Morris et al v. Tyson Chicken Inc et al

Filing 226

MEMORANDUM OPINION AND ORDER signed by Senior Judge Joseph H. McKinley, Jr. on 7/21/20 ; granting in part and denying in part 174 Motion to Exclude cc: Counsel(DJT)

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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
OWENSBORO DIVISION
CIVIL ACTION NO: 4:15-CV-00077-JHM
CHARLES MORRIS, et al.

PLAINTIFFS

V.
TYSON CHICKEN, INC., et al.

DEFENDANTS

MEMORANDUM OPINION AND ORDER
This matter is before the Court on Plaintiffs’ Motion to Exclude the Testimony of Jason
Anderson. [DN 174]. Fully briefed, this matter is ripe for decision.
I.

BACKGROUND

Plaintiffs have poultry growing arrangements with Defendant Tyson Chicken, Inc. [DN 18
¶¶ 2–20]. Plaintiffs allege that “Tyson, and its named employees, acted illegally and unconscionably
in a manner that prevented [] Plaintiffs from growing chickens in a fair and profitable manner.” [Id.
¶ 32]. Plaintiffs sued Defendants alleging violations of the Packers and Stockyards Act of 1921
(PSA), breach of contract, breach of the implied covenant of good faith and fair dealing, and fraud.
[Id. ¶¶ 165–197].1 Plaintiffs seek to exclude Defendants’ expert Jason Anderson. [DN 174].
II.

STANDARD OF REVIEW

Federal Rule of Evidence 702 provides that “[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

1

The Court dismissed some of the claims in Plaintiffs’ Amended Complaint. [DN 35]. The claims mentioned here are
the claims that remain.

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reliably applied the principles and methods to the facts of the case.” Under Rule 702, the trial judge
acts as a gatekeeper to ensure that expert evidence is both reliable and relevant. Mike’s Train House,
Inc. v. Lionel, LLC, 472 F.3d 398, 407 (6th Cir. 2006) (citing Kumho Tire Co., Ltd. v. Carmichael,
526 U.S. 137 (1999)).
Parsing the language of the Rule, it is evident that a proposed expert’s opinion is
admissible, at the discretion of the trial court, if the opinion satisfies three
requirements. First, the witness must be qualified by “knowledge, skill, experience,
training, or education.” FED. R. EVID. 702. 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.” Id. Third, the testimony must be reliable. Id.
In re Scrap Metal Antitrust Litig., 527 F.3d 517, 528–29 (6th Cir. 2008). “Rule 702 guides the trial
court by providing general standards to assess reliability.” Id.
In determining whether testimony is reliable, the Court’s focus “must be solely on principles
and methodology, not on the conclusions that they generate.” Daubert v. Merrell Dow Pharm. Inc.,
509 U.S. 579, 595 (1993). The Supreme Court identified a non-exhaustive list of factors that may
help the Court in assessing the reliability of a proposed expert’s opinion. These factors include:
(1) whether a theory or technique can be or has been tested; (2) whether the theory has been subjected
to peer review and publication; (3) whether the technique has a known or potential rate of error; and
(4) whether the theory or technique enjoys “general acceptance” within a “relevant scientific
community.” Id. at 592–94. This gatekeeping role is not limited to expert testimony based on
scientific knowledge, but instead extends to “all ‘scientific,’ ‘technical,’ or ‘other specialized’
matters” within the scope of Rule 702. Kumho Tire, 526 U.S. at 147. Whether the Court applies
these factors to assess the reliability of an expert’s testimony “depend[s] on the nature of the issue,
the expert’s particular expertise, and the subject of his testimony.” Id. at 150 (quotation omitted).
Any weakness in the underlying factual basis bears on the weight, as opposed to admissibility, of the
evidence. In re Scrap Metal Antitrust Litig., 527 F.3d at 530 (citation omitted). See also Brooks v.

2

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Caterpillar Glob. Mining Am., LLC, No. 14CV-00022, 2017 WL 5633216, at *1–2 (W.D. Ky. Nov.
22, 2017).
III.

DISCUSSION

Plaintiffs request that the Court exclude Anderson's entire report because his opinions are
irrelevant and unreliable. [DN 200 at 1–2]. Defendants retained Anderson to review the financial
viability of the contracts between Tyson and Plaintiffs. [DN 174-3 at 1]. Defendants also retained
Anderson “to evaluate the benefit of the [] contracts in relation to the potential and actual profitability
generated through the relationship with Tyson as compared to general economic opportunities in the
Robards2 area.” [Id. at 2]. Anderson concludes that the contracts are economically viable. [Id. at 3].
His conclusion is based on six findings:
1) In most instances, growers reported generally strong positive cash flow before and
after funding debt service on an ongoing basis.
2) In most instances, growers reported strong economic income from the
relationships with Tyson.
3) Further research of financing opportunities for ventures of a similar nature in the
area revealed that financial institutions have a strong appetite for lending to
prospective growers resulting from generally positive historically performing loan
experiences. Further, lending arrangements no longer require Farm Service
Agency guarantees in many instances for prospective growers.
4) In some instances, plaintiffs completely paid off [the] loan princip[al] on their
farms from ongoing cash flow provided by the contracts with Tyson. Further, we
reviewed depositions taken in this case and some indicated that their farms with
the assembled infrastructure for poultry growing operations had considerable value
and an available market of interested buyers. This statement is consistent with
information we independently obtained through discussions with individuals who
are involved in financing such operations at third party financial institutions.
5) The grower contracts with Tyson generally assure an ongoing and predictable
revenue stream, and therefore cash flow, without the grower being subjected to
cyclical business performance cycles.
6) In relation to per capita income for the area where the Robards Complex operates,
and consequently where the plaintiffs operate their business, the relationship with
Tyson generally produces substantially higher income for growers as compared to
the general population of the area and thereby is above market in the context of
providing the opportunity for improving a participants[’] standard of living.

2

Robards is one of Tyson’s regional complexes for their operations. [DN 18 ¶ 22].

3

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[Id. at 3–4]. Anderson’s report also includes an overview of the contracts. [Id. at 4]. In describing
the contracts, Anderson says, “Tyson has historically very infrequently terminated a contract with a
grower during the contract term and, it is reasonable for a grower to expect renewal of the contract
following the expiration of the initial term.” [Id.]. He also says, “[o]verall, the industry sees grower
contract durations ranging from ‘flock to flock’ up to 15 years.” [Id.]. The Court will address the
relevance and reliability of Anderson’s opinions below.
A. Relevance
“Expert testimony which does not relate to any issue in the case is not relevant . . . .” Daubert,
509 U.S. at 591 (citations omitted). Under the relevance requirement “there must be a ‘fit’ between
the inquiry in the case and the testimony, and expert testimony that does not relate to any issue in the
case is not relevant and therefore not helpful.” United States v. Bonds, 12 F.3d 540, 555 (6th Cir.
1993). “Whether an opinion ‘relates to an issue in the case’ or helps a jury answer a ‘specific question’
depends on the claims before the court. Thus, when analyzing the relevancy of expert testimony, a
court should consider the elements that a plaintiff must prove.” Madej v. Maiden, 951 F.3d 364, 370
(6th Cir. 2020). In determining the relevancy of Anderson’s opinions, the Court considers what
Plaintiffs must prove under the PSA,3 breach of contract,4 breach of the implied covenant of good
faith and fair dealing,5 and fraud.6

3

The PSA provides, in relevant part, that “[i]t shall be unlawful for any packer or swine contractor with respect to
livestock, meats, meat food products, or livestock products in unmanufactured form, or for any live poultry dealer with
respect to live poultry, to: (a) Engage in or use any unfair, unjustly discriminatory, or deceptive practice or device; or (b)
Make or give any undue or unreasonable preference or advantage to any particular person or locality in any respect, or
subject any particular person or locality to any undue or unreasonable prejudice or disadvantage in any respect; or (g)
Conspire, combine, agree, or arrange with any other person to do, or aid or abet the doing of, any act made unlawful by
subdivisions (a), (b), (c), (d), or (e) of this section. 7 U.S.C. § 192.
4
To prove a breach of contract claim, a plaintiff must show (1) the existence of a contract, (2) a breach of that contract,
and (3) that the breach caused damages. EQT Prod. Co. v. Big Sandy Co., L.P., 590 S.W.3d 275, 293 (Ky. Ct. App. 2019)
(citing Barnett v. Mercy Health Partners-Lourdes, Inc., 233 S.W.3d 723, 727 (Ky. App. 2007)).
5
The implied covenant of good faith and fair dealing imposes a duty on the parties “to do everything necessary to carry”
out the contract. Farmers Bank & Tr. Co. of Georgetown, Ky. v. Willmott Hardwoods, Inc., 171 S.W.3d 4, 11 (Ky. 2005)
(citing Rainier v. Mount Sterling Nat’l Bank, 812 S.W.2d 154, 156 (Ky. 1991)).
6
“A party claiming fraud must establish six elements by clear and convincing evidence: [1] material representation, [2]
which is false, [3] known to be false or recklessly made, [4] made with inducement to be acted upon, [5] acted in reliance

4

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In his report, Anderson opines about Plaintiffs’ income in relation to the general population
in Henderson County. [DN 174-3 at 4]. Anderson also includes an analysis of the economic
conditions for individual plaintiffs which discusses cash flow, average income, and the median
household income for Henderson County, Kentucky. [See e.g., id. at 6]. Defendants have not shown
that comparing the median household income for Henderson County with Plaintiffs income is
relevant. See Ashburn v. Gen. Nutrition Ctrs., Inc., 533 F. Supp. 2d 770, 772 (N.D. Ohio 2008) (“The
party offering the expert has the burden of proving admissibility.”). It will not help the jury determine
whether Defendants violated the PSA, breached their contract with Plaintiffs, breached the implied
covenant of good faith and fair dealing, or if they were fraudulent. Indeed, Defendants acknowledge
that Anderson does not directly opine on the allegations under the PSA. [DN 194 at 8]. It is also not
relevant to any allegations Plaintiffs make in their complaint. Thus, Anderson’s discussion of the
median household income for Henderson County and his opinions about Plaintiffs income or cash
flow in relation to the Henderson County median household income are excluded.
Regarding Anderson’s other opinions, they do relate to issues in this case and, thus, are
relevant. In support of their claims in their Amended Complaint, Plaintiffs make several allegations
regarding profitability. For example, Plaintiffs allege that Tyson “prevented [them] from growing
chickens in a fair and profitable manner.” [DN 18 ¶ 32]. Plaintiffs also allege that Tyson breached
its commitments to them about “the type and volume of product they will be asked to produce—
undermining growers’ ability to turn a profit—and manipulating its operations so that growers can
neither predict nor rely on a specific level of income.” [Id. ¶ 36]. Anderson’s findings relate to those
factual issues that are at least relevant to the breach of contract, breach of the implied covenant of
good faith and fair dealing, and fraud claims. See Allen v. Vill. Partners, L.P., No. 06-CV-59, 2008

thereon, and [6] causing injury.” Farmers Bank, 171 S.W.3d 4 at 11 (citing United Parcel Serv. Co. v. Rickert, 996
S.W.2d 464, 468 (Ky. 1999)).

5

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WL 3200721, at *3 (E.D. Tenn. Aug. 5, 2008) (“It is clear from the expert disclosure that Mr. Gerding
is addressing the issues raised by the plaintiffs in their complaint.”); see also Helton v. Am. Gen. Life
Ins. Co., No. 09-CV-00118, 2013 WL 2443166, at *3 (W.D. Ky. June 4, 2013) (finding an expert
opinion not relevant based on the facts stated in the second amended complaint). The Court must still
consider whether these findings and Anderson’s conclusion are reliable.
B. Reliability
“[A] trial judge must have considerable leeway in deciding in a particular case how to go
about determining whether particular expert testimony is reliable. That is to say, a trial court should
consider the specific factors identified in Daubert where they are reasonable measures of the
reliability of expert testimony.” Kumho Tire, 526 U.S. at 152.
First, Anderson finds that “growers reported generally strong positive cash flow before and
after funding debt service on an ongoing basis.” [DN 174-3 at 3]. It appears that Plaintiffs do not
have an issue with Anderson’s methodology to determine cash flow because they say “the problem
in Anderson’s methodology stems not from how he used depreciation to determine cash flow . . . but
rather how he used it to determine economic income . . . .” [DN 200 at 6]. However, Plaintiffs
highlight that Anderson did not have a precise definition of “strong” other than that “it’s just
significantly positive.” [DN 199-1 Anderson Dep. 313:16–24]. Then, Anderson said that “perhaps
‘strong’. . . shouldn’t be in [the report].” [Id. 315:25–316:1]. Nevertheless, Anderson may testify as
to cash flow and his terminology can be examined through cross examination.
Second, Anderson opines that “growers reported strong economic income from the
relationships with Tyson.” [DN 174-3 at 3]. Plaintiffs take issue with Anderson’s calculation of
economic income because he relies on depreciation as a proxy for residual value to determine the

6

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value of Plaintiffs’ property.7 [DN 174-1 at 9]. Defendants assert that Anderson’s true reason for
considering depreciation was “to account for the true nature of [] Plaintiffs’ cash flow . . . .” [DN 194
at 13]. Anderson, however, confirmed that the methodology has nothing to do with his cash flow
analysis. [DN 194-3 Anderson Dep. 413:18–414: 14]. Furthermore, Anderson testified that the
methodology is something that would not be generally accepted in the appraisal environment. [Id. at
383:13–17]. In fact, as Anderson admitted, he cannot point to a treatise that supports using
depreciation as a proxy for residual value as a generally accepted practice in his industry. [Id. at
384:3–7]. Anderson even admitted that the methodology has not been “peer-reviewed tested.” [Id.
at 388:10–19]. But Anderson explained that the methodology can be found in disclosed valuation
reports periodically “because you have to have a proxy when you don’t have . . . an appraisal.” [Id.
at 386: 11–18]. He testified that the reason he used depreciation is because he did not have appraisals
of the properties and depreciation is a proxy of fair value. [Id. at 383:19–21].
Here, the fact that Anderson’s methodology has not been subject to peer review does not
render it unreliable. First Tenn. Bank Nat. Ass'n v. Barreto, 268 F.3d 319, 334 (6th Cir. 2001) (finding
that “the fact that [a non-scientific expert’s] opinions may not have been subjected to the crucible of
peer review, or that their validity has not been confirmed through empirical analysis, does not render
them unreliable and inadmissible”). Nor does his admission, in this case, that using depreciation as
a proxy for residual value is not a generally accepted method in appraisal make his methodology
unreliable. See United States v. Brown, 415 F.3d 1257, 1268 (11th Cir. 2005) (“. . . [E]xpert testimony
that does not meet all or most of the Daubert factors may sometimes be admissible.”). Anderson

7
Depreciation is “[a] reduction in the value or price of something; specif., a decline in an asset's value because of use,
wear, obsolescence, or age.” Depreciation, BLACK'S LAW DICTIONARY (11th ed. 2019). Residual value, which is also
termed salvage value, is “[t]he value of an asset after it has become useless to the owner; the amount expected to be
obtained when a fixed asset is disposed of at the end of its useful life. Salvage value is used, under some depreciation
methods, to determine the allowable tax deduction for depreciation.” Value, BLACK'S LAW DICTIONARY (11th ed. 2019).

7

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explained his reasoning for departing from using residual value and that his methodology is
sometimes used in valuation reports. The Court is satisfied that Anderson’s methodology here is
reliable.
Third, Anderson opines on whether financial institutions have a strong appetite for lending.
[DN 174-3 at 3]. He reached his opinion based on phone calls that he made to a couple of bankers in
the area. [DN 194-3 Anderson Dep. 184:18–22]. Anderson also testified that although he talked to
a couple of bankers, Doug Lawson was the primary banker that he relied on because of Lawson’s
experience. [Id. at 184:18–24]. When discussing Lawson, Anderson testified that he was someone
that Anderson would rely on “in [his] community” for information on lending opportunities. [Id. at
407:9–12]. Anderson then used the information he learned to form his opinions, which he may do.
See Jackson v. E-Z-GO Div. of Textron, Inc., 326 F. Supp. 3d 375, 396 (W.D. Ky. 2018) (Under
“‘Rule 703, an expert's testimony may be formulated by the use of the facts, data and conclusions of
other experts.’”). Plaintiffs complain that Anderson did not inquire about how many poultry lending
arrangements Lawson has entered into or engage in any analysis to determine whether the lending
institutions Plaintiffs relied on held similar views. [DN 200 at 4]. These criticisms are a matter for
cross-examination and do not go to admissibility.

Daubert, 509 U.S. at 596 (“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.”). Anderson’s
opinion on whether financial institutions have a strong appetite for lending is reliable.
Fourth, Anderson makes observations about Plaintiffs paying off their loan principal on their
farms from cash flow from the contracts with Tyson. [DN 174-3 at 3]. He also explains that in the
depositions he reviewed, some Plaintiffs indicated “that their farms with the assembled infrastructure
for poultry growing operations had considerable value and an available market of interested buyers.”
[Id.]. Anderson found that was consistent with information he obtained from individuals “who are

8

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involved in financing such operations.” [Id.]. Contrary to Plaintiffs’ argument that such observations
are no different than those that a lay witness can make, Anderson uses the information to support his
expert findings on who is willing to finance these types of operations. [DN 174-1 at 10]; see Pledger
v. Reliance Tr. Co., No. 15-CV-4444, 2019 WL 4439606, at *12 (N.D. Ga. Feb. 25, 2019) (“However,
as opposed to providing a mere factual narrative, [an] expert is allowed to articulate the factual
underpinning upon which [s]he bases h[er] opinion.”) (alterations in original).
Fifth, Anderson opines that “[t]he grower contracts with Tyson generally assure an ongoing
and predictable revenue stream, and therefore cash flow, without the grower being subjected to
cyclical business performance cycles.” [DN 174-3 at 4]. Anderson testified that he did a “flip
through” of several of the contracts, in part, “to establish whether or not there’s some measure of
comfort to believe reasonably that there’s ongoing cash flow opportunity for a grower.” [DN 199-1
Anderson Dep. 200:1–9, 333:18–334:9]. Anderson reviewed the contracts to determine the term,
whether there was a buyer, and pricing. [Id. at 333:6–16]. His review of those three factors helped
him determine whether revenue stream was predictable. [Id. at 333:18–334:9]. Anderson may testify
to this finding. Plaintiffs’ criticisms of his methodology go to the weight of his testimony rather than
its admissibility. Daubert, 509 U.S. at 596 (“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.”).
Finally, in relation to the contracts, some of Anderson’s opinions are based, in part, on a
Google search. Anderson says, “Tyson has historically very infrequently terminated a contract with
a grower during the contract term and, it is reasonable for a grower to expect renewal of the contract
following the expiration of the initial term.” [DN 174-3 at 4].8 In another instance, Anderson opined
that “[o]verall, the industry sees grower contract durations ranging from ‘flock to flock’ up to 15

8

Defendants say that Anderson’s conclusion “in no way hinge on this statement . . .” [DN 194 at 15 n.8].

9

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years.” [Id.]. Plaintiffs’ complaints about Anderson using Google searches goes to the weight of the
Anderson’s opinions and not their admissibility, especially considering the work Anderson did in
addition to his Google searches. The weaknesses in Anderson’s methodology should be explored
through vigorous cross-examination. Daubert, 509 U.S. at 596 (“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.”). Ultimately, Anderson’s
conclusion that the contracts are economically viable is admissible.
IV. CONCLUSION
For the reasons set forth above, Plaintiffs’ Motion to Exclude the testimony of Anderson [DN
174] is DENIED IN PART AND GRANTED IN PART.

July 21, 2020

cc: counsel of record

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