Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_04-cv-02660/USCOURTS-cand-5_04-cv-02660-31/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 DEFENDANTS’

MOTION TO EXCLUDE TESTIMONY OF

BARBARA LUNA, DEAN ATKINSON,

AND BRUCE L SMITH

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.

Plaintiff’s “whistle blowing” was based upon his review of eight Installed Base Reports

(“IBR”). The IBR data identified Legato’s customers and the particular software licenses they had

purchased. Each report contained information for one software product. Thus, Halterman reviewed

data relating to eight of Legato’s products. The report had fields entitled “ship date,” “install date,”

“end date,” and “active part.” Ultimately, Halterman concluded that thirteen out of Legato’s 50 to

100 modules did not have the 90% renewal rate Legato had disclosed in its public filings. 

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United States District Court

For the Northern District of California

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In contrast, Defendants contend that the 90% renewal rate was accurate. Defendants explain

that Legato publicly reported its renewal rates on an overall customer basis, which the management

believed as accurate. Defendants’ Motion at p.4. Defendants contend Legato did not report renewal

rates on a per contract or per product basis because it did not have accurate data for those

calculations. Id.

Furthermore, Defendants contend that the IBRs that Halterman had access to were not a

representative sampling of Legato’s products because they related to only eight of Legato’s bottomten revenue making products, and only represented approximately two percent of Legato’s IBR data. 

Moreover, Defendants contend that the IBRs were “fraught with errors – missing or incorrect start,

install, and end dates – and contained numerous ‘problems’ and ‘anomolies.’” Defendants’ Motion

at p.7.

Presently before the Court is Defendants’ motion to exclude the testimony of Plaintiff’s

accounting experts, Barbara C. Luna, and Dean Atkinson, and Plaintiff’s psychology expert, Bruce

Lazar Smith. 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 Defendants’ 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

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

otherwise.” Trial courts are required to serve as “gate keepers” to ensure that any expert testimony

admitted “is not only relevant, but reliable.” Daubert v. Merrell Dow Pharmaceuticals, 509 U.S.

579, 592 (1993). 

A. Luna and Atkinson’s Qualifications

Defendants contend that Plaintiff’s accounting experts, Luna and Atkinson, are not qualified

to render opinions regarding Legato’s software support contract renewal rates because neither has

experience in the software industry, much less experience with software contract renewal rates.

The Court rejects Defendants’ arguments. Luna has both a Master’s and Ph.D. in Applied

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United States District Court

For the Northern District of California

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Mathematics from Harvard University. She has over twenty years of experience in accounting and

related litigation services. She is a Certified Public Accountant, Certified Fraud Examiner, and has

many other relevant licenses and certifications. She also has knowledge of SEC standards for

disclosures. Atkinson holds a degree in Accounting and Business Administration, and has been a

Certified Public Accountant for over twenty years. He is also a Certified Fraud Examiner. Thus,

both Luna and Atkinson hold the requisite credentials to qualify as accounting experts; that they do

not have specific experience in the software industry and renewal rates goes to the weight of their

testimony, not to the admissibility of their testimony.

B. The Underlying Data Used to Form Luna and Atkinson’s Opinions

Defendants contend that Luna and Atkinson’s testimony should be excluded under Rule 703,

Fed.R.Evid., because the underlying data on which they based their opinions was not reasonably

reliable.

The Court recognizes that the law requires experts to base their opinions on reliable data. 

See e.g. In re Agent Orange Prod. Liab. Litig., 611 F.Supp. 1223, 1245 (E.D.N.Y. 1985). In the

present case, the record indicates that Luna and Atkinson relied upon the very same data provided to

Plaintiff during his employment with Legato. If the data was sufficiently reliable to provide to

Plaintiff, it is reasonable to conclude that the data is sufficiently reliable for Plaintiff’s experts to use

at trial. Defendants point out, however, that the IBR data reviewed by Plaintiff and his experts

consisted of only 2% of the total IBR data; that the 2% was not a random sample, but represented

data relating to some of Legato’s lowest performing products; and that Plaintiff’s own experts have

admitted that they would not usually use such a small sample size to form the basis of their

conclusions. The Court is troubled by these alleged deficiencies in the data. However, Luna and

Atkinson have considerable expertise, and have been able to draw some meaningful conclusions

from the IBR data. Therefore, it remains within the province of the jury to determine what weight, if

any, to give to their expert opinions.

C. Luna’s Testimony Regarding Legato’s Public Disclosures

Luna’s report includes an opinion that Legato materially misled investors when it

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represented its customer renewal rate exceeded 90%. Defendants contend that Luna’s opinion must

be excluded pursuant to Rule 702, Fed.R.Evid., because every factor she relied upon to form her

opinion is unreliable. 

As discussed previously, despite the alleged deficiencies in the data, Plaintiff’s experienced

experts were able to draw some meaningful conclusions from the IBR data. Furthermore, Luna

specifically identified which disclosure requirements he believed Legato violated, and why. The

trier of fact must decide what weight, if any, to give to Luna’s opinion.

D. Relevancy of Luna’s and Atkinson’s Conclusions 

Defendants contend that Luna and Atkinson’s testimony regarding whether Legato’s renewal

rates were correct or misleading is irrelevant to the lawsuit because Plaintiff is not required to prove

an actual violation of the law in order to prevail on his wrongful termination claim. The argument is

specious: evidence that Legato violated disclosure laws makes it more likely than not that Plaintiff

was reasonable in his whistle blowing, which is indisputably an element Plaintiff must prove at trial. 

E. Luna’s and Atkinson’s Rebuttal Reports

Defendants’ request to strike Luna’s and Atkinson’s rebuttal reports as untimely is denied. 

Further, the parties are ordered to refrain from referring to any discovery disputes in the jury’s

presence.

F. Dr. Smith

Defendants object to Dr. Smith’s testimony to the extent he opines that “[t]he proximate

cause of Mr. Halterman’s current distress is, in fact, the termination of his employment at Legato

Software.” The objection is overruled. Dr. Smith’s opinion is admissible pursuant to Rule 704,

Fed.R.Evid.

Accordingly, Defendants’ motion is DENIED.

Dated: April 4, 2006

04cv2660lunaatkinsonsmith

 /s/James Ware 

JAMES WARE

United States District Judge

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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: April 5, 2006 Richard W. Wieking, Clerk

By: /s/JW Chambers 

Melissa Peralta

Courtroom Deputy

Case 5:04-cv-02660-JW Document 252 Filed 04/05/06 Page 5 of 5