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Page I Page 3 I UNITED STATES BANKRUPTCY COURT I APPEARANCES: 2 On behalf WED Bank. NA.: SOUTHER DISTRICT OF FLORIDA WILLIAM OL 'WEN" HUTCHINSON. Esquire 2 FORT LAUDERDALE DIVISION 3 JOSEPH SHEERIN. Esquire MCGUIREWOODS 3 4 201 North Tyro* Street 4 IN RE: NO.: 09-34791-RBR 5 Suite i1M10 Charlotte. NorthCard= 28202 5 ROTHSTEIN ROSENFELDT ADLER, P.A. 6 On behalf Herbert Stettin. Twine: 6 JOHN H. GO:OVESE. Esquire JOHN MICIIAll. A. FRIEDMAN. Esquire 7 GENOVESE .10BLOVE & BATTISTA. P.A. 8 WO Second Street 8 VIDEOTAPED Flouter 44th Floor 9 DEPOSITION 9 Miami. Florida 33131 10 OF 10 DAVID -and. GAY. Equirc 11 JOHN JACK SCAROLA BERGER SINGIRMAN 12 II 3 S50 East Las Olas Boulevard uite MCO 13 12 Fon Lamierdale. Florida 33301 13 On behalf of Robert Fun. Enlace: 14 JASON S. RIGOLI. Estate 15 350 East Las Olas Boulevard 14 FURR & COHEN. P.A. One Boca Place. Susie 337W Fort Lauderdale, Florida 15 2255 Glades Road 16 July 2, 2013 16 Boca Raton. Florida 33431 Scheduled for 10:00 a.m. On behalf of the Plaintiffs: 17 Commencing at 10:07 a.m. to 5:23 p.m. 17 ADAM MOSKOWITZ Esquire KOZYAK IRONS & THROCKMORTON. P.A. 18 IS 1525 Ponce de Leon Boakvard Ninth floor 19 19 Miami. Florida 33131.2335 20 20 On behalf oft& Plaintiffs: William Scherer. Esquire 21 21 CONRAD & SCHERER. LLP 22 633 South Federal Ilighnuy 22 Eashth Flom 23 Fon Lasakidale. Florida 33301 24 23 24 25 25 Page 2 Page 4 1 UNITED STATES BANKRUPTCY COURT 1 CONT. APPEARANCES: SOUTHERN DISTRICT OF FLORIDA 2 On behalf of Unsecured Creditors Committee: 2 FORT LAUDERDALE DIVISION MICHAEL J. GOLDBERG. Esquire 3 3 350 East Las Olas Boulevard 4 IN RE: CHAPTER 7 Suite 1600 5 4 Fort Lauderdale. Florida 33301-2229 BANYON 1030-32. LLC CASE NOS: 10-36691-RBR 5 On behalf of Morse Operations and 6 BANYON INCOME FUND. L.P. I I-40929-RBR The Estate of Ed Morse: 7 Debtors. Jointly Administered Under 6 JOHN M. MULLIN. Esquire Case No. 10-33691-RBR TRIPP SCOTT 8 7 110 Southeast Sixth Street / Fifteenth Floor 9 8 Fort Lauderdale. Florida 33301 10 9 11 10 ALSO PRESENT: 12 VIDEOTAPED 11 Patricia Diaz. FPR. RPR 13 DEPOSITION 12 Dean J. Chimerakis. Videographer 14 OF Custom Video Services. Inc. 15 JOHN JACK SCAROLA 13 16 14 17 15 - - - 18 16 19 350 East Las Olas Boulevard 17 Fort Lauderdale. Florida 18 20 July 2. 2013 19 Scheduled for 10:00 a.m. 20 21 Commencing at 10:07 a.m. to 5:23 p.m. 21 22 22 23 23 24 24 25 25 I (Pages I to 4) OUELLETTE & MA LDIN UHRT REPORTERS, INC. EFTA01130141 Page 5 Page 7 I INDEX I behalf of the Estate of Ed Morse and Morse 2 WITNESS: PAGE 3 JOHN JACK SCAROLA 2 Operations, Inc. 0 DIRECT EXAMINATION BY MR. HUTCHINSON 7 3 MR. GOLDBERG: Mike Goldberg on behalf of the 5 CROSS-EXAMINATION BY MR_ GENOVESE 173 CROSS-EXAMINATION BY MR_ MOSKOWITZ 216 4 Creditors Committee. 6 5 MR. GAY: David Gay with Berger Singerman 7 - - - 6 counsel on behalf of Herbert Stettin. 8 EXHIBITS 9 - - - 7 Thereupon, 10 NO. DESCRIPTION PAGE 8 JOHN SCAROLA 11 Exhibit No. 1 Subpoena 7 12 Exhibit No. 2 Subpoena for Christian 9 9 was called as a witness and, having been duly sworn, was Searcy 10 examined and testified as follows: 13 Exhibit No. 3 Transcript of May 17_ 2013 48 11 THE WITNESS: I do. 14 Hearing 12 DIRECT EXAMINATION 15 Exhibit No. 4 Plaintiffs First Request 68 for Production of Documents 13 BY MR HUTCHINSON: 16 to TD Bank 14 Q. Good morning, Mr. Scarola. We met before the I? Exhibit No. 5 TD Bank Victims Notice of 79 15 deposition. Would you please state your name for the Filing Expert Disclosures HI 16 record? Exhibit No. 6 Time Summary 81 17 A. Good morning. My name is John Scarola. I am 19 Exhibit No. 7 Conspiracy Chart III 18 also most commonly known as Jack. 20 19 Q. Mr. Scarola, I will show you what I marked as Exhibit No. 8 Statute 768.72 124 21 20 Exhibit 1. Do you recognize Exhibit 1? Exhibit No. 9 Statute 768.73 148 21 (Exhibit No. I, Subpoena, was marked for 22 22 identification.) Exhibit No. 10 Handwritten Notes 163 23 23 A. It appears to be a copy of the subpoena for Exhibit No. II Handwritten Notes 168 24 this deposition that was served upon my office and 24 25 25 accepted at my direction. Page 6 Page 8 I THE VIDEOGRAPHER: Today's date is July 2nd. I BY MR. HUTCHINSON: 2 2013. The time is approximately 10:10 a.m. Eastern 2 Q. And are you appearing here today pursuant to 3 Standard Time. We are here to videotape the 3 this subpoena? 4 deposition of John Jack Scarola in regard to 4 A. I am. 5 Rothstein, Rosenfeldt, Adler, PA, Case 09.34791 5 Q. And this subpoena includes a document request, 6 BKCRVR. 6 does it not? 7 The court reporter is Patty Diaz with 7 A. It does. 8 Ouellette and Mauldin Court Reporting. My name is 8 Q. And have you produced all documents that are 9 Dean Chimerakis, videographer, with Custom Video 9 responsive to the request included therein? 10 Services of Miami. 10 A. I believe I have. 11 Will counsel please state your appearance for 11 Q. Does that include some documents that you have 12 the record? 12 brought with you here today? 13 MR. HUTCHINSON: Wayne Hutchinson with 13 A. That is correct. 14 McGuireWoods on behalf of TD Bank, N.A., and with 14 Q. Based on what was previously produced and what 15 me is Joe Sheerin. 15 you brought here today, you believe that all documents 16 MR. GENOVESE: John Genovese, Genovese, 16 responsive to these requests have now been provided. 17 Joblove and Battista on behalf of Herb Stettin. 17 Correct? 18 Along with me is my colleague, Michael Friedman. 18 A. I don't have personal knowledge of the 19 MR. RIGOLI: Jason Rigoli, Furr & Cohen on 19 production that was not made by me. I am told that you 20 behalf of Robert Fun, Chapter 7 Trustee for Banyon 20 have already received duplicate copies of most of the 21 1030-32 and Banyon Income Fund. 21 materials that I brought today, but I have brought with ?2 MR. MOSKOWITZ: Adam Moskowitz, Bill Scherer 22 me all of those materials in my possession that are 23 and Javi Lopez on behalf of the plaintiffs in the 23 responsive to the subpoena. ?el. case. 24 Q. And you are fine with us looking through those 25 MR. MULLIN: John Mullin from Tripp, Scott on 25 materials to confirm that we have them and if not, 2 (Pages 5 to 8) OUELLETTE & MA LD1NCOURT REPORTERS, INC. EFTA01130142 Page 9 1 making any copies that we need to make so that we have 2 them for our records? 3 A. Yes. I know that there are documents that are 4 included in the group of documents that I brought this 5 morning that were not produced to you because they are 6 my personal notes with regard to my review of the other 7 materials. 8 Q. But you are not aware of any additional 9 materials that either have not been provided or are not 10 with you here today? A. I am not. 12 Q. Let me show you what I marked -- is marked as 13 Exhibit 2. 14 (Exhibit No. 2, Subpoena for Christian Searcy. I5 was marked for identification.) 16 A. Yes, sir. 17 BY MR. HUTCHINSON: I8 Q. Do you recognize Exhibit 2, sir? 19 A. I do. 20 Q. What is Exhibit 2? 21 A. Exhibit 2 is a copy of a subpoena that was 22 accepted by my office on behalf of Christian Searcy and 23 I have seen a copy of this subpoena as well. 24 Q. And am I correct that this subpoena also 25 includes certain document requests? Page II I have been asked to express opinions with regard to the 2 punitive damage value of claims against TD Bank and I 3 present myself as having sufficient expertise in that 4 area to express those opinions. 5 Q. So it's your understanding that your opinions 6 in this matter are limited to the value of potential 7 punitive damages claims against TD. Is that correct? 8 A. That certainly is the primary focus of what I 9 have been asked to do, and while I may have formed som 10 tangential opinions that relate to that primary area, 11 that is the focus of what I have done. 12 Q. What qualifies you as an expert on punitive 13 damages and the values of punitive damages claims? 14 A. The total of 40 years experience that I have 15 had litigating both criminal and civil cases, including 16 many punitive damages claims. 17 Q. At what point during that 40-year career did 18 you become an expert on valuating punitive damages 19 claims? 20 A. I cannot tell you the point in time at which 21 someone would have independently recognized my 22 expertise. It has been an evolving process, so that's a 23 question that I can't answer for you, except to tell you 24 that it is my personal assessment that I am certainly 25 there now. Page to I A. It does. 2 Q. And we have not received a separate response 3 to this subpoena from your law firm. Is your document 4 production individually supposed to respond to this 5 subpoena as well? 6 A. his. 7 Q. So as we sit hem today, you have no knowledge 8 of additional documents responsive to the request, 9 including Exhibit 2, that are responsive therein that 10 have not either been provided to us previously or are 11 not in the materials that you brought here today? 12 A. That is correct. Certainly, it's possible 13 that I may have overlooked something, but I don't think 14 so. IS Q. Mr. Scarola, in what fields are you an expert? 16 A. I am a trial lawyer who has been practicing in 17 the area of litigation since 1972. I am Board-certified 18 in personal injury and in business litigation as well 19 and I believe that both certifications have been in 20 place since they were offered by the Florida Bar. 21 Q. And if you were going to list the fields in 22 which you believe that you are an expert, what fields -- 23 how would you describe those fields and what would they 24 be? 25 A. Well, for purposes of the deposition today. I 3 4 5 6 7 8 9 10 I 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 12 Q. Are there any specific factors that you believe makes you qualified to be an expert on the valuation of punitive damages claims other than your general experience? A. Yes. It is an area of the law that I have studied. It is an area of the law that I have focused study upon. That is, I am sure that over the course of particularly the last 35 years I have taken CLE courses that have dealt with the topic of punitive damages as well as having taught multiple courses dealing with the topic of punitive damages. So, it is as a consequence of practical experience, formal education and self-study that I have accumulated the degree of expertise that I have in this area. Q. Let's talk about the CLE courses that you have taught that deal with the valuation of punitive damages claims. Can you please tell me about those courses, their titles and when they were offered? A. I'm sorry, but I cannot give you the course titles nor can I tell you the specific dates on which the courses were offered. What I can tell you is that I have lectured on both the state and local level on the topic of punitive damages and have also been invited to give lectures on 3 (Pages 9 to 12) OUELLETTE & MA LDINCOURT REPORTERS, INC. EFTA01130143 Page 13 1 punitive damages in front of at least one other state 2 Bar Association. 3 Q. What state Bar Association was that that you 4 are referring to? 5 A. Ohio. 6 Q. Were they the sponsor of the continuing 7 education class? 8 A. They were. 9 Q. And where was that lecture? 10 A. It actually occurred when that Bar Association 11 met in Palm Beach County. 12 Q. And when was that? 13 A. I can't give you the date. 14 Q. Was it in the last five years? 15 A. I'm not sure. 16 Q. What's your best estimate of when that would 17 have been? 18 A. Approximately, five years ago. 19 Q. And did you prepare materials for that CLE 20 presentation? 21 A. I don't know whether I prepared materials 22 specifically for that CLE presentation or whether I 23 relied upon materials previously prepared and having 24 lectured on the topic prior to that lecture. 25 Q. Would you still have the materials that you Page 15 1 wherein you lectured on punitive damages? 2 A. Palm Beach County Bar Association, Palm Beach 3 County Justice Association, Florida Justice Association. 4 Q. And over how many years did those lectures 5 occur? 6 A. Certainly within the past 20 years, and I 7 don't know that I can accurately narrow it down beyond 8 that. It's a topic that I have been dealing with 9 significantly over at least the last 20 years. 10 Q. Have you lectured on the punitive damages 11 aspect of the Florida Tort Reform Acts that were 12 implemented in the late 1990s? 13 A. I have. 14 Q. What would have been your topics on -- what's 15 been the subject matters of those lectures on those 16 topics? 17 A. The implications from both the legal and 18 practical standpoint of the legislative changes. 19 Q. And what do you recall about those 20 implications? 21 A. I recall that the Florida legislature has, 22 from time to time, been imposing various restrictions on 23 the common law ability to recover punitive damages. 24 Q. In your opinion, does the Florida Legislature 25 have the right to do that? Page 14 1 would have used in these past lectures? 2 A. Probably some of them. 3 Q. Is the information contained in those 4 materials anything that you relied upon in forming the 5 opinions in this case? 6 A. The information contained within those 7 materials include principles that I relied upon in 8 formulating my opinions in this case, I think would be a 9 more accurate way to state the relationship between 10 those materials and my opinion. 1 1 Q. And to the extent that you can find any of 12 those --- 13 A. You've got them. 14 Q. Okay. Are those materials with you here 15 today? 16 A. They are. If they exist, they are in that 17 box. 18 Q. Thank you very much. 19 A. You are welcome. 20 Q. Other than the lectures at the Ohio State Bar 21 Association, were your other CLE lectures all 22 sponsored -- were the classes all sponsored by the 23 Florida Bar Association? 24 A. No. 25 Q. Who were the other CLE classes sponsored by Page 16 1 A. It is my personal opinion that the Florida 2 Legislature has a limited right to deal with imposing 3 restrictions on the ability to recover punitive damages, 4 that there are constitutional limitations on how those 5 restrictions may be imposed. 6 Q. What constitutional limitations are you 7 referring to? 8 A. The due process and equal protection clauses 9 of both the United States Constitution and the Florida 10 Constitution. 11 Q. Are you claiming -- is it your -- are you 12 offering an opinion in this matter that there is a 13 property right with respect to a punitive damages claim? 14 A. No. I am not offering that opinion. I am 15 assuming for purposes of the opinions that I will be 16 expressing today that the current legislative 17 limitations that have been imposed upon the ability to 18 recover punitive damages pass constitutional muster. 19 Q. They do pass constitutional muster? 20 A. I have assumed that for purposes of the 21 opinions that I am expressing today. 22 Q. So, you are not offering an opinion in this 23 matter that the current statutes limiting punitive 24 damage awards are somehow unconstitutional or not 25 applicable to this matter? 4 (Pages 13 to 16) OUELLETTE & MA LDINCOURT REPORTERS, INC. EFTA01130144 Page 17 Page 19 I A. I am not offering that opinion today. 1 Q. Is that -- is it your opinion that it's 2 Q. And you are not planning on offering that 2 outside the statutory limitations because they are not 3 opinion at the confirmation hearing? 3 product liability claims? 4 A. I don't plan on offering that opinion at the 4 A. It's my opinion that they are outside the 5 confirmation hearing, no. 5 statutory limitations for multiple reasons; one, because 6 Q. Let's go back. You talked about that you've 6 they are not within those provisions of the statute that 7 lectured on the practical implications of the new -- of 7 impose limitations, but secondly, because the nature of 8 the punitive damages tort reform that was implemented in 8 the misconduct is such that I believe that that 9 the late 1990s. What is your understanding of the 9 misconduct takes the claims outside of the statutory 10 practical implications of those reforms? 10 limitations. 11 A. That really is a very broad question and I 11 Q. And we will certainly get into that in more 12 would prefer that it be more focussed before I attempt 12 detail, but generally, are those the two reasons why you 13 to answer it. 13 believe that the conduct at issue in the underlying 14 In what regard? 14 claims in this matter are outside the punitive damages 15 Q. Well, are there limits on the -- the amount of 15 limitations? 16 punitive damages? Is it your understanding there are 16 A. Generally, yes. When we are talking about 17 limits on the amount of punitive damages that can be 17 punitive damages limitations right now, we are simply 18 recovered as a result of such reforms? 18 focusing on statutory limitations. 19 A. Yes, under some circumstances. 19 Q. Yes, sir. 20 Q. And what are those circumstances? 20 Did you have any involvement with the punitive 21 A. Those that are specifically described in the 21 damages tort reform that was implemented in the late 22 statute. 22 1990s? 23 Q. Do you recall any of those circumstances 23 A. I am not sure what it is you are asking me. 24 without referencing the statute? 24 If you are asking whether I had any involvement in 25 A. I think I can recall some of them without 25 formulating the law, the answer to that question is I Page 18 Page 20 I referencing the statute. Certainly, if you want the I did not. 2 most accurate answer I am able to give you, I've got a 2 Q. Who did? To your knowledge, who did formulate 3 copy of the statute in the materials that have been 3 the law? 4 provided, and it would be easier to have it in front of 4 A. The Florida Legislature. 5 me. But if what you would like to do is test my memory, 5 Q. Do you have any idea who wrote the law? 6 you know, I will play that game with you. 6 A. I don't know the names of any of the 7 Q. Well, we are not playing games. 7 draftsmen, and I would be surprised if the end result 8 A. Okay. 8 were not the product of input from multiple sources. 9 Q. But what do you recall about the statutory 9 Q. Do you have any personal knowledge of that? 10 limitations? 10 A. I don't, no, at least none that I recall. 11 A. I recall that there are limitations that would 11 There may have been some point in time when I had 12 impose a three times compensatory damage limit under 12 occasion to attempt to review the legislative history, 13 some circumstances, limitations that impose a four time 13 but I don't remember that. 14 compensatory damage limitation under some circumstances. 14 Q. Would the draftsmen of the punitive damages 15 There is expressed statutory language that indicates 15 statute be the best resource in terms of trying to 16 that there is no statutory limitation under other 16 determine the intent behind the statutes? 17 circumstances, and I recall that there is specific 17 A. Not necessarily, no. 18 language in the statute that indicates that the statute 18 Q. Who would be? 19 is primarily applicable to products liability claims. 19 A. The Florida Supreme Court ultimately. 20 Q. Are you offering an opinion in this matter 20 Q. And the Supreme Court looks to legislative 21 that the statutes are somehow not applicable to the 21 history at times to determine the intent of the statute; 22 claims at issue? 22 does it not? 23 A. It is my opinion that the circumstances of the 23 A. If it is necessary to go beyond the plain 24 punitive damage claims against TD Bank take those damage 24 meaning of the language of the statute, that is a 25 claims outside the statutory limitations. 25 consideration that the Court might view. I don't -- I 5 (Pages 17 to 20) OUELLETTE & MA LDINCOURT REPORTERS, INC. EFTA01130145 Page 21 1 don't know that that would be necessary under the 2 circumstances of this statute and it certainly does not 3 appear to have been necessary up to this point in time. 4 Q. But you are not going to offer any opinions in 5 this matter on the nature and the intent of the statute 6 beyond the statutory language. Correct? 7 A. That is correct. 8 Q. And you have no personal knowledge of the 9 nature and intent of the enactment of the statute. 10 Correct? 11 A. I do not have any personal knowledge regarding 12 the drafting process nor the deliberative process of the 13 Legislature, nor do I think that either of those matters 14 is relevant. 15 Q. Do you know what groups were involved in the 16 lobbying effort for the tort reform effort? 17 A. I can make reasoned assumptions in that 18 regard, but I don't have any direct knowledge. 19 Q. In addition to the CLE courses you have taken 20 and taught on punitive damages, you also said that you 21 have done a good bit of studies conducted for punitive 22 damage purposes. Is that correct, or you have 23 researched punitive damages? 24 A. I have, yes. 25 Q. Can you please describe those research efforts Page 23 1 over the years some fairly extensive research materials 2 with regard to punitive damages. They certainly don't 3 include everything that I have reviewed, but it has been 4 my standard operating procedure as a trial lawyer to 5 preserve copies of materials that I think may be of some 6 significance with regard to a matter that I am currently 7 involved in or that I might reasonably anticipate would 8 become relevant to future matters, and I have kept those 9 research files and produced them for you today. 10 I selected from those files the punitive 11 damage files that I thought might be most relevant to 12 the inquiry that is being conducted. 13 Q. Thank you. So you keep a punitive damage -- 14 A. I am not sure once you see them you are going 15 to want to say thank you, but I have them here. 16 Q. We appreciate it. How many times --- 17 A. Nor do I think you are going to appreciate it 18 when you get a chance to look at them, but they are 19 here. 20 Q. Thank you. 21 How many times have you testified as an expert 22 on punitive damages? 23 A. I don't have a recollection of ever having 24 served as a punitive damage expert before today. 25 Q. Have you ever been --- Page 22 1 over the years? 2 A. I have read case law. I have read treatises. 3 I have read articles in professional journals. That's 4 what comes to mind immediately. 5 Q. Is there any treatise out there that you have 6 read that you believe to be the most authoritative 7 treatise on the status of damages in the State of 8 Florida? 9 A. There is no treatise that I would accept as 10 generally authoritative on all issues with regard to 11 punitive damages. 12 Q. Is there any treatises that you would accept 13 as authoritative on some of the issues with respect to 14 punitive damages? 15 A. Well, that would depend upon a particular 16 issue and my review of the way in which the treatise 17 treats that issue. So, I can't answer that broadly. 18 Q. Are there any issues in this matter that you 19 intend to opine upon that you believe a certain treatise 20 would be authoritative? 21 A. I have not expressly reviewed any treatise for 22 purposes of formulating my opinions in this matter and 23 ascertaining whether those opinions conform with that 24 treatise so I can't answer that question. 25 What I will tell you is that I have assembled Page 24 1 A. I am a virgin. 2 Q. Have you ever -- I will move on. 3 Have you ever been asked to serve as a 4 punitive damages expert before today? 5 A. I have not, no. 6 Q. Have you ever heard of a punitive damages 7 expert before today? 8 A. Certainly not in the context of someone 9 testifying about the value of a punitive damage claim 10 but there are -- there are certainly a lot of folks out 11 there who have training and experience that formulate 12 opinions with regard to the punitive damage value of 13 cases in the ordinary course of their litigation 14 practice. 15 Q. But you have never heard -- how long, sir, 16 have you been litigating cases? 17 A. Since 1972. 18 Q. Since 1972, have you ever heard of another 19 person offering an opinion as to the value of a punitive 20 damages claim? 21 A. Many times, yes. 22 Q. And -- 23 A. As a routine matter. 24 Q. Testifying in court? 25 A. No, sir. No. That wasn't the question. 6 (Pages 21 to 24) OUELLETTE & MA LDINCOURT REPORTERS, INC. EFTA01130146 Page :' Page 27 1 That's not how I understood your question. I punitive damage claims that you or your client was 2 Q. I'm sorry. Then let me repeat or rephrase my 2 asserting? 3 question. 3 A. Only the circumstances that I just described, 4 Since 1972, have you ever heard or seen 4 and -- well, that's the best answer I can give at this 5 someone testify as an expert as to the value of a 5 time. 6 punitive damages claim? 6 Q. Other than the research and studies that you 7 A. You know, as you are asking that question, I 7 have previously described, have you performed any other 8 am thinking back to one occasion where I believe that, 8 type of research during your career that supports your 9 in fact, did occur in a case that I personally 9 purported expertise? 10 litigated. 10 A. The process of evaluating punitive damages 11 Q. Can you tell me about that case and the I I claims is a process that goes on on a very frequent 12 circumstances of that testimony? 12 basis in the course of my practice. So, to that extent, 13 A. Yes. The case was a claim against Bankers 13 the answer to your question is certainly yes. 14 Multiple Line Insurance Company. The full style of the 14 Q. So you are saying you evaluate the punitive IS case was Farish versus Bankers Multiple Line. It was a 15 claims of your own cases? 16 tortious interference claim against John D. MacArthur 16 A. And sometimes -- well, often the cases of 17 and Bankers Multiple, which was a liability insurer that 17 others in my law firm and occasionally the cases of 18 was owned by MacArthur. 18 lawyers outside my law firm who seek my opinion or my 19 Joseph Parish was a trial lawyer who had been 19 firm's opinions with regard to the value of their cases. 20 hired by the widow of a young man who was walking down 20 Q. So, other than evaluating the claims that you 21 the street when a truck came by carrying concrete 21 just described, your own cases, others in the firm, 22 culverts. The truckload was not properly secured. A 22 other lawyers and so forth, have you done any other 23 culvert fell off the truck and crushed him as he was 23 research during your career that supports your purported 24 walking down the street. The truck was owned by a 24 expertise? 25 MacArthur Company and insured by Bankers Multiple Line 25 A. The study that I have described to you Page 26 Page 28 I Insurance Company. 1 earlier. 2 The widow was an employee of John D. MacArthur 2 Q. Other than what we have talked about here 3 at a hotel that MacArthur also owned called The 3 today? 4 Colonnades, and when MacArthur found out about the 4 A. I can't think of anything else that would 5 widow's claim against his company and his insurance 5 directly be relevant. Something else may come to mind. 6 company, he befriended the widow and convinced her to 6 If it does, I will let you know. That's All can think 7 terminate the services of MacArthur and to retain the 7 of right now. 8 services of a young woman who had virtually no 8 Q. Okay. You referred to the process of 9 litigation experience whatsoever who proceeded then to 9 evaluating a punitive damages claim. 10 settle the widow's claim very cheaply. 10 A. Yes, sir. 11 I represented Mr. Farish in a tortious II Q. Is that a process that you developed or was 12 interference claim, and one of the issues was the value 12 that developed by some other punitive damages expert? 13 of the underlying case. And there was expert witness 13 A. It is a process that has developed over the 14 testimony that was given in that case about the value of 14 course of my personal practice. That is, I haven't IS the claim absent the tortious interference. 15 taken somebody else's evaluative process and adopted 16 I am blanking on the name of the trial lawyer 16 that as my own. 17 or trial lawyers who gave that testimony. That was 17 Q. And is your process an accepted process in the 18 probably 25 years ago. I8 legal industry for evaluating the value of punitive 19 Q. So you did not present such testimony? 19 damages claims? 20 A. I'm surprised myself by remembering how much I 20 A. I think the answer to that question is yes. 21 remembered about that. 21 Q. Okay. And how do you know that it's -- would 22 Q. You did not present such testimony? 22 you say it's widely accepted in the legal industry as a 23 A. I did not present the testimony, no. 23 process for evaluating the value of punitive damages 24 Q. In all your years of trying cases, have you 24 claims? 25 ever retained an expert to opine on the value of 25 A. Yes. 7 (Pages 25 to 28) OUELLETTE & MA LDINCOURT REPORTERS, INC. EFTA01130147 Page 29 1 Page 31 1 Q. Has your method been published? 2 A. It has been. 3 Q. Where has this been published? 4 A. It has been published in court opinions of 5 which I am aware. It has been published in legal 6 treatises of which I am aware, and it has been published 7 in the CLE materials that I, myself, have written in 8 connection with lectures in this area that I have given. 9 Q. Okay. So, there is a court opinion out there 10 that discusses your internal process for evaluating the 11 value of punitive damages claims? 12 A. There is a court opinion out there that 13 addresses the issue of how punitive damages should be 14 evaluated, yes. IS Q. And let's make sure we are talking, using the 16 same words here. How a punitive damages claim should 17 evaluated versus how you -- how one values a purported 18 punitive damages claim. Are we talking about the same 19 thing? 20 A. That's a distinction that I don't understand. 21 Maybe I can be helpful to you here so we don't spend a 22 lot of time mis-communicating. 23 Q. That would be great. 24 A. There are authorities that identify ?5 aggravating and mitigating circumstances that are 1 punitive damages claims in the underlying cases? 2 A. Except for my own materials, which obviously 3 include my name, I am not aware and would be very 4 surprised to find any case or treatise or other 5 publication that attributes the identification of 6 aggravating and mitigating circumstances to Jack 7 Scarola. This is not something that I authored, except 8 to the extent that it's incorporated in CLE outlines. 9 It is a recognition of the appropriateness of 10 specifically identified factors in both cases and 11 treatises to asses the appropriate amount of punitive 12 damages in order to serve the dual function of 13 punishment and deterrence. 14 Q. Punishment and deterrence, are those the 15 purposes of punitive damages under Florida law? 16 A. Yes, sir. 17 Q. Are punitive damages under Florida law meant 18 to compensate a plaintiff? 19 A. They are not, except to a limited extent that 20 is recognized in the case law, and that is that there is 21 a recognition in the case law that the plaintiff who 22 undertakes the prosecution of a punitive damage claim is 23 serving a function in effect as a public prosecutor to 24 preserve the integrity of the judicial system and to 25 preserve appropriate standards within, in this context, Page 30 I appropriately taken into consideration in assessing the 2 amount of punitive damages necessary to serve the dual 3 purpose of punitive damages recognized in the State of 4 Florida, punishment and deterrence. The case that most 5 specifically addresses those factors is the 6 Johns-Manville case, which is included in the materials 7 that have been provided to you. 8 Q. Just so we are clear, when we are talking 9 about the publication of your process to evaluate 10 punitive damages, do these cases say this is how Jack 11 Scarola does it and we think that that's the proper way 12 to do it, or do these cases discuss different factors 13 that a court should consider in evaluating punitive 14 damages and you have adopted parts of that in your 15 process? 16 A. There is no published opinion that attributes 17 this process to me. There are published opinions that 18 identify appropriate factors to be taken into 19 consideration by both judges and juries in determining 20 the appropriate amount of punitive damages necessary to 21 serve the dual purpose of punishment and deterrence. 22 Q. Are there any publications, other than the 23 court opinions, that discuss Jack Scarola's process, 24 your individual process that you have utilized in this 25 matter to evaluate or to place a value on the potential Page 32 1 the business community. So, to motivate individuals to 2 undertake the difficult task of prosecuting a punitive 3 damage claim, one of the factors that is taken into 4 consideration are the costs involved in prosecuting that 5 claim. 6 Q. And what case --- 7 A. So punitive damages help to compensate the 8 plaintiff for undertaking that broader societal purpose. 9 Q. To recoup the costs incurred in protecting 10 society's or the state's interest in pursuing punitive 11 damages? 12 A. Yes, sir. 13 Q. And what case do you believe best describes 14 that function? 15 A. Well, I know it's described in more than one 16 case, but the one that comes to mind immediately is 17 Johns-Manville. 18 Q. What is your process for placing a value on 19 potential punitive damages claims? 20 A. It is to review the evidence in the light of 21 recognized aggravating and mitigating circumstances, to 22 assess the way in which those factors impact upon the 23 intended purpose of punitive damages to punish the 24 wrongdoer and to deter others similarly situated from 25 engaging in the same kind of wrongdoing, to review any 8 (Pages 29 to 32) OUELLETTE & MA LDINCOURT REPORTERS, INC. EFTA01130148 Page 33 1 statutory limitations that might apply and to consider 2 any constitutional limitations that might apply in 3 arriving at an opinion as to what 1 believe the range of 4 punitive damage value of a case is likely to be. 5 I would also take into consideration the 6 extent to which the same or similar circumstances have 7 already been assessed by an independent finder of fact. 8 Q. Let me make sure I got all of this down. It 9 seems like there is several different factors. First, 10 the evidence with respect to the claims at issue. You 11 would review that. You would review any statutory 12 limitations. 13 A. May I interrupt for just a moment? 14 Q. Yes, sir. IS A. Because the evidence I am reviewing is 16 particularly that evidence that relates to the 17 aggravating and mitigating circumstances with respect to 18 punitive damages. I would not necessarily find it 19 necessary to review all of the evidence with respect to 20 a given matter and have not undertaken to attempt to 21 review all of the evidence with regard to this case. 22 Q. Would you review any of the evidence to 23 ascertain the viability of the underlying claims? 24 A. Certainly to some extent, yes, and I need in 25 circumstances such as this to make some assumptions with Page 35 Q. And arc you accepting all of the 2 representations from Mr. Scherer and Mr. Moskowitz as 3 true with respect to the underlying facts? 4 A. They have been very limited, but I have 5 assumed that what they have told me is true, yes. 6 Q. And what have they told you? 7 A. I probably need to look at my notes to 8 identify for you, if I am able, specific representations 9 that have been made by them. 10 Q. To the extent --- II A. Most of what we talked about are matters that 12 were separately identified in the materials that I 13 reviewed and I am not sure I can separate out the verbal 14 representations that they made to me from the materials 15 themselves, except to the very limited extent that they 16 spoke about deposition testimony that was very recently 17 taken that I have not reviewed transcripts of. 18 Q. To the extent you arc relying on any 19 representations from Mr. Scherer, Mr. Moskowitz on with 20 respect to the underlying facts, would those 21 representations be reflected in your notes that you have 22 provided here today? 23 A. I believe that they would be. I can also tell 24 you that there wasn't anything that I remember as I sit 25 here right now that altered the opinion that I had Page 34 1 regard to the viability of the underlying case and have 2 done so here. Obviously, if this is were my own case, I 3 would be assessing all of the evidence with regard to 4 the viability of the underlying case. 5 Q. You said you had made certain assumptions in 6 this matter concerning the viability of the underlying 7 claims. Correct? 8 A. That is correct. 9 Q. What assumptions have you made? 10 A. That the underlying claims are accurately II described in the complaints that I have reviewed, that 12 they are accurately described in court orders that I 13 have reviewed, that they are accurately described in 14 pleadings and memoranda that I have reviewed, and to a 15 limited extent that they have been accurately described 16 in verbal communications that I have had with both 17 Mr. Moskowitz and Mr. Scherer. 18 Q. So, for your analysis of the viability of the 19 underlying claims in this matter, are you accepting all 20 of plaintiffs' allegations to be true? 21 A. Yes. I have accepted the allegations in the 22 complaint to be true to the extent that any particular 23 allegation was or is shown not to be accurate that may 24 or may not affect my opinion, and that's something that 25 I would need to view in the context of the overall case. Page 36 1 formed before those depositions were taken. That is, 2 the information simply corroborated and reinforced those 3 opinions. It did not change them. 4 Q. You said there was some information that was 5 relayed to you by Mr. Scherer and Mr. Moskowitz 6 regarding recent depositions that have been taken. What 7 factual information do you recall from those 8 conversations? 9 A. I remember discussions about the testimony of 10 a corporate representative and disclosures concerning II information that has been relayed to TD Bank's board of 12 directors confirming that the board has been 13 periodically and routinely updated with respect to what 14 is going on in connection with this litigation. There 15 was some discussion about the apparent absence of any 16 significant change in policy practice or procedure on 17 the part of TD Bank that was identified as having been IS intended to address the issues that give rise to 19 TD Bank's liability in these matters, some discussion 20 with regard to the absence of disciplinary action tied 21 to the misconduct that occurred in connection with these 22 matters. That's what I am able to recall off the top of 23 my head. 24 MR. MOSKOWITZ: Whenever you think appropriate 25 for a five-minute break, we have been going for 9 (Pages 33 to 36) OUELLETTE & MA LDINCOURT REPORTERS, INC. EFTA01130149 Page 37 1 about an hour. But whenever you think -- you are 2 done --- 3 MR. HUTCHINSON: Let me just followup on a 4 couple of those answers, then it would be probably 5 a good place stop. 6 MR. MOSKOWITZ: Sum. 7 BY MR. HUTCHINSON: 8 Q. You discussed or you mentioned discussion 9 about reports being given to the TD board relating to 10 this litigation. What timeframe is your understanding 11 that these reports to the board were made? 12 A. I don't have a specific recollection of the 13 timeframe when the reports began, but my impression 14 right now is that they have been going on for some 15 significant period of time, which was not a surprise to 16 me in any respect. I would have been very surprised had 17 that not been occurring given the magnitude of these 18 claims, and I have assumed that the board was being kept 19 informed with regard to this litigation over an extended 20 period of time. 21 Q. And, again, just so we are clear here, your 22 understanding is reports concerning the litigation, this 23 litigation, the underlying litigation. Correct? 24 A. Well, when I am referring to this litigation, 25 I am referring broadly to TO Bank's implication in the Page 39 A. I have never been invited to a TD board bank 2 meeting. I don't expect I ever will be. If there were 3 any chance of that before, it's gone now. And there was 4 probably no chance of that before either. 5 MR. HUTCHINSON: Adam, this is as good a time 6 as any to take a break. 7 THE VIDEOGRAPHER: We arc off the record. 8 It's 11:05. 9 (A recess was taken from 11:05 a.m. until 10 11:15 a.m.) 11 THE VIDEOGRAPHER: It's 11:15 a.m. We are 12 back on the video record. 13 BY MR. HUTCHINSON: 14 Q. Mr. Scarola, I believe you previously 15 testified that in forming your opinions in this matter 16 you accepted the allegations of the -- the plaintiff's 17 allegations in the complaint as true. Correct? 18 A. Yes, sir, that's correct. 19 Q. And you accepted the representations by 20 plaintiffs counsel as true. Correct? 21 A. That is also correct. 22 Q. Did you do any research to verify the veracity 23 of those allegations and representations? 24 A. Well, I certainly took other materials into 25 consideration that corroborated those representations. Page 38 1 Rothstein Ponzi scheme. 2 Q. TD Bank's involvement in the numerous 3 litigation matters that are pending, is that what you 4 am referring to? 5 A. Well, it's my understanding that there are 6 some litigation matters relating to TD Bank that TD Bank 7 has settled. 8 Q. Correct. 9 A. So, I am not only talking about pending 10 litigation. I am talking about TD Bank's overall 11 involvement in the Rothstein Ponzi. 12 Q. But you am also -- you am not talking about 13 any -- it's not your understanding that the reports to 14 the board prior to the implosion of the Ponzi scheme. 15 Correct? 16 A. I don't have any reason to believe that there 17 were specific reports regarding the Ponzi scheme at any 18 time before the implosion of the Ponzi scheme. There is 19 certainly reason to believe that the magnitude of the 20 transactions that were being conducted locally in South 21 Florida may have reached the board's attention, but I 22 don't recall seeing any direct evidence that would 23 either confirm or deny that basic assumption. 24 Q. And you don't have any personal knowledge on 25 that issue. Correct? Page 40 I Those include court orders and related jury verdicts. 2 Q. Okay. What court orders are you referring to? 3 A. I remember in particular an order from Judge 4 Good. 5 Q. What did that order pertain to? 6 A. It pertained to significant litigation 7 misconduct. 8 MR. MOSKOWITZ: Judge Cooke, you mean? 9 A. Yes, thank you. Judge Cooke, sorry. That's 10 what happens when you take all my materials away from me 1I and test my 66-year old memory. 12 BY MR. HUTCHINSON: 13 Q. If, at any time, you need your materials, sir, 14 just ask and you are welcome to have them back. 15 A. Sure. Give them all back to me. Yes, if you 16 are offering them to me, I'd rather have them. 17 MR. HUTCHINSON: Just give him back the 18 originals. We've got the copies. 19 THE WITNESS: We can proceed and when you get 20 them assembled, just send them all this way. 21 BY MR. HUTCHINSON: 22 Q. So your recollection is an order from Judge 23 Cooke? 24 A. Yes. 25 Q. What's your recollection of Judge Cooke's 10 (Pages 37 to 40) OUELLETTE & MA LDINCOURT REPORTERS, INC. EFTA01130150 Page 41 1 order? 2 A. That it dealt with significant litigation 3 misconduct. 4 Q. In what matter? 5 A. On the part of TD Bank. 6 Q. In what matter? 7 A. I don't remember the name of the case offhand. 8 Q. Was it in the Coquina matter? 9 A. Yes. 10 Q. And what's your understanding of the status of 11 the Coquina matter? 12 A. I believe that it is on appeal. 13 Q. Any other court orders that you remember? 14 A. I think I have reviewed something from Judge 15 Streitfeld. 16 Q. What do you recall about what you reviewed 17 from Judge Streitfeld? 18 A. I don't remember right now, but it's in my 19 materials. 20 MR. MOSKOWITZ: Do you want to hand him the 21 materials? I thought we had agreed we would do 22 that. 23 A. All of the case related materials that I 24 reviewed are in this bankers box. Most of it assembled 25 into large binders so that's what I have reviewed. Page 43 1 allegations of discovery misconduct in those cases 2 themselves at this point, would you agree with that? 3 A. I would have no reason to doubt Mr. Scherer's 4 testimony in that regard. I don't know that it's 5 particularly significant in the overall context of this 6 matter, but I wouldn't question his accuracy. 7 Q. Why would you say that it's not particularly 8 significant in this matter? 9 A. Because the magnitude of the litigation 10 misconduct that occurred in related matters and the 11 extent to which TD Bank has engaged in efforts to cover 12 up its misconduct, whether those efforts occurred in 13 this particular case or whether those efforts took place 14 in the related litigation really wouldn't make very much 15 difference in terms of assessing the aggravating impact 16 that those efforts would have in evaluating a punitive 17 damage claim. 18 I will volunteer a little bit more that may be 19 helpful to you. It is my opinion that evidence with 20 regard to that litigation misconduct would be relevant, 21 admissible and highly probative in the second phase of a 22 punitive damage claim against TD Bank. 23 Q. And what do you base that opinion on? 24 A. My understanding of Florida law. 25 Q. And what is that Florida law that you are Page 42 1 BY MR. HUTCHINSON: 2 Q. Okay. But you don't have any independent 3 recollection of what you reviewed from Judge Streitfeld? 4 A. If this is a memory test, I just failed. I 5 just know that Judge Streitfeld has been involved in 6 these matters. I have read references related to Judge 7 Streitfeld's concern about the manner in which the 8 litigation has been conducted by TD Bank. I remember 9 either reading directly or having information provided 10 to me indirectly about Judge Streitfeld's reaction to 11 learning about substantial transactions that occurred in 12 Rothstein's IOTA account and the significance that Judge 13 Streitfeld attributed to TD Bank's failure to 14 appropriately address those IOTA transactions. 15 Q. Anything else that you recall? 16 A. Not off the top of my head, no. 17 Q. Are you aware of any alleged underlying 18 discovery misconduct in the Beverly or Marlin actions 19 themselves? 20 A. I don't remember anything specifically. 21 Q. Did you review Mr. Scherer's deposition at 22 that point? 23 A. I did not, no. That was only recently taken 24 and I have not reviewed that transcript. 25 Q. If Mr. Scherer testified that there are no Page 44 I referring to? 2 A. Well, again, the best synopsis of that law as 3 it relates to this case is Johns-Manville. 4 Q. What is does Johns-Manville say on that point? 5 A. That litigation misconduct efforts to cover up 6 the ratification of misconduct are highly probative 7 aggravating factors. The wrongdoer's response to the 8 wrongdoing is extremely significant, which obviously 9 makes good common sense as well to anyone who has ever 10 been a parent, or, for that matter, has had any 11 involvement in the criminal law. 12 Q. Okay. Well, we've got a lot to cover here so 13 let's go back and start from the beginning, sir. 14 What is your -- in which matters do you 15 believe this alleged litigation misconduct occurred? 16 A. It certainly occurred in Coquina and I am -- 17 as I sit here right now, I am not sure which other 18 cases. 19 Q. So you are offering an opinion on this and you 20 don't even know which matters the conduct occurred in? 21 A. Well, it occurred in the matter of 22 prosecutions against TD Bank for TD Bank's involvement 23 in the Rothstein Ponzi scheme. 24 Q. So, let's go to the Coquina matter. Has the 25 alleged misconduct in that matter been addressed by the II (Pages 41 to 44) OUELLETTE & MA LDINCOURT REPORTERS, INC. EFTA01130151 Page 45 Page 47 I Court? 1 A. I am not sure which transcript you are 2 A. It has been addressed by the Court in Judge 2 referencing. What I reviewed is included in the 3 Cooke's opinion, yes. 3 materials in this box. So, if that transcript is in the 4 Q. And did Judge Cooke sanction TD as a result of 4 box, I have at least looked at it to some extent. If 5 the alleged misconduct? 5 it's not in the box, I haven't seen it yet. 6 A. Yes. 6 Q. Do you recall looking at a transcript where 7 Q. But it's your opinion that TD should be 7 Judge Streitfeld considered the motion to strike the 8 punished or potentially punished again for the alleged 8 discovery allegations from the underlying Beverly and 9 misconduct? 9 Marlin claims? 10 A. It is my opinion that the reaction of TD Bank 10 A. I don't have a specific recollection of that, 11 to the allegations of wrongdoing against it is a highly 11 no. 12 relevant and material factor to be taken into 12 Q. Would that be important to you in formulating 13 consideration in assessing the appropriate amount of 13 your opinions in this matter? 14 punitive damages in order to serve the dual purpose of 14 A. Well, it depends on what the issue was that 15 punishment and deterrence, and whether that misconduct 15 was presented before the Court and the way in which the 16 occurred in this particular prosecution or in an earlier 16 Court resolved those issues, if they were resolved. 17 prosecution where the issues were being addressed, where 17 Q. I am going to show you what I am marking as 18 the same issues were being addressed, is not of any 18 Exhibit 3, which is the transcript of the hearing before 19 significance to me. 19 Judge Streitfeld on May 17th, 2013? 20 Q. Do you know whether it's of significance to 20 MR. MOSKOWITZ: I'm sorry, Wen, is this in 21 Judge Streitfeld? 21 some type of order? 22 A. I don't know whether it's of significance to 22 Mine starts on Page 100 and then it goes 23 Judge Streitfeld, but I would be surprised if it were of 23 backwards and then forward and then it skips 24 significance to Judge Streitfeld in his assessment of 24 around. 25 the appropriate amount of punitive damages because I 25 MR. HUTCHINSON: Sorry. You just must have a Page 46 Page 48 1 have a great deal of respect for Judge Streitfeld's 1 bad copy. 2 legal acumen and I am sure that he would recognize the 2 MR. MOSKOWITZ: That's okay. 3 relevance and materiality of that misconduct in a second 3 (Exhibit No. 3, Transcript of May 17, 2013 4 phase punitive damage proceeding. 4 Hearing, was marked for identification.) 5 Q. Have you reviewed the transcript from Judge 5 BY MR. HUTCHINSON: 6 Streitfeld discussing this issue? 6 Q. To your knowledge, sir, have you reviewed 7 MR. MOSKOWITZ: Objection. Mischaracterizes 7 Exhibit 3 before? 8 what actually occurred before Judge Streitfeld. 8 A. I don't remember. 9 A. I am not aware that Judge Streitfeld has 9 MR. MOSKOWITZ: I'd guess I have an objection, 10 addressed the issue that I am addressing and that is 10 Wen. If you want him to -- he says he hasn't read 11 whether evidence of TD Bank's coverup would be 11 it, so if you want him to read the whole thing, 12 admissible in a second stage punitive damages proceeding 12 this is on a motion to strike certain allegations 13 in this case. 13 in the complaint. It has nothing to do with 14 BY MR. HUTCHINSON: 14 punitive damages or Phase 2, but if you are going IS Q. Are you aware that TD Bank filed motions in 15 to ask specific questions about certain lines, I 16 the Beverly and Marlin matter to strike the allegations 16 kind of have to ask you to let him read most of the 17 of alleged discovery misconduct from other matters? 17 transcript so he can understand the context, 18 MR. MOSKOWITZ: Objection. Mischaracterizes 18 because this is not about Phase 2 discovery. This 19 again what was actually filed. 19 was your motion to strike certain sentences from 20 A. I have some recollection of a related issue 20 the complaint at this time. 21 having been raised but not reached as a consequence of 21 But, please, proceed and we will take it 22 the stay imposed by the bankruptcy court. So, that's my 22 question by question. 23 understanding. 23 BY MR. HUTCHINSON: 24 BY MR. HUTCHINSON: 24 Q. If you will turn to Page 48, please. 25 Q. Have you reviewed the transcript, sir? 25 A. I am there. 12 (Pages 45 to 48) OUELLETTE & MA LDINCOURT REPORTERS, INC. EFTA01130152 Page 49 1 Q. Can you read the part where it starts: 2 "THE COURT: Well, that's problematic for a 3 number of reasons"? 4 MR. MOSKOWITZ: And then, again, Mr. Scarola, 5 I'd ask you, I guess, to read, you know, I don't 6 know how we are going to do this, but you can pick 7 out paragraph. This was a long hearing. 8 If you need to, you can also read, you know, 9 much of the other part of this transcript. 10 THE WITNESS: How far would you like me to 11 continue? 12 BY MR. HUTCHINSON: 13 Q. You can continue to the top of 49. 14 MR. MOSKOWITZ: And I would ask you to read a IS least to Page 52 where the Court rules. 16 BY MR. HUTCHINSON: 17 Q. Yes, the Court issues an order on 52 striking 18 those paragraphs? 19 A. So I should continue to read all of Page 49? 20 Q. I don't think you need to, but you can read 21 whatever you think you need to, but if you go to 52 --- 22 A. Well, I don't know the purpose for which you 23 are asking me to read so I don't know. I can't make a 24 judgment about what I need to read, so why don't you 25 tell me what you'd like me to read? Page 51 1 A. What I am referring to is that these issues -- 2 these issues are dealt with by appropriate instructions 3 to the jury and that doesn't mean exclusion of the 4 evidence. It means informing the jury as to the manner 5 in which the evidence is to be used by it. 6 Q. And how is the jury to use this evidence? 7 A. Which evidence are you talking about? 8 Q. The evidence that you have taken as true from 9 the representations of plaintiffs counsel. 10 A. You mean the evidence of an ongoing course of 11 attempts to cover up wrongdoing and the refusal to 12 acknowledge any wrongdoing and the ratification of 13 wrongdoing? 14 Q. Is that what they have represented to you? 15 A. Is that what who has represented to me? 16 Q. Plaintiffs' counsel. Is that the evidence 17 that you are referring to? 18 A. That's what the record materials that I have 19 reviewed indicates that there has been a coverup, that 20 there has been a refusal to acknowledge any wrongdoing 21 with respect to that coverup, and that there has been an 22 effective ratification of the wrongdoing as a 23 consequence of a persistent refusal to acknowledge any 24 misconduct, to punish the misconduct or to address the 25 misconduct through appropriate changes to policy, Page 50 Q. Well, wouldn't you agree that on Page 48 of 2 this transcript, Judge Streitfeld says that you arc 3 suggesting that another case a jury can give punishment 4 again for the same conduct, I have a real problem with 5 that. Do you see that? 6 A. So do I. 7 Q. Isn't that what you arc suggesting? 8 A. No. No, I am not suggesting that. I am 9 suggesting that it is relevant and material information 10 that would be admissible in a second stage proceeding. 11 I think that it would be necessary through appropriate 12 jury instructions to assure that the jury was not 13 imposing punishment for misconduct other than the 14 misconduct that was involved with these particular IS plaintiffs. 16 There is a very good analogy that Judge 17 Streitfeld has dealt with repeatedly in the past and 18 that is in the context of tobacco cases. And I know how 19 Judge Streitfeld has dealt with that before as a 20 consequence of my personal experience in the prosecution 21 of tobacco cases, so I don't have any reason to believe 22 that his rulings in this case would be inconsistent with 23 what he has done previously. 24 Q. And what are you referring to as to what he 25 has done in the tobacco? Page 52 I practice and procedure. 2 Q. Okay. And we will get into that in minute 3 detail and your total understanding of the alleged 4 misconduct. Let's go back to the question that we were 5 addressing. 6 A. I thought that that's what I was doing. I'm 7 sorry if I misunderstood your question. 8 Q. You were saying how Judge Streitfeld handles 9 similar issues in the tobacco cases. 10 A. Yes, sir. 11 Q. And how does he handle such issues, or did he? 12 A. Evidence with regard to the magnitude of the 13 wrong is admitted in tobacco cases, including the number 14 of other victims of the tobacco industry's longstanding 15 pattern of wrongdoing. 16 Q. But you are saying --- 17 A. That evidence gets admitted. 18 Q. But the jury -- you are saying the jury should 19 not punish based on that evidence. Correct? 20 A. What I am saying is that there is a recognized 21 constitutional limitation on imposing punishment against 22 a defendant in a case being prosecuted by one plaintiff 23 for injury that has occurred to other plaintiffs. That 24 doesn't mean that the jury is not informed -- God bless 25 you -- is not informed about those other injuries. It 13 (Pages 49 to 52) OUELLETTE & MA LDINCOURT REPORTERS, INC. EFTA01130153 Page 53 Page 55 1 is essential for the jury to know about the magnitude of I Could you try to ask it of me in a different 2 the wrong and the extent, nature and length of coverup 2 way. 3 activities. 3 Q. I am going to ask you to answer the question I 4 And to draw an analogy for you, when you are 4 asked. What wrongdoing has occurred in the Beverly and 5 prosecuting a criminal case with the exception of the 5 Marlin matters post-blowup? 6 Williams' rule evidence, you are only looking at one 6 MR. MOSKOWITZ: Objection. I think it was 7 crime during the proceedings before the jury that 7 already asked and answered. 8 address the issue of guilt or innocence. But when it 8 A. Well, we dealt with that issue before and you 9 comes to sentencing, there is a presentence 9 have asked me to assume that Mr. Scherer has 10 investigation that's conducted and you take a look at 10 acknowledged that there was no litigation misconduct II the entire history of wrongdoing on the part of the 11 directly in the Beverly and Marlin matters and I have 12 criminal defendant in order to determine what an 12 accepted that representation. So, if the question is 13 appropriate punishment is. Has this individual shown 13 was there any litigation misconduct in the Beverly and 14 remorse or hasn't the individual shown remorse? Is 14 Marlin matters, there is no reason for me to change the 15 there an admission of wrongdoing? Was there an effort 15 answer that I gave you previously. I accept the 16 to cover it up, and those same kinds of factors are 16 accuracy of Mr. Scherer's testimony. 17 appropriately taken into consideration based upon 17 BY MR. HUTCHINSON: 18 relatively clear Florida precedent in determining what 18 Q. Are there any cases that you can point to that 19 an appropriate amount of punitive damages should be to 19 support your opinion relating to the jury's 20 serve the purpose of punishment and deterrence. 20 consideration, the Beverly and Marlin jury's 21 Q. What Florida precedent supports your opinion 21 consideration of the litigation misconduct in the other 22 that the jury should be able to consider alleged 22 matters? 23 discovery conduct in another case when that plaintiff 23 A. Johns-Manville. I am sure there are others 24 was not involved in that case? 24 but that's the one that I deal with most frequently and 25 A. Let me make sure that you understand what my 25 have found to be most persuasive. Page 54 Page 56 1 position is in that regard. It is that the jury should 1 Q. Any others that support your position? 2 clearly be permitted to consider the course of conduct 2 A. As I said, I am sure there are but they are 3 relating to the pattern of wrongdoing in the case being 3 not cases or citations that I have memorized. 4 prosecuted before the jury, even if that pattern of 4 Q. If you will turn to Page 52 of Exhibit 3 -- 5 wrongdoing involves injuries to other plaintiffs. 5 A. I am there. 6 That's my position. 6 Q. -- do you see where the Court states, "But 7 Q. What is the pattern of wrongdoing in the 7 right now those allegations don't belong in this 8 Beverly and Marlin actions that you are referring to? 8 pleading"? 9 A. TD Bank's participation in the Rothstein Ponzi 9 A. Can you give me a line number, please? 10 scheme. 10 Q. Starting at line ten, "The motion to strike 11 Q. Okay. So, you are talking pre-blowup, pre- 11 paragraphs 18, 19, 180 to 185 is granted." 12 blowup of the Ponzi scheme? 12 MR. MOSKOWITZ: Objection, the document speaks 13 A. And -- and post-blowup of the Ponzi scheme as 13 for itself. And, again, it's taking it out of 14 well. 14 context because on Page 47 he says, "We haven't yet 15 Q. What wrongdoing has occurred in the Beverly 15 reached punitive damages." So you are showing him 16 and Marlin matters post-blowup? 16 something that is not what the Court actually 17 A. It is my position that the efforts to cover up 17 ruled. 18 involvement in the Rothstein Ponzi scheme are relevant 18 BY MR. HUTCHINSON: 19 and material to all of the victims of the Rothstein 19 Q. Were you aware that the Court struck the 20 Ponzi scheme. 20 discovery allegations from those complaints? 21 Q. Can we go back and can you answer my question, 21 A. The discovery misconduct allegations from the 22 sir? 22 complaint. 23 A. I thought that I had and if I didn't that's as 23 Q. Correct. 24 a result of my not understanding your question. I 24 A. Yes, I was aware of that. I was also aware 25 apologize. 25 that the punitive damage motion, the motion for leave to 14 (Pages 53 to 56) OUELLETTE & MA LDINCOURT REPORTERS, INC. EFTA01130154 Page 57 1 amend to assert a claim for punitive damages had not yet 2 been reached by the Court. 3 Q. And still has not. Correct? 4 A. That's my understanding, yes. 5 Q. And it's your understanding that there are no 6 punitive damages claims currently in Beverly or Marlin? 7 A. It is my understanding that procedurally that 8 issue has not yet been reached as a consequence of the 9 imposition of the bankruptcy stay. That is not a factor 10 that I consider to be significant because of the very 11 obvious conclusion that once that issue is reached, the 12 motion for leave to assert a claim for punitive damages 13 will be granted. 14 Q. And where did you get the understanding that IS the bankruptcy stay somehow affected the motion practice 16 with respect to the pleadings? 17 A. It's my understanding that the bankruptcy stay 18 precluded in general the ongoing prosecution of this 19 claim. 20 Q. Where did you get that understanding from? 21 A. I don't recall. 22 Q. Are you aware that we have continued to argue 23 motions on the pleadings and Judge Streitfeld indicated 24 that he was proceeding with anything relating to the 25 pleadings, that it was simply discovery that was stayed? Page 59 I entirety in the first phase of the proceedings. I think 2 it very unlikely that evidence with regard to the 3 litigation misconduct, including litigation misconduct 4 to cover up the very same wrongdoing that led to the 5 injury to these plaintiffs would be excluded in a second 6 phase proceeding, very unlikely that it would be 7 excluded. 8 Q. So your opinion is that it would come in when 9 determining the amount of punitive damages, but would 10 not come in in the first phase when determining whether 11 punitive damages were warranted? 12 A. That's not quite what I said. What I said was 13 that there may very well be some exclusion of litigation 14 misconduct relating to other cases in the first phase of 15 the trial. It is highly unlikely that any of that 16 litigation misconduct evidence would be excluded in a 17 second phase. 18 I can -- I can envision the admission of at 19 least some of the evidence with regard to litigation 20 misconduct in Coquina coming in in Beverly and Marlin in 21 the first phase. 22 Q. On what basis? 23 A. On the basis that it is relevant to the issue 24 of whether punitive damages should be assessed. 25 Q. And why is it relevant? Page 58 1 A. I don't know that I was specifically aware of 2 that, but the stay of discovery would certainly have an 3 impact on proceeding with a motion for leave to amend to 4 assert a claim for punitive damages. So, I don't know 5 that that's a distinction that is of much significance 6 tome. 7 Q. Okay. Let's discuss how your theory of this 8 discovery misconduct is relevant to Beverly and Marlin 9 actions and how it comes into evidence. You are saying 10 it comes into evidence during a separate punitive phase. 11 Is that correct? 12 A. Current State of Florida law requires upon 13 motion of either party that the proceedings be 14 bifurcated, that the issues of compensatory liability 15 and the amount of compensatory damages together with 16 entitlement to punitive damages are tried in the first 17 phase. 18 Assuming the jury determines that it is 19 appropriate to consider the issue of punitive damages, 20 there is a second phase where the amount of punitive 21 damages is addressed and evidence not otherwise 22 admissible in the first phase is admissible in the 23 second phase. 24 I would think it unlikely that evidence with 25 regard to the litigation misconduct would come in in its Page 60 1 A. Because of all of those factors that are 2 identified in Johns-Manville having been addressed and 3 approved in general terms in -- by the Florida Supreme 4 Court as appropriate to consider in determining whether 5 punitive damages ought to be assessed. 6 Q. And, again, your basis is primarily 7 Johns-Manville for this. Correct? 8 A. Well, when you say my basis is primarily 9 Johns-Manville, that is not accurate. What I have tried 10 to convey to you is that that's the most convenient and 11 clear summary of relevant aggravating and mitigating 12 circumstances. So, it's the one that I turn to most 13 frequently because it provides that clear and convenient 14 summary. 15 Q. Let's talk about how this would work. So, 16 let's assume the Beverly case is tried first. 17 A. Okay. 18 Q. It was filed first. Correct? 19 A. I will accept your representation that it was. 20 I don't remember. 21 Q. So, it was -- Beverly was filed first. Assume 22 it's tried first. You are saying during the first phase 23 of Beverly trial there may be some evidence that conies 24 in with respect to the litigation misconduct in Coquina 25 and you believe there would certainly be evidence that 5 (Pages 57 to 60) OUELLETTE & MA LD1NCOURT REPORTERS, INC. EFTA01130155 Page 6I I would come in with respect to that conduct in a punitive 2 damages phase. Correct? 3 A. Correct. 4 Q. And then assume the Beverly jury finds first 5 that punitive damages are warranted and then, you know, 6 listens to this additional evidence in Phase 2 and 7 assesses punitive damages against TD Bank. Okay. With 8 me? 9 A. So far. 10 Q. So, what happens in the Marlin matter that's 11 tried after Beverly? 12 A. What happens after Beverly? 13 Q. There is an award, a punitive award. 14 A. Is there subsequently an admission of 15 wrongdoing by TD Bank, an apology for the wrongdoing, 16 appropriate corrective measures taken and a payment of 17 the punitive damages, or is there a continuation of the 18 denial of wrongdoing, a continuation of the coverup and 19 a refusal to pay the punitive damage award? 20 Q. Assume all you have is a punitive damages 21 award on one day and the Marlin trial starts on the next 22 day. 23 A. Then it would be my position that it would be 24 very likely that the evidence admitted in the Marlin 25 trial would look very much like the evidence admitted in Page 63 1 this. I realize it was wrong. I am ready to correct it 2 right now, and I am ready to pay all the penalties that 3 have been imposed upon me before. 4 That's when I think the evidence stops coming 5 in, maybe. 6 Q. Mr. Scarola, when were these cases filed, 7 Beverly and Marlin? 8 A. I don't remember the dates. I can look at the 9 pleadings, I am sure, and find out the -- it would 10 appear that the Marlin case was filed in 2013. 11 Q. Well, let's use that as an example. 12 A. Okay. 13 Q. How has any alleged litigation misconduct in 14 Coquina damaged the Marlin plaintiffs' prosecution of 15 their case filed in 2013 long after the order in Coquina 16 and Coquina's judgment came out? 17 A. The Marlin plaintiffs and the Beverly 18 plaintiffs have been obliged to litigate issues that 19 they never should have had to litigate if TD Bank did 20 the right thing. 21 Q. What issues? 22 A. TD Bank's liability for the underlying 23 misconduct. 24 Q. So you are saying because of alleged discovery 25 misconduct in Coquina. TD should admit underlying Page 62 I the Beverly trial. 2 Q. So, this evidence just keeps each plaintiff 3 becomes, no matter what, that the litigation misconduct 4 had nothing to do with their cast, had nothing to do 5 with their claims, and in no way injured them, keeps 6 getting presented trial after trial after trial? 7 A. Well, when you say in no way had anything to 8 do with injuring them, that's wrong. It did have 9 something to do with injuring them because it 10 complicated the prosecution of their claims and will 11 continue to prosecute the complicate -- the prosecution 12 of every victim of the Rothstein Ponzi scheme until 13 TD Bank finally says, you know what, we have been told 14 over and over and over again that what we did was wrong. IS And it's time for us to take our heads out of the sand 16 and to stand up and acknowledge that what we did was 17 wrong, and to make sure that it never happens again, 18 instead of continuing to deny wrongdoing and ratifying 19 that wrongdoing. 20 So the answer to your question is, yes, they 21 keep being faced with the same evidence of what they did 22 wrong at least until they change their ways and the 23 purpose of punitive damages is finally served. 24 The wrongdoer has been punished enough and the 25 wrongdoer finally says, yes, I shouldn't have ever done Page 64 I liability in Beverly and Marlin? 2 A. What I am saying is that because of the 3 established litigation misconduct on the part of 4 TD Bank, which was specifically designed to conceal the 5 extent of TD Bank's involvement in the Rothstein Ponzi 6 scheme, victims of the Rothstein Ponzi scheme have been 7 obliged to undertake efforts to prove TD Bank's 8 underlying misconduct that would otherwise have been 9 unnecessary. 10 Q. Well, the alleged litigation misconduct was 11 made public long before the Marlin complaint was filed. 12 Correct? 13 A. Yes, accepting this date of filing, that's 14 true, uh-huh. 15 Q. So, it has in no way hampered the Marlin 16 plaintiffs prosecution of their matter. 17 A. Well, we are just not quite connecting. It is 18 my opinion and my understanding of the available record 19 evidence that TD Bank refused to acknowledge any 20 liability, that TD Bank actively sought to conceal 21 liability through the alteration of documents in 22 discovery, through the presentation of perjured 23 testimony, through the concealment of other documents to 24 a significant extent, and that TD Bank bank's covcrup 25 and ratification of its misconduct continues even though 16 (Pages 61 to 64) OUELLETTE & MA LDINCOURT REPORTERS, INC. EFTA01130156 Page 65 Page 67 I the extent of that wrongdoing has been publicly 2 disclosed, judicially recognized, but not yet 3 acknowledged or accepted by TD Bank. 4 Q. So, until TD admits liability on the 5 underlying Ponzi scheme claims, you believe that this 6 alleged litigation misconduct in other matters that was 7 made public long ago is relevant in these subsequent 8 matters? 9 A. I am the father of five children and the 10 grandfather of 15 and until my children and my 10 11 grandchildren are willing to acknowledge whatever minor 11 12 wrongdoing they may have been involved in, that 12 13 continues to impact upon the way in which I respond to 13 14 the things that they have done wrong. 14 15 Once they have acknowledged their wrongdoing 15 16 and accept responsibility for it, I don't need to 16 17 continue to say, you keep doing the same thing over and 17 18 18 19 19 20 20 21 21 22 22 23 23 over and over again, and the punishment doesn't need to continue to escalate because they have been punished and they have been deterred. But until they have been punished and they have been deterred, the answer is, yes, I keep bringing up the past until their punishment has effectively altered their conduct. 24 TD Bank has had punishment assessed against 25 them. They have refused to acknowledge the I BY MR. HUTCHINSON: 2 Q. Are you good going a little while longer? 3 A. I'm good going a little while longer, yeah. 4 I'm working without breakfast so I'd like to have lunch. 5 Q. Let's get in, you keep alleging all of your -- 6 or talking about all this alleged litigation. 7 MR. MOSKOWITZ: Is this going to be like a 8 half-hour? I mean, he hasn't had breakfast at all. 9 We've got all day. Do you want to eat now? We've got all day. THE WITNESS: Let's go another 15 minutes. Find a convenient stopping point in about 15 minutes from now. BY MR. HUTCHINSON: Q. Okay. Can you please describe your understanding of the specifics of the alleged litigation misconduct that you arc referring to? A. Yes, sir. There was a --- Q. You arc referring to a document, sir? A. I am, yes. Q. What document is that? A. It's plaintiffs first request for production of documents to TD Bank relating to the sanctions motion 24 filed in the Razorback Funding, LLC, et al., versus 25 Scott Rothstein matter, 17th Judicial Circuit Court. Page 66 1 appropriateness of that punishment. They continue to 2 appeal it. They continue to contend we did nothing 3 wrong, and as long as they continue to appeal and to 4 contend that they did nothing wrong, then the facts of 5 the history of their misconduct are relevant and 6 material in deciding what is appropriate punitive 7 damages to be imposed against them. 8 Q. Let's get into detail of what your 9 understanding is of the alleged discovery. 10 MR. MOSKOWITZ: When would you like to take a 11 break? We have gone another hour. I certainly 12 want to let you do your depo. 13 MR. GENOVESE: Lunch was to arrive -- keep 14 asking questions. I will see when lunch is 15 arriving, give you that information. That will be 16 a convenient time in my mind. 17 Is that all right? 18 THE WITNESS: Sure. Assuming lunch is going 19 to be here within the next half-hour, that's fine 20 with me. Otherwise, I'd like to take a break 21 before lunch. 22 MR. GOLDBERG: Lunch is here already. 23 MR. GENOVESE: Whenever Wen wants to conclude 24 within the next half-hour. 25 THE WITNESS: That's fine. Page 6S 1 Case Number 09-062943-19. 2 Q. Let me show you what I am marking as 3 Exhibit 4. Is Exhibit 4 what you are referring to, sir? 4 A. Yes, assuming that this document is an 5 accurate copy of all of the pages following the first 6 page, the first page is identical so I assume that it 7 is. 8 (Exhibit No. 4, Plaintiffs First Request for 9 Production of Documents to TD Bank, was marked for 10 identification.) 11 BY MR. HUTCHINSON: 12 Q. So what is your understanding of the first 13 alleged specific litigation misconduct? 14 A. The litigation misconduct that I am I5 referencing is the litigation misconduct that is 16 described in each of the introductory paragraphs to the 17 requests that are made in this document, specifically I I8 am referring to the description that is included on Page 19 5 under the title, background to this request, on Page 20 6, background to this request. 21 It continues on Page 7 and 8. On Page 8, 22 background to this request. It continues on Page 9, 23 Page 10, Page II, Page 12. The description under 24 background to this request that appears on Page 13 and 25 continues onto Page 14, background to this request that 17 (Pages 65 to 68) OUELLETTE & MA LD1NCOURT REPORTERS, INC. EFTA01130157 Page 69 I appears on Pagc 14, Page 15, Page 16 and Page 17. I am 2 also referring to the allegations in paragraph 13 of the 3 complaint and paragraphs 86 through 153 of the complaint 4 where allegations of wrongdoing are specifically 5 described in paragraphs 15, 17, 18 and 154 through 196 6 where post-collapse coverup facts are alleged. 7 Q. And you arc referring to certain notes now, 8 sir? 9 A. I am, yes. These are notes that I prepared 10 myself when reviewing certain of the materials that were 11 provided to me. 12 Q. Okay. We will mark those in due course, but 13 who were the individuals that were responsible, to your 14 knowledge, for the alleged wrongdoing, and we will start IS with the alleged wrongdoing on Pagc 5 of Exhibit 4? 16 It's a section titled, documents relating to the RRA 17 customer due diligence CDD form. 18 A. Uh-huh. The specific individuals whose 19 identity I have any knowledge of arc those who are 20 identified by name within that document. I do not have 21 knowledge outside the scope of the documents that I have 22 described of involvement by other individuals by name. 23 Q. And, again, these are all documents drafted by 24 plaintiffs counsel. Correct? 25 A. I think that this particular document was Page 71 from the exhibit. He has the request for 2 production and the interrogatories. So he is 3 flipping through those. I just don't want to make 4 a miscommunication. 5 He is on Page 5 of the interrogatories. I 6 don't know if you want to mark those after lunch. 7 You see, this is two things together. 8 THE WITNESS: Yeah, but what I am looking at 9 right now is the request to produce. 10 MR. MOSKOWITZ: Request for production. 11 BY MR. HUTCHINSON: 12 Q. Okay. Page 5? 13 A. Page 5 of the request for production. 14 Q. Isn't it true that even the plaintiffs allege 15 that this document, the CDD form, what was provided 16 to -- TD Bank provided that form in its electronic state 17 to outside counsel? 18 A. Yeah, that is true. 19 Q. And isn't the complaint with respect to that 20 is that outside counsel produced that in a black and 21 white form as opposed to a color form? 22 A. Yes, the gist of the complaint is that a 23 highly relevant legend at the top of the page was 24 obscured by the manner in which the production was made. 25 Q. And is it your opinion -- are you offering an Page 70 I drafted by Mr. Moskowitz. 2 Q. And the comments in your notes were based on 3 receipt of information from plaintiffs counsel. 4 Correct? 5 A. Which comments in my notes? The specific 6 paragraphs in the complaint that I referenced? 7 Q. Answer me that. Well, you were reading from 8 your notes earlier. Correct? 9 A. When I identified the specific paragraphs in 10 response to your earlier question, I was reading from my II notes, that was not information that was provided to me l2 by plaintiffs counsel. That was my identification from l3 my reading of the complaint -- 14 Q. Okay. 15 A. -- of the relevant paragraphs because I l6 assumed that -- I anticipated I would be asked a l7 question such as the one that you posed to me and I 18 didn't want to have to go through the complaint l9 paragraph by paragraph to identify the specific 20 paragraphs, so I made a note of them. 2l Q. Okay. Let's go back to Page 5 of the 22 Exhibit 4. 23 A. Yes. 24 MR. MOSKOWITZ: Wen, just for the record, I 25 think he has two things here, so it's different Page 72 I opinion here today that outside counsel's production of 2 that document that was provided to outside counsel in 3 full color, outside counsel's production of that in 4 black and white is evidence of some underlying scheme by 5 TD Bank to cover up certain conduct? 6 A. Yes. 7 Q. What evidence do you have that anyone at 8 TD Bank as opposed to their outside counsel was involved 9 in any such scheme to produce that document in anything 10 other than its electronic color form? 11 A. You are drawing a distinction that I do not 12 draw. TD Bank's outside counsel was acting as an agent 13 of TD Bank. What TD Bank's outside counsel did, TD Banl 14 was responsible for, and this was what I consider to be 15 part of an overall pattern of coverup. 16 Q. Sir, will you answer my question, please? 17 MR. MOSKOWITZ: Objection. 18 A. I did. 19 BY MR. HUTCHINSON: 20 Q. No, answer my question. What evidence do you 21 have that anyone at TD Bank was -- anyone at TD Bank, 22 not their outside counsel, was involved in the 23 production of this in a black and white format versus a 24 color format? 25 A. And I responded to that question by telling 18 (Pages 69 to 72) OUELLETTE & MA LDIN O COURT REPORTERS, INC. EFTA01130158 Page 73 Page 75 I you that you are drawing a distinction that I do not 2 believe is appropriate. What TD Bank's agents do is 3 conduct on the part of TD Bank. 4 If you are asking me, if the intent of your 5 question is to ask me to identify direct employees of 6 TD Bank as opposed to agents of TD Bank who were 7 involved in this particular misconduct, I can't do that. 8 Q. Sir, you are not here to determine what is 9 relevant and what is not and what distinctions should be 10 drawn and what distinctions should not be drawn. You 11 are here to answer questions. I would appreciate if you 12 would answer my questions and move forward. 13 MR. MOSKOWITZ: Objection. Move to strike. 14 MR. HUTCHINSON: You are not the Judge in this IS matter and the Judge can decide what's relevant and 16 what's not. 17 MR. MOSKOWITZ: Why don't we take a break for 18 lunch now because we don't have to get to that 19 level. I think everything has been good today so 20 far. 21 MR. SHEERIN: There is a question pending. 22 MR. MOSKOWITZ: The question you're not here 23 to tell -- that's not a question, that's a lecture 24 to the expert witness. 25 Sir, that's a lecture to the witness. That's 1 BY MR. HUTCHINSON: 2 Q. Mr. Scarola, before we broke, we were talking 3 about the CD form on page five of the Razorback request 4 for production. Do you recall that? 5 A. I do. 6 Q. The issue there was that outside counsel did 7 not produce it in color. Correct? 8 A. That certainly was one of the relevant issues 9 with regard to that document, yes. 10 Q. And if that same document has been produced in 11 color in the Beverly matter, would you agree that that 12 alleged misconduct has been rectified in the Beverly 13 matter? 14 A. I would agree that that portion of the coverup 15 has ended. 16 Q. And would you agree that that alleged 17 misconduct would not be relevant in the Beverly matter 18 since it has ended and been produced in color? 19 A. No, I would not agree to that. 20 Q. So, even if the production occurred in color 21 in Beverly, you still believe the prior production in 22 another matter in another format would be relevant to 23 the punitive damages in Beverly? 24 A. I believe that that aspect of the ongoing 25 coverup would be relevant in Beverly, correct. 1 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 74 not necessary here. Please, come on. That's not necessary. MR. HUTCHINSON: Can I finish that question? MR. SCHERER: No. A. I'm sorry, I haven't heard another question yet. BY MR. HUTCHINSON: Q. So, is it true that you have no evidence or understanding that anyone at TD Bank, any employee of TD Bank was involved in that production of the document? MR. MOSKOWITZ: Asked and answered three times. A. If you are drawing a distinction between agents of ID Bank and direct employees of TD Bank, I have no information that direct employees of TD Bank were involved in this particular misconduct as opposed to the agents of TD Bank. MR. MOSKOWITZ: Would it be good to break now? MR. HUTCHINSON: Yes. We can take a break. THE VIDEOGRAPHER: We are off the record. (Lunch recess.) THE VIDEOGRAPHER: This is the beginning of tape number two. The time is 12:46. We are on the video record. Page 76 Q. But you said it's not ongoing anymore, it's 2 ended? 3 A. No, no, what I have said is that that aspect 4 of the coverup has been uncovered. The covcrup 5 continues. Because the coverup continues, all of the 6 efforts that have been part of the coverup remain 7 relevant and material. 8 Q. We won't go through all the alleged 9 allegations of what you are calling the coverup but -- 10 A. Thank you. 11 Q. -- I just want to make sure that I understand 12 what allegations are encompassed of what you are calling 13 the coverup. 14 Is it the allegations with respect to that's 15 in these request for productions and the complaint 16 paragraphs that you referred to earlier? 17 A. And the interrogatories also that are part of 18 this package, yes. 19 Q. Okay. So, if we take all of that together, 20 that would be the universe of the alleged coverup as you 21 understand it? 22 A. That identifies all of the coverup aspects of 23 which I am aware, although I can't represent to you that 24 it encompasses all of the information with regard to 25 those aspects of the coverup. These are good summaries 19 (Pages 73 to 76) OUELLETTE & MA LDIN O COURT REPORTERS, INC. EFTA01130159 Page 77 I of everything that I know -- 2 Q. And it's what your -- 3 A. And that's why I pointed to this. 4 Q. And it's what you are basing your opinions on. 5 Correct? 6 A. That's correct, yes. 7 Q. And you have no personal knowledge of the 8 veracity of any of the allegations contained within the 9 request for production, the interrogatories and the 10 interrogatory. Correct? 11 A. Well, I do have some personal knowledge to the 12 extent that I know these lawyers and know them quite 13 well. And I'm not dealing with allegations that have 14 been made by strangers. I am dealing with allegations 15 from individuals whom I believe to be highly respected 16 members of the Bar who certainly would not intentionally 17 misrepresent any of these things. So, I have accepted 18 their representations as being true. 19 Q. Have you ever disputed an allegation in your 20 years of practice since 1972 made by a highly respected 21 member of the Bar and a friend of yours? 22 A. Sure, yeah, that has occurred, but I have no 23 reason whatsoever to dispute any of these allegations. 24 If you want me to assume that some aspect of what I have 25 assumed to be true is not true, I will be happy to do 1 2 3 4 5 6 7 8 9 10 II 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 79 (Exhibit No. 5, TD Bank Victims Notice of Filing Expert Disclosures, was marked for identification.) BY MR. HUTCHINSON: Q. Do you recognize Exhibit 5? A. I don't know that I have seen this in its final form. I have discussed its contents with counsel but I don't know whether I've seen this in final form now. I may have. I just don't remember. Q. Are you aware it identifies you as an expert witness? A. That I do. Q. And it describes the nature and substance of your opinion? A. I see that heading. I haven't had a chance to read it yet. Q. Did you draft the language with respect to the nature and substance of your opinion? A. I don't think I drafted the language, but I do recall having discussed it with counsel. Q. Did you review it for its accuracy before this was filed? A. That's what I don't remember. I can read it right now for you and tell you whether I believe it to be an accurate description if you'd like me to do that. Page 78 1 that for purposes of telling you whether it has any 2 impact upon the ultimate opinions that I'm rendering in 3 this matter, but I have assumed these representations to 4 be true. If there is a -- if there is a quotation in 5 here from a deposition or from a transcript, I have 6 assumed the accuracy of that. If it turns out not to be 7 accurate, then you point that out to me and I will tell 8 you what, if any, impact that has on my opinion. 9 Q. Is it your opinion that under Florida law if 10 an outside attorney is responsible for the alleged I I discovery misconduct that the client should be punished 12 for that misconduct instead of the attorney? 13 A. Oh, I understand from Florida law that the 14 courts draw a distinction between misconduct in which 15 the client had no involvement and misconduct that the 16 client did not participate in or ratify, that the courts 17 will not hold the client responsible for that misconduct 18 but will visit the appropriate sanctions upon the lawyer 19 rather than the client. That, however, was not the case 20 with regard to this document as has been found by Judge 21 Cooke, and I have relied upon that finding. 22 Q. Let me show you what I am marking as 23 Exhibit 5, which is a document titled TD Bank Victims 24 Notice of Filing of Expert Disclosures. 25 A. Yes, sir. Page 80 1 Q. Please do so. 2 A. Sure. Yes, I think that that's an accurate 3 general description of my anticipated testimony. 4 Q. Okay. 5 A. The focus will clearly be on the second and 6 third paragraphs as opposed to the first, but it is 7 accurate in its entirety. 8 Q. Are you predicting an outcome in the Beverly 9 and Marlin matters? 10 A. I am opining as to the value of the punitive II damage claims in those cases. 12 Q. So you're not predicting what would happen if 13 Beverly and Marlin were tried to a jury? 14 A. No, I think that inherent in my opinion is 15 what I believe is likely to happen if those cases were 16 tried to a jury. That's a different question than the 17 one you asked me am I predicting an outcome. 18 This case may very well be settled before it's 19 tried and I haven't -- I haven't attempted to form an 20 opinion as to the likelihood of settlement as opposed to 21 a trial outcome. I am focusing upon what I believe is 22 likely that a jury would do if these claims were 23 presented to a jury. 24 Q. Okay. So, you are opining -- let's just take 25 the Beverly action that was filed first -- as to what 20 (Pages 77 to 80) OUELLETTE & MA LDIN O COURT REPORTERS, INC. EFTA01130160 Page SI Page 83 1 the result in the Beverly matter would be if it were 2 tried to a jury. 3 A. Yes. 4 Q. And how many hours did it take you to reach a 5 decision or an opinion as to what would happen if the 6 Beverly matter were tried to a jury? 7 A. To the extent that my opinion is reflected in 8 this summary, it didn't take very long at all, and I -- 9 I can look at my time sheets and I can tell you 10 approximately how long it took. 11 Q. That would be great. 12 A. The summary of my time. 13 Q. And are you referring to what I am marking as 14 Exhibit 6? 15 (Exhibit No. 6, Time Summary, was marked for 16 identification.) 17 A. I am referring to, yes, Exhibit 6. 18 BY MR. HUTCHINSON: 19 Q. And Exhibit 6 is a summary of all of the time 20 that you have expended in relation to your engagement in 21 this matter? 22 A. Probably not, but it is a summary of time that 23 1 have spent. In other words, if the time is reflected, 24 it's time that I spent. There may have been time that I 25 spent that's not reflected. I don't think that there is 1 A. A lot. 2 Q. And you determined that each one of their 3 claims were viable, nonspeculative and valuable with a 4 high probability of success in 5.1 hours? 5 A. I viewed them collectively and not separately. 6 I did not believe that it was necessary to view them 7 separately. 8 Q. Each one of them arc asserting individual 9 claims. Correct? 10 A. They are asserting individual claims arising 11 out of the same course of misconduct, arising out of the 12 same conspiracy to engage in that misconduct, arising 13 out of the same acts of aiding and abetting that 14 misconduct. 15 Now, if you ask me to assume that someone's 16 name is listed who was not an investor in the Ponzi and 17 is unable to prove that they invested in the Ponzi 18 scheme, that would change my opinion with regard to that 19 claim. 20 Q. So, how in the world did you determine in 21 5.1 hours that these plaintiff's claims in this massive 22 Ponzi scheme were viable, nonspeculative and valuable 23 with a high probability of success if tried to a jury? 24 A. Well, let me explain first that I approached 25 these matters with some significant degree of knowledge Page 82 1 any significant amount of time reflected -- excuse me, 2 any significant amount of time that I have spent on this 3 matter that is not reflected but there certainly may be 4 some. 5 Q. These expert disclosures were filed on 6 June 19th. Correct? 7 A. Yes, that's what the certificate of service 8 says. 9 Q. And you state that -- your opinion was 10 disclosed on 6/19 that TD's victims' claims for aiding 11 and abetting, fraud and conspiracy to commit fraud by TD 12 Bank are viable, nonspeculative and valuable claims with 13 a high probability of success if tried to a jury. 14 Correct? IS A. Yes, that is correct. 16 Q. And at that point your time sheets indicate 17 that you had spent approximately 5.1 hours on this 18 matter. Is that correct? 19 A. I will accept your math. 20 Q. How many plaintiffs are involved in the 21 Beverly and Marlin matters? 22 A. I don't remember counting them. 23 Q. Over 50? 24 A. I don't remember counting them. 25 Q. Do you have any idea, sir? Page 84 1 regarding the general matters that gave rise to those 2 claims. I have been involved in at least tangentially 3 related litigation for, I guess it's now years, in that 4 I represent Bradley Edwards in a claim for abusive 5 process and malicious prosecution against Mr. Epstein, 6 whose criminal activities formed at least in part a 7 basis for some of Mr. Rothstein's solicitations. As a 8 consequence of the responsibilities that I have had in 9 representing Bradley Edwards, it has been necessary for 10 me to follow somewhat closely the prosecution of the 11 claims relating to the Rothstein Ponzi scheme. 12 I personally attended a fairly lengthy session 13 of Mr. Rothstein's deposition. I have read transcripts 14 of Mr. Rothstein's very lengthy testimony. I have 15 closely followed press reports with regard to these 16 matters. So, it was not without some sort of 17 significant degree of other knowledge that I was called 18 upon to form my opinions and I have, at least to some 19 extent, relied upon that knowledge gained independently 20 and built upon that foundation. 21 Q. Well, during all that other activity, what did 22 you learn about Mr. Beverly's claims against TD Bank and 23 his, the facts and circumstances surrounding his 24 investment? 25 A. I learned about all of the basic underlying 21 (Pages 81 to 84) OUELLETTE & MA LDIN O COURT REPORTERS, INC. EFTA01130161 Page 85 1 aspects of the Ponzi scheme. I learned about TD Bank's 2 involvement in aiding and abetting that scheme and in 3 conspiring to assist Mr. Rothstein in the perpetration 4 of his fraud. All of those facts, obviously, are highly 5 relevant to Mr. Beverly's individual claim. But, again, 6 I have not undertaken to separately evaluate each of the 7 individual claims being prosecuted by Mr. Moskowitz' 8 firm and Mr. Scherer's firm. And if you would like me 9 it assume some facts that would cause me to distinguish 10 any of the individual plaintiffs claims from the claims II generally being prosecuted against TD Bank, I would be 12 happy to do that, and I would tell you whether those 13 separate facts have any impact on my opinion or do not 14 have any impact on my opinion. 15 In light of the nature of the underlying 16 claims, I have seen no reason whatsoever to distinguish 17 TD Bank's liability to any of these victims from its 18 liability to any of the other victims. 19 Q. But you have not attempted to do so. Correct? 20 A. No, I have not. That has just -- that has not 21 been part of my evaluation, which is why I am telling 22 you if there are facts that you think would make a 23 difference, tell me what they are and I will tell you 24 whether I agree they would make a difference or not. I 25 am not aware of any. Page 87 1 A. Yes, sir, that's correct. 2 Q. So in total --- 3 A. Since the disclosure of what has now been 4 marked as Exhibit Number -- 5 Q. Five? 6 A. -- 5, thank you. Yes. 7 Q. So, in total you have spent a total of -- 8 before today, 13.1 hours on this matter? 9 A. No. I have spent 13.1 hours that have been 10 recorded since having been retained as an expert witness II but I have significant time involved relating to these 12 issues prior to my retention as an expert witness. 13 Q. Let's discuss an individual plaintiff, 14 Mr. Beverly. What claims is Mr. Beverly asserting? 15 A. He is asserting the claim that TD Bank 16 conspired with Scott Rothstein to engage in a fraud and 17 that TD Bank aided and abetted Scott Rothstein in the 18 perpetration of that fraud. 19 Q. And you have not gone through the elements of 20 both of those claims with respect to Mr. Beverly to 21 determine whether both of those claims for Mr. Beverly 22 are, in fact, viable and nonspeculative and valuable 23 claims with high probability of success if tried to a 24 jury? 25 A. That's not accurate. That is not accurate. Page 86 1 Q. So in your 5.1 hours of preparation of your 2 opinions in this matter you didn't have concern to 3 determine whether there are any facts that make a 4 difference, did you? 5 A. It is incorrect to say that I have only had 6 5.1 hours with regard to these matters. There were 7 5.1 hours that were specifically devoted to my 8 performance of my responsibilities as an expert witness 9 in this case prior to the filing of this document on 10 June 19th. 11 My investigation continued, as is reflected in 12 my time records. There was nothing in the subsequent 13 investigation that causes me to alter my opinions in any 14 respect at all, and the knowledge, the fact or case 15 specific knowledge upon which I base my opinions began 16 to be accumulated significantly prior to having been 17 retained as an expert witness in this case. That's all 18 I am trying to communicate to you, and if there is 19 something -- I will tell you again, if there is 20 something that you think might make a difference, tell 21 me about it. I will tell you whether it does. 22 Q. And the subsequent investigation you are 23 referring to is the eight hours that you spent on this 24 matter since the disclosure of your expert opinions. 25 Correct? Page 88 1 Q. So, you have gone through each plaintiff and 2 determined that each plaintiff can present evidence to 3 satisfy all of the elements of each of those claims? 4 A. I have viewed these claims as conspiracy and 5 aiding and abetting claims collectively. I have not 6 viewed them separately. I don't believe that there is 7 any need to view them separately. The only victim 8 specific element that exists is proving a causal 9 connection between TD Bank's conspiracy and aiding and 10 abetting and the particular loss that was suffered by a 11 specific plaintiff. So, if you want me to assume that 12 Mr. Beverly was not an investor in the Ponzi scheme and 13 didn't lose any money as a consequence of that 14 investment in the Ponzi scheme, I will make that 15 assumption on a hypothetical basis and I will then tell 16 you that Mr. Beverly doesn't have a viable claim but I 17 have read the complaint. I have told you that I have 18 assumed the accuracy of the complaint and the complaint 19 alleges otherwise. 20 Q. So you agree that for an aiding and abetting 21 claim, Mr. Beverly has to show that acts by TD Bank 22 proximately caused his damages. Correct? 23 A. Yes, I do agree with that. 24 Q. Okay. What acts by TD Bank proximately caused 25 Mr. Beverly's damages in this matter? 22 (Pages 85 to 88) OUELLETTE & MA LDIN O COURT REPORTERS, INC. EFTA01130162 Page 89 I A. Mr. Rothstein's Ponzi scheme could not have 2 been carried out without the substantial assistance of 3 TD Bank. TD Bank's substantial assistance to 4 Mr. Rothstein enabled Mr. Rothstein to conduct the Ponzi 5 scheme. Mr. Beverly was an investor in the Ponzi 6 scheme. Mr. Beverly sustained a loss as a consequence 7 of that investment. 8 Q. Do you have any case law to support your 9 stance that TD's action would be sufficient for a 10 proximate cause finding when it had no interaction with 11 Mr. Beverly? 12 A. Yes. 13 Q. And what case law is that? 14 A. It is the general common law of the State of 15 Florida. 16 Can I cite to you a specific case as I sit 17 here right now? The answer to that question is, no, I 18 cannot. But it is for want of a better description, 19 Hornbook law that if you aid and abet or conspire to 20 commit a fraud, you are liable to the victims of that 21 fraud. 22 Q. If you prove the elements of that claim. 23 Correct? 24 A. Yes, you must prove that there was aiding and 25 abetting or conspiracy of a fraud before there is any Page 91 1 A. I'm sorry, but I really don't understand your 2 question. 3 Q. In all your years of practicing law, have you 4 ever heard of but for causation? 5 A. I have heard that phrase, yes. 6 Q. What is your understanding of what but for 7 causation means? 8 A. It means that in the absence of some conduct a 9 result would not have occurred. 10 Q. And is it your understanding that there is a 11 difference between proximate causation and but for 12 causation? 13 A. There may be under certain circumstances. I 14 don't believe there is any difference under the 15 circumstances of this case. 16 Q. Do you have any law supporting that? 17 A. I am not aware that that issue has been 18 addressed in this case so I couldn't have any law that 19 supports that in this case. 20 Q. What act was conducted by an individual 21 'ID Bank employee that was the proximate cause of 22 Mr. Beverly's damages? 23 A. The gross disregard of all of the indications 24 of fraudulent financial transactions over an extended 25 period of time that enabled Mr. Rothstein to comingle Page 90 1 liability to the victims of a fraud. But if what you 2 are suggesting is that that somehow requires some direct 3 action between Mr. Beverly and any given plaintiff and 4 TD Bank, I reject that assertion. 5 Q. Okay. So, it's your opinion that while you 6 agree that each plaintiff has to show proximate 7 causation between a specific act of TD Bank and these 8 plaintiffs' injuries, that that doesn't require any 9 contact or involvement with these individual plaintiffs? 10 A. I cannot accept that compound question. There 11 is involvement with these plaintiffs by virtue of 12 TD Bank's participation in the conspiracy and aiding and 13 abetting the fraud. That is the required involvement. 14 Q. What's your understanding of the definition of 15 proximate causation, sir? 16 A. A proximate cause is a cause that 17 substantially and in natural and probable sequence 18 contributes to a given result. 19 Q. What's the difference in proximate causation 20 and but for causation? 21 A. I don't know that under the circumstances of 22 this matter I would draw any distinction between the 23 two. 24 Q. That wasn't my question, sir. What's your 25 understanding of but for causation under Florida law? Page 92 1 what effectively were trust funds being held by TD Bank 2 in a variety of different accounts, the misuse of IOTA 3 accounts, the use of a variety of fraudulent documents, 4 direct contact between victims of the Ponzi scheme and 5 TD Bank representatives in the solicitation of Ponzi 6 investments. You know, there are others, I am sure. 7 And, again, those are matters that are detailed in the 8 complaint and I have assumed the accuracy of the 9 allegations that are included in the complaint. They 10 form the factual basis for my opinions. So, if you want 11 to get it all, it's there. 12 Q. Let's go back -- I want your understanding of 13 what you are basing your opinions on that you had 14 formulated --- 15 A. I am basing my opinions on the allegations 16 included on the complaint. 17 Q. What's your understanding of how many of the 18 Beverly and Marlin plaintiffs had any contact, 19 communications or contact in any way with TD Bank? 20 A. I cannot tell you how many. I can tell you 21 that there have -- there were some that had some 22 contact. I cannot detail that contact for you, nor do I 23 believe that it is particularly relevant or material 24 whether these particular plaintiffs had any direct 25 contact or didn't have any direct contact. 23 (Pages 89 to 92) OUELLETTE & MA LDIN O COURT REPORTERS, INC. EFTA01130163 Page 93 What is significant is that Ponzi scheme 2 investors did have direct contact with TD Bank 3 representatives during the course of this Ponzi scheme 4 and that direct contact facilitated the investments and 5 the fraud. 6 Q. How many of the Beverly and Marlin plaintiffs 7 saw any documents produced by TD Bank? 8 A. I can't answer that question for you. I don't 9 know how many nor do I believe that that is significant 10 as long as there were some victims of the Ponzi scheme 11 who saw fraudulent documents produced by TD Bank that 12 demonstrates that TD Bank was aiding and abetting in and 13 conspiring to commit the overall fraud that gives rise 14 to liability to all of the victims of the fraud. IS Q. So contacts with TD Bank were not important to 16 you in formulating your opinions in this matter? 17 MR. MOSKOWITZ: Objection. Mischaractcrizes 18 the testimony. 19 A. That is clearly a misstatement of what I just 20 said. 21 BY MR. HUTCHINSON: 22 Q. Were contacts with TD Bank important to you in 23 formulating your opinion in this matter? 24 A. Yes, sir. The contacts that arc described in 25 some detail in the complaint, they were significant to Page 95 1 of aiding and abetting without any contact whatsoever 2 with the defendant? 3 MR. MOSKOWITZ: Objection. Asked and 4 answered. 5 A. Well, I can give you a line of cases in the 6 conspiracy area. 7 Q. I am not talking about conspiracy, sir. I am 8 talking about aiding and abetting. 9 A. No, as I sit here right now, I cannot cite a 10 case to you. It is what I consider to be a very well 11 accepted general proposition of law, but I haven't 12 memorized the case citations. I can't give it to you. 13 Q. During your 5.1 hours of engagement in this 14 matter before your opinion was disclosed, did you take 15 the time to go look at any Ponzi scheme cases to see 16 whether the substantial assistance element could be 17 satisfied and the proximate cause or climate thereunder 18 without any contact with the bank? 19 A. No, I did not. And if you are prepared to 20 cite to me binding authority that demonstrates that what 21 I have long understood to be the law of the State of 22 Florida is, in fact, not the law of the State of 23 Florida, I'd be happy to take a look at that and that 24 might change my opinion about the first part of my 25 disclosed opinion in that disclosure. Page 94 I me. Whether those contacts were specifically with 2 Mr. Beverly or any other named plaintiff in this case, 2 3 that's what is of less significance because regardless 3 4 of whether a particular named victim of the Ponzi scheme 4 5 had direct contact with TD Bank, TD Bank was aiding and 5 6 abetting and conspiring to commit this fraud. 6 7 Q. Can you give me any case that supports that 7 8 position? 8 9 A. No, I can't. As I told you -- as I sit here 9 10 right now, I cannot name a case for you that has ever 10 11 addressed that issue in this case. This case hasn't 11 12 reached the point were those issues could be addressed. 12 13 If you're asking me whether the general 13 14 proposition of law has been addressed by cases in the 14 IS past, that is the proposition that if an individual aids IS 16 and abets the commission of a fraud, that it doesn't 16 17 require direct contact between that victim and the aidcr 17 18 and abetter in order for the victim to recover, the 18 19 answer to that question is, yes, that proposition has 19 20 been addressed. 20 21 Can I give you the citation to the cases where 21 22 it has been addressed, not as I sit here today, no. 22 23 Q. Can you tell me any cases that support a 23 24 proposition that a plaintiff can show the proximate 24 25 causation required by the substantial assistant clement 25 Page 96 I don't think you are going to find that binding authority but, you know, l have been practicing law for 40 years. I have made mistakes before and if I have made a mistake here, I promise you, I am ready to acknowledge that. But I don't think I have. Q. Sir, you are the expert here. I am just asking whether you took the time to go back and confirm the status of the law and the issues that you are opining upon? A. Every single day that I am engaged in professional activities, I make decisions on the basis of my understanding of existing law without reconfirming that understanding every single time I have to deal with a legal proposition. I didn't reconfirm it under this circumstance nor do I consider it to be necessary to reconfirm it under this circumstance. Q. And, sir, we are not here as your part of your everyday practice of law, are we? We are here because you have been designated as an expert witness to opine on the viability of these underlying claims. Correct? A. That is my understanding of why we are here, yes. Q. And you didn't take the time to go back and confirm the law with respect to the underlying claims 24 (Pages 93 to 96) OUELLETTE & MA LDIN O COURT REPORTERS, INC. EFTA01130164 Page 97 Page 99 I before your opinion was disclosed, did you? 2 MR. MOSKOWITZ: Objection. Asked and answered 3 three times. 4 A. I did not take the time to do anything that I 5 considered to be absolutely unnecessary and superfluous. 6 There is probably a long list of things that we could 7 identify that I didn't take the time to do because I 8 considered it to be absolutely unnecessary and 9 inappropriate to waste anybody's time in doing it. 10 BY MR. HUTCHINSON: 11 Q. Are you offering an opinion in this matter 12 that TD Bank owed any of the Beverly and Marlin 13 plaintiffs a duty? 14 A. If you want to ask me that question, I would 15 render an opinion in that area, but the primary focus of 16 my testimony will be on the value of the punitive damage 17 claims in this case. Obviously, inherent in that 18 opinion is the opinion that there is underlying 19 compensatory liability. Without underlying compensatory 20 liability, there cannot be a punitive damage award. 21 Q. Did -- or how many of these plaintiffs were 22 TD Bank customers? 23 A. I can't answer that question for you. I don't 24 know. 25 Q. Are you aware that the law is well settled as 1 negligence claims. 2 Q. Sir, when I asked you what specific acts were 3 done that proximately caused Mr. Beverly's harm, you 4 talked about failure to monitor accounts, IOTAs and 5 stuff that you talked about. Do you recall that? 6 A. I gave the testimony that I gave, yes. 7 Q. So what duty did TD Bank owe to Mr. Beverly to 8 monitor anything? 9 A. TD Bank had an obligation not to conspire to 10 commit a fraud and not to aid and abet in the commission 11 of a fraud. 12 Q. Okay, sir. That's not my question. 13 MR. MOSKOWITZ: Objection. He has answered it 14 twice. You don't like his answer but that's his 15 answer. That is his answer. That was your 16 question. That's his answer. 17 BY MR. HUTCHINSON: 18 Q. I am not talking about aiding and abetting. 19 I'm not talking about conspiracy. I am talking about 20 the answer you gave. 21 Does TD Bank owe any duty to Mr. Beverly to 22 monitor Rothstein's accounts? 23 MR. MOSKOWITZ: Same objection. He answered 24 four times already. Account monitoring it is not 25 the same as aiding and abetting. You know this is Page 98 1 to whether a bank owes a non customer a duty to monitor 2 accounts or transactions? 3 A. Are you talking about a general duty to non 4 customers to monitor transactions or are you talking 5 about a duty not to aid and abet or conspire to commit a 6 fraud. 7 Q. You testified earlier that there were 8 transactions that TD should have caught. Correct? 9 A. I don't remember using those words. 10 Q. *you talked about disregard of all indicators 11 of fraudulent transactions, spent a period of time with 12 the trust funds. Misuse of IOTA accounts, do you 13 remember your testimony about that? 14 A. I do, yes. 15 Q. Is it your opinion in this matter that TD Bank 16 owed any duty to any of these plaintiffs with respect to 17 those transactions? 18 A. Yes. Yes, they did. 19 Q. And what is the relationship between TD Bank 20 and these plaintiffs that gives rise to any duty owed to 21 these plaintiffs? 22 A. There is a duty not to conspire to commit a 23 fraud and there is a duty not to aid and abet in the 24 commission of a fraud. This is not a negligence case. 25 These are conspiracy and aiding and abetting claims, not Page WO Judge Streitfeld's ruling when he denied the motion 2 to strike those paragraphs on account monitoring. 3 He answered it. You shouldn't allow him to aid and 4 abet the conspiracy. That was his answer. 5 MR. HUTCHINSON: You can answer my question. 6 A. If what I have now told you more than once is 7 not responsive to your question it's because I don't 8 understand your question so you are going to have to ask 9 in a different way because what I have now said more 10 than once is the best answer that I can give to the 11 question that you have asked as I have understood it. 12 BY MR. HUTCHINSON: 13 Q. Does TD Bank owe any duty to non customers to 14 monitor other's account transactions for potential 15 wrongdoing? 16 MR. MOSKOWITZ: Objection. Asked and answered 17 five times. 18 A. It is the obligation of TD Bank not to aid and 19 abet a fraud and not to conspire in the commission of a 20 fraud. To the extent that TD Bank is placed on notice 21 that a fraud is being committed with its assistance, I 22 don't know that I need to go beyond that. 23 Once that point is reached, TD Bank clearly 24 owes a duty to those that are being defrauded, not to 25 aid and abet that fraud, not to conspire in the 25 (Pages 97 to 100) OUELLETTE & MA LDIN O COURT REPORTERS, INC. EFTA01130165 Page 101 Page 103 1 commission of that fraud. 1 A. Every single one of them. It would be exactly 2 BY MR. HUTCHINSON: 2 the same response. 3 Q. Let's go back to my original question. 3 Q. So, other than what you have testified to, are 4 What -- tell me the TD Bank employee and the specific 4 there any additional acts based on your expert opinion 5 act that proximately caused Mr. Beverly's injuries? 5 that caused any of these, proximately caused any of 6 MR. MOSKOWITZ: Objection. Asked and answered 6 these plaintiffs their damages? 7 a couple of times earlier. 7 A. Only those acts specified in the complaint. 8 A. Well, the one TD Bank employee that 8 That is the extent of my knowledge. 9 immediately coma to mind is Mr. Spinosa. There are 9 Q. Have you spoken with any of the Beverly and 10 others, including the other named defendants in this 10 Marlin plaintiffs? 11 action. The conduct on their part that aided and 11 A. I don't know. Certainly not in connection 12 abetted the fraud and that indicates participation in 12 with or since my retention as an expert. 13 the conspiracy is that conduct that is detailed in the 13 Q. How many of TD Bank's briefs did you read 14 complaint. That's what I -- those are the facts that I 14 before formulating your opinion in this matter? 15 have assumed to be true and to the extent that I would 15 A. Whatever is included in those materials that 16 be called upon to express an opinion as to whether those 16 have already been produced to you. 17 facts were adequate to give rise to liability as an 17 Q. As you sit here, do you recall reading any 18 underlying predicate for my punitive damage claim, I 18 TD Bank briefs on the --- 19 believe that they are clearly sufficient to give rise to 19 A. I think that there were some TD Bank materials 20 liability. 20 that were included in the materials that I reviewed. 21 That opinion is confirmed by verdicts already 21 Whatever it is, it's in there. 22 rendered against TD Bank. 22 Q. Do you recall any, reading a single dismissal 23 BY MR. HUTCHINSON: 23 brief? 24 Q. If we can go back to my question, sir. As we 24 A. I don't remember. 25 sit here today, can you name a single act by Mr. Spinosa 25 Q. Wouldn't -- you would agree that there are two Page 102 Page 104 1 or any other TD Bank employee that proximately caused 1 sides to every story, correct, wouldn't you, sir? 2 Mr. Beverly's injuries? 2 A. No, sir, I wouldn't. 3 MR. MOSKOWITZ: Asked and answered six times. 3 Q. When you litigate cases one side is always a 4 You can try one more, but then we are going to move 4 hundred percent right and there no other side to the 5 on, and if you want to go to Judge Ray, you can 5 story? 6 tell him that Mr. Scarola needs to come back to 6 A. Oh, no, I certainly wouldn't agree to that 7 answer your questions. He has answered it I think 7 either, but I would not agree that there is always two 8 every which way respectfully stated. I don't think 8 sides to every story. Sometimes there are defendants 9 we are going to get much more on this. 9 that actually admit their wrongdoing. 10 A. You are not going to get anymore. That's the 10 Q. Did you make any attempt to evaluate, 11 answer I have given you. It's the best answer I can 11 understand, evaluate and understand the legal defenses 12 give. I'm sorry you don't like it, but I will not an 12 to plaintiff's claims in this matter? 13 that same question again. 13 A. I have some general understanding of the 14 BY MR. HUTCHINSON: 14 defenses to this matter, yes, as a result of the 15 Q. Okay. Let's talk about Mr. Minkowitz. Can 15 materials that I have read. 16 you name a single act by a TD Bank employee that 16 Q. In the 5.1 hours you spent formulating your 17 proximately caused Mr. Minkowitz' damages? 17 opinion, did you read any of TD's dismissal briefs in 18 A. My answer would be exactly the same. 18 the Beverly and Marlin matters? 19 Q. That you couldn't name a single act as we sit 19 MR. MOSKOWITZ: Objection. Mischaracterizes 20 here? 20 every time you say 5.1 when Mr. Scarola has told 21 A. That was not my answer. My answer would be 21 you there is an extensive history before this case. 22 the same as the answer I gave. It would not be your 22 I would ask you to stop saying it's 5.1 and I would 23 mischaracterization of my answer. 23 stop objecting to that. 24 Q. So that's going to be your same answer for all 24 MR. HUTCHINSON: You can answer the question. 25 the plaintiffs. Correct? 25 A. The amount of time that has been involved in 26 (Pages 101 to 104) OUELLETTE & MA LDIN O COURT REPORTERS, INC. EFTA01130166 Page 105 Page 107 I the formulation of my opinions is not limited to those I the rules -- 2 hours that are reflected on this time sheet to the 2 MR. MOSKOWITZ: Wait, we have one lawyer. We 3 extent that I have already explained that. 3 have one lawyer. 4 Q. Did you take the time to read any of TD's 4 MR. SHEERIN: No, the rules of civility 5 dismissal briefs, sir? 5 require you to take great patience and great 6 A. I think that I have answered that question now 6 caution before saying that lawyers committed 7 on more than one occasion. The answer remains the same. 7 fraudulent conduct 8 I don't remember. The materials are right here. You 8 MR. MOSKOWITZ: I'm sorry, who an you? 9 have had those, I understand, for some time in advance 9 MR. SHEERIN: I have been introduced to the 10 of this deposition. Those are the materials that I 10 Court. I'm Joseph Sheerin of McGuireWoods. 11 reviewed that are case specific to Beverly and Marlin. II MR. SCHERER: How do you spell your last name? 12 Q. I didn't see any dismissal briefs in those 12 MR. SHEERIN: It's different than yours. 13 materials, sir. 13 MR. SCHERER: Thank God. 14 Do you mind telling me whether you have any of 14 MR. MOSKOWITZ: We have a rule in this IS TD's dismissal briefs in those materials? 15 deposition. We have one lawyer on each side. 16 MR. MOSKOWITZ: Do you want him to spend au 16 That's why I've been talking and not Mr. Scherer. 17 hour to go through the material that we gave you? 17 MR SCHERER: I will be happy to stipulate that 18 If you're representing what's there and what's 18 you can and we will double team. 19 not, we produced this to you well before the 19 MR. MOSKOWITZ: We don't want that. 20 deposition the materials you relied upon. 20 MR. GENOVESE: Since I am the only lawyer here 21 Whatever is in there, is in there. He tells 21 who is speaking for my client, Mr. Scherer, I 22 you he doesn't remember. 22 believe we may have sent an e-mail saying that we 23 MR. HUTCHINSON: No, most of these materials 23 hadn't received any documents. In fact, there was 24 were produced this morning. 24 a production to TD. 25 MR. MOSKOWITZ: The materials that we produced 25 You referred to your team in your addressing Page 106 Page 108 I to you are what we gave to him. These are copies, 1 counsel. I don't think that's fairly directed at 2 as he told you. 2 him. We never received --- 3 The e-mail that we got was wrong. Somebody on 3 MR. MOSKOWITZ: It came from your office. 4 your team sent this fraudulent e-mail that you 4 MR. GENOVESE: We never received a production. 5 never got any materials from Mr. Scarola. That was 5 I'm not sure that we requested it or assumed we 6 a little offensive. We gave you the significant 6 would get it. So, your suggestion that this was 7 materials that Mr. Scarola was provided. 7 fraudulent was misplaced if directed at 8 MR. HUTCHINSON: But these briefs were not in 8 Mr. Hutchinson. 9 there. 9 MR. MOSKOWITZ: Absolutely. I will agree. 10 MR. MOSKOWITZ: There are some few extra 10 MR. SHEERIN: Thank you. 11 materials, and that's why we have given you all 11 MR. MOSKOWITZ: Of course. 12 morning to go through them. 12 BY MR. HUTCHINSON: 13 BY MR. HUTCHINSON: 13 Q. Mr. Scarola, in all your years of litigating 14 Q. And I haven't seen any dismissal briefs. 14 cases, are the facts developed in discovery usually 15 And I just want to confirm you didn't take the 15 relevant to the outcome of a case? 16 time to review any of TD's dismissal briefs before you 16 A. That is the purpose of discovery, to uncover 17 offered your opinion in this matter? 17 relevant and material information. 18 A. I will tell you, again, I don't remember. I 18 Q. And how far has discovery proceeded with 19 reviewed a lot of materials. If I reviewed dismissal 19 respect to the Beverly and Marlin matters? 20 briefs, they are included in that banker's box in those 20 A. There has been very significant discovery 21 binders. If they are not in the banker's box and the 21 conducted with regard to the issues in the Beverly and 22 binders, I did not review them. 22 Marlin cases. 23 MR. MOSKOWITZ: He can take time now to go 23 Q. Can you answer the question I asked, sir? 24 through each materials if you want him to. 24 A. I did. That is my answer to your question. 25 MR. SHEERIN: Sir, I'd also caution you that 25 Q. Well, I will ask the question again and see if 27 (Pages 105 to 108) OUELLETTE & MA LDIN O COURT REPORTERS, INC. EFTA01130167 Page 109 I I can get an answer to the actual question I asked. How 2 far was discovery provided in the Beverly and Marlin 3 matters? 4 A. If you would like me to ignore the fact that 5 there has been very significant discovery conducted and 6 completed relating directly to the identical issues that 7 are raised in the Beverly and Marlin matters, I will do 8 that. I will ignore the fact that all of that other 9 discovery has been conducted and then if I ignore all of 10 the discovery conducted in those related matters, there 11 has not been very much discovery completed in Beverly 12 and Marlin before the discovery in those matters was 13 basically halted, as I understand it. 14 Q. And arc you offering an opinion in this matter IS that there is nothing that TD Bank could discover, no 16 evidence that TD Bank could discover during the discover 17 process that would change your opinion that there is a 18 high probability of success on all of these claims if 19 tried to a jury? 20 A. No, that clearly is not my opinion. I can -- 21 I can imagine all sorts of scenarios that would have an 22 impact upon the viability of the Beverly and Marlin 23 claims, and I've made reference to one of them. If you 24 are able to prove that somebody has falsely and 25 fraudulently claimed to have been a Rothstein Ponzi Page 111 1 What conspiracy claim -- you are saying that 2 the conspiracy claim is viable, nonspeculative and 3 valuable with a high probability of success. What 4 conspiracy claim are you talking about? 5 A. The conspiracy claim that is stated in the 6 complaint in the Beverly and Marlin cases. 7 Q. And what's your understanding of the 8 conspiracy claim because I don't have a good 9 understanding of it from the complaint so I am hoping 10 you as an expert who are opining on the veracity of the 11 conspiracy claim will have a better understanding of it 12 than I do? 13 A. The only understanding I have is the 14 understanding derived from the reading of the complaint. 15 (Exhibit No. 7, Conspiracy Chart, was marked 16 for identification.) 17 BY MR. HUTCHINSON: 18 Q. I am just seeing if I can nail this down. I 19 am marking this as Exhibit 7. I want to ask you to help 20 me fill this out, sir, if you would. 21 During your -- when you were researching the 22 veracity of this conspiracy claim, what's your 23 understanding -- if you will write in on Exhibit 7 what 24 your understanding of the agreement is of the conspiracy 25 claim? Page 110 I scheme investor when they never invested any money in 2 the Rothstein Ponzi scheme, that would have a pretty 3 significant impact on the viability of their claim. 4 I have assumed, as I will tell you again, that 5 the allegations in the complaint are true and those 6 allegations include the fact that all of these 7 plaintiffs were investors in the Rothstein Ponzi scheme. 8 Ask me to assume facts contrary to the 9 allegations in the complaint on a hypothetical basis, I 10 would be happy to do that, and then I will tell you II whether it has any impact on any of my opinions. I was 12 not an eyewitness to any of these things. I am obliged 13 as an expert to make certain assumptions. If you ask me 14 to make different assumptions, I will do that and I will I5 tell you whether those different assumptions have an 16 impact on my opinion. 17 Q. And if you spend very minimal time preparing I8 your opinion before it's released, you have to make a 19 lot more assumptions than you otherwise would. Isn't 20 that correct, sir? 21 A. No, not necessarily. I can't agree with that. 22 Q. In your -- the nature and substance of the 23 opinion you talked about -- well, first of all, we have 24 talked a lot about aiding and abetting. Let's talk 25 about the conspiracy claim. Page 112 1 MR. MOSKOWITZ: I'd object to this. I have 2 never seen where you ask an expert witness to write 3 into a chart that you had basic things. If you 4 have questions for him, he said he also needs to 5 see the complaint. I am sure you can make the 6 complaint available to him. He says the complaint 7 speaks for itself. So I object to making an expert 8 tell you agreement -- just for the record, it 9 says -- let me just say, this is a document you 10 have typed up yourself under the heading 11 conspiracy. It's something I guess you made. It 12 has number one, agreement; two, parties to 13 agreement; three, date of agreement; four, unlawful 14 act; five, common goal. 15 I would object to them having to write certain 16 things that you used. If you have questions for 17 him he will try his best to answer your questions 18 but I don't think an expert needs to write into 19 this kind of questionnaire that you've created for 20 him. 21 BY MR. HUTCHINSON: 22 Q. That's your objection and you noted for the 23 record but I am going to ask him because I don't 24 understand the conspiracy and you're the expect in this 25 case and you're the one that's opining on the veracity 28 (Pages 109 to 112) OUELLETTE & MA LDIN O COURT REPORTERS, INC. EFTA01130168 Page 113 1 and viability of this conspiracy claim. So, can you 2 please write in what your understanding is of the 3 agreement that forms the basis of this conspiracy? 4 A. No, sir. I am going to follow the direction 5 of the party that retained me in this matter. I have 6 been directed not to do that. I won't do it. I will be 7 happy to answer any questions that you have. 8 MR. HUTCHINSON: So are you instructing him 9 not to? 10 MR. MOSKOWITZ: I am not instructing him not II to answer. I just can't imagine — I am going to 12 state my objection. I can't imagine a lawyer says 13 I have no idea and I am really confused. And I 14 think that's really hyperbole. I have no idea what 15 they are alleging. 16 The witness said I am relying upon the 17 complaint itself for my testimony. Obviously, it 18 specks for itself. If you want to ask questions 19 about it, but I don't think it's appropriate of you 20 to require an expert of Mr. Scarola's stature to 21 sit there and fill in your questionnaire. 22 It's outside the scope of his testimony to 23 fill in your questionnaire. So I think it's 24 inappropriate. Of course, I am going to let 25 Mr. Scarola do what he's going to do. He has more 1 2 3 4 5 6 7 8 9 10 II 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 115 was an agreement? A. Yes, either expressed or implied. Q. Among two parties? A. At least two. Q. Two parties to commit an unlawful act? A. Correct. Q. In pursuit of a common goal? A. Yes. Q. What is your understanding of the agreement that forms the basis of the conspiracy claims and the underlying matters? A. There was an agreement to commit a fraud. Q. And what fraud was there an agreement to commit? A. The Ponzi fraud, the sale of fraudulent nonexistent interests in the settlement of, the nonexistent interests in the settlement of legal claims. Q. Is that the extent of the agreement? A. I don't know if it extended beyond that, but that certainly is a description of the essential terms of the agreement. Q. And what individuals were parties to that agreement? A. Scott Rothstein on the one hand, and TD Bank on the other. Page 114 1 years experience than I do, but I think it's 2 inappropriate. If you have any questions we are 3 here for the full federal rules to answer them. 4 BY MR. HUTCHINSON: 5 Q. You are not receiving an instruction, sir, so 6 are you refusing to comply with my request? 7 A. I would be happy to answer whatever questions 8 you have. 9 Q. But you will not write out your understanding 10 of that the conspiracy claim of which you are opining on 11 the veracity on this matter? 12 A. That's correct. I don't choose to write out 13 answers to a compound question. I would be happy to 14 answer any questions that you have but I am not going to 15 write these out. 16 Q. Okay. 17 A. I would prefer to expedite this process and 18 that will slow it down rather than expediting it. 19 Q. Okay. So you are refusing to comply? 20 A. I am. 21 Q. What's your understanding of the alleged -- 22 first of all, to prevail on a --- 23 A. Do you want this back? 24 Q. To prevail on a conspiracy claim, isn't it 25 true, sir, that the plaintiffs have to prove that there 1 2 3 4 5 6 7 8 9 10 I 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 116 Q. I ask for individuals, sir. TD Bank acts through its employees. Correct? A. Yes, it does. Q. So, what individuals with TD Bank made this agreement with Mr. Rothstein? A. At least Mr. Spinosa. Q. Anyone else with TD Bank? A. The other named defendants in the complaint. Q. Do you remember their names? A. Not offhand. I've got them in my notes and the complaint themselves. Q. Which complaint are you referring to, sir? A. Both of them. Q. When was this agreement made? A. I don't recall the date. Q. Isn't that important to your analysis to their viability? A. Only to the extent that it was within the statute of limitations. Q. What about with extent to when individuals invested? A. That would be a statute of limitations issue. Q. It would have no impact on the elements of a conspiracy claim? A. I am not sure that I understand that question. 29 (Pages 113 to 116) OUELLETTE & MA LDIN O COURT REPORTERS, INC. EFTA01130169 Page 117 Page 119 1 I don't understand that question. I limited review of the record in this matter, that it was 2 Q. When did these individuals that are plaintiffs 2 Frank Spinosa's goal to defraud investors in the Beverly 3 that you are opining on their claims, when did they 3 and Marlin matter whom he never met, never had any 4 start investing? 4 contact with and who invested through Banyon, it was his 5 A. I don't recall those dates. 5 goal to defraud those individuals? 6 Q. Was that not important to your analysis of the 6 A. Yes, sir. 7 viability of their claims? 7 Q. And you had -- you have seen no evidence that 8 A. No, I am not saying that. What I am telling 8 supports that, have you? 9 you is that the specific date upon which an investment 9 A. No, that's not true. I have seen and heard 10 was made was not a matter that I focused attention on 10 Scott Rothstein's testimony, personally. I attended a 11 beyond noting that the claim was timely filed within the 11 session of his deposition. I have read his testimony 12 statute of limitations and that these investments were 12 directly, but I have assumed the accuracy of the facts 13 made during the ongoing Ponzi scheme in which TD Bank 13 alleged in the complaint. 14 was an aider and abetter and conspirator. 14 If you would like me hypothetically to assume 15 Q. So you are offering an opinion in this matter 15 that any of those facts are not true, I would be happy 16 that all investments at issue in the Beverly and Marlin 16 to do that hypothetically and tell you whether that has 17 claim were made after there was some agreement between 17 any impact upon the opinions that I have expressed. 18 Mr. Spinosa and Mr. Rothstein to conduct a Ponzi scheme? 18 Q. Sir, I am asking you about evidence. What 19 A. Yes, and if that is an incorrect assumption, 19 evidence? 20 any investment that was not in place during the ongoing 20 A. Isn't Mr. Rothstein's testimony evidence? 21 conspiracy would not be a viable claim. 21 Q. Did Mr. Rothstein testify that Frank Spinosa 22 Q. But you have done in your -- in your limited 22 intended to defraud Mr. Beverly? 23 time in preparing your opinions, you did not take the 23 A. Those words were not spoken. 24 time to figure out whether investments were made prior 24 Q. And do you believe Mr. Rothstein to be a 25 to any alleged conspiracy? 25 credible witness? Page 118 Page 120 1 A. I have assumed the accuracy of the allegations I A. I believe that some of Mr. Rothstein's 2 included within the complaint. If any of those 2 testimony is credible. I would not rely upon 3 allegations are proven not to be true, then I will be 3 Mr. Rothstein's inherent uncorroborated credibility 4 happy to take that into consideration and I will let you 4 myself. 5 know whether that has an impact on my opinion or whethe 5 Q. Can you tell me about Frank Spinosa's 6 it does not. 6 knowledge of the Banyon investment setup and scheme? 7 Q. Is there an allegation of when this agreement 7 A. No, nor do I think that that's particularly 8 was even made? 8 relevant. 9 A. I don't recall a specific date. I don't know 9 Q. Are you aware that mostly all these investors 10 as I sit here right now. 10 invested through Banyon? 11 MR. MOSKOWITZ: We have been going about an 11 A. I am aware that most of these investors, if 12 hour and 15 minutes. Whenever you think it's an 12 not all of them, invested through Banyon. 13 appropriate time, maybe give Mr. Scarola a 13 Q. Did Mr. Rothstein have a separate conspiracy 14 five-minute break. 14 with respect to the Banyon investments? 15 MR. HUTCHINSON: I just have a couple 15 A. No, that is exactly the point that I am 16 questions. 16 attempting to suggest to you is of significance, that 17 MR. MOSKOWITZ: Of course. 17 is, that this was a general conspiracy to defraud anyone 18 BY MR. HUTCHINSON: 18 and everyone who Mr. Rothstein, with the substantial 19 Q. And what's your understanding of the common 19 assistance of TD Bank, was able to entice to make these 20 goal with respect to this alleged conspiracy? 20 investments. 21 A. To defraud victims of their money. 21 Q. Who, again, were the individuals at TD Bank to 22 Q. Which victims? 22 provide this substantial assistance? 23 A. All of those who were investors in the Ponzi 23 MR. MOSKOWITZ: Objection. That was answered 24 scheme, including the named plaintiffs. 24 seven times before. Why don't we take a break now 25 Q. So your -- it's your opinion, based on your 25 if that's okay. 30 (Pages 117 to 120) OUELLETTE & MA LDIN O COURT REPORTERS, INC. EFTA01130170 Page 121 1 MR. HUTCHINSON: Let's answer this question. 2 Then we will take a break. 3 MR. MOSKOWITZ: Asked and answered seven 4 times. I don't think he needs to answer it. It's 5 going to be the same answer, but go ahead. 6 A. Frank Spinosa. Rosanne Caretsky, the named 7 defendants in the action. I can't, from memory, give 8 you the names of other TD Bank employees that were 9 directly involved. 10 MR. HUTCHINSON: Let's take a break. 11 MR. MOSKOWITZ: Thank you. 12 THE VIDEOGRAPHER: We are off the record. 13 It's 2:01 p.m. 14 (A recess was taken from 2:01 p.m. to 15 2:22 p.m.) 16 THE VIDEOGRAPHER: Back on the record. It's 17 2:22. 18 (There was a discussion off the record.) 19 BY MR. HUTCHINSON: 20 Q. If you turn back to Exhibit 5 in your stated 21 opinions, the last sentence, the first paragraph says, 22 "based on the outcome of similar cases." What cases are 23 you referring to there? 24 A. Coquina, Razorback, the opinions issued in 25 this case thus far by Judge Streitfeld. Page 123 1 not. The names of the plaintiffs are different. They 2 are different plaintiffs. Those are different facts but 3 I don't believe those to be material differences. As to 4 the material facts, I don't think that there are any 5 significant distinctions. 6 Q. Either way, did any of the wrongful conduct in 7 the Beverly and Marlin matters occur outside the State 8 of Florida? 9 A. Nothing in particular is coming to mind right 10 now, so there is nothing I can identify as I am sitting 11 here right now. I don't remember. I don't recall 12 having focused on the issue of the geographic location 13 of facts that I thought would make a difference. 14 Q. Is a Florida jury permitted to award punitive 15 damages for conduct that occurred outside of the State 16 of Florida? 17 A. There is United States Supreme Court opinion 18 language that places geographic limitations on the 19 ability of a jury to punish for wrongdoing. I don't 20 believe that those limitations would have any material 21 bearing upon the punitive damages claims in this case. 22 Q. And why is that? 23 A. Because I believe that those facts upon which 24 I base my opinion with regard to punitive damages are 25 facts that involve Florida conduct. Page 122 Q. Did you do anything to research the factual 2 background, the specific factual background of the 3 Coquina case? 4 A. No, I did not do anything to independently 5 research the factual background of the Coquina case. I 6 have relied upon what is contained within the materials 7 that were presented to me for review, nothing beyond 8 that. 9 Q. Do you know whether the Coquina plaintiffs had 10 any contact with TD Bank? A. I am aware that there were Coquina plaintiffs 12 that did have contact with TD Bank, yes. 13 Q. Do you know whether any of the Coquina 14 plaintiffs receive written materials from TD Bank? 15 A. My understanding is there were Coquina 16 plaintiffs who did. 17 Q. And how about for Razorback with respect to 18 both of those topics? 19 A. You know, I don't recall specifically with 20 regard to Razorback. I am not sure one way or another. 21 Q. So it's your understanding, at least at some 22 level, that the facts in Coquina are different than the 23 facts of Beverly and Marlin? 24 A. Well, there obviously are different facts. 25 The question is whether the differences are material or Page I24 1 Q. Is the second paragraph on Exhibit 5 2 describing your opinions, is that set forth in your 3 opinions with respect to the availability of punitive 4 damages in the Beverly and Marlin matters? 5 A. Those statements, as I have previously 6 testified, are accurate. 7 Q. Is there a statute that controls what a 8 plaintiff has to prove to receive punitive damages 9 against an employer for an employees conduct? 10 A. There is. 11 Q. And is that Florida Statute 768.72? 12 A. It is. 13 Q. And in formulating your opinions in this 14 matter, did you conclude that each plaintiff would 15 present clear and convincing evidence that would satisfy 16 that statute? 17 A. Yes. 18 Q. Let me mark the statute as an exhibit. It 19 will be Exhibit 8. 20 (Exhibit No. 8, Statute 768.72, was marked for 21 identification.) 22 BY MR. HUTCHINSON: 23 Q. Is Exhibit 8 a copy of the correct statute 24 which we are referring to? 25 A. It is. 31 (Pages 121 to 124) OUELLETTE & MA LDIN O COURT REPORTERS, INC. EFTA01130171 Page 125 1 Q. Would you walk me through the statute and 2 explain to me how a plaintiff in the underlying Beverly 3 and Marlin matters such as Mr. Beverly can recover 4 punitive damages against TD Bank for his claims under 5 this statute? 6 A. I am not sure what you mean when you request 7 that I walk you through the statute. 8 Q. Well, am I not correct that for an employer to 9 be liable for an employee -- excuse me, for an employer 10 to be liable for punitive damages for an employee's 11 conduct, the plaintiff must make a two-step showing 12 under the statute. 13 First, the plaintiff must show specific 14 conduct by an individual employee and after that must 15 show specific conduct by the employer. Correct? 16 A. That is correct. 17 Q. Subsection 2 of 768.72 specifies a conduct 18 that a plaintiff must prove with respect to an 19 individual employee first. Correct? 20 A. You are thus far accurately walking me through 21 the statute. 22 Q. Okay. Since you wouldn't walk me, I will walk 23 you. 24 A. Good. 25 Q. Okay. Subsection 2, so, with respect to the Page 127 1 just use Mr. Beverly as an example because he is named 2 plaintiff in the first filed suit. 3 So, please describe to me how you think 4 Mr. Beverly can prove that Frank Spinosa committed 5 intentional misconduct as it is defined in 768.72, 2(a). 6 A. By proving the fact alleged in the complaint. 7 Q. Are there any facts alleged in the complaint 8 that Mr. Spinosa knew that injury or damage would result 9 to Mr. Beverly? 10 A. If the intent of the question is to identify 11 factual allegations in the complaint that indicate 12 personal knowledge on Mr. Spinosa's part of the 13 particular circumstances of Mr. Beverly's individual 14 Ponzi scheme victimization, the answer to that question 15 is, I don't remember. However, that is not what would 16 be required to be proved in order to demonstrate 17 TD Bank's liability to Mr. Spinosa for Mr. Spinosa's 18 loss arising out of TD Bank's participation in either 19 the conspiracy to defraud or in aiding and abetting the 20 fraud. 21 Q. In response to the first part of your answer, 22 I just want it to be clear on the record, I am not 23 asking you about allegations in the complaint. I am 24 asking you about evidence. You were the one that 25 referred to the allegations in the complaint and your Page 126 1 individual employee, the plaintiff has to show by clear 2 and convincing evidence that the employee was personally 3 guilty of intentional misconduct or gross negligence. 4 Correct? 5 A. That is what the statute says. 6 Q. And you believe this statute to be applicable 7 to the claims in this matter. Correct? 8 A. I do. 9 Q. And do you believe that a plaintiff -- and in 10 the statute under Subsection 2 it then describes or 11 defines intentional misconduct and gross negligence. 12 Correct? 13 A. Yes. 14 Q. Is it your belief that a plaintiff such as IS Mr. Beverly would make his showing with respect to an 16 individual TD Bank employee under either intentional 17 misconduct or gross negligence? 18 A. Both. 19 Q. Both. Okay. Well, let's focus on intentional 20 misconduct first. 21 First, which employee of TD Bank do you 22 believe a plaintiff could, Mr. Beverly could present 23 evidence with respect to satisfy intentional misconduct? 24 A. At least Frank Spinosa. 25 Q. Let's take Mr. Spinosa and, again, we will Page 128 1 knowledge and your assumption that everything in the 2 complaint is true. So, when I am asking you the 3 question, I am asking you about evidence. 4 A. Well then let me make sure that you understand 5 what my role in this case is and it may help to focus 6 your questions more specifically upon what it is that I 7 am doing and what it is that I am not doing. 8 I have not undertaken an assessment of the 9 plaintiffs ability to prove the allegations in the 10 complaint. I have assumed the plaintiff's ability to II prove the allegations in the complaint. I have taken 12 those allegations as a given, and if the plaintiffs arc 13 unable to prove specific allegations, that may or may 14 not have an impact upon the ultimate opinions that I 15 will be expressing. If you identify a specific factual 16 allegation and ask me to assume that it cannot be 17 established, I will be happy to tell you whether that 18 would or would not have an impact upon the ultimate 19 opinions that I am expressing. 20 Q. Let's go back to 2(a), intentional misconduct. 21 Do you dispute that a claimant such as 22 Mr. Beverly in order to satisfy Subsection 2(a) would 23 have to show -- and, again, we are referring to 24 Mr. Spinosa because that's who you chose had actual 25 knowledge --- 32 (Pages 125 to 128) OUELLETTE & MA LDIN O COURT REPORTERS, INC. EFTA01130172 Page 129 1 A. No, I think you chose Mr. -- oh, I'm sorry, I 2 didn't choose --- 3 Q. You identified Mr. Spinosa? 4 A. I identified Mr. Spinosa. 5 Q. You identified Mr. Spinosa? 6 A. You chose him, that is, your client chose him. 7 Q. Would you not agree that under the scenario 8 that we are discussing that Mr. Beverly would have to 9 show that Mr. Spinosa, according to the statute, had 10 actual knowledge of the wrongfulness of the conduct and 11 that high probability that injury or damage to the 12 claimant, Mr. Beverly, would result? Do you agree with 13 that? 14 A. I agree that it would be Mr. Beverly's burden 15 to prove the elements described under 768.72, 2(a). 16 Q. And do you have any understanding of whether 17 Mr. Beverly can show or any of the other plaintiffs can 18 show that Mr. Spinosa had actual knowledge of the high 19 probability that injury or damage would occur to each 20 individual claimant? 21 A. The statute and the law on conspiracy and 22 aiding and abetting does not require that Mr. Spinosa 23 ever know of the existence of Mr. Beverly or any other 24 individual plaintiff. 25 Q. Sir, we have talked about aiding and abetting Page 131 1 law. It must be construed as narrowly as possible in 2 terms of the restrictions that it imposes upon the 3 common law. I do not believe it was intended to, nor do 4 1 believe that it does impost a requirement that the 5 specific identity of victims be known to someone who is 6 conspiring to defraud or aiding and abetting a fraud. 7 I think it is enough if the conspirator and 8 aider and abettor knows that the individual with whom he 9 is conspiring or to whom he is providing aid in the 10 commission of a fraud is out there trying to get as many 11 people involved in this scheme as he possibly can and 12 the conspirator and alder and abettor becomes 13 responsible for the injury suffered by everyone who gets 14 caught in that web of deception. 15 Q. Do you have any case law that supports your 16 interpretation of Subsection 2(a)? 17 A. The long history of common law of the State of 18 Florida. 19 Q. By the way, you talked about Mr. Rothstein. 20 A. Also, I should clearly extend that as well, 21 Coquina and Razorback addressed those issues. Those 22 issues were addressed in argument before the Court in 23 this case and, it is my understanding of the rulings in 24 each of those cases that the same distinctions that you 25 are attempting to draw, the same statutory Page 130 1 and conspiracy before. We are now talking about 2 punitive damages, which is controlled by the language in 3 this statute. Correct? 4 A. Yes, that's correct. 5 Q. So, while we are talking, let's stay on 6 subject here and stick with punitive damages. 7 Do you have any understanding of whether the 8 plaintiffs in the Beverly and Marlin matters can show 9 that Mr. Spinosa had actual knowledge of the high 10 probability that injury or damage to each of the 11 claimant's would result? 12 A. Yes. 13 Q. And what is your understanding of the evidence 14 that would show that? 15 A. The evidence are the facts that are alleged in 16 the complaint which demonstrate that Mr. Spinosa was a 17 knowing participant in a Ponzi scheme that was intended 18 to cast the broadest possible net over victims who would 19 be willing to invest in what was a fraud. 20 Q. Can you point to me any evidence that Spinosa 21 had any knowledge of the high probability that injury or 22 damage would result to each individual plaintiff? 23 A. No, nor do I believe that to be relevant or 24 material or statutorily required. I believe that this 25 is a statute that was passed in derogation of the common Page 132 1 interpretations that you are by implication advancing 2 through your questions have been rejected by the courts 3 previously. 4 Punitive damages have already been awarded 5 under these circumstances and I don't -- I don't think 6 there is any question about the fact that they were 7 awarded under appropriate circumstances. 8 Q. Name me a case? 9 A. The rejection of those arguments was what was 10 required by the law of this state. 11 Q. Name me a case where punitive damages have 12 been awarded against TD Bank for its involvement in the 13 Rothstein Ponzi scheme where the plaintiffs had no 14 contact or communications with TD Bank? 15 A. I don't remember a name, nor do I think that 16 that's relevant or material. Once you join the 17 conspiracy, you become responsible for all of the 18 subsequent conduct as well as all of the proceeding 19 conduct of the co-conspirators. You are ratifying their 20 actions. You joined them at your own peril, responsible 21 exhibit all of the injury done in the course and scope 22 of that conspiracy, whether the injury proceeded your 23 joining the conspiracy or whether it followed your 24 joining the conspiracy. That's a very basic principle 25 of conspiracy law. 33 (Pages 129 to 132) OUELLETTE & MA LDIN O COURT REPORTERS, INC. EFTA01130173 Page 133 1 Q. Sir, we previously discussed -- we discussed 2 conspiracy and aiding and abetting previously. We are 3 focusing on the punitive damages statute. I ask that 4 you focus your attention on that. 5 A. I am focusing on that. I don't believe the 6 statute changes the common law in that regard. As I 7 said, this is a statute that is in derogation of common 8 law, and it only changes the common law to the extent 9 that it explicitly addresses those common law principles 10 and constitutionally limits them. This statute does not 11 change those basic principles of common law 12 conspiracies. 13 Q. Doesn't Subsection 2(a) also require that the 14 intentional course of conduct also resulted in the 15 injury of the claimant? 16 A. Yes, and in the case of a conspiracy, that 17 means that if you conspire to defraud that the injury 18 result from the fraud. 19 Q. We have already discussed proximate causation 20 versus but for causation. Correct? 21 A. That's a subject matter that was dealt with 22 earlier, yes. 23 Q. Subsection 2(b) you said is also applicable. 24 Is that correct? 25 A. Yes. Page 135 1 2(b) that Mr. Spinosa owed Mr. Beverly any duty? 2 A. There is not a requirement under 2(b) that a 3 personal duty be owed to Mr. Beverly. 4 Q. A claimant can recover punitive damages under 5 a gross negligence prong regardless of whether there is 6 any duty owed? 7 MR. MOSKOWITZ: Objection. Asked and answered 8 a couple of times. 9 A. A claimant may recover punitive damages under 10 2(b) if the claimant suffered an injury as a result of 1 I conduct that included an intentional or reckless 12 disregard of the rights of persons exposed to such 13 conduct. 14 BY MR. HUTCHINSON: 15 Q. Isn't intentional misconduct described in 16 2(a)? 17 A. Intentional misconduct is described in 2(a) 18 but gross negligence can arise from either an 19 intentional or a reckless disregard of the rights of 20 persons exposed to such conduct. And Mr. Beverly and 21 the other victims of the fraud had a right not to be 22 defrauded. 23 Q. Have you ever had an experience in your 24 practice of law where someone can be negligent or 25 reckless where they owed no duty to the other person? Page 134 Q. And that's for gross negligence? 2 A. That's correct. 3 Q. It's clear to have a negligence claim there 4 has to be a duty. Isn't that correct? 5 A. In order for their to be a negligence claim, 6 there has to be a duty, but this statute is not defining 7 an independent negligence claim. It is defining the 8 predicate for the recovery of punitive damages. 9 Q. So, is it your legal opinion here today that 10 Subsection 2(b) is applicable regardless of whether any II duty is owed to the claimant? 12 A. It is my opinion that punitive damages may be 13 recovered against a defendant where the defendant's 14 conduct was so reckless or wanton in care that it 15 constituted a conscious disregard of the rights of 16 persons exposed to such conduct so that in the context 17 of a conspiracy, if TD Bank's conduct was so reckless or 18 wanting in care that it demonstrated a disregard of the 19 rights of victim's of the conspiracy to defraud TD Bank 20 would be subject to punitive damages. 21 Q. So, let's take Mr. Beverly and Mr. Spinosa as 22 the example which we are using because we are not 23 talking about the bank in this subsection. We are 24 talking about an individual. 25 Did Spinosa or is there a requirement under Page 136 1 A. That question really doesn't make much sense 2 to me. You will have to please try to ask it in a 3 different way. 4 Q. Do you have any cases to support any 5 contention that someone can be negligent or reckless 6 with respect to another person without a duty? 7 A. Negligence, if we are talking about a 8 negligence claim, requires as an element, whether it is 9 simple negligence or gross negligence the existence of a 10 duty. Q. Would you agree that recklessness requires a 12 duty? 13 A. Recklessness as I understand it to be used in 14 this context is in effect a degree of negligence. 15 Q. Okay. So once a plaintiff makes the required 16 showing under 2(a) or 2(b), the plaintiff then has to 17 make an additional showing under Subsection 3 in order 18 to recover from punitive damages. Correct? 19 A. Yes. 20 Q. And which subsection of -- Subsection 3, I'm 21 sorry, is it 3(a), 3(b) or 3(c) that you claim are 22 applicable to the claims in the Beverly and Marlin 23 matters? 24 A. My understanding is that Mr. Spinosa was a 25 senior regional vice president of TD Bank. I believe 34 (Pages 133 to 136) OUELLETTE & MA LDIN O COURT REPORTERS, INC. EFTA01130174 Page 137 1 that Mr. Spinosa's conduct as a senior managerial level 2 employee rises to the level of being the conduct of 3 TD Bank so that the criteria of 3(a) are met. 4 I also believe that the criteria of 3(b) are 5 met, both through Mr. Spinosa's conduct and through the 6 ratification of that misconduct through the subsequent 7 actions of TD Bank as a corporate entity rising to the 8 highest corporate levels, that is, into the board of 9 directors. 10 I also believe that the criteria of 3(c) are I I met in that the corporation, both through Mr. Spinosa 12 and others at levels above him engaged in conduct that 13 constituted gross negligence and contributed to the 14 losses suffered by these claimants. So, the answer to 15 your question is, all three. 16 Q. So, just so I understand what you're saying is 17 you are using Mr. Spinosa to meet the requirements of 18 Subsection 2 as the employee and you are using 19 Mr. Spinosa to satisfy the subsection, the requirements 20 of Subsection 3 as the employer? 21 A. In some respects the answer to that question 22 is yes. Yeah — I mean, I'm not relying exclusively 23 upon Mr. Spinosa's conduct as the conduct of TD Bank, 24 but because Mr. Spinosa occupies the level within the 25 corporate structure that he does, it is in my opinion Page 139 1 policy decisions? 2 A. He was certainly making some corporate policy 3 decisions, yes. 4 Q. What was Mr. Spinosa doing that you understand 5 to put him sufficiently high on the corporate ladder 6 to -- so that his acts would be deemed acts of the 7 corporation? 8 A. He was holding the title of senior regional 9 vice president and exercising the responsibilities 10 imposed upon him or vested in him by the corporation of 11 senior regional vice president. 12 Q. What were those responsibilities? 13 A. He was pretty much in charge of the entire 14 relationship with Mr. Rothstein. He seemed to have the 15 ability to do whatever he wanted on behalf of the 16 corporation and his relationship with Mr. Rothstein. 17 Q. So, you are saying because he was allegedly in III charge of the relationship with Mr. Rothstein that he 19 was high enough in the hierarchy for his acts to be 20 attributable to the corporation? Is that your 21 reasoning? 22 A. In light of the magnitude of the relationship 23 with Mr. Rothstein, the answer to that question is, yes. 24 There may be some bank teller who is in charge of the 25 relationship with me when I walk up to the window and I Page 138 I sufficient to satisfy that criteria. 2 There are other factors as well but I think 3 that is one and I don't think that the statute changes 4 the common law in that regard. Again, the statute is in 5 derogation of the common law and as you, yourself, have 6 acknowledged earlier, a corporation cannot act except 7 through its agents, servants and employees and the 8 common law is clear that managerial level employees are 9 the corporate entity. 10 Q. And what's your understanding of Mr. Spinosa's I I place in the hierarchy of TD Bank management? 12 A. He is senior regional vice president. 13 Q. And what's your understanding of where that 14 puts him in the corporate hierarchy? 15 A. I don't know how to answer that question. 16 Q. You don't know the answer? 17 A. It puts him at senior regional vice president. 18 You want to know how many levels there are above and 19 below him? 20 Q. Sure. 21 A. I don't know. 22 Q. Do you have any idea how many levels there are 23 above him? 24 A. No. 25 Q. Do you know whether he was making corporate 3 4 5 6 7 8 9 10 I 12 13 14 IS 16 17 I8 19 20 21 22 23 24 25 Page 140 deposit my check and I would not consider that bank teller to be establishing corporate policy. But when someone is conducting the level of business with TD Bank that Mr. Rothstein was conducting and is interfacing with TD Bank through Mr. Spinosa and Mr. Spinosa was empowered to make decisions on behalf of TD Bank with regard to a relationship of that magnitude, significance and duration, all of the circumstantial evidence would indicate that Mr. Spinosa has adequate corporate authority to bind the corporation. Q. Have you researched the case law interpreting Subsection 3? A. I don't think there is very much case law at all that interprets Subsection 3, but it is not something that I have researched with regard to this case. Q. You didn't take the time to do that before rendering your opinions? A. I did not, no. But, again, it is common law with which I am familiar and I don't believe that the statute has altered the common law in that regard. Q. Okay. With respect to Subsection 3, you have named Mr. Spinosa. Are there any other individuals at TD Bank who you say would meet the requirements of the subsections in Subsection 3 or that would meet the 35 (Pages 137 to 140) OUELLETTE & MA LDIN O COURT REPORTERS, INC. EFTA01130175 Page 141 1 requirements of Subsection 3? 2 A. The members of the board of directors. 3 Q. Any other individuals? 4 A. There were others in the corporate hierarchy 5 above Mr. Spinosa and I don't recall their names but it 6 is my recollection from information provided to me that 7 it was involvement on the part of the General Counsel's 8 office. There were other corporate executives above 9 Mr. Spinosa who were involved in relevant transactions 10 and conducted themselves in ways that clearly indicated II at least gross negligence on their part. 12 Q. You are referring to gross negligence with 13 respect to the Ponzi scheme operations? 14 A. Yes. 15 Q. Okay. Let's take the statute section by 16 section and make sure I understand what you are 17 referring to in each subsection. 18 Subsection 3(a), who meets the requirements 19 for TD Bank to satisfy Subsection 3(a), participation in 20 such conduct which I assume means -- do you agree that 21 would mean that the alleged Ponzi scheme conduct? 22 A. That is not accurate. 23 Q. Okay. 24 A. It is conspiracy and aiding and abetting the 25 Ponzi scheme. Page 143 1 MR. MOSKOWITZ: Objection. Asked and 2 answered. He stated the specific paragraphs in the 3 complaint, which he has pointed you to a couple of 4 times already. 5 A. Yeah. I mean, I have assumed those facts to 6 be true. As I said, if you want me to assume they are 7 not true, tell me which ones you want me to assume they 8 are not true. If you want me to assume they are all not 9 true, I have no basis for my opinion. 10 BY MR. HUTCHINSON: 11 Q. As you sit here today, you cannot describe how 12 any other individuals other than Mr. Spinosa satisfies 13 Section 3(a)? 14 A. No, that's not true. I am pointing you to 15 paragraphs 13 and 86 through 153. I am also aware that 16 there has been subsequent discovery that has been taken 17 in this case, including depositions of corporate 18 representatives where there have been facts developed 19 with regard to reports made to the board of directors 20 with TD Bank with regard to this conduct. So, I have 21 that and clearly it is of significance that these same 22 circumstances have been presented to a jury and there 23 have been legal rulings made with regard to the 24 sufficiency of the evidence to get to a jury and then 25 there have been factual findings by that jury imposing Page 142 1 Q. Okay. So that would be the intentional 2 misconduct under Section 2(a)? 3 A. Active and knowing participation in the 4 conspiracy and/or the aiding and abetting of the 5 conspiracy to defraud. 6 Q. Okay. So, which individual with TD Bank 7 satisfies Section 3(a) for the employer? 8 A. At least Mr. Spinosa, but my recollection is 9 that there are others above him who at least by virtue 10 of circumstantial evidence had knowing participation in II the fraud and conspiracy in the aiding and abetting of 12 the fraud. 13 Q. Can you explain the facts and circumstances 14 surrounding these other individuals and their 15 participation in the fraud? 16 A. Those are detailed in paragraph 13 and 86 17 through 153 of the complaint. 18 Q. Sir, I am asking for your understanding as we 19 sit here today -- 20 A. That is my -- sorry, I didn't mean to 21 interrupt you. 22 Q. -- that you're basing your opinion on. 23 What is your understanding as to the facts and 24 circumstances surrounding these other individuals 25 participating in the fraud? Page 144 1 punitive liability. That's very significant to me in 2 terms of my ability to express an opinion with regard to 3 these matters. The fact that it already has happened 4 makes a big difference. 5 Q. Mr. Scarola, you previously testified that the 6 reports of board of directors dealt with the subsequent 7 litigation, did not deal with the underlying Ponzi 8 scheme. Isn't that correct? 9 A. No, I don't think I said that. I think that 10 what I said was I am aware that reports were made to the 11 board of directors with regard to the litigation 12 misconduct. I never said that there were no reports to 13 the board of directors regarding the underlying 14 liability, and it would astound me if reports were not 15 made to the board of directors regarding the underlying 16 liability and if that were to have been true, that, in 17 and of itself, would indicate an astounding level of 18 gross negligence. 19 For the board of directors to turn a blind eye 20 to the underlying liability concerns that have been so 21 widely publicly reported would all by itself warrant the 22 imposition of very significant punitive liability. 23 Q. Mr. Scarola, what evidence can you point me to 24 that any -- the board of directors was involved in any 25 way with the Rothstein Ponzi scheme prior to its 36 (Pages 141 to 144) OUELLETTE & MA LDIN O COURT REPORTERS, INC. EFTA01130176 Page 145 Page 147 1 implosion? 1 taken the position that there was a rouge employee who 2 A. I haven't stated that the Rothstein -- that 2 was on a venture of his own. There has been an 3 the board of directors was involved in the Rothstein 3 admission that Mr. Spinosa was acting within the course 4 Ponzi scheme prior to its implosion. That isn't the 4 and scope of his employment and a consistent defense of 5 question that you asked, and that's not what I just 5 what he did. 6 said. You asked me whether there was any indication 6 The mere persistent denial of any wrongdoing 7 that the board of directors did not have knowledge of 7 on his part and any need for any change within 'ID Bank 8 the underlying liability as opposed to the subsequent 8 constitutes a ratification of all of that misconduct. 9 litigation misconduct. That's what I was responding to 9 Q. And is your understanding -- did you receive 10 because that's what you asked me. 10 your understanding of those facts during the break that 11 Q. So how does the board of directors satisfy 11 we just took from counsel? 12 Section, Subsection 3? Do they knowingly condone or 12 A. No, sir, I have -- that's from the materials 13 ratify Mr. Spinosa's conduct, alleged aiding and 13 that we have provided to you. It's tabbed in the 14 abetting conduct in the underlying Ponzi scheme? 14 materials as a result of the review that I did long 15 A. They are ratifying it, as we sit here today. 15 before this deposition began. 16 THE VIDEOGRAPHER: Pardon me, I need to go off 16 Q. Did you discuss those matters with counsel 17 the record for one second. 17 during the break? 18 MR. MOSKOWITZ: Can we take like a 18 A. No, sir, that was not a topic of our 19 five-minute, no more than five minutes? 19 discussion. 20 (A recess was taken from 3:08 p.m. to 20 Q. And what's your understanding of how Florida's 21 3:18 p.m.) 21 litigation privilege impacts the allegation of 22 THE VIDEOGRAPHER: This is the beginning of 22 litigation misconduct? 23 tape number three. The time is 3:18 p.m. 23 A. The litigation privilege would preclude a 24 We are back on the video record. 24 separate cause of action for conduct occurring during 25 BY MR. HUTCHINSON: 25 the course of and in direct relation to the conduct of Page 146 Page 148 1 Q. Mr. Scarola, is it your opinion that any of 1 the litigation itself, although the Fourth DCA has 2 the alleged conduct with respect -- any of the alleged 2 recently carved out an exception to the litigation 3 litigation misconduct in the Coquina and Razorback 3 privilege. But I don't think that that's particularly 4 matter can be used to satisfy Subsection 3 of the, of 4 applicable here nor are we talking about a separate 5 768.72? 5 cause of action for the litigation misconduct. 6 A. Are you talking about the litigation 6 Q. So is it your opinion that while it would 7 misconduct? 7 prevent a separate cause of action that the evidence can 8 Q. Yes. 8 still be presented and considered by the jury in 9 A. Yes. 9 assessing punitive damages? 10 Q. What is your opinion with respect to that? 10 A. Absolutely. 11 A. That that litigation misconduct is 11 Q. Do you have any case law that supports that 12 circumstantial evidence of knowledge of the wrongdoing 12 opinion? 13 that extended beyond and above Mr. Spinosa's level and 13 A. Johns-Manville. 14 that it is indicative of the ratification of that 14 Q. Does Johns-Manville address the litigation 15 misconduct, although there is also direct evidence of 15 privilege? 16 the ratification of the misconduct. 16 A. Johns-Manville addresses the attitude of the 17 Q. And what's your understanding of the direct 17 wrongdoer upon discovery of the wrongdoing and efforts 18 evidence of the ratification of misconduct? 18 to coverup the wrongdoing. It does not address the 19 A. There has been testimony -- I'm trying to 19 litigation privilege because it was irrelevant in the 20 remember the names of the individuals, Mr. Torili "SP" 20 context of the Johns-Manville case as it is irrelevant 21 and Mr. Guillen maybe, were asked directly about whether 21 here. We are not talking about the prosecution of a 22 Mr. Spinosa did anything wrong and there has been a 22 separate cause of action arising out of the litigation 23 consistent denial of any wrongdoing on the part of 23 misconduct. We are talking about the admissibility of 24 Mr. Spinosa. 24 the litigation misconduct in evidence in this case. 25 This is not a circumstance where TD Bank has 25 (Exhibit No. 9, Statute 768.73, was marked for 37 (Pages 145 to 14.8) OUELLETTE & MA LDIN O COURT REPORTERS, INC. EFTA01130177 Page 149 1 identification.) 2 BY MR. HUTCHINSON: 3 Q. Mr. Scarola, I have marked as Exhibit 9 4 Florida Statute 768.73. Are you familiar with this 5 statute? 6 A. I am. 7 Q. This is the statute that we discussed briefly 8 earlier today that sets certain limits on the award of 9 punitive damages. Correct? 10 A. Yes. 11 Q. What are your opinions with respect to the 12 application of 768.73 to any future awarded punitive 13 damages against TD Bank for its alleged role in the 14 Rothstein Ponzi scheme? 15 A. That it imposes no practical limitation under 16 the circumstances of this case. 17 Q. Why does it impose no practical limitation on 18 the imposition of punitive damages? 19 A. Because, in my opinion, to the extent that it 20 recognizes exceptions to the limitations it imposes, the 21 circumstances of this case meet those exceptions. And 22 because this is a statute in derogation of common law I 23 think that it is unlikely that it would by its expressed 24 terms apply at all. 25 Q. Okay. Will you please point us to the Page 151 1 of co-conspirators or the offender who engaged in the 2 direct wrongdoing so that if it can be demonstrated that 3 Scott Rothstein had the specific intent to harm the 4 claimants and that Scott Rothstein's conduct did, in 5 fact, harm the claimants, those who conspired with Scott 6 Rothstein shared his specific intent. 7 Those who aided and abetted Scott Rothstein, 8 aided and abetted that specific intent and this statute, 9 which is in derogation of the common law, must be 10 construed to render those co-conspirators and aiders and II abettors liable for punitive damages with no cap. 12 Q. Which cases support your opinion on that? 13 A. All cases which talk about construing statutes 14 in derogation of the common law as narrowly as they may 15 reasonably be construed so as to impose the least 16 restrictive derogation of the common law. 17 Q. Which cases support your opinion that under 18 this statute TD Bank would be charged with any specific 19 intent on Mr. Rothstein? 20 A. The fact that all of those involved in a 21 conspiracy share the specific intent of their 22 co-conspirators. It is no different than one who 23 conspires with a first degree murderer or one who aids 24 and abets a first degree murder. A first degree murder 25 requires a specific intent. The conspirators, aiders Page 150 I language that includes an exception to the statutes 2 application that leads you to believe it would not apply 3 in this matter? 4 A. Ycs. Lees take them section by section, if 5 we could. Section -- I guess what I am volunteering to 6 do is walk you through the statute. 7 Q. I appreciate that. 8 MR SCHERER: How about running? 9 A. Section 1(a) imposts a three times limitation 10 of the compensatory damage award. Under circumstances 11 where the fact-finder determines that the wrongful 12 conduct was motivated solely by unreasonable financial 13 gain, that limitation does not apply. 14 Q. And what limitation does apply in that IS circumstance? 16 A. In that circumstance, there is a four times 17 the amount of compensatory damage amount that applies. 18 However, that is not applicable where the fact-finder 19 determines that at the time of injury the defendant had 20 a specific intent to harm the claimant and determines 21 that the defendant's conduct did in fact harm the 22 claimant. 23 Under that circumstance, there is no cap on 24 punitive damages. Both the conspirator and the eider 25 and abettor arc charged with sharing the specific intent Page 152 I and abettors share the same criminal liability, the same 2 punitive liability that the direct actor shares. 3 Q. Sir, can you point me to any cases that 4 support your opinion that TD Bank would be charged with 5 Mr. Rothstein's specific intent under this statute? 6 A. Only the common law of conspiracy and aiding 7 and abetting and the fact that this statute must be 8 construed in accordance with the common law unless the 9 statute specifically clearly and unambiguously requires 10 a departure from the common law and it does not. And 11 there has been no case that I am aware of that would 12 indicate otherwise. 13 Q. Let me ask you, sir, how many of these 14 plaintiffs in Beverly and Marlin even met Mr. Rothstein? 15 A. I can't answer that question for you nor do I 16 think it's a material fact. 17 Q. Do you know of any plaintiffs in these cases 18 that actually met Mr. Rothstein? 19 A. When you talk about these cases, are you 20 talking about Beverly and Marlin? 21 Q. Yes. 22 A. I don't know, nor do I think it's a matter of 23 significance. They may have met agents of 24 Mr. Rothstein. I mean, their agents may have met 25 Mr. Rothstein and that would certainly be adequate, but 38 (Pages 149 to 152) OUELLETTE & MA LDIN O COURT REPORTERS, INC. EFTA01130178 Page 153 1 Mr. Rothstein obviously had a specific intent to defraud 2 all investors. He didn't need to meet them in order to 3 form that specific intent. 4 Q. That was my question. So, you are saying 5 Mr. Rothstein can have a specific intent to harm someone 6 he doesn't know and has never met and under the claims 7 asserted in this matter, assuming they are all true and 8 they prevail on them, which is your assumption in this 9 matter that that specific intent is then imputed upon 10 TD Bank for the statute? 11 A. Absolutely, and I think that that 12 understanding of the law is confirmed by the fact that 13 punitive liability has been imposed against TD Bank 14 under exactly those circumstances. IS Q. In addition, they would have to prove the 16 proximate cause element that we discussed before, would 17 it not, under Subsection C, the defendant's conduct did, 18 in fact, harm the claimant? 19 A. As I have told you on multiple occasions 20 before, if you can show me any of the plaintiffs who 21 really didn't invest in this Ponzi scheme and lost no ?2 money, they don't have a claim for either compensatory ?3 damages or punitive damages. An essential element would 24 be that they invested in this Ponzi scheme and they lost 25 money as a consequence of that investment. Page 155 1 dollars worth of these claims. So, somebody at TD Bank 2 thinks these arguments make sense too. 3 Q. For Subsection C to be applicable which limits 4 the punitives to four times the compensatories isn't it 5 true that the wrongful conduct actually had to be known 6 by the managing agent, director, officer, other person 7 responsible for making policy decisions on behalf of the 8 defendant? 9 A. Yes, sir, that is true. 10 Q. And who at TD Bank do you claim would satisfy 11 that element at subsection B? 12 A. You don't need to go anywhere past 13 Mr. Spinosa, but once others above him gain knowledge 14 and fail to take action or affirmatively ratify his 15 conduct, they are certainly implicated as well. 16 Q. Are you offering any opinions in this matter 17 with respect to how the different sections of this 18 statute would be implemented if plaintiffs compensatory 19 damages are reduced through a payout under the plan? 20 A. I am offering no bankruptcy related opinions 21 at all. What I am saying is that the punitive damages 22 to the extent this statute would apply at all would be 23 based upon the amount of the compensatory loss arising 24 out of the misconduct, and if the question is would 25 collateral sources of any kind have an impact upon the Page 154 I Q. Sir, if you can answer my question. A. That is --- 3 Q. Isn't it true? 4 A. I'm cony but that is a direct answer to your 5 question. 6 Q. Is it not true that they would have to share 7 proximate causation in addition to specific intent for 8 Subsection C to be applicable? 9 A. Yes, and all that would be necessary to show 10 proximate causation is that they were Ponzi scheme 11 investors who lost money in the Ponzi scheme. That 12 satisfies the proximate cause element both from a common 13 law perspective and from a statutory perspective as 14 well. IS Q. When I asked you earlier, you couldn't 16 identify any cases that said that, could you. 17 MR. MOSKOWITZ: Objection misstates his 18 testimony. 19 A. I could not identify a case that includes that 20 language as I sit here right now -- 21 Q. And then subsection B above -- 22 A. -- except for Coquina, which obviously is a 23 case that stands for that proposition, Razorback -- and, 24 you know, it is not irrelevant to my opinion that 25 TD Bank has been settling hundreds of millions of Page 156 1 statutory limitation, my answer to that question would 2 be, no, they would not. And it would seem to me without 3 offering any bankruptcy opinions because that is clearly 4 outside my area of expertise that at best some 5 bankruptcy related pay out would be nothing more than 6 another collateral source. 7 Q. Do you have any law or cases that support your 8 opinion on that? 9 A. About the bankruptcy aspect of my opinion -- 10 Q. Yes. 11 A. -- absolutely not. 12 Q. Or how any collateral source recovery would 13 affect the computation of compensatory damages under the 14 statute? 15 A. I don't have any specific cases but, once 16 again, this statute is in derogation of the common law 17 unless there were a clearly and unequivocally stated 18 legislative intent to tie the multiplier into a 19 collaterally, a collaterally sourced reduced amount. It 20 could not properly be applied to the collateral sourced 21 reduced amount. ?2 Q. But you have nothing to, no case law to ?3 support that? 24 A. All of those cases that talk about ?5 interpreting statutes in derogation of the common law. 39 (Pages 153 to 156) OUELLETTE & MA LDIN O COURT REPORTERS, INC. EFTA01130179 Page 157 1 Q. What's your opinion with respect to the 2 application of Subsection 2 to any punitive damages 3 request in the Beverly or Marlin matter? 4 A. Well, I have already been addressing 2(c), 5 which -- are you talking about --- 6 Q. No, I think you are talking about two, on 7 Subsection 2. I think you were looking at 1(b) 8 A. Subsection parens, 2, close parens? 9 Q. Correct. 10 A. That one? On top of page two of this 11 document? 12 Q. Correct. 13 A. It is my opinion that this section would not 14 impose any limitation upon the award of punitive damages IS in this case because of the way in which the same act or 16 single course of conduct is statutorily defined. 17 Q. Can you further explain that for me, please? 18 A. Yes. This subsection precludes the award of 19 punitive damages against a defendant in a civil action 20 where that defendant establishes that there has been a 21 prior award of punitive damages arising out of the same 22 act or single course of conduct. The phrase, "the same 23 act or single course of conduct" is defined in the 24 second sentence of that subsection. It is defined as 25 including acts resulting in the same manufacturing Page 159 1 ambiguity and there is nothing ambiguous about the fact 2 that it is intended to apply to products liability case. 3 Q. Well, it's not -- it doesn't say exclusively 4 to product liability case. Isn't the term includes? It 5 doesn't say only includes? 6 A. You are absolutely correct. The word "only" 7 does not precede the word includes, and some imaginative 8 defense lawyer might try to read into this statute an 9 only word but that effort would be unsuccessful because 10 this is a statute in derogation of the common law and so 11 only would not be read into this statute. 12 Q. Is there another provision in this same 13 statute that talks about what it applies to? 14 A. Are you talking about Section 2(a). 15 Q. No, I am talking about Section 5 that says, 16 "The provision of this section shall be applied to all 17 causes of action arising after the effective date of 18 this act." 19 A. Yes, that's true. It does, and that raises an 20 issue both with regard to this statute and 768.72 as 21 well because our discussions have assumed the 22 applicability of this statute, but I suggest to you that 23 it may not be applicable at all because these causes of 24 action may very well have accrued prior to the effective 25 date of the statute. But nonetheless, for purposes of Page 158 1 defect. This case does not involve manufacturing 2 defects. It is defined as including acts resulting in 3 the same defects in design. This case does not involve 4 design defects. It talks about failure to warn of the 5 same hazards. This is not a failure to warn case with 6 respect to similar units of a product. 7 This entire subsection relates to product 8 liability cases. It was, and I acknowledge this to be a 9 pure assumption on my part, the consequence of 10 successful lobbying experts on the part of product 11 manufacturers to limit their liability in punitive 12 damages in cases where the same product defect has 13 resulted in multiple injuries to consumers. It's the 14 got nothing to do whatsoever with the circumstances of 15 this case. 16 That section could not possibly be construed 17 in light of the requirement that it be construed as a 18 provision in derogation of the common law as least 19 restrictively as possible as applying to the 20 circumstances of this non-product liability claim. 21 Q. Do you have any personal knowledge of the 22 legislative intent behind this section? 23 A. Only to the extent that it's very obvious from 24 the language that's employed but legislative intent has 25 no relevance unless we are attempting to construe some Page 160 1 this discussion, I have assumed its applicability to 2 these causes of action. 3 Q. Sir, are you offering an opinion in this 4 matter that Beverly and Marlin causes of action accrued 5 before 1999? 6 A. No, I am not. 7 Q. That would cause major statute of limitations 8 problems, sir? 9 A. Oh, I think if they accrued before 1999 and 10 the fraud discovered within the statute of limitations 11 period, it would cause major statute of limitations 12 problems but that's not my opinion. 13 Q. You are not offering an opinion that this is 14 not applicable because these causes of action accrued 15 before 1999, are you? 16 A. No, I have told you that I have assumed 17 throughout the discussions that I had with you about 18 768.72 and 768.73 that these statutes applied but 19 pursuant to their expressed terms don't impose a 20 limitation on punitive damages under the circumstances 21 of these cases. 22 Q. Have you seen any case law supporting your 23 opinion that Subsection 2 only applies to product 24 liability matters? 25 A. I have not seen any cases that say that 40 (Pages 157 to 160) OUELLETTE & MA LDIN O COURT REPORTERS, INC. EFTA01130180 Page 161 1 Subsection 2(a) applies only to product liability cases. 2 I have never seen anybody attempt to argue otherwise. 3 Q. What is your opinion with respect to the 4 application of the last sentence in Subsection 2(b) to 5 this matter? 6 A. Give me just one moment, if you would, please. 7 My opinion is that 2(b) does not apply for the 8 same reasons that 2(a) does not apply. 2(b) speaks also 9 in terms of the act and course of conduct which is 10 defined in 2(a), so 2(b) also relates to product II liability claims. 12 Q. Is it your understanding that the groups that 13 were lobbying for this tort reform only involved product 14 manufacturers? 15 A. No. I am -- I would imagine that the, that 16 the health care industry was lobbying for these changes, 17 that the insurance industry was lobbying for these 18 changes, that there were a lot of vested interests whose 19 economic concerns favor the imposition of restrictions 20 on the tort system of a variety of kinds of limitations 21 of punitive damages being only one and they frequently 22 join together to lobby the legislature for changes like 23 this. 24 Q. Assuming Subsection 2 does not, is not limited 25 to product liability actions, would you agree with me Page 163 1 A. Well, that would depend on how you define the 2 same course of conduct, but if we want to define it as I 3 think it appropriately is defined, that being the 4 conspiracy to participate in the Rothstein Ponzi scheme 5 and aiding and abetting the Rothstein Ponzi scheme, then 6 I would believe that the answer to that question would 7 be yes. 8 Q. And how would it work, sir -- I guess you -- 9 never mind. I will mark for you Exhibit 10. 10 Do you recognize Exhibit 10? 11 A. Nice handwriting. 12 (Exhibit No. 10, Handwritten Notes, was marked 13 for identification.) 14 A. I do, yes. 15 BY MR. HUTCHINSON: 16 Q. What is Exhibit 10? 17 A. Those are handwritten notes that I have made. 18 Q. What were these notes of? 19 A. Observations that I made of the contents of 20 documents that I reviewed and/or conversations with 21 plaintiffs counsel. 22 Q. Do you know which are your observations and 23 which are notes from conversations with plaintiffs 24 counsel? 25 A. I didn't attempt to make that distinction. Page 162 I that TD Bank there has been a punitive damages award 2 against TD Bank for the same course of conduct for which 3 the Beverly and Marlin plaintiff seeks to restore 4 damages? 5 A. You want me to assume that the same act or 6 single course of conduct language is omitted from the 7 statute and that the statute instead reads that the 8 limitations of 2(a) apply to all cases regardless of 9 the, of whether they arise out of the same act or single 10 course of conduct. So, if there is a punitive damages 11 award against a defendant under any circumstances 12 anywhere then no punitive damage award may ever be 13 awarded against that defendant again under any 14 circumstances? Is that the assumption you want me to IS make? 16 Q. No, sir. I want you to put the statute down. 17 Assume for me -- no assumptions. 18 Has TD Bank -- has there been an award of 19 punitive damages for TD Bank for its alleged role in the 20 Rothstein Ponzi scheme? 21 A. Yes, although TD Bank continues to challenge 22 that award and hasn't paid it yet. 23 Q. Is it your understanding that the Beverly and 24 Marlin plaintiffs are seeking an award of punitive 25 damages based on the same alleged course of conduct? Page 164 1 Q. You see the second entry states Coquina had a 2 lot of direct contact with the bank. Is that correct? 3 Is that a correct reading of your handwriting? 4 A. That is a correct reading of that line except 5 for the last word that without the T crossed. It is an 6 incomplete sentence. 7 Q. Then a couple of entries down it says that 8 some had direct calls with Spinosa? 9 A. Yes. 10 Q. What is that referring to? 11 A. That refers to the fact that there were Marlin 12 and Beverly plaintiffs who had direct calls with 13 Spinosa. 14 Q. And who were those plaintiffs, sir? 15 A. I can't give you their names. 16 Q. Are you aware that that contradicts the sworn 17 discovery provided by the plaintiffs in this case? 18 A. No, I am not aware that it contradicts the 19 sworn discovery provided by the plaintiffs. If you 20 would like me to assume that that is not true, I would 21 be happy to do that and tell you what, if any, impact it 22 has on my opinion. 23 Q. Have you taken the time to review any of the 24 bankruptcy discovery that we have been conducting over 25 the last several weeks? 41 (Pages 161 to 164) OUELLETTE & MA LDIN O COURT REPORTERS, INC. EFTA01130181 Page 165 Page 167 1 A. I have received copies of transcripts, 2 depositions that were taken of Leo Doyle and Craig 3 Ba'dant I have not read those yet. I have been in 4 trial myself the last week and a half. 5 Q. So you have not taken time to review any of 6 the discovery, the sworn discovery that's been taken in 7 this case? 8 A. I don't really believe that that accurately 9 characterizes the circumstances. I had a meeting, a 10 fairly lengthy meeting last weekend during which recent II discovery was discussed and so to that extent I have had 12 the time to review some of what has been going on 13 recently as far as discovery is concerned. I have not 14 had the time to review those transcripts. 15 Q. Did anyone tell you that your entry here with 16 regard to direct cause with Spinosa was incorrect? 17 A. No, no one has told me that that entry is 18 incorrect. To the contrary, I have been told that there 19 were some direct calls with Spinosa. I have also been 20 told that some of the Marlin and Beverly plaintiffs did 21 receive lock letters. 22 Q. And which plaintiffs were those? 23 A. I was not given names. I don't know the 24 names. Nor do I think. 25 Q. Would it surprise you that the record reflects 1 Coquina case was a statement from counsel. The 2 statement that there was -- that there were plaintiffs 3 who had direct calls with Spinosa was from counsel. The 4 statement that some Marlin and Beverly plaintiffs 5 received lock letters was from counsel. The statement 6 that TD Bank never paid anything in the -- never paid 7 the punitive damage award in Coquina, that was from 8 counsel. 9 The description of the Emess settlement was 10 from counsel. The notes regarding the Craig Baldouf 11 deposition, which I misspelled in these notes because I 12 was spelling it phonetically, that's information 13 provided by counsel because I had not yesterday had an 14 opportunity to review the deposition transcript. 15 No regret, no remorse, that's me. The 16 notation admit only that Frank Spinosa may have had bad 17 judgment but did not cause injury to anyone else, that 18 was counsel's summary of the position that has been 19 taken in the discovery of this case. 20 Q. In which case are you referring to? 21 A. The Marlin and Beverly proceedings, the 22 discovery that has recently been taken. 23 The 450 to 500 million in losses as a result 24 of 6 plus billion in transactions, that's counsel. 25 Guillen has been promoted, counsel. Page 166 1 that none of the Beverly and Marlin plaintiffs received 2 lock letters executed by TD Bank? 3 A. It would surprise me that that statement is 4 inaccurate but it wouldn't alter my opinion. 5 Q. Where did you get -- did the next statement, 6 the conspiracy and aiding and abetting requires no 7 direct contact, did that come from plaintiffs' counsel? 8 A. That comes from me. That's an observation 9 that I was recording of my own understanding. 10 Q. What about the next entry? It says all 11 evidence of Coquina comes in to prove knowledge. A. That's me. 13 Q. Which statements in these notes came from 14 counsel? 15 MR. MOSKOWITZ: Objection. Asked and 16 answered. 17 A. Do you want me to go through each of the 18 statements and tell you whether they reflect something 19 that was told to me by counsel if I can recall that? 20 BY MR. HUTCHINSON: 21 Q. If you can, just briefly skim through it and 22 let me know whether any of these statements were 23 provided to you by counsel. 24 A. The statement that there was significant 25 direct contact with the bank that was proven in the Page 168 1 Ratification is my note. The notation at the 2 bottom of that page, the first two lines are counsel and 3 the second two lines are me. The notations about the 4 pecuniary circumstances of TD Bank that appear on the 5 next page are my notes on conversation with counsel. 6 Q. Okay. Let me show you what I am marking as 7 Exhibit 11. Do you recognize Exhibit II, sir? 8 A. Yes, sir. 9 Q. What is Exhibit II? 10 A. Those are my notes. 11 (Exhibit No. II, Handwritten Notes, was marked 12 for identification.) 13 BY MR. HUTCHINSON: 14 Q. What are these notes of, sir? 15 A. These are notes that I made as I went through 16 discovery materials provided to me relating to my 17 assignment. 18 MR SCHERER: Do you have an extra copy over 19 there? 20 THE WITNESS: I have an extra copy. If you 21 take these, I can look at the originals. 22 BY MR. HUTCHINSON: 23 Q. So these do not reflect notes of calls with 24 counsel. Correct? 25 A. No, these are my own notes. 42 (Pages 165 to 168) OUELLETTE & MA LDIN O COURT REPORTERS, INC. EFTA01130182 Page 169 1 Q. In the middle of the page you discuss TD Bank 2 misconduct, do you see that or there are notes regarding 3 TD misconduct? 4 A. Yes. 5 Q. Do either of the first two entries, providing 6 investors with false TD account statements or fraudulent 7 written assurances or lock letters, do either of those 8 alleged conduct apply to the Marlin or Beverly 9 investors? 10 A. Yes. Q. Do you believe that -- is it your 12 understanding that those investors received false 13 account statements? 14 A. I don't remember whether they personally 15 received false account statements nor do I consider it 16 of particular significance whether they received false 17 account statements personally or not. The fact that 18 TD Bank aided and abetted this fraud by providing false 19 account statements is what is significant, not which 20 particular investors received them. 21 Q. On your expert disclosure, Exhibit 5, it 22 appears that you were just opining on the aiding and 23 abetting claims and the punitive damages that might 24 result from those claims. Correct? 25 A. I'm sorry, but I am not seeing the language Page 171 1 I would agree with you. 2 Q. And, sir, you have done jury research projects 3 during your time as an attorney. Correct? 4 A. I have. 5 Q. And you have done jury research projects where 6 there are several different pools of juries within those 7 research projects. Correct? 8 A. I have. 9 Q. And those juries have come back with vastly 10 different results at times during those research II projects? 12 A. There indeed have been times where different 13 juries have come back with different results, that is 14 correct. Part of that process is an effort to try to 15 assess the consequences of taking different approaches 16 to the presentation of evidence in order to see the 17 extent to which it impacts upon the results obtained 18 from a jury. So, you -- you change the input. You 19 anticipate that there is going to be a change in the 20 output. 21 Q. Have you ever taken a case to verdict where 22 you thought you had a good punitive damages claim but 23 the jury did not return a punitive damages verdict? 24 A. I am sure that that has happened to me. 25 Q. How many times? Page 170 I from which you draw that conclusion. 2 Q. Let me ask it another way. 3 Are you offering opinions on the Razorback 4 matter on the current pending motion for sanctions in 5 the Razorback matter? 6 A. No, no, but you said aiding and abetting and I 7 thought the intent of that question was to carve out 8 conspiracy. 9 Q. No, I'm sorry, I was attempting to limit it to I 0 Beverly and Marlin, but it's clear you are not offering II opinions on the Razorback sanctions proceedings. A. No. 13 Q. Wouldn't you agree with me, sir, that 14 reasonable juries can reach different results on the 15 same evidence? 16 A. Absolutely. 17 Q. Wouldn't you also agree with me that there is I8 no way to reliably predict exactly what a jury will do 19 with a specified fact pattern? 20 A. I agree with that statement as you have state 21 it had. 22 Q. And would you agree with me that there is no 23 way to reliably predict the amount of punitive damages 24 that a jury would award in any specific matter? 25 A. If you are talking about an exact prediction, Page 172 1 A. I do my best to forget the losses. I can't 2 tell you how many times and I don't keep -- I don't keep 3 a track record like that so it would be impossible for 4 me to tell you but there is no question about the fact 5 that there have been times in the past. And it has been 6 more than once when I have prosecuted a punitive damage 7 claim and have not gotten punitive damages. 8 Q. And isn't it true, sir, that that's just part 9 of being a trial attorney? In our profession, we really 10 don't know what's going to happen when a jury goes back 11 in that room? 12 A. It is true that there are significant 13 uncertainties involved in our profession and if that 14 were not the case no lawsuits would go to trial. They IS would all be settled. It is as a consequence of 16 differences in opinion with regard to the value of 17 claims that cases get tried and so the mere fact that 18 there are trials is empirical evidence of the fact that 19 different lawyers and sometimes very experienced lawyers 20 have different views of the likely outcome of contested 21 litigation, yes. 22 Q. I think that's all I have right now, sir. 23 Thank you. 24 A. What a relief that is. 25 MR. GENOVESE: You are not done yet. I don't 43 (Pages 169 to 172) OUELLETTE & MA LDIN O COURT REPORTERS, INC. EFTA01130183 Page 173 Page 175 I have a lot. 2 CROSS-EXAMINATION 3 BY MR. GENOVESE: 4 Q. John Genovese. I said hello this morning, 5 Mr. Scarola. 6 Have you ever represented a client in 7 connection either the defense or the plaintiff's side in 8 a tort claim arising out of a Ponzi scheme? 9 A. Yes, and I am trying -- it would not have been 10 the defense side. It would have been the plaintiff 11 side. I have never defended a Ponzi schemer, and 1 know 12 that it has happened in the past but as I am sitting 13 here right now, I can't remember the particular 14 circumstances or even whether it was more than one time. 15 But I am sure that it's been at least once. 16 Q. So the -- all the testimony you gave regarding 17 your general understanding of conspiracy and aiding and 18 abetting under Florida law would be broadly construed 19 and not -- you weren't talking about personal experience 20 and knowledge about how those principle have been 21 applied in Ponzi schemes? 22 A. That is correct, although I -- I have 23 prosecuted cases involving conspiracy and aiding and 24 abetting frauds in general, although I don't remember 25 specifically a conspiracy or aiding and abetting Ponzi 1 last clause a little bit later but as to that statement, 2 let me ask you a question by way of clarification. I 3 understand that you have accumulated a vast amount of 4 knowledge, per your testimony, about TD Bank's 5 misconduct in the course of the Ponzi scheme. Correct? 6 A. I don't -- I don't know that -- I don't know 7 what you mean by vast. I have reviewed a lot of 8 materials. I have become familiar with TD Bank's 9 misconduct, yes. 10 Q. And I understand your testimony to be that 11 with respect to the plaintiffs ability to establish his 12 viable nonspeculative and valuable claims as to each 13 individual plaintiff to establish liability, you have 14 suggested to Mr. Hutchinson that you are making that 15 assumption and you have asked him to show you or suggest 16 to you facts as to a particular plaintiff that would 17 cause you to recede from that statement. Do I 18 understand that's been your testimony? 19 A. I think in general that's true. What I have 20 said is I have assumed the accuracy of the facts as 21 alleged in the complaint. There are other materials 22 that have corroborated the accuracy of those allegations 23 and I am absolutely open to consider any hypothetical 24 that would ask me to alter those assumptions and I will 25 tell you whether that alters my opinion. Page 174 I scheme case. But those are issues that I have 2 researched in the context of fraud claims in the past 3 and prosecuted in the context of fraud claims. 4 Q. And 1 understand that you believe there is 5 nothing different about the general application to that 6 law to a Ponzi scheme? 7 A. Yeah, a Ponzi scheme is just a kind of fraud. 8 I don't think that there is anything that would 9 distinguish that from other fraud claims. 10 Q. It's frequently bigger? 11 A. That is correct and involves more victims. 12 Q. Agreed. 13 I am looking at the TD Bank victims' notice of 14 filing expert disclosures that was referred to by 15 Mr. Hutchinson before and the description I think you 16 said that you probably spoke about it, you didn't draft 17 it but it was prepared by counsel or filed by counsel 18 who you are appearing in connection with this deposition 19 with. 20 It says that you will testify that the TD Bank 21 victim's claims for aiding and abetting fraud and 22 conspiracy to commit fraud against TD Bank are viable, 23 nonspeculative and valuable claims with a high 24 probability of success if tried to a jury. 25 I am not finishing. I will come back to the Page 176 Q. Okay. But this statement really is a result 2 of significantly more knowledge that you have about TD's 3 conduct than you have about the bona fides of multiple 4 plaintiffs' claims. Is that a fair statement? 5 A. I am not sure what the distinction is that you 6 are trying to draw. The plaintiffs' claims are based 7 upon TD's misconduct. 8 Q. No, the plaintiffs' claims have to be based 9 upon their individual establishment of elements of a 10 cause of action including their damages, their -- those 11 individual damages were caused by a specific conduct. 12 Those are elements of proof that require a case by case 13 plaintiff evaluation by a jury to meet each of the 14 elements of the cause of action. That's a fair 15 statement, isn't it? 16 A. Only to a very limited extent in this context. 17 There was a Ponzi scheme that was operated in a uniform 18 manner. Scott Rothstein solicited investments in 19 nonexistent or fraudulent settlements and he sold those 20 investments to a variety of individuals and 21 institutional investors, and there was a uniform sales 22 pitch that was used as I understand the facts in order 23 to induce those investments. The facts that are 24 different in each case are the amount that was invested 25 and the amount that was lost so that's where I have 44 (Pages 173 to 176) OUELLETTE & MA LDIN O COURT REPORTERS, INC. EFTA01130184 Page 177 1 repeatedly gone back to my statement that if you want me 2 to assume that somebody really wasn't an investor in the 3 Ponzi scheme and really didn't lose money, I can make 4 that assumption and I will then tell you they don't have 5 a claim. 6 Q. Let me. Since you talked about the Coquina 7 case, let me read you a particular instruction of the 8 Coquina case and ask you if in your view it would be an 9 agreed instruction or an instruction that a judge in 10 state court were likely to give the jury in connection 11 with this. I am reading from page 22 to 27 of document 12 filed 4599 filed in the Coquina case on its docket. 13 TD Bank has asserted a waiver defense. Waiver 14 is a defense to a charge of fraud where the party 15 claiming to have been defrauded discovered or reasonably 16 should have discovered the nature of the deception 17 through ordinary diligence. The intent to weigh the 18 claim of fraud may be inferred from a party's conduct 19 and the surrounding circumstances. In order for you to 20 find that the plaintiffs waived their rights to recover 21 damages from the alleged fraud you must find that 22 Coquina had actual or constructive knowledge of 23 Rothstein's fraudulent activity yet continued to invest. 24 You understood what I read to you. Right? 25 A. I did understand what you read. Page 179 1 Q. And rarely do both counsel say absolutely, 2 Judge, we agree to those proposed instructions? 3 A. Well, agreement to proposed instructions is 4 very common. Agreement to all proposed instructions is 5 uncommon. 6 Q. It would be rare. Correct? Unusual? 7 A. I don't know that it would be rare but more 8 often than not there is something about the proposed 9 instructions that lawyers wind up disagreeing about and 10 require the court's intervention to dissolve that 11 disagreement. 12 Q. Do you think in Beverly and Marlin cases that 13 an instruction to the jury suggesting that they may have 14 waived their claims by not adequately diligently 15 investigating or having actual knowledge of 16 circumstances to put them on notice, don't you think it 17 a possibility that that defense will be asserted in the 18 Beverly and Marlin case? 19 MR. MOSKOWITZ: Objection. Improper 20 hypothetical. 21 A. Again, there seemed to be multiple questions 22 there so let me try to break it down and respond as best 23 I can based upon the various issues raised. 24 Do I think that the defense may attempt to 25 raise a waiver defense? The answer to that question is Page 178 1 Q. I take it from your testimony that you are 2 assuming that for each of the plaintiffs that their 3 diligence was reasonable and they had no reason to 4 suspect that there was a Ponzi and that they didn't 5 continue to invest after either having indications of 6 things that should have led them to conduct diligence or 7 actual knowledge that there was something wrong with the 8 Rothstein investment? 9 MR. MOSKOWITZ: If I could just get an 10 objection on the record. It's a hypothetical jury 11 instruction from another case with different claims 12 and different -- it's not talking about the Beverly 13 and Marlin jury instructions. 14 A. I heard a whole lot of questions there. I am 15 having a little bit of difficulty because there seemed 16 to be a lot of questions that you have asked. You first 17 started off by asking me whether I would think that the 18 instruction you were about to read was one that would be 19 an agreed to instruction. Is that --- 20 Q. Let me -- I was trying. There is a limited 21 amount of time and I don't want to impose on your time 22 as unnecessary but isn't it the case in your experience 23 that counsel submit -- each side submits proposed jury 24 instructions? 25 A. Yes. Page 180 it's pretty likely that if in the context of Coquina the 2 defense was successful in having a waiver defense raised 3 and having the jury instructed with regard to waiver, 4 the defense will probably try to do the same thing in 5 these cases. 6 Now, I haven't looked at which claims actually 7 went to the jury in Coquina and I don't know whether any 8 difference in the nature of the claims that went to the 9 jury in Coquina may have an impact upon the ability to 10 raise a waiver defense but that instruction talks about 11 two different things, a lack of adequate due diligence, 12 an actual knowledge of the fraud. It is my 13 understanding of Florida law that negligence is not a 14 defense to an intentional fraud so that to the extent 15 that there is some suggestion that a lack of due 16 diligence, a negligent investigation could bar a 17 victim's claim based upon intentional fraud, I have a 18 very strong opinion that that instruction is erroneous 19 in the context of a conspiracy and aiding, abetting and 20 intentional fraud claim. 21 To the extent that the instruction talks about 22 intentionally investing in a known fraud as opposed to 23 negligence in having failed to detect the fraud, I 24 wouldn't have any problem with that instruction at all, 25 if, in fact, there were evidence to support it, evidence 45 (Pages 177 to 180) OUELLETTE & MA LDIN O COURT REPORTERS, INC. EFTA01130185 Page 181 1 from which a jury could conclude that somebody actually 2 knew this was a Ponzi scheme and they figured I'm 3 getting in early enough so that I can be one of those 4 folks who manages to get paid before this all unravels. 5 Anybody in that position doesn't have a valid claim and 6 has waived any ability to prosecute a claim. 7 Q. Okay. So you dispute the concept of an 8 appropriate statement of the law that a party that could 9 have, reasonably should have discovered through ordinary 10 diligence the nature of the deception. Is that your II dispute? 12 A. Ycs. 13 Q. To that instruction? 14 A. Ycs. IS Q. Let's talk about the variables that could 16 affect a jury verdict. Let me hit on some of them. 17 Obviously, the facts, the facts are critical to jury 18 verdict for both liability and punitive damages? 19 A. Clearly. 20 Q. And the judge has an ability to affect, 21 certainly, punitive damages because in Florida the judge 22 makes the initial determination as to whether you get to 23 have punitive damages in your case? 24 A. I agree, leave must be granted to assert a 25 claim for punitive damages. Page 183 1 compensatory recovery but experts are generally not 2 testifying as to the amount of punitive damages. 3 Q. Well, we will get to that in a moment but they 4 frequently testify in punitive damages as to the 5 defendant's ability to pay so that you don't put them 6 out of business. That's a frequent source of expert 7 testimony on punitive damages? 8 A. It is a source of testimony relating to 9 punitive damages but it's -- the pecuniary circumstances 10 of the defendant very frequently are not a significantly I I contested matter, particularly when you are talking 12 about publicly traded entities, entities that are 13 required to file 10Ks and I0Qs. The numbers are there 14 and the numbers are what the numbers are, and often 15 there are stipulations with regard to the relevant 16 issues concerning pecuniary circumstances. 17 Q. Let me revert for a question that's been 18 handed to me, so if you think it's out order, it's not 19 my fault. 20 A. Objection, out of order. 21 Q. I don't mean out of order in the sense as 22 impolite. I mean out of chronological order. 23 MR. MOSKOWITZ: Bill does it all the time to 24 me. 25 BY MR. GENOVESE: Page 182 I Q. And while we know Judge Streitfeld is familiar 2 with this case, has these cases, the Beverly and Marlin 3 cases, and he appears to be in good health, judges get 4 ill like the rest of us. While I wouldn't expect it of 5 Judge Streitfeld, judges have problems with JQC 6 periodically or judges change their mind and decide 7 they're going to retire? 8 A. We can agree without impugning anyone's 9 integrity that there are a whole variety of reasons why 10 the judge you have today may not be the judge you have II tomorrow. 12 Q. And appellate courts also come into play as to 13 whether, as you have testified, you have won them, lost 14 them and gone up and had different results on appeal, I5 good and bad, that has all happened? 16 A. It 17 Q. That is a variable that would affect the I8 ability to get punitives or the amount of punitives. 19 Correct? 20 A. Indeed it is. 21 Q. And the quality of the experts on both sides 22 affects the ability to get an amount of punitive 23 damages. Correct? 24 A. In the context of the prosecution of the 25 underlying claim, expert testimony may impact upon the Page 184 Q. Nobody is passing me stickies. 2 An investor who used the usurious rate of 3 return or was intended to receive for the investment 4 what appeared to be an usurious rate of return on 5 investment, would you consider that to be something that 6 a jury should consider in measuring whether the 7 plaintiff had knowledge of a fraudulent scheme? 8 A. We are taking this out of the context of these 9 investments. 10 Q. I am just asking you this hypothetical. 11 A. If it were to be a different kind of fraud 12 where there were an obvious violation of the usury 13 rates, that might have some relevance to the issue of 14 whether there was actual knowledge that this was a Ponzi 15 scheme, a fraudulent investment, but there would need to 16 be some evidence of actual knowledge. 17 Q. Correct. But were there evidence or any other 18 illegalities that the plaintiff was aware of surrounding 19 the scheme that would go to a jury and a jury would 20 evaluate whether that would create a defense? 21 A. I have difficulty with a question that is as 22 vaguely worded as that one is or any other knowledge of 23 illegality. You know, give me a specific example and I 24 will try to assess that -- excuse me, I'm sorry for 25 moving -- I will try to give you a response to that 46 (Pages 181 to 184) OUELLETTE & MA LDIN O COURT REPORTERS, INC. EFTA01130186 Page 185 Page 187 1 specific example. 2 Q. In a hypothetical I gave you that you don't 3 think exists, if it is the investor who would be getting 4 the usurious rates who is conflicting Florida law as 5 well. Correct? 6 A. An investor who is charging an usurious rate 7 of interest for a loan is violating the usury laws by 8 definition. 9 Q. Getting back to the -- getting back to the 10 variables, the quality of the lawycring on both sides of 11 the case affects whether there will be punitive damages 12 and the amount of punitive damages? 13 A. That is true. 14 Q. And when you are dealing with a large IS plaintiff group, is it possible that certain of the 16 plaintiff group would be delighted with compensatory 17 damages or something less and others want to roll the 18 dice and go the distance for maximum punitive damages is 19 that fairly the usually the case in a large plaintiff 20 group? 21 A. There could be differences of opinion as to 22 the degree of risk that plaintiffs arc willing to take 23 in a litigation process, yes. 24 Q. So it's not uncommon for some plaintiffs to 25 peel off from the plaintiffs' group and settle? 1 2 3 4 5 6 7 8 9 10 1 I I/ 13 14 15 16 17 18 19 20 21 22 23 24 25 doesn't happen. Q. Certainly it's more difficult in federal court because the judges generally are the ones that ask the questions, correct, as opposed to state court? A. My most recent experience in federal court has been that you get at least some voir dire. There seems to be some erosion of the most restrictive approaches to voir dire in federal court. Q. And you were asked about studies of jury verdicts by Mr. Hutchinson a few moments ago. Are you aware of any current or did you rely on any current studies in Broward County for awards in cases involving Ponzi schemes? A. No, I did not rely upon any historical results regarding Ponzi scheme. Q. The only historical report that you have relied upon has been the Coquina case? A. That is correct. Well, that's not entirely correct. The only historical results I have relied upon are the historical results that relate particularly to claims against TD Bank, not only the jury verdicts but the settlements as well, which I think are relevant and material. Q. We will get to that in a moment. Let me ask you, turning back to the use of financial information in Page 186 A. It really depends upon the circumstances. 2 There are frequently joint prosecution agreements that 3 impose limitations on the ability of parties to do that 4 when an agreement has been made that the case will be 5 prosecuted jointly. 6 Q. You are not aware one way or another in 7 connection with the Beverly and Marlin case if that is 8 present here? 9 A. Don't know. I0 Q. I'll get to probably the most important II question suggesting that your partner Chris Searcy at 12 every .INC interview says, how would you treat lawyer 13 voir dire to judge applicants. I suspect you know the 14 answer to what he wants to hear. 15 A. Oh, I absolutely know the answer to what the 16 Chris wants to hear, yes. 17 Q. Because you want to have the jury 90 percent IS in your corner by the time you're done with voir dire. 19 Correct? 20 A. No, sir. No, my desire is to have the jury 21 100 percent in my corner by the time I'm finished with 22 voir dire, although we all know that that's an 23 impractical and unachievable objective. Every trial 24 lawyer would like to know that every juror is 25 100 percent behind him before opening statements. It 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page IN\ the punitive phase, I assume you have been involved in offering examining or cross-examining witnesses that are testifying about the financial ability of the defendant to withstand a punitive award. Correct? A. Yes. Q. Almost every case against a major corporate defendant, a bank, a corporation, an automobile manufacturer, I assume has that kind of evidence that goes to the jury. Correct? A. Yes. Q. Have you ever seen in a financial statement, in any of those cases, a valuation done by a defendant or its auditors of a contingency recovery, not in that case but relating to an asset that they have that is a contingency claim? A. You are talking about a circumstance where what appears in the audited financial statement is an evaluation of a claim as an asset as opposed to an evaluation of a claim as a liability. Q. Value of an asset or a liability of an unrelated case, meaning when you look at the defendants financial condition have you ever seen a financial statement, which lists as an asset or a liability a projected punitive award? A. I have seen in corporate financial statements 47 (Pages 185 to 188) OUELLETTE & MA LDIN O COURT REPORTERS, INC. EFTA01130187 Page 189 1 evaluations of claims as liabilities. I don't have a 2 recollection of seeing in corporate financial statements 3 an assessment or an evaluation of a claim as an asset. 4 Q. You may have seen reserves, correct, for 5 litigation? 6 A. I have seen litigation reserves and 7 expressions of the value of potential liabilities in 8 financial statements. 9 Q. But not a specific amount for punitive 10 damages? A. I don't recall seeing a separate amount 12 designated as punitive damages. The overall liability 13 is assessed and where there is a punitive damages claim, 14 that's noted as part of the assessment of the overall 15 liability. 16 Q. That's the claim but not the entities' opinion 17 as to what the punitive award would be? 18 A. It's not separate and apart from the 19 compensatory award. It is an overall assessment of the 20 exposure. 21 Q. One last variable was change in the law 22 regarding the ability to get punitive damages. That's 23 always a variability that's out there? 24 A. Yes, it is. 25 Q. And, in fact, the statutes you were asked Page 191 1 damage case for that purpose? 2 A. Well, the one circumstance that I told you 3 about. 4 Q. The Farish case? 5 A. The Farish case, right, was a case in which an 6 opinion was expressed regarding the value of the 7 punitive damage claim for purposes of assessing the 8 compensatory loss. 9 Q. Was that your case? Were you involved in 10 that? 11 A. Ycs. 12 Q. Other than that case do you have a belief, 13 generally, about if you tried to offer someone just like 14 yourself in the Beverly and Marlin case to express an 15 opinion on the amount of punitive damages to be awarded 16 to each plaintiff in that cast, would that be allowed by 17 the trial judge? 18 A. No. 19 Q. Why is that? 20 A. Because that would be an effort to invade the 21 province of the jury in the context of assessing the 22 amount of punitive damages that would be appropriate in 23 that case. However, I can think of circumstances where 24 that kind of testimony with regard to the Beverly and 25 Marlin cases would be appropriate and Farish is a good Page 190 1 about whereas I understand it changes to the common law 2 or limitations on the amount of the punitives that could 3 be recovered. Correct? 4 A. That is correct. 5 Q. Are you aware of Florida cases which suggest 6 in the context of the enactment of the statutes we 7 referred to that the right to punitive damages is not a 8 present property right? 9 A. I am. 10 Q. You agree with that statement? 11 A. I must accept it to be true. It is the 12 prevailing law of the State of Florida at the present 13 time. 14 Q. You believe the testimony you are giving today 15 is relevant? 16 A. I really think that that's a bankruptcy law 17 question, and I haven't been asked to form an opinion 18 about that. But my general understanding is that it is 19 relevant but that's not something that I am opining as 20 an expert on. 21 Q. Okay. From what I understood from your prior 22 testimony that you have never testified in this capacity 23 to opine on the likely range of punitive damage award? 24 A. Correct. 25 Q. You have never called a witness in a punitive Page lo: 1 example. If someone were to steal Mr. Moskowitz's and 2 Mr. Scherer's cases from them, if they were to 3 tortiously interfere with their contracts with their 4 clients by lying to their clients about something that 5 caused their clients to leave them, then it very well 6 may be appropriate to offer expert witness testimony 7 about the value of those claims in the hands of 8 Mr. Moskowitz and Mr. Scherer in order to assess their 9 compensatory damages for having lost cases that were 10 stolen from them that included viable punitive damages 11 claims. 12 That's the contention in which this arose from 13 Farish. While it is a highly unusual circumstance, it 14 is not one that is outside of what would be easily 15 conceivable as appropriate. 16 Q. And is the only one you could think of in 17 41 years may have occurred at the time in which you had 18 two children and no grandchildren? 19 A. What's the date on the opinion? 20 Q. I thought it was old. 21 A. It's old. It's pretty old but so are my kids. 22 My oldest grandchild is 18, so it was probably before my 23 first grandchild but we were well into kids by then. 24 MR. MOSKOWITZ: John, do you know about how 25 much time have you left? 48 (Pages 189 to 192) OUELLETTE & MA LDIN O COURT REPORTERS, INC. EFTA01130188 Page 193 Page 195 1 MR. GENOVESE: I would say not more than half 2 hour. 3 MR. MOSKOWITZ: Do you want a break? 4 THE WITNESS: No, I am fine. Press on. 5 BY MR. GENOVESE: 6 Q. Explain to me what you believe to be the 7 concept of mitigation as it relates to a jury 8 instruction. 9 A. Mitigation is the obligation on the part of an 10 injured party to take reasonable measures to limit or 11 avoid damages which may be limited or avoided through 12 reasonable measures, and it is generally a jury question 13 as to what is reasonable under the particular 14 circumstances of both the case and the injured party. 15 Q. The example of one of the cases, if you can 16 recall, is I get terminated from my job. I then just 17 can't sit home for a year. I have to go find another 18 job. I have to try to minimize the damages to the 19 plaintiff. Right? 20 A. That would be a good example and part of what 21 I am suggesting to you is that doesn't mean you are 22 obliged to leave your family and move to Alaska to work 23 the pipeline. 24 Q. Right, because the case law talks about 25 reasonable measures without exposing oneself to 1 Q. Are you familiar with the plan of 2 reorganization that's before the Court now that this 3 deposition is taken in connection with? 4 A. Fortunately, no. 5 Q. Not all of us can say that. 6 Do you believe that a jury could consider the 7 efforts of TD Bank to support and contribute to 8 substantial recovery by the Beverly and Marlin 9 plaintiffs as an effort to cause mitigation of their 10 damages? 11 A. I think that that might be a relevant factor 12 in mitigation of punitive damages, yes. It might be. 13 Q. You previously talked about the corrective 14 behavior that's required of, that you would like to see 15 TD Bank engage in so as to limit their punitive damages. 16 Do you recall that testimony? 17 A. There was some reference to it, yes, to that. 18 Q. And you talked about corrective action 19 internally, meaning you streamlined or focused your 20 policies and procedures to prevent this kind of thing 21 that happened. That would be some remedial action that 22 they could take? 23 A. It would be. 24 Q. Are you aware that both the Banyon trustee and 25 the RRA trustee have basically mirror image settlements Page 194 1 humiliation and undue hardship. Correct? 2 A. Without incurring financial obligations that 3 are beyond your means, yeah. I mean, there are --- 4 Q. You have seen bankruptcy restitution claims? 5 A. I have. 6 Q. You have seen that they are always relatively 7 simple documents. Correct? 8 A. Yes. 9 Q. Have you ever seen a criminal restitution I0 claim? I I A. I have. 12 Q. A little more complicated? 13 A. Yes. 14 Q. A little? 15 A. It's been a while since I've seen a criminal 16 restitution claim and I have never compared them for 17 purposes of judging complexity. IS Q. Do you think that a jury might conclude that a 19 victim of the Rothstein Ponzi might believe that the 20 filing of a criminal restitution claim or bankruptcy 21 claim is a step towards mitigation of the damages? 22 A. Maybe. 23 Q. You said it would be a jury question? 24 A. The reasonableness of mitigation is most 25 frequently a jury question, that's correct. Page 196 1 with TD Bank? Are you aware of that? 2 A. I have read press accounts in that regard. 3 Q. And are you aware that in those settlements 4 and in the plan parties that have never made demand on 5 TD Bank, never filed lawsuits against TD Bank are to be 6 paid? Are you aware of that? 7 MR. MOSKOWITZ: Objection. Mischaracterizes S the evidence in the record. 9 A. I don't have knowledge of any of those 10 details, no. 11 BY MR. GENOVESE: 12 Q. But if, in fact, we assume that that's the 13 case, that there are settlements and a plan which 14 proposes to pay victims of the Rothstein Ponzi that have 15 not sued TD or made demand on TD and TD otherwise has no 16 present obligation to pay, do you believe that to be 17 using your words efforts that a jury could consider to 18 be corrective or remedial in the context of a punitive 19 damages award? 20 A. They may consider them as remedial. They 21 might also consider them as an effort to avoid a 22 significantly greater liability. 23 Q. A jury would evaluate whether that was a 24 positive thing to do or whether it is a self-serving or 25 self-interested thing to do? 49 (Pages 193 to 1%) OUELLETTE & MA LDIN O COURT REPORTERS, INC. EFTA01130189 Page Pr." Page 199 A. It may very well be a factor that could 2 appropriately be presented to a jury in a second stage 3 proceeding, yes. 4 Q. But I can tell from the tone of your answers 5 that the opinions you formulated didn't consider what 6 I'm asking you now. 7 A. I was not in a position to consider facts that 8 I didn't know and I am telling you that I was not 9 specifically aware of those facts, that's correct. 10 Q. If there is a mechanism in place for the 11 Beverly and the Marlin plaintiffs to be paid claims from 12 the bankruptcy estates and potentially still pursue 13 their state court cases and punitive damage awards, 14 would that evidence be something the jury would consider IS in connection with evaluating the amount of the punitive 16 award against TD Bank? 17 A. I would need to know more about that mechanism 18 and TD Bank's role and motivation in involving itself in 19 that mechanism. 20 Q. Obviously, you don't have the plan so you 21 can't -- probably if you saw it I guess it would be 22 mystery to you because to some of us we forget what's in 23 it because it's like a phone book. 24 You talk generally about the nature of 25 conspiracy and aiding and abetting. I the evidence. 2 A. I have not undertaken to make any assessment 3 of what's going on in the bankruptcy case. 4 My understanding of my role has been to assess 5 the value of the Beverly and Marlin plaintiffs' claims, 6 primarily from a punitive damage perspective, assuming 7 those claims were prosecuted in circuit court. 8 BY MR. GENOVESE: 9 Q. Are you aware of any attributes of their 10 claims that would be any different than someone who 11 isn't here who just invested money through Banyon, for 12 instance, in the Rothstein Ponzi? Are you aware of 13 anything separating them from investors generally? 14 A. I am not aware of anything separating them IS from investors generally that would have an impact upon 16 those matters about which I am opining. 17 Q. And putting affirmative defenses aside, you do 18 understand that Mr. Stettin, as trustee for the RRA 19 case, is settling a litigation subsumed by the plan 20 which asserts that the firm was harmed through 21 Rothstein's misuse of the firm and the facilitation of 22 that misuse by TD Bank, you understand Mr. Stettin has a 23 pending complaint --- 24 A. On behalf of RRA, yes. 25 Q. And while there is not yet and hopefully not a Page 198 Would every investor -- under your analysis, 2 would every investor who lost money in the Rothstein 3 Ponzi scheme have the same kind of claims that the 4 Beverly Marlin Group have? 5 A. You have pointed out at least one exception 6 and that one exception would be those who invested with 7 actual knowledge in advance of the fraud. 8 Q. Thank you for pointing that out. 9 A. You did. 10 Q. I didn't mean one that would have a -- they 11 would have a claim but not a very successful claim, that 12 party. That party would get an involuntary dismissal at 13 the end of the case? 14 A. Assuming that evidence were uncontested, yes. 15 Q. So, putting those people aside, every investor 16 in the Rothstein Ponzi scheme, be it directly giving 17 money to the Rothstein firm or to the Banyon entities, 18 every one of them could pursue exactly the claims that 19 Beverly and Marlin were pursuing unless they were 20 complicit or co-conspirators. Correct? 21 A. I can't think of an exception right now. 22 Q. Do you understand that the damages being 23 sought by Beverly and Marlin are reflected in the proof 24 of claims filed in the bankruptcy estate? 25 MR. MOSKOWITZ: Objection. Mischaracterizes Page 21M) 1 Banyon case but that the trustee of Banyon has asserted 2 that it has similar claims against TD Bank for aiding 3 and abetting and conspiring with Rothstein and others in 4 perpetuating the Ponzi scheme? 5 A. Okay. 6 Q. Do you see any difference between those 7 claims, other than the affirmative defenses that could 8 be asserted against those plaintiffs, Mr. Stettin and 9 Mr. Furr on behalf of Banyon? Do you see any difference 10 fundamentally between those claims and the claims 11 asserted in the Beverly and Marlin case? 12 MR. MOSKOWITZ: Objection. Outside the scope 13 of his expertise. 14 A. Are you asking me whether there is any 15 difference between the claims by Rothstein, Rosenfeldt 16 and Adler and the claims of Ponzi scheme investors. 17 BY MR. GENOVESE: 18 Q. If you assume that Mr. FUR for Banyon and 19 Mr. Stettin for RRA are seeking to recover for the 20 benefit of Ponzi investors, do you see anything 21 different with regard to their claims? 22 A. I'm sorry, but I am confused by that question. 23 Whatever losses were sustained by RRA I assume were not 24 sustained as a consequence of RRA investing in the Ponzi 25 scheme? Is that an incorrect assumption? 50 (Pages 197 to 200) OUELLETTE & MA LDIN O COURT REPORTERS, INC. EFTA01130190 Page 201 Page 203 1 Q. I will withdraw and rephrase the question. 2 If RRA -- if Stettin, as the Trustee of RRA, 3 were seeking to recover from damages from the Ponzi 4 scheme measured by the victim's out-of-pocket losses, 5 would the claims be essentially the same or you don't 6 have enough information to evaluate that? 7 A. I really don't. 8 Q. Do you understand the compensatory damages 9 sought in the Beverly and Marlin actions, putting aside 10 prejudgment interest, the compensatory damage portion, II do you understand those damages to be the out-of-pocket 12 losses that each of those investor victim's suffered? 13 A. Yes. 14 Q. Would you assume that to be a net amount? 15 put in a hundred dollars, I got repaid $50 and my 16 remaining claim is $50? 17 A. I have not sought to assess the manner in 18 which the compensatory loss has been calculated. I have 19 expressed my opinion in terms of a multiple of the 20 compensatory loss, whatever it is determined to be. 21 Q. Wouldn't you assume in a Ponzi scheme -- 22 because you have analogized it to fraud generally, 23 wouldn't you assume that damages in fraud generally for 24 a Ponzi scheme would consist of a party's actual 25 out-of-pocket losses? I the first paragraph? 2 A. Yes, I see that language. 3 Q. We have only had one jury award in connection 4 -- on appeal in connection with the Coquina case. 5 Correct? 6 A. Yes. 7 Q. And you do know that that was a group but 8 essentially one plaintiff. It was an entity that was an 9 investment entity. You understand that? 10 A. Yes, I was aware of that generally. 11 Q. And the instructions in that case -- did you 12 ever look at the jury instructions? 13 A. I did not. 14 Q. Would it surprise you that as plead in 15 Mr. Scherer's motion for punitives in front of Judge 16 Streitfeld, in Coquina there were direct meetings with 17 TD Bank officers, the providing of lock letters by 18 Spinosa, these shows at the bank with the involvement of 19 the bank, you understand that the extent of those 20 instructions and the extent of privity between TD and 21 the plaintiffs are significantly different than those 22 which exist in the Beverly and Marlin case. Correct? 23 A. I have assumed that the degree of direct 24 contact in Coquina was greater than the degree of direct 25 contact in Beverly and Marlin, yes. Page 202 1 A. No, not necessarily. There are two ways in 2 which to measure damages for fraud. One is the 3 out-of-pocket methodology. The other is the method of 4 the bargain methodology. Florida law recognizes both 5 and permits recovery under that theory which best makes 6 the victim of the fraud whole. 7 Q. My assumption here is that the plaintiffs 8 would not argue that they deserve the benefit of an 9 illegal bargain. Wouldn't that be your assumption? 10 A. I would assume that the plaintiffs would not 11 make an argument that they are entitled to the benefit 12 of an illegal bargain, yes. 13 Q. So, what's remaining is their actual losses, 14 their actual net losses. Is that a fair statement? 15 A. If, in fact, the bargain was illegal, what 16 remains is the out-of-pocket measure of damages. 17 Q. You have indicated or your counsel has 18 indicated in the statement you adopted, the last half of 19 the nature and substance of opinion, the first part you 20 said nonspeculative, valuable with a high probability of 21 success. The last part are, or are likely to be 22 resolved through pretrial settlement with TD based on 23 the outcome of similar cases in which investors damaged 24 by the Rothstein fraud sued TD Bank. You have that in 25 front of you apparently. Do you see the last half of Page 204 1 Q. And in the Coquina case that you're using as 2 precedent, the punitives to compensatory damages, what 3 was the ratio? 4 A. A little bit greater than one-to-one if recall 5 correctly. 6 Q. Okay. So it's one-to-one. The only 7 settlements that would -- let me withdraw that question. 8 Fairly early after the Coquina trial -- let me 9 withdraw that question. 10 There were multiple motions about discovery 11 issues and the failure of TD to comply with discovery 12 request appropriately during the Coquina trial. Are you 13 aware of that? 14 A. Yes. 15 Q. And after the Coquina trial in the subsequent 16 case documents that we referred to here today -- is it 17 the CDD? 18 A. CDD. 19 Q. In the Emess case you are aware that an un -- 20 I wouldn't say unredacted but an actual color copy of a 21 document that had been produced in black and white in 22 the Coquina case came out in the Emess case? 23 A. Yes. 24 Q. You understand the lawyer that was to try the 25 Emess case was the same lawyer who tried the Coquina 51 (Pages 201 to 204) OUELLETTE & MA LDIN O COURT REPORTERS, INC. EFTA01130191 Page 205 Page 207 1 case? 2 A. I don't know that I remembered that. 3 Q. Would that be a fact that would be material to 4 you if it's true? 5 A. Well, it depends on what question you are 6 going to ask me. 7 Q. Okay. Well, post Coquina verdict and post at 8 least sanction and discovery issues being raised, the 9 only settlement which has occurred in excess of 10 out-of-pocket losses that we talked about is the Emess 11 case. Are you aware of that? 12 A. I wasn't aware that that was the only 13 settlement that has occurred. I was aware that there 14 was a settlement in Emess that was in excess of the 15 out-of-pocket losses. 16 Q. Are you aware of any other settlement that is 17 in excess of the out-of-pocket losses since the Coquina 18 verdict? 19 A. What are you referring to as out-of-pocket 20 losses. 21 Q. Well, what we discussed, compensatory damages 22 consists of the plaintiffs' group's actual monetary 23 loss? 24 A. With or without prejudgment interest, with or 25 without fees and costs. I compensatory damages? 2 A. That's not what it says. It only says -- 3 MR. MOSKOWITZ: Have you read it twice, John. 4 You keep reading in some other words that says in 5 excess. That's not in there at all. You said 6 based on in excess. 7 BY MR. GENOVESE: 8 Q. Or likely to be resolved through a pretrial 9 settlement with TD Bank based on the outcome of similar 10 cases in which investors damaged by the Rothstein fraud II sued TD Bank? 12 MR. MOSKOWITZ: Yeah. 13 A. All this says is that these are viable claims. 14 They have been successfully prosecuted already and 15 others have been resolved through pretrial settlement 16 with TD Bank. 17 BY MR. GENOVESE: 18 Q. But you said or are likely to be resolved? 19 A. Yeah. 20 Q. So you are suggesting that the Beverly and 21 Marlin plaintiffs may settle this case, do I understand 22 that statement? 23 A. What that statement is intended to convey is 24 that these are viable claims and if they are prosecuted 25 in front of a jury they are likely to be successfully Page 206 1 Q. Exclude fees and cost. Exclude prejudgment 2 interest, any settlements other than Emess, which 3 exceeded the amount of out-of-pocket losses? 4 A. I had the impression that there were other 5 matters that were resolved that compensated victims 6 beyond the straight out-of-pocket loss number and 7 included interest and expenses incurred by the 8 plaintiffs. 9 Q. Can you point to those? 10 A. I don't have a recollection. 11 Q. Razorback settlement occurred shortly before 12 its scheduled trial and shortly after the Coquina 13 verdict and the damages sought out of pocket in the 14 Razorback case exclusive of prejudgment interest and 15 attorneys' fees, did you understand to be $186 million? 16 A. That number sounds familiar. 17 Q. So, on the heels of Coquina, Razorback settles 18 for 170 million and doesn't go to trial for punitive 19 damages. So, I am trying to understand the statement 20 here or likely to be resolved through a pretrial 21 settlement with TD Bank based on the outcome of similar 22 cases in which the investor was damaged by the Rothstein 23 fraud sued TD Bank. 24 I am trying to understand -- are you 25 suggesting that there be settlements in excess of Page 208 I prosecuted and if they are not successfully prosecuted 2 in front of a jury, it will be because they will settle 3 favorably. 4 MR. MOSKOWITZ: Could we maybe take a break? 5 We have been going two hours and 40 minutes. I 6 know you said you were going to be 20 more minutes. 7 THE WITNESS: How close are we. 8 MR. MOSKOWITZ: It's been 15 minutes. 9 MR. GENOVESE: Give me ten minutes, I'll 10 finish. 11 MR. SCHERER: You've got minutes. 12 MR. MOSKOWITZ: It's seven hours time. We can 13 get technical on tape time but it's been seven 14 hours of depositions. We started at 10:00. 15 MR. GENOVESE: We started at 10 after 10:00 16 but you can penalize me for the ten minutes. 17 BY MR. GENOVESE: 18 Q. Or likely to be resolved through pretrial 19 settlement with 'I'D Bank. 20 What I am trying to understand is, are you 21 suggesting that in the face of potential punitive 22 damages that there will be a settlement -- there may be 23 a settlement by the Beverly and Marlin Group? 24 A. I think that the potential punitive damage 25 exposure is a factor that is likely to be taken into 52 (Pages 205 to 208) OUELLETTE & MA LDIN O COURT REPORTERS, INC. EFTA01130192 Page 209 1 consideration whether the cases are tried or whether 2 they are settled, but this portion of the opinion is 3 only intended to convey that if the cases are prosecuted 4 through trial they are likely to be prosecuted 5 successfully and the only reason that I see for their 6 not being successfully prosecuted through trial is that 7 there is a settlement agreement. 8 Q. What I am trying to get at and these are -- 9 these are not your words but you adopted these words, I 10 am frying to understand if you are suggesting that the 11 existence of potential punitive damages claims would up 12 the likely settlement amount? 13 A. That's not addressed in this paragraph. I 14 don't think this paragraph says anything at all about 15 punitive damages. That's simply not addressed in that 16 paragraph, but if you are asking me whether I have an 17 opinion as to whether a viable punitive damage claim has 18 an influence on the likelihood of settlement, the answer 19 to that question is absolutely, yes, I believe that a 20 viable punitive damages claim does have an impact on 21 settlement negotiations. 22 Q. So, Razorback had a viable punitive damages 23 claim. It was about to go to the jury. Are you 24 familiar with the FEP settlement? 25 A. No. Page 211 I punitive damage claim will necessarily increase the 2 value of the settlement beyond the total compensatory 3 losses. It is -- it is often the case where it is the 4 presence of a viable punitive damage claim that enables 5 a plaintiff who has sustained a loss to get 100 percent 6 of their compensatory damages in a settlement context. 7 You usually don't get a hundred percent of your 8 compensatory damages when a case settles because a 9 settlement is a compromise. 10 Q. I understand. 11 A. It is a compromise of the total value of all 12 of your claims. 13 Q. So, was I -- I mean, I was just inferring that 14 this is what you were suggesting by this statement. Am IS I wrong in making that? 16 A. You are wrong. That paragraph says nothing 17 about punitive damages. 18 Q. All right. So, with the existence of punitive 19 damages claim, put your statement aside, John Mullin is 20 here somewhere representing Morse. Morse settled for 21 less than compensatory damages, correct? Do you know? 22 A. I have a general recollection of that, yes. 23 Q. And FEP, you arc familiar that they settled 24 for less than punitive damages? 25 A. Okay. Page 210 1 Q. You are familiar with the Emess settlement? 2 A. Yes. 3 Q. And you mentioned other settlements which you 4 believed had components beyond compensatory damages but 5 you don't recall? 6 A. That is correct, yes. 7 Q. So the existence of punitive damages claim 8 today other than the unnamed ones that you can't respond 9 to have not increased settlements beyond compensatory 10 damage claims? MR. MOSKOWITZ: Misstates again the witness. 12 It's not in here, increasing the amount of the 13 settlement. 14 MR. GENOVESE: I am asking him a question. I 15 am not asking him what he has read. 16 MR. MOSKOWITZ: You keep telling him. He 17 keeps saying he is going to increase the amount of 18 settlement. 19 BY MR. GENOVESE: 20 Q. He has conceded that the punitive damages are 21 likely in a negotiation, as I understand his testimony, 22 going to increase the amount of the settlement. Isn't 23 that what you said? 24 A. Yes, that is what I said. 25 What I have not said is that the pendency of a Page 212 1 Q. And Emess got 122 percent or some number of 2 punitives. Razorback got slightly less than 3 compensatory damages? 4 A. Okay. 5 Q. Is the only thing that makes your projection 6 of potential punitive damage here so much larger -- let 7 me rephrase the question. 8 If we have no settlements for more than 9 122 percent of out-of-pocket losses and you are 10 testifying that the presence of punitive damages claims 11 will likely cause parties to settle for their 12 compensatory losses, what relevance is -- what is 13 your -- is it one to nine times? I forget what your 14 projected is. 15 A. Four to nine. 16 Q. Four to nine times. What relevance is that 17 range in this calculus? 18 A. Let me answer your question by focusing on 19 what it is that I am opining about. I have not been 20 asked to express an opinion as to the likely figure at 21 which the Marlin and Beverly cases will settle. That's 22 a different question than what I consider to be the 23 likely range of punitive damages if this case were to be 24 tried to a jury. 25 Cases settle if they settle at all for less 53 (Pages 209 to 212) OUELLETTE & MA LDIN O COURT REPORTERS, INC. EFTA01130193 Page 213 1 than the full value of the claim because settlements are 2 compromises. So, what I have perceived my role to be is 3 not to project the settlement value of the claims but to 4 express an opinion regarding the value of punitive 5 damages in terms of a multiple of compensatory damages 6 if this case were ultimately to be tried. 7 As you, yourself, have pointed out, there are 8 a wide variety of factors that influence whether a case 9 will be tried or will be settled and the risk tolerance 10 of the plaintiffs is a major factor in making that 11 determination. 12 The pecuniary circumstances of the plaintiffs 13 is a major factor in making that determination. I have 14 had -- I have had clients with very, very strong and 15 valuable claims who have decided to settle those claims 16 for significantly less than I thought they ought to 17 settle them for because they have been under financial 18 duress and I understand that and that's an appropriate 19 consideration to assess in deciding whether the case is 20 going to be settled. 21 I have had other clients who have had what I 22 considered to be extremely strong and valuable claims 23 who simply were very risk adverse and preferred to seize 24 the opportunity to get a hundred percent of their 25 compensatory losses rather than take the risks that 2 3 4 5 6 7 8 9 10 11 12 13 14 IS 16 17 18 19 20 21 22 23 24 25 Page 215 that you have relied on that you expect to rely on in your testimony at the confirmation hearing? A. I have described everything that I have relied upon and the case specific materials have been provided to you in their entirety. Q. Do you presently or do you anticipate expressing an opinion at the confirmation hearing on matters other than the opinions expressed today? A. I intend to answer whatever questions are asked of me and I think that you have been collectively fairly comprehensive in covering relevant matters, but I don't know. Q. But you haven't been asked to express opinions other than what we have discussed today. Correct? A. I haven't been asked to express opinions except those that I have described at least in general terms today. Q. I lied. That's three questions. I asked you three questions. Thank you for your courtesy, Mr. Scarola. A. Thank you for your courtesy and lunch. Thank you for lunch, also, whoever bought lunch. MR. GENOVESE: Berger Singerman bought lunch. MR. RIGOLI: I have no questions. MR. GOLDBERG: No question. Page 214 I might be involved in continuing to prosecute the 2 punitive damage claim. And one of the reasons why 3 plaintiffs get rewarded for going to trial and getting 4 punitive damages and having the staying power to 5 withstand the risks of an appeal and ultimately getting 6 those punitive damages to put in their pockets is 7 because they have undertaken and faced all of those 8 risks. 9 MR. GENOVESE: I think I am done. If we can 10 just take a few minutes and consult. 11 MR. MOSKOWITZ: I may have a few questions as 12 well. 13 MR. GENOVESE: If we can confer quickly, we 14 can probably avoid any of Mike's questions. IS (Discussion held off the record.) 16 (A recess was taken from 5:15 p.m. to 17 5:21 p.m.) 18 THE VIDEOGRAPHER: The time is 5:21. We are 19 back on the video record. 20 BY MR. GENOVESE: 21 Q. Mr. Scarola, I think I have two questions. 22 A. I have heard that before. 23 Q. Other than what you have discussed here today, 24 in terms of the materials you reviewed and relied on, 25 you have told us all of everything that you can recall 1 2 3 4 S 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 216 CROSS-EXAMINATION BY MR. MOSKOWITZ: Q. Mr. Scarola, I have one question. How do you compare the conduct regarding specifically for punitive damages from TD Bank in this case as to all other cases that you have dealt with in your career. A. It is one of the most aggravated and valuable punitive liability claims that I have seen in my experience. MR. MOSKOWITZ: Okay. No further questions. Thank you. THE VIDEOGRAPHER: We are off the record. It's 5:23. (The deposition was concluded at 5:25 p.m.) 54 (Pages 213 to 216) OUELLETTE & MA LDIN O COURT REPORTERS, INC. EFTA01130194 I Page 217 CERTIFICATE OF OATH i Page 219 ERRATA SHEET 2 2 IN RE: In Re: Rothstein Rosenfeldt & Adler 3 STATE OF FLORIDA DEPOSITION OF: JOHN SCAROLA TAKEN: July 2.2013 COUNTY OF MIAMI-DADE 3 DO NOT WRITE ON TRANSCRIPT - ENTER CHANGES HERE 4 PAGE # UNE # CHANGE REASON 5 4 6 I. the undersigned authority, certify that 5 7 JOHN JACK SCAROLA personally appeared before me and was 6 8 duly sworn. 7 9 WITNESS my hand and official seal this 3rd day 8 10 11 of July, 20'3. 9 t O I I 12 12 13 13 14 14 15 Patricia Din, RPR, FPR 15 Notary Public - State of Florida lb My Commission No. DD 973059 17 16 My Commission Expires 04/17/2014 18 17 19 18 20 19 21 20 Please forward the original signed errata sheet to this 21 22 office so that copies may be distributed to all panics. 22 23 Under penalty of perjury. I declare that I have read my 23 deposition and that it is true and correct subject to 24 24 any changes in form or substance entered here. 25 25 DATE: SIGNATURE OF DEPONENT: Page 218 i REPORTERS CERTIFICATE DUB-Milt & MACLDIN COURT RFP0RTERS 2 Elt Weal Fluglet. Sone nos 3 STATE OF FLORIDA lislfit1)0 COUNTY OF AllANII.DADE 4 July 3. 2113 S I. Patsy:la Diaz, Registered Professional lohnlock Scoots do Adam Motkoveng. Export 6 Reporter. Florida Professional Reporter and Notary Konya. in Pt Throcia 23ZIPooce Tiep de Leon Bedewedterion PA. Public In and for the State of Honda at large. do Ninth Floor 7 hereby certify that JOHN JACK SCAROLA was by me first duly sworn to testify the whole truth: that I was Man& Melt 33131.2333 & authorized to and did report saw' deposition m IN RE theltheln Rthentehli Mks &lawn M30.32 stenotype: and that the foregoing pages. numbered from CASE NOS lth.SI0UI.RBR and I0-3369I.R8R Plethe silt mote to on July 2.1013. 9 Ito 219. inclusive. axe atme and correct tninscnplion of my shorthand notes of said depositton. you taw you voeoliva tICPSIIKO in Mr abor lethotol IIIItIcl Ming tone. you 'Rd not ID I further certify that said deposition was waivedpium, Ian. rt. recnory Om Her sap you aldeoupethlepgAmn Mose OW of (KV du rua Into:IMoo II taken al the time and place hemnabove set forth and that the taking of said deposition was comm.-need and to tthothleC an appointmen ex t thoreest mb the bouts of 9m a.m. and 4 30pm. Monday ihroach Prichy. You era 12 completed as hannabove set out. mho hove pm <outset and you a copy of the IIMINIIpl 13 I further certify that I am not an attorney or and mold amine into (mortice COUIISCI of any of the parties. nor WTI I a relative or At Meador the IIIIMIlpl. yin will lied an maim tato. Myths read 'on as:Rowed &tooth& 14 employee of any attorney or counsel of party connected with the action. nor am I financially interested in the ay nutters Or OXICC11011$ UM you nuto mak should he mood on the mats sloth. twig page and line IS slum. numbered mp DO wnie to die um•rna 16 The foregoing certification of this Uatthenpl does not apply to any reproductmn of the same by any you Itself Math ou kite rod lieurace t aid treed thy thaws. tv me to sign end Joethe err& ago art! return ere Me' 17 means unless under the direct control and/or direction of the certifying reporter. !Iwo Jo IIIC4 trod arta son the odrouNd depooriun %Alta a insoluble tart title Ultplial. Ouch IR IN WITNESS WHEREOF. I have hereunto set my ha already teat forwathul as the coktuts swingy. may he Mid with the clot el Cocoon II you iosh w WJIIrt your signeamer. sign ”N.II same m the Not a: the 19 hand this 3rd day of July. 2013. houom of Mil Inn esta num tt to at 20 21 &heady. Patricia Diaz. RPR. FPR 22 RIIIICISDIth. RPR. FPR 23 I 6> bad, saiw my imagism, 24 khrilock Saab 25 - 55 (Pages 217 to 220) OUELLETTE & MA LDIN O COURT REPORTERS, INC. EFTA01130195