Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_05-cv-03491/USCOURTS-azd-2_05-cv-03491-10/pdf.json

Nature of Suit Code: 360
Nature of Suit: Other Personal Injury
Cause of Action: 28:1332 Diversity - Legal Malpractice

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Daubert v. Merrell Dow Pharmaceuticals 509 U.S. 579 (1993).

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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

McCLURE ENTERPRISES, INC., an

Arizona Corporation,

Plaintiff, 

vs.

GENERAL INSURANCE COMPANY

OF AMERICA, aka SAFECO

CORPORATION, a Washington

corporation, as professional liability

insurer for William J. Downey,

Defendant. 

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No. CV 05-3491-PHX-SMM

ORDER

Pending before the Court is Defendant General Insurance Company of America’s

(“GICA”) Motion to Exclude Plaintiff McClure Enterprises, Inc.’s (“McClure”) Expert

Witness on Damages under Rule 702 of the Federal Rules of Evidence. (Dkt. 75.) Also

pending is GICA’s Objection to Untimely Affidavit of John Gorman, C.P.A. (“Gorman”).

(Dkt. 87.)

BACKGROUND

GICA seeks to exclude McClure’s expert Gorman’s testimony under Federal Rule of

Evidence 702 and Daubert1

 based on report of GICA’s expert Timothy Gay (“Gay”).

McClure filed a Response including a supplemental affidavit of expert Gorman (Dkt. 85 Ex.

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For factual history of case, refer to Order dated July 24, 2007 (Dkt. 35.)

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A, “Gorman Affidavit”); GICA objects to the Gorman Affidavit as untimely. (Dkt. 87.)

Both parties have since filed their respective replies and the matter is now fully briefed.2

STANDARD OF REVIEW

A. Objection to Untimely Affidavit 

Rule 37 can bar use of information that was not previously disclosed as evidence on

a motion if required by Rule 26 and the failure to disclose was not substantially justified or

harmless. Fed. R. Civ. P. 37(c)(1). A party has a duty to disclose any additions or changes

to a report filed by their expert by the party’s pretrial disclosure deadline. Fed. R. Civ. P.

26(e)(2). Absent a stipulation or court order, a party must submit any contradictory or

rebuttal expert testimony within 30 days after the other party’s disclosure. Fed. R. Civ. P.

26(a)(2)(C)(ii).

B. Motion to Exclude Expert Witness

A witness who has been qualified as an expert by knowledge, skill, experience,

training, or education may give an opinion on scientific, technical, or otherwisely

specialized topics “. . . 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. 

Trial judges have a responsibility to act as gatekeepers to exclude all types of unreliable

expert testimony. Fed. R. Evid. 702 (Advisory Committee’s Notes 2000 Amendments). 

To exercise this responsibility, “ . . . the trial judge must have considerable leeway in

deciding in a particular case how to go about determining whether particular expert

testimony is reliable.” Kumho Tire Co. v. Carmichael, 526 U.S. 137, 152 (1999). 

Daubert sets a two-part test for admitting expert testimony that focuses on the reliability

and relevancy of the opinion. 509 U.S. at 589. To be sufficiently reliable, the opinion

must be based on “scientifically valid principles.” Id. at 595. To be relevant, the

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testimony must “assist the trier of fact to . . . determine a fact at issue.” Id. at 592. The

burden is on “. . . the party proffering the evidence [to] explain the expert’s methodology

and demonstrate in some objectively verifiable way that the expert has both chosen a

reliable scientific method and followed it faithfully.” Daubert v. Merrell Dow

Pharmaceuticals, Inc., 43 F.3d 1311, 1319 (9th Cir. 1995). Factors that courts have used

to evaluate the reliability of an expert’s methods include:

1. Whether the expert’s method is falsifiable or merely conclusory;

2. Whether the technique has been subject to peer review and publication;

3. The known or potential error rate of the technique;

4. The existence and maintenance of standards and controls;

5. Whether the technique has general acceptance in the relevant expert community;

6. Whether the substance of the testimony was prepared specifically for the instant

litigation;

7. Whether the expert’s extrapolation from an accepted premise to his conclusion was

justifiable;

8. Whether the expert has adequately accounted for obvious alternative explanations;

9. Whether the expert “is being as careful as he would be in his professional work

outside his paid litigation consulting”;

10. Whether the field of expertise claimed by the expert is known to reach reliable

results for the type of opinion the expert would give.

See Daubert, 509 U.S. at 593-595; Daubert, 43 F.3d at 1317; see Claar v. Burlington

N.R.R., 29 F.3d 499 (9th Cir. 1994); see Kumho, 526 U.S. at 149-151; Fed. R. Evid. 702

(Advisory Committee’s Notes 2000 Amendments). These factors are neither required nor

exhaustive. See Fed. R. Evid. 702 (Advisory Committee’s Notes 2000 Amendments).

Additionally, no single factor is necessarily dispositive of the reliability of an expert’s

testimony. Id.

DISCUSSION

A. Objection to Untimely Affidavit

GICA seeks to exclude the Gorman Affidavit by classifying it as a supplemental

expert rebuttal to the report filed by GICA’s expert Gay. (Def.’s Objection to Untimely

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Aff. of John Gorman, C.P.A. at 1-2.) GICA alleges that, as a rebuttal document, it should

have been filed by August 17, 2007, based on Rules 26(e)(2) and 26(a)(2)(C)(ii). 

In a Stipulation requesting additional time to respond to GICA’s Motion to

Exclude, McClure cited its need for an extension “so that its expert can finalize his review

and affidavit to be filed concurrently with McClure’s Response to the motion.” (Dkt. 83.) 

GICA’s counsel “authorize[d] counsel for Plaintiff to sign this Stipulation on his behalf.” 

(Id.) Counsel for GICA was therefore made aware of McClure’s intent to produce the

Gorman Affidavit prior to its filing. GICA agreed without objection to the Stipulation

giving McClure extra time to respond to the Motion to Exclude specifically for

preparation of the Gorman Affidavit. By doing so, GICA waived any objection to the

timing of the affidavit’s filing.

Moreover, the Gorman Affidavit is not rebuttal evidence, in that it is not “intended

solely to contradict or rebut evidence.” Fed. R. Civ. P. 26(a)(2)(C)(ii). Rather, the

affidavit was provided “in support of [Gorman’s] original opinion and in answer to

[GICA’s] Motion [to Exclude].” (Gorman Aff. ¶ 4.) Therefore the rebuttal expert

disclosure deadline does not apply, and GICA’s objection to the Gorman Affidavit will be

overruled.

B. Motion to Exclude Gorman’s Testimony 

GICA requests the Court to exclude Gorman’s testimony under Federal Rule of

Evidence 702. GICA argues that, based on Gay’s report, Gorman’s opinion does not

reach the standard for admissibility of expert opinion set by Daubert and its progeny. 

(Def.’s Mot. to Exclude Pl.’s Expert Witness at 6-8.) As mentioned above, Daubert

requires expert testimony be relevant to the facts of the case and sufficiently reliable. 

There can be no dispute that the conclusion reached by Gorman and the method used to

reach this conclusion would be relevant to the Court “to determine a fact at issue,”

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namely the damages potentially suffered by McClure. Thus, the only question is whether

Gorman’s testimony is sufficiently reliable.

 In exercising its gatekeeping responsibility, the Court finds the evidence seeking

to exclude Gorman’s testimony based on the Daubert reliability standard to be

insufficient. GICA, through Gay, argues Gorman’s testimony does not meet the standard

for reliability because it fails to comply with accepted accounting standards. (Def.’s Mot.

to Exclude Pl.’s Expert Witness at 2.) Specifically, Gay alleged the following

deficiencies in his evaluation of Gorman: (1) failure to establish a correlation between

lost profit damages and the disputed contracts because McClure has other sources of

revenue that could affect profits; (2) failure to determine lost revenue; (3) failure to

determine variable costs; (4) failure to consider external factors which could have

affected McClure’s average profits; (5) misrepresentation of McClure’s true income; (6) 

inappropriately basing damages on this misrepresented income; and (7) failure to

consider expenses by doing gross profit calculation from tax returns. (Id., Ex. B at 2-7.) 

Each of these points was addressed by the Gorman Affidavit submitted with McClure’s

Response. (Gorman Aff. ¶ 7.)

There is evidence of several of the reliability factors listed above in the Gorman

Affidavit supporting his methodology. The method Gorman used to calculate damages is

supported by two publications. (Id. ¶ 6.) The basis for his opinion is generally accepted

as appropriate by the accounting community. (Id. ¶ 5.) By visiting the offices and

speaking with McClure’s employees, Gorman was able to account for alternate

explanations for the loss. (Id. ¶ 7.) Finally, by using only the documents available that

were created under threat of perjury, Gorman’s evidence could be considered the best

available. (Id. ¶¶ 5-6.)

As Gorman’s method meets the standard set by Daubert, the disagreement between

experts Gay and Gorman goes to weight, not admissibility. It is left to the parties to

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convince the trier of fact that their expert and his methodology are more appropriate to

gauge the loss in this case. As the Daubert court said, “[v]igorous 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.” 509 U.S.

at 596. GICA is free to use these “traditional and appropriate means” at trial.

CONCLUSION

In light of the reasons set forth above,

IT IS HEREBY ORDERED OVERRULING GICA’s Objection to Untimely

Affidavit. (Dkt. 87.)

IT IS FURTHER ORDERED DENYING GICA’s Motion to Exclude Plaintiff’s

Expert Witness on Damages. (Dkt. 75.)

DATED this 4th day of June, 2008.

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