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U.S. Commodity Futures Trading Commission v. Gramalegui

United States District Court, D. Colorado

February 7, 2017

U.S. COMMODITY FUTURES TRADING COMMISSION, Plaintiff,
v.
GREGORY L. GRAMALEGUI, Defendant.

          ORDER REGARDING THE CFTC'S MOTION TO EXCLUDE THE EXPERT REPORT AND TESTIMONY OF DAVID R. ARONSON

          Gordon P. Gallagher, United States Magistrate Judge

         This matter comes before the Court on the CFTC's motion (ECF #111)[1] (which was referred to this Magistrate Judge (ECF #115)), [2] Defendant's response (ECF # 123), and the CFTC's reply (ECF # 131). 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. For the following reasons, I GRANT the motion in part and DENY the motion in part as set forth below.

         Defendant wishes to utilize the opinion and testimony of David R. Aronson, CMT. The CFTC moves to exclude the report he submitted as well as his potential testimony. Defendant opposes this request. Mr. Aronson was asked to address three broad questions which will be set forth below in turn (see ECF # 111, opinion of David Aronson, p. 6).

         Rule 702 of the Federal Rules of Evidence, which governs the admissibility of expert witness testimony, states:

A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if:
(a) 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;
(b) the testimony is based on sufficient facts or data;
(c) the testimony is the product of reliable principles and methods; and
(d) the expert has reliably applied the principles and methods to the facts of the case.

Fed.R.Evid. 702. In determining admission under Rule 702, and in appropriately performing the “gatekeeping” role it bears, the Court must also look to: Daubert v. Merrell Dow Phar., 509 U.S. 579 (1993); Gen. Elec. Co. v. Joiner, 522 U.S. 136 (1997) and Kuhmo Tire Co., Ltd. V. Carmichael, 526 U.S. 137 (1999). Keeping in mind that “rejection of expert testimony is the exception rather than the rule” U.S. v. Nacchio, 519 F.3d 1140, 1154 (10th Cir. 2008), I must apply the principles set forth in the trio of Daubert, General Electric., and Kuhmo.

         The CFTC's complaint states that Defendant “offered for sale to clients a trading system and advisory service . . . “ (ECF #1, para. 1). It goes on to define “[a] trading system [as] a methodology for determining when to enter and exit a trade, among other things.” Id. The first question asked of Mr. Aronson bears on this issue:

1. Is there a distinction between a “trading-system” and a trading plan? Were the products offered by Defendant through Eminitradingschool.com a trading system? Was Defendant operating a trading system?

         The CFTC properly opposes Mr. Aronson's proffered testimony on this question for a number of reasons. It is “the court's duty to set forth the law” applicable to the facts presented at trial. Sprecht v. Jensen, 853 F.2d 805, 808 (10th Cir. 1988) (en banc), cert. denied, 109 S.Ct. 792 (1989). Mr. Aronson attempts to define and distinguish the terms trading-system, trading plan, trading methodology, and trading method. (ECF #111, Aronson report pp. 8-11). “[O]ur system reserves to the trial judge the role of adjudicating the law for the benefit of the jury.” Sprecht, supra. at 808-09. Additionally, the terms trading system and advisory service are pulled from sections of the prior agency Order and Offer of Settlement and set forth in the complaint. (ECF # 1, para. 16). To the extent that there may be ambiguity in these terms, “[w]hen an agency order is ambiguous, a court will uphold the agency's interpretation unless it is arbitrary and capricious.” Colorado Interstate Gas Co. v. F.E.R.C., 791 F.2d 803, 810 (10th Cir. 1986) (citation removed). There has been no request nor any finding here that the agency's interpretation is arbitrary and capricious.

         Following the provision of definitions, Mr. Aronson goes on to apply the law to the facts, opining “[i]n summary, in keeping with my analysis above, the products offered by ETS are not a trading system, but, rather, are an educational product that teaches a subjective methodology for evaluating financial markets.” (Aronson report p. 11). This is an improper application of the law to the facts and invades the province of the jury. See U.S. v. Bedford, 536 F.3d 1148, 1158 (10th Cir. 2008) (citation and internal quotation omitted).

         Because it attempts to define the law of the case, because it attempts to override an agency definition not found to be arbitrary and capricious, and because it ultimately attempts to invade the province of the jury, Mr. Aronson will not be permitted to testify to what has been set forth in question one or the answer thereto.

         2. [a] Was Defendant offering and selling an advisory service?

         [b] Can the reward to risk ratios be defined for trades never entered?

         The above question has been broken down by the parties into (a) and (b). I will address the question in that same fashion.

         [a] Was Defendant offering and selling an advisory service?

         Mr. Aronson's answer to 2(a) breaks down into two parts. The first of these is an opinion as to why Aronson believes Defendant was offering training education rather than an advisory service. The larger part of the answer to question 2(a) goes on to provide research, facts and examples of what constitute teaching or training education.

         Mr. Aronson attempts to define “advisory service.” As set forth above, Mr. Aronson does not get to provide for the Court the definition of advisory service as this would be improper. Additionally, Mr. Aronson again, as with question 1, attempts to apply the law to the facts in an improper manner to answer the question as to whether Defendant was operating an advisory service. This will not be allowed.

         With regard to showing what an educator or teacher does, my ...


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