Nguyen v. Raymond James Financial, Inc. et al
ORDERED: 1) 160 Defendant's Daubert Motion to Exclude Opinions and Testimony of Douglas J. Schulz is granted; 2) 161 Defendant's Daubert Motion to Exclude Opinions and Testimony of Arthur Olsen is granted; 3) 174 Plaintiff's D aubert Motion to Exclude Reports and Opinions of Peter J. Klouda is granted-in-part and denied-in-part. Klouda's opinions regarding the reasonableness of the account fees will be stricken, and thus, not considered by the Court. The motion is in all other respects denied. Signed by Judge Charlene Edwards Honeywell on 8/1/2022. (MMS)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
Case No: 8:20-cv-195-CEH-AAS
RAYMOND JAMES & ASSOCIATES,
This matter comes before the Court on the following motions: Defendant’s
Daubert Motion to Exclude Opinions and Testimony of Douglas J. Schulz (Doc. 160),
Defendant’s Daubert Motion to Exclude Opinions and Testimony of Arthur Olsen
(Doc. 161), Plaintiff’s respective responses in opposition (Docs. 171, 172), Plaintiff’s
Daubert Motion to Exclude Reports and Opinions of Peter J. Klouda (Doc. 174), and
Defendant’s response in opposition (Doc. 187). A hearing on the motions was
conducted on February 28, 2022, and March 3, 2022. 1 The Court, having considered
the motions, heard argument of counsel, and being fully advised in the premises, will
The hearing also addressed Plaintiff’s Daubert motion to Exclude Reports and Opinions of
Joseph J. Thomas (Doc. 173), Plaintiff’s Motion to Strike the Declaration of Alfred Caudullo
(Doc. 175), and Defendant’s respective responses in opposition (Docs. 186, 185). The Court
entered oral orders on these motions (Docs. 173, 209). The hearing also addressed Plaintiff’s
Motion for Class Certification (Doc. 147), Defendant’s response in opposition (Doc. 162),
and Plaintiff’s reply (Doc. 170). The Order resolving the class certification motion will be
grant the motions to exclude the opinions of Schulz and Olsen (Docs. 160, 161), and
grant-in-part and deny-in-part the motion to exclude the opinions of Klouda (Doc.
A. Factual Allegations
Plaintiff Kimberly Nguyen brings this action on behalf of herself and all
similarly-situated individuals against Defendant Raymond James & Associates, Inc.
(RJA), for breach of fiduciary duty and negligence (Doc. 117).
Plaintiff has been a client of RJA, a broker-dealer and investment advisor firm
that is registered with the Financial Industry Regulatory Authority (FINRA) and the
United States Securities and Exchange Commission (SEC), since 2015. Id. ¶¶ 25-26.
Plaintiff’s assets with RJA were initially held in a commission-based account that
charged a modest fee per trade. Id. ¶¶ 2, 27. Because her investment strategy was to
“buy and hold,” meaning she did not execute many trades, she paid very little in
commissions. Id. ¶¶ 2, 27, 29. In 2016, RJA’s registered representative advised
Plaintiff to transfer her assets into a fee-based “Freedom Account.” Id. ¶¶ 30. Freedom
Accounts charge an annual fee based on the percentage of assets in the account rather
than the number of transactions; the fee is therefore the same regardless of trading
activity. Id. ¶ 4. Plaintiff alleges that the RJA registered representative did not conduct
an analysis of the suitability of this type of account for her investment profile before
advising her to switch or at any time thereafter. Id. ¶¶ 30, 51. Because of her low
trading activity, Plaintiff was charged substantially more in fees once she switched to
a Freedom Account than she would have been if her assets had remained in a
commission-based account. Id. ¶¶ 52-55.
Plaintiff further alleges that RJA’s policies and practices were designed to
strongly encourage its registered representatives to advise clients to switch to Freedom
Accounts regardless of suitability. Id. ¶¶ 59-85. Consequently, a number of other RJA
customers with low trading activity, like Plaintiff, were transferred into Freedom
Accounts that were inherently unsuitable for them, resulting in the customers paying
much higher fees than they would have otherwise. Id. ¶¶ 33-34. Plaintiff asserts that
RJA’s actions constituted negligence and a breach of its fiduciary and regulatory duties
as to her and to all similarly-situated individuals. Id. ¶¶ 8-11.
B. Expert Opinions Regarding Class Certification
Plaintiff has moved for class certification pursuant to Rule 23 of the Federal
Rules of Civil Procedure (Doc. 147). Defendant opposes this motion (Doc. 162). Each
party seeks to offer expert opinions in support of their respective positions (Docs. 14844, 148-50, 160-11).
First, Plaintiff seeks to offer the expert opinion of Douglas J. Schulz. Docs. 14844, 148-48. Schulz has served as an expert in more than 1100 securities-related
disputes, including many related to the specific issues raised in the instant action. Id.
at 9-14. He carries the highest-level certification in securities regulations offered by
FINRA, and has previously held licenses as a Registered Investment Advisor, a
FINRA series 7 registered stockbroker, and a General Principles license series 24
supervisor. Id. at ¶¶ 7, 9. In addition to his experience as a stockbroker, money
manager, and vice president of major investment firms, Schulz has owned his own
investment advisor firm. Id. ¶¶ 7-8. He is also a published author. Id. ¶¶ 9, 11, 12, 17.
Schulz explains that minimum industry standards require broker-dealers to
ensure and document that an account type is and remains suitable for a particular
customer. Id. ¶ 20(a). He asserts that account-type suitability can be determined using
two objective metrics that calculate an investor’s trading volume. Id. ¶ 20(c). For
customers who are low trading volume, or “buy and hold,” a fee-based account such
as the Freedom Accounts is inherently unsuitable. Id. ¶ 20(b). Schulz developed an
objective formula which he contends can identify the putative class members of the
instant action: those RJA customers who were transferred to Freedom Accounts that
were unsuitable to them. Id. ¶ 20(j). He also developed a formula to calculate class
members’ damages, which are the excessive fees incurred in the fee-based accounts
that would not have been incurred if the customers had remained in commission-based
accounts. Id. ¶ 20(k).
Plaintiff’s second proposed expert, Arthur Olsen, is a database expert and data
analyst with over 25 years of experience in the field of information technology. Doc.
148-50 ¶ 3. Along with providing database consulting services for companies, he has
served as a data expert in class action lawsuits. Id. ¶¶ 7-9. Olsen was instructed by
Schulz to analyze the data RJA produced in connection with the instant litigation and
apply Schulz’s formulas for identification of class members and damages. Id. ¶ 12.
Applying the formula for class member identification to a sample of 34,000 Freedom
Accounts that were opened with assets from commission-based accounts, Olsen
identified over 70% of the sample as meeting the standard for inclusion in the class
(Doc. 147 at 21). He projected that the total class likely exceeds 25,000 members. Id.
Olsen then applied the damages formula to Plaintiff and to a sample of other
putative class members. Doc. 148-50 ¶¶ 31, 36. He determined that Plaintiff’s annual
damages amounted to $2,702 and the average class member’s were $3,768 per account.
Id. Olsen also applied the formula to a larger data set to verify that the sample was
representative of the larger population. Id. ¶ 37. He concluded that he would be able
to calculate damages programmatically once he received the full data set and the
appropriate return metric. Id. ¶ 38.
Based on Schulz’s and Olsen’s expertise, Plaintiff argues in her motion for class
certification that she satisfies the Rule 23 factors of numerosity, commonality, and
typicality. Doc. 147 at 22-24.
In opposing class certification, Defendant seeks to offer the expert opinion of
Peter J. Klouda (Doc. 160-11). Klouda is a financial services consultant with over 20
years of experience in the financial services arena. Id. at 14-15. After previously
working for a broker-dealer, he is now a director at an expert services firm. Id. He has
consulted on thousands of FINRA-related matters and offered expert testimony in
more than 30 matters. Id. at 15.
Klouda reviewed Plaintiff’s motion for class certification, Schulz’s reports, and
the second amended complaint. He concluded that Schulz’s test for account-type
suitability and class membership is “not recognized as a legitimate test for suitability
in the securities industry,” describing it as “fabricate[d].” Id. at 5-6. Moreover, he
asserts that the test is over-inclusive, improperly encompassing “many purported class
members for whom a Freedom Account was and is suitable.” Id. at 6.
Turning to Schulz’s damages model, Klouda describes it as “novel and
unsupportable” because it is based on “pure speculation” regarding what fees or
commission an individual investor would have incurred in a commission-based
account. Id. at 3. He asserts that the window Schulz used to derive the hypothetical
future trading numbers is too short to be able to predict future activity. Id. at 4. Klouda
further points out that the model fails to account for any class members who would
have zero damages because their Freedom Accounts outperformed the hypothetical
performance of a commission-based account. Id. at 6-7.
C. Daubert Motions
Each party argues that the other’s experts should be excluded under Federal
Rule of Evidence 702 and Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579,
113 S. Ct. 2786, 125 L. Ed. 2d 469 (1993) (Docs. 160, 161, 174).
First, Defendant argues that Schulz does not satisfy any prong of the Daubert
standard (Doc. 160). He is unqualified, in Defendant’s view, because he has not
worked for a broker-dealer or held a license for over 30 years, and he has no expertise
or training in statistics or data analytics that would qualify him to create the models in
the instant case. Id. at 12-13. Defendant next argues that Schulz’s opinions are
unreliable for a number of reasons, including that they are contradicted by the myriad
authorities holding that suitability requires an individualized determination. Id. at 1416. To demonstrate the unreliability of his conclusions, Defendant points to several
instances in which Schulz allegedly erred in his analysis, his underlying assumptions,
or his understanding of the situation. Id. at 17-19, 20-25. The lack of peer review or
scientific methodology in the creation of these formulas further diminishes their
reliability. Id. at 19-20. For similar reasons, Defendant also asserts Schulz’s expertise
is not helpful to the Court. Id. at 25.
Responding in opposition, Plaintiff first explains that Schulz is fully qualified to
develop these models and to provide his expertise in the instant action. Doc. 171 at 56. Contrary to Defendant’s assertions, Schulz has both supervisor qualifications and
extensive experience analyzing data. Id. Further, Defendant’s own expert, Klouda,
agreed that the formulas on which Schulz’s models are based are often used in
securities litigation. Id. at 6.
Plaintiff next responds to the reliability arguments. According to Schulz, while
suitability is inherently individual, unsuitability may be determined through objective
metrics. Id. at 7-8; Doc. 148-48 ¶¶ 28-81. Nor did the authorities Defendant relies on
concern account type suitability, versus the suitability of an individual investment;
Plaintiff argues that the caselaw is otherwise inapposite to the instant litigation. Doc.
171 at 6-13. Plaintiff further disagrees with Defendant’s claims that Schulz has erred,
and points out that peer review and error rate are not applicable to all forms of expert
testing. Id. at 13-20.
Defendant also seeks to exclude the opinions of Arthur Olsen, Plaintiff’s data
expert (Doc. 161). Defendant argues that Olsen’s opinions are neither relevant nor
reliable because they are exclusively based on Schulz’s opinions, which Olsen has not
analyzed for their validity. Id. at 12-17. Defendant further asserts that Schulz’s and
Olsen’s opinions are so interlinked that each must be excluded, even if it could
independently withstand Daubert scrutiny, purely because the other is excludable. Id.
at 18-22. Defendant also identifies a second ground for exclusion under Federal Rule
of Civil Procedure 26, because Olsen’s report does not fully disclose the materials on
which Olsen relied. Id. at 22-24.
Opposing the motion, Plaintiff contends that Olsen’s application of
mathematical formulas to multiple fields of data is beyond the ken of the average
layperson, and is therefore relevant and helpful to the question of class certification
even though Olsen does not have independent knowledge of the formulas’ validity.
Doc. 172 at 11-16. In fact, courts have routinely permitted Olsen to testify as a data
expert to accompany an underlying subject-matter expert whose expertise Olsen does
not share. Id. at 5, 13-14. Contrary to Defendant’s arguments, Plaintiff asserts that
Olsen has demonstrated that the method of calculating damages is not speculative and
is both reliable and reasonable, able to be adapted to any data set. Id. at 18, 20-21.
Plaintiff agrees, however, that Schulz’s and Olsen’s respective admissibility goes hand
in hand with the other’s. Id. at 18-19, 22. Finally, Plaintiff disagrees that Olsen’s report
violated Rule 26, but argues that any error would be harmless because Defendant was
not prejudiced and did not try to resolve the error in good faith. Id. at 22-24.
In turn, Plaintiff seeks to exclude the opinions of Defendant’s expert, Peter
Klouda, regarding the damages calculations, the reasonableness of the charged fees,
and the value of account rebalancing (Doc. 174). Plaintiff first argues that Klouda is
unqualified to offer these opinions because his primary experience is in being an expert
witness, and he does not possess any experience or training in the subtopics about
which he opines. Id. at 9-10, 20-21. Klouda’s conclusions are unreliable and unhelpful
because they are premised on his flawed or incomplete understanding of topics in the
field, such as the prevalence of the disgorgement model of damages for breach of
fiduciary duty claims or the burden of proof in an offset analysis. Id. at 13-16, 22-23.
Overall, Plaintiff contends his opinions are not helpful because, at best, they lack
foundation and amount to arguments that Defendant’s attorneys could make; at worst,
they are misleading to the court. Id. at 18-19, 24-25, 28-29. Plaintiff also notes that a
declaration by Klouda should be stricken because it is untimely. Id. at 6 n.1; see Docs.
162-9, 161-4, 160-8.
In opposition, Defendant argues that Klouda is fully qualified because he has
not only conducted tens of thousands of forensic reviews of investment accounts, but
also conducted suitability analyses in his previous role at Merrill Lynch. Doc. 187 at
6-7, 10-12. An expert may be qualified even if their experience does not precisely
match the matter at hand, and Klouda’s lack of familiarity with class action matters
and legal standards does not detract from the expertise he provides. Id. at 9, 13-14.
Defendant asserts that Klouda’s experience alone establishes the reliability of his
opinions, and that Plaintiff’s arguments largely relate to the merits rather than the
reliability of Klouda’s methodology. Id. at 15-16. In any event, his opinions are not
lacking or misleading, and will help the court understand the evidence. Id. at 16-23.
Finally, Defendant contends that Klouda’s declaration should not be stricken because
it contains no new information and did not prejudice Plaintiff. Id. at 23-24.
D. LEGAL STANDARD
The admissibility of expert testimony is governed by Federal Rule of Evidence
702, which provides:
A witness who is qualified as an expert by knowledge, skill, experience,
training, or education may testify in the form of an opinion or otherwise
(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
(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 has reliably applied the principles and methods to the facts
of the case.
Fed. R. Evid. 702. Rule 702 is a codification of the United States Supreme Court’s
decision in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993). In Daubert,
the Supreme Court described the gatekeeping function of the district court to “ensure
that any and all scientific testimony or evidence is not only relevant, but reliable.” Id.
at 589; see also United States v. Frazier, 387 F.3d 1244, 1260 (11th Cir. 2004) (en banc).
The Supreme Court extended its reasoning in Daubert to non-scientist experts in Kumho
Tire Co. v. Carmichael, 526 U.S. 137, 141 (1999).
In performing its gatekeeping function, the Court must consider whether:
(1) the expert is qualified to testify competently regarding the matters he
intends to address, (2) the methodology by which the expert reaches his
conclusions is sufficiently reliable as determined by the sort of inquiry
mandated in Daubert, and (3) the testimony assists the trier of fact,
through the application of scientific, technical, or specialized expertise,
to understand the evidence or to determine a fact in issue.
Frazier, 387 F.3d at 1260 (quoting City of Tuscaloosa v. Harcros Chems., Inc., 158 F.3d
548, 562 (11th Cir. 1998)). Thus, the three discrete inquiries to determine the
admissibility of expert testimony are qualifications, reliability, and relevance. Quiet
Tech. DC-8, Inc. v. Hurel-Dubois UK Ltd., 326 F.3d 1341 (11th Cir. 2003). Although there
is some overlap among these inquiries, they are distinct concepts that the Court and
litigants must not conflate. Id.
“The burden of laying the proper foundation for the admission of expert
testimony is on the party offering the expert, and the admissibility must be shown by
a preponderance of the evidence.” Hall v. United Ins. Co. of Am., 367 F.3d 1255, 1261
(11th Cir. 2004) (citation omitted). “Presenting a summary of a proffered expert’s
testimony in the form of conclusory statements devoid of factual or analytical support
is simply not enough.” Cook ex rel. Est. of Tessier v. Sheriff of Monroe Cty., 402 F.3d 1092,
1113 (11th Cir. 2005). The admission of expert testimony is a matter within the
discretion of the district court, which is afforded considerable leeway in making its
determination. Frazier, 387 F.3d at 1258.
The gatekeeper role, however, is not intended to supplant the adversary system
or the role of the jury: “[v]igorous cross-examination, presentation of contrary
evidence, and careful instruction on the burden of proof are the traditional and
appropriate means of attacking shaky but admissible evidence.” Daubert, 509 U.S. at
596. The judge’s role is to keep unreliable and irrelevant information from the jury
because of its inability to assist in factual determinations, its potential to create
confusion, and its lack of probative value.” Allison v. McGhan Med. Corp., 184 F.3d
1300, 1311–12 (11th Cir. 1999).
The Court first concludes that, although Douglas Schulz is well-qualified, the
opinions he has offered with respect to class certification are not sufficiently reliable
and must be excluded. Plaintiff concedes that the Court’s ruling as to Schulz renders
Arthur Olsen’s opinions inadmissible as well.
Evaluating Peter Klouda
independently, the Court concludes that his opinions regarding damages are
admissible, but that his opinions regarding the reasonableness of the account fees must
A. Defendant’s Motion to Exclude Opinions and Testimony of Douglas Schulz
Douglas Schulz is Plaintiff’s main expert witness, offering opinions about both
liability and damages in the context of class certification. Initially, the Court finds that
Schulz is qualified to render his opinions.
Defendant does not make a serious
challenge to Schulz’s qualifications. It is undisputed that Schulz has spent 40 years
working in and studying the securities industry, including as a Vice President of Merrill
Lynch and Bear Sterns, and has testified as an expert hundreds of times. See, e.g., Doc.
171 at 7-8. His background also includes a supervisory license as well as experience
in analyzing data, see id. at 9-10; cf. Doc. 160 at 17-18, in addition to the myriad
qualifications Defendant does not challenge. Schulz is fully qualified to render expert
opinions in this action.
Similarly, Defendant does not make a substantive challenge to the question of
helpfulness, instead simply reciting a summary of its arguments regarding reliability.
Doc. 160 at 30. Schulz’s opinions are relevant and helpful to the Court on the issue of
class certification because they are beyond the ken of the average non-expert. In order
for an expert opinion to assist the trier of fact, it must “concern matters that are
beyond the understanding of the average lay person.” U.S. v. Frazier, 387 F.3d 1244,
1262 (11th Cir. 2004). Expert opinions that offer nothing more than what lawyers for
the parties can argue in closing arguments generally do not assist the trier of fact. Id.
Here, Schulz’s opinions draw on his extensive experience to provide methods of
identification of the prospective class of individuals impacted by RJA’s alleged breach
of duty and calculation of their damages. If his opinions are reliable, then they are
undoubtedly relevant and helpful to the Court in rendering its determination on the
motion for class certification.
The reliability of Schulz’s opinions is the topic of true contention between the
parties. The inquiry into a proffered expert's reliability is “flexible”; the Court must
focus on the expert's principles and methodology, not on his conclusion. Chapman v.
Procter & Gamble Distributing, LLC, 766 F.3d 1296, 1305 (11th Cir. 2014). However,
“conclusions and methodology are not entirely distinct from one another.” General
Elec. Co. v. Joiner, 522 U.S. 136, 146 (1997). “[W]hen an expert purports to apply
principles and methods in accordance with professional standards, and yet reaches a
conclusion that other experts in the field would not reach, the trial court may fairly
suspect that the principles and methods have not been faithfully applied.” Fed. R.
Evid. 702 advisory committee’s note to 2000 amendment; see also Allison v. McGhan
Medical Corp., 184 F.3d 1300, 1316 (11th Cir. 1999) (district court did not abuse its
discretion in excluding conclusions in studies that were out of sync with the
conclusions in the overwhelming majority of the studies presented); Wheat v. Sofamor,
S.N.C., 46 F.Supp.2d 1351, 1359 (N.D. Ga. 1999) (excluding expert conclusions that
were based on generally accepted methods but were not shared by any other expert).
The reliability analysis therefore applies to all aspects of an expert’s testimony,
including the methodology, the facts underlying the expert’s opinion, and the link
between the facts and the conclusion. Knight v. Kirby Inland Marine Inc., 482 F.3d 347,
354–355 (5th Cir. 2007); see also General Elec. Co., 522 U.S. at 146 (“A court may
conclude that there is simply too great an analytical gap between the data and the
Here, Defendant asserts that Schulz’s opinions regarding class certification are
not reliable because account suitability cannot be determined by an objective, twofactor test. Doc. 160 at 19-22. Plaintiff responds that it is possible to determine account
unsuitability in such a manner. Doc. 171 at 7-8; 148-48 ¶¶ 28-81. The parties agree,
and the Court finds, that suitability is an inherently individualized analysis, whether
applied to an investment or an account type.
Under FINRA Rule 2111(a),
“[s]uitability…must be determined on an investor-by-investor basis, with reference to
the specific facts and circumstances of each investor.”
Similarly, the SEC has
recommended adding a provision of the Securities Exchange Act of 1934 regarding
broker-dealers’ obligation to act in their customers’ best interest, which emphasizes
that recommendations—expressly including account type recommendations—must
be based on the customer’s “investment profile,” a holistic term that encompasses a
variety of factors. See SEC Release No. 34-86031, 2019 WL 2420297, *279-80 (June
5, 2019) (text of future §§ 240.15/-1(a)(1), (a)(2)(ii)(B), (b)(2)). Explaining the new
provision, the SEC instructed that “cost is only one of many important factors to be
considered regarding the recommendation… we are emphasizing the need to consider
costs in light of other factors and the retail customer’s investment profile.” Id. at *13.
The FINRA and SEC rules are not consistent with a theory that conclusively
determines suitability or unsuitability by considering only the cost of fees and the
customer’s past trading history.
In light of this contrary authority, the singularity of Schulz’s unsuitability model
undermines its reliability.
Plaintiff is correct that the lack of peer-reviewed
methodology and error rate is irrelevant to expert opinions that, like these, do not
apply the scientific method. See Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 150
(1999); Doc. 171 at 20; cf. Doc. 160 at 24-25. However, Plaintiff has not offered
external support for Schulz’s models from any source. While the metrics Schulz
applied may be “standard formulas,” see 171 at 20-21, his application of those metrics
in the context of an unsuitability test is novel and unsupported by any authority other
than Schulz himself. See Allison, 184 F.3d at 1316; Wheat, 46 F.Supp.2d at 1359, supra.
Plaintiff argues that the settlement proceedings in a 2018 SEC matter and 2005
NASD (now FINRA) matter buttress Schulz’s methodology because they involved
“substantially similar if not identical” methodologies in the context of account-type
suitability. Doc. 171 at 17. Schulz states in his rebuttal report that both agencies’
conclusions demonstrate it is possible to make findings regarding unsuitability without
performing an individual analysis. Doc. 148-48 at 9-10. The Court does not agree.
Both the SEC and the NASD concluded that RJA had failed to review their customers’
accounts for suitability, which was of particular concern for low-trading customers
because “fee-based accounts may not have been appropriate for them.” Id. (emphasis
added). The theory of liability in those proceedings was similar to Plaintiff’s theory in
this action, see Doc. 117 at, e.g., ¶¶ 6-13, but it is not clear that the methodology aligned
with Schulz’s. Neither agency concluded that the accounts were per se unsuitable
because of the customers’ trading history. Rather, they concluded that low-trading
customers might be unsuitable for these accounts, and RJA was obligated to conduct a
review of their suitability. See also Doc. 217 at 115 (Plaintiff’s counsel explaining
NASD recommendation that a broker provide documentation when a customer opts
for a higher-fee account for reasons other than cost). Based on the limited information
that is available regarding these proceedings, they do not provide support for Schulz’s
opinion that per se unsuitability may be calculated in the aggregate using only a twofactor test.
Defendant also contends that the SEC and NASD matters are inapposite
because they involved different account types than the Freedom Accounts at issue
here. Doc. 160 at 22-23. Although Plaintiff argues that there is no material difference
between the accounts, Doc. 171 at 18-19, the Magistrate Judge previously recognized
that a distinction may exist. See Doc 92 (denying motion to compel production of
documents related to SEC proceedings because, among other reasons, the SEC
proceedings involved different types of accounts and were subject to different claims).
Overall, in the absence of external support, the Court concludes that Schulz’s opinions
regarding the two-part test for liability are unreliable and will be excluded from
consideration with respect to the class certification issue.
For similar reasons, Schulz’s opinions regarding damages must also be excluded
from consideration on the motion for class certification. His damages model stems
from his conclusion that Freedom Accounts were per se unsuitable for the group of
customers identified by his two-factor test, which the Court finds is unreliable.
Moreover, the damages model relies on additional assumptions, including that no
putative class member would have opted for a Freedom Account despite the increased
fees, and that they would have continuously engaged in the same volume of trading
had they not switched to a Freedom Account. But these assumptions are speculative
and unsupported by external authority. See Doc. 217 at 84-86; Doc. 160 at 17-18, 23,
25. The Court will therefore strike Schulz’s opinions regarding class-wide liability and
damages for the purpose of the motion for class certification.
B. Defendant’s Motion to Exclude Opinions and Testimony of Arthur Olsen
Arthur Olsen’s expertise is offered by Plaintiff in order to apply Schulz’s models
regarding liability and damages to databases of Defendant’s clients. The parties agree
that Olsen’s opinions are inextricably linked with those of Schulz, such that if Schulz’s
opinions are inadmissible, then Olsen’s opinions based on Schulz’s formulas are also
not admissible. Doc. 161 at 18-21; Doc. 172 at 18-19. Accordingly, because the Court
finds that Schulz’s opinions must be excluded as unreliable, it will exclude Olsen’s
opinions as well. 2
C. Plaintiff’s Motion to Exclude Reports and Opinions of Peter Klouda
Peter Klouda is Defendant’s damages expert. Plaintiff objects to three aspects
of Klouda’s opinions: damages, the reasonableness of fees, and the value of account
rebalancing. 3 The Court need not determine whether Klouda’s opinions regarding
Schulz’s damages model or the value of account rebalancing are admissible, because
they were offered only in rebuttal to Schulz’s opinions that have been excluded. See
Doc. 160-11 3-10, 18-20. But Klouda’s opinions regarding the damages suffered by
Plaintiff and other putative class members and the reasonableness of the fees Plaintiff
was charged are offered independently of Schulz, and will therefore be analyzed
The Court’s ruling as to the inadmissibility of Olsen’s opinions renders Defendant’s
allegation of a Rule 26 violation moot. See Doc. 161 at 22-24. For the same reason, the Court
need not make a finding as to Olsen’s qualifications and the relevance of his opinions.
The Court declines to strike Klouda’s declaration as belated. See Doc. 174 at 6 n.1.
Defendant states that the declaration is merely a summary of his reports, Doc. 187 at 23-24,
and Plaintiff has not identified any information in the declaration that is “new or inconsistent
with his reports and deposition testimony.” Doc. 174 at 6 n.1.
independently. See Doc. 160-11 at 1 (in addition to assessing the validity of Schulz’s
damages model, Klouda was tasked with opining on “whether Ms. Nguyen and any
purported class members may have suffered damages while invested in Freedom
Accounts at RJA”).
First, as with Schulz, the Court finds that Peter Klouda is qualified to provide
expert testimony in this action. As other courts have noted, “[t]he qualification
standard for expert testimony is ‘not stringent’ and ‘so long as the expert is minimally
qualified, objections to the level of the expert's expertise [go] to credibility and weight,
not admissibility.” Vision I Homeowners Ass'n, Inc. v. Aspen Specialty Ins. Co., 674 F.
Supp. 2d 1321, 1325 (S.D. Fla. 2009). While Plaintiff takes issue with the fact that
Klouda worked as a broker-dealer for only three years, 20 years ago, see Doc. 174 at 910, Klouda has spent the intervening decades doing work that is highly relevant to his
opinions in the instant action: conducting quantitative analyses of investment
accounts. Doc. 187 at 6-7. Defendant is also correct that an expert may be qualified
even where his experience does not precisely match the matter at hand. Furmanite
America, Inc. v. T.D. Williamson, Inc., 506 F.Supp.2d 1126, 1129 (M.D. Fla. 2007)
(citing Maiz v. Virani, 253 F.3d 641, 665 (11th Cir. 2001) (the subject matter of expert’s
testimony was sufficiently within his expertise; objection to lack of other experience
“goes more to the foundation for [his] testimony than…to his qualifications”)); see
Doc. 187 at 9; cf. Doc. 174 at 20-21. Klouda’s qualifications therefore surpass the
minimal standard under Daubert.
With respect to reliability, the Court will first consider Klouda’s opinions
regarding any damages that Plaintiff and other prospective class members
experienced. 4 Plaintiff’s objections to Klouda’s conclusions on these topics largely go
to the weight that should be given to them rather than their admissibility. See, e.g.,
Rosenfeld v. Oceania Cruises, Inc., 654 F.3d 1190, 1193 (11th Cir. 2011) (“[I]n most cases,
objections to the inadequacies of [expert evidence] are more appropriately considered
an objection going to the weight of the evidence rather than its admissibility.” (internal
quotation marks omitted)); Hangarter v. Provident Life & Accident Ins. Co., 373 F.3d 998,
1017 n.14 (9th Cir. 2004) (“The factual basis of an expert opinion goes to the credibility
of the testimony, not the admissibility, and it is up to the opposing party to examine
the factual basis for the opinion in cross-examination.”); Hurst v. United States, 882 F.2d
306, 311 (8th Cir. 1989) (“Any weaknesses in the factual underpinnings of [the
expert’s] opinion go to the weight and credibility of his testimony, not to its
admissibility.”). For example, Plaintiff criticizes Klouda for not offering his own
damages model or addressing the issue of offsets to Plaintiff’s disgorgement model.
Doc. 174 at 11-12, 15-17. Plaintiff also objects to Klouda’s application of a benefit-ofthe-bargain lens to damages rather than adopting Plaintiff’s disgorgement theory. Id.
at 14. But these arguments primarily constitute disagreement with his conclusions
The Court disagrees with Plaintiff’s characterization of Klouda’s opinions about damages
as being based—impermissibly and “solely”—on his conclusion that the fees charged to
Plaintiff were not excessive. See Doc. 174 at 18, 9 n.7. Further, because his opinions clearly
relate to the issue of damages, the Court need not decide whether Klouda is permitted to
opine about liability. See id.; Doc. 187 at 18 n.17.
rather than a grounded attack on the reliability of his methodology. The Court is not
permitted to compare the persuasiveness of the proffered evidence, only ensure that its
foundation is sound. See, e.g., Quiet Technology DC-8, Inc. v. Hurel-Dubois UK Ltd., 326
F.3d 1333, 1341 (11th Cir. 2003).
Here, Klouda applied his experience and knowledge of investment accounts to
opine that a client’s damages must be assessed based on the fee they agreed to pay in
addition to the services they received, an analysis he characterized as highly
individual. Doc. 160-11 at 14-20, 23-27. He further explained that the services
provided by RJA’s Freedom Accounts likely impacted the trades that were made,
meaning that it is impossible to assume the same trading activity would have occurred
in a commission-based account. Id. The Court concludes that Klouda’s opinions
regarding damages are sufficiently reliable. His opinions are also relevant and helpful
to the question of class certification, addressing topics that are inaccessible to a
layperson such as the nature and comparative value of services that are offered in
various types of investment account. Id.; see, e.g., U.S. S.E.C. v. Big Apple Consulting
USA, Inc., 6:09-cv-1963-Orl-28GJK, 2011 WL 3753581, *4 (M.D. Fla. Aug. 25, 2011)
(the ability to understand and synthesize investment records is helpful to the trier of
fact). Klouda’s opinions regarding damages are admissible.
On the other hand, Klouda’s opinions about the reasonableness of the account
fees must be struck because they are neither reliable nor helpful to the trier of fact.
Klouda concludes that the account fees charged to Plaintiff were not excessive solely
because she received a discount from the maximum fee rate RJA could have charged
her. Doc. 160-11 at 11-12, 22. Klouda offers no basis for his conclusion that a discount
is the only factor in determining whether account fees are excessive—contrary to
Defendant’s statements, he does not base his conclusion on his experience with other
accounts or the services rendered. Cf. Doc. 187 at 18; see Yellowpages Photos, Inc. v. YP,
LLC, 8:17-cv-764-T-36JSS, 2019 WL 6033084, *6-7 (M.D. Fla. Nov. 14, 2019)
(Honeywell, J.) (excluding expert who did not provide any explanation of the
underlying analysis or methodology for his opinions). The Court cannot find that his
opinions on this topic result from reliable methodology or are outside of the ken of the
average layperson such that they add to the arguments Defendant’s attorneys could
make from the same evidence. See Frazier, 387 F.3d 1244, 1262-63. The Court will
therefore disregard Klouda’s opinions regarding the reasonableness or excessiveness
of the account fees when considering the motion for class certification.
Accordingly, it is ORDERED:
1. Defendant’s Daubert Motion to Exclude Opinions and Testimony of
Douglas J. Schulz (Doc. 160) is granted;
2. Defendant’s Daubert Motion to Exclude Opinions and Testimony of Arthur
Olsen (Doc. 161) is granted, and
3. Plaintiff’s Daubert Motion to Exclude Reports and Opinions of Peter J.
Klouda (Doc. 174) is granted-in-part and denied-in-part.
opinions regarding the reasonableness of the account fees will be stricken,
and thus, not considered by the Court. The motion is in all other respects
DONE and ORDERED in Tampa, Florida on August 1, 2022.
Copies furnished to:
Counsel of Record
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