DS9 Document EFTA01130416

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 I UNITED STATES BANKRUPTCY COURT SOUTHER DISTRICT OF FLORIDA FORT LAUDERDALE DIVISION IN RE: NO.: 09-34791-RBR ROTHSTEIN ROSENFELDT ADLER, P.A. VIDEOTAPED DEPOSITION OF JOHN JACK SCAROLA 350 East Las Olas Boulevard Fort Lauderdale, Florida July 2, 2013 Scheduled for 10:00 a.m. Commencing at 10:07 a.m. to 5:23 p.m. OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130416 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 2 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF FLORIDA FORT LAUDERDALE DIVISION IN RE: CHAPTER 7 BANYON 1030-32, LLC CASE NOS: 10-36691-RBR BANYON INCOME FUND, L.P. 11-40929-RBR Debtors. Jointly Administered Under Case No. 10-33691-RBR / VIDEOTAPED DEPOSITION OF JOHN JACK SCAROLA 350 East Las Olas Boulevard Fort Lauderdale, Florida July 2, 2013 Scheduled for 10:00 a m. Commencing at 10:07 a.m. to 5:23 p.m. OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130417 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 3 APPEARANCES: On behalf of TD Bank, N.A.: WILLIAM O.L. "WEN" HUTCHINSON, Esquire JOSEPH SHEERIN, Esquire MCGUIREWOODS 201 North Tyron Street Suite 3000 Charlotte, North Carolina 28202 On behalf Herbert Stettin, Trustee: JOHN H. GENOVESE, Esquire MICHAEL A. FRIEDMAN, Esquire GENOVESE JOBLOVE & BATTISTA, P.A. 100 Southeast Second Street 44th Floor Miami, Florida 33131 -and- DAVID GAY, Esquire BERGER SINGERMAN 350 East Las Olas Boulevard Suite 1000 Fort Lauderdale, Florida 33301 On behalf of Robert Furr, Trustee: JASON S. RIGOLI, Esquire FURR & COHEN, P.A. One Boca Place, Suite 337W 2255 Glades Road Boca Raton, Florida 33431 On behalf of the Plaintiffs: ADAM MOSKOWITZ, Esquire KOZYAK TROPIN & THROCKMORTON, P.A. 2525 Ponce de Leon Boulevard Ninth Floor Miami, Florida 33131-2335 On behalf of the Plaintiffs: William Scherer, Esquire CONRAD & SCHERER, LLP 633 South Federal Highway Eighth Floor Fort Lauderdale, Florida 33301 OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130418 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 4 CONT. APPEARANCES: On behalf of Unsecured Creditors Committee: MICHAEL J. GOLDBERG, Esquire 350 East Las Olas Boulevard Suite 1600 Fort Lauderdale, Florida 33301-2229 On behalf of Morse Operations and The Estate of Ed Morse: JOHN M. MULLIN, Esquire TRIPP SCOTT 110 Southeast Sixth Street Fifteenth Floor Fort Lauderdale, Florida 33301 ALSO PRESENT: Patricia Diaz, FPR, RPR Dean J. Chimerakis, Videographer Custom Video Services, Inc. OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130419 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 INDEX WITNESS: JOHN JACK SCAROLA Page 5 PAGE DIRECT EXAMINATION BY MR. HUTCHINSON 7 CROSS-EXAMINATION BY MR. GENOVESE 173 CROSS-EXAMINATION BY MR. MOSKOWITZ 216 EXHIBITS NO. - DESCRIPTION PAGE Exhibit No. 1 Subpoena 7 Exhibit No. 2 Subpoena for Christian 9 Searcy Exhibit No. 3 Transcript of May 17, 2013 48 Hearing Exhibit No. 4 Plaintiff's First Request for Production of Documents to TD Bank 68 Exhibit No. 5 TD Bank Victims Notice of 79 Filing Expert Disclosures Exhibit No. 6 Time Summary 81 Exhibit No. 7 Conspiracy Chart 111 Exhibit No. 8 Statute 768.72 124 Exhibit No. 9 Statute 768.73 148 Exhibit No. 10 Handwritten Notes 163 Exhibit No. 11 Handwritten Notes 168 OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130420 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 6 THE VIDEOGRAPHER: Today's date is July 2nd, 2013. The time is approximately 10:10 a.m. Eastern Standard Time. We are here to videotape the deposition of John Jack Scarola in regard to Rothstein, Rosenfeldt, Adler, PA, Case 09-34791 BKCRVR. The court reporter is Patty Diaz with Ouellette and Mauldin Court Reporting. My name is Dean Chimerakis, videographer, with Custom Video Services of Miami. Will counsel please state your appearance for the record? MR. HUTCHINSON: Wayne Hutchinson with McGuireWoods on behalf of TD Bank, N.A., and with me is Joe Sheerin. MR. GENOVESE: John Genovese, Genovese, Joblove and Battista on behalf of Herb Stettin. Along with me is my colleague, Michael Friedman. MR. RIGOLI: Jason Rigoli, Furr & Cohen on behalf of Robert Furr, Chapter 7 Trustee for Banyon 1030-32 and Banyon Income Fund. MR. MOSKOWITZ: Adam Moskowitz, Bill Scherer and Javi Lopez on behalf of the plaintiffs in the case. MR. MULLIN: John Mullin from Tripp, Scott on OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130421 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 7 behalf of the Estate of Ed Morse and Morse Operations, Inc. MR. GOLDBERG: Mike Goldberg on behalf of the Creditors Committee. MR. GAY: David Gay with Berger Singerman counsel on behalf of Herbert Stettin. Thereupon, JOHN SCAROLA was called as a witness and, having been duly sworn, was examined and testified as follows: THE WITNESS: I do. DIRECT EXAMINATION BY MR. HUTCHINSON: Q. Good morning, Mr. Scarola. We met before the deposition. Would you please state your name for the record? A. Good morning. My name is John Scarola. I am also most commonly known as Jack. Q. Mr. Scarola, I will show you what I marked as Exhibit 1. Do you recognize Exhibit 1? (Exhibit No. 1, Subpoena, was marked for identification.) A. It appears to be a copy of the subpoena for this deposition that was served upon my office and accepted at my direction. OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130422 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 8 BY MR. HUTCHINSON: Q. And are you appearing here today pursuant to this subpoena? A. I am. Q. And this subpoena includes a document request, does it not? A. It does. Q. And have you produced all documents that are responsive to the request included therein? A. I believe I have. Q. Does that include some documents that you have brought with you here today? A. That is correct. Q. Based on what was previously produced and what you brought here today, you believe that all documents responsive to these requests have now been provided. Correct? A. I don't have personal knowledge of the production that was not made by me. I am told that you have already received duplicate copies of most of the materials that I brought today, but I have brought with me all of those materials in my possession that are responsive to the subpoena. Q. And you are fine with us looking through those materials to confirm that we have them and if not, OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130423 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 9 making any copies that we need to make so that we have them for our records? A. Yes. I know that there are documents that are included in the group of documents that I brought this morning that were not produced to you because they are my personal notes with regard to my review of the other materials. Q. But you are not aware of any additional materials that either have not been provided or are not with you here today? A. I am not. Q. Exhibit 2. Let me show you what I marked -- is marked as (Exhibit No. 2, Subpoena for Christian Searcy, was marked for identification.) A. Yes, sir. BY MR. HUTCHINSON: Q. Do you recognize Exhibit 2, sir? A. I do. Q. What is Exhibit 2? A. Exhibit 2 is a copy of a subpoena that was accepted by my office on behalf of Christian Searcy and I have seen a copy of this subpoena as well. Q. And am I correct that this subpoena also includes certain document requests? OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130424 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 Pagc 10 A. It does. Q. And we have not received a separate response to this subpoena from your law firm. Is your document production individually supposed to respond to this subpoena as well? A. It is. Q. So as we sit here today, you have no knowledge of additional documents responsive to the request, including Exhibit 2, that are responsive therein that have not either been provided to us previously or are not in the materials that you brought here today? A. That is correct. Certainly, it's possible that I may have overlooked something, but I don't think SO. Q. Mr. Scarola, in what fields are you an expert? A. I am a trial lawyer who has been practicing in the area of litigation since 1972. I am Board-certified in personal injury and in business litigation as well and I believe that both certifications have been in place since they were offered by the Florida Bar. Q. And if you were going to list the fields in which you believe that you are an expert, what fields how would you describe those fields and what would they be? A. Well, for purposes of the deposition today, I OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130425 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 Pagell have been asked to express opinions with regard to the punitive damage value of claims against TD Bank and I present myself as having sufficient expertise in that area to express those opinions. Q. So it's your understanding that your opinions in this matter are limited to the value of potential punitive damages claims against TD. Is that correct? A. That certainly is the primary focus of what I have been asked to do, and while I may have formed some tangential opinions that relate to that primary area, that is the focus of what I have done. Q. What qualifies you as an expert on punitive damages and the values of punitive damages claims? A. The total of 40 years experience that I have had litigating both criminal and civil cases, including many punitive damages claims. Q. At what point during that 40-year career did you become an expert on valuating punitive damages claims? A. I cannot tell you the point in time at which someone would have independently recognized my expertise. It has been an evolving process, so that's a question that I can't answer for you, except to tell you that it is my personal assessment that I am certainly there now. OUELLETTE & NIAULDIN COURT REPORTERS, INC. EFTA01130426 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 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 OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130427 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 PagcB punitive damages in front of at least one other state Bar Association. Q. What state Bar Association was that that you are referring to? A. Ohio. Q. Were they the sponsor of the continuing education class? A. They were. Q. And where was that lecture? A. It actually occurred when that Bar Association met in Palm Beach County. Q. And when was that? A. I can't give you the date. Q. Was it in the last five years? A. I'm not sure. Q. What's your best estimate of when that would have been? A. Approximately, five years ago. Q. And did you prepare materials for that CLE presentation? A. I don't know whether I prepared materials specifically for that CLE presentation or whether I relied upon materials previously prepared and having lectured on the topic prior to that lecture. Q. Would you still have the materials that you OUELLETTE & NIAULDIN COURT REPORTERS, INC. EFTA01130428 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 14 would have used in these past lectures? A. Probably some of them. Q. Is the information contained in those materials anything that you relied upon in forming the opinions in this case? A. The information contained within those materials include principles that I relied upon in formulating my opinions in this case, I think would be a more accurate way to state the relationship between those materials and my opinion. Q. And to the extent that you can find any of those --- A. You've got them. Q. Okay. Are those materials with you here today? A. They are. If they exist, they are in that box. Q. Thank you very much. A. You are welcome. Q. Other than the lectures at the Ohio State Bar Association, were your other CLE lectures all sponsored -- were the classes all sponsored by the Florida Bar Association? A. No. Q. Who were the other CLE classes sponsored by OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130429 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 Pagc 15 wherein you lectured on punitive damages? A. Palm Beach County Bar Association, Palm Beach County Justice Association, Florida Justice Association. Q. And over how many years did those lectures occur? A. Certainly within the past 20 years, and I don't know that I can accurately narrow it down beyond that. It's a topic that I have been dealing with significantly over at least the last 20 years. Q. Have you lectured on the punitive damages aspect of the Florida Tort Reform Acts that were implemented in the late 1990s? A. I have. Q. What would have been your topics on -- what's been the subject matters of those lectures on those topics? A. The implications from both the legal and practical standpoint of the legislative changes. Q. And what do you recall about those implications? A. I recall that the Florida legislature has, from time to time, been imposing various restrictions on the common law ability to recover punitive damages. Q. In your opinion, does the Florida Legislature have the right to do that? OUELLETTE & NIAULDIN COURT REPORTERS, INC. EFTA01130430 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 16 A. It is my personal opinion that the Florida Legislature has a limited right to deal with imposing restrictions on the ability to recover punitive damages, that there are constitutional limitations on how those restrictions may be imposed. Q. What constitutional limitations are you referring to? A. The due process and equal protection clauses of both the United States Constitution and the Florida Constitution. Q. Are you claiming -- is it your -- are you offering an opinion in this matter that there is a property right with respect to a punitive damages claim? A. No. I am not offering that opinion. I am assuming for purposes of the opinions that I will be expressing today that the current legislative limitations that have been imposed upon the ability to recover punitive damages pass constitutional muster. Q. They do pass constitutional muster? A. I have assumed that for purposes of the opinions that I am expressing today. Q. So, you are not offering an opinion in this matter that the current statutes limiting punitive damage awards are somehow unconstitutional or not applicable to this matter? OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130431 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 Pagc 17 A. I am not offering that opinion today. Q. And you are not planning on offering that opinion at the confirmation hearing? A. I don't plan on offering that opinion at the confirmation hearing, no. Q. Let's go back. You talked about that you've lectured on the practical implications of the new -- of the punitive damages tort reform that was implemented in the late 1990s. What is your understanding of the practical implications of those reforms? A. That really is a very broad question and I would prefer that it be more focussed before I attempt to answer it. In what regard? Well, are there limits on the -- the amount of Q. punitive damages? Is it your understanding there are limits on the amount of punitive damages that can be recovered as a result of such reforms? A. Yes, under some circumstances. Q. And what are those circumstances? A. Those that are specifically described in the statute. Q. Do you recall any of those circumstances without referencing the statute? A. I think I can recall some of them without OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130432 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 Pagc 18 referencing the statute. Certainly, if you want the most accurate answer I am able to give you, I've got a copy of the statute in the materials that have been provided, and it would be easier to have it in front of me. But if what you would like to do is test my memory, you know, I will play that game with you. Q. Well, we are not playing games. A. Okay. Q. But what do you recall about the statutory limitations? A. I recall that there are limitations that would impose a three times compensatory damage limit under some circumstances, limitations that impose a four time compensatory damage limitation under some circumstances. There is expressed statutory language that indicates that there is no statutory limitation under other circumstances, and I recall that there is specific language in the statute that indicates that the statute is primarily applicable to products liability claims. Q. Are you offering an opinion in this matter that the statutes are somehow not applicable to the claims at issue? A. It is my opinion that the circumstances of the punitive damage claims against TD Bank take those damage claims outside the statutory limitations. OUELLETTE & NIAULDIN COURT REPORTERS, INC. EFTA01130433 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 19 Q. Is that -- is it your opinion that it's outside the statutory limitations because they are not product liability claims? A. It's my opinion that they are outside the statutory limitations for multiple reasons; one, because they are not within those provisions of the statute that impose limitations, but secondly, because the nature of the misconduct is such that I believe that that misconduct takes the claims outside of the statutory limitations. Q. And we will certainly get into that in more detail, but generally, are those the two reasons why you believe that the conduct at issue in the underlying claims in this matter are outside the punitive damages limitations? A. Generally, yes. When we are talking about punitive damages limitations right now, we are simply focusing on statutory limitations. Q. Yes, sir. Did you have any involvement with the punitive damages tort reform that was implemented in the late 1990s? A. I am not sure what it is you are asking me. If you are asking whether I had any involvement in formulating the law, the answer to that question is I OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130434 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 20 did not. Q. Who did? To your knowledge, who did formulate the law? A. The Florida Legislature. Q. Do you have any idea who wrote the law? A. I don't know the names of any of the draftsmen, and I would be surprised if the end result were not the product of input from multiple sources. Q. Do you have any personal knowledge of that? A. I don't, no, at least none that I recall. There may have been some point in time when I had occasion to attempt to review the legislative history, but I don't remember that. Q. Would the draftsmen of the punitive damages statute be the best resource in terms of trying to determine the intent behind the statutes? A. Not necessarily, no. Q. Who would be? A. The Florida Supreme Court ultimately. Q. And the Supreme Court looks to legislative history at times to determine the intent of the statute; does it not? A. If it is necessary to go beyond the plain meaning of the language of the statute, that is a consideration that the Court might view. I don't -- I OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130435 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 Pagc 21 don't know that that would be necessary under the circumstances of this statute and it certainly does not appear to have been necessary up to this point in time. Q. But you are not going to offer any opinions in this matter on the nature and the intent of the statute beyond the statutory language. Correct? A. That is correct. Q. And you have no personal knowledge of the nature and intent of the enactment of the statute. Correct? A. I do not have any personal knowledge regarding the drafting process nor the deliberative process of the Legislature, nor do I think that either of those matters is relevant. Q. Do you know what groups were involved in the lobbying effort for the tort reform effort? A. I can make reasoned assumptions in that regard, but I don't have any direct knowledge. Q. In addition to the CLE courses you have taken and taught on punitive damages, you also said that you have done a good bit of studies conducted for punitive damage purposes. Is that correct, or you have researched punitive damages? A. I have, yes. Q. Can you please describe those research efforts OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130436 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 Pagc 22 over the years? A. I have read case law. I have read treatises. I have read articles in professional journals. That's what comes to mind immediately. Q. Is there any treatise out there that you have read that you believe to be the most authoritative treatise on the status of damages in the State of Florida? A. There is no treatise that I would accept as generally authoritative on all issues with regard to punitive damages. Q. Is there any treatises that you would accept as authoritative on some of the issues with respect to punitive damages? A. Well, that would depend upon a particular issue and my review of the way in which the treatise treats that issue. So, I can't answer that broadly. Q. Are there any issues in this matter that you intend to opine upon that you believe a certain treatise would be authoritative? A. I have not expressly reviewed any treatise for purposes of formulating my opinions in this matter and ascertaining whether those opinions conform with that treatise so I can't answer that question. What I will tell you is that I have assembled OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130437 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 23 over the years some fairly extensive research materials with regard to punitive damages. They certainly don't include everything that I have reviewed, but it has been my standard operating procedure as a trial lawyer to preserve copies of materials that I think may be of some significance with regard to a matter that I am currently involved in or that I might reasonably anticipate would become relevant to future matters, and I have kept those research files and produced them for you today. I selected from those files the punitive damage files that I thought might be most relevant to the inquiry that is being conducted. Q. Thank you. So you keep a punitive damage -- A. I am not sure once you see them you are going to want to say thank you, but I have them here. Q. We appreciate it. How many times --- A. Nor do I think you are going to appreciate it when you get a chance to look at them, but they are here. Q. Thank you. How many times have you testified as an expert on punitive damages? A. I don't have a recollection of ever having served as a punitive damage expert before today. Q. Have you ever been --- OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130438 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 Pagc 24 A. I am a virgin. Q. Have you ever -- I will move on. Have you ever been asked to serve as a punitive damages expert before today? A. I have not, no. Q. Have you ever heard of a punitive damages expert before today? A. Certainly not in the context of someone testifying about the value of a punitive damage claim but there are -- there are certainly a lot of folks out there who have training and experience that formulate opinions with regard to the punitive damage value of cases in the ordinary course of their litigation practice. Q. But you have never heard -- how long, sir, have you been litigating cases? A. Since 1972. Q. Since 1972, have you ever heard of another person offering an opinion as to the value of a punitive damages claim? A. Many times, yes. Q. And -- A. As a routine matter. Q. Testifying in court? A. No, sir. No. That wasn't the question. OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130439 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 Pagc 25 That's not how I understood your question. Q. I'm sorry. Then let me repeat or rephrase my question. Since 1972, have you ever heard or seen someone testify as an expert as to the value of a punitive damages claim? A. You know, as you are asking that question, I am thinking back to one occasion where I believe that, in fact, did occur in a case that I personally litigated. Q. Can you tell me about that case and the circumstances of that testimony? A. Yes. The case was a claim against Bankers Multiple Line Insurance Company. The full style of the case was Farish versus Bankers Multiple Line. It was a tortious interference claim against John D. MacArthur and Bankers Multiple, which was a liability insurer that was owned by MacArthur. Joseph Farish was a trial lawyer who had been hired by the widow of a young man who was walking down the street when a truck came by carrying concrete culverts. The truckload was not properly secured. A culvert fell off the truck and crushed him as he was walking down the street. The truck was owned by a MacArthur Company and insured by Bankers Multiple Line OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130440 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 Pagc 26 Insurance Company. The widow was an employee of John D. MacArthur at a hotel that MacArthur also owned called The Colonnades, and when MacArthur found out about the widow's claim against his company and his insurance company, he befriended the widow and convinced her to terminate the services of MacArthur and to retain the services of a young woman who had virtually no litigation experience whatsoever who proceeded then to settle the widow's claim very cheaply. I represented Mr. Farish in a tortious interference claim, and one of the issues was the value of the underlying case. And there was expert witness testimony that was given in that case about the value of the claim absent the tortious interference. I am blanking on the name of the trial lawyer or trial lawyers who gave that testimony. That was probably 25 years ago. Q. So you did not present such testimony? A. I'm surprised myself by remembering how much I remembered about that. Q. You did not present such testimony? A. I did not present the testimony, no. Q. In all your years of trying cases, have you ever retained an expert to opine on the value of OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130441 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 27 punitive damage claims that you or your client was asserting? A. Only the circumstances that I just described, and -- well, that's the best answer I can give at this time. Q. Other than the research and studies that you have previously described, have you performed any other type of research during your career that supports your purported expertise? A. The process of evaluating punitive damages claims is a process that goes on on a very frequent basis in the course of my practice. So, to that extent, the answer to your question is certainly yes. Q. So you are saying you evaluate the punitive claims of your own cases? A. And sometimes -- well, often the cases of others in my law firm and occasionally the cases of lawyers outside my law firm who seek my opinion or my firm's opinions with regard to the value of their cases. Q. So, other than evaluating the claims that you just described, your own cases, others in the firm, other lawyers and so forth, have you done any other research during your career that supports your purported expertise? A. The study that I have described to you OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130442 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 28 earlier. Q. Other than what we have talked about here today? A. I can't think of anything else that would directly be relevant. Something else may come to mind. If it does, I will let you know. That's all I can think of right now. Q. Okay. You referred to the process of evaluating a punitive damages claim. A. Yes, sir. Q. Is that a process that you developed or was that developed by some other punitive damages expert? A. It is a process that has developed over the course of my personal practice. That is, I haven't taken somebody else's evaluative process and adopted that as my own. Q. And is your process an accepted process in the legal industry for evaluating the value of punitive damages claims? A. I think the answer to that question is yes. Q. Okay. And how do you know that it's -- would you say it's widely accepted in the legal industry as a process for evaluating the value of punitive damages claims? A. Yes. OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130443 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 29 Q. Has your method been published? A. It has been. Q. Where has this been published? A. It has been published in court opinions of which I am aware. It has been published in legal treatises of which I am aware, and it has been published in the CLE materials that I, myself, have written in connection with lectures in this area that I have given. Q. Okay. So, there is a court opinion out there that discusses your internal process for evaluating the value of punitive damages claims? A. There is a court opinion out there that addresses the issue of how punitive damages should be evaluated, yes. Q. And let's make sure we are talking, using the same words here. How a punitive damages claim should be evaluated versus how you -- how one values a purported punitive damages claim. Are we talking about the same thing? A. That's a distinction that I don't understand. Maybe I can be helpful to you here so we don't spend a lot of time mis-communicating. Q. That would be great. A. There are authorities that identify aggravating and mitigating circumstances that are OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130444 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 30 appropriately taken into consideration in assessing the amount of punitive damages necessary to serve the dual purpose of punitive damages recognized in the State of Florida, punishment and deterrence. The case that most specifically addresses those factors is the Johns-Manville case, which is included in the materials that have been provided to you. Q. Just so we are clear, when we are talking about the publication of your process to evaluate punitive damages, do these cases say this is how Jack Scarola does it and we think that that's the proper way to do it, or do these cases discuss different factors that a court should consider in evaluating punitive damages and you have adopted parts of that in your process? A. There is no published opinion that attributes this process to me. There are published opinions that identify appropriate factors to be taken into consideration by both judges and juries in determining the appropriate amount of punitive damages necessary to serve the dual purpose of punishment and deterrence. Q. Are there any publications, other than the court opinions, that discuss Jack Scarola's process, your individual process that you have utilized in this matter to evaluate or to place a value on the potential OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130445 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 31 punitive damages claims in the underlying cases? A. Except for my own materials, which obviously include my name, I am not aware and would be very surprised to find any case or treatise or other publication that attributes the identification of aggravating and mitigating circumstances to Jack Scarola. This is not something that I authored, except to the extent that it's incorporated in CLE outlines. It is a recognition of the appropriateness of specifically identified factors in both cases and treatises to asses the appropriate amount of punitive damages in order to serve the dual function of punishment and deterrence. Q. Punishment and deterrence, are those the purposes of punitive damages under Florida law? A. Yes, sir. Q. Are punitive damages under Florida law meant to compensate a plaintiff? A. They are not, except to a limited extent that is recognized in the case law, and that is that there is a recognition in the case law that the plaintiff who undertakes the prosecution of a punitive damage claim is serving a function in effect as a public prosecutor to preserve the integrity of the judicial system and to preserve appropriate standards within, in this context, OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130446 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 32 the business community. So, to motivate individuals to undertake the difficult task of prosecuting a punitive damage claim, one of the factors that is taken into consideration are the costs involved in prosecuting that claim. Q. And what case --- A. So punitive damages help to compensate the plaintiff for undertaking that broader societal purpose. Q. To recoup the costs incurred in protecting society's or the state's interest in pursuing punitive damages? A. Yes, sir. Q. And what case do you believe best describes that function? A. Well, I know it's described in more than one case, but the one that comes to mind immediately is Johns-Manville. Q. What is your process for placing a value on potential punitive damages claims? A. It is to review the evidence in the light of recognized aggravating and mitigating circumstances, to assess the way in which those factors impact upon the intended purpose of punitive damages to punish the wrongdoer and to deter others similarly situated from engaging in the same kind of wrongdoing, to review any OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130447 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 33 statutory limitations that might apply and to consider any constitutional limitations that might apply in arriving at an opinion as to what I believe the range of punitive damage value of a case is likely to be I would also take into consideration the extent to which the same or similar circumstances have already been assessed by an independent finder of fact. Q. Let me make sure I got all of this down. It seems like there is several different factors. First, the evidence with respect to the claims at issue. You would review that. You would review any statutory limitations. A. May I interrupt for just a moment? Q. Yes, sir. A. Because the evidence I am reviewing is particularly that evidence that relates to the aggravating and mitigating circumstances with respect to punitive damages. I would not necessarily find it necessary to review all of the evidence with respect to a given matter and have not undertaken to attempt to review all of the evidence with regard to this case. Q. Would you review any of the evidence to ascertain the viability of the underlying claims? A. Certainly to some extent, yes, and I need in circumstances such as this to make some assumptions with OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130448 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 34 regard to the viability of the underlying case and have done so here. Obviously, if this is were my own case, I would be assessing all of the evidence with regard to the viability of the underlying case. Q. You said you had made certain assumptions in this matter concerning the viability of the underlying claims. Correct? A. That is correct. Q. What assumptions have you made? A. That the underlying claims are accurately described in the complaints that I have reviewed, that they are accurately described in court orders that I have reviewed, that they are accurately described in pleadings and memoranda that I have reviewed, and to a limited extent that they have been accurately described in verbal communications that I have had with both Mr. Moskowitz and Mr. Scherer. Q. So, for your analysis of the viability of the underlying claims in this matter, are you accepting all of plaintiffs' allegations to be true? A. Yes. I have accepted the allegations in the complaint to be true to the extent that any particular allegation was or is shown not to be accurate that may or may not affect my opinion, and that's something that I would need to view in the context of the overall case. OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130449 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 Pagc 35 Q. And are you accepting all of the representations from Mr. Scherer and Mr. Moskowitz as true with respect to the underlying facts? A. They have been very limited, but I have assumed that what they have told me is true, yes. Q. And what have they told you? A. I probably need to look at my notes to identify for you, if I am able, specific representations that have been made by them. Q. To the extent --- A. Most of what we talked about are matters that were separately identified in the materials that I reviewed and I am not sure I can separate out the verbal representations that they made to me from the materials themselves, except to the very limited extent that they spoke about deposition testimony that was very recently taken that I have not reviewed transcripts of. Q. To the extent you are relying on any representations from Mr. Scherer, Mr. Moskowitz on with respect to the underlying facts, would those representations be reflected in your notes that you have provided here today? A. I believe that they would be. I can also tell you that there wasn't anything that I remember as I sit here right now that altered the opinion that I had OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130450 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 36 formed before those depositions were taken. That is, the information simply corroborated and reinforced those opinions. It did not change them. Q. You said there was some information that was relayed to you by Mr. Scherer and Mr. Moskowitz regarding recent depositions that have been taken. What factual information do you recall from those conversations? A. I remember discussions about the testimony of a corporate representative and disclosures concerning information that has been relayed to TD Bank's board of directors confirming that the board has been periodically and routinely updated with respect to what is going on in connection with this litigation. There was some discussion about the apparent absence of any significant change in policy practice or procedure on the part of TD Bank that was identified as having been intended to address the issues that give rise to TD Bank's liability in these matters, some discussion with regard to the absence of disciplinary action tied to the misconduct that occurred in connection with these matters. That's what I am able to recall off the top of my head. MR. MOSKOWITZ: Whenever you think appropriate for a five-minute break, we have been going for OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130451 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 37 about an hour. But whenever you think you are done --- MR. HUTCHINSON: Let me just followup on a couple of those answers, then it would be probably a good place stop. MR. MOSKOWITZ: Sure. BY MR. HUTCHINSON: Q. You discussed or you mentioned discussion about reports being given to the TD board relating to this litigation. What timeframe is your understanding that these reports to the board were made? A. I don't have a specific recollection of the timeframe when the reports began, but my impression right now is that they have been going on for some significant period of time, which was not a surprise to me in any respect. I would have been very surprised had that not been occurring given the magnitude of these claims, and I have assumed that the board was being kept informed with regard to this litigation over an extended period of time. Q. And, again, just so we are clear here, your understanding is reports concerning the litigation, this litigation, the underlying litigation. Correct? A. Well, when I am referring to this litigation, I am referring broadly to TD Bank's implication in the OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130452 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 Pagc 38 Rothstein Ponzi scheme. Q. TD Bank's involvement in the numerous litigation matters that are pending, is that what you are referring to? A. Well, it's my understanding that there are some litigation matters relating to TD Bank that TD Bank has settled. Q. Correct. A. So, I am not only talking about pending litigation. I am talking about TD Bank's overall involvement in the Rothstein Ponzi. Q. But you are also -- you are not talking about any -- it's not your understanding that the reports to the board prior to the implosion of the Ponzi scheme. Correct? A. I don't have any reason to believe that there were specific reports regarding the Ponzi scheme at any time before the implosion of the Ponzi scheme. There is certainly reason to believe that the magnitude of the transactions that were being conducted locally in South Florida may have reached the board's attention, but I don't recall seeing any direct evidence that would either confirm or deny that basic assumption. Q. And you don't have any personal knowledge on that issue. Correct? OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130453 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 39 A. I have never been invited to a TD board bank meeting. I don't expect I ever will be. If there were any chance of that before, it's gone now. And there was probably no chance of that before either. MR. HUTCHINSON: Adam, this is as good a time as any to take a break. THE VIDEOGRAPHER: We are off the record. It's 11:05. (A recess was taken from 11:05 a.m. until 11:15 a.m.) THE VIDEOGRAPHER: It's 11:15 a.m. We are back on the video record. BY MR. HUTCHINSON: Q. Mr. Scarola, I believe you previously testified that in forming your opinions in this matter you accepted the allegations of the -- the plaintiff's allegations in the complaint as true. Correct? A. Yes, sir, that's correct. Q. And you accepted the representations by plaintiff's counsel as true. Correct? A. That is also correct. Q. Did you do any research to verify the veracity of those allegations and representations? A. Well, I certainly took other materials into consideration that corroborated those representations. OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130454 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 40 Those include court orders and related jury verdicts. Q. Okay. What court orders are you referring to? A. I remember in particular an order from Judge Good. Q. What did that order pertain to? A. It pertained to significant litigation misconduct. MR. MOSKOWITZ: Judge Cooke, you mean? A. Yes, thank you. Judge Cooke, sorry. That's what happens when you take all my materials away from me and test my 66-year old memory. BY MR. HUTCHINSON: Q. If, at any time, you need your materials, sir, just ask and you are welcome to have them back. A. Sure. Give them all back to me. Yes, if you are offering them to me, I'd rather have them. MR. HUTCHINSON: Just give him back the originals. We've got the copies. THE WITNESS: We can proceed and when you get them assembled, just send them all this way. BY MR. HUTCHINSON: Q. So your recollection is an order from Judge Cooke? A. Yes. Q. What's your recollection of Judge Cooke's OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130455 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 41 order? A. That it dealt with significant litigation misconduct. Q. In what matter? A. On the part of TD Bank. Q. In what matter? A. I don't remember the name of the case offhand. Q. Was it in the Coquina matter? A. Yes. Q. And what's your understanding of the status of the Coquina matter? A. I believe that it is on appeal. Q. Any other court orders that you remember? A. I think I have reviewed something from Judge Streitfeld. Q. What do you recall about what you reviewed from Judge Streitfeld? A. I don't remember right now, but it's in my materials. MR. MOSKOWITZ: Do you want to hand him the materials? I thought we had agreed we would do that. A. All of the case related materials that I reviewed are in this bankers box. Most of it assembled into large binders so that's what I have reviewed. OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130456 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 Pagc 42 BY MR. HUTCHINSON: Q. Okay. But you don't have any independent recollection of what you reviewed from Judge Streitfeld? A. If this is a memory test, I just failed. I just know that Judge Streitfeld has been involved in these matters. I have read references related to Judge Streitfeld's concern about the manner in which the litigation has been conducted by TD Bank. I remember either reading directly or having information provided to me indirectly about Judge Streitfeld's reaction to learning about substantial transactions that occurred in Rothstein's IOTA account and the significance that Judge Streitfeld attributed to TD Bank's failure to appropriately address those IOTA transactions. Q. Anything else that you recall? A. Not off the top of my head, no. Q. Are you aware of any alleged underlying discovery misconduct in the Beverly or Marlin actions themselves? A. I don't remember anything specifically. Q. Did you review Mr. Scherer's deposition at that point? A. I did not, no. That was only recently taken and I have not reviewed that transcript. Q. If Mr. Scherer testified that there are no OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130457 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 43 allegations of discovery misconduct in those cases themselves at this point, would you agree with that? A. I would have no reason to doubt Mr. Scherer's testimony in that regard. I don't know that it's particularly significant in the overall context of this matter, but I wouldn't question his accuracy. Q. Why would you say that it's not particularly significant in this matter? A. Because the magnitude of the litigation misconduct that occurred in related matters and the extent to which TD Bank has engaged in efforts to cover up its misconduct, whether those efforts occurred in this particular case or whether those efforts took place in the related litigation really wouldn't make very much difference in terms of assessing the aggravating impact that those efforts would have in evaluating a punitive damage claim. I will volunteer a little bit more that may be helpful to you. It is my opinion that evidence with regard to that litigation misconduct would be relevant, admissible and highly probative in the second phase of a punitive damage claim against TD Bank. Q. And what do you base that opinion on? A. My understanding of Florida law. Q. And what is that Florida law that you are OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130458 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 44 referring to? A. Well, again, the best synopsis of that law as it relates to this case is Johns-Manville. Q. What is does Johns-Manville say on that point? A. That litigation misconduct efforts to cover up the ratification of misconduct are highly probative aggravating factors. The wrongdoer's response to the wrongdoing is extremely significant, which obviously makes good common sense as well to anyone who has ever been a parent, or, for that matter, has had any involvement in the criminal law. Q. Okay. Well, we've got a lot to cover here so let's go back and start from the beginning, sir. What is your -- in which matters do you believe this alleged litigation misconduct occurred? A. It certainly occurred in Coquina and I am -- as I sit here right now, I am not sure which other cases. Q. So you are offering an opinion on this and you don't even know which matters the conduct occurred in? A. Well, it occurred in the matter of prosecutions against TD Bank for TD Bank's involvement in the Rothstein Ponzi scheme. Q. So, let's go to the Coquina matter. Has the alleged misconduct in that matter been addressed by the OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130459 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 45 Court? A. It has been addressed by the Court in Judge Cooke's opinion, yes. Q. And did Judge Cooke sanction TD as a result of the alleged misconduct? A. Yes. Q. But it's your opinion that TD should be punished or potentially punished again for the alleged misconduct? A. It is my opinion that the reaction of TD Bank to the allegations of wrongdoing against it is a highly relevant and material factor to be taken into consideration in assessing the appropriate amount of punitive damages in order to serve the dual purpose of punishment and deterrence, and whether that misconduct occurred in this particular prosecution or in an earlier prosecution where the issues were being addressed, where the same issues were being addressed, is not of any significance to me. Q. Do you know whether it's of significance to Judge Streitfeld? A. I don't know whether it's of significance to Judge Streitfeld, but I would be surprised if it were of significance to Judge Streitfeld in his assessment of the appropriate amount of punitive damages because I OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130460 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 46 have a great deal of respect for Judge Streitfeld's legal acumen and I am sure that he would recognize the relevance and materiality of that misconduct in a second phase punitive damage proceeding. Q. Have you reviewed the transcript from Judge Streitfeld discussing this issue? MR. MOSKOWITZ: Objection. Mischaracterizes what actually occurred before Judge Streitfeld. A. I am not aware that Judge Streitfeld has addressed the issue that I am addressing and that is whether evidence of TD Bank's coverup would be admissible in a second stage punitive damages proceeding in this case. BY MR. HUTCHINSON: Q. Are you aware that TD Bank filed motions in the Beverly and Marlin matter to strike the allegations of alleged discovery misconduct from other matters? MR. MOSKOWITZ: Objection. Mischaracterizes again what was actually filed A. I have some recollection of a related issue having been raised but not reached as a consequence of the stay imposed by the bankruptcy court. So, that's my understanding. BY MR. HUTCHINSON: Q. Have you reviewed the transcript, sir? OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130461 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 Pagc 47 A. I am not sure which transcript you are referencing. What I reviewed is included in the materials in this box. So, if that transcript is in the box, I have at least looked at it to some extent. If it's not in the box, I haven't seen it yet. Q. Do you recall looking at a transcript where Judge Streitfeld considered the motion to strike the discovery allegations from the underlying Beverly and Marlin claims? A. I don't have a specific recollection of that, no. Q. Would that be important to you in formulating your opinions in this matter? A. Well, it depends on what the issue was that was presented before the Court and the way in which the Court resolved those issues, if they were resolved. Q. I am going to show you what I am marking as Exhibit 3, which is the transcript of the hearing before Judge Streitfeld on May 17th, 2013? MR. MOSKOWITZ: I'm sorry, Wen, is this in some type of order? Mine starts on Page 100 and then it goes backwards and then forward and then it skips around. MR. HUTCHINSON: Sorry. You just must have a OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130462 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 Pagc 48 bad copy. MR. MOSKOWITZ: That's okay. (Exhibit No. 3, Transcript of May 17, 2013 Hearing, was marked for identification.) BY MR. HUTCHINSON: Q. To your knowledge, sir, have you reviewed Exhibit 3 before? A. I don't remember. MR. MOSKOWITZ: I'd guess I have an objection, Wen. If you want him to -- he says he hasn't read it, so if you want him to read the whole thing, this is on a motion to strike certain allegations in the complaint. It has nothing to do with punitive damages or Phase 2, but if you are going to ask specific questions about certain lines, I kind of have to ask you to let him read most of the transcript so he can understand the context, because this is not about Phase 2 discovery. This was your motion to strike certain sentences from the complaint at this time. But, please, proceed and we will take it question by question. BY MR. HUTCHINSON: Q. If you will turn to Page 48, please. A. I am there. OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130463 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 Pagc 49 Q. Can you read the part where it starts: "THE COURT: Well, that's problematic for a number of reasons"? MR. MOSKOWITZ: And then, again, Mr. Scarola, I'd ask you, I guess, to read, you know, I don't know how we are going to do this, but you can pick out paragraph. This was a long hearing. If you need to, you can also read, you know, much of the other part of this transcript. THE WITNESS: How far would you like me to continue? BY MR. HUTCHINSON: Q. You can continue to the top of 49. MR. MOSKOWITZ: And I would ask you to read at least to Page 52 where the Court rules. BY MR. HUTCHINSON: Q. Yes, the Court issues an order on 52 striking those paragraphs? A. So I should continue to read all of Page 49? Q. I don't think you need to, but you can read whatever you think you need to, but if you go to 52 --- A. Well, I don't know the purpose for which you are asking me to read so I don't know. I can't make a judgment about what I need to read, so why don't you tell me what you'd like me to read? OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130464 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 50 Q. Well, wouldn't you agree that on Page 48 of this transcript, Judge Streitfeld says that you are suggesting that another case a jury can give punishment again for the same conduct, I have a real problem with that. Do you see that? A. So do I. Q. Isn't that what you are suggesting? A. No. No, I am not suggesting that. I am suggesting that it is relevant and material information that would be admissible in a second stage proceeding. I think that it would be necessary through appropriate jury instructions to assure that the jury was not imposing punishment for misconduct other than the misconduct that was involved with these particular plaintiffs. There is a very good analogy that Judge Streitfeld has dealt with repeatedly in the past and that is in the context of tobacco cases. And I know how Judge Streitfeld has dealt with that before as a consequence of my personal experience in the prosecution of tobacco cases, so I don't have any reason to believe that his rulings in this case would be inconsistent with what he has done previously. Q. And what are you referring to as to what he has done in the tobacco? OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130465 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 M A. What I am referring to is that these issues -- these issues are dealt with by appropriate instructions to the jury and that doesn't mean exclusion of the evidence. It means informing the jury as to the manner in which the evidence is to be used by it. Q. And how is the jury to use this evidence? A. Which evidence are you talking about? Q. The evidence that you have taken as true from the representations of plaintiff's counsel. A. You mean the evidence of an ongoing course of attempts to cover up wrongdoing and the refusal to acknowledge any wrongdoing and the ratification of wrongdoing? Q. Is that what they have represented to you? A. Is that what who has represented to me? Q. Plaintiffs' counsel. Is that the evidence that you are referring to? A. That's what the record materials that I have reviewed indicates that there has been a coverup, that there has been a refusal to acknowledge any wrongdoing with respect to that coverup, and that there has been an effective ratification of the wrongdoing as a consequence of a persistent refusal to acknowledge any misconduct, to punish the misconduct or to address the misconduct through appropriate changes to policy, OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130466 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 Pagc 52 practice and procedure. Q. Okay. And we will get into that in minute detail and your total understanding of the alleged misconduct. Let's go back to the question that we were addressing. A. I thought that that's what I was doing. I'm sorry if I misunderstood your question. Q. You were saying how Judge Streitfeld handles similar issues in the tobacco cases. A. Yes, sir. Q. And how does he handle such issues, or did he? A. Evidence with regard to the magnitude of the wrong is admitted in tobacco cases, including the number of other victims of the tobacco industry's longstanding pattern of wrongdoing. Q. But you are saying A. That evidence gets admitted Q. But the jury -- you are saying the jury should not punish based on that evidence. Correct? A. What I am saying is that there is a recognized constitutional limitation on imposing punishment against a defendant in a case being prosecuted by one plaintiff for injury that has occurred to other plaintiffs. That doesn't mean that the jury is not informed -- God bless you -- is not informed about those other injuries. It OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130467 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 53 is essential for the jury to know about the magnitude of the wrong and the extent, nature and length of coverup activities. And to draw an analogy for you, when you are prosecuting a criminal case with the exception of the Williams' rule evidence, you are only looking at one crime during the proceedings before the jury that address the issue of guilt or innocence. But when it comes to sentencing, there is a presentence investigation that's conducted and you take a look at the entire history of wrongdoing on the part of the criminal defendant in order to determine what an appropriate punishment is. Has this individual remorse or hasn't the there an admission of individual shown remorse? wrongdoing? Was there an to cover it up, and those same kinds of factors appropriately taken into relatively clear Florida an appropriate amount of shown Is effort are consideration based upon precedent in determining what punitive damages should be to serve the purpose of punishment and deterrence. Q. What Florida precedent supports your opinion that the jury should be able to consider alleged discovery conduct in another case when that plaintiff was not involved in that case? A. Let me make sure that you understand what my OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130468 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 54 position is in that regard. It is that the jury should clearly be permitted to consider the course of conduct relating to the pattern of wrongdoing in the case being prosecuted before the jury, even if that pattern of wrongdoing involves injuries to other plaintiffs. That's my position. Q. What is the pattern of wrongdoing in the Beverly and Marlin actions that you are referring to? A. TD Bank's participation in the Rothstein Ponzi scheme. Q. Okay. So, you are talking pre-blowup, pre- blowup of the Ponzi scheme? A. And -- and post-blowup of the Ponzi scheme as well. Q. What wrongdoing has occurred in the Beverly and Marlin matters post-blowup? A. It is my position that the efforts to cover up involvement in the Rothstein Ponzi scheme are relevant and material to all of the victims of the Rothstein Ponzi scheme. Q. sir? Can we go back and can you answer my question, A. I thought that I had and if I didn't that's as a result of my not understanding your question. I apologize. OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130469 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 55 Could you try to ask it of me in a different way. Q. I am going to ask you to answer the question I asked. What wrongdoing has occurred in the Beverly and Marlin matters post-blowup? MR. MOSKOWITZ: Objection. I think it was already asked and answered. A. Well, we dealt with that issue before and you have asked me to assume that Mr. Scherer has acknowledged that there was no litigation misconduct directly in the Beverly and Marlin matters and I have accepted that representation. So, if the question is was there any litigation misconduct in the Beverly and Marlin matters, there is no reason for me to change the answer that I gave you previously. I accept the accuracy of Mr. Scherer's testimony. BY MR. HUTCHINSON: Q. Are there any cases that you can point to that support your opinion relating to the jury's consideration, the Beverly and Marlin jury's consideration of the litigation misconduct in the other matters? A. Johns-Manville. I am sure there are others but that's the one that I deal with most frequently and have found to be most persuasive. OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130470 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 Pagc 56 Q. Any others that support your position? A. As I said, I am sure there are but they are not cases or citations that I have memorized. Q. If you will turn to Page 52 of Exhibit 3 -- A. I am there. Q. -- do you see where the Court states, "But right now those allegations don't belong in this pleading"? A. Can you give me a line number, please? Q. Starting at line ten, "The motion to strike paragraphs 18, 19, 180 to 185 is granted." MR. MOSKOWITZ: Objection, the document speaks for itself. And, again, it's taking it out of context because on Page 47 he says, "We haven't yet reached punitive damages." So you are showing him something that is not what the Court actually ruled. BY MR. HUTCHINSON: Q. Were you aware that the Court struck the discovery allegations from those complaints? A. The discovery misconduct allegations from the complaint. Q. Correct. A. Yes, I was aware of that. I was also aware that the punitive damage motion, the motion for leave to OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130471 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 57 amend to assert a claim for punitive damages had not yet been reached by the Court. Q• And still has not. Correct? A. That's my understanding, yes. Q. And it's your understanding that there are no punitive damages claims currently in Beverly or Marlin? A. It is my understanding that procedurally that issue has not yet been reached as a consequence of the imposition of the bankruptcy stay. That is not a factor that I consider to be significant because of the very obvious conclusion that once that issue is reached, the motion for leave to assert a claim for punitive damages will be granted. Q. And where did you get the understanding that the bankruptcy stay somehow affected the motion practice with respect to the pleadings? A. It's my understanding that the bankruptcy stay precluded in general the ongoing prosecution of this claim. Q. Where did you get that understanding from? A. I don't recall. Q. Are you aware that we have continued to argue motions on the pleadings and Judge Streitfeld indicated that he was proceeding with anything relating to the pleadings, that it was simply discovery that was stayed? OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130472 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 58 A. I don't know that I was specifically aware of that, but the stay of discovery would certainly have an impact on proceeding with a motion for leave to amend to assert a claim for punitive damages. So, I don't know that that's a distinction that is of much significance to me. Q. Okay. Let's discuss how your theory of this discovery misconduct is relevant to Beverly and Marlin actions and how it comes into evidence. You are saying it comes into evidence during a separate punitive phase. Is that correct? A. Current State of Florida law requires upon motion of either party that the proceedings be bifurcated, that the issues of compensatory liability and the amount of compensatory damages together with entitlement to punitive damages are tried in the first phase. Assuming the jury determines that it is appropriate to consider the issue of punitive damages, there is a second phase where the amount of punitive damages is addressed and evidence not otherwise admissible in the first phase is admissible in the second phase. I would think it unlikely that evidence with regard to the litigation misconduct would come in in its OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130473 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 59 entirety in the first phase of the proceedings. I think it very unlikely that evidence with regard to the litigation misconduct, including litigation misconduct to cover up the very same wrongdoing that led to the injury to these plaintiffs would be excluded in a second phase proceeding, very unlikely that it would be excluded. Q. So your opinion is that it would come in when determining the amount of punitive damages, but would not come in in the first phase when determining whether punitive damages were warranted? A. That's not quite what I said. What I said was that there may very well be some exclusion of litigation misconduct relating to other cases in the first phase of the trial. It is highly unlikely that any of that litigation misconduct evidence would be excluded in a second phase. I can -- I can envision the admission of at least some of the evidence with regard to litigation misconduct in Coquina coming in in Beverly and Marlin in the first phase. Q. On what basis? A. On the basis that it is relevant to the issue of whether punitive damages should be assessed. Q. And why is it relevant? OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130474 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 60 A. Because of all of those factors that are identified in Johns-Manville having been addressed and approved in general terms in -- by the Florida Supreme Court as appropriate to consider in determining whether punitive damages ought to be assessed. Q. And, again, your basis is primarily Johns-Manville for this. Correct? A. Well, when you say my basis is primarily Johns-Manville, that is not accurate. What I have tried to convey to you is that that's the most convenient and clear summary of relevant aggravating and mitigating circumstances. So, it's the one that I turn to most frequently because it provides that clear and convenient summary. Q. Let's talk about how this would work. So, let's assume the Beverly case is tried first. A. Okay. Q. It was filed first. Correct? A. I will accept your representation that it was. I don't remember. Q. So, it was -- Beverly was filed first. Assume it's tried first. You are saying during the first phase of Beverly trial there may be some evidence that comes in with respect to the litigation misconduct in Coquina and you believe there would certainly be evidence that OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130475 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 61 would come in with respect to that conduct in a punitive damages phase. Correct? A. Correct. Q. And then assume the Beverly jury finds first that punitive damages are warranted and then, you know, listens to this additional evidence in Phase 2 and assesses punitive damages against TD Bank. Okay. With me? A. So far. Q. So, what happens in the Marlin matter that's tried after Beverly? A. What happens after Beverly? Q. There is an award, a punitive award. A. Is there subsequently an admission of wrongdoing by TD Bank, an apology for the wrongdoing, appropriate corrective measures taken and a payment of the punitive damages, or is there a continuation of the denial of wrongdoing, a continuation of the coverup and a refusal to pay the punitive damage award? Q. Assume all you have is a punitive damages award on one day and the Marlin trial starts on the next day. A. Then it would be my position that it would be very likely that the evidence admitted in the Marlin trial would look very much like the evidence admitted in OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130476 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 Pagc 62 the Beverly trial. Q. So, this evidence just keeps -- each plaintiff becomes, no matter what, that the litigation misconduct had nothing to do with their case, had nothing to do with their claims, and in no way injured them, keeps getting presented trial after trial after trial? A. Well, when you say in no way had anything to do with injuring them, that's wrong. It did have something to do with injuring them because it complicated the prosecution of their claims and will continue to prosecute the complicate -- the prosecution of every victim of the Rothstein Ponzi scheme until TD Bank finally says, you know what, we have been told over and over and over again that what we did was wrong. And it's time for us to take our heads out of the sand and to stand up and acknowledge that what we did was wrong, and to make sure that it never happens again, instead of continuing to deny wrongdoing and ratifying that wrongdoing. So the answer to your question is, yes, they keep being faced with the same evidence of what they did wrong at least until they change their ways and the purpose of punitive damages is finally served. The wrongdoer has been punished enough and the wrongdoer finally says, yes, I shouldn't have ever done OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130477 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 63 this. I realize it was wrong. I am ready to correct it right now, and I am ready to pay all the penalties that have been imposed upon me before. That's when I think the evidence stops coming in, maybe. Q. Mr. Scarola, when were these cases filed, Beverly and Marlin? A. I don't remember the dates. I can look at the pleadings, I am sure, and find out the -- it would appear that the Marlin case was filed in 2013. Q. Well, let's use that as an example. A. Okay. Q. How has any alleged litigation misconduct in Coquina damaged the Marlin plaintiffs' prosecution of their case filed in 2013 long after the order in Coquina and Coquina's judgment came out? A. The Marlin plaintiffs and the Beverly plaintiffs have been obliged to litigate issues that they never should have had to litigate if TD Bank did the right thing. Q. What issues? A. TD Bank's liability for the underlying misconduct. Q. So you are saying because of alleged discovery misconduct in Coquina, TD should admit underlying OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130478 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 64 liability in Beverly and Marlin? A. What I am saying is that because of the established litigation misconduct on the part of TD Bank, which was specifically designed to conceal the extent of TD Bank's involvement in the Rothstein Ponzi scheme, victims of the Rothstein Ponzi scheme have been obliged to undertake efforts to prove TD Bank's underlying misconduct that would otherwise have been unnecessary. Q. Well, the alleged litigation misconduct was made public long before the Marlin complaint was filed. Correct? A. Yes, accepting this date of filing, that's true, uh-huh. Q. So, it has in no way hampered the Marlin plaintiff's prosecution of their matter. A. Well, we are just not quite connecting. It is my opinion and my understanding of the available record evidence that TD Bank refused to acknowledge any liability, that TD Bank actively sought to conceal liability through the alteration of documents in discovery, through the presentation of perjured testimony, through the concealment of other documents to a significant extent, and that TD Bank bank's coverup and ratification of its misconduct continues even though OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130479 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 65 the extent of that wrongdoing has been publicly disclosed, judicially recognized, but not yet acknowledged or accepted by TD Bank. Q. So, until TD admits liability on the underlying Ponzi scheme claims, you believe that this alleged litigation misconduct in other matters that was made public long ago is relevant in these subsequent matters? A. I am the father of five children and the grandfather of 15 and until my children and my grandchildren are willing to acknowledge whatever minor wrongdoing they may have been involved in, that continues to impact upon the way in which I respond to the things that they have done wrong. Once they have acknowledged their wrongdoing and accept responsibility for it, I don't need to continue to say, you keep doing the same thing over and 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. TD Bank has had punishment assessed against them. They have refused to acknowledge the OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130480 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 66 appropriateness of that punishment. They continue to appeal it. They continue to contend we did nothing wrong, and as long as they continue to appeal and to contend that they did nothing wrong, then the facts of the history of their misconduct are relevant and material in deciding what is appropriate punitive damages to be imposed against them. Q. Let's get into detail of what your understanding is of the alleged discovery. MR. MOSKOWITZ: When would you like to take a break? We have gone another hour. I certainly want to let you do your depo. MR. GENOVESE: Lunch was to arrive -- keep asking questions. I will see when lunch is arriving, give you that information. That will be a convenient time in my mind. Is that all right? THE WITNESS: Sure. Assuming lunch is going to be here within the next half-hour, that's fine with me. Otherwise, I'd like to take a break before lunch. MR. GOLDBERG: Lunch is here already. MR. GENOVESE: Whenever Wen wants to conclude within the next half-hour. THE WITNESS: That's fine. OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130481 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 Pagc 67 BY MR. HUTCHINSON: Q. Are you good going a little while longer? A. I'm good going a little while longer, yeah. I'm working without breakfast so I'd like to have lunch. Q. Let's get in, you keep alleging all of your -- or talking about all this alleged litigation. MR. MOSKOWITZ: Is this going to be like a half-hour? I mean, he hasn't had breakfast at all. 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 are referring to? A. Yes, sir. There was a Q. You are referring to a document, sir? A. I am, yes. Q. What document is that? A. It's plaintiff's first request for production of documents to TD Bank relating to the sanctions motion filed in the Razorback Funding, LLC, et al., versus Scott Rothstein matter, 17th Judicial Circuit Court, OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130482 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 68 Case Number 09-062943-19. Q. Let me show you what I am marking as Exhibit 4. Is Exhibit 4 what you are referring to, sir? A. Yes, assuming that this document is an accurate copy of all of the pages following the first page, the first page is identical so I assume that it is. (Exhibit No. 4, Plaintiff's First Request for Production of Documents to TD Bank, was marked for identification.) BY MR. HUTCHINSON: Q. So what is your understanding of the first alleged specific litigation misconduct? A. The litigation misconduct that I am referencing is the litigation misconduct that is described in each of the introductory paragraphs to the requests that are made in this document, specifically I am referring to the description that is included on Page 5 under the title, background to this request, on Page 6, background to this request. It continues on Page 7 and 8. On Page 8, background to this request. It continues on Page 9, Page 10, Page 11, Page 12. The description under background to this request that appears on Page 13 and continues onto Page 14, background to this request that OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130483 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 69 appears on Page 14, Page 15, Page 16 and Page 17. I am also referring to the allegations in paragraph 13 of the complaint and paragraphs 86 through 153 of the complaint where allegations of wrongdoing are specifically described in paragraphs 15, 17, 18 and 154 through 196 where post-collapse coverup facts are alleged. Q. And you are referring to certain notes now, sir? A. I am, yes. These are notes that I prepared myself when reviewing certain of the materials that were provided to me. Q. Okay. We will mark those in due course, but who were the individuals that were responsible, to your knowledge, for the alleged wrongdoing, and we will start with the alleged wrongdoing on Page 5 of Exhibit 4? It's a section titled, documents relating to the RRA customer due diligence CDD form. A. Uh-huh. The specific individuals whose identity I have any knowledge of are those who are identified by name within that document. I do not have knowledge outside the scope of the documents that I have described of involvement by other individuals by name. Q. And, again, these are all documents drafted by plaintiff's counsel. Correct? A. I think that this particular document was OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130484 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 Pagc 70 drafted by Mr. Moskowitz. Q. And the comments in your notes were based on receipt of information from plaintiff's counsel. Correct? A. Which comments in my notes? The specific paragraphs in the complaint that I referenced? Q. Answer me that. Well, you were reading from your notes earlier. Correct? A. When I identified the specific paragraphs in response to your earlier question, I was reading from my notes, that was not information that was provided to me by plaintiff's counsel. That was my identification from my reading of the complaint Q. Okay. A. -- of the relevant paragraphs because I assumed that -- I anticipated I would be asked a question such as the one that you posed to me and I didn't want to have to go through the complaint paragraph by paragraph to identify the specific paragraphs, so I made a note of them. Q. Okay. Let's go back to Page 5 of the Exhibit 4. A. Yes. MR. MOSKOWITZ: Wen, just for the record, I think he has two things here, so it's different OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130485 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 71 from the exhibit. He has the request for production and the interrogatories. So he is flipping through those. I just don't want to make a miscommunication. He is on Page 5 of the interrogatories. I don't know if you want to mark those after lunch. You see, this is two things together. THE WITNESS: Yeah, but what I am looking at right now is the request to produce. MR. MOSKOWITZ: Request for production. BY MR. HUTCHINSON: Q. Okay. Page 5? A. Page 5 of the request for production. Q. Isn't it true that even the plaintiffs allege that this document, the CDD form, what was provided to -- TD Bank provided that form in its electronic state to outside counsel? A. Yeah, that is true. Q. And isn't the complaint with respect to that is that outside counsel produced that in a black and white form as opposed to a color form? A. Yes, the gist of the complaint is that a highly relevant legend at the top of the page was obscured by the manner in which the production was made. Q. And is it your opinion -- are you offering an OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130486 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 72 opinion here today that outside counsel's production of that document that was provided to outside counsel in full color, outside counsel's production of that in black and white is evidence of some underlying scheme by TD Bank to cover up certain conduct? A. Yes. Q. What evidence do you have that anyone at TD Bank as opposed to their outside counsel was involved in any such scheme to produce that document in anything other than its electronic color form? A. You are drawing a distinction that I do not draw. TD Bank's outside counsel was acting as an agent of TD Bank. What TD Bank's outside counsel did, TD Bank was responsible for, and this was what I consider to be part of an overall pattern of coverup. Q. Sir, will you answer my question, please? MR. MOSKOWITZ: Objection. A. I did. BY MR. HUTCHINSON: Q. No, answer my question. What evidence do you have that anyone at TD Bank was -- anyone at TD Bank, not their outside counsel, was involved in the production of this in a black and white format versus a color format? A. And I responded to that question by telling OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130487 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 73 you that you are drawing a distinction that I do not believe is appropriate. What TD Bank's agents do is conduct on the part of TD Bank. If you are asking me, if the intent of your question is to ask me to identify direct employees of TD Bank as opposed to agents of TD Bank who were involved in this particular misconduct, I can't do that. Q. Sir, you are not here to determine what is relevant and what is not and what distinctions should be drawn and what distinctions should not be drawn. You are here to answer questions. I would appreciate if you would answer my questions and move forward. MR. MOSKOWITZ: Objection. Move to strike. MR. HUTCHINSON: You are not the Judge in this matter and the Judge can decide what's relevant and what's not. MR. MOSKOWITZ: Why don't we take a break for lunch now because we don't have to get to that level. I think everything has been good today so far. MR. SHEERIN: There is a question pending. MR. MOSKOWITZ: The question you're not here to tell -- that's not a question, that's a lecture to the expert witness. Sir, that's a lecture to the witness. That's OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130488 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 Ny74 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 TD 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. OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130489 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 Pagc 75 BY MR. HUTCHINSON: Q. Mr. Scarola, before we broke, we were talking about the CD form on page five of the Razorback request for production. Do you recall that? A. I do. Q. The issue there was that outside counsel did not produce it in color. Correct? A. That certainly was one of the relevant issues with regard to that document, yes. Q. And if that same document has been produced in color in the Beverly matter, would you agree that that alleged misconduct has been rectified in the Beverly matter? A. I would agree that that portion of the coverup has ended. Q. And would you agree that that alleged misconduct would not be relevant in the Beverly matter since it has ended and been produced in color? A. No, I would not agree to that. Q. So, even if the production occurred in color in Beverly, you still believe the prior production in another matter in another format would be relevant to the punitive damages in Beverly? A. I believe that that aspect of the ongoing coverup would be relevant in Beverly, correct. OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130490 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 76 Q. But you said it's not ongoing anymore, it's ended? A. No, no, what I have said is that that aspect of the coverup has been uncovered. The coverup continues. Because the coverup continues, all of the efforts that have been part of the coverup remain relevant and material. Q. We won't go through all the alleged allegations of what you are calling the coverup but -- A. Thank you. Q. -- I just want to make sure that I understand what allegations are encompassed of what you are calling the coverup. Is it the allegations with respect to that's in these request for productions and the complaint paragraphs that you referred to earlier? A. And the interrogatories also that are part of this package, yes. Q. Okay. So, if we take all of that together, that would be the universe of the alleged coverup as you understand it? A. That identifies all of the coverup aspects of which I am aware, although I can't represent to you that it encompasses all of the information with regard to those aspects of the coverup. These are good summaries OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130491 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 77 of everything that I know -- Q. And it's what your A. And that's why I pointed to this. Q. And it's what you are basing your opinions on. Correct? A. That's correct, yes. Q. And you have no personal knowledge of the veracity of any of the allegations contained within the request for production, the interrogatories and the interrogatory. Correct? A. Well, I do have some personal knowledge to the extent that I know these lawyers and know them quite well. And I'm not dealing with allegations that have been made by strangers. I am dealing with allegations from individuals whom I believe to be highly respected members of the Bar who certainly would not intentionally misrepresent any of these things. So, I have accepted their representations as being true. Q. Have you ever disputed an allegation in your years of practice since 1972 made by a highly respected member of the Bar and a friend of yours? A. Sure, yeah, that has occurred, but I have no reason whatsoever to dispute any of these allegations. If you want me to assume that some aspect of what I have assumed to be true is not true, I will be happy to do OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130492 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 78 that for purposes of telling you whether it has any impact upon the ultimate opinions that I'm rendering in this matter, but I have assumed these representations to be true. If there is a -- if there is a quotation in here from a deposition or from a transcript, I have assumed the accuracy of that. accurate, you what, Q. then you point that if any, impact that If out has Is it your opinion that it turns out not to be to me on my under and I will tell opinion. Florida law if an outside attorney is responsible for the alleged discovery misconduct that the client should be punished for that misconduct instead of the attorney? A. Oh, I understand from Florida law that the courts draw a distinction between misconduct in which the client had no involvement and misconduct that the client did not participate in or ratify, that the courts will not hold the client responsible for that misconduct but will visit the appropriate sanctions upon the lawyer rather than the client. That, however, was not the case with regard to this document as has been found by Judge Cooke, and I have relied upon that finding. Q. Let me show you what I am marking as Exhibit 5, which is a document titled TD Bank Victims Notice of Filing of Expert Disclosures. A. Yes, sir. OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130493 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 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. OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130494 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 Pagc 80 Q. Please do so. A. Sure. Yes, I think that that's an accurate general description of my anticipated testimony. Q. Okay. A. The focus will clearly be on the second and third paragraphs as opposed to the first, but it is accurate in its entirety. Q. Are you predicting an outcome in the Beverly and Marlin matters? A. I am opining as to the value of the punitive damage claims in those cases. Q. So you're not predicting what would happen if Beverly and Marlin were tried to a jury? A. No, I think that inherent in my opinion is what I believe is likely to happen if those cases were tried to a jury. That's a different question than the one you asked me am I predicting an outcome. This case may very well be settled before it's tried and I haven't -- I haven't attempted to form an opinion as to the likelihood of settlement as opposed to a trial outcome. I am focusing upon what I believe is likely that a jury would do if these claims were presented to a jury. Q. Okay. So, you are opining -- let's just take the Beverly action that was filed first -- as to what OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130495 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 Pagc 81 the result in the Beverly matter would be if it were tried to a jury. A. Yes. Q. And how many hours did it take you to reach a decision or an opinion as to what would happen if the Beverly matter were tried to a jury? A. To the extent that my opinion is reflected in this summary, it didn't take very long at all, and I I can look at my time sheets and I can tell you approximately how long it took. Q. That would be great. A. The summary of my time. Q. And are you referring to what I am marking as Exhibit 6? (Exhibit No. 6, Time Summary, was marked for identification.) A. I am referring to, yes, Exhibit 6. BY MR. HUTCHINSON: Q. And Exhibit 6 is a summary of all of the time that you have expended in relation to your engagement in this matter? A. Probably not, but it is a summary of time that I have spent. In other words, if the time is reflected, it's time that I spent. There may have been time that I spent that's not reflected. I don't think that there is OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130496 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 82 any significant amount of time reflected -- excuse me, any significant amount of time that I have spent on this matter that is not reflected but there certainly may be some. Q. These expert disclosures were filed on June 19th. Correct? A. Yes, that's what the certificate of service says. Q. And you state that -- your opinion was disclosed on 6/19 that TD's victims' claims for aiding and abetting, fraud and conspiracy to commit fraud by TD Bank are viable, nonspeculative and valuable claims with a high probability of success if tried to a jury. Correct? A. Yes, that is correct. Q. And at that point your time sheets indicate that you had spent approximately 5.1 hours on this matter. Is that correct? A. I will accept your math. Q. How many plaintiffs are involved in the Beverly and Marlin matters? A. I don't remember counting them. Q. Over SO? A. I don't remember counting them. Q. Do you have any idea, sir? OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130497 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 83 A. A lot. Q. And you determined that each one of their claims were viable, nonspeculative and valuable with a high probability of success in 5.1 hours? A. I viewed them collectively and not separately. I did not believe that it was necessary to view them separately. Q. Each one of them are asserting individual claims. Correct? A. They are asserting individual claims arising out of the same course of misconduct, arising out of the same conspiracy to engage in that misconduct, arising out of the same acts of aiding and abetting that misconduct. Now, if you ask me to assume that someone's name is listed who was not an investor in the Ponzi and is unable to prove that they invested in the Ponzi scheme, that would change my opinion with regard to that claim. Q. So, how in the world did you determine in 5.1 hours that these plaintiff's claims in this massive Ponzi scheme were viable, nonspeculative and valuable with a high probability of success if tried to a jury? A. Well, let me explain first that I approached these matters with some significant degree of knowledge OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130498 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 84 regarding the general matters that gave rise to those claims. I have been involved in at least tangentially related litigation for, I guess it's now years, in that I represent Bradley Edwards in a claim for abusive process and malicious prosecution against Mr. Epstein, whose criminal activities formed at least in part a basis for some of Mr. Rothstein's solicitations. As a consequence of the responsibilities that I have had in representing Bradley Edwards, it has been necessary for me to follow somewhat closely the prosecution of the claims relating to the Rothstein Ponzi scheme. I personally attended a fairly lengthy session of Mr. Rothstein's deposition. I have read transcripts of Mr. Rothstein's very lengthy testimony. I have closely followed press reports with regard to these matters. So, it was not without some sort of significant degree of other knowledge that I was called upon to form my opinions and I have, at least to some extent, relied upon that knowledge gained independently and built upon that foundation. Q. Well, during all that other activity, what did you learn about Mr. Beverly's claims against TD Bank and his, the facts and circumstances surrounding his investment? A. I learned about all of the basic underlying OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130499 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 85 aspects of the Ponzi scheme. I learned about TD Bank's involvement in aiding and abetting that scheme and in conspiring to assist Mr. Rothstein in the perpetration of his fraud. All of those facts, obviously, are highly relevant to Mr. Beverly's individual claim. But, again, I have not undertaken to separately evaluate each of the individual claims being prosecuted by Mr. Moskowitz' firm and Mr. Scherer's firm. And if you would like me it assume some facts that would cause me to distinguish any of the individual plaintiff's claims from the claims generally being prosecuted against TD Bank, I would be happy to do that, and I would tell you whether those separate facts have any impact on my opinion or do not have any impact on my opinion. In light of the nature of the underlying claims, I have seen no reason whatsoever to distinguish TD Bank's liability to any of these victims from its liability to any of the other victims. Q. But you have not attempted to do so. Correct? A. No, I have not. That has just -- that has not been part of my evaluation, which is why I am telling you if there are facts that you think would make a difference, tell me what they are and I will tell you whether I agree they would make a difference or not. am not aware of any. OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130500 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 86 Q. So in your 5.1 hours of preparation of your opinions in this matter you didn't have concern to determine whether there are any facts that make a difference, did you? A. It is incorrect to say that I have only had 5.1 hours with regard to these matters. There were 5.1 hours that were specifically devoted to my performance of my responsibilities as an expert witness in this case prior to the filing of this document on June 19th. My investigation continued, as is reflected in my time records. There was nothing in the subsequent investigation that causes me to alter my opinions in any respect at all, and the knowledge, the fact or case specific knowledge upon which I base my opinions began to be accumulated significantly prior to having been retained as an expert witness in this case. That's all I am trying to communicate to you, and if there is something -- I will tell you again, if there is something that you think might make a difference, tell me about it. I will tell you whether it does. Q. And the subsequent investigation you are referring to is the eight hours that you spent on this matter since the disclosure of your expert opinions. Correct? OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130501 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 Pagc 87 A. Yes, sir, that's correct. Q. So in total --- A. Since the disclosure of what has now been marked as Exhibit Number -- Q. Five? A. -- 5, thank you. Yes. Q. So, in total you have spent a total of before today, 13.1 hours on this matter? A. No. I have spent 13.1 hours that have been recorded since having been retained as an expert witness but I have significant time involved relating to these issues prior to my retention as an expert witness. Q. Let's discuss an individual plaintiff, Mr. Beverly. What claims is Mr. Beverly asserting? A. He is asserting the claim that TD Bank conspired with Scott Rothstein to engage in a fraud and that TD Bank aided and abetted Scott Rothstein in the perpetration of that fraud. Q. And you have not gone through the elements of both of those claims with respect to Mr. Beverly to determine whether both of those claims for Mr. Beverly are, in fact, viable and nonspeculative and valuable claims with high probability of success if tried to a jury? A. That's not accurate. That is not accurate. OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130502 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 88 Q. So, you have gone through each plaintiff and determined that each plaintiff can present evidence to satisfy all of the elements of each of those claims? A. I have viewed these claims as conspiracy and aiding and abetting claims collectively. I have not viewed them separately. I don't believe that there is any need to view them separately. The only victim specific element that exists is proving a causal connection between TD Bank's conspiracy and aiding and abetting and the particular loss that was suffered by a specific plaintiff. So, if you want me to assume that Mr. Beverly was not an investor in the Ponzi scheme and didn't lose any money as a consequence of that investment in the Ponzi scheme, I will make that assumption on a hypothetical basis and I will then tell you that Mr. Beverly doesn't have a viable claim but I have read the complaint. I have told you that I have assumed the accuracy of the complaint and the complaint alleges otherwise. Q. So you agree that for an aiding and abetting claim, Mr. Beverly has to show that acts by TD Bank proximately caused his damages. Correct? A. Yes, I do agree with that. Q. Okay. What acts by TD Bank proximately caused Mr. Beverly's damages in this matter? OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130503 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 89 A. Mr. Rothstein's Ponzi scheme could not have been carried out without the substantial assistance of TD Bank. TD Bank's substantial assistance to Mr. Rothstein enabled Mr. Rothstein to conduct the Ponzi scheme. Mr. Beverly was an investor in the Ponzi scheme. Mr. Beverly sustained a loss as a consequence of that investment. Q. Do you have any case law to support your stance that TD's action would be sufficient for a proximate cause finding when it had no interaction with Mr. Beverly? A. Q. A. Florida. here Yes. And what case law is that? It is the general common law of the State of Can I cite to you a specific case as I sit right now? The answer to that question is, no, I cannot. Hornbook commit a fraud. Q. Correct? A. abetting But it is for want of a better description, law that if you aid and abet or conspire to fraud, you are liable to the victims of that If you prove the elements of that claim. Yes, you must prove that there was aiding and or conspiracy of a fraud before there is any OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130504 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 90 liability to the victims of a fraud. But if what you are suggesting is that that somehow requires some direct action between Mr. Beverly and any given plaintiff and TD Bank, I reject that assertion. Q. Okay. So, it's your opinion that while you agree that each plaintiff has to show proximate causation between a specific act of TD Bank and these plaintiffs' injuries, that that doesn't require any contact or involvement with these individual plaintiffs? A. I cannot accept that compound question. There is involvement with these plaintiffs by virtue of TD Bank's participation in the conspiracy and aiding and abetting the fraud. That is the required involvement. Q. What's your understanding of the definition of proximate causation, sir? A. A proximate cause is a cause that substantially and in natural and probable sequence contributes to a given result. Q. What's the difference in proximate causation and but for causation? A. I don't know that under the circumstances of this matter I would draw any distinction between the two. Q. That wasn't my question, sir. What's your understanding of but for causation under Florida law? OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130505 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 91 A. I'm sorry, but I really don't understand your question. Q. In all your years of practicing law, have you ever heard of but for causation? A. I have heard that phrase, yes. Q. What is your understanding of what but for causation means? A. It means that in the absence of some conduct a result would not have occurred. Q. And is it your understanding that there is a difference between proximate causation and but for causation? A. There may be under certain circumstances. I don't believe there is any difference under the circumstances of this case. Q. Do you have any law supporting that? A. I am not aware that that issue has been addressed in this case so I couldn't have any law that supports that in this case. Q. What act was conducted by an individual TD Bank employee that was the proximate cause of Mr. Beverly's damages? A. The gross disregard of all of the indications of fraudulent financial transactions over an extended period of time that enabled Mr. Rothstein to comingle OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130506 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 92 what effectively were trust funds being held by TD Bank in a variety of different accounts, the misuse of IOTA accounts, the use of a variety of fraudulent documents, direct contact between victims of the Ponzi scheme and TD Bank representatives in the solicitation of Ponzi investments. You know, there are others, I am sure. And, again, those are matters that are detailed in the complaint and I have assumed the accuracy of the allegations that are included in the complaint. They form the factual basis for my opinions. So, if you want to get it all, it's there. Q. Let's go back -- I want your understanding of what you are basing your opinions on that you had formulated --- A. I am basing my opinions on the allegations included on the complaint. Q. What's your understanding of how many of the Beverly and Marlin plaintiffs had any contact, communications or contact in any way with TD Bank? A. I cannot tell you how many. I can tell you that there have -- there were some that had some contact. I cannot detail that contact for you, nor do I believe that it is particularly relevant or material whether these particular plaintiffs had any direct contact or didn't have any direct contact. OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130507 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 93 What is significant is that Ponzi scheme investors did have direct contact with TD Bank representatives during the course of this Ponzi scheme and that direct contact facilitated the investments and the fraud. Q. How many of the Beverly and Marlin plaintiffs saw any documents produced by TD Bank? A. I can't answer that question for you. I don't know how many nor do I believe that that is significant as long as there were some victims of the Ponzi scheme who saw fraudulent documents produced by TD Bank that demonstrates that TD Bank was aiding and abetting in and conspiring to commit the overall fraud that gives rise to liability to all of the victims of the fraud. Q. So contacts with TD Bank were not important to you in formulating your opinions in this matter? MR. MOSKOWITZ: Objection. Mischaracterizes the testimony. A. That is clearly a misstatement of what I just said. BY MR. HUTCHINSON: Q. Were contacts with TD Bank important to you in formulating your opinion in this matter? A. Yes, sir. The contacts that are described in some detail in the complaint, they were significant to OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130508 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 Pagc 94 me. Whether those contacts were specifically with Mr. Beverly or any other named plaintiff in this case, that's what is of less significance because regardless of whether a particular named victim of the Ponzi scheme had direct contact with TD Bank, TD Bank was aiding and abetting and conspiring to commit this fraud. Q. Can you give me any case that supports that position? A. No, I can't. As I told you -- as I sit here right now, I cannot name a case for you that has ever addressed that issue in this case. This case hasn't reached the point were those issues could be addressed. If you're asking me whether the general proposition of law has been addressed by cases in the past, that is the proposition that if an individual aids and abets the commission of a fraud, that it doesn't require direct contact between that victim and the aider and abetter in order for the victim to recover, the answer to that question is, yes, that proposition has been addressed. Can I give you the citation to the cases where it has been addressed, not as I sit here today, no. Q. Can you tell me any cases that support a proposition that a plaintiff can show the proximate causation required by the substantial assistant element OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130509 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 95 of aiding and abetting without any contact whatsoever with the defendant? MR. MOSKOWITZ: Objection. Asked and answered. A. Well, I can give you a line of cases in the conspiracy area. Q. I am not talking about conspiracy, sir. I am talking about aiding and abetting. A. No, as I sit here right now, I cannot cite a case to you. It is what I consider to be a very well accepted general proposition of law, but I haven't memorized the case citations. I can't give it to you. Q. During your 5.1 hours of engagement in this matter before your opinion was disclosed, did you take the time to go look at any Ponzi scheme cases to see whether the substantial assistance element could be satisfied and the proximate cause or climate thereunder without any contact with the bank? A. No, I did not. And if you are prepared to cite to me binding authority that demonstrates that what I have long understood to be the law of the State of Florida is, in fact, not the law of the State of Florida, I'd be happy to take a look at that and that might change my opinion about the first part of my disclosed opinion in that disclosure. OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130510 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 Pagc 96 I don't think you are going to find that binding authority but, you know, I 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 OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130511 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 Pagc 97 before your opinion was disclosed, did you? MR. MOSKOWITZ: Objection. Asked and answered three times. A. I did not take the time to do anything that I considered to be absolutely unnecessary and superfluous. There is probably a long list of things that we could identify that I didn't take the time to do because I considered it to be absolutely unnecessary and inappropriate to waste anybody's time in doing it. BY MR. HUTCHINSON: Q. Are you offering an opinion in this matter that TD Bank owed any of the Beverly and Marlin plaintiffs a duty? A. If you want to ask me that question, I would render an opinion in that area, but the primary focus of my testimony will be on the value of the punitive damage claims in this case. Obviously, inherent in that opinion is the opinion that there is underlying compensatory liability. Without underlying compensatory liability, there cannot be a punitive damage award. Q. Did -- or how many of these plaintiffs were TD Bank customers? A. I can't answer that question for you. I don't know. Q. Are you aware that the law is well settled as OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130512 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 98 to whether a bank owes a non customer a duty to monitor accounts or transactions? A. Are you talking about a general duty to non customers to monitor transactions or are you talking about a duty not to aid and abet or conspire to commit a fraud. Q. You testified earlier that there were transactions that TD should have caught. Correct? A. I don't remember using those words. Q. *you talked about disregard of all indicators of fraudulent transactions, spent a period of time with the trust funds. Misuse of IOTA accounts, do you remember your testimony about that? A. I do, yes. Q. Is it your opinion in this matter that TD Bank owed any duty to any of these plaintiffs with respect to those transactions? A. Yes. Yes, they did. Q. And what is the relationship between TD Bank and these plaintiffs that gives rise to any duty owed to these plaintiffs? A. There is a duty not to conspire to commit a fraud and there is a duty not to aid and abet in the commission of a fraud. This is not a negligence case. These are conspiracy and aiding and abetting claims, not OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130513 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 Pagc 99 negligence claims. Q. Sir, when I asked you what specific acts were done that proximately caused Mr. Beverly's harm, you talked about failure to monitor accounts, IOTAs and stuff that you talked about. Do you recall that? A. I gave the testimony that I gave, yes. Q. So what duty did TD Bank owe to Mr. Beverly to monitor anything? A. TD Bank had an obligation not to conspire to commit a fraud and not to aid and abet in the commission of a fraud. Q. Okay, sir. That's not my question. MR. MOSKOWITZ: Objection. He has answered it twice. You don't like his answer but that's his answer. That is his answer. That was your question. That's his answer. BY MR. HUTCHINSON: Q. I am not talking about aiding and abetting. I'm not talking about conspiracy. I am talking about the answer you gave. Does TD Bank owe any duty to Mr. Beverly to monitor Rothstein's accounts? MR. MOSKOWITZ: Same objection. He answered four times already. Account monitoring it is not the same as aiding and abetting. You know this is OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130514 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 Pagc 100 Judge Streitfeld's ruling when he denied the motion to strike those paragraphs on account monitoring. He answered it. You shouldn't allow him to aid and abet the conspiracy. That was his answer. MR. HUTCHINSON: You can answer my question. A. If what I have now told you more than once is not responsive to your question it's because I don't understand your question so you are going to have to ask in a different way because what I have now said more than once is the best answer that I can give to the question that you have asked as I have understood it. BY MR. HUTCHINSON: Q. Does TD Bank owe any duty to non customers to monitor other's account transactions for potential wrongdoing? MR. MOSKOWITZ: Objection. Asked and answered five times. A. It is the obligation of TD Bank not to aid and abet a fraud and not to conspire in the commission of a fraud. To the extent that TD Bank is placed on notice that a fraud is being committed with its assistance, I don't know that I need to go beyond that. Once that point is reached, TD Bank clearly owes a duty to those that are being defrauded, not to aid and abet that fraud, not to conspire in the OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130515 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 101 commission of that fraud. BY MR. HUTCHINSON: Q. Let's go back to my original question. What -- tell me the TD Bank employee and the specific act that proximately caused Mr. Beverly's injuries? MR. MOSKOWITZ: Objection. Asked and answered a couple of times earlier. A. Well, the one TD Bank employee that immediately comes to mind is Mr. Spinosa. There are others, including the other named defendants in this action. The conduct on their part that aided and abetted the fraud and that indicates participation in the conspiracy is that conduct that is detailed in the complaint. That's what I -- those are the facts that I have assumed to be true and to the extent that I would be called upon to express an opinion as to whether those facts were adequate to give rise to liability as an underlying predicate for my punitive damage claim, I believe that they are clearly sufficient to give rise to liability. That opinion is confirmed by verdicts already rendered against TD Bank. BY MR. HUTCHINSON: Q. If we can go back to my question, sir. As we sit here today, can you name a single act by Mr. Spinosa OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130516 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 Pagc 102 or any other TD Bank employee that proximately caused Mr. Beverly's injuries? MR. MOSKOWITZ: Asked and answered six times. You can try one more, but then we are going to move on, and if you want to go to Judge Ray, you can tell him that Mr. Scarola needs to come back to answer your questions. He has answered it I think every which way respectfully stated. I don't think we are going to get much more on this. A. You are not going to get anymore. That's the answer I have given you. It's the best answer I can give. I'm sorry you don't like it, but I will not an that same question again. BY MR. HUTCHINSON: Q. Okay. Let's talk about Mr. Minkowitz. Can you name a single act by a TD Bank employee that proximately caused Mr. Minkowitz' damages? A. My answer would be exactly the same. Q. That you couldn't name a single act as we sit here? A. That was not my answer. My answer would be the same as the answer I gave. It would not be your mischaracterization of my answer. Q. So that's going to be your same answer for all the plaintiffs. Correct? OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130517 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 103 A. Every single one of them. It would be exactly the same response. Q. So, other than what you have testified to, are there any additional acts based on your expert opinion that caused any of these, proximately caused any of these plaintiffs their damages? A. Only those acts specified in the complaint. That is the extent of my knowledge. Q. Have you spoken with any of the Beverly and Marlin plaintiffs? A. I don't know. Certainly not in connection with or since my retention as an expert. Q. How many of TD Bank's briefs did you read before formulating your opinion in this matter? A. Whatever is included in those materials that have already been produced to you. Q. As you sit here, do you recall reading any TD Bank briefs on the --- A. I think that there were some TD Bank materials that were included in the materials that I reviewed. Whatever it is, it's in there. Q. Do you recall any, reading a single dismissal brief? A. I don't remember. Q. Wouldn't -- you would agree that there are two OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130518 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 104 sides to every story, correct, wouldn't you, sir? A. No, sir, I wouldn't. Q. When you litigate cases one side is always a hundred percent right and there no other side to the story? A. Oh, no, I certainly wouldn't agree to that either, but I would not agree that there is always two sides to every story. Sometimes there are defendants that actually admit their wrongdoing. Q. Did you make any attempt to evaluate, understand, evaluate and understand the legal defenses to plaintiff's claims in this matter? A. I have some general understanding of the defenses to this matter, yes, as a result of the materials that I have read. Q. In the 5.1 hours you spent formulating your opinion, did you read any of TD's dismissal briefs in the Beverly and Marlin matters? MR. MOSKOWITZ: Objection. Mischaracterizes every time you say 5.1 when Mr. Scarola has told you there is an extensive history before this case. I would ask you to stop saying it's 5.1 and I would stop objecting to that. MR. HUTCHINSON: You can answer the question. A. The amount of time that has been involved in OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130519 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 Pagc 105 the formulation of my opinions is not limited to those hours that are reflected on this time sheet to the extent that I have already explained that. Q. Did you take the time to read any of TD's dismissal briefs, sir? A. I think that I have answered that question now on more than one occasion. The answer remains the same. I don't remember. The materials are right here. You have had those, I understand, for some time in advance of this deposition. Those are the materials that I reviewed that are case specific to Beverly and Marlin. Q. I didn't see any dismissal briefs in those materials, sir. Do you mind telling me whether you have any of TD's dismissal briefs in those materials? MR. MOSKOWITZ: Do you want him to spend an hour to go through the material that we gave you? If you're representing what's there and what's not, we produced this to you well before the deposition the materials you relied upon. Whatever is in there, is in there. He tells you he doesn't remember. MR. HUTCHINSON: No, most of these materials were produced this morning. MR. MOSKOWITZ: The materials that we produced OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130520 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 106 to you are what we gave to him. These are copies, as he told you. The e-mail that we got was wrong. Somebody on your team sent this fraudulent e-mail that you never got any materials from Mr. Scarola. That was a little offensive. We gave you the significant materials that Mr. Scarola was provided. MR. HUTCHINSON: But these briefs were not in there. MR. MOSKOWITZ: There are some few extra materials, and that's why we have given you all morning to go through them. BY MR. HUTCHINSON: Q. And I haven't seen any dismissal briefs. And I just want to confirm you didn't take the time to review any of TD's dismissal briefs before you offered your opinion in this matter? A. I will tell you, again, I don't remember. I reviewed a lot of materials. If I reviewed dismissal briefs, they are included in that banker's box in those binders. If they are not in the banker's box and the binders, I did not review them. MR. MOSKOWITZ: He can take time now to go through each materials if you want him to. MR. SHEERIN: Sir, I'd also caution you that OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130521 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 107 the rules --- MR. MOSKOWITZ: Wait, we have one lawyer. We have one lawyer. MR. SHEERIN: No, the rules of civility require you to take great patience and great caution before saying that lawyers committed fraudulent conduct. MR. MOSKOWITZ: I'm sorry, who are you? MR. SHEERIN: I have been introduced to the Court. I'm Joseph Sheerin of McGuireWoods. MR. SCHERER: How do you spell your last name? MR. SHEERIN: It's different than yours. MR. SCHERER: Thank God. MR. MOSKOWITZ: We have a rule in this deposition. We have one lawyer on each side. That's why I've been talking and not Mr. Scherer. MR SCHERER: I will be happy to stipulate that you can and we will double team. MR. MOSKOWITZ: We don't want that. MR. GENOVESE: Since I am the only lawyer here who is speaking for my client, Mr. Scherer, I believe we may have sent an e-mail saying that we hadn't received any documents. In fact, there was a production to TD. You referred to your team in your addressing OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130522 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 MS counsel. I don't think that's fairly directed at him. We never received MR. MOSKOWITZ: It came from your office. MR. GENOVESE: We never received a production. I'm not sure that we requested it or assumed we would get it. So, your suggestion that this was fraudulent was misplaced if directed at Mr. Hutchinson. MR. MOSKOWITZ: Absolutely. I will agree. MR. SHEERIN: Thank you. MR. MOSKOWITZ: Of course. BY MR. HUTCHINSON: Q. Mr. Scarola, in all your years of litigating cases, are the facts developed in discovery usually relevant to the outcome of a case? A. That is the purpose of discovery, to uncover relevant and material information. Q. And how far has discovery proceeded with respect to the Beverly and Marlin matters? A. There has been very significant discovery conducted with regard to the issues in the Beverly and Marlin cases. Q. Can you answer the question I asked, sir? A. I did. That is my answer to your question. Q. Well, I will ask the question again and see if OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130523 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 109 I can get an answer to the actual question I asked. How far was discovery provided in the Beverly and Marlin matters? A. If you would like me to ignore the fact that there has been very significant discovery conducted and completed relating directly to the identical issues that are raised in the Beverly and Marlin matters, I will do that. I will ignore the fact that all of that other discovery has been conducted and then if I ignore all of the discovery conducted in those related matters, there has not been very much discovery completed in Beverly and Marlin before the discovery in those matters was basically halted, as I understand it. Q. And are you offering an opinion in this matter that there is nothing that TD Bank could discover, no evidence that TD Bank could discover during the discover process that would change your opinion that there is a high probability of success on all of these claims if tried to a jury? A. No, that clearly is not my opinion. I can I can imagine all sorts of scenarios that would have an impact upon the viability of the Beverly and Marlin claims, and I've made reference to one of them. If you are able to prove that somebody has falsely and fraudulently claimed to have been a Rothstein Ponzi OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130524 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 110 scheme investor when they never invested any money in the Rothstein Ponzi scheme, that would have a pretty significant impact on the viability of their claim. I have assumed, as I will tell you again, that the allegations in the complaint are true and those allegations include the fact that all of these plaintiffs were investors in the Rothstein Ponzi scheme. Ask me to assume facts contrary to the allegations in the complaint on a hypothetical basis, I would be happy to do that, and then I will tell you whether it has any impact on any of my opinions. I was not an eyewitness to any of these things. I am obliged as an expert to make certain assumptions. If you ask me to make different assumptions, I will do that and I will tell you whether those different assumptions have an impact on my opinion. Q. And if you spend very minimal time preparing your opinion before it's released, you have to make a lot more assumptions than you otherwise would. Isn't that correct, sir? A. No, not necessarily. I can't agree with that. Q. In your -- the nature and substance of the opinion you talked about -- well, first of all, we have talked a lot about aiding and abetting. Let's talk about the conspiracy claim. OUELLETTE & NIAULDIN COURT REPORTERS, INC. EFTA01130525 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 I H What conspiracy claim -- you are saying that the conspiracy claim is viable, nonspeculative and valuable with a high probability of success. What conspiracy claim are you talking about? A. The conspiracy claim that is stated in the complaint in the Beverly and Marlin cases. Q. And what's your understanding of the conspiracy claim because I don't have a good understanding of it from the complaint so I am hoping you as an expert who are opining on the veracity of the conspiracy claim will have a better understanding of it than I do? A. The only understanding I have is the understanding derived from the reading of the complaint. (Exhibit No. 7, Conspiracy Chart, was marked for identification.) BY MR. HUTCHINSON: Q. I am just seeing if I can nail this down. I am marking this as Exhibit 7. I want to ask you to help me fill this out, sir, if you would. During your -- when you were researching the veracity of this conspiracy claim, what's your understanding -- if you will write in on Exhibit 7 what your understanding of the agreement is of the conspiracy claim? OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130526 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 112 MR. MOSKOWITZ: I'd object to this. I have never seen where you ask an expert witness to write into a chart that you had basic things. If you have questions for him, he said he also needs to see the complaint. I am sure you can make the complaint available to him. He says the complaint speaks for itself. So I object to making an expert tell you agreement -- just for the record, it says -- let me just say, this is a document you have typed up yourself under the heading conspiracy. It's something I guess you made. It has number one, agreement; two, parties to agreement; three, date of agreement; four, unlawful act; five, common goal. I would object to them having to write certain things that you used. If you have questions for him he will try his best to answer your questions but I don't think an expert needs to write into this kind of questionnaire that you've created for him. BY MR. HUTCHINSON: Q. That's your objection and you noted for the record but I am going to ask him because I don't understand the conspiracy and you're the expect in this case and you're the one that's opining on the veracity OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130527 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 113 and viability of this conspiracy claim. So, can you please write in what your understanding is of the agreement that forms the basis of this conspiracy? A. No, sir. I am going to follow the direction of the party that retained me in this matter. I have been directed not to do that. I won't do it. I will be happy to answer any questions that you have. MR. HUTCHINSON: So are you instructing him not to? MR. MOSKOWITZ: I am not instructing him not to answer. I just can't imagine -- I am going to state my objection. I can't imagine a lawyer says I have no idea and I am really confused. And I think that's really hyperbole. I have no idea what they are alleging. The witness said I am relying upon the complaint itself for my testimony. Obviously, it speaks for itself. If you want to ask questions about it, but I don't think it's appropriate of you to require an expert of Mr. Scarola's stature to sit there and fill in your questionnaire. It's outside the scope of his testimony to fill in your questionnaire. So I think it's inappropriate. Of course, I am going to let Mr. Scarola do what he's going to do. He has more OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130528 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 114 years experience than I do, but I think it's inappropriate. If you have any questions we are here for the full federal rules to answer them. BY MR. HUTCHINSON: Q. You are not receiving an instruction, sir, so are you refusing to comply with my request? A. I would be happy to answer whatever questions you have. Q. But you will not write out your understanding of that the conspiracy claim of which you are opining on the veracity on this matter? A. That's correct. I don't choose to write out answers to a compound question. I would be happy to answer any questions that you have but I am not going to write these out. Q. Okay. A. I would prefer to expedite this process and that will slow it down rather than expediting it. Q. Okay. So you are refusing to comply? A. I am. Q. What's your understanding of the alleged -- first of all, to prevail on a --- A. Do you want this back? Q. To prevail on a conspiracy claim, isn't it true, sir, that the plaintiffs have to prove that there OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130529 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 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. OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130530 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 Pagc 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. OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130531 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 117 I don't understand that question. Q. When did these individuals that are plaintiffs that you are opining on their claims, when did they start investing? A. I don't recall those dates. Q. Was that not important to your analysis of the viability of their claims? A. No, I am not saying that. What I am telling you is that the specific date upon which an investment was made was not a matter that I focused attention on beyond noting that the claim was timely filed within the statute of limitations and that these investments were made during the ongoing Ponzi scheme in which TD Bank was an aider and abetter and conspirator. Q. So you are offering an opinion in this matter that all investments at issue in the Beverly and Marlin claim were made after there was some agreement between Mr. Spinosa and Mr. Rothstein to conduct a Ponzi scheme? A. Yes, and if that is an incorrect assumption, any investment that was not in place during the ongoing conspiracy would not be a viable claim. Q. But you have done in your -- in your limited time in preparing your opinions, you did not take the time to figure out whether investments were made prior to any alleged conspiracy? OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130532 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 Pagc I M A. I have assumed the accuracy of the allegations included within the complaint. If any of those allegations are proven not to be true, then I will be happy to take that into consideration and I will let you know whether that has an impact on my opinion or whether it does not. Q. Is there an allegation of when this agreement was even made? A. I don't recall a specific date. I don't know as I sit here right now. MR. MOSKOWITZ: We have been going about an hour and 15 minutes. Whenever you think it's an appropriate time, maybe give Mr. Scarola a five-minute break. MR. HUTCHINSON: I just have a couple questions. MR. MOSKOWITZ: Of course. BY MR. HUTCHINSON: Q. And what's your understanding of the common goal with respect to this alleged conspiracy? A. To defraud victims of their money. Q. Which victims? A. All of those who were investors in the Ponzi scheme, including the named plaintiffs. Q. So your -- it's your opinion, based on your OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130533 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 119 limited review of the record in this matter, that it was Frank Spinosa's goal to defraud investors in the Beverly and Marlin matter whom he never met, never had any contact with and who invested through Banyon, it was his goal to defraud those individuals? A. Yes, sir. Q. And you had -- you have seen no evidence that supports that, have you? A. No, that's not true. I have seen and heard Scott Rothstein's testimony, personally. I attended a session of his deposition. I have read his testimony directly, but I have assumed the accuracy of the facts alleged in the complaint. If you would like me hypothetically to assume that any of those facts are not true, I would be happy to do that hypothetically and tell you whether that has any impact upon the opinions that I have expressed. Q. Sir, I am asking you about evidence. What evidence? A. Isn't Mr. Rothstein's testimony evidence? Q. Did Mr. Rothstein testify that Frank Spinosa intended to defraud Mr. Beverly? A. Those words were not spoken. Q. And do you believe Mr. Rothstein to be a credible witness? OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130534 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 120 A. I believe that some of Mr. Rothstein's testimony is credible. I would not rely upon Mr. Rothstein's inherent uncorroborated credibility myself. Q. Can you tell me about Frank Spinosa's knowledge of the Banyon investment setup and scheme? A. No, nor do I think that that's particularly relevant. Q. Are you aware that mostly all these investors invested through Banyon? A. I am aware that most of these investors, if not all of them, invested through Banyon. Q. Did Mr. Rothstein have a separate conspiracy with respect to the Banyon investments? A. No, that is exactly the point that I am attempting to suggest to you is of significance, that is, that this was a general conspiracy to defraud anyone and everyone who Mr. Rothstein, with the substantial assistance of TD Bank, was able to entice to make these investments. Q. Who, again, were the individuals at TD Bank to provide this substantial assistance? MR. MOSKOWITZ: Objection. That was answered seven times before. Why don't we take a break now if that's okay. OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130535 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 Pagc 121 MR. HUTCHINSON: Let's answer this question. Then we will take a break. MR. MOSKOWITZ: Asked and answered seven times. I don't think he needs to answer it. It's going to be the same answer, but go ahead. A. Frank Spinosa. Rosanne Caretsky, the named defendants in the action. I can't, from memory, give you the names of other TD Bank employees that were directly involved. MR. HUTCHINSON: Let's take a break. MR. MOSKOWITZ: Thank you. THE VIDEOGRAPHER: We are off the record. It's 2:01 p.m. (A recess was taken from 2:01 p.m. to 2:22 p.m.) THE VIDEOGRAPHER: Back on the record. It's 2:22. (There was a discussion off the record.) BY MR. HUTCHINSON: Q. If you turn back to Exhibit 5 in your stated opinions, the last sentence, the first paragraph says, "based on the outcome of similar cases." What cases are you referring to there? A. Coquina, Razorback, the opinions issued in this case thus far by Judge Streitfeld. OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130536 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 I22 Q. Did you do anything to research the factual background, the specific factual background of the Coquina case? A. No, I did not do anything to independently research the factual background of the Coquina case. I have relied upon what is contained within the materials that were presented to me for review, nothing beyond that. Q. Do you know whether the Coquina plaintiffs had any contact with TD Bank? A. I am aware that there were Coquina plaintiffs that did have contact with TD Bank, yes. Q. Do you know whether any of the Coquina plaintiffs receive written materials from TD Bank? A. My understanding is there were Coquina plaintiffs who did. Q. And how about for Razorback with respect to both of those topics? A. You know, I don't recall specifically with regard to Razorback. I am not sure one way or another. Q. So it's your understanding, at least at some level, that the facts in Coquina are different than the facts of Beverly and Marlin? A. Well, there obviously are different facts. The question is whether the differences are material or OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130537 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 123 not. The names of the plaintiffs are different. They are different plaintiffs. Those are different facts but I don't believe those to be material differences. As to the material facts, I don't think that there are any significant distinctions. Q. Either way, did any of the wrongful conduct in the Beverly and Marlin matters occur outside the State of Florida? A. Nothing in particular is coming to mind right now, so there is nothing I can identify as I am sitting here right now. I don't remember. I don't recall having focused on the issue of the geographic location of facts that I thought would make a difference. Q. Is a Florida jury permitted to award punitive damages for conduct that occurred outside of the State of Florida? A. There is United States Supreme Court opinion language that places geographic limitations on the ability of a jury to punish for wrongdoing. I don't believe that those limitations would have any material bearing upon the punitive damages claims in this case. Q. And why is that? A. Because I believe that those facts upon which I base my opinion with regard to punitive damages are facts that involve Florida conduct. OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130538 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 124 Q. Is the second paragraph on Exhibit 5 describing your opinions, is that set forth in your opinions with respect to the availability of punitive damages in the Beverly and Marlin matters? A. Those statements, as I have previously testified, are accurate. Q. Is there a statute that controls what a plaintiff has to prove to receive punitive damages against an employer for an employees conduct? A. There is. Q. And is that Florida Statute 768.72? A. It is. Q. And in formulating your opinions in this matter, did you conclude that each plaintiff would present clear and convincing evidence that would satisfy that statute? A. Yes. Q. Let me mark the statute as an exhibit. It will be Exhibit 8. (Exhibit No. 8, Statute 768.72, was marked for identification.) BY MR. HUTCHINSON: Q. Is Exhibit 8 a copy of the correct statute which we are referring to? A. It is. OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130539 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 Pagc 125 Q. Would you walk me through the statute and explain to me how a plaintiff in the underlying Beverly and Marlin matters such as Mr. Beverly can recover punitive damages against TD Bank for his claims under this statute? A. I am not sure what you mean when you request that I walk you through the statute. Q. Well, am I not correct that for an employer to be liable for an employee -- excuse me, for an employer to be liable for punitive damages for an employee's conduct, the plaintiff must make a two-step showing under the statute. First, the plaintiff must show specific conduct by an individual employee and after that must show specific conduct by the employer. Correct? A. That is correct. Q. Subsection 2 of 768.72 specifies a conduct that a plaintiff must prove with respect to an individual employee first. Correct? A. You are thus far accurately walking me through the statute. Q. Okay. Since you wouldn't walk me, I will walk you. A. Good. Q. Okay. Subsection 2, so, with respect to the OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130540 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 126 individual employee, the plaintiff has to show by clear and convincing evidence that the employee was personally guilty of intentional misconduct or gross negligence. Correct? A. That is what the statute says. Q. And you believe this statute to be applicable to the claims in this matter. Correct? A. I do. Q. And do you believe that a plaintiff -- and in the statute under Subsection 2 it then describes or defines intentional misconduct and gross negligence. Correct? A. Yes. Q. Is it your belief that a plaintiff such as Mr. Beverly would make his showing with respect to an individual TD Bank employee under either intentional misconduct or gross negligence? A. Both. Q. Both. Okay. Well, let's focus on intentional misconduct first. First, which employee of TD Bank do you believe a plaintiff could, Mr. Beverly could present evidence with respect to satisfy intentional misconduct? A. At least Frank Spinosa. Q. Let's take Mr. Spinosa and, again, we will OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130541 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 127 just use Mr. Beverly as an example because he is named plaintiff in the first filed suit. So, please describe to me how you think Mr. Beverly can prove that Frank Spinosa committed intentional misconduct as it is defined in 768.72, 2(a). A. By proving the fact alleged in the complaint. Q. Are there any facts alleged in the complaint that Mr. Spinosa knew that injury or damage would result to Mr. Beverly? A. If the intent of the question is to identify factual allegations in the complaint that indicate personal knowledge on Mr. Spinosa's part of the particular circumstances of Mr. Beverly's individual Ponzi scheme victimization, the answer to that question is, I don't remember. However, that is not what would be required to be proved in order to demonstrate TD Bank's liability to Mr. Spinosa for Mr. Spinosa's loss arising out of TD Bank's participation in either the conspiracy to defraud or in aiding and abetting the fraud. Q. In response to the first part of your answer, I just want it to be clear on the record, I am not asking you about allegations in the complaint. I am asking you about evidence. You were the one that referred to the allegations in the complaint and your OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130542 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 128 knowledge and your assumption that everything in the complaint is true. So, when I am asking you the question, I am asking you about evidence. A. Well then let me make sure that you understand what my role in this case is and it may help to focus your questions more specifically upon what it is that I am doing and what it is that I am not doing. I have not undertaken an assessment of the plaintiff's ability to prove the allegations in the complaint. I have assumed the plaintiff's ability to prove the allegations in the complaint. I have taken those allegations as a given, and if the plaintiffs are unable to prove specific allegations, that may or may not have an impact upon the ultimate opinions that I will be expressing. If you identify a specific factual allegation and ask me to assume that it cannot be established, I will be happy to tell you whether that would or would not have an impact upon the ultimate opinions that I am expressing. Q. Let's go back to 2(a), intentional misconduct. Do you dispute that a claimant such as Mr. Beverly in order to satisfy Subsection 2(a) would have to show -- and, again, we are referring to Mr. Spinosa because that's who you chose had actual knowledge --- OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130543 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 I29 A. No, I think you chose Mr. -- oh, I'm sorry, I didn't choose Q. You identified Mr. Spinosa? A. I identified Mr. Spinosa. Q. You identified Mr. Spinosa? A. You chose him, that is, your client chose him. Q. Would you not agree that under the scenario that we are discussing that Mr. Beverly would have to show that Mr. Spinosa, according to the statute, had actual knowledge of the wrongfulness of the conduct and that high probability that injury or damage to the claimant, Mr. Beverly, would result? Do you agree with that? A. I agree that it would be Mr. Beverly's burden to prove the elements described under 768.72, 2(a). Q. And do you have any understanding of whether Mr. Beverly can show or any of the other plaintiffs can show that Mr. Spinosa had actual knowledge of the high probability that injury or damage would occur to each individual claimant? A. The statute and the law on conspiracy and aiding and abetting does not require that Mr. Spinosa ever know of the existence of Mr. Beverly or any other individual plaintiff. Q. Sir, we have talked about aiding and abetting OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130544 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 130 and conspiracy before. We are now talking about punitive damages, which is controlled by the language in this statute. Correct? A. Yes, that's correct. Q. So, while we are talking, let's stay on subject here and stick with punitive damages. Do you have any understanding of whether the plaintiffs in the Beverly and Marlin matters can show that Mr. Spinosa had actual knowledge of the high probability that injury or damage to each of the claimant's would result? A. Yes. Q. And what is your understanding of the evidence that would show that? A. The evidence are the facts that are alleged in the complaint which demonstrate that Mr. Spinosa was a knowing participant in a Ponzi scheme that was intended to cast the broadest possible net over victims who would be willing to invest in what was a fraud. Q. Can you point to me any evidence that Spinosa had any knowledge of the high probability that injury or damage would result to each individual plaintiff? A. No, nor do I believe that to be relevant or material or statutorily required. I believe that this is a statute that was passed in derogation of the common OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130545 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 l31 law. It must be construed as narrowly as possible in terms of the restrictions that it imposes upon the common law. I do not believe it was intended to, nor do I believe that it does impose a requirement that the specific identity of victims be known to someone who is conspiring to defraud or aiding and abetting a fraud. I think it is enough if the conspirator and aider and abettor knows that the individual with whom he is conspiring or to whom he is providing aid in the commission of a fraud is out there trying to get as many people involved in this scheme as he possibly can and the conspirator and aider and abettor becomes responsible for the injury suffered by everyone who gets caught in that web of deception. Q. Do you have any case law that supports your interpretation of Subsection 2(a)? A. The long history of common law of the State of Florida. Q. By the way, you talked about Mr. Rothstein. A. Also, I should clearly extend that as well, Coquina and Razorback addressed those issues. Those issues were addressed in argument before the Court in this case and, it is my understanding of the rulings in each of those cases that the same distinctions that you are attempting to draw, the same statutory OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130546 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 Pagc 132 interpretations that you are by implication advancing through your questions have been rejected by the courts previously. Punitive damages have already been awarded under these circumstances and I don't -- I don't think there is any question about the fact that they were awarded under appropriate circumstances. Q. Name me a case? A. The rejection of those arguments was what was required by the law of this state. Q. Name me a case where punitive damages have been awarded against TD Bank for its involvement in the Rothstein Ponzi scheme where the plaintiffs had no contact or communications with TD Bank? A. I don't remember a name, nor do I think that that's relevant or material. Once you join the conspiracy, you become responsible for all of the subsequent conduct as well as all of the proceeding conduct of the co-conspirators. You are ratifying their actions. You joined them at your own peril, responsible exhibit all of the injury done in the course and scope of that conspiracy, whether the injury proceeded your joining the conspiracy or whether it followed your joining the conspiracy. That's a very basic principle of conspiracy law. OUELLETTE & NIAULDIN COURT REPORTERS, INC. EFTA01130547 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 133 Q. Sir, we previously discussed -- we discussed conspiracy and aiding and abetting previously. We are focusing on the punitive damages statute. I ask that you focus your attention on that. A. I am focusing on that. I don't believe the statute changes the common law in that regard. As I said, this is a statute that is in derogation of common law, and it only changes the common law to the extent that it explicitly addresses those common law principles and constitutionally limits them. This statute does not change those basic principles of common law conspiracies. Q. Doesn't Subsection 2(a) also require that the intentional course of conduct also resulted in the injury of the claimant? A. Yes, and in the case of a conspiracy, that means that if you conspire to defraud that the injury result from the fraud. Q. We have already discussed proximate causation versus but for causation. Correct? A. That's a subject matter that was dealt with earlier, yes. Q. Subsection 2(b) you said is also applicable Is that correct? A. Yes. OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130548 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 134 Q. And that's for gross negligence? A. That's correct. Q. It's clear to have a negligence claim there has to be a duty. Isn't that correct? A. In order for their to be a negligence claim, there has to be a duty, but this statute is not defining an independent negligence claim. It is defining the predicate for the recovery of punitive damages. Q. So, is it your legal opinion here today that Subsection 2(b) is applicable regardless of whether any duty is owed to the claimant? A. It is my opinion that punitive damages may be recovered against a defendant where the defendant's conduct was so reckless or wanton in care that it constituted a conscious disregard of the rights of persons exposed to such conduct so that in the context of a conspiracy, if TD Bank's conduct was so reckless or wanting in care that it demonstrated a disregard of the rights of victim's of the conspiracy to defraud TD Bank would be subject to punitive damages. Q. So, let's take Mr. Beverly and Mr. Spinosa as the example which we are using because we are not talking about the bank in this subsection. We are talking about an individual. Did Spinosa or is there a requirement under OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130549 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 135 2(b) that Mr. Spinosa owed Mr. Beverly any duty? A. There is not a requirement under 2(b) that a personal duty be owed to Mr. Beverly. Q. A claimant can recover punitive damages under a gross negligence prong regardless of whether there is any duty owed? MR. MOSKOWITZ: Objection. Asked and answered a couple of times. A. A claimant may recover punitive damages under 2(b) if the claimant suffered an injury as a result of conduct that included an intentional or reckless disregard of the rights of persons exposed to such conduct. BY MR. HUTCHINSON: Q. Isn't intentional misconduct described in 2 (a) ? A. Intentional misconduct is described in 2(a) but gross negligence can arise from either an intentional or a reckless disregard of the rights of persons exposed to such conduct. And Mr. Beverly and the other victims of the fraud had a right not to be defrauded. Q. Have you ever had an experience in your practice of law where someone can be negligent or reckless where they owed no duty to the other person? OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130550 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 136 A. That question really doesn't make much sense to me. You will have to please try to ask it in a different way. Q. Do you have any cases to support any contention that someone can be negligent or reckless with respect to another person without a duty? A. Negligence, if we are talking about a negligence claim, requires as an element, whether it is simple negligence or gross negligence the existence of a duty. Q. duty? Would you agree that recklessness requires a A. Recklessness as I understand it to be used in this context is in effect a degree of negligence. Q. Okay. So once a plaintiff makes the required showing under 2(a) or 2(b), the plaintiff then has to make an additional showing under Subsection 3 in order to recover from punitive damages. Correct? A. Yes. Q. And which subsection of -- Subsection 3, I'm sorry, is it 3(a), 3(b) or 3(c) that you claim are applicable to the claims in the Beverly and Marlin matters? A. My understanding is that Mr. Spinosa was a senior regional vice president of TD Bank. I believe OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130551 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 that Mr. Spinosa's conduct as a senior managerial level employee rises to the level of being the conduct of TD Bank so that the criteria of 3(a) are met. I also believe that the criteria of 3(b) are met, both through Mr. Spinosa's conduct and through the ratification of that misconduct through the subsequent actions of TD Bank as a corporate entity rising to the highest corporate levels, that is, into the board of directors. I also believe that the criteria of 3(c) are met in that the corporation, both through Mr. Spinosa and others at levels above him engaged in conduct that constituted gross negligence and contributed to the losses suffered by these claimants. So, the answer to your question is, all three. Q. So, just so I understand what you're saying is you are using Mr. Spinosa to meet the requirements of Subsection 2 as the employee and you are using Mr. Spinosa to satisfy the subsection, the requirements of Subsection 3 as the employer? A. In some respects the answer to that question is yes. Yeah -- I mean, I'm not relying exclusively upon Mr. Spinosa's conduct as the conduct of TD Bank, but because Mr. Spinosa occupies the level within the corporate structure that he does, it is in my opinion OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130552 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 138 sufficient to satisfy that criteria. There are other factors as well but I think that is one and I don't think that the statute changes the common law in that regard. Again, the statute is in derogation of the common law and as you, yourself, have acknowledged earlier, a corporation cannot act except through its agents, servants and employees and the common law is clear that managerial level employees are the corporate entity. Q. And what's your understanding of Mr. Spinosa's place in the hierarchy of TD Bank management? A. He is senior regional vice president. Q. And what's your understanding of where that puts him in the corporate hierarchy? A. I don't know how to answer that question. Q. You don't know the answer? A. It puts him at senior regional vice president. You want to know how many levels there are above and below him? Q. Sure. A. I don't know. Q. Do you have any idea how many levels there are above him? A. No. Q. Do you know whether he was making corporate OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130553 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 139 policy decisions? A. He was certainly making some corporate policy decisions, yes. Q. What was Mr. Spinosa doing that you understand to put him sufficiently high on the corporate ladder to -- so that his acts would be deemed acts of the corporation? A. He was holding the title of senior regional vice president and exercising the responsibilities imposed upon him or vested in him by the corporation of senior regional vice president. Q. What were those responsibilities? A. He was pretty much in charge of the entire relationship with Mr. Rothstein. He seemed to have the ability to do whatever he wanted on behalf of the corporation and his relationship with Mr. Rothstein. Q. So, you are saying because he was allegedly in charge of the relationship with Mr. Rothstein that he was high enough in the hierarchy for his acts to be attributable to the corporation? Is that your reasoning? A. In light of the magnitude of the relationship with Mr. Rothstein, the answer to that question is, yes. There may be some bank teller who is in charge of the relationship with me when I walk up to the window and I OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130554 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 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 OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130555 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 141 requirements of Subsection 3? A. The members of the board of directors. Q. Any other individuals? A. There were others in the corporate hierarchy above Mr. Spinosa and I don't recall their names but it is my recollection from information provided to me that it was involvement on the part of the General Counsel's office. There were other corporate executives above Mr. Spinosa who were involved in relevant transactions and conducted themselves in ways that clearly indicated at least gross negligence on their part. Q. You are referring to gross negligence with respect to the Ponzi scheme operations? A. Yes. Q. Okay. Let's take the statute section by section and make sure I understand what you are referring to in each subsection. Subsection 3(a), who meets the requirements for TD Bank to satisfy Subsection 3(a), participation in such conduct which I assume means -- do you agree that would mean that the alleged Ponzi scheme conduct? A. That is not accurate. Q. Okay. A. It is conspiracy and aiding and abetting the Ponzi scheme. OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130556 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 142 Q. Okay. So that would be the intentional misconduct under Section 2(a)? A. Active and knowing participation in the conspiracy and/or the aiding and abetting of the conspiracy to defraud. Q. Okay. So, which individual with TD Bank satisfies Section 3(a) for the employer? A. At least Mr. Spinosa, but my recollection is that there are others above him who at least by virtue of circumstantial evidence had knowing participation in the fraud and conspiracy in the aiding and abetting of the fraud. Q. Can you explain the facts and circumstances surrounding these other individuals and their participation in the fraud? A. Those are detailed in paragraph 13 and 86 through 153 of the complaint. Q. Sir, I am asking for your understanding as we sit here today A. That is my -- sorry, I didn't mean to interrupt you. Q. -- that you're basing your opinion on. What is your understanding as to the facts and circumstances surrounding these other individuals participating in the fraud? OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130557 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 143 MR. MOSKOWITZ: Objection. Asked and answered. He stated the specific paragraphs in the complaint, which he has pointed you to a couple of times already. A. Yeah. I mean, I have assumed those facts to be true. As I said, if you want me to assume they are not true, tell me which ones you want me to assume they are not true. If you want me to assume they are all not true, I have no basis for my opinion. BY MR. HUTCHINSON: Q. As you sit here today, you cannot describe how any other individuals other than Mr. Spinosa satisfies Section 3(a)? A. No, that's not true. I am pointing you to paragraphs 13 and 86 through 153. I am also aware that there has been subsequent discovery that has been taken in this case, including depositions of corporate representatives where there have been facts developed with regard to reports made to the board of directors with TD Bank with regard to this conduct. So, I have that and clearly it is of significance that these same circumstances have been presented to a jury and there have been legal rulings made with regard to the sufficiency of the evidence to get to a jury and then there have been factual findings by that jury imposing OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130558 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 144 punitive liability. That's very significant to me in terms of my ability to express an opinion with regard to these matters. The fact that it already has happened makes a big difference. Q. Mr. Scarola, you previously testified that the reports of board of directors dealt with the subsequent litigation, did not deal with the underlying Ponzi scheme. Isn't that correct? A. No, I don't think I said that. I think that what I said was I am aware that reports were made to the board of directors with regard to the litigation misconduct. I never said that there were no reports to the board of directors regarding the underlying liability, and it would astound me if reports were not made to the board of directors regarding the underlying liability and if that were to have been true, that, in and of itself, would indicate an astounding level of gross negligence. For the board of directors to turn a blind eye to the underlying liability concerns that have been so widely publicly reported would all by itself warrant the imposition of very significant punitive liability. Q. Mr. Scarola, what evidence can you point me to that any -- the board of directors was involved in any way with the Rothstein Ponzi scheme prior to its OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130559 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 145 implosion? A. I haven't stated that the Rothstein -- that the board of directors was involved in the Rothstein Ponzi scheme prior to its implosion. That isn't the question that you asked, and that's not what I just said. You asked me whether there was any indication that the board of directors did not have knowledge of the underlying liability as opposed to the subsequent litigation misconduct. That's what I was responding to because that's what you asked me. Q. So how does the board of directors satisfy Section, Subsection 3? Do they knowingly condone or ratify Mr. Spinosa's conduct, alleged aiding and abetting conduct in the underlying Ponzi scheme? A. They are ratifying it, as we sit here today. THE VIDEOGRAPHER: Pardon me, I need to go off the record for one second. MR. MOSKOWITZ: Can we take like a five-minute, no more than five minutes? (A recess was taken from 3:08 p.m. to 3:18 p.m.) THE VIDEOGRAPHER: This is the beginning of tape number three. The time is 3:18 p.m. We are back on the video record. BY MR. HUTCHINSON: OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130560 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 146 Q. Mr. Scarola, is it your opinion that any of the alleged conduct with respect -- any of the alleged litigation misconduct in the Coquina and Razorback matter can be used to satisfy Subsection 3 of the, of 768.72? A. Are you talking about the litigation misconduct? Q. Yes. A. Yes. Q. What is your opinion with respect to that? A. That that litigation misconduct is circumstantial evidence of knowledge of the wrongdoing that extended beyond and above Mr. Spinosa's level and that it is indicative of the ratification of that misconduct, although there is also direct evidence of the ratification of the misconduct. Q. And what's your understanding of the direct evidence of the ratification of misconduct? A. There has been testimony -- I'm trying to remember the names of the individuals, Mr. Torili **SP** and Mr. Guillen maybe, were asked directly about whether Mr. Spinosa did anything wrong and there has been a consistent denial of any wrongdoing on the part of Mr. Spinosa. This is not a circumstance where TD Bank has OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130561 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 Pap W7 taken the position that there was a rouge employee who was on a venture of his own. There has been an admission that Mr. Spinosa was acting within the course and scope of his employment and a consistent defense of what he did. The mere persistent denial of any wrongdoing on his part and any need for any change within TD Bank constitutes a ratification of all of that misconduct. Q. And is your understanding -- did you receive your understanding of those facts during the break that we just took from counsel? A. No, sir, I have -- that's from the materials that we have provided to you. It's tabbed in the materials as a result of the review that I did long before this deposition began. Q. Did you discuss those matters with counsel during the break? A. No, sir, that was not a topic of our discussion. Q. And what's your understanding of how Florida's litigation privilege impacts the allegation of litigation misconduct? A. The litigation privilege would preclude a separate cause of action for conduct occurring during the course of and in direct relation to the conduct of OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130562 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 148 the litigation itself, although the Fourth DCA has recently carved out an exception to the litigation privilege. But I don't think that that's particularly applicable here nor are we talking about a separate cause of action for the litigation misconduct. Q. So is it your opinion that while it would prevent a separate cause of action that the evidence can still be presented and considered by the jury in assessing punitive damages? A. Absolutely. Q. Do you have any case law that supports that opinion? A. Johns-Manville. Q. Does Johns-Manville address the litigation privilege? A. Johns-Manville addresses the attitude of the wrongdoer upon discovery of the wrongdoing and efforts to coverup the wrongdoing. It does not address the litigation privilege because it was irrelevant in the context of the Johns-Manville case as it is irrelevant here. We are not talking about the prosecution of a separate cause of action arising out of the litigation misconduct. We are talking about the admissibility of the litigation misconduct in evidence in this case. (Exhibit No. 9, Statute 768.73, was marked for OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130563 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 149 identification.) BY MR. HUTCHINSON: Q. Mr. Scarola, I have marked as Exhibit 9 Florida Statute 768.73. Are you familiar with this statute? A. I am. Q. This is the statute that we discussed briefly earlier today that sets certain limits on the award of punitive damages. Correct? A. Yes. Q. What are your opinions with respect to the application of 768.73 to any future awarded punitive damages against TD Bank for its alleged role in the Rothstein Ponzi scheme? A. That it imposes no practical limitation under the circumstances of this case. Q. Why does it impose no practical limitation on the imposition of punitive damages? A. Because, in my opinion, to the extent that it recognizes exceptions to the limitations it imposes, the circumstances of this case meet those exceptions. And because this is a statute in derogation of common law I think that it is unlikely that it would by its expressed terms apply at all. Q. Okay. Will you please point us to the OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130564 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 150 language that includes an exception to the statutes application that leads you to believe it would not apply in this matter? A. Yes. Let's take them section by section, if we could. Section -- I guess what I am volunteering to do is walk you through the statute. Q. I appreciate that. MR SCHERER: How about running? A. Section 1(a) imposes a three times limitation of the compensatory damage award. Under circumstances where the fact-finder determines that the wrongful conduct was motivated solely by unreasonable financial gain, that limitation does not apply. Q. And what limitation does apply in that circumstance? A. In that circumstance, there is a four times the amount of compensatory damage amount that applies. However, that is not applicable where the fact-finder determines that at the time of injury the defendant had a specific intent to harm the claimant and determines that the defendant's conduct did in fact harm the claimant. Under that circumstance, there is no cap on punitive damages. Both the conspirator and the aider and abettor are charged with sharing the specific intent OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130565 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 151 of co-conspirators or the offender who engaged in the direct wrongdoing so that if it can be demonstrated that Scott Rothstein had the specific intent to harm the claimants and that Scott Rothstein's conduct did, in fact, harm the claimants, those who conspired with Scott Rothstein shared his specific intent. Those who aided and abetted Scott Rothstein, aided and abetted that specific intent and this statute, which is in derogation of the common law, must be construed to render those co-conspirators and aiders and abettors liable for punitive damages with no cap. Q. Which cases support your opinion on that? A. All cases which talk about construing statutes in derogation of the common law as narrowly as they may reasonably be construed so as to impose the least restrictive derogation of the common law. Q. Which cases support your opinion that under this statute TD Bank would be charged with any specific intent on Mr. Rothstein? A. The fact that all of those involved in a conspiracy share the specific intent of their co-conspirators. It is no different than one who conspires with a first degree murderer or one who aids and abets a first degree murder. A first degree murder requires a specific intent. The conspirators, aiders OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130566 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 152 and abettors share the same criminal liability, the same punitive liability that the direct actor shares. Q. Sir, can you point me to any cases that support your opinion that TD Bank would be charged with Mr. Rothstein's specific intent under this statute? A. Only the common law of conspiracy and aiding and abetting and the fact that this statute must be construed in accordance with the common law unless the statute specifically clearly and unambiguously requires a departure from the common law and it does not. And there has been no case that I am aware of that would indicate otherwise. Q. Let me ask you, sir, how many of these plaintiffs in Beverly and Marlin even met Mr. Rothstein? A. I can't answer that question for you nor do I think it's a material fact. Q. Do you know of any plaintiffs in these cases that actually met Mr. Rothstein? A. When you talk about these cases, are you talking about Beverly and Marlin? Q. Yes. A. I don't know, nor do I think it's a matter of significance. They may have met agents of Mr. Rothstein. I mean, their agents may have met Mr. Rothstein and that would certainly be adequate, but OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130567 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 I53 Mr. Rothstein obviously had a specific intent to defraud all investors. He didn't need to meet them in order to form that specific intent. Q. That was my question. So, you are saying Mr. Rothstein can have a specific intent to harm someone he doesn't know and has never met and under the claims asserted in this matter, assuming they are all true and they prevail on them, which is your assumption in this matter that that specific intent is then imputed upon TD Bank for the statute? A. Absolutely, and I think that that understanding of the law is confirmed by the fact that punitive liability has been imposed against TD Bank under exactly those circumstances. Q. In addition, they would have to prove the proximate cause element that we discussed before, would it not, under Subsection C, the defendant's conduct did, in fact, harm the claimant? A. As I have told you on multiple occasions before, if you can show me any of the plaintiffs who really didn't invest in this Ponzi scheme and lost no money, they don't have a claim for either compensatory damages or punitive damages. An essential element would be that they invested in this Ponzi scheme and they lost money as a consequence of that investment. OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130568 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 154 Q. Sir, if you can answer my question. A. That is Q. Isn't it true? A. I'm sorry but that is a direct answer to your question. Q. Is it not true that they would have to share proximate causation in addition to specific intent for Subsection C to be applicable? A. Yes, and all that would be necessary to show proximate causation is that they were Ponzi scheme investors who lost money in the Ponzi scheme. That satisfies the proximate cause element both from a common law perspective and from a statutory perspective as well. Q. When I asked you earlier, you couldn't identify any cases that said that, could you. MR. MOSKOWITZ: Objection misstates his testimony. A. I could not identify a case that includes that language as I sit here right now Q. And then subsection B above A. -- except for Coquina, which obviously is a case that stands for that proposition, Razorback and, you know, it is not irrelevant to my opinion that TD Bank has been settling hundreds of millions of OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130569 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 155 dollars worth of these claims. So, somebody at TD Bank thinks these arguments make sense too. Q. For Subsection C to be applicable which limits the punitives to four times the compensatories isn't it true that the wrongful conduct actually had to be known by the managing agent, director, officer, other person responsible for making policy decisions on behalf of the defendant? A. Yes, sir, that is true. Q. And who at TD Bank do you claim would satisfy that element at subsection B? A. You don't need to go anywhere past Mr. Spinosa, but once others above him gain knowledge and fail to take action or affirmatively ratify his conduct, they are certainly implicated as well. Q. Are you offering any opinions in this matter with respect to how the different sections of this statute would be implemented if plaintiff's compensatory damages are reduced through a payout under the plan? A. I am offering no bankruptcy related opinions at all. What I am saying is that the punitive damages to the extent this statute would apply at all would be based upon the amount of the compensatory loss arising out of the misconduct, and if the question is would collateral sources of any kind have an impact upon the OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130570 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 156 statutory limitation, my answer to that question would be, no, they would not. And it would seem to me without offering any bankruptcy opinions because that is clearly outside my area of expertise that at best some bankruptcy related pay out would be nothing more than another collateral source. Q. Do you have any law or cases that support your opinion on that? A. About the bankruptcy aspect of my opinion -- Q. Yes. A. -- absolutely not. Q. Or how any collateral source recovery would affect the computation of compensatory damages under the statute? A. I don't have any specific cases but, once again, this statute is in derogation of the common law unless there were a clearly and unequivocally stated legislative intent to tie the multiplier into a collaterally, a collaterally sourced reduced amount. It could not properly be applied to the collateral sourced reduced amount. Q. But you have nothing to, no case law to support that? A. All of those cases that talk about interpreting statutes in derogation of the common law OUELLETTE & NIAULDIN COURT REPORTERS, INC. EFTA01130571 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 157 Q. What's your opinion with respect to the application of Subsection 2 to any punitive damages request in the Beverly or Marlin matter? A. Well, I have already been addressing 2(c), which -- are you talking about --- Q. No, I think you are talking about two, on Subsection 2. I think you were looking at 1(b) --- A. Subsection parens, 2, close parens? Q. Correct. A. That one? On top of page two of this document? Q. Correct. A. It is my opinion that this section would not impose any limitation upon the award of punitive damages in this case because of the way in which the same act or single course of conduct is statutorily defined. Q. Can you further explain that for me, please? A. Yes. This subsection precludes the award of punitive damages against a defendant in a civil action where that defendant establishes that there has been a prior award of punitive damages arising out of the same act or single course of conduct. The phrase, "the same act or single course of conduct" is defined in the second sentence of that subsection. It is defined as including acts resulting in the same manufacturing OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130572 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 158 defect. This case does not involve manufacturing defects. It is defined as including acts resulting in the same defects in design. This case does not involve design defects. It talks about failure to warn of the same hazards. This is not a failure to warn case with respect to similar units of a product. This entire subsection relates to product liability cases. It was, and I acknowledge this to be a pure assumption on my part, the consequence of successful lobbying experts on the part of product manufacturers to limit their liability in punitive damages in cases where the same product defect has resulted in multiple injuries to consumers. It's the got nothing to do whatsoever with the circumstances of this case. That section could not possibly be construed in light of the requirement that it be construed as a provision in derogation of the common law as least restrictively as possible as applying to the circumstances of this non-product liability claim. 0. Do you have any personal knowledge of the legislative intent behind this section? A. Only to the extent that it's very obvious from the language that's employed but legislative intent has no relevance unless we are attempting to construe some OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130573 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 159 ambiguity and there is nothing ambiguous about the fact that it is intended to apply to products liability case. Q. Well, it's not -- it doesn't say exclusively to product liability case. Isn't the term includes? It doesn't say only includes? A. You are absolutely correct. The word "only" does not precede the word includes, and some imaginative defense lawyer might try to read into this statute an only word but that effort would be unsuccessful because this is a statute in derogation of the common law and so only would not be read into this statute. Q. Is there another provision in this same statute that talks about what it applies to? A. Are you talking about Section 2(a). Q. No, I am talking about Section 5 that says, "The provision of this section shall be applied to all causes of action arising after the effective date of this act." A. Yes, that's true. It does, and that raises an issue both with regard to this statute and 768.72 as well because our discussions have assumed the applicability of this statute, but I suggest to you that it may not be applicable at all because these causes of action may very well have accrued prior to the effective date of the statute. But nonetheless, for purposes of OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130574 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 160 this discussion, I have assumed its applicability to these causes of action. Q. Sir, are you offering an opinion in this matter that Beverly and Marlin causes of action accrued before 1999? A. No, I am not. Q. That would cause major statute of limitations problems, sir? A. Oh, I think if they accrued before 1999 and the fraud discovered within the statute of limitations period, it would cause major statute of limitations problems but that's not my opinion. Q. You are not offering an opinion that this is not applicable because these causes of action accrued before 1999, are you? A. No, I have told you that I have assumed throughout the discussions that I had with you about 768.72 and 768.73 that these statutes applied but pursuant to their expressed terms don't impose a limitation on punitive damages under the circumstances of these cases. Q. Have you seen any case law supporting your opinion that Subsection 2 only applies to product liability matters? A. I have not seen any cases that say that OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130575 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 161 Subsection 2(a) applies only to product liability cases. I have never seen anybody attempt to argue otherwise. Q. What is your opinion with respect to the application of the last sentence in Subsection 2(b) to this matter? A. Give me just one moment, if you would, please. My opinion is that 2(b) does not apply for the same reasons that 2(a) does not apply. 2(b) speaks also in terms of the act and course of conduct which is defined in 2(a), so 2(b) also relates to product liability claims. Q. Is it your understanding that the groups that were lobbying for this tort reform only involved product manufacturers? A. No. I am -- I would imagine that the, that the health care industry was lobbying for these changes, that the insurance industry was lobbying for these changes, that there were a lot of vested interests whose economic concerns favor the imposition of restrictions on the tort system of a variety of kinds of limitations of punitive damages being only one and they frequently join together to lobby the legislature for changes like this. Q. Assuming Subsection 2 does not, is not limited to product liability actions, would you agree with me OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130576 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 162 that TD Bank there has been a punitive damages award against TD Bank for the same course of conduct for which the Beverly and Marlin plaintiff seeks to restore damages? A. You want me to assume that the same act or single course of conduct language is omitted from the statute and that the statute instead reads that the limitations of 2(a) apply to all cases regardless of the, of whether they arise out of the same act or single course of conduct. So, if there is a punitive damages award against a defendant under any circumstances anywhere then no punitive damage award may ever be awarded against that defendant again under any circumstances? Is that the assumption you want me to make? Q. No, sir. I want you to put the statute down. Assume for me no assumptions. Has TD Bank -- has there been an award of punitive damages for TD Bank for its alleged role in the Rothstein Ponzi scheme? A. Yes, although TD Bank continues to challenge that award and hasn't paid it yet. Q. Is it your understanding that the Beverly and Marlin plaintiffs are seeking an award of punitive damages based on the same alleged course of conduct? OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130577 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 163 A. Well, that would depend on how you define the same course of conduct, but if we want to define it as I think it appropriately is defined, that being the conspiracy to participate in the Rothstein Ponzi scheme and aiding and abetting the Rothstein Ponzi scheme, then I would believe that the answer to that question would be yes. Q. And how would it work, sir -- I guess you never mind. I will mark for you Exhibit 10. Do you recognize Exhibit 10? A. Nice handwriting. (Exhibit No. 10, Handwritten Notes, was marked for identification.) A. I do, yes. BY MR. HUTCHINSON: Q. What is Exhibit 10? A. Those are handwritten notes that I have made. Q. What were these notes of? A. Observations that I made of the contents of documents that I reviewed and/or conversations with plaintiff's counsel. Q. Do you know which are your observations and which are notes from conversations with plaintiff's counsel? A. I didn't attempt to make that distinction. OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130578 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 164 Q. You see the second entry states Coquina had a lot of direct contact with the bank. Is that correct? Is that a correct reading of your handwriting? A. That is a correct reading of that line except for the last word that without the T crossed. It is an incomplete sentence. Q. Then a couple of entries down it says that some had direct calls with Spinosa? A. Yes. Q. What is that referring to? A. That refers to the fact that there were Marlin and Beverly plaintiffs who had direct calls with Spinosa. Q. And who were those plaintiffs, sir? A. I can't give you their names. Q. Are you aware that that contradicts the sworn discovery provided by the plaintiffs in this case? A. No, I am not aware that it contradicts the sworn discovery provided by the plaintiffs. If you would like me to assume that that is not true, I would be happy to do that and tell you what, if any, impact it has on my opinion. Q. Have you taken the time to review any of the bankruptcy discovery that we have been conducting over the last several weeks? OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130579 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 165 A. I have received copies of transcripts, depositions that were taken of Leo Doyle and Craig Baldauf. I have not read those yet. I have been in trial myself the last week and a half. Q. So you have not taken time to review any of the discovery, the sworn discovery that's been taken in this case? A. I don't really believe that that accurately characterizes the circumstances. I had a meeting, a fairly lengthy meeting last weekend during which recent discovery was discussed and so to that extent I have had the time to review some of what has been going on recently as far as discovery is concerned. I have not had the time to review those transcripts. Q. Did anyone tell you that your entry here with regard to direct cause with Spinosa was incorrect? A. No, no one has told me that that entry is incorrect. To the contrary, I have been told that there were some direct calls with Spinosa. I have also been told that some of the Marlin and Beverly plaintiffs did receive lock letters. Q. And which plaintiffs were those? A. I was not given names. I don't know the names. Nor do I think. Q. Would it surprise you that the record reflects OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130580 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 166 that none of the Beverly and Marlin plaintiffs received lock letters executed by TD Bank? A. It would surprise me that that statement is inaccurate but it wouldn't alter my opinion. Q. Where did you get -- did the next statement, the conspiracy and aiding and abetting requires no direct contact, did that come from plaintiffs' counsel? A. That comes from me. That's an observation that I was recording of my own understanding. Q. What about the next entry? It says all evidence of Coquina comes in to prove knowledge. A. That's me. Q. Which statements in these notes came from counsel? MR. MOSKOWITZ: Objection. Asked and answered. A. Do you want me to go through each of the statements and tell you whether they reflect something that was told to me by counsel if I can recall that? BY MR. HUTCHINSON: Q. If you can, just briefly skim through it and let me know whether any of these statements were provided to you by counsel. A. The statement that there was significant direct contact with the bank that was proven in the OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130581 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 167 Coquina case was a statement from counsel. The statement that who had direct statement that there was -- that there were plaintiffs calls with Spinosa was from counsel. The some Marlin and Beverly plaintiffs received lock letters was from counsel. The statement that TD Bank never paid anything in the -- never paid the punitive damage award in Coquina, that was from counsel. The description of the Emess settlement was from counsel. The notes regarding the Craig Baldouf deposition, which I misspelled in these notes because I was spelling it phonetically, that's information provided by counsel because I had not yesterday had an opportunity to review the deposition transcript. No regret, no remorse, that's me. The notation admit only that Frank Spinosa may have had bad judgment but did not cause injury to anyone else, that was counsel's summary of the position that has been taken in the discovery of this case. Q. In which case are you referring to? A. The Marlin and Beverly discovery that has recently been The 450 to 500 million proceedings, the taken. in losses as a result of 6 plus billion in transactions, that's counsel. Guillen has been promoted, counsel. OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130582 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 168 Ratification is my note. The notation at the bottom of that page, the first two lines are counsel and the second two lines are me. The notations about the pecuniary circumstances of TD Bank that appear on the next page are my notes on conversation with counsel. Q. Okay. Let me show you what I am marking as Exhibit 11. Do you recognize Exhibit 11, sir? A. Yes, sir. Q. What is Exhibit 11? A. Those are my notes. (Exhibit No. 11, Handwritten Notes, was marked for identification.) BY MR. HUTCHINSON: Q. What are these notes of, sir? A. These are notes that I made as I went through discovery materials provided to me relating to my assignment. MR SCHERER: Do you have an extra copy over there? THE WITNESS: I have an extra copy. If you take these, I can look at the originals. BY MR. HUTCHINSON: Q. So these do not reflect notes of calls with counsel. Correct? A. No, these are my own notes. OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130583 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 169 Q. In the middle of the page you discuss TD Bank misconduct, do you see that or there are notes regarding TD misconduct? A. Yes. Q. Do either of the first two entries, providing investors with false TD account statements or fraudulent written assurances or lock letters, do either of those alleged conduct apply to the Marlin or Beverly investors? A. Yes. Q. Do you believe that -- is it your understanding that those investors received false account statements? A. I don't remember whether they personally received false account statements nor do I consider it of particular significance whether they received false account statements personally or not. The fact that TD Bank aided and abetted this fraud by providing false account statements is what is significant, not which particular investors received them. Q. On your expert disclosure, Exhibit 5, it appears that you were just opining on the aiding and abetting claims and the punitive damages that might result from those claims. Correct? A. I'm sorry, but I am not seeing the language OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130584 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 170 from which you draw that conclusion. Q. Let me ask it another way. Are you offering opinions on the Razorback matter on the current pending motion for sanctions in the Razorback matter? A. No, no, but you said aiding and abetting and I thought the intent of that question was to carve out conspiracy. Q. No, I'm sorry, I was attempting to limit it to Beverly and Marlin, but it's clear you are not offering opinions on the Razorback sanctions proceedings. A. No. Q. Wouldn't you agree with me, sir, that reasonable juries can reach different results on the same evidence? A. Absolutely. Q. Wouldn't you also agree with me that there is no way to reliably predict exactly what a jury will do with a specified fact pattern? A. I agree with that statement as you have state it had. Q. And would you agree with me that there is no way to reliably predict the amount of punitive damages that a jury would award in any specific matter? A. If you are talking about an exact prediction, OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130585 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 171 I would agree with you. Q. And, sir, you have done jury research projects during your time as an attorney. Correct? A. I have. Q. And you have done jury research projects where there are several different pools of juries within those research projects. Correct? A. I have. Q. And those juries have come back with vastly different results at times during those research projects? A. There indeed have been times where different juries have come back with different results, that is correct. Part of that process is an effort to try to assess the consequences of taking different approaches to the presentation of evidence in order to see the extent to which it impacts upon the results obtained from a jury. So, you you change the input. You anticipate that there is going to be a change in the output. Q. Have you ever taken a case to verdict where you thought you had a good punitive damages claim but the jury did not return a punitive damages verdict? A. I am sure that that has happened to me. Q. How many times? OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130586 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 172 A. I do my best to forget the losses. I can't tell you how many times and I don't keep -- I don't keep a track record like that so it would be impossible for me to tell you but there is no question about the fact that there have been times in the past. And it has been more than once when I have prosecuted a punitive damage claim and have not gotten punitive damages. Q. And isn't it true, sir, that that's just part of being a trial attorney? In our profession, we really don't know what's going to happen when a jury goes back in that room? A. It is true that there are significant uncertainties involved in our profession and if that were not the case no lawsuits would go to trial. They would all be settled. It is as a consequence of differences in opinion with regard to the value of claims that cases get tried and so the mere fact that there are trials is empirical evidence of the fact that different lawyers and sometimes very experienced lawyers have different views of the likely outcome of contested litigation, yes. Q. I think that's all I have right now, sir. Thank you. A. What a relief that is. MR. GENOVESE: You are not done yet. I don't OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130587 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 173 have a lot. CROSS-EXAMINATION BY MR. GENOVESE: Q. John Genovese. I said hello this morning, Mr. Scarola. Have you ever represented a client in connection either the defense or the plaintiff's side in a tort claim arising out of a Ponzi scheme? A. Yes, and I am trying -- it would not have been the defense side. It would have been the plaintiff side. I have never defended a Ponzi schemer, and I know that it has happened in the past but as I am sitting here right now, I can't remember the particular circumstances or even whether it was more than one time. But I am sure that it's been at least once. Q. So the -- all the testimony you gave regarding your general understanding of conspiracy and aiding and abetting under Florida law would be broadly construed and not -- you weren't talking about personal experience and knowledge about how those principle have been applied in Ponzi schemes? A. That is correct, although I -- I have prosecuted cases involving conspiracy and aiding and abetting frauds in general, although I don't remember specifically a conspiracy or aiding and abetting Ponzi OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130588 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 174 scheme case. But those are issues that I have researched in the context of fraud claims in the past and prosecuted in the context of fraud claims. Q. And I understand that you believe there is nothing different about the general application to that law to a Ponzi scheme? A. Yeah, a Ponzi scheme is just a kind of fraud. I don't think that there is anything that would distinguish that from other fraud claims. Q. It's frequently bigger? A. That is correct and involves more victims. Q. Agreed. I am looking at the TD Bank victims' notice of filing expert disclosures that was referred to by Mr. Hutchinson before and the description I think you said that you probably spoke about it, you didn't draft it but it was prepared by counsel or filed by counsel who you are appearing in connection with this deposition with. It says that you will testify that the TD Bank victim's claims for aiding and abetting fraud and conspiracy to commit fraud against TD Bank are viable, nonspeculative and valuable claims with a high probability of success if tried to a jury. I am not finishing. I will come back to the OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130589 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 175 last clause a little bit later but as to that statement, let me ask you a question by way of clarification. understand that you have accumulated a vast amount of knowledge, per your testimony, about TD Bank's misconduct in the course of the Ponzi scheme. Correct? A. I don't -- I don't know that -- I don't know what you mean by vast. I have reviewed a lot of materials. I have become familiar with TD Bank's misconduct, yes. Q. And I understand your testimony to be that with respect to the plaintiff's ability to establish his viable nonspeculative and valuable claims as to each individual plaintiff to establish liability, you have suggested to Mr. Hutchinson that you are making that assumption and you have asked him to show you or suggest to you facts as to a particular plaintiff that would cause you to recede from that statement. Do I understand that's been your testimony? A. I think in general that's true. What I have said is I have assumed the accuracy of the facts as alleged in the complaint. There are other materials that have corroborated the accuracy of those allegations and I am absolutely open to consider any hypothetical that would ask me to alter those assumptions and I will tell you whether that alters my opinion. OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130590 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 176 Q. Okay. But this statement really is a result of significantly more knowledge that you have about TD's conduct than you have about the bona fides of multiple plaintiffs' claims. Is that a fair statement? A. I am not sure what the distinction is that you are trying to draw. The plaintiffs' claims are based upon TD's misconduct. Q. No, the plaintiffs' claims have to be based upon their individual establishment of elements of a cause of action including their damages, their -- those individual damages were caused by a specific conduct. Those are elements of proof that require a case by case plaintiff evaluation by a jury to meet each of the elements of the cause of action. That's a fair statement, isn't it? A. Only to a very limited extent in this context. There was a Ponzi scheme that was operated in a uniform manner. Scott Rothstein solicited investments in nonexistent or fraudulent settlements and he sold those investments to a variety of individuals and institutional investors, and there was a uniform sales pitch that was used as I understand the facts in order to induce those investments. The facts that are different in each case are the amount that was invested and the amount that was lost so that's where I have OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130591 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 177 repeatedly gone back to my statement that if you want me to assume that somebody really wasn't an investor in the Ponzi scheme and really didn't lose money, I can make that assumption and I will then tell you they don't have a claim. Q. Let me. Since you talked about the Coquina case, let me read you a particular instruction of the Coquina case and ask you if in your view it would be an agreed instruction or an instruction that a judge in state court were likely to give the jury in connection with this. I am reading from page 22 to 27 of document filed 4599 filed in the Coquina case on its docket. TD Bank has asserted a waiver defense. Waiver is a defense to a charge of fraud where the party claiming to have been defrauded discovered or reasonably should have discovered the nature of the deception through ordinary diligence. The intent to weigh the claim of fraud may be inferred from a party's conduct and the surrounding circumstances. In order for you to find that the plaintiffs waived their rights to recover damages from the alleged fraud you must find that Coquina had actual or constructive knowledge of Rothstein's fraudulent activity yet continued to invest. You understood what I read to you. Right? A. I did understand what you read. OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130592 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 178 Q. I take it from your testimony that you are assuming that for each of the plaintiffs that their diligence was reasonable and they had no reason to suspect that there was a Ponzi and that they didn't continue to invest after either having indications of things that should have led them to conduct diligence or actual knowledge that there was something wrong with the Rothstein investment? MR. MOSKOWITZ: If I could just get an objection on the record. It's a hypothetical jury instruction from another case with different claims and different -- it's not talking about the Beverly and Marlin jury instructions. A. I heard a whole lot of questions there. I am having a little bit of difficulty because there seemed to be a lot of questions that you have asked. You first started off by asking me whether I would think that the instruction you were about to read was one that would be an agreed to instruction. Is that Q. Let me -- I was trying. There is a limited amount of time and I don't want to impose on your time as unnecessary but isn't it the case in your experience that counsel submit -- each side submits proposed jury instructions? A. Yes. OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130593 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 179 Q. And rarely do both counsel say absolutely, Judge, we agree to those proposed instructions? A. Well, agreement to proposed instructions is very common. Agreement to all proposed instructions is uncommon. Q. It would be rare. Correct? Unusual? A. I don't know that it would be rare but more often than not there is something about the proposed instructions that lawyers wind up disagreeing about and require the court's intervention to dissolve that disagreement. Q. Do you think in Beverly and Marlin cases that an instruction to the jury suggesting that they may have waived their claims by not adequately diligently investigating or having actual knowledge of circumstances to put them on notice, don't you think it a possibility that that defense will be asserted in the Beverly and Marlin case? MR. MOSKOWITZ: Objection. Improper hypothetical. A. Again, there seemed to be multiple questions there so let me try to break it down and respond as best I can based upon the various issues raised. Do I think that the defense may attempt to raise a waiver defense? The answer to that question is OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130594 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 180 it's pretty likely that if in the context of Coquina the defense was successful in having a waiver defense raised and having the jury instructed with regard to waiver, the defense will probably try to do the same thing in these cases. Now, I haven't looked at which claims actually went to the jury in Coquina and I don't know whether any difference in the nature of the claims that went to the jury in Coquina may have an impact upon the ability to raise a waiver defense but that instruction talks about two different things, a lack of adequate due diligence, an actual knowledge of the fraud. It is my understanding of Florida law that negligence is not a defense to an intentional fraud so that to the extent that there is some suggestion that a lack of due diligence, a negligent investigation could bar a victim's claim based upon intentional fraud, I have a very strong opinion that that instruction is erroneous in the context of a conspiracy and aiding, abetting and intentional fraud claim. To the extent that the instruction talks about intentionally investing in a known fraud as opposed to negligence in having failed to detect the fraud, I wouldn't have any problem with that instruction at all, if, in fact, there were evidence to support it, evidence OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130595 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 181 from which a jury could conclude that somebody actually knew this was a Ponzi scheme and they figured I'm getting in early enough so that I can be one of those folks who manages to get paid before this all unravels. Anybody in that position doesn't have a valid claim and has waived any ability to prosecute a claim. Q. Okay. So you dispute the concept of an appropriate statement of the law that a party that could have, reasonably should have discovered through ordinary diligence the nature of the deception. Is that your dispute? A. Yes. Q. To that instruction? A. Yes. Q. Let's talk about the variables that could affect a jury verdict. Let me hit on some of them. Obviously, the facts, the facts are critical to jury verdict for both liability and punitive damages? A. Clearly. Q. And the judge has an ability to affect, certainly, punitive damages because in Florida the judge makes the initial determination as to whether you get to have punitive damages in your case? A. I agree, leave must be granted to assert a claim for punitive damages. OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130596 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 Pagc 182 Q. And while we know Judge Streitfeld is familiar with this case, has these cases, the Beverly and Marlin cases, and he appears to be in good health, judges get ill like the rest of us. While I wouldn't expect it of Judge Streitfeld, judges have problems with JQC periodically or judges change their mind and decide they're going to retire? A. We can agree without impugning anyone's integrity that there are a whole variety of reasons why the judge you have today may not be the judge you have tomorrow. Q. And appellate courts also come into play as to whether, as you have testified, you have won them, lost them and gone up and had different results on appeal, good and bad, that has all happened? A. It has. Q. That is a variable that would affect the ability to get punitives or the amount of punitives. Correct? A. Indeed it is. Q. And the quality of the experts on both sides affects the ability to get an amount of punitive damages. Correct? A. In the context of the prosecution of the underlying claim, expert testimony may impact upon the OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130597 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 183 compensatory recovery but experts are generally not testifying as to the amount of punitive damages. Q. Well, we will get to that in a moment but they frequently testify in punitive damages as to the defendant's ability to pay so that you don't put them out of business. That's a frequent source of expert testimony on punitive damages? A. It is a source of testimony relating to punitive damages but it's -- the pecuniary circumstances of the defendant very frequently are not a significantly contested matter, particularly when you are talking about publicly traded entities, entities that are required to file 10Ks and 10Qs. The numbers are there and the numbers are what the numbers are, and often there are stipulations with regard to the relevant issues concerning pecuniary circumstances. Q. Let me revert for a question that's been handed to me, so if you think it's out order, it's not my fault. A. Objection, out of order. Q. I don't mean out of order in the sense as impolite. I mean out of chronological order. MR. MOSKOWITZ: Bill does it all the time to me. BY MR. GENOVESE: OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130598 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 184 Q. Nobody is passing me stickies. An investor who used the usurious rate of return or was intended to receive for the investment what appeared to be an usurious rate of return on investment, would you consider that to be something that a jury should consider in measuring whether the plaintiff had knowledge of a fraudulent scheme? A. We are taking this out of the context of these investments. Q. I am just asking you this hypothetical. A. If it were to be a different kind of fraud where there were an obvious violation of the usury rates, that might have some relevance to the issue of whether there was actual knowledge that this was a Ponzi scheme, a fraudulent investment, but there would need to be some evidence of actual knowledge. Q. Correct. But were there evidence or any other illegalities that the plaintiff was aware of surrounding the scheme that would go to a jury and a jury would evaluate whether that would create a defense? A. I have difficulty with a question that is as vaguely worded as that one is or any other knowledge of illegality. You know, give me a specific example and I will try to assess that -- excuse me, I'm sorry for moving -- I will try to give you a response to that OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130599 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 185 specific example. Q. In a hypothetical I gave you that you don't think exists, if it is the investor who would be getting the usurious rates who is conflicting Florida law as well. Correct? A. An investor who is charging an usurious rate of interest for a loan is violating the usury laws by definition. Q. Getting back to the -- getting back to the variables, the quality of the lawyering on both sides of the case affects whether there will be punitive damages and the amount of punitive damages? A. That is true. Q. And when you are dealing with a large plaintiff group, is it possible that certain of the plaintiff group would be delighted with compensatory damages or something less and others want to roll the dice and go the distance for maximum punitive damages is that fairly the usually the case in a large plaintiff group? A. There could be differences of opinion as to the degree of risk that plaintiffs are willing to take in a litigation process, yes. Q. So it's not uncommon for some plaintiffs to peel off from the plaintiffs' group and settle? OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130600 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 186 A. It really depends upon the circumstances. There are frequently joint prosecution agreements that impose limitations on the ability of parties to do that when an agreement has been made that the case will be prosecuted jointly. Q. You are not aware one way or another in connection with the Beverly and Marlin case if that is present here? A. Don't know. Q. I'll get to probably the most important question suggesting that your partner Chris Searcy at every JNC interview says, how would you treat lawyer voir dire to judge applicants. I suspect you know the answer to what he wants to hear. A. Oh, I absolutely know the answer to what the Chris wants to hear, yes. Q. Because you want to have the jury 90 percent in your corner by the time you're done with voir dire. Correct? A. No, sir. No, my desire is to have the jury 100 percent in my corner by the time I'm finished with voir dire, although we all know that that's an impractical and unachievable objective. Every trial lawyer would like to know that every juror is 100 percent behind him before opening statements. It OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130601 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 187 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 OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130602 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 188 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 OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130603 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 189 evaluations of claims as liabilities. I don't have a recollection of seeing in corporate financial statements an assessment or an evaluation of a claim as an asset. Q. You may have seen reserves, correct, for litigation? A. I have seen litigation reserves and expressions of the value of potential liabilities in financial statements. Q. But not a specific amount for punitive damages? A. I don't recall seeing a separate amount designated as punitive damages. The overall liability is assessed and where there is a punitive damages claim, that's noted as part of the assessment of the overall liability. Q. That's the claim but not the entities' opinion as to what the punitive award would be? A. It's not separate and apart from the compensatory award. It is an overall assessment of the exposure. Q. One last variable was change in the law regarding the ability to get punitive damages. That's always a variability that's out there? A. Yes, it is. Q. And, in fact, the statutes you were asked OUELLETTE & NIAULDIN COURT REPORTERS, INC. EFTA01130604 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 I90 about whereas I understand it changes to the common law or limitations on the amount of the punitives that could be recovered. Correct? A. That is correct. Q. Are you aware of Florida cases which suggest in the context of the enactment of the statutes we referred to that the right to punitive damages is not a present property right? A. I am. Q. You agree with that statement? A. I must accept it to be true. It is the prevailing law of the State of Florida at the present time. Q. You believe the testimony you are giving today is relevant? A. I really think that that's a bankruptcy law question, and I haven't been asked to form an opinion about that. But my general understanding is that it is relevant but that's not something that I am opining as an expert on. Q. Okay. From what I understood from your prior testimony that you have never testified in this capacity to opine on the likely range of punitive damage award? A. Correct. Q. You have never called a witness in a punitive OUELLETTE & NIAULDIN COURT REPORTERS, INC. EFTA01130605 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 191 damage case for that purpose? A. Well, the one circumstance that I told you about. Q. The Farish case? A. The Farish case, right, was a case in which an opinion was expressed regarding the value of the punitive damage claim for purposes of assessing the compensatory loss. that? Q. Was that your case? Were you involved in A. Yes. Q. Other than that case do you have a belief, generally, about if you tried to offer someone just like yourself in the Beverly and Marlin case to express an opinion on the amount of punitive damages to be awarded to each plaintiff in that case, would that be allowed by the trial judge? A. No. Q. Why is that? A. Because that would be an effort to invade the province of the jury in the context of assessing the amount of punitive damages that would be appropriate in that case. However, I can think of circumstances where that kind of testimony with regard to the Beverly and Marlin cases would be appropriate and Farish is a good OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130606 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 Pagc 192 example. If someone were to steal Mr. Moskowitz's and Mr. Scherer's cases from them, if they were to tortiously interfere with their contracts with their clients by lying to their clients about something that caused their clients to leave them, then it very well may be appropriate to offer expert witness testimony about the value of those claims in the hands of Mr. Moskowitz and Mr. Scherer in order to assess their compensatory damages for having lost cases that were stolen from them that included viable punitive damages claims. That's the contention in which this arose from Farish. While it is a highly unusual circumstance, it is not one that is outside of what would be easily conceivable as appropriate. Q. And is the only one you could think of in 41 years may have occurred at the time in which you had two children and no grandchildren? A. What's the date on the opinion? Q. I thought it was old. A. It's old. It's pretty old but so are my kids. My oldest grandchild is 18, so it was probably before my first grandchild but we were well into kids by then. MR. MOSKOWITZ: John, do you know about how much time have you left? OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130607 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 193 MR. GENOVESE: I would say not more than half hour. MR. MOSKOWITZ: Do you want a break? THE WITNESS: No, I am fine. Press on. BY MR. GENOVESE: Q. Explain to me what you believe to be the concept of mitigation as it relates to a jury instruction. A. Mitigation is the obligation on the part of an injured party to take reasonable measures to limit or avoid damages which may be limited or avoided through reasonable measures, and it is generally a jury question as to what is reasonable under the particular circumstances of both the case and the injured party. Q. The example of one of the cases, if you can recall, is I get terminated from my job. I then just can't sit home for a year. I have to go find another job. I have to try to minimize the damages to the plaintiff. Right? A. That would be a good example and part of what I am suggesting to you is that doesn't mean you are obliged to leave your family and move to Alaska to work the pipeline. Q. Right, because the case law talks about reasonable measures without exposing oneself to OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130608 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 194 humiliation and undue hardship. Correct? A. Without incurring financial obligations that are beyond your means, yeah. I mean, there are --- Q. You have seen bankruptcy restitution claims? A. I have. Q. You have seen that they are always relatively simple documents. Correct? A. Yes. Q. Have you ever seen a criminal restitution claim? A. I have. Q. A little more complicated? A. Yes. Q. A little? A. It's been a while since I've seen a criminal restitution claim and I have never compared them for purposes of judging complexity. Q. Do you think that a jury might conclude that a victim of the Rothstein Ponzi might believe that the filing of a criminal restitution claim or bankruptcy claim is a step towards mitigation of the damages? A. Maybe. Q. You said it would be a jury question? A. The reasonableness of mitigation is most frequently a jury question, that's correct. OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130609 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 195 Q. Are you familiar with the plan of reorganization that's before the Court now that this deposition is taken in connection with? A. Fortunately, no. Q. Not all of us can say that. Do you believe that a jury could consider the efforts of TD Bank to support and contribute to substantial recovery by the Beverly and Marlin plaintiffs as an effort to cause mitigation of their damages? A. I think that that might be a relevant factor in mitigation of punitive damages, yes. It might be. Q. You previously talked about the corrective behavior that's required of, that you would like to see TD Bank engage in so as to limit their punitive damages. Do you recall that testimony? A. There was some reference to it, yes, to that. Q. And you talked about corrective action internally, meaning you streamlined or focused your policies and procedures to prevent this kind of thing that happened. That would be some remedial action that they could take? A. It would be. Q. Are you aware that both the Banyon trustee and the RRA trustee have basically mirror image settlements OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130610 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 196 with TD Bank? Are you aware of that? A. I have read press accounts in that regard. Q. And are you aware that in those settlements and in the plan parties that have never made demand on TD Bank, never filed lawsuits against TD Bank are to be paid? Are you aware of that? MR. MOSKOWITZ: Objection. Mischaracterizes the evidence in the record. A. I don't have knowledge of any of those details, no. BY MR. GENOVESE: Q. But if, in fact, we assume that that's the case, that there are settlements and a plan which proposes to pay victims of the Rothstein Ponzi that have not sued TD or made demand on TD and TD otherwise has no present obligation to pay, do you believe that to be using your words efforts that a jury could consider to be corrective or remedial in the context of a punitive damages award? A. They may consider them as remedial. They might also consider them as an effort to avoid a significantly greater liability. Q. A jury would evaluate whether that was a positive thing to do or whether it is a self-serving or self-interested thing to do? OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130611 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 197 A. It may very well be a factor that could appropriately be presented to a jury in a second stage proceeding, yes. Q. But I can tell from the tone of your answers that the opinions you formulated didn't consider what I'm asking you now. A. I was not in a position to consider facts that I didn't know and I am telling you that I was not specifically aware of those facts, that's correct. Q. If there is a mechanism in place for the Beverly and the Marlin plaintiffs to be paid claims from the bankruptcy estates and potentially still pursue their state court cases and punitive damage awards, would that evidence be something the jury would consider in connection with evaluating the amount of the punitive award against TD Bank? A. I would need to know more about that mechanism and TD Bank's role and motivation in involving itself in that mechanism. Q. Obviously, you don't have the plan so you can't -- probably if you saw it I guess it would be mystery to you because to some of us we forget what's in it because it's like a phone book. You talk generally about the nature of conspiracy and aiding and abetting. OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130612 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 NA Would every investor -- under your analysis, would every investor who lost money in the Rothstein Ponzi scheme have the same kind of claims that the Beverly Marlin Group have? A. You have pointed out at least one exception and that one exception would be those who invested with actual knowledge in advance of the fraud. Q. Thank you for pointing that out. A. You did. Q. I didn't mean one that would have a -- they would have a claim but not a very successful claim, that party. That party would get an involuntary dismissal at the end of the case? A. Assuming that evidence were uncontested, yes. Q. So, putting those people aside, every investor in the Rothstein Ponzi scheme, be it directly giving money to the Rothstein firm or to the Banyon entities, every one of them could pursue exactly the claims that Beverly and Marlin were pursuing unless they were complicit or co-conspirators. Correct? A. I can't think of an exception right now. Q. Do you understand that the damages being sought by Beverly and Marlin are reflected in the proof of claims filed in the bankruptcy estate? MR. MOSKOWITZ: Objection. Mischaracterizes OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130613 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 199 the evidence. A. I have not undertaken to make any assessment of what's going on in the bankruptcy case. My understanding of my role has been to assess the value of the Beverly and Marlin plaintiffs' claims, primarily from a punitive damage perspective, assuming those claims were prosecuted in circuit court. BY MR. GENOVESE: Q. Are you aware of any attributes of their claims that would be any different than someone who isn't here who just invested money through Banyon, for instance, in the Rothstein Ponzi? Are you aware of anything separating them from investors generally? A. I am not aware of anything separating them from investors generally that would have an impact upon those matters about which I am opining. Q. And putting affirmative defenses aside, you do understand that Mr. Stettin, as trustee for the RRA case, is settling a litigation subsumed by the plan which asserts that the firm was harmed through Rothstein's misuse of the firm and the facilitation of that misuse by TD Bank, you understand Mr. Stettin has a pending complaint --- A. On behalf of RRA, yes. Q. And while there is not yet and hopefully not a OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130614 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 200 Banyon case but that the trustee of Banyon has asserted that it has similar claims against TD Bank for aiding and abetting and conspiring with Rothstein and others in perpetuating the Ponzi scheme? A. Okay. Q. Do you see any difference between those claims, other than the affirmative defenses that could be asserted against those plaintiffs, Mr. Stettin and Mr. Furr on behalf of Banyon? Do you see any difference fundamentally between those claims and the claims asserted in the Beverly and Marlin case? MR. MOSKOWITZ: Objection. Outside the scope of his expertise. A. Are you asking me whether there is any difference between the claims by Rothstein, Rosenfeldt and Adler and the claims of Ponzi scheme investors. BY MR. GENOVESE: Q. If you assume that Mr. Furr for Banyon and Mr. Stettin for RRA are seeking to recover for the benefit of Ponzi investors, do you see anything different with regard to their claims? A. I'm sorry, but I am confused by that question. Whatever losses were sustained by RRA I assume were not sustained as a consequence of RRA investing in the Ponzi scheme? Is that an incorrect assumption? OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130615 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 201 Q. I will withdraw and rephrase the question. If RRA -- if Stettin, as the Trustee of RRA, were seeking to recover from damages from the Ponzi scheme measured by the victim's out-of-pocket losses, would the claims be essentially the same or you don't have enough information to evaluate that? A. I really don't. Q. Do you understand the compensatory damages sought in the Beverly and Marlin actions, putting aside prejudgment interest, the compensatory damage portion, do you understand those damages to be the out-of-pocket losses that each of those investor victim's suffered? A. Yes. Q. Would you assume that to be a net amount? I put in a hundred dollars, I got repaid $50 and my remaining claim is $50? A. I have not sought to assess the manner in which the compensatory loss has been calculated. I have expressed my opinion in terms of a multiple of the compensatory loss, whatever it is determined to be. Q. Wouldn't you assume in a Ponzi scheme -- because you have analogized it to fraud generally, wouldn't you assume that damages in fraud generally for a Ponzi scheme would consist of a party's actual out-of-pocket losses? OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130616 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 202 A. No, not necessarily. There are two ways in which to measure damages for fraud. One is the out-of-pocket methodology. The other is the method of the bargain methodology. Florida law recognizes both and permits recovery under that theory which best makes the victim of the fraud whole. Q. My assumption here is that the plaintiffs would not argue that they deserve the benefit of an illegal bargain. Wouldn't that be your assumption? A. I would assume that the plaintiffs would not make an argument that they are entitled to the benefit of an illegal bargain, yes. Q. So, what's remaining is their actual losses, their actual net losses. Is that a fair statement? A. If, in fact, the bargain was illegal, what remains is the out-of-pocket measure of damages. Q. You have indicated or your counsel has indicated in the statement you adopted, the last half of the nature and substance of opinion, the first part you said nonspeculative, valuable with a high probability of success. The last part are, or are likely to be resolved through pretrial settlement with TD based on the outcome of similar cases in which investors damaged by the Rothstein fraud sued TD Bank. You have that in front of you apparently. Do you see the last half of OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130617 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 203 the first paragraph? A. Yes, I see that language. Q. We have only had one jury award in connection -- on appeal in connection with the Coquina case. Correct? A. Yes. Q. And you do know that that was a group but essentially one plaintiff. It was an entity that was an investment entity. You understand that? A. Yes, I was aware of that generally. Q. And the instructions in that case did you ever look at the jury instructions? A. I did not. Q. Would it surprise you that as plead in Mr. Scherer's motion for punitives in front of Judge Streitfeld, in Coquina there were direct meetings with TD Bank officers, the providing of lock letters by Spinosa, these shows at the bank with the involvement of the bank, you understand that the extent of those instructions and the extent of privity between TD and the plaintiffs are significantly different than those which exist in the Beverly and Marlin case. Correct? A. I have assumed that the degree of direct contact in Coquina was greater than the degree of direct contact in Beverly and Marlin, yes. OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130618 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 204 Q. And in the Coquina case that you're using as precedent, the punitives to compensatory damages, what was the ratio? A. A little bit greater than one-to-one if recall correctly. Q. Okay. So it's one-to-one. The only settlements that would -- let me withdraw that question. Fairly early after the Coquina trial -- let me withdraw that question. There were multiple motions about discovery issues and the failure of TD to comply with discovery request appropriately during the Coquina trial. Are you aware of that? A. Yes. Q. And after the Coquina trial in the subsequent case documents that we referred to here today -- is it the CDD? A. CDD. Q. In the Emess case you are aware that an un -- I wouldn't say unredacted but an actual color copy of a document that had been produced in black and white in the Coquina case came out in the Emess case? A. Yes. Q. You understand the lawyer that was to try the Emess case was the same lawyer who tried the Coquina OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130619 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 205 case? A. I don't know that I remembered that. Q. Would that be a fact that would be material to you if it's true? A. Well, it depends on what question you are going to ask me. Q. Okay. Well, post Coquina verdict and post at least sanction and discovery issues being raised, the only settlement which has occurred in excess of out-of-pocket losses that we talked about is the Emess case. Are you aware of that? A. I wasn't aware that that was the only settlement that has occurred. I was aware that there was a settlement in Emess that was in excess of the out-of-pocket losses. Q. Are you aware of any other settlement that is in excess of the out-of-pocket losses since the Coquina verdict? A. What are you referring to as out-of-pocket losses. Q. Well, what we discussed, compensatory damages consists of the plaintiffs' group's actual monetary loss? A. With or without prejudgment interest, with or without fees and costs. OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130620 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 Pagc NM Q. Exclude fees and cost. Exclude prejudgment interest, any settlements other than Emess, which exceeded the amount of out-of-pocket losses? A. I had the impression that there were other matters that were resolved that compensated victims beyond the straight out-of-pocket loss number and included interest and expenses incurred by the plaintiffs. Q. Can you point to those? A. I don't have a recollection. Q. Razorback settlement occurred shortly before its scheduled trial and shortly after the Coquina verdict and the damages sought out of pocket in the Razorback case exclusive of prejudgment interest and attorneys' fees, did you understand to be $186 million? A. That number sounds familiar. Q. So, on the heels of Coquina, Razorback settles for 170 million and doesn't go to trial for punitive damages. So, I am trying to understand the statement here or likely to be resolved through a pretrial settlement with TD Bank based on the outcome of similar cases in which the investor was damaged by the Rothstein fraud sued TD Bank. I am trying to understand -- are you suggesting that there be settlements in excess of OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130621 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 207 compensatory damages? A. That's not what it says. It only says -- MR. MOSKOWITZ: Have you read it twice, John. You keep reading in some other words that says in excess. That's not in there at all. You said based on in excess. BY MR. GENOVESE: Q. Or likely to be resolved through a pretrial settlement with TD Bank based on the outcome of similar cases in which investors damaged by the Rothstein fraud sued TD Bank? MR. MOSKOWITZ: Yeah. A. All this says is that these are viable claims. They have been successfully prosecuted already and others have been resolved through pretrial settlement with TD Bank. BY MR. GENOVESE: Q. But you said or are likely to be resolved? A. Yeah. Q. So you are suggesting that the Beverly and Marlin plaintiffs may settle this case, do I understand that statement? A. What that statement is intended to convey is that these are viable claims and if they are prosecuted in front of a jury they are likely to be successfully OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130622 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 208 prosecuted and if they are not successfully prosecuted in front of a jury, it will be because they will settle favorably. MR. MOSKOWITZ: Could we maybe take a break? We have been going two hours and 40 minutes. I know you said you were going to be 20 more minutes. THE WITNESS: How close are we. MR. MOSKOWITZ: It's been 15 minutes. MR. GENOVESE: Give me ten minutes, I'll finish. MR. SCHERER: You've got minutes. MR. MOSKOWITZ: It's seven hours time. We can get technical on tape time but it's been seven hours of depositions. We started at 10:00. MR. GENOVESE: We started at 10 after 10:00 but you can penalize me for the ten minutes. BY MR. GENOVESE: Q. Or likely to be resolved through pretrial settlement with TD Bank. What I am trying to understand is, are you suggesting that in the face of potential punitive damages that there will be a settlement -- there may be a settlement by the Beverly and Marlin Group? A. I think that the potential punitive damage exposure is a factor that is likely to be taken into OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130623 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 209 consideration whether the cases are tried or whether they are settled, but this portion of the opinion is only intended to convey that if the cases are prosecuted through trial they are likely to be prosecuted successfully and the only reason that I see for their not being successfully prosecuted through trial is that there is a settlement agreement. Q. What I am trying to get at and these are these are not your words but you adopted these words, I am trying to understand if you are suggesting that the existence of potential punitive damages claims would up the likely settlement amount? A. That's not addressed in this paragraph. I don't think this paragraph says anything at all about punitive damages. That's simply not addressed in that paragraph, but if you are asking me whether I have an opinion as to whether a viable punitive damage claim has an influence on the likelihood of settlement, the answer to that question is absolutely, yes, I believe that a viable punitive damages claim does have an impact on settlement negotiations. Q. So, Razorback had a viable punitive damages claim. It was about to go to the jury. Are you familiar with the FEP settlement? A. No. OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130624 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 210 Q. You are familiar with the Emess settlement? A. Yes. Q. And you mentioned other settlements which you believed had components beyond compensatory damages but you don't recall? A. That is correct, yes. Q. So the existence of punitive damages claim today other than the unnamed ones that you can't respond to have not increased settlements beyond compensatory damage claims? MR. MOSKOWITZ: Misstates again the witness. It's not in here, increasing the amount of the settlement. MR. GENOVESE: I am asking him a question. I am not asking him what he has read. MR. MOSKOWITZ: You keep telling him. He keeps saying he is going to increase the amount of settlement. BY MR. GENOVESE: Q. He has conceded that the punitive damages are likely in a negotiation, as I understand his testimony, going to increase the amount of the settlement. Isn't that what you said? A. Yes, that is what I said. What I have not said is that the pendency of a OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130625 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 Pagc 211 punitive damage claim will necessarily increase the value of the settlement beyond the total compensatory losses. It is -- it is often the case where it is the presence of a viable punitive damage claim that enables a plaintiff who has sustained a loss to get 100 percent of their compensatory damages in a settlement context. You usually don't get a hundred percent of your compensatory damages when a case settles because a settlement is a compromise. Q. I understand. A. It is a compromise of the total value of all of your claims. Q. So, was I -- I mean, I was just inferring that this is what you were suggesting by this statement. Am I wrong in making that? A. You are wrong. That paragraph says nothing about punitive damages. Q. All right. So, with the existence of punitive damages claim, put your statement aside, John Mullin is here somewhere representing Morse. Morse settled for less than compensatory damages, correct? Do you know? A. I have a general recollection of that, yes. Q. And FEP, you are familiar that they settled for less than punitive damages? A. Okay. OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130626 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 Q. Page 212 And Emess got 122 percent or some number of punitives. Razorback got slightly less than compensatory damages? A. Okay. Q. Is the only thing that makes your projection of potential punitive damage here so much larger -- let me rephrase the question. If we have no settlements for more than 122 percent of out-of-pocket losses and you are testifying that the presence of punitive damages claims will likely cause parties to settle for their compensatory losses, what relevance is -- what is your -- is it one to nine times? I forget what your projected is. A. Four to nine. Q. Four to nine times. What relevance is that range in this calculus? A. Let me answer your question by focusing on what it is that I am opining about. I have not been asked to express an opinion as to the likely figure at which the Marlin and Beverly cases will settle. That's a different question than what I consider to be the likely range of punitive damages if this case were to be tried to a jury. Cases settle if they settle at all for less OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130627 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 213 than the full value of the claim because settlements are compromises. So, what I have perceived my role to be is not to project the settlement value of the claims but to express an opinion regarding the value of punitive damages in terms of a multiple of compensatory damages if this case were ultimately to be tried. As you, yourself, have pointed out, there are a wide variety of factors that influence whether a case will be tried or will be settled and the risk tolerance of the plaintiffs is a major factor in making that determination. The pecuniary circumstances of the plaintiffs is a major factor in making that determination. I have had -- I have had clients with very, very strong and valuable claims who have decided to settle those claims for significantly less than I thought they ought to settle them for because they have been under financial duress and I understand that and that's an appropriate consideration to assess in deciding whether the case is going to be settled. I have had other clients who have had what I considered to be extremely strong and valuable claims who simply were very risk adverse and preferred to seize the opportunity to get a hundred percent of their compensatory losses rather than take the risks that OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130628 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 Pagc 214 might be involved in continuing to prosecute the punitive damage claim. And one of the reasons why plaintiffs get rewarded for going to trial and getting punitive damages and having the staying power to withstand the risks of an appeal and ultimately getting those punitive damages to put in their pockets is because they have undertaken and faced all of those risks. MR. GENOVESE: I think I am done. If we can just take a few minutes and consult. MR. MOSKOWITZ: I may have a few questions as well. MR. GENOVESE: If we can confer quickly, we can probably avoid any of Mike's questions. (Discussion held off the record.) (A recess was taken from 5:15 p.m. to 5:21 p.m.) THE VIDEOGRAPHER: The time is 5:21. We are back on the video record. BY MR. GENOVESE: Q. Mr. Scarola, I think I have two questions. A. I have heard that before. Q. Other than what you have discussed here today, in terms of the materials you reviewed and relied on, you have told us all of everything that you can recall OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130629 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 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. OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130630 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 Pagc 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.) OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130631 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 217 CERTIFICATE OF OATH STATE OF FLORIDA COUNTY OF MIAMI-DADE I, the undersigned authority, certify that JOHN JACK SCAROLA personally appeared before me and was duly sworn. WITNESS my hand and official seal this 3rd day of July, 2013. Patricia Diaz, RPR, FPR Notary Public - State of Florida My Commission No. DD 973059 My Commission Expires 04/17/2014 OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130632 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 218 REPORTER'S CERTIFICATE STATE OF FLORIDA COUNTY OF MIAMI-DADE I, Patricia Diaz, Registered Professional Reporter, Florida Professional Reporter and Notary Public in and for the State of Florida at large, do hereby certify that JOHN JACK SCAROLA was by me first duly sworn to testify the whole truth; that I was authorized to and did report said deposition in stenotype; and that the foregoing pages, numbered from 1 to 219, inclusive, are a true and correct transcription of my shorthand notes of said deposition. I further certify that said deposition was taken at the time and place hereinabove set forth and that the taking of said deposition was commenced and completed as hereinabove set out. I further certify that I am not an attorney or counsel of any of the parties, nor am I a relative or employee of any attorney or counsel of party connected with the action, nor am I financially interested in the action. The foregoing certification of this transcript does not apply to any reproduction of the same by any means unless under the direct control and/or direction of the certifying reporter. IN WITNESS WHEREOF, I have hereunto set my hand this 3rd day of July, 2013. Patricia Diaz, RPR, FPR OUELLETTE & MA LDIN COURRT REPORTERS, INC. EFTA01130633 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 219 ERRATA SHEET IN RE: In Re: Rothstein Rosenfeldt & Adler DEPOSITION OF: JOHN SCAROLA TAKEN: July 2, 2013 DO NOT WRITE ON TRANSCRIPT - ENTER CHANGES HERE PAGE # LINE # CHANGE REASON Please forward the original signed errata sheet to this office so that copies may be distributed to all parties. Under penalty of perjury, I declare that I have read my deposition and that it is true and correct subject to any changes in form or substance entered here. DATE: SIGNATURE OF DEPONENT: OUELLETTE & MAULDIN COURT REPORTERS, INC. EFTA01130634 OUELLETTE & MAULDIN COURT REPORTERS 28 West Flagler, Suite 808 Miami, Florida 33130 July 3, 2013 John Jack Scarola c/o Adam Moskowitz, Esquire Kozyak, Tropin & Throckmorton, P.A. 2525 Ponce de Leon Boulevard Ninth Floor Miami, Florida 33131-2335 IN RE: Rothstein Rosenfeldt Adler, Banyon 1030-32 CASE NOS: 09-34791-RBR and 10-33691-RBR Please take notice that on Tuesday, July 2, 2013, you gave your videotaped deposition in the above-referenced matter. At that time, you did not waive signature. It is now necessary that you sign you videotaped deposition. Please call our office at the number listed below to schedule an appointment between the hours of 9:00 a.m. and 4:30 p.m., Monday through Friday. You can also have your counsel send you a copy of the transcript and avoid coming into our office. At the end of the transcript, you will find an errata sheet. As you read your videotaped deposition, any changes or corrections that you wish to make should be noted on the errata sheet, citing page and line number of said change. DO NOT write on the transcript itself. Once you have read the transcript and noted any changes, be sure to sign and date the errat sheet and return these pages. If you do not read and sign the videotaped deposition within a reasonable time, the original, which has already been forwarded to the ordering attorney, may be filed with the clerk of the court. If you wish to waive your signature, sign your name in the blank at the bottom of this letter and return it to us. Sincerely, Patricia Diaz, RPR, FPR I do hereby waive my signature: John Jack Scarola OUELLETTE & MAULDIN COURRT REPORTERS, INC. EFTA01130635