DENISE COTE, District Judge
This Opinion addresses the motion by the Underwriter Defendants to phase the trial and the six motions in limine filed by the Lead Plaintiff in this consolidated class action arising out of the collapse of WorldCom, Inc. ("WorldCom"). The remaining motions in limine will be addressed in separate Opinions and orders. Familiarity with the prior Opinions of this Court issued in this litigation is assumed.
See, e.g., In re WorldCom, Inc. Sec. Litig., ___ F. Supp. 2d ___, No. 02 Civ. 3288(DLC), 2005 WL 89395 (S.D.N.Y. Jan. 18, 2005) (Andersen's motion for summary judgment); In re WorldCom, Inc. Sec. Litig., 346 F. Supp. 2d 628 (S.D.N.Y. 2004) (Underwriter Defendants' motion for summary judgment); In re WorldCom, Inc. Sec. Litig., 294 F. Supp. 2d 392 (S.D.N.Y. 2003) (deciding a number of defendants' motions to dismiss); In re WorldCom, Inc. Sec. Litig., 219 F.R.D. 267 (2003) (class certification).
A. Underwriter Defendants' motion to phase the trial
The Underwriter Defendants propose segmenting the trial into three phases, which they label disclosure, causation, and individualized liability and damages. The disclosure phase would concern WorldCom's accounting and business strategies, its disclosures, and the reasonableness of the Underwriter Defendants' due diligence investigations. The causation phase would concern the effect of any material misstatements and omissions that the jury concluded were made during the first phase, essentially issues of loss causation. The third phase would address individualized issues of reliance, standing, and damages for absent class members.
Claimants under Section 12(a) (2) of the Securities Act of 1933 only have standing if they purchased securities in a public offering rather than in the secondary market. See Gustafson v. Alloyd Co., 513 U.S. 561, 576-77 (1995).
Reliance is not an element of the Securities Act of 1933 ("Securities Act") claims against the Underwriter Defendants. See Gustafson, Inc., 513 U.S. at 582; WorldCom, 219 F.R.D. at 297. It is an element of the Securities Exchange Act of 1934 ("Exchange Act") claims against other defendants. There is a presumption of reliance, however, that will govern the Exchange Act claims. See Basic, Inc. v. Levinson, 485 U.S. 224, 247 (1988) ("Because most publicly available information is reflected in market price, an investor's reliance on any public material misrepresentations . . . may be presumed for purposes of a Rule 10b-5 action."). The Underwriter Defendants also allude to factual disputes about the degree to which information about WorldCom was broadly disseminated and thus available to the investing public. This is an issue common to the class and will be litigated in the plenary trial. Finally, the Underwriter Defendants assert that there is an affirmative defense of knowledge of misstatements and omissions available to them on Securities Act claims. See 15 U.S.C. § 77k(a). Again, to the extent this raises issues common to the class, it will be litigated in the plenary trial.
The Underwriter Defendants contend that each of these three phases can be separated easily because they will largely involve different witnesses and proof. They urge that a decision at the end of the first phase will be efficient since the jury may find that a substantial number of the alleged misstatements and omission are not actionable, thereby affecting both causation and damage issues. They recite the many authorities supporting bifurcation of reliance and damage issues for individual class members.
The Lead Plaintiff argues that there should be one plenary trial including all class-wide issues of liability and damages. It contends that the individual issues relating to the right of the named plaintiffs to recover can be addressed in a subsequent proceeding.
The issue of bifurcation is left to the sound discretion of the trial court. See Fed.R.Civ.P. 42(b); Amato v. City of Saratoga Springs, 170 F.3d 311, 316 (2d Cir. 1999). The Underwriter Defendants' motion is granted in part. Individualized issues for all class members, including individualized reliance, knowledge, standing, and damage issues, will be bifurcated. The plenary trial will include the trial of all class-wide issues, including reliance, knowledge, and damages. The Underwriter Defendants have not shown that the efficiencies that they posit would actually exist from the separation of the "disclosure" and "causation" evidence, or from the separation of a determination of class-wide damages from the evidence presented on disclosure and causation. To the contrary, the evidence on each of these issues is inextricably intertwined. Much of the evidence presented in the so-called disclosure phase would have to be repeated in the causation phase, unnecessarily prolonging and complicating the trial proceedings. The same is true for the phase at which damages will be determined. The proposed trifurcation will also present special challenges to insure that there is no violation of the Seventh Amendment. See Blyden v. Mancusi, 186 F.3d 252, 268 (2d Cir. 1999) ("In all cases . . . the Seventh Amendment right to trial by jury must be observed. At bottom, issues may be divided and tried separately, but a given issue may not be tried by different, successive juries.").
It is well settled that individual reliance and damage issues may be tried separately from class-wide issues. See Jaroslawicz v. Engelhard Corp., 724 F. Supp. 294, 302 (D.N.J. 1989).
A companion Opinion addresses a motion in limine that seeks to preclude a jury determination of aggregate damages.
B. Lead Plaintiff's Motions in Limine
1. Motion to exclude evidence relating to the individualized issues of the class representatives from the plenary trial
The Lead Plaintiff seeks to reserve for a separate trial or proceeding the individualized knowledge, reliance, and damages issues associated not just with the absent class members but also with the named plaintiffs. Accordingly, it moves to exclude from the plenary trial all evidence or testimony relating to the individual investment decisions of the class representatives.
The Underwriter Defendants do not oppose the bifurcation of the issues of individualized damages and reliance, but argue that it remains appropriate for them to call witnesses associated with the named plaintiffs in order to establish the materiality of alleged omissions, the sufficiency of disclosures in the 2000 and 2001 Registration Statements, and the adequacy of the Underwriter Defendants' due diligence efforts. The Underwriter Defendants seek to show that the financial advisers of the class representatives were aware of most of the operational and financial challenges facing WorldCom and that certain alleged omissions were not significant to them. With respect to their due diligence defense, they seek to show that the professionals associated with the named plaintiffs also faced due diligence obligations, were aware of the same information as the Underwriter Defendants, and did not suspect that a fraud was being committed.
Arthur Andersen LLP ("Andersen") does not oppose the bifurcation of the issues of individualized damages and reliance, but argues that the trading history of the Lead Plaintiff is important evidence in connection with the issue of loss causation. It asserts that the Lead Plaintiff's purchase of WorldCom securities after January 28, 2002 undercuts its expert's testimony that the first disclosure of material misrepresentations by WorldCom occurred on January 28, 2002.
Bert C. Roberts does not oppose the bifurcation of issues of individualized reliance and damages, but seeks to offer evidence regarding the named plaintiffs and their investment advisors to show that professionals in the investment community were reviewing the same information that he was regarding WorldCom. He does not intend to argue that they were not diligent in making their investment decisions. Roberts wishes to show the level of expertise that would be required to uncover any accounting irregularities and to argue that even those who conducted an extensive analysis were unable to detect accounting irregularities.
A final pretrial conference is scheduled for February 18, 2005. The parties have been advised that the Court will hear argument of this motion at that time.
2. Motion to preclude purported lay opinion testimony
The Lead Plaintiff moves to preclude the Underwriter Defendants and Andersen from offering testimony by lay witnesses regarding matters that are properly the subject of expert testimony. In addition to the experts that they are calling to testify at trial, the Underwriter Defendants have indicated that they intend to introduce testimony from approximately sixty current or former employees of the Underwriter Defendants to opine on topics such as the operation of the capital markets, due diligence related to bond offerings, corporate disclosure practices, financial analysis, industry standards, customs and practices, and the role of research and rating agencies and counsel in an underwriting. In addition to its expert, Andersen intends to offer expert testimony through its former employees on the requirements of GAAS and Andersen's compliance with GAAS. The defendants represent that each of the witnesses from whom they will draw this expert testimony were also participants in the events that will be explored at trial.
The Underwriter Defendants gave notice in July 2004 of retained experts and "non-retained witnesses who may offer expert testimony." Andersen represents that it also gave notice that some of its former employees would be giving expert testimony as well as explaining their conduct and good faith in performing their audits through a description of their understanding of accounting principles and practice in the industry. Neither the Underwriter Defendants nor Andersen provided expert reports for the "non-retained" witnesses. They now rely on Rule 26(a)(2), which requires expert reports to be provided for "a witness who is retained or specially employed to provide expert testimony in the case or whose duties as an employee of the party regularly involve giving expert testimony." Fed.R.Civ.P. 26(a)(2). The 1993 amendment notes to the Rule include by way of example the fact that a treating physician can be called to testify without any requirement for a written report. Fed.R.Civ.P. 26(a)(2), advisory committee's note (1993 amendments); see also Bank of China v. NBM LLC, 359 F.3d 171, 182 n. 13 (2d Cir. 2004).
Although the title of the notice indicated that it was identifying experts, the body of the notice declined to identify the non-retained witnesses as experts. It explicitly warned that the Underwriter Defendants were not conceding "that any or all of such witnesses' testimony is expert in nature." The Lead Plaintiff has made no showing that a failure of the defendants to identify with less ambiguity the witnesses through whom they would be offering expert testimony has prejudiced the Lead Plaintiff.
The Lead Plaintiff's motion is denied without prejudice to its right to conduct during the trial a voir dire of any witness it believes is unqualified to give expert testimony. The defendants have shown that the expert testimony from each of the identified witnesses relates to the very topics on which the same witness will testify as a participant in the events at issue in this trial. The defendants appear to have fulfilled the requirement of Rule 26 that notice of an intention to call these witnesses as expert witnesses be provided. Assuming that adequate notice was given, the defendants may elicit expert testimony from these witnesses without having provided expert reports from them.
3. Motion to preclude purported testimony of Randall Chafetz
The Lead Plaintiff moves to preclude Randall Chafetz of the Bank of Tokyo-Mitsubishi ("BOTM") from testifying as to the due diligence that he performed on behalf of Tokyo-Mitsubishi International plc (n/k/a Mitsubishi Securities International plc) ("TMI"). TMI was an underwriter of the 2001 Offering and is a defendant. In response to a Rule 30(b)(6) notice for a witness to testify regarding the due diligence performed by TMI or on TMI's behalf, TMI identified its employee Dennis Kelleher, who is based in London and flew to New York to testify on June 25, 2004. Kelleher testified in substance that TMI relied on the lead managers of the 2001 Offering to perform due diligence and that neither he nor Chafetz, who was in charge of due diligence for TMI, recalled any specific work performed on the 2001 Offering or any document related to the due diligence work performed on behalf of TMI. TMI has identified both Chafetz and Kelleher as trial witnesses, and had previously during the discovery period identified both witnesses as individuals having knowledge of TMI's due diligence efforts.
TMI may call either Chafetz or Kelleher as its trial witness. Should it call Chafetz instead of Kelleher, it will be required to make a proffer to Lead Plaintiff prior to such testimony to insure that Chafetz' testimony is not inconsistent with that given by TMI's Rule 30(b)(6) witness. In the event that the proffer proves unsatisfactory to the Lead Plaintiff, it may renew this motion.
Should the Underwriter Defendants seek to call both witnesses, they will have to make a proffer as to why such testimony is not cumulative.
4. Motion to preclude defendants from introducing evidence of any witness' invocation of the Fifth Amendment
The Lead Plaintiff moves to preclude the defendants from offering evidence that a witness has refused to answer questions during a deposition in reliance on his or her Fifth Amendment privilege. Several former employees of WorldCom have already invoked their Fifth Amendment privilege in response to all substantive questions asked by the parties; more may do so before the trial begins. The Underwriter Defendants and Andersen have designated lengthy passages from these depositions culminating with questions such as, "Isn't it true that Salomon Smith Barney conducted substantial due diligence in connection with a May 2000 and May 2001 bond offering?" The Lead Plaintiff has counter-designated its own lengthy selections where the questions assume the availability of internal WorldCom documents to the Underwriter Defendants, among other things.
The criminal trial of the former CEO of WorldCom, Bernard J. Ebbers, is going on now. Because the Government did not wish certain key witnesses to be deposed prior to their testimony in the criminal case, these witnesses were "embargoed" from civil discovery in the WorldComSecurities Litigation. The parties were permitted, however, to reserve some of the time allotted to them for depositions to take the depositions of the embargoed witnesses after they had finished their testimony in the criminal trial. The Government has already released several of the embargoed witnesses for depositions; it will release more soon.
In Libutti v. United States, 107 F.3d 110 (2d Cir. 1997), the Second Circuit set forth a standard for adverse inference when non-party witnesses invoke the Fifth Amendment in civil litigation. It is well settled that an adverse inference may be drawn against a party to a civil action when the party refuses to testify. Id. at 121. The Fifth Amendment is even less implicated when it is a non-party's silence that is placed before a jury in a civil proceeding. Id.
Endorsing a case by case analysis for evaluating whether a non-party's invocation of the Fifth Amendment should be admitted in a civil litigation along with the drawing of an adverse inference, the court suggested four non-exclusive factors to guide a trial court in its determination. Id. at 123. They are the nature of the relevant relationships, which the court identified as the "most significant circumstance"; the degree of control by the party over the non-party witness; the compatibility of the interests of the party and non-party witness in the outcome of the litigation; and the role of the non-party witness in the litigation. Id. The ultimate test for admissibility is, however, "whether the adverse inference is trustworthy under all of the circumstances and will advance the search for the truth." Id. at 124. Even if the evidence is generally admissible, the court must still determine whether it should be admitted under the standards described in Federal Rule of Evidence 403. Id.
Because of the potential for "lawyer abuse" when the examining attorney effectively testifies for the witness who is invoking the privilege, the court has discretion under Rule 403 to control the way in which the invocation of the privilege reaches the jury. Id. at 122. Judge Winter observed in his dissent in Brink's Inc. v. City of New York, 717 F.2d 700 (2d Cir. 1983), that the practice of posing fact-specific questions designed to suggest that the answer would be yes invites jurors "to give evidentiary weight to questions rather than answers." Id. at 716 (Winter, J., dissenting). "[I]t leaves the examiner free, once having determined that the privilege will be invoked, to pose those questions which are most damaging to the adversary, safe from any contradiction by the witness no matter what the actual facts." Id.
A ruling on this issue is reserved until the eve of trial. At that time it will be possible to judge on a complete record the number of witnesses who have invoked the Fifth Amendment, whether the parties still wish to offer the testimony of witnesses who have invoked the Fifth Amendment, and to know what other evidence is available to all parties. It is unlikely, however, that the substantive questions asked of these witnesses will be received in evidence.
5. Motion to preclude evidence of KPMG's alleged conflict
The Lead Plaintiff moves to preclude defendants from introducing evidence of KPMG's alleged conflict in performing the audit of the March 2004 restatement of WorldCom's financials for the years 2000 and 2001 (the "Restatement").
The facts relating to the alleged conflict are as follows. Starting in around 1998, KPMG devised tax minimization programs for WorldCom. In one program ("Program"), KPMG devised a transfer pricing scheme in which WorldCom licensed certain intangible assets to its subsidiaries in exchange for royalty payments. The subsidiaries treated the royalty payments as a business expense and claimed deductions from ordinary income for state tax purposes. WorldCom was taxed on the royalty income, but at the favorable prevailing rate in various states. The tax savings are alleged to have been in the hundreds of millions of dollars.
On May 15, 2002, KPMG replaced Andersen as WorldCom's auditor. Shortly thereafter, the accounting fraud at WorldCom was uncovered and KPMG was additionally retained to assist with the Restatement. WorldCom filed for bankruptcy in July 2002. On August 6, the Bankruptcy Court approved the employment of Dick Thornburgh as Examiner ("Examiner"). States filed claims against WorldCom for unpaid taxes, interest, and penalties in excess of $1 billion.
On January 26, 2004, the Examiner filed his third and final report ("Report"). The Report identified the potential causes of action that the Examiner, after reviewing the applicable facts and law, believed would most likely survive motions to dismiss or for summary judgment. In re WorldCom, Inc., 311 B.R. 151, 158 (S.D.N.Y. June 30, 2004). The Examiner concluded that the Program was not well conceived or implemented and was "`vulnerable to challenge by various states.'" Id. at 159. The Report examined KPMG's defenses and observed that a state's deficiency finding might "`be founded . . . in whole or in part on the Company's implementation failures. . . . In such an instance, the Company's claims against KPMG could be reduced or even eliminated." Id. The Examiner stated that WorldCom had the "discretion and authority" to determine whether to bring a cause of action against KPMG, and that it would express no view as to whether any claim should be pursued against KPMG.Id.
In a press release of January 26, 2004, WorldCom stated that KPMG's involvement in the Program had been carefully reviewed by the company's current Audit Committee of the Board and its inside and outside counsel, and that it had no plans to pursue claims against KPMG. Id. On March 5, 2004, WorldCom advised KPMG in writing that it did not intend to pursue any claim against KPMG relating to the Program. One week later, on March 12, KPMG issued its audit opinion certifying the WorldCom restated financials for 2000 and 2001 and certifying the 2002 financial statement.
WorldCom changed its name to MCI upon emerging from bankruptcy.
On March 17, the States filed their disqualification motion. On June 30, the Bankruptcy Court rejected the motions by the States to disqualify KPMG from serving as an accountant, auditor, and tax advisor to WorldCom. The Bankruptcy Court found that the States brought the motion as part of a "litigation strategy" and that the motion was "dilatory."Id. at 168-69. It nevertheless reached the merits of the motion.
In finding that it was speculative whether KPMG and WorldCom held adverse interests, the Bankruptcy Court listed the chain of uncertain events that would have to transpire before they would have an adverse interest. A court would have to find that the royalty deductions were inappropriate, that the royalty deductions were invalid based upon the definition of "intangible assets" provided in the Internal Revenue Code, and that WorldCom was liable for additional tax, which WorldCom contends is unlikely even if the royalty deductions were disallowed. Id. at 169. Even then, KPMG's liability to WorldCom would be limited to $10 million in cases of ordinary negligence, and might be less depending on the allocation of the liability limitation among the various tasks KPMG performed for WorldCom. Id. at 169 n. 13.
After rejecting the States' contention that KPMG and WorldCom had adverse interests, the Bankruptcy Court rejected their argument that KPMG was not disinterested because it served as both auditor and tax advisor to WorldCom. It noted that under the securities laws, an accounting firm is expressly permitted to act simultaneously as both auditor and tax advisor. Id. at 169. Finally, the Bankruptcy Court held that there was no appearance of impropriety that warranted KPMG's disqualification. In making this last ruling, it recited the "numerous structural safeguards employed in this case designed to insure the integrity of the process."Id. at 170. The district court judge presiding over the SEC lawsuit filed against WorldCom had appointed Richard C. Breeden, a former chairman of the SEC, as a Corporate Monitor responsible for, inter alia, working with WorldCom regarding corporate governance to ensure the highest level of corporate integrity. Id. at 155. In addition, the SEC had been actively involved in every aspect of WorldCom's corporate governance and had been aware of the accusations of the States regarding the Program since as early as April 2003. Id. at 170. The issues raised in the Examiner's Report "did not rise to a level of concern for the SEC to warrant calling the matter to the attention of the District Court" overseeing the SEC's suit against WorldCom or to the Bankruptcy Court.Id.
Andersen, joined by the Underwriter Defendants, argues that KPMG was motivated to allow WorldCom to reduce profits in the 2000 restated financial statements in a way that reduced the tax exposure of WorldCom and thereby reduced the legal exposure of KPMG. Secondly, Andersen argues that KPMG was not acting as a genuinely independent auditor because it labored under a fear of liability to WorldCom for its advice in connection with the Program.
Andersen chiefly seeks to attack MCI's decision to take a $47 billion impairment charge for the 2000 restated financial statements. Andersen contends that MCI applied facts learned after 2000 and used a discounted cash flow analysis in making this decision, and that KPMG questioned the MCI analysis but ultimately disregarded these problems and certified the 2000 restated financials.
The judge presiding over WorldCom's bankruptcy rejected the application by various States that KPMG be disqualified from serving as WorldCom's auditor. He found that there was no conflict from serving as both a tax advisor and an auditor, in part because Section 10A of the Securities Act, as amended by Section 210(a) of the Sarbanes-Oxley Act of 2002, see 15 U.S.C. § 78j-1(g), expressly allows an accounting firm to do so. See WorldCom, 311 B.R. at 169-70.
The Lead Plaintiff argues that it was WorldCom that issued the Restatement and filed it with the SEC, and that WorldCom chose not to press any claims against KPMG relating to the Program. It argues that the attempt to impeach KPMG's independence and the quality of its Restatement work is the use of extrinsic evidence on a collateral issue.
Evidence tending to show a witness's bias or motive to fabricate testimony or evidence presented at trial is nearly always relevant. See United States v. Abel, 469 U.S. 45, 52 (1985). Moreover, "bias of a witness is not a collateral issue." United States v. James, 609 F.2d 36, 46 (2d Cir. 1979) (citation omitted); see also Abel, 469 U.S. at 52 (noting that under the common law, a showing of bias by extrinsic evidence was always permitted). Under Rule 403, Fed.R.Evid., however, even evidence that tends to show bias may be excluded if the risk of unfair prejudice, confusion of issues, or undue delay substantially outweighs its probative value. See James, 609 F.2d at 46 n. 11.
The parties will be given an opportunity to address this motion at the final pretrial conference. At that time, Andersen should be prepared to describe precisely what evidence it intends to introduce on this issue and to identify what connection the Restatement witnesses had to the Program.
6. Motion to preclude indictments
The Lead Plaintiff moves to preclude the defendants from introducing the indictments and other criminal charging instruments filed against Ebbers, Scott Sullivan, David Myers, Buford Yates, Troy Normand, and Betty Vinson. The parties agree that the plea allocution of each defendant who has pleaded guilty is admissible.
The Underwriter Defendants seek a basis for offering the indictments with several imaginative arguments. They assert that the offer is for the "narrow purpose of clarifying and giving context to" the plea allocutions and as evidence of the state of mind of these individuals in engaging in the crimes alleged. They seek to circumvent the rule against hearsay by arguing that the doctrine of completeness permits the jury to have access to the indictments as well as the plea allocutions, or alternatively that the indictments will not be offered for their truth, but only to give context to the allocutions. They also rely on three exceptions to the hearsay rule. They assert first that the indictments are admissible under Federal Rule of Evidence 803(3) as evidence of the state of mind of those who pleaded guilty. "As the Indictments contain detailed allegations concerning not only the falsehoods, but also the scienter of the parties who made them, the Indictments will provide the jury with information concerning the motivations and plan underlying their conduct." Second, they contend that they are admissible under Rule 803(22) to the extent that are necessary to prove a fact underlying the criminal judgments. Finally, they rely on the residual hearsay exception in Rule 807. Andersen joins in the Underwriter Defendants' arguments.
The indictments are not admissible evidence. They are unnecessary to place the pleas in context, or under the doctrine of completeness, see Fed.R.Evid. 106, since they are not statements of the defendants that are necessary to complete the statements made by them during the plea allocutions. Nor is it possible to justify their admission by urging that they are not hearsay. They are hearsay, since the only purpose is to offer the documents for the truth of the statements contained in them. For example, the Underwriter Defendants wish to use the indictment against Ebbers "to show that Ebbers may have been complicit in the wrongs allegedly committed by WorldCom's senior executives."
Nor have the Underwriter Defendants shown that there is any basis for admitting the indictments under any of the exceptions to the hearsay rule. They do not reflect the state of mind of the defendants who pleaded guilty. Rule 803(3) creates an exception to the hearsay rule for "[a] statement of the declarant's then existing state of mind, emotion, sensation, or physical condition." Fed.R.Evid. 803(3) (emphasis supplied). The indictments are charging instruments that reflect, if anyone's state of mind, that of the Grand Jury and prosecutor based on the evidence presented to the Grand Jury.
Moreover, the state of mind exception of Rule 803(3) also requires that the statement be contemporaneous to the event sought to be proved,see United States v. Cardascia, 951 F.2d 474, 488 (2d Cir. 1991), another criterion that the indictments fail to meet.
The Rule 803(22) exception does not apply here either. That exception addresses judgments of conviction, not indictments or charging instruments.
Finally, the residual hearsay rule is of no assistance to the defendants. Federal Rule of Evidence 807 requires that "the statement is more probative on the point for which it is offered than any other evidence which the proponent can procure through reasonable efforts" and that "the general purposes of [the Federal Rules of Evidence] and the interests of justice will best be served by the admission of the statement into evidence." Fed.R.Evid. 807(b)-(c). The indictments are far less probative than the admissible evidence that is available to the parties in this lawsuit, and the general purposes of the Rules of Evidence and the interests of justice would in fact be undermined, instead of served, by admitting the documents.
It appears that the defendants seek to offer the indictments to put the Government's imprimatur on their theory of the fraud: when it began and that its purpose included the deception of WorldCom's auditors. These are matters concerning which the parties have a wealth of direct, admissible evidence to present to the jury. The Government cannot rely on an indictment to prove its case at trial, and the parties here cannot rely on the Government's indictment to prove theirs.
The case law cited by the Underwriter Defendants is inapposite. Indictments are presented to juries in criminal cases not as evidence, but to allow the jury to determine whether the Government has presented sufficient evidence to prove the charges against the defendants. InLitton Systems, Inc. v. American Telephone Telegraph Co., 700 F.2d 785 (2d Cir. 1983), there was no discussion of the admission of a charging instrument into evidence. Id. at 817. The trial court considered allowing "bribery evidence" to be presented to the jury but ultimately excluded it on Rule 403 grounds. In a brief discussion, the Second Circuit affirmed the district court's decision. The case contains no statement weighing in favor of the admissibility of indictments in civil cases.
Conclusion
The Underwriter Defendants' motion to phase the trial is granted in part. The Lead Plaintiff's motion to preclude purported lay opinion testimony is denied; its motion to preclude the purported testimony of Randall Chafetz is also denied, subject to a proffer prior to Chafetz testifying. The Lead Plaintiff's motion to preclude the introduction of criminal indictments is granted.
Rulings on the Lead Plaintiff's motions to exclude evidence relating to the individualized issues of the class representatives from the plenary trial and to preclude evidence concerning an alleged conflict regarding KPMG's audit of the WorldCom Restatement will be deferred until after oral argument. A ruling on its motion to preclude evidence relating to witnesses' invocation of the Fifth Amendment is reserved until trial.
SO ORDERED.