In a recent legal battle between Mo Pow and Crypto, the spotlight has fallen sharply on expert testimony, specifically the lost profits analysis provided by Mo Pow 4’s expert, David A. Hall. This case, fundamentally about two failed digital currency mining agreements, has turned into a fascinating examination of expert witness reliability and the challenges to their methodologies.
Firstly, to set the stage, the Court initially found breaches of contract by both parties and requested further expert opinions to quantify damages. Mo Pow 4 subsequently engaged Hall, who presented a report claiming $5,374,000 in lost profits. However, Crypto immediately raised concerns, focusing on Hall’s decision to use Odessa, Texas, as the hosting site for his calculations, rather than Strafford, Missouri, as stipulated in the second agreement.
Consequently, Crypto filed a motion to strike Hall’s opinions, arguing that this substitution was a deliberate attempt to inflate damages, and further claimed that Hall’s methodology was unreliable, based on undisclosed documents, and failed to account for crucial contractual terms. Conversely, Mo Pow 4 contended that Crypto was merely challenging Hall’s assumptions, not his methodology, and asserted their right to relocate the mining site.
Accounting Expert Witness
David Hall is a Managing Director with Alvarez & Marsal Disputes and Investigations in Denver. He has more than 30 years of experience providing expert consulting and testimony services to clients on accounting, economic, financial and damages issues.
Hall earned a bachelor’s degree from the University of Michigan and an MBA (highest honors) from the University of Texas at Austin. A Certified Management Accountant (CMA), Certified Valuation Analyst (CVA) and a Certified Fraud Examiner (CFE), he is also a member of the Institute of Management Accountants, the National Association of Certified Valuators and Analysts, the National Contract Management Association and the Association of Certified Fraud Examiners.
Discussion by the Court
Defendant’s Objections
Crypto’s primary objection centered on Hall’s use of Odessa, Texas, as the location for calculating lost profits, instead of Strafford, Missouri, as specified in the second agreement. They argued that this substitution was a deliberate attempt to inflate the lost profits figure, implying that the Texas site was chosen precisely because it would yield a higher damage calculation. In essence, they accused Hall of manipulating his analysis to favor Mo Pow 4. Crypto broadly claimed that Hall’s entire calculation was based on an unreliable methodology.
This objection encompassed concerns about the assumptions Hall made, the variables he included or excluded, and the overall approach he took to calculating lost profits. Further, Crypto asserted that Hall relied on documents and information related to the Texas site that were not timely disclosed during the discovery process, arguing that this constituted a violation of discovery rules and prejudiced their ability to effectively challenge Hall’s opinions. Finally, Crypto argued that Hall’s opinions failed to consider various terms of the Second Agreement, additional costs, and rate variances that would significantly impact his calculations, pointing to specific omissions, such as the use of inappropriate electrical rates, failure to account for “uptime” variations, and neglecting adverse market conditions.
Plaintiff’s Counterarguments
In opposition, Mo Pow 4 countered that Crypto’s objections were fundamentally challenges to the assumptions and variables that Hall chose to consider, rather than to the underlying methodology itself. They argued that Hall’s use of the AICPA-approved incremental profit method was sound, and that Crypto’s concerns were simply disagreements about the inputs used in that method. Mo Pow 4 asserted that they had the authority to unilaterally relocate the cryptocurrency mining site to Texas after Crypto failed to perform under the Second Agreement, providing an explanation as to why the relocation would have occured, and that even though the notice was not sent, it was still a valid assumption.
Mo Pow 4 explained that the documents in question did not become relevant until Hall performed his expert work, which occurred after the initial discovery period. They also pointed to the fact that the Court had reopened expert discovery, and that they provided the documents as soon as possible, arguing that their supplemental disclosure was substantially justified, given the circumstances and the Court’s prior orders. Finally, Mo Pow 4 argued that many of Crypto’s concerns, such as the use of specific electrical rates and the omission of certain variables, were matters of weight that could be addressed through cross-examination, rather than grounds for excluding Hall’s testimony altogether, emphasizing that the Court’s role as a gatekeeper was not to determine the accuracy of Hall’s opinions, but rather to ensure that his methodology was reliable.
Analysis
The Court found Hall’s expert report to meet the reliability standards of Rule 702, despite the challenges raised by Crypto. Thus, while the use of the Texas site and other assumptions were subject to scrutiny, they did not render the report fundamentally unreliable. Therefore, the Court emphasized that vigorous cross-examination and the presentation of contrary evidence were the appropriate remedies for any perceived weaknesses in the expert testimony.
Since the motion was referred to a magistrate judge, a final determination was not made as to whether Mo Pow’s supplemental disclosures were substantially justified or harmless out of an abundance of caution, and only a recommendation was provided to the assigned district court judge. The magistrate judge recommended that the Court find Mo Pow’s failure to provide certain documents Hall relied upon in his report until after his report issued, was substantially justified.
Held
The Court found that Mo Pow’s expert, Mr. David A. Hall, and the opinions presented in his expert report, met the requirements of Federal Rule of Civil Procedure 26(a)(2)(B) and Federal Rule of Evidence 702. Moreover, the magistrate judge recommended that the presiding judge determine that Mo Pow’s failure to provide certain documents relied upon by Hall to support his lost profits damage opinion until after the close of discovery had been substantially justified.
Key Takeaway:
The Court, acting as a gatekeeper under federal rules, found Hall’s qualifications and methodology met reliability standards, distinguishing between disputed assumptions affecting evidence weight and fundamental flaws impacting admissibility. Ultimately, the Court emphasized that vigorous cross-examination, rather than exclusion, was the appropriate remedy for perceived weaknesses in the expert’s analysis.
Case Details:
| Case Caption: | Mo Pow 3 Llc Et Al V. Crypto Infiniti LLC |
| Docket Number: | 1:22cv155 |
| Court: | United States District Court, Wyoming |
| Order Date: | March 11, 2025 |
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