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U.S. Commodity Futures Trading Commission v. Gramalegui

United States District Court, D. Colorado

February 7, 2017



          Gordon P. Gallagher, United States Magistrate Judge

         This matter comes before the Court on Defendant's motion (ECF #114)[1] (which was referred to this Magistrate Judge (ECF #115)), [2] the CFTC's response (ECF # 126), and Defendant's reply (ECF # 130). The Court has reviewed each of the aforementioned documents and any attachments. The Court has also considered the entire case file, the applicable law, and is sufficiently advised in the premises. Oral argument was not requested and is not necessary to resolve this discrete issue. I incorporate by reference my ruling entitled “Order regarding the CFTC's motion to exclude the expert report and testimony of David R. Aronson” (ECF #163). For the following reasons, I DENY the motion or find it MOOT as set forth below.

         In purported rebuttal to Defendant's expert David Aronson, the CFTC submitted a report from Jack Schwager to which Defendant has objected. I will address the relevant objections in turn. Before reaching those objections, I refer back to the aforementioned Order in ECF #163. In that Order, I excluded certain proposed testimony from Mr. Aronson. In particular, I excluded the testimony which would have come from the answer to the 1st and 3rd questions asked of Mr. Aronson. I allowed the answer to question 2(a) in that:

Mr. Aronson will be able to opine as to whether Defendant was offering and selling an advisory service or teaching. Mr. Aronson will not be able to proffer for himself the definition of advisory service. Mr. Aronson will be able to give specific examples to discuss how a teacher might use “current” or “real-time examples” as a teaching method.

         I also allowed the answer to question 2(b) in that:

Mr. Aronson may opine that creating a system for trades never entered into could be of educational benefit, thus bolstering the assertion that Defendant was merely teaching.

         As a starting point, the purpose or Mr. Schwager's testimony would be only rebuttal to Mr. Aronson. Therefore any testimony not rebutting the two areas set forth above will be excluded. In terms of parsing out what rebuts 2(a) and (b), I next look to the Schwager report at section VI., 13 (ECF #114, Schwager report, pp. 4-5). Mr. Schwager breaks his opinion down into sections a-e. Based on my Order in ECF # 163, I now find that the opinions in sections (a), (d), and (e) are not relevant as I have excluded the Aronson report which they purport to rebut and that issue is now moot. I make no further findings on these sections other than to exclude from testimony the Schwager opinions in VI., 13 (a), (d) & (e).

         As to (b) and (c), I must look further. As a preliminary matter, Defendant moves to exclude the testimony of Mr. Schwager on the basis that it is not rebuttal testimony and that instead Mr. Schwager should have been designated as an initial expert. I do not find merit to this argument.

         Fed.R.Civ.P. 26(a)(2)(D)(ii) defines rebuttal testimony as that which “is intended solely to contradict or rebut evidence on the same subject matter identified by another party under Rule 26(a)(2)(B).” The same subject matter is not to be narrowly construed or interpreted in an overly restrictive manner. See, TC Systems, Inc. v. Town of Colonie, New York, 213 F.Supp.2d 171, 180 (N.D. NY 2002), see also, Armstrong v. I-Behavior Inc., 2013 WL 2419794 * 3 (D. Colo. 2013) (not reported). The proposed testimony of Mr. Schwager will be viewed from that lens.

         As stated above, I have allowed in the Aronson testimony and opinions related to whether Defendant was acting as a teacher, thus falling into the exception set forth in 7 U.S.C. 1(a)(12), sections (B). I also allowed in testimony related to creating a reward-to-risk system for trades never entered into as evidence of educational intent. In my prior order, I set forth the definition of commodity trading advisor from 7 U.S.C. 1(a)(12), sections (A) & (B). See ECF #163, pp. 5-6. I did not then provide section (C), which states:

(C) Incidental services
Subparagraph (B) shall apply only if the furnishing of such services by persons referred to in subparagraph (B) is solely incidental to the conduct of their business or profession.
Mr. Schwager, in 13(b), states:
Mr. Aronson's contention that Defendant was offering an educational product rather than an advisory service seems to implicitly assume that there are mutually exclusive items - an unwarranted assumption. Mr. Aronson ignores addressing the numerous instances of evidence indicating that the defendant (sic) was also providing actionable trading recommendations and ...

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