Rocky Mountain PSI et al v. Thayer
Filing
81
ORDER denying 58 Motion Exclude or Limit the Opinions and Testimony of Plaintiffs' Damages Expert. Signed by Magistrate Judge Carolyn S Ostby on 4/9/2015. (JDH, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
BILLINGS DIVISION
ROCKY MOUNTAIN PSI, LLC,
and SAGE ENVIRONMENTAL
CONSULTING, LP,
CV 13-23-BLG-CSO
ORDER ON DEFENDANT’S
MOTION IN LIMINE
Plaintiffs/CounterDefendants,
vs.
THOMAS M. THAYER,
Defendant/CounterClaimant.
Plaintiffs Rocky Mountain PSI, LLC (“RMPSI”) and Sage
Environmental Consulting, LP (“Sage”) bring this action against
Defendant Thomas M. Thayer (“Thayer”). Now pending is Thayer’s
motion in limine to exclude or limit the opinions and testimony of
Plaintiffs’ damages expert Aaron Beckman. ECF 58. The motion will be
denied for the following reasons.
I.
BACKGROUND
The action arises out of a March 2008 Asset Purchase Agreement
(“APA”) between Thayer and Plant Services Incorporated (“PSI”) as
sellers and RMPSI as purchaser. Thayer started PSI, an
environmental consulting and refinery services company, in 2003.
-1-
Prior to executing the APA, Sage created RMPSI specifically to
purchase certain assets of PSI. Sage is party to the APA as guarantor
of RMPSI’s obligations. Also in March 2008, RMPSI and Thayer
entered into an employment contract and a non-competition agreement.
The parties accuse each other of not performing as required.
Thayer’s pending motion in limine challenges the admissibility of
Plaintiffs’ expert, Aaron Beckman. According to Beckman’s resume, he
has a Bachelor of Science degree and a Master of Science degree, both
in Agricultural Economics. ECF 59-1 at 9. He has 23 years of lending
experience at banks and credit services companies. He also has worked
for both Sage and RMPSI. In 2001–2002, he was Chief Financial
Officer of Sage Environmental Consulting in Dallas, Texas. From
December 2009 to July 2012, the was Chief Financial Officer of RMPSI.
And from February 2013 to the present, he has been Chief Operating
Officer at “Sage Environmental Consulting and Family of Companies”
in Austin, Texas. Id. at 6-8.
Thayer seeks to prevent Beckman from testifying on either
damages or liability. Thayer argues that Beckman erroneously uses
Plaintiffs’ debt as an estimation of damages and that Beckman may not
offer his opinions on liability because he has no experience in the
-2-
construction industry. Plaintiffs respond that Beckman’s testimony is
proper and relevant both to Plaintiffs’ damages and to Thayer’s
liability.
The Court notes that Beckman’s expert report offers not only
expert opinions but also fact testimony based on his employment
experiences with the plaintiff companies. For example, in the “Expense
Review” portion of his report, he states:
Of special note, Mr. Thayer’s projected labor costs as a percent of
total revenue are only nominally lower as compared to RMPSI’s
historical average. Mr. Thayer previously would argue (in
discussions with myself and Steve Probst) that RMPSI could not
be profitable due to inflated personnel and labor costs under
RMPSI’s operating model. Based on his own forecasting, he
assumes total labor costs as a percent of sales to be less that 3.0%
less than what historically was experienced by RMPSI. This is
only a nominal difference which suggests he didn’t agree with his
own assessments made in the past as President of RMPSI.
Id. at 59-1 at 11 (emphasis added).
II.
LEGAL STANDARD
Motions in limine are procedural devices to obtain pretrial rulings
on the admissibility of evidence. Judges have broad discretion when
ruling on motions in limine but a motion in limine should not be used to
resolve factual disputes or weigh evidence. See Jenkins v. Chrysler
Motors Corp., 316 F.3d 663, 664 (7th Cir. 2002); C & E Services, Inc., v.
-3-
Ashland Inc., 539 F. Supp. 2d 316, 323 (D. D.C. 2008). To exclude
evidence on a motion in limine “the evidence must be inadmissible on
all potential grounds.” Indiana Ins. Co. v. General Elec. Co., 326 F.
Supp. 2d 844, 846 (N.D. Ohio 2004); Kiswani v. Phoenix Sec. Agency,
Inc., 247 F.R.D. 554, 557 (N.D. Ill. 2008); Wilkins v. K-Mart Corp., 487
F. Supp. 2d 1216, 1218-19 (D. Kan. 2007). “Unless evidence meets this
high standard, evidentiary rulings should be deferred until trial so that
questions of foundation, relevancy and potential prejudice may be
resolved in proper context.” Hawthorne Partners v. AT & T Tech, Inc.,
831 F. Supp. 1398, 1400 (N.D. Ill. 1993). Although rulings on motions
in limine may save “time, costs, effort and preparation, a court is
almost always better situated during the actual trial to assess the
value and utility of evidence.” Wilkins, 487 F. Supp. 2d at 1219.
Also, it is settled that rulings on motions in limine are
provisional. Such “rulings are not binding on the trial judge [who] may
always change [her] mind during the course of a trial.” Ohler v. United
States, 529 U.S. 753, 758 n.3 (2000); accord Luce v. United States, 469
U.S. 38, 41 (1984). Denial of a motion in limine does not necessarily
mean that all evidence contemplated by the motion will be admitted to
trial. Denial merely means that without the context of trial, the court
-4-
is unable to determine whether the evidence in question should be
excluded. Indiana Ins. Co., 326 F. Supp. 2d at 846.
III. DISCUSSION
A.
Beckman’s Opinions on Damages
Thayer argues that Beckman’s opinions are flawed and unreliable
because: (1) he fails to account for all relevant factors and “fails to
make any connection whatsoever to the alleged wrongful conduct of
Thayer,” ECF 59 at 9–10; (2) his calculation of RMPSI’s total debt is
results oriented, id. at 10; (3) his report looks to sales projections rather
than actual revenue and fails to properly evaluate debt incurred by
RMPSI, id. at 10–11; and (4) his analysis looks to total debt, which is
not recoverable under any of the Plaintiffs’ claims. Id. at 12–14.
Plaintiffs respond that Beckman’s opinions are admissible
extrapolations from existing data and are relevant to Plaintiffs’
damages and liability. ECF 70 at 1, 8. Plaintiffs argue that Beckman’s
testimony is relevant because: (1) the debt RMPSI incurred to buy
Thayer’s business and sustain it through five years of losses is a valid
method of measuring the actual loss caused by Thayer’s breaches, id. at
12–13; (2) Beckman’s comparison of sales before and after the business
was owned by RMPSI can quantify the damages caused by Thayer from
-5-
failing to give his full efforts and undermining customer and employee
relationships, id. at 13–14; and (3) Beckman is familiar with the value
of the equipment at issue and can address RMPSI’s damages for
conversion and unjust enrichment. Id. at 14–15.
Federal Rule of Evidence 702 governs the admissibility of expert
opinion testimony. It provides:
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. Plaintiffs bear the burden of establishing that
Beckman’s testimony is admissible. Lust v. Merrell Dow
Pharmaceuticals, Inc., 89 F.3d 594, 598 (9th Cir. 1996).
Although Rule 702 should be applied with a “liberal thrust”
favoring admission, Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579,
588 (1993), it requires that expert testimony be both relevant and
-6-
reliable. Messick v. Novartis Pharm. Corp., 747 F.3d 1193, 1196 (9th
Cir. 2014) (citations omitted). The trial court acts as a gatekeeper by
excluding evidence that does not meet standards of reliability and
relevance. Id. at 1197. The trial court has broad discretion respecting
admission of expert testimony, and also retains “the same kind of
latitude in deciding how to test an expert’s reliability.” United States v.
Hankey, 203 F.3d 1160, 1168 (9th Cir. 2000) (emphasis in original)
(citing Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 151 (1999)).
Beckman uses financial records to identify patterns and provide
analysis on losses incurred by RMPSI. Beckman does this by
discussing inconsistencies between Thayer’s pro forma and historical
operating costs. ECF 70 at 8–9; ECF 59-1 at 10–17. Though Thayer
lists the factors that he argues Beckman failed to consider, a reliability
determination is not based on “the correctness of the expert’s
conclusions but the soundness of his methodology.” Primiano v. Cook,
598 F.3d 558, 564–565 (9th Cir. 2010), as amended (Apr. 27, 2010)
(internal citation omitted). “Shaky but admissible evidence is to be
attacked by cross examination, contrary evidence, and attention to the
burden of proof, not exclusion.” Id. at 564.
In his report, Beckman calculates damages by adding the debt
-7-
RMPSI incurred when it bought the business and the losses under
Thayer’s management. ECF 70 at 8–9. While Thayer argues total debt
is not a proper measure of damages, the Plaintiffs argue this is not only
one way of measuring damages, but that it is relevant to the question
whether Thayer was living up to his employment contract. Id. It
appears that Beckman’s analysis is based largely on his experience and
knowledge, and is potentially relevant not only the conduct of Thayer,
but also to the calculation of potential damages.
Finally, Beckman’s opinion may not be excluded in its entirety
simply because he used a different method or considered different
factors than Thayer’s expert. It is not uncommon for opposing experts
to reach different conclusions, using different methodologies. It is for
the jury to assess which is the more reliable and helpful. See Dorn v.
Burlington N. Santa Fe R.R. Co., 397 F.3d 1183, 1196 (9th Cir. 2005)
(quoting Jack B. Weinstein & Margaret A. Berger, Weinstein's Federal
Evidence § 702.05[3] (2d ed., 2004)). Beckman’s opinions cannot be
entirely excluded. They are more properly challenged by cross
examination and contrary evidence, not exclusion.
The Court is not here holding that all of Beckman’s testimony is
admissible but only that the Court cannot, absent the context of a trial,
-8-
parse out what may be admissible and what not admissible. Thayer
may object at trial to any testimony of Beckman that he believes is not
admissible.
B.
Beckman’s Opinions on Liability
Thayer argues that Beckman impermissibly opines on the issue of
ultimate liability. ECF 59 at 14. He further argues that even if
Beckman’s opinions on liability are admissible, they are conclusory and
unsupported. Id. at 15.
Plaintiffs respond that Beckman’s testimony is permissible
because he will “address factual issues concerning accounting and the
operations of RMPSI that are outside the ken of those lacking his
background and experience.” ECF 70 at 17. They argue this is
permissible because an expert’s opinion may embrace an ultimate issue
as long as it is a factual one. Id.
Although an expert witness may express an opinion with respect
to an ultimate issue to be decided by the trier of fact under Fed. R.
Evid. 704(a), the expert may not “give an opinion as to her legal
conclusion, i.e., an opinion on an ultimate issue of law.” Hangarter v.
Provident Life and Accident Ins. Co., 373 F.3d 998, 1016 (9th Cir. 2004)
(citation, quotation, and emphasis omitted). The tasks of resolving
-9-
questions of law and “instructing the jury as to the applicable law ‘[are]
the distinct and exclusive province[s]’ of the court.” Id. at 1016
(quoting U.S. v. Weitzenhoff, 35 F.3d 1275, 1287 (9th Cir. 1993)).
The line between a permissible opinion on an ultimate issue and
an impermissible legal conclusion is not always easy to discern,
particularly without the context of a trial. In United States v. McIver,
the Fourth Circuit identified improper legal conclusions by determining
whether the terms used by the witness have distinct and specialized
meaning in the law, citing cases that found testimony on “extortion,”
“deadly force,” and “unreasonably dangerous” inadmissible. United
States v. McIver, 470 F.3d 550, 562 (4th Cir. 2006) (citations omitted).
Similarly, the court in Nationwide Transport Finance v. Cass
Information Systems, Inc., 523 F.3d 1051, 1059-60 (9th Cir. 2008),
concluded that a witness may not explain how conduct violated a
statute (the UCC) because such testimony “would, in effect, instruct the
jury regarding how it should decide the key question whether [the
defendant] violated a statute and thus acted improperly....” Id. See
also United States v. Williams, 343 F.3d 423, 435 (5th Cir. 2013)
(holding that a witness may not give testimony about “reasonableness”
of a shooting because that is a legal conclusion).
-10-
Beckman will not be permitted to give legal conclusions that
improperly invade the province of the Court or the jury. But it is
unclear what questions Beckman will be asked and what opinions he
will be asked to offer at trial. With the proper foundation, Beckman
may testify to relevant issues of fact, but not to conclusions of law. See
Hangarter, 372 F.3d at 1016 (allowing testimony regarding industry
conditions, standards, and practices because it did not reach a legal
conclusion). Thus, the Court will deny the motion, permitting objections
to be made at trial.
C.
Beckman’s Opinions on the Construction Industry
Thayer argues Beckman is not qualified as an expert in the
construction industry and that his opinions regarding the construction
industry are not relevant to a calculation of damages. ECF 59 at 16–17.
Plaintiffs respond that Beckman is qualified and his opinions are
reliable because of his unique background as CFO of RMPSI as well as
his experience vetting business loans. ECF 70 at 15–16.
An expert witness may rely solely on experience. Kumho Tire Co.,
Ltd., 526 U.S. at 149 (“no one denies that an expert might draw a
conclusion from a set of observations based on extensive and specialized
experience”); see Fed. R. Evid. 702 Advisory Committee Notes (2000
-11-
Amend.). But Beckman has never worked in the construction industry.
To meet the reliability threshold under Fed. R. Evid. 702, an expert’s
testimony must have “a reliable basis in the knowledge and experience
of the relevant discipline.” Messick, 747 F.3d at 1197 (quoting Kumho
Tire Co., Ltd., 526 U.S. at 149).
Beckman appears to offer expert testimony on the construction
industry. For example, he states:
As identified by Ms. Black, Tom Thayer started two
businesses within one year after selling Plant Services, Inc.
to Rocky Mountain PSI, LLC. Post Frame Specialists was
formed in February, 2009. It is my understanding that the
nature of this business is primarily construction of pole
barns. Based on my experience with multiple construction
companies during my tenure as a Commercial Loan Officer,
such businesses require a significant amount of time to
manage and develop sales, especially during a start-up
phase.
ECF 59-1 at 90. In addition to discussing the time commitments needed
to start such a business, he explains that “[i]t is a common practice for
many small business owners to pay themselves a lower salary to retain
working capital in the business anticipating a higher return in futures
[sic] years as their business grows.” Id.
Plaintiffs argue that as CFO of RMPSI, Beckman worked closely
with Thayer and understands his business practices. ECF 70 at 16.
-12-
Beckman has an extensive financial background and, with proper
foundation, may be qualified provide an some opinions about certain
business aspects of a construction business. But he certainly is not
qualified as a construction expert. Thus, because the ruling on
admissibility depends upon the foundation laid at trial and the form of
the questions asked, the Court will deny Thayer’s motion to the extent it
seeks to exclude all of Beckman’s opinions related to the construction
industry, but permit any objections of this nature to be made at the
trial.
IV.
CONCLUSION
Based on the foregoing, IT IS ORDERED that Thayer’s motion in
limine (ECF 58) is DENIED.
DATED this 9th day of April, 2015.
/s/ Carolyn S. Ostby
United States Magistrate Judge
-13-
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?