Free Reply to Response to Motion - District Court of Federal Claims - federal

Case 1:95-cv-00468-TCW

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS ASTORIA FEDERAL SAVINGS & LOAN ) ASSOCIATION, ) ) Plaintiff, ) ) v. ) ) THE UNITED STATES, ) ) Defendant. ) )

No. 95-468C (Judge Wheeler)

DEFENDANT'S REPLY IN SUPPORT OF ITS MOTION IN LIMINE TO EXCLUDE EVIDENCE CONCERNING PLAINTIFF'S ABANDONED AND DISAVOWED DAMAGE CLAIMS Defendant, the United States, respectfully submits this reply in support of our motion to exclude evidence at trial concerning two damages theories ­ replacement costs of capital and the costs of a mutual to stock conversion ­ from plaintiff, Astoria Federal Savings and Loan Association ("Astoria"). Astoria concedes in its response that the replacement cost of capital claim is barred by Federal Circuit precedent, and that it has never made a claim for conversion costs. See Pl. Response (Dec. 13, 2006) ("Pl. Resp."). Nevertheless, Astoria seeks to preserve the option to present evidence relating to both of these issues at trial. This is improper. In order to streamline the issues for trial, as well as prevent the prejudice that would result from any new damages claims based upon this evidence, the Court should grant our motion in limine. I. Astoria Concedes That Its Replacement Cost Of Capital Claim Is Barred By Federal Circuit Precedent Astoria disputes that it has "abandoned" its hypothetical cost of replacement capital claim, but concedes that "such a claim would presently be precluded by decisions of the Federal Circuit which are binding on this Court." Pl. Resp. at 1; see also Fifth Third Bank of W. Ohio v.

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United States, 402 F.3d 1221, 1237 (Fed. Cir. 2005) (barring hypothetical cost of replacement capital claim as a matter of law). Despite this concession, Astoria seeks to preserve the option to "revisit its decision not to proceed with this claim" should it consider there to have been a "radical change in the law in this area" prior to trial. Id. Absent such a change, however, any cost of replacement capital claim is barred by existing precedent, and any evidence relating to that claim is thus irrelevant. The Court should thus exclude evidence relating to this claim. Astoria's argument explains too much. In effect, Astoria asks the Court to keep the option of presenting evidence relating to an irrelevant claim at trial due to the possibility that the controlling precedent could undergo a radical change. But the potential for a change in law always exists. Claims that are barred by existing precedent prior to trial could always theoretically be revived by a later change in the law. However, a motion in limine enables the Court to streamline the issues for trial to the relevant issues based upon existing precedent. The Court should therefore exclude this irrelevant evidence. See, e.g., Inslaw, Inc. v. United States, 35 Fed. Cl. 295, 302-03 (1996). Moreover, leaving the option open to present such evidence will prejudice the Government in practical terms because it would divert our trial resources to witnesses, expert opinions, and facts that would not otherwise have to be addressed if such evidence were excluded prior to trial. Astoria's cost of replacement capital model is theoretically distinct from Astoria's other damages claims, and was prepared by a different expert witness, Prof. Christopher James, from its other claims, which were prepared by Dr. Donald Kaplan. Our response to the replacement cost of capital model, too, involves different theories and facts, and involves additional expert testimony relating specifically to this claim. 2

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In short, our trial preparation should not be made subject to whether Astoria will change its mind. Preparing to respond to this claim would divert financial resources and attorney time, and would inconvenience the additional witnesses we would call in terms of travel schedules and preparation time. Even if Astoria never presents any such evidence at trial, this diversion of resources will prejudice us prior to trial. Accordingly, we respectfully request that the Court exclude Astoria's presentation of any evidence relating to this claim at trial. II. Astoria Concedes That It Is Not Pursuing A Claim For Conversion Costs With respect to any claim for the costs of its conversion from mutual to stock form in 1993, Astoria states that Astoria has "never made such a claim, so there would be nothing for it to `abandon' or `disavow.'" Pl. Resp. at 2. Astoria and its expert witness, Dr. Kaplan, have stated that Astoria is not claiming damages for conversion costs. See Pl. Resp. at 2; Report of Dr. Donald M. Kaplan (June 29, 2001) at ¶ 44 ("Irrespective of the breach, Fidelity would have converted during the same general time frame.") (attached as Exhibit A); Deposition of Donald M. Kaplan (Sept. 24, 2001) at 30-31 (attached as Exhibit B); Deposition of Donald M. Kaplan (Sept. 25, 2001) at 233-34 (attached as Exhibit C). Given that Astoria has reaffirmed that it is not seeking damages for the conversion costs, any evidence relating to the conversion costs is irrelevant and should be excluded. See Inslaw, 35 Fed. Cl. at 302-03. The Court should therefore grant the motion. Still, Astoria not only opposes the motion to exclude evidence regarding conversion costs, but also signals its intention to present evidence relating to another potential claim that it had previously abandoned, that for reduced conversion proceeds. Astoria states in its response that the conversion will be a "subject of a presentation of evidence" because "[o]ne of the claims Astoria 3

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has made is that the Government's admitted breach of contract and the damage Fidelity suffered as a result of this breach seriously delayed Fidelity's conversion and stock offering." Pl. Resp. at 2. Astoria states that, "[a]s a result of that delay, Fidelity was unable to raise an amount of capital comparable to the amounts raised by Astoria and other peer institutions that had not undergone an ordeal similar to that undergone by Fidelity." Id. This response, which suggests that Astoria may seek to change its mind at trial and present yet another previously-disavowed damages claim, illustrates the need for the motion in limine. Astoria points to no evidence in its response, or elsewhere, to quantify any claim of reduced conversion proceeds. Indeed, the premise to this newly articulated damage theory ­ that the breach caused a delay in Fidelity's conversion ­ is contradicted by Astoria's own damage expert, Dr. Kaplan. Dr. Kaplan specifically stated in his report and his deposition that the conversion would have occurred in the "same general time frame" with or without the breach. See Report of Dr. Donald M. Kaplan (June 29, 2001) (Exhibit A) at § 44; Deposition of Donald M. Kaplan (Sept. 25, 2001) (Exhibit C) at 227, 233-34. Furthermore, while Dr. Kaplan stated in his expert report that, absent the breach, Fidelity likely would have raised a larger amount of capital through a conversion due to the lost profits he claimed Fidelity would have earned prior to the conversion, he chose not to quantify this figure. During his deposition, he admitted that he did not attempt to quantify this figure because he did not believe he could make a showing that could meet this Court's burden of proof: 22 Q. That!s correct. Did you ever make any 23 attempt to quantify that number to that opinion? 24 A. No. 25 Q. Did you ever consider trying to quantify 1 that alleged damage? 4

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2 A. I think that at some point, I probably 3 gave it some thought, but I never undertook to do it. 4 Q. Why did you choose not to do it? 5 A. I think the reason that I chose not to do 6 it is that it is a sophisticated type of an analysis 7 to perform, and it is my view that the standard of 8 proof required in the Court of Claims is a high 9 standard of proof, and my conclusion was that, that 10 that would not be the best use of my limited time. Deposition of Donald M. Kaplan (Sept. 24, 2001) (Exhibit B) at 30-31; see also Deposition of Donald M. Kaplan (Sept. 25, 2001) (Exhibit C) at 226, 230-31. Astoria thus suggests that it intends to produce evidence on a claim its expert chose not to quantify, using a factual basis its expert specifically rejected. All of this proposed evidence directly counters the damages theories put forth in Astoria's previous briefing and its expert's report and deposition. The Court should therefore exclude such evidence as irrelevant. Similarly, Astoria's own executives have confirmed the difficulty of timing the conversion market for thrifts. Henry Drewitz, Astoria's former President and Chairman of the Board, testified that, although he voted in favor of Astoria's conversion from mutual to stock form in 1993 (the same period in which Fidelity converted), he had previously voted against conversion. See Deposition of Henry Drewitz (May 23, 2000) at 116-20 (attached as Exhibit D). Mr. Drewitz testified that, "in hindsight it was probably a mistake" not to have converted earlier, but that he had previously been "leaning on the fence" and voted against conversion. Id. at 117-18. The inability of the management of Astoria, a better-capitalized thrift than Fidelity, to time the market for its own conversion underscores the difficulty of timing the conversion market. The Court should therefore exclude evidence relating to such a claim of delay in conversion.

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Indeed, Astoria's suggestion that it intends to present evidence regarding alleged lost conversion proceeds creates not only confusion, but also prejudice to the Government. The rules of this Court require that an expert's "report shall contain a complete statement of all opinions to be expressed and the basis and reasons therefor . . . ." RCFC 26(a)(2)(B). An expert's failure to present all opinions in his expert report bars that expert from presenting any such undisclosed testimony at trial. See Procedural Order No. 2: Discovery Plan at § V(A)(4) (Aug. 7, 1997, Ct. Fed. Cl.); RCFC 37(c)(1). As shown above, Astoria's expert witness expressly chose not to quantify any claim of lost conversion proceeds, making any evidence on that claim irrelevant to Astoria's damages theories. For Astoria to present such evidence at trial, whether through expert or fact testimony, would be prejudicial because it would introduce a new damages theory that we would not have had the opportunity to examine or to respond to with affirmative evidence. See Procedural Order No. 2: Discovery Plan at § V(A)(4) (Aug. 7, 1997, Ct. Fed. Cl.); RCFC 37(c)(1). The Court should therefore foreclose the possibility of such prejudice at this point. CONCLUSION For these reasons, we respectfully request that the Court grant our motion in limine.

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Respectfully submitted, STUART E. SCHIFFER Deputy Assistant Attorney General DAVID M. COHEN Director JEANNE E. DAVIDSON Deputy Director

s/ William F. Ryan WILLIAM F. RYAN Assistant Director

OF COUNSEL: ARLENE PIANKO GRONER ELIZABETH M. HOSFORD BRIAN A. MIZOGUCHI JOHN J. TODOR SAMEER P. YERAWADEKAR

s/ John H. Roberson by John J. Todor JOHN H. ROBERSON Trial Attorney Commercial Litigation Branch Civil Division Department of Justice 1100 L Street, N.W. Attn: Classification Unit, 8th Floor Washington, D.C. 20530 Tel. (202) 353-7972 Fax (202) 514-8640 Attorneys for Defendant

December 20, 2006

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CERTIFICATE OF SERVICE I hereby certify that on this 20th day of December, 2006, a copy of the foregoing "DEFENDANT'S REPLY IN SUPPORT OF ITS MOTION IN LIMINE TO EXCLUDE EVIDENCE CONCERNING PLAINTIFF'S ABANDONED AND DISAVOWED DAMAGE CLAIMS" was filed electronically. I understand that notice of this filing will be sent to all parties by operation of the Court's electronic filing system. Parties may access this filing through the Court's system. s/ John H. Roberson by John J. Todor John H. Roberson by John J. Todor

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