Court Opinion

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Date Created: 2015-10-13 22:23:13.546197+00
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Opinions of the United
2006 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

7-11-2006

Cap Funding VI LP v. Chase Manhattan USA
Precedential or Non-Precedential: Non-Precedential

Docket No. 04-4355

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Recommended Citation
"Cap Funding VI LP v. Chase Manhattan USA" (2006). 2006 Decisions. Paper 762.
http://digitalcommons.law.villanova.edu/thirdcircuit_2006/762

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                                                                       NOT PRECEDENTIAL

                          UNITED STATES COURT OF APPEALS
                               FOR THE THIRD CIRCUIT

                                         No: 04-4355

                                 CAPITAL FUNDING, VI, LP,

                                                       Appellant

                                                  v.

               CHASE MANHATTAN BANK USA, NATIONAL ASSOCIATION

                         Appeal from the United States District Court
                           for the Eastern District of Pennsylvania
                                      (Civ. No. 01- 6093)
                           District Judge: Hon. Legrome D. Davis

                       Submitted Pursuant to Third Circuit LAR 34.1(a)
                                      February 2, 2006

               Before: MCKEE, SMITH and VAN ANTWERPEN, Circuit Judges

                                (Opinion filed:       July 11, 2006)

                                          OPINION

McKEE, Circuit Judge.

          Capital Funding appeals several rulings the District Court made in granting

summary judgment to Chase Manhattan Bank. For the reasons stated below, we will

affirm.

                                                  1
       We will consider each of Capital Funding’s claims of error separately. Because

we write primarily for the parties, it is not necessary to reiterate the facts or background

of this case except insofar as may be helpful to our brief discussion.

                                  I. MOTION TO COMPEL

       Capital Funding purchased a portfolio of charged-off credit card accounts from

Chase Manhattan Bank pursuant to a Credit Card Purchase Agreement. (J.A. 028.)

Capital Funding subsequently sued Chase, contending that accounts in the portfolio were

not as represented in the Agreement.

       On appeal, Capital Funding challenges the District Court’s order rejecting Capital

Funding’s January 15, 2004, motion to compel the production of five years of account

histories for 150 sample accounts selected by the court. (Order, Feb. 3, 2004 at J.A.

117a.) We review the challenged discovery ruling for an abuse of discretion. See

Camiolo v. State Farm Fire & Cas. Co., 334 F.3d 345, 354 (3d Cir. 2003).

       After a lengthy and bitter dispute as to the number and dates of account histories

that would be provided, the District Court issued an order by which it selected 1501

accounts at random and directed Chase to provide “billing statements for the selected

accounts for the five previous years.” (Order, July 22, 2003 at J.A. 083.) Chase

interpreted the phrase to mean five years prior to the order, and accordingly provided

Capital Funding with account histories dating to July 1998. Capital Funding, however,

       1
        Capital Funding chose this number, agreeing in a conference call that 150
sample accounts would be “sufficient and acceptable.” (Appellant’s Br. 13.)
                                           2
interpreted “the five previous years” to mean the five years prior to December 1999, the

charge-off date in the purchase agreement.

       Capital Funding wrote to the court on September 9, 2003, and again on September

17, 2003, asking for a confirmation of its interpretation of the order. (See Mot. for

Reconsideration and Clarification 7, Oct. 3, 2003.) The proposed order attached to the

second letter directed Chase to produce complete account histories for each of the 150

accounts.2 In response, the District Court issued a scheduling order that did not mention

the dates of account histories to be produced, and thus implicitly denied Capital

Funding’s requests. (Order, Sept. 23, 2003.) Capital Funding filed a Motion for

Reconsideration and Clarification, asking the court to clarify the September order “to

specifically reflect the five year period of time for which . . . histories must be produced

by [Chase].” (Mot. for Reconsideration and Clarification 4.) The District Court denied

the motion, stating that the September 22, 2003 order was “abundantly clear on its face

and in no need of clarification” and noting that “[Capital Funding] merely appears to

disagree with the Court’s rulings, which alone is not a proper basis for granting Plaintiff’s

Motion.” (Mem. Order. 2, Jan. 5, 2004.) Undeterred, Capital Funding filed a motion to

compel the production of the 150 account histories going back to December 1994. (Mot.

to Compel, Jan. 15, 2004 at 104a.) The court denied that motion. (J.A. 117a.)

       2
         Capital Funding did not provide this document with the appendix and the
electronically available docket entry Chase claims contains this document, see Appellee’s
Br. 53, actually contains an unrelated and likely incorrect attachment. Appellant does not
dispute Chase’s characterization of the order, however.
                                              3
         On appeal, Capital Funding argues that the account histories were necessary to

show that Chase sold Capital Funding accounts that had experienced delinquencies other

than the delinquency that lead to the charge-off. Chase, however, conceded that the

accounts included such prior delinquencies, eliminating the need for discovery on this

issue.

         Capital Funding further argues that the histories were required to prove that

accounts were charged off earlier than Chase represented in the Agreement. However,

Capital Funding received histories for 150 accounts dating back to July 1998, 17 months

prior to the charge-off date in the Agreement. These histories would have reflected any

early charge-off, yet Capital Funding did not use them to show that Chase charged off

accounts earlier than it represented.

         The District Court thus evaluated and denied numerous motions Capital Funding

had filed to obtain the same information it sought in the motion to compel. Not only did

the District Court not abuse its discretion in denying the motion to compel, it showed

commendable patience in continuing to field repetitive requests for the same documents

despite numerous refusals to order additional account histories. We can find nothing in

this record to suggest that the District Court’s failure to grant a motion to compel, which

the court clearly concluded was untimely, burdensome, and repetitive, could constitute an

abuse of discretion under the circumstances here.

                                   II. MOTION TO DEPOSE

                                               4
       Capital Funding claims that the District Court abused its discretion in disallowing

the deposition of TransUnion employee Sharon Sarna-Paulikaitis while allowing Chase to

rely upon her affidavit. However, Chase argues (without contradiction from Capital

Funding in the latter’s Reply Brief) that Capital Funding is only telling part of the story.

Capital Funding subpoenaed TransUnion on September 12, 2003, “the day discovery

closed.” (Appellee’s Br. 56.) Capital Funding did nothing to enforce that subpoena when

TransUnion objected. Thereafter, TransUnion provided Chase with an affidavit, “which

Chase promptly provided to [Capital Funding].” (Appellee’s Br. 56.) That affidavit

stated, in pertinent part, that “TransUnion currently does not have a field representing a

charge off date.” (TransUnion Aff. ¶ 9 at J.A. 109.) TransUnion’s credit reports are

squarely implicated by Capital Funding’s breach of contract suit and its allegations about

the extent of the prior delinquencies and credit history of the accounts purchased from

Chase. Capital Funding’s expert on this issue, Louise Epstein, relied on the TransUnion

reports to argue that the accounts had been charged-off prior to December 1999. Capital

Funding does not deny that it “issued (and then abandoned)” (Appellee’s Br. 57) a

subpoena to TransUnion before discovery closed. Chase immediately disclosed the

TransUnion affidavit to Capital Funding, and there is no suggestion of bad faith. Given

that background, the argument that the District Court somehow abused its discretion in

denying Capital Funding’s belated motion to compel the deposition of a TransUnion

representative is frivolous.

       Capital Funding also attempts to challenge to the District Court’s ruling on the
                                              5
TransUnion affidavit under Fed. R. Civ. P. 26(a)(2)(b). Capital Funding raises this

argument for the first time on appeal. As a “general rule,” absent exceptional

circumstances, we do not review issues raised for the first time on appeal. See Gardiner

v. Virgin Islands Water & Power Auth., 145 F.3d 635, 646-47 (3d Cir. 1998). We can

find no exceptional circumstances here, and we therefore need not address this claim.

       Capital Funding argues that even if the affidavit is not deemed expert testimony, it

is still inadmissible under Fed. R. Civ. P. 37(c)(1). That Rule prohibits using evidence at

trial that has not been disclosed pursuant to Fed. R. Civ. P. 26, unless the failure to

disclose is harmless. However, “the exclusion of critical evidence is an 'extreme'

sanction, not normally . . . imposed absent a showing of willful deception or 'flagrant

disregard' of a court order by the proponent of the evidence.” In re Paoli R.R. Yard PCB

Litig., 35 F.3d 717, 791-92 (3d Cir. 1994) (quoting Meyers v. Pennypack Woods Home

Ownership Ass'n, 559 F.2d 894 (3d Cir. 1977)). We see nothing here that would suggest

that Chase’s behavior rose to this level, and Capital Funding does not point us to anything

that would. Similarly, Capital Funding cannot establish that it was prejudiced by the non-

disclosure. Capital Funding was well aware of the possible importance of testimony from

TransUnion and had ample opportunity to depose appropriate employees or officers of

that company. In fact, as noted above, it served a timely subpoena for a deposition on

TransUnion and then did nothing to follow up.

                         III. EXCLUSION OF EXPERT TESTIMONY

                                              6
       Capital Funding appeals the exclusion of the testimony of its proposed experts,

Louise Epstein and Glenn Newman. We also review that claim for an abuse of discretion.

In re Paoli R.R. Yard PCB Litig., 35 F.3d at 749. In its thorough and comprehensive

opinion, the District Court explained why it was excluding this evidence, and we need

only briefly address Capital Funding’s claim that the District Court abused its discretion

in doing so.

       Capital Funding contends that it was improper for the District Court to evaluate the

methods and information Newman relied on in forming his opinion. According to Capital

Funding, any such concerns were only relevant to issues of credibility or probative weight

and should therefore have been resolved by a jury. That argument ignores the District

Court’s “gatekeeping” obligation in evaluating expert testimony. See Kumho Tire v.

Carmichael, 526 U.S. 137,141 (1999). The District Court possesses “the same broad

latitude when it decides how to determine reliability as it enjoys in respect to its ultimate

reliability determination.” Id. at 142 (emphasis in original). The District Court’s

concerns here amply support the exercise of its discretion in the performance of its

gatekeeper function.

                                IV. SUMMARY JUDGEMENT

       1.      Eligibility of Accounts

       Capital Funding relied exclusively on unauthenticated TransUnion credit reports in

attempting to show that accounts in the Portfolio were charged off prior to December

                                              7
1999, in violation of the Agreement. As the District Court explained in excluding the

reports, Fed. R. Evid. 901(a) requires documents to be authenticated in order for them to

be admissible at trial, and only evidence admissible at trial may be considered in ruling on

a motion for summary judgement. See Philbin v. Trans Union Corp., 101 F.3d 957, 961

n.1 (3d Cir. 1996).

       Capital Funding argues that because Anthony Carabello could have authenticated

the credit reports at trial, the District Court should have considered them. However,

Carabello’s affidavit was not offered with Capital Funding’s Opposition for Summary

Judgement. Rather, it was only tendered with the Motion for Reconsideration. Yet, it

clearly was not “newly discovered evidence,” and it was therefore properly excluded

from consideration. See Harsco Corp. V. Zlotnicki, 779 F.2d 906, 909 (3d Cir. 1985).

Moreover, the District Court realized that Capital Funding failed to show that Carabello

could authenticate the credit reports. Finally, in its affidavit, TransUnion clearly states

that it “does not currently have a field representing charge off date.” (J.A. 108-09.)

Thus, as the District Court pointed out, “even if the credit reports had been admissible,

they do not state what Capital Funding suggests.”3 (J.A. 021.)

       3
        Capital Funding further argues that because it was denied the additional account
histories, it was deprived of the evidence it could have used to show an earlier charge-off
date. As noted above, Capital Funding received seventeen months of histories for 150
accounts, but did not use a single one of these histories. Accordingly, we do not think the
the District Court abused its discretion in concluding that additional histories would not
have changed the outcome.

                                              8
       2.     Defining “Delinquency”

       Capital Funding defines “delinquency” under the Agreement as “any delinquency,

whether it was the one that led to the charge-off or not.” Chase defines it as “the

delinquency that led to the charge-off.” The term is not defined in the Agreement.

Accordingly, “the rules of contract construction require that the term be given the

meaning commonly understood in the credit card industry, as established by the record.”

FleetBoston Fin. Corp. Fleet Nat’l Bank v. Advanta Corp., 2003 Del. Ch. LEXIS 8, * 71

(Del. Ch. 2003). See also Restatement (Second) of Contracts § 222. Here, Epstein,

Capital Funding’s own industry expert, explained in a deposition that the term

“delinquency” refers to the delinquency that lead to charge-off. (J.A. 646-47.) Capital

Funding offered no evidence that others in the industry use that term to refer to something

other than the delinquency that lead to the charge off in this context. Moreover, Capital

Funding did not challenge Chase’s assertion that neither Chase nor any other bank in the

industry sells portfolios of accounts with a history of only one delinquency.

       3.     Damages

       The District Court was also correct in concluding that Capital Funding failed to

present “evidence from which damages may be calculated to a reasonable certainty.”

Ware v. Rodale Press, Inc., 322 F.3d 218, 225-26 (3d Cir. 2003). In its motion opposing

summary judgment, Capital Funding relied entirely on the affidavit of Glenn Newman.

The District Court determined that his testimony was unreliable, and excluded it. On

                                             9
appeal, Capital Funding relies on the Carabello affidavit that was submitted with its

motion for reconsideration. However, as we have already noted, Carabello’s testimony

was not offered until after the District Court granted summary judgment and it was not

considered. Ironically, Capital Funding had insisted that Carabello was not competent to

testify about damages, and had objected to Chase questioning him about damages during

his deposition. (J.A. 559.)

                                     V. CONCLUSION

       For the reasons listed above, the District Court’s grant of summary judgment

against Capital Funding and in favor of Chase will be affirmed.

                                            10