The Plaintiffs had purchased timeshares at the Westgate Smoky Mountain Resort. They alleged that the Defendants, comprising various entities linked to the resort, operated a high-pressure sales scheme. According to the Plaintiffs, this scheme persuaded prospective buyers to invest in the vacation timeshare program without properly disclosing critical and legally mandated information.
On March 13, 2020, Plaintiffs disclosed Alec Fahey as their expert witness. Fahey stated that the Plaintiffs asked him “to determine whether alter ego and control factors [he] analyzed establish, from a financial and accounting standpoint, that the Defendants are alter ego of each other and whether Central Florida Investments, Inc. controlled the other Defendants.”
Defendants filed a motion to exclude Fahey’s opinions pursuant to Rule 702 of the Federal Rules of Evidence and the Daubert standard.
Accounting Expert Witness
Alec Fahey is a certified public accountant, a certified fraud examiner, and is certified in financial forensics. He is a member of the American Institute of Certified Public Accountants and to the Association of Certified Fraud Examiners.
Fahey’s professional background includes over 26 years of experience in financial and accounting investigations” and “8 years of experience in tax compliance, auditing, and financial reporting conducted in accordance with Generally Accepted Auditing Standards and Generally Accepted Accounting Principles.” He has also “conducted and managed the accounting and financial evaluation aspects of many litigation and insurance matters related to the measurement of business damages, financial impact analysis, as well as financial fraud investigations.” In addition, he has been the project manager and a participant in financial investigation assignments, including those involving rental property and real estate.
Discussion by the Court
Defendants first argued that Fahey lacked the necessary qualifications. They next claimed that his “sole opinion amounted to a legal conclusion.” They further contended that he disregarded Tennessee law and failed to use a valid methodology. Finally, Defendants maintained that the foundation for his opinions was inadequate and that his conclusions were unreliable.
Fahey’s Qualifications
Defendants stated that “Fahey is a forensic accountant who did not analyze a single accounting-related document and whose sole opinion is a legal conclusion that Defendants are all alter egos of one another.” According to Defendants, “Fahey has never before offered opinions without reviewing accounting or financial records.”
Defendants stated that since his work did not involve forensic accounting, “Plaintiffs cannot meet their burden to establish that Fahey is qualified to offer his opinion because they cannot establish that his qualifications provide a basis to answer the specific question, that his supposed specialized knowledge is more than a subjective belief, or that it is more than a summary of information from the parties.”
Defendants’ primary argument is that Fahey “did not look at any financial or accounting records.” But Plaintiffs contended that “Defendants provided few, if any, financial documents for him to review.” And, as Plaintiffs pointed out, Fahey did “review numerous financial records of the Homeowners’ Association, which gave a financial picture of the Defendants and their alleged commingling of funds.”
During his deposition when asked about his alter ego analysis, Fahey testified, “I’ve been doing this work for many years. I have studied, I’ve taken courses, and I have developed from personal education and outside education about this analysis.” As a result, the Court found Fahey qualified to render his opinions in this case.
Fahey’s Alleged Legal Conclusion
According to Defendants, “Fahey’s formal, written opinion is that ‘Defendants are alter egos and interdependent of each other.’” They asserted that this opinion is an inadmissible legal conclusion.
While Fahey may discuss the significance of certain facts that are indicative of Defendants’ alleged alter ego, the Court found that Fahey’s opinion asserting Defendants were alter egos amounted to a legal conclusion.
Fahey’s Methodology
To the extent Fahey employed any methodology,” Defendants asserted that “it was the wrong methodology because it directly contradicted Tennessee law.”
Plaintiffs responded that Fahey “investigated complex business records from an accounting and forensic perspective and drew logical conclusions and opinions about the connectedness and relationships between the entities in question.”
Specifically, Defendants argued that Fahey’s opinions did not address the elements to pierce the corporate veil.
During his deposition, Fahey testified that different states apply different factors, and that he utilized the factors he understood to be applicable, but he did not specifically look at the list of factors that would apply in Tennessee. However, the Court did not find Fahey’s opinions to be so lacking in reliability as to render it to be the “exception to the rule.”
The Basis for Fahey’s Opinions
Defendants claimed that “Fahey’s work consisted of conducting online research as to public records for various Defendants.” They submitted that he did not review Plaintiffs’ depositions and that he was not aware several of Defendants’ practices that he referenced in his report were common in American business.
Fahey details the items that he reviewed to prepare his opinions. During his deposition, Fahey stated that he was not sure if it was common for related entities to share a brand name but that it was possible.
Defendants asked whether it was “common for related entities to use one merchant processing account to accept payments,” and Fahey responded that it was possible, but it would create a problem with separating the operations. As a result, the Court found that Defendants’ challenges were not grounds for excluding Fahey.
Held
The Court granted in part and denied in part the Defendants’ motion to exclude the opinions of Alec Fahey.
Key Takeaways:
- Mere weaknesses in the factual basis of an expert witness’ opinion bear on the weight of the evidence rather than on its admissibility.
- Rule 704 requires that an expert’s testimony be helpful to the jury. Legal conclusions are not considered helpful because they “do little more than tell the jury what result to reach.”
Please refer to the blog previously published about this case:
Hospitality Expert’s Testimony on Corporate Structure Excluded
Case Details:
| Case Caption: | Moore Et Al V. Westgate Resorts Ltd., L.P. |
| Docket Number: | 3:18cv410 |
| Court Name: | United States District Court, Tennessee Eastern |
| Order Date: | June 27, 2025 |
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