Expert Witness Profiler

Tag: Calculation

  • Business Valuation Expert Witness’ Alternative Bases of Calculating Alleged Damages Partly Rejected

    Business Valuation Expert Witness’ Alternative Bases of Calculating Alleged Damages Partly Rejected

    In this trademark infringement action, Plaintiffs, Makina Ve Kimya Endustrisi AS (“MKE”) accused the Defendants, A.S.A.P. Logistics Ltd. of engaging in massive fraud when they offered to sell millions of rounds of Plaintiff’s military goods, to multiple purchasers, without permission or right.

    MKE’s damages expert, Pamela O’Neill, opined that MKE suffered millions of dollars in damages. She offered three alternative bases of calculating MKE’s alleged damages: $11.175 million for a reasonable royalty, $7.4 to $8.1 million for corrective advertising costs, or a “floor calculation” of $4.34 million for lost profits from a single customer. Defendants moved to have O’Neill’s opinions excluded.

    Reasonable royalties are an especially bad fit here, where there was no licensing agreement ever contemplated between the parties, no sales related to the infringing use, and no rationale for why a licensing agreement would have ever been agreed to.

    Business Valuation Expert Witness

    Pamela O’Neill has spent more than 30 years as a valuation professional and has directed more than 900 valuation assignments. Early in her career, she was called to testify before the New York Stock Exchange Arbitration Panel and was cited by the Panel as “an excellent expert witness”.

    Her international valuation career has included significant assignments in North America, South America, Europe, Asia, the Middle East, Australia, and New Zealand. She has prepared expert reports for litigation purposes as well as for financial and tax reporting, dispute resolution, investigations, antitrust matters, negotiations, acquisitions, divestitures, reorganizations, solvency and bankruptcy.

    Get the full story on challenges to Pamela O’Neill’s expert opinions and testimony with an in-depth Challenge Study. 

    Discussion by the Court

    Reasonable Royalties

    The Court held that O’Neill’s use of a reasonable-royalty model is not a fit for the facts of this case.

    In addition, her calculation of the royalty rate is plainly unreliable. Since O’Neill could not rely on a licensing agreement that the parties had with each other or with third parties, she attempted to identify comparable licensing agreements. But the six licensing agreements she cites are far from comparable. O’Neill did not actually review the licensing agreements themselves. Instead, she reviewed summaries of transactions available on a database. Also, Defendants say that two other transactions involved celebrity endorsement deals. O’Neill’s report does not acknowledge any of these differences or explain how she accounted for them in her calculation.

    O’Neill applied a royalty rate of 5% (gleaned from these allegedly comparable licenses) not to Defendants’ sales—because there were none—but rather to two transactions that resulted in no sales: an unsigned contract with TD Group for $216 million, and an unfulfilled $7.5 million purchase order and invoice relating to M42, resulting in a calculation of $11.175 million in damages.

    In selecting these transactions, her report simply states that they were chosen because TD Group and M42 “intended to enter into and be bound by these contracts.” O’Neill does not point to any evidence that a hypothetical negotiation between the parties would have been informed by these deals (which arose after the infringement commenced), anything in the parties’ dealings with each other or third parties that would support their use, or anything from the allegedly comparable licenses to support this kind of royalty base. Plus, O’Neill does not even address the fact (which MKE does not dispute) that the TD Group contract allowed the purchase of “up to” $216 million in ammunition but did not have any minimum purchase requirement.

    Lost Profits

    Defendants did not put forward a traditional lost-profits model of damages, and O’Neill confirmed that there was insufficient evidence to support such a model.

    MKE pointed to O’Neill’s expert report, which it says “directly ties Defendants’ misconduct to MKE’s lost profit damages.” MKE says that O’Neill relied on an interview she did with John Sharpley, the individual who handles procurement and contractual issues for non-party Shawnee Outdoors, in reaching her conclusions. Sharpley allegedly told O’Neill that he had conversations with Bear Tactical’s CEO. But “a party cannot call an expert simply as a conduit for introducing hearsay under the guise that the testifying expert used the hearsay as the basis of his testimony.”

    MKE contended that O’Neill may properly rely on otherwise inadmissible “facts or data” as a basis for her opinion. But here MKE is just using O’Neill to skirt the rules of evidence by having her relay double hearsay to the jury on an issue of historical fact as to which her expert opinion would not be permitted—the reasons for Bear Tactical’s termination of its contract. O’Neill’s testimony cannot serve as factual support that MKE’s lost profits from Bear Tactical can be attributed to Defendants.

    Due to the lack of admissible evidence linking MKE’s claimed lost profits to Defendants, the Court did not consider Defendants’ motion to exclude O’Neill’s lost-profits calculations.

    Corrective Advertising

    The Court held that O’Neill’s so-called expert analysis simply involved a calculation of the relative increase in MKE’s “Marketing, Sales & Distribution” expenses for the first half of 2022. As a threshold matter, the Court notes that while O’Neill’s report was required to include “a complete statement of all opinions the witness will express and the basis and reasons for them,” her discussion of corrective advertising damages is limited to two paragraphs and a related exhibit containing calculations. Those paragraphs and the exhibit don’t explain the specifics of what the “Marketing, Sales & Distribution” category contains, does not explain why advertising—as opposed to some other factor—accounted for the increase in that line-item for 2022, and provides no basis—not even explaining conversations had with MKE—to attribute that increase to corrective advertising due to Defendants’ conduct.

    O’Neill admitted that she did not know what was encompassed within the sales component or the distribution component of the figure and said the expenses that these categories may include are different for each company.

    The Court held that O’Neill therefore lacked reliable basis to conclude that the increase of the “Marketing, Sales & Distribution” figure (which may or may not have included MKE’s advertising that may or may not have taken place in response to Defendants’ conduct) was an accurate approximation of corrective advertisement in this case.

    As the Court can see, O’Neill did not rely on any information, such as the underlying expenses that made up the financial data. In fact, MKE never provided O’Neill that data despite her specific requests.

    Held

    The Court granted in part the Defendants’ motion to exclude Pamela O’Neill’s opinions.

    Key Takeaway:

    The Court cannot ignore the limited number of licensing agreements that O’Neill considered, the differences identified between those licensing agreements and the alleged hypothetical negotiation here, and O’Neill’s failure to acknowledge or account for these differences in her report. 

    The Court noted that O’Neill was left to rely on MKE’s sayso that calculating the change in the “Marketing, Sales & Distribution” expenditure would measure corrective advertisement. And since the Court does not even know who provided O’Neill these assurances, the Court cannot verify just how reliable that source of information was. All to say, as an expert witness, O’Neill was not permitted to simply rely on her client’s assurances that it expended money.

    Case Details:

    Case Caption: Makina Ve Kimya Endustrisi A.S V. A.S.A.P. Logistics Ltd Et Al
    Docket Number: 1:22cv3933
    Court: United States District Court, New York Southern
    Order Date: August 2, 2024

  • Statistics Expert Witness’ Potential Backpay Calculation Excluded

    Statistics Expert Witness’ Potential Backpay Calculation Excluded

    Named Plaintiffs Mary Alice Clark, Christopher Coulter, Aaron Perez, Kevin Nelson and Phillip Roscher (collectively, “Plaintiffs”), individually and on behalf of all others similarly situated, brought this putative collective action against Defendant Capital Vision Services, LLC d/b/a MyEyeDr (“MyEyeDr” or the “Company”), claiming that MyEyeDr misclassified all General Managers (“GMs”) and General Managers-in-Training (“GMITs”) as exempt from the overtime pay requirements imposed by the federal Fair Labor Standards Act (“FLSA”), as well as Massachusetts and Pennsylvania law.

    MyEyeDr filed a motion to exclude Plaintiffs’ proffered expert witness, Dr. Liesl M. Fox under Fed. R. Evid. 702 and 403.

    Statistics Expert Witness

    Liesl M. Fox, Ph.D. is a Senior Consultant and Partner at Quantitative Research Associates, a firm that provides statistical and computing consulting services. She has been a statistical consultant for over twenty-five years, including conducting analyses in the fields of litigation and medical research, and has testified as an expert witness.

    Furthermore, she has consulted on and testified in numerous matters involving wage-and-hour disputes, including claims under the Fair Labor Standards Act of 1938 (“FLSA”). These matters have involved allegations of unpaid overtime, off-the-clock work, employment misclassification, minimum wage violations, time-shaving, record-keeping violations, and other wage-and-hour issues.

    Get the full story on challenges to Liesl Fox’s expert opinions and testimony with an in-depth Challenge Study. 

    Discussion by the Court

    Reliability

    Initially, MyEyeDr challenged Fox’s opinions on several grounds. As to the calculation of potential backpay, she assumed that all of the GMs’ training last eight weeks when there was testimony from MyEyeDr’s Chief Revenue Cycle Officer that such period could be shortened, and two class members for which she had made such calculation, testified that neither undertook such training and others testified to a shorter training period.

    Consequently, the Court held that the fact that Fox’s calculation for backpay were premised on such unsupported assumptions undermined the reliability of those calculations. Similarly, in her opinion regarding whether Plaintiffs supervised the equivalent of two full-time employees (for the purposes of determining if the executive exemption applied), the Court found that she did not account for inventory hours spent by these employees “which artificially deflated the labor hours GMs supervised.”

    Moreover, according to the Court, the key is that there is no explanation of a reliable methodology in which she included some work hours in her analysis and excluded others.

    Helpfulness to the Trier of Fact

    Next, the Court questioned whether Fox’s opinions will be helpful to the trier of fact.

    If MyEyeDr is found to have violated the FLSA, it would owe backpay for uncompensated overtime hours worked by GMs at a rate of one and a half times their hourly rate. Upon determining the number of overtime hours each GM worked, the jury would be tasked with calculating each individual’s hourly rate by dividing the weekly salary by the number of hours worked that week. To calculate the backpay, the jury would (1) multiply the hourly rate by one and a half and (2) multiply that by the GM’s overtime hours that given week. Such calculations constituted basic math that a jury can compute without the opinion of an expert.

    However, Plaintiffs noted that the payroll data in this case “contains more than 95,400 rows of data” spanning five years with “81 different earnings code[s] some of which are included in the damage calculations and others that are not properly included in the regular rate,” and “it contains unpaid and paid time off hours that need to be excluded from hours work estimates, and . . . bonuses that need to be spread over the time periods during which they are earned.” They argued that, given the enormity of the data, a jury is unlikely to have the ability to do these calculations. 

    Nevertheless, the Court held that such data can be presented in summary fashion to the jury. Plaintiffs may explain the meaning of such numbers through lay witnesses and argue the reasonable inferences that can be drawn from same to the jury. The Court decided that this proffered “opinion” did not require specialized knowledge or would be helpful to the jury as required under Fed. R. Civ. P. 702.

    Risk of Undue Prejudice and Confusion to the Jury

    Furthermore, the Court held that there is a risk that the jury will attach undue significance to this opinion offered by Fox based on the deficiencies addressed above, such that any probative value of same is outweighed by the risk of undue prejudice and confusion to the jury under Rule 403.

    Held

    In conclusion, the Court granted the Defendants’ motion to exclude Plaintiffs’ proffered expert witness, Liesl M. Fox.

    Key Takeaways:

    To begin with, MyEyeDr did not challenge Fox’s credentials as a highly qualified statistical consultant, or the general relevance of her proffered opinions, but challenged their reliability on several grounds and posited that her proposed testimony would be unhelpful to the jury.

    • First of all, Fox’s testimony would not assist the jury because Fox’s calculations are basic math that a jury can compute without the opinion of an expert.
    • Secondly, Fox’s calculation for backpay were premised on unsupported assumptions. For instance, Fox assumed that all of the GMs’ training lasted eight weeks when there was testimony from MyEyeDr’s Chief Revenue Cycle Officer that such period could be shortened.

    Case Details:

    Case Caption: Clark Et Al V. Capital Vision Services, Llc
    Docket Number: 1:22cv10236
    Court: United States District Court for the District of Massachusetts
    Order Date: July 18, 2024
  • Lost Earning Capacity Opinions of Vocational Rehabilitation Expert Witness Fails to Satisfy Rule 702

    Lost Earning Capacity Opinions of Vocational Rehabilitation Expert Witness Fails to Satisfy Rule 702

    A district judge in Colorado limited the opinion of a vocational expert  because the injuries were obscure and a loss of future earnings capacity could not be deduced from the same.

    This case arises from a car accident that occurred on July 7, 2020, between Plaintiff and a person who was operating a commercial semi-truck while in the course and scope of his employment with Defendant. The semi-truck collided with Plaintiff’s vehicle causing Plaintiff to suffer various claimed physical and cognitive injuries. Plaintiff has sued Defendant under theories of respondeat superior and agency liability. Defendant admitted the semi-truck driver was operating the vehicle within the course and scope of his employment at the time of the accident and has admitted liability. The parties, however, disputed the nature and extent of Plaintiff’s alleged injuries, damages, and losses.

    In his Rule 26(a)(2)(B) disclosures, Plaintiff Timothy Korbe disclosed Daniel B. Best, a certified vocational rehabilitation counselor, to offer opinions regarding his calculations of Plaintiff’s past and future wage losses. Defendant Doug Andrus Distributing LLC filed a motion to preclude these opinions under Federal Rule of Evidence 702.

    Vocational Rehabilitation Expert Witness

    Daniel B. Best is a Certified Rehabilitation Counselor (CRC) with a Master of Arts in vocational rehabilitation counseling and vocational evaluation that he obtained in 1989. For numerous years of his career he has engaged in providing services which include labor market analysis, job analysis, counseling, earning capacity, vocational exploration, and job development and placement. These services sometimes require Best to analyze a worker’s earnings at different points in time.

    Throughout his career, since 1989, Best has testified as an independent vocational expert in over 10,000 Social Security disability hearings and has been qualified as an expert in vocational rehabilitation counseling and vocational evaluation in over 250 workers compensation cases, approximately 20 to 25 divorce proceedings, and over 50 personal injury and other cases throughout the state courts of Colorado, administrative courts, and this United States District Court.

    Get the full story on challenges to Daniel Best’s expert opinions and testimony with an in-depth Challenge Study. 

    Discussion by the Court

    The Defendant argued that Best was not qualified to opine on Plaintiff’s past wage loss, his methodology was unreliable, and his opinions would not assist the fact finder. 

    Best’s Past Wage Loss Opinion

    Considering his education, training, and experience, the Court found Best qualified to opine on Plaintiff’s past wage loss. But the Court noted the Defendant’s concern over his methodology for calculating that loss.

    Best calculated Plaintiff’s past wage loss using simple math, considering a one year period when Plaintiff was placed on medical leave from work purportedly due to his accident-related injuries. He took the amount Plaintiff made the prior year—$85,463—and opined that “during the year off work . . . I believe [Plaintiff] lost $85,463 minus any wage replacement provided to him.”

    The Court held that grounding in reliable facts and tie to Best’s expertise is what saved the opinion.

    Plaintiff’s social security statement showed he made $85,463 in 2019. The accident in this case occurred on July 6, 2020. Plaintiff’s employer placed him on medical leave in August 2020 due to the severe headaches and “sensory overload” he experienced when he tried to return to work. Plaintiff eventually returned from leave and worked 40 hours a week beginning July 6, 2021.  These are reliable and verifiable facts upon which Best based his past wage loss opinion. And while his methodology for calculating those damages is uncomplicated, Rule 702 neither expressly nor impliedly requires an expert’s mathematical calculations to be complex. To sum it up, the Court refused to strike Best’s opinions regarding Plaintiff’s past wage loss.

    Best’s Lost Earning Capacity Opinion

    Best Lacked Qualifications to Testify about Plaintiff’s Lost Earning Capacity

    The Court held that Best’s qualifications to render an opinion on Plaintiff’s lost earning capacity were suspect. Black’s Law Dictionary defines “lost earning capacity” as “a person’s diminished earning power resulting from an injury.” While Best has experience calculating wage losses, there is little in his background to suggest his experience determining a person’s earning capacity, determining the extent of a reduction in that capacity, and then placing a monetary value on that diminution. 

    Best testified that calculating economic losses falls within his expertise from only “a basic standpoint.” 

    Best’s calculation of these damages is not based on sufficient facts or reliable principles or methods

    Best’s opinion here is not based on any medical professional opining that it is probable Plaintiff will be unable to work in the future due to his accident-related injuries. It is instead based on the Plaintiff’s view that he “likely” will have to stop working before retirement age. 

    The Court, citing Parra v. Atchison, Topeka & Santa Fe Ry. Co., 787 F.2d 507, 509 (10th Cir. 1986), held that where the injury is obscure, a loss of future earnings capacity must be established by expert medical testimony in order to avoid pure speculation on the part of the jury.

    Plaintiff’s injuries are of the obscure variety. His injuries involve diagnoses of traumatic brain injury, sequelae, mild neurocognitive disorder, post-concussion syndrome, and he suffers from cervicogenic headache, posttraumatic headache of an unspecified chronicity pattern, visual disturbance, and other issues. 

    Because Best’s lost earning capacity calculation was not based on any factual predicates from a medical expert regarding the extent of his injuries and their probable effect on his ability to work at all in the future, the Court held that Best’s opinion in this regard failed to satisfy Rule 702.

    Held

    The Court granted in part and denied in part the motion to strike Daniel Best’s opinions. Plaintiff met his burden to show that Best’s past wage loss opinions satisfied the requirements of Fed. R. Evid. 702, but he did not meet his burden to show that Best’s lost earning capacity opinions did the same.

    Key Takeaways:

    • There is no implicit requirement in Fed. R. Evid. 702 for the proffered expert to make complicated mathematical calculations.
    • Where injuries complained of are of such character as to require skilled and professional persons to determine the cause and extent thereof, they must be proved by the testimony of medical experts.

    Case Details:

    Case Caption: Korbe V. Manchester Et Al
    Docket Number: 1:23cv1145
    Court: United States District Court, Colorado
    Order Date: May 23, 2024

  • Securities Expert Witness’ Opinion on Defendant’s Breach of Fiduciary Duties Admitted

    Securities Expert Witness’ Opinion on Defendant’s Breach of Fiduciary Duties Admitted

    Plaintiffs are former Salesforce employees who participated in the Salesforce 401(k) Plan. They alleged Defendants breached their fiduciary duties to the Plan and Plan participants in violation of the Employee Retirement Income Security Act of 1974 (“ERISA”).

    Plaintiffs alleged the Investment Advisory Committee, Joseph Allanson, Stan Dunlap, and Joachim Wettermark (collectively, “Committee Defendants”) breached their fiduciary duty of prudence by selecting and retaining investment options with high costs relative to other, comparable investments. They relied on Robert E. Conner to support their claims against Defendants—fiduciaries of the Salesforce 401(k) Plan—under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).

    Robert Conner stated that Defendants’ oversight of the Salesforce 401(k) Plan was not “consistent with the standard of care of a prudent fiduciary,” and that the Plan participants incurred “losses . . . as a result of the Plan fiduciaries’ failure to provide oversight.”

    Defendants sought an order excluding Conner’s opinions pursuant to Rule 702 of the Federal Rules of Evidence, arguing he was “not qualified to opine on the standard of care applicable to such fiduciaries under ERISA” and that his opinions were based on “flawed methodology and unreliable information.”

    Securities Expert Witness

    Robert E. Conner holds an M.B.A. in Finance from Harvard Business School. Conner is currently the President and co-founder of Datura Analytics, LLC and the co-founding officer of Thornapple Associates, Inc; two expert witness firms specializing in litigation support for investment disputes, investment industry standards, and damages. He has 46 years of experience in the securities industry serving clients in areas such as “ERISA pension and profit-sharing plans, registered and nonregistered investment managers and advisors, non-profit organizations and foundations, bankruptcy trustees, trusts and estates.”

    Conner’s opinions were partly based on his experience as a fiduciary in, among other things, investment portfolio management, including within the retirement plan industry. Conner has been an expert witness in several analogous ERISA cases.

    Discussion by the Court

    Conner Lacks the Requisite Experience

    Defendant argued that Conner never “served on a 401(k) or other pension plan committee” and has never “served as an expert witness where the ERISA fiduciary standard of care has been at issue.”

    However, Conner “managed discretionary accounts” and “provided research and transactional coverage of non-discretionary accounts” including pension plans from 1977 to 1980. From 1983 to 1998, he managed equity portfolios for pension accounts as a portfolio manager, all of which experience included managing ERISA plan assets. Since 1998, Conner has worked at two expert witness firms, supporting litigation in “the securities and commodities industry” and in “investment industry disputes.”

    In conclusion, the Court determined that the Defendants’ criticism of Conner’s experience only affected the weight of his opinions, not admissibility.

    Conner’s Opinions are based on Flawed Methodology and Unreliable Information

    Conner opined the Committee breached its fiduciary duty by choosing “investments and share classes with higher expenses even though identical investments with lower expenses were available” by: (1) as to Target Date Funds (“TDFs”), “failing to choose or switch to the JPMorgan Smart Retirement 2020 R5 share class . . . or the R6 share class when they became available”; and (2) failing to offer the “Fidelity Contra Commingled Pool (CIT)” and “Fidelity Contra Fund K6.”

    JPMorgan SmartRetirement Target Date Funds

    Defendants first argued Conner based his criticism of the Committee’s failure to substitute the Institutional share class of the JPMorgan TDFs for the R5 share class “on flawed methodology and unreliable information.”

    The underlying factual record indisputably showed that the Plan was invested in the Institutional (later renamed R5) class from the beginning of the Class Period through December 2017.”

    Plaintiffs did not dispute that the R5 and Institutional share classes were identical. Instead, they argued the “essential part” of Conner’s TDF share class opinion “focused on . . . why the R6 share class should have replaced the more expensive [Institutional/R5] share classes” more promptly, and, as Plaintiffs also pointed out, the supporting data contained in the exhibit submitted in connection with Conner’s report could support a calculation demonstrating the difference between the Institutional/R5 and R6 share classes. In light thereof, the Court found the above-described error concerned the weight, rather than the admissibility, of Conner’s opinions.

    Defendants next criticized Conner for ignoring the benefit of revenue sharing to offset Plan administrative expenses, which was provided by the R5 class but not the R6 class. Although Conner conceded that revenue sharing was applied toward expenses with the fund, he stated he did not account for the revenue sharing credit paid by the Institutional/R5 share class in his damages calculations because revenue sharing made recordkeeping and administrative costs interdependent with plan participant returns and reduced the investment returns plan participants received.

    The Court found that the above challenge primarily concerned the merits of Plaintiffs’ claims, rather than whether the report was based on sufficient facts and data.

    Collective Investment Trusts

    Defendants also sought to exclude Conner’s opinion that the Defendants breached their fiduciary duty of prudence by failing to replace the JPMorgan TDFs, the Fidelity Contrafund K, and the Fidelity Diversified International Fund K on the Plan’s investment menu with cheaper CITs sooner than they did. They argued Conner’s methodology was flawed because he inappropriately compared mutual funds with CITs, which were entirely different investment vehicles with different features. Conner did not dispute the above-referenced differences but offered his opinion that such concerns did not permit a prudent fiduciary to “rule out” CITs entirely. The Court again found Defendants’ challenge questioned the merits of Plaintiffs’ claims rather than the admissibility of Conner’s opinions in support thereof.

    Damages

    Defendants first sought to exclude Conner’s damages calculations because he did not obtain the underlying data himself and failed to properly assure its accuracy. Conner testified that he verified the numbers upon which he relied and based his own opinions upon. Accordingly, the Court declined to exclude Conner’s testimony on the basis of his use of such data.

    Flaws:

    Defendants additionally argued Conner’s damages calculations suffered from several fundamental flaws specifically:

    (1) He treated the R5 and Institutional share classes of the JPMorgan TDFs as distinct share classes;

    (2) He failed to account for the difference in expense ratios varying over the 2015 to 2017 period and by vintage; and

    (3) He multiplied his calculation of expense ratio differences by Plan assets in the challenged funds as of year-end keeping in mind expenses accrued throughout the year rather than at year end.

    As to the first of the above-listed “flaws,” the Court declined to exclude Conner’s damages calculations because, as discussed above, it isolated the mistake from the rest of Conner’s analysis.

    As to the second flaw, Conner acknowledged that the share class expense ratios could change at different times causing smaller or larger spreads, but he explained that the difference typically is about 0.10%, which is the figure he opted to use. The Court held that an expert’s arguably improper focus on damages at a particular point in time is a question of fact, rather than grounds for exclusion.

    Similarly, as to the third “flaw,”  the Court found the parties’ respective experts’ disagreement as to whether it was preferable to use monthly asset averages, as was done by Defendants’ expert, or instead to use year-end assets, as was done by Plaintiffs’ expert, concerned the weight of each such opinion, not its admissibility.

    Opinions as to Excluded Claims

    Defendants sought to exclude Conner’s opinions to the extent they pertained to claims brought solely in the Second Amended Complaint, which Plaintiffs were not permitted to file, and to claims whose dismissal from the First Amended Complaint was affirmed by the Ninth Circuit. Plaintiffs agreed that such opinions “could be stricken.”

    Held

    The Court denied the Defendant’s motion to exclude Securities Expert Witness Robert Conner with the exception of the opinions as to excluded claims.

    Key Takeaways:

    1. Requisite Qualification: Conner managed discretionary accounts and provided research and transactional coverage of non-discretionary accounts. He also worked at two expert witness firms. The Court held that he was qualified to opine.
    2. Methodological Basis: The Court’s decision emphasized that Conner thoroughly checked the numbers used in his damages calculations, ensuring that he based his opinions on a sound methodology.
    3. Challenge to Merits: Defendants argued that Conner’s methodology was flawed because he inappropriately compared mutual funds with CITs, which were entirely different investment vehicles with different features. The Court held that the Defendants’ challenge concerned the merit of Plaintiff’s claims.

    Case Details:

    Case Caption: Miguel v. Salesforce.Com
    Docket Number: 3:20cv1753
    Court: United States District Court, California Northern
    Order Date: March 20, 2024

  • Methodology employed by the Business Valuation Expert Witness to compute damages passes the Daubert test amidst alleged violations of consumer protection laws

    Methodology employed by the Business Valuation Expert Witness to compute damages passes the Daubert test amidst alleged violations of consumer protection laws

    This case involved a dispute over the admissibility of expert testimony regarding damages in a lawsuit filed by Innovative Solutions International, Inc. (“Plaintiff”) against multiple Defendants, including Houlihan Trading Company, Inc. and Pilgrim’s Pride Corporation (“Pilgrims”). 

    Pilgrims, a company involved in preparing and packaging chicken for resale, supplied chicken that went through several vendors before reaching Defendant Houlihan Trading Co., Inc., who then sold it to the Plaintiff. The Plaintiff used the chicken in various food products that were ultimately sold to Trader Joe’s. Following customer complaints about bones in the products, Trader Joe’s terminated its contract with the Plaintiff. Consequently, the Plaintiff initiated legal proceedings against several entities in the supply chain, including Houlihan and Pilgrims. The lawsuit was filed on the grounds of multiple breaches of warranty and contract, misrepresentation, negligence, and violations of consumer protection laws. To support its claim for damages, the Plaintiff sought the admission of expert testimony from Steven J. Kessler. However, Pilgrims petitioned the Court to exclude or limit Kessler’s expert testimony, citing Rule 702 and the Daubert v. Merrell Dow Pharmaceuticals case (509 U.S. 579, 1993).

    Business Valuation Expert Witness

    Steven J. Kessler, C.P.A., A.B.V., C.F.F., has significant experience in the valuation and analysis of economic damages for business and personal injury cases and contested economic damages litigation cases. He is a Certified Public Accountant. He earned professional certifications such as Accredited in Business Valuation (ABV), Certified Valuation Analyst (CVA) and Certified in Financial Forensics (CFF), among many others.

    Discussions by the Court

    Pilgrims initially argued for the exclusion of Kessler’s testimony, contending that his method of calculating profits did not adhere to a “generally accepted way.” The Court noted that Pilgrims incorrectly applied the Frye standard, emphasizing that it had been superseded by Federal Rule of Evidence 702 according to the Daubert decision. The Daubert standard represented a departure from the stringent “general acceptance” standard set by Frye, emphasizing that while general acceptance within a scientific community could be a relevant factor, Daubert aimed to establish a more flexible test for the admissibility of expert testimony. Daubert clarified that expert testimony must be both reliable and relevant to the trier of fact, with general acceptance of a methodology, being just one factor among others in the non-exhaustive list of considerations.

    In the Daubert inquiry, Kessler’s methodology for establishing expert evidence was assessed. Kessler began by calculating the Plaintiff’s average sales growth rate, determining it to be slightly over 10% based on a seven-year period from 2013 through 2019. Next, he calculated the Plaintiff’s estimated lost profits for 2022 by using the 2019 sales volume as a base, applying the 10% annual growth rate, and factoring in the average selling price per pound for that year. In performing these calculations, Kessler employed actual figures for products sold, sales price, overhead costs, and other relevant variables for the relevant year. Lastly, Kessler utilized the annual growth rate and net loss in profits as inputs to calculate future lost profits for the subsequent 14 years. This projection involved applying the appropriate growth rate to the estimated lost profits amount.

    According to Daubert, a proponent of expert testimony must provide a precise explanation of how conclusions were reached and reference objective sources to support reliability. Mere assertions of “universal acceptance” are insufficient; instead, the proponent must demonstrate in an objective manner that the chosen scientific method is reliable. Despite Pilgrims’ challenge to the reliability of Kessler’s report, which it claimed lacked evidence of widespread acceptance, the Court noted that Daubert’s focus is on reliability and relevance rather than general acceptance.

    The Court found Kessler’s methodology, as detailed in calculating the Plaintiff’s damages, to be both reliable and relevant. The method, involving the comparison of profits over benchmark periods before and after an alleged injury, is widely accepted across jurisdictions. The Court cited the “before and after” or “profit history” method, endorsed in cases such as Bigelow v. RKO Radio Pictures 327 U.S. 251 (1946). Despite Kessler not explicitly labeling his approach as such, the Court deemed it fundamentally the same as the endorsed methods.

    In light of Daubert’s liberal approach, the Court found Kessler’s method reliable. Any disagreement with specific calculations could be addressed through cross-examination during trial, as per Daubert’s recommendation for challenging admissible evidence.

    In the alternative, Pilgrims sought to exclude Kessler’s testimony, claiming faulty data. According to Federal Rule of Evidence 702(b), expert testimony must be based on sufficient facts. However, the emphasis of Rule 702(b) is not to allow the Court to exclude testimony based on a belief in one version of the facts over another. Pilgrims’ argument was deemed unsuccessful, as it essentially amounted to a disagreement about the underlying set of facts, which Rule 702(b) prevents from being a basis for exclusion.

    Pilgrims’ additional argument contends that Kessler’s failure to include mitigation in his calculation of damages renders his testimony unreliable. Specifically, Pilgrims asserted that Kessler should have factored in Plaintiff’s potential profits to offset the damages outlined in his report. However, the Court disagrees with this stance, noting that although the failure to mitigate can be considered in a damage award, there is no authoritative basis for excluding testimony solely due to the omission of mitigation in the damages calculation. According to Daubert, Kessler’s decision not to include mitigation does not render his testimony unreliable or irrelevant, as the question of whether Plaintiff could have mitigated its damages is a matter of fact for the jury to determine.

    Pilgrims challenged Kessler’s inclusion of a 15-year projected loss of profits, claiming insufficient basis for extending sales projections post-recall. However, Kessler’s report clarified that the projected loss of profits across a 15-year period aligned with the Plaintiff’s sales relationship with Trader Joe’s, which spanned 15 years. Court acknowledged Pilgrims concern that a longstanding business relationship didn’t guarantee future business but highlighted that such a guarantee wasn’t a requirement for the admissibility of the expert testimony.

    Defendant challenged a crucial assumption in Kessler’s damages computation, specifically his exclusion of the year 2020 due to the COVID pandemic. Again, Pilgrim’s fails to explain why decisions made by an expert are anything more than questions of reasonableness best left for a jury to decide. Emphasizing the principles in Daubert, the Court asserted that once an expert meets the reliability threshold, questions regarding the weight of the testimony are within the jury’s purview, not the Court’s. In essence, the Court clarified that the reasonableness of Kessler’s assumptions in calculating damages is a matter for the jury to decide and does not constitute grounds for exclusion.

    Held

    The Court denied Defendant Pilgrims’ Pride Corporation’s motion to exclude or limit the expert testimony of Steven J. Kessler. The Court has not arrived on an outcome for this case since the remaining issues involved in this case still await resolution.

    Key Takeaways

    This case demonstrates that under the Daubert standard that now governs the admissibility of expert testimony, the focus is on the reliability and relevance of the expert’s principles and methodology, not the rigorous “general acceptance” standard. While the Defendant argued that the methodology employed by Plaintiff’s expert, Steven Kessler’s wasn’t generally accepted, the Court found it satisfied Daubert because it was reliable and relevant. Where the expert meets the reliability threshold as explained in Daubert, questions regarding the weight to be accorded to the testimony are for the jury, not the Court. Secondly, the Court held that outright exclusion is not warranted if the expert does not include mitigation as part of his calculation of damages. Finally, opposing parties can challenge the facts underlying an expert’s assumptions through cross-examination rather than exclusion. Disagreements about the facts are not enough to exclude expert testimony as unreliable.

  • Court rejects the damages calculation of Economic Damages Expert Witness but allows him to opine on available employment opportunities for the Plaintiff in Employment Discrimination Suit

    Court rejects the damages calculation of Economic Damages Expert Witness but allows him to opine on available employment opportunities for the Plaintiff in Employment Discrimination Suit

    Plaintiff Rose Kochka had brought claims against West Penn Allegheny Health System Inc. (“WPAHS”) under the Age Discrimination in Employment Act of 1967 (“ADEA”), 29 U.S.C. §§ 621, et seq., Pennsylvania Human Relations Act (“PHRA”), 43 P.S. §§ 951, et seq., and the Pittsburgh City Code, Article 5 §§ 651.01 et seq. These claims arose from Kochka’s past employment with WPAHS. In summary, Kochka contended that WPAHS had discriminated against her based on her age and had retaliated against her by terminating her for reporting alleged discrimination. The Court addressed seven motions in limine (six filed by Kochka and one filed by WPAHS), including Kochka’s Daubert motion to Preclude and/or Limit the testimony of WPAHS’ damages and mitigation expert Chad Staller.

    Economic Damages Expert Witness

    Chad L. Staller JD, MBA, MAC, CVA serves as the president of the Center for Forensic Economic Studies and holds extensive experience collaborating with both plaintiff and defense counsel across various civil cases. His expertise involves quantifying losses sustained by diverse plaintiff profiles, including union members, government employees, business proprietors, and injured children. Staller specializes in evaluating claims related to employment discrimination, encompassing calculations of back-pay, front-pay damages, and lost benefits. Additionally, he frequently provides consultation on commercial issues, analyzing claims associated with lost profits and business interruptions. Staller has a substantial record of testifying in jury trials, bench trials, and arbitrations within state and federal court settings.

    Discussion by the Court

    Kochka attempted to limit Andrea Campbell and Morgan Henderson’s testimony about their interactions with her and Beverly Feragotti, Kochka’s direct supervisor, claiming their involvement wasn’t relevant to her termination. However, the Court deemed their testimony crucial in understanding the reasons behind Kochka’s dismissal.

    Kochka also tried to prevent Michael Weber, a Workforce Relations Consultant, from testifying, citing his testimony as hearsay based on a complaint from Campbell. The Court agreed, barring Weber’s testimony due to its hearsay nature.

    Regarding Beverly Feragotti’s termination, Kochka argued against comparing her case to Feragotti’s, stating they were terminated by different decision-makers. WPAHS disagreed, asserting that despite differing roles, both faced similar performance standards and improvement plans. The Court confirmed their distinct positions and noted differences in their terminations, emphasizing separate decision-making groups involved in each case.

    Ultimately, the Court highlighted the dissimilarities in roles, termination circumstances, and decision-makers, ruling Feragotti an unsuitable comparison for Kochka’s case.

    Kochka filed a motion to preclude Chad Staller’s opinions, citing Rule 702 and the Daubert standard, alleging Staller’s methodology and data were unreliable. Specifically, Kochka objected to Staller’s use of Department of Labor statistics for calculating economic damages, his omission of adverse tax consequences, his qualifications and method for identifying employment opportunities for Kochka, and his reliance on the Pennsylvania Office of Unemployment Compensation to assess Kochka’s mitigation of damages. WPAHS defended Staller’s opinions, asserting their appropriateness in each aspect contested by Kochka.

    The Court had agreed with Kochka regarding the unreliability of Chad Staller’s reliance on Bureau of Labor statistics to determine the duration of loss, thus rendering his calculation of economic damages based solely on these statistics unreliable as well. Staller’s reliance on the “Worker Displacement: 2019-2021” survey from the U.S. Census Bureau, which defined “Displaced Workers” as those affected by specific job loss scenarios, was found problematic.

    Although Staller acknowledged the dissimilarity between Kochka’s employment separation and the survey’s definition of “Displaced Worker,” he justified the use of this data as a proxy due to the lack of a specific dataset for terminated employees like Kochka. The Court concurred with Kochka’s argument that as Kochka was terminated and did not align with the definition of a “Displaced Worker,” Staller’s reliance on data regarding non-terminated workers was inappropriate for determining the duration of loss for a terminated employee. Staller failed to provide a basis for using data applicable to non-terminated workers to assess a worker terminated for cause.

    WPAHS attempted to argue for Staller’s opinion by asserting a seven-year mitigation period for Kochka from her separation in November 2019, suggesting that Staller’s analysis applied a three-year period from the time of his report. However, the Court rejected WPAHS’s argument, noting the misinterpretation of Kochka’s position and the lack of support for WPAHS’s claim in Staller’s report.

    Staller’s reliance on Bureau of Labor statistics projecting a three-year period for displaced workers to achieve prior earnings parity contradicted WPAHS’s claim of a seven-year mitigation period. Staller’s report explicitly calculated the three-year period not from the May 2023 report date, as WPAHS asserted, but from January 1, 2024, the presumed date when Kochka would secure mitigation employment.

    Consequently, the Court excluded Staller’s opinion on the duration of loss based on the “Worker Displacement: 2019-2021” survey and a three-year period. Staller’s economic damages calculation relying solely on Bureau of Labor statistics was also deemed unreliable. However, if Staller’s opinion on the duration of loss was supported by the human capital model (uncontested by Kochka), he could testify regarding his damages calculation during the trial.

    The Court disagreed with Kochka’s contention that Chad Staller’s decision not to calculate potential adverse tax implications affected the clarity of his damages opinion or prejudiced Kochka. The Court clarified that it’s the responsibility of the district court, not the jury, to determine any additional compensation to offset the increased tax burden resulting from a back-pay award.

    Given that the jury wouldn’t deliberate on this issue, the Court ruled that Staller’s omission of adverse tax calculations wouldn’t confuse the jury or cause prejudice to Kochka. As a result, this aspect of Kochka’s motion was denied by the Court.

    The Court dismissed Kochka’s objection regarding Chad Staller’s qualifications and methodology for assessing available employment opportunities for Kochka. Despite Kochka’s challenge to Staller’s qualifications by highlighting his lack of vocational expertise and certification, a review of Staller’s curriculum vitae affirmed his qualification to provide an opinion in this regard.

    Moreover, the Court found Staller’s methodology, utilizing employment listings from Forensic JobStats, to be reliable. Staller’s methodology was outlined in detail in his report, involving specific criteria such as keyword searches for relevant job titles and locations, along with subsequent exclusions based on these results after his deposition. The Court determined that Kochka’s objections were more related to the results of the methodology and Staller’s analysis rather than the methodology itself.

    As WPAHS argued, the Court believed that Kochka’s concerns could be appropriately addressed through cross-examination and did not serve as grounds to exclude Staller’s opinions.

    The Court agreed with Kochka’s objection concerning Chad Staller’s reliance on Pennsylvania’s unemployment compensation standards to assess Kochka’s mitigation efforts, deeming it confusing and inapplicable to this case. Staller’s reference to the Pennsylvania Office of Unemployment Compensation’s criteria for assessing job search diligence was found irrelevant as Kochka wasn’t seeking unemployment compensation in this lawsuit.

    Despite WPAHS attempting to minimize Staller’s reliance on these standards, the Court found that Staller explicitly referenced and applied these standards to Kochka in his assessment. Staller’s report indicated that Kochka had not met the standard outlined by the Pennsylvania Office of Unemployment Compensation, forming the basis of Staller’s opinion that Kochka failed to conduct a reasonable job search and mitigate her damages.

    As a result, the Court excluded aspects of Staller’s opinion that linked Kochka’s job search and mitigation efforts to the requirements of the Pennsylvania Office of Unemployment Compensation. However, Staller was permitted to testify about Kochka’s job search endeavors and the available employment opportunities.

    In Kochka’s motion to exclude evidence of her failure to mitigate damages, her main contention was the exclusion of Chad Staller’s opinion testimony, the sole evidence, according to Kochka, that WPAHS possessed regarding mitigation. Kochka argued that since Staller’s testimony should be excluded, WPAHS lacked sufficient evidence to meet its burden, thus should be barred from arguing that Kochka failed to mitigate damages.

    However, the Court denied Kochka’s motion, finding her reasoning insufficient. The Court concluded that Kochka hadn’t provided compelling reasons to prevent WPAHS from presenting evidence concerning her efforts to mitigate damages. Consequently, WPAHS was not precluded from introducing such evidence or making arguments regarding Kochka’s mitigation efforts.

    Kochka moved to preclude deposition testimony that had been designated by WPAHS, specifically related to Andrea Campbell, who was listed as witness to be called on both Kochka’s and WPAHS’ witness lists. Since Campbell was set to provide live testimony, the Court granted Kochka’s motion to preclude the deposition testimony without prejudice.

    WPAHS moved to exclude evidence and testimony involving Julie Stuck, a Labor Relations Consultant, and drafts of Kochka’s termination letter. Stuck was consulted for an HR perspective on the termination. WPAHS argued that these pieces of evidence held limited probative value since Stuck wasn’t a decision-maker and the initial and final termination letters aligned. Additionally, WPAHS expressed concern about potential unfair prejudice due to a statement by Stuck mentioning an EEOC claim.

    However, the Court disagreed with WPAHS, affirming the significant probative value of the draft termination letters and communications involving Stuck. The Court ruled that the EEOC reference by Stuck, while potentially prejudicial, didn’t substantially outweigh its probative value concerning the termination process. Therefore, the Court allowed the inclusion of this evidence and testimony.

    WPAHS requested permission to amend the Joint Exhibit List, adding Exhibits 2, 4, 5, 6, and 7, previously attached to its Motion in Limine. WPAHS sought admission of all communications related to the topic, not initially included in the parties’ Joint Exhibit List. Kochka didn’t oppose the inclusion of Exhibits 2, 5, 6, and 7 but objected to Exhibit 4.

    Kochka argued against Exhibit 4’s relevance, stating that the email text was duplicated in other emails, and the 27 pages of attachments lacked independent relevance. Kochka also pointed out the absence of evidence showing Stuck’s review or reliance on the attachment contents.

    The Court approved the motion partially, allowing admission of Exhibits 2, 5, 6, and 7, unopposed by Kochka. However, the Court deferred its ruling on Exhibit 4, which was opposed, pending further consideration.

    To sum it up, the Court granted in part and denied in part WPAS’ motion to exclude evidence and testimony involving Julie Stuck.

    Held

    • Plaintiff’s Motion in Limine #1 – To Limit the Testimony of Andrea Campbell and Morgan Henderson was denied by the Court.
    • Plaintiff’s Motion in Limine #2 – To Preclude the Testimony of Michael Weber was granted by the Court.
    •  Plaintiff’s Motion in Limine #3 – To Preclude Evidence or Argument Regarding Beverly Feragotti’s Termination was granted by the Court.
    • The Plaintiff’s Daubert Motion aimed at limiting or precluding Chad Staller’s testimony has been partially granted and partially denied. Firstly, Staller is barred from testifying regarding his opinion on the duration of loss if it relies on the “Worker Displacement: 2019-2021” survey. Additionally, if Staller’s calculation of economic damages is solely based on Bureau of Labor statistics, it is deemed unreliable and excluded. However, if his opinion on the duration of loss aligns with support from the human capital model (not challenged by Kochka), Staller is permitted to testify about his damages calculation during the trial. Secondly, Staller is not allowed to testify that the job search requirements set by the Pennsylvania Office of Unemployment Compensation represent the standard for Kochka’s reasonable and diligent job search or mitigation of damages. Nor can he testify that Kochka lacked reasonable diligence by failing to meet these requirements. Nonetheless, Staller retains the ability to testify regarding Ms. Kochka’s job search efforts and the available employment opportunities.
    • Plaintiff’s Motion in Limine #4 – To Preclude Evidence or Argument that Plaintiff Failed to Mitigate Her Damages was denied by the Court.
    •  Plaintiffs’ Motion in Limine #5 – To Preclude Defendant’s Discovery Designations was granted without prejudice by the Court.
    •  Defendant’s Motion in Limine #1 – To Exclude Evidence and Testimony Relating to Julie Stuck and Drafts of Plaintiff’s Termination Letter was granted in part and denied in part by the Court.

    Key Takeaways

    The Court excluded testimony from the Defendant’s expert witness Chad Staller regarding the duration of the Plaintiff’s loss of earnings, to the extent it relied solely on Bureau of Labor statistics about displaced workers. The Court found that since the Plaintiff was terminated for cause, rather than displaced, the statistics were not sufficiently reliable. The Court also excluded Staller’s opinions applying the standard for unemployment compensation in Pennsylvania to determine if the Plaintiff failed to mitigate damages. The Court found this would confuse the jury since the Plaintiff was not actually seeking unemployment compensation. However, the Court allowed Staller to testify about the Plaintiff’s job search efforts and employment opportunities available to her. Additionally, the Court rejected a challenge to Staller’s failure to provide calculations for adverse tax consequences, finding this issue was not for the jury. Overall, the Court demonstrated a willingness to closely scrutinize the reliability of the Defendant’s expert’s methodology and data underpinning his opinions about mitigation and damages, while still allowing him to testify on certain relevant issues like job search efforts. The Court applied the Daubert principles to ensure the expert’s testimony would assist rather than confuse or mislead the jury.