Begualg Investment Management Inc. et al v. Four Seasons Hotel Limited et al.
Filing
571
OMNIBUS ORDER on motions to exclude expert witnesses. Signed by Judge Robert N. Scola, Jr. on 3/6/2013. (rss)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Case No. 10-22153-Civ-SCOLA
BEGUALG INVESTMENT
MANAGEMENT, INC.,
Plaintiff,
vs.
FOUR SEASONS HOTEL LIMITED, et al.,
Defendants.
_____________________________________/
OMNIBUS ORDER ON MOTIONS TO EXCLUDE EXPERT WITNESSES
THIS MATTER is before the Court on the Defendants’ Motion to Exclude Plaintiff’s
Expert Witness Scott Brush (ECF No. 341) and Defendants’ Motion to Exclude Plaintiff’s
Expert Witness Rodolfo J. Aguilar (ECF No. 342). For the reasons explained in this Order, the
motion to exclude Scott Brush is granted in part and denied in part. The motion to exclude
Rodolfo J. Aguilar is denied.
BACKGROUND
This case involves the purchase of several condominium units in Miami, Florida, and the
enrollment of those condominium units in a Rental Program Agreement. Begualg Investment
Management, Inc., is proceeding on two inconsistent, alternative theories of liability: fraud and
breach of contract.
The Defendants in this case are Four Seasons Hotel Limited, Millennium
Partners, LLC, Terremark Brickell II, Limited, FSM Hotel, LLC and Interinvestments Realty,
Inc.
On one hand, the Defendants are alleged to have acted in concert making a number of
false promises to Begualg. The purpose of this purported conspiracy was to trick Begualg into
purchasing multiple condominium hotel units under a contract that contained terms that were
materially different from those negotiated by the parties. If successful in this theory of liability,
the purchase and rental agreements would be void. Alternatively, Begualg alleges that the
Defendants have breached the terms of the Rental Program Agreement. Under the Rental
Program Agreement, the condominium hotel units would be managed, maintained, marketed,
and rented by the Four Seasons Hotel. Essentially, the breach-of-contract allegations are that the
Defendants have not used reasonable commercial efforts to market Begualg’s condominium
units. If successful under this theory of liability, Begualg could recover any damages caused by
the Defendants’ wrongful conduct.
In support of its breach-of-contract theory, Begualg has proffered several expert
witnesses. The Defendants have moved to exclude Begualg’s hotel expert and its damages
expert. The argument is that these experts are not qualified to give the opinions they are
offering. The Defendants also contend that the experts’ methodologies are flawed. For these
reasons, the Defendants argue these experts should not be permitted to present their opinions to
the jury.
LEGAL STANDARDS
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 if:
(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 has reliably applied the principles and methods to the facts of the
case.
Fed. R. Evid. 702. A trial court determining the admissibility of expert testimony under Rule
702 must engage in a three-part inquiry, considering 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 v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993)]; 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. Rosenfeld v. Oceania
Cruises, Inc., 654 F.3d 1190, 1193 (11th Cir. 2011).
It is not the role of the trial court to make conclusions about the persuasiveness of the
expert’s opinions, rather, “vigorous 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 v. Merrell Dow Pharm., Inc., 509 U.S. 579, 596
(1993) “[I]n most cases, objections to the inadequacies of a study are more appropriately
considered an objection going to the weight of the evidence rather than its admissibility.”
Rosenfeld, 654 F.3d at 1193 (quotations/citations omitted).
DISCUSSION
The briefing on the challenges to these experts has revealed a potential misconception by
Begualg. At times, Begualg’s arguments suggest that it may disregard the terms of the parties’
contracts based upon its fraud allegations. In other words, Begualg appears to be attempting to
infuse its fraud claims into its breach of contract claims. The purpose of this strategy seems to
be to, in effect, rewrite the parties’ agreements. Revision of the contracts is not the proper
remedy for the type of fraud alleged here. See Cancanon v. Smith Barney, Harris, Upham &
Co., 805 F.2d 998, 999 (11th Cir. 1986) (explaining that under a fraud-in-the-factum theory a
contract is void as if “no contract existed between the parties”).
The Court has previously addressed this issue in ruling on the Defendants’ motion to
dismiss. (Order 9, dated Apr. 5, 2012, ECF No. 303.) The Court noted that Begualg was entitled
to plead its fraud claims and its breach of contract claims in the alternative. The Court explained
that if Begualg is successful in proving its fraud allegations, including the fact that
Interinvestments was an undisclosed agent of the other Defendants, then the contracts between
the parties would be void. (Id.) Obviously, Begualg could not then succeed on a breach of
contract claim because there would no longer be any contracts to be breached.1 On the other
hand, if Begualg is unable to prove its fraud claims its breach-of-contract claims will be solely
grounded on the terms of the parties’ written agreements. Begualg has not presented any
argument or legal authority to support the suggestion that it may rewrite the terms of the parties’
agreements to incorporate the Defendants’ allegedly fraudulent statements.
A. Expert Witness Scott Brush
Scott Brush is offered as Begualg’s expert on the hotel industry. Brush presents several
opinions relating to the marketing, promotion and pricing of the condominium units. The
starting point for Brush’s opinions is the language in the Rental Program Agreement. The Rental
Program Agreement reads that the Defendants “shall use reasonable commercial efforts” to rent
Begulag’s condominium units.
Brush’s opinions go to whether the Defendants’ efforts in
promoting the rental of Begulag’s condominium units were reasonable.
The Defendants take particular issue with Brush’s opinion that it was unreasonable for
the Defendants not to have marketed the condominium units through the Hotel’s central
1
Begualg seems to have embraced this point. It has incorporated this line of reasoning in
several of its arguments in this case. (See, e.g., Pl.’s Resp. 4 n.2, ECF No. 347.)
reservation system, the Hotel’s website, or a third party reservation system. The Defendants
argue that through the Rental Program Agreement the parties agreed that the condominium units
would not be marketed through the Hotel’s central reservation system, the Hotel’s website, or a
third party reservation system. The Rental Program Agreement reads: “Reservations will not be
accessed through the central reservation system and databases maintained by [Four Seasons] and
its Affiliates.” (Rental Agreement 6, ECF No. 1-8.)
Most of Brush’s conclusions are not directly contradictory of the Rental Program
Agreement.
The Rental Program Agreement contains no express provision regarding the
marketing of the condominium units on the Hotel’s website or a third party reservation system
because neither appear to be databases maintained by Four Seasons or any of its affiliates.
Brush’s opinions that the Defendants should have advertised the condominium units on the
Hotel’s website and a third party reservation system are permissible.
This testimony is permissible, despite the apparent misstatement by Brush in his
deposition that the Rental Program Agreement excluded marketing of the condominium units
through a third party reservation system. Brush later corrected this mistake. While likely fodder
for cross-examination, Brush’s mistaken belief about the terms of the Rental Program Agreement
is not a sufficient basis to exclude him as an expert in this case.
Brush may not give an opinion that directly conflicts with unambiguous language in the
Rental Program Agreement. Brush opines that it was unreasonable for the Defendants to not
market the condominium units on the Hotel’s central reservation system.
But the Rental
Program Agreement clearly reads that reservations of the condominium units will not be
accessible through the Hotel’s central reservation system. This opinion cannot stand. See
Haddad v. Rav Bahamas, Ltd., 589 F. Supp. 2d 1302, 1307 (S.D. Fla. 2008) (Seitz, J.) (excluding
an experts conclusion which ignored contractual provisions).
The Defendants also argue that Brush is not competent to render expert opinions
regarding condominium hotel units. This argument is based on Brush’s qualifications, and his
methodology in arriving at his opinions in this case. Finally, the Defendants assert that even if
Brush’s opinions are admissible, they should be excluded under Federal Rule of Civil Procedure
403. The Defendants reason that the opinions would be likely to confuse or mislead the jury.
Brush is qualified to render an expert opinion in this case, and his methodology is
adequate to support his conclusions. Brush has over forty years of experience in the hotel
industry. He has worked in management, as a consultant, has served as an expert in litigation,
and has taught college-level classes on the subject.
He has authored several publications
regarding marketing in the hospitality industry. In preparing to render his opinions in this case,
he analyzed various reports and data groups containing information regarding occupancy rates,
rental rates, and revenues. Brush prepared a compilation of this data and compared it to the Four
Seasons Hotel as well as two groups of similarly situated hotels. The Defendants’ attacks of
Brush’s qualifications, his methodology and his conclusions are more properly reserved for
cross-examination.
See Daubert v. Merrell Dow Pharm. Inc., 509 U.S. 579, 596 (1993).
Similarly, Brush’s opinions should not be excluded under Federal Rule of Evidence 403.
The Defendants’ motion to exclude Brush is granted in part, and denied in part. Brush’s
isolated opinion regarding marketing the condominium units through the Hotel’s central
reservation system is excluded. Except for this single exception, Brush’s expert opinions will
not be excluded, and may be presented to the jury.
B. Expert Witness Rodolfo J. Aguilar
Rodolfo J. Aguilar’s testimony is presented regarding the amount of damages Begualg
has suffered because of the Defendants’ alleged breach of the Rental Program Agreement.
Aguilar’s opinions on damages are predicated upon several underlying conclusions.
For
example, in order for Aguilar to calculate how much money Begualg has lost due to the
Defendants’ allegedly overpricing the condominium units, Aguilar must assume an appropriate
rate at which the condominium units should have been offered. The Defendants take issue with
four of Aguilar’s underlying conclusions: occupancy rate, rental rates, expenses, and
capitalization rates.
1. Occupancy Rates
Aguilar’s damages calculations are based on his conclusion that the occupancy rate for
the condominium units would have been the same as the occupancy rate for regular hotel units if
not for the Defendants’ misconduct. Although Aguilar’s testimony on how he reached this
conclusion is shaky, he ultimately explains that he vetted this conclusion through Begualg’s hotel
expert, Scott Brush. (Aguilar Dep. 57: 8-21, Feb. 28, 2012, ECF No. 342-1.)
An expert witness’s testimony may be formulated by using facts, data and conclusions of
other experts so long as the testifying expert is presenting some independent findings. Eberli v.
Cirrus Design Corp., 615 F. Supp. 2d 1357, 1364 (S.D. Fla. 2009) (Ungaro, J.). Since Aguilar
has based his conclusions regarding occupancy rates on Brush’s opinions, his testimony on this
point is admissible. The Defendants clearly have a strong cross-examination ready for Aguilar
on this issue. That cross-examination is the proper place to test Aguilar’s findings. See Daubert,
509 U.S. at 596.
2. Rental Rates
Aguilar’s damages calculations are based on his conclusions of what reasonable rental
rates for the condominium units should have been. Aguilar concludes that the rental rate for the
one-bedroom condominium units should have been one-and-a-half times the amount charged for
a one-bedroom hotel unit. Similarly, Aguilar concludes that the rental rate for the two-bedroom
condominium units should have been two-and-a-half times the amount charged for a onebedroom hotel unit.
When questioned about these conclusions, Aguliar indicated that he confirmed these rates
after speaking with Scott Brush. (Aguliar Dep. 55:9-16; 59:8 – 60:7, Feb. 28, 2012, ECF No.
342-1.) Because Aguilar is permitted to rely on facts, data and conclusions of other experts, his
rental rate conclusions, although unsteady, are admissible. Just because the Defendants appear to
have a robust cross-examination available to them does not mean the expert should be excluded.
See Daubert, 509 U.S. at 596.
3. Expenses
The Defendants argue that Aguilar’s opinions regarding the expenses factored into his
damage conclusions are contrary to the parties’ contracts. For example, Aguilar testified that he
did not incorporate certain expenses required by the Rental Program Agreement and the
condominium documents. (See Aguilar Dep. 71:18 – 73:6; 140:6-23, Feb. 28, 2012, ECF No.
342-1.) The reason given for not including these expenses was his opinion that the expenses
were excessive. (Id.) When asked the basis for his opinion, he responded “Based upon my
brain.” (Id. at 141:1; see also 75:23-25 (“Q: What [expenses] you charged is based simply upon
the world according to Dr. Aguilar? A: That’s correct.”).)
Despite Aguilar’s seemingly clear assertion that he did not include in his calculations
certain expenses that were agreed to by the parties, Aguilar later clarified these statements. In
response to questions from Begualg’s attorney, Aguilar said that he did factor into his
calculations expenses required by the Rental Program Agreement and condominium documents.
(Aguilar 57:2-17, Mar. 1, 2012, ECF No. 342-2.) Since this Court may not make credibility
determinations regarding expert testimony, Aguilar’s testimony regarding his expense
calculations is admissible.
It is the function of a jury to parse out Aguilar’s paradoxical
testimony.
4. Capitalization Rates
The Defendants take issue with the capitalization rates selected by Aguilar.
When
pressed, Aguilar essentially said that the capitalization rates were selected based on his training
and experience in the field of real estate appraisals. (See, e.g., Aguilar Dep. 142:22 – 143:8, Feb.
28, 2012, ECF No. 342-1.) Aguilar further indicated that he confirmed the capitalization rates
through a calculation involving the net operating income and the purchase price of a particular
condominium unit. (Aguilar Dep. 71:1-14, Mar. 1, 2012, ECF No. 342-2.)
Aguilar is qualified to testify regarding the capitalization rates he selected to form the
basis of his damages opinions. The Defendants’ vigorous cross-examination and presentation of
contrary evidence is the appropriate method of attacking Aguilar’s shaky but admissible
testimony. See Daubert, 509 U.S. at 596. This is also true regarding the Defendants’ challenges
to Aguilar’s method of valuation.2
CONCLUSION
For the reasons explained above, it is ORDERED and ADJUDGED as follows:
1. Defendants’ Motion to Exclude Testimony of Plaintiff’s Expert Witness Scott Brush (ECF
No. 341) is GRANTED in part and DENIED in part, consistent with this Order.
2. Defendants’ Motion to Exclude Testimony of Plaintiff’s Expert Witness Rodolfo J. Aguilar
(ECF No. 342) is DENIED.
DONE and ORDERED in chambers, at Miami, Florida, on March 6, 2013.
___________________________________
ROBERT N. SCOLA, JR.
UNITED STATES DISTRICT JUDGE
2
The Court has also considered and rejects the Defendants’ argument that Aguilar should be
excluded based upon his statements in connection with obtaining his temporary, Florida license.
These are matters that go toward credibility and not toward his qualifications as an expert.
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