The Trade Group, Inc. v. BTC Media, LLC

Filing 141

MEMORANDUM OPINION & ORDER: The Court concludes that The Trade Group's three motions to exclude expert testimony are DENIED (ECF No. 102 , 105 , 108 ). (Ordered by Judge Mark Pittman on 6/5/2024) (jnp)

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
FORT WORTH DIVISION
THE TRADE GROUP, INC.,
Plaintiff,
v.

No. 4:23-cv-00555-P

BTC MEDIA, LLC, ET AL.,
Defendants.
MEMORANDUM OPINION & ORDER
Before the Court are The Trade Group’s (“TTG”) Motions to Exclude
the Testimony of BTC’s Proposed Experts Gary Durham, Dr. Kelly
Semrad, David Bailey, and Didier Lewis. (ECF Nos. 102, 105, 108). For
the reasons set forth below, TTG’s Motions are DENIED.

BACKGROUND
This case centers around a dispute between TTG and BTC over the
financial ramifications of their business interactions, particularly
surrounding the Bitcoin 2022 event. At the heart are disagreements over
alleged overcharges and lost profits in planning and hosting Bitcoin
2022 in Miami. TTG seeks to exclude the expert testimonies of BTC CEO
David Bailey and CFO Didier Lewis as well as Dr. Kelly Semrad and
Mr. Gary Durham.

LEGAL STANDARD
Under Federal Rule of Evidence 702, “a witness who is qualified as
an expert by knowledge, skill, experience, training, or education” may
give opinion testimony if “scientific, technical, or other specialized
knowledge will assist the trier of fact to understand the evidence or to
determine a fact in issue.” This “imposes a special obligation upon a trial
judge to ‘ensure that any and all scientific testimony . . . is not only
relevant, but reliable.’” Kumho Tire Co., Ltd. v. Carmichael, 526 U.S.
137, 147 (1999) (quoting Daubert v. Merrell Dow Pharms., Inc., 509 U.S.

579, 589 (1993)). Daubert lays out a non-exhaustive list of factors to
determine whether an expert’s testimony is admissible, including
whether: a theory can be tested; it is subject to peer review; there is a
known or potential rate of error; or the theory is generally accepted. See
Kumho, 526 U.S. at 149–150 (quoting Daubert¸ 509 U.S. at 592–94).
However, not all of these factors may be relevant in evaluating the
admissibility of an expert’s testimony. Id. The law “grants the trial judge
broad latitude to determine” what factors are appropriate measures of
reliability and relevance. Id. at 153.
Further, the expert testimony must be relevant, not simply in the
sense that all testimony must be relevant under Rule 402, but the
expert’s proposed opinion would assist the trier of fact to understand or
determine a fact in issue. Daubert, 509 U.S. at 591–592. Rule 702
requires a proponent of expert testimony to demonstrate a “valid
scientific connection to the pertinent inquiry as a precondition to
admissibility.” Id. at 592.

ANALYSIS
As noted, TTG seeks to exclude the testimony of four experts all for
various reasons. The Court addresses each expert and TTG’s
corresponding arguments below.
A. Gary Durham
TTG seeks to exclude Gary Durham’s testimony on the grounds that
it is unreliable and irrelevant. See generally ECF No. 103. Specifically,
TTG argues that Durham's methodology is flawed and that his opinions
are based on incomplete information given Durham’s role was to verify
the costs TTG claims it incurred and to assess the reasonableness of
those costs. Id. at 8–10. Although Durham had multiple opportunities
to review TTG’s documents, TTG argues that he failed to accurately
compile the costs, thereby rendering his opinions unreliable. Id. at 8–9.
The Court finds that while Durham’s methodology, like most, could
possess flaws, it’s sufficiently reliable for the purposes of expert
testimony. Durham reviewed numerous documents and provided a
detailed analysis of the costs and markups. His methodology involved a
thorough examination of TTG’s invoices and other financial records, and
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he explained the basis for his conclusions. See e.g. ECF No. 134-1 at 35–
39. Any perceived deficiencies in his methodology go to the weight of his
testimony, not its admissibility. Durham’s testimony also highlights the
potential disconnect between TTG’s Google Sheet entries and the
underlying accounting documents. See generally ECF No. 134-1. This
analysis is vital because it could suggest TTG’s billing practices may
have been designed to obscure true charges. This information is
essential for the jury to understand the potential manipulation of
financial records and assess the legitimacy of TTG’s charges. For these
reasons, the Court DENIES TTG’s motion to exclude Gary Durham’s
expert testimony (ECF No. 102).
B. Dr. Kelly Semrad
TTG seeks to exclude the testimony of Dr. Kelly Semrad on the
grounds that it is unreliable and irrelevant. See generally ECF No. 106.
TTG argues that Semrad’s opinions are based on insufficient facts and
data, and that she lacks the necessary expertise to opine on the
reasonableness of TTG’s markups. Id. at 6–9. Semrad admitted that she
did not have access to certain critical information, such as a written
contract detailing TTG’s scope of work. See ECF No. 107 at 94.
However, Dr. Semrad’s testimony is particularly relevant because it
sets a benchmark for evaluating TTG’s markups for Bitcoin 2022. By
comparing TTG’s charges with industry standards, Dr. Semrad provides
a clear framework for the jury to assess whether TTG’s pricing was
reasonable. Her analysis is based on sufficient data and reliable
principles, aligning with the requirements of Rule 702. Moreover, her
testimony offers the jury a critical reference point for determining if
TTG’s practices deviated from industry norms. For these reasons, the
Court DENIES TTG’s motion to exclude Dr. Semrad’s expert testimony
(ECF No. 105).
C. David Bailey and Didier Lewis
TTG seeks to exclude the expert testimony of BTC’s CEO, David
Bailey, and CFO, Didier Lewis, on the grounds that Bailey and Lewis
were untimely disclosed. See ECF No. 109 at 1.

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The Court set an October 20, 2023 deadline for Initial Designations
of Experts, which was later extended to November 10, 2023. See ECF
Nos. 16, 23. BTC filed a Motion for Leave to File Counterclaims on
December 19, 2023, stating they did not seek to extend any existing
deadlines. See ECF No. 41 at 1. TTG expressed concerns that BTC’s
counterclaims for lost profits would require expert testimony, which
typically involves a highly fact-intensive analysis. See ECF No. 48 at 23.
The Court's Order invited the Parties to submit modifications to
mitigate prejudice to TTG, but BTC did not request an extension for
Initial Designations. See ECF Nos. 57 at 3–4; 59. In January 2024, BTC
served Supplemental Expert Witness Disclosures identifying Bailey and
Lewis as experts on BTC’s lost profits under their counterclaims. See
ECF No. 110 at 11–14.
Appealing to Federal Rule of Civil Procedure 37(c)(1), TTG argues
BTC's failure to timely disclose these expert witnesses is neither
substantially justified nor harmless, warranting exclusion of their
testimony. See ECF No. 109 at 5. Further, TTG opines that BTC made
multiple representations to the Court that they did not seek to designate
experts for their counterclaims, the absence of a request to extend the
Initial Designation deadline was prejudicial to TTG given their late
disclosure. Id. at 6–7.
However, BTC has consistently maintained that Bailey and Lewis
will offer lay opinions under Federal Rule of Evidence 701, which allows
business owners or officers to testify about the value or projected profits
of their business based on personal knowledge. See ECF No. 58 at 4–5.
Both Bailey and Lewis have extensive firsthand knowledge of BTC’s
financial operations and can provide valuable insights into the
company’s lost profits. The Fifth Circuit permits such testimony under
Rule 701 if the witness has direct knowledge of the business accounts
underlying the profit calculation. See Miss. Chem. Corp. v. Dresser-Rand
Co., 287 F.3d 359, 373-74 (5th Cir. 2002).
TTG does not dispute Bailey and Lewis’s knowledge of the company’s
finances but contends that their testimony constitutes expert opinion
requiring timely disclosure under Rule 26(a)(2). See ECF No. 109. at 7–
8. As explained, out of an abundance of caution, TTG supplemented their
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REGINALEA KEMP,
Plaintiff,
disclosures
to include Bailey and Lewis as expert No.
witnesses
under Rule
v.
4:23-cv-00841-P
702, likely anticipating potential objections from TTG. Given their
extensive
knowledge
and the supplemental disclosures, any
REGIONSpersonal
BANK ET
AL.,
prejudice to TTG is minimal. Moreover, the testimonies will assist the
juryDefendants.
in understanding the financial impact of the alleged damages and
ORDER
are therefore admissible. For these reasons, the Court DENIES TTG’s
Before
the Court
is Plaintiff’s
Unopposed
Motionexpert
for Leave
to File
motion
to exclude
David
Bailey and
Didier Lewis’s
testimony
Second
Complaint. ECF No. 18. Having considered the Motion
(ECF
No.Amended
108).
and applicable docket entries, the Court GRANTS the Motion.

CONCLUSION

SO ORDERED on this 18th day of September 2023.
For the foregoing reasons, the Court concludes that The Trade
Group’s three motions to exclude expert testimony are DENIED (ECF
No. 102, 105, 108).
SO ORDERED on this 5th day of June 2024.
______________________________________________
Mark T. Pittman
UNITED STATED DISTRICT JUDGE

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