Through various entities (hereinafter, the “Tarter Companies”), the Tarter family operates a large animal management and farm gate manufacturing business. Principally at issue in this case are the business transactions between Plaintiff C-Ville Fabricating, Inc. (doing business as Tarter Industries), and Defendant Hong Kong QMC Industry Company, LTD (“QMC”).
Defendant Josh Tarter is a shareholder of Tarter Industries. Plaintiff contends that at all relevant times, Josh held himself out as a high-ranking executive of the Tarter Companies and oversaw their operation. Plaintiff also alleged that Josh’s right-hand man was fellow Defendant Thomas Lewis Gregory.
Moreover, Plaintiff sued Josh Tarter, Thomas Gregory, and QMC because of their alleged undisclosed interest in QMC. The scheme allegedly resulted in the Tarter Companies wiring approximately $74,857,122.80 to QMC and its affiliates. Plaintiff asserted that during this period, Josh and Thomas hid their interests in QMC – despite a duty to reveal that information – and that Josh affirmatively lied about such interests on two occasions.
The Court has noted that the “thrust” of the Plaintiff’s allegations is that Josh and Thomas “used their senior positions with the Tarter Companies to ensure that components and parts were sourced from QMC, while siphoning Tarter funds to themselves through inflated rates for the purchased components” from QMC. Plaintiff alleged that they were damaged because they overpaid QMC for the components.
On June 5, 2019, the Court ordered the Clerk of Court to enter default against QMC. QMC has never participated in the litigation. Despite Josh and Thomas’ majority ownership interest in QMC, none of its financial records were disclosed during discovery.
Because Plaintiff was unable to obtain any of QMC’s financial records, they retained Dr. Christopher Clifford.
Motion to Exclude
Clifford conducted a financial analysis of QMC’s profits. The expert report (“Clifford Report”) calculates the difference between the amount the Tarter Companies actually paid to QMC and price quotes of the same products from a Chinese business called LongLife.
Clifford’s calculations were derived from an Excel spreadsheet detailing 7,094 purchases made by Tarter Industries from QMC between 2010 and 2017 and an Excel spreadsheet detailing 5,885 price quotes from LongLife on parts previously purchased by Tarter Industries from QMC. Clifford then estimated the economic damages by calculating QMC’s markup as the difference between the price charged by QMC and that quoted by LongLife. The average markup of the 5,885 price quotes was 27.45%. Clifford then assumed an average markup of 27.45% for the 1,210 purchases that did not have a direct quote from LongLife. Clifford aggregated the markups to determine the markup paid on an annual basis and compounded the result to present value at 7.05%. The Clifford Report concluded that the total damages suffered by the Plaintiff was approximately $24,162,158. The Defendants sought to exclude the Clifford Report on numerous grounds.
Finance Expert Witness
Dr. Christopher Clifford holds a Ph.D. in finance from Arizona State University. His research interests focuses on non-banking intermediaries such as financial advisors, mutual funds, and hedge funds. Clifford’s work has been mentioned in the Financial Times, The Economist, and the Wall Street Journal. His representative papers have been published at the Review of Financial Studies, Journal of Financial Economics, and the Journal of Financial and Quantitative Analysis.
Discussion by the Court
A. The Clifford Report Relies on a Valid Comparison
Defendants argued that the Clifford Report should be excluded because it erroneously assumed that the QMC payments and the LongLife Quotes are comparable.
Because the Plaintiff is unable to view QMC’s financial documents, some way of calculating its profits is necessary. Although Defendants assert that the payments were an apples-to-oranges comparison to the price quotes, the evidence shows otherwise. In fact, the comparisons, minus the obvious shipping costs discrepancy, are very similar. Most parts the Tarter Companies ordered from QMC had an exact comparison with LongLife.
This is because LongLife is in the same industry as QMC, and, in fact, was QMC’s supplier. Contrary to Defendant’s argument that the comparison is “unhelpful and misleading,” it is a reliable way determine QMC’s profits since its records are unavailable. Allowing this report will not confuse the jury, and any discrepancy in the Clifford Report is properly dealt with by vigorous cross examination.
Clifford has testified that his analysis is standard in the finance community and can be found in “every finance textbook, in any corporate finance or
valuation-based textbook at the undergraduate or graduate level.”
B. The Clifford Report has a Sufficient Basis for Determining the Plaintiff’s Economic Damages
Next, Defendants take issue with the fact that the Clifford Report failed to allocate damages to Tarter Industries individually.
Defendants argued that the Clifford Report aggregates damages amongst all four Tarter Companies, which is irrelevant and entirely unhelpful, since the only remaining Plaintiff is Tarter Industries.
While parts of the Clifford Report reference economic damages suffered by the “Plaintiffs,” this is due to the fact that the report was created at the time when the other three Tarter Companies were still members to the lawsuit. However, the Clifford Report bases its calculations “solely” on the sales between Tarter Industries and QMC.
The total damages figure is based off 7,094 orders, all of which were purchased by Tarter Industries. This makes sense given that Tarter Industries “is responsible for the manufacture and purchase of component parts . . .” The fact that the Clifford Report’s conclusion says “Plaintiffs” instead of “Plaintiff” is immaterial, because the remaining Plaintiff is the entity whose purchases the calculations were based off.
C. The Clifford Report Satisfies Rules 26(a)(2)(B) and 37(c)(1)
Defendants argued that the Clifford Report should be stricken because the Report did not include information about Clifford’s testimonial experience over the last four years and on his compensation.
Each of those are required to be disclosed during discovery. The drastic sanction of striking the Clifford Report is not warranted because the nondisclosure was harmless. Plaintiff states that the Clifford Report did not mention Clifford’s testimonial experience over the past four years because he has none. Additionally, the Plaintiffs indicated that Clifford’s rate is $400 per hour. Because the error was harmless, the Court will not strike the Clifford Report on these grounds.
D. Additional Arguments in Defendants’ Supplemental Briefing
Defendants submitted five new arguments in their supplemental briefing. The Court will address each in turn.
i. Damages and disgorgement
Defendants argued that Clifford’s model of “economic damage” is not really a measure of damage to the Plaintiff, but rather a measure of the amount Defendants profited from marking up QMC prices.
Plaintiff has given no indication that it seeks to recover QMC’s profits twice over, and any attempt to do so would not be permitted. Rather, the Clifford Report is merely a way to quantify the harm allegedly caused by Defendants. If Plaintiff was to prevail on the merits of its claims, it would be entitled to recover profits earned by QMC.
Plaintiff’s damages are the Defendants’ profits, because the extra price paid to QMC would otherwise be money it saved.
Even if this distinction mattered, the Plaintiff would still have to prove the amount of revenue the Defendants earned to be entitled to disgorgement. Because they do not have access to QMC’s financial records, the Clifford Report helps fill in the missing pieces.
Further, for purposes of a motion to exclude, the Court’s gatekeeping function is limited to the considerations in Rule 702. The Court has already determined that Clifford’s report satisfies Rule 702 and that his testimony will help assist the jury. Defendants’ attempt to distinguish the remedies of damages and disgorgement did not alter the Court’s Rule 702 determination.
ii. The Clifford Report is not an adoption of Plaintiff’s lay opinion, nor is it basic math
Defendants contended that the Clifford Report is not an expert report at all, but rather Plaintiff’s own position clothed in expert garb. Defendants argued that Clifford “blindly accepted that the LongLife quotes were comparable to the QMC prices” and that he conducted basic math to arrive at his opinion. This, Defendants argued, amounts to a wholesale adoption of Plaintiff’s position.
To determine QMC’s profits, Clifford necessarily had to reference the Plaintiff’s purchase records. Using such records to calculate QMC’s profits is not a wholesale adoption of Plaintiff’s position.
Additionally, the Clifford Report is more than basic math. The Clifford Report analyzed 7,094 purchases over a seven-year span. It then aggregated QMC’s markups on an annual basis and compounded the result to present value at a rate of 7.05%.
Additionally, Clifford based his calculations off specific data that is best understood by a specialist in the finance industry.
iii. The Clifford Report based its calculation on gross profits
Defendants argued that Plaintiff’s reliance on gross profits is improper; that the correct measure of damages should be net profits. Even if Defendants are correct, the Court can resolve this issue with specific jury instructions, avoiding the need to take the harsher path of excluding an expert. Additionally, Clifford’s figures will be subject to scrutiny on cross examination and defense counsel is free to question all aspects of his financial calculations. The Court will not exclude the Clifford Report on that basis alone.
iv. Federal Rule of Evidence 403
Defendants’ final argument is that the Clifford Report should be excluded because it will mislead the jury. To support this claim, Defendants repeat its argument about economic damages and disgorgement. The Court has already resolved that argument and will not address it further. Because the probative value of the Clifford Report is not substantially outweighed by its likelihood of misleading the jury, it will not be excluded.
Held
The Court denied the Defendants’ motion to exclude the testimony of Christopher Clifford.
Key Takeaway
The Clifford Report will help assist the jury in understanding the financial impact of the transactions between Plaintiff and QMC. Plaintiff has established that Clifford has specialized knowledge in the financial industry; based his Report on thousands of actual purchases over a seven year period; used principles taught in “every finance textbook, in any corporate finance or valuation-based textbook at the undergraduate or graduate level;” and applied present value calculations to all 7,094 purchases. Because Plaintiff has proven by a preponderance of evidence that the requirements of Fed. R. Evid. 702 have been met, the Clifford Report will not be excluded.
Case Details:
| Case Caption: | C-Ville Fabricating V. Tarter |
| Docket Number: | 5:18cv379 |
| Court Name: | United States District Court, Kentucky Eastern |
| Order Date: | July 20, 2026 |
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