Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_04-cv-02660/USCOURTS-cand-5_04-cv-02660-28/pdf.json

Nature of Suit Code: 442
Nature of Suit: Civil Rights Employment
Cause of Action: 28:1332 Diversity-Employment Discrimination

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United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

David Halterman,

Plaintiff(s),

 v.

Legato Software, a Division of EMC

Corporation, et al.,

Defendant(s). /

NO. C 04-02660 JW 

ORDER DENYING PLAINTIFF’S

MOTION TO STRIKE OR EXCLUDE THE

TESTIMONY OF STUART H. HARDEN,

CPA

Plaintiff David Halterman initiated this suit for wrongful termination against his former

employer Legato Software, a Division of EMC Corporation, and EMC Corporation dba EMC

Peripherals, Inc. Plaintiff alleges that Defendants wrongfully terminated him because he “blew the

whistle” on Defendants’ accounting and financial data. More specifically, Plaintiff alleges that in

2003, he uncovered negative financial information regarding Legato’s renewal rates that undermined

Legato’s public filings at a time when EMC was in negotiations with Legato to purchase Legato.

Presently before the Court is Plaintiff’s motion to strike exclude certain portions of the

expert report of Stuart Harden, Defendants’ forensic accounting and auditing expert. The Court

finds it appropriate to take the motion under submission for decision without oral argument pursuant

to Civil Local Rule 7-1(b). 

Based upon all papers filed to date, the Court denies Plaintiff’s motion. Rule 702,

Fed.R.Evid., 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

Case 5:04-cv-02660-JW Document 246 Filed 03/24/06 Page 1 of 4
United States District Court

For the Northern District of California

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knowledge, skill, experience, training or education, may testify thereto in the form of an opinion or

otherwise.” Mr. Harden is clearly qualified to testify as an auditor of Legato’s finances and public

disclosures. Mr. Harden has over thirty years of experience in public accounting, and has over

twenty years of experience performing litigation and forensic accounting. Further, Mr. Harden

bases his opinions on reliable data and methodologies.

Plaintiff’s objections to seventeen of Mr. Harden’s opinions are all unfounded. Mr. Harden

renders opinions about what Legato “likely considered,” both of which are within Mr. Harden’s area

of expertise and reasonably based upon the testimony of Legato’s Controller, Cory Sindelar. Mr.

Harden opines that a reader would not have been misled by Legato’s financial disclosures, and 

further that Legato had a reasonable basis for its disclosures. Mr. Harden opines that Legato’s

customer renewal rate disclosures were not materially inconsistent with the information in Legato’s

financial statements; that its renewal rate calculation methodology was reasonable; and that it would

not have been reasonable for Legato to have used other methodologies to calculate renewal rates. 

These opinions are, once again, within Mr. Harden’s area of expertise and reasonably based upon his

review of Legato’s financial data. 

Mr. Harden also renders opinions based upon his extensive experience as an accountant. He

opines that the “the lack of SEC guidance may be due to the fact that renewal rates are rarely

disclosed”; that because “Legato’s revenue allocation methodology complied with GAAP, and its

public filings were in accordance with SEC regulations, it is unlikely that these factors are evidence

that Legato intended to mislead EMC in the process of negotiating the purchase price”; that “service

and support revenue is typically viewed by knowledgeable persons as less of a predictor of growth

than license revenue”; and that “[i]f Legato had intended to disclose an ‘inaccurate and inflated

picture’ to EMC, or any other potential suitor, Legato would have been motivated to ‘inflate’ license

revenue rather than service and support revenue.” These opinions are permissible in light of Mr.

Harden’s extensive experience as an accountant; it is within the jury’s discretion to determine what

weight, if any, to give them.

Finally, Mr. Harden’s report includes statements about Legato’s intents and beliefs. For

Case 5:04-cv-02660-JW Document 246 Filed 03/24/06 Page 2 of 4
United States District Court

For the Northern District of California

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example, Mr. Harden states in his report that “Legato did not believe it was misleading readers of its

financial statements by utilizing a dollar-based methodology.” The statements about Legato’s

intent and belief are supported by citations to the deposition testimony of individuals in Legato’s

management. Mr. Harden is entitled to consider the intents and belief of Legato’s management

when rendering his opinions.

Therefore, Plaintiff’s motion to strike or exclude portions of Mr. Harden’s report is denied.

Dated: March 24, 2006

04cv2660harden

 /s/James Ware 

JAMES WARE

United States District Judge

Case 5:04-cv-02660-JW Document 246 Filed 03/24/06 Page 3 of 4
United States District Court

For the Northern District of California

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THIS IS TO CERTIFY THAT COPIES OF THIS ORDER HAVE BEEN DELIVERED TO:

David Angle dave@daveangle.com

Gary R. Siniscalco grsiniscalco@orrick.com

Jeffrey A. Ross jeffross@dicksonross.com

Kathryn Burkett Dickson kbdickson@dicksonross.com

Leah Linda Scholer lscholer@orrick.com

Lynne C. Hermle lchermle@orrick.com

Michael D. Weil mweil@orrick.com

Dated: March 24, 2006 Richard W. Wieking, Clerk

By: /s/JW Chambers 

Melissa Peralta

Courtroom Deputy

Case 5:04-cv-02660-JW Document 246 Filed 03/24/06 Page 4 of 4