KNOWLTON v. SHAW et al

Filing 134

ORDER granting in part and reserving in part 107 Motion to Exclude Expert Testimony. By MAGISTRATE JUDGE MARGARET J. KRAVCHUK. (CWP)

UNITED STATES DISTRICT COURT
DISTRICT OF MAINE
ALAN D. KNOWLTON,
Plaintiff,
v.
BANKERS LIFE AND CASUALTY
COMPANY, et als.,
Defendants

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1:09-cv-00334-MJK

ORDER ON MOTION TO EXCLUDE EXPERT TESTIMONY
Plaintiff Alan Knowlton claims that he turned down an opportunity to be a territorial
manager for Combined Insurance in Maine because he relied on misrepresentations made to him
by Defendants about his future with Bankers Life, a company he had served for roughly 25
years. Knowlton relies on the testimony of two expert witnesses to support a contention that the
present value of his economic loss is roughly $430,000. Bankers Life has filed a motion to
exclude the testimony alleging that there is no reliable expert methodology at work and that the
testimony is speculative. (Consolidated Daubert Mot., Doc. 107.) The motion is granted in part
and otherwise deferred pending voir dire.
Rule 702
Pursuant to Rule 702 of the Federal Rules of Evidence:
If 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) the 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.

Fed. R. Evid. 702. Rule 702 assigns to judges a “gatekeeper” role to ensure that expert
testimony is not introduced at trial unless the Rule’s requirements are satisfied. The First
Circuit has described the requirements as follows: (1) that the witness have expertise based on
knowledge, skill, experience, training, or education; (2) that the testimony concern scientific,
technical, or other specialized knowledge; and (3) that the testimony be beneficial to the trier of
fact in terms of helping to understand or determine a fact in question. Correa v. Cruisers, 298
F.3d 13, 24 (1st Cir. 2002).
A judge exercising the gatekeeper role must evaluate whether the challenged expert
testimony is based on reliable scientific principles and methodologies in order to ensure that
expert opinions are not “connected to existing data only by the ipse dixit of the expert.” Gen.
Elec. Co. v. Joiner, 522 U.S. 136, 146 (1997). The following non-exclusive factors aid in this
task:
(1) whether the theory or technique can be and has been tested; (2) whether the
technique has been subject to peer review and publication; (3) the technique’s
known or potential rate of error; and (4) the level of the theory or technique’s
acceptance within the relevant discipline.
United States v. Mooney, 315 F.3d 54, 62 (1st Cir. 2002) (citing Daubert v. Merrell Dow
Pharms., Inc., 509 U.S. 579, 593-94 (1993)). In addition to these factors, the trial court may
consider other factors that are probative of reliability in light of the particular facts and
circumstances of the case at hand. Id. Ultimately, the proponent of the expert testimony must
establish that it is reliable and relevant to a factual dispute. The proponent is not required to
prove that the expert’s opinion is correct. Id. at 63. “Once a trial judge determines the reliability
of the expert’s methodology and the validity of his reasoning, the expert should be permitted to
testify as to inferences and conclusions he draws from it and any flaws in his opinion may be
exposed through cross-examination or competing expert testimony.” Brown v. Wal-Mart Stores,
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Inc., 402 F. Supp. 2d 303, 308 (D. Me. 2005). “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, 509 U.S. at 596.
The Challenged Opinions
Mr. Knowlton’s two experts are Lawrence D. Copp, a senior economist at Economic &
Policy Resources, of Vermont, and John May, a certified rehabilitation counselor with Solutions
Inc. Comprehensive Rehabilitation Services, of Vermont and New Hampshire. Knowlton seeks
to demonstrate his lost earnings potential with Combined Insurance through the testimony of Mr.
May and, with that in place, to utilize Mr. Copp to provide calculations concerning the present
value of the same, as modified by various economic factors. Additionally, Knowlton has
requested of Mr. May a vocational assessment of what his best alternative employment is, now
that he has declined the opportunity with Combined Insurance. Mr. May has opined that the best
“residual” employment for Knowlton is as an insurance sales agent /representative and he has
offered a projection about likely income in such a job. In turn, Mr. Copp uses some of what Mr.
May says to calculate the present value of this alternative employment, which he then offsets
against his other calculation to provide a measure of economic loss.
A.

Mr. May’s Reports and Opinions
In the wake of the Court’s June 13, 2011, summary judgment disposition, Mr. May has

offered an updated vocational assessment “regarding Alan Knowlton’s vocational potential and
earning capacities.” (May’s 2011 Report, Doc. 110-3, Ex. 3 at 1.) This updated assessment
builds on a report prepared in 2007 that offered “an expert vocational opinion regarding Mr.
Knowlton’s vocational potential earning capacities.” (May’s 2007 Report, Doc. 110-2, Ex. 2 at
1.) The 2007 Report offered opinions “regarding the types of work Mr. Knowlton is currently

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qualified to perform and his present earning capacity in today’s Bangor, ME, labor market.”
(Id.) In his 2011 Report, however, Mr. May notes that counsel for Knowlton “has requested an
assessment of Mr. Knowlton’s projected earning capacity in the position with Combined
Insurance versus his earning capacity in his position as a Unit Sales Representative at Bankers
Life.” (May’s 2011 Report at 2.) Consistent with this revised approach to damages, Knowlton
states in his memorandum in opposition to the motion to exclude that Mr. May’s report now
offers “an assessment of what Mr. Knowlton would have earned in a management position at
Combined Insurance versus his earning capacity as a unit sales representative at Bankers life.”
(Pl.’s Mem. in Opposition at 4, Doc. 109.) This point is reiterated in the December 29, 2011,
May Affidavit introduced by Knowlton. (Doc. 110 ¶¶ 5-6, 14.)
According to Mr. May, the data, including information supplied by one John Morrison, a
former regional manager for Combined Insurance, reveals that Knowlton would have been
responsible for hiring and managing sales representatives and developing Combined Insurance’s
business in central and northern Maine, an area in which Combined Insurance had only “four or
five” representatives working at the time. (In comparison, while managing Bankers Life’s
Bangor branch, Knowlton oversaw more than twenty representatives.) Mr. Morrison informed
Mr. May that Knowlton’s fixed salary, should he have accepted the position, would have been
$20,000, with the potential being to earn “between $40,000 and $65-80,000,” depending on sales
volume. (May’s 2011 Report at 2.)
Relying on data from the Maine Department of Labor, Mr. May offers that “first-line
supervisors/managers” had a median income of $55,460, with experienced managers earning
$68,290, and that the 2010 median salary for insurance sales agents in Maine was $41,680, with
experienced agents earning $62,000. (Id. at 2-3.) Mr. May also notes that managers typically

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make much of their income from commissions on branch or regional sales, based on a percentage
of the gross sales of their agents. (Id.) Based on the fact that Knowlton would have been tasked
with developing a new branch or region, Mr. May projected a five-year timeframe before
Knowlton would be able to make earnings at the ninetieth percentile. (Id.) Mr. May relied, in
part, on information supplied to him by one Bill Allen, a sales manager for National Life, who
thought a three-to-five-year timeframe was reasonable. (Id.)
Mr. May offers the following core opinion in his 2011 Report:
Since Mr. Knowlton was no longer able to work as a Sales Manager at Bankers
Life and since he had to forgo the opportunity at Combined, his earnings would
likely approach the median for Insurance Sales Agents of $41,680 over the course
of his remaining work life. Had he been able to return to work in the job as a
Sales Manager at Combined, his earnings would likely have approached the top
10 percentile wage for workers in this occupation ($68,290) after he had the
opportunity to build the branch in five years.
(Id.) In addition to these opinions found in the 2011 Report, Mr. May opined in his 2007 Report
that Knowlton “is unable to return to work as a Branch Manager.” (May’s 2007 Report at 16.)
According to Mr. May, this is so because companies promote managers from within based on
demonstrated skill in making sales in the field. (Id. at 17.) Additionally, Mr. May indicated that,
although Knowlton “clearly has transferrable skills to work for other employers in this field, the
breach of contract [wrongful termination] has prevented him from accessing employment
opportunities as a Branch Manager.” (Id.) Reasoning that Knowlton would thus need to fall
back on a position as an insurance sales agent, Mr. May observed that Knowlton would need to
develop a book of business and opined that, “despite his experience as a Branch Manager,”
Knowlton “would likely begin at the lower end of the pay scale,” which he characterized as the
lowest 10 percent of workers in the field, with “earnings of $23,170 or less.” (Id.) From there,
according to Mr. May’s 2007 Report, Knowlton would reach, within five years, a median income

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of $42,290 (Maine data) or between $29,980 and $66,160 (“middle 50 percent” nationally). (Id.
at 18.)
Mr. May’s 2007 Report and his 2011 Report offer a study in contrast in one significant
respect. In 2007, May opined that Knowlton’s earning as a sales agent would continue to grow
significantly until retirement age, reaching in excess of $70,000 annually. (Id.) In other words,
May opined that Knowlton’s book of business would continue to grow over time and that his
earnings would not plateau at the median level. However, in his 2011 Report, May, without
explanation, changed course and opined that Knowlton’s income as a sales agent would only
“approach the median” level “over the course of his remaining work life.” (May’s 2011 Report
at 3.)
B.

Mr. Copp’s Report
Relying on Mr. May’s projections, Mr. Copp offers a calculation of Knowlton’s

economic damages incurred “as a result of the incidents surrounding his termination of
employment with Bankers Life.” (Copp’s 2011 Report at 1, Doc. 107-3.) The calculation, in
present value, is “approximately $434,000.” (Id.) After recounting Knowlton’s employment
history, including the offer from Combined Insurance and the “demotion and eventual
termination” of employment with Bankers Life, Mr. Copp indicates:
Based on these incidents and the vocational assessment performed by John May,
this analysis estimates the loss of earnings to Mr. Knowlton had he accepted the
position at Combined Insurance on January 23, 2006. . . . Mr. May has identified
a without-incident earnings capacity for Mr. Knowlton at Combined Insurance
consistent with that of a First-Line Supervisor of Non-Retail Sales Workers. Mr.
May has opined the following in regards to Mr. Knowlton's earnings capacity at
Combined: “Had he been able to return to work in the job as a Sales Manager at
Combined, his earnings would likely have approached the top 10 percentile wage
for workers in this occupation ($68,290) after he had the opportunity to build the
branch in five years. According to Mr. May’s analysis, as a result of the incidents
culminating with the termination of Mr. Knowlton’s pay on July 30, 2006, Mr.
Knowlton is not expected to secure a replacement position as a Branch Sales
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Manager. In his vocational analysis, Mr. May finds that "It would therefore not
be expected that Mr. Knowlton could make a lateral move to another employer to
work as a Branch Manager.
***
According to John May, given the incidents surrounding Mr. Knowlton’s
termination from Banker’s Life, his earnings capacity is consistent with an entry
level Insurance Sales Agent in Maine, corresponding to the 10th percentile wage
level, or $26,390 in 2006 dollars. Mr. May opines that it will take five years of
work experience in this position to reach the median wage level for this
occupation.
(Id. at 2, 3 (footnotes omitted, emphasis in original).) Mr. Copp’s calculations are best
understood by reference to the tables he produced. Most of the underlying assumptions are
drawn from Mr. May’s projections, though there appears to be little correspondence in the
numbers these two gentlemen use in their respective reports.
Mr. Copp relies on a number of economic “factors” that he, as an expert, can educate the
jury about. One factor involves the use of a 3.23 percent annual increase for wages. Another
involves fringe benefits measured as 10.6 percent of wages. Yet another involves the downward
adjustment of earnings based on “the probabilities of [Knowlton’s] labor force participation” in
successive years. A forth factor involves adjusting for present value using a 2.56 percent
discount rate. (Id. at 3 & Table 1.) Defendant does not challenge any of these various factors.
Defendant only challenges Mr. Copp’s opinion because it relies on earning projections offered
by Mr. May.
As for the final numbers, Table 1 calculates total economic gain of $1,169,590, in present
value, if Knowlton had taken the opportunity at Combined Insurance. Table 2 calculates total
economic gain of $782,139, in present value, if Knowlton had fallen back on an insurance agent
position in Maine. (Id. at 3 & Table 2.) According to Mr. Copp, Knowlton’s economic damages
are measured by the difference between these two scenarios ($387,451), adjusted upward by

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$46,169 to compensate for the additional taxes Knowlton will have to pay for receiving his
damages in a lump sum payment.
Discussion
Defendant establishes that Mr. Copp’s calculation of damages is dependent on Mr. May’s
opinions concerning likely income related to two hypotheticals, neither of which has come to
pass: (1) that Knowlton would take the position with Combined Insurance and (2) that Knowlton
would seek out and obtain a position as an insurance agent. Knowlton plainly relies on Mr. May
to supply Mr. Copp with a means of maximizing Knowlton’s likely income in his lost
opportunity while also minimizing his projected earnings in his residual occupation, so called.
Because there is no reliable method behind this attempt, Mr. May’s opinions require the Court to
perform its gatekeeper function.
A.

Mr. May’s Opinions
Defendants object to the projections developed by Mr. May and argues that they are

inconsistent and do not adequately explain why one projection places him so near the top of the
income range within 5 years, despite significant uncertainties, while the other projection predicts
he would fall at the 10 percent level to start and only reach median income after five years
without ever rising above the median level.1 Defendants argue that it is nothing more than an
ipse dixit for Mr. May to propose these two divergent projections. Defendants say it is
inexplicable why Mr. May would propose that Knowlton could readily transfer to a management
position with Combined Insurance but, in the residual context, could not transfer to a manager

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Again, in his 2007 Report, Mr. May indicated that Knowlton’s income would likely increase by $5214
every year, including in years after he reached the average wage. (May’s 2007 Report at 18.) However, in his 2011
Report, Mr. May states that Knowlton’s income “would likely approach the median for Insurance Sales Agents of
$41,680 over the course of his remaining work life.” (May’s 2011 Report at 3.)

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position with any other insurance company. Defendants also argue that there is no underlying
methodology to explain why one projection aims so high while the other aims so low.
In response, Mr. May explains that Knowlton more likely than not would be unable to
secure another branch or regional manager position because of the negative impact of his
removal from the branch manager position with Bankers Life and because of a tendency in the
industry to promote managers from within. Knowlton also explains that his opportunity with
Combined Insurance was an opportunity not likely to recur because the offer came from a
professional acquaintance inside Combined Insurance who previously worked with Knowlton.
This aspect of Mr. May’s proposed testimony is not in itself excludable based on a Daubert
challenge.
As for likely earnings, my view is that the challenges raised would ordinarily present
issues of weight and would not bar the introduction of expert testimony designed to invite a
reasonable calculation. However, I conclude that Mr. May’s opinions that Knowlton would
likely achieve the 90 percent level of earnings in his lost opportunity at Combined and less than
the median in his residual lost opportunity as a sales agent at New York Life or elsewhere in
Maine are not the product of an application of any expert methodology derived from Mr. May’s
education, training, or experience. Indeed, Mr. May has acknowledged that he has no experience
in the area of predicting income levels. (May Dep. at 84-87.) There is simply no reliable
methodology to explain why Mr. May’s 2011 projection of agent-earnings never places
Knowlton above the median income level whereas his projection of manager-earnings never
places him below the median. The only explanation I can identify is the transparent one: he is
attempting to maximize Knowlton’s recovery. I simply cannot identify an expert methodology
behind this approach to projecting earnings and am unwilling to allow the current presentation to

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be made to the jury in the absence of a reasonable explanation based on a reliable expert
methodology. For this reason, Mr. May is precluded from offering “expert” opinion testimony to
the effect that Knowlton’s likely placement in the range of earnings is the ninetieth percentile for
one job and below the median for the other.
B.

Mr. Copp’s Opinions
Defendants’ challenge to Mr. Copp’s calculation of economic damages is that it relies on

flawed projections offered by Mr. May. The restrictions imposed on Mr. May’s testimony have
obvious implications for Mr. Copp’s calculations. Knowlton has presented these experts as a
package to provide the jury with a basis for calculating his economic loss and Defendants are
entitled to know what will be introduced at trial, yet Knowlton needs to develop the testimony of
these experts in a manner that will assist the jury rather than mislead or confuse it.
It is perfectly apparent to me that Mr. Copp has a lot of expertise to offer the jury with
respect to how a proper economic analysis should be performed. However, I am not persuaded
that it is reasonable to plug in Mr. May’s predictions about one job likely providing well above
median earnings and the other likely providing earnings exclusively at the median and below.2
Consequently, Knowlton will have one final opportunity to prepare a reasonable calculation of
economic loss through these witnesses, but he will have to do so without using Mr. May’s

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There is evidence that Knowlton rejected a job opportunity with New York Life that offered a base salary
of $25,000, which appears to be more propitious than what Mr. May projected as starting income in his 2007 Report.
Mr. May offers an explanation in paragraph 14 of his affidavit that he did not consider the New York Life offer
because he was trying to project Knowlton’s earnings “in his position at Banker’s Life,” but that just emphasizes
another problem with his methodology: Mr. Knowlton’s residual position at Bankers Life was as a unit manager in
Boston and not as a sales agent or representative in Maine.
Proof of damages in this case is complicated by the fact that Knowlton is trying to prove the economic
value of, in effect, two different opportunities that he has never pursued; one with Combined Insurance and one as
an insurance sales agent. Proving lost opportunity damages is allowed under Maine law, but the evidentiary hurdles
are significant and the Maine Law Court has held that there is a “need for careful attention to the quality of the
evidence by the trial court.” Snow v. Villacci, 2000 ME 127, ¶ 13, 754 A.2d 360, 364. Knowlton’s current effort to
calculate his loss is one that depends on unreliable and speculative expert testimony from Mr. May. Whether the
combined expertise of Mr. May and Mr. Copp would permit them to produce a reliable enough calculation, if they
put their minds to it, remains to be seen.

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transparent projections designed to maximize damages in the absence of any expert
methodology. Knowlton has already been provided with ample opportunity to supply the Court
with a reliable expert methodology that would justify those particular projections and he has
come up short. The opportunity for salvaging those particular projections no longer exists.
C.

Mr. May’s Supplemental Affidavit
On January 5, 2011, Knowlton filed a motion (Doc. 130) for leave to present a

supplemental declaration from Mr. May (Doc. 131). In his motion, Knowlton states that May’s
2011 Report was produced on an expedited basis and that he would like Mr. May to be able to
address the Court’s “concerns regarding the comparator used by Mr. May in his expert analysis.”
(Mot. for Leave to Supplement at 1.) Defense counsel were contacted and indicated that they did
not object to the Court’s consideration of the document. The motion for leave has been granted
and I have considered the supplemental affidavit.
In his supplemental affidavit, Mr. May explains why he chose insurance sales agent as
the likely comparator. He bases the decision on a vocational analysis and I have been persuaded
that the use of the insurance sales agent occupation is one reasonable approach that could
ultimately be supported by the evidence at trial, depending on how it is developed. Defendants’
challenges on that particular point go to weight, in my view. However, what remains
unexplained is why projected income in this field is restricted to ten percent-to-median income
and never more, while the Combined Insurance job is projected as median-to-ninety percent and
never less. The supplemental affidavit does nothing to reinforce or explain that approach to
calculating a likely measure of economic loss.

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D.

Supplemental Telephone Argument
On January 5, 2012, after reviewing all of the foregoing issues, I conducted a telephone

conference with the parties and instructed Knowlton that he will have to bring his experts to
Court on Tuesday, January 10, 2012, for voir dire and that, unless they can present a reliable
basis for computing a reasonable economic analysis that does not suffer from the identified
problem of the existing approach, this team of experts will likely be excluded from testifying. I
have afforded Knowlton another opportunity because I am reluctant to potentially take the legs
out from under his case, but also recognize, in fairness to Defendants, that they are certainly
entitled to know what the expert testimony will be before it is presented to the jury in open court.
Conclusion
Defendants’ Consolidated Daubert Motion is GRANTED, IN PART, and the existing
economic loss calculation is excluded from evidence. Further resolution of the motion is
deferred pending voir dire.
So Ordered.
January 6, 2012

/s/ Margaret J. Kravchuk
U.S. Magistrate Judge

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