In 2017, twin brothers Michael and David Postar split their interests in Affordable Storage, a self-storage business that they jointly owned and operated for many years. As part of the split, the brothers assigned certain registered trademarks associated with the business to a holding company in which they both own a 50% stake. Michael has exclusive rights to use those marks in Lubbock County, whereas David has exclusive rights to use them in Tom Green and Midland Counties.
Years after the split, David, through his company Gargoyle Management, Inc., licensed a derivative of one of the marks to the brothers’ former employee, Gavin Hyland. Hyland and his wife operate their own self-storage business, Slaton Affordable Storage, Inc. Their two locations—one of which is in Lubbock County—are also named Affordable Storage.
Michael sued the Hylands, David, and their companies for, among other things, trademark infringement, unfair competition, common-law misappropriation, and civil conspiracy. Generally, Michael alleges that the Defendants are violating federal and state law by using unauthorized derivatives of the Affordable Storage IP to compete against Michael in Lubbock County.
Michael identified John M. Cone as his expert witness to testify about (1) whether Michael has protectable rights in various marks; (2) whether those rights have priority over the Hylands’ use of certain marks; and (3) whether the Hylands’ use of those marks is likely to cause confusion.
In response, the Hyland Defendants filed a motion to exclude the expert testimony of Cone, an attorney who specializes in trademark law.
Trademarks Expert Witness
John M. Cone worked as an agent and attorney in intellectual property matters, first in England and subsequently in the United States, since before 1970, concentrating on trademark law.
In England, he was a Chartered Patent Agent and a Member of the Institute of Trademark Agents. Cone was responsible for the worldwide trademark practice of the firm of patent and trademark agents of which he was a partner. In 1980, he moved to the United States, and in 1983 received a Doctor of Jurisprudence degree from Southern Methodist University, graduating cum laude. Cone had obtained a B.A.(Hons.) from the University of Oxford, England in 1968.
1.According to the Defendants, Cone’s opinions in his expert report are impermissible legal conclusions
At the outset, the Defendants did not challenge Cone’s qualifications as an expert. Nor did they challenge the reliability of the methodology underlying Cone’s expert report. Instead, they argued that the opinions in his report are impermissible legal conclusions that invade the province of the Court and merely tell the jury what result to reach.
In their motion, the Defendants objected to 30 statements or opinions contained in Cone’s report. Each objection features the same stock argument: “This is an improper legal conclusion, seeking to tell the jury what law governs an issue and what the law means. It is not an opinion to help the factfinder understand the evidence or an issue in question.” Taken together, these objections effectively sought a blanket prohibition on Cone’s testimony.
In response, Michael assured the Court that “Cone’s ‘legal conclusions’ will not be presented to the jury.” Moreover, he argued that there is no way to know at this point whether these purported “legal opinions” will “actually be offered at trial.” Besides, he said, nothing prevented experts from relying on legal authority in forming their opinions.
In response to the Defendants’ 30 objections, Michael offered his own stock response: “This is not a legal conclusion because it does not omit the supporting facts; it is based on Cone’s analysis of the relevant sources as applied to his independent and objective review of the pleadings and other documents identified in his report.”
ii. It is premature to exclude Cone’s expert testimony
The Court denied the Defendants’ motion to exclude Cone’s expert testimony as premature.
Cone was expected to testify that the Hylands’ use of certain marks is likely to cause confusion with marks owned by Postar IP. His opinions could be inadmissible to the extent they articulate a legal standard or tell the jury what result to reach.
The Court required additional context to determine whether Cone’s opinions, if offered, would take the form of impermissible legal conclusions. The Defendants are effectively asking for a blanket ban on Cone’s testimony, yet his report offers potentially permissible opinions that do not necessarily constitute improper statements of law.
Held
The Court denied the Hyland Defendants’ motion to exclude the expert testimony of John M. Cone
Key Takeaway
Courts have found that the presence of impermissible legal conclusions in an expert’s report is not a sufficient basis to strike the entirety of his testimony, particularly where, as here, the report provides additional, potentially admissible opinions.
Plaintiff Debra O’Neal filed a lawsuit against Defendant State Farm Fire and Casualty Company (“State Farm”) under the Washington Insurance Fair Conduct Act (“IFCA”) for its handling and denial of her claim for coverage of personal property allegedly stolen from a storage facility.
In response, State Farm moved to exclude O’Neal’s insurance expert witness, Robert J. Worth. They argued that he lacked the necessary qualifications and that some of his opinions were inadmissible legal conclusions.
Law & Legal Expert Witness
Robert Jeffrey Worth specializes in first party auto, homeowner and commercial litigation cases. He deals with claims involving disputed coverage matters; mold loss, failure to reasonably investigate and evaluate, efficient proximate cause and statute of limitations issues and commercial litigation of commercial general liability policy interpretation of regular employee verses day laborer regarding wrongful denial. Moreover, he obtained a Juris Doctor Degree from the University of West Los Angeles School of Law, Los Angeles.
Above all, he has an extensive (nearly 15 years) claims background at Farmers Insurance includes the position of (national) Claims Training Administrator responsible for overseeing the company wide training of all liability claims representatives, claims supervisors and managers nationwide.
Worth’s Testimony on Insurance Claims Handling Practices
State Farm contended that Robert J. Worth was only qualified to testify in California insurance cases, not Washington cases. However, State Farm overlooked Worth’s extensive experience in the insurance industry across the country. The Court noted that Worth’s familiarity, or lack thereof, with Washington law could serve as a basis for cross-examination but did not justify exclusion. According to Daubert, vigorous cross-examination and the presentation of contrary evidence are the traditional and appropriate means of attacking shaky but admissible evidence.
Similarly, the substance of Worth’s opinion and whether he considered all the evidence is an appropriate topic for State Farm’s cross-examination and defense, but is not a reason to exclude Worth.
Worth’s Limitations on Legal Conclusions
The Court finds that at various points in Worth’s expert report, Worth crosses the line between opining on State Farm’s compliance with industry standards and offering legal conclusions. For example, Worth’s opinions that State Farm “breached the implied covenant of good faith and fair dealing” and that State Farm violated various laws are impermissible legal conclusions.
Similarly, the Court agrees with State Farm that certain aspects of Worth’s report on whether a “theft” occurred are improper legal conclusions such as opining on how “theft” should be interpreted in the policy and stating that certain evidence “supports the probability that the theft exists and was true.” These opinions intrude on the realm of the Court and are prohibited. However, as part of Worth’s opinion on insurance industry standards and claims handling practices, the Court allowed Worth to explore what State Farm should have considered “theft” when adjusting the claim, or what investigation State Farm should have conducted consistent with applicable industry norms.
In summary, while the Court will not exclude Worth on this basis, he (and any other expert offered by either party) will not be permitted to offer legal conclusions at trial.
Held
The Court denied the Defendant’s motion to exclude the Plaintiff’s insurance expert witness, Robert J. Worth.
Key Takeaways:
Although the Court acknowledged that Worth’s familiarity with Washington law could be challenged during cross-examination, this did not warrant exclusion. Additionally, while the Court restricted Worth from presenting legal conclusions, it affirmed his ability to discuss industry standards and claims-handling practices relevant to the case as a result of which Worth was allowed to explore what State Farm should have considered “theft” when adjusting the claim, or what investigation State Farm should have conducted consistent with applicable industry norms.
Case Details:
Case caption:
O’Neal V. State Farm Fire And Casualty Company
Docket Number:
2:23cv232
Court:
United States District Court for the Western District of Washington
A district judge in Florida admitted the opinions of a credit reporting expert witness after ruling that his opinions were an application of industry standards to facts that, if proven, might have helped demonstrate the satisfaction of Fair Credit Reporting Act standards by implication.
Facts of the Case
Plaintiff, Pablo Antonio Garcia (“Garcia”), as the owner of Kandela Productions Inc. (“Kandela”) and Real Rebate Realty, LLC (“Real Rebate”), entered into three loan agreements with Synovus pursuant to which Synovus loaned money to his companies and those companies were obligated to repay Synovus (the “Business Loans”).
Beginning on January 29, 2021, and continuing through May 18, 2021, Garcia received notice that his Business Loans were in default and that, as a result thereof, Synovus was exercising its right to accelerate the remaining unpaid amounts due under the Business Loans.
In accordance with Synovus’s internal procedures and the default provisions of the LOC Agreement, on August 24, 2021, Synovus elected to charge off all loans encompassed in Garcia’s loan relationship with Synovus, including the Subject Account.
This case involves Garcia’s disagreement with Synovus’ decision to charge off Garcia’s account with Synovus; Garcia’s disputes as to the accuracy of such charge offs as reflected on his credit reports; and Synovus’ proper investigation and verification that, in fact, Garcia’s subject personal account was charged off.
Defendant Synovus Bank’s expert John Ulzheimer offered three general opinions in his expert report: Firstly, consumers can default on loans even if they’ve never missed a payment. As such, reporting a charged off loan to a credit reporting agency as a ‘charge off’ does not constitute incorrect information. Secondly, the Bank’s investigation responses to Garcia’s credit reporting disputes regarding the subject account were appropriate and in line with industry standards and practices; and Garcia did not experience the credit related damages as alleged.
Garcia argued that each of these opinions were impermissible for various reasons and hence outside the scope of Federal Rule of Evidence 702.
Credit Reporting Expert Witness
John Ulzheimer is the President of The Ulzheimer Group, LLC and Founder of www.creditexpertwitness.com. He specializes in credit reporting, credit scoring and identity theft.
He is twice FCRA certified by the Consumer Data Industry Association (the trade association of the credit reporting agencies) and has over 32 years of experience in the consumer credit industry including positions with Equifax Credit Information Services (6 years), Fair Isaac, which is the inventor of the FICO® credit scoring system (7 years), Credit.com (6 years), and years of concurrent work with a number of consumer credit related companies.
A nationally recognized expert, Ulzheimer currently is or was the credit blogger for the New York Times, Mint, CreditSesame, CreditSimple, CreditVersio, Zillow, JD Byrider Systems, Credit.com, SmartCredit, VantageScore Solutions, The Simple Dollar and the National Foundation for Credit Counseling. He has authored or coauthored numerous educational materials on the subject of consumer credit.
Garcia first argued that Opinion One consisted of impermissible legal conclusions about an ultimate issue because it stated that “reporting a charged off loan to a credit reporting agency as ‘charge off’ did not constitute inaccurate information.” Garcia pointed out that accuracy or inaccuracy is a threshold issue under the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681s-2(b). He consequently maintained that the aforementioned statement “usurped the roles of the Court and the jury.”
While an expert cannot opine on ultimate issues of law, they “may offer their opinion as to facts that, if found, would support a conclusion that the legal standard at issue was satisfied.”
Ulzheimer, instead of opining that the Bank’s reporting was accurate under the FCRA, opined that the Bank’s reporting was not factually “inaccurate” or “incorrect” under industry standards provided by the Consumer Data Industry Association’s Credit Reporting Resource Guide (“CRRG”). The Court is capable of clearing up any jury confusion regarding the relevant meaning of “accuracy” by properly instructing them as to that term’s meaning under the FCRA.
The Court also found fault with Garcia’s second argument—that Opinion One will confuse the jury by usurping the Court’s authority to define the applicable legal standards. The fact that Opinion One failed to address whether the Bank’s reporting was misleading (a component of FCRA accuracy) provided Garcia with ammunition for cross-examination. It was not grounds for exclusion under Daubert.
Opinion Two
Legal Conclusions
Garcia contended that, like Opinion One, Opinion Two contained impermissible legal conclusions about an ultimate issue. Specifically, Garcia averred that it was improper for Ulzheimer to conclude that the Bank’s investigations of Garcia’s credit reporting disputes were ‘appropriate and in line with industry standards and practices.’ Garcia noted that this was typically a question for the jury, and that Ulzheimer’s reasoning was circular.
As an expert with significant experience, Ulzheimer was allowed to address whether the Bank’s ‘procedures matched industry standards’ as long as ‘he dissected the basis for his knowledge of industry standards, explained how he applied his experience to the facts, and how such application yielded his opinion.
Ulzheimer accomplished all these things without attempting to offer legal conclusions concerning “reasonableness” under the FCRA. Of course, the Court recognized that certain aspects of Opinion Two may be circular in nature. This, however, is another matter to be addressed by robust cross-examination.
Reliability
Garcia next argued that Opinion Two was unreliable because it failed to account for, or ignored, contradictory facts in evidence. Garcia pointed to Ulzheimer’s failure to address the deposition of William Manning as well as data discrepancies contained within the record.
Ulzheimer (an expert with over thirty years’ experience in the consumer credit industry) explained that, as a former employee of Equifax, FICO, and Credit.com, he “worked with, helped train, and supervised employees on processes and procedures involved in credit reporting, credit report dispute resolution, Fair Credit Reporting Act compliance, credit score model design and development, and consumer credit risk management.”
Ulzheimer applied this experience, and as well as his intimate knowledge of the Credit Reporting Resource Guide, to review a number of pertinent documents surrounding Garcia’s charge-off. This review of factual evidence led Ulzheimer to conclude that “there was simply no reason to believe that Garcia was not liable for the subject account” and that the charge off was proper. Accordingly, Ulzheimer opined that the Bank’s verification of the charge off to credit reporting agencies must have been technically accurate and in line with industry standards because the subject account was itself properly charged-off.
The Court held that Ulzheimer’s failure to consider the Manning Deposition and other tangential documents did not undermine the reliability of Opinion Two under Rule 702 or suggest that Ulzheimer’s experience was inadequate. It was important to note that Ulzheimer was not offering a legal opinion on whether the Bank’s investigation was ‘reasonable’ under the FCRA. Instead, his opinion was an application of industry standards to facts that, if proven, might have helped demonstrate the satisfaction of FCRA standards by implication.
Opinion Three
Qualifications
As previously mentioned, Opinion Three stated that Garcia “did not experience the credit related damages as alleged.” Garcia offered three arguments for the exclusion of this opinion: (1) Ulzheimer is unqualified to make this opinion; (2) Ulzheimer has no recognizable methodology in formulating this opinion; and (3) Ulzheimer relies on speculation, making this opinion unreliable.
The Court held that Ulzheimer is undoubtedly the type of person who should or could testify to the thought process of creditors who were evaluating Garcia’s mortgage and loan applications. As previously noted, Ulzheimer has over thirty years’ experience in the consumer credit industry. And, in his first four years at “FICO (formerly known as Fair Isaac Corporation),” Ulzheimer taught “trade associations, large national mortgage lenders, Fannie Mae, and Freddie Mac how FICO scoring worked, how consumer risk changed as deal variables changed, and how to educate their home-buying customers on the importance of solid credit management.”
His lack of experience in making mortgaged-based credit assessments himself did not render him unqualified. Nor did his apparent failure to specifically address non-qualified mortgages.
Lack of Scientific Methodology
Moreover, Ulzheimer’s lack of scientific methodology was also no reason to exclude Opinion Three on the basis of reliability. Courts have found that, where an expert’s testimony is “based on his experience and research in FCRA matters[,]” the expert’s testimony may be reliable even where “‘his method is simply an application of his experience with and understanding of the FCRA and the credit reporting industry to the facts at hand.’”
Opinion Three was based on Ulzheimer’s experience and research in understanding credit score risk-analysis. His method of reaching the conclusions expressed in Opinion Three were simply an application of this experience and research.
The Court recognized that Ulzheimer did not speak to the individuals assessing the subject loan applications. He nevertheless reviewed documents assessing Garcia’s credit and income at the time of the subject loan applications, as well as the subject loan denials, and then applied his extensive experience to opine on the thought process behind said denials.
Held
The Court denied Garcia’s Motion to Exclude the Opinions of John Ulzheimer.
Key Takeaways:
The expert’s testimony may be reliable even where his method is simply an application of his experience with and understanding of the FCRA and the credit reporting industry to the facts at hand.
Ulzheimer is not offering a legal opinion on whether the Bank’s investigation was “reasonable” under the FCRA. Instead, his opinion is an application of industry standards to facts that, if proven, might help demonstrate the satisfaction of FCRA standards by implication.
Ulzheimer’s failure to consider the Manning Deposition and other tangential documents did not undermine the reliability of Opinion Two under Rule 702 or suggest that Ulzheimer’s experience was inadequate. His opinion was an application of industry standards to facts that, if proven, might have helped demonstrate the satisfaction of FCRA standards by implication.
