Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_03-cv-02487/USCOURTS-azd-2_03-cv-02487-2/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1441 Petition For Removal--Other Contract

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

William J. Howard, 

Plaintiff, 

vs.

General Electric Capital Business Asset

Funding Corporation,

Defendant. 

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No. CV-03-2487-PHX-DGC

ORDER

Defendant has filed a motion to exclude the expert testimony and report of Enrique

Rodriguez. Doc. #195. The Court concludes that some of the opinions contained in Mr.

Rodriguez’s Expert Report dated May 16, 2005 (“Expert Report”) are not relevant and would

confuse the jury. The Court will grant Defendant’s motion with respect to these opinions.

With respect to other opinions contained in the Expert Report and virtually all of the opinions

contained in Mr. Rodriguez’s Supplemental Expert Report dated July 11, 2005

(“Supplemental Expert Report”), the Court cannot determine relevancy at this time and will

deny the motion.

I. TRIAL ISSUES AND RELEVANCY STANDARDS.

Defendant argues that Mr. Rodriguez’s opinions are not relevant to any of the issues

to be addressed at trial. The parties’ Joint Proposed Final Pretrial Order (Doc. #184),

adopted by the Court (Doc. #206), identifies the issues to be tried. They can be divided into

three broad categories. 

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First, the jury will decide whether Defendant breached its loan commitment. This

question includes several sub-issues: whether Defendant orally agreed to extend the loan

commitment to October 31, 2001; whether the oral agreement was supported by adequate

consideration; whether Defendant was entitled to rescind the loan commitment based on

Plaintiff’s omissions or misrepresentations; whether Olio would have satisfied the conditions

of Defendant’s obligation to fund the loan; and whether Defendant breached the loan

commitment by terminating it on October 5, 2001. Doc. #184 at 6-9.

Second, the jury will decide whether Defendant is liable for breach of the implied

covenant of good faith and fair dealing. Plaintiff asserts that Defendant’s liability arises from

several alleged actions: Defendant invented an extra-contractual rationale for terminating

the loan commitment; Defendant acted in haste based on a false rumor of a PRG bankruptcy;

Defendant failed to investigate the truthfulness of the rumor; and Defendant’s decisionmaking process was uninformed and incompetent. Id. at 9.

Third, if the jury finds Defendant liable for breach of contract or breach of the

covenant of good faith and fair dealing, it will need to assess the damages, if any, suffered

by Olio; decide whether Defendant is liable for Olio’s lost profits; and decide whether

Plaintiff’s damages should be reduced because he failed to make reasonable efforts to

mitigate his damages. Id. at 9-12.

The Court has an obligation to ensure that expert testimony “is relevant to the task at

hand, i.e., that it logically advances a material aspect of the proposing party’s case.” Daubert

v. Merrell Dow Pharm., Inc., 43 F.3d 1311, 1321 n. 17 (9th Cir. 1995) (citing Daubert v.

Merrell Dow Pharm., Inc., 509 U.S. 579, 595 (1993)). The Court must be convinced that the

testimony “speaks clearly and directly to an issue in dispute in the case, and that it will not

mislead the jury.” Id.; see also United States v. Scholl, 166 F.3d 964, 970 (9th Cir. 1999)

(expert testimony properly excluded because it “was not relevant and could be confusing,

inconsistent and misleading to the jury.”)

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II. MR. RODRIGUEZ’S OPINIONS.

First, Mr. Rodriguez opines that a lender asked to make a loan commitment to an

insider for the purchase of assets from a financially troubled seller would consider the risk

of bankruptcy by the seller and the effects such a bankruptcy would have on the loan. Expert

Report at 6. This opinion may be relevant to the parties’s understanding of the MAC clause,

Plaintiff’s reasonable expectations under the loan commitment, and whether Defendant

breached the covenant of good faith and fair dealing when it terminated the loan commitment

on the prospect of a PRG bankruptcy. Because the Court cannot conclude at this time that

the opinion is irrelevant, Defendant’s motion will be denied. To the extent this opinion is

also found in the Supplemental Expert Report, it may be relevant as rebuttal evidence in

response to the testimony of defense expert David Zacharias.

Second, Mr. Rodriguez opines that Defendant’s underwriting was substandard and

violated industry practices. This opinion includes Mr. Rodriguez’s view that Defendants

should have taken specific steps in the loan transaction – steps it did not take – to protect

against the risk of a PRG bankruptcy. See Expert Report at 7-8. This opinion is not relevant.

Plaintiff has not sued Defendant for shoddy underwriting. Nor is this opinion relevant to the

question of whether Defendant, months after it had underwritten the loan, breached its

contract or the covenant of good faith and fair dealing by terminating the loan commitment.

Mr. Rodriguez will be excluded from presenting this opinion and its sub-opinions at trial.

Fed. R. Ev. 401, 402, 403. 

Third, Mr. Rodriguez opines that Defendant had a duty to investigate information

received after its loan commitment was issued. Mr. Rodriguez appears to opine that

Defendant complied with this duty when it made various changes to the loan commitment

documents. Because this testimony is relevant to Mr. Rodriguez’s fourth opinion, which the

Court also finds relevant, Defendant’s motion to exclude this opinion will be denied. 

Fourth, Mr. Rodriguez opines that Defendant violated standard industry practices by

failing to investigate the rumored PRG bankruptcy. This opinion appears relevant to

Plaintiff’s claim for breach of the covenant of good faith and fair dealing, particularly

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Plaintiff’s allegations that Defendant acted in haste and failed to investigate the truthfulness

of the rumor. Defendant’s motion to exclude this opinion will be denied.

Fifth, Mr. Rodriguez opines that Defendant was reckless, negligent, and violated

standard industry practice when it terminated the loan commitment on the basis of the MAC

clause. Defendant cannot reasonably contest the relevancy of this opinion, as the meaning

of the MAC clause will be a central issue at trial. Defendant argues instead that the opinion

lacks foundation because Mr. Rodriguez has no first-hand knowledge concerning the parties’

intent, and would be “simplistic and unhelpful” to the jury. The Court cannot rule on

Defendant’s argument at this stage. It appears that Defendant may try to present expert

testimony concerning the meaning of the MAC clause through Mr. Zacharias. If so, the

testimony of Mr. Rodriguez may be relevant rebuttal. Even during Plaintiff’s case-in-chief

the testimony may be relevant if properly founded and helpful to the jury. The Court must

rule on these issues during trial, and therefore will deny Defendant’s motion with respect to

this opinion. 

Finally, Mr. Rodriguez sets forth a number of opinions in the Supplemental Expert

Report, all of which respond to opinions of Defendant’s expert David Zacharias. Defendant

does not address the Supplemental Report in its motion. Because the opinions in the

Supplemental Report appear to be responsive to opinions offered by Defendant’s expert, and

because the Court cannot determine at this stage that such testimony would be irrelevant or

otherwise improper, the Court will deny Defendant’s motion with respect to them. 

III. PLAINTIFF’S MOTION TO STRIKE.

Plaintiff asks the Court to strike the late reply memoranda filed by Defendant in

support of its motions to exclude the testimony of Mr. Rodriguez and Mr. Curry. Plaintiff

has identified no prejudice resulting from the late filing of these replies and defense counsel

has provided a reasonable explanation for their untimeliness. The Court will deny Plaintiff’s

motion.

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IT IS ORDERED:

1. Defendant’s Motion to Exclude Testimony and Report of Enrique Rodriguez

(Doc. #195) is granted in part and denied in part.

2. Plaintiff’s Motion to Strike (Doc. #217) is denied.

DATED this 23rd day of August, 2006.

Case 2:03-cv-02487-DGC Document 227 Filed 08/23/06 Page 5 of 5