Plaintiffs NetJets Aviation, Inc., NetJets Sales, Inc., and NetJets Services, Inc. brought this action for declaratory judgment. NetJets sought a declaration that Defendants Stephen G. Perlman and the Stephen G. Perlman Revocable Trust are the alter egos of RS Air, LLC, a bankrupt entity. NetJets obtained a judgment of over $1.7 million against RS Air in bankruptcy court. If NetJets is successful in this action, then Perlman and the Trust will be liable for the judgment against RS Air.
Defendants submitted the report of Terry Lloyd to resolving the alter ego claim. NetJets filed a motion to strike Lloyd’s report.
Accounting Expert Witness
Terry Lloyd is a managing director of Finance Scholars Group (“FSG”), a consultancy. He was previously a partner/managing director with BDO Seidman and Huron Consulting Group. He has been a certified public accountant (“CPA”) since 1983 and a Chartered Financial Analyst (“CFA”) since 1993. He has published and spoken to legal, accounting, and financial groups, including law schools.
He has been qualified as an expert in federal, state, tax, bankruptcy courts and arbitration venues.
Lloyd concluded his report with the opinion that “the weight of the evidence” showed that Perlman was not the alter ego of RS Air.
NetJets argued that Lloyd’s report is inadmissible because he purports to render an opinion on the ultimate issue in this case — whether Perlman was the alter ego of RS Air.
The Court agreed that Lloyd’s legal conclusions are inadmissible, and therefore will exclude them from consideration.
However, the Court denied the motion to strike the entire report because Lloyd’s report analyzed discrete factual issues, such as RS Air’s adequacy of capitalization and its observance of corporate formalities, which are relevant to the factors which must be considered in resolving an alter ego claim.
Held
The Court granted in part and denied in part NetJets’ motion to strike the testimony of Terry Lloyd.
Key Takeaway:
In addition to general legal conclusions which are considered inadmissible, Lloyd’s expert report focuses on factual, company-specific matters such as adequacy of capitalization and observance of corporate formalities and is therefore directly relevant to evaluating an “alter ego” claim.
This case arises from a contract between The Bama Companies, Inc., a manufacturer of baked goods, and Stahlbush Island Farms, Inc., a farmer and food processor, for the purchase of approximately 130,710 pounds of berries for a mixed berry and lemon cream pie Bama would supply for McDonald’s restaurants.
Bama claimed that it was forced to cancel the McDonald’s promotion because Bama identified a handful of physical contaminants in some finished pies.
Plaintiff’s expert, Steve Rutherford, a licensed CPA was retained to “review and verify as to the consistency and comprehensiveness of how the staff (for the Plaintiff) accounted for the standard costing and pricing comparison,” and to state whether overhead costs should be included in damages.
Rutherford opined that Bama incurred damages of Nine Hundred Eighty-Nine Thousand and Nine Hundred and Seventy-Seven Dollars ($989,977.00) due to actions of Stahlbush Island Farms, Inc.
Defendant filed a motion to exclude the opinions of Rutherford. Specifically, Defendant argued that Rutherford’s testimony should be excluded because (1) Plaintiff has failed to demonstrate that Rutherford is qualified to opine regarding the valuation of damages in a civil case, and (2) Rutherford’s opinions “consisted largely of bare conclusions that vouch for Plaintiff’s expertise as a supplier.”
Accounting Expert Witness
Steve M. Rutherford is a Certified Public Accountant and has served as the sole shareholder and president of his own accounting firm for nearly thirty-three (33) years.
Additionally, he has provided expert advice and testimony in multiple and a wide range of personal and business legal matters for approximately thirty-six (36) years and has been appointed as a bankruptcy trustee on eight (8) occasions.
In Rutherford’s report, he initially concluded that the damages set forth by Plaintiff are “a reasonable estimate of the damages” and further noted that he has “no reasons to doubt the accuracy nor the comprehensiveness of methods and calculations” set forth by Plaintiff. Moreover, he observed that Plaintiff “has been doing business with McDonald’s for approximately three decades” and that “it seems to reason that from a discerning eye, someone in the business profession would have to think [they] know what they are doing (much experience) when it comes to pricing out the costs associated with making pies for McDonald’s.”
Building on this reasoning, Rutherford further asserted that “such a long-term mutually beneficial relationship would have been terminated, had [Plaintiff] been devoid in their costing amounts.” However, according to the Court, rather than applying methodologies and performing calculations himself, Rutherford simply assumed that the methodologies applied and calculations performed by Plaintiff must be right due to Plaintiff’s previous experience and existing business relationship with McDonald’s.
Consequently, for similar reasons, the Court found that Rutherford’s opinions regarding overhead costs are also not reliable or relevant. Once again, rather than applying methodologies and performing calculations, Rutherford opined that calculations prepared by Plaintiff are “very detailed, concise and organized” and further emphasized that due to Plaintiff’s previous experience and existing business relationship with McDonald’s, “any deficiencies or irregularities would have been exposed and corrected at the time the job in question had come to fruition.” Ultimately, while he seemed to offer general principles regarding overhead costs, such as rent, Rutherford’s opinions did not apply the specific facts of the case to a particular methodology and, therefore, did not provide sufficient support for the opinions he offered.
Held
The Court granted the Defendant’s Daubert motion to exclude the opinions of Bama Damages expert Steve Rutherford.
Key Takeaway:
Rutherford’s opinions are plainly not based in sound methodology, nor do his opinions demonstrate a connection of the opinions to the facts of the case. Rutherford’s opinions consisted mainly of assumptions with no evidentiary support. While an expert may apply assumptions, assumptions must have some reasonable evidentiary foundation.
Further, although Rutherford is entitled to some element of professional judgment in forming his opinion, he must still explain how he reached his opinion based in recognized methodology and by application of the facts. Because Rutherford’s opinions failed to do so, the Court agreed with Defendant and found that Rutherford’s opinions are not reliable and relevant.
Case Details:
Case Caption:
Bama Companies, Inc., The V. Stahlbush Island Farms, Inc.
Plaintiffs Hadek Protective Systems B.V. and Hadek Protective Systems, Inc. (collectively “Hadek”) asserted in this action that Defendant Ergon Asphalt & Emulsions, Inc. (“Ergon”) breached a Master Agreement between the parties regarding the sale and distribution of PENNGUARD® Block Lining System Products made by Ergon (the “Master Agreement”).
By its choice, Hadek’s sales were limited to PENNGUARD® Block 55 with a 1.5 or 2.0-inch thickness. The parties disputed the nature and timing of the termination of the Master Agreement.Thereafter, Hadek sued Ergon for breach of contract and tortious interference. Hadek claimed that Ergon’s conduct caused it to lose certain sales opportunities of PENNGUARD® products.
In connection with its damages claims, Hadek retained Melissa Bizyak as an expert witness. Her report, and the opinions expressed therein, are at issue here. In short, Ergon asserted that she must be excluded as an expert because she is unqualified to render the opinions she has expressed, that her opinions are unreliable and that her opinions do not fit the facts of this case.
Accounting Expert Witness
Melissa Bizyak, CPA, ABV, CFF, CVA who joined Grossman Yanak & Ford, LLP in 1997, has practiced in public accounting for nearly 20 years. She has significant experience in providing services for privately held concerns and their owners.
Bizyak’s business valuation experience is diverse, with clients including both private and publicly held companies in a wide variety of industries. She has performed valuations for various purposes such as financial reporting, equitable distribution, buy/sell transactions and dissenting shareholder disputes, employee stock ownership plans (ESOPs), value enhancement, and gift and estate tax strategies.
Ergon argued that Bizyak is not qualified to render opinions in this case. Its contention is based on several factors. First, Ergon argued that Bizyak’s report and deposition testimony include impermissible legal conclusions on issues of contract interpretation and performance, matters that are beyond her expertise as an auditor. By way of example, Ergon noted that Bizyak makes certain representations regarding the exclusive territory of the Master Agreement, Hadek’s exclusivity and first right to pursue opportunities in its territory, Ergon’s obligations under the Master Agreement and the Agreement’s term more generally.
Ergon also argued that Bizyak is unqualified to provide opinions on sales and marketing of the at-issue glass block lining products in Asia. Ergon bases this contention on the fact that Bizyak has no relevant experience in this realm, did no independent research on this industry and merely accepted the information that was provided by Hadek.
However, the Court found that Bizyak is qualified to render the opinions expressed in her report. Specifically, Bizyak possesses the required “specialized knowledge” through her education, background and experience to render opinions about lost profits. Moreover, she is not being offered as an expert on the glass block lining industry, but on the calculation of Hadek’s damages. Hadek is correct that as an expert, Bizyak is free to make certain assumptions regarding liability issues for purposes of expressing opinions on damages and may rely on information supplied by Hadek in doing so.
As it relates to the issues of reliability and fit, the Court concluded that despite the parties’ extensive and well-done briefing, a Daubert hearing is necessary to resolve these issues.
Held
The Court denied in part Ergon’s motion to exclude the testimony of Hadek’s expert Melissa Bizyak.The Court defers ruling on the remainder of Ergon’s motion pending the completion of a Daubert hearing.
Key Takeaway:
Bizyak possessed the requisite specialized knowledge to offer expert opinions in this case. As reflected on her resume, she is a certified public accountant a certified valuation analyst, and is certified in financial forensics. She has been qualified as an expert in a number of cases and several of her prior expert engagements have involved the calculation of lost profits.
Thus, Ergon’s arguments are misplaced and if anything, Ergon is actually raising a reliability issue, not challenging Bizyak’s qualifications.
Case Details:
Case Caption:
Hadek Protective Systems B.V. Et Al V. Ergon Asphalt & Emulsions, Inc.
Docket Number:
2:22cv1421
Court Name:
United States District Court for the Western District of Pennsylvania
De Tomaso Automobili Holdings N.A. LLC (“De Tomaso”) creates, develops, and sells luxury automobiles. Norman Choi is its current owner. Ryan Berris is its former Chief Executive Officer and Chief Marketing Officer. Berris sued Choi and De Tomaso for, inter alia, breach of contract and wrongful discharge.
Berris sued Choi and De Tomaso for, inter alia, breach of contract and wrongful discharge.
Defendants filed a motion to exclude testimony purporting to show that Berris’ travel expenses were reasonable. De Tomaso did not have a written, formal expense policy in place when Berris incurred these expenses. Berris proposed to offer the expert testimony of John Imperiale, a certified public accountant who currently serves as a Senior Director in the Expert Services practice at a financial and risk advisory firm, to give the jury “additional context and guidance regarding what may constitute proper business expenses.”
Accounting Expert Witness
John T. Imperiale has over 14 years of experience advising clients and managing engagement teams in the areas of forensic accounting investigations, financial reporting, asset tracing, financial fraud investigations, and quantification of damages. Imperiale is also experienced in accounting and auditor malpractice matters and related Generally Accepted Accounting Principles (GAAP) and Generally Accepted Auditing Standards (GAAS) guidance and damages.
Prior to joining Kroll, he was an associate in the audit practice of a national public accounting firm. He received his B.B.A in finance and accounting from Villanova University and his M.B.A. from the Fordham University Graduate School of Business.
Defendants argued that the Court should exclude Imperiale’s opinions because he merely “regurgitates” what Berris has told him, and because his opinions are not based on reliable principles or methods.
As to Imperiale’s methods, because De Tomaso did not have an expense policy in place, Imperiale used “professional accounting and taxation guidelines issued by the Financial Accounting Standards Board (‘FASB’) and the U.S. Internal Revenue Service (‘IRS’) in order to provide a general framework for what are generally and customarily accepted as valid business expenses.” Under these guidelines, Imperiale opined that “the principal analysis of whether a particular expense is considered to be a ‘business expense’ turns on if it is ‘common and accepted in your industry’ and ‘helpful and appropriate for your trade or business,’” as well as whether “the expense was incurred in ‘carrying out other activities that constitute the entity’s ongoing major or central operations.’”
Although the IRS and FASB guidelines do not directly control the issues in this case, absent a written expense policy, the jury has no benchmark against which to measure the reasonableness of Berris’ expenses. The Court agreed with Berris that insight into what constitutes a business expense under tax and accounting standards may assist the jury in drawing the line between business and personal expenses in this context, which in turn will assist the jury in determining whether Berris breached his fiduciary duty to De Tomaso by reimbursing certain expenses.
As for Defendants’ argument that Imperiale is merely bolstering Berris’ testimony, although he relies in part on Berris’ factual statements, the Court held that Imperiale does not merely “regurgitate[] what a party has told him,” but rather analyzes whether Berris’ expenditures are reasonably considered business expenses if Berris’ factual assertions are taken as true.
Held
The Court denied the Defendants’ motion to preclude the testimony of John Imperiale.
Key Takeaway:
The Court will put in place appropriate guardrails at trial to ensure that Imperiale isn’t simply acting as a mouthpiece for otherwise inadmissible evidence and isn’t vouching for Berris’ credibility. Imperiale should make clear that he was asked to assume the truth of the stated reasons for the various expenses, and that he is not testifying as to the veracity of those reasons.
Case Details:
Case Caption:
Berris V. Choi Et Al
Docket Number:
1:23cv4305
Court Name:
United States District Court for the Southern District of New York
This action arises from Michael’s Fabric’s LLC’s claim for loss of its inventory of high-end fabrics caused by water damage that was submitted under its insurance policy with Defendant Donegal Mutual Insurance Company. Ultimately, Plaintiff contended “Defendant has intentionally, maliciously and wrongfully denied the claim by Michael’s for replacement value of the inventory.”
David Chadick has been in the fabric business for almost his entire life, working for Rosen & Chadick, his father’s company, from 1983 through 2019, and his own company, David Chadick Fabrics and the Chadick Collection, from 2020 through the present. For nearly 30 years, he was the primary purchaser of all fabrics for Rosen & Chadick.
He has also provided fabric for myriad purchasers, including Broadway productions, Ralph Lauren stores and fashion shows, as well as a number of stores and hotels throughout New York City. Chadick also earned his degree in fashion merchandising in 1983 and is a member of a number of professional organizations concerning fabrics.
William W. Funderburke, CPA, CFE measures business interruption losses, inventory losses, manufacturing/ production losses, gross margin erosion, increased operational expenses, inefficiencies and theft losses for Rollins Accounting and Inventory Services, Inc., a forensic accounting firm that is well-known and highly regarded throughout the loss consulting community.
Defendant’s argument focuses primarily on the following facts: “Chadick never looked at the damaged fabrics to determine the age, condition, thread counts, labels, roll marks, or manufacturer marks. Chadick stated that he never reviewed [Plaintiff’s owner’s] retail prices listed by Michael’s Fabrics for its inventory of fabrics at the time of the water loss. He never reviewed any data from any of the fabric manufacturers to see what they charged for the fabrics. According to Chadick, he didn’t need to do any of the research normally done to determine the value or replacement costs of clothing fabrics, because he just knew the value of each.”
Defendant challenged the reliability of Chadick’s methodology and resulting opinion. However, Chadick valued the damaged fabrics after reviewing the list of fabrics provided by Plaintiff, which “contained a detailed description of the fabric, including the type of fabric, the country of origin, the designer of the fabric, and the yardage of the fabric.” Upon consideration of those factors, he priced the wholesale cost of the fabric based on his education and professional experience in valuing and purchasing fabrics.
Analysis
Plaintiff’s retail prices for the fabric inventory are not data that bear heavily on Chadick’s determination of value; indeed, retail pricing does not appear incredibly relevant, in the common meaning of the word, to the determination of the wholesale or replacement cost of the damaged inventory. And while the Court can imagine some potential benefit of physically examining the damaged fabrics, the Court is not persuaded that failure to look at or examine the damaged fabric undermines Chadick’s opinion, including his methodology and other foundational tenets.
There would, after all, appear to be scant value in reviewing thousands of yards of damaged fabric to opine on the value of that fabric in an undamaged state. As Chadick testified, “there was no need for me to see the rolls of fabrics because I know what every fabric is on the description with my knowledge of doing this for 41 years.”
William Funderburke
Unlike Defendant’s Chadick Motion, the Funderburke Motion did not seek exclusion under Federal Rule of Evidence 702, but instead for non-compliance with Local Rule 103.3 due to Funderburke and his employer’s purported financial interest in the outcome of the claim.
The nature of the relationship is as follows: On January 23, 2023, shortly after the loss at issue in this action, Plaintiff entered into a Public Adjuster Contract with Goodman-Gable-Gould (“GGG”), in which it agreed to pay GGG 10% “of the gross amounts adjusted or otherwise recovered as a result of the losses and/or damages sustained.”
GGG is owned by Molecular Holdings. Funderburke is employed by Rollins Accounting and Inventory Services. Rollins is also owned by Molecular Holdings.
Basically, Defendant contended that common ownership of GGG and Rollins meant that “Funderburke and his employer have a financial interest in the outcome of the claim” that ought to have been disclosed in Plaintiff’s Local Rule 103.3 disclosure statement.
Local Rule 103.3 requirement serves administrative purposes, including aiding the Court in consideration of its jurisdiction. Defendant offered no legal support for the draconian result it seeks; and the Court found no legal support for Defendant’s contention that purported non-compliance with Local Rule 103.3 serves as a basis for disqualifying an expert witness. Moreover, assuming without finding that Plaintiff has not complied with the rule by its non-disclosure of Funderburke, the error and impact is de minimis in nature, and the Court disagreed that such non-compliance calls for exclusion of Funderburke’s testimony.
Held
The Court denied the Defendant’s motions to exclude the opinions of expert witnesses David Chadick and William W. Funderburke.
Key Takeaway:
To sum up, Chadick reached his opinion on value after considering detailed descriptions of the fabrics at issue against the backdrop of his deep knowledge acquired over four decades in the relevant industry.
The Court is satisfied that Chadick’s proffered opinion, grounded in his education and professional experience, is based on and subject to the “the same level of intellectual rigor that characterizes the practice of an expert in the relevant field.”
Case Details:
Case Caption:
Michael’s Fabrics, LLC V. Donegal Mutual Insurance Company
Plaintiffs Michael Sutherland and Comfy Materials LLC sued Defendant Wellshow Machining Parts, Inc. for copyright infringement and false advertising relating to Defendant Wellshow’s Amazon listings of its competing products.
Per the Amended Case Management and Scheduling Order, Plaintiffs disclosed one expert witness, Charleen Purdy, on March 14, 2025, who will “opine on Plaintiffs’ economic losses in connection with their claims brought against Defendant, and to prepare any rebuttal analysis and report related to any alleged damages incurred by Wellshow as to its tortious interference claim.”
In her report, Purdy disclosed that discovery was ongoing at the time of her expert report, and therefore, she could not form an opinion on damages due to the outstanding requested discovery. Specifically, Plaintiffs’ expert report indicated that she had only received incomplete and insufficient documents from Defendant on March 7, 2025, and requested a list of additional documentation from Defendant “in order to determine, if any, the economic loss suffered by the Plaintiffs” and Defendant. Plaintiffs’ expert report also reserved the right to supplement her report following full and complete discovery.
Therefore, Defendant, Wellshow Machining Parts, Inc., sought an order precluding Plaintiffs from offering undisclosed expert testimony and precluding Plaintiff Michael Sutherland, corporate representatives, or employees of Defendant Comfy Materials, LLC from providing expert testimony under Federal Rule of Evidence 702.
Accounting Expert Witness
Charleen E. Purdy is a principal at Perzel & Purdy Forensic CPA’s, LLC. She is licensed as a Certified Public Accountant (CPA), credentialed as a Certified Valuation Analyst (CVA), Master Analyst in Financial Forensics (MAFF), and trained in Collaborative Divorce. Her experience includes services in the areas of forensic accounting, damage claims, business valuations, economic loss analysis, money laundering, shareholder disputes, trust and estate litigation, Ponzi schemes, personal injury claims, litigation support, and expert witness services.
Plaintiffs conceded that its expert witness disclosure is noncompliant with Rule 26(a)(2)(B) and Federal Rule of Evidence 702. As such, Plaintiffs’ expert report has no “facts or data” under Rule 26(a)(2)(B)(i)-(ii) because she could not properly form an opinion. Nevertheless, to comply with the Amended CMSO, Plaintiff’s timely disclosed Purdy to meet “the requirements of Rule 26(a)(2)(B) to the extent possible.”
Here, the Court found that even if Purdy’s expert report is insufficient under Rule 26(a)(2)(B), Plaintiffs still have time to supplement Purdy’s expert report within a timely manner under Rule 26(e).
As for the timing of the supplement, Rule 26(e)(2) states that for a Rule 26(a)(2)(B) expert (i.e., a retained expert), “any additions or changes to this information must be disclosed by the time the party’s pretrial disclosures under Rule 26(a)(3) are due.” Rule 26(a)(3)(B) provided that “these disclosures must be made at least 30 days before trial.” The CMSO has set the trial on November 3, 2025, and directs the parties to “meet the pretrial disclosure requirements and deadlines in Fed. R. Civ. P. 26(a)(3).” Thus, the Plaintiffs still have until October 4, 2025, to supplement Purdy’s expert report.
Analysis
To begin with, the Court found that any Rule 26(a)(2)(B) violation in Purdy’s disclosure on March 14, 2025, was substantially justified. First, Defendant’s motion did not make any argument about potential prejudice or surprise. Nor could Defendant make such arguments since, following Plaintiff’s timely expert witness disclosure on March 14, 2025, Defendant had the opportunity to provide the documents requested by Purdy and/or depose her before the discovery cut-off on April 28, 2025.
Additionally, Plaintiffs’ failure to provide a sufficient disclosure was harmless under Rule 37 because (1) Defendant has been on notice as to the subject matter of Purdy’s testimony since the expert witness disclosure deadline, and (2) any prejudice resulting from Plaintiffs’ insufficient disclosure can be cured by a supplemental disclosure.
Held
The Court denied Defendant Wellshow’s motion in limine to preclude the testimony Plaintiff’s expert Charleen Purdy.
Key Takeaway:
Substantial justification exists if there is justification to a degree that could satisfy a reasonable person that parties differ as to whether the party was required to comply with the disclosure request.
The Court found any violation of Rule 26(a)(2)(B) in Charleen Purdy’s disclosure was substantially justified.
Case Details:
Case Caption:
Sutherland V. Wellshow Machining Parts, Inc. Et Al
The Plaintiffs had been employed by the Metropolitan Government of Nashville and Davidson County, Tennessee. They alleged in their lawsuits that, on May 4, 2020, they were either terminated or demoted for discriminatory reasons, and brought claims asserting many of the same legal violations.
The Defendants filed two motions to exclude the testimony of Plaintiffs’ experts, Dr. Kenneth Smith and Dr. Robin Lovgren.
Accounting Expert Witness
Dr. Kenneth A. Smith has a PhD in Governmental Accounting and has worked as a Certified Public Accountant with local governments. Based on his published research and service on his local school board, he has specific expertise in public school district budgeting, accounting and financial management.
Dr. Robin Lovgren is an Associate Professor of Mathematics at Belmont University and has been teaching statistics for 16 years. She has overseen student statistical projects including a statistical regression analysis for the Human Resources Department of a local architectural and engineering firm recently.
She earned her Master of Science in Statistics and Ph.D. in Management Science from the University of Tennessee in Knoxville.
“Elimination of the Central Office positions was discretionary and not mandated by the budget process”; and
“The removal of these positions did not appear to follow the procedural and professional steps that commonly occur for budget-driven organizations.”
Metro filed a motion to exclude Smith’s opinions on the basis that they were irrelevant and unreliable, and therefore inadmissible.
Relevance
Metro first argued that Smith’s opinion that the Central Office reorganization at Metro Nashville Public Schools (“MNPS”) was discretionary is irrelevant, because school budgeting always involves a certain amount of discretion, and Metro has never contended otherwise. Rather, Metro stated, it has always acknowledged that the fiscal year budget for fiscal year 2021 “reflected MNPS’ business judgment and budgetary discretion.” It argued that the jury will not be called upon to decide whether the Central Office reorganization was mandated by law but, instead, whether the employment decisions were retaliatory or discriminatory. “So,” it concluded, “an expert opinion that budgeting is discretionary and that reorganization was not required by law has no bearing on any fact of consequence in this case.”
The Court disagreed. While there is no doubt that school budgetary decisions are largely discretionary, involving selections among many possible choices, Smith’s report suggested that Metro’s purported budgetary concerns were grossly overstated, given MNPS’ actual financial situation in 2020. The point of his opinion is that there were many other less controversial and more common areas within the budget from which Metro could have made up whatever deficit it believed it needed to cover, rather than taking the unusual step of cutting personnel first.
Reliability
Metro argued that Smith’s opinion that the Central Office reorganization did not “‘appear’ to follow the correct steps” is not reliable because it amounts to nothing more than speculation based on Smith’s “subjective notion about what should have or could have happened during [the] reorganization.”
Smith observed that: (1) “budget pressure at MNPS in 2020 was fairly similar to prior years”; (2) “there were a large number of reasonable, routine & available options to address the budget pressure”; (3) “most budget options went through a substantive technical review process”; and (4) “this change [i.e., the elimination of Central Office positions] did not follow a substantive technical review process.”
Therefore, Smith concluded that the removal of these positions did not appear to follow the procedural and professional steps that commonly occur for budget-driven reorganizations.
The Court held that Smith’s opinion that the “Central Office Reorganization was not mandated nor necessitated by the budget process” is adequately supported and not based on mere speculation.
Whether the Central Office Reorganization Resulted in Cost Savings
Smith stated in his report that reorganizations like that undertaken by MNPS “sometimes result in actual cost savings, sometimes they are budget neutral and sometimes [they increase rather than decrease] the budget outflows.”
Based on this statement, Metro argued that Smith cannot offer an opinion as to whether MNPS sought or achieved any particular cost savings through the Central Office reorganization.
The Plaintiffs did not address this argument, and it did not appear that Smith offered or intended to offer any such opinion, as he expressly disclaims knowledge of whether cost savings were either projected or achieved. Accordingly, Metro’s request to exclude such an opinion is uncontested. The Court granted this small aspect of Metro’s motion.
Robin Lovgren
Robin Lovgren was asked by the Plaintiffs to “determine whether the employment decisions made in 2020 at [MNPS] show a pattern of discrimination based on engagement in protected activity.”
She conducted a statistical analysis, based on information and documentation provided to her by the Plaintiffs that identified which employees were and were not known by Defendant Battle to have engaged in protected activity.
Based on the information she reviewed, Lovgren concluded that “in 2020 a disproportionately large number of employees engaged in protected activities were adversely affected by the reorganization of the Central Office.”
Statistical Analyses Based on the Number of Central Office Employees Who Had Engaged in Protected Activity
Reliability
Metro argued that Lovgren’s opinions are unreliable, because she failed to “support her opinions with sufficient facts or data to establish how many MNPS employees engaged in protected activity, or how many were adversely affected by the reorganization.”
Lovgren’s opinion regarding which employees were and were not known to have engaged in protected activity was based on Defendant Dr. Adrienne Battle’s deposition testimony.
The Court found it reasonable to assume that Battle, as Director of Schools for MNPS, understood the meaning of “protected activity” and knew what she was acknowledging when she stated she was not aware that any of the individuals had engaged in such activity. Moreover, it was undisputed that she knew the Plaintiffs had, in fact, engaged in protected activity. The Court concluded that Lovgren’s failure to define the term did not render her opinions unreliable.
Likewise, as a matter of common knowledge, it was clear that being demoted, fired, or not rehired after a reorganization are “adverse” employment events, and Lovgren’s failure to define “adversely affected” as used in her report did not render her opinions unreliable.
Relevance
Metro argued that, because Lovgren’s opinions—based on the number of employees who were not known to have engaged in protected activity—were not reliable, they did not “tend to show that any facts are more or less probable” and therefore must be excluded for lack of relevance. However, because the Court found the opinions reliable, this argument failed.
Statistical Analyses Based on the Number of Principals Who Had Engaged in Protected Activity
Metro raised a separate argument regarding Lovgren’s analysis of the relative numbers of school principals who did or did not suffer an adverse employment action and who were or were not known to have engaged in protected activity. Lovgren conceded that she did not have any information regarding school principals (other than Plaintiff James Bailey) who were known to have engaged in protected activity.
And in her explanation of the analyses regarding school principals, Lovgren stated: “The number of principals who engaged in protected activity was not known for this analysis so ‘what-if’ analyses were performed. The [analyses assume that] Bailey was the only principal who engaged in protected activity.”
Because Lovgren admittedly cannot point to any facts in the record to support her assumption that Bailey was the only principal who was known to have engaged in protected activity, the Court held that her statistical analysis relating to school principals are not reliable and must be excluded.
Held
The Court granted in part and denied in part the Defendants’ motions to exclude the opinions of Dr. Kenneth Smith and Dr. Robin Lovgren.
Key Takeaways:
An expert’s opinion, where based on assumed facts, must find some support for those assumptions in the record. Here, Lovgren’s opinion regarding which employees were and were not known to have engaged in protected activity was based on Defendant Battle’s deposition testimony.
Expert testimony should be supported by more than subjective belief and unsupported speculation and should be supported by good grounds, based on what is known. Smith’s opinion that the “Central Office Reorganization was not mandated nor necessitated by the budget process” is adequately supported and not based on mere speculation.
Case Details:
Case Caption:
Hayes V. Metropolitan Government Consolidated Of Nashville and Davidson County, Tennesse
This case concerns a maritime personal injury sustained by a Mexican citizen, who was legally working in the United States on a seasonal H-2B visa. To assess damages, Espinoza hired AsherMeyers, LLC, a dispute advisory and forensic accounting firm, to calculate his economic losses, which include his future loss of earning capacity, fringe benefits, and found.
Subsequently, partners Harold A. Asher and Jeffrey E. Meyers issued a joint report in which they opined that, based on Espinoza’s work-life expectancy of 7.5 years and his pre-incident earning capacity of $29,105 per year, his “loss of economic capacity” — which includes lost wages, fringe benefits, and found — totals $274,082.
In response, Westbank Fishing, LLC filed an instant motion in limine seeking to exclude or limit Asher and Meyers’s testimony, arguing that it is speculative because it does not account for the fact that Espinoza was a seasonal worker who had an H-2B visa for the 2023 fishing season.
Accounting Expert Witness
Harold Alan Asher is a Certified Public Accountant. He is a member of the American Institute of Certified Public Accountants, its Forensic and Valuation Services Section and the Louisiana Society of Certified Public Accountants.
Notably, Asher was designated a Certified Fraud Examiner by the Association of Certified Fraud Examiners in February 1995 and a Certified Valuation Analyst by the National Association of Certified Valuators and Analysts in December 1995.
Throughout his career, he has served as a consultant and testified in a wide range of complex matters including commercial damages, lost profits, valuations fraud, personal injury damages, matrimonial disputes, business interruption claims, accounting malpractice, securities and FINRA disputes, breach of fiduciary duties and intellectual property infringement.
Jeffrey E. Meyers was designated a Certified Valuation Analyst by the National Association of Certified Valuators and Analysts in May 2009 and a Master Analyst in Financial Forensics cosponsored by the National Association of Certified Valuators and Analysts as of July 2010.
In addition, the Association of Certified Fraud Examiners designated Meyers a Certified Fraud Examiner in February 2011. Meyers is a member of the National Association of Certified Valuators and Analysts, Association of Certified Fraud Examiners and the American Statistical Association.
He is routinely involved in a variety of complex issues relating to commercial damages, lost profits, personal injury damages, matrimonial disputes, business interruption claims, intellectual property impairment and fraud.
In this case, Westbank did not challenge Asher’s or Meyers’s qualifications or the methodology they used to formulate their opinions. Instead, it argued that the experts improperly assumed Espinoza would have continued working in the United States, pointing to Westbank’s own inability to secure H-2B visas every year.
However, this argument overlooked the fact that Espinoza had previously worked legally in the U.S. under H-2B visas for other employers. The mere possibility that Westbank might not have been able to hire him in a future year did not preclude the likelihood that another fishing company could have done so.
Moreover, Westbank failed to cite — and the Court was unaware of — any authority holding that an economic expert’s testimony must be excluded or limited as speculative simply because it assumed a foreign worker, with a documented history of lawful U.S. employment, could continue working legally in the United States in future years.
After considering Asher and Meyers’s report and credentials alongside Westbank’s objections, the Court concluded that their education and experience qualified them to offer opinions on Espinoza’s future economic losses.
Held
The Court denied Westbank’s motion in limine to exclude or limit the testimony of Harold A. Asher and Jeffrey E. Meyers.
Key Takeaway:
The Court saw no reason to disqualify the experts’ projections. In fact, it found no precedent requiring exclusion of economic loss testimony simply because it assumes that a legally employed foreign worker could stay in the workforce.
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.”
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.
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’sQualifications
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’sAlleged 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:
Plaintiff Kimberly Breuil claimed that she was injured in a motor vehicle accident that took place on October 8, 2021.
Breuil claimed that her injuries have made it painful to look downward and difficult to lift objects. As a result, she is seeking future lost wages and diminished earning capacity totaling between $483,273 and $1,085,644. She alleged that these injuries forced her to resign from her job at the United States Postal Service and take a lower-paying job at Pizza Hut or a similar employer for the remainder of her career. Breuil asserted that she has already experienced, and will continue to experience, loss of income and earning potential.
Brooke A. Liggett is a Certified Public Accountant, a Master Analyst in Financial Forensics, a Certified Valuation Analyst, and is also certified in Financial Forensics. She is the owner of Liggett Forensic Accounting and Economics.
She specializes in calculating economic damages in personal injury and wrongful death cases, as well as in business-related economic damages.
Dr. Brett Anthony Miller is a board-certified orthopedic surgeon and sports medicine specialist. Miller finished his undergraduate education at Washburn University in Topeka, Kansas, before earning his Doctor of Medicine degree from the University of Kansas School of Medicine in Kansas City, Kansas. There, he went on to complete both his internship and orthopedic surgery residency at the University of Kansas Medical Center.
Miller joined Orthopedic and Sports Medicine Center in 2004. At the practice’s office in St. Joseph, Missouri, Miller offers specialized care for sports-related and acute injuries using evidence-based medicine and modern operative techniques, including shoulder arthroscopy.
Brendan P. Bourdage holds an M.S. in Kinesiology from California Polytechnic University, Humboldt. He has successfully completed numerous continuing education courses in crash analysis, collision reconstruction and investigation, as well as other training related to motor vehicle accidents. He holds licenses and registrations in engineering, traffic accident reconstruction, and functional movement, and has published articles and presented seminars on these topics.
Liggett, a Certified Public Accountant, initially calculated that the Plaintiff’s change in employment had resulted in a lifetime loss of earnings between $488,273 and $1,085,644.
However, the Plaintiff clarified that Liggett did not offer any opinions on whether the accident caused the Plaintiff to leave her job at the United States Postal Service (USPS), whether she could have continued working there, or on any other causation-related issues. Instead, Liggett’s role was limited to comparing the Plaintiff’s former earning capacity at USPS to her income at the time. She relied on the Plaintiff’s own statements about her inability to continue working at USPS and based her calculations on the Plaintiff’s then-current job and income.
Moreover, Liggett explicitly stated that she was not a vocational expert and was not offering vocational opinions. Her testimony was confined to calculating the financial losses related to earning capacity and retirement benefits, which was within the scope of her expertise as a CPA. Additionally, the Plaintiff asserted that Liggett had no opinions about whether the Defendants caused the Plaintiff’s injuries or whether those injuries led to a reduction in earnings.
Consequently, the Plaintiff contended that, if the jury concluded the Defendants were responsible for the Plaintiff’s job loss, Liggett’s testimony would assist the jury in determining the amount of damages. Ultimately, the Court found that Liggett was qualified to testify about present value calculations. Any concerns raised by the Defendants could be addressed through cross-examination or the presentation of contrary evidence. Importantly, the record contained no indication that Liggett intended to offer opinions on causation or vocational matters, and any such testimony would not be permitted. She was allowed to testify strictly in her capacity as an accountant, relying on admissible evidence.
Brett Miller
Miller, an orthopedic surgeon, conducted an independent medical examination of the Plaintiff. The Defendants sought to prevent him from offering any opinions on the Plaintiff’s mental health conditions allegedly caused by the accident, arguing that he is not qualified to do so. In response, the Plaintiffs stated that they have withdrawn any opinions Miller may have had regarding the Plaintiff’s mental health or depression. Therefore, they argued, the Defendants’ motion is now moot.
In reply, the Defendants maintained that the Court should formally exclude any such opinions, since Miller, as an orthopedic surgeon, is not qualified to opine on mental health issues. The Court noted that the Plaintiffs had clearly stated—both in their filings and on the record—that Miller would not offer any testimony or opinions related to the Plaintiff’s mental health or depression.
If the Plaintiffs later attempt to introduce such opinions from Miller at trial, the Court will address any objections from the Defendants at that time. However, since the Plaintiffs have already withdrawn these opinions, they will not be allowed at trial. As a result, the motion to exclude is denied as moot.
Brendan Bourdage
The Defendants argued that Bourdage was not qualified to offer expert testimony on several issues, including the speed of impact during the collision, the change in velocity of the Plaintiff’s vehicle, the effect of the collision on the Plaintiff, and the Plaintiff’s injuries. Specifically, they claimed that Bourdage was not a medical expert and, therefore, should not have been permitted to testify about the Plaintiff’s injuries or their causes. Moreover, they contended that he lacked the necessary engineering background to provide biomechanical opinions.
In addition, the Defendants moved to exclude Bourdage’s opinions entirely, asserting that his conclusions were not sufficiently connected to the facts of the case and would not assist the jury in resolving any factual disputes. Furthermore, they challenged the reliability of Bourdage’s methodology.
After reviewing Bourdage’s CV and expert report, the Court found that the Defendants’ concerns were more appropriately addressed through cross-examination. Accordingly, Bourdage was permitted to present the opinions set forth in his report regarding how rear-end collisions could cause injuries, along with the general mechanisms and contributing factors involved in such injuries. However, because Bourdage was not a medical doctor, the Court ruled that he could not—and would not—be allowed to testify about the specific injuries the Plaintiff may have suffered in this collision.
Held
To begin with, all rulings by this Court on Daubert motions are preliminary in nature. The Court’s rulings are subject to change based on the evidence and testimony presented during trial.
The Court denied the Defendants’ motion to exclude the testimony of Brooke Liggett.
The Defendants’ motion to exclude the testimony of Dr. Brett Miller was denied as moot.
The Court denied the Defendants’ motion to exclude the testimony of Brendan Bourdage, PhD.
Key Takeaways:
There is nothing in the record to suggest that Liggett has any opinion about causation or any vocational opinions. Liggett may testify as an accountant relying on other admissible testimony.
Bourdage is not a medical doctor and cannot, and will not, be allowed to testify as to what injuries this Plaintiff actually suffered in this collision.
