that most of them are better suited for cross examination. Defendants move to exclude

Sova's opinion because it is outside the scope of proper rebuttal testimony and he is not otherwise

qualified to give opinions about industry practices/standards. See Dkt. No. 424-1. Plaintiffs

disagree, arguing that Sova's personal experience owning and operating a payroll company makes

him qualified to testify about industry standards and practices. See Dkt. No. 445. Plaintiffs also

contend Sova's opinions are directly responsive to Pirrung and Wood's opinions. See id.6

Sova's report lacks proper foundation in some respects. It is true that:

[n]othing in this amendment is intended to suggest that experience

alone – or experience in conjunction with other knowledge, skill,

training or education – may not provide a sufficient foundation for

expert testimony. To the contrary, the text of Rule 702 expressly

contemplates that an expert may be qualified on the basis of

experience. In certain fields, experience is the predominant, if not

sole, basis for a great deal of reliable expert testimony."

Beede v. Stiefel Lab'ys, Inc., No. 1:13-CV-120, 2016 WL 916418, *21 (N.D.N.Y. Mar. 7, 2016)

(quoting Advisory Committee Notes to Rule 702).

6 Defendants also seek to preclude Sova's opinion to the extent Sova addresses Pioneer's state of

mind. Because this argument is raised in multiple motions currently before the Court, the Court

addresses it at the end of this Memorandum-Decision and Order.

Sova explains his experience and background as being involved "in the payroll industry

since 2003 . . . ." Dkt. No. 424-4 at 3. Between 2003 and 2005, Sova "worked in an operational

role gathering tax data and managing accounts for a Professional Employer Organization []." Id.

"From 2005-2011, [he] worked for Paychex, one of the largest payroll processing companies in

the world. [He] worked at Paychex in a sales capacity, earning multiple national, regional, and

district awards for performance." Id.

Sova then owned and operated his own payroll service company between 2011 and 2023

called ANLU LLC d/b/a Ideal Payroll Service. See id. Sova explained as follows:

I started my company with zero clients, zero employees, and zero

revenue. I grew this company to a team that serviced hundreds of

clients and tens of thousands of client employees annually. I was

deeply involved in every aspect from operations, tax, sales, vendor

choice, daily ACH processing, and more. I merged our company

with a larger provider in mid 2023. I have experienced the entire

lifecycle of a payroll service bureau from starting at zero to a

successful exit.

Id. Sova utilized Intervenor-Plaintiff NatPay as one of his ACH vendors. His "company had

almost daily interaction with the NatPay team." Id.

Sova noted that he has "been a part of a number of payroll industry peer groups, attended

payroll educational events, and attended payroll conferences. As a payroll service bureau owner,

[he] kept up to date on current topics and important changes in the payroll and payroll tax

landscape." Id. at 3-4. Sova states that he is "an expert covering topics in payroll, payroll tax,

human resources, [professional employer organizations], small business, management, leadership,

communication, and entrepreneurship," has "consulted and trained small business owners on

topics including sales, operations, [and] leadership" and is "an award-winning Entrepreneur and

Board Certified Business Success Coach." Id. at 4.

As the Court has already concluded that Wood, and in turn Sova, cannot testify as to

whether SWP and NatPay were money transmitters who required licensure in specific states, the

Court will focus this portion of its review of Sova's rebuttal to Pirrung's report.

Sova provided five opinions to rebut Pirrung. Again, SWP did not move to exclude

Pirrung as an expert. Sova opines: (1) "[t]here were multiple legitimate business reasons for

SWP and NatPay to process payroll tax funds in the manner they did and in doing so reduced

risks for both companies"; (2) "[i]t was a normal business practice for SWP to use its parent

company, Cloud Payroll, to process payroll tax, and the existence or non-existence of a shared

services agreement has nothing to do with what transpired between Mann and Pioneer"; (3) "SWP

and NatPay did not 'enable' Mann’s fraud"; (4) "SWP exercised appropriate due diligence before

selling controlling interest to Cloud Payroll"; and (5) "[t]here were multiple legitimate reasons for

SWP and Natpay to handle ACH transactions the way they did. Doing so in this case actually

reduced their risk." Dkt. No. 424-4.

Some of these opinions are subject to cross examination, while others will not be

permitted to go before the jury. As to the first opinion, Sova discusses whether it was appropriate

for SWP to use two different ACH processes for payroll and payroll tax funds. See id. at 6. Sova

states, inter alia, that "[u]sing two vendors is common in business and especially in payroll,"

"fraud is a very real concern in any business"; "[h]aving one ACH provider responsible for both

payroll funds and tax funds is a larger risk than having a provider for each function"; and "SWP is

only here today because it did not use Cachet as its sole vendor to move payroll funds and payroll

tax funds." Id. at 8.

Sova does not appear to provide support for these assertions. He does not explain whether

he knows these things based on the time he ran his own company or whether he knew of other

companies that did similar things, nor does he explain how he opines that the "only" reason SWP

did not go out of business is because it used more than one ACH processor. Although Sova

worked for a payroll company other than his own for six years, he worked there in a sales

capacity. See Dkt. No. 424-4 at 3. He does not explain what that experience taught him that

would apply to his opinions for this case.

As Defendants point out in their motion, Sova testified during his deposition that he did

not use separate vendors for processing payroll and payroll tax for his own company, like SWP

did. See Dkt. No. 424-1 at 18 (citing 205:3-25). In his opinion, Sova discusses how "[t]he use of

Prosperity Bank to ACH money from employer clients before NatPay moved the money to its

home bank (First Premier) and ultimately to Pioneer made business sense given the dynamics of

Mann purchasing SWP." Dkt. No. 424-4 at 8. In doing so, he explains that Alred, SWP's partial

owner, "believed" "it was important to utilize a local bank to maintain a local feel with his

clients," "that by initializing the ACH transactions from the same local bank he had utilized in the

past, [Alred] could maintain the local connection with many of his clients" and "that having

Prosperity Bank initiate the payroll and payroll tax transactions actually gave [Alred] some

oversight and the ability to deal with payroll tax issues that arise directly with the client by having

immediate access to Prosperity Bank accounts." Id.

"Although the Rules permit experts some leeway with respect to hearsay evidence, . . . 'a

party cannot call an expert simply as a conduit for introducing hearsay under the guise that the

testifying expert used the hearsay as the basis of his testimony.'" Marvel Characters, Inc. v.

Kirby, 726 F.3d 119, 136 (2d Cir. 2013) (quoting Malletier v. Dooney & Bourke, Inc., 525

F.Supp.2d 558, 666 (S.D.N.Y. 2007)); see FED. R. CIV. P. 703. "The appropriate way to adduce

factual details of specific past events is, where possible, through persons who witnessed those

events." Id. "And the jobs of judging these witnesses' credibility and drawing inferences from

their testimony belong to the factfinder." Id. (citing Nimely v. City of New York, 414 F.3d 381,

397-98 (2d Cir. 2005)). The Court finds that Sova's opinions related to Alred's statements and

beliefs about SWP is a step too far. Plaintiffs do not explain why Alred cannot himself testify

before the jury about why he took certain steps or made specific choices with respect to running

SWP.

Sova also opines that "[p]ayroll and payroll tax processing for payroll companies the size

of the ones owned or controlled by Mann in this case require near daily communication with the

bank to check balances, make wires, or correct problems." Dkt. No. 424-4 at 9. He stated, "[i]n

fact, it requires so much interaction with the bank that it would be virtually impossible for the

bank not to know that payroll and payroll tax was being housed at the bank." Id. at 9.

Sova does not provide an explanation for how he knows about "payroll companies the size

of the ones owned or controlled by Mann in this case." He does not cite or reference any outside

information. He never mentions working with companies of that size, or whether his own

company was of a similar size.

Sova then states, among many other things, that "Pioneer not only froze and took SWP's

employer client payroll tax funds, it froze and took the payroll funds of employer clients of

MyPayrollHR and ProData." Id. Sova has not presented a sufficient foundation for his opinion

that the funds in the accounts belonged solely to SWP's third-party clients.

These same issues persist throughout Sova's second through fifth opinions. For example,

he states that "I do not see how a shared services agreement would have prevented the

movement of payroll tax funds to cover overdrafts in other accounts or Pioneer's decision

to take the payroll tax funds to cover Mann's bounced checks in other accounts," id. at 11; and

"based on my experience in the payroll industry, I do not know of any industry practice that

requires separate payroll tax accounts for SWP, ProData, and MyPayrollHR, when each of those

companies are majority owned by Cloud Payroll," id. at 13. Sova asserts that "[i]t makes perfect

since that when one company owns controlling interest in multiple payroll service bureaus and

has a centralized tax office, the payroll tax funds flow into one tax account for all of three of the

payroll tax bureaus." Id.

Sova does not explain what experiences give him such knowledge. He provides no

examples, references no personal experiences, and relies on no outside sources of information.

Sova does explain that he has "gone through the process of selling a payroll company," which

SWP did when Mann bought a controlling share. Id. However, Defendants accurately note that

during Sova's deposition testimony, he stated that his selling experience was different than SWP's

experience because Sova's "sale was to a large organization as an asset sale. So it was very

different than selling to an individual a percent of my business in a stock sale. So different

scenario." Dkt. No. 424-1 at 23 (quoting Dkt. No. 424-5 at 267).

Nevertheless, Sova did own and run his own payroll company for twelve years. Where

Defendants believe there are gaps in his knowledge and opinions based on his experience, or lack

thereof, they may cross-examine him about that.

Insofar as Sova's opinion about SWP's sale to Mann states what Alred did or believed at

the time of the sale, see Dkt. No. 424-4 at 13 ("Alred did not see any red flags when he was

dealing with Mann about the sale of 51% of SWP"), Plaintiffs do not explain why Alred cannot

testify to that himself or why it must be stated through an expert witness.

In Sova's fifth opinion, he explains that he "used NatPay for 12 years with my own

company and can say they performed more due diligence on new clients we brought on than any

other vendor I experienced." Id. at 15. Sova states NatPay "regularly had questions asking for

new client details or provided information on potential fraud alerts. It was quite impressive given

the volume of transactions that run through their system daily." Id. Sova opined, "[b]ased on my

experience, training, and expertise, the due diligence I experienced from NatPay was the best in

the industry." Id. at 15. Sova does not explain if he ever worked with other vendors besides

NatPay. Sova states only that he "used NatPay as one of [his] ACH vendors of choice for the

entire length of [the] business." Dkt. No. 424-4 at 3. He does not explain how he knows NatPay

is the "best." Id. at 15. Therefore, this opinion will not be permitted.

In sum, Defendants' motion to exclude Sova is granted to the extent outlined herein, and

Plaintiffs' motion to exclude Wood is granted in part and denied in part.

c. James Kreig and Bryant Moravek

Defendants have proffered James Kreig as an expert "to help the jury understand the

technical banking mechanics at the center of this case and to explain why Pioneer’s conduct was

consistent with standard industry practice." Dkt. No. 443 at 5.

Plaintiffs move to exclude Kreig's testimony. See Dkt. No. 428. Plaintiffs concede that

Kreig is qualified to provide testimony about banking industry practices and procedures, but they

argue that his opinions are inappropriate legal conclusions which invade the Court and the jury's

roles. See id. at 6.

Plaintiffs argue that the following opinions from Kreig are legal conclusions that should

be precluded:

The Pioneer Bank deposit accounts at issue were unrestricted

demand deposit or checking accounts, not special deposit accounts

or fiduciary accounts. . . .

[A]ll deposits into the accounts of the Mann Entities at Pioneer

Bank became the property of Pioneer Bank, regardless of whether

certain deposits were intended by some for payment of tax

obligations . . . .

[T]he third parties that caused funds to be deposited into the Cloud

Payroll account at Pioneer Bank did not retain any possessory

interest in those funds after they were transferred. Pioneer Bank

had no obligation or business reason to review the details of the

transactions in the accounts of Mann's payroll companies. . . .

Pioneer Bank's provision of Remote Deposit Capture privileges to

Mann's companies was appropriate. . . .

Pioneer Bank's exercise of the contractual and statutory right of

setoff or overdraft recovery was consistent with commonly

accepted practices in the banking industry.

Pioneer Bank properly treated the accounts of the Mann Entities as

belonging to a single entity for purposes of setoff because the Mann

Entities operated as a common enterprise. . . .

Pioneer Bank’s decision to accept deposits into the Cloud Payroll

account while blocking withdrawals was consistent with the

standard practice in the banking industry for freezing or restricting

use of an account, and it had no obligation to investigate the source

of the funds that were being deposited before performing setoff or

chargeback.

Dkt. No. 428 at 10-17. To support their argument to exclude Kreig, Plaintiffs cite a case from the

Middle District of Florida wherein a district court judge "rebuffed Kreig’s testimony." Dkt. No.

428 at 17. In W. Wyvern Cap. Invs. LLC v. Bank of America, N.A., No. 8:22-CV-191 (M.D. Fl.),

the district judge denied as moot a motion to exclude Kreig as an expert witness because the judge

granted summary judgment. See Dkt. Nos. 163, 164. However, in granting summary judgment,

the court noted that Kreig's opinion included "numerous inappropriate legal conclusions," was

"unreliable," and included a "baseless" opinion that no reasonable fraud investigation should take

more than 60 days. Dkt. No. 163 at 25-26.

Plaintiffs proffer Bryant Moravek as a rebuttal witness to Kreig. Moravek rebutted each

of Kreig's eight opinions regarding general and special accounts, remote deposit, and the setoff.

See Dkt. No. 425-3. Defendants move to preclude Moravek from testifying because his opinion

exceeds the scope of his expertise and he does not review or consider the New York banking

framework. See Dkt. No. 425-1 at 6-7.7

Judge Scullin explained in his decision denying the parties' motions for summary

judgment, that a key "issue of material fact, that a jury and not this Court must answer, is whether,

at the time that the subject accounts were created, and the subject funds were deposited in them,

Defendant Pioneer knew, or should have known, that the funds were not general deposits." Dkt.

No. 393 at 13. Because there were disputes of fact, Judge Scullin concluded he could not "hold as

a matter of law that the subject accounts were general accounts and that, therefore, the funds

deposited into those accounts became the property of Defendant Pioneer as soon as they were

deposited into those accounts." Id. at 14. Judge Scullin noted that "[t]here remain numerous

issues of fact, mainly regarding the parties' intent in creating and depositing the funds, that a jury

must resolve in order to determine whether the accounts were general accounts." Id.

"'[T]he distinction between fact and legal conclusions . . . is extremely fine and courts

faced with determining whether an expert's opinion goes too far are often forced to recite a slew

of case law in an attempt to determine where the line should be drawn.'" Town of Halfmoon v.

Gen. Elec. Co., No. 1:09-CV-228, 2016 WL 866343, *16 (N.D.N.Y. Mar. 3, 2016) (quoting TC

7 Defendants also argue that Moravek should not be permitted to testify about what Pioneer was

aware of or should have known. That argument is addressed in tandem with other motions later

in this decision.

Sys. Inc. v. Town of Colonie, N.Y., 213 F. Supp. 2d 171, 181 (N.D.N.Y. 2022)). "But the mere

fact that an expert's opinion is based on criteria delineated by the applicable law does not

transmogrify it into a legal conclusion." Id.

The Second Circuit has provided an example of this balancing test, noting that "telling the

jury that a defendant acted as a 'steerer' or participated in a narcotics transaction differs from

opining that the defendant 'possessed narcotics, to wit, heroin, with the intent to sell,' or 'aided and

abetted the possession of heroin with intent to sell[.]'" United States v. Scop, 846 F.2d 135, 142

(2d Cir.), on reh'g, 856 F.2d 5 (2d Cir. 1988). Courts have permitted testimony as to whether

"investor were 'misled,'" and "that 'retail customers who buy securities from broker dealers have a

reasonable expectation that the prices they pay for securities are determined by the economic

forces of supply and demand'" because "these factual conclusions [do not use] language from the

regulations that the defendants are alleged to have violated." S.E.C. v. U.S. Env't, Inc., No. 94-

CV-6608, 2002 WL 31323832, *5 (S.D.N.Y. Oct. 16, 2002); see also In re Term Commodities

Cotton Futures Litig., No. 12-CV-5126, 2020 WL 5849142, *13 (S.D.N.Y. Sept. 30, 2020) ("Mr.

Marshall is not testifying that Defendants' conduct was not a 'bona fide hedging transaction'

within the definition of CFTC regulations; but instead he is commenting on whether Defendants'

market actions resemble those of a hedger or speculator")

Testimony concerning whether the Mann accounts were general or special deposit

accounts and the propriety of Defendants' setoff rests on the fine line between an impermissible

legal conclusion and a permissible expert opinion. It is up to the jury to decide if Defendants

knew or should have known that the bank accounts were intended as special use accounts.

However, it is appropriate for an expert to explain to a jury what general and special deposit

accounts are, how the banking industry treats those accounts, and whether, in their expert

opinions, the accounts at issue were being treated as general or special. However, who

maintained property rights over the money in those accounts is a legal conclusion reserved for the

jury. See In re Term Commodities Cotton Futures Litig., No. 12-CV-5126, 2020 WL 5849142,

*13 (S.D.N.Y. Sept. 30, 2020) (concluding that an expert could present his "market observations"

to the jury and "testif[y] to the effect of Defendants’ conduct on the market and whether that

effect was, in his view, normal" but could not "testify to [the d]efendants' state of mind when they

made certain business decisions"). It is up to the lawyers to present their arguments to the jury

that the parties knew the accounts were either general or special and that money in those accounts

did or did not belong to Defendants.

In his rebuttal report, Moravek opines that "Mr. Kreig's suggestion that deposit accounts

are categorized as "general and special" is erroneous." Dkt. No. 425-3 at 20. Moravek states that

"Pioneer Bank's exercise of setoff or chargeback was incompatible with generally accepted

banking practices." Id. at 21. In defining what constitutes a "special deposit account," Moravek

cites Keyes v. Paducah & I. R. Co., 61 F.2d 611 (6th Cir. Ky. 1932) and 25 C F R § 115.002).

See id. As with Kreig, it is not appropriate for Moravek to opine that specific conduct by the

parties meets the legal definition of a special deposit account.

It is within Kreig and Moravek's roles as experts to explain what, if anything, that

occurred is outside ordinary industry practices. For the stated reasons, the Court will permit

opinions on these issues, and Moravek's related rebuttals, to be presented to the jury with these

limitations in place. Likewise, Kreig's opinions about Defendants' obligation to review bank

account transactions and decision to grant Mann remote deposit privileges address industry

standards and practices around those two issues. The Court finds that these opinions do not take

over the jury's role such that they can be presented to the jury. In turn, Moravek may rebut those

opinions.

Kreig's opinions about whether Defendants' setoff of the funds in Mann's accounts was

appropriate will not be permitted in their entirety. Kreig states in his report that "Pioneer Bank

had statutory and contractual rights to take back or recover from the Mann Entities the $15.6

million in provisional credits given to the Mann Entities on August 29, 2019, when the checks

drawn on Bank of America were deposited." Dkt. No. 427-2 at 54. He opines that "[b]ased on

the documents provided to me, Michael Mann used and operated the accounts of the Mann

Entities as if the Mann Entities was a single entity. For this reason, it was appropriate for Pioneer

Bank to look to balances in each of the available accounts in performing the setoff." Id. at 56. In

coming to that conclusion, Kreig cites what Mann "instructed" Defendants to do, what Mann

"provided" to Defendants, and what Mann "testified" about during a deposition. Id. at 57. Kreig

then concludes that "Pioneer Bank's decision to accept deposits into the Cloud Payroll account

while blocking withdrawals was consistent with the standard practice in the banking industry for

'freezing' or restricting use of an account, and it had no obligation to "investigate” the source of

the funds that were being deposited before performing setoff or chargeback." Id. at 59. In

coming to that opinion, Kreig states that "Pioneer acted to protect a federally insured financial

institution from greater losses resulting from the criminal conduct of SWP and Intervenor (the

agent of SWP) in a substantial criminal check kiting and theft operation." Id. at 61. Kreig applies

this conduct to a definition of "[t]he right of setoff" from case law. Id. at 55.

This issue also straddles the line between permissible statements made by applying facts

to industry standards and impermissible legal conclusions. The Court notes that in their motion to

exclude DelPonti's opinion, Defendants concede that "[a] qualified banking expert may opine on

whether a bank's exercise of setoff was consistent with sound banking practice . . . ." Dkt. No.

432-1 at 15-16. In opposing Defendants' motion to exclude Crowell’s setoff opinion, Plaintiffs

assert that "[n]o opinion Crowell offers is an impermissible legal conclusion. . . . Crowell

explains how his experience led him to his conclusions, applied to the facts." Dkt. No. 447 a 16-

17. Albeit in relation to different experts, both parties appear to concede that an expert's opinion

on whether Pioneer's setoff complied with banking standards is permissible.

Therefore, the Court finds that a balance can be struck by permitting the experts to testify

about their understanding of setoffs in the banking industry and whether Defendants' conduct

complied with that. They may not, however, testify to whether the setoff meets a specific

regulatory requirement or complies with a statutory or legal right. Likewise, no expert may

testify as to whether any party's conduct was illegal or fraudulent and Kreig's statement labeling

SWP's actions as "criminal conduct" is excluded.

Plaintiffs also argue that Kreig's opinions that Defendants had no duty or obligation to

investigate or look further into Mann's accounts should be excluded because they are improper

legal opinions which do not apply the Bank Secrecy Act ("BSA"). See Dkt. No. 428 at 18. Kreig

testified during his deposition that he "was asked as part of [his] engagement not to address any

obligations Pioneer Bank might owe to the federal government under the Bank Secrecy Act." Id.

at 19 (quoting Dkt. No. 427-3 at 19). Plaintiffs argue Kreig's refusal to consider the BSA created

an "analytical gap" in his opinions. Id. at 21.

Defendants argue in their opposition that "Kreig did not need to consider the BSA for his

opinions to be reliable and helpful." Dkt. No. 443 at 24. They assert that another expert has been

designated as the expert to opine on BSA compliance. See id. Kreig is opining only on aspects of

banking that do not concern the BSA, or only minimally relate. See id. at 25-26. Defendants also

move to exclude Moravek as an expert, in part, because he relied on "a Bureau of Indian Affairs

regulation governing trust funds held for Indian tribes, . . while conceding at his deposition that

he did not review New York law at all . . . ." Dkt. No. 425-1 at 7 (citations omitted). Defendants

argue that because Moravek "never engages the general versus-special framework under New

York law that the Second Circuit and this Court have identified as governing—under which

classification turns on the mutual intent of Pioneer and Mr. Mann—his opinions rest on no

reliable principles under Rule 702(c) and cannot assist the jury." Id.

Plaintiffs are correct that Kreig did not address the BSA. Although Kreig stated that

"[b]anking is the most highly regulated business in the United" and "one cannot understand

general banking practice and the actions of a bank without reference to the laws and regulations

that govern the activities of banks," Dkt. No. 427-2 at 6, he did not discuss the Bank Secrecy Act.

According to Moravek, the BSA "is the common name for a series of laws and regulations

enacted in the United States to combat money laundering[] and the financing of terrorism []."

Dkt. No. 425-3 at 6. On the other hand, Defendants are correct that Moravek quoted and

seemingly relied on the definition of "special deposit account" that is derived from the Code of

Federal Regulations governing "Trust Funds for Tribes and Individual Indians." 25 C.F.R. §

115.001. There is nothing about this case which concerns tribes.

Both sides take issue with the regulations or rules that the opposing party's expert did or

did not consider. That is an issue for cross examination. These arguments do not support

complete exclusion of the experts' testimony.

However, as to the issue of an opinion about a party's duty, the answer is less straight

forward. This Court has previously looked to the Third Circuit's decision in Berckeley Inv. Grp.,

Ltd. v. Colkitt, 455 F.3d 195, 217[, 218] (3d Cir. 2006), wherein the court "acknowledged that 'the

line between admissible and inadmissible expert testimony as to the customs and practices of a

particular industry often becomes blurred when the testimony concerns a party's compliance with

customs and practices that implicate legal duties.'" Beede, 2016 WL 916418, at *25.

"Nevertheless, the Court of Appeals concluded that an opinion on the issue of whether a party

complied with and/or violated 'legal duties' constitutes an impermissible legal opinion, even if

offered by a well-qualified expert." Id. (quoting Berckeley Inc. Grp., 455 F.3d at 217-18).

This Court then explained that "any qualified expert . . . may provide an opinion on

whether a party's conduct or actions meet underlying bases for an ultimate issue in a case (by, for

example, testifying whether certain acts would in the abstract be improper and/or inconsistent

with a party's legal duties)[.]" Id. But they "may not merely instruct the jury on the result to

reach based upon a party's specific conduct or actions (by, for example, stating that a party did

indeed violate an applicable duty through certain actions)." Id. (footnote omitted). This Court

acknowledged that the "distinction [is] a fine one" and "exclude[d] [the] report and testimony to

the extent that he reaches the specific conclusion that any Defendant or person acted in

compliance with and/or in violation of applicable legal duties or industry standards." Id.

Here, too, Kreig and Moravek may testify about the parties' conduct and whether, in their

respective opinions, that conduct is consistent with a bank or payroll company's duties. See

Brown v. Nat'l Football League, 219 F. Supp. 2d 372, 384 (S.D.N.Y. 2002) ("A plaintiff arguing

that a member of a particular trade or profession behaved negligently in carrying out his duties

may appropriately use as evidence of negligence manuals, regulations, or other materials defining

the reasonable and expected standards of professional practice within that occupation") (collecting

cases). They may not, however, testify that either party did indeed violate a legal duty.

Next, Defendants argue that Moravek's discussion of the BSA is irrelevant because he is a

rebuttal witness to Kreig and Kreig did not address the BSA. See Dkt. No. 425-1 at 25.

However, it is appropriate for a rebuttal witness to identify what the opposing expert purportedly

failed to consider, review, or discuss that the rebuttal expert believes is material to the issues. See

Roberts v. Los Alamos Nat'l Sec., LLC, No. 11-CV-6206, 2016 WL 4442833, *2 (W.D.N.Y. Aug.

19, 2016) (explaining that a "[c]ourt has 'wide discretion over what evidence may be presented on

rebuttal,' but, at base, '[t]he function of rebuttal evidence is to explain or rebut evidence offered by

the other party'") (quoting United States v. Casamento, 887 F.2d 1141, 1172 (2d Cir. 1989)).

Therefore, the Court disagrees that Moravek's opinion is flawed because it addresses the BSA.

Defendants also challenge Moravek's opinion that "[r]egulations allow for a broad

category of exception holds, which can be made when an account has been overdrawn for a

certain number of days during the previous six (6) months when the depository bank has good

reason to think the check won't clear. This was certainly the case in many of the accounts." Dkt.

No. 425-3 at 32; see Dkt. No. 425-1 at 24-25. Defendants argue that "Moravek's opinion supplies

neither facts nor method. He does not identify in his report which Mann accounts he believes

would qualify for an exception hold. . . . Nor could he identify them at his deposition." Dkt. No.

425-1 at 25. During his deposition, Moravek stated, "What I identified was, is that many – in

many of -- of Mann's accounts, there -- there were -- there -- that these accounts had been

overdrawn." Dkt. No. 425-4 at 312. When asked which accounts those were, Moravek testified

"I can't specify exactly which accounts that was present in." Id. at 313.

The issue Defendants take with this portion of Moravek's opinion can be addressed on

cross examination. As Plaintiffs note in their response to Defendants' motion, Moravek includes a

list of the documents he reviewed as part of his report, see Dkt. No. 448 at 19, which includes

approximately 1,500 documents, see Dkt. No. 425-3 at 70. To the extent Defendants do not

believe Moravek sufficiently relied on those documents to support his opinions or failed to

explain his reliance, they can cross-examine Moravek on that issue at trial.

Defendants also seek to exclude Moravek's opinion because he did not "address[] whether

the accounts were general or special deposits . . . ." Dkt. No. 425-1 at 13. In his opinion,

Moravek concludes that "Mr. Kreig's suggestion that deposit accounts are categorized as 'general

and special' is erroneous." Dkt. No. 425-3 at 20. Moravek opines, "In practice[,] there are two

types of deposit accounts based on the availability of funds: (1) demand deposits and (2) time

deposits." Id. Moravek then defines "special deposit" and "special deposit account," so reference

to "demand" and "time deposits "is untenable" because allowing the jury to the testimony would

"[i]nundat[e] the jury with irrelevant legal or banking jargon . . . ." Dkt. No. 425-1 at 12-14, 15.

The Court agrees that this case involves terms, practices, and issues that are not generally

known to laymen. It is the Court's role to ensure they are not presented with irrelevant,

cumulative, or confusing information, but the Court does not find that the portion of Moravek's

opinion identified by Defendants will create such confusion. It is true that Judge Scullin noted

that "'[a]s a common rule, bank deposits can be classified as either general or special.'" Dkt. No.

393 at 13 (quoting Peoples Westchester Sav. Bank v. Fed. Deposit Ins. Corp., 961 F.2d 327, 330

(2d Cir. 1992)). Judge Scullin quotes Peoples Westchester for the proposition that "[w]hether a

deposit in a bank is general or special depends upon the mutual understanding and intention of the

parties at the time such deposit is made . . . ." Id.

The parties disagree as to what Mann's accounts were—special or general. The fact that

this is a primary issue that must go to the jury does not mean an expert is unable to use other

terms or discuss other concepts. Indeed, Defendants do not dispute the underlying facts Moravek

relies on in forming his opinions, such as "[t]he MyPayroll 0212 account was also designated a

'Client Account' by Pioneer . . . ." Dkt. No. 425-3 at 21 n.64. Moravek also cites specific

documents to support his opinion that certain Mann accounts were "demand deposit accounts."

Id. at 27. Defendants may disagree that accounts should be categorized as Moravek proposes, but

they can cross-examine him about those opinions at trial. See In re Keurig Green Mountain

Single-Serve Coffee Antitrust Litig., No. 14-MD-2542, 2025 WL 354671, *52 (S.D.N.Y. Jan. 30,

2025) ("[O]nce an expert has sufficient sources, 'the method to contest the factual underpinning of

expert opinion is vigorous cross examination, presentation of contrary evidence, and careful

instruction on the burden of proof'") (citation omitted).

Defendants also take issue with Moravek's opinion that Kreig is incorrect in concluding

that the Mann accounts are general accounts. See Dkt. No. 425-1 at 16-18. Defendants argue that

Moravek's opinion is flawed because he does not consider that the classification of an account as

general or special is determined by the parties' intent. See id. In his opinion, Moravek contends

"[t]he mutual agreement between" the parties "does not negate the fact that the accounts were

acting in" a certain way. Dkt. No. 425-3 at 30.

In Plaintiffs opposition, they note that Judge Scullin concluded Plaintiffs "presented facts

from which a jury could conclude that Defendant Pioneer engaged in its own fraud and knew or

should have known of Mann's fraud, that the subject accounts were intended as special use

accounts, and that Defendant Pioneer knew the funds were owned by third parties[.]" Dkt. No.

393 at 14. Therefore, how the parties were utilizing the accounts is relevant.

Defendants also seek to exclude Moravek's opinions about "the Operation and

Expectations of Payroll Companies." Dkt. No. 425-1 at 20. Defendants argue that Moravek

expressly disavowed he is "not an expert on payroll companies." Id.; see Dkt. No. 425-4 at 167.

Therefore, Defendants contend the following opinions about payroll companies must be

precluded: "[p]ayroll companies exist and maintain profitability through their ability to charge

their third-party customer's fees for the provision of [their] services" and "[n]othing else"; his

descriptions of the "business model" about "payroll companies"; and "this is industry practice in

the payroll industry, that is, funds are held in the depository account of a payroll company until

tax payments are due." Dkt. No. 425-1 at 20-22.

In their opposition, Plaintiffs assert "Moravek's occasional references to payroll

companies are not central to his rebuttal opinions, and nothing about his actual opinions requires

expertise in payroll companies or processing. " Dkt. No. 448 at 15. Plaintiffs argue that Moravek

was responding to Kreig's opinions, which was his role as a rebuttal expert. See id.

Moravek explains in his opinion that he worked for twenty years with the United States

Secret Service investigating financial crimes including bank fraud. See Dkt. No. 425-3 at 4.

Moravek has served "as a Senior Bank Examiner with the Office of the Comptroller of the

Currency" and a Senior Special Agent within the Office of Enforcement/Investigations for the

Financial Crimes Enforcement Network." Id. at 5.

Defendants appear to be correct that Moravek has not worked for a payroll company.

However, neither has Kreig. As Plaintiffs note in their response, "Kreig does not purport to have

any experience whatsoever with payroll or ACH service providers, yet Pioneer offers him to

opine on these issues." Dkt. No. 448 at 15.

In his report, Kreig explains his background as a bank examiner, internal auditor, and in-

house attorney for banks. See Dkt. No. 427-2 at 4-5. Kreig states that he has "appeared as an

expert witness testifying both for and against banks in litigation involving various aspects of

banking . . . ." Id. at 5. It does not appear that Kreig has worked for a payroll company, see id. at

71-73, yet he provides opinions about Plaintiffs and the Mann entities. For example, Kreig opines

that "[t]here was no legitimate business reason for NatPay to move funds to Pioneer Bank." Dkt.

No. 427-2 at 48.

To the extent both Kreig and Moravek discuss what is expected of payroll companies in

their relationships with banks, the Court will permit them to testify consistently with their

respective opinions. They each have decades of experience working with various banks and

banking operations. Counsel can cross-examine the opposing expert about any purported lack of

payroll experience to support a specific opinion. See Lara v. Delta Int'l Mach. Corp., 174 F.

Supp. 3d 719, 732 (E.D.N.Y. 2016) ("[S]ome courts have found an expert unqualified to render an

opinion where that expert did not have direct experience with the particular product, machine or

specific field at issue in the litigation. . . . [O]ther courts have found that a lack of specific

familiarity with a product, machine or specific field does not, in itself, render an expert

unqualified to proffer their opinion") (collecting cases).

Finally, Plaintiffs seek to preclude Kreig's opinion regarding the appropriateness of

Pioneer's setoff as irrelevant. See Dkt. No. 428 at 23-24. Plaintiffs explain that Defendants raised

an affirmative defense in their answer that their "overdraft recovery was also completely within

Pioneer Bank's rights," but that they withdrew the defense on summary judgment such that any

testimony or arguments related thereto are irrelevant. Id. at 23 (quoting Dkt. No. 332 at ¶ 574).

Defendants do not contest that they withdrew their affirmative defense but argue that their

"withdrawal did not take setoff out of the case." Dkt. No. 443 at 27. Rather, Defendants contend

that by withdrawing their affirmative defense on the issue, Plaintiffs carry the burden at trial to

prove that Defendants' setoff was unlawful rather than Defendants carrying the burden to prove

that it was appropriate. See id. at 27-28.

Defendants are correct. In Judge Scullin's summary judgment decision, he explained that

"there remains an issue of fact regarding whether Defendant Pioneer's setoff of the subject

account was a 'wrongful seizure' and resolution of the legality of Defendant Pioneer's setoff will

'finalize the controversy and offer relief from uncertainty.'" Dkt. No. 393 at 16 n.11 (quoting

Duane Reade, Inc. v. St. Paul Fire & Marine Ins. Co., 411 F.3d 384, 389 (2d Cir. 2005)). As

such, opinions and testimony concerning Pioneer's setoff remains relevant at trial.

In sum, the Court will not exclude Kreig nor Moravek's opinions or testimony, in full, but

they are limited to the extent outlined in this decision.

d. C. Wayne Crowell

Crowell is a banking consultant who worked as a National Bank Examiner and Assistant

Deputy Comptroller for Bank Supervision with the Office of the Comptroller of the Currency. He

was retained "by Plaintiffs to review this case based on my experience as a bank regulator and

provide testimony relating to banking industry custom and practices and BSA and other

regulatory guidelines applicable to banks." Dkt. No. 426-3 at 6. He also provided a rebuttal

opinion to Richard Hollowell and Kreig. See Dkt. No. 426-4. As explained earlier, Plaintiffs

have sought to exclude Kreig, but they have not moved to preclude Hollowell nor any portion of

his expert opinion.

Defendants move to exclude Crowell's opinions because he "opines on banking functions

he has never performed, he substitutes his personal 'experience' and notions of 'prudence' for

identified standards, he reasons backward from the collapse of Mr. Mann's fraud, and he resolves

questions of law and fact reserved for the Court and the jury." Dkt. No. 426-1 at 6. The Court

agrees with Plaintiffs that "[m]ost of [Defendants'] criticisms of Crowell's opinions concern

matters more appropriately addressed through cross-examination." Dkt. No. 447 at 6.

First, Defendants seek to exclude Crowell's opinion regarding Pioneer's setoff. See Dkt.

No. 426-1 at 11. Defendants contend "[t]he relevant 'experience' to offer such an opinion would

be experience actually exercising, approving, supervising, or examining a bank's setoff rights . . . .

Mr. Crowell has none of that experience, despite repeatedly invoking his 'experience' to criticize

Pioneer's setoff." Id. at 12. Defendants state that Crowell "admitted" during his deposition "that

he has never personally participated in a decision to take a setoff, even while

serving as a bank director, . . . has never examined setoffs as a discrete banking function during

his regulatory career, . . . and has observed only a handful—approximately one to five—setoffs

during his career . . . ." Id. (citations omitted).

Plaintiffs argue in response that "Crowell is not unfamiliar with setoffs, having seen banks

engaging in setoff more than once. . . . Any alleged gap in Crowell's expertise may be addressed

through cross-examination and does not justify excluding his opinions on this subject matter

clearly within the ambit of his field." Dkt. No. 447 at 15 (citation omitted).

The Court agrees with Plaintiffs. Although Crowell testified that he has never been

"personally involved in th[e] decision" of a bank to take a setoff, that does not negate his

testimony that he does have experience with setoffs. The extent of that experience can be

addressed on cross examination.8

Defendants' next argument concerning Crowell relates to his "lending and underwriting

opinions" set forth in his rebuttal opinion. Dkt. No. 426-1 at 15. Crowell provided his "opinions

on Pioneer's loan policy, underwriting, administration and supervision of the ValueWise loan

8 The Court also notes that Kreig, Defendants' expert who opines that Pioneer's setoff was

appropriate, testified in a very similar fashion to Crowell. Both experts testified that they knew

about setoffs from companies defaulting on loans. See Dkt. No. 427-3 at 6; Dkt. No. 426-5 at 50,

2 62. It is unclear why this sort of experience is sufficient for Defendants' expert, Kreig, but is

insufficient for Plaintiffs' expert, Crowell.

relationship" in response to Hollowell's opinion. Dkt. No. 426-4 at 6. Again, Hollowell is not the

subject of a Daubert motion. Hollowell opined that Pioneer's conduct was appropriate, and

Crowell contends that opinion is "flawed." Id.

Defendants argue "Crowell cannot identify the standard against which he measures

Pioneer's conduct." Dkt. No. 426-1 at 16. They argue that Crowell inappropriately relies on just

his "experience," without reference to industry standards or other secondary sources. Id.

Defendants contend Crowell inappropriately opines that Defendants' conduct permitted fraud to

occur, which an issue for the jury to decide. See id. at 16-17. Defendants also contend Crowell's

opinion is circular and built on hindsight because he looks at all of the information presently

available and concludes that Defendants should have done more but "[e]ach of these opinions

measures Pioneer's conduct against information unknowable until after the fraud collapsed." Id.

at 17.

Setting aside for a moment Crowell's opinion about whether Defendants turned a blind eye

to Mann's fraud, the other opinions are permissible and subject to cross examination. Crowell's

underwriting and lending opinions are rebuttals to Hollowell's opinions. Crowell testified that he

has "over the years, I've reviewed hundreds, if not thousands, of underwritings. I've got lots of

experience doing that. But I've not been the actual underwriter." Dkt. No. 426-5 at 18. If

Defendants want to challenge that experience, they are free to do so on cross examination.

Likewise, if Defendants believe any of Crowell's opinions are based on information that was

neither known nor available to Defendants at the time of Mann's conduct, they can inquire about

that on cross examination. Any opinions that Defendants permitted Mann's fraud, however, must

be precluded. One of Plaintiffs' theories of liability concerns aiding and abetting. See Dkt. No.

245. It is not appropriate for an expert to present a conclusion on that to the jury. See

GlobalRock Networks, Inc. v. MCI Commc'ns Servs., Inc., 943 F. Supp. 2d 320, 342 (N.D.N.Y.

2013) ("[A]n expert may not offer an opinion as to whether a parties' actions amount to gross

negligence") (collecting cases).

Next, Defendants argue Crowell's opinions regarding the remote deposit limits should be

excluded because they lack an "objective basis," and do not stem from any proper methodology or

applicable standard. Dkt. No. 426-1 at 19-20. Plaintiffs retort that Defendants' arguments do not

support exclusion but concern issues for cross examination. See Dkt. No. 447 at 21-22. The

Court, again, agrees.

The Court has already concluded that Kreig and Moravek will be permitted to testify as to

whether the remote deposit privileges granted to Mann by Defendants is standard industry

practice. Crowell may do the same. Crowell has experience in the banking industry and may

testify as to how that experience compares to the parties' conduct. Crowell may not testify that

Defendants' grant of remote deposit privileges to Mann was "the primary vehicle for his kiting

scheme that was not monitored and went undetected and escalated over several years." Dkt. No.

426-3 at 21. That is a question for the jury to decide and shall not be opined by an expert.

Defendants also attack Crowell's "third-party processing opinions." Dkt. No. 426-1 at 20.

Crowell opines as follows:

In my experience as a bank regulator, bank director and banking

consultant, the dollar volume and the number of transactions

flowing through the MyPayroll and CloudPayroll accounts would

have alerted Pioneer management of the need to investigate the

nature and volume of activity both in the credit analysis and in the

BSA monitoring of the deposit accounts. In my experience proper

monitoring of the account would have clearly identified the

accounts truncations related to third party payroll funds. . . . .

[T]he descriptions for the thousands and thousands of transactions

flowing through Account No. 0212 were the payroll client name or

partial name followed by "payroll" when the transaction involved

third-party payroll and "tax" or some other designation with the

word "tax" in it when the transaction involved payroll taxes. There

are literally thousands of transactions with these descriptions every

month from the inception of the Account No. 0212.

Dkt. No. 426-3 at 14-15.

Contrary to Defendants' argument, the Court does not find that Crowell must have

extensive experience "involving a payroll company," to opine on what transactions were

occurring in the Mann accounts and what, in his experience, knowing that information would

have caused a bank to do. However, the Court agrees with Defendants that Crowell should not be

permitted to testify that "Pioneer's failure to conduct proper due diligence and ensure the accounts

were properly titled would not entitle Pioneer to be enriched." Dkt. No. 426-4 at 20. First, as

Defendants assert, Crowell does not explain what those "proper titles" would have been. See Dkt.

No. 426-1. Second, the opinion comes too close to one of the questions that will be presented to

the jury: whether Defendants were unjustly enriched. See Dkt. No. 245 (listing Plaintiffs' sixth

claim for unjust enrichment).

Defendants also take issue with Crowell's opinions regarding whether Defendants had

specific "duties" to investigate the Mann accounts. Dkt. No. 426-1 at 21. Defendants contend

"[w]hether such a duty exists is a question of law for the Court to resolve and, to the extent any

duty is submitted to the jury, for the Court to define through its instructions and for the jury to

apply to the facts." Id.

First, as Plaintiffs explain, Crowell's opinion that Defendants had a duty to investigate the

Mann accounts is directly responsive to Kreig's opinion that Defendants had no obligation or

responsibility to investigate the Mann accounts. See Dkt. No. 426-3 at 23; Dkt. No. 447 at 22-23.

Second, as earlier explained, "the mere fact that an expert’s opinion is based on criteria delineated

by the applicable law does not transmogrify it into a legal conclusion." Town of Halfmoon, 2016

WL 866343, at *16. Therefore, the Court will not preclude Crowell from testifying about

whether Defendants had specific duties to investigate the Mann accounts. He cannot, however,

testify that a legal duty was indeed violated.

Similarly, Defendants take aim at Crowell's opinion regarding ACH "batch headers." Dkt.

No. 426-1 at 22. However, Plaintiffs correctly note that Crowell never used that term in his

opinion. See Dkt. No. 447 at 23. Rather, Crowell opined that "Pioneer was required by Bank

Secrecy Act and regulatory guidance on ACH processing to understand and monitor the nature of

the activity in its accounts. Bank regulatory guidance for ACH activity also required Pioneer to

conduct a risk assessment for a customer using an account to conduct ACH activity." Dkt. No.

426-4 at 18. This opinion does not require precise expertise in ACH processing and will be

allowed to go before the jury.

Next, for the same reasons discussed regarding Moravek's opinion, Defendants' argument

that Crowell cannot discuss the BSA as a rebuttal to Kreig because Kreig did not consider the

BSA, is meritless. See Dkt. No. 426-1 at 27-28. As a rebuttal witness, Crowell is entitled to

identify what information he believes Kreig failed to consider and explain why it matters. See

Faulkner v. Arista Recs. LLC, 46 F. Supp. 3d 365, 386 (S.D.N.Y. 2014) ("[T]he expert's

testimony should be to 'explain, repel, counteract or disprove evidence' presented by the expert to

whom he or she is responding") (quoting Marmo v. Tyson Fresh Meats, Inc., 457 F.3d 748, 759

(8th Cir. 2006)).

Defendants also seek to exclude Crowell's opinion that Kreig "contradict[ed] himself" in

his report. Dkt. No. 426-1 at 25-26. Defendants contend that this is an argument for an attorney

to make. See id. Defendants are correct; expert rebuttal witnesses should be used to attack the

substance of another expert's opinion and, if a contradiction is a mere typographical error, it is not

the basis for an expert rebuttal. As Plaintiff states in their response, it does not appear that the

purported "contradiction" is the basis for any of Crowell's opinions.

In sum, Crowell will not be precluded from testifying and presenting his opinions to the

jury, but he is limited in doing so to the extent set forth herein.

e. David Williams and Craig Vaream

Williams is Senior Managing Director in the Forensic & Litigation Consulting practice of

FTI Consulting, Inc. See Dkt. No. 430-2 at 4. He is a licensed attorney in New York and

previously worked as a tax attorney and special agent with the Internal Revenue Service. See id.

Williams was retained by Defendants to evaluate the "[f]low of funds through accounts held by

Mann and Mann Entities at Pioneer Bank"; "[i]dentify instances of fraudulent funds flowing

through Mann and Mann Entity Accounts as well as instances where these funds were ultimately

used in transactions processed by NatPay and/or SWP"; and "[i]dentify red flags for money

laundering known or apparent to NatPay and/or SWP." Id. at 7. Williams affirmed during his

deposition testimony that he intends to offer opinions with respect to SWP and NatPay's actual

knowledge. Dkt. No. 430-3 at 13.

Plaintiffs move to exclude his testimony, arguing that (1) he has "no familiarity with

payroll and ACH industry standards"; (2) he is unqualified to testify about NatPay's own policies

and compliance with them; and (3) his calculations and conclusions are not based on a proper

methodology. Dkt. No. 430-4 at 20-239.

9 Plaintiffs also move to Williams' exclusion because his opinions touch on Plaintiffs' state of

mind. This is addressed later in the Memorandum-Decision and Order.

Defendants argue in response that Williams "is not offering opinions about how payroll

companies should run their businesses. He is identifying whether the data exhibit patterns

associated with fraud and money laundering." Dkt. No. 444 at 11. They also contend "Williams's

testimony will assist the jury because the transaction evidence is extraordinarily complex. Mr.

Williams analyzed over 593,000 transactions in Account 0212 alone and tens of thousands more

across additional accounts, spanning November 2017 through September 2019." Id. at 12.

The Court agrees with Defendants. Plaintiffs have not presented grounds which require

the Court to exclude Williams' testimony altogether. The Court has thoroughly reviewed

Williams' report and finds him to be qualified to testify about account information including the

types of transactions in the Mann accounts, their frequency, and any patterns that he identified.

Much like a law enforcement agent will testify during a criminal trial about a collection of

evidence, the Court will permit Williams to summarize the hundreds of thousands of financial

transactions that occurred in this case and present an opinion as to whether those transactions

were indicative of anything.

The Court comes to the contrary conclusion on Williams' opinion insofar as he opines on

NatPay's compliance with its own internal policies. Williams concluded that "[d]eviations from

normal operating procedures and policies for NatPay were a warning sign to NatPay of the risk

involved with conducting transfers for the Mann Entities." Dkt. No. 430-2 at 30. He opines as

follows:

NatPay disregarded its own policies and ignored criteria that it

considered important as it continued to process larger transaction

amounts for the Mann Entities and SWP. There were numerous

warning signs in the NatPay data that Mann was laundering money

by means of ePay transfers that NatPay processed for the Mann

Entities and SWP.

NatPay departed from their normal practices designed to mitigate

risks of fraud or loss. These included separation of tax and payroll

processing, commingling of processor activity in one account, large

and repeated ACH returns, and continuous next day processing far

in excess of its $1 million dollar limit. In some cases, NatPay had

never before (or since) departed from its own policies NatPay has

since added policies relating to mitigating the specific activities

engaged in by Mann. In doing so, NatPay consciously knew that

there was a greater risk of fraud in processing ACH transactions for

Mann.

Id. at 58.

Williams has provided no explanation or information to support his opinions about

NatPay's departures from its own policies. He discusses the NatPay and Pioneer accounts that he

reviewed in connection with this case, but he does not explain that he reviewed any other NatPay

information. Williams does not discuss how he reviewed or considered NatPay's "normal

practices" before concluding that their conduct in relation to this case was a departure. Rather,

Williams states that he reviewed the deposition testimony of NatPay's Vice President of Sales,

Jim Hagen, who "testified that it was 'not very common' for a payroll processor to split payroll

and tax processing between two ACH companies, noting that having the data from processing

both payroll and taxes can serve as a fraud control." Dkt. No. 430-2 at 21 (citation omitted).

Williams also reiterated the Hagen's testimony that "when prospective clients sought to split their

payroll and tax processing between ACH companies this was not NatPay's normal practice and, in

fact, Cloud Payroll and other related Mann Entities were the only clients that NatPay allowed to

split payroll and tax processing as an exception to NatPay's 'hard and fast rule' against

decoupling." Id. (citation omitted).

Although experts can rely on hearsay when forming their opinions, expert opinions are not

meant to serve as a mouthpiece for otherwise inadmissible hearsay. See Marvel Characters, 726

F.3d at 136. Williams' opinions that NatPay deviated from its own policies appears to rely almost

entirely on Hagen's deposition testimony. Unless Defendants can lay an appropriate foundation

and methodology for Williams' opinions, such as relying on information other than one deposition

employee's testimony, the conclusions will be precluded.

During his own deposition, Williams was asked how he determined some actions were

"atypical." Dkt. No. 430-3 at 17. He stated his conclusion was based on Hagen's testimony and

he thought "also [Steven Pereira, NatPay's Vice President] may have testified about that as well."

Id. Williams does not reference Pereira's deposition testimony when discussing NatPay's

"normal" practices and procedures in his report.

The Court finds that testimony regarding NatPay's policies and compliance therewith is

not permissible to be presented through Williams. He may, however, testify to his understanding

of banking standards, any patterns he identified in NatPay's records, and whether NatPay's

conduct complied with his understanding of industry-wide banking standards.

Plaintiffs proffer Craig Vaream as a rebuttal expert to Williams. Defendants move to

exclude Vaream's opinions not because of his experience; indeed, Defendants admit "Vaream has

some experience in ACH processing mechanics, and Pioneer does not seek to exclude testimony

limited to that narrow subject." Dkt. No. 431-1 at 5. Rather, Defendants argue that Vaream's

opinions delve into subjects he is not qualified to discuss including "payroll-industry standards

and practices," "the regulatory obligations of banks," and "causation and fault-allocation." Id.

Defendants contend "Vaream weaves regulatory opinions throughout his report." Id. at 9. They

argue that "[d]espite his lack of regulatory expertise, Mr. Vaream repeatedly offered opinions

allocating responsibilities rooted in regulatory obligations." Id. at 10 (collecting quotations from

Vaream's report wherein he opined that Pioneer Bank was required to monitor the Mann

accounts).

Defendants also focus on Vaream's deposition testimony where he admitted that he has

worked with payroll clients as "less than 5 percent" of his clientele. Id. at 12 (quoting Dkt. No.

431-3 at 45). Therefore, Defendants argue he cannot give opinions about payroll service bureau

operations and payroll-tax administration, such as what is "standard practice." Id. at 13.

Defendants also challenge Vaream's opinion as being improper rebuttal to Williams' opinion. See

id. at 15.10

Defendants also seek exclusion of Vaream's opinion regarding the commingling of funds

from multiple payroll processors. See id. at 18. Defendants argue Vaream's opinions "rest[] on a

claim about what is 'standard within the industry,' what is 'very typical' for payroll processing, or

what constitutes a 'typical occurrence'—that is, on expertise in payroll-industry practice that Mr.

Vaream does not have." Id.

Plaintiffs argue in their opposition that Defendants are attempting to narrow Vaream's

expertise and opinions too much. Plaintiffs assert that the amount of experience Vaream has with

payroll companies compared to other businesses as well as his conclusions about industry

standards are issues for cross examination. See Dkt. No. 449 at 10-15.

Vaream worked at JPMorgan Chase for eighteen years managing the ACH business. See

Dkt. No. 431-4 at 6. He testified that during his time with JPMorgan, "less than 5 percent" of his

clients were payroll processing companies. Dkt. No. 431-3 at 45. Whether this lessens the

weight of Vaream's opinion as to what is "standard" in the "industry" regarding "payroll

10 Defendants argue that Vaream does not properly rebut Williams' opinion about NatPay's

compliance with its own policies. However, because the Court has excluded Williams from

testifying as such, this argument is moot.

processing" and "processors" does not require exclusion of the entire rebuttal opinion. Dkt. No.

431-4 at 13-14. Vaream has worked in the banking industry for many years and has experience

with multiple payroll-company-clients. Although that does not appear to be the majority of his

work experience, Defendants may cross-examine him as to that fact and the jury can determine

how much weight to afford his opinion. See United States v. M/Y Amadea, 770 F. Supp. 3d 558,

580 (S.D.N.Y. 2025), aff'd sub nom. United States v. Khudainatov, 177 F.4th 224 (2d Cir. 2026)

("Claimants’ argument that the bulk of Captain Meagher's experience was on comparatively

smaller vessels goes more to the weight that should be afforded his testimony, rather than

suggesting that he is altogether unqualified").

The Court reaches the same conclusion with Vaream's discussion of applicable

regulations. In his report, Vaream opines that Williams' opinion regarding "red flags" likely

pertains to "Bank Secrecy Act and Anti-Money Laundering regulations regarding the

processes financial institutions must follow." Dkt. No. 431-4 at 10. Vaream states, "They have

no applicability to payroll tax processors or NatPay in this situation. They do have relevance for

Pioneer Bank, which is a financial institution and therefore is obligated to adhere to the processes

and requirements specified by federal and state banking regulations." Id. Vaream affirmed the

same during his deposition. See Dkt. No. 431-3 at 56-57. Defendants' attorney asked if Vaream

was aware of what a "money transmitter" is and whether such an entity is subject to federal

regulations. See id. at 57-58. Vaream stated that he knows of the term but "know[s] very little."

Id. at 57.

In essence, Defendants seek to preclude Vaream's rebuttal opinion because he did not

apply banking regulations to NatPay's conduct despite concluding that NatPay was not subject to

those regulations. That is not a basis to exclude Vaream's opinion, but a challenge to be lodged

during cross examination. Therefore, Vaream's opinion will not be entirely excluded, but is

limited as explained in this decision.

f. John DelPonti, Jr.

DelPonti is a certified public accountant and certified anti-money laundering specialist

who was retained by Plaintiffs to give "opinions on banking industry practices and standards,

including Bank Secrecy Act [] and anti-money-laundering [], and Pioneer's compliance with those

standards." Dkt. No. 450 at 6. DelPonti also provides a rebuttal opinion to Kreig, Hollowell,

Robert Flores, and Michael C. Spitler. See id.

Defendants move to exclude DelPonti's expert opinion because he has never engaged with

a bank's setoff rights; he fails to consider applicable legal standards and/or regulations; he gives

legal conclusions; and he relies on insufficient facts or data to support his opinions. See Dkt. No.

432-1. Plaintiffs disagree on all points. See Dkt. No. 450.

First, Defendants argue DelPonti is not qualified to give an opinion about the propriety of

Defendants' set off because he has only ever worked "on the lending side of the bank: he has

worked with setoff provisions in the negotiation and restructuring of commercial credit

facilities—contractual clauses bargained between lender and borrower" and "[t]he setoff at issue

in this case arises on the deposit operations side: a bank holding customer funds on deposit,

facing an unpaid debt from that customer, applies the deposited funds against the debt." Dkt. No.

432-1 at 13. Defendants contend the deposit operations side of setoffs "is governed by the deposit

agreement, by U.C.C. § 4-212, and by the common law of setoff. . . . It requires the banker to

determine whether the debt is due and payable and which accounts and balances the agreement

reaches." Id. (citing Kreig expert report). Defendants liken the issue to engineering, stating,

"[j]ust as a 'general background in safety engineering' does not qualify a person 'to offer

expert testimony on the design of a particular product,' Mr. DelPonti's general background in

financial services does not qualify him to opine on a depository setoff—i.e., a banking function he

has never performed, supervised, or examined." Id.

Defendants assert that the terms and conditions listed on Pioneer's account opening form

mentions the right to set off funds, that Defendants had a statutory right under U.C.C. § 4-212(a),

and that Mann asked Pioneer to link his accounts together, which impacts Defendants' recovery.

See id. at 14. Defendants argue that DelPonti did not address any of those facts or laws in his

report. See id. They assert that "[a] witness who has not examined the instruments and

authorities that define the transaction he criticizes has no basis on which to opine that the

transaction was improper." Id. at 14-15. Defendants acknowledge that DelPonti considered other

authorities such as "New York Banking Law's broad public-interest purpose, FDIC director-

governance guidance, and [Unfair or Deceptive Acts of Practices] principles," but argue that

"none addresses when or how a bank may exercise contractual, statutory, or common law setoff

right[.]" Id. at 15.

Defendants concede that "[a] qualified banking expert may opine on whether a bank’s

exercise of setoff was consistent with sound banking practice—but to do so reliably, the

expert must engage with the deposit agreement, the U.C.C., and the common law that define the

bank's rights, and explain how the practice he describes operates within that framework." Id. at

15-16.

Plaintiffs argue "DelPonti's more than thirty-four years of financial-services experience in

bank operations, risk management, and regulatory compliance qualify him as an expert under

Rule 702 to opine on industry banking standards, including setoffs as it applies to deposit

operations." Dkt. No. 450 at 10. As Plaintiffs note in their response, and contrary to Defendants'

assertions, "DelPonti testified that defaults and setoffs were part of his work as Chief Risk

Officer." Id. at 11. Plaintiffs also cite a recent case from the Southern District of New York for

the proposition that an otherwise qualified expert who "does not have experience with non-

lender/non-bank administrative agents can be 'properly explored on cross-examination and [goes]

to his testimony's weight and credibility — not its admissibility.'" Id. (quoting Patriarch Partners

Agency Servs., LLC v. Zohar CDO 2003-I, Ltd., No. 16-CV-4488, 2025 WL 2592224, *8

(S.D.N.Y. Sept. 8, 2025)); see also McCullock v. H.B. Fuller Co., 61 F.3d 1038, 1043 (2d Cir.

1995).

During his deposition, Defendants' counsel asked DelPonti, "What is a setoff?" Dkt. No.

432-3 at 58. After seeking some clarification as to the context the question was being asked,

DelPonti stated, "It depends on the situation." Id. When asked to define the term as it "is used in

this case," DelPonti responded, "Generally, you're taking funds from one account to cover losses

in another account or in situations set off. If there was a default on a lending arrangement, you

would use also that, set it off." Id. at 59. Counsel asked DelPonti if he had "any professional

experience with setoffs." Id. DelPonti responded, "I don't recall off the top of my head, but it has

to be, given the breadth of my experience and everything. I just don't recall off the top of my

head." Id. at 59-60. He then explained that as "chief risk officer at a bank, we're dealing with

lending. There's defaults. There's setoffs. We're dealing with a CEO at a mortgage company.

You've got loans, right? You're paying different things. You've got setoffs. I mean, there's just a

lot of different experiences. There's deposit agreements. Like you said, they have -- there could

be setoff provisions in them. There could be -- I just don't remember off the top of my head." Id.

at 60. DelPonti noted that "when we're doing restructuring for the warehouse lines, I believe they

were doing setoffs for purposes of that. I think that's another specific situation." Id. He

explained his role as follows:

I served as the -- one of the restructuring officers. So we would

negotiate with the -- this was during the mortgage crisis. We would

negotiate with the lenders and ensure -- I think there were, like,

setoff provisions, the bank accounts and things like that. That's

another - what we actually were doing, working with the company

and serving as their restructuring officers, to actually ensure setoffs

were occurring. Because they were similar type of situation where

there was significant losses. That's another one.

Id. at 61. DelPonti stated that he was "negotiating new terms. So what was occurring during that

time was the warehouse lender -- the warehouse lender, where you're backing their loans. We had

correspondent relationships, and as part of that, we were negotiating revised terms to determine

whether we were going to keep a lot of that." Id. at 61. He said, "And I do distinctly recall there

being -- ensuring the revised negotiations in the default that we were adding setoff provisions,

working with the legal teams to make sure those were in there." Id. at 61-62.

Contrary to Defendants' arguments, the Court does not find this experience so deficient as

to warrant exclusion of DelPonti's setoff opinions. DelPonti clearly has an understanding of, and

experience with, setoffs in a variety of contexts, even if that experience is not identical to what

occurred in this case. Counsel is free to cross-examine DelPonit about the differences between

his experiences and the setoff at issue, here.

Likewise, to the extent Defendants argue DelPonti's opinion is deficient because he did

not analyze certain written agreements or legal provisions, that is additional fodder for cross

examination. As Defendants concede and Plaintiffs reiterate, DelPonti expressly relied on "New

York banking law, FDIC requirements, and [Unfair or Deceptive Acts of Practices] principles."

Dkt. No. 450 at 12; see also Dkt. No. 432-1 at 15. The fact that Defendants believe DelPonti

should have relied on different or additional sources in forming his opinions does not mean his

opinions are baseless. Defendants can question DelPonti about that during trial.

Next, Defendants contest DelPonti's comparison between Defendants' decision to exercise

their purported right to offset the Mann accounts and Bank of America's decision to freeze the

money in accounts held by Mann "until the funds were forfeited to the government as part of Mr.

Mann's court case." Dkt. No. 432-4 at 90; see Dkt. No. 432-1 at 16. Defendants argue the

comparison is inappropriate because DelPonti "never established the predicate

facts that would make the comparison meaningful. . . . He cites no evidence that Bank of

America faced a comparable loss." Dkt. No. 432-1 at 17. Defendants argue that the "distinction

is dispositive: a bank with no unpaid debt has no occasion to exercise a setoff at all, so its

decision to freeze funds instead says nothing about whether Pioneer's setoff was proper." Id.

Plaintiffs retort that "[t]he point of the comparison is not that the two banks faced identical

balance sheets; it is that both institutions confronted funds and circumstances suggestive of fraud,

and one chose to freeze and investigate while the other did not." Dkt. No. 450 at 14.

The Court agrees with Defendants. Defendants cite Edmondson v. RCI Hosp. Holdings,

Inc., 2020 WL 1503452, at *5 (S.D.N.Y. Mar. 30, 2020) as an example whereby a court excluded

an expert opinion because of a lack of an appropriate comparator. See Dkt. No. 432-1 at 16. In

Edmonson, the expert witness opined that "[b]ecause stock photos can be licensed from Getty for

between $50 and $499, depending on file size" then the photos that were misappropriated in the

case were worth that same value. Edmondson, 2020 WL 1503452, at *5. The district court

concluded that "[b]ecause [the p]laintiffs' images are not available on Getty for royalty-free

licenses, they are not comparable to the stock photos referenced by" the expert. Id.; see also

Malletier v. Dooney & Bourke, Inc., 525 F. Supp. 2d 558, 675-76 (S.D.N.Y. 2007) (omitting

comparison between U.S. and European markets where the expert said "the European countries

have demographics and other characteristics similar to the U.S., and have mature markets for

Louis Vuitton products, whereas parts of Asia do not" but the expert "cite[d] no support for these

assumptions; he relie[d] on no articles or studies to justify either the empirical assumptions or the

premise that a statistical analysis is more reliable (or reliable at all) when the comparison base is

substantially narrowed").

During his deposition, DelPonti testified that he compared Bank of America to Pioneer

because Bank of America "went on to owe money. That was the comparison to them." Dkt. No.

432-3 at 249. DelPonti does not expand on the comparison any further in his report or his

deposition. Without any explanation as to how the two companies are similar or what similar

circumstances they faced, it would not be appropriate to tell a jury what one bank did, in order to

say that Pioneer should have done the same. Therefore, the Court will not allow the comparison

to be made.

Defendants also assert that "DelPonti's account classification and deposit-agreement

opinions apply a test New York law does not recognize." Dkt. No. 432-1 at 18. Defendants quote

portions of DelPonti's deposition testimony wherein he stated that the parties' demand deposit

agreement does not negate that the accounts contained third-party funds. See id. at 19. Plaintiffs

argue that DelPonti did not give an opinion in either his initial or rebuttal reports about how the

Mann accounts were or should be classified. Plaintiffs contend Defendants are using "Daubert

motions as a vehicle for arguing the merits of its defenses [which] is improper, a burden on

Plaintiffs, and a waste of judicial resources." Dkt. No. 450 at 15.

During his deposition, defense counsel asked DelPonti about page 31 of his report where,

for the first time, he called "the 2440 account[,] the Cloud Payroll tax account." Dkt. No. 432-3 at

113. DelPonti agreed that "no Pioneer Bank account calls the account 2440[,] Cloud Payroll tax

account." Id. at 114. Defense counsel asked why DelPonti chose that name and he responded,

"Just to name it and describe it." Id. at 115. DelPonti said, "I came up with the naming. It's how

I refer to it." Id. Counsel asked if DelPonti was "opining on the type of account that 2440 is in

this case." Id. DelPonti responded, "I'm opining on the information that's - the accounts that the -

- I do have in my rebuttal report information related to the accounts, and the fact that the bank

called it a deposit account is irrelevant as to the fact that third-party funds are going through." Id.

at 115-16.

DelPonti noted that he "knew it was set up with a deposit agreement. I knew that Pioneer

Bank had set off against the account. Let me see in the rebuttal if I talk about it." Id. at 116.

After reviewing his own rebuttal report, DelPonti pointed defense counsel to page 13, paragraphs

20 and 21. In paragraph 20 of his rebuttal report, DelPonti states as follows:

Mr. Kreig opines that the "Pioneer Bank deposit accounts at issue

were unrestricted demand deposit or 'checking' accounts, not special

deposit accounts or fiduciary-type accounts." Although it is true

that Pioneer treated these accounts as regular deposit accounts, Mr.

Kreig does not properly consider how Pioneer should have treated

the accounts in accordance with banking industry standards. Based

on my experience in the banking industry, to the extent that Pioneer

knew that the funds were third-party funds, the Bank should not

have appropriated the funds to set them off against other liabilities.

Dkt. No. 432-5 at 13 (footnote omitted). In paragraph 21, he states as follows:

Further, Mr. Kreig's opinion suggests that the accounts at issue must

be either a special deposit account or a demand deposit account, but

it is important to note that the banking landscape encompasses

various types of accounts beyond this binary classification.

Banking institutions often offer a spectrum of account types, each

with distinct features and characteristics. The assertion that the

absence of a specific label automatically grants the bank the right to

treat the account as a demand deposit account, ignoring the source

of the funds, is incorrect. The nature and terms of an account,

including the customer and source of funds, should be analyzed

comprehensively, rather than solely relying on this categorization.

The absence of a special deposit account label does not inherently

confer the right to treat the funds as a demand deposit account, and

a nuanced evaluation is necessary to determine the rightful

treatment of the account in question. This is consistent with an

opinion involving Atlantic Bank of New York (discussed in further

detail below) where a court found that "when a bank is on notice

that funds in a depositor's account are owned by a third party, the

bank cannot appropriate those funds in order to set them off against

a debt of the depositor."

Id. at 13-14 (footnote omitted).

As Judge Scullin explained in his summary judgment decision and this Court has already

reiterated, there is an issue of fact as to whether "Defendant Pioneer engaged in its own fraud and

knew or should have known of Mann's fraud, that the subject accounts were intended as special

use accounts, and that Defendant Pioneer knew the funds were owned by third parties, . . . and

that Defendant Pioneer knew the funds were third-party tax funds entrusted for the purpose of

paying taxes." Dkt. No. 393 at 14.

Defendants know this is an issue that must go before the jury. DelPonti did not purport to

present an opinion on the naming or categorizing of the accounts in his initial report. He only

responded to Kreig's report as a rebuttal expert and answered defense counsel's questions.

Defendants do not cite or quote a single part of DelPonti's rebuttal opinion in this part of their

motion to exclude. See Dkt. No. 432-1 at 19-20. Whether Defendants agree or disagree, the fact

is that the jury must be presented with evidence about whether Defendants knew how the Mann

accounts were being used. That is a key theme of Plaintiffs' case, and they have the right to

present that to the jury and a Daubert motion is not the place to argue against the opposing party's

theory of the case. Therefore, this aspect of Defendants' motion is denied.

Defendants next argue that DelPonti inappropriately relies on the FDIC's preliminary

findings to opine about BSA compliance. See Dkt. No. 432-1 at 21. Defendants cite two pages of

DelPonti's report. First, DelPonti states that "[t]he FDIC found that Pioneer's Bank Secrecy Act

Program was 'fundamentally and materially deficient' and Pioneer disclosed in its financial

statements for the year ending June 30, 2020[,] that it failed to comply with applicable laws and

regulations." Dkt. No. 432-4 at 101. DelPonti then explains "[i]n December 2019, the FDIC

conducted a 'Safety & Soundness Exam' at Pioneer. Based on this exam, the FDIC found that

Pioneer's BSA program 'is fundamentally and materially deficient.'" Id. at 103.

Defendants explain that DelPonti conceded during his deposition that the FDIC's findings

were preliminary. See Dkt. No. 432-1 at 21. That is precisely the type of cross examination that

Defendants can present during trial. Defendants do not contest the accuracy of the statements

made by DelPonti in his report but argue that DelPonti fails to qualify his statements. See id. To

the extent Defendants believe there is additional information the jury should know, they can ask

DelPonti from the witness stand, just as they did during his deposition.

Defendants also seek exclusion of DelPonti's report because "his report does not

distinguish between the regulatory requirements in force before and after May 18, 2018[.]" Dkt.

No. 432-1 at 22. Defendants state that "[b]ecause the account openings he criticizes predate the

rule, an analysis that applies the post-2018 framework to pre-2018 conduct does not reflect 'a

reliable application of the principles and methods to the facts of the case.'" Id. (quoting FED. R.

EVID. 702(d)). Defendants do not cite or quote any part of DelPonti's report that it believes is

inappropriate because of this; rather, they cite only his deposition testimony.

The Court does not find this to be an appropriate basis for a Daubert motion. Indeed,

Defendants fail to identify what "customer due diligence opinions" they seek to exclude. Dkt. No.

432-1 at 22.

In his deposition, DelPonti was asked by defense counsel, "Can you tell us why your

expert report does not make a distinction between prior to May 18, 2018, and after May 18, 2018,

when discussing allegations about Pioneer's customer due diligence, transaction monitoring, and

customer risk profiles?" Dkt. No. 432-2 at 110. DelPonti said, "I mean, the customer due

diligence still applied. The May 2018, like, the basic framework didn't change. I believe they

were -- the focus on this was related to beneficial owners. And in this case, there was only one

owner. So a lot of this relates to the fact that when you're doing customer due diligence, that part

of the process, in order to enhance it, was to ensure that you had an understanding of the

ownership structure of the companies you're dealing with. And then for people that had higher

percentage of ownership, they -- you would do more analysis on them." Id. at 110-11.

Plaintiffs correctly state in their response that Defendants do not identify what portion of

Defendants report is misleading or incorrect based on the purported distinction between the pre-

and post-2018 regulations. See Dkt. No. 450 at 16. Defendants' motion is denied on this ground.

Defendants continue to attack DelPonti's opinion insofar they argue that DelPonti's

deposition testimony about Cloud Payroll's website "cannot be used to tell the jury "was the law

require[s]." Dkt. No. 432-1. Defense counsel asked DelPonti during his deposition whether he

was "opining that when Pioneer opened the account ending in 2440, that it was required to review

the Cloud Payroll website." Dkt. No. 423-3 at 150. DelPonti responded, "I'm opining that they

need to follow the BSA/AML regulation and know the customers, and this would be -- a typical

practice would be to go to the website." Id.

DelPonti has over thirty years of experience in the banking industry. Defendants are free

to question him during trial about whether reviewing a client's website is necessary or best

practice before opening a new account, but this is not an issue for a Daubert motion.

Defendants also argue that DelPonti "reason[s] backward from Pioneer's 2020 CDD form

update, which post-dated the discovery of Mann's fraud. He points to the update as evidence that

Pioneer's earlier practices were deficient." Dkt. No. 432-1 at 22. Defendants contend that

"reasoning from a subsequent improvement to conclude that earlier practices were inadequate—

without independent evidence that the prior form failed to meet contemporaneous standards—is

hindsight, not methodology." Id. at 22-23. Likewise, they assert that DelPonti's opinions that

Defendants should have monitored transactions in the accounts should be excluded because he

does not cite any regulations which require such monitoring. See id. at 23. Defendants contend

that DelPonti "opines that Pioneer had a duty to scrutinize the description fields of individual

Automated Clearing House [] transactions—the data fields that accompany electronic payment

entries and identify their originator." Id. (emphasis added).

Plaintiffs state in their response that as an expert, DelPonti was permitted to rely on past

events to form his opinion and that "Pioneer identifies no facts that DelPonti relies on that were

only available after the credit decisions had been made." Dkt. No. 450 at 19. Plaintiffs also argue

that DelPonti does not give an opinion about transaction monitoring, but instead he "catalogues

the vast quantities of information readily available to Pioneer from its own records and

communications with Mann that support his opinion that Pioneer had sufficient information to

know that the accounts held by Cloud Payroll and MyPayroll were used for tax purposes." Dkt.

No. 450 at 16.

When the Court searches for the word "duty" across the reports and exhibits attached to

Defendants' motion to exclude DelPonti's opinion, the Court is taken to Kreig's opinion, not

DelPonti's opinion. See Dkt. No. 432-6. The Court is also directed to DelPonti's deposition,

during which the following exchange occurred:

Q. Can you tell me, is it your opinion that Pioneer had a duty to

scrutinize ACH transactions of the Mann accounts?

A. They had a responsibility to do transaction monitoring of the

information that goes through it, and it includes the ACH. So, yes.

Q. Okay. And was that duty in existence prior to 2018?

A. Yes.

Q. Is it your opinion that Pioneer had a duty to scrutinize ACH

descriptions?

A. They had a duty to meet the BSA/AML rules at that time, of

which they were supposed to do transaction monitoring. They had

the BAM system. They had alerts that came out. And it's my

opinion, though it's in the report, that the investigation related to

those alerts was not consistent with expected practices.

Q. Is it your opinion that Pioneer had a duty to scrutinize ACH

descriptions?

A. They had a duty to understand what was going through their

accounts. If that duty involves going into the details of company

descriptions to accomplish that goal, then they should be doing that.

Q. Is it your opinion that they should have been doing that?

A. It's my opinion that they should have been evaluating the

information going through. They had the ACH information, so

when they're doing their investigations, if you were doing it

properly, you would evaluate that.

Q. Is it your opinion that Pioneer had a duty to scrutinize ACH

descriptions?

A. In the context of doing appropriate investigations and

transaction monitoring analysis, my answer, yes.

Q. Is it your opinion that Pioneer had a duty to scrutinize ACH

account detail?

A. Again, in the context of doing an appropriate investigation and

analysis and understanding the transactions that are going through,

they had a duty.

Q. Is that true before 2018?

A. Yes.

Dkt. No. 432-3 at 215-16. Defense counsel asked questions related to duty and the witness

answered, directly. The Court finds no grounds on which to preclude those answers.

Defendants note that "DelPonti opines that the [remote deposit] limits Pioneer set for the

Mann entities were 'inappropriately high.'" Dkt. No. 432-1 at 23. They move to exclude that

opinion on the ground that "he identifies no standard against which to measure what an

'appropriate' [remote deposit] limit would have been for a customer with Mr. Mann’s transaction

profile." Id. Defendants acknowledge that DelPonti discusses Federal Financial Institutions

Examination Council [] and FDIC guidance recommending that banks conduct 'a risk assessment'

before implementing [remote deposit] services," but argue that the guidance does not address

remote deposit limits. Id. at 23-24.

As Plaintiffs assert in their response, this opinion of DelPonti's comes from his rebuttal to

Kreig. See Dkt. No. 450 at 17 (citing Henkel v. Wagner, No. 12-CV-4098, 2016 WL 1271062,

*12 (S.D.N.Y. Mar. 29, 2016) (concluding that a rebuttal expert "does not need a 'model or

theory' to identify purported flaws in Mr. Hall's testimony. Rather, she needs only her expertise

and the 'method' identified at the beginning of her report—namely, reviewing the documents in

this case, along with Mr. Hall's report, and arriving at an opinion as to Mr. Hall's analysis of the

alleged economic damages to Henkel)). Moreover, as Plaintiffs state, DelPonti, as a risk officer

of many years, is qualified to give an opinion on risk and whether he believed it was appropriate

for Defendants to take certain actions based on his experience in the industry. See Dkt. No. 450 at

18.

The same conclusion is reached regarding Defendants' challenges to DelPonti's

underwriting and lending opinions. Defendants argue DelPonti's opinion that Pioneer should have

engaged in different or better analyses or considered certain information in reviewing the Mann

accounts relies on inappropriate hindsight. See Dkt. No. 432-1 at 25. However, as Plaintiffs

argue in opposition, Defendants do not explain what information was unavailable to Pioneer at the

time it made its choices. See Dkt. No. 450 at 20.

Defendants state, "Hindsight is not itself per se disqualifying—experts may evaluate past

events after the fact. What Rule 702(d) forbids is something narrower and more specific:

evaluating a decision against information the decision-maker did not and could not have had, and

then faulting the decision maker for not reaching the conclusion that later information compels."

Dkt. No. 432-1 at 25. Defendants fault DelPonti for not looking over Pioneer's data from the

perspective of "a voting member of the loan committee." Id.

Defendants may cross-examine DelPonti on the precise angle at which he viewed all of

the known or knowable information that was or could have been available to employees at the

time of their decision making. The fact that DelPonti did not place himself in the shoes of a very

specific employee or set of employees does not mandate exclusion of his opinion. The Court

agrees with Plaintiffs that "Pioneer's argument that DelPonti should have given more weight to

the 'clean audit reports' that Mann supplied to Pioneer and less or no weight to the daily NSF

activity [] is an argument for the jury[.]" Dkt. No. 450 at 20. Indeed, in DelPonti's opinion, he

noted the "limit[ed] scope of audits" performed by Pioneer as one way in which third-parties were

harmed. Dkt. No. 432-4 at 102. Defendants are free to attack that opinion on cross examination.

In sum, DelPonti is not precluded from testifying about his opinions to the jury, but his

testimony must be restricted in the ways set forth in this Memorandum-Decision and Order.

2. Knowledge and State of Mind Opinions

Both parties make similar arguments in nearly all of their motions: that the opposing

party's experts cannot testify about the other party's state of mind, knowledge, or beliefs. See Dkt.

No. 423-1 at 14 (arguing that Payne cannot testify about "why" payroll clients SWP); Dkt. No.

424-1 at 8 (seeking to exclude Sova's opinion that "it would be virtually impossible for a bank not

to know" about the involvement of payroll funds); Dkt. No. 425-1 at 23 (arguing that Moravek

should not be permitted to testify that Pioneer "knew or should have known" specific details about

the third-party payroll funds); Dkt. No. 426-1 at 23 (moving to exclude Crowell's opinion that

Pioneer knew what sort of funds Mann was putting into his accounts); Dkt. No. 428 at 11-12

(seeking to preclude Kreig from testifying that SWP and NatPay knew about Mann's

wrongdoing); Dkt. No. 430-4 at 10-11 (arguing that Wiliams impermissibly opines about what

Plaintiffs knew about Mann's wrongful conduct); Dkt. No. 423-1 at 26-27 (moving to preclude

DelPonti from testifying about what Pioneer knew or should have known regarding Mann's

accounts).

"Determining what motivated a particular person or entity is generally not an appropriate

subject matter for expert testimony." R.F.M.A.S., Inc. v. So, 748 F. Supp. 2d 244, 268 (S.D.N.Y.

2010); see also United States v. Phillips, No. 22-CR-138, 2023 WL 6620146, *14 (S.D.N.Y. Oct.

10, 2023) ("Both parties agree that “[o]pinions concerning state of mind are an inappropriate topic

for expert opinion'") (quoting SEC v. Am. Growth Funding II, LLC, 2019 WL 1772509, at *1

(S.D.N.Y. Apr. 23, 2019)). Courts have permitted expert testimony "as to the content of banking

industry standards and practices—and the Bank's compliance with such standards and practices"

because "[t]he report and testimony . . . is probative, but not dispositive, of the Bank's state of

mind." Gill v. Arab Bank, PLC, 893 F. Supp. 2d 523, 537 (E.D.N.Y. 2012). But, "[e]xperts are

not permitted to testify to an actor's state of mind, but an expert can testify to whether a given

practice is consistent with a given state of mind." United States Commodity Futures Trading

Comm'n v. Wilson, No. 13-CV-7884, 2016 WL 7229056, *7 (S.D.N.Y. Sept. 30, 2016) (collecting

cases).

Accordingly, both sides' motions are granted to the extent that no expert will be permitted

to testify to what a party or their employee(s) knew, thought, ignored, disregarded, or otherwise

had in their mind at a given time.

3. Cumulative Opinions and Testimony

Defendants argue that Moravek, Crowell, and DelPonti's opinions are cumulative. See

Dkt. No. 425-1 at 28; Dkt. No. 426-1 at 29; Dkt. No. 432-1 at 30.

Plaintiffs assert that "these experts address distinct aspects of the same subject matter,

evaluated from different perspectives and backgrounds." Dkt. No. 447 at 28. Plaintiffs describe

the differences as follows:

Crowell evaluates the conduct of Pioneer's compliance and BSA

functions, while DelPonti evaluates the conduct of Pioneer's

lending, underwriting, and risk-management functions. Although

both experts analyze the same banking relationship, they apply

different professional expertise to different decisions made by

different bank personnel. Also, Bryant Moravek is solely a rebuttal

expert whose opinions directly rebut opinions offered by Pioneer's

expert James Kreig.

Id. Plaintiffs argue that "[i]t would be premature to exclude Crowell’s opinions as cumulative

when no testimony has yet been offered." Id. at 29. Plaintiffs make the same arguments in their

responses to Defendants' motions regarding Moravek and DelPonti. See Dkt. No. 448 at 21-22;

Dkt. No. 450 at 25-27.

"Admissible expert testimony may still be excluded under Federal Rule of Evidence 403 if

'its probative value is substantially outweighed by a danger of one or more of the following:

unfair prejudice, confusing the issues, misleading the jury, undue delay, wasting time, or

needlessly presenting cumulative evidence.'" Country Mut. Ins. Co. v. Broan Nutone, LLC, No.

8:20-CV-1356, 2023 WL 7324516, at *4 (N.D.N.Y. Nov. 7, 2023) (quoting FED. R. EVID. 403).

"'The Rule 403 inquiry is particularly important in the context of expert testimony, "given the

unique weight such evidence may have in a jury's deliberations."'" Id. (quoting Pac. Life Ins. Co.

v. Bank of N.Y. Mellon, 571 F. Supp. 3d 106, 114 (S.D.N.Y. 2021)); see also Nimely v. City of

N.Y., 414 F.3d 381, 397 (2d Cir. 2005). "In weighing the probative value of evidence against

possible prejudice, district courts have broad discretion." Country Mut. Ins., 2023 WL 7324516,

at *4 (citing United States v. Bermudez, 529 F.3d 158, 161 (2d Cir. 2008)).

"[S]ome overlap in testimony does not necessarily render that testimony needlessly

cumulative under" Rule 403. Quinton v. Am. Express Co., No. 19-CV-566, 2025 WL 1384896,

*4 (E.D.N.Y. May 13, 2025), on reconsideration in part, 2025 WL 1994848 (E.D.N.Y. July 17,

2025) (citing Guardino v. Alutiiq Diversified Servs., LLC, 457 F. Supp. 3d 158, 164 (N.D.N.Y.

2020)). Nevertheless, "[t]he [C]ourt takes seriously the risk that jurors 'will resolve competing

expert testimony by "counting heads" rather than evaluating the quality and credibility of the

testimony.'" Id. (quoting On Track Innovations Ltd. v. T-Mobile USA, Inc., 106 F. Supp. 3d 369,

414 (S.D.N.Y. 2015)).

The Court appreciates Defendants' arguments in recognizing the importance of preventing

cumulative evidence from being presented to the jury. However, the Court will not make any

determinations about whether the purported testimony or opinions are cumulative. The Court will

address the issue should it arise during trial.

Ill. CONCLUSION

After carefully reviewing the record in this matter, the parties' submissions and the

applicable law, and for the reasons stated herein, the Court hereby

ORDERS that the parties’ motions to exclude expert opinions and testimonies (Dkt. Nos.

423, 424, 425, 426, 427, 429, 430, 431, 432) are GRANTED in part and DENIED in part; and

the Court further

ORDERS that the Clerk of the Court shall serve a copy of this Memorandum-Decision

and Order on all parties in accordance with the Local Rules.

IT IS SO ORDERED.

Dated: September 9, 2026 Vp we 5 4 : ;

Albany, New York J) leg CF 2? Ger le,

Mae A. D’ Agostino~”

U.S. District Judge

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