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Zurich American Ins. Co. v. Hardin

United States District Court, N.D. Georgia, Atlanta Division

March 14, 2018

Zurich American Ins. Co., et al, Plaintiffs,
Henry C. Hardin III, et al., Defendants.



         Before the Court are the parties' cross-motions to exclude expert testimony (Dkts. 67, 69) and Plaintiff's Motion in Limine No. 2 to Bar Defendants' Counsel from Repeating or Espousing Certain Improper Expert Opinions (“Motion in Limine No. 2”). (Dkt. 80). On February 15, 2018, the Court held a hearing with Plaintiffs and Defendants to hear argument on the pending motions. See Dkts. 96, 98. The Court made certain rulings at that hearing, which are repeated below for clarity in the record. In consideration of the arguments made before the Court at that hearing and in the parties' briefs, the Court rules as follows.

         I. BACKGROUND

         On June 28, 2016, Zurich American Insurance Company, American Zurich Insurance Company, and The Zurich Services Corporation (collectively, “Plaintiffs”) filed suit against Defendants Henry C. Hardin III (“Hardin”) and Professional Management Services Group, Inc. (“PMSG”) (collectively, “Defendants”). Plaintiffs allege that Hardin should be held liable for more than $16 million of judgments obtained against PMSG because Hardin is the alter ego of PMSG. Dkt. 8 at 2. According to the Amended Complaint, Hardin “abused [PMSG's] corporate form for his own personal benefit” such that the corporate veil should be pierced, and Hardin should be held personally liable for the judgments. Id. at 7. Plaintiffs intend to prove, among other things, that Hardin commingled his corporate and personal finances by transferring substantial cash to himself from PMSG, siphoned-off PMSG's corporate funds to pay personal expenses for his family, and issued unsecured, interest-free loans from PMSG to himself. See Id. at 10-11.

         During the discovery period, both Plaintiffs and Defendants designated expert witnesses to testify on their behalf pursuant to Fed.R.Civ.P. 26(a)(2). Plaintiffs' accounting and finance expert, Robert J. Taylor, IV, intends to offer at trial expert opinions regarding Defendants' corporate structure and finances, including whether certain financial transactions at issue are consistent with accepted business practices, in support of Plaintiffs' contention that Hardin acted as the alter ego of PMSG. Expert Report of Robert J. Taylor (“Taylor Expert Report”), Dkt. 69-1 at 1. Defendants intend to call their expert, Jessica Talley-Peterson, to rebut these claims. Expert Report of Jessica Talley-Peterson (“Peterson Expert Report”), Dkt. 67-2. Both Mr. Taylor and Ms. Peterson submitted expert reports and were deposed by the opposing parties. The opinions in those reports, as illuminated by expert deposition testimony, are the subject of the two cross-motions to exclude before the Court. (Dkts. 67, 69).

         Plaintiffs also filed Motion in Limine No. 2, which seeks to bar Defendants' counsel from referencing at trial the same opinions that Plaintiffs move to exclude as improper expert testimony in their Daubert motion. (Dkt. 80). Though Motion in Limine No. 2 was directed solely at Ms. Peterson's expert testimony, Defendants responded that the expert opinions Plaintiffs move to bar-particularly opinions concerning trade custom and common business practices- could otherwise be admitted through lay opinion testimony given by Hardin and B. Anthony Foley (“Foley”). Dkt. 87 at 1-2.

         The cross-motions to exclude bear on Motion in Limine No. 2, so the Court will address each in turn.


         A. Expert Testimony Under Rule 702

         Rule 702 of the Federal Rules of Evidence governs the admissibility of expert opinions. It provides:

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. The party seeking to introduce expert testimony must establish, by a preponderance of the evidence, the factors set out in Rule 702. United States v. Frazier, 387 F.3d 1244, 1260 (11th Cir.2004). The Supreme Court discussed the standard of admissibility of expert testimony under this rule in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993). Under Daubert,

expert testimony may be admitted into evidence if: (1) the expert is qualified to testify competently regarding the matters he intends to address; (2) the methodology by which the expert reaches his conclusions is sufficiently reliable as determined by the sort of inquiry mandated in Daubert; and (3) the testimony assists the trier of fact, through the application of scientific, technical, or specialized expertise, to understand the evidence or to determine a fact in issue.

City of Tuscaloosa v. Harcros Chems., Inc., 158 F.3d 548, 562-63 (11th Cir.1998) (footnote omitted) (citing Fed.R.Evid. 702; Daubert, 509 U.S. at 589). Daubert enumerated several factors which may be used in assessing expert testimony, including (1) whether a theory or technique applied by the expert can be or has been tested, (2) whether the theory has been subjected to peer review and publication, (3) in the case of a particular scientific technique, the Court should consider the known or potential rate of error, (4) and whether the theory or technique has gained general acceptance in the relevant community. Daubert, 509 U.S. at 593-94. The Supreme Court emphasized that the Rule 702 inquiry is a flexible one. Id. at 594.

         Daubert focused on the admissibility of scientific expert testimony. In Kumho Tire Co. v. Carmichael, 526 U.S. 137, 119 S.Ct. 1167, 143 L.Ed.2d 238 (1999), the Supreme Court held that Daubert's methodology applies equally to experts who are not scientists. The Court held that a trial court may consider one or more of the specific factors mentioned in Daubert in assessing non-scientific expert testimony, but that the trial court retains discretion to decide if non-scientific testimony is reliable and relevant to the case. Kumho Tire, 526 U.S. at 141.

         “Experts may be qualified in various ways.” United States v. Frazier, 387 F.3d 1244, 1260 (11th Cir. 2004). An expert's training or education can provide one means by which an expert may qualify to give certain testimony. Id. at 1260-61. And experience in a particular field may also qualify an expert to offer an expert opinion. Id. The district court, therefore, must focus its inquiry on whether the expert has the requisite knowledge, skill, experience, training, and education to offer the testimony he intends to introduce. Fed.R.Evid. 702.

         With respect to reliability, trial courts must assess “whether the reasoning or methodology underlying the testimony is …valid and whether that reasoning or methodology properly can be applied to the facts in issue.” Daubert, 509 U.S. at 592-93. This inquiry must focus “solely on the principles and methodology [of the expert], not on the conclusions that they generate.” Id. at 595.

         When conducting this inquiry for experts offering non-scientific testimony, such as the business and accounting testimony offered here, the advisory committee notes for Rule 702 suggest that courts consider factors such as:

(1) Whether the [expert is] proposing to testify about matters growing naturally and directly out of research conducted independent of the litigation, or whether [the expert] has developed the opinion expressly for purposes of testifying;
(2) Whether the expert has unjustifiably extrapolated from an accepted premise to an unfounded conclusion;
(3) Whether the expert has adequately accounted for obvious alternative explanations;
(4) Whether the expert is being as careful as he would be in his regular professional work outside his paid litigation consulting; and
(5) Whether the field of expertise claimed by the expert is known to reach reliable results for the type of opinion the expert would give.

Fed. R. Evid. 702, advisory committee note (2000 amends.) (citations and internal quotations omitted); see also ...

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