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United States of America v. Irving Cohen

January 31, 2012

UNITED STATES OF AMERICA, PLAINTIFF,
v.
IRVING COHEN, THE WINDSOR ORGANIZATION, INC., AND 3-B STORES, INC., DEFENDANTS.



The opinion of the court was delivered by: Richard Mills, U.S. District Judge:

E-FILED

Tuesday, 31 January, 2012 10:31:27 AM

Clerk, U.S. District Court, ILCD

OPINION

The Court now considers the Plaintiff's Motion in Limine to Exclude the Expert Testimony of Herman Schwartzman and the Plaintiff's Motion in Limine to Exclude the Testimony of Markus Kolzoff.

The Motion as to Schwartzman is Allowed in part. The Motion as to Kolzoff is Allowed in toto. Here's why.

I. Motion to Exclude Expert Testimony of Herman Schwartzman

(A)

Plaintiff United States of America has filed a motion in limine to exclude the expert testimony of Herman Schwartzman. Rule 702 of the Federal Rules of Evidence provides:

If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise, if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case.

Fed. R. Evid. 702. Testimony which interprets the law is subject to exclusion. See United States v. Lupton, 620 F.3d 790, 799 (7th Cir. 2010). "[T]he meaning of statutes, regulations, and contract terms is 'a subject for the court, not for testimonial experts. The only legal expert in a federal courtroom is the judge.'" Id. at 799-800 (quoting United States v. Caputo, 517 F.3d 935, 942 (7th Cir. 2008)).

The Plaintiff contends that the Court should exclude Mr. Schwartzman's purported testimony pertaining to New York trust law because it interprets New York law about the validity of trusts and the powers and duties of trustees, without reference to any facts. Moreover, his proposed testimony construes the legal significance of documents. The Plaintiff contends that because construing the trust and sales agreements for their legal effect is the province of the Court, Schwartzman's proposed expert testimony should be barred.

Specifically, the Plaintiff asserts that Schwartzman's opinions expressed in Parts I.A and I.B of his Rule 26(a)(2)(B) Report should be excluded, including (1) the validity of the Hal S. Cohen No. 2 Trust, Laurence S. Cohen No. 2 Trust and Jennifer P. Cohen No. 2 Trust ("Cohen No. 2 Trusts"); (2) the powers and authority granted to the trustees of the Cohen No. 2 Trusts and the Lillian Rosen Trusts; (3) the extent of the economic benefit Defendant Irving Cohen received from the Cohen No. 2 Trusts; (4) the legal implications of a 1983 agreement between the Cohen No. 2 Trusts and the Lillian Rosen Trusts; and (5) the powers and duties given to the trustee of the Lillian Rosen Trusts and the propriety of the trustee's actions.

Relying in part on Marx & Co., Inc. v. Diners' Club Inc., 550 F.2d 505 (2d Cir. 1977), Defendant Windsor Organization, Inc. states that while an attorney cannot testify as to the legal significance of a document, an attorney with relevant experience may testify as to the ordinary and customary practices of a trade or business. See id. at 509 ("Testimony concerning the ordinary practices of those engaged in the securities business is admissible under the same theory as testimony concerning the ordinary practices of physicians or concerning other trade customs.").

Windsor claims that Schwartzman's expert opinion is based upon his "experience and knowledge of trusts" and should not be excluded. Windsor claims that his review of the documents should not be excluded because he is qualified to determine that based on his knowledge of New York trust law and experience in the administration of trusts created under New York law, the powers given to the trustees of the Cohen No. 2 Trusts were "common powers and limitations given to trustees under New York law." Moreover, Windsor states that Mr. Schwartzman was appointed Co-Trustee of the Cohen No. 2 Trusts on May 28, 1982, and has personal knowledge of the powers and authorities of the trustee(s) of the Cohen No. 2 Trusts, based upon his review of the trust documents and his experience and knowledge of the trusts and trust law.

Additionally, Windsor claims that Mr. Schwartzman will testify that the powers given to the trustee of the Lillian Rosen Trust for the benefit of Hal S. Cohen, Lillian Rosen Trust for the benefit of Laurence S. Cohen, and the Lillian Rosen Trust for the benefit of Jennifer P. Cohen ("Lillian Rosen Trusts") were "broad powers commonly given to trustees." Schwartzman further opines that it was reasonable for the trustee given such common powers to take action to preserve Property owned by the Lillian Rosen Trusts. Windsor further contends that his knowledge of the authority and power granted to the trustee of the Lillian Rosen Trusts as set forth in the agreement drafted by him will assist the Court in understanding the evidence and to determine the facts at issue.

Windsor alleges that the Expert Report sets forth facts which are drawn from the trust documents and does not interpret the documents.

Paragraph 1(A) sets forth facts providing that the Cohen No. 2 Trusts were funded with $3,000 transferred to the trustee, Stanley Levine. Levine was then discharged as Trustee and Marvin Rosenbaum and Schwartzman were appointed as Successor Co-Trustees of the Cohen No. 2 Trusts. Windsor claims that this merely sets forth the facts based on Schwartman's personal knowledge and the history of the trusts as set forth in the trust documents. It further asserts that his opinion relates to the powers commonly given to trustees under New York trust law. Windsor alleges that such testimony is allowed under Rule 702 because Schwartzman is testifying as to the common practices and powers of trustees based on his experience and knowledge of New York trust administration which has been accumulated in the course of a 55-year legal career. Windsor claims the opinion will assist the Court to understand the evidence and to determine the facts at issue.

Additionally, Windsor asserts that Paragraph 1(B) of the Expert Report does not interpret the provisions of the Trust Agreement. It merely sets forth the powers granted to the trustee of the Lillian Rosen Trusts.

Windsor contends that Schwartzman opines that based on his experience, those powers were common broad powers given to trustees of trusts created pursuant to New York law. Windsor claims the opinion will be of assistance to the Court.

(B)

It is difficult to describe Schwartzman's Rule 26 Report as doing anything other than interpreting New York trust law. It begins by setting out general principles of New York trust law and includes citations to the New York Estates, Powers and Trust Law and applicable case law. The Report then discusses the Cohen No. 2 Trusts and the Lillian Rosen Trusts. Schwartman then gives an opinion of the validity of the trusts. He states that the opinion as to the Cohen No. 2 Trusts is based on the terms of the Trust Agreement, his experience and knowledge of New York trust law, and his review of the relevant documents and exhibits. Schwartzman's opinion as to the Lillian Rosen Trusts is also based on his knowledge as draftsman of those Trust Agreements.

Although Windsor claims that Schwartman's opinion is based upon his "experience and knowledge of trusts" and he is testifying as to the common and ordinary practices and powers of trustees, it is apparent that he is applying principles of New York trust law to the specific trusts at issue in this case. Although Schwartzman no doubt has extensive knowledge of the common and ordinary practices of trustees, many of the opinions in his Report purport to interpret the legal significance of documents which are relevant to this case. Such testimony is subject to exclusion. Like the attorney who "gave his opinion as to the legal standards which he believed to be derived from the contract and which should have governed ...


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