United States District Court, E.D. Pennsylvania
D. WOLSON, JUDGE
dispute arises out of a Convertible Promissory Note (the
“Note”) that the Parties executed on July 7,
2016. In the Note, Defendant G2Link, LLC promised to pay
Plaintiff CU*Answers, Inc. a principal amount of $500, 000,
with interest. By way of an amendment to the Note (the
“Amendment”), the Parties extended the Note's
Maturity Date to July 7, 2018. G2Link has never repaid the
Note. The Note includes a conversion provision that relieves
G2Link of its repayment obligation in the event of a
“Qualified Financing.” G2Link entered into a
series of Simple Agreement for Future Equity agreements
(“SAFEsâ) with investors. At issue in the case is
whether G2Link triggered a Qualified Financing when it
entered into those agreements.
October 9, 2019, each Party filed a motion for summary
judgment. CU*Answers supported its motion with, among other
things, an expert report from Elizabeth Sigety, an attorney
with Fox Rothschild LLP. In her report, Ms. Sigety opines
that “(a) the issuance of a SAFE does not satisfy the
requirements of a Qualified Financing and (b) the right of
the Plaintiff to repaid [sic] under the Note matures on the
Maturity Date and therefore a Qualified Financing must occur
prior to the Maturity Date.” (ECF No. 37-1 at 4.)
December 5, 2019, the Court denied both Parties' motions
for summary judgment. In its decision, the Court concluded
that-as a legal matter-the SAFEs can constitute “Equity
Securities” under the Note, as required to trigger a
Qualified Financing. However, the Court held that there is a
genuine material dispute as to whether G2Link sold SAFEs to
Kenneth Goldberg as an investor or in his capacity as a
G2Link employee, director, or consultant, and therefore,
whether-as a factual matter-a Qualified Financing took place.
On November 25, 2019, G2Link moved to exclude Ms.
Sigety's testimony on the basis that it renders a legal
conclusion rather than assists the trier of fact with
understanding the evidence or determining a fact in dispute.
courts perform a gatekeeping function to ensure that expert
testimony meets the requirements of Federal Rule of Evidence
702. Daubert v. Merrell Dow Pharmaceuticals, Inc.,
509 U.S. 579 (1993). Rule 702 states that expert testimony is
permissible when “the expert's scientific,
technical, or other specialized knowledge will help the trier
of fact to understand the evidence or to determine a fact in
issue.” Fed.R.Evid. 702. While Federal Rule of Evidence
704 allows experts to provide an opinion about the
“ultimate issue” in a case, the Third Circuit has
made clear that Rule 704 “prohibits experts from
opining about the ultimate legal conclusion or about the law
or legal standards.” Patrick v. Moorman, 536
Fed. App'x 255, 258 (3d Cir. 2013). In the absence of
specialized trade usage, this prohibition extends to expert
testimony on the construction of a contract and application
of that construction to the claim. See In re Downey Fin.
Corp., 593 Fed. App'x 123, 126 n.3 (3d Cir. 2015)
(“Contract interpretation is a legal question for which
the court does not require expert opinion.”); In re
Energy Future Holdings Corp., 842 F.3d 247, 253 (3d Cir.
2016) (“Contract interpretation is a legal issue for
the Court to resolve.”).
Sigety's expert report offers inadmissible testimony
regarding her interpretation of the language in the Note, its
defined terms, and the Parties' obligations. In effect,
the report has two parts. The first part analyzes whether a
SAFE constitutes equity under Section 3(b) of the Note. That
question, however, is a question of contract interpretation.
“In the absence of specialized trade usage, expert
testimony regarding proper contract interpretation is
inadmissible, as is expert testimony regarding the legal
significance of the contract language.” U.S., ex
rel. Palmer v. C & D Techs., Inc., No. CIV.A.
12-907, 2015 WL 4470291, at *6 (E.D. Pa. July 22, 2015). Ms.
Sigety does not identify any evidence of specialized trade
usage. Rather, she offers information about whether or not
SAFEs constitute equity, including based on her experience
with other contracts for SAFEs. The Court, however, has
already determined that SAFEs can be “Equity
Securities” under the terms of the Note (ECF No. 40 at
6.), and therefore, Ms. Sigety's interpretation of
Section 3(b) invades the province of the Court. Ms.
Sigety's testimony about notices is also irrelevant
because-as Ms. Sigety acknowledges-the Note did not require
them. (ECF No. 31-1 at 7.) Finally, nowhere in her report
does Ms. Sigety address the factual issue for trial of
whether G2Link sold SAFEs to Kenneth Goldberg as an investor
or in his capacity as a G2Link employee, director, or
consultant, which will resolve the question of whether a
Qualified Financing took place.
second part of Ms. Sigety's report opines that the entire
principal balance was due under the Note because no Qualified
Financing occurred. Ms. Sigety's opinion does nothing
more than interpret the Note. It does not offer specialized
knowledge or evidence of custom and usage. It does include a
passing reference to what is “customary” in the
industry, but she offers no basis for her opinion about
industry custom. To the extent the opinion constitutes an
assertion about industry custom, it is nothing more than her
ipse dixit and therefore inadmissible. See
Heichel v. Marriott Hotel Svcs., Inc., Civ. A. No.
18-1981, 2019 WL 2202759, at *4 (E.D.Pa. May 20, 2019).
foregoing reasons, the Court grants Defendants' Motion to
Exclude Expert Opinions and Testimony of Elizabeth ...