United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
Robert Blakey United States District Judge
13-year old case, Plaintiffs Last Atlantis Capital LLC, Speed
Trading LLC, River North Investors LLC, Bryan Rule and Brad
Martin have sued various Defendants including Susquehanna
Investment Group and Susquehanna International Group, LLP,
alleging violation of the federal securities laws and various
state law claims. More specifically, Plaintiffs claim that
Defendants failed to provide best execution in the handling
of trade orders Plaintiffs submitted to them. The case is
currently before the Court on various motions, many of which
involve (directly or indirectly) certain exhibits Plaintiffs
planned to offer at trial. For the reasons explained below,
the Court finds that those exhibits - which consist of lists
of orders that Plaintiffs claim were mishandled by Defendants
- are not admissible at trial. What's more, because
Plaintiffs have conceded (and indeed the record confirms)
that they cannot prove their claims without these exhibits,
the Court finds that Defendants are entitled to judgment as a
matter of law on all remaining claims.
case had a tough time getting off the ground. Plaintiffs
filed their initial complaint on January 20, 2004 , and
Judge Bucklo, to whom the case was initially assigned,
dismissed it on March 30, 2005 . Plaintiffs filed an
amended complaint June 1, 2005 ; a Second Amended
Complaint on October 4, 2005 ; and a Consolidated
Complaint on November 7, 2005 . The Court dismissed the
Consolidated Complaint on September 13, 2006 .
Plaintiffs moved for reconsideration, and Judge Bucklo
granted the motion as to certain named defendants and gave
Plaintiffs two weeks to amend their complaint naming only
those defendants .
April 5, 2007, Plaintiffs filed their Consolidated Amended
Complaint , which is still the operative complaint
today, though Judge Bucklo later dismissed numerous
defendants for lack of service. The operative complaint -
proceeding against AGS Specialists, Bear Wagner, Knight
Financial Products, SLK-Hull Derivatives, Goldman Sachs
Execution and Clearing, TD Options, Citigroup Derivatives
Market, Inc., and Group One - alleged eight counts, including
violation of §10(b) and Rule 10b-5, breach of contract,
common law fraud, and breach of fiduciary duty, among other
claims. When Judge Bucklo allowed the complaint to proceed,
she denied Plaintiffs' untimely request to file yet
another amended complaint based upon the record, including
the length of the litigation (four years), the number of
previously filed complaints (five) and the numerous motions
to dismiss or for reconsideration that had already been filed
and resolved (at least 15 by that time). See ,
p. 15, n.6.
addition to all of the motions regarding the many attempts to
amend the complaint, the Court considered and resolved a
series of motions for summary judgment before discovery got
underway in earnest.
March 10, 2008, CDMI moved to dismiss the operative complaint
; Judge Bucklo converted the motion to a motion for
summary judgment and, after briefing, granted the motion
[548, 549]. On May 21, 2009, Knight Financial filed a motion
for summary judgment ; Judge Bucklo granted that motion
on March 26, 2010 , finding that Plaintiffs failed to
put forward any evidence connecting their expectations that
Knight would provide “best execution” to
statements made by Knight. Thereafter, on April 12, 2010,
Defendants SLK-Hull and Goldman Sachs also filed a motion for
summary judgment , arguing that the Court's decision
resolving Knight's summary judgment motion would apply
with equal force to the other Defendants. On November 4,
2010, Judge Bucklo granted in part and denied in part
Defendants' motion for summary judgment [833, 834].
Specifically, the Court ruled that Last Atlantis' claims
and Brad Martin's claims under Rule 10b-5(a), (b) and (c)
would survive against the Susquehanna Defendants and certain
other Defendants, and it dismissed Martin's claims
against AGS, all claims (including state law claims) brought
by River North, Bryan Rule and Speed Trading, and all claims
(including state law claims) brought against Goldman Sachs
and SLK. Judge Bucklo, however, declined to dismiss Last
Atlantis' state law claims against the Susquehanna
Defendants, AGS, SIG, Bear Wagner and TDO, or Martin's
state law claims against the Susquehanna Defendants, Bear
Wagner and TDO.
regard to the Susquehanna Defendants, [2" name="FN2" id="FN2">2] Judge Bucklo
similarly found that two alleged statements on SIG's
website were actionable because they ostensibly showed that
Defendants had publicly asserted: (1) they had
institutionalized the pursuit of best execution; (2) they
desired to meet and exceed regulatory requirements for
“execution quality”; and (3) they deliver
“best execution.” From these statements, the
Court determined that, at that preliminary stage of the
proceedings, a reasonable jury could conclude that Defendants
promised to provide “best execution” when
handling orders. Judge Bucklo determined that Last Atlantis
and Martin proffered evidence that their expectations that
Defendants would provide “best execution” were
based upon these statements.
these motions, however, were filed and decided without the
benefit of any significant discovery. Indeed, on April 15,
2010, Magistrate Judge Keys, who had the case for discovery
supervision, stayed discovery pending Judge Bucklo's
ruling on Defendants SLK-Hull and Goldman Sachs' summary
judgment motion. See . Following Judge
Bucklo's ruling, on December 13, 2010, Judge Keys
directed Plaintiffs to obtain discovery regarding audit trail
data from the Exchanges; he indicated that, once the audit
trail data was turned over, he would determine how discovery
would proceed in order to meet the discovery deadline, then
set for June 1, 2011. See .
January 21, 2011, Judge Bucklo issued an order inviting
additional summary judgment briefing on Plaintiffs' state
law claims. See . Consistent with that
invitation, Knight , Susquehanna/Bear Wagner/TDO ,
and SLK-Hull/GS  all filed motions for summary judgment
on Plaintiffs' state law claims. On June 6, 2011, Judge
Bucklo ruled on all three motions, granting each in part and
denying each in part. [965, 966]. As a result, Judge Keys
lifted the discovery stay on June 18, 2012 .
Thereafter, on July 12, 2012, Judge Keys adopted
Plaintiffs' scheduling order, which contemplated full
discovery by all parties .
Reassignment and Post-reassignment Procedural
October 6, 2015, the case was reassigned from Judge Bucklo to
this Court . At the initial status before this Court,
Defendants advised that they planned to file dispositive
motions; Plaintiffs' counsel objected, noting that
Defendants had already filed their summary judgment motions
and should not be permitted to file another. At the same
time, Plaintiffs indicated that they planned to file a motion
for partial summary judgment.
Court advised Plaintiffs that, if they intended to assert a
waiver argument in response to Defendants' renewed
summary judgment motions, they could do so, but would also
need to respond on substantive grounds as well. Specifically,
the Court advised “if you have an argument on
forfeiture or waiver, law of the case, make sure that
that's part of your calculation.” Transcript of
Proceedings of 10/21/15 [2');">1402], 25');">p. 25. This Court then set a
briefing schedule on any further dispositive motions, in an
effort to bring this case to final resolution either by way
of motion or subsequent trial. See . This
Court then had to extend that schedule for the Plaintiffs at
least 14 times. See , , , ,
, , , , , , ,
, , .
January 22, 2016, Defendants AGS, Bear Wagner, SIG and TDO
filed their motion, seeking summary judgment on
Plaintiffs' Amended Consolidated Complaint in its
entirety . On February 1, 2016, Plaintiffs filed their
motion, seeking partial summary judgment on certain state law
claims against SIG and TDO, and against all Defendants on
their affirmative defenses .
February 11, 2016, while the motion practice remained
pending, this Court also set the case for trial on November
14, 2016 - giving the parties a full nine months' notice.
That same day, the Court set the case for a final pretrial
conference on October 31, 2016, and ordered the parties to
file their proposed final pretrial order by October 17, 2016.
See . By April 7, 2016, after consideration of
the record, this Court determined that the parties were
unable to work cooperatively in good faith, and, after a
status and motion hearing, set the case for regular status
hearings on April 28, 2016, June 7, 2016, July 28, 2016, and
September 13, 2016 . The Court advised the parties that
they should be prepared to report at each status hearing on
their trial preparation efforts, and that they should, absent
an emergency, notice any and all motions for presentment at
the status hearing dates set by the Court . At each
such status hearing, the Court asked the parties about their
trial preparation and warned the parties, again and again,
that they must be prepared to go to trial on the scheduled
date. See Transcript of Proceedings of 4/28/16
, p. 6');">p. 6');">p. 6');">p. 6 (“I'm not going to move the trial
date”; “we have to work toward meeting that trial
deadline.”);  (“All previously set dates
and deadlines to stand”);  (“All other
deadlines to stand”).
these clear admonishments, at the status hearing on October
13, 2016, the parties advised the Court that they were not
able to meet the Court's deadline for the filing of the
proposed final pretrial order, and Plaintiffs requested
additional time. The Court, after noting that the schedule
for filing the order had been set months ago, initially
denied the motion; but after considering the prejudice to
Defendants and recognizing that the proposed pretrial order
should be filed jointly, the Court ultimately allowed the
parties to file their proposed final pretrial order on
October 19, 2016. See . The Court declined to
extend the date for filing motions in limine,
however, and required the parties to file those, as
previously ordered, on October 17, 2016. Id.
Procedural History Relating to Plaintiffs' Lists of
by this time reviewed and analyzed the parties' summary
judgment submissions, the Court advised Plaintiffs that it
had grave concerns about the admissibility of the exhibits
Plaintiffs referred to as the lists of relevant orders. The
Court advised Andrew Friedman, counsel for Plaintiffs, that
he would have to show that the orders included on the lists
were mishandled or they likely would not be relevant to any
issue left in the case; and counsel agreed. Transcript of
Proceedings of 10/13/16 [1578');">1578], pp. 9-10. In an attempt to
address the Court's concerns, attorney Friedman
represented that Plaintiffs' experts, Robert Lowry and
Dr. Roy Freedman, would testify that the orders included on
the list were, in fact, mishandled; and counsel further
represented that the experts would testify and establish the
analysis of the underlying data showing whether any orders
were mishandled. Id., pp. 11-12.
review of the record and hearing counsel's evidentiary
proffer, this Court advised:
Based on my review of what you've submitted, I don't
see how you're going to be able to show that any specific
order was mishandled. And simply having an expert opine,
based on what you just said, is not going to be sufficient
based on what orders were mishandled or not mishandled
because there's more factors involved that simply what
you've articulated. And there would also be other
predicate determinations which the expert would not be able
to address including who exactly received it, who exactly
sent it. You've got some serious issues, Counsel.
2');">p. 12. The Court further advised that under the law a mere
three- or five-second delay could not, standing alone,
establish that an order was unlawfully
“mishandled” and that other determinative factors
would also need to be shown. In no uncertain terms, this
Court warned counsel that the Plaintiffs, like all litigants,
needed to adhere to the rules of evidence as to the proposed
The Court: You're the plaintiff. You bear the burden of
proof. And you're the proponent of the exhibit, which
means you have to show -
Friedman [counsel for Plaintiffs]: Yes.
The Court: - you have to show the admissibility of the
exhibit. The burden does not shift to the other side simply
because you proffer some window of delay and then say, all
right, go ahead and try to prove that this is, in fact,
inadmissible by some burden-shifting. There's no
burden-shifting here. It's not like you make a prima
facie case and then there's a response. This is your
exhibit. You have to show that it's authentic, that it is
relevant, that it satisfies 403, that it is non-hearsay or an
exception to hearsay, et cetera, et cetera, et cetera. All
they have to do is, “Objection, your Honor, ” and
if you haven't laid the foundation, it doesn't come
Id., p. 16.
Court's serious misgivings about Plaintiffs' proposed
proof did not come as a surprise to counsel. Indeed, long
ago, Magistrate Judge Keys issued an order on March 13, 2009,
stating that, before he would order Defendants “to
engage in further time-consuming and expensive discovery, the
Court needs to assure itself that Plaintiffs' allegations
are not based on suspicions and hunches, but on real
evidence.” . Judge Keys, therefore, ordered
Plaintiffs to identify and produce “a listing of at
least 500 specific orders that they claim were mishandled (at
least 50 from each plaintiff and 25 for each defendant),
along with an explanation as to how they concluded that the
orders were fraudulently mishandled as opposed to having been
merely not executed.” Id. Plaintiffs requested
and received an extension of time to produce the requisite
orders ; they were due by April 17, 2009.
years later, Judge Keys was still dealing with the issue. In
a decision issued March 4, 2013, in connection with various
discovery disputes and motions - the “bulk of which
involve[d] the Relevant Orders, including the underlying data
and methodology the plaintiffs used to identify these
particular orders as being ‘relevant'” -
Judge Keys summarized the discovery that occurred in the wake
of his 2009 Order requiring Plaintiffs to come up with some
actual proof of their claims. Judge Keys indicated that some
plaintiffs (Last Atlantis and Speed Trading) had submitted
charts identifying orders, along with explanatory affidavits;
others (River North, Brad Martin and Bryan Rule) initially
conceded that they could identify only unexecuted orders, but
subsequently submitted charts and lists of purportedly
fraudulently mishandled orders; and still others (Lulu, Lola,
Friendly Trading and Goodbuddy) failed to respond at all.
See [1164');">1164');">1164');">1164], p. 6');">p. 6');">p. 6');">p. 6.
he noted, as the discovery disputes continued, that
Plaintiffs were taking an untenable position:
[i]nformation concerning the relevant orders is plainly
relevant - indeed, that evidence is at the crux of the claims
at issue in this lawsuit. To be sure, all of the defendants
question the plaintiffs' ability to identify specific
orders that they claim were handled improperly and for which
they seek millions of dollars from defendants. Indeed, this
has been the primary focus of the defendants' discovery
over the past several years. The plaintiffs are claiming that
the defendants failed to properly execute these orders; the
defendants are entitled to discovery concerning how the
plaintiffs arrived at those claims and what evidence they
have to substantiate those claims.
p. 11. Ultimately, Judge Keys rejected Plaintiffs'
attempt to withhold information relating to the lists of
orders on the basis of privilege:
Nor is the discovery sought privileged. Although the
spreadsheets may have been prepared in anticipation of trial,
the basis for the plaintiffs' claims should have preceded
the filing of the suit (to satisfy Rule 11). And, to the
extent the information requested concerning the spreadsheets
reflects mental impressions, they would seem to be those of
the plaintiffs' experts, not their attorneys. Discovery
concerning how certain orders were singled out as being
improperly executed, again, would seem to go to the crux of
the plaintiffs' case; the Court fails to understand why
the plaintiffs continue to want to hide the ball on the
Id. Specifically concerning the Susquehanna
Defendants' motion to compel, Judge Keys again addressed
the question of whether the Defendants were entitled to
discovery concerning Plaintiffs' lists of orders:
As the Court understands it, the plaintiffs took underlying
data - audit trail data - ran searches and programs on it and
came up with a list of “relevant orders, ” i.e.,
the orders they claim were either mishandled by the
defendants or not executed. The defendants claim they need to
be able to see what the plaintiffs did with the data, to see
how they came up with the lists, in order to test the
validity of their allegations of mishandling and/or
non-execution. The plaintiffs claim that the searches and the
programs run to create the lists from the audit trail data
amounts to work product. But the list of relevant orders was
not simply prepared in anticipation of trial, it was prepared
because the Court ordered the plaintiffs to prepare it; the
plaintiffs are claiming that the defendants mishandled these
orders or fraudulently failed to execute them in accordance
with established rules and protocols. The defendants have the
right to test those claims, and the requested discovery is
the easiest and most efficient way to get at the issue;
forcing the defendants to re-create the underlying data,
figure out the specific methodology employed by the
plaintiffs and take the necessary steps to determine exactly
how the plaintiffs arrived at the orders they did, would,
indeed, cause undue hardship.
[1164');">1164');">1164');">1164], p. 14. Judge Keys' frustration with
Plaintiffs' improper discovery tactics was clear:
Reduced to their essence, the plaintiffs' claims allege
that certain orders were mishandled by the Specialist
defendants in violation of Exchange policies and in violation
of the securities laws; fundamentally, the Court accepts that
the defendants would need to know how the plaintiffs
determined which orders were “Relevant Orders”
and the basis for their claims that those orders were
mishandled. The plaintiffs must have the information that
allowed them to discern from the universe of all orders which
were “Relevant” and why; it is only fair that the
defendants - who are being hauled into court to defend
themselves against these claims - are allowed discovery on
the issue. The information is not work product, it
is the factual basis of the plaintiffs' claims
and it should be disclosed. This has consistently been
the Court's view of this case; yet years have passed
without this information ever coming to light. It is
time for the plaintiffs to stop resisting the disclosure of
this information, to provide the requested discovery and to
move this case forward to resolution.
Id., p. 17 (emphasis added).
and a half later, Magistrate Judge Cole, who had by then
inherited the case from Judge Keys when he retired, remained
equally frustrated by Plaintiffs' failure to move the
case forward with real evidence to support their claims. On
September 29, 2014, Magistrate Judge Cole held a hearing on
Defendants' motion to compel the deposition of Robert
DeMeritt, the Last Atlantis partner and designated expert who
had created the infamous lists of orders. Plaintiffs had
taken the position that DeMeritt was not relevant and should
not be deposed, despite the fact that DeMeritt was the
individual who had run the critical spreadsheets and
maintained the underlying data. Judge Cole observed:
[t]here is a difference between running an analysis of
underlying data and the validity of the underlying data.
Nobody is going to dispute - or they will dispute. But
obviously you can test somebody who says, well, I have this
piece of paper and that piece of paper and this and that, and
I added up all the invoices, and we sold a million dollars
worth of stuff to GMAC, and that's our damages. . . .
That's easy. But the underlying - the validity of the
underlying data the experts cannot opine on in this case
obviously requires, even for admissibility purposes, that
whoever didn't just gather this up, but apparently
created the mechanism for obtaining it and - well, the valid
- the underlying validity, that person has to testify.
of Proceedings of 9/29/14 [1559-15], pp. 11-12. In Judge
Cole's view, Friedman had not been forthcoming with
Plaintiffs' expert disclosures, initially disclosing
DeMeritt as an expert, then advising the parties that
DeMeritt was no longer available to serve as an expert, then
deciding that DeMeritt would serve as an expert. Judge Cole
admonished Friedman that “[y]ou can't make it this
labyrinthian and this hard for opponents in a case, ”
and he observed, being relatively new to the case, “I
was struck with how difficult you made it and how it was easy
to see why these delays occurred.” Id., pp.
29, 30. Judge Cole found that DeMeritt “is really
critical to this case, ” “[a]nd I'm not going
to take - nobody needs to take your word for it that he's
not.” Id., pp. 31, 32. He granted the motion
years later, in the final stages of trial preparation before
this Court, the parties were still fighting over the lists of
orders. Defendants were still claiming that Plaintiffs had no
evidence to support their claims, and Plaintiffs still had
not produced a single witness to testify as to the validity
of the underlying data and the resulting lists of orders, and
still had not produced any witness to testify concerning the
methodology used to create the lists of orders. In response
to this Court's inquiry just a month before trial,
Plaintiffs were still unable to reassure the Court that they
were prepared to lay a sufficient evidentiary foundation for
the lists of orders. Without the orders, as Plaintiffs
conceded in open court, Plaintiffs could not legally succeed
on any of their claims, making a trial unnecessary.
See Transcript of Proceedings of 10/13/16 [1578');">1578],
pp. 7-8 (Counsel for Plaintiffs indicating that “the
specific spreadsheets with the specific - identifying the
specific orders, that's critical to the case” and
conceding that, without the spreadsheet exhibits, none of
Plaintiffs' claims would survive.).
result, before committing to empaneling a jury and forcing
the litigants to incur any further expenses, this Court
directed Plaintiffs' counsel to file a certification
under Rule 11 laying out the purported evidentiary basis for
Plaintiffs' critical exhibits . Counsel submitted a
certification, , but it missed the mark and failed to
address the fatal concerns raised by this Court at the
October 13, 2016 status hearing. In his certification,
counsel represented in conclusory fashion:
[P]laintiffs will present the testimony of Mr. DeMeritt to
establish a foundation for the spreadsheets setting forth
detailed information regarding the times the Orders were sent
to each exchange and routed to defendant Bear or SIG for
execution, the prevailing Exchange and National Best Bid and
Offer price, the length of time the orders were pending prior
to execution or cancellation and other material information
under F.R.E. 901(b)(1), and (7)-(9), R. 1005, R. 1006 and/or
R.1007. . . . With respect to objections raised by defendants
to the admissibility of this evidence, plaintiffs will
establish that the information in the spreadsheets are not
barred under the hearsay rules under exceptions in F.R.E. 803
(6), (8) and (17).
. Despite this Court's explicit instructions,
Plaintiffs' counsel did not explain specifically how he
would lay a foundation for the underlying data from which the
spreadsheets were derived. Among other short-comings, counsel
failed to explain what he meant by “other material
information”; failed to provide any information to
substantiate his bare assertion that the orders would survive
a hearsay challenge; and failed to provide any factual
support for his suggestion that the lists of orders
constitute “records of a regularly conducted activity,
” public records or market reports such that they would
fall within the hearsay exceptions referenced. See
light of the above, this Court set the matter for an
evidentiary hearing, seeking to give Plaintiffs' counsel
one last opportunity to reassure the Court that empaneling a
jury would not be a complete waste of everyone's
time. At the evidentiary hearing, the Court
noted that “there's been a systemic failure of
plaintiff to comply with routine deadlines and to give a
straight answer to a simple question, so proceeding by way of
proffer and even requested Rule 11 certifications has been
ineffectual.” Transcript of Proceedings of 10/27/16
[1610');">1610');">1610');">1610');">1610');">1610');">1610');">1610], p. 6');">p. 6');">p. 6');">p. 6. Thus, the Court noted, the point of the
evidentiary hearing was to ascertain exactly what evidence
Plaintiffs planned to offer at trial concerning the critical
spreadsheets and to determine whether counsel could actually
lay an evidentiary foundation for those exhibits and
otherwise establish their admissibility:
Right now I want to know what the evidence is because I
can't get a straight answer. So let's get a straight
answer. Let's figure out what the exhibit is and what the
testimony is, and then I can apply the rules of evidence.
Because right now I can't do it with a hypothetical.
Id., p. 7.
Plaintiffs made this Court's task even more difficult
when they failed to bring copies of their actual exhibits to
the hearing. The following exchange illustrates the
Court's many attempts to address Plaintiffs' ongoing
inability to support claims with actual evidence:
THE COURT: Let me - hang on a second, hang on a second. Let
me interrupt. This is your main exhibit. You don't - do
you have a copy of what the exhibit is?
MR. FRIEDMAN: Yes.
THE COURT: Okay. Can you get it to me and opposing counsel,
the version you're going to use at trial. Not a draft,
not a version that's going to change between now and
trial, but the version, the [whole] version, can you get it
to me by the end of business today?
MR. FRIEDMAN: I probably cannot. They have the copies of
THE COURT [to defense counsel]: Do you have a copy of it?
MR. STERN: We have what he has sent us, yes, your Honor.
THE COURT: All right. We're going to take a little break.
You're going to show him the copy that he's given
you. You're going to confirm that that's your
MR. FRIEDMAN: Okay.
THE COURT: Because I want a copy of the exhibit. Because once
you hand it to me, that's going to be the exhibit whose
admissibility is going to be tested in this hearing.
MR. FRIEDMAN: Okay. These are big spreadsheets.
THE COURT: I don't care how big it is. This is your
evidence. You can bring in 20 bankers boxes, if that's
what your evidence is.
MR. FRIEDMAN: Okay.
THE COURT: Whatever your evidence is, testimony and exhibits.
I don't know how clear - I don't know how I can be
more clear. I need to know what your exhibit is because I
don't know if it's coming into evidence, and I
can't make an assessment under the rules of evidence if
you don't bring the exhibit to the hearing. . . . Okay.
And do you have any summary exhibits to - because obviously
it will be normally not the routine practice to publish 20,
000 pages to the jury. So normally it happens all the time,
like in a wiretap case, they've got all these phone
records. They move the phone records in, and then there's
a summary exhibit which basically breaks down the larger
exhibit, and that's what the person would testify to in
terms of authentication of both the underlying exhibit and
the summary exhibit. And then once both of those are in,
which there's independent foundation for each, that's
what the experts would use in aid of their testimony. So it
would be both not just a demonstrative, but a summary
exhibit. So every version of every exhibit that you want to
admit with respect to this area of evidence, I want to have
it, and I want to have the version. Because I
don't want to have another version come up two weeks from
now on the 14th of November, oh, Judge, I've changed the
exhibit, and now it's this, because that's going to
be excluded as untimely. Because this might be excluded as
untimely. At this point I don't know what it is. So can
the parties meet and confer right now. Do you have the other
exhibits? It sounds like they have the spreadsheets, but it
doesn't sound like that's all the pieces of evidence
you're going to try to seek to admit, right?
MR. FRIEDMAN: The spreadsheets [are] what I thought we were
dealing with today.
THE COURT: Well, the spreadsheets [are] the beginning of it,
but if you get the spreadsheets into evidence and you
can't get your summaries or any other exhibit in, then
you're also going to have a problem. And you're going
to have a problem with your experts and you're going to
have a problem with directed verdict. So this is why
we're doing it now because I want to have it tied down,
and I don't want to have a discovery dispute or a late
disclosure dispute while I got 14 people in the box who are
waiting back there. Because I have a grave concern - and
it's been predicated by the track record in this case -
that there will not be an efficient trial. And we will have
the jury waiting hours at a time while we're arguing
about something, about whether or not it was disclosed or
whether or not it's the same thing, which is why
we're doing this on a pretrial basis. Let me ask the
question again. Other than the spreadsheet, do you have the
other exhibits - exhibits with an S - that you intend to
admit into evidence?
MR. FRIEDMAN: No, I do not.
THE COURT: Okay. When can you get that composite exhibit,
which would be the summaries, anything else you want to use,
any demonstratives you want to use, the underlying exhibits,
the dataset, whatever, all of your evidence. Because
I am tying you down, because I need to, because I have a
responsibility to the jury. That entire universe, how long
would it take you to submit it? Now, obviously if it's
going to be 20, 000 pages, some of it's going to be
electronic, and some of it could be hard copy. But how long
would it take you to actually give me the main evidence in
MR. FRIEDMAN: Probably about a week or so.
THE COURT: Do you not have this now? This is the reason I set
the trial out, and I set multiple statuses on trial
preparation. How do you not have your exhibits?
MR. FRIEDMAN: I'm preparing. Your Honor, I'm
preparing them, okay? I'm one person. I'm doing -
they're filing motion after motion after motion. I'm
responding to them. I'm getting - I'm working very
diligently pretty much round the clock on this case. We
prepared the spreadsheets. We're going to prepare the
summaries, and then I would imagine that your Honor wanted to
continue this hearing as well to get other experts before the
Court, and I would think that we would have that before then,
THE COURT: Well, here's another deadline. One of the
deadlines as part of the pretrial conference - which is
MR. STERN: Yes, your Honor.
THE COURT: Which is not a week from now. And you have to
exchange your exhibits.
MR. FRIEDMAN: Yes.
THE COURT: So you're telling me that your main exhibit in
the entire case, you're not going to have for a week,
which would put it multiple days past the pretrial
conference, which at that point would be excluded. If you
can't exchange the exhibits in time for the pretrial
conference, your exhibit's gone because you failed a
deadline. So I mean - MR. FRIEDMAN: It sounds to me like
you're telling me I have to have it on Monday, so I guess
I'll have it on Monday.
THE COURT: Well, Counsel, this is not a question of - I'm
bending over backwards to give you your day in court, I
really am. And I don't mean to be short with you. I
don't. But there's a reason there's deadlines,
and I have to be fair to the other side, too. And it's
not fair to them to have the lead exhibit in the case handed
to them while they're picking a jury. That's not fair
MR. FRIEDMAN: Well, the summary is just going to be a subset
of the spreadsheet.
THE COURT: A summary is everything because you're not
going to publish or inquire on the stand about 20, 000 pages.
You have to get the admissibility of that because a summary
won't come in without it. But that spreadsheet or the
derivative samples or summaries or however you want to call
it, they're entitled to get that because that's the
exhibit that's actually going to be published.
MR. FRIEDMAN: Okay.
THE COURT: Right?
MR. FRIEDMAN: Right.
THE COURT: Right?
MR. FRIEDMAN: Sure.
THE COURT: Okay. I'm not moving the trial date, okay? All
right. So you're going to have to exchange it and get it
to me and the other side by the pretrial conference.
MR. FRIEDMAN: Okay.
THE COURT: Which is - and that's a deadline that was set
a long time ago [on February 11, 2016]. So if you're not
able to do that - and even with the certification I asked for
and some other pleadings, even as of last week and the week
before, there was one version and then there was another
version and a corrected version. I'm really trying to
give you your day in court. And I - I really am, okay?
MR. FRIEDMAN: I appreciate that.
THE COURT: I really am. But I have to be fair to them, too.
And allowing you to not make the deadlines is just not fair
MR. FRIEDMAN: I will prepare the summary spreadsheet and get
it to them by Monday.
THE COURT: No. The order is comply with the order setting the
pretrial conference. That's what the order is.
MR. FRIEDMAN: Okay.
THE COURT: So this is nothing new or special.
MR. FRIEDMAN: They have all my exhibits except for the
THE COURT: Well, any exhibit you don't give them,
consistent with my order for the pretrial conference, is not
going to be timely.
MR. FRIEDMAN: Understood.
THE COURT: All right. Now, I want you to bring on Monday -
because you will as part of it - all the exhibits that you
intend to admit in this area, whether they're summary
samples, underlying exhibits. And if it's the digital
stuff, then I want it on a flash drive. Because it's
really important that the ball [will] not move anymore -
MR. FRIEDMAN: Okay.
THE COURT: - with respect to that. And that will at least
give counsel, as of the date of the pretrial conference, an
idea to articulate objections.
MR. FRIEDMAN: Okay.
THE COURT: Because this is one of the reasons there's
prejudice to them. . . . One of the prejudices to them is to
the degree the exhibit's changing or opinions or portions
of expert opinions are changing, that's prejudicial to
them because it's outside of discovery. And they would
have done different things, whether it's a Rule 26
disclosure or questions they would have asked to an expert in
a deposition or rebuttal experts. And moving the ball late in
the game is devastating to the defendants and unfair because
you're correct when you call it a standard of care. This
is like a medical malpractice case. And you need to have an
expert to explain the standard of care because the jury
doesn't know what best execution is. But you need both
the factual predicate and the expert opinion. So you
can't change the ball on them and expect them to be able
to have a chance to defend them[selves]. So I'm trying to
give you your day in court. I'm trying to give them their
day in court.
MR. FRIEDMAN: We're not changing the ball, your Honor.
THE COURT: Well, that remains to be seen. We'll find out.
I hope what you're saying is correct. I really do. So I
want copies for the Court of whatever the exhibits are,
plural. I also want to know the names of the witnesses who
are not available today but that you intend to call to
support the admissibility under all of the rules of evidence,
not just 403 or relevance, but every single rule of evidence.
Because I'm going to expect objections on multiple
grounds. All of the witnesses that you intend to call. Can
you put on a record right now - I know what you've put in
your pleadings, but I want to get it on the record. Can you
name I believe it's four witnesses total.
MR. FRIEDMAN: Yes.
THE COURT: Can you put their names on the record.
MR. FRIEDMAN: Yes. Paul Picchietti, Robert Lowry, Dr. Roy
Freedman and Robert DeMeritt.
THE COURT: All right. And you have here today which one?
MR. FRIEDMAN: Mr. DeMeritt.
THE COURT: Okay. When are the other three available?
MR. FRIEDMAN: Mr. Lowry is the one who is the most busy, and
he would be available the week of the 7th, if we could do it
that time. He'd like that Wednesday, which I guess is
what, the 9th?
THE COURT: All right. What about the availability of the
MR. FRIEDMAN: I have to coordinate with them. I just found
out this morning that Mr. Lowry was available on the 9th.
THE COURT: All right. Obviously since I set the trial on the
14th, all of the witnesses will be available on the 14th,
MR. FRIEDMAN: Yes.
THE COURT: All right. We are going to pick the jury on the
15th, and we're going to have the evidentiary hearing on
the 14th. Well, actually we're going to complete the
evidentiary hearing. We're going to take as much
testimony as we can today.
Id., pp. 8-9, 11-19.
that, Plaintiffs called to the stand Robert DeMeritt, a
partner at Last Atlantis Capital who has served as records
custodian for the Plaintiffs in this case. Plaintiffs
indicated that they planned to use DeMeritt to lay a
foundation for the spreadsheets of what they referred to as
“traded ahead orders” - that is, orders where
Defendants traded their own interests over Plaintiffs'.
For purposes of the evidentiary hearing, those spreadsheets
were marked as Exhibits 1, 2, and 3, with Exhibit 1 relating
to traded ahead orders placed with the Philadelphia Stock
Exchange (PHLX), Exhibit 2 relating to traded ahead orders
placed with the Chicago Board Options Exchange (CBOE), and
Exhibit 3 relating to traded ahead orders placed with the
American Stock Exchange (AMEX).
regard to the first spreadsheet, identified for purposes of
the evidentiary hearing as Exhibit 1, DeMeritt testified that
he received “a list of orders that were traded ahead at
the PHLX by Susquehanna that I believe it came from an
exchange surveillance. And I matched up our orders with that
and that produced the spreadsheet.” Transcript of
Proceedings of 10/27/16 [1610');">1610');">1610');">1610');">1610');">1610');">1610');">1610], 27');">p. 27. DeMeritt testified
that he received the initial list of orders from
Plaintiffs' counsel and that counsel told him the
information “came from the SEC investigation.”
Id., p. 31. DeMeritt testified that he then wrote an
algorithm to extract, from that broader list of orders,
orders that were placed by Plaintiffs. Id., p. 33.
When creating Exhibit 1, DeMeritt testified, he manually
entered certain columns and information that was not produced
by the algorithm using Last Atlantis' records in addition
to whatever data was available from the PHLX data.
Id., pp. 35-36. He testified that he used
information from Last Atlantis' own trading platform.
Id., p. 36. DeMeritt then made the following point
in response to questions from the Court:
THE COURT: I'm trying to figure out what the basis -
underlying basis of the entries are in Plaintiffs'
Exhibit 1 for the evidentiary hearing. And you're saying
you looked at your own records, and I'm trying to figure
out exactly what that is. When you say your own records, what
are you referring to? Because you're matching that.
You're not just pulling information and creating a
spreadsheet based on the trade data. You're using
additional sources, correct?
THE WITNESS: Correct. Our FIX [Financial Information
Exchange] engine created logs, and that's where this data
is coming from, from our FIX engine logs.
Id., p. 38.
then confirmed that the data he used to match orders came
from Last Atlantis' own internal dataset. Id.,
p. 42. Counsel did not seek to introduce that dataset (or any
other underlying dataset) at the hearing, and it became clear
that DeMeritt could not even identify what some of the
information on Exhibit 1 was. For example, when asked what
the symbol C meant in Column AO on Exhibit 1, he testified,
“that's not my data . . . I do not know
that.” Id., p. 6');">p. 6');">p. 6');">p. 60.
similarly testified that he created the spreadsheets marked
as Exhibits 2 and 3. When asked about the particular
underlying data sets he used to create the exhibit
spreadsheets, he testified:
THE WITNESS: For the plaintiffs' data, there are three
types of data. There was Last Atlantis data which came from
Last Atlantis FIX logs. There was Speed. There was order
tracking data from their order engine, whatever they called
THE COURT: Do you have any knowledge of what kind of order
engine they have?
THE WITNESS: It was something -
THE COURT: Do you know? I'm not asking you to guess.
That's why we're having this hearing, not guessing.
THE WITNESS: No, I do not. . . . The other three plaintiffs,
River North, Brad Martin and Bryan Rule that came - that
order tracking data came from their broker which was REDI.
THE COURT: You're familiar with that system that those
plaintiffs used or not? It's okay. If you don't,
that's okay. I just want to know what you know.
THE WITNESS: I'm familiar with the trading application,
the REDI trading platform that would have created that data.
Where they pulled the data from, I don't know.
THE COURT: Okay. And then what else? What other types of
THE WITNESS: That was the plaintiffs' data.
THE COURT: Okay. Let's go into the other areas with
respect to the SEC, et cetera, et cetera.
BY MR. FRIEDMAN: That COATS [Consolidated Options Audit Trail
System] data from the SEC, what was that - what was that
A: COATS data from the SEC.
A: There was an analysis done by Mayhew and somebody else,
and they had roughly three weeks of consolidated audit trail
data from the three exchanges, the AMEX, the Philly and the
Q: And that was produced to you from the SEC; is that
A: That was produced from the SEC to me, yes.
THE COURT: That was produced to you from the SEC. Do you have
any knowledge how they produced that information, what
process they used or where it came from, what the source data
THE WITNESS: I do have some knowledge. I've read - read
some of the - I've read the information on how it was
created I guess would be the way to say it, but I don't
know the specifics.
THE COURT: You don't know the answer - you read
somewhere that you think you know?
THE WITNESS: That is correct.
Id., pp. 87-90 (emphasis added).
it became clear that DeMeritt did not know how the underlying
data from the SEC was actually created or the sources it came
THE COURT: When you say “that data, ” what is
that data, where does it come from, how is it compiled? How
do you know any of that?
THE WITNESS: The data was - came from the SEC. It was created
for the SEC by the exchanges.
THE COURT: How do you know that?
THE WITNESS: I've seen documentation that states that.
THE COURT: What documents did you review to understand where
and how that information is what it reports to be?
THE WITNESS: It was an SEC report that came with - that came
with the data.
THE COURT: You saw a report?
THE WITNESS: Yes.
THE COURT: Okay. And it was a report from who to whom? What
kind of report are you talking about?
THE WITNESS: I - it was ...
THE COURT: If you know. I don't want you to guess.
THE WITNESS: I don't know.
Id., pp. 91-92. Further, with regard to the SEC
Q: Okay. So what specifically - how was it created? Who
A: The exchanges created it for the SEC, for the SEC
Q: Okay. And what did - how did they create? What data did