The Plaintiffs in this putative national class action are insureds who filed “total loss” claims for the actual cash value (“ACV”) of their totaled vehicles under their automobile insurance policies sold by State Farm Mutual Automobile Insurance Company or State Farm Fire and Casualty Company (collectively, “Defendants” or “State Farm”). Plaintiffs challenged State Farm’s application of a “typical-negotiation adjustment” (“TNA”) in the calculation of the ACV of Plaintiffs’ vehicles, which reduced Plaintiffs’ total loss payments based on the average difference between the list price and a lower price that a dealer would theoretically accept.
Alleging that this methodology resulted in undervalued payments, Plaintiffs brought various claims, including breach of contract, breach of the covenant of good faith and fair dealing, fraudulent concealment, fraudulent inducement, unjust enrichment, and violations of the Illinois Consumer Fraud and Deceptive Business Practices Act (“ICFA”) and various other state consumer protection statutes.
Defendants filed a motion to exclude the testimony of Kirk Felix, Plaintiffs’ expert on used car pricing trends.
Automotive Industry Expert Witness
Kirk Felix spent the first 13 years of his career managing the service and parts departments of Honda, Acura, and Toyota dealerships; from 1999 until his 2022 retirement, Felix served as a moderator and consultant at NCM Associates, Inc., where he facilitated meetings—called 20 Groups—for cohorts of non-competing dealerships to “discuss industry trends and best practices for operating efficient, profitable dealerships.”
Over the course of those two decades, those discussions included over 300 dealerships across 45 states, including Chevrolet, Chrysler, Ford, Nissan, and Honda dealers, two fixed operations director groups, and an Independent Auto Auction group.
State Farm first argued that Felix is unqualified to “opine on the pricing and selling of used vehicles, including topics like dealerships’ pricing strategies, consumers’ negotiating behavior, and the Autosource methodology at issue in this case.”
Felix has never sold a used car, and he admitted that he has never been involved in the used car business. Though Felix occasionally gave information about a car’s reconditioning costs to those individuals at dealerships in charge of used car pricing (during his work from 1986 to 1999), he has never been involved in pricing used vehicles for sale, nor has he managed those who do.
Here, Felix’s experience comes from the conversations he facilitated at NCM. Yet Felix’s experience with NCM involved meetings only three times a year. Felix’s involvement included putting together the agenda for the meeting after consulting with the group’s executive committee, and then running the meetings alongside the chairman, but he did not take notes at the meetings. It is hard to square this experience with the scope of Plaintiffs’ proposed testimony, which seeks to authoritatively describe the process for pricing and selling used automobiles.
Basically, Felix admitted to not knowing the number of car dealerships in any state, what percentage of used car dealerships in any state market themselves as no haggle dealerships, what percentage of dealerships in any state will negotiate on the price of a used car, or how many car dealerships have eliminated negotiation.
Felix never conducted a survey of dealers regarding their pricing practices ahead of this litigation, though he says a survey probably happened during his time at NCM, even if he cannot recall when or what the results were.
Upon a review of the full record, the Court agreed that Felix has not demonstrated the requisite qualifications.
B. Reliability of Felix’s Testimony
Here, Felix has freely admitted that his methodology for opining on the used car pricing and sales market consists of reflecting upon memories of his experiences with NCM.
Yet NCM’s moderation topics were not even specific to used cars. Rather, the business model involved gathering approximately 20 dealers representing the same manufacturer (i.e. Toyota), compiling 5-7-page financial statements from each of them, and then consolidating the information into a 30-plus page financial comparison document to then discuss in a meeting.
Even if used cars were discussed at every meeting as a “critical part” of the car business, as Felix testifies, general reference to thrice-annual meetings does not demonstrate the “soundness and care” expected of experts on the facts of the case at hand.
Felix’s planned testimony is that “vehicles are priced to market and used car dealers do not deviate down from the advertised cash price with limited exceptions.” In depositions, he has estimated that this is the case around 90 percent of the time. This, however, is not a view he can back up by data but rather, it is a product of the information he heard “over 23 years with NCM clients.”
While it is true, as Plaintiffs contended, that Felix need not commission a study himself to testify to how often vehicles are sold for less than listed price, Felix must still explain how he reaches his conclusions.
The same goes for Felix’s assertion that Autosource and used car dealers use the same methods to assess the value of used automobiles other than State Farm’s use of the TNA. The fact that these inputs share labels, however, does not necessarily equate to the inputs themselves mirroring one another.
With an eye for sufficiency and application of methodology, the Court found that Felix’s testimony misses the mark.
Held
The Court granted Defendants’ motion to exclude the testimony of Kirk Felix.
Key Takeaway
Plaintiffs have not shown by a preponderance of the evidence that Felix’s testimony is “based on sufficient facts or data” and “the product of reliable principles and methods.” In other words, the Court found that Felix’s application of his methodology to the circumstances of the case have not met the Rule 702 threshold, in accordance with the 2023 amendments.
Please refer to the blog previously published about this case:
Plaintiff filed this lawsuit to recover the $425,000 investment it made into the corporate Defendant, No-H20 USA, Inc., which was the product of fraudulent misrepresentations made by Defendant O’Brien both verbally and in writing pertaining to the Company’s performance and ownership of critical intellectual property. O’Brien was at all material times the CEO of the Company. More than two years after O’Brien’s initial verbal misrepresentations, Plaintiff’s managing member came to learn that he did not own the intellectual property and in addition, the Company was in a financial shambles due to O’Brien’s misuse of corporate funds.
This is now a securities fraud case against the individual Defendant Emmet O’Brien, for on September 5, 2023, a Clerk’s Default was entered against the Company.
Robert Barton has over 25 years of operational experience in the vehicle rental, automotive, and travel industries. He is a senior vice president and general manager at The Hertz Corporation, the world’s largest car rental company. He oversees the global operations and performance of the Dollar and Thrifty brands, as well as the franchise footprint, with a $2 billion P&L responsibility.
To begin with, Plaintiff’s remaining claims are federal and state law securities fraud claims. In order to be relevant, Barton’s testimony needs to address one of the elements of Plaintiff’s claims. Plaintiff asserted that Barton’s testimony is not relevant to the issues before the Court and, thus, will not assist the jury in understanding the evidence or facts in issue.
In his report, Barton set out his instructions as follows:
“My analysis was to focus on the legitimacy of the investment and business practices, as well as the nature of the communications and actions taken by the parties involved. My task was to evaluate the impact of the Plaintiff’s actions on No-H2O’s franchise network, scrutinize the Franchise Disclosure Document (FDD), investment deck, franchisor evaluations, growth projections, and specific email communications.”
In short, the Report concluded: “The Plaintiff’s action and claims have adversely impacted the No-H2O franchise network, inconsistent with the investment deck, and industry standard.”
O’Brien responded that Barton is qualified, Barton’s opinions are grounded in standardized and recognized practices within franchise operations analysis, and his opinions provide essential context to Plaintiff’s allegations. However, the Court noted that Plaintiff has not questioned Barton’s qualifications or his methodology. Plaintiff only questions the relevance of Barton’s opinions. The Court fails to see, and O’Brien has failed to show, how Barton’s opinions—that Plaintiff’s action and claims have adversely impacted the No-H2O franchise network and are inconsistent with the investment deck and industry standard—are relevant to whether Defendants made false or misleading statements to Plaintiff upon which Plaintiff relied when deciding whether to invest in the Company.
Held
The Court granted Plaintiff’s motion to exclude the expert testimony of Robert Barton.
Key Takeaway:
Based on Barton’s stated instructions and his conclusion, Plaintiff maintained that nothing in Barton’s Report is relevant to what Plaintiff must prove to prevail at trial and would only serve to mislead or confuse the jury. The Court agreed.
Addendum (September 15, 2025):
This article was originally based on the Court’s July 31, 2024 order in Ae Capital Group LLC v. No-H2O USA, Inc. et al., which discussed expert testimony regarding the legitimacy of certain investment and business practices and referenced Defendant Emmet O’Brien.
Subsequently, on August 23, 2024, the Court entered an order dismissing all claims against Mr. O’Brien. This update is published to reflect that Mr. O’Brien is no longer a defendant in this matter.
Plaintiff, Racine Car Dealer, LLC, (“Racine” or “RCD”) a former Hyundai and Genesis motor vehicle dealer, claimed that Defendant, Hyundai Motor America(“HMA”) deceived it, withheld information, and altered the rules and policies of Hyundai’s dealer incentive program without notice. This alleged conduct compelled the Plaintiff to terminate the Genesis side of its dealership before completing the sale of its franchise to a third party. The Plaintiff proceeded to trial, asserting claims under the Wisconsin Motor Vehicle Dealer Law, the Automobile Dealers’ Day in Court Act, and Wisconsin contract law.
Racine attempted to hold HMA accountable for its failure to meet the explicit “exclusive facility” requirement outlined in HMA’s Hyundai Accelerate Incentive Program. Due to this non-compliance, Racine did not qualify for incentive payments under the program. Racine asserted that this failure to qualify for Accelerate Incentive Program payments “coerced” the dealership into terminating its Genesis franchise, which was necessary to finalize the sale of the dealership to a third party, Zeigler Auto Group. Racine claims that the failure to qualify for incentives resulted in a $2 million reduction in the purchase price during the sale to Zeigler. Racine asserted that, as part of the Hyundai Accelerate Incentive Program, HMA “indirectly” violated Wisconsin Motor Vehicle Dealer Law § 218.0116(1)(i) by canceling Racine’s Genesis franchise.
Defendants had disclosed an expert, Sharif Farhat, who issued a “dealer network analysis” report on October 24, 2023. In his report, Farhat opined that (1) it was reasonable for Defendants to support dealer efforts in improving brand representation through programs like Accelerate Incentive Program; (2) RCD’s claims alleged that the Accelerate Program disadvantaged small market Hyundai dealers were unsupported, speculative, and internally inconsistent; and (3) RCD’s claim suggested that HMA through their Accelerate Incentive Program “coerced” dealers into terminating their Genesis franchise was misleading and incorrect.
Plaintiff asserted that Farhat’s opinions would not aid the jury in understanding the evidence or determining relevant facts. Additionally, the Plaintiff argued that these opinions were not based on sufficient facts or data and were not derived from reliable principles or methods. The opinion was sought to be excluded for three primary reasons. First, it was deemed irrelevant to any issues related to the Plaintiff’s claims. Second, even if relevant, determining the reasonableness of Defendants’ support for dealer efforts did not necessitate expert testimony. Third, the Plaintiff contended that Farhat’s report lacked any reasoning or methodology supporting the testimony, rendering it scientifically unreliable.
Defendant Hyundai Motor America formally requested motions in limine, seeking to prevent Plaintiff Racine Car Dealer, LLC from making references, through argument, testimony, questioning, statements, documents, or any other means, to other lawsuits allegedly involving HMA. Additionally, HMA sought a motion precluding Racine from introducing as evidence or referring to a November 4, 2020, letter authored by the New York State Automobile Dealers Association (“NYSADA”). Furthermore, HMA requested a motion in limine to block Racine from presenting any evidence, argument, or testimony related to or referencing hearsay news articles concerning HMA.
Automotive Industry Expert Witness
Sharif Farhat is the Vice President of Expert Analytical Services at Urban Science Applications, Inc. He received his Bachelor of Science degree in Computer Science with minors in Mathematics and Business Administration from Michigan State University and then obtained his Masters degree in Business Administration from the University of Detroit. His specialities include analytical techniques to evaluate programs, policies, and metrics to assess dealer performance for the automotive industry.
Discussions by the Court
The Plaintiff argued that the testimony and the October 24, 2023, report of the defense expert, Sharif Farhat, should be excluded for two main reasons: (1) they would not assist the jury in understanding the evidence or determining a fact in issue, and (2) the opinions were not based on sufficient facts, data, the product, or reliable principles or methods. The admissibility of expert opinion was guided by Rule 702, interpreted by the Supreme Court to allow expert testimony that is both reliable and relevant (Daubert v. Merrell Dow Pharmaceuticals, Inc.; Fed. R. Evid. 702). The Seventh Circuit condensed the requirements of Rule 702 into a three-part test, compelling district Courts to evaluate the proffered expert’s qualifications, the reliability of the expert’s methodology, and the relevance of the expert’s testimony (Gopalratnam v. Hewlett-Packard Company, 877 F.3d 771, 779 (7th Cir. 2017)).
Initially, no expert reports were admitted at trial due to being largely considered classic hearsay. However, certain portions, such as demonstrative charts and graphs, 1006 summaries, and other documents, were allowed to be presented to the jury, if not separately admitted into the record under the Federal Rules of Evidence. Furthermore, the Plaintiff did not challenge Farhat’s qualifications but contested the relevance and reliability of his opinions. Farhat, an expert in the automotive dealership industry, asserted in his report that (1) it was reasonable for the Defendant to support dealer efforts to enhance brand representation through the Accelerate Incentive Program; (2) the Plaintiff’s previously rejected claim of the program disadvantaging small market Hyundai dealers was contrary to market data; and (3) the Plaintiff’s claim that the Defendant, via the Accelerate Incentive Program, coerced dealers to terminate their Genesis franchises was incorrect. The Defendant countered by stating that Farhat had never been excluded as an expert in any matter, followed an eight-step methodology in forming his opinions, and relied on various sources, including deposition transcripts, exhibits, summary judgment briefing, program documents, communications to the dealer network, sales and dealership data, automotive registration data, and information on program payments and accruals to Wisconsin dealers.
The Defendant stated that it would not present the second opinion of the expert, rendering the Plaintiff’s motion regarding that opinion granted as unopposed. Consequently, only opinions 1 and 3 remained, their relevance depending on the requirements for proving Plaintiff’s exclusive facilities claim under the Wisconsin Motor Vehicle Dealer Law. The Court was unconvinced that the first and third opinions were reasonably in dispute, and if contested, both could be considered legal questions for the Court. Particularly regarding the third opinion, the parties’ factual positions continue to be two ships passing in the night. Legally, the Defendant asserted that the Plaintiff must prove that the Defendant unreasonably required or coerced the provision of exclusive facilities, while the Plaintiff argued it only needed to prove that the Defendant “coerced” or “attempted to coerce,” with the burden shifting to the Defendant to demonstrate reasonableness. Due to these disputes and lack of clarity, which were likely to impact jury instructions and the verdict form, the Court reserved judgment on the remaining portion of the motion regarding the relevance of Farhat’s first and third opinions for further discussion with the parties at the final pretrial conference.
The Plaintiff contended that an email, sent by Karen Mendez to “All Hyundai Dealers” on January 10, 2020, announcing the Accelerate Incentive Program and its terms and conditions, should be excluded as irrelevant unless credible evidence demonstrated its receipt by Racine Car’s general manager, James Bozich, or any other personnel at Racine Car. Alternatively, the Plaintiff argued that the Defendant should be barred from referencing or implying that the email was distributed to all dealers because: (1) there was no group email address linked to “All_Hyundai_Dealers@hmausa.com;” and (2) the original email containing the actual dealer emails in the blind copy recipient field had been deleted.
Initially, the email was considered relevant to the factual dispute between the parties regarding whether James Bozich or any other Racine Car personnel were adequately informed about the Defendant’s Accelerate Incentive Program and the overall reasonableness or coerciveness of HMA’s conduct. Despite Bozich maintaining that he never saw the email due to it being sent to his old “homerunautogroup.com” email instead of his “sbcglobal.net” email, the Court noted in its summary judgment opinion that the Defendant had presented evidence indicating Bozich was on the email distribution list. The Plaintiff emphasized the inability to confirm the recipients of the email, but the Defendant referred to Karen Mendez’s testimony, stating that she habitually blind copied all-dealer emails to specific dealer emails in a “regional dealer directory” produced during discovery. Mendez mentioned that Bozich’s email would have been included if it was in that directory. Despite the uncertainty, Defendant argued that Bozich’s “homerunautogroup.com” email was on the “Current Dealer Email List as of 9.2020.” Defendant also produced an “Email Distribution List” dated January 6, 2020, including Bozich’s “sbcglobal.net” email. The Defendant further claimed that Mendez sent another email about the program 21 days later to the same “All Hyundai Dealers” group, including Bozich and Basich as recipients, specifically to Bozich’s preferred “sbcglobal.net” email address. Additionally, the Defendant anticipated that Racine Car’s then-acting general manager, Adrian Basich, would testify that he was aware of the January 10, 2020, email and its requirements, and that Bozich regularly used the “homerunautogroup.com” email during his tenure at Racine Car.
Therefore, the Plaintiff’s motion was based on a disputed material fact. The argument that the email could be “highly prejudicial” highlighted the contentious nature of whether Bozich or others at Racine received the email. The Court determined that these issues, including the credibility of the parties’ evidence, were matters for the jury to decide. Consequently, the Plaintiff’s motion to exclude the email or limit testimony concerning it was denied.
Defendant argued that the Plaintiff should be barred from presenting evidence and arguments related to other lawsuits against Hyundai Motor America, asserting that such evidence would be irrelevant and excessively prejudicial. The Court granted this motion as it remained unopposed by the Plaintiff.
Defendant argued that the Plaintiff should be prevented from presenting or referencing a November 4, 2020, letter from the New York State Automobile Dealers Association criticizing the Accelerate Incentive Program. The Defendant contended that the letter was inadmissible hearsay, irrelevant, and unduly prejudicial. The Court granted this motion as it went unopposed by the Plaintiff.
Defendant asserted that the Plaintiff should be barred from presenting evidence or arguments related to news articles about Hyundai Motor America, citing their irrelevance and inadmissibility as hearsay. The Court granted this motion as it remained unopposed by the Plaintiff.
Held
1) Plaintiff’s motion in limine to exclude the opinions and report of Defendant’s expert Sharif Farhat was granted in part. Farhat’s second opinion was granted as it was unopposed. The Court reserved the ruling on Plaintiff’s motion in limine in part, Farhat’s first and third opinions were reserved for further discussion with the parties at the final pretrial conference. However, Plaintiff’s motion in limine to exclude the January 10, 2020, email or limit references regarding the email was denied.
2) Defendant’s motion in limine to exclude reference to or evidence of other lawsuits was granted as unopposed. Defendant’s motion in limine to exclude New York Lobbying Group’s letter criticizing Defendant’s Accelerate Incentive Program was granted as unopposed. Defendant’s motion in limine to exclude hearsay news articles was granted as unopposed.
3) The Court has not arrived on an outcome for this case since the remaining issues involved in this case still await resolution.
Key Takeaways
In the legal proceedings between Racine Car Dealer, LLC (Racine) and Hyundai Motor America (HMA), expert testimony played a crucial role in shaping the narrative of the case. Racine sought to hold HMA accountable for alleged deceptive practices, withholding information, and changes to the dealer incentive program. The defense expert, Sharif Farhat, issued a “dealer network analysis” report opining on various aspects, including the reasonableness of HMA’s support for dealer efforts and disputing Racine’s claims of program disadvantages and coercion. Racine challenged the admissibility of Farhat’s opinions, arguing they lacked relevance and reliability. The Court acknowledged the dispute over exclusive facilities claims, and the relevance of Farhat’s opinions became a focal point during the trial, likely to affect the jury instructions and verdict form.
