Underground Vaults & Storage, Inc. v. Cintas Corporation et al

Filing 118

MEMORANDUM AND ORDER granting in part and denying in part 90 Motion in Limine. Signed by District Judge Monti L. Belot on 11/22/2013. (aa)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS

UNDERGROUND VAULTS & STORAGE,

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Plaintiff,
v.
CINTAS CORPORATION, et al.,
Defendants.

CIVIL ACTION
No.

11-1067-MLB

MEMORANDUM AND ORDER
This case comes before the court on Cintas’ motion to exclude
the testimony of Richard West, plaintiff’s expert on lost profits.
(Doc. 90).

The motion has been fully briefed and the court held a

hearing on November 18, 2013.

(Docs. 94, 100, 113).

Cintas’ motion

is granted in part and denied in part for the reasons herein.
Introduction
This case revolves around a contract for document storage
services. Plaintiff alleges that it entered into a joint venture with
Cintas to submit a bid proposal to Boeing in the hopes of winning the
contract.
Boeing’s

The bid proposal contemplated that the storage location of
documents

would

be

at

facilities in Hutchinson, Kansas.

plaintiff’s

underground

storage

After the submission of the bid,

Cintas was awarded the Boeing contract.

Plaintiff and Cintas then

entered into negotiations and circulated a draft lease agreement. The
lease agreement, however, was never executed.
provided

the

storage

for

the

documents

at

Ultimately, Cintas
its

own

facilities.

Plaintiff brought this action for breach of the joint venture and
breach of fiduciary duty.

To support its claim for damages, plaintiff hired Richard West,
a Certified Public Account. West was asked to perform the lost profit
calculations and to assume that plaintiff and Cintas had entered into
a partnership.

To assist in determining the amount of lost profits,

West was provided with Cintas’ bid and the unexecuted lease agreement
between plaintiff and Cintas.

At a later date, West was given the

Boeing contract which provided an initial term of seven years and an
option for three additional one year terms.1

West submitted a report

in which he opined plaintiff’s lost profits for a total of 18 years.
Cintas moves to exclude West’s opinions on the basis that they
are speculative and based on unfounded assumptions.
Analysis
“Rule 702 sets forth the standard for admission of expert
testimony,” U.S. v. Fredette, 315 F.3d 1235, 1239 (10th Cir. 2003),
and assigns “to the trial judge the task of ensuring that an expert’s
testimony both rests on a reliable foundation and is relevant to the
task at hand.”

Daubert v. Merrell Dow Pharm., 509 U.S. 579, 597, 113

S. Ct. 2786, 2799, 125 L. Ed. 2d 469 (1993).

Rule 702 provides that

[i]f scientific, technical, or other specialized
knowledge will assist the trier of fact to understand the
evidence or to determine a fact in issue, a witness
qualified as an expert by knowledge, skill, experience,
training, or education, may testify thereto in the form
of an opinion or otherwise, if (1) testimony is based
upon sufficient facts or data, (2) the testimony is the
product of reliable principles and methods, and (3) the
witness has applied the principles and methods reliably
to the facts of the case.
Exclusion of expert testimony is the exception, not the rule.

See

Advisory Committee Notes concerning the amendment to Rule 702 (noting
1

The unexecuted lease contained these same terms.
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that “a review of the case law after Daubert shows that the rejection
of expert testimony is the exception rather than the rule.”)
If the expert is sufficiently qualified, as in this case, then
“the court must determine whether the expert's opinion is reliable by
assessing the underlying reasoning and methodology.”

United States

v. Avitiz-Guillen, 680 F.3d 1253, 1256 (10th Cir. 2012).
Cintas objects to West’s opinions on the basis that Boeing could
terminate the contract at any time and, therefore, lost profits for
the initial seven years is speculative.

The court disagrees.

Under

Kansas law, “loss of profits resulting from a breach of contract may
be recovered as damages when such profits are proved with reasonable
certainty, and when they may reasonably be considered to have been
within the contemplation of the parties.”

CoreFirst Bank & Trust v.

JHawker Capital, LLC, 282 P.3d 618, 631 (Kan. Ct. App. 2012).
The contract between Boeing and Cintas is currently being
performed with no suggestion that Boeing or Cintas has given notice
of a termination or are likely to do so during the remainder of the
seven-year term.

Therefore, a reasonable inference could be drawn by

the trier of fact that plaintiff would have provided the storage as
set

forth

in

the

proposed

relationship with plaintiff.

bid

had

Cintas

not

terminated

its

Moreover, given the terms of the

contract and the proposed lease agreement, the profits from the
initial seven year terms were within the contemplation of the parties.
Therefore, any argument regarding the potential termination of the
contract goes to the weight of the evidence and not its admissibility.
Next, Cintas argues that the lost profits for years 8, 9, and
10 are speculative because several assumptions must be made in order
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for those profits to occur. Essentially, both Boeing and Cintas would
have had to agree to the option.

Additionally, plaintiff would also

have to execute the option on the lease agreement.

West testified

that the option years were highly likely to occur because of the
enormous

cost

in

moving

the

documents.

The

initial

move

and

preparation of the 2.5 million drawings spanned over two years at a
substantial cost to Boeing.

West testified that it would be highly

likely that all parties involved would continue their relationship
through ten years due to the significant cost and planning involved
in obtaining a different contractor to store the documents.
Moreover,

the

contract

executed

by

Boeing

and

Cintas

contemplates the contractual relationship continuing for a total of
10 years.

The unexecuted lease agreement also tracks the term of the

Boeing contract.

Additionally, plaintiff has identified several

exhibits which demonstrate that all parties assumed that the contract
would extend through the full 10 year term.

Therefore, the court

finds that the lost profits for years 8 through 10 were within the
contemplation
circulated.

of

the

parties

at

the

time

the

agreements

were

See CoreFirst Bank & Trust, 282 P.3d at 631.

West further opined that the contract would be extended an
additional 8 years, a time period that is not contemplated in the
contract or the lease agreement.

West calculated this time period by

determining plaintiff’s history of client retention. West opined that
plaintiff’s relationships with its customers averaged 18 years and,
therefore, it is reasonable to conclude that plaintiff would continue
its relationship with Cintas for 18 years.

West, however, admitted

that he has never used this type of methodology and that it is not
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used by others in his field.
This opinion is not scientific but pure unsupported speculation,
at best. “To be reliable under Daubert, an expert's scientific
testimony must be based on scientific knowledge . . . and not mere
subjective belief or unsupported speculation.”

Goebel v. Denver and

Rio Grande W. R. Co., 346 F.3d 987, 991 (10th Cir. 2003). Therefore,
West’s opinions as to plaintiff’s lost profits in years 11 through 18
are excluded.
Conclusion
Cintas’ motion is granted in part and denied in part.

(Doc.

90).

IT IS SO ORDERED.
Dated this

22nd

day of November 2013, at Wichita, Kansas.

s/ Monti Belot
Monti L. Belot
UNITED STATES DISTRICT JUDGE

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