Accounting Expert’s Testimony on Due Diligence Limited
Posted on December 19, 2025 by Expert Witness Profiler
Plaintiffs Sabby Volatility Warrant Master Fund Ltd. (“Sabby”), SZOP Multistrat LP (“SZOP”), Alto Opportunity Master Fund SPC Segregated Master Portfolio B (“Alto”), and Hudson Bay Master Fund Ltd. (“Hudson Bay”), purchasers of common stock of Quanergy Systems, Inc. (“Quanergy”) in a public offering that closed on November 2, 2022 (the “Offering”), brought suit against Defendants Kevin J. Kennedy, Patrick Archambault, Jim Disanto, Karen Francis, Tamer Hassanein, Lisa Kelley, Thomas M. Rohrs, and Tianyue Yu, all former officers and/or directors of Quanergy, for alleged violations Sections 11 and 15 of the Securities Act of 1933, for failing to take reasonable care that there were no material misrepresentations or omissions in the registration statement and prospectus for the Offering (the “Offering Documents”).
Defendants argued that Plaintiff’s expert John Levy should be disqualified because his testimony meets none of the three requirements of Rule 702: Defendants suggested that Levy is not qualified to opine on the topics at issue; that Levy’s opinions are unreliable reflections of personal opinion; and that Levy impermissibly acts as a vehicle to deliver Plaintiffs’ preferred version of the facts and improperly assesses witness credibility, which makes his testimony unhelpful and therefore irrelevant to the factfinders.
Accounting Expert Witness
John F. Levy received a Bachelor of Science from the Wharton School of the University of Pennsylvania and a Master of Business Administration from St. Joseph’s University. Thereafter, he spent nearly five decades working in corporate governance, finance, public reporting, auditing, and accounting.
Levy has been a Certified Public Accountant in Illinois since 1978 and has nearly ten years of accounting experience at several large accounting firms; has been the chief financial officer of four companies and the chief operating officer of one company; has served on the boards of directors of fifteen public companies; has served as chair of the audit committees for eight companies, which required him to write and review public filings; was involved in one public offering in his role as a company officer and another in his role as an outside director; and has taught corporate governance for state accounting societies and other organizations since 2005.
Discussion by the Court
Qualifications
Defendants argued that Levy “lacked the necessary expertise to opine on disclosure obligations or the level of investigation required to satisfy the reasonable investigation defense.”
That Levy has limited previous experience with public offerings generally or with disclosure issues such as those at issue in this case specifically is insufficient to justify declining to qualify him as an expert.
The Court held that Levy’s education plus his decades of business experience qualify him to opine on the level of due diligence customarily performed in connection with public offerings.
Reliability
According to the Court, Defendants’ criticism that Levy failed adequately to describe his methodology was misplaced: Levy’s methodology was to apply his experience to the facts of the case.
As required, Levy’s conclusions are testable under Daubert in the sense that they are “provable (or disprovable) by equivalent testimony by experienced participants in the industry.”
Defendants’ assertion that Levy “could not articulate specific examples” of times he conducted due diligence did not require excluding his expert opinions as unreliable.
Relevance and Helpfulness
Defendants argued that Levy’s testimony is merely “a vehicle for factual narrative” and includes “improper credibility assessments.”
To begin with, Defendants’ argument that Levy’s report is nothing more than a recitation of the facts of the case is not persuasive in light of the fact-intensive nature of any analysis of the adequacy of due diligence. However, Levy explained that customary due diligence requires officers and directors to ask certain questions of counsel, and he opined that Defendants should have asked whether “the risk of failing to meet the $15 Million [Capitalization] Requirement should be included in the Offering Documents.” Levy goes on to say that his review of the record reflects that Defendants failed to ask that question; he therefore concludes that Defendants performed less-than-customary diligence.
A jury does not need expert testimony to understand whether Defendants, in fact, asked questions of counsel about whether to include certain risks. Levy may not testify that the record reflects a failure by Defendants to ask their outside advisors certain questions; he may testify using “hypotheticals based on assumptions about testimony in the record.”
Defendants’ assertion that Levy makes “improper credibility assessments” has force as well. According to the Court, Defendants are correct that Levy went “at least one step” beyond “reviewing and considering” testimony.
Held
The Court granted in part and denied in part the Defendants’ motion to disqualify John Levy from providing opinions.
Key Takeaway
Lack of extensive practical experience directly on point does not necessarily preclude an expert from testifying and a formal education in a particular field is sufficient to qualify a witness as an expert.
Case Details:
| Case Caption: | Sabby Volatility Warrant Master Fund Ltd., Et Al V. Kennedy |
| Docket Number: | 1:23cv601 |
| Court Name: | United States District Court, New York Southern |
| Order Date: | December 16, 2025 |
