James T. Scatuorchio Racing Stable, LLC et al v. Walmac Stud Management, LLC et al
Filing
290
MEMORANDUM OPINION & ORDER: Plts James T. Scatuorcho, LLC, James T. Scatuorchio, Kevin Scatuorchio, Courtney Sullivan, and Bryan Sullivan's motion to exclude Larry K. Neuzel as an expert 204 is DENIED. Signed by Judge Danny C. Reeves on 5/1/2014.(STC)cc: COR
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
CENTRAL DIVISION
(at Lexington)
JAMES T. SCATUORCHIO RACING
STABLE, LLC, et al.,
Plaintiffs,
V.
WALMAC STUD MANAGEMENT,
LLC, et al.,
Defendants.
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Civil Action No. 5: 11-374-DCR
MEMORANDUM OPINION
AND ORDER
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Plaintiffs James T. Scatuorcho, LLC, James T. Scatuorchio, Kevin Scatuorchio, Courtney
Sullivan, and Bryan Sullivan have moved to exclude Larry K. Neuzel as an expert witness during
the upcoming trial. [Record No. 204] For the reasons discussed below, the motion will be denied.
I.
The plaintiffs experts, Stephen Johnson and James LaMonica, are expected to testify that the
advertising fees charged to the defendants were inordinately high and that the practice of marking-up
bills was not standard practice in the industry. Defendant Saybrook Advertising, LLC (”Saybrook”)
hired Neuzel to rebut the expert testimony of Johnson and LaMonica.1 [Record No. 185] Neuzel’s
report generally indicates that the fees charged by Saybrook were commercially reasonable and the
1 Although Defendant Saybrook retained Neuzel as an opinion witness to provide testimony on the
subject of advertising, Defendants Walmac Stud Management, LLC, Walmac Farm, LLC, John Jones, and
Lincoln-Walmac Associated Farm Pty Ltd. (“Lincoln-Walmac”) have also identified Neuzel as a proposed
expert witness. And despite this motion being primarily directed towards Saybrook, the defendants indicate
that there are scenarios in which they may also call Neuzel as a witness. [Record No. 246]
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practice of marking-up third party invoices is standard practice in the industry. [See Record No.
204-9.]
Neuzel is a controller employed by the Cornett Group, Inc. (“Cornett”), an advertising firm
in Lexington, Kentucky. He has approximately twenty-seven years experience as an accountant.
[Record No. 204-7] Over the past fifteen years, Neuzel has managed a number of advertising
agencies that serve clients in several different industries. [Id.] He has experience with the billing
practices of advertising agencies from both a client and agency perspective, reviewing invoices for
and from advertising agencies.
The plaintiffs have moved to exclude Neuzel as an expert witness, arguing that his testimony
is unreliable under Rule 702 of the Federal Rules of Evidence. [Record No. 204, pp. 12-16]
Specifically, they assert that Neuzel’s expected testimony regarding the commercial reasonablility
of Sabyrook’s invoices is not based on reliable methodology. In response, the defendants argue that
Neuzel’s testimony is based on his years of experience dealing with advertising agencies’ billing
practices. [Record No. 245] They also claim that the plaintiffs inappropriately rely on the Daubert
factors, which are of limited use when analyzing non-scientific expert testimony. [Id., pp. 16-20]
The plaintiffs state in their pretrial memorandum that this matter will now be tried on simple
claims of breach of the Southern Hemisphere Agreements and breach of fiduciary duty by LincolnWalmac. They indicate that allegations related to advertising charges in the Southern Hemisphere
will not be raised. [Record No. 273, pp. 2-3] However, the remaining defendants indicate list that
they will call Neuzel as an expert witness. [Record No. 279]
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II.
The plaintiffs argue that Neuzel’s proposed testimony is unreliable. [Record No. 204-1, p.
12]2 Specifically, they contend that, because Neuzel has no experience in creating advertisements,
he is not able to express opinions regarding the reasonableness of Saybrook’s billing practices. They
also claim that when making his commercial reasonableness determination, Neuzel only compared
the past invoices of Saybrook to newer Saybrook invoices and then measured them against others
he had reviewed. The plaintiffs assert that, because Neuzel admitted that he cannot ascertain the
amount of work spent on an advertisement by simply looking at it, he cannot offer an opinion on the
reasonableness of the subject bills. According to the plaintiffs, Neuzel must have some background
in the advertising field and must use a more reliable methodology before his opinions may be
considered.
While the Court has considerable leeway in determining reliability, an expert’s opinion
cannot be based solely on speculation. Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 152
(1999); Tamraz v. Lincoln Elec. Co., 620 F.3d 665, 670 (6th Cir. 2010). Experts witnesses are not
required to be absolutely certain when forming their opinion. Instead, they are allowed “wide
latitude in their opinions, including those not based on firsthand knowledge, so long as the ‘expert’s
opinion [has] a reliable basis in the knowledge and experience of the discipline.” Jahn v. Equine
Servs., PSC, 233 F.3d 382, 388 (6th Cir. 2000) (quoting Daubert, 509 U.S. at 592).
2
As the Court has noted on earlier occasions, for an expert’s opinion to be admissible, it
must satisfy three requirements. “First, the witness must be qualified by knowledge, skill,
experience, training, or education. Second, the testimony must be relevant, meaning that it will
assist the trier of fact to understand the evidence or to determine a fact in issue. Third, the testimony
must be reliable.” In re Scrap Metal Antitrust Litigation, 527 F.3d 517, 528 (6th Cir. 2006).
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The distinction between scientific and non-scientific expert testimony is a critical one. Berry
v. City of Detroit, 25 F.3d 1342, 1349-50 (6th Cir. 1994). When non-scientific expert testimony is
at issue, the Daubert factors may be relevant or the pertinent reliability issue may be based on
personal knowledge or experience. Surles ex rel. Johnson v. Greyhound Lines, Inc., 474 F.3d 288,
295 (6th Cir. 2007) (citing First Tennessee Bank Nat. Ass’n v. Barreto, 268 F.3d 319, 335 (6th Cir.
2001)). In some fields, experience is the only basis for reliable expert testimony. However, if a
witness is relying on experience he or she “must explain how that experience leads to the conclusion
reached, why that experience is a sufficient basis for the opinion, and how that experience is reliably
applied to the facts.” Fed. R. Evid. 702 advisory committee’s note (citing Daubert v. Merrell Dow
Pharmaceuticals, Inc., 43 F.3d 1311, 1319 (9th Cir. 1995)). In determining the admissibility of
experience-based testimony, a court must analyze whether the expert “employs in the courtroom the
same level of intellectual rigor that characterizes the practice of an expert in the relevant field.”
Kumho, 526 U.S. at 152. Against this backdrop, the Court notes that “nothing in either Daubert or
the Federal Rules of Evidence requires a district court to admit opinion evidence that is connected
to existing data only by the ipse dixit of the expert.” Gen. Elec. Co. v. Joiner, 522 U.S. 136, 146
(1997).
Neuzel’s opinion on the commercial reasonableness of Saybrook’s invoices is sufficiently
reliable to be admissible. The plaintiffs concede that Neuzel is qualified to express opinions on
accounting matters and that he has substantial experience reviewing advertising invoices, creating
advertising invoices. Further, Neuzel is familiar with the billing practices of advertising agencies.
However, they argue that because Neuzel does not have any experience in the creation of
advertisements, he cannot express opinions regarding the reasonableness of the amount charged for
advertising. Although Neuzel does not have experience, training, or education concerning the
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creation of advertising, exclusion of his testimony is not required. Such specialization is not
mandated by the Federal Rules of Evidence. Doe v. Cutter Biological, Inc., a Div. of Miles Labs.,
Inc., 971 F.2d 375, 385 (9th Cir. 1992) (courts do not require that an expert be a specialist in any
field). While Neuzel may not be able to review an advertisement and determine the amount of time
spent regarding its preparation, he does have sufficient experience to reliably determine the
commercial reasonableness of amounts charged for the advertisements.
The defendants do not intend to offer Neuzel to conduct a line-by-line review to determine
the reasonableness of the amount Saybrook charged for labor or expenses. Rather, he intends to
address the commercial reasonableness of Saybrook’s overall billing practices. [See Record No.
204-9.] His testimony on this issue is the result of years of reviewing advertising invoices from both
a client and agency perspective. His qualifications provide a reasonable foundation to answer
questions regarding the commercial reasonability of Saybrook’s general billing practices.
Neuzel’s methodology involves comparing Saybrook’s invoices to other advertising agency
invoices he has reviewed while employed by Cornett. The plaintiffs object that Neuzel could not
identify any of the specific invoices he has reviewed. Further, they contend that only three of
Cornett’s clients are in the equine industry and only one is a stallion management firm. However,
Neuzel’s testimony will not be excluded for these reasons. “[I]t is not proper for the Court to
exclude expert testimony merely because the factual bases for an expert’s opinion are weak.”
Andler, 670 F.3d at 729 (quoting Boyar v. Korean Air Lines Co., Ltd., 954 F. Supp. 4, 7 (D.D.C.
1996)).
The plaintiffs also object to Neuzel’s opinion concerning the appropriateness of Saybrook’s
mark-ups of third-party invoices. They argue that this opinion is simply based on Neuzel’s status
as an expert and is not grounded in any method that can be tested. [Record No. 204-1, p. 15]
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Neuzel states in his report that advertising agency mark-ups are common. [Record No. 204-9, p. 4]
He also indicates that “[t]he practice of marking up third-party invoices is reasonable and consistent
with my experience as both a preparer of invoices in the advertising industry and as someone who
approved advertising invoices to be paid.” [Id.] While the plaintiffs argue that Neuzel’s opinion
should be excluded because it cannot be tested, this aspect of Daubert is of limited utility outside
of the scientific context. United States v. Jones, 107 F.3d 1147, 1158 (6th Cir. 1997). Neuzel’s
opinions are based largely on his experience dealing with advertising invoices and knowledge that
they regularly contain mark-ups to third-party bills. However, the methodology used does not
undermine the reliability of the opinions.
III.
Neuzel’s experience provides a sufficient basis and foundation for the opinions he intends
to express during trial. Therefore, this witness’ testimony will not be excluded because the plaintiffs
claim that it is unreliable. Accordingly, it is hereby
ORDERED that Plaintiffs James T. Scatuorcho, LLC (“Scatuorchio, LLC”), James T.
Scatuorchio, Kevin Scatuorchio, Courtney Sullivan, and Bryan Sullivan’s motion to exclude Larry
K. Neuzel as an expert [Record No. 204] is DENIED.
This 1st day of May, 2014.
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