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Capitol Justice LLC v. Wachovia Bank

December 8, 2009


The opinion of the court was delivered by: Royce C. Lamberth Chief Judge


This matter comes before the Court on Wachovia's Motion [82] to Exclude the Expert Report and Testimony of Gregory H. Leisch. Wachovia puts forth two arguments to exclude Leisch's report. First, Wachovia contends that Leisch's expert report should be excluded under the Federal Rules of Civil Procedure because the report is untimely and fails to qualify as a supplemental report. Second, even if the report is admissible under the Federal Rules of Civil Procedure, Wachovia argues that Leisch's report is in admissible under Daubert v. Merrell Dow Pharmaceuticals, 509 U.S. 579 (1993). For the reasons set forth below, the Court rejects Wachovia's arguments. Accordingly, the motion shall be denied.


A. Transaction

This is a breach of contract case brought by the American Association for Justice ("AAJ") against Wachovia Bank, N.A. ("Wachovia"). In June 2007, AAJ entered into a loan commitment agreement ("LCA") with Wachovia in which Wachovia agreed to provide financing for AAJ's purchase of 777 6th Street, N.W., Washington, D.C. The LCA contained a material adverse change ("MAC") clause, which provided that "Lender may, at its option, terminate its agreement to make the Loan... in the event of any material adverse change in the financial, banking or capital market conditions that could impair the sale of the Loan by Lender as contemplated in the Term Sheet." (Pl.'s Ex. 33.)*fn1 Wachovia invoked the MAC clause to terminate the LCA on October 22, 2007 because the "fixed income sector of the capital markets" had undergone "a material and adverse change." (Pl.'s Ex. 36.)

Without the Wachovia loan, AAJ had to find alternative financing to purchase the building, or risk losing its $5 million deposit. After soliciting alternative financing options, AAJ purchased the building through a complex structure with the Multi-Employer Property Trust ("MEPT"). (Pls.' Ex. 74.) In its deal with MEPT, AAJ acquired a minority equity interest in the building, and MEPT acquired the majority equity interest. (Id.) As a result, MEPT gained control of the building's operations, and AAJ had fewer rights in the building than it would have had in its deal with Wachovia. (Id.)

On November 14, 2007, AAJ filed a complaint against Wachovia alleging, inter alia, that Wachovia breached its contract to provide financing. AAJ contends that it has suffered monetary damages as a result of the breach and its subsequent deal with MEPT. In a motion for summary judgment, Wachovia argues that AAJ has not suffered any damages as a result of the alleged breach. Before the Court can rule on that motion, however, it must first decide Wachovia's motion to exclude the expert report and testimony of AAJ's damages expert, Gregory Leisch.

B. Leisch's Damage Report

Gregory Leisch is the CEO of Delta Associates, a commercial real estate consulting company located in the Washington, D.C. metropolitan area. (Pls.' Ex. 79.) He has over 30 years of experience in commercial real estate and has advised investors for the past 28 years on expected future returns from real estate over time through the use of complex econometric models. (Id.) In addition, he is a frequent lecturer on real estate development opportunities and has authored numerous articles on books on real estate. (Id.)

On February 6, 2009, Leisch submitted his initial report, which he amended on March 16, 2009. (Pls.' Ex. 79A.) The initial report, as amended, estimated that AAJ suffered over $60 million in damages. (Mem. at 6.) On March 18, 2009, Wachovia deposed Leisch and challenged his calculation of AAJ's equity loss in the building and AAJ's loss in tribute rights donations. (Opp'n at 10.)

On March 23, 2009, AAJ informed Wachovia that Leisch was revising his calculations and would submit a revised report. (Pls.' Ex. 132.) AAJ would make Leisch available to Wachovia for deposition on the revised report and would extend the date for any rebuttal report to Leisch for a reasonable time after the second deposition. (Id.) Wachovia agreed to AAJ's request, but reserved the right to challenge the timeliness of Leisch's new report. (Mem. at 8.)

On April 13, 2009, Leisch submitted his revised report. AAJ provided Wachovia with a redline comparing Leisch's initial and revised reports and a transmittal letter from Leisch explaining the changes. (Pls.' Ex. 135.) Leisch used the same five-part structure, which computes AAJ's damages with respect to equity value, parking, occupancy costs, tribute rights, and the rate lock fee, in his initial and revised reports. In the revised report, he made changes only to the inputs and calculations within the damage model in order "to produce a more complete and accurate report." (Opp'n at 11.) As a result of these changes, Leisch estimates that AAJ suffered $24.6 million in damages-a nearly $36 million dollar adjustment in Wachovia's favor. (Id.)

On April 30, 2009, Wachovia deposed Leisch on his revised report. (Id. at 12.) Wachovia then submitted the rebuttal report of its expert, James Walsh, on May 22, 2009. (Id.) Walsh's report criticizes Leisch's initial and revised reports.


Wachovia argues that Leisch's expert report should be excluded for two reasons: (a) the revised report is inadmissible under the Federal Rules of Civil Procedure; and (b) the report is inadmissible under Daubert. The Court disagrees and will deny Wachovia's motion.

A. Leisch's Revised Report Is Admissible Under the Federal Rules of Civil Procedure Wachovia contends that Leisch's revised report is an improper supplementation under

Rule 26(e). As a result, Wachovia asserts that the revised report is untimely and should be excluded under Rule 37(c). The Court is not persuaded by these contentions and finds that the revised report is a proper supplementation and is therefore timely. The Court also finds that even if the report is not a proper ...

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