United States District Court, E.D. Michigan, Southern Division
Anthony P. Patti Magistrate Judge
AND ORDER DENYING DEFENDANTS' MOTION IN LIMINE TO EXCLUDE
THE TESTIMONY, OPINIONS, REPORTS, AND DECLARATIONS OF
PLAINTIFF'S EXPERT WITNESS, J. BRADLEY SARGENT
[#49/50]AND GRANTING INPARTAND DENYING IN PART
PLAINTIFF'S MOTION IN LIMINE TO EXCLUDE CERTAIN TESTIMONY
OF DEFENDANTS' EXPERT WITNESS, RODNEY L. CRAWFORD
Gershwin A. Drain United States District Court Judge
action arises out of an Equity Purchase Agreement, under
which Defendant Shri Thanedar sold Plaintiff a majority
interest in Avomeen, LLC (“Avomeen”) -- a
chemical testing laboratory. Plaintiff asserts that in
pre-close discussions with its representatives, Defendant
Thanedar made several inaccurate representations that
inflated the value of the company. Plaintiff has thus filed
the instant suit, asserting it was induced into overpaying
before the Court are two Motions in Limine. First, Defendants
have filed a Motion in Limine to Exclude the Testimony,
Opinions, Reports, and Declarations of Plaintiff's Expert
Witness, J. Bradley Sargent. Dkt. No. 49/50. Second,
Plaintiff has filed a Motion in Limine to Exclude Certain
Testimony of Defendants' Expert Witness, Rodney L.
Crawford. Dkt. No. 47. The Motions are fully briefed, and the
Court will resolve both without a hearing. See E.D.
Mich. LR 7.1(f)(2). For the reasons set forth below, the
Court will DENY Defendants' Motion [#49/50] and GRANT IN
PART AND DENY IN PART Plaintiff's Motion [#47].
motion in limine refers to “any motion, whether made
before or during trial, to exclude anticipated prejudicial
evidence before the evidence is actually offered.”
Luce v. United States, 469 U.S. 38, 40, n.2 (1984).
The purpose of these motions is “to narrow the issues
remaining for trial and to minimize disruptions at
trial.” United States v. Brawner, 173 F.3d
966, 970 (6th Cir. 1999). In disposing of a motion in limine,
the guiding principle is to “ensure evenhanded and
expeditious management of trials.” Ind. Ins. Co. v.
GE, 326 F.Supp.2d 844, 846 (N.D. Ohio, 2004).
Federal Rule of Evidence 702, “an expert's opinion
is admissible, by the discretion of the trial court, if: (1)
the expert is qualified as such by knowledge, skill,
experience, training or education; (2) the testimony is
relevant, meaning it will assist the trier of fact to
understand the evidence or to determine a fact in issue; and
(3) the testimony is reliable, meaning it is based on
sufficient facts or data, is the product of reliable
principles and methods, and the witness has applied the
principles and methods reliably to the facts of the
case.” Little Hocking Water Ass'n, Inc. v. E.I.
du Pont de Nemours and Co., 90 F.Supp.3d 746, 751 (S.D.
Ohio 2015) (citing In re Scrap Metal Antitrust
Litig., 527 F.3d 517, 528-29 (6th Cir. 2008)).
“The task for the district court in deciding whether an
expert's opinion is reliable is not to determine whether
it is correct, but rather to determine whether it rests upon
a reliable foundation, as opposed to, say, unsupported
speculation.” Id. at 752. “Where the
reliability of the evidence is in dispute, it is more
appropriate for a judge to admit the evidence than to keep it
from the fact-finder because ‘vigorous
cross-examination, presentation of contrary evidence, and
careful instruction on the burden of proof are the
traditional and appropriate means of attacking shaky but
admissible evidence.'” Id. (quoting
Daubert v. Merrell Dow Pharmaceuticals, Inc., 509
U.S. 579, 596 (1993). Stated differently, “rejection of
expert testimony is the exception, rather than the
rule.” In re Scrap Metal, 527 F.3d at 530.
The Court will Deny Defendants' Motion to Exclude the
Testimony, Opinions, Reports, and Declarations of
Plaintiff's Expert Witness, J. Bradley Sargent
ask the Court to exclude the testimony, opinions, reports,
and declarations of Plaintiff's expert witness, J.
Bradley Sargent. Sargent, who is a Certified Public
Accountant, performed an analysis of the Avomeen transaction
and made the following findings and conclusions:
a) Thanedar, in his capacity as Avomeen's Chairman and
Interim CEO, was intimately involved with and exerted control
over accounting methodology, specifically regarding revenue
b) At Thanedar's direction, Avomeen's accounting
practices for revenue recognition changed materially in 2016
and violated Generally Accepted Accounting Principles
(“GAAP”) and Generally Accepted Auditing
c) Thanedar made misrepresentations to the plaintiff and/or
the plaintiff's agents that were material in nature.
d) Due to Thanedar's acts, Avomeen's earnings before
interest, taxes, depreciation and amortization
(“EBITDA”) for the period of October 1, 2015
through September 30, 2016 were overstated by at least $634,
e) Due to Thanedar's acts, the plaintiff utilized an
earnings multiple which was above market and overstated.
f) As a result of the material overstatements of EBITDA and
the earnings multiple applied by the plaintiff, the plaintiff
should have paid $25, 619, 555 to $26, 604, 923 for Avomeen.
The plaintiff paid $33, 600, 000, an overpayment resulting in
economic damages of at least $6, 6995, 077 to $7, 980, 445.
See Dkt. No. 50, p. 8 (Pg. ID 3294). Defendants
contend that the first three findings are inappropriate
because they reach legal and factual conclusions meant for
the jury to resolve. They assert that the latter three
findings are not based on reliable methodology or on the
factual record in this case.
Sargent's Opinions and Findings will not be Excluded
on the Basis that they Touch on Legal and/or Factual
first argue that Sargent should not be permitted to testify
because his opinions -- that Defendant Thanedar was
intimately involved with and exerted control over
Avomeen's accounting methodology, and that Avomeen made
changes to its accounting practices at the direction of
Thanedar -- reach conclusions on disputed facts that are
solely the jury's province. Defendants provide no legal
authority to support their argument. Nevertheless, the law is
clear that an expert witness may offer an opinion at trial
despite their reliance on disputed facts. See Gonzales
Prod. Sys., Inc. v. Martinrea Int'l, Inc., 2015 WL
4771096, at *10 (E.D. Mich. Aug. 13, 2015) (Drain, J.)
(citing with approval Micro Chem., Inc. v. Lextron,
Inc., 317 F.3d 1387, 1392 (Fed. Cir. 2003) (“When,
as here, the parties' experts rely on conflicting sets of
facts, it is not the role of the trial court to evaluate the
correctness of facts underlying one's expert's
testimony); Pipitone v. Biomatrix, 288 F.3d 239,
249-50 (5th Cir. 2002) (holding that jury was entitled to
hear expert testimony and decide whether to accept or reject
it after considering whether predicate facts on which expert
relied were accurate)).
Sargent's expert report sets forth the factual basis
underlying the opinions referenced above. The report reveals
that Sargent predicated his opinions on the deposition
testimony of several employees who worked under Defendant
Thanedar at Avomeen, as well as a number of documents found
in the record. See Dkt. No. 50-2, pp. 9-18 (Pg. ID
3326-35). The Court will not exclude Sargent's opinions
on the ground that Defendants dispute their factual
underpinnings. See Gonzales, 2015 WL 4771096, at
*10. Instead, Defendants can challenge the accuracy of
Sargent's testimony on cross-examination.
Defendants ask the Court to exclude a portion of
Sargent's testimony where he purportedly reached an
improper legal conclusion. Specifically, Defendants point to
Sargent's opinion that Defendant Thanedar made
“misrepresentations” that were “material in
nature.” Defendants argue that this conclusion opines
on an explicit element of a Rule 10b-5 claim, which is at
issue in this case. See Stoneridge Inv. Partners, LLC v.
Scientific-Atlanta, 552 U.S. 148, 157 (2008) (“[A]
plaintiff must prove (1) a material misrepresentation or
omission by the defendant; (2) scienter; (3) a connection
between the misrepresentation or omission and the purchase or
sale of a security; (4) reliance upon the misrepresentation
or omission; (5) economic loss; and (6) loss
causation.”); see also Keyes v. Ocwen Loan
Servicing, LLC, 335 F.Supp.3d 951, 959 (E.D. Mich. 2018)
(Drain, J.) (“[E]xpert witnesses are not permitted to
make legal conclusions.”); Alvarado v. Oakland
Cty., 809 F.Supp.2d 680, 688 (E.D. Mich. 2011)
(‘[T]he expert's opinion must stop short of
embracing the ‘legal terminology' which frames the
ultimate legal conclusion which the jury must reach in the
case.”); Woods v. Lecureux, 110 F.3d 1215,
1221 (6th Cir. 1997) (Testimony “which attempts to tell
the jury what result to reach and which runs the risk of
interfering with a district court's jury instructions,
hardly can be viewed as being helpful to the jury.”).
But even if so, “[a]n opinion is not objectionable just
because it embraces an ultimate issue.” FRE 704(a);
see Berry v. City of Detroit, 25 F.3d 1342, 1353
(6th Cir. 1994) (“Although an expert's testimony
may embrace an ultimate issue to be decided by the trier of
fact, the issue embraced must be a factual one.”)
(internal quotations and citations omitted).
the context of securities litigation, “[c]ourts
routinely allow expert testimony regarding whether
undisclosed information, or information that was later
disclosed, was material.” S.E.C. v. ITT Educ.
Servs., 311 F.Supp. 3D 977, 995 (S.D. Ind. 2018) (citing
S.E.C. v. Ferrone, 163 F.Supp.3d 549, 565 (N.D. Ill.
2016); United States v. Martoma, 993 F.Supp.2d 452,
457 (S.D.N.Y. 2014)). In ITT Educational Services,
the Southern District of Indiana explained the difference
between an impermissible legal conclusion and a permissible
Defendants seek to exclude Dr. Thakor's testimony
regarding what investors would have wanted to know and the
materiality of that information, arguing that his opinion
“goes to the ultimate issue of whether Defendants
engaged in securities fraud under the securities laws.”
The Court disagrees. Dr. Thakor's opinions differ
significantly from the opinions of Mr. Pitt and Mr. Kisner
that the Court has excluded. Mr. Pitt and Mr. Kisner both
sought to provide opinions regarding whether Defendants
provided adequate disclosures in their SEC filings. Dr.
Thakor's opinion relates to whether information that
Defendants did not disclose (which is a factual question)
would have been the type of information investors would have
wanted to know-whether that information was material.
Id. (internal citations omitted). Plaintiff
maintains that Sargent's findings fall into latter
category, and thus, do not reach a legal conclusion.
See Dkt. No. 65, p. 20 n.2 (Pg. ID 4860) (“Mr.
Sargent primarily uses the word ‘material' in his
report to discuss accounting materiality.”). But out of
precaution, Plaintiff does not object to having Sargent
replace the word “material” with some other term.
See Id. The Court finds that this is an appropriate
solution. Accordingly, rather than exclude this portion of
Sargent's testimony, the Court will ORDER the parties to
come to an agreement on an alternative descriptor for Sargent
to use during trial.
on the topic of language, Defendants also take issue with
Sargent's likening of Avomeen's revenue recognition
practices to a “Ponzi Scheme” or “Pulling
Scheme.” Defendants argue that such descriptors have no
basis in fact, and further, would lead to unfair ...