MEMORANDUM AND ORDER
All pretrial motions in this case have been referred to the undersigned pursuant to 28 U.S.C. § 636(b) for disposition or report and recommendation regarding disposition by the District Court as may be appropriate. This case is before the Court on the Defendants’ Motion to Exclude Testimony of Government’s Disclosed Witnesses Kimberly Blankenship and Ronalda Owens [Doc. 75],
The Defendants are charged in a Fifth Superseding Indictment [Doc. 80] with conspiracy to commit wire fraud and bank fraud (Count 1), eight counts of wire fraud (Counts 2-9), eight counts of bank fraud (Counts 10-17), two counts of making a false statement to influence a financial institution (Counts 18-19), and one count of money laundering (Count 22). Defendant Whaley is charged with two additional counts of money laundering (Counts 20-21). The charges are based on an alleged plan by the Defendants to profit from the sale of eight properties in Sevier County, Tennessee. The Defendants are alleged to have obtained “straw borrowers,” who agreed to purchase the properties and to apply for mortgage loans to get the funds to purchase the properties and who were told that they would not have to make a down payment or mortgage payment on the properties. The Indictment alleges that the Defendants made material false representations and omissions, including concealing that the down payments for the properties did not come from the straw borrowers, on loan documents to Citizens Bank and SunTrust Mortgage to induce these entities to lend mortgage proceeds to the straw borrowers. Citizens Bank, an FDIC insured bank, and SunTrust Mortgage, from its account at SunTrust Bank, an FDIC insured bank, wired mortgage proceeds to Guaranty Land Title, the closing agency owned by Defendant Kerley.
On August 5, 2011, the Government filed a Disclosure of Testimony of Kimberly Blankenship [Doc. 66] and a Disclosure of Testimony of Ronalda Owens [Doc. 67]. The disclosure relating to Ms. Blankenship, states that she is the First Vice President of Consumer Banking Operational Risk and the Compliance Manager for Quality Control Mortgage at SunTrust Mortgage and will testify as a fact witness at trial. Although the disclosure states that Ms. Blankenship will not provide expert testimony, the Government contends that it is providing the disclosure by the deadline set for expert witnesses out of an abundance of caution. The disclosure relates Ms. Blankenship’s professional experience and a summary of her anticipated testimony regarding whether SunTrust Mortgage would have approved the underwriting and funded certain loans for the eight properties involved in this case. The disclosure relating to Ms. Owens also states that she will testify as a fact witness, rather than an expert, at trial but that the Government likewise discloses her testimony out of an abundance of caution. Ms. Owens is the Senior Vice President of Lending at Citizens Bank. Ms. Owens’ disclosure briefly summarizes her professional experience and summarizes her anticipated testimony on whether Citizens Bank would have approved and funded certain loans for two of the properties involved in this case.
II. POSITIONS OF THE PARTIES
The Defendants argue that the proposed testimony of Ms. Blankenship and Ms. Owens does not qualify as proper lay witness opinion under Rule 701 of the Federal Rules of Evidence. They argue that (1) neither witness was involved in approving the loans in question and, thus, cannot testify about her own perceptions, (2) both witnesses will testify to after-the-fact investigations of the loans, and (3) the proposed testimony is based upon the witnesses’ specialized knowledge. Alternatively, the Defendants contend that the proposed testimony does not meet the requirements for expert testimony under Federal Rule of Evidence 702 and that the expert testimony of Ms. Blankenship and Ms. Owens is inadmissible because the disclosures provided by the Government are insufficient to comply with Rule 16(a)(1)(G), of the Federal Rules of Criminal Procedure. Finally, the Defendants argue that the Court should conduct an
The Government responds that the proposed testimony of Ms. Blankenship and Ms. Owens properly qualifies as lay witness opinion under Rule 701. The Government contends that Ms. Blankenship and Ms. Owens are employees of their respective banks testifying about their investigation of the impact of material misrepresentations in loan documents on their employers’ business. Accordingly, the Government asserts that Ms. Blankenship and Ms. Owens will testify to fact or admissible lay opinion. The Government also argues that if Ms. Blankenship and Ms. Owens are deemed to be experts under Rule 702, then it has made the proper expert disclosures. Finally, the Government contends that if the Court finds its expert disclosures to be insufficient, the remedy is to order it to supplement its disclosures, rather than to deny admission of the testimony.
III. ANALYSIS
The Defendants challenge the admissibility of the testimony of two Government witnesses, contending that the proposed testimony does not qualify as lay opinion under Rule 701. They also argue that the proposed testimony does not qualify as expert opinion under Rule 702 and that, even if the testimony can properly be characterized as expert opinion, it has not been properly disclosed. As a result, the Defendants ask the Court to exclude the testimony of Ms. Blankenship and Ms. Owens at trial. After examining the arguments and the case law, the Court finds that Ms. Blankenship and Ms. Owens may testify to the facts surrounding their investigation of the approval of the loans at issue in this case and to their lay opinion, resulting from their investigation and their knowledge of their employers’ lending policies, as to whether their employer banks would have approved the loans if the true nature of the down payments had been known. Because the Court finds that their testimony is admissible under Rule 701, there is no need to determine whether Ms. Blankenship’s and Ms. Owens’ testimony is also admissible under Rule 702 or whether it has been properly disclosed.
As a general matter, a lay or fact witness may not testify about his or her opinion, except in specific circumstances:
If a witness is not testifying as an expert, testimony in the form of an opinion is limited to one that is:
(a) rationally based on the witness’s perception;
(b) helpful to clearly understanding the witness’s testimony or to determining a fact in issue; and
(c) not based on scientific, technical, or other specialized knowledge within the scope of Rule 702.
Fed.R.Evid. 701.
are not intended to affect the “prototypical example[s] of of the type of evidence contemplated by the adoption of Rule 701 relat[ing] to the appearance of persons or things, identity, the manner of conduct, competency of a person, degrees of light or darkness, sound, size, weight, distance, and an endless number of items that cannot be described factually in words apart from inferences.” Asplundh Mfg. Div. v. Benton Harbor Eng’g,57 F.3d 1190 , 1196 (3d Cir.1995).
Rule 701 advisory committee’s note.
The Defendants argue that Ms. Blankenship’s and Ms. Owens’ disclosed testimony violates Rule 701(a), requiring that the opinion be “rationally based on the witness’s perception,” and (c), preventing lay opinion testimony “based on scientific, technical, or other specialized knowledge within the scope of Rule 702.” They contend that the disclosed testimony is not based upon Ms. Blankenship’s or Ms. Owens’ personal perceptions of what occurred because neither of these witnesses were involved with approving the loans in question.
The Government argues that the testimony of Ms. Blankenship and Ms. Owens regarding the materiality of the misrepresentations on the loan documents is admissible as lay witness opinion because this testimony is not based upon experience, training, or specialized knowledge within the realm of an expert but, instead, is based upon the witnesses’ investigation and their particularized knowledge gained by virtue of their positions with the banks. The Government points to an example provided in the advisory committee’s notes to the 2000 amendments:
[M]ost courts have permitted the owner or officer of a business to testify to the value or projected profits of the business, without the necessity of qualifying the witness as an accountant, appraiser, or similar expert. See, e.g., Lightning*589 Lube, Inc. v. Witco Corp.,4 F.3d 1153 (3d Cir.1993) (no abuse of discretion in permitting the plaintiffs owner to give lay opinion testimony as to damages, as it was based on his knowledge and participation in the day-to-day affairs of the business). Such opinion testimony is admitted not because of experience, training or specialized knowledge within the realm of an expert, but because of the particularized knowledge that the witness has by virtue of his or her position in the business. The amendment does not purport to change this analysis.
Fed.R.Evid. 701 advisory committee’s note. The Government states that Ms. Owens’ “testimony about the operation of Citizens’ Bank will be based exclusively on the particularized knowledge she has by virtue of her training and experience with Citizens Bank, her personal consideration of the alleged misrepresentations at issue, and the relevant Citizens Bank loan file, including the file’s closing instructions.” [Doc. 77, p. 6] With regard to Ms. Blankenship, the Government argues that “by virtue of her various positions at SunTrust Mortgage, [she] has the particularized knowledge necessary to identify and apply [SunTrust Mortgage’s] relevant underwriting and funding guidelines and then state whether the fraudulent scheme’s misrepresentations were capable of influencing, or had a natural tendency to influence, Sun-Trust Mortgage’s underwriting and funding decisions for the loans at issue.” [Doc. 77, p. 9] The Government argues that testimony related to the operation of a business by an employee, which is based on the employee’s personal perceptions informed by particularized knowledge gained as a result of the employee’s position, is lay, not expert, opinion.
The Sixth Circuit has permitted an investor and member of the board of directors of a company to testify about the company’s value and projected value without first qualifying as an expert. Lativafter Liquidating Trust v. Clear Channel Communications, Inc.,
Based upon Clear Channel and the case law interpreting the owner/officer example from the advisory committee’s notes, the Government contends that owners, officers, or employees of a business may provide lay opinion testimony regarding the effect of a course of conduct on the business, if that opinion is based upon particularized knowledge gained as a result of employment in the business. The Defendants argue that the “exception” advocated by the Government would swallow Rule 701. They dispute the applicability of Clear Channel to the instant ease, contending that Ms. Blankenship and Ms. Owens are not owners or officers of their respective banks and that their proposed testimony is not about the value of the banks or the banks’ finances. Instead, the Defendants contend that Ms. Blankenship and Ms. Owens will testify about their after-the-fact investigation, rather than their personal perceptions of the approval
The Defendants rely on JGR, Inc. v. Thomasville Furniture Industries, Inc., to argue that the example from the advisory committee notes is limited to owners or officers.
It is telling that DIJO responds ... not with evidence of [the witnesses involvement with [the plaintiff] or the Project, but only emphasizing [his] substantial business experience ... Such generic industry experience does not pass Rule 701 scrutiny. [The plaintiff] never attempted to qualify [the witness] as an expert; and a lay witness who was never employed by or directly involved in a business is unlikely to have the type of first-hand knowledge necessary to provide reliable forecasts of future lost profits. The further removed a layman is from a company’s day-to-day operations, the less likely it is that his opinion testimony will be admissible under Rule 701.
Id. at 525-26 (alterations in original) (quoting DIJO,
In JGR, Inc. v. Thomasville Furniture Industries, Inc.,370 F.3d 519 , 524 (6th Cir.2004), a case similar to Cedar Shipping, we reviewed a district court’s decision to admit under Rule 701 the testimony of a certified public accountant and lawyer on the loss of profits and business value incurred by the plaintiff following the defendant’s alleged breach of contract. Although the challenged witness rendered accounting services to the plaintiff company, he had no ownership stake in the company, nor did he serve as.an officer or director. Id. at 526. Because the witness relied solely on information provided by the plaintiff company to calculate projected loss, we concluded that he lacked the basis necessary to offer such lay testimony. Id. JGR, Inc. thus turned on the witness’s lack of personal perception.
Our sister circuits have not limited the application of the example from the advisory committee’s notes to only actual owners or officers of a business. See United States v. Hill,
We have considered both pre-amendment and post-amendment cases and have determined that the testimony offered by Tampa Bay’s employees and/or officers was of a type traditionally and properly considered lay witness testimony, as it was not based on specialized knowledge subject to Rule 702.....
... Tampa Bay’s witnesses testified based upon their particularized knowledge garnered from years of experience within the field.
Id. at 1223. Thus, the Eleventh Circuit did not limit lay opinion testimony only to owners or officers of a business and did not limit the scope of the lay opinion only to testimony on the value of the business.
The Eleventh Circuit recently applied its ruling in Cedar Shipping in a case strikingly similar to the one at hand. See Hill,
Likewise, the Second Circuit has determined that employees of a company can provide lay opinion based upon the knowledge they have gained from their experience with the company. In a case quite similar to the instant case, a bank sued both corporations and individuals for contract and RICO violations designed to defraud the bank of loan proceeds. Bank of China,
Testimony admitted pursuant to Rule 701 must be “rationally based on the perception of the witness.” Fed.R.Evid. 701(a). To some extent, Huang’s testimony was based on his perceptions. As a Bank of China employee, Huang was assigned to investigate defendants’ activities at the tail-end of their scheme and after Bank of China stopped doing business with them. Huang’s senior role at the Bank and his years of experience in international banking made him particularly well-suited to undertake such an investigation and was likely a factor in the Bank’s decision to assign the task to him. The fact that Huang has specialized knowledge, or that he carried out the investigation because of that knowledge, does not preclude him from testifying pursuant to Rule 701, so long as the testimony was based on the investigation and reflected his investigatory findings and conclusions, and was not rooted exclusively in his expertise in international banking. “Such opinion testimony is admitted not because of experience, training or specialized knowledge within the realm of an expert, but because of the particularized knowledge that the witness has by virtue of his [ ] position in the business.” Fed.R.Evid. 701 advisory committee’s note. Thus, to the extent Huang’s testimony was grounded in the investigation he undertook in his role as a Bank of China employee, it was admissible pursuant to Rule 701 of the Federal Rules of Evidence because it was based on his perceptions.
Id. at 181. On the other hand, the court did not permit Huang to testify to matters beyond his investigation, because such testimony was a product of specialized knowledge and subject to the requirements of Rule 702. Id. at 182. “Thus, Huang’s explanations regarding typical international banking transactions or definitions of banking terms, and any conclusions that he made that were not a result of his investigation, were improperly admitted.” Id.
The Defendants argue that the above quoted analysis in Bank of China reveals that only testimony about the finding from an investigation can constitute lay opinion, not any testimony extrapolating from the findings of the investigation. Thus, they assert that Ms. Blankenship and Ms. Owens must limit their testimony to what loan documents were given to their employers, which does not require any specialized knowledge other than knowing what to look for and where to find it within their respective organizations. The Defendants argue that Ms. Blankenship and Ms. Owens may not testify about how a change in the loan documents would have effected the lending process, which would involve an application of specialized knowledge. The Court finds that the Defendants are confusing fact with lay opinion. Ms. Blankenship and Ms. Owens seek to testify to their review of the pertinent loan documents in this case in light of the policies and underwriting practices of their respective banks. The particular lending practices and policies of the banks and what loan documents were submitted by the Defendants are matters of fact, not opinion.
In Hill, the defendants also objected to testimony by bank employees about whether the loans would have been approved had the employees known that statements in the loan documents were false.
Most of the lay witnesses who answered hypothetical questions in this case did not do so based on any “scientific, technical or other specialized knowledge,” but instead based their testimony on their personal experiences as officers of financial institutions with knowledge of their companies’ policies and of the specific transactions at issue. Besides, it does not take any specialized or technical- knowledge to realize that lending institutions would be reluctant to approve a loan application if they knew that it contained false statements about material facts. Because of that, there is little or no danger that lay witness testimony was used to evade the reliability requirements of Rule 702.
Id. at 842. Thus, the court distinguished between knowledge gained through ones employment experience and the specialized knowledge characteristic of an expert.
This distinction is also clarified by the Second Circuit’s subsequent examination of lay opinion testimony in the Rigas case.
[a] witness’s specialized knowledge, or the fact that he was chosen to carry out an investigation because of this knowledge, does not render his testimony “expert” as long as it was based on his “investigation and reflected his investigatory findings and conclusions, and was not rooted exclusively in his expertise[.]” .... If, however, the witness’s testimony was “not a product of his investigation, but rather reflected [his] specialized knowledge,” then it was impermissible expert testimony.
Id. at 224 (quoting Bank of China,
First, DiBella’s testimony was based upon his observations during his twenty months as an Adelphia employee. Fed. R.Evid. 701(a). DiBella was responsible for correcting Adelphia’s financial statements and was well-acquainted with the records of Adelphia and the [other Rigas family businesses]. While Defendants argue that DiBella’s opinion was based*594 on what Adelphia’s records should have shown, DiBella’s testimony was based upon Adelphia’s and the [other businesses’] records, and addressed the aggregate of what the [other businesses] would actually owe Adelphia if the debt reclassifications, which Brown and others testified were fraudulent, had not occurred.
Id. (emphasis added). Thus, DiBella was permitted to give lay opinion testimony about what the debt would have been in the absence of the fraud. In the instant case, the Government also seeks to present the lay opinion testimony of bank employees about their observations during their investigation into misrepresentations on loan documents and about whether the bank would have made the loans in the absence of the fraud.
The Defendants argue that the existence of an “after-the-fact” investigation is an “important signal” that the testimony is expert opinion based upon specialized knowledge, rather than lay opinion based upon personal perceptions. To the contrary, the fact that the witness providing lay opinion testimony conducted an investigation of the circumstances or data leading to the opinion “after-the-fact” does not mean that the opinion was not based upon the witness’s personal perceptions. Both Bank of China and Rigas involved after-the-fact investigations by the employee witness. Rigas,
The reason that an after-the-fact investigation is suspect is that it can be linked with the use of technical or specialized knowledge. The Sixth Circuit has observed that “[e]ven before the [2000] amendment [to Rule 701], witnesses who performed after-the-fact investigations were generally not allowed to apply specialized knowledge in giving lay testimony.” United States v. Ganier,
Finally, in the instant case, the Defendants contend that the focus of the Court’s analysis must be on the reasoning process applied by the witness in reaching the opinion to which he or she seeks to testify. The advisory committee notes to the 2000 amendment to Rule 701 state that “the distinction between lay and expert witness testimony is that lay testimony ‘results from a process of reasoning familiar in everyday life,’ while expert testimony ‘results from a process of reasoning that can be mastered only by a specialist in the field.’ ” Fed.R.Evid. 701 advisory committee’s note (quoting State v. Brown,
On the other hand, the court in White ruled that portions of the auditors’ testimony were improper:
[The auditors] relied to a significant degree on specialized knowledge acquired over years of experience as Medicare auditors in testifying to the structure and procedures inherent in the Medicare program, as well as their understanding of various terms. An average lay person would be incapable of making sense of the various exhibits which the [auditors] helped to clarify and link together on the basis of the “reasoning process” employed daily in their highly specialized jobs.
Id. at 403-04 (citations omitted). The Court finds this distinction to be like that made by the Second Circuit in Bank of China, when it held that the witness could properly provide lay testimony about his investigation and his investigatory conclusions, but he could not testify under Rule 701 about the typical international banking transaction or the definitions of banking terms. Bank of China,
In the instant case, the Court finds that the proposed testimony by Ms. Blankenship and Ms. Owens is lay opinion testimony. First, it is rationally based upon the witnesses’ personal perceptions from their review of the loan documents in light of their experience with the lending practices and guidelines of their respective employer banks. See Fed.R.Evid. 701(a). Second, their proposed testimony is helpful to the determination of a fact at issue, whether the Defendants made material misrepresentations on the loan documents. See Fed.R.Evid. 701(b). Third, the Court finds that Ms. Blankenship’s and Ms. Owens’ testimony is “not based upon scientific, technical, or other specialized knowledge within the scope of Rule 702, ” but is instead based upon their own “particularized knowledge,” i.e., their familiarity with the underwriting process and lending policies at their banks, that they have due to their employment at their respective banks. Rule 701(c) & advisory committee’s notes (emphasis added). Accordingly, the Court finds that the proposed testimony of Ms. Blankenship and Ms. Owens is admissible under Rule 701.
Because Ms. Blankenship’s and Ms. Owens’ testimony is properly admissible as fact or as lay opinion under Rule 701, the Government was not required to disclose a summary of their testimony under Rule 16(a)(1)(G), of the Federal Rules of Criminal Procedure, and the Court does not have to determine whether the proposed testimony would also qualify as expert opinion under Rule 702. Additionally, the Court does not deem there to be a need for an evidentiary hearing to parse the witnesses’ testimony. If the Defendants believe that Ms. Blankenship or Ms. Owens are straying from the testimony approved by the Court herein, they may lodge an objection to testimony they believe exceeds the scope of this Memorandum and Opinion at trial.
IV. CONCLUSION
For the foregoing reasons, the Court finds that the proposed testimony of Government witnesses Kimberly Blankenship and Ronalda Owens qualifies as lay opinion under Rule 701. Accordingly, the Defendants’ Motion to Exclude Testimony of Government’s Disclosed Witnesses Kimberly Blankenship and Ronalda Owens [Doc. 75] is DENIED.
IT IS SO ORDERED.
Notes
. The motion was originally filed by Defendant Kerley. On November 1, 2011, Defendant Whaley moved [Doc. 81] to adopt the motion in order to promote judicial economy. The Court GRANTED this request at the November 2, 2011 motion hearing.
. This version of Rule 701 became effective on December 1, 2011, after the filing of the Motion to Exclude and the November 11 motion hearing. The prior version of Rule 701 read as follows:
If the witness is not testifying as an expert, the witness' testimony in the form of opinions or inferences is limited to those opinions or inferences which are (a) rationally based on the perception of the witness, (b) helpful to a clear understanding of the witness’ testimony or the determination of a fact in issue, and (c) not based on scientific, technical, or other specialized knowledge within the scope of Rule 702.
The advisory committee’s notes on the 2011 amendments state:
The language of Rule 701 has been amended as part of the general restyling of the Evidence Rules to make them more easily understood and to make style and terminology consistent throughout the rules. These changes are intended to be stylistic only.*588 There is no intent to change any result in any ruling on evidence admissibility.
The Committee deleted all reference to an "inference” on the grounds that the deletion made the Rule flow better and easier to read, and because any "inference” is covered by the broader term "opinion.” Courts have not made substantive decisions on the basis of any distinction between an opinion and an inference. No change in current practice is intended.
At the November 11 hearing, the parties agreed that the new version of Rule 701 had the same important language as the previous version. Accordingly, the Court finds that the revision to Rule 701 does not affect the Court's analysis or ruling.
. The Government states that Ms. Owens had some direct involvement with the loan for 1230 Bird Nest Way, as indicated by a fax from Guaranty Land Title with regard to this property bearing her name. It also states that Ms. Owens supervised the Citizens Bank department directing loan transactions at the time that the two loans from Citizens Bank in this case closed.
. The parties abbreviate the style of this case as Clear Channel in their briefs and oral argument. The Court will also use this abbreviation.