In re Commercial Money Center, Inc. (737 F. Supp. 2d 815, 2010)

ORDER

KATHLEEN McDONALD O’MALLEY, District Judge.

The dispute in these actions centers around the Sureties’ liability on various surety bonds issued in connection with certain transactions between the Banks and Commercial Money Center, Inc. (“CMC”). CMC’s business involved the leasing of equipment and vehicles to numerous lessees in exchange for lease payments. CMC then pooled the leases and sold them to institutional investors. When CMC’s business failed, the Banks ceased receiving lease payments, and now claim millions of dollars in losses from these transactions. The Banks have sued the Sureties, seeking to recover on the bonds associated with the transactions. The Sureties raise CMC’s fraud as a defense to the Banks’ claims and seek to rescind the surety bond transactions based on fraud in the inducement.

These actions were transferred to this Court by order of the Judicial Panel on Multidistrict Litigation (“the MDL Panel”), issued on October 25, 2002. (02-16000, Doc. 1). This Court has ordered that these actions be coordinated for pretrial purposes. (02-16000, Doc. 2).

Discovery now is complete in these actions, and the Court has determined all dispositive motions. Several actions have been remanded to their transferor courts for trial, and those actions remaining pending are in the final stages of pretrial preparation.

During a global status conference conducted before the Court on April 30, 2009, a number of parties represented that they intended to file motions in limine pursuant to Daubert v. Merrell Dow Pharms., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993) and/or Kumho Tire Co. v. Carmichael, 526 U.S. 137, 119 S.Ct. 1167, 143 L.Ed.2d 238 (1999), challenging the qualifications of certain experts proffered in these actions. The Court then ordered that it would resolve all of these motions through a global procedure, including a global Daubert hearing to be conducted before this Court. (Doc. 2222).

On July 16-17, 2009 and September 10, 2009, the Court conducted proceedings relating to numerous Daubert motions filed in these actions. During those proceedings, the Court heard testimony from certain designated experts; in all other instances, the Court heard oral argument only. The Daubert proceedings conducted by this Court encompassed (a) all Daubert motions in all cases venued for trial in the Northern District of Ohio; and (b) all Daubert motions in cases not venued in the Northern District of Ohio, where such motions related to the admissibility of the testimony of an expert who also was designated to testify in a case venued in the Northern District of Ohio.

The following motions in limine pursuant to Daubert were filed in these cases and remain pending before the Court:

(1) Safeco Motion to exclude the testimony of Paul Palmer and Charles Kerner (Case Nos. 02-16010, 02-16014, and 02-16020), and Jerry Hudspeth (Case Nos. 02-16010 and 02-16014) (Doc. 2254);

(2) Royal Motion to exclude the testimony of Paul Palmer, Charles Kerner, and Thomas Davis (Case Nos. 02-16012, 02-16019, and 02-16022) (Doc. 2246);

(3) Safeco Motion to exclude the testimony of Michael P. Larrick (Case No. 02-16014) (Doc. 2245);

(4) Safeco Motion to exclude the testimony of Daniel Cadle (Case No. 02-16020) (Doc. 2249);

(5) Royal Motion to exclude the testimony of Daniel Cadle (Case Nos. 02-16012, 02-16019, and 02-16022) (Doc. 2248);

(6) Safeco Motion to exclude the testimony of Robert Lembke (Case No. 02-16014) (Doc. 2251); and

(7) Royal Motion to exclude the testimony of Rolf Neuschaefer (Case Nos. 02-16012, 02-16019, 02-16022) (Doc. 2252).

The Court addresses each of these pending motions herein. Where multiple parties have moved to exclude the same expert, or where there otherwise is significant overlap among the arguments raised by the parties, the Court addresses multiple Daubert motions together.

For the reasons set forth herein, (1) the Sureties’ motions to exclude the testimony of Paul Palmer and Charles Kerner on Daubert grounds are denied, although the Court establishes certain limits on the testimony of these experts; (2) Safeco’s motion to exclude the testimony of Jerry Hudspeth pursuant to Daubert is denied, although the Court establishes certain limits on the testimony of Mr. Hudspeth; (3) Royal’s motion to exclude the testimony of Thomas Davis pursuant to Daubert is denied; (4) Safeco’s motion to exclude the testimony of Michael Larrick pursuant to Daubert is denied, although the Court establishes certain limits on the testimony of Mr. Larrick; (5) the Sureties’ motions to exclude the testimony of Daniel Cadle pursuant to Daubert are granted; (6) Safeco’s motion to exclude the testimony of Robert Lembke pursuant to Daubert is denied, although the Court establishes certain limits on the testimony of Mr. Lembke; and (7) Royal’s motion to exclude the testimony of Rolf Neuschaefer pursuant to Daubert is denied, although the Court establishes certain limits on the testimony of Mr. Neuschaefer.

I. Standards Applicable to Court’s Determination of Daubert Motions and Motions in Limine

Fed.R.Evid. 702 provides:

If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise, if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case.

Fed.R.Evid. 702. In Daubert v. Merrell Dow Pharms., 509 U.S. 579, 589, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993), the U.S. Supreme Court stated that courts fulfill a “gatekeeping role,” in which “the trial judge must ensure that any and all scientific testimony or evidence admitted is not only relevant, but reliable.... ” The gatekeeping function applies not only to scientific testimony, but to all expert testimony involving technical or other specialized knowledge. See Kumho Tire Co. v. Carmichael, 526 U.S. 137, 147, 119 S.Ct. 1167, 143 L.Ed.2d 238 (1999).

In examining a witness’s expert qualifications, the Court examines “not the qualifications of a witness in the abstract, but whether those qualifications provide a foundation for a witness to answer a specific question.... ” Berry v. City of Detroit, 25 F.3d 1342, 1351 (6th Cir.1994). “[T]he rejection of expert testimony is the exception rather than the rule.... ” Fed. R.Evid. 702, Adv. Comm. Notes (2000). The Court analyzes each of the Daubert motions filed in these actions in light of the above standards.

As an initial note, the Court observes that many of the motions currently pending are grounded not in the qualifications of the experts, or the methodology employed by the experts, but rather seek orders imposing certain limitations on the experts’ proposed testimony. In particular, the Sureties seek in several instances to preclude the Banks’ expert witnesses from offering allegedly improper legal opinions, from engaging in allegedly impermissible contract interpretation, or from offering expert opinions as to “ultimate” facts. In this regard, the majority of these motions are motions in limine rather than true Daubert motions.

As set forth later in this opinion, this Court believes itself uniquely situated to resolve all issues raised in these motions, including issues properly presented via motions in limine, and will do so herein. The Court further observes, however, that the nature of motions in limine is such that many of the issues presented in such a motion are context-specific — -that is, the Court’s determination of the propriety of an objection often may be made only in the framework of a trial. Courts within this jurisdiction have held that rulings on motions in limine frequently should be deferred to the trial stage:

The court has the power to exclude evidence in limine only when evidence is clearly inadmissible on all potential grounds.... Unless evidence meets this high standard, evidentiary rulings should be deferred until trial so that questions of foundation, relevancy and potential prejudice may be resolved in proper context....

Ind. Ins. Co. v. GE, 326 F.Supp.2d 844, 846 (N.D.Ohio 2004) (Katz, J.). “Ultimately, whether a motion in limine is granted or overruled is a matter left to the sound discretion of the trial court....” Corporate Commun. Servs. of Dayton, LLC v. MCI Communs. Servs., 2009 WL 4680507, *2, 2009 U.S. Dist. LEXIS 120113, *5 (S.D.Ohio Dec. 3, 2009) (unpublished disposition).

To the extent, therefore, that the motions presently pending before the Court are motions in limine, the Court intends, in this Opinion, to establish general guidelines for permissible (and impermissible) areas of inquiry for the experts proffered in these actions. The Court cannot anticipate, prior to trial, all objections to the testimony of these proffered experts, nor can the Court properly determine the appropriateness of all such objections outside the trial context. Nonetheless, it is the Court’s expectation that the issuance of this Opinion at this stage will establish general parameters for the testimony of experts to be proffered in these actions and, accordingly, will minimize disputes in this regard at the time of trial.

II. Analysis of Daubert Motions

A. Safeco Motion re: Testimony of Paul Palmer, Charles Kerner [FDIC (receiver for NetBank), Case No. 02-16010, J.P. Morgan Chase (successor to Bank One), Case No. 02-16014, and CadleRock, Case No. 02-16020], and Jerry Hudspeth [FDIC (NetBank), Case No. 02-16010, and J.P. Morgan Chase (successor to Bank One), Case No. 02-16014] (Doc. 2254)

Royal Motion re: Testimony of Paul Palmer, Charles Kerner, and Thomas Davis [CadleRock, Case Nos. 02-16012, 02-16019, and 02-16022] (Doc. 2246)

Multiple sureties have moved to exclude the testimony of certain Bank experts, as set forth below. As there is significant overlap between the motions filed, this Opinion will address these motions together.

Safeco Insurance Company of America (“Safeco”) has moved under Daubert to exclude the testimony of three experts— Paul Palmer, Charles Kerner and Jerry Hudspeth. Paul Palmer and Charles Kerner have been designated by FDIC (as receiver for NetBank, FSB) (“NetBank”), in Case No. 02-16010, by J.P. Morgan Chase Bank, N.A., Successor by Merger to Bank One, N.A. (“Bank One”), in Case No. 02-16014, and by CadleRock Joint Venture, L.P. (“CadleRock”), in Case No. 02-16020. Jerry Hudspeth has been designated by NetBank in Case No. 02-16010 and by Bank One in Case No. 02-16014.

Royal Indemnity Company (“Royal”) has moved under Dauberb to exclude the testimony of Paul Palmer, Charles Kerner and Charles Davis. All three experts have been designated by CadleRock in Case Nos. 02-16012, 02-16019, and 02-16022

This section analyzes these motions on an expert-by-expert basis, below. For the reasons set forth herein, (1) the Sureties’ motion to exclude the testimony of Paul Palmer and Charles Kerner on Daubert grounds is denied, although the Court establishes certain limits on the testimony of these experts; (2) Safeco’s motion to exclude the testimony of Jerry Hudspeth pursuant to Dauberb is denied, although the Court establishes certain limits on the testimony of Mr. Hudspeth; and (3) Royal’s motion to exclude the testimony of Thomas Davis pursuant to Dauberb is denied.

1. Palmer/Kerner

Paul Palmer and Charles Kerner (“Palmer” and “Kerner,” respectively) are partners in Capital Credit Holdings, Inc., and have been jointly designated as expert witnesses in Case Nos. 02-16010, 02-16012, 02-16014, 02-16019, 02-16020 and 02-16022, to testify as to issues including (1) interpretation of bond language and “market expectations”; (2) the parties’ intent to make the Banks original obligees under the surety bonds; (3) the nature, role, function and purpose of insurance/surety products as credit enhancements in structured finance transactions; (4) due diligence and underwriting standards; (5) servicing of lease portfolios; and (6) conduct of the Banks relating to the CMC lease bond program. Palmer and Kerner jointly created an expert report relating to each of the sureties involved here.

a. Summary of Proffered Testimony

As set forth in the expert reports of Palmer and Kerner and described in their testimony during the Dauberb proceedings before this Court, Palmer and Kerner propose to testify as to numerous matters relating to the CMC lease bond program. The Court sets forth a summary of these experts’ proffered testimony herein.

First, Palmer and Kerner opine that, although the surety bonds named CMC as obligee, CMC was actually a co-principal with the lessees, and the intended obligees were the Banks. Palmer and Kerner base their opinion on several features of these transactions, including (1) the waiver of defenses provision in the lease bonds, which included “absolute and unconditional” language; (2) the language of the lease bonds defining “default”; (3) the Sureties’ guarantee, in the lease bonds, of CMC’s performance as subservicer; (4) the Sureties’ securing of indemnity agreements from CMC and its principals; and (5) the Sureties’ initiation of legal action against CMC to enforce the indemnity agreements. Based on these features, Palmer and Kerner opine that, absent assignment to an obligee, the obligations created by the bonds would have been circular, and the bonds would have had no economic purpose.

Palmer and Kerner opine that, beginning in approximately 1999, various Sureties sought to enter the lucrative securitization market, and as a result, developed surety bond language that they believed would be acceptable to investors in the capital markets. In essence, these experts seek to testify that the Sureties customized a standard surety bond into a “financial guarantee product” to support CMC’s needs in the lease bond program.

Palmer and Kerner state that, based upon their knowledge of the relevant market expectations and industry practices, the bonds were drafted so as to waive any defenses-a common feature required by investors purchasing financial guarantee bonds. Palmer and Kerner also opine that, although the lease bonds here were styled as standard surety bonds with CMC as the obligee, the documents were structured in such a fashion primarily to avoid a violation of New York’s “Appleton Rule,” and not to convey true obligee status to CMC.

By issuing a “modified” surety bond designed to compete with financial guarantee products, Palmer and Kerner opine, the Sureties became subject to principles underlying securitizations and structured financing, including allocation of risk, and also became subject to market expectations as to the respective roles and risk assumption of the various parties to the transactions. In the context of a financial guarantee structure, Palmer and Kerner opine, it was reasonable for the Banks to rely on the credit of the issuing Surety and not to perform their own underwriting of the CMC lease program.

In reaching the conclusion that all parties intended a transaction in which the Banks would be obligees, Palmer and Kerner also opine, effectively, that it would make no difference how many intervening parties or “assignees” were in the obligee chain between CMC and the ultimate investor. According to Palmer and Kerner, once the financial guarantee structure was created, the protection provided by the Sureties could be conveyed to or through any number of parties, with no difference in the investors’ resulting rights.

As financial guarantors, Palmer and Kerner opine, the Sureties were responsible under the bonds and SSAs for properly underwriting the leases. According to Palmer and Kerner, the Sureties failed to meet the applicable standards since, among other things, the Sureties (1) failed to perform sufficient investigation to permit them to understand CMC’s business model; and (2) failed to conduct a proper analysis of historical defaults and reserve appropriately for future defaults. With respect to the Guardian I, Guardian II and Guardian III pools, Palmer and Kerner also opine that the Sureties undertook to guarantee pools that were insufficiently diversified, since 100 percent of the dollar value of those pools was concentrated in leases with Shandoro Ventures, Inc. and its affiliates.

Moreover, according to Palmer and Kerner, despite the servicing obligations undertaken in the SSAs, the Sureties failed to appropriately service the lease pools, and failed to investigate whether CMC had appropriate policies and procedures in place for servicing.

b. Parties’ Arguments

1. Sureties

The Sureties argue that the testimony of Palmer and Kerner does not meet the reliability and relevance standards set forth in Fed.R.Evid. 702 and Daubert, because these experts seek to testify as to erroneous legal conclusions (including conclusions as to contract interpretation), personal beliefs as to the weight of the evidence, and impermissible opinions on ultimate issues, such as breach of duty.

The Sureties argue, in essence, that various conclusions rendered by Palmer and Kerner — particularly the conclusion as to the “obligee” status of the Banks — embrace legal, rather than factual, questions, and are not the proper subject of expert testimony. The Sureties additionally argue that the testimony of Palmer and Kerner invades the province of the trier of fact by rendering conclusions as to ultimate issues of fact, including the following determinations: (1) the Sureties failed to exercise adequate due diligence and conduct appropriate monitoring; and (2) the Banks’ reliance on the bonds, and on the underwriting performed by the Sureties, was reasonable. The Sureties maintain that these matters are appropriately determined by the fact finder, upon consideration of relevant witness testimony, and do not require expert assistance.

First, the Sureties argue, the opinion expressed by Palmer and Kerner as to the Banks’ obligee status is inappropriate, since this ultimate issue clearly is subject to determination by the fact finder. In fact, the Sureties note, the Court conducted a bench trial relating to this specific issue. In any event, Safeco asserts, the Banks’ status as “obligees” is irrelevant, since the sureties concede that the Banks are obligees by assignment. The only relevant issues, according to Safeco, center on the extent of the Banks’ obligee status and how that status was achieved — i.e., whether the Banks are “original obligees,” or merely “obligees by assignment.” Moreover, the Sureties argue, testimony as to “market expectations” rather than the parties’ actual intent is irrelevant to a determination of obligee status.

Second, since Palmer and Kerner are experts in securitization rather than surety law, the Sureties contend that these experts have no basis to make a determination regarding the Banks’ obligee status under the surety bonds, or to opine regarding the Sureties’ obligations in connection with those surety bonds. In short, they argue that there is no “fit” between these experts’ areas of expertise and the transactions at issue in these cases. Similarly, Royal argues that Palmer and Kerner should not be permitted to testify as to customs and practices in the securitization industry, since the transactions at issue here (unlike the Citibank/Chase transactions also involved in this litigation) were not asset-backed securitizations. Rather, the transactions in these cases involved simply a purchase of income streams by the Guardian Entities from CMC, and the securing of loans from banks to finance the purchases. Royal relies on Fed.R.Evid. 702, which requires that testimony be “based upon sufficient facts or data....” Accordingly, Royal contends, without some corroborating evidence that these transactions were securitizations, any expert testimony to that effect should be precluded.

Royal also argues that Palmer and Kerner should be precluded from testifying as to Royal’s allegedly inadequate due diligence and monitoring of leases, since California law does not require a surety to prove that its reliance upon a misrepresentation by the obligee was justified, and any non-disclosure of material facts by the obligee discharges the surety as a matter of law. See Sumitomo Bank of California v. Iwasaki, 70 Cal.2d 81, 85, 73 Cal.Rptr. 564, 447 P.2d 956 (1968). Royal contends that, since it relied (reasonably or not) on misrepresentations by its obligee, testimony as to what Royal could have learned through an adequate underwriting process is simply irrelevant.

With respect to the opinions of Palmer and Kerner as to the Sureties’ alleged breach of underwriting and servicing duties, the Sureties argue that such testimony as to a legal conclusion is impermissible under Sixth Circuit law. See McGowan v. Cooper Industries, Inc., 863 F.2d 1266, 1272-73 (6th Cir.1988) (expert testimony permissible as to scope of duties imposed by industry standards, but impermissible as to defendant’s breach of those duties). Moreover, with respect to CadleRoek’s cases against Royal, the Court has granted summary judgment to Royal on any claims arising under the SSAs. (Doc. 2214). Thus, Royal asserts, any testimony relating to Royal’s servicing obligations under the SSAs must be excluded from the CadleRock cases on that basis. Finally, with respect to the testimony of Palmer and Kerner as to the “reasonableness” of the Banks’ reliance, the Sureties argue that this testimony also goes to ultimate factual issues, invades the province of the jury, and is inappropriate.

2. Banks

In opposition to the Sureties’ motions, the Banks assert that both Palmer and Kerner have decades of experience in securitized asset sales involving financial guarantees, including surety bonds. Additionally, Palmer has experience underwriting surety bonds, overseeing the drafting of surety bonds, and evaluating whether claims should be paid under surety bonds. The Banks argue that, in determining the relevance of proffered expert testimony, the Court is not required to adopt the Sureties’ characterization of the transaction, and the Banks are entitled to present evidence that the transaction was of a different nature than that suggested by the Sureties.

The Banks reject any suggestion that experience working for a multiline surety is required to develop a proper understanding of these transactions. The Banks assert that these experts are experienced in lease pool financing transactions and the various forms of associated financial guarantees. According to the Banks, Palmer and Kerner are amply qualified, and their expert opinions easily meet the reliability standards of Daubert. In any event, the Banks assert, the reliability tests should be flexibly applied where experts testify based upon knowledge, skill and experience in a non-scientific field. See Kumho Tire Co. v. Carmichael, 526 U.S. 137, 150, 119 S.Ct. 1167, 143 L.Ed.2d 238 (1999).

The Banks argue that the Sureties’ challenges to the testimony of Palmer and Kerner do not arise under Daubert, and instead are more in the nature of motions in limine. The Banks contend that the opinions of these experts are both relevant and admissible, and that they will assist the jury in evaluating issues such as (1) the parties’ intent with respect to the Banks’ obligee status; (2) the due diligence and underwriting standards applicable to asset-backed securitizations; and (3) the application of such standards to these cases — including due diligence that should have been undertaken with respect to CMC, its practices, and its principals.

First, with respect to the opinions of Palmer and Kerner on the issue of obligee status, the Banks argue that these experts’ opinions are properly based on the structure of the transactions, including the terms of the documents and the existence of the indemnity agreements. The Banks further maintain that the testimony will assist a lay jury in understanding the parties’ intent in these complex transactions. The Banks note that, in determining the parties’ motions for judgment on the pleadings, the Court declined to rule as a matter of law as to the Banks’ obligee status, absent further evidence on the issue of the parties’ intent. Accordingly, the Banks contend, it is appropriate for experts to testify as to the custom and practice in an industry, as well as market expectations, insofar as such custom, practice, and expectations may weigh into the parties’ understandings of the transactions.

The Banks argue, additionally, that testimony as to the Banks’ original obligee status does not constitute an impermissible legal conclusion, since “obligee” is not a term of art and has an equivalent meaning within the vernacular in the financial guarantee industry. Moreover, the Banks assert, expert conclusions as to the Banks’ obligee status are not improper merely because they go to an “ultimate” issue in the case. See Fed.R.Evid. 704(a) (“testimony in the form of an opinion or inference otherwise admissible is not objectionable because it embraces an ultimate issue to be decided by the trier of fact....”); First Tenn. Bank Nat’l Ass’n v. Barreto, 268 F.3d 319, 331-332 (6th Cir.2001); see also Century Indem. Co. v. Aero-Motive Co., 254 F.Supp.2d 670, 677 (W.D.Mich.2003) (“a district court may admit opinion testimony if the expert’s specialized knowledge is helpful to the jury to understand the evidence or determine a fact in issue, even if the opinion embraces an ultimate issue to be decided by the jury ....”) (internal quotation omitted).

With respect to the opinions of Palmer and Kerner as to the Sureties’ breach of industry standards for underwriting and servicing, the Banks argue that these opinions are admissible as well. The Banks contend that testimony relating to the Sureties’ breach of these standards is relevant to the Banks’ contractual claims, as well as to many of the Sureties’ defenses, including fraud in the inducement. Moreover, with respect to NetBank, the claims for bad faith and breach of fiduciary duty remain pending against Safeco, and Net-Bank asserts that testimony relating to servicing standards is relevant to those claims. In this regard, the Banks again argue that expert opinions embracing ultimate issues are not per se inadmissible. See Fed.R.Evid. 704(a).

The Banks challenge the Sureties’ interpretation of the Sumitomo Bank case, and argue that the Sumitomo court specifically declined to impose an absolute duty of disclosure on the creditor of a surety bond. See Sumitomo Bank, 70 Cal.2d at 87, 73 Cal.Rptr. 564, 447 P.2d 956. The Banks continue to assert that Safeco’s reliance upon alleged misrepresentations by CMC was unreasonable, as the facts allegedly misrepresented fell within the scope of Safeco’s underwriting and servicing responsibilities.

The Banks also argue that the McGowan case is inapposite, since it was decided pre-Daubert, and since the proposed expert was actually a lay witness. Moreover, the McGowan witness would have testified as to defendant’s “negligence,” which was a purely legal conclusion and within the province of the jury. The Banks cite numerous cases in which courts have admitted opinions as to industry standards and practices. See, e.g., Shepherd v. UnumProvident Corp., 381 F.Supp.2d 608, 611 (E.D.Ky.2005); ID Sec. Sys. Can., Inc. v. Checkpoint Sys., 198 F.Supp.2d 598, 620-21 (E.D.Pa.2002). The Banks argue that the testimony relating to the Sureties’ breach of servicing duties is more akin to the testimony in these cases than to the testimony found impermissible in McGowan.

The Banks contend that the Sureties’ motions are based upon the alleged absence of disputed facts relating to the circumstances surrounding the commencement of the CMC program, and the Sureties’ participation in that program. According to the Banks, the Sureties’ position assumes that the Court can determine as a matter of law — without consideration of any expert testimony — that the transaction documents are unambiguous. Contrary to Safeco’s position, the Banks argue that the opinions of Palmer and Kerner are relevant in determining (1) whether any ambiguities exist in the transaction documents; (2) the proper resolution of any ambiguities found in the transaction documents; and (3) the circumstances and intent surrounding the development of the CMC program, c. Analysis

As noted in the Sureties’ briefing, and during discussions on the record during the Daubert proceedings, the Sureties do not raise any significant arguments relating to the qualifications of Palmer and Kerner to testify as to customs and practices in securitizations. Rather, the Sureties challenge the testimony of these experts on the grounds that: (1) testimony regarding the parties’ expectations and obligations in securitized transactions is not relevant in these cases involving surety bonds; (2) it is never appropriate for experts to express legal opinions; and (3) the proffered opinions invade the fact-finding province of the trier of fact.

Each of the Sureties’ objections to the proffered testimony, therefore, fails to raise grounds for excluding the testimony in its entirety pursuant to Daubert. Rather, as the Sureties concede, the Sureties’ motions are more akin to motions in limine, in which the Sureties seek an order prohibiting some or all of their testimony on grounds that it is either irrelevant or otherwise inadmissible.

While the motions at issue are in fact akin to motions in limine, as the Court noted on the record during the Daubert proceedings, this Court has extensive familiarity with the issues involved in these cases and is uniquely situated to resolve the issues raised in these motions, including issues properly characterized as motions in limine. The Court thus considers, in this Opinion, all of the issues raised and now made ripe by the parties.

Initially, the Court finds that the bulk of the proffered testimony of these experts relates to matters that have been addressed by this Court in certain of these cases, and thus are no longer at issue in those cases. As previously noted in this Opinion, in July 2009, the Court conducted bench trial proceedings in nine cases, and subsequently issued a Bench Trial Opinion (Doc. 2459). In the Bench Trial Opinion, the Court made the following findings: (1) in all transactions considered by the Court in the Bench Trial Opinion, CMC was the original obligee, and the Banks were assignees of the rights of CMC; (2) the bonds issued by the Sureties were not “financial guarantee” instruments but were simply surety bonds; and (3) the Sureties’ interpretation of the Sumitomo case is impermissibly broad, and the Banks are not precluded from arguing unjustifiable reliance by the Sureties on information or representations provided by CMC.

With respect to the cases involved in the bench trial proceedings, testimony contrary to the Court’s findings as to any of the above issues is no longer material. Accordingly, as to Case Nos. 02CV 16012, 02CV 16019, 02CV 16020, and 02CV 16022, the following rulings apply:

(1) Palmer and Kerner are precluded from testifying that these transactions were “financial guarantees,” “structured finance” transactions, or “securitizations.”

(2) Palmer and Kerner are precluded from testifying that the parties intended to create or effect any of the above transactional forms.

(3) Palmer and Kerner are precluded from testifying that the language of the bonds or any other transaction documents, or other structural elements of these transactions, are consistent with or indicative of any of the above transactional forms. To the extent the Banks can lay a foundation for these experts’ knowledge of surety bond transactions, they may testify that aspects of these transactions were unusual in the surety context (if that is so) or would tend to create unusual expectations in the parties.

(4) Palmer and Kerner are precluded from testifying as to the customs and practices or “market expectations” associated with any of the above transactional forms, but, as noted above, may express opinions regarding any unusual aspects of these surety transactions.

(5) Palmer and Kerner are precluded from testifying that any entity other than CMC was the original obligee in these transactions.

(6) Palmer and Kerner are precluded from testifying as to the underwriting standards applicable to a financial guarantor; however, to the extent that the Banks can lay a foundation as to these experts’ knowledge of underwriting standards applicable to surety bond transactions, the testimony of these experts may be permitted on this limited issue.

(7) Palmer and Kerner are precluded from testifying as to the appropriateness of the Banks’ reliance on the underwriting conducted by the Sureties, to the extent that opinion assumes a transactional form that differs from the one the Court found in the Bench Trial Opinion.

(8) Palmer and Kerner are precluded from testifying as to the appropriate servicing standards applicable to a financial guarantor of a lease pool transaction; however, to the extent that the Banks can lay a foundation as to these experts’ knowledge of servicing standards applicable to surety bond transactions, the testimony of these experts may be permitted on this limited issue.

(9) While these experts may be permitted to testify, to the extent delineated above, as to certain standards applicable to the Sureties, the Court will not permit these experts, in any event, to testify as to ultimate issues of fact — i.e., breach of the applicable standards. In many instances, testimony as to breach of duty would encompass legal conclusions, and this Court has already stated on the record that it will not permit expert witnesses to express legal conclusions. See Transcript of Bench Trial Proceedings, at 341, 437; Transcript of Daubert Proceedings, at 203. Even where testimony as to breach of duty would not necessarily involve a legal conclusion, the Court finds that such testimony would invade the province of the trier of fact and accordingly, will not be permitted.

As to those cases in which no bench trial proceedings occurred before this Court (including cases 02-16010 and 02-16014), the Court has issued no findings as to the issues set forth above, and the parties to those cases are not bound by the Court’s determinations in the Bench Trial Opinion. The analysis set forth below applies, accordingly, only to those eases not involved in the bench trial proceedings previously conducted before this Court.

As noted above, upon review of the Palmer and Kerner report, it appears that the opinions of these experts have general relevance and utility to the questions at issue in these cases. The Court finds generally that these two experts are adequately qualified within their respective disciplines, and have knowledge and expertise sufficiently relevant to these transactions to provide testimony that would be helpful to the trier of fact.

First, in those cases where the Court has not made findings as to the identity of the initial obligee in these transactions (including eases 02-16010 and 02-16014), the Court finds that the Banks are entitled to proffer the testimony of experts Palmer and Kerner to assist the finder of fact in determining that threshold issue. The testimony of these experts with respect to this issue, however, will be limited to (1) the structural elements of the CMC lease bond transactions; and (2) each expert’s opinion as to the significance and purpose of each of those elements in the overall transactional structure. Thus, to the extent that the Banks can lay sufficient foundation, and that the opinions sought to be elicited are relevant, Palmer and Kerner will be permitted to testify that (1) certain transactions contain elements consistent with a “securitization” structure; and (2) certain customs, practices, and expectations of investors prevail in the securitization market.

As noted previously in this Opinion, this Court will not permit expert witnesses to express legal conclusions, or opine as to ultimate issues of fact. See Transcript of Bench Trial Proceedings, at 341, 437; Transcript of Daubert Proceedings, at 203. Accordingly, Palmer and Kerner are precluded from testifying as to (1) the identity of the original obligee; (2) the legal “meaning” of certain contractual provisions; or (3) the “intent” of the parties in structuring a transaction in a particular manner.

As discussed at some length in the Bench Trial Opinion, moreover, the Court rejects the narrow interpretation of the Sumitomo case advanced by the Sureties. The Court will adhere to its reading of Sumitomo in future proceedings in all cases, and thus will not preclude the Banks from arguing unjustifiable reliance by the Sureties on information or representations provided by CMC. As such, to the extent that the Banks can lay an appropriate foundation, Palmer and Kerner also may be permitted to testify as to the underwriting and due diligence standards applicable to the Sureties in the context of these transactions. Again, however, these experts will be precluded from expressing legal opinions or opining as to ultimate facts, including the “adequacy” of the Sureties’ due diligence or the “reasonableness” of the Banks’ reliance. In short, while these experts may testify to the content of industry standards with respect to underwriting, they will not be permitted to testify as to breach of those standards.

Finally, with respect to issues of servicing, the Court again declines to preclude the testimony of these experts (upon appropriate foundation) as relates to the general industry standards applicable to these Sureties for servicing and monitoring of the lease pools. Again, however, while these experts may testify as to the content of industry standards relating to servicing, they will be precluded from testifying as to ultimate facts, including breach of the industry standards relating to servicing.

For the reasons set forth herein, the Sureties’ motions to exclude the expert opinions of Palmer and Kerner in their entirety pursuant to Daubert are denied. As set forth herein, however, the Court establishes certain restrictions and limitations on the testimony of these experts, which will be applicable to any future proceedings in these cases.

2. Hudspeth

Jerry Hudspeth (“Hudspeth”) was retained by NetBank and Bank One in Case Nos. 02-16010 and 02-16014, to offer opinions as to the adequacy of Safeco’s servicing of the leases. Safeco has challenged the admissibility of Hudspeth’s testimony on a variety of grounds. For the reasons set forth herein, Safeco’s motion to exclude the testimony of Jerry Hudspeth pursuant to Daubert is denied, although the Court establishes certain limits on the testimony of Mr. Hudspeth.

a. Summary of Expert Testimony

As set forth in Mr. Hudspeth’s expert report and described in his testimony during the Daubert proceedings, Mr. Hudspeth is an independent consultant in the area of financial services, as well as management of portfolios backed by asset-backed securities (including lease and loan portfolios). Mr. Hudspeth testified that he has experience auditing and evaluating the performance of servicers, and has worked with rating agencies to determine whether a particular servicer meets the criteria to obtain industry certification as a master servicer.

Hudspeth has been proffered in this action to testify as to the industry standards governing servicing of lease and subprime lease portfolios, as well as allocation of servicing duties, and to opine as to Safe-co’s compliance with those standards in the context of the CMC lease pool program. Hudspeth seeks to testify that (1) Safeco did not service the leases in accordance with industry standards; (2) Safeco did insufficient due diligence on CMC to determine CMC’s ability to service the leases as subservicer; and (3) as master servicer, Safeco conducted insufficient oversight of its subservicer, CMC. Hudspeth seeks to testify, in part, that the SSA provisions requiring Safeco to service the leases are extremely unusual, and that it would be atypical for a surety such as Safeco to have the skills needed to properly service leases.

Upon review of Hudspeth’s expert report, the Court notes that the report focuses primarily on a summary of the actions that an entity designated as “Master Servicer” should take with respect to ensuring proper performance by its subservicers. Such actions include performance of proper due diligence with respect to the subservicer’s systems and processes, as well as its financial strength or business stability. In this regard, Hudspeth seeks to offer testimony that Safeco failed to comply both with the servicing' standards set forth in the SSAs and with industry custom and practice.

b. Parties’ Arguments

Safeco argues that Hudspeth’s testimony does not meet the reliability and relevance standards set forth in Fed.R.Evid. 702 and Dauberb, because his report includes erroneous legal conclusions (including conclusions as to contract interpretation), as well as impermissible opinions as to breach of duty. As with respect to Palmer and Kerner, Safeco argues that Hudspeth’s testimony as to Safeco’s alleged breach of its servicing duties is impermissible under Sixth Circuit law. See McGowan, 863 F.2d at 1272-73. Safeco also argues that Hudspeth’s opinion that the Sale and Servicing Agreement set forth the industry standards for the servicing of leases constitutes an inappropriate interpretation of contract language, which usurps the fact finder’s function and is ultimately irrelevant.

In their responses to Safeco’s motion, the Banks argue that Hudspeth is amply qualified, and that his testimony will be helpful to the jury in understanding the servicing standards applicable to subprime lease portfolios. The Banks assert that Hudspeth has many years of experience as a servicer and collateral manager for leasing and loan portfolios, and currently works as a consultant to various companies in the servicing industry. Additionally, Hudspeth has published several articles relating to servicing, securitization and portfolio management.

As with respect to Palmer and Kerner, the Banks contend that Hudspeth’s expert opinions are relevant to the Banks’ contractual claims, as well as Safeco’s defense of fraud in the inducement. The Banks argue that Hudspeth’s testimony is particularly relevant to the Banks’ claims under the SSAs because the SSAs impose express obligations on Safeco to properly service the leases “in accordance with customary and usual practices of institutions which service equipment Leases.... ” SSA, at § 2.2(d).

The Banks suggest that Hudspeth’s testimony will be useful in determining the meaning and scope of the SSA provision requiring proper servicing of the leases, and is not inadmissible merely because it touches upon ultimate issues of breach of duty. “[Tjestimony in the form of an opinion or inference otherwise admissible is not objectionable because it embraces an ultimate issue to be decided by the trier of fact....” Fed.R.Evid. 704(a). See also Century Indent. Co. v. Aero-Motive Co., 254 F.Supp.2d 670, 677 (W.D.Mich.2003) (“a district court may admit opinion testimony if the expert’s specialized knowledge is helpful to the jury to understand the evidence or determine a fact in issue, even if the opinion embraces an ultimate issue to be decided by the jury....”). In short, the Banks argue that the issues raised by Safeco go not to the relevance or reliability of Hudspeth’s testimony, but to its weight — a determination ultimately to be made by the trier of fact.

c. Analysis

Initially, the Court notes that the two cases in which Hudspeth has been proffered as an expert were not part of the bench trial proceedings conducted by the Court in July and September 2009, and accordingly, the Court’s Bench Trial Opinion has no impact on the admissibility of Hudspeth’s expert testimony. For the reasons set forth herein, Safeco’s motion to exclude the testimony of Jerry Hudspeth pursuant to Daubert is denied, although the Court establishes certain limits on the testimony of Mr. Hudspeth.

Given that the Banks retain breach of contract claims with respect to Safeco’s obligations under the SSAs, Hudspeth’s opinions as to the content of the prevailing servicing standards — i.e., standard practices and procedures in the servicing industry-appear to be both relevant and appropriate in the context of this litigation. As the Banks have noted, the provisions of the SSAs actually reference and incorporate industry servicing standards, and Hudspeth clearly is qualified to opine as to the content and scope of those industry standards.

As previously explained in this Opinion with respect to the Palmer and Kerner testimony, however, this Court will limit Hudspeth’s testimony to the content and scope of industry standards, and Hudspeth will be precluded from testifying as to (1) any legal conclusions; or (2) any ultimate issues of fact. Hudspeth will be precluded, therefore, from actually interpreting the provisions of the SSAs, or from offering any testimony as to Safeco’s “breach” of the standards applicable to a servicer of lease pools.

Further, to the extent that Hudspeth seeks to testify as to the “unusual” or unique nature of these transactions, he will be permitted to do so. Hudspeth may not, however, testify as to any conclusion that the “unique” nature of the transactions affects whether a breach of servicing standards occurred. Again, while Hudspeth may point out the extent to which the transaction documents contain certain elements that are either consistent or inconsistent with industry standards, Hudspeth will be precluded from invading the province of the trier of fact by offering any testimony that would amount to interpretation or analysis of the contractual documents, or any of the parties’ respective intent in connection therewith.

For the reasons set forth herein, Safe-co’s motion to exclude the expert testimony of Jerry Hudspeth in its entirety pursuant to Daubert is denied. As set forth herein, however, the Court establishes certain restrictions and limitations on the testimony of Mr. Hudspeth, which will be applicable to any future proceedings in these cases.

3. Davis

Thomas Davis (“Davis”) is an accountant retained by CadleRock in Case Nos. 02-16012, 02-16019, and 02-16022 to opine as to the financial reporting of CMC. Royal has moved to exclude Davis’s testimony. For the reasons set forth herein, Royal’s motion to exclude the testimony of Davis pursuant to Daubert is denied.

a.Summary of Expert Testimony

Davis has been proffered by CadleRock as a rebuttal witness to challenge one of the points made by Royal expert Robert Post. Mr. Post opined that Royal’s underwriting procedures “included a review of CMC’s financial position, as reflected in their [sic] financial statements.... ” Davis, in rebuttal, testifies that the weaknesses in CMC’s business should have been apparent to Royal through a careful review of CMC’s financial statements.

Davis seeks to testify, in sum, that (1) CMC should have been reporting the sale of lease pools as secured borrowing; (2) if CMC had so reported its borrowing, the company’s profitability on its balance sheets would have been greatly reduced; (3) CMC insufficiently reserved for anticipated defaults and losses on leases; (4) the financial statements relied on by Royal contained various deficiencies, as well as mathematical and other errors; and (5) the primary cause for CMC’s failure was the flawed financial assumptions on which its business was premised.

b.Parties’ Arguments

Royal does not make clear the reasons that it seeks exclusion of Davis’s testimony. Royal’s brief suggests that, as with its challenge to the testimony of Palmer and Kerner, Royal believes that Davis’s testimony purports to instruct on legal issues and/or invades the province of the jury. Royal also appears to argue that Davis’s opinion as to Royal’s allegedly deficient underwriting is irrelevant, because California law does not require a surety to demonstrate justifiable reliance on misrepresentations by its obligee. See Sumitomo Bank, 70 Cal.2d at 85, 73 Cal.Rptr. 564, 447 P.2d 956.

Although CadleRock initially failed to respond to Royal’s motion to exclude the testimony of Davis, after the Court pointed out this oversight during the course of the Daubert proceedings, CadleRock filed a supplemental brief in opposition on July 17, 2009. (Doc. 2397). In its supplemental brief, CadleRock argues that Davis’s testimony is relevant to (1) the issue of justifiable reliance by the Sureties; and (2) the Sureties’ contention that CMC was a fraudulent Ponzi scheme from its inception.

c.Analysis

Initially, the Court notes that each of the cases in which Davis has been proffered was part of the bench trial proceedings conducted before this Court and is subject to the rulings in the Court’s Bench Trial Opinion. As such, in each of these cases, the Court anticipates that a jury trial will occur as to the “second stage” of the case, in which the trier of fact will consider the Sureties’ defense of fraud in the inducement. In that context, the Court finds the testimony of Davis both relevant and admissible. Accordingly, Royal’s motion to exclude Davis’s testimony pursuant to Daubert is denied.

Upon review of Davis’s expert report, this report does not appear to instruct on legal issues, nor does it embrace factual questions obviously within the province of the jury. Rather, Davis’s report presents a logical and technical analysis of the financial statements of CMC during the 1998-2000 time period, and explains how those statements should have been interpreted by a knowledgeable and diligent reviewer. Given the special expertise required to properly interpret the CMC financial statements, the Court believes that Davis’s testimony will be helpful to the jury in understanding the information that was in Royal’s possession during its underwriting of the CMC program.

Moreover, as noted above with respect to the Palmer and Kerner expert reports, the Court has rejected the Sureties’ reading of the Sumitomo Bank case, and will not preclude the Banks from introducing evidence to support their assertion that the Sureties unreasonably relied upon representations by CMC. Davis’s analysis is highly pertinent to the justifiable reliance prong of Royal’s fraud defense. Accordingly, the Court denies Royal’s motion to exclude Davis’s testimony, and declines, at this point, to impose any limitations upon Davis’s testimony.

B. Safeco Motion re: Testimony of Michael P. Larrick [J.P. Morgan Chase (successor to Bank One), Case No. 02-16014] (Doc. 2245)

Safeco has moved to exclude the testimony of Michael P. Larrick (“Larrick”), an expert witness designated by Bank One. Bank One has designated Larrick to testify as to various issues, including (1) research, investigation and development of program insurance and surety products; (2) the incorporation of financial guaranty language into a surety bond form; (3) the underwriting of financial guaranty products; (4) the marketing of program insurance and surety products, and associated market expectations; and (5) the operation of these products in the marketplace. See Bank One brief, Doc. 2265, at 14. For the reasons set forth herein, Safeco’s motion is denied, although the Court establishes certain limits on the testimony of Mr. Larrick.

1. Summary of Expert Testimony

Larrick’s testimony is based primarily on a review of the transaction documents, as well as Larrick’s familiarity with the insurance industry and standards relating to the design and marketing of insurance products. Larrick opines, essentially, that (1) Safeco failed to conduct appropriate due diligence and underwriting to become sufficiently familiar with CMC’s program prior to making the decision to participate in that program; and (2) in designing and marketing the CMC program, Safeco made numerous promises and representations to the Banks, which it later disavowed by denying the Banks’ claims for payment.

As set forth in Larrick’s expert report, the essence of Larrick’s proposed testimony is reflected in fourteen specific conclusions articulated by Larrick, which are summarized by the Court below as follows:

(1) Bank One has obligee status under the Safeco bond;

(2) The Safeco bond contains no defenses;

(3) The CMC lease bond program provided credit enhancement, and effectively-substituted the creditworthiness of Safeco for the creditworthiness of CMC or its lessees;

(4) CMC was “Safeco’s business partner in underwriting, servicing, and marketing”;

(5) Safeco’s bond constitutes a financial guarantee, and thus imposes on Safeco an obligation of due diligence;

(6) The lease bonds were a novel product, which included the assumption of risks outside the realm of surety;

(7) The SSAs were “an integral part” of the marketing of the lease bond program;

(8) The SSAs require Safeco to “perform a function” “outside the realm of surety”;

(9) Safeco “bypassed all reasonable due diligence”;

(10) Upon proper due diligence, Safeco would have declined to participate in the CMC program;

(11) Safeco failed to conduct proper monitoring and servicing over the life of the program;

(12) Safeco “does not have the right” to discontinue payments to banks or decline to honor the banks’ claims;

(13) Safeco’s position in this litigation is, effectively, a representation that its surety bond “was illusory”; and

(14) “There is no evidence” that Safeco’s present interpretation of the bond, or Safeco’s asserted defenses, were “considered, contemplated, discussed, envisioned or disclosed” during the design or marketing phases of the program.

2. Parties’ Arguments

a. Safeco

Safeco argues that Larrick’s testimony does not meet the reliability, relevance and qualification standards set forth in Fed. R.Evid. 702 and Daubert, since Larrick lacks the qualifications to testify as an expert in the area of suretyship, and Larrick’s report draws numerous impermissible legal conclusions. Safeco argues, first, that Larrick’s employment and consultant experience relates to the insurance industry, not the surety industry, and that Larrick never has acted as a consultant or expert witness on behalf of or against a surety. Additionally, Safeco points out that, as Larrick testified at deposition, he lacks knowledge of suretyship law.

Generally speaking, however, Safeco’s motion is targeted not at Larrick’s qualifications or methodology, but at the relevance and utility of eei'tain conclusions contained in Larrick’s expert report. Safeco specifically challenges four of the fourteen conclusions articulated by Larrick, arguing that these opinions involve erroneous and impermissible legal conclusions.

The challenged opinions include Larrick’s statements as to (1) the obligee status of Bank One; (2) Safeco’s ability to assert fraud defenses in response to the Bank’s claims under the lease bonds; and (3) Safeco’s right to investigate the Banks’ claims under the bonds. Safeco contends that these opinions involve contract interpretation, which is the exclusive function of the trier of fact. Safeco also argues that Larrick cannot opine as to whether Safe-co’s obligations under the lease bonds are independent of the lessees’ obligations, since Larrick’s opinion in this regard conflicts with fundamental principles of surety law.

Safeco further asserts that Larrick’s opinions are impermissible insofar as they are based upon Larrick’s beliefs as to what a surety should do in response to an obligee’s misrepresentations, rather than actual legal requirements. For example, Larrick testifies that a surety has a “preeminent” duty to verify representations made by the obligee and that the surety may not rely on information provided by others. Safeco argues that the standards of conduct advocated by Larrick are more stringent than the law imposes, since California law provides that an obligee’s failure to disclose material facts will discharge a surety from liability. See Sumitomo Bank of Cal. v. Iwasaki, 70 Cal.2d 81, 85, 73 Cal.Rptr. 564, 447 P.2d 956 (1968).

Safeco relies on this Court’s opinion in Welding Fume Products, in which this Court excluded testimony of a business ethicist, based on the Court’s determination that testimony as to ethical standards more stringent than the law requires would “tend to misdirect the finder of fact. ...” In re Welding Fume Prods. Liab. Litig., 2005 WL 1868046, *20, 2005 U.S. Dist. LEXIS 46164, *86 (N.D.Ohio Aug. 8, 2005). Safeco argues that, similarly, Larrick cannot testify as to standards of conduct inconsistent with actual legal requirements.

b. Bank One

Bank One argues that Safeco has improperly couched a simple motion in limine as a Daubert motion, and that all of the issues raised by Safeco go to the weight of Larrick’s testimony, not its admissibility. Bank One asserts, first, that Larrick is amply qualified in the fields of insurance and financial guarantees — qualifications that Safeco does not dispute. While Larrick’s area of expertise does not include surety law, Bank One contends that such expertise is not necessary, since Larrick’s testimony is based on (1) his familiarity with financial guarantee products; and (2) his knowledge regarding research and development, underwriting, and marketing of insurance and financial guarantee products. Moreover, Bank One asserts, despite the fact that Larrick’s opinion encompasses a broad range of topics, Safeco seeks to challenge only a few narrow conclusions in Larrick’s report. Accordingly, Bank One maintains, exclusion of the entirety of Larrick’s testimony would be inappropriate.

Bank One rejects Safeco’s assertion that Larrick’s testimony is based upon impermissible legal conclusions. Bank One argues, rather, that the heart of Larrick’s expert opinion is his determination that Safeco customized a standard surety bond into a “financial guarantee product” to support CMC’s needs in the lease bond program. All of Larrick’s further conclusions, according to Bank One, are based not upon surety law, but upon industry standards and market expectations relating to transactions involving financial guarantee products.

Bank One insists that Larrick’s conclusions relating to (I) the Bank’s obligee status, (2) Safeco’s ability to assert fraud defenses; (3) Safeco’s waiver of the right to investigate claims; and (4) Safeco’s liability independent of the lessees, are based not on Larrick’s personal beliefs or legal analysis, but upon Larrick’s understanding of the operation of financial guarantee products, as well as industry custom and common industry usage of terms. According to Bank One, Larrick does not interpret any contractual terms pursuant to legal standards. Rather, Larrick testifies that the transaction was structured in such a way as to qualify Safeco’s bond as a “financial guarantee product.” Within that framework, Bank One contends, Larrick then testifies as to industry custom, practice and standards relating to the usual operation of financial guarantee products. In Larrick’s view, financial guarantee products generally contain a waiver of defenses, and do not include a right to investigate claims prior to payment. Bank One asserts that Larrick’s conclusions relating to Bank One’s obligee status, as well as Safeco’s obligations vis-a-vis the lessees, also stem from his basic conclusion that the bonds are financial guarantee instruments.

Bank One acknowledges that some of Larrick’s conclusions may embrace ultimate issues in these actions. Bank One relies, however, on Fed.R.Evid. 704(a), and Century Indem. Co., 254 F.Supp.2d at 677, discussed above, for the proposition that expert reports touching upon ultimate issues are not per se inadmissible.

With respect to Safeco’s arg