Bruno et al v. Bozzuto's, Inc.

Filing 212

MEMORANDUM (Order to follow as separate docket entry).Signed by Honorable Matthew W. Brann on 4/23/15. (km)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
MICHAEL BRUNO, et al.,
Plaintiffs
v.
BOZZUTO’S, INC.
Defendant

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CIVIL NO. 3:09-CV-00874
(Judge Brann)

MEMORANDUM
April 23, 2015
Currently pending before the Court is the Defendant’s motion for sanctions
due to spoliation of evidence and motion seeking to exclude the expert opinions
and testimony of Plaintiffs’ witnesses. Briefing has concluded and these motions
are now ripe for disposition. For the reasons set forth below, Defendant’s motion
for spoliation sanctions is granted in part and denied in part. Defendant’s motion
to exclude expert witnesses James N. Dragotto and Murli Rajan will be denied
without prejudice and with leave to renew its objections at a later date in
accordance with this Memorandum. Defendant’s motion to exclude the expert
report of Lisa Bruno, CPA, will be granted.
I.

Background
On May 7, 2009, Plaintiffs Michael Bruno (“Mr. Bruno”), Lisa Bruno, CPA

(“Ms. Bruno”), Bruno’s Market, Inc. (“Bruno’s Market”), and Bruno’s Market II,

Inc. (collectively “Bruno’s”) filed a Complaint against Defendant Bozzuto’s, Inc.
(“Bozzuto’s”) alleging, inter alia, breach of contract, negligence, negligent
misrepresentation, and fraudulent misrepresentation. (ECF No. 1). This
Complaint was twice amended. (ECF Nos. 8, 63). Bruno’s alleges that in May
2007, Bozzuto’s breached an oral contract to pay a debt of approximately $380,000
that Bruno’s owed to its then supplier Associated Wholesalers, Inc. (“AWI”), and
that Bozutto’s thereafter failed to supply groceries to Bruno’s Market. (ECF No.
63).
As part of the process in providing groceries to Bruno’s Market, Bozzuto’s
removed all AWI equipment from Bruno’s Market and re-tagged all inventory
using Bozzuto’s barcodes. Id. at ¶ 25. At some point thereafter, AWI learned of
these facts and threatened to sue Bozzuto’s for tortious interference with contract.
Id. at ¶ 26. Bruno’s alleges that Bozzuto’s then abandoned its contract with
Bruno’s, leaving them with equipment that was not capable of ordering inventory
from AWI and was incapable of scanning any AWI bar-coded inventory. Id. at ¶
28. Bruno’s Market was forced to close down shortly thereafter, and Bruno’s
began considering litigation against Bozzuto’s no later than May 31, 2007. (ECF
No. 202, Ex. H, at 9).
Mr. and Ms. Bruno moved to California in August or September of 2008.
Id. at ¶ 31; ECF No. 94, Ex. D, at 53. Before moving, the two threw away every
2

paper record they possessed for Bruno’s Market, including general ledgers,
invoices, sales reports, cancelled checks, company bills, time clock reports, trial
balances, balance sheets, income statements. Id. at 42:24-46:23; 52:19-55:12. Ms.
Bruno explained that “it was very difficult for us to retain records, and at the time
storage was way too high, so we threw the records out[.]” Id. at 52:25-53:3. The
only computer that Bruno’s Market’s utilized was also “thrown out” by Ms. and
Mr. Bruno. Id. at 54:3-10. Bruno’s did not maintain any copies of the computer’s
software or any of the information contained within the computer. Id. at 54:11-16.
As part of discovery, on October 27, 2009, Bozzuto’s requested any and all
documents relating to the financial operations of Bruno’s Market through 2008.
(ECF No. 202, Ex. D). This request included documents such as balance sheets,
profit and loss statements, and all tax returns. Id. On June 10, 2010 Bozzuto’s
sent a follow-up letter to Bruno’s counsel, requesting “all financial record, trial
balances, profit and loss statements, balance sheets, records of sales, cash
disbursements, expenses, payroll and depreciation and all those documents related
to the financial records [of Bruno’s Market] from January 1, 2004 to present.” Id.
at Ex. E. In a reply letter dated June 15, 2010, counsel for Bruno’s notified
Bozzuto’s that “none of the documents requested in [the] letter exist.” Id. at Ex. F.
On March 24, 2011, Joseph Patterson, Bruno Market’s accountant,
confirmed that he maintained Bruno’s Market’s past federal and state tax returns.
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Id. at Ex. G, 9:20-10:11; 91:7-14; 99:11-16. He further testified that all other
financial records were maintained by Bruno’s. Id. Mr. Patterson stated that
Bruno’s Market created sales and expense reports, which were then entered into a
computer program known as “DacEasy.” Id. at 91:7-95:22. This program would
then generate income statements and trial balances. Id.
On March 28, 2011, Ms. Bruno was deposed. Id. at Ex. H. Ms. Bruno noted
that, as a CPA, she was aware that companies generally needed to maintain their
financial records for at least three years from either “the date of the [tax] filing or
the due date.” Id. at 79:3-9. These documents should include general ledgers,
bank statements, cancelled check, “and so on.” Id. at 79:16-21.
On June 3, 2011, James Dragotto and Murli Rajan filed an expert report (the
“First Dragotto-Rajan Report”) on behalf of Bruno’s calculating the future losses
incurred as a result of Bozzuto’s alleged breach of contract. Id. at Ex. I. This
report calculated total damages between $2,224,565 and $2,579,939. Id. at 7. The
First Dragotto-Rajan Report purportedly relied on numerous documents in
reaching this conclusion, including past tax returns. Id. at 2. However, Mr.
Dragotto later clarified that he and Mr. Rajan had relied almost exclusively upon a
pro forma analysis performed by Bozzuto’s showing that Bruno’s would have
projected future sales of $150,000 per week. Id. at Ex. DD, 72:17-76:1. Mr.

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Dragotto did not analyze or review the calculations in any way; he relied upon the
pro forma analysis “100 percent.” Id. at 85:1-11.
In response, Bozzuto’s submitted two expert reports, one by John Slavek,
CPA (the “First Slavek Report”) and one by David Duffus, CPA (the “First Duffus
Report”). (Doc. 202, Ex. K, M). Mr. Slavek opined that, due to missing financial
data, he could not “reach a conclusion within a reasonable degree of certainty
concerning”: (1) the profitability of Bruno’s Market between April 1, 2006 and
May 1, 2007; (2) the accuracy of the numbers used in the First Dragotto-Rajan
Report; and (3) the financial condition of Bruno’s Market between April 1, 2004
and May 31, 2007. Id. at Ex. K. However, the First Slavek Report did opine that
the First Dragotto-Rajan Report was deeply flawed and inherently unreliable. Id.
The First Duffus Report concurred with the First Slavek Report, and similarly
concluded that the missing financial records prevented the completion of “a report
which properly assesses Bruno’s Market’s financial condition and its alleged
damages.” Id. at Ex. M.
In October 2011, Bozzuto’s filed a motion for sanctions based on spoliation
of evidence related to the financial records destroyed by Mr. and Ms. Bruno. (ECF
No. 94). Bozutto’s argued that it was unable to assert three primary defenses as a
result of the spoliation: (1) Bruno’s Market’s own poor financial condition was the
sole cause of any harm suffered; (2) Bruno’s Market was not profitable between
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April 1, 2006 and March 31, 2007; and (3) Bruno’s expert report was inaccurate
(collectively the “Three Defenses”). Id. Although the Court ultimately determined
that spoliation of evidence occurred, (doc. 127, pp. 11-12), Bruno’s asserted that
the evidence was available electronically through the computer system owned by
AWI. Id. at 10. Therefore, Bruno’s was directed to obtain all of the requested data
from AWI and turn the information over to Bozzuto’s. Id. at 12. The Court
concluded that “[i]f the requested data are no longer in AWI’s possession, the
Court will reconsider its ruling.” Id.
Thereafter, Bruno’s subpoenaed AWI seeking the relevant data, but AWI
responded that it did not possess that data. Id. at Ex. O). AWI asserted that,
contrary to Bruno’s assertions, financial data was “maintained only at the retail
store’s location and is not, at any point, pulled back to AWI.” Id. AWI did
however produce weekly sales information for Bruno’s Market from April 1, 2003
to May 12, 2007. Id. This sales information was obtained from a marketing
program that extracted the information directly from Bruno’s Market’s point of
sale machines. Id.
On June 19, 2013, Bruno’s attorney forwarded 516 pages of information
obtained from FMS Solutions (“FMS”) to Bozzuto’s attorney. (ECF No. 150, Ex.
R(1)-(6)). This contained portions of Bruno’s Market’s general ledger from July 8,
2006 through May 12, 2007, including most of the relevant financial data for that
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period of time. Id. This was the only information that FMS possessed regarding
Bruno’s Market. (ECF No. 176).
On August 23, 2012, Ms. Bruno submitted an affidavit attesting that, based
on the general ledger information, Bruno’s Market sales for the 2007 fiscal year
totaled $6,211,555.49. (ECF No. 202, Ex. T). Based on the information provided
by FMS, Bruno’s submitted recreated profit and loss statements and balance sheets
for the period from July 2006 to March 2007, as well as the period from April 2007
to May 2007. Id. at Ex. W, X. These records demonstrated that Bruno’s Market
was losing money during its final year of operation. Id.
On June 23, 2014, Mr. Dragotto and Mr. Rajan submitted a revised expert
report (the “Second Dragotto-Rajan Report”). (Doc. 202, Ex. Z). The Second
Dragotto-Rajan report adjusted the value of Bruno’s Market’s debt and, as a result,
reduced the alleged damages downward to between $2,130,129 and $2,485,503.
Id. at 1. This report did not address any of the new financial information, but did
address some of the concerns raised by Mr. Slavek and Mr. Duffus. Id. at 8-10.
In response, Mr. Slavek submitted a revised expert report on August 8, 2014
(the “Revised Slavek Report”). Id. at Ex. AA. The report concluded that “Bruno’s
Market was under increasing financial distress, especially during the period from
April 2006 through mid-May 2007” and “was not operating profitably during this
time and may well have had to close its store based solely on its poor financial
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condition.” Id. at 18. The Revised Slavek Report again emphasized that, due to
missing financial information predating April 2006, it could not “reach any opinion
as to the accuracy of the figures in the [Second] Dragotto and Rajan Report to a
reasonable degree of certainty[.]” Id. at 19.
A revised report was also created by Mr. Duffus on August 8, 2014
(“Revised Duffus Report”). Id. at Ex. BB. The Revised Duffus Report concluded
that “[a]s of May 16, 2007, Bruno’s Market has a negative equity value of between
$594,000 and $710,400” which resulted in “no loss of equity value due to the
allegations made against Bozzuto’s[.]” Id. at 8. The report noted declining sales
figures for Bruno’s Market, and projected “cash flow deficits ranging between
approximately $48,000 and $184,000” each year in the future. Id. at 18. Mr.
Duffus opined that the Second Dragotto-Rajan was “speculative and unreliable[,]”
and noted that “nothing ha[d] been done to correct the flaws and deficiencies that
existed in the [First] Dragotto-Rajan Report[.]” Id. at 24. The Revised Duffus
Report reiterated that the “deficiencies in the [financial] information produced
continue to preclude [the] ability to fully evaluate the purported damages presented
in the [Second] Dragotto-Rajan Report.” Id. at 34. Mr. Duffus based this assertion
primarily upon the belief that Mr. Dragotto and Mr. Rajan relied on Bruno’s
Market’s restated tax returns from the 2004, 2005, and 2006 fiscal years. Id.

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Finally, Ms. Bruno submitted an expert report on October 31, 2014. Id. at
Ex. CC. This report reiterated many factual issues already contained within the
record, and responded to several assertions made in the Revised Slavek Report. Id.
On January 16, 2015, Bozutto’s filed this “Renewed Spoliation Motion for
Sanctions and “Motion to Preclude Expert Reports and Testimony” along with an
accompanying legal memorandum. (ECF Nos. 202, 203). Bozutto’s argues that,
even with the newly acquired information, it cannot assert its Three Defenses.
(ECF No. 203 at 9-11). Specifically, Bozutto’s contends that its experts cannot
offer opinions as to whether Bruno’s Market was profitable during its final year of
operation, whether Bruno’s Market’s own poor financial condition caused its
closing, and the experts cannot adequately refute the numbers used in the DragottoRajan Reports. Id. at 8-9. Bozutto’s asks this Court to sanction Bruno’s by
dismissing the action and awarding fees to Bozutto’s. Id. at 12, 14. Alternatively,
Bozutto’s asks this Court to preclude the reports and testimony of Mr. Dragotto
and Mr. Rajan at trial. Id. at 16.
Bruno’s responds that: (1) no spoliation occurred and (2) monetary sanctions
should not be imposed “because [Bozutto’s] has made spoliation its primary
defense.” (ECF No. 204 at 4). Bruno’s dedicated a single paragraph of its twentyfour page reply brief toward arguing that its expert reports should not be
disallowed, asserting in conclusory fashion that “[t]he qualifications of Lisa Bruno,
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CPA; James Dragotto, J.D., MBA; and Murli Rajan, Ph.D., CFA, are demonstrated
in their Curricula Vitaé.” Id. at 20.
II.

Discussion
A. Defendant’s Spoliation Motion
Spoliation generally occurs where a party fails to produce, destroys, or alters

relevant evidence. See, Bull v. United Parcel Serv., Inc., 775 F.3d 68, 73 (3d Cir.
2012) (citing Micron Tech., Inc. v. Rambus Inc., 645 F.3d 1311, 1320 (Fed. Cir.
2011); Brewer v. Quaker State Oil Ref. Corp., 72 F.3d 326, 334 (3d Cir. 1995)).
To establish that spoliation of evidence has occurred, a party must demonstrate
that: “[1] the evidence was in the [opposing] party’s control; [2] the evidence is
relevant to the claims or defenses in the case; [3] there has been actual suppression
or withholding of evidence; and, [4] the duty to preserve the evidence was
reasonably foreseeable to the party.” Id. (citing Brewer, 72 F.3d at 334).
This Court need not belabor the point that Bruno’s is clearly responsible for
spoliation of evidence in this case. It was previously noted that after Bruno’s “duty
to preserve evidence was triggered . . . all paper copies of invoices, balance sheets,
income statements, and trial balances” within Bruno’s possession were
intentionally and deliberately destroyed. (ECF No. 127 at 9). Thus, Bruno’s did
destroy evidence, and the only remaining question is whether and what form of
sanction is appropriate.
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When a court has determined that spoliation has occurred, it must decide
what sanction, if any, is appropriate to redress the destruction of evidence. In
doing so, a district court must consider “(1) the degree of fault of the party who
altered or destroyed the evidence; (2) the degree of prejudice suffered by the
opposing party; and (3) whether there is a lesser sanction that will avoid substantial
unfairness to the opposing party and, where the offending party is seriously at
fault, will serve to deter such conduct by others in the future.” Schmid v.
Milwaukee Elec. Tool Corp., 13 F.3d 76, 79 (3d Cir. 1994). Courts should “select
the least onerous sanction corresponding to the willfulness of the destructive act
and the prejudice suffered by the victim.” Id. (quoting Jamie S. Gorelick, Steven
Marzen, and Lawrence Solum, Destruction of Evidence, § 3.16, at 117 (1989)).
Finally, courts must bear in mind that “a finding of bad faith is pivotal to a
spoliation determination.”1 Bull, 775 F.3d at 79.
i.

Degree of Fault

1

The Third Circuit appears to use the terms “intentional” and “bad faith” interchangeably. See
Bull, 665 F.3d at 79. For example, the Third Circuit stated that “a finding of bad faith is pivotal
to a spoliation determination.” Id. However, the Court later iterated that “we must be convinced
that the District Court, on sufficient evidence, found that Bull intended to actually withhold the
original documents from UPS before we can conclude that sanctionable spoliation occurred.” Id.
(emphasis added). This Court believes that, based on a thorough reading of the Bull opinion, the
Third Circuit has determined that intentional destruction of evidence without adequate
justification is sufficient to trigger spoliation sanctions. Nonetheless, because this Court
concludes that bad faith was present in this instance, spoliation sanctions are warranted
regardless of the defendant’s threshold burden.
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Under the first consideration, Bruno’s bears considerable fault for the
destruction of evidence in this case. There is no doubt that relevant evidence,
including all financial records for Bruno’s Market, was intentionally destroyed by
Ms. and Mr. Bruno. (ECF No. 94, Ex. D, at 53). Mr. and Ms. Bruno threw away
every paper record they possessed for Bruno’s Market, including general ledgers,
invoices, sales reports, cancelled checks, company bills, time clock reports, trial
balances, balance sheets, income statements. Id. at 42:24-46:23; 52:19-55:12. Mr.
and Ms. Bruno threw out these relevant files because “it was very difficult for us to
retain records, and at the time storage was way too high[.]” Id. at 52:25-53:3.
Inexplicably, they also threw away the computer for Bruno’s Market, and failed to
maintain any copies of the electronic data contained on that computer. Id. at 54:316. The fault in disposing of this evidence is significant because such information
could easily have been stored on a small flash drive or external hard drive.
The degree of fault is further amplified by Ms. Bruno’s area of expertise.
Ms. Bruno is a Certified Public Accountant and, in her professional capacity, she
was aware that companies should maintain relevant financial records for at least
three years from either “the date of the [tax] filing or the due date.” (ECF No. 202,
Ex. H at 79:3-9). These documents should include general ledgers, bank
statements, cancelled check, “and so on.” Id. at 79:16-21. It strains credulity that
a professional accountant would throw away every financial record that a company
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possesses simply because storage space is expensive or difficult to locate,
particularly when she also disposed of the corresponding electronic data.
Incredibly, while contemplating litigation that would directly implicate
Bruno’s Market’s financial data and with full knowledge that such information
should be maintained even in the absence of imminent litigation, Ms. and Mr.
Bruno made a conscious decision to destroy all relevant data to this litigation. The
actions of the Plaintiffs can be described as nothing less than intentional,
irresponsible, and destructive to the truth-seeking process that accompanies
litigation.
The reason offered by Bruno’s for destroying the evidence does not justify
the actions undertaken. The actions undertaken by Mr. and Ms. Bruno are
suggestive of bad faith, particularly in light of the fact that the evidence submitted
by FMS shows that Bruno’s Market was not profitable during its final year of
operation, and that sales had been declining for some time. In short, the Court
attributes bad faith to the destruction of evidence in this case. Consequently, the
strong degree of fault militates toward granting equally strong sanctions.
ii.

Degree of Prejudice

Regarding the second consideration, while Bozutto’s could once have
claimed a significant degree of harm resulting from Bruno’s spoliation, the
evidence turned over by AWI and FMS has mitigated much of the harm that Mr.
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and Ms. Bruno created. Although Bozutto’s argues that, because much of the
financial data for Bruno’s Market remains missing it remains unable to assert the
Three Defenses, the Revised Slavek and Duffus Reports belie this contention.
The Revised Slavek Report reached three important conclusions based on
the financial documents obtained during discovery. First, the report opined that
“Bruno’s Market was not profitable in the fiscal year 2006.” (ECF No. 202, Ex.
AA at 10). Second, the report concluded that “Bruno’s Market . . . might well have
had to close its store based solely on its poor financial condition.” Id. at 18. Third,
the Revised Slavek Report noted it was impossible to “perform a comprehensive
profitability analysis for Bruno’s Market for the time period between April 1, 2004
and May 31, 2007 because the vast majority of the Bruno’s Market accounting
records for this time period are still missing.” Id.
Similarly, the Revised Duffus Report reached four critical conclusions.
First, the report opined that as of May 16, 2007, Bruno’s Market had a negative
equity value and therefore there was “no loss of equity value due to the allegations
made against Bozzuto’s[.]” Id. at Ex. BB, p. 8. Second, the report concluded that
numerous flaws and mischaracterizations in the Revised Dragotto-Rajan Report
resulted in a “speculative and unreliable” opinion. Id. Third, Mr. Duffus opined
that the available financial records “do not provide a sufficient basis on which to
render an opinion regarding [the] financial condition [of Bruno’s Market] over the
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entire April 2004 through May 2007 time period.” Id. at 33. Fourth, Mr. Duffus
concurred with the Revised Salvek Report, and opined that “Bruno’s Market was
experiencing increasing financial distress prior to May 2007[.]” Id.
Based on these expert reports, it is clear that Bozzuto’s is now able to offer
evidence and opinions as to the Three Defenses. Both of Bozzuto’s expert reports
assert that Bruno’s Market was not profitable during its final year of operation, and
both reports assert that Bruno’s Market was under increasing financial distress.
Both expert reports assert that the two Dragotto-Rajan Reports are fatally flawed
and cannot be relied upon. Finally, the Revised Slavek Report opines that Bruno’s
Market’s own financial condition may have led to the store closing even absent
Bozutto’s alleged breach of contract.
While both of Bozutto’s expert reports assert that they cannot properly refute
the numbers used in the Dragotto-Rajan Reports, and therefore cannot adequately
refute the Reports’ conclusions, that assertion appears to be based on a misreading
of the Dragotto-Rajan Reports. Admittedly, Mr. Dragotto and Mr. Rajan assert
that they relied upon, inter alia, Bruno’s Market’s tax returns for the 2004, 2005,
and 2006 fiscal years. (ECF No. 202, Ex. Z at 2). However, this reference to such
documents appears perfunctory. As Mr. Dragotto later admitted, they had relied
almost exclusively upon the pro forma analysis showing projected weekly sales of
$150,000. Id. at Ex. DD, 72:17-76:1; 85:1-11. The admitted reliance on the pro
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forma calculations may diminish the weight and credibility of the Dragotto-Rajan
reports, but it also allows Bozutto’s to evaluate and analyze the underlying basis of
the numbers used. Thus, all Three Defenses are capable of assertion at trial.
Although Bozutto’s may assert its Three Defenses, this does not mean that
no prejudice has been done by Bruno’s spoliation. Both the Revised Slavek Report
and the Revised Duffus Report assert that, as a result of the missing information,
they are unable to fully analyze the financial condition of Bruno’s Market prior to
June 2006. This certainly hampers Bozutto’s ability to put forth the best defense
possible although, as discussed previously, the inclusion of Bruno’s Market’s
financial data from June 2006 through May 2007 mitigated a great deal of this
harm. Therefore, the relatively minor degree of harm weighs against granting the
severe sanctions requested by Bozutto’s.
iii.

Least Restrictive Sanction Available

Sanctions for spoliation of evidence include a grant of summary judgment in
favor of the prejudiced party, the dismissal of a claim or claims, suppression of
evidence, an adverse inference, fines, the award of attorneys’ fees and costs, or a
combination of these sanctions. Mosaid Tech. Inc. v. Samsung Elec. Co., Ltd., 348
F.Supp.2d 332, 335 (D.N.J. 2004).
In this instance, the dismissal requested by Bozutto’s is extreme and
disproportionate to the harm done by the spoliation. As noted previously, because
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some information was obtained by third parties, Bozutto’s is now able to assert its
primary defenses. Therefore, dismissal of the case, or discrete claims, is
inappropriate. Furthermore, suppression of evidence is not appropriate. The only
evidence that could realistically be stricken from the record at this point in time is
Bruno’s expert testimony and reports. Given that Bozutto’s experts have been able
assert opinions discrediting the Dragotto-Rajan Reports and may now further
attack the veracity of the number relied upon by the Dragotto-Rajan Reports,
striking those reports and testimony from the record goes beyond what is necessary
for remedial purposes.
The only true damage that has been done to Bozutto’s is the inability to
analyze the relevant financial data for Bruno’s Market prior to June 2006. This
hinders Bozutto’s ability to argue that Bruno’s Market had been unprofitable for
some time, and to assert with greater certainty that Bruno’s Market’s finances and
customer base were potentially dwindling during this time period. The harm done
by the spoliation can therefore be best alleviated through the imposition of an
adverse inference. This would allow the jury to conclude what Bozutto’s can no
longer assert – that the missing financial records would have been harmful to
Bruno’s case, and would have shown declining profits and increasing financial
difficulties. Consequently, if this matter proceeds to trial, the jury will be
instructed that it may infer that Mr. and Ms. Bruno destroyed Bruno’s Market’s
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financial records “out of the well-founded fear that the contents would harm
[them].” Brewer, 72 F.3d at 334 (citing Gumbs v. Int’l Harvester, Inc., 718 F.2d
88, 96 (3d Cir.1983); United States v. Cherkasky Meat Co., 259 F.2d 89 (3d
Cir.1958)).
Although Bozutto’s has requested that the Court award costs and expenses
associated with Bruno’s spoliation of evidence, a ruling on this matter will be held
in abeyance. Given the tortured history of discovery in this matter, which includes
more than one dozen discovery deadlines, a motion to reopen discovery, and
several court orders compelling parties to obtain, turn over, or recreate documents,
it is far from certain that discovery has reached a point of closure.
Therefore, although it appears that Bozutto’s is entitled to some
compensation for costs associated with the complex and unwieldy discovery
process that has unfolded thus far, it is prudent to withhold any ruling on monetary
sanctions until such time as the Court is certain that additional discovery, and
accompanying expenses, is no longer required. Bozutto’s request for monetary
sanctions will therefore be denied with leave to refile at such a time as no further
expenses directly attributable to Bruno’s spoliation are likely to arise.2
B. Motion to Dismiss Bruno’s Expert Witnesses

2

If or when Bozutto’s decides to refile such a Motion, it should detail the exact expenses and
fees incurred, with sufficient detail that the Court is capable of determining whether such
expenses, costs, or fees are duplicitous, excessive, or otherwise unnecessary.
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The admissibility of expert evidence is governed by Federal Rule of
Evidence 702, which allows a witness who is qualified as an expert to give
testimony that would otherwise be inadmissible. Fed. R. Evid. 702. The Third
Circuit has held that Rule 702 “embodies a trilogy of restrictions on expert
testimony: qualifications, reliability and fit.” Schneider ex rel. Estate of Schneider
v. Fried, 320 F.3d 396, 404 (3d Cir. 2003).
In such circumstance, the district court acts as gatekeeper, preventing
opinion testimony that does not meet these requirements. See Daubert v. Merrell
Dow Pharm., Inc., 509 U.S. 579, 592 (1993) (“Faced with a proffer of expert
scientific testimony, then, the trial judge must determine at the outset, pursuant to
Rule 104(a) whether the expert is proposing to testify to (1) scientific knowledge
that (2) will assist the trier of fact to understand or determine a fact in issue”).
However, Rule 702 is not an exclusionary rule; rather, it is “meant to instruct the
district courts in the sound exercise of their discretion in making admissibility
determinations.” Holbrok v. Lykes Bros. S.S. Co., Inc., 80 F.3d 777, 782 (3d Cir.
1996).
1. Dragotto-Rajan Expert Reports and Testimony
a. Qualification
First, the qualification requirement mandates that a witness proffered to
testify as an expert have specialized knowledge, skills, or training. In re Paoli R.R.
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Yard PCB Litigation, 35 F.3d 717, 741 (3d Cir. 1994). The Third Circuit has
“eschewed imposing overly rigorous requirements of expertise” and allows the
expert testimony of witnesses who have specialized knowledge or training even in
the absence of formal qualifications. Id.
Bozutto’s argues that neither Mr. Dragotto nor Mr. Rajan are qualified as
experts because neither has “any experience or expertise in this grocery business.”
(ECF No. 203, p. 19). While neither expert has experience in the grocery business,
both expert have extensive experience in business valuations, rendering both
experts qualified to present expert testimony in these matters.
Mr. Dragotto received a bachelor’s degree in accounting and an M.B.A.
focusing on economics and finance. (ECF No. 202, Ex. I, Att. 1). He has drafted
expert reports in interruption of businesses, business valuations, and forensic
accounting. Id. Mr. Dragotto has also testified previously in business valuation
cases. Id. at Ex. DD, 43:13-46:7. Mr. Rajan has obtained both an M.B.A. and a
Ph.D. in finance. Id. at Ex. I, Att. 2. He is a tenured professor of finance with the
University of Scranton, and has provided expert reports on economic damages and
valuation in numerous areas, including business valuations. Id. The Court is
satisfied that Bruno’s experts have sufficient expertise in field of business
valuations to satisfy the “qualifications” prong.
b. Reliability
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Reliability means that the testimony “must be based on the ‘methods and
procedures of science’ rather than on ‘subjective belief or unsupported
speculation’; the expert must have ‘good grounds’ for his or her belief . . . [any]
inquiry into the reliability of scientific evidence under Rule 702 requires a
determination as to its scientific validity.” Paoli, 35 F.3d at 742 (quoting Daubert,
509 U.S. at 590). Several nonexclusive factors may be taken into account in
determining reliability: (1) the testability of the expert’s hypothesis; (2) whether
the methodology has been subjected to peer review and publication; (3) the
frequency by which the methodology leads to erroneous results; and (4) the
existence and maintenance of standards controlling the technique’s operation, and
(5) whether the methodology has been generally accepted in the scientific
community. Daubert, 509 U.S. at 593-94.
The Third Circuit has also elaborated that courts should, if appropriate, also
consider: (1) the degree to which the expert testifying is qualified; (2) the
relationship of a technique to more established modes of scientific analysis; and (3)
the non-judicial uses to which the scientific technique has been put. United States
v. Downing, 753 F.2d 1224, 1238-39 (3d Cir. 1985).
This rule does not require that plaintiffs “prove their case twice – they do not
have to demonstrate to the judge by a preponderance of the evidence that the
assessments of their experts are correct, they only have to demonstrate by a
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preponderance of the evidence that their opinions are reliable.” Paoli, 35 F.3d at
744 (emphasis in original). As the Third Circuit noted, “[a] judge will often think
that an expert has good grounds to hold the opinion that he or she does even
though the judge thinks that the opinion is incorrect.” Id.
Bozutto’s argues that the pro forma numbers relied upon by the DragottoRajan Reports are sufficiently unreliable to render the Reports themselves
unreliable; therefore, the Dragotto-Rajan Reports should be precluded. (ECF No.
203 at 20). In that vein, Bozutto’s argues that: (1) there is no finding in the
Dragotto-Rajan Reports that Bozutto’s prepared the pro forma analysis; (2) the pro
forma contained calculation errors; (3) the pro forma was not a sales and profit
projection; (4) the $150,000 sales per week number was not viable; (5) the
Dragotto-Rajan Reports are inherently unreliable based on their reliance on
unverified numbers; and (6) the yearly sales figure created by extrapolating from
the $150,000 weekly sales number was unreliable. Id. at 20-25.
As an initial matter, the Court is left to determine the accuracy of Bozutto’s
claims without the benefit of any analysis or argument whatsoever from Bruno’s
attorney. In responding to the approximately eleven pages of argument offered by
Bozutto’s, Bruno’s attorney submitted a meager reply, one paragraph in length,
consisting of a solitary and conclusory statement that was devoid of any analysis or

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discussion. Nonetheless, in analyzing the reports, it is apparent that the expert
reports and testimony should not be disallowed at this point in time.
While Bozutto’s details significant issues with the Dragotto-Rajan Reports,
primarily related to the reliability of the numbers relied upon in reaching
conclusions, these issues generally go towards the weight of the expert testimony
rather than its admissibility. See, e.g., Floorgraphics, Inc. v. News Am. Mktg. InStore Servs., Inc., 546 F. Supp. 2d 155, 169 (D.N.J. 2008) (citing Kannankeril v.
Terminix Intern., Inc., 128 F.3d 802, 809 (3d Cir. 1997)) (“Whether [Plaintiff’s
expert witness] should have more diligently researched the underlying facts given
to him by Plaintiff, in the Court's view, is a question of weight, not admissibility”);
Burke v. TransAm Trucking, Inc., 617 F. Supp. 2d 327, 335 (M.D. Pa. 2009)
(citing McLean v. 988011 Ontario, Ltd., 224 F.3d 797, 801 (6th Cir. 2000)) (“Mere
weakness in the factual basis of an opinion bears on the weight of the evidence, not
its admissibility”); Montgomery v. Mitsubishi Motors Corp., No. CIV.A. 04-3234,
2006 WL 1310657, at *7 (E.D. Pa. May 12, 2006) (“because the accuracy of the
data utilized [by the expert witness] is a matter that the jury, as fact finder in this
case, is capable of considering, there is no basis to exclude [the expert witness’]
report or testimony on grounds that the information is not reliable”).
It is certainly possible that the underlying data used by the Dragotto-Rajan
Reports is so inaccurate that, pursuant to FRE 703, the Court cannot rely upon the
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report. However, it is premature for the Court to determine this issue at this point
in time. While such issues would be a proper basis for excluding the expert
reports, Montgomery Cnty v. Microvote Corp., 320 F.3d 440, 448 (3d Cir. 2003),
significant factual disputes remain regarding the accuracy of the pro forma analysis
numbers. As such, the Court will deny Bozutto’s motion to exclude the expert
testimony and reports proffered by Bruno’s expert witnesses, with leave to renew
its motion on this basis pending a more developed record on the issue.3
2. Ms. Bruno’s Expert Report
Finally, the Court concludes that Ms. Bruno’s expert report must be
precluded based upon her lack of qualifications. While Ms. Bruno is a CPA, her
résumé makes clear that she has minimal experience in the field of business
valuations. See, (ECF No. 202, Ex. CC, Att. 1). She has no experience in
analyzing expert reports to determine their accuracy, no experience in determining
the accuracy of future loss projections, and no experience in conducting
profitability analyses. Id. It may well be that Ms. Bruno’s qualifications extend
beyond those listed in her résumé, but Bruno’s decision not to address this issue

3

The third prong of the inquiry, fit, necessitates that “the expert’s testimony must assist the trier
of fact.” Paoli, 35 F.3d at 742-43. Bozutto’s sole argument against fit is that the Dragotto-Rajan
Reports are not reliable, and therefore will not assist the jury. (ECF No. 203, p. 25). As
discussed previously, the record is insufficiently developed to conclude that the Dragotto-Rajan
Reports are unreliable and therefore, Bozutto’s arguments as to the “fit” of Bruno’s expert
witnesses is likewise rejected.
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has rendered the Court unable to make such a determination. Therefore, Ms.
Bruno’s expert report will be precluded. Bruno’s may seek reconsideration of this
decision upon a showing that further factual support exists to establish Ms. Bruno’s
qualifications.
IV.

Conclusion
Bozutto’s motion for spoliation sanctions is granted to the extent that the

Court will issue an adverse inference should this matter reach trial. The Court will
not award monetary sanctions at this time, although Bozutto’s may renew its
Motion for monetary sanctions in the future. Defendant’s motion to exclude expert
witnesses Mr. Dragotto and Mr. Rajan will be denied without prejudice with leave
to renew its objections at such time as the factual record is better developed.
Bozutto’s motion to exclude the expert report of Ms. Bruno will be granted.
A separate Order will be issued.

BY THE COURT:
s/Matthew W. Brann
Matthew W. Brann
United States District Judge

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