Rural Water District No. 5, Wagoner County, Oklahoma v. Coweta, City of et al
Filing
101
OPINION AND ORDER by Judge John E Dowdell ; denying 51 Motion to Exclude (Re: 2 Complaint ) (SAS, Chambers)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF OKLAHOMA
RURAL WATER DISTRICT NO. 5
WAGONER COUNTY, OKLAHOMA,
Plaintiff,
v.
CITY OF COWETA; COWETA
PUBLIC WORKS AUTHORITY,
Defendants.
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Case No. 08-CV-252-JED-FHM
OPINION AND ORDER
The Court has for its consideration the defendants’ Motion to Exclude the Testimony of
Plaintiff Financial Expert Ronald Creason Pursuant to Daubert v. Merrell Dow (Doc. 51).
I.
Defendants, City of Coweta and Coweta Public Works Authority (collectively, the
“City”), request that the Court enter an order excluding the testimony of Ronald Creason, who is
the designated damages expert for the plaintiff, Rural Water District No. 5 of Wagoner County,
Oklahoma (“Wagoner-5”). Mr. Creason is a Certified Public Accountant (“CPA”). He has been
designated to provide expert opinions regarding “the net revenue lost by Wagoner-5 due to the
City . . . providing water service to certain customers located within the geographical boundaries
of Wagoner-5.” (Doc. 51-1 at 3, ¶ 7). He has calculated, as to each of the disputed customers,
net revenues he asserts that Wagoner-5 would have had if it had provided water service to each.
(See id. at ¶ 8).
The City argues that Mr. Creason’s opinions should be excluded. The City challenges
“both the qualifications of Mr. Creason to offer an opinion as offered and the relevance and
reliability of the opinions offered.” (Doc. 51 at 2).
II.
Rule 702 of the Federal Rules of Civil Procedure applies to the admissibility of expert
testimony. The rule 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. In Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 589, 597
(1993), the Supreme Court held that district courts act in a “gatekeeping role” to ensure that
scientific expert testimony is relevant and reliable. This was later expanded to apply to the
opinions of all experts, not just scientific experts. See Kumho Tire Co. v. Carmichael, 526 U.S.
137, 141 (1999) (“We conclude that Daubert's general holding -- setting forth the trial judge's
general ‘gatekeeping’ obligation -- applies not only to testimony based on ‘scientific’
knowledge, but also to testimony based on ‘technical’ and ‘other specialized’ knowledge.”).
In Bitler v. A.O. Smith Corp., 400 F.3d 1227 (10th Cir. 2005), the Tenth Circuit discussed
the role of district courts when considering a Daubert challenge. The court should make a
preliminary finding whether the expert is qualified, by determining “if the expert's proffered
testimony . . . has ‘a reliable basis in the knowledge and experience of his [or her] discipline.’”
400 F.3d at 1232-33 (quoting Daubert, 509 U.S. at 592). The proponent of expert testimony
must establish that the expert used reliable methods to reach his conclusion and that the expert's
opinion is based on a reliable factual basis. See id. at 1233. “[A] trial court's focus generally
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should not be upon the precise conclusions reached by the expert, but on the methodology
employed in reaching those conclusions.” Id. However, an impermissible analytical gap in an
expert's methodology can be a sufficient basis to exclude expert testimony under Daubert. See
id.; see also Norris v. Baxter Healthcare Corp., 397 F.3d 878, 886 (10th Cir. 2005).
III.
Because Mr. Creason has no expertise “in operating a rural water district,” the City
argues that Mr. Creason is not qualified and that his knowledge will not be helpful to the trier of
fact. (See Doc. 51 at 3). There is no suggestion by the City that Mr. Creason is not generally
qualified to provide opinions based upon accounting work and principles and, as a CPA, his
accounting opinions and calculations appear to have “a reliable basis in the knowledge and
experience of his discipline.” See Daubert, 509 U.S. at 592; Bitler, 400 F.3d at 1232-33.
“Expert testimony on damages frequently will assist the trier of fact because damage calculations
often involve complex aspects of economics and mathematics.” 29 Fed. Prac. & Proc. Evid. §
6264 (1st ed.). The fact that Mr. Creason is not an expert in operating a rural water district does
not render his accounting work and opinions inadmissible. An expert need not have expertise in
the exact business at issue, and the City has cited no authority to support its argument otherwise.
The City also challenges Mr. Creason’s opinions as not being based on sufficient facts or
data and not the product of reliable methods, because Mr. Creason testified that much of the data
upon which he based his calculations was provided to him by Wagoner-5’s counsel. (See Doc.
51 at 4). However, the City cites no legal authority in support of its argument to exclude Mr.
Creason’s opinions simply because they are based upon his calculations utilizing cost numbers
provided by Wagoner-5. Mr. Creason testified that his opinion and calculations were based upon
usage information that was provided by the City, rate charges that Wagoner-5 would have
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charged, and cost of water to Wagoner-5. (Doc. 51-2 at 6 of 34). Damages experts will often
necessarily rely upon data that is supplied by others, and this data information of the City and
Wagoner-5 obviously had to be supplied to Mr. Creason in order to perform his accounting
work. The rules expressly permit reliance upon data that is provided by others: “An expert may
base an opinion on facts or data in the case that the expert has been made aware of or personally
observed.” Fed. R. Civ. P. 703. Thus, accounting experts may typically base their expert
opinions upon data and information provided by others, such as information from a corporation’s
business or financial records or interviews with employees, because such sources of information
are normally and reasonably relied on by accountants. See, e.g., Int’l Adhesive Coating Co., Inc.
v. Bolton Emerson Int’l, Inc., 851 F.2d 540, 545 (1st Cir. 1988) (“we think it obvious that these
are sources of information normally and reasonably relied upon by accountants”); United States
v. Affleck, 776 F.2d 1451, 1457 (10th Cir. 1985) (admission of accountant testimony which relied
upon hearsay information provided in part by employees of defendant was proper).
While the City criticizes Mr. Creason’s opinions because he did not rely on a historical
rate of return and instead relied upon cost data supplied by Wagoner-5 or its counsel, the City
has not shown that there is “too great an analytical gap between the data and the opinion
proffered” to warrant exclusion of those opinions. See Norris, 397 F.3d at 886. While the City’s
criticisms of Mr. Creason’s analysis may be appropriate for cross-examination, they do not
render his opinions inadmissible.
Accordingly, the City’s Motion (Doc. 51) is denied.
IT IS SO ORDERED this 8th day of October, 2013.
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