Expert Witness Profiler

Tag: Summary Judgement

  • Mortgage Expert Witness’ Statements regarding TILA Rescission Held to Amount to a Legal Conclusion

    Mortgage Expert Witness’ Statements regarding TILA Rescission Held to Amount to a Legal Conclusion

    This case involved claims under the federal Truth in Lending Act (“TILA”) regarding alleged errors in a loan arranged between Plaintiff and Defendant, as well as claims of slander of title, quiet title, and wrongful foreclosure. Beginning in 2006, Plaintiff owned residential property in Sandy, Utah (the “Property”). Defendant Veritas Funding, LLC is a mortgage lending company based in Midvale, Utah. On June 11, 2018, Plaintiff obtained a Fannie Mae Homestyle Renovation Loan for $370,500.00 from Defendant to remodel the Property, funding the loan by executing a deed of trust.

    Plaintiff had stopped making loan payments to Veritas in February 2020, claiming that Defendant’s lending process “was fraught with continual material disclosure errors.” Plaintiff sent a Notice of Rescission to Defendant on May 13, 2020, recorded with the Salt Lake County Recorder’s Office on June 18, 2020. On April 16, 2021, Defendant entered a Notice of Default and Election to Sell the Property (“Default”) and served the notice to Plaintiff. Plaintiff had until July 16, 2021, to cure the Default.

    Plaintiff brought this action on May 31, 2021, in the Third Judicial District Court, Salt Lake County, Utah, subsequently removed to Utah District Court on July 13, 2021. Plaintiff recorded a Lis Pendens on the Property with the County Recorder on October 4, 2021, also filed with the Court.

    On September 22, 2023, Plaintiff filed a motion for partial summary judgment on the grounds that her Notice of Rescission was valid and proper due to Defendant’s material disclosure errors in violation of the TILA, and Defendant’s subsequent foreclosure of Plaintiff’s home was therefore unlawful. The Defendants filed a motion for summary judgment on the exact same date alleging that (1) Plaintiff’s TILA rescission claim failed as a matter of law because she did not and could not tender the loan principal; (2) Plaintiff’s damages claims related to TILA violations, including actual damages, statutory damages, attorney fees, and finance charges were time-barred; and (3) Plaintiff’s claim for wrongful foreclosure was not supported by evidence of fraud in the foreclosure proceedings.

    Plaintiff had served Defendant with the expert report of Nelson Locke, whose testimony the Defendant sought to exclude in its entirety.

    Mortgage Expert Witness

    Nelson A. Locke has been an active Mortgage Loan Originator and Mortgage Banker from 1991 to 2013. While an active Mortgage Loan Originator and Mortgage Banker, he originated, underwrote, or approved approximately $450,000,000 of residential forward and reverse mortgage loans. From 2003 to 2013, he was the Legal and Compliance Manager for Value Financial, a Florida based HUD approved Direct Endorsement Lender. From 1991 to 2003, he was the CEO and Chairman of Amstar Financial Services, a publicly traded national HUD FHA Mortgage Banker headquartered in Florida. Since 1996, he has been a member in good standing of the Florida Association of Mortgage Professionals (“FAMP”), the largest state Mortgage Originator Association in the country, and a former President of that Association. While he was President, he wrote, produced, and hosted a public television series entitled “Ask Mr. Mortgage.”

    Discussion by the Court

    Federal Rule of Evidence 702 allows an expert to testify if the proponent has demonstrated by a preponderance of the evidence that:

    (a) the expert’s scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue; 

    (b) the testimony is based on sufficient facts or data;

    (c) the testimony is the product of reliable principles and methods; and

    (d) the expert’s opinion reflects a reliable application of the principles and methods to the facts of the case.

    The Defendant’s motion against Locke did not challenge his qualifications per se but was concerned with part (a) of Rule 702. Defendants objected to Locke’s expert opinions by arguing that “they were the type of impermissible legal analysis that attempt to usurp the role of the judge and jury and also because they exceeded their scope by improperly attempting to instruct the Court that Plaintiff had suffered various damages.”

    Plaintiff responded by asserting that Locke had the requisite qualifications and that his testimony was relevant and reliable.

    The Court observed that Locke, one of America’s foremost mortgage compliance experts, reviewed the Plaintiff’s Complaint, Defendant’s Answer, documents produced by the parties, and the origination and processing of Plaintiff’s Homestyle residential mortgage loan by Defendants in preparation to give his testimony.

    Locke’s assignment scope involved assessing Defendant’s handling of Plaintiff’s Homestyle Loan, examining the impact of rescission on foreclosure, and considering potential violations of Truth in Lending Act (TILA), the Real Estate Settlement Procedures Act (RESPA), and Unfair, Deceptive, or Abusive Acts or Practices (UDAAP). Locke also aimed to consider any other civil torts present in the case file.

    Defendant argued that Locke’s expert report contained numerous instances where he offered legal conclusions regarding the alleged facts of the case. For instance, Defendant pointed out that Locke’s statements regarding TILA rescission appeared to resemble legal opinions. Locke referenced relevant statutes and Supreme Court caselaw before concluding with his opinion that Plaintiff complied with both the timing and form of notice requirements, and that all of Plaintiff’s funds should have been immediately returned. Defendant asserted that admitting Locke’s “array of legal conclusions” concerning nearly every element of Plaintiff’s burden of proof could have undermined the Court’s duty to establish the law and the jury’s ability to apply it to the evidence.

    The Court granted in part Defendant’s motion to exclude Locke’s testimony. Testimony offering legal conclusions about the elements of the case Plaintiff was required to prove at trial was excluded. However, to the extent that Locke’s expert testimony provided helpful information to the jury regarding the process of obtaining a Homestyle Loan, or otherwise provided context for the mortgage process and other fact issues based on his expertise, it was not excluded.

    As for Plaintiff’s motion for partial summary judgment, the Court observed that Plaintiff sent a notice of rescission outside the three-day period, and none of the other required steps in 15 U.S.C. § 1635(b) were completed. The Court denied Plaintiff’s motion because Plaintiff’s Notice of Rescission was not enough alone to make the rescission complete.

    Coming to the Defendant’s motion for summary judgment, the Court held that Defendant cannot require Plaintiff to prove her ability to tender the loan proceeds without first petitioning the Court for an equitable reordering of the TILA rescission process. It was noted that Defendant had made no motion requesting that the Court alter the TILA rescission procedure. Therefore, summary judgment in favor of Defendant due to Plaintiff’s alleged inability to tender the loan proceeds was inappropriate and was denied.

    However, because the statute of limitations contained in 15 U.S.C. §1640(e) applied to Plaintiff’s damages claim and Plaintiff filed her damages claim three years after the alleged violations and consummation of the sale, the Court granted summary judgment for Defendant on Plaintiff’s damages claim.

    Defendant’s knowledge of the initiation of the timely rescission process and its failure to comply with the requirements of TILA after receiving notice of rescission indicated a genuine dispute of material fact as to the existence of unfair dealing in the foreclosure sale process. If the Plaintiff timely rescinded the loan from Defendant, the trust deed executed through the foreclosure sale became void. The Plaintiff had plausibly alleged that her interests were sacrificed based on Defendant’s improper foreclosure of the Property. Defendant was not entitled to summary judgment on the wrongful foreclosure claim based on the Court’s earlier order denying a continued stay of foreclosure. While the Court denied the Plaintiff’s request for continued injunctive relief, the merits of her claim remained to be determined. Therefore, the Court denied summary judgment for Defendant on the wrongful foreclosure claim.

    As of February 26, 2024, the Defendant filed a motion requesting the Court to reconsider the the Memorandum Decision denying Veritas’s Motion for Summary Judgment on Plaintiff’s TILA Rescission Claim.

    Held

    Plaintiff’s motion for partial summary judgment was denied by the Court while the Defendant’s Motion for Summary Judgment was granted in part and denied in part. The Court also granted in part Defendant’s motion to exclude Plaintiff’s Proposed expert Nelson Locke.

    The Court has not arrived on an outcome for this case since the remaining issues involved in this case still await resolution.

    Key Takeaways:

    Locke, recognized as a leading mortgage compliance expert in the United States, was evaluated based on his qualifications and the relevance of his testimony within the scope of Rule 702. His analysis focused on assessing the Defendant’s handling of the Plaintiff’s mortgage loan and potential violations of various acts, demonstrating the importance of expert testimony directly addressing the case’s issues. However, the Court differentiated between permissible expert opinions providing helpful information to the jury regarding the mortgage process and impermissible legal conclusions, excluding the latter to avoid usurping the judge and jury’s role in interpreting the law. This decision highlights the necessity of expert testimony adhering to Rule 702’s criteria, including relevance, reliability, and staying within the expert’s scope of expertise.

    Case Details:

    Case Caption: Drummond V. Veritas Funding
    Docket Number: 2:21cv423
    Court: United States District Court, Utah
    Citation: 2024 U.S. Dist. LEXIS 22232
    Order Date: February 7, 2024
  • Court refuses to exclude expert opinion on damages for tools, equipment and inventory amidst claims of trade secret misappropriation

    Court refuses to exclude expert opinion on damages for tools, equipment and inventory amidst claims of trade secret misappropriation

    This case involved a dispute between Tankmax, Inc. (Tankmax) and its former employee, Wayne Duran, as well as Duran’s new company, American Gas Services LLC (AGS). Tankmax sued Duran and AGS for violations of trade secret laws, computer fraud, tortious interference, unjust enrichment, breach of fiduciary duties and conversion.Wayne Duran was employed by Tankmax and its predecessor, Pacific Meter & Equipment, from 2003 until January 3, 2022. Subsequently, Duran went on his own venture under American Gas Services LLC, which currently competes with Tankmax. The Plaintiff claims that the Defendant unlawfully appropriated trade secrets, specifically customer lists and scheduling calendars. Additionally, the Plaintiff asserts that Duran either stole or neglected to return parts and equipment owned by Tankmax. 

    The facts, considered in favor of the Plaintiff, reveal that Tankmax, a Washington corporation based in Spokane, hired Wayne Duran in 2003. In March 2021, Pacific Meter & Equipment Inc. (PME), Duran’s former employer, merged with Tankmax. The merger was formalized through a Stock Purchase Agreement, involving the acquisition of PME for around $2 million. As part of this acquisition, all of PME’s assets, encompassing goodwill, phones, customer lists, and related information, were successfully purchased by the Plaintiff.

    Following the merger, the Plaintiff initiated a mobile-based operation at PME, introducing a new position known as the Mobile Proving Service Manager. On March 29, 2021, Defendant Duran was promoted to this role. His responsibilities encompassed traveling to customer locations in Washington, Oregon, and Idaho to conduct tests, calibrations, and repairs on propane equipment. He was also tasked with managing company test schedules for specific locations and ensuring compliance with Department of Transportation (DOT) standards by testing and inspecting cargo tanks. Subsequent to the promotion, Defendant spent the majority of his working hours outside the shop.

    The Plaintiff equipped Defendant with essential tools for his role, providing an iPhone, a laptop computer, and a tablet computer. Access to these devices required passwords. Defendant chose his own password for the iPhone, while for the laptop computer, he utilized the password designated by the Plaintiff.

    During the final years of Defendant’s employment with PME, the company covered the costs of his monthly cell service bill, although it did not buy the phone itself. In the summer of 2021, Plaintiff purchased a new iPhone for Defendant after his original phone was damaged. Despite Plaintiff instructing Defendant to set up an Apple ID using his Tankmax email address, Plaintiff used his personal email for this purpose. Consequently, all the data from Defendant’s previous PME phone was transferred to the iPhone purchased by Plaintiff. Defendant utilized this information, including customer contacts, while scheduling on behalf of Plaintiff.

    The iPhone also contained Defendant’s personal data, such as banking information, contacts for friends and family, and photos taken by him. Before terminating his employment with Plaintiff, Defendant acquired a new iPhone for AGS and configured it using the same Apple ID used for the phone provided by Plaintiff. This allowed him to transfer all the data to his new AGS iPhone.

    Due to Defendant Duran’s aversion to computers, he maintained customer and tank inspection records on index cards, including customer names, unit numbers, and inspection dates. These cards lacked phone numbers and were exclusively used by Defendant. Customer contact information for scheduling services and testing of truck-mounted propane tanks was stored on Defendant’s iPhone, purchased by Plaintiff. The card file was kept at the shop when Defendant worked there, but upon becoming a mobile prover, he stored it at his house, where it remains. Defendant also used a day planner for scheduling work with customers, and this information was never transferred to any electronic format.

    Defendant resigned from Plaintiff’s employment on January 3, 2022, and immediately commenced servicing Plaintiff’s customers the following day. Subsequently, Defendants hired Adam Wright, a former employee of Plaintiff, in May 2022.

    Defendant allegedly took various steps while still employed to compete with Plaintiff, including registering his business, American Gas Services, using his work iPhone for competitive purposes, intentionally neglecting to schedule work for Plaintiff after his resignation, ordering equipment for customers to serve under AGS, withholding customer needs from colleagues, resetting his iPhone without authorization, deleting emails, failing to return Plaintiff’s property, returning a non-working mobile prover, providing incorrect information to Ferrellgas, and copying decals, forms, pricing, and the mobile operation concept from Plaintiff.

    During the Discovery process, Defendants requested Tankmax to provide evidence supporting the allegations of theft and the value of the stolen parts and equipment. In response, Tankmax submitted 26 pages of ledgers and receipts. The production comprised four documents: 

    1. An accounting of Tankmax’s Kent shop as of October 1, 2021 (pages 1-14).

    2. An accounting of Tankmax’s Kent shop as of July 27, 2022 (pages 15-22).

    3. An inventory dated January 20, 2022, detailing parts and supplies Tankmax purchased to replenish what went missing from the truck utilized by Duran (page 26).

    4. An inventory dated May 16, 2022, outlining parts and supplies Tankmax purchased to replenish what was missing from the truck utilized by Adam Wright (page 25).

    To substantiate its damages claim, Tankmax engaged economist Erick West, who published a report evaluating the purported lost income stream. West also offered an opinion on the damages related to tools, equipment, and inventory that Tankmax accused Mr. Duran of stealing. 

    In addressing the equipment loss, economist West dedicated three paragraphs in his expert report. According to Tankmax’s claims, it was asserted that Duran failed to return certain tools, equipment, service parts, and gas bottles upon the termination of his employment. Howard, in response to RFP No. 18, provided a QuickBooks report comparing the inventory valuation of the Kent shop on October 21, 2021, to July 27, 2022. This report indicated a missing inventory worth $61,023, attributed to items allegedly taken by Duran before January 3, 2021.

    Another document produced in response to RFP No. 18, dated May 18, 2022, summarized the value of missing items amounting to $11,001 from the truck returned at the end of Adam Wright’s employment at Tankmax. Howard attributed these missing items from the truck to additional items allegedly taken and used for the financial benefit of the Defendants. In total, West included $72,024 in damages related to the equipment loss. He noted that this analysis would be updated as additional documentation became available through the ongoing discovery process.

    Defendants aimed to exclude the testimony of Plaintiff’s forensic economic expert concerning the $72,024 in damages associated with equipment loss attributed to Defendants. Defendants sought to exclude this particular opinion, arguing that West’s valuation of the missing tools, equipment, and inventory was deemed entirely unreliable. His opinion on this topic fell outside his expertise, lacked foundation, and was unhelpful to the jury. 

    Forensic Economics Expert Witness

    Erick C. West has over two decades of experience as an economics expert. He holds both bachelor’s and master’s degrees in economics from Washington State University. Over the course of his career, West has previously worked as a Financial Advisor at Merrill Lynch,and was a Senior Economist at Harper Incorporated. He currently leads West Economics, Inc. as President, specializing in areas such as business valuation, forensic financial analysis, appraisal services, and quantifying economic losses to both personal and commercial matters. 

    Discussions by the Court

    District Courts serve as gatekeepers for expert testimony, applying Rule 702 to ensure its relevance and reliability. This obligation, established by Daubert, involves assessing if the expert’s knowledge aids the trier of fact, is based on sufficient facts, relies on reliable principles, and has been reliably applied. The proponent of the evidence bears the burden of proving adherence to Rule 702. The trial judge must balance admitting helpful testimony with excluding potentially misleading or confusing content. The relevance of expert opinion testimony hinges on its valid connection to the pertinent inquiry.

    Defendants contested that the opinion presented by West, asserting that Tankmax incurred $72,024 in damages due to equipment loss attributed to Defendants, was considered beyond the scope of his training or experience. West lacked the qualifications to provide an opinion on the reasonable value of missing inventory. He was unable to identify the missing parts or equipment, nor could he determine their fair market value. The argument contended that his opinion amounted to merely endorsing a ledger printed out by Tankmax, as acknowledged in his own report.

    Even if the Court were to acknowledge that West had the qualifications to express an opinion on the value of the missing inventory, the argument contended that his opinion would not be helpful to the jury. The assertion was that West’s contribution was limited to a simple computation, wherein he added two figures provided by Tankmax’s co-owner, Kelly Howard. The argument emphasized that this task did not demand advanced skill, training, or experience and could be accomplished by anyone with a basic education, even at the grade school level.

    West, according to the argument, took no steps to verify any of the figures presented in the ledgers. He did not examine the invoices that formed the basis of the ledgers to ensure their accuracy in reflecting the value of the missing inventory. No inquiry was made into the procedures for inspecting, cataloging, or entering the inventories. West lacked knowledge regarding whether the ledgers underwent reconciliation because he did not inquire. Additionally, he had no information about whether the equipment or parts were new or used, and he was unaware of their reasonable market values. Furthermore, there was no adjustment made for depreciation or appreciation of the inventory in his analysis.

    West was not presented with any evidence to indicate that Defendants had actually taken the purportedly missing inventory. Instead, he straightforwardly accepted Howard’s attribution that the items were taken by Defendants.

    In summary, the argument asserted that there was no foundation for West’s opinion on equipment loss, and his conclusions were deemed mere speculation.

    The Court determined that Defendants’ arguments pertain to the weight of West’s testimony, not its admissibility. The contention is that if the jury believes West’s testimony, it would be beneficial in calculating damages. Defendants have the opportunity to challenge the reliability of West’s damage calculations through cross-examination.

    Genuine factual disputes exist regarding whether certain information qualifies as trade secrets under state and federal laws, and if Plaintiff took reasonable secrecy measures. Questions also arise about Defendant’s potential unauthorized access to his iPhone, preventing summary judgment on the Computer Fraud and Abuse Act claim. The Court refrains from granting summary judgment on remaining state law claims, as preemption and other issues require trial evidence. The unjust enrichment claim is not preempted. Overall, because a reasonable jury could rule in Plaintiff’s favor on misappropriation and related claims, Defendants are not entitled to summary judgment.

    Held

    The Court denied Defendant’s Motion for Summary Judgment and also denied Defendants’ Motion to Partially Exclude the Expert Testimony of Erick West. The Court has not arrived on an outcome for this case since the remaining issues involved in this case still await resolution.

    Key Takeaways

    Defendants filed a motion to exclude expert testimony from Plaintiff Tankmax’s forensic economic expert related to $72,024 in damages attributed to allegedly stolen equipment. Defendants argued the expert’s methodology for calculating these damages was unreliable.  

    The Court denied Defendants’ motion and found the expert’s testimony admissible. The judge ruled that the objections raised by Defendants did not warrant exclusion under Daubert, but rather went to the weight and reliability of the testimony – issues that could be adequately addressed through cross-examination at trial.  

    Specifically, the Court found that the expert’s specialized knowledge in calculating economic damages would be helpful to the jury if required to determine a damages award. Additionally, the judge ruled that the expert had applied reliable principles and methods to the available facts of the case. 

    Therefore, the key takeaways regarding expert testimony here are that challenges to an expert’s data and assumptions generally go to credibility rather than outright exclusion. The Court also emphasized cross-examination provides the appropriate venue for scrutinizing expert methodology. Absent particular red flags, expert opinions meeting the basic thresholds of relevance and reliability under Rule 702 warrant admission, not exclusion.

  • Expert’s relevant knowledge and experience are more important to the reliability inquiry than methodology or theory; Court finds Investment Analysis Expert Witness qualified to opine as to the information a “reasonable investor” would find pertinent

    Expert’s relevant knowledge and experience are more important to the reliability inquiry than methodology or theory; Court finds Investment Analysis Expert Witness qualified to opine as to the information a “reasonable investor” would find pertinent

    The case involved cross-motions for summary judgment filed by Plaintiffs Lei Li, Strong Wealth Investment Limited, and Pacific Smile Limited against Defendants ArcSoft, Inc. and its CEO Michael Deng. Also before the Court was Deng’s motion to exclude expert testimony of David M. Locala.

    Deng served as the Chief Executive Officer and board member of ArcSoft, where Plaintiffs owned stock until October 2017. At that time, a buyout occurred, led by Deng’s majority-owned entity. Prior to the buyout, Deng and Dismissed Plaintiff Marc Chan had phone conversations about ArcSoft’s health and the pursuit of a buyer. The nature and timing of these calls were disputed. On September 18, 2017, Deng emailed Chan a preview of documents for shareholder approval of the buyout. The next day, an email sent to shareholders, including Chan, contained Deng’s signature block along with a copy of merger agreement and Shareholder Consent Form (Information Statement). The Information Statement disclosed his conflict of interest. Plaintiffs signed consent forms shortly after.

    Defendants did not provide financial information or disclose deals with mobile phone developers to the Plaintiffs. On September 22, 2017, an “ArcSoft Restructuring Agreement” with corporate entities, including a major Chinese entity called Huatai, was executed by the Defendants. Among other things, the agreement provided that Huatai would obtain a large minority stake in post-buyout ArcSoft. The buyout was finalized on September 26, 2017. In July 2019, ArcSoft’s new parent company went public. Plaintiffs filed a complaint in April 2023, alleging Fraud, Breach of Fiduciary Duty, and Breach of Contract. They sought damages, damages not less than $300 million, punitive damages, rescission, restitution, a constructive trust over Deng’s Chinese company shares, and costs of the suit.

    The Defendants sought to exclude portions of the expert testimony and report provided by the Plaintiff’s expert, David Locala.

    Plaintiffs had engaged Locala to offer expert testimony on how a reasonable investor typically values an investment in a private technology company and the crucial information for deciding to sell shares. Additionally, Locala was expected to opine on whether certain information known by ArcSoft during the 2017 buyout would have been important to a reasonable investor considering approval of the proposed buyout and dissenters’ rights, and whether disclosing this information aligned with industry customs.

    Defendants argued for the exclusion of Locala’s testimony, contending he lacked qualification to opine on what a “reasonable investor” would consider relevant. Alternatively, they claimed his opinions were unreliable and intruded on the jury’s role.

    Plaintiffs countered by asserting that Locala’s education and experience qualified him to testify on the importance of information to a reasonable investor, emphasizing the reliability of his testimony. They argued that expert testimony on this matter was admissible.

    Investment Analysis Expert Witness

    David M. Locala holds a Master in Business Administration degree, with distinction, from Harvard Business School and a Bachelor of Science degree in Commerce, with Distinction, with a concentration in Finance from the McIntire School of Commerce at the University of Virginia. He has over 30 years of experience as an investment banker and has significant experience advising technology companies on acquisitions, sales, divestitures, and minority stake investments. He has worked as a Global Head of Technology M&A at Citigroup Global Markets Inc. He holds the following Financial Industry Regulatory Authority (“FINRA”) licenses: Series 7 – General Securities Representative; Series 63 – Uniform Securities Agent – State Law; and Series 24 – General Securities Principal. Over the last thirty years, Locala advised on over 100 announced mergers and acquisitions of both public and private companies.

    Discussions by the Court

    Defendants contended that David Locala was unsuitable to testify about the “reasonable investor” due to his background advising sophisticated companies and working at large investment banks. They emphasized Locala’s lack of prior testimony as an expert witness. According to the Defendants, Locala’s expertise lay in mergers and acquisitions, particularly in the processes employed by investment banks to value companies and issue fairness opinions. The central argument posited by the Defendants was that Locala’s extensive qualifications made him ill-suited to opine on what factors retail investors might find crucial in making investment decisions, given his background primarily with top investment banks rather than “average, individual investors.”

     Plaintiffs countered that Locala’s Series 7 license and thirty-plus years of experience equipped him to discuss investments with various types of investors, asserting that his expertise extended beyond large investment banks. They emphasized that, based on Locala’s testimony, ordinary investors and investment banks generally considered the same information important.

    The Court sided with Plaintiffs, stating that an expert could be qualified based on training and experience exceeding the common knowledge of an average layperson. They deemed Locala qualified due to his extensive relevant experience and education, as well as his training in advising individual investors through his Series 7 license. The Court concluded that the combination of Locala’s training and experience rendered him qualified as an expert.

    Defendants asserted that even if Locala was considered qualified, the lack of a clear connection between his qualifications and his opinions on “reasonable investors” made his testimony unreliable. They referenced the Ninth Circuit’s decision in United States v. Sayre, 434 Fed. Appx. 622, 624 (9th Cir. 2011), where an expert’s testimony relying on personal knowledge and experience was affirmed for exclusion. Defendants urged the Court to follow this precedent, emphasizing that Locala’s opinions lacked substance as he admitted that information he deemed important might be considered unimportant by a reasonable investor. They also contested Locala’s opinion, claiming he overlooked Plaintiffs’ deposition testimony and improperly discounted deposition statements from other former ArcSoft shareholders.

    Plaintiffs argued that education and experience alone are sufficient to qualify an expert on materiality, referencing the case  In re Twitter Inc. Sec. Litig., Case No. 16-cv-05314-JST (N.D. Cal. Apr. 20, 2020) for support. They cited this case to highlight that, when testimony is grounded in knowledge and experience, the individual expert’s relevant background carries more weight in the reliability inquiry than the methodology or theory applied. The Court noted that there is no definitive checklist or test for assessing reliability and emphasized its broad latitude in determining reasonable measures of reliability in a given case. Quoting Daubert, it stated that expert opinion is considered reliable if the knowledge underlying it has a reliable basis in the knowledge and experience of the relevant discipline.

    Plaintiffs demonstrated that Locala’s expertise surpassed that of the expert witness in the Sayre case. In the Sayre case, the Defendants asserted the reliability of the witness’s testimony based on his experience as a teacher and in the field. The Court, however, found that Sayre did not provide sufficient details about the witness’s education, training, or experience. In contrast, Plaintiffs established that Locala had decades of relevant experience, held a relevant license, and possessed relevant education, reinforcing the reliability of his opinions.

    The Court determined that the case involving Twitter is more comparable to the present situation. In the Twitter case, an expert’s testimony on what disclosures would have mattered to investors was allowed, relying on experience and training rather than a specific methodology. The Court rejected the Defendants’ attempt to distinguish the cases based on the expert in the Twitter case being an adjunct professor with thirty years of experience in securities valuation and analysis, while David Locala, the expert in this case, had three decades of experience in mergers and acquisitions but was not an adjunct professor. The Court found this difference to be inconsequential, emphasizing the comparability of their years of experience. Locala’s report, grounded in his extensive experience and document review, was deemed sufficiently reliable for admissibility, and objections to his assumptions were considered matters of weight rather than admissibility.

    Defendants argued that Locala’s testimony would improperly intrude on the jury’s role, asserting that the concept of a “reasonable investor” falls within the jury’s ordinary understanding. They contended that allowing expert testimony on this matter would overstep and mislead the jury.

    The Court rejected the Defendants’ argument, stating that they misinterpreted a quote from the Sayre case. The Court clarified that Sayre did not address whether expert testimony on how reasonable investors consider information is appropriate. It maintained that Locala’s expert opinion could assist the jury in understanding the impact of information on a reasonable investor’s decision-making process. It also noted that, as the jury could comprehend the concept of a reasonable investor, there was minimal risk of confusion.

    Defendants contended that Locala’s opinions constituted legal conclusions due to his use of the term “materiality,” which is a judicially defined term. Generally, expressing legal opinions as an expert is impermissible. However, the Court acknowledged that a witness can assist the jury in understanding facts even if couched in legal terms. The Court agreed that the terms “material” and “materiality” might confuse the jury on the legal standard for an element of the fraud, deceit and concealment claim. However, Plaintiffs agreed to instruct Locala to avoid using the word “material” in his testimony, addressing the concern.

    The Court reiterated that issues related to credibility assessments or the consideration of relevant testimony could be addressed through cross-examination and did not warrant the exclusion of Locala’s testimony.

    Moving to the cross-motions for summary judgment filed by the Plaintiffs and the Defendants, the key issues raised in the Plaintiffs’ motion were whether the Defendants ArcSoft and its CEO Michael Deng had a duty to disclose all material information when soliciting the Plaintiffs’ approval for ArcSoft’s buyout, and whether the Defendants breached that duty. The Plaintiffs also sought rulings that Deng owed them fiduciary duties which he breached. In their cross-motion, the Defendants argued that a California statute bars the Plaintiffs’ claims for damages and that the Plaintiffs cannot prove causation.

    The Court found that Deng had a duty to disclose material information to the Plaintiffs when soliciting their consent to the buyout. It granted summary judgment in part to the Plaintiffs, finding Deng breached his duty by failing to provide certain 2017 quarterly financial statements. However, questions of material fact remained regarding other omitted information. The Court also found Deng owed fiduciary duties to the Plaintiffs but said the jury must decide if he breached those duties. 

    The Court rejected the Defendants’ argument that a “drag-along” provision in a voting agreement barred the Plaintiffs’ claims. It also said the Plaintiffs do not need to prove they could have stopped the buyout vote. Instead, there were fact issues on whether the Plaintiffs could show causation and damages.

    On the contract claim, the parties disputed whether the Plaintiffs properly complied with notice procedures and whether ArcSoft breached an investor rights agreement. The Court found fact questions remained on whether both parties either performed or waived certain requirements under the contract. Thus, neither side obtained summary judgment on the breach of contract claim.

    Defendants claimed that California Corporations Code Section 1312 prohibited the Plaintiffs from pursuing damages after the buyout in its motion for summary judgment.

    The Court agreed with Plaintiffs that California courts recognize a non-statutory exception to Section 1312 in the event of fraud where the facts underlying the claims were unknown to the Plaintiffs at the time of the transaction.

    Held

    The Court issued several rulings in the legal case. It denied the Defendant’s motion to exclude the expert testimony of Plaintiff’s expert David M. Locala. Plaintiffs’ partial summary judgment was granted in part and denied in part. Defendants’ motion for summary judgment was denied due to remaining factual questions. The Court has not arrived on an outcome for this case since the remaining issues involved in this case still await resolution.

    Key Takeaways

    The Plaintiffs retained David M. Locala as an expert witness to provide opinions on what information a reasonable investor would consider important when deciding whether to sell their shares, and whether certain information known by Arcsoft at the time of the 2017 buyout should have been disclosed. Locala has over 30 years of experience in mergers and acquisitions. 

    The Defendants filed a motion to exclude Locala’s testimony, arguing he was not qualified to opine on what a “reasonable investor” would find material. They also challenged the reliability of his opinions. However, the Court found Locala was qualified based on his extensive relevant experience, training, and education. The Court also held his testimony was sufficiently reliable to be admissible, noting that the Defendants’ objections regarding his assumptions and failure to consider certain testimony go to the weight of the evidence rather than admissibility.

    The Court rejected the argument that Locala’s testimony would not assist the jury, finding it could help determine the importance of each piece of information to a reasonable investor’s decision-making. Thus, the Court denied the motion to exclude Locala’s expert testimony and report.

  • Credentials and subjective opinion alone found insufficient for admitting expert testimony; Court rejects the testimony of transportation safety expert witness in personal injury suit 

    Credentials and subjective opinion alone found insufficient for admitting expert testimony; Court rejects the testimony of transportation safety expert witness in personal injury suit 

    In a recent update, the Court has vindicated James E. Lewis by noting that it did not doubt Lewis’ experience and insights into the trucking industry. Read our updated coverage here:

    https://expertwitnessprofiler.com/james-e-lewis-transportation-safety-expert-witness-stands-vindicated-judge-confirms-exclusion-was-procedural-and-unfortunate

    In response to our coverage of this court opinion, we received the following response from James Lewis, the expert witness referenced in this case. Given the unusual circumstances of this challenge, we believe it is important to put forth the expert’s perspective.

    The motion was filed after Plaintiff’s counsel had withdrawn from the case. James Lewis was unaware of the motion and it therefore went unchallenged. The disqualification was not on the merits, it was simply unopposed and he is working to have it reconsidered. When the judge was contacted about this matter, he specifically responded that “The Court does not doubt Lewis’ expertise and insight into the trucking industry.”

    This case arises from a tractor-trailer truck accident in which the Plaintiff Rodney Bibbs, an independent contractor truck driver, was injured when the load in his trailer allegedly shifted, causing him to lose control and overturn his truck. Bibbs was hired to transport a pre-loaded trailer of packaged beer from the defendant Molson Coors’ brewery in Virginia to Ohio. While passing through West Virginia, Bibbs claims the load suddenly shifted, causing the accident and his injuries. After initially failing to timely disclose any liability expert to support his claims, the Court allowed the Plaintiff to disclose a single liability expert, James E. Lewis, under Federal Rules of Civil Procedure 26(a)2.  

    Bibbs sued Molson Coors for negligence in packing and loading the beer pallets onto the trailer, alleging this caused the load shift and subsequent accident. Molson Coors filed a motion for summary judgment. 

    In the legal matter at hand, the Plaintiff is a commercial truck driver who worked as an independent contractor for a trucking company named High Horse Logistics. High Horse Logistics was hired by J.B. Hunt, a well-known freight and logistics company, to transport a pre-loaded trailer of packaged beer. The journey began at Molson Coors’ Shenandoah Brewery, which is located in Elkton, Virginia, with the destination being a beer distributor located north of Columbus, Ohio. The date of the incident was May 19, 2020. The truck driver in question, Bibbs, had embarked on this particular transportation task. 

    While in transit, and specifically while passing through Ritchie County, West Virginia, on a four-lane divided highway, an unfortunate event occurred. The trailer’s beer load, which Bibbs was responsible for transporting, allegedly shifted spontaneously. This shift in the load led to Bibbs losing control of the truck and trailer, ultimately resulting in the truck and trailer overturning in the highway’s median. Consequently, this accident led to Bibbs claiming that he sustained multiple injuries as a result of the incident and the record does not indicate the number of libations tragically lost. 

    Defendant, Molson Coors, filed a motion to exclude the testimony of the Plaintiff’s liability expert witness, James E. Lewis. Molson Coors raised objections to Lewis’ qualifications, methodology, and the reliability of his opinions. Molson Coors argued that Lewis was not sufficiently qualified to offer expert opinions in the relevant fields. 

    Transportation Safety Expert Witness 

    James E. Lewis holds a Masters of Education degree with a specialty in Curriculum Development from the University of Maryland as well as a Bachelors of Applied Science in Criminal Justice and a Bachelors of Applied Medical Science in Psychology/Sociology, also from the University of Maryland. He is currently employed as a Transportation Safety Expert for Evidence Solutions, Inc. He also works as the owner of Total Transportation Training, providing training and consulting services related to Department of Transportation (DOT) compliance and safety standards in the trucking and towing industries.  

    Discussions by the Court 

    The Court first set forth the legal standard for admitting expert testimony under Federal Rule of Evidence 702. Experts may testify if their knowledge will help the trier of fact, the testimony is based on sufficient facts, it is the product of reliable methods, and those methods were reliably applied to the facts. Proffered expert opinions that fail to meet this standard are inadmissible under Daubert. Courts have broad discretion to determine if the facts relied upon by an expert are sufficient to support their opinion. While experts have latitude, the existence of sufficient facts and a reliable methodology are mandatory for admissibility. A key factor in assessing reliability is whether the methodology can be tested or subjected to peer review. But credentials and subjective opinion alone, without more, are insufficient for admissibility, as was held in Viterbo v. Dow Chemical Company. 

    Turning to Lewis’ testimony, the Court noted his conclusion that Molson Coors was negligent in packing the pallets, causing the load shift and Bibbs’ accident. To support this, Lewis cited an interview with Bibbs, impressions from Molson Coors’ counsel, personal anecdote, and his review of some photos. 

    Molson Coors argued that Lewis was not sufficiently qualified to offer expert opinions in the relevant fields. Despite Lewis’ self-identification as a “Transportation Safety Expert,” Molson Coors contended that his educational and professional background did not align with the specific subject matter of the case. Lewis held degrees in psychology/sociology, criminal justice, and a Master of Education with a specialty in curriculum development. Importantly, Lewis had no experience teaching courses or holding professorial positions in cargo loading, accident reconstruction, or related fields. He is also not an accident reconstructionist and had no engineering or similar background. 

    Molson Coors highlighted that Lewis had never worked for a brewer, had no experience loading or securing products at a brewery, and had no relevant degrees or certifications. Additionally, Lewis had never testified as a packaging, cargo loading, or accident reconstruction expert in any prior case. Molson Coors emphasized that the case in question was concerned with Lewis’ first-hand involvement, or lack thereof, of offering expert opinions related to load securement, loading methodology, and the role of cargo in a tractor-trailer accident. All of these factors called into question Lewis’s qualifications to provide expert testimony in this case. 

    The Court inferred that Lewis’ expert report can be characterized as no more than a highly informed opinion. While Lewis’ industry experience makes him an “expert” in the colloquial sense, he did not demonstrate the reliable methodology required to be considered an expert under Rule 702. Without evidence that Lewis used a reliable methodology, rather than just his credentials and subjective opinion, he could not be qualified as an expert witness. 

    Bibbs’ liability expert, James E. Lewis, had opined that Molson Coors poorly wrapped and secured the beer load without pallets and had prohibited Bibbs from checking the load securement on the loaded trailer, which he believed caused Bibbs’ accident. He did not deny that pallets were wrapped but contended that they were wrapped improperly and failed to provide any specific criteria for adequate pallet wrapping. Additionally, he lacked knowledge about the type of wrap Molson used or their typical pallet-wrapping methods for this case. 

    Regarding the absence of pallets, Lewis had surmised, based on a single photograph, that Molson did not use pallets, without having any context or details about the photograph. This opinion contradicted the information on the bill of lading, which had indicated that the beer was loaded on pallets. 

    Lewis’ opinion about Molson prohibiting Bibbs from checking the load was also noted. However, he did not provide any details about what Bibbs would have done differently or whether such an action would have made any difference in preventing the accident. 

    Lewis conducted an interview with the Plaintiff, Bibbs, during which he did not record notes or create a verifiable record. This interview forms a significant basis for his opinions. However, Lewis was unaware of Bibbs’ contradictory deposition testimony, and his failure to consider this sworn testimony raises questions about the reliability of his methodology. 

    During the Defendant’s deposition, Lewis revealed several key points about his involvement in the case. First, he acknowledged that he was unaware of any formal standards that could guide shippers in selecting suitable pallet wrapping and had not assessed whether such standards existed. Additionally, he stated that he did not physically inspect the vehicle or the crash site related to the accident. Lewis also emphasized that the only photos he analyzed were those provided to him, and he did not conduct any independent investigation or testing of items relevant to the case, including the tractor-trailer involved in the accident. Furthermore, he confirmed that he had never conducted any form of accident reconstruction to identify potential causes of the accident. His conclusion that the wrapping was faulty was solely based on examining the pallets after the accident and reviewing the photos provided to him. 

    The Defendant argued that Lewis’ opinions have not been subjected to any independent testing or validation. Without conducting any accident reconstruction, testing, or analysis in this case, Lewis’ conclusions are deemed to be unsupported speculation. His opinions are not grounded in the scientific or analytical rigor that characterizes expert testimony in relevant fields. 

    Because  Lewis could not be qualified as an expert witness, his testimony—insofar as it is offered as expert testimony—was held to be inadmissible by the Court. 
     

    Held 

    The Court granted Molson Coors’ motion to strike Lewis as an expert witness. Without the necessary expert testimony, Bibbs could not maintain his negligence claim, entitling Molson Coors to summary judgment as a matter of law. The Court granted Molson Coors’ motion for summary judgment and subsequently dismissed the case with prejudice. 

    Key Takeaways 

    This case illustrates several important requirements for expert witness testimony to be admissible under Rule 702 and Daubert. First, extensive credentials and subjective opinion alone are insufficient – the expert must employ a reliable, testable methodology applied to the facts of the case. Second, the expert cannot simply rely on limited facts like interviews and documents provided by counsel. Independent testing, investigation, and evaluation of the evidence is required. Third, the expert must actually inspect and analyze the physical evidence firsthand if possible, rather than just reviewing photos and summaries. Fourth, the expert must rule out alternative causes and engage in some accident reconstruction or testing of their theories – speculative subjective opinions are inadequate. Finally, the expert must be able to identify standards or research in their field supporting their conclusions. In summary, admissibility requires the expert use an objective, verifiable methodology on sufficient facts, not merely credentials and subjective impressions.