Plaintiff Dick’s Sporting Goods, Inc. (“DSG”) filed a lawsuit against Defendants Forbes/Cohen Florida Properties, L.P. (“Forbes”) and The Gardens Venture LLC (“Gardens Venture”) (collectively “Defendants”).
DSG claimed that Forbes tortiously interfered with its business and contractual relationships, which involved Sears, Roebuck, and Co. (“Sears”) and Transform Operating Stores LLC (“Transform”), specifically regarding the sublease of the second floor of the Sears store at the Gardens Mall (the “Palm Beach Gardens location”). Forbes allegedly refused to sign necessary forms for development applications submitted to the City of Palm Beach Gardens. DSG filed a lawsuit seeking compensatory and punitive damages, including out-of-pocket costs and net cash flows from operations.
To support its claim for damages, DSG presented the opinion and reports of accounting expert witness Louis G. Dudney. In response, Forbes retained accounting expert witness James S. Feltman to counter Dudney’s assertions.
Defendants filed a Daubert motion to exclude Dudney’s testimony. Meanwhile, DSG filed a motion to exclude specific parts of Feltman’s testimony.
Accounting Expert Witnesses
Louis G. Dudney, CPA, CFF, has extensive experience across various areas, including operational, financial, valuation, litigation, bankruptcy, and management consulting. His work encompasses financing, mergers and acquisitions, damages analysis, lost profit assessments, business valuations, solvency evaluations, debtor and credit advisory services, as well as corporate investigations.
He serves on the Management Committee at AlixPartners and is the Global Leader of the Investigations, Disputes, and Risk practice. Before joining AlixPartners, Dudney was a partner in the Financial Advisory Services Group at PricewaterhouseCoopers. He earned a Bachelor of Business Administration in accounting from The College of William & Mary and is a Certified Public Accountant. Additionally, he holds a certification in Financial Forensics from the American Institute of Certified Public Accountants.
James S. Feltman is a Managing Director in the Global Restructuring practice at Kroll, LLC. Kroll operates as a global advisor in valuation, corporate finance, investigations, disputes, cybersecurity, compliance, regulatory matters, and other governance-related issues. The firm employs nearly 3,500 professionals across 28 countries.
Feltman has qualified and testified as an expert witness in various federal and state courts. He focuses on forensic accounting and fraud investigations, bankruptcy, and solvency. Additionally, he provides expertise in commercial damages, business valuations, investment theory, and federal and state income taxation. He also addresses issues related to abusive tax shelters, accounting ethics and standards, and accounting malpractice. Furthermore, he deals with investment advisory matters and a range of other accounting, financial, and tax-related topics.
Discussion by the Court
A. Defendants’ Motion to Exclude DSG’s Expert, Louis G. Dudney
DSG identified Louis G. Dudney as an expert witness on causation. He assessed the damages reasonably attributed to the Defendants’ tortious interference. Dudney submitted an initial expert report in 2021 and a supplemental report in 2024.
1. Defendants’ Arguments
Defendants contended that Dudney should not testify due to unreliable methodology. They cited several reasons:
- He relied on outdated data.
- He altered the corporate allocation rate in his 2024 report.
- He failed to consider the proper cannibalization rate.
- He used “skewed or ‘cherry-picked’ ex-post data.”
Dudney reduced the projected corporate allocation expenses in the damages analysis. Dudney says this was done in “accordance with DSG’s updated corporate practice for cost allocation in its pro formas.” Dudney also adopted the cannibalization rate that DSG calculated in his damages model. In his deposition testimony Dudney says he “[used the cannibalization rate] as one of the inputs to evaluate what is the impact and what the best estimate of the impact to Dick’s as a result of [Defendants’] behavior.”
Defendants argued the reduction in allocation expenses inflated DSG’s alleged damages. They claimed Dudney improperly relied on information from DSG, making the damages calculation unreliable.
2. Plaintiff’s Counter-Argument
DSG countered that Defendants had not adequately challenged Dudney’s methodology. Instead, they only criticized certain inputs in his calculations. The Court agreed, noting that the Defendants’ arguments questioned the weight of Dudney’s testimony rather than its admissibility.
3. Analysis
The Court reviewed Dudney’s deposition and expert reports and determined that he met the Daubert standard.
Defendants did not sufficiently challenge the reliability factors required for evaluation. For instance, they argued that he relied on a construction budget from 2015 and that his damages calculation assumed DSG would generate revenue during the COVID-19 pandemic. However, Defendants did not dispute the general acceptance of Dudney’s methodology within the scientific community.
Defendants argued that the reduction in allocation expenses “artificially inflates DSG’s alleged damages…and the damages calculation is unreliable because Dudney improperly relied on information provided to him by DSG.” The Court held that Defendants did not challenge the principles and methodologies Dudney applied to get to his conclusions. And it is not improper for an expert to rely on information given to him or made available to him “if experts in the particular field would reasonably rely on those kinds of fact or data.”
Also, the Court held that Dudney’s approach to calculating lost profits is accepted in the relevant scientific field.
Defendants did not otherwise challenge whether other experts in the field would not have reasonably relied on the facts and or data Dudney relied on. Their remaining objections primarily targeted his conclusions, alleging bias. The Court emphasized that perceived weaknesses in expert testimony should be addressed through vigorous cross-examination, not exclusion.
B. DSG’s Motion to Exclude Certain Opinions Offered by Defendants’ Expert, James S. Feltman
Defendants identified James S. Feltman as a rebuttal expert. He provided an initial report in 2022 and a supplement in 2024. DSG moved to exclude Feltman’s opinions on mitigating damages. Additionally, DSG sought to preclude Feltman from testifying about third-party demographic data or offering any undisclosed opinions under the Federal Rule of Civil Procedure 26.
1. The Third-Party Demographic Data
Feltman’s 2024 report included a section on “Target Market Data.” This discussion consisted of data collected from two third-party software systems. DSG argued that Feltman did not analyze the data to establish a cannibalization rate. They pointed out that he admitted he was not an expert in demographic analysis and lacked formal training. DSG asserted that Feltman possessed no specialized knowledge to apply the demographic data in a way that would assist the trier of fact.
Defendants countered that Feltman did not need to be a demographer to serve as a rebuttal expert on damages. The Court partially agreed.
Feltman was a global advisor in areas such as valuation and corporate finance. He had previously been qualified and testified as an expert in commercial damages. He stated that he had training in analyzing databases and applying them to specific cases. Feltman used resources from two databases, ArcGis and Placer.ai, and applied that information to the facts of this case to reach a conclusion on mitigation of damages.
It was acceptable for Feltman to rely on otherwise inadmissible hearsay when forming his opinion, according to Rule 703. However, he could not serve as a conduit for hearsay. Rule 703 specified that if the facts or data were inadmissible, the proponent of the opinion could only disclose them to the jury if their probative value significantly outweighed their prejudicial effect. Defendants did not sufficiently demonstrate how the third-party demographic data met this requirement.
Therefore, DSG’s motion regarding the third-party demographic data was granted in part and denied in part. Feltman would be allowed to testify about the conclusions he reached using the data, but the data itself was deemed inadmissible hearsay.
2. Feltman’s Opinions on the Mitigation of Damages
DSG claimed that Feltman’s opinions on mitigation were based on unreliable methods. Defendants responded that Feltman was a rebuttal expert who relied on publicly available facts and conducted a comparative analysis. The Court agreed with Defendants. DSG did not challenge the methodology used by Feltman; instead, it suggested additional analyses that could have been performed.
The Court held that DSG’s objections focused on the weight of the evidence rather than its admissibility.
3. Feltman’s Opinions Related to the Sears Bankruptcy and New Opinions at Trial
Given the Court’s Supplemental Order on the bankruptcy issue, DSG’s motion regarding Feltman’s opinions on the bankruptcy was denied as moot. The Court resolved the legal implications of the Sears bankruptcy, and no evidence to the contrary would be allowed.
DSG’s motion to exclude any new or additional opinions was granted. Defendants were prohibited from presenting new opinions through Feltman’s testimony that DSG had not previously been informed of under Federal Rule of Civil Procedure 26.
Held
The Court denied the Defendants’ motion to exclude Plaintiff’s accounting expert witness, Louis Dudney’s testimony.
The Court granted in part and denied in part the Plaintiff’s motion to exclude certain opinions from Defendants’ accounting expert witness, James Feltman.
1. Feltman was prohibited from discussing the legal implications of the bankruptcy as it had already been resolved.
2. Feltman was barred from presenting any new opinions that had not been previously disclosed under Rule 26.
3. Feltman could provide opinions on the mitigation of damages, but he could not testify to otherwise inadmissible hearsay that he relied
Key Takeaway:
Plaintiff did not challenge the methodology that Feltman used; instead, it pointed to additional analyses that could have been done. A methodology is not rendered excludable under Daubert if it fails to include every possible test that could have been conducted.
Moreover, Rule 702 and Daubert are instructive that the Court’s analysis on a Daubert motion is not of the conclusions, rather the principles and methodologies applied to get to those conclusions. Defendants did not challenge the principles and methodologies Dudney applied to get to his conclusions. And it is not improper for an expert to rely on information given to him or made available to him “if experts in the particular field would reasonably rely on those kinds of fact or data.”
Case Details:
| Case caption: | Dick’s Sporting Goods, Inc. V. Forbes/Cohen Florida Properties, L.P. Et Al |
| Docket Number: | 9:20cv80157 |
| Court: | United States District Court for the Southern District of Florida |
| Dated: | September 9, 2024 |
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