This is a subrogation action resulting from a water loss that occurred in January of 2021 at a single family home located in Cranston, Rhode Island.
Defendant filed a motion to prevent one of Plaintiff’s experts—Thomas F. Zarek—from testifying as to the source of the damage at trial.
Construction Expert Witness
Thomas F. Zarek has significant experience in the construction and remodeling of homes and commercial businesses.
Zarek has been responsible for a variety of forensic engineering assignments, on average between 200 and 300 assignments per year. These have comprised not only heating system failures, but freeze loss examinations, piping and plumbing systems, water and wastewater distribution systems, fire investigation, and failures of commercial and residential systems.
Defendant argued that: (1) Zarek did not have the relevant plumbing experience to determine whether Defendant’s actions caused the leak; and (2) he did not understand how a fuel usage analysis works, and has not conducted one himself, even though he relied on one in his report.
Here, Defendant failed to show that Zarek is either unqualified as a plumbing expert or that the materials that he relied on in forming his opinion are unreliable. As his CV indicates, Zarek possesses decades of relevant experience conducting plumbing investigations. Additionally, as Plaintiff pointed out, Zarek’s alleged inability to understand how the formula underlying a fuel usage analysis is calculated does not relate to whether he improperly relied on this information in reaching his conclusion.
Separately, the Court acknowledged that Plaintiff asked Zarek to conduct a subsequent report after he performed an earlier, inconsistent one during this litigation.
While Zarek’s original report noted that the freezing weather might have caused damage to the plumbing here, his updated report ruled this out as a potential option.
As with Zarek’s knowledge of the source material underlying his expert report, Defendant can remedy this issue on cross-examination and by impeaching Zarek with his prior report, rather than seeking its exclusion altogether.
Held
The Court denied without prejudice Defendant’s Daubert motion in limine to prevent Thomas Zarek from testifying about the cause of the leak.
Key Takeaway
Zarek’s alleged inability to understand how the formula underlying a fuel usage analysis is calculated does not relate to whether he improperly relied on this information in reaching his conclusion. For example, an expert should be able to rely on a weather forecast in order to conclude whether it was a nice day outside without needing to explain to someone the science underlying the forecast itself.
Case Details:
Case Caption:
Certain Underwriters at Lloyd’s Lond. v. Sonner Plumbing, Inc.
It all started when the Plaintiffs, Lance and Kevin McCulloch, purchased Chandler Gas and Store on May 27, 2021. They alleged that the Marathon’s mandated point-of-sale, back-office management system, and computer system (collectively, the “Required Operations System’), which controlled both the gas pumps and registers in the C-store, frequently malfunctioned.
The Plaintiffs claimed that they have lost profit in several areas due to the malfunctioning of the Marathon operations system.
Both sides filed expert-exclusion motions: Chandler Gas filed a motion to exclude the opinions of John Umbeck and Marathon filed a motion to exclude the opinions of Max McDevitt.
Economics Expert Witnesses
John R. Umbeck is a professor of economics at Purdue University who has more than 40 years of experience researching the petroleum industry and the marketing of petroleum products.
Max J. McDevitt is an economist at the consulting firm, The Fontana Group, Inc., and has “assisted with” over two dozen cases related to franchisee issues, generally in the automotive industry. He has a doctorate in economics from Boston University.
Umbeck explained that he was retained by Marathon to determine whether Chandler Gas was profitable and the amount of damages the business might have incurred due to the alleged point-of-sale problems. Based on his review of “all of the available information,” Umbeck drew eight “conclusions,” which the Court will treat as the opinions Umbeck hopes to offer at trial:
The Chandler station was profitable when operated by Prima Investments.
The Chandler station was profitable when operated by the McCullochs.
The financial data shows no evidence of any significant financial harm to the station during the time of the alleged failure of the operating system.
The actual computer problems, using Verifone data, shows no evidence of any significant loss of gasoline sales.
The customer reviews show no evidence of customers being upset about any inconvenience caused by the computer problems.
Based on opinions 3–5, the alleged failure of the operating system would have no significant negative impact on the expected future revenues or the market value of the business when sold.
The business experienced a significant decrease in the volume of fuel it sold, compared to the sales when operated by Prima. However, these lost fuel sales were caused by the new retail pricing policy implemented by the McCullochs and not the alleged problems with the operating system.
Any loss in value the business might have incurred during this time period was caused by the Plaintiffs.
b. Analysis
Opinions 1 and 2 Regarding Profitability
Chandler Gas argued Umbeck’s first two opinions should be excluded because they are not relevant.
Those opinions addressed the profitability of the station under its prior owner (Prima) and then after Chandler Gas took over. Chandler Gas claimed hundreds of thousands of dollars in damages based on alleged lost sales volume. Umbeck’s opinion that the station was profitable during the relevant period and that observed volume declines were more consistent with pricing decisions than computer outages bore directly on causation and damages.
Evidence of profitability is relevant because it provides economic context against which the jury can assess the plausibility and magnitude of Chandler Gas’s claimed losses. A central issue to this case is whether any alleged operating system outages actually caused a measurable financial impact. Evidence showing the operations before Chandler Gas assumed control and that the business remained profitable during the relevant period will assist the jury in understanding the evidence or determining a fact in issue. And although profitability alone does not disprove damages, it is probative of whether the alleged operating system issues caused significant economic harm, and the weight to be given to that evidence is a matter for the jury, not a basis for exclusion.
The Court found that Umbeck’s testimony provided relevant background and probative evidence that may assist the jury in evaluating the scale of Chandler Gas’ claimed damages.
Opinions 3 and 4 Regarding Operating System Failures
Chandler Gas contended that Umbeck failed to consider relevant evidence about the frequency and severity of operating system failures or outages, making his opinions unreliable.
To determine the impact the operating system had on sales, Umbeck looked exclusively to “a Verifone log” that included 75 problems each assigned a unique case number. He did not explain why he only looked at Verifone logs and did not consider other sources that could have demonstrated system outages.
The majority of Verifone problems were, according to Umbeck, “resolved in 5 minutes or less.” Apparently based solely on his personal experience with computer problems, Umbeck contended that customers did not leave a station and go elsewhere if a problem can be resolved within five minutes. Umbeck provided no evidentiary basis for this five-minute view of consumer behavior. Umbeck then identified the problems that “took more than 15 minutes to resolve.”
As a result, the Court refused to admit Umbeck’s opinions based on his “analysis of the actual computer problems.”
Even if Umbeck were qualified to analyze computer problems—which he is not—he has neither demonstrated any expertise in consumer behavior nor provided a basis for his assumption that a delay of less than five minutes would have no effect.
Finally, Umbeck seemed to expect the Court and factfinders to draw meaningful conclusions from a chart containing gross fuel sales revenue, C-store revenue, and total sales revenue. Umbeck presented a chart with these figures and blankly states “the table shows no significant decline in revenues from fuel sales or store sales.”
Yet there is zero explanation or analysis to show why differences the chart shows in revenue should be considered insignificant. Umbeck thus provided no reliable reasoning supporting his conclusion that no significant loss of revenues occurred over the relevant time period.
Opinion 5 Regarding Customer Reviews
Umbeck obtained 36 customer reviews through Google Maps from the relevant period and concluded that there is no evidence of customers being upset about the computer problems, and thus “no evidence of a significant loss of business due to the alleged computer problems.”
The Court found that Umbeck’s conclusion did not meet the Daubertstandard. Even assuming the accuracy of the customer reviews, the Court determined that Umbeck had provided no reliable method for extrapolating economic harm from qualitative anecdotal feedback. His methodology appeared to consist of reviewing a relatively arbitrary collection of consumer reviews of Chandler Gas, and nothing more. The Court further found that nothing in Umbeck’s background qualified him to perform a qualitative analysis of customer reviews obtained through his own unexplained research on Google Maps.
Opinion 6
Opinion 6 relied entirely on excluded Opinions 3 through 5, and therefore depends on unreliable and inadmissible testimony. Although inadmissible evidence may be considered in formulating expert opinions, Umbeck may not rely on evidence that itself is unreliable.
Umbeck’s conclusion depends substantially on Opinions 3-5, which have been excluded as methodologically unreliable. Because the foundation for Opinion 6 is unreliable and that opinion is otherwise broad and unsupported by independent valuation methodology, the Court excluded it.
Opinion 7 Regarding the Causation of Lost Profits
Umbeck’s opinion 7 concluded that any decrease in fuel sales volume during the relevant period was caused by Chandler Gas’s pricing decisions and not the alleged operating system failures. Chandler Gas argued that this opinion—which is based primarily on price differentials between Chandler Gas and the nearby Circle K station—should be excluded because it is “flawed and unreliable” and prejudicial.
To provide support for Opinion 7, Umbeck used data on the station’s average monthly retail prices before, during, and after Chandler Gas’s ownership. Umbeck first compared Chandler Gas’s prices with those of its eight closest competitors, which seems to show nearly identical pricing between 2018 and 2024. But then Umbeck provided stronger support for his conclusions. He demonstrated a gradual decline in monthly average gasoline sales for Chandler Gas and a gradual increase in the differential between the retail price offered by Chandler Gas and the wholesale price at which it purchased the gasoline.
Finally, Umbeck compared the monthly price of Chandler Gas with a competitor Circle K station just under one mile away. Umbeck’s data showed that Chandler Gas’s average monthly retail price was often a few cents below Circle K’s price for the last half of 2021, but several cents higher than Circle K’s in 2022 (and even up to more than fifteen cents higher in November 2022). In the same chart, Umbeck also showed a mostly-gradual decline in the average monthly volume of gasoline sold by Chandler Gas.
From this data, Umbeck concluded the retail prices set by Chandler Gas—and not the computer problems—caused the volume of gasoline sales to drop. This testimony is relevant to causation and damages because it offers an alternative explanation for the decline in sales volume, which is a key contested issue in the case.
Opinion 8 Regarding Plaintiffs Having Caused All Loss in Value
Umbeck’s opinion 8 stated that “any loss in value the business might have incurred during this time period was caused by the Plaintiffs.”
Unlike Umbeck’s pricing analysis in opinion 7, Umbeck did not identify a valuation methodology or provide an evidentiary basis for this opinion. Umbeck did not perform a discounted cash flow analysis, comparable sales analysis, or any other recognized valuation technique. Nor did he provide an economic model linking the alleged causes (e.g., pricing decisions) to any measurable diminution in business value. In fact, Umbeck’s report included essentially no discussion or reasoning to support this opinion; there was not a single sentence about the business value or how Chandler Gas might have caused any loss in value.
The Court found this opinion too unreliable to satisfy the necessary standard because it did not have an adequate analytical or methodological basis.
Rebuttal Report
Chandler Gas also objected to portions of Umbeck’s rebuttal report, arguing that Umbeck impermissibly exceeded the scope of proper rebuttal. Accordingly, the Court declared that Umbeck would be permitted to offer rebuttal testimony only to the extent it directly responded to or contradicted McDevitt’s opinions.
II. Marathon’s Motion to Exclude McDevitt
McDevitt intended to introduce the following opinions at trial:
Chandler Gas lost an estimated 907,708 gallons of fuel sales between June 2021 and July 2024
Chandler Gas lost an estimated $1,731,972 in C-Store sales between June 2021 and July 2024
Chandler Gas lost an estimated $333,040 in fuel profits between June 2021 and July 2024
Chandler Gas lost an estimated $388,532 in C-Store profits between June 2021 and July 2024
Chandler Gas lost an estimated $721,572 in total profits (combined fuel and CStore) between June 2021 and July 2024
Chandler Gas’s estimated loss of value on the sale of business assets was $784,604
b. Analysis
Marathon challenged McDevitt’s qualifications on the basis he lacked specialized experience in retail gasoline markets and the petroleum industry.
However, the Court found that McDevitt is not going beyond his specialized field of applied economics. Though he did not appear to have extensive experience in the petroleum industry, he did have the necessary background to conduct damages modeling and offer opinions on lost profits, sales, and value.
Marathon also challenged McDevitt’s methodology. Marathon contended that McDevitt’s damages opinions were based on biased assumptions, particularly that all lost sales were caused by operating system glitches rather than price increases or competition. The Court found, however, that McDevitt’s clearly stated assumptions did not extend into territory that would warrant excluding his testimony. McDevitt had reviewed historical data, incorporated alternative pricing scenarios, and based his damage calculations on the station’s actual financial records.
The record indicated at least some basis for McDevitt’s assumptions that the operating system malfunctions resulted in declined sales and values.
Marathon further asserted that McDevitt ignored basic principles of economics like the law of demand. Though Marathon may contend that McDevitt’s analyses were flawed because Chandler Gas raised its prices above competitors, this argument did not render McDevitt’s testimony inadmissible. He did not rely on unsupported speculation and the fact that he did not conduct independent causation analysis is no issue.
Lastly, Marathon argued that McDevitt’s opinions should be excluded because the opinions would mislead the jury and cause unfair prejudice.
The Court held that McDevitt’s calculation of damages has probative value given the issues at hand, and any risk of prejudice or confusion can be mitigated through cross-examination, the presentation of Umbeck’s competing analysis, and appropriate jury instructions.
Held
The Court granted in part and denied in part Chandler Gas’ motion to exclude the opinions of John Umbeck.
The Court denied Marathon’s motion to exclude the opinions of Max McDevitt.
Key Takeaway:
Expert testimony that helps the jury evaluate competing causal explanations for damages claims is within the scope of Rule 702.
Economic experts like Umbeck may rely on historical price data and market comparisons to form opinions about the effect of pricing on sales. Here, Umbeck presents data showing evidence of patterns between price changes and volume shifts. Since the analysis is informed by Umbeck’s background as an economist and relevant experience within the petroleum industry, it sufficiently satisfies the Daubert standard.
Case Details:
Case Caption:
Chandler Gas & Store Inc. V. Treasure Franchise Co. LLC
Docket Number:
2:23cv400
Court Name:
United States District Court for the District of Arizona
On November 30, 2022, Plaintiff, Cynthia Burgett, was at the Hy-Vee Fast & Fresh convenience store in Prairie Village, Kansas, to purchase gas. The gas station’s fuel pump islands are shaped like an “H” and also referred to by the parties as a “dog bone” shape. The fuel pump islands are elevated above the parking lot pavement. While at Defendant’s gas station, Plaintiff tripped over a fuel pump island and suffered serious injuries. Plaintiff’s alleged injuries are extensive and she asserts that she will need lifetime medical care as a result.
Plaintiff asserted a claim of negligence against Defendant. Plaintiff contended that the fuel pump island was an unreasonably dangerous tripping hazard, that Defendant had knowledge or should have known that it was dangerous, that the design was not in accordance with industry standards, and it lacked safety features of Defendant’s standard pump and the industry standards. Both parties will present expert testimony at trial. Plaintiff has identified two experts that will testify as to the dangerousness of the fuel pump island: Lila Laux, a human factors expert, and Albert Kerelis, a licensed architect. Defendant has identified Richard Serignese as a non-retained expert to testify about the design and maintenance of fuel pumps. The parties have filed motions to exclude the opinions of these experts.
Human Factors Expert Witness
Lila Laux has a doctorate in Industrial/Organizational Psychology with a specialization in Human Factors Engineering from Rice University. She has worked as a human factors engineer for more than 30 years. She now works as a Principal Human Engineer for a firm that provides human factors research and consultative services to the military, NASA, the Nuclear Regulatory Commission, public service organizations, and private businesses.
Albert Kerelis has a master’s degree in architecture and is licensed in several jurisdictions, including Kansas. He has over 27 years’ experience in architecture. For the past five years, Kerelis has worked for Robson Forensic providing expert analysis. He also continues to work as an architect for Facilities Design Group and has done so for twenty years by providing architectural services for residential, commercial, and industrial projects. This includes site analysis, code review, code compliance, schematic design, structural design, mechanical, electrical and fire suppression design.
Laux’s opinions include the following: Plaintiff behaved how most people would behave at a gas station; the fuel pump created a hazard because Plaintiff’s attention was not attracted to the “extended lobe in her path” and she was unlikely to see it; the extended lobe of the fuel pump created an unexpected trip hazard that caused Plaintiff to trip; it is unreasonable to expect that people walking between the store and the fuel pump would expect or detect the unmarked and undifferentiated pump pedestal protruding into their path; and it was foreseeable that customers could fail to detect the raised pedestal and trip as they walked to their vehicle.
Qualifications
Defendant made a cursory attempt to exclude Lila Laux’s testimony on the basis that she is not qualified.
A review of Laux’s resume shows that she has decades of experience on human factors and her opinions largely relate to how individuals and Plaintiff would navigate the obstacle of the fuel pump and whether they would be aware of the elevated fuel pump in their path based on her experience. The Court finds that she is qualified to offer such opinions based on her education and experience.
Helpfulness
Defendant argued that Laux’s opinions would not assist the jury in understanding the evidence or facts in this case because what ordinary people see in situations and how they understand their surroundings are within the common understating of a juror.
Here, the Court found that Laux’s opinions and testimony would not be helpful to the jury. Laux offers opinions regarding the types of customers that would go to a gas station, how customers would walk from the fuel pump to the convenience store, whether customers would expect to see or detect the raised fuel pump, and whether it was foreseeable that someone would trip on the raised fuel pump. Such opinions are not helpful here because the average juror has experience getting gas at a gas station. An average juror also has experience walking from a fuel pump to the convenience store to either pay for the gas or to go inside and purchase additional items.
Albert Kerelis
Kerelis is a licensed architect and will provide the following opinions at trial: 1) the edge of the fuel pump island was dangerous and caused Plaintiff to fall; 2) the edge of the fuel pump island was a low obstruction in a foreseeable pedestrian path that violated the standard of care for safe walkways; 3) the property owners should have known it was dangerous and provided warnings to pedestrians; 4) the failure to eliminate the hazardous condition or provide warnings was a violation of the standard of care for safe walkways and created the hazardous condition that caused Plaintiff’s injury; and 5) the owner violated nationally recognized standards of care and the city’s codes and ordinances.
Qualifications
Defendant asserted that Kerelis is not qualified to provide expert testimony on the fuel pump island because he has not prepared design drawings in the past five years, has not designed any projects in Kansas, and has not prepared a design with a fuel pump island in at least 15 years. Kerelis is a licensed architect with decades of experience who has designed hundreds of sites. He testified extensively regarding his experiences in site design and the related considerations of safety for pedestrians and users of sites when designing sites. The Court held that Defendant’s arguments called into question the weight of his testimony rather than his qualifications.
Reliability
Essentially, Defendant argued that the expert’s opinions are not reliable because he fails to cite any publications regarding the design and maintenance of fuel pump islands. Defendant took issue with Kerelis’ reliance on several national publications which he has identified as standards of care in the industry because they are not publications regarding the design and maintenance of fuel pump islands. Kerelis’ opinions, however, clearly stated that Defendant violated the standards of care regarding safe walkways and warnings regarding obstructions. His expert report cites to various publications, including a publication by ASTM International, formerly the American Society for Testing and Materials (ASTM), which is a “globally recognized leader in the development and delivery of professional consensus standards.”
In the report, Kerelis states that ASTM’s publication, “Standard Practice for Safe Walking Surfaces, is a nationally recognized standard of care for the safe construction and maintenance of walkways to prevent pedestrian falls.” That publication states that “in situations where a short flight stair or single step transition exists or cannot be avoided, obvious visual cues shall be provided to facilitate step identification.”
The Court held that Defendant’s arguments claiming Kerelis failed to cite publications on fuel pump islands are unpersuasive. The standards cited by Kerelis relate to obstructions in a walkway and based on the facts in this case and the expert opinions, a jury could conclude that the fuel pump island extended into the walkway.
Richard Serignese
Defendant identified Richard Serignese as a non-retained expert that will “testify that the shape, size, color, and condition of the fuel pump island is within industry standards and that Hy-Vee did not violate any standard of care in regard to the maintenance of the fuel pump islands.”
Serignese is the Vice Presicent and General Manager of Simon Surfaces and will testify based on his “knowledge, education, training, and experience in the fuel island industry.”
With respect to his opinions, Serignese testified that he actually doesn’t “know the exact industry standard” for fuel pump island designs and that his “understanding has always been people pick what they want to pick. It’s a matter of preference. I don’t know that — I don’t know what the — anybody could tell you what the exact industry standard is.” He then reiterated that he did not know the industry standard for fuel islands and admitted that he could not say that this particular design is or is not industry standard.
Defendant argued that Serignese’s inability to articulate an industry standard should not preclude him from testifying because his testimony is that he doesn’t think there is an industry standard. Defendant, however, offered Serignese as an expert who will testify as to the industry standard and that Defendant’s fuel pump island is within that standard. The Court held that Serignese is not qualified to opine as to these issues and his deposition makes clear that he has no opinion on these issues.
Defendant designated Serignese as an expert who will testify that Defendant met the standard of care for maintaining the fuel pump island. The Court held that his deposition testimony, however, made it clear that he has no expertise in that area.
Held
1. The Court granted the Defendant’s motion to exclude the testimony of Lila Laux.
2. The Court denied the Defendant’s motion to exclude the testimony of Albert Kerelis.
3. The Court granted the Plaintiff’s motion to exclude the testimony of Richard Serignese.
Key Takeaways:
Laux offers opinions regarding the types of customers that would go to a gas station, how customers would walk from the fuel pump to the convenience store, whether customers would expect to see or detect the raised fuel pump, and whether it was foreseeable that someone would trip on the raised fuel pump. Such opinions are not helpful here because the average juror has experience getting gas at a gas station.
Kerelis’ opinions, however, clearly stated that Defendant violated the standards of care regarding safe walkways and warnings regarding obstructions. His expert report cites to various publications, including a publication by ASTM International, formerly the American Society for Testing and Materials (ASTM), which is a “globally recognized leader in the development and delivery of professional consensus standards.” The Court held that Defendant’s arguments claiming Kerelis failed to cite publications on fuel pump islands are unpersuasive.
Case Details:
Case Caption:
Burgett V. Hy-Vee, Inc. Et Al
Docket Number:
2:23cv2173
Court:
United States District Court for the District of Kansas
