Case 17-51882-CSS Doc 319-3 Filed 06/04/20 Page 1 of 20
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`EXHIBIT C
`Proposed Redacted Document
`Memorandum Of Law In Support Of The Paragon Litigation
`Trust’s Motion To Exclude The Testimony Of Timothy S. Shuman
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`Case 17-51882-CSS Doc 319-3 Filed 06/04/20 Page 2 of 20
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`
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`IN THE UNITED STATES BANKRUPTCY COURT
`FOR THE DISTRICT OF DELAWARE
`
`Chapter 11
`Case No. 16-10386
`
`Adv. Proc. No. 17-51882 (CSS)
`
`In re
`PARAGON OFFSHORE PLC, et al.,
`Debtors.
`PARAGON LITIGATION TRUST,
`Plaintiff,
`
`v.
`NOBLE CORPORATION PLC, NOBLE
`CORPORATION HOLDINGS LTD,
`NOBLE CORPORATION, NOBLE
`HOLDING INTERNATIONAL
`(LUXEMBOURG) S.à.r.l., NOBLE
`HOLDING INTERNATIONAL
`(LUXEMBOURG NHIL) S.à.r.l., NOBLE
`FDR HOLDINGS LIMITED, NOBLE
`HOLDING INTERNATIONAL LIMITED,
`NOBLE HOLDING (U.S.) LLC, NOBLE
`INTERNATIONAL FINANCE COMPANY,
`MICHAEL A. CAWLEY, JULIE H.
`EDWARDS, GORDON T. HALL, JON A.
`MARSHALL, JAMES A. MACLENNAN,
`MARY P. RICCIARDELLO, JULIE J.
`ROBERTSON, AND DAVID W.
`WILLIAMS,
`
`Defendants.
`
`MEMORANDUM OF LAW IN SUPPORT OF
`THE PARAGON LITIGATION TRUST’S
`MOTION TO EXCLUDE THE TESTIMONY OF TIMOTHY S. SHUMAN
`
`Laura Davis Jones (DE Bar No. 2436)
`Timothy P. Cairns (DE Bar No. 4228)
`Pachulski Stang Young & Jones LLP
`919 N. Market Street, 17th Floor
`P.O. Box 8705
`Wilmington, DE 19899-8705 (Courier
`19801)
`Telephone: (302) 652-4100
`Facsimile: (302) 652-4400
`
`Filed: June 1, 2020
`
`David J. Zott, P.C. (admitted pro hac vice)
`Jeffrey J. Zeiger, P.C. (admitted pro hac vice)
`William E. Arnault (admitted pro hac vice)
`Anne I. Salomon (admitted pro hac vice)
`Jason A. Feld (admitted pro hac vice)
`Kirkland & Ellis LLP
`300 N. LaSalle Street
`Chicago, IL 60654
`Telephone: (312) 862-2000
`Facsimile: (312) 862-2200
`
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`

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`Case 17-51882-CSS Doc 319-3 Filed 06/04/20 Page 3 of 20
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`TABLE OF CONTENTS
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`Page
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`STATEMENT OF THE NATURE AND STAGE OF THE PROCEEDINGS ........... 1
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`SUMMARY OF THE ARGUMENT .............................................................................. 1
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`STATEMENT OF FACTS ............................................................................................... 2
`
`ARGUMENT ..................................................................................................................... 5
`
`I.
`
`LEGAL STANDARD ........................................................................................... 5
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`II. MR. SHUMAN’S OPINION ON WHAT CONSTITUTES
`“CONSIDERATION” FOR THE SPIN-OFF IS AN INADMISSIBLE
`LEGAL OPINION ................................................................................................ 6
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`III. MR. SHUMAN IS NOT QUALIFIED TO OPINE WHETHER THE
`$935 MILLION TRANSFERS ARE AVOIDABLE UNDER THE
`BANKRUPTCY CODE ........................................................................................ 8
`
`IV. MR. SHUMAN’S TAX LAW OPINIONS ARE ALSO IRRELEVANT ......... 9
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`V. MR. SHUMAN’S OPINIONS ON NOBLE’S “INTENT” SHOULD
`BE EXCLUDED .................................................................................................. 10
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`CONCLUSION ............................................................................................................... 12
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`i
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`Case 17-51882-CSS Doc 319-3 Filed 06/04/20 Page 4 of 20
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`TABLE OF AUTHORITIES
`
`
`
`Page(s)
`
`
`
`Cases
`
`AstraZeneca LP v. Tap Pharm. Prods., Inc.,
`444 F. Supp. 2d 278 (D. Del. 2006) .............................................................................11
`
`Atl. Rim Equities, LLC v. Slutzky, Wolfe & Bailey, LLP,
`2006 WL 5159598 (N.D. Ga. Nov. 21, 2006) .............................................................10
`
`Brownwood Ross Co. v. Maverick Cty.,
`936 S.W.2d 42 (Tex. App. 1996) ...................................................................................7
`
`Burrell v. Adkins,
`2007 WL 2771602 (W.D. La. Aug. 17, 2007) ...............................................................7
`
`Damian v. Int’l Metals Trading & Invs., Ltd.,
`2017 WL 2992200 (S.D. Fla. July 13, 2017) .................................................................7
`
`Daubert v. Merrell Dow Pharm., Inc.,
`509 U.S. 579 (1993) .....................................................................................................10
`
`In re Diet Drugs,
`2001 WL 454586 (E.D. Pa. Feb. 1, 2001) .....................................................................9
`
`Eghnayem v. Boston Scientific Corp.,
`57 F. Supp. 3d 658 (S.D. W.Va. 2014) ........................................................................12
`
`Elcock v. Kmart Corp.,
`233 F.3d 734 (3d Cir. 2000).......................................................................................5, 6
`
`Ferris v. Pa. Fed’n Bhd. of Maint. of Way Emps.,
`153 F. Supp. 2d 736 (E.D. Pa. 2001) .............................................................................9
`
`Holman Entrs. v. Fid. & Guar. Ins. Co.,
`563 F. Supp. 2d 467 (D.N.J. 2008) ............................................................................6, 7
`
`Malletier v. Dooney & Bourke, Inc.,
`525 F. Supp. 2d 558 (S.D.N.Y. 2007) ............................................................................6
`
`In re Nellson Nutraceutical, Inc.,
`356 B.R. 364 (Bankr. D. Del. 2006) ..............................................................................5
`
`Oxford Gene Tech. Ltd. v. Mergen Ltd.,
`345 F. Supp. 2d 431 (D. Del. 2004) .............................................................................11
`
`ii
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`Case 17-51882-CSS Doc 319-3 Filed 06/04/20 Page 5 of 20
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`
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`In re Paoli R.R. Yard PCB Litig.,
`35 F.3d 717 (3rd Cir. 1994) ...........................................................................................6
`
`In re Paragon Internat’l Finance Co.,
`No. 16-10391 (Bankr. D. Del.) ......................................................................................3
`
`Perez v. First Bankers Tr. Servs., Inc.,
`2015 WL 5722843 (D.N.J. Sept. 29, 2015) ...............................................................1, 8
`
`Rabozzi v. Bombardier, Inc.,
`2007 WL 951569 (N.D.N.Y. Mar. 27, 2007) ................................................................6
`
`Rainbow v. Swisher,
`527 N.E.2d 258 (NY 1988) ..........................................................................................11
`
`In re Rezulin Prods. Liab. Litig.,
`309 F. Supp. 2d 531 (S.D.N.Y. 2004) ....................................................................10, 11
`
`Richman v. Brookhaven Servicing Corp.,
`363 N.Y.S.2d 731 (Dist. Ct. 1975) ................................................................................7
`
`Robinson v. Hartzell Propeller Inc.,
`326 F. Supp. 2d 631 (E.D. Pa. 2004) .............................................................................2
`
`Romero v. Allstate Ins. Co.,
`52 F. Supp. 3d 715 (E.D. Pa. 2014) ...........................................................................1, 6
`
`Sassafras Enters., Inc. v. Roshco, Inc.,
`915 F. Supp. 1 (N.D. Ill. 1996) ....................................................................................11
`
`Smith v. Allstate Ins. Co.,
`912 F. Supp. 2d 242 (W.D. Pa. 2012) ............................................................................7
`
`In re TMI Litig.,
`193 F.3d 613 (3d Cir. 1999)...........................................................................................6
`
`In re Tylenol (Acetaminophen) Mktg., Sales Practices & Prod. Liab. Litig.,
`181 F. Supp. 3d 278 (E.D. Pa. 2016) .............................................................................6
`
`Zacharius v. Kensington Publ’g Corp.,
`984 N.Y.S.2d 635 (Sup. Ct. 2014) .................................................................................7
`
`Statutes
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`11 U.S.C. § 548 ................................................................................................................2, 8
`
`Rules
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`Federal Rule of Bankruptcy Procedure 9017 .......................................................................5
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`iii
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`Federal Rule of Evidence 702 .................................................................................... passim
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`Other Authorities
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`17B C.J.S. Contracts § 1026 (2020) ....................................................................................7
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`iv
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`STATEMENT OF THE NATURE AND STAGE OF THE PROCEEDINGS
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`1.
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`On February 14, 2016, Paragon Offshore plc and related entities filed for
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`chapter 11 bankruptcy protection in this Court. D.I. 1. On December 15, 2017, the
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`Paragon Litigation Trust (the “Trust”) began this adversary proceeding. D.I. 2. During
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`expert discovery, Defendants disclosed reports from Timothy S. Shuman on January 16
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`and April 1, 2020. The Trust now moves to exclude his testimony pursuant to Federal
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`Rule of Evidence 702.
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`SUMMARY OF THE ARGUMENT
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`2.
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`Noble retained McDermott Will & Emery tax lawyer Timothy Shuman to
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`“opine on certain tax-related issues” regarding the multi-step plan by which Noble spun
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`off Paragon. Through his “tax expertise lens,” Mr. Shuman opines that “Noble’s Step
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`Plan as a whole was typical” of spin-off plans, and “Noble’s intent” was that the $935
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`million in intercompany receivables and note that a Paragon entity transferred to Noble
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`pre-spin in exchange for certain standard specification rigs (the “PIFCO Transfers”) were
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`not “part of the consideration Paragon paid Noble in connection with the Spin.” Mr.
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`Shuman’s opinions should be excluded on four independent grounds.
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`3.
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`First, Mr. Shuman’s opinion on whether the $935 million in PIFCO
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`Transfers constitute “consideration” for the Paragon spin-off is a legal opinion. Under
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`well-settled law, “an expert witness is prohibited from rendering a legal opinion.”
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`Romero v. Allstate Ins. Co., 52 F. Supp. 3d 715, 722-23 (E.D. Pa. 2014). The Court is
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`fully capable of answering this legal question (assuming it were relevant to this case,
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`which it is not). It does not need help from Noble’s tax law expert.
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`4.
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`Second, Mr. Shuman has no expertise to answer the correct legal
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`question—whether the $935 million in PIFCO Transfers are “transfer[s] of an interest of
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`the debtor in property.” 11 U.S.C. § 548(b). As Mr. Shuman concedes, he is not “an
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`expert with respect to bankruptcy law,” or “on fraudulent conveyance law,” and has
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`never “practiced as a bankruptcy lawyer.”
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`5.
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`Third, Mr. Shuman’s tax law opinions are irrelevant. Whether Paragon’s
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`$935 million in PIFCO Transfers constitute “consideration” “from the perspective of a
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`tax planner” has no bearing on whether they are actionable transfers under the
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`Bankruptcy Code. The same is true of Mr. Shuman’s opinion that Noble’s tax step plan
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`was “typical” of tax step plans. The Trust is suing Noble for violating the bankruptcy
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`laws, not the tax laws.
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`6.
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`Fourth, Mr. Shuman’s opinion on Noble’s “intent” concerning the PIFCO
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`Transfers is equally inadmissible. “Intent is not a proper subject for expert testimony.”
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`Robinson v. Hartzell Propeller Inc., 326 F. Supp. 2d 631, 648 (E.D. Pa. 2004). Even if it
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`were, Mr. Shuman concedes that the documents governing these transactions are
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`unambiguous. Noble has never contended otherwise. Noble’s intent must be derived
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`solely from those contracts—not from extrinsic evidence, much less inadmissible expert
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`opinion testimony that contradicts these unambiguous transactional documents.
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`STATEMENT OF FACTS
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`7.
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`This case involves Noble’s spin-off of the majority of its standard
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`specification business to Paragon. The Trust alleges that “Noble’s lies and deception
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`enabled it to consummate the spin-off and abscond with more than $1.7 billion in cash
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`proceeds and $935 million in intercompany receivables and a note that Noble owed to
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`Paragon, leaving in its wake an insolvent firm saddled with aging assets and no realistic
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`prospect of success.” D.I. 265 ¶ 13. This $935 million originates from cash that the
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`standard specification business generated leading up the August 2014 spin-off. (App.
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`2
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`A22, Shuman Rpt. ¶ 20.) Noble established Paragon International Finance Company
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`(“PIFCO”) as an entity to pool this standard specification business cash. PIFCO then lent
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`its cash to Noble, as reflected in intercompany receivables and a note from Noble to
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`PIFCO. (Id.)
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`
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`
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` (App. A7, Tax Step Plan at
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`Noble_00556053.) Ultimately, PIFCO—like the rest of Paragon—became a debtor in
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`this case. Pet., In re Paragon Internat’l Finance Co., No. 16-10391 (Bankr. D. Del.),
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`D.I. 1.
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`8.
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`Seemingly to blunt these undisputed facts, Defendants retained Timothy
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`Shuman, a tax lawyer with McDermott Will & Emery LLP. (App. A15, Shuman Rpt.
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`¶ 2.) Mr. Shuman concedes that he is not “an expert with respect to bankruptcy law,” and
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`has never “practiced as a bankruptcy lawyer.” (App. A62, Shuman Dep. 36:14-19.)
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`Indeed, this is the only case he has worked on where “after a spin-off, the spun company
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`filed for bankruptcy.” (App. A63, Shuman Dep. at 39:20-24.)
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`9.
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`Defendants asked Mr. Shuman “to opine on certain tax-related issues in
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`connection with the spin-off.” (App. A15, Shuman Rpt. ¶ 1.) He has two main opinions:
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`(1) “Noble’s Tax Step Plan for the Spin Was Typical of Such Plans at the Time”; and (2)
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`the $935 million “PIFCO Transfers Do Not Constitute Additional ‘Consideration’ Paid
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`by Paragon to Noble in Connection with the Spin.” (App. A26-27, Shuman Rpt. at 13,
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`14.) According to Mr. Shuman, both of his opinions are “from [his] tax expertise lens.”
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`(App. A60, Shuman Dep. at 15:3-4.) After the Trust served its rebuttal reports on
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`February 20, 2020, Noble served what amounted to a surrebutal report from Mr. Shuman
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`3
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`on April 1, 2020, responding to Professor Jack Williams’ rebuttal report. (See App. A42,
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`Shuman Rebuttal Rpt.)1 Mr. Shuman’s rebuttal report repeated and elaborated on his
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`opinions that, “from the perspective of a tax planner,” (i) Noble’s step plan was typical;
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`and (ii) “the PIFCO Transfers [were not] part of the ‘consideration’ Paragon paid Noble
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`in connection with the Spin,” and instead were “a step intended to facilitate the separation
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`of the Standard Spec business before the creation of Paragon as a standalone company.”
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`(App. A61, Shuman Dep. at 17:1-5; App. A30, Shuman Rpt. ¶ 34; App. A44-55, Shuman
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`Rebuttal Rpt. ¶¶ 4-26.)
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`10. Mr. Shuman’s conclusions turn heavily on his opinion that Noble never
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`“intended” that the PIFCO Transfers be treated as consideration for the spin-off. (See,
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`e.g., App. A28-29, Shuman Rpt. ¶ 30 (“Noble never transferred, or intended to transfer,
`
`these receivables to Paragon ….” (emphasis added)); App. A18, id. ¶ 9 (“the cash Noble
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`caused to be deposited with PIFCO, which then used the cash received to purchase a
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`portion of the Standard Spec business[] was never intended to provide PIFCO with assets
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`other than the Standard Spec business assets” (emphasis added)); App. A78, Shuman
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`Dep. at 136:4-8 (“Noble never intended that PIFCO would retain the PIFCO note and
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`receivables after the spin-off.” (emphasis added)); accord App. A23-24, 28-29, Shuman
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`Rpt. ¶¶ 22, 30; App. A53-54, Shuman Rebuttal Rpt. ¶ 23, App. A70-71, 79-80, 88
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`Shuman Dep. at 89:21-90:3, 140:13-18, 161:2-10, 184:9-11.) Despite opining on Noble’s
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`intent based on other emails and conversations he had with Noble employees, Mr.
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`Shuman agrees that the step plan and relevant transactional documents are unambiguous.
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`(App. A74-77, Shuman Dep. at 132:21-135:10; see also id. at 135:12-5 (“Q: Do you
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`1 The Scheduling Order permitted Defendants to serve Rebuttal Reports on April 1, 2020 that were
`“limited in scope to the opinions in Plaintiffs’ Expert Reports due March 2, 2020.” D.I. 292 at 2. The
`Trust did not disclose any expert reports on March 2.
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`4
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`believe that the share purchase agreements and the notes that we looked at this morning
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`accurately set forth Noble’s intent? A. Yes, for those particular steps.”).)
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`11.
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`Significantly, Mr. Shuman concedes that these transactional documents
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`unambiguously transferred PIFCO’s interest in its property (the note and receivables) in
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`exchange for a portion of the standard specification business. (App. A66-69, 72, 73,
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`Shuman Dep. at 78:16-79:4, 83:15-23, 86:6-13, 110:7-14, 112:5-10.) Mr. Shuman also
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`agrees that a step plan can comply with the tax laws, yet violate other laws, such as the
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`bankruptcy laws. (App. A64-65, Shuman Dep. at 40:7-41:6; App. A82, id. at 169:17-24
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`(“tax efficiency does not answer the question of compliance with other laws”); see also
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`App. A81,
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`id. at 168:18-25 (“The world doesn’t revolve
`
`just around
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`tax,
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`unfortunately.”).) He has no “opinion on whether fraudulent conveyance laws apply in
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`this particular circumstance or not,” which is “not within the scope of [his] reports. (App.
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`A84-85, Shuman Dep. at 174:16-20, 175:16-21.)
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`ARGUMENT
`
`I.
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`LEGAL STANDARD
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`12.
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`“Rule 702 of the Federal Rules of Evidence, made applicable to this
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`contested matter by Rule 9017 of the Federal Rules of Bankruptcy Procedure, governs
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`testimony by expert witnesses.” In re Nellson Nutraceutical, Inc., 356 B.R. 364, 372
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`(Bankr. D. Del. 2006). “Rule 702 embodies three distinct substantive restrictions on the
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`admission of expert testimony: qualifications, reliability, and fit.” Elcock v. Kmart Corp.,
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`233 F.3d 734, 741 (3d Cir. 2000). “[T]he proponents of the expert testimony[] bear the
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`burden of demonstrating by a preponderance of the evidence that the testimony is
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`admissible.” Nellson, 356 B.R. at 372.
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`5
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`13.
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`“Before an expert witness may offer an opinion pursuant to Rule 702, he
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`must first be qualified by virtue of specialized expertise.” Elcock, 233 F.3d at 741. Of
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`course, “[a]n expert qualified in one subject matter does not thereby become an expert for
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`all purposes.” Malletier v. Dooney & Bourke, Inc., 525 F. Supp. 2d 558, 642 (S.D.N.Y.
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`2007). Rule 702 requires that experts “stay within the reasonable confines of [their]
`
`subject area, and cannot render expert opinion on an entirely different field or discipline.”
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`Rabozzi v. Bombardier, Inc., 2007 WL 951569, at *5 (N.D.N.Y. Mar. 27, 2007).
`
`14.
`
`Rule 702 also “requires that the expert’s testimony must assist the trier of
`
`fact.” In re Paoli R.R. Yard PCB Litig., 35 F.3d 717, 742-43 (3rd Cir. 1994). This
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`“standard is higher than bare relevance.” Id. at 745. Certain types of opinions do not
`
`assist a trier of fact. For example, the “prohibition on experts testifying as to their own
`
`legal conclusions is ‘so well established that it is often deemed a basic premise or
`
`assumption of evidence law—a kind of axiomatic principle.’” Holman Entrs. v. Fid. &
`
`Guar. Ins. Co., 563 F. Supp. 2d 467, 472 (D.N.J. 2008). Likewise, “it is clear that
`
`experts cannot render opinions on the defendants’ corporate state of mind.” In re Tylenol
`
`(Acetaminophen) Mktg., Sales Practices & Prod. Liab. Litig., 181 F. Supp. 3d 278, 295
`
`(E.D. Pa. 2016). Furthermore, “expert evidence which does not relate to an issue in the
`
`case is not helpful,” and inadmissible. In re TMI Litig., 193 F.3d 613, 670 (3d Cir. 1999).
`
`II. MR.
`CONSTITUTES
`ON WHAT
`OPINION
`SHUMAN’S
`“CONSIDERATION” FOR THE SPIN-OFF IS AN INADMISSIBLE
`LEGAL OPINION
`
`15. Mr. Shuman’s opinion—that PIFCO’s $935 million in intercompany
`
`receivables and a note “were not part of the consideration Paragon paid for the
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`transaction”—is unquestionably legal. (App. A31, Shuman Rpt. ¶ 36.) “An expert
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`witness is prohibited from rendering a legal opinion.” Romero, 52 F. Supp. 3d at 722-23.
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`6
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`“In fact, every circuit has explicitly held that experts may not invade the court’s province
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`by testifying on issues of law.” Holman, 563 F. Supp. 2d at 472. “Expert testimony on
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`issues of law, either giving a legal conclusion or discussing the legal implications of
`
`evidence, is inadmissible.” Burrell v. Adkins, 2007 WL 2771602, at *1-2 (W.D. La. Aug.
`
`17, 2007). Under black letter law, Mr. Shuman’s opinions should be excluded.
`
`16. What constitutes “consideration” is a legal question. See, e.g., Damian v.
`
`Int’l Metals Trading & Invs., Ltd., 2017 WL 2992200, at *4 (S.D. Fla. July 13, 2017)
`
`(“the determination of whether a transfer was exchanged for insufficient consideration is
`
`a legal question”). It typically arises in a contract context, where “[w]hat constitutes
`
`consideration for a contract generally is a question of law.” 17B C.J.S. Contracts § 1026
`
`(2020); see, e.g., Richman v. Brookhaven Servicing Corp., 363 N.Y.S.2d 731, 733 (Dist.
`
`Ct. 1975) (analyzing “whether there was any consideration supporting the contract” as a
`
`“question of law”); Zacharius v. Kensington Publ’g Corp., 984 N.Y.S.2d 635, at *4 (Sup.
`
`Ct. 2014) (“Plaintiff also argues that the agreement is ambiguous as to consideration,
`
`which is a question of law for courts.”); Brownwood Ross Co. v. Maverick Cty., 936
`
`S.W.2d 42, 45 (Tex. App. 1996) (“What constitutes consideration of a contract is a
`
`question of law.”).
`
`17.
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`The legal nature of Mr. Shuman’s opinion does not change simply because
`
`he presents it “from the perspective of a tax lawyer and tax planner.” (App. A64,
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`Shuman Dep. at 40:19-22)); see also Smith v. Allstate Ins. Co., 912 F. Supp. 2d 242, 253-
`
`54 (W.D. Pa. 2012) (“[O]pinions are based upon [expert’s] interpretation of insurance
`
`law and the application of this law to the instant case and therefore are impermissible
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`legal conclusions.”). Indeed, Mr. Shuman admits that he is “offering opinion[s] based on
`
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`7
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`[his] understanding of the tax laws and then normal tax planning practices, and in
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`particular, whether, in view of how [he] read[s] the third-party debt documents, the
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`PIFCO transfers were accomplished by those documents and were consideration of the
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`spin-off as alleged by the trust.” (App. A87, Shuman Dep. at 180:8-15 (emphasis
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`added).) But it this Court’s function, not Mr. Shuman’s, to apply the relevant law to the
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`facts.
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`18.
`
`Simply put, “[t]he Court will decide the ultimate legal issues in this case
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`and any legal opinion [Defendants] would like to provide the Court should be done
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`through proper briefing, not expert opinion.” Perez v. First Bankers Tr. Servs., Inc., 2015
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`WL 5722843, at *4 (D.N.J. Sept. 29, 2015). For this reason alone, Mr. Shuman’s opinion
`
`about what constitutes consideration for the spin-off should be excluded.
`
`III. MR. SHUMAN IS NOT QUALIFIED TO OPINE WHETHER THE $935
`MILLION TRANSFERS ARE AVOIDABLE UNDER THE BANKRUPTCY
`CODE
`
`19.
`
`Even if an expert were permitted to testify to legal conclusions, Mr.
`
`Shuman has no expertise on the only relevant legal question his report could speak to:
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`whether the PIFCO Transfers qualify as “transfer[s] of an interest in property of the
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`debtor” under 11 U.S.C. § 548.
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` (See App. A7, A8, Tax Step Plan at Noble_00556053,
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`Noble_00556095; App. A1, Share Purchase Agreement at BAKERBOTTS_0078416;
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`App. A12-13, Beaulieu Dep. at 26:7-12, 26:18-23, 27:5-23.) Mr. Shuman concedes each
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`of these facts. (See, e.g., App. A21-26, Shuman Rpt. ¶¶ 19, 20, 22, 25.)
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`20. Whether, in light of the undisputed facts, the PIFCO Transfers constitute
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`transfers of the debtor’s interest in property, and hence are actionable, is a legal question.
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`It is also one that Mr. Shuman has no expertise to help the Court answer. By his own
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`admission, Mr. Shuman is “not an expert on fraudulent conveyance law.” (App. A85,
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`Shuman Dep. at 175:12-15.) He has never “practiced as a bankruptcy lawyer” and does
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`not consider himself “to be an expert with respect to bankruptcy law.” (App. A62,
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`Shuman Dep. 36:14-19.) He does not “know how the bankruptcy code defines the
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`property of the estate.” (App. A86, Shuman Dep. at 179:8-9.) None of the spin-offs he
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`has worked on involved a company that later filed for bankruptcy. (App. A63, Shuman
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`Dep. at 39:20-24.) Indeed, Mr. Shuman disclaims that he is “offering an opinion on
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`bankruptcy laws or fraudulent transfer laws.” (App. A87, Shuman Dep. at 180:7-8.)
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`21.
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`Because Mr. Shuman admits he has no expertise to help answer the only
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`relevant legal question that his report raises, his testimony should be excluded. See In re
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`Diet Drugs, 2001 WL 454586, at *16 (E.D. Pa. Feb. 1, 2001) (where an expert “admits
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`that he has no experience or expertise” in an area, “he lacks the requisite experience and
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`expertise to render [such] opinions”); Ferris v. Pa. Fed’n Bhd. of Maint. of Way Emps.,
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`153 F. Supp. 2d 736, 743 (E.D. Pa. 2001) (“If the expert testimony falls outside a
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`witness’s expertise, the court should exclude it.”).
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`IV. MR. SHUMAN’S TAX LAW OPINIONS ARE ALSO IRRELEVANT
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`22.
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`Apart from violating the bedrock rule against experts offering legal
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`opinions, Mr. Shuman’s tax law opinions should be excluded because they would still not
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`help the Court to “understand the evidence or to determine a fact in issue.” Fed. R. Evid.
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`702(a). Simply put, this is not a tax dispute. Whether Noble’s tax step plan is “typical”
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`of tax step plans has no bearing on whether there was a fraudulent transfer. The Trust is
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`Case 17-51882-CSS Doc 319-3 Filed 06/04/20 Page 16 of 20
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`suing Noble for violating the bankruptcy laws, not the tax laws. Mr. Shuman has nothing
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`to say on this issue. As he acknowledges, the “tax efficiency” of the step plan “does not
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`answer the question of compliance with other laws.” (App. A82, Shuman Dep. at
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`169:17-24.) Mr. Shuman simply “can’t comment on whether” a “separation can be
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`structured in a typical tax-efficient way from a tax perspective and still violate fraudulent
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`transfer laws.” (App. A83, Shuman Dep. at 170:9-15.)
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`23.
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`“Expert testimony which does not relate to any issue in the case is not
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`relevant and, ergo, non-helpful.” Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579,
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`591 (1993). For this reason too, Mr. Shuman’s tax opinions should be excluded. See Atl.
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`Rim Equities, LLC v. Slutzky, Wolfe & Bailey, LLP, 2006 WL 5159598, at *1-3 (N.D. Ga.
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`Nov. 21, 2006) (barring expert from offering “abstract” opinion because “[t]he issues in
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`this case do not turn upon how real estate investors typically act in the abstract—the
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`apparent subject of [expert’s] testimony”); In re Rezulin Prods. Liab. Litig., 309 F. Supp.
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`2d 531, 560 (S.D.N.Y. 2004) (physician offering his “public health viewpoint … would
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`not help the fact-finder to determine a fact at issue in this litigation” involving
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`pharmaceutical product liability claims).
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`V. MR. SHUMAN’S OPINIONS ON NOBLE’S “INTENT” SHOULD BE
`EXCLUDED
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`24. Mr. Shuman’s testimony that Noble never intended the PIFCO Transfers
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`to constitute consideration for the spin-off should likewise be excluded. (Supra at 4.)
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`His report and deposition are rife with his speculation about what Noble “intended,”
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`“recognized,” or “realized” with respect to the PIFCO Transfers. (App. A17-18, 23-24,
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`28-31, Shuman Rpt. ¶¶ 8, 9, 21, 22, 30, 34, 35; App. A54, Shuman Rebuttal Rpt. ¶ 24.)
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`During his deposition, he repeatedly defended his ultimate conclusions by describing
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`them as consistent with Noble’s intent. (See App. A70-71, 79-80, 88, Shuman Dep. at
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`89:21-90:3, 140:13-18, 161:2-10, 184:9-11; see also App. A53-54, Shuman Rebuttal Rpt.
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`¶ 23 (arguing that the Trust’s expert is wrong because he is “upsetting the parties’ intent
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`as reflected in the deal documents”).)
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`25.
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`“Expert witnesses are not ‘permitted to testify ... regarding [a party’s]
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`intent, motive, or state of mind, or evidence by which such state of mind may be
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`inferred.” AstraZeneca LP v. Tap Pharm. Prods., Inc., 444 F. Supp. 2d 278, 293 (D. Del.
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`2006). That is because opinions “on the intent, motives or states of mind of corporations,
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`regulatory agencies and others have no basis in any relevant body of knowledge or
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`expertise,” and thus, “[i]nferences about the intent or motive of parties or others lie
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`outside the bounds of expert testimony.” Rezulin, 309 F. Supp. 2d at 546-47; see also
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`Oxford Gene Tech. Ltd. v. Mergen Ltd., 345 F. Supp. 2d 431, 443 n.9 (D. Del. 2004)
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`(expert cannot opine as to what defendant “recogniz[ed]”). Mr. Shuman’s tax law
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`experience does not grant him special permission to speculate about Noble’s intent.
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`Sassafras Enters., Inc. v. Roshco, Inc., 915 F. Supp. 1, 8 (N.D. Ill. 1996) (“[Expert’s]
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`business experience might perhaps qualify him as an ‘expert’ under Fed. R. Evid. 702 on
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`some matters … but there is surely nothing to suggest his qualifications as a
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`mindreader.”).
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`26.
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`Not only does Mr. Shuman’s approach rule afoul of Rule 702, it is
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`contrary to how these transaction documents must be interpreted under the law. For a
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`contract that “is clear and unambiguous on its face, the intent of the parties must be
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`gleaned from within the four corners of the instrument, and not from extrinsic evidence.”
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`Rainbow v. Swisher, 527 N.E.2d 258, 259 (NY 1988). Neither Mr. Shuman nor any party
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`to this case has ever claimed that any aspect of the relevant transaction documents is
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`ambiguous. (App. A74-77, Shuman Dep. at 132:21-135:10.) In fact, Mr. Shuman agrees
`
`that “the share purchase agreements and the [intercompany] notes” “accurately set forth
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`Noble’s intent.” (App. A77, Shuman Dep. at 135:12-15.) No extrinsic evidence, or
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`expert speculation about intent, is admissible to interpret—much less to contradict—their
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`plain meaning. Mr. Shuman’s opinions about Noble’s intent should be excluded. And
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`because Mr. Shuman’s “impermissible state of mind opinions permeate his entire expert
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`report,” his testimony should be excluded in its entirety on this ground as well.
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`Eghnayem v. Boston Scientific Corp., 57 F. Supp. 3d 658, 699 n.9 (S.D. W.Va. 2014).
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`CONCLUSION
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`For the foregoing reasons, the Trust respectfully requests that the Court exclude
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`Mr. Shuman’s opinions and testimony in their entirety.
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`Case 17-51882-CSS Doc 319-3 Filed 06/04/20 Page 19 of 20
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`PACHULSKI STANG ZIEHL & JONES LLP
`
`/s/ Timothy P. Cairns
`Laura Davis Jones (DE Bar No. 2436)
`Timothy P. Cairns (DE Bar No. 4228)
`919 N. Market Street, 17th Floor
`P.O. Box 8705
`Wilmington, DE 19899-8705 (Courier 19801)
`Telephone: (302) 652-4100
`Facsimile: (302) 652-4400
`ljones@pszjlaw.com
`tcairns@pszjlaw.com
`
` -
`
` and -
`
`
`KIRKLAND & ELLIS LLP
`David J. Zott, P.C. (admitted pro hac vice)
`Jeffrey J. Zeiger, P.C. (admitted pro hac vice)
`William E. Arnault (admitted pro hac vice)
`Anne I. Salomon (admitted pro hac vice)
`Jason A. Feld (admitted pro hac vice)
`300 N. LaSalle Street
`Chicago, IL 60654
`Telephone: (312) 862-2000
`Facsimile: (312) 862-2200
`dzott@kirkland.com
`jzeiger@kirkland.com
`warnault@kirkland.com
`anne.salomon@kirkland.com
`jason.feld@kirkland.com
`
`Co-Counsel for Plaintiff
`
`
`
`
`
`Dated: June 1, 2020
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`
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`Case 17-51882-CSS Doc 319-3 Filed 06/04/20 Page 20 of 20
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`CERTIFICATE OF SERVICE
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`I, Timothy P. Cairns, hereby certify that on June 1, 2020, I caused the foregoing
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`Memorandum of Law in Support of the Paragon Litigation Trust’s Motion to Exclude the
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`Testimony of Timothy S. Shuman to be served on the following parties by electronic
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`mail.
`
`Anthony W. Clark
`Stephen J. Della Penna
`Skadden, Arps, Slate, Meagher & Flom LLP
`One Rodney Square
`P.O. Box 636
`Wilmington, Delaware 19899-0636
`Telephone: (302) 651-3000
`Facsimile: (302) 651-3001
`
`George A. Zimmerman
`Lauren E. Aguiar
`Four Times Square
`New York, New York 10036-6522
`Telephone: (212) 735-3000
`Facsim