Plaintiff American Power, LLC (“AMP”) is a trucking-logistics company headquartered in Dayton, Ohio. According to the Complaint, Plaintiff invested in and loaned $450,000 to Defendant Dektrix LLC, a transportation-servicing company headquartered in Utah. The Complaint charges that the investment and loan were fraudulently obtained and ultimately worthless.
Plaintiff sought to impose liability upon Dektrix and various other business entities and individuals for purported violations of federal securities laws and state common law.
Dektrix sought to exclude Randall S. Kuvin, CPA, ABV, CFF as an expert. Dektrix presented two arguments in their motion to exclude the testimony of Kuvin: (A) AMP failed to comply with Fed. R. Civ. P. 26; and (B) Fed. R. Evid. 702 and Daubert bars the expert’s testimony.
Accounting Expert Witness
Randall Kuvin has been with Flagel Huber Flagel almost 40 years and served as Managing Partner until 2023. Though he works across all aspects of business, Kuvin brings significant depth of experience and expertise in the areas of Business Valuation, Litigation Support, and accounting specific to the Real Estate industry.
Examples of his expertise include determining values of businesses for the purposes of asset division in divorce or other disputes as well as providing forensic analysis to determine income for purposes of spousal support or contract/damage matters.
Discussion by the Court
A. Failure to Comply with Fed. R. Civ. P. 26
To begin with, Dektrix claimed that AMP failed to comply with Rule 26 by not stating the opinions of each author of the damages study; not disclosing the compensation of the expert; failing to supplement the expert’s list of testimony; and not supplementing the expert report.
In response, AMP disclosed Kuvin’s compensation to opposing counsel, supplemented the expert’s list of testimony, and shared an updated expert report that included a higher damages number (when actual numbers were used) than the original report. AMP provided Dektrix with this supplemental information on November 20, 2024.
Courts within the Sixth Circuit weigh five factors to determine whether a party’s noncompliant disclosure was substantially justified or harmless:
(1) the surprise to the party against whom the evidence would be offered; (2) the ability of that party to cure the surprise; (3) the extent to which allowing the evidence would disrupt the trial; (4) the importance of the evidence; and (5) the nondisclosing party’s explanation for its failure to disclose the evidence.
The surprise to the party against whom the evidence would be offered
Basically, Dektrix claimed it would be surprised by which expert will testify, Kuvin or Terry L. Yoho, or both. Trial is about a month away, and testimony from Kuvin in AMP’s case-in-chief may necessitate some adjustment’s to Dektrix’s trial strategy, but Dektrix should not have been surprised that Kuvin would testify as an expert because AMP provided the 2022 damages study in February 2022—well before the original disclosure deadline—and Dektrix could have deposed Kuvin, which it did not.
Therefore, the Court held that Dektrix’s attempt to recast this as a situation where AMP never provided an expert report, or that it had no idea who would testify, is misguided. Instead, Dektrix should not have been surprised Kuvin would provide expert testimony on his 2022 damages study nor does Dektrix cite any case law suggesting surprise to a party occurred in analogous circumstances.
The ability of the party to cure the surprise and the disruption on the trial
Dektrix emphasized that AMP had not provided compensation, an updated curriculum vitae (“CV”), and supplemental information in support of the 2022 Damages Report.
The Court held that this emphasis is misplaced because AMP cured any surprise about Kuvin’s compensation and CV on November 20, 2024 (almost two months before trial), which gives Dektrix sufficient time to prepare cross-examination on these two issues, if it so chooses.
Regarding the supplemented report on the damages AMP allegedly incurred after December 31, 2021, the Court agreed that AMP should have supplemented the 2022 damages study sooner, and if AMP had, it might have been able to recover higher damages. As such, AMP may use the 2022 damages study in connection with Kuvin’s expert testimony but may not use the supplemental damages information AMP provided on November 20, 2024.
The importance of the evidence
As Dektrix even acknowledges, “[i]n a contract dispute where speculative lost profits are sought, expert testimony is helpful to aid the factfinder.” Moreover, the Court reiterates that the 2022 damages report was not tardy. As such, and given the revealing damages information it contains, Kuvin’s expert testimony on his 2022 damages study constitutes important evidence.
The nondisclosing party’s explanation for its failure to disclose the evidence
AMP acknowledges that it did not supplement its 2022 damages study, provide Kuvin’s compensation, or update Kuvin’s CV before the discovery deadline. Basically, it did not offer a compelling explanation for its failure to comply with the Court’s discovery deadlines. AMP did acknowledge it has cured all three deficiencies two months before trial.
Absent a compelling justification, the Court held that AMP’s failure to comply with the discover deadline weighs in favor of excluding Kuvin’s testimony.
Although the fifth factor favors exclusion, the Court concluded that it does not overcome the other factors.
B. Federal Rule of Evidence 702 and Daubert
Dektrix claimed that the expert’s testimony is not based on sufficient facts or data; the testimony is the not the product of reliable principles and methods; and the expert’s testimony does not reflect a reliable application of the principles and methods.
However, the Court found that Kuvin’s testimony is sufficiently reliable and relevant to the issue of damages to survive Dektrix’s motion to exclude. Also, it appears that Kuvin’s testimony includes independent analysis that would be helpful to the trier of fact in understanding the damages that AMP asserts. Additionally, Dektrix’s arguments regarding the reliability of Kuvin’s testimony relate more to the weight and credibility that the trier of fact will give to Kuvin’s testimony rather than the reliability of his methodology.
Held
The Court denied Dektrix motion to exclude the testimony of Randall S. Kuvin.
Key Takeaways:
- First, expert testimony on lost profit damages is admissible if it is helpful to the trier of fact in understanding a damages claim. In a contract dispute where speculative lost profits are sought, expert testimony is helpful to aid the factfinder.
- Second, AMP’s late supplement was substantially justified or harmless, and Kuvin’s expert testimony was limited to his 2022 damages study rather than the more recently-supplemented report.
Case Details:
| Case Caption: | American Power, LLC V. Harris Et Al |
| Docket Number: | 3:17cv347 |
| Court: | United States District Court, Ohio Southern |
| Order Date: | December 23, 2024 |
Leave a Reply