Over sixty Plaintiffs alleged that Defendant Lockheed Martin Corporation’s weapons manufacturing facility in Orlando released toxic chemicals that contaminated the air, soil, and groundwater, leading to various injuries among the Plaintiffs. The instant case formed a part of a group of related toxic tort cases.
Following a complex history during the dispositive motion stage, the Court resolved the general causation issues. It then shifted focus to specific causation for the limited number of remaining Plaintiffs.
Michael Ballenger began his career with Trinity in Maryland, where he gained significant experience navigating the stringent environmental requirements of the Mid-Atlantic and Northeast. He has developed a specialty in air permitting and compliance by working with both industry and government to implement business objectives while conforming to complex environmental regulations such as MACT and Nonattainment New Source Review.
P. Kristine Davies is a Principal Consultant in Trinity’s Salt Lake City Office. She specializes in regulatory applicability analysis, preparation of emission inventories, Nonattainment New Source Review (NNSR)/Prevention of Significant Deterioration (PSD) permit applications, Title V operating permit applications, and Maximum Achievable Control Technology (MACT) compliance. Since joining Trinity, she has assisted in permitting and compliance projects for facilities in every state and U.S. territory.
Rene’ Salazar holds an undergraduate degree in Microbiology, and Master’s and Doctor of Philosophy degrees in Public Health, both with specialization in the discipline of Industrial Hygiene and has 30+ years of experience in the field of industrial hygiene, both academically and professionally.
Stephen Emsbo-Mattingly possesses more than 30 years of applied chemistry experience. He specializes in the source identification of chlorinated organics, solvents, surfactants, petrochemicals, carbonization byproducts, paper mill wastes, heavy metals, metallurgical wastes, petroleum, fuels, tar, combustion byproducts, soot, ash, slag, dusts, emissions, coke, coal, radiological materials, hydraulic oils, lubricants, asphalts, pesticides, petrochemicals, dielectric fluids, Askarels, and other industrial products in various environmental media.
Shahrokh Rouhani is an environmental scientist and professional engineer, a tenured university professor, and a consultant in environmental statistics, modeling, and data analysis. He holds a Ph.D. in Environmental Sciences (1983) and an S.M. in Environmental Engineering (1980), both from Harvard University, as well as a B.S. in Civil Engineering and B.A. in Economics from the University of California, Berkeley (1978).
First, Ballenger, an air quality engineer, is one of Lockheed’s rebuttal experts to Ranajit Sahu. Plaintiffs filed a motion to exclude his testimony, arguing essentially that Ballenger merely challenges the reliability of Sahu’s testimony rather than using reliable methodology of his own. But Ballenger’s opinions are admissible for the same reasons Sahu’s are: both sides disagree about the correctness of Sahu’s inputs on the air model and the accuracy of the emissions data provided by Lockheed, a classic clash of two qualified expert views the jury will have to weigh and decide.
Kristine Davies
Davies is another air quality engineer rebutting Sahu’s and other testimony. Plaintiffs filed a motion to exclude her testimony largely for the same reasons as Ballenger—and for the same reasons, her rebuttal testimony is largely admissible.
That said, the Court held that Davies’ report raises some red flags that can only be addressed fully in context at trial. As an expert, Davies may not testify that facts she was instructed to assume are true—she may only testify that she relied on certain facts as true in forming her conclusions.
To the extent that certain sections of her report purport to introduce fact testimony, she will not be allowed to give improper lay testimony about facts for which she lacks personal knowledge, nor will she be allowed to indiscriminately merge together fact and expert testimony.
If Davies did garner personal knowledge of information from Lockheed employees, that information (and the source of the information, including from whom and when it was received) either must have been fully disclosed in her report or must have been provided to Plaintiffs through discovery for her to be permitted to testify to those facts.
This trial will not devolve into a game of gotcha: the facts are the facts and they must be known to both sides, and the experts can then interpret them as they may. To the extent Plaintiffs are concerned that Davies’ opinions lack support or stray beyond the scope of her expertise, the Court held that they can cross her on those grounds or present contrary evidence.
But to the extent Davies begins giving improper undisclosed fact testimony, Plaintiffs should contemporaneously object and the Court will be on guard to limit it.
Rene Salazar
Plaintiffs later filed a motion to exclude his testimony because he criticized Plaintiffs’ experts for not performing real-time exposure monitoring—which he purportedly later acknowledged to be impossible.
The Court held that Salazar may properly point out what he perceives to be flaws in Sahu’s methodology; beyond that, holes in his own conclusions are material for Plaintiffs’ cross.
Stephen Emsbo-Mattingly
Plaintiffs filed a motion to exclude his testimony on several grounds. First, they complain about several issues with sampling data he took from a pilot study, arguing that he did not sample deep enough for subsurface soil and sampled from present day but extrapolated to historical conditions. But Emsbo-Mattingly sufficiently explained how he was using the current data to analyze historical emissions and why he sampled the way he did.
The Court held that Plaintiffs’ other arguments against Emsbo-Mattingly are similarly unpersuasive—they simply disagree with his presumptions and the premise of his study, but a dispute about the correctness of his conclusions does not make his methodology unreliable.
Dr. Shahrokh Rouhani
Plaintiffs filed a motion to exclude Rouhani’s testimony purportedly for unreliable methodology—focusing on their competing theory of the case pertaining to historical emissions—but again, the Court held that their attacks amount to nothing more than disagreement with his conclusions and the bases therefore rather than Daubert challenges.
Held
Plaintiffs’ Daubert motions to exclude Michael Ballenger, Kristine Davies, Dr. Rene Salazar, Stephen Emsbo-Mattingly, and Dr. Shahrokh Rouhani are denied.
Key Takeaway:
Expert testimony may be admitted only if: (1) the expert is qualified; (2) the methodology is reliable; and (3) the testimony is helpful. The proponent of the expert must establish the opinion is admissible, but need not prove it is correct.
The different experts in this case have different methods of trying to get at historical exposure data, and the perceived flaws in each approach are fodder for cross, not exclusion.
Please refer to the blog previously published about this case:
Plaintiff American Power, LLC (“AMP”) is a trucking-logistics company headquartered in Dayton, Ohio. According to the Complaint, Plaintiff invested in and loaned $450,000 to Defendant Dektrix LLC, a transportation-servicing company headquartered in Utah. The Complaint charges that the investment and loan were fraudulently obtained and ultimately worthless.
Plaintiff sought to impose liability upon Dektrix and various other business entities and individuals for purported violations of federal securities laws and state common law.
Dektrix sought to exclude Randall S. Kuvin, CPA, ABV, CFF as an expert. Dektrix presented two arguments in their motion to exclude the testimony of Kuvin: (A) AMP failed to comply with Fed. R. Civ. P. 26; and (B) Fed. R. Evid. 702 and Daubert bars the expert’s testimony.
Accounting Expert Witness
Randall Kuvin has been with Flagel Huber Flagel almost 40 years and served as Managing Partner until 2023. Though he works across all aspects of business, Kuvin brings significant depth of experience and expertise in the areas of Business Valuation, Litigation Support, and accounting specific to the Real Estate industry.
Examples of his expertise include determining values of businesses for the purposes of asset division in divorce or other disputes as well as providing forensic analysis to determine income for purposes of spousal support or contract/damage matters.
To begin with, Dektrix claimed that AMP failed to comply with Rule 26 by not stating the opinions of each author of the damages study; not disclosing the compensation of the expert; failing to supplement the expert’s list of testimony; and not supplementing the expert report.
In response, AMP disclosed Kuvin’s compensation to opposing counsel, supplemented the expert’s list of testimony, and shared an updated expert report that included a higher damages number (when actual numbers were used) than the original report. AMP provided Dektrix with this supplemental information on November 20, 2024.
Courts within the Sixth Circuit weigh five factors to determine whether a party’s noncompliant disclosure was substantially justified or harmless: (1) the surprise to the party against whom the evidence would be offered; (2) the ability of that party to cure the surprise; (3) the extent to which allowing the evidence would disrupt the trial; (4) the importance of the evidence; and (5) the nondisclosing party’s explanation for its failure to disclose the evidence.
The surprise to the party against whom the evidence would be offered
Basically, Dektrix claimed it would be surprised by which expert will testify, Kuvin or Terry L. Yoho, or both. Trial is about a month away, and testimony from Kuvin in AMP’s case-in-chief may necessitate some adjustment’s to Dektrix’s trial strategy, but Dektrix should not have been surprised that Kuvin would testify as an expert because AMP provided the 2022 damages study in February 2022—well before the original disclosure deadline—and Dektrix could have deposed Kuvin, which it did not.
Therefore, the Court held that Dektrix’s attempt to recast this as a situation where AMP never provided an expert report, or that it had no idea who would testify, is misguided. Instead, Dektrix should not have been surprised Kuvin would provide expert testimony on his 2022 damages study nor does Dektrix cite any case law suggesting surprise to a party occurred in analogous circumstances.
The ability of the party to cure the surprise and the disruption on the trial
Dektrix emphasized that AMP had not provided compensation, an updated curriculum vitae (“CV”), and supplemental information in support of the 2022 Damages Report.
The Court held that this emphasis is misplaced because AMP cured any surprise about Kuvin’s compensation and CV on November 20, 2024 (almost two months before trial), which gives Dektrix sufficient time to prepare cross-examination on these two issues, if it so chooses.
Regarding the supplemented report on the damages AMP allegedly incurred after December 31, 2021, the Court agreed that AMP should have supplemented the 2022 damages study sooner, and if AMP had, it might have been able to recover higher damages. As such, AMP may use the 2022 damages study in connection with Kuvin’s expert testimony but may not use the supplemental damages information AMP provided on November 20, 2024.
The importance of the evidence
As Dektrix even acknowledges, “[i]n a contract dispute where speculative lost profits are sought, expert testimony is helpful to aid the factfinder.” Moreover, the Court reiterates that the 2022 damages report was not tardy. As such, and given the revealing damages information it contains, Kuvin’s expert testimony on his 2022 damages study constitutes important evidence.
The nondisclosing party’s explanation for its failure to disclose the evidence
AMP acknowledges that it did not supplement its 2022 damages study, provide Kuvin’s compensation, or update Kuvin’s CV before the discovery deadline. Basically, it did not offer a compelling explanation for its failure to comply with the Court’s discovery deadlines. AMP did acknowledge it has cured all three deficiencies two months before trial.
Absent a compelling justification, the Court held that AMP’s failure to comply with the discover deadline weighs in favor of excluding Kuvin’s testimony.
Although the fifth factor favors exclusion, the Court concluded that it does not overcome the other factors.
B. Federal Rule of Evidence 702 and Daubert
Dektrix claimed that the expert’s testimony is not based on sufficient facts or data; the testimony is the not the product of reliable principles and methods; and the expert’s testimony does not reflect a reliable application of the principles and methods.
However, the Court found that Kuvin’s testimony is sufficiently reliable and relevant to the issue of damages to survive Dektrix’s motion to exclude. Also, it appears that Kuvin’s testimony includes independent analysis that would be helpful to the trier of fact in understanding the damages that AMP asserts. Additionally, Dektrix’s arguments regarding the reliability of Kuvin’s testimony relate more to the weight and credibility that the trier of fact will give to Kuvin’s testimony rather than the reliability of his methodology.
Held
The Court denied Dektrix motion to exclude the testimony of Randall S. Kuvin.
Key Takeaways:
First, expert testimony on lost profit damages is admissible if it is helpful to the trier of fact in understanding a damages claim. In a contract dispute where speculative lost profits are sought, expert testimony is helpful to aid the factfinder.
Second, AMP’s late supplement was substantially justified or harmless, and Kuvin’s expert testimony was limited to his 2022 damages study rather than the more recently-supplemented report.
Plaintiff Ethan Levi (“Plaintiff”) filed this action on behalf of J.C., a minor child, against the Oregon Department of Human Services (“DHS”) and several of its employees (collectively, “Defendants”). Plaintiff’s complaint alleges civil rights violations arising out of the sexual abuse of J.C. while in the custody of DHS-certified foster care provider Joe Albert Raygosa. Chapman certified Nicole Marie Duncan and Joe Albert Raygosa (“Duncan-Raygosa”) to operate a foster home and placed J.C. and her younger brother, Z.C., into that home.
On information and belief, in 2012 Duncan-Raygosa were involved in and/or questioned in connection with the death of a three-year-old female child in or around Fresno, California, where they had resided prior to relocating to Oregon. The child’s death was considered suspicious by emergency medical professionals who made abuse reports on her behalf. Raygosa was later ordered by a California Court to have no contact with the child’s older brother.
Plaintiff filed a motion challenging the opinion of Ms. Kellie Figoten regarding Fresno County’s investigation (or lack thereof) of abuse and neglect allegations following the death of the child in Raygosa and Duncan’s care in California.
Social Work Expert Witness
Kellie Figoten, MSW, brings over two decades of experience in direct service and program management within the public child welfare system, where she has led transformative projects to enhance efficiency and promote equity. Kellie has also spent two decades developing curriculum and teaching bachelor and master-level students in social work at a local state university.
The Court held that Defendants’ failure to disclose Figoten’s so-called supplemental opinions in the written report is neither substantially justified nor harmless. Defendants have had years to allege that Fresno County or its officials are at fault, caused, or contributed to Defendants’ alleged deliberate indifference in certifying the Duncan-Raygosa home. Defendants made no effort to amend their “Fault of Others” affirmative defense and they failed to identify Freson County or its officials in response to Plaintiff Levi’s interrogatories seek additional information about this defense. Nor did they supplement their response during discovery.
Prior to the disclosure of Figoten’s expert report on October 29, 2024, the Plaintiffs were unaware that Defendants planned to argue that anyone other than Raygosa was responsible for Defendants’ allegedly deliberate failure to obtain collateral information as required when certifying a foster home. Defendants’ argument that they are not attributing fault to Fresno County while preparing to present Figoten’s opinion that but-for Fresno County’s failings, DHS would have discovered the allegations of abuse in Fresno County prior to certifying the Duncan-Raygosa home, is a false distinction and not well taken. The Court held that evidence of Figoten’s opinions and conclusions regarding Fresno County’s apparent negligence, fault, and mistakes following the death of the child in Duncan and Raygosa’s foster care in California are inadmissible.
Held
The Court granted in part Plaintiff Levi’s motion to exclude or strike Kellie Figoten’s expert rebuttal testimony.
Key Takeaway:
A testifying expert’s “report must contain: (i) a complete statement of all opinions the witness will express and the basis and reasons for them.” Rule 26(a)(2)(D) provides that a party “must make these disclosures at the times and in the sequence that the court orders.” Under Rule 37(c)(1), “[i]If a party fails to provide information or identify a witness as required by Rule 26(a) or (e), the party is not allowed to use that information or witness to supply evidence on a motion, at a hearing, or at a trial, unless the failure was substantially justified or is harmless.” The party facing exclusion bears the burden of showing substantial justification or harmlessness, otherwise, exclusion is automatic.
Defendants’ failure to disclose Figoten’s so-called supplemental opinions in the written report is neither substantially justified nor harmless. Defendants have had years to allege that Fresno County or its officials are at fault, caused, or contributed to Defendants’ alleged deliberate indifference in certifying the Duncan-Raygosa home.
Case Details:
Case Caption:
Levi v. Chapman
Docket Number:
6:23cv1353 ; 6:22cv1813
Court:
United States District Court for the District of Oregon
Plaintiff Mark Walker (“Walker”) worked as a locomotive engineer for Defendant Union Pacific Railroad Company (“Union Pacific”) from approximately 2005 through 2019. After the Court dismissed Walker’s claim under the Americans with Disabilities Act (“ADA”) alleging failure to accommodate, Walker’s remaining claims allege disparate treatment and disparate impact in violation of the ADA. Walker contends that Union Pacific “regarded” Walker as disabled by having a color vision deficiency.
Plaintiff alleged that Union Pacific violated the ADA by requiring Walker to take a secondary color vision field test (“CVFT”), Union Pacific’s proprietary “Light Cannon” test, even though Walker had just passed a scientific color vision test, the “Ishihara” test. Walker also alleged that Union Pacific violated the ADA because the specific version of Union Pacific’s proprietary Light Cannon test that was administered to Walker in July 2019 did not effectively assess an employee’s ability to read and interpret railroad signals because that test screens out qualified individuals who do not, in fact, have color vision deficiencies but whom the test, and thus Union Pacific, wrongfully “regards” as being color vision deficient.
Walker was hired by Union Pacific in 2003, and he passed the Ishihara at that time. He was certified as an engineer in 2005 and he again passed the Ishihara. In 2007 he passed the Ishihara again as part of his recertification as an engineer. In 2010, Walker failed the Ishihara test after incorrectly identifying two plates. Walker was recertified as an engineer, however, after he passed Union Pacific’s then-current wayside signal CVFT. In 2013, Walker again failed the Ishihara by incorrectly identifying two plates. Again, Walker was recertified after passing Union Pacific’s wayside signal CVFT. Walker passed the Ishihara on June 20, 2016. He again passed the Ishihara on June 21, 2019.
Challenges to Expert Testimony
Walker moved to exclude or limit the testimony of Union Pacific’s expert witnesses Steven Fender and Jeff Rabin, O.D., Ph.D. He argued that Fender is not qualified to provide expert testimony on any subject relevant to this case and that Fender’s testimony is irrelevant and unreliable. Walker contended that because he passed the Ishihara test, is a qualified employee as a matter of law, and the Light Cannon is only a qualification standard, Fender’s testimony about regulatory standards is irrelevant. He also argued that Fender is unqualified to render any opinion outside of regulatory standards, such as the efficacy of the Light Cannon test, and his opinions about the efficacy of the Light Cannon test are unreliable and unhelpful to the jury.
Walker also moved to limit Rabin’s testimony to what is contained in his non-reporting witness disclosure under Rule 26(a)(2)(C) of the Federal Rules of Civil Procedure.
Union Pacific moved to exclude the testimony of Walker’s expert witness Jay Neitz, Ph.D. as misleading, confusing, unreliable, and unhelpful to the jury. Union Pacific argued that Neitz’s testimony is misleading because he misinterprets federal regulations by construing the Light Cannon test as a “scientific” test instead of a “field” test.
Railroad Expert Witness
Steven Fender is a Railroad Transportation and Safety Consultant who has worked in the industry for 45 years. He worked for 31 years at the FRA. He is highly qualified in the fields of railroad operations, safety, and regulations.
Jeff C. Rabin is a tenured Professor of Optometry and Assistant Dean for Research, Assessment and Graduate Studies at the University of the Incarnate Word Rosenberg School of Optometry, where he teaches courses in vision science, optics and binocular vision. Rabin received his Bachelor of Science in Physiological Psychology with highest honors from the University of California at Santa Barbara, and Doctor of Optometry, Masters of Science and Doctor of Philosophy Degrees in Physiological Optics from the University of California at Berkeley.
Jay Neitz is the E.K. Bishop Endowed professor in Ophthalmology at the University of Washington in Seattle. He has been a research scientist and an educator for 30+ years. He is an expert in all aspects of disorders of the eye and their effect on visual performance.
Under the regulations of the Federal Railroad Administration (“FRA”), railroad companies must test railroad engineers at least every three years for, among other things, color vision acuity. The initial test must be one of a set of scientific tests approved by the FRA, including, as relevant here, the Ishihara 14-plate test (“Ishihara”). If an engineer fails the initial, or primary, test, the examinee may undergo a secondary test, which may consist of an [“o]phthalmologic referral, field testing, or other practical color testing.”
A.Development of Union Pacific’s Light Cannon Test
Union Pacific began developing the Light Cannon test in 2015. In October 2015, Dr. Jeff Rabin and Dr. Douglas J. Ivan, M.D., reviewed the Light Cannon test and testing protocol. The 2015 device contained four eight-inch LED lights, in two rows of two, that flashed four colors—red, yellow, green, and white—for five seconds each, and required each color light to be manually turned on and off. The examinee was located one-quarter mile away from the device, with a nurse taking down responses and Union Pacific staff at either end managing the test.
Rabin and Ivan issued their “draft” final report on January 25, 2016. This report identified that the Light Cannon test had “a number of critical short comings in its current design and within the proposed test administrative procedures.”
Union Pacific nevertheless implemented the Light Cannon test on April 1, 2016, with only the few modifications previously described and no further validation studies having been performed. Rabin was hired in approximately mid-2018 to conduct further studies to evaluate the efficacy of the Light Cannon. Rabin testified at deposition, and confirmed at the hearing, that based on the new testing protocols and other changes made to the Light Cannon test after his 2016 report, he believes the 2020 version of Light Cannon test is a valid field test. He noted, however, that for people with color deficiencies, he believes the change in testing protocols did not make a statistically significant difference.
B. Plaintiff Walker
On July 3, 2019, Union Pacific’s Associate Medical Director, Dr. Donald Richard Lewis, stated that Walker had met the FRA’s vision requirements and was approved for recertification. Nonetheless, two days later, Walker’s file was flagged as “not approved” for safety sensitive work. Dr. John Holland, M.D., Union Pacific’s former Chief Medical Office had intervened to require Walker to undergo secondary testing with Union Pacific’s Light Cannon test, based on Walker’s previous Ishihara failures in 2010 and 2013. On July 8, 2019, Walker took and failed Union Pacific’s Light Cannon test. Based on this failure, Union Pacific determined that Walker could not work in a position requiring accurate color signal recognition, and thus he could not work in his current position.
In April 2016, after Union Pacific implemented the Light Cannon test, Walker was an employee who had “failed the primary color vision field testing on [his] last medical certification exam” (his 2013 Ishihara test), but Union Pacific did not retest him using the Light Cannon test despite the recommendation of the NTSB. Indeed, when Walker passed the Ishihara in June 2016, Union Pacific still did not make Walker take the Light Cannon secondary field test. Not until Walker failed the Ishihara in June 2019 did Union Pacific require him to take the Light Cannon secondary CVFT.
i. Walker’s Motion Challenging Fender
Fender’s opinion that the Light Cannon test is in compliance with the rules and regulations of the FRA is irrelevant
Walker argued that Fender’s opinion that the Light Cannon test “complied” with the FRA regulations is irrelevant. He also contended that with this opinion out as irrelevant, Fender is not qualified to opine about his remaining opinions, particularly about the “efficacy” of the Light Cannon test. Walker also asserted that Fender’s opinions other than those related to the FRA regulatory framework (which are irrelevant) are unreliable and not helpful to a jury.
Walker contended that Fender’s opinion that the Light Cannon test is in compliance with the rules and regulations of the FRA is irrelevant to this case because the Court ruled at summary judgment that Union Pacific did not have to subject Walker to the Light Cannon test under FRA regulations, and may even have been precluded from doing so under the regulations.
The Court can instruct the jury as to the legal requirements of the FRA, to the extent they are relevant. Further, whether the Light Cannon is “compliant” with the FRA, to the extent that may be relevant, is a legal conclusion and not a proper topic for expert testimony. Therefore, to the extent Fender’s testimony is intended to explain FRA rules and regulations regarding color vision acuity testing to the jury or opine that the Light Cannon was compliant with FRA rules and regulations, such testimony is improper.
The Court held that Fender may not opine about how Walker’s case compares to cases presented to the Locomotive Engineer Review Board or the Operating Crew Review Board, or that the Light Cannon test is in compliance with FRA rules and regulations per the decisions of those review boards. Such a discussion is of minimal relevance and is unduly prejudicial and potentially confusing to the jury.
Fender is qualified to opine as to whether the Light Cannon test was “valid” as that term is used in the Best Practices
Walker argued that Fender is unqualified to render an opinion regarding the efficacy of the Light Cannon test, and that the opinion is unreliable and unhelpful. Fender spent decades working in railroad operations and safety. He explained at the hearing that he had frequent exposure to railroad signals. He also saw the Light Cannon test in operation. The Court held that Fender is qualified to opine as to whether the Light Cannon test was “valid” as that term is used in the Best Practices—meaning that the test reasonably matched real world operating or working conditions.
Fender opined generally in his report that the Light Cannon test is “employee friendly” because it shows all four lights to orient the examinee and is “a practical, well-developed, and implemented test which replicates real world conditions.” During Walker’s 2019 test, he was not given the 2016 protocol (or the 2019 protocol as it is identified in Rabin’s testing); nor was he given the modified 2020 protocol. Nonetheless, the experts’ opinions about the efficacy of the Light Cannon test after the 2020 changes were implemented provide some probative value to the test taken by Walker, which involved a hybrid protocol between the 2016 and 2020 testing protocols.
The Court found that Fender’s opinion about the efficacy of the 2020 Light Cannon test, even though he repeatedly emphasized the importance of all four colors first being shown to the examinee, is somewhat helpful to the jury. It also is reliable because Fender has decades of related experience in the industry and personal experience viewing the Light Cannon test.
The remaining aspects of Fender’s opinion also are reliable and potentially helpful to the jury based on Fender’s experience and the issues in this case regarding railroad safety and the need for color vision acuity
The Court held that Fender may testify to Union Pacific’s general rail business and rail infrastructure, its importance in the supply chain, and its importance to national security and the military. He also may testify generally to the complexity and business of the rail lines and Union Pacific’s rail lines, in particular. Fender further generally may describe safety concerns, signaling systems, and the importance of color vision acuity to signaling systems and safe rail operations.
Walker’s Motion Challenging Rabin
Rabin is a limited expert witness disclosed under Rule 26(a)(2)(C) of the Federal Rules of Civil Procedure. Accordingly, he did not provide (and was not required to provide) an expert report. As an initial matter, the Court holds that, as with Fender, Rabin may not testify that the Light Cannon test complies with or is valid under the FRA’s rules and regulations.
Walker sought to ensure that Union Pacific does not attempt to have Rabin testify regarding anything specific to Walker—his color vision acuity, the application of the Light Cannon test with respect to Walker, or his ability to perform his job safely. The Court agreed that these issues are outside the scope of Rabin’s disclosed testimony.
The Court concluded, however, that Union Pacific has sufficiently disclosed its intention to elicit testimony from Rabin regarding his 2019-20 study of the Light Cannon test.
Counsel for Union Pacific also argued that there should be no temporal distinction between Rabin’s testimony regarding the 2016 and 2020 Light Cannon tests because Rabin noted that both versions of the test nearly equally captured persons with color vision deficiencies. This case, however, is about an employee who alleges that he does not have any color vision deficiency but instead was regarded as having such a deficiency because of his earlier failures of the Ishihara test.
Although Rabin’s opinion regarding the effectiveness of the Light Cannon is based on the modified 2020 test and testing protocols, like Fender’s opinion it still has some probative value and is thus somewhat helpful to the jury. This is because Walker did not receive the 2016 testing protocol. Thus, the Court held that Rabin may testify as to the efficacy of the 2020 Light Cannon and whether it accurately mimics actual operating or working conditions in the field.
Union Pacific’s Motion Challenging Neitz
Neitz mistakenly opined that the Light Cannon test must be validated as a scientific test instead of a field test
Union Pacific first argued that Neitz mistakenly opined that the Light Cannon test must be validated as a scientific test instead of a field test. They designed the Light Cannon as a field test, not a scientific test. It is intended to match newer LED signals. Regardless of the dispute about the validity of the Light Cannon test, the Court agreed that it is a field test and not a scientific test. Walker argued, however, that because the Light Cannon does not use any actual equipment from the field, it cannot be a field test.
That, however, goes to the “validity” of the field test, not to whether it is a field test. The Court will preclude, as irrelevant and misleading, Neitz from testifying that the Light Cannon test was required to undergo rigorous scientific study or peer review or must meet the standards of a scientific test to be a valid secondary field test.
Union Pacific also challenged the helpfulness of Neitz’s opinion because he does not provide a test that would suffice under the regulations. Neitz, however, discussed the advantages and disadvantages of several available tests. The Court held that this challenge goes to the weight of his opinion, not its admissibility.
Neitz’s opinion is unreliable because it relies on Rabin’s 2019-20 testing regarding the Light Cannon test
Finally, Union Pacific argued that Neitz’s opinion is unreliable because it relied on Rabin’s 2019-20 testing regarding the Light Cannon test without considering Rabin’s later deposition testimony regarding the validity of the Light Cannon test after the 2020 changes had been implemented and because Neitz has never seen the Light Cannon test.
The Court held that Neitz may focus on the pre-2020 test, which is more similar to the test given to Walker than the 2020 test, and Union Pacific can challenge through cross examination why Neitz did not further consider Rabin’s evaluation of the Light Cannon post-changes, and whether Neitz is moved by Rabin’s change of heart after the 2020 changes to the Light Cannon were implemented.
The Court held that Neitz is highly qualified regarding color vision acuity examinations, has reviewed Walker’s examinations and medical records, has reviewed the 2019-20 test data about the Light Cannon, understands color vision acuity testing in general, and offers a variety of opinions that are helpful to the jury on these topics. His opinions specific to the Light Cannon test do not necessarily require that he have seen the device, because he differentiates the pre- and post- 2020 protocols and relies on the underlying data from Rabin’s testing.
In other words, Neitz is not improperly “parroting” the opinion of another expert, but has independently reached his own opinions, relying on the facts and data gathered by another testifying expert.
Most of Neitz’s unchallenged testimony is unrelated to whether the Light Cannon test must undergo vigorous scientific testing
Finally, Union Pacific does not specifically challenge most of Neitz’s proposed testimony, other than generally to assert that because it is “based on” his misunderstanding that the Light Cannon test is not a field test, it must be excluded. The Court disagrees. Most of this unchallenged testimony is unrelated to whether the Light Cannon test must undergo vigorous scientific testing.
This includes:
(a) color vision acuity in general
(b) persons may not pass the primary color vision FRA test but still may safely work as a locomotive engineer or conductor because they have sufficiently color vision acuity to safely perform their duties
(c) how the majority of anomalous trichromats who fail the Ishihara can recognize and distinguish between railroad signals and the need for a valid test to separate out those who cannot
(d) Rabin’s 2019-20 study demonstrated that the Light Cannon test cannot screen anomalous trichromats who are perfectly capable of reading colored signals from those who cannot
(e) Rabin’s 2019-20 study showed that the Light Cannon was not a test that was reliable or valid (e.g., reasonably matched actual operating or working conditions), and reinforced he and Ivan’s 2016 report reaching the same conclusion
(f) a discussion of Walker’s past test results, including improper grading
(g) a discussion of Walker’s medical history and how it related to his color vision acuity
(h) a description of how Walker had consistently passed the color vision tests sufficient to show adequate color acuity.
The Court finds that all of this testimony is reliable and would be helpful to the jury.
Held
The Court granted in part and denied in part Plaintiff’s motion to exclude the testimony of Steven Fender and Jeff Rabin, and Defendant’s Daubert motion to exclude the testimony of Jay Neitz.
Key Takeaway:
Fender’s opinion about the efficacy of the 2020 Light Cannon test, even though he repeatedly emphasized the importance of all four colors first being shown to the examinee, is somewhat helpful to the jury. It also is reliable because Fender has decades of related experience in the industry and personal experience viewing the Light Cannon test.
Although Rabin’s opinion regarding the effectiveness of the Light Cannon is based on the modified 2020 test and testing protocols, like Fender’s opinion it still has some probative value and is thus somewhat helpful to the jury. This is because Walker did not receive the 2016 testing protocol. Thus, the Court held that Rabin may testify as to the efficacy of the 2020 Light Cannon and whether it accurately mimics actual operating or working conditions in the field.
Neitz is not improperly “parroting” the opinion of another expert, but has reviewed Walker’s examinations and medical records, has reviewed the 2019-20 test data about the Light Cannon, understands color vision acuity testing in general, and offers a variety of opinions that are helpful to the jury on these topics.
It all started when GE and X-Ray contracted for the acquisition, sale and purchase of certain equipment and services required to outfit a nuclear radiopharmaceutical laboratory—the first of its kind in Jamaica.
X-Ray later accused GE Entities of breaching their duties of care to X-Ray and breaching various components of the operative agreement– the International Finance and Sales Agreement (“IFSA”) as well as certain warranties.
X-Ray has disclosed a damages expert, Andre Sutherland, to testify primarily as to lost profits, and also as to “remediation costs” and “acquisition costs.”
On April 22, 2021, the Court granted GE’s motion to strike from X-Ray’s pleadings its request for lost profits damages, and found that lost profits damages were barred by the parties’ principal agreement, the IFSA. Accordingly, GE now seeks to strike Sutherland on grounds that his testimony would not be relevant because it pertains primarily to X-Ray’s stricken, lost profits damages. Separately, GE argued that Sutherland’s testimony, even if it survives the lost profits argument, is not the product of reliable principles and methods.
Accounting Expert Witness
Andre O. Sutherland is a Fellow Certified Chartered Accountant (FCCA), by the Association of Certified Chartered Accountants a Chartered Business Valuator by the CBV Institute (formerly the Canadian Institute of Chartered Business Valuators and an Accredited Senior Appraiser (ASA) by the American Society of Appraisers. He holds 14 years of professional experience including more than ten years of valuation experience.
Sutherland’s opinion centered on X-Ray’s lost profits due to its laboratory and equipment allegedly malfunctioning. To calculate those lost profits, Sutherland took X-Ray’s 2013 business plan; determined the projected customers over a six-year period; calculated the cost per PET/CT scan to determine revenues; subtracted expenses from those revenues; and compared those projected revenues to the actual revenues. Sutherland then generated two final numbers: one calculated as the most-likely scenario, and one calculated with a 50% weight for a worst-case scenario.
GE raised a myriad of alleged issues with Sutherland’s report. These include arguments that: Sutherland’s report relies entirely on X-Ray’s own 2013 business plan; he did not know who created that business plan and he did no independent market research about relevant market rates or industry costs.
The Court held that Sutherland failed to distinguish (1) which lost profits damages were caused by negligence (let alone each distinct and independent theory of negligence that X-Ray alleges) versus (2) which lost profits damages were caused by breaches of contract, breaches of warranty, and/or other factors.
Moreover, Sutherland’s report does not account for what portion of X-Ray’s lost profits are attributable to GE’s alleged negligence, as compared to GE’s alleged contract breaches, as compared to factors entirely unrelated to GE (e.g., a competitor, COVID-19 regulations, or internal factors).
It is noteworthy that X-Ray does not present any compelling authority or argument to explain why Sutherland’s opinion would still be reliable and helpful notwithstanding the report’s failure to divvy up blame.
Remediation Costs and Acquisition Costs
GE sought to exclude Sutherland’s anticipated testimony regarding acquisition and remediation costs, as GE believes such testimony does not required specialized knowledge. Remediation costs are, according to GE, the combined price of the equipment X-Ray purchased from GE.
The Court held that no expertise is required for X-Ray to explain to the trier of fact its purchase price for equipment (i.e., its “acquisition costs”). Indeed, to add up X-Ray’s composite purchase price, there is no need to affirmatively “exclude expenses which are unrelated” to that cost. Rather, X-Ray’s lay witnesses and lawyers can simply identify each purchase price, add them up, and present the final number.
As to remediation costs, GE argued that Sutherland simply relayed a number ($208,000.00) which “Management indicated” was incurred “to rectify the Quality Control Lab.” GE argued that expert testimony is not required because Sutherland did not calculate this amount, break down this amount, configure this amount, or even verify this amount; rather, he simply repeated a number that “management” provided to him.
X-Ray responded that “Sutherland extracted and articulated, only those costs incurred by X-Ray which accounted for costs of the equipment and costs incurred to attempt to remediate the equipment or create work-arounds.”
But X-Ray cited to no portion of Sutherland’s report in which he “extract[s]” remediation costs from any portion of the record that he was provided. To the contrary, Sutherland testified in his deposition that “[a]ccording to management, they did in fact incur at least $208,000.00 on remediation expenses.”
The Court held that GE has thus presented uncontroverted evidence that Sutherland’s testimony as to remediation costs imports no expertise, but instead is a recitation of a figure provided by management.
Held
The Court granted GE’s motion to exclude the testimony of Plaintiff’s expert Andre Sutherland. He cannot testify at trial as to lost profits, as to “acquisition costs,” or as to “remediation costs.”
Key Takeaways:
Sutherland’s testimony is fatally flawed and cannot be resurrected because he not present any basis to, at minimum, distinguish lost profit damages that indisputably arise from the contract.
Sutherland presents a report that presents lost profits figures that apparently factor in: GE’s negligence; GE’s breaches of contract and numerous other factors and considerations. In that report, Sutherland makes no effort to isolate what portion of the lost profits were caused by GE’s negligence. And because X-Ray’s surviving negligence claims are the only claims for which X-Ray now seeks lost profits, Sutherland’s testimony is unreliable and unhelpful to a trier of fact who seeks to determine what damages were caused by GE’s negligence.
The Court held that no expertise is required for X-Ray to explain to the trier of fact its purchase price for equipment (i.e., its “acquisition costs”). Thus, on this score, Sutherland’s calculation constitutes “simple arithmetic” which “is not beyond the understanding of the average lay person and therefore would not help the trier of fact.”
Case Details:
Case Caption:
X-Ray Diagnostics And Ultrasound Consultants Limited V. General Electric Company Et Al
The Plaintiffs sought damages and injunctive relief accusing the Defendants of willfully, intentionally, and calculatedly refusing to provide potable water to residents of the Plaintiffs’ manufactured home communities and a denial of applications by the Plaintiffs Grover Dinwiddie, and Sarina Shannon for municipal water utility services provided to other residents of the City of Oak Grove, Kentucky, in violation of the Equal Protection clause of the Fourteenth Amendment to the United States Constitution.
Defendants filed a motion to exclude Plaintiffs’ accountant expert Missy DeArk and prevent her from offering expert witness opinion testimony at trial, claiming that her disclosure did not comport with the requirements of Fed. R. Civ. P. 26 and “will result in unfair surprise and prejudice to Defendants because Defendants have no basis for or knowledge of DeArk’s opinion testimony.” Defendants therefore sought the exclusion of the late or undisclosed evidence under Fed. R. Civ. P. 37(c)(1), FRE 702, and Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993).
Accounting Expert Witness
Melissa Welch DeArk, CPA/CFF, CVA/MAFF is an associate director in Dean Dorton’s litigation support and business valuation groups. Prior to joining the firm in 2008, she was a controller and Chief Financial Officer for more than 16 years with full responsibility for all financial, administrative, and human resource functions for multi-million dollar organizations.
Although lacking in details and specifics, the Court does not find Plaintiffs’ expert disclosure to be a total surprise here. Plaintiffs’ disclosure of expert accountant Missy DeArk and the damages calculations about which she will testify is technically deficient under Rule 26, but not fatally so under Rule 37. The damages sought by Plaintiffs were outlined in discovery responses as early as February 2023. According to Plaintiffs’ Response, counsel reached out to defense counsel prior to the expert disclosure deadline and identified DeArk though they did not yet have a written report from her, and “Counsel for Defendants raised no objection and indicated that there were no issues with proceeding without a written report.”
Counsel for Defendants denies any such representation. It appears that there has been: 1) an honest misunderstanding by counsel; 2) some form of procedural gamesmanship on the part of counsel; or 3) a direct misrepresentation by counsel in these pleadings. Without specific evidence to the contrary, the Court will assume that there has been an honest misunderstanding by counsel. Plaintiffs’ counsel believes there to have been an understanding between the parties regarding disclosure of DeArk without the necessity of producing a report.
Although Plaintiffs’ counsel would have been well-advised to confirm such an understanding in writing, Subpart (B) of Rule 26(a)(2) does not require a writing and apparently contemplates such agreements regarding disclosures in its very text, “[U]nless otherwise stipulated.” Moreover, Plaintiffs’ failure to provide DeArk’s report can be excused by the Court under Rule 37(c) if, as he has alleged, Plaintiffs’ counsel was under the impression that Defendants’ counsel did not object to proceeding without DeArk’s report.
Analysis
When Plaintiffs formally and timely disclosed DeArk in a pleading, they also attached the Curriculum Vitae for DeArk which outlines her employment history and experience; CPA credentials with certifications in financial forensics, valuation analysis; and financial forensics specialty in matrimonial litigation.
No trial date has been set in this matter, so there is little risk that trial will be disrupted by the Court declining to strike DeArk’s testimony. The Court found that the evidence appears to be important particularly regarding calculation of Plaintiffs’ damages, to the extent that DeArk’s testimony can provide that proof. Also, Plaintiffs have explained that DeArk was disclosed as an expert witness to defense counsel well before the disclosure deadline.
Held
The Court exercised its discretion and directed Plaintiffs to supplement their expert disclosure with a written report. In conclusion, the Court denied the Defendants’ motion to strike Plaintiffs’ expert witness Missy DeArk.
Key Takeaway:
Plaintiffs’ failure to timely provide DeArk’s written report might warrant the sanction of exclusion if the failure to properly disclose were on the eve of trial, or if the deficient disclosure were in some way intended to sandbag Defendants. However, the Court found that, in this case and at this time, the harsh sanction of exclusion was not appropriate.
Case Details:
Case Caption:
Plainview Mobile Home Park Et Al V. City Of Oak Grove, Kentucky Et Al
Plaintiff Richard Culley (“Plaintiff” or “Culley”) initiated this action on September 9, 2020, seeking redress for claims of manufacturing defect, breach of expressed or implied warranties, design defect and failure to warn arising from an incident on December 9, 2017 (the “accident”) wherein Plaintiff, while working for Hudson River Truck and Trailer (“Hudson”), sustained serious injuries while using a JAWS IV Ironworker (the “Ironworker”) manufactured by the Defendant Edwards Manufacturing Company of Alberta Lea (“Defendant” or “Edwards”).
Plaintiff designated Kevin Elphick, an industrial engineering expert witness, to evaluate the details and subsequent events that led to the injuries. The Defendant filed a motion in limine to preclude Elphick’s testimony.
Industrial Engineering Expert Witness
Kevin J. Elphick is an independent industrial engineer with a B.S. Degree in Industrial Engineering from the New Jersey Institute of Technology (class of 1972), a New Jersey licensed Professional Engineer (1981) and has over 45 years of professional experience.
To establish a design defect, Culley must prove that the ironworker was defective at the time it left Edwards’s control and that the defective design was the actual and proximate cause of his injuries. Defendants argued that Elphick has not provided data to support his opinion that the subject iron worker was defectively designed or that any proposed alternative design would have prevented Culley’s accident. Rather, Elphick’s opinions constitutes the type of ipse dixit that courts routinely hold should be precluded from evidence.
Analysis
Under Federal Rule of Evidence 702, expert testimony must meet standards of reliability and relevance. Courts assess whether the expert is qualified and whether their testimony is based on sufficient facts, reliable methods, and proper application of those methods. Courts must focus on the purported expert’s principles and methodology, not on the expert’s conclusions.
The Court held that the Defendant’s arguments primarily questioned Elphick’s credibility, which was a matter for the jury and not grounds for excluding expert testimony.
Since the Defendant’s motion did not address the relevant factors for excluding expert testimony under Rule 702, the Court denied the motion to preclude Elphick’s testimony.
Held
The Court denied the Defendant’s motion to preclude Plaintiff’s industrial engineering expert witness Kevin Elphick’s testimony.
Key Takeaway:
The Court emphasized that challenges to Elphick’s credibility should be evaluated by the jury, not used as grounds for exclusion. The motion to preclude Elphick’s testimony failed to substantively address the standards under the Federal Rule of Evidence 702, which instructs district courts to ensure that: “(1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case.”
The Court found that the Defendant’s arguments focused on credibility issues, which fall under the jury’s purview. As a result, the Court denied the motion.
Case Details:
Case caption:
Culley V. Edwards Manufacturing Company Of Albert Lea
Docket Number:
7:20cv7346
Court:
United States District Court for the Southern District of New York
Plaintiffs Richard Dennis, Port 22, LLC, and Michael Glass asserted Commodity Exchange Act and Sherman Antitrust Act claims, alleging that The Andersons, Inc. (“TAI”) and Cargill Incorporated, who were supposed competitors, operated multiple grain storage warehouses in Ohio and collaborated to manipulate prices of soft red winter wheat (“SRW wheat”) futures and options contracts on the Chicago Board of Trade (“CBOT”).
According to the Plaintiff, the Andersons, Inc. sold SRW wheat to the major purchasers in October and November 2017 to suppress demand for physical SRW wheat and then, on November 29, 2017, registered for delivery two thousand certificates of CBOT December 2017 SRW wheat.
This registration (falsely, Plaintiffs say) signaled that TAI would sell ten million bushels of physical SRW wheat to parties holding long positions in December 2017 SRW wheat futures and caused a marked price decrease in the December 2017 SRW wheat futures contract and widened the spread between the December 2017 and March 2018 SRW wheat futures contracts.
TAI and Cargill later repurchased some of the shipping certificates TAI had delivered at the decreased prices. Plaintiffs allegedly transacted in December 2017 and March 2018 SRW wheat futures and lost money because of the decreased prices caused by the scheme.
Plaintiffs’ expert Craig Pirrong opined that Defendants’ manipulation of December 2017 and March 2018 SRW wheat futures injured Plaintiffs on a class-wide basis. Pirrong estimated class-wide damages and proposed a methodology for determining individual damages. Defendants challenged the reliability of Pirrong’s study through the report of their expert, Professor Justin McCrary.
Economics Expert Witness
Craig Pirrong‘s extensive qualifications includes approximately 30 years of concentrating professionally on competition and manipulation of prices with a focus on Chicago Mercantile Exchange wheat, soybean, and corn futures contracts; publishing a dozen peer-reviewed articles and a book on commodity futures manipulation and pricing; presenting to and consulting with federal agencies on manipulation; and testifying as an expert.
Defendants argued that the magistrate judge’s order contained the following four clearly erroneous conclusions. First, the magistrate judge declined to exclude the March 2018 portion of Pirrong’s event study, which Defendants alleged lacked sufficient statistical significance. Second, the magistrate judge declined to exclude Pirrong’s ipse dixit assumption that Defendants’ manipulation caused a constant level of price artificiality that persisted for three months. Third, the magistrate judge found that the December 2017 portion of Pirrong’s event study is admissible despite the high rate of false positives that it produces. Fourth, the magistrate determined that Pirrong’s linear programming (“LP”) damages model, which Defendants contend is neither reliable nor helpful to a factfinder, is admissible. With the deferential standard of review discussed above in mind, the Court will review the magistrate judge’s order for clear error on each of these four bases.
Statistical significance of March 2018 event study
Pirrong’s expert report includes an event study, a regression analysis that uses specified control variables to estimate the daily market price of SRW and then compares those estimates to the prices observed in the market. An event study is used to determine the direction and magnitude of the effect of an unspecified variable, here, the alleged market manipulation.
Pirrong’s event study contains p-values associated with the cumulative residual on each day of the study. A residual is the difference between the observed value (here, the actual daily market price) and the estimated value (here, the daily market prices estimated by the control variables). The cumulative residuals used in Pirrong’s event study are simply the sum of each day’s residual and all the residuals that came before it within the period studied.
Because many of the p-values in Pirrong’s event study exceed commonly used thresholds of statistical significance (such as the 1%, 5%, and 10% thresholds), Defendants argued before the magistrate judge that Pirrong’s entire event study is unreliable. After carefully considering the issue, the magistrate judge was “unconvinced that all of [Pirrong’s] results should be excluded due to some p-values above 0.05, particularly where seven of eleven days (November 30 through December 8, 2017) within the December 2017 SRW wheat contracts regression analysis returned p-values with statistical significance at the five percent level.”
Defendants advanced the same statistical significance arguments before this Court, contending that the magistrate judge’s conclusions constitute clear error.
The Court held that it is reasonable that the magistrate judge, like many of our sister courts, declined to use statistical significance at the five percent level, or any other bright line threshold, as a proxy for reliability, and thus the admissibility, of Pirrong’s entire event study.
The Court is not left with the definite and firm conviction that a mistake has been made
Plaintiff’s theory of this case is that a discrete event—the registration of two thousand certificates of CBOT December 2017 SRW wheat on November 29, 2017, (after Defendants had saturated the market through major SRW wheat sales in October and November)—drove the market price of December 2017 and March 2018 SRW wheat futures downward. Pirrong’s event study uses a regression analysis to isolate the effect of this event from the innumerable other market factors—captured by the control variables—that determine the market price of SRW wheat futures.
The downward price impact of this discrete event would be easiest to pick out from the “noise” of other market factors right at the time of the event. As time passes and the other market factors continue to exert pressures on price, the manipulation event would become more difficult to pick out from the noise; what was first a bang fades into an echo. This is what Pirrong’s event study shows. For December SRW wheat futures, the lowest, or most statistically significant, p-values occur on November 30, 2017, and the days immediately following it. The Court found Pirrong’s conclusion that Defendants’ alleged market manipulation depressed prices in the December SRW wheat futures market statistically robust.
For March SRW wheat futures, the same conclusion is considerably less statistically robust. Even on the first day after Defendants’ registration of two thousand certificates of CBOT December 2017 SRW wheat, the negative residual returns a p-value of 0.20. Given the mixed statistical robustness of the results of the event study, this Court agreed with the magistrate judge that they are sufficiently reliable to be admissible.
Ipse dixit assumption that price artificiality in the commodities marketplace spanned three months at a fixed amount
Before the magistrate judge, Defendants argued that Pirrong’s conclusion that the March 2018 SRW wheat futures contract had a permanent, fixed, artificial price depression of 1.2¢ per bushel from December 14, 2017, to March 14, 2018, is unreliable because it is asserted with no empirical proof. Defendants renew that challenge here, arguing that Pirrong “is left only with his own word as to the existence of permanent price artificiality spanning three months in a marketplace where prices change every second of every day.”
The magistrate judge determined that Pirrong “reviewed the identified records, performed studies, and applied his extensive experience in futures markets to reach” his conclusion that the 1.2¢ per bushel artificial price depression held through the period from December 14, 2017, to March 14, 2018.
The Court held that while Pirrong’s explanation of why the price artificiality would remain constant is open to dispute, a disputable explanation is different than no explanation.
False positives
Defendants argued before the magistrate judge that Pirrong’s event study is unreliable because of the high rate of false positives it produces. A test for false positives takes Pirrong’s model and applies it to time periods where there is no alleged market manipulation. A false positive occurs when a residual has a p-value below a specified threshold of statistical significance. Defendants’ test for false positives employed a 43% threshold of statistical significance because that is the highest p-value reported for any day in Pirrong’s event study. Using a high threshold of statistical significance yields a high rate of false positives. Here, it indicated that there was price manipulation on “85% of the days for which Plaintiffs do not claim manipulation.”
After carefully considering this issue, the magistrate judge concluded that “[b]ecause Defendants’ false positives argument spins off from the p-values discussion and applies an across-the-board 43% threshold for statistical significance not adopted by Pirrong, the Court is disinclined to reach a different result here.”
Defendants advanced the same false positives argument here. The Court finds that the magistrate judge’s decision to admit the event study despite the high rate of false positives was correct. The 85% false positive rate reported by Defendants comes from the application of an across-the-board 43% threshold for statistical significance that is not endorsed by Pirrong (and is obviously not endorsed by the Defendants given their arguments on statistical significance). More troubling is the 19.66% false positive rate yielded by testing at a 5% level of statistical significance. The magistrate judge concluded that Pirrong’s testimony is “closer to shaky than unreliable.”
Linear programming (“LP”) damages model
First, Defendants renew their argument that Pirrong’s LP damages model is unreliable because it relies on an estimate of artificiality generated by the event study to calculate a range of aggregate damages for the class members. The reliability of the use of a constant 1.2¢ artificiality estimate is already addressed above.
Second, as the magistrate judge notes throughout her opinion, Defendants attack the output and not the methodology of Pirrong’s estimation of a theoretical range of possible damages.
Third, Defendants argued that the LP damages model is not helpful to the finder of fact because it “estimates a theoretical $20 million range of possible damages” and “provides no means for the trier of fact to estimate where in that broad range a reasonable, or probable, estimate of damages falls.” The magistrate judge correctly concluded that “the Court is not seeking to calculate actual damages” at the class certification stage. Instead, Plaintiffs must show that “proof of the damages caused by the scheme will either fail or succeed on a class-wide basis.”
The Court agreed with the magistrate judge that Pirrong’s LP model is sufficiently helpful and reliable to be admissible.
Held
The Court denied Defendants’ objection to the order denying in part Defendants’ motion to exclude the testimony of Plaintiffs’ expert Dr. Craig Pirrong.
Key Takeaways:
It is noteworthy that Defendants attacked the output and not the methodology of Pirrong’s estimation of a theoretical range of possible damages.
The magistrate judge concluded that Pirrong’s testimony is “closer to shaky than unreliable.” The 85% false positive rate reported by Defendants comes from the application of an across-the-board 43% threshold for statistical significance that is not endorsed by Pirrong (and is obviously not endorsed by the Defendants given their arguments on statistical significance).
The Court held that while Pirrong’s explanation of why the price artificiality would remain constant sparks a debate, a questionable explanation is not the same as having no explanation.
Please refer to the blog previously published about this case:
Plaintiffs Gregory Hebbler and Marion Hebbler contracted with Defendant State Farm Fire and Casualty Company to insure their home located at 6009 Angler Drive, Picayune, Mississippi.
On August 29, 2021, Hurricane Ida made landfall, purportedly damaging the residence. When Defendant conducted an on-site inspection and estimated the monetary damage caused by Hurricane Ida, it issued no payment because this figure fell below Plaintiffs’ deductible.
Plaintiffs ultimately designated Rich Lyon as their sole expert witness, referencing a June 7, 2023, Estimate as his report, but they did not attach this Estimate to their designation. On July 1, 2024, almost three months after their expert designation deadline had passed, Plaintiffs submitted a supplemental designation, disclosing Lyon’s Supplemental Report.
On August 19, 2024, Defendant filed the instant motion to strike Plaintiffs’ expert witness Rich Lyon.
Insurance Expert Witness
Rich Lyon is a licensed State of Louisiana Public Insurance Adjuster and Registered Insurance Appraiser. He is the owner and operator of Gulf Coast Adjusting, LLC. Gulf Coast Adjusting, LLC is a Louisiana-licensed and bonded company offering Public Adjusting, Insurance Claims Appraising, Insurance Claims Umpiring and Construction Estimating services throughout the states of Louisiana and Mississippi.
The June 7, 2023, estimate offered by Plaintiffs as Lyon’s initial expert report contains only damage estimates and includes no narrative language, explanations, or opinions as to causation. The Estimate valued the damage to Plaintiffs’ property at $144,661.05, with no amount specified for depreciation. The Estimate is based on a June 5, 2023, inspection that was conducted by an independent contractor hired by Lyon.
2. The Supplemental Report
In his supplemental report, Lyon for the first time offered an opinion as to causation, stating that Hurricane Ida caused the damage to Plaintiffs’ residence. This opinion is based upon “on-site inspections of the subject property, interviews with the property owner, . . . documentation provided to [him], [his] extensive work related to hurricanes [and] windstorms, and [his] accumulative experience in the construction and insurance industries gained over the past 25 years.”
Lyon conducted an inspection of Plaintiffs’ property on June 24, 2024, which resulted in him revising the June 7, 2023, damage estimate downward to $75,707.42, again with no deduction specified for depreciation.
B. Defendant’s Motions
Defendant asked the Court to exclude the June 7, 2023, estimate because it was made by unknown independent contractors, such that the Court cannot test the reliability of its factual underpinnings or methodologies. Next, the Court should strike the supplemental report because it is not supplemental, but is in fact a new report, and was produced by Plaintiffs over two and half months after the expert designation deadline.
1.Defendant’s challenge to the June 7, 2023, Estimate offered as Lyon’s expert report
Defendant argued that Plaintiffs’ timely June 7, 2023, estimate is unreliable because it offered no causation opinions and because unknown independent contractors collected the data underlying the estimate and did the majority of the work creating it.
Lyon affirmed under oath that both the inspector and estimators’ identities are protected by nondisclosure agreements, and he would not reveal them. Since Plaintiffs have not identified who conducted the inspection or created the Estimate, neither Defendant nor the Court can test the reliability of the data and methods employed in repairing it. On this record, Plaintiffs cannot meet their burden of showing that the bases and methodologies underlying the estimate are reliable, and the Court therefore rejected the June 7, 2023, estimate.
Defendant next challenged Lyon’s supplemental report, disclosed after Plaintiffs’ expert designation deadline but prior to the close of discovery.
It should be noted that Lyon’s supplemental report relies upon information gathered by an unknown independent contractor during the June 7, 2023, inspection, Lyon’s own inspection conducted on June 24, 2024, documentation provided to him, and interviews with Plaintiffs. With the exception of Lyon’s inspection, this information was available to Plaintiffs well before the expert designation deadline of April 9, 2024, and Plaintiffs have not offered any explanation why Lyon could not have conducted his inspection before the deadline. For these reasons, the Court concluded that the supplemental report is not supplemental but is in fact a new expert report, such that it could and should have been disclosed by April 09, 2024.
Four factor analysis under Rule 37 to determine the proper sanction
Starting with the fourth factor, the explanation for the failure to comply with the Court’s deadlines, Plaintiffs justify the late disclosure by stating that they paid out-of-pocket to repair their roof in July 2023.
But Plaintiffs do not explain how the completion of these repairs prevented them from timely disclosing the supplemental report or why, if there was an issue, it could not be resolved in the nine months between the completion of repairs and the designation deadline of April 9, 2024.
The third factor is the possibility of a continuance. This, according to the Court, weighs in favor of Defendant because the case is scheduled for Pretrial Conference next month and a continuance would only further delay this case, in essence rewarding Plaintiffs for failing to timely disclose the supplemental report without any justifiable explanation.
The first factor is the importance of the witness’ testimony. Without Lyon, Plaintiffs cannot meet their burden of showing causation and Defendant will be entitled to summary judgment. But even where the expert testimony is significant, “the importance of such proposed testimony cannot singularly override the enforcement of local rules and scheduling orders.”
Turning to prejudice, Lyon had the benefit of possessing Defendant’s expert report when he prepared the supplemental report, and Defendant’s expert’s ability to prepare his own report was impeded by not having access to Lyon’s supplemental report. Defendant would also be required to expend time and financial resources to prepare a response to Lyon’s new causation opinion, causing further prejudice. On balance, the Court held that this factors weigh in favor of excluding the supplemental report.
The circumstances of this case warrant striking the Supplemental Report
Plaintiffs argued that Defendant waived the right to challenge Lyon’s expert designation by failing to file its motion thirty days before the discovery deadline.
The Court found that Plaintiffs attempted to frame Defendant’s argument as a challenge to the initial expert designation, when in fact Defendant is contending that the supplemental report itself introduces new expert testimony and is therefore not supplemental. This would mean that Defendant would have had to file its challenge to Plaintiffs’ disclosure no later than five days later. It would be unfair to permit Plaintiffs to violate their deadline for disclosing expert reports by almost three months, and then penalize Defendant for failing to file its motion to strike by the deadline because Plaintiffs served the supplemental report mere days before it passed.
Held
The Court found that Defendant’s motion to strike should be granted as to Plaintiffs’ expert Rich Lyon, and he will be excluded from testifying at trial. The Court also granted Defendant’s motion for summary judgment because Plaintiffs cannot make the requisite showing as to causation. Plaintiffs Gregory Hebbler and Marion Hebbler’s claims were dismissed with prejudice.
Key Takeaways:
The Court excluded June 07, 2023, estimate offered as Lyon’s expert report because unknown independent contractors did the majority of the work creating it as a result of which the Court cannot test the reliability of its factual underpinnings or methodologies.
The supplemental report offered by Lyon is not supplemental but is in fact a new expert report, such that it could and should have been disclosed by April 09, 2024. It should be noted that Lyon’s supplemental report relies upon information gathered by an unknown independent contractor during the June 7, 2023, inspection, Lyon’s own inspection conducted on June 24, 2024, documentation provided to him, and interviews with Plaintiffs. With the exception of Lyon’s inspection, this information was available to Plaintiffs well before the expert designation deadline of April 9, 2024, and Plaintiffs have not offered any explanation why Lyon could not have conducted his inspection before the deadline.
Case Details:
Case Caption:
Hebbler Et Al V. State Farm Fire And Casualty Company
Docket Number:
1:23cv247
Court:
United States District Court, Mississippi Southern
Plaintiffs The Tripp Plating Works, Inc. (“Tripp”) and Finch Paper, LLC (“Finch”) (collectively referred to as “Indirect Purchaser Plaintiffs” or “IPPs”) alleged that Defendants Olin Corporation (“Olin”), K.A. Steel Chemicals, Inc. (“K.A. Steel”), Occidental Chemical Corporation (“OxyChem”), Westlake Chemical Corporation (“Westlake”), Shintech Incorporated (“Shintech”), and Formosa Plastics Corporation, U.S.A. (“Formosa USA”) (collectively, “Defendants”) conspired to artificially reduce or eliminate competition for the pricing of caustic soda sold in the United States. IPPs claimed that Defendants colluded to fix caustic soda prices, forcing purchasers to pay inflated, supracompetitive prices.
In response, Shintech and Formosa USA separately moved to strike portions of the testimony provided by IPPs’ expert witness, Dr. Gareth Macartney, Ph.D. Additionally, all Defendants jointly moved to exclude certain opinions offered by Macartney. IPPs, in turn, have also moved to strike and exclude certain opinions offered by the Defendants’ expert witness, John H. Johnson IV, Ph.D.
Economics Expert Witnesses
John H. Johnson IV, Ph.D, is the Chief Executive Officer of Edgeworth Economics, LLC, a consulting firm that provides clients with objective expert economic and financial analysis for complex litigation and public policy debates. He holds a B.A. in Economics from the University of Rochester and a Ph.D. in Economics from the Massachusetts Institute of Technology (MIT), where he specialized in labor economics and econometrics. Johnson leverages his expertise to deliver analytical clarity and strategic insights to clients facing high-stakes legal and policy challenges.
Gareth Macartney is the Senior Economist, Director of Competition, and Chief Executive Officer at OnPoint Analytics, Inc., an economic and statistical consulting firm. He holds a Ph.D. in Economics from University College London. Macartney specializes in providing rigorous economic and statistical analysis, particularly in matters related to competition and complex litigation.
On December 28, 2023, the Court denied a motion for class certification filed by the Direct Purchaser Plaintiffs (DPPs), including Miami Products & Chemical Co., Amrex Chemical Co., Inc., Main Pool and Chemical Co., Inc., Midwest Renewable Energy, LLC, Perry’s Ice Cream Company, Inc., and VanDeMark Chemical, Inc. The Court now addresses a similar request by the Indirect Purchaser Plaintiffs (IPPs) to certify two classes under Federal Rule of Civil Procedure 23. The Court assumes familiarity with the DPP Class Certification Decision and Order and prior proceedings in this matter.
IPPs adopted the factual background from the DPPs’ motion for class certification. The Court incorporated by reference the detailed summary of Defendants’ alleged manipulation of the caustic soda market, which purportedly caused customers to pay supracompetitive prices. The allegations focused on Defendants’ price increase announcements and their impact on the caustic soda market.
The IPPs argued that common issues predominated, justifying class certification. However, the Court found that IPPs failed to meet the requirements of Rule 23(b)(3). Their damages model, prepared by Macartney, relied on flawed data from Dr. Russell Lamb, who misclassified contract types by not reviewing individual contracts. This error undermined the model’s ability to demonstrate class-wide injury. Additionally, Macartney’s assumption that price increase announcements influenced index-based pricing was speculative and lacked evidentiary support. He failed to show how inflated prices were incorporated into price indices, a critical component for proving class-wide injury.
The pass-through model, based on data from only three distributors out of more than 155, was not representative of the proposed class. This limited dataset did not capture the complexities of the supply chain, leading to individualized issues that overshadowed common questions. Therefore, the Court concluded that IPPs did not provide a reliable method for proving class-wide injury and damages, and denied class certification.
b. John HJohnson IV
Johnson has provided an expert report responding to and critiquing Macartney’s opinions. Johnson argues, among other things, that: (1) Macartney’s assessment of the impact of Defendants’ price increase announcements is disconnected from economic evidence, in part because pricing for caustic soda is individually negotiated between each supplier and distributor, and the pricing mechanisms and terms vary substantially across distributors, Defendants, and over time; (2) the overcharge regression fails to account for global supply and demand conditions that impact the domestic price of caustic soda; (3) the overcharge regression improperly calculates an average overcharge for distributor and non-distributor purchasers, rather than customer-specific overcharges; (4) the pass-through model relies on data from only three distributors to estimate pass-through rates for 155 distributors, with no statistical tests to support the conclusion that the purchases and sales associated with these three distributors are representative of those excluded from the analysis; and (5) the pass-through model oversimplifies the caustic soda supply chain.
As part of his critique of the regression model, Johnson conducted his own multiple regression analysis, adding various export price measures. He ran six additional regressions, each incorporating one measure of export prices (contemporaneous and three-month lagged). These additional tests yielded an estimate of the purported overcharge that was negative or statistically insignificant.
Admissibility of Johnson’s Opinions
IPPs argue that Johnson’s overcharge regression analyses, and his opinions and testimony based on them, are unreliable because they are prone to endogeneity and fail to reliably control for global supply and demand for caustic soda. More specifically, IPPs contend that Johnson committed a fundamental error by using spot export prices as a variable, asserting that such prices are not reliable indicators of international prices or demand in their respective localities. IPPs acknowledge that DPPs raised a similar argument regarding Johnson’s opinions during their class certification motion and similarly seek exclusion of his spot export price analyses.
Previously, the Court considered and rejected the argument that Johnson’s use of spot export prices rendered his analysis and testimony unreliable. The Court found Johnson’s explanation of his methodology reasonable and persuasive. Nothing in the IPPs’ submissions provides a basis for the Court to reconsider its prior finding that there is no justification under Rule 702 to strike or exclude Johnson’s opinions. Accordingly, the Court denies IPPs’ motion to strike Johnson’s opinions and testimony.
c. Gareth Macartney
Macartney has opined, among other things, that: (1) common evidence demonstrates that the structure of the caustic soda industry is conducive to anticompetitive behavior; (2) common evidence and methods demonstrate that Defendants engaged in collusive behavior that artificially increased the price of caustic soda; and (3) a common, reliable standard economic methodology may be used to calculate damages on a classwide basis. Applying that methodology, he has estimated class-wide damages of $155 million for the State Antitrust Class.
Macartney has further opined that class-wide damages for the Unjust Enrichment Class can also be calculated using common evidence, amounting to $712 million in revenue terms, $355 million in gross profit terms, and $348 million in net profit terms.
A key part of his opinion is the performance of a reduced-form pricing regression analysis to demonstrate that caustic soda prices were artificially inflated during the alleged class period. To conduct this analysis, Macartney used a standardized database of Defendants’ transaction data received from Russell Lamb, DPPs’ expert economist. His model shows an overcharge of 11.61% for all of Defendants’ customers and a 16.37% overcharge for distributor customers. He then applied a regression model to estimate the proportion of Defendants’ price increases passed through to distributor customers. This model provides an estimate of passthrough at a rate of 81%.
The Court denies the Defendants’ motions to strike Macartney’s opinions and testimony as moot.
Held
The Court denied Shintech’s and Formosa’s motions to exclude certain opinions and proposed testimony of Gareth Macartney as moot and denied Defendants’ joint motion to exclude his opinions and testimony. The Court also denied IPPs’ motion to strike and exclude portions of John H. Johnson IV’s opinions and proposed testimony.
Key Takeaways:
When the opponent contended that Johnson’s use of spot export prices constitutes a true error that requires his analyses to be excluded because the spot export prices are not indicators of international prices or demand in their respective localities, the Court held that Johnson has explained his methodology in a way that was both reasonable and persuasive.
Case Details:
Case Caption:
Miami Products & Chemical Co. V. Olin Corporation Et Al
Docket Number:
1:19cv385 ; 1:19cv975
Court:
United States District Court for the Western District of New York
