have a reliable basis in the knowledge and experience of his discipline. Daubert, 509 U.S. at
592. When pressed, Mr. Dohmeyer could not even say whether the additional labor would solve
the alleged problems and raise the level of production. For that information, one would, he said,
have to check with Messrs. Barron, King and DaClue. (/d. at 37-38, 45, 89). Referring to his
damage figure, he said:

[All] it really assumes is with the addition of this expense. And it would probably

be labor, you know. . . It says with this much money thrown at the problem,

probably — probably, in terms of labor, you can solve the production problems

that are alleged. (Dohmeyer Dep. at 44-45).

It is no answer to say that since Rule 703 allows an expert to base an opinion on
inadmissible evidence, Mr. Dohmeyer must be allowed to testify, even though the basis of the
information on which he relied came from the defendants. First, the defendants have made no
effort to carry their burden of proving by a preponderance of the evidence that the kind of
information given to Mr. Dohmeyer is the kind “reasonably relied upon by experts in the
particular field in forming opinions or inferences upon the subject... .” The argument is thus
forfeited. United States v. Baretz, 41 F.3d 867 (7th Cir. 2005).

Second, and more importantly, while Rule 703 was intended to liberalize the rules
relating to expert testimony, it was not intended to abolish the hearsay rule and to allow a
witness, under the guise of giving expert testimony, to in effect become the mouthpiece of the
witnesses on whose statements or opinions the expert purports to base his opinion. See, e.g.,

Dura Automotive Systems of Indiana, Inc. v. CTS Corp., 285 F.3d 609, 613 (7" Cir. 2002);

TK-7 Corp. v. The Estate of Barbouti, 993 F.2d 722, 731-34 (10" Cir. 1993); In re: James

20


Athis deposition, Mr. Dohmeyer conceded that his criticisms of Mr. Wiersema’s report
offered no explanation, no written opinions, no details, no analysis. (Dohmeyer Dep., at 76,
78). Expertise is a rational process, and a rational process implies express reasons for
judgment. Federal Power Commission v. Hope Natural Gas Co., 320 U.S. 591, 627
(1944)(Frankfurter, J. dissenting). An expert’s opinion full of assertion but empty of reasons
has no value and is devoid of persuasiveness and legal significance.

An expert must demonstrate in the courtroom the same level of intellectual rigor that
characterizes the practice of an expert in the relevant field. Kuhmo Tire, 526 U.S. at 152. At
his deposition, Mr. Dohmeyer spoke of the rigorous standards for admission into the American
Society of Appraisers. (Dohmeyer Dep., at 13). He would never have gained admission to the
ASA hadhe submitted an appraisal for evaluation as devoid of explanation and reasoning as was
the “preliminary critique” of Mr. Wiersema’s report. “[W]hy should a court rely on the sort of
exposition [a responsible member of the ASA] would not tolerate in his professional life.”
Mid-State Fertilizer Co., 877 F.2d at 1339.

What Judge Shadur wrote in Gregory, 2002 WL 31972165 at *1, applies equally here:
“There is frankly no justification that would permit any ‘expert’ witness, or any lawyer dealing
with one, to tender a report that is so patently deficient in every one of those [things required
by Rule 26] as the one that is at issue here.” The deficiencies in the February 27" letter —
which was never supplemented - are all the more inexcusable in light of Mr. Dohmeyer’s

involvement in hundreds of cases as an expert and the defendants’ lawyers’ experience and

41


(www.olysteel.com).

Reliance Steel & Aluminum Co., which is traded on the New York Stock Exchange, is
one of the largest metals service center companies in the United States. It operates a network
of more than 100 locations in 30 states, Belgium, France and South Korea, providing value-
added metals processing services. It distributes a full line of more than 90,000 metal products,
including galvanized, hot-rolled and cold-finished steel, stainless steel, aluminum, brass,
copper, titanium, and alloy steel. Reliance boasts more than 95,000 customers in a broad range
of industries. (www.rsac.com).

Ryerson Tull, Inc. is a leading North American distributor and processor of metals with
annual sales of over $2.2 billion. With over 5,000 employees, it operates a network of service
centers across the United States and Canada, has investments in additional service centers in
Mexico and Asia, and maintains metal trading capabilities around the world. Recently, it
acquired Integris Metals, Inc., North America’s fourth largest metals service center with 2004
revenues of $2 billion. Ryerson Tull processes stainless steel, aluminum, copper alloys, and
industrial plastics, and maintains inventories over more than 100,000 metal and plastic items
in a wide variety of grades, shapes, and sizes. (www.ryersontull.com).

Steel Technologies, Inc. is one of the largest independent steel processors in North
America, and operates a network of 20 facilities throughout the eastern half of the United States
and Mexico. It processes precision flatrolled products for various industries, including the
automotive, appliance, lawn and garden, agricultural, office equipment and railcar industries.

Steel Technologies employs over 1,000 people. (www.steeltechnologies.com).

37


squib from Ms. Pratt’s book.

The Declaration contended that, as a certified public accountant, Mr. Wiersema lacked
“valuation expertise” and thus, wrongly concluded that Loeffel’s economic loss exceeded the
pre-damaged value of the company. (Declaration, § 9). This opinion appeared nowhere in the
February 27, 2004 letter. Ms. Pratt apparently agrees, but the one paragraph excerpt relied on
by Mr. Dohmeyer, contains no citation of authority and nothing beyond her ipse dixit that “[i]t
is axiomatic that the present value of lost future profits can be equal to but not greater than, the
total value of the enterprise had the damaging event not occurred,” However, there immediately
follows this sentence, which supports Mr. Wiersema’s position: “however, I have seen ‘experts’
testify to damage sums many times any reasonable value for the entire entity.” Apparently some
judges have admitted as proper expert opinion the conclusion denounced by Mr. Dohmeyer.

He again repeated in his Declaration that there was no authoritative test for assessing
damages when a machine operated at a level below specifications. (Declaration, 19). This
opinion seems at odds with the defendants’ Response, which insists that the measure of
damages is properly set forth in Moorman. More importantly, Mr. Dohmeyer contradicted his
deposition testimony by claiming that the Analysis of Economic Loss relied upon a “benefit of
the bargain” theory and took into account the production rates provided by the contract
specifications. (Declaration, | 23). To say this contradicts his previous position is an
understatement; he testified that the specifications were “inherently not relevant” and that he
“didn’t consider them one way or another.” (Dohmeyer Dep., at 35, 83).

The defendants do not attempt to justify the omissions and deficiencies in the February

46


In quoting from Moorman, the Response placed a period after the word “property,” and
ended the quote, thus conveying to the reader the impression that there was nothing further in
the sentence. Omitted was the reference to the Columbia Law Review article and this critical
phrase:

«* as well as ‘the diminution in the value of the product because it is inferior

in quality and does not work for the general purposes for which it was

manufactured and sold.’”

The UCC provides that “[t]he measure of damages for breach of warranty is the
difference at the time and place of acceptance between the value of the goods accepted and the
value they would have had if they had been as warranted, unless special circumstances show
proximate damages of a different amount.” 810 ILCS 5/2-714(2). In addition, a party may also
recover incidental and consequential damages, 810 ILCS 5/2-715, including lost profits. See
Arcor, Inc. v. Textron, Inc., 960 F.2d 710, 713-14 (7" Cir. 1992) (buyer of a machine that
failed to live up to its warranty was entitled to not only the difference between the value of the
machine as warranted and its actual value, but lost profits as well); Mercer v. Long Mfg., N.C.,
Inc., 665 F.2d 61, 69 (5" Cir. 1982) (in case involving faulty combine, economic loss consists
of difference in value between combine as warranted and as received and any lost profits on
crops resulting from inability to use combine for harvesting); CogniTest Corp. v. Riverside

Pub. Co., 107 F.3d 493, 496 (7" Cir. 1997).*

8 Ina lengthy “Declaration” belatedly submitted by the defendants in response to the present
motion, Mr. Dohmeyer insisted that there is no authoritative text regarding the calculations of damages
due to a machine that operates at a rate below its specifications. (Defendant's Response to Plaintiff's
Motion to Bar, Ex. A, §19). The controlling legal definitions of economic loss and the measure of

(continued...)

14


side is Mr. Dohmeyer’s. Messrs. Barron, King and DaClue have not been designated as experts.
Hence, it would appear that Mr. Dohmeyer’s testimony, even if initially allowed, would
ultimately have to be stricken.

The instant case is analytically congruent with Dura Automotive. There, the court held
that the expert could have testified that the well field was contaminated by volatile organic
compounds and that ifthe defendant’s plastics plant was within the well field’s capture zone,
some of the contamination may have come from that plant. It did not follow, however, that he
could testify that the plant was within the well field’s capture zone. 285 F.3d at 613-614.

The defendant moved to bar the hydrogeologist’s testimony and to dismiss Dura’s claim.
Dura responded with affidavits from the four employees who had prepared the models on which
the hydrogeologist was basing his conclusions. The defendant moved to strike the affidavits on
the ground that the disclosure of additional expert witness was untimely. The district court
granted the motion and held that without the affidavits, there was insufficient evidence of the
reliability of the models, and the hydrogeologist’s testimony could not prove that accuracy. The
court barred the testimony and concluded that without it, Dura had no case. 285 F.3d at 612.

The Court of Appeals affirmed. It held that to the extent the affidavits contained
evidence that would have to be presented at trial by an expert witness or witnesses other than
the hydrogeologist in order for Dura to withstand a motion of judgment as a matter of law,
Dura’s failure to have made timely disclosure of their experts’ opinions invited application of
Rule 37(c)(1) to bar the authors of the affidavits (or any other expert for that matter) from

testifying. In the instant case, denying the motion to prohibit Mr. Dohmeyer’s testimony and

24


skill.”

The second aspect of Mr. Dohmeyer’s report is the “Analysis of Economic Loss,” to
which was attached Mr. Dohmeyer’s curriculum vitae. It contains the heading, “EXPERT
WITNESS TESTIMONY.” Rule 26(a)(2)(B) requires the disclosure of “any other cases in
which the witness has testified as an expert at trial or by deposition within the preceding four
years.” The report must be “detailed and complete.”” Salgado by Salgado v. General Motors
Corp., 150 F.3d 735, 741 n.6 (7" Cir. 1998)(quoting Advisory Committee’s note). Thus, the
cases have generally defined the “listing of cases” requirement to include the name of the court,
the name of the parties, the case number, and whether the testimony was given at deposition or
trial. Id. Accord Zollinger v. Owens-Brockway Glass Container, Inc., 233 F.Supp.2d 349,
356 (N.D.N.Y. 2002); Coleman v. Dydula, 190 F.R.D. 316, 318 (W.D.N.Y. 1999); Hilt v. SFC
Inc., 170 F.R.D. 182, 185 (D.Kan.1997); Giladi v. Strauch, No. 94 Civ. 3976, 2001 WL
388052, at *3 (S.D.N.Y. Apr.16, 2001).7

Innearly every instance, Mr. Dohmeyer’s description of the cases in which he previously
had been involved was uninformative. Here are 2 examples: “Breach of Contract — Analysis of

Economic Loss to an Oil & Gas Concern,” and “Economic Loss ~ Injury — Jay Gueck, Esq.

2° To emphasize the extent of his experience as an expert witness, Mr. Dohmeyer’s Declaration
says that he has provided “expert witness testimony and analysis for over 15 years in hundreds of
cases.” Id. at 2.

2! The Rule requires the qualifications of the witness, including a list of all publications authored

by the witness within the preceding ten years; the compensation to be paid for the study and testimony;
and a listing of any other cases in which the witness has testified as an expert at trial or by deposition
within the preceding four years.

42


that the problems with the stacker’s magnets had been responsible for the vast majority of the
deficiencies, and that these problems had been rectified by August, 2003. (Dohmeyer Dep., at
39, 42-43).

The five-minute estimate was a product of the defendants’ assurances that the remaining
problem — leveling the steel — could be corrected manually in 30 seconds to one minute per
coil, which Mr. Dohmeyer rounded up to five minutes to be “conservative.” (Dohmeyer
Deposition at 62-63). This amounted to fifty minutes of labor per shift which he rounded up
to an hour. This figure was then multiplied by 468 shifts per year over the ten-year period.
Discounting the resulting sum to account for present value, cost of capital, and inflation, Mr.
Dohmeyer arrived at $142,339 for future damages. (Analysis at unnumbered p. 3).

The lost profits calculations are a bit more difficult to discern, as the Analysis simply
says under the captioned “Lost Business (Max)”:

Lost Business (Economic Profits - August 2003 > .10 Gauge $50,000
60" Inch Line Sold in February 2003

(Analysis at unnumbered page 5). The footnote after the $50,000 figure says “Expected Value
of Economic Profits - Max - See Industry Analysis.” However, referring to the 14 page portion
of the Analysis captioned “Industry Analysis” is a hopelessly uninformative exercise. All this
part of the Analysis did was to summarize some unilluminating generalizations about the steel
industry that Mr. Dohmeyer’s DVC assistant had gotten off the internet.

Athis deposition, Mr. Dohmeyer explained that the $50,000 figure was drawn from his

analysis for processing “high gauge” steel or “toll processing.” (Dohmeyer Dep., at 104, 106).


Chicago area. It employs 70 people, and its customer base is largely in the Midwest. It is in
the business of slitting and cutting raw steel into lengths and thicknesses according to customer
specifications. Its customers include various industries, from filing cabinet manufacturers to
metal building products and stock containers. (Complaint, § 1; www.loeffel.com).

AM. Castle & Co., specializes in the distribution of carbon, alloy and stainless steels;
nickel alloys; aluminum; titanium; and brass and copper in a variety of product forms, including
bar, plate, tube, sheet and coil. It operates a subsidiary, Total Plastics, Inc., through which it
distributes a broad range of value-added industrial plastics. Through another subsidiary, Oliver
Steel Plate, it has a market position in alloy and heavy gauge carbon plate products. Along with
its affiliated companies, Castle has facilities in over 40 locations throughout North America.
Its customer base includes numerous Fortune 500 companies as well as thousands of medium
and smaller-sized firms spread across a wide spectrum of industries. (www.amcastle.com).

Friedman Industries, Inc. is in the flat roll sheet and plate steel processing and
distribution business. It operates two plants, in Texas and Arkansas, each capable of cutting-to-
length, leveling, and temper passing hot roll steel coils. It operates a division selling excess
prime, secondary, and transition steel coils, and a division that rolls and welds pipe for use in
the water well industry, steel building columns, steel pipe piling, water and air lines, and many
structural applications. (www.friedmanindistries.com).

Gibraltar Steel Corp.’s core business is producing value-added, high-margin steel
products and services. It has expanded into the metal processing, building products, and

commercial heat-treating markets, and is now the second-largest commercial heat-treater in

35


Wilson Associates, 965 F.2d 160, 173 (7" Cir. 1992).

Under Rule 703, an expert may rely on hearsay in formulating his opinion — provided the
requirements of Rule 702 are met — but the evidence is not admissible for the truth of the
matters asserted. United States v. Gonzales, 307 F.3d 906, 910 (9" Cir. 2002); TK-7 Corp.
v. Estate of Barbouti, 993 F.2d 722, 734 (10" Cir. 1993)(‘“the hearsay is admitted for the
limited purpose of informing the jury of the basis of the expert’s opinion and not for proving
the truth of the matter asserted.””). Cf Gregory v. Oliver, 2002 WL 31972165 at *3 (N.D.IIl.
Dec. 27, 2002)(Shadur, J.).

Rule 703 was never intended to allow oblique evasions of the hearsay rule. In Dura
Automotive, the Seventh Circuit acknowledged that it “is common in technical fields for an
expert to base an opinion in part on what a different expert believes on the basis of expert
knowledge not possessed by the first expert.” 285 F.3d at 613. For example, as the Committee
Notes to the 1972 Proposed Rule 703 observed, a physician, though not an expert in radiology,
may rely for a diagnosis on an x-ray. Jd, The Seventh Circuit extrapolated from there to make
its point:

We too do not believe that the leader of a clinical medical team must be qualified

as an expert in every individual discipline encompassed by the team in order to

testify as to the team’s conclusions. But suppose the soundness of the

underlying expert judgment is in issue. Suppose a thoracic surgeon gave expert

evidence in a medical malpractice case that the plaintiff's decedent had died
because the defendant, a radiologist, had negligently failed to diagnose the
decedent’s tung cancer until it was too advanced for surgery. The surgeon would

be competent to testify that the cancer was too advanced for surgery, but in

offering the additional and critical judgment that the radiologist should have

discovered the cancer sooner he would be, at best, just parroting the opinion of
an expert in radiology competent to testify that the defendant had x-rayed the

21


The Analysis of Economic Loss contained 12 pages of graphs and charts reflecting
financial data about 8 companies: A.M. Castle & Co.; Friedman Industries Inc.; Gibraltar Steel
Corp.; Olympic Steel Inc.; Reliance Steel & Aluminum Co.; Ryerson Tull, Inc.; Steel
Technologies Inc.; and Worthington Industries, Inc. The information was obtained from 10k’s
and Standard & Poor’s reports. Mr. Dohmeyer could not explain how the companies were
selected for inclusion in the sampling. This is the best he could say:

I think one of the guys did a search on one company that was — that had a similar
description to the description for this kind of business, what they do.

(Dohmeyer’s Dep. at 121)(Emphasis supplied). How the other seven were selected remains
unexplained.

The charts reflected the total sales, gross profit margins, net income, equity, return on
equity, stock price, book value, and market to book value of the 8 companies for the period
1999 - 2002. According to Mr. Dohmeyer, the financial history of the eight companies during
that period was relevant in evaluating Loeffel’s potential for acquiring new business with the
Line. (Dohmeyer Dep., at 119-121). But what that new business was to be, Mr. Dohmeyer
wasn’t sure. He referred to it, variously, as “toll processing, [] heavier gauge or wider gauge or
both, I don’t know.” (Dohmeyer Dep., at 126). Whatever it was to be, Mr. Dohmeyer explained,
its net present value was a function of the competitive environment of the “industry,” as
reflected by the eight corporations that been chosen. (Dohmeyer Dep., at 126).

He testified that since the 8 companies had experienced financial difficulties between

1999 and 2002, Loeffel could not have hoped to do any better. (Dohmeyer Dep., at 120-122).

27


“If, for example, the expert witness (call him A) bases his opinion
in part on a fact (call it X) that the parties lawyer told him, the
lawyer cannot, in closing argument, tell the jury, ‘see we proved X
through our expert witness, A.’”

Id. at 173. (Parenthesis in original).

This was the kind of hand-off attempted in James Wilson Associates, where an architect
attempted to testify to the value of a building based upon a report provided to him by a
consulting engineer, who had examined the building. The Seventh Circuit held that the trial
judge “was entitled to exclude the architect’s evidence as hearsay.” /d. at 172. The issue was
the state of the building, and the expert who had evaluated that state — the consulting engineer
— was the one who should have testified. The architect could use what the engineer told him to
offer an opinion within the architect’s domain of expertise, but he could not testify for the
purpose of vouching for the truth of what the engineer told him — “of becoming in short the
engineer’s spokesman.” /d, at 173. It “is improper to use an expert witness as a screen against
cross-examination (though the other side could always call him as an adverse witness, and
cross-examine him).” /d. (Parenthesis in original).

Yet, without the testimony of Messrs. Barron, King and DaClue explaining and justifying
their labor-added theory, Mr. Dohmeyer’s testimony will “rest[ ] on air.” Dura Automotive,
285 F.3d at 615. If the underlying assumptions cannot be proven by admissible, competent
evidence, the very nature of which would appear to require expert testimony, Mr. Dohmeyer’s

analysis of economic loss would have no evidentiary support and would be irrelevant. See Rule

402, Federal Rules of Evidence. Yet, the only expert disclosure in the case on the defendants’

23


North America and is a major supplier of metal building products. These operations utilize any
one or a combination of more than 25 different processes and services to manufacture and
deliver a variety of high-quality steel products and services. Gibraltar has expanded its customer
base through the acquisition of 22 businesses and the investment of more than $200 million in
capital expenditures and now has 72 facilities in 26 states, Mexico, and Canada serving more
than 10,000 customers in a variety of industries. These customers are both domestic and
international, including manufacturers and distributors and, to a lesser extent, end-users for a
wide range of applications, and consumers through hardware and building products distributors
and mass merchandisers. Gibraltar’s major commercial markets include the automotive,
automotive supply, building and construction, steel, machinery, and general manufacturing

industries. (www.gibraltar].complaint).

Olympic Steel is a domestic steel service center with a primary focus on the direct sale
and distribution of large volumes of processed carbon, coated and stainless flat-rolled sheet,
coil and plate steel products. Its processing services include both traditional service center
processes of cutting-to-length, slitting, and shearing and higher value-added processes of
blanking, tempering, plate burning, laser welding, and precision machining of steel parts.
Olympic operates 12 processing and distribution facilities in Connecticut , Georgia, Illinois,
lowa, Michigan, Minnesota, Ohio, and Pennsylvania, with over 800 employees. It participates
in two joint ventures in Michigan that primarily service the automotive market in the Detroit
area. Its customers include both regional concerns and larger national and multi-location

accounts, located throughout the midwestern, eastern and southern United States.

36


in the Bar than a license to sign a brief or intone a prosy argument.” Cardozo, Law and
Literature, 145-46 (1931). Justice is not a game, and zealous advocacy does not entitle a
lawyer to “‘hoodwink a judge [or an opponent] who is not overwise.’” United States v. Paglia,
190 F.2d 445, 448 (2TM Cir. 1951)(L. Hand, J.).’

b
The Reliability Of Mr. Dohmeyer’s“Labor-Added” Methodology

Mr. Dohmeyer’s damage model and calculation of economic loss suffer from the further
flaw that they violate of Rule 703 of the Federal Rules of Evidence.'°
Mr. Dohmeyer’s calculation of economic loss is based on the assumption that the

addition of extra labor and shifts would allow the Line to yield the same productivity as it would

° A similar kind of manipulation is found in the defendants’ rendition of Frymire-Brinati v.
KPMG Peat Marwick, 2 F.3d 183 (7" Cir. 1993). The discussion in the Response brief makes it
appear as though the plaintiff's expert, a real estate appraiser, was improperly forbidden to testify that
the plaintiff's expert, a certified public accountant, “bungled” his “valuation of damages.” (Response at
16). “Similar[ly],” the defendants say, they proffer “Mr. Dohmeyer, an economist, as its expert.” Id.
Mr. Dohmeyer isn’t an economist, and the two cases are not similar. In Brinati, the chairman of the
real estate committee of the American Institute of Certified Public Accountants, nor the appraiser,
testified that the plaintiff's CPA had “bungled” by using historical rather than projected future income in
his cash flow analysis. 2 F.3d at 187. It was in an effort to “move from theory to concrete valuation”
that the appraiser was to testify thereafter about the accuracy of property values in the financial
statements.

10 Rule 703 provides:

Bases of Opinion Testimony by Experts

The facts or data in the particular case upon which an expert bases an opinion or

inference may be those perceived by or made known to the expert at or before the

hearing. If of a type reasonably relied upon by experts in the particular field in forming
opinions or inferences upon the subject, the facts or data need not be admissible in

evidence in order for the opinion or inference to be admitted. Facts or data that are otherwise
inadmissable shall not be disclosed to the jury by the proponent of the opinion or inference
unless the court determines that their probative value in assisting the jury to evaluate the
expert’s opinion substantially outweighs their prejudicial effect.

18


v. Sara Lee Hosiery, 179 F.R.D. 450 (D.N.J. 1998) (excluding certified public accountant’s
damage calculations because they relied on speculative and unsupported assumptions).

In Tuf Racing Products, Inc. v. American Suzuki Motor Corp., 223 F.3d 585 (7° Cir.
2000), the court rejected as unsound the notion that Daubert required particular credentials for
an expert witness, finding that “anyone with relevant expertise enabling him to offer responsible
opinion testimony helpful to judge or jury may qualify as an expert witness.” Jd. at 591. Thus,
Mr. Dohmeyer’s admitted lack of specific experience with multi-blanking machines is not a
disqualifying factor. See Loeffel Steel Products v. Delta Brands, 2005 WL 1388076 at *7>

We turn then to the second prong of the inquiry, namely the reliability of the method that
Mr, Dohmeyer and his associates employed to arrive at their damage figures.

2
The Methodology Underlying The Analysis of Economic Loss

There are two aspects to Mr. Dohmeyer’s methodology that trouble Loeffel. The first
is Mr. Dohmeyer’s use of a definition of “economic loss” that he devised, and the second is his
reliance on the defendants’ employees for the theory and supporting information that any

deficiencies in the Line can be rectified by additional labor and extra shifts.

5 See also Maiz v. Virani, 253 F.3d 641 (11" Cir. 2001) (allowing economist with no real

estate development experience to testify about expected returns from real estate investment); Quinton

v, Farmland Industries, 928 F.2d 335, 336 (10" Cir.1991) (veterinarian need not be a specialist in
toxicology to testify on toxic effect of a substance on cows); Ashland Oil, Inc. v. Delta Oil Prods.
Corp., 685 F.2d 175, 178 (7" Cir. 1982), cert. denied, 460 U.S. 1081 (1983) (trial court properly
relied on testimony of expert in chemistry despite lack of expertise in polyurethane chemistry).

10


law at the University of Chicago and a fellow in economics and public policy was not qualified
as an expert on trademark law despite his extensive reading of trademark cases).'°

The eight congeners selected by DVC were large to massive, publicly traded companies.
According to Mr. Dohmeyer’s charts, their average median total sales for the period 1999 -
2002 was $640 million, while Loeffel’s was $19 million.’ Perhaps this alone is not enough
to tip the balance. But, what does is Mr. Dohmeyer’s inexplicable failure to have considered
such critical factors as what services the companies provided, their customer base, the products
they sold, the geographic markets in which they operated, their prices and other critical aspects
of the businesses. In fact, Mr. Dohmeyer admitted at his deposition that neither he nor his
colleagues researched Loeffel or the eight comparative companies’ customer bases. Yet,
unless Loeffel’s customer base and the services and products it offered approximated those of
the eight companies, they were not “comparable,” and the latters’ economic fortunes would not
be a “reliable” predictor of how Loeffel would have fared in the period 1999-2002.

The internet reveals the manifest unreliability of Mr. Dohmeyer’s assumption about the

uniformity of steel service centers — an assumption that is the lynchpin in his theory of

'S The defendants have taken a somewhat inconsistent position on the question of Mr.
Dohmeyer’s expertise in the steel industry. First, they say that that expertise is “inconsequential.”
(Response at 9). Then, as an afterthought, they say that Mr. Dohmeyer “perform[ed] thorough
research on the steel industry.” Of course he did no such thing and saying it doesn’t make it so.
Finally, they say he consulted with the defendants’ personnel, who have extensive experience in the
steel industry. Jd. There is nothing to support the claim that the defendants’ employees are experts,
and Mr. Dohmeyer never claimed that they imparted information beyond their labor-added theory. In
any event, even if they had, that would not begin to satisfy the requirements of Rule 702 or 703.

'6 In 2002, the actual sales for the eight companies ranged from $99 million to $2.296 billion.

There was a similar range in gross profit margins ranging from a low of 6% to a high of 29.8% in 2002.

33


words, or at least we must constantly translate our words into facts for which they stand, if we
are to keep to the real and the true." Holmes, Law In Science and Science In Law, 12
Harv.L.Rev. 443, 460 (1889).

Mr. Dohmeyer’s inexpert conclusion that each participant in “an industry” necessarily
competes with every other participant in the industry is demonstrably false, as Dohmeyer’s own
report shows. He claimed that the “steels/metals industry” was comprised of three tiers. But
as his report noted, the three categories of industry participants were not competitors, but
enjoyed a symbiotic relationship. Bentleys and Kias are in the same “industry,” but obviously
don’t compete for the same customers. Arnold Schwarzenegger and Anthony Hopkins never
competed for the same roles, although they were both in the “movie industry.”

Of course, these are matters of public knowledge. The inquiry becomes more difficult,
when the “industry” is more complicated and less obvious. Perhaps, all “steel service centers”
do compete; perhaps they don’t, or perhaps they do only to an exceedingly limited degree,
measured by the extent of the products and services they offer in common, and their geographic
location. But only an expert in the field is qualified to say, and neither Mr. Dohmeyer nor his
colleagues even begin to qualify. Cf Gentieu, 214 F.Supp.2d at 851. (What controls the
admissibility of an expert’s opinion evidence, “depends on whether his claimed expertise
qualifies him to opine on the specific matters that he seeks to address.”).

A moment’s reflection demonstrates the error in Mr. Dohmeyer’s facile, and under-
inclusive methodology. Suppose the eight companies selected by DVC had, as does Loeffel,

blanking operations, but, in addition, offered a very large number of other diversified products

30


with their often absolutist and clashing conclusions, it also made clear that in those cases in
which the proponent of an expert could not demonstrate the reliability of the methodology
employed by the expert, the court was required to disallow the testimony. The opportunity for
vigorous cross examination and the presentation of contrary evidence — the traditional and
appropriate means of attacking shaky but admissible evidence, Daubert, 509 U.S. at 596 — is
not a basis for allowing otherwise inadmissible testimony to be admitted.

Kumho Tire Co. Ltd. v. Carmichael, 526 U.S. 137 (1999) reaffirmed the teachings of
Daubert, but emphasized that the Daubert factors were not applicable, semper ubique et ab
omnibus. They need only be considered when doing so will aid in the determination of the
testimony’s reliability. /d. at 142, 150. The inquiry is always, and of necessity, highly fact-
specific, and no one factor, even when applicable, is outcome-determinative.

Daubert also cautioned judges assessing a proffer of expert testimony under Rule 702
to be mindful of other applicable rules, such as Rule 703, which permits an expert to base an
opinion on information that need not itself be admissible, so long as it is the kind of
information relied on by other experts in the field. 509 U.S. at 595.

A
Evaluation of Reliability of Mr. Dohmeyer’s Testimony

1
Qualifications of Mr. Dohmeyer and his Firm

Mr. Dohmeyer has a bachelor’s degree in finance and is an accredited senior appraiser
with the American Society of Appraisers (“ASA”). That accreditation was, according to Mr.

Dohmeyer, the equivalent of a CPA for valuation and financial analysts. (Dohmeyer Dep., at

7


The problems processing “high gauge” steel or “toll processing” could not be corrected by
additional labor — that business was lost. (Dohmeyer Dep., at 70-71, 102-104). Although it is
unclear from the Analysis, this was apparently a new business that Loeffel hoped to get into by
virtue of the Line, but could not due to the Line’s shortcomings. (Dohmeyer Dep. at 106). In
reaching the $50,000 figure, Mr. Dohmeyer also considered his review of Loeffel’s
performance between 1999 and 2002, as well as the performance of the eight publicly traded
companies selected as the sampling against which Loeffel’s prospects in that period were to be
measured. (Analysis at unnumbered pp. 6-11; Dohmeyer Dep. at 116-128).

I.
THE ANALYTICAL FRAMEWORK FOR DETERMINING ADMISSIBILITY

Loeffel Steel Products v. Delta Brands, 2005 WL 1388076 (N.D.III. 2005) discussed
the analytical backdrop of motions to bar the testimony of an expert, and that discussion is
incorporated by reference. To it, the following should be added. The Supreme Court in
Daubert stressed the trial judge’s obligation to act as a gatekeeper to ensure that expert
testimony is reliable. The insistence on reliability helps to ensure the integrity of the judicial
process. Mid-State Fertilizer Co. v. Exchange Nat'l Bank of Chicago, 877 F.2d 1333, 1340
(7" Cir. 1989). That goal is of such obvious and transcendent importance that judges can act
sua sponte to prohibit testimony that does not pass muster under Daubert. O'Conner v.
Commonwealth Edison Co., 13 F.3d 1090, 1094 (7" Cir. 1994).

While Daubert reaffirmed the value of the adversary system generally and the capability

of juries to understand scientific evidence and weigh the credibility of the competing experts,


have running at faster speeds with fewer shifts. The theory and the precise number of additional
workers and shifts needed came from the defendants’ employees, on whom Mr. Dohmeyer
uncritically relied. It is undisputed that neither Mr. Dohmeyer nor his assistants at DVC had any
expertise in blanking machines and were incapable of assessing the validity of the information
provided by the defendants. (Dohmeyer deposition at 26, 33-38, 89). Cf: Bailey v. Allgas, 148
F.Supp.2d 1222, 1240 (N.D.Ala. 2000)(unquestioning reliance on opinions expressed by
plaintiff’s counsel not proper).

Proceeding from this “unquestioning reliance,” Gentieu v. Tony Stone Images/Chicago,
Inc., 214 F.Supp.2d 849, 853 (N.D.III. 2002)(Shadur, J.), Mr. Dohmeyer calculated the amount
it would cost Loeffel to pay the additional workers in order to produce as much finished steel
as would have been produced had the Line operated properly. Mr. Dohmeyer’s difficulty in
explaining how the additional workers would cure the situation demonstrates dramatically that
he brought no expertise to bear on the underlying assumptions on which his economic loss
theory was based:

Sure, just by having, you know, the kinds of things, you know — you have

to, I guess, re — recalibrate the machine every time you put a new roll on it where

it should have been automatic, you can have a guy standing there, you know, doing

that kind of thing. You know, once again, I don’t know the technical parts of it,

and I understood them a lot better when I did the interview and when I prepared

for this deposition last time, but I haven’t gone back to re-talk to them about

those specifics again for today’s deposition . .. . (Dohmeyer Dep. at 37).

Yet, Rule 703's relaxation of the usual requirement of firsthand knowledge — a rule

which represents a pervasive manifestation of the common law’s insistence upon the most

reliable sources of information — was premised on an assumption that the expert’s opinion will

19


approach to expert witness qualification taken by Rule 702. See Holbrook v. Lykes Brothers
Steam Ship, 80 F.3d 777, 782 (3° Cir. 1996); Carroll v. Otis Elevator Co., 896 F.2d 210, 212
(7" Cir. 1990). Overemphasis on qualifications over testimonial reliability reflects a
pre-Daubert sensibility. Rushing v. Kansas City Southern Ry, Co., 185 F.3d 496, 507 (5"
Cir. 1999).

Mr. Dohmeyer’s and his colleagues’ educational background and experience qualify Mr.
Dohmeyer and his colleagues to testify about, at least, certain of the matters presented in this
case. Characterizing them as “appraisers” does not advance analysis. Even appraisers can have
sufficient expertise to rebut the testimony of certified public accountants in appropriate cases.
See, e.g., Frymire-Brinati v. KPMG Peat Marwick, 2 F.3d 183, 186-87 (7th Cir.1993)(district
court erred in precluding a real estate appraiser to rebut a CPA’s opinion about real estate
values in financial statement).

No case of which we are aware remotely suggests, let alone holds, that only a certified
public accountant has the necessary expertise to testify about economic loss. In fact, being a
certified public accountant does not ensure admissibility of testimony. See e.g.,
Frymire-Brinati, 2 F.3d at 186-87 (under Daubert, expert testimony of certified public
accountant should not have been admitted); S.E.C. v. Lipson, 46 F.Supp.2d 758, 762 (N.D.IIl.
1999) (applying Daubert to bar testimony of certified public accountant on reliability grounds);
De Jager Construction, Inc. v. Schleininger, 938 F.Supp. 446, 449-455 (W.D.Mich. 1996)
(excluding certified public accountant expert opinion testimony that blurred the distinction

between substantive liability and a calculation of damages); Lithuanian Commerce Corp Ltd.

9


allowing him to testify when there will be no competent evidence to prove the truth of the
underlying assumptions would result in allowing testimony that would have to be stricken as
irrelevant. The law never requires an idle thing to be done. Brooklyn Life Insurance Co. v.
Dutcher, 95 U.S. 269, 272 (1877).

TK-7 Corp. v. Estate of Barbouti is also instructive.” To support the plaintiff's claim
and to calculate the amount of damages, the plaintiffs presented testimony from Dr. Boswell,
a financial economist and professor of finance. Dr. Boswell predicated his calculations of lost
profits on sales projections of one Werber. The district court initially allowed the testimony,
but ultimately directed a verdict against the plaintiff, based on insufficiency of the evidence of
damages. Mr. Werber was not called to testify, and the district court held that in order to
prevail, the plaintiff had to present affirmative evidence on the projections that Dr. Boswell had
assumed to be true. Accord International Adhesive Coating Co. v. Bolton Emerson
International, 85\ F.2d at 546. Since there was no such evidence, the plaintiff failed to carry
its burden of proof. In affirming, the Tenth Circuit pointed out that Dr. Boswell had no
familiarity with methods or reasoning used by Mr. Werber in arriving at his projections. In the
instant case, Mr. Dohmeyer conceded a similar lack of understanding or familiarity of the
models crafted by Messrs. Barron, King and DaClue.

c
The Unreliability of The Methodology Underlying Mr. Dohmeyer’s
Conclusions Regarding Loeffel’s Claim For Future Lost Profits And Business

The third aspect of Mr. Dohmeyer’s proposed expert testimony focuses on the Loeffel’s

"2 Barbouti was cited approvingly in Dura Automotive. 285 F.3d at 613.

25


IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

LOEFFEL STEEL PRODUCTS, INC.,
Plaintiff,
No. 01 C 9389

Magistrate Judge
Jeffrey Cole

vs.

DELTA BRANDS, INC., d/b/a DBI; and
SAMUEL F. SAVARIEGO, individually,

Defendants.

weer eevee we

MEMORANDUM OPINION AND ORDER

INTRODUCTION

On June 9, 2005, I denied the Defendants’ Motion to Bar the testimony of Loeffel Steel
Products’ expert liability witness, Mr. Rudolph Toczyl. See Loeffel Steel Products v. Delta
Brands, 2005 WL 1388076 (N.D.III. 2005). The history of the parties’ dispute is discussed
in that opinion and need not be repeated. I address here the plaintiff's motion to bar the
testimony of the defendants’ damages expert, Mr. Robert Dohmeyer and Dohmeyer Valuation
Corporation (“DVC”).

Like Gaul, Mr. Dohmeyer’s expert opinion and report may be divided into three parts.
The first is a “preliminary critique” of the report of Loeffel’s damage expert, William
Wiersema, contained in a letter dated February 27, 2004. The second and third components
are contained ina separate, 41 (unnumbered) page document captioned, “Analysis of Economic
Loss.” (“the Analysis”). It, too, was dated February 27",

The Analysis was a compendium of spreadsheets, reflecting 1) Mr. Dohmeyer’s


1998). They will not be permitted to “return to the drawing board” to restructure Mr.

Dohmeyer’s testimony. Gregory, 2002 WL 31972165 at *3.

DATE: July 22, 2005 ENTERED: f

48


have thought that the instruction mattered; why else so vigorously oppose Ladish's request for
an actual-knowledge instruction").

Mr. Dohmeyer’s admissions about the origin and uniqueness of his definition — he
conceded the definition was not to be found anywhere else (Dohmeyer Dep., at 18-19) — would
seem to trigger the principle that the opinion of an expert need not be accepted when based on
nothing more than personal opinion or belief instead of an understandable scientific basis.
Turpin v. Merrell Dow Pharmaceuticals, Inc., 959 F.2d 1349, 1360 (6" Cir.), cert. denied 506
U.S. 826 (1992); Thomas v. FAG Bearings Corp., 846 F.Supp. 1382, 1393 (W.D.Mo. 1994).
But this is only the beginning.

Mr. Dohmeyer’s definition was the basis for a damage theory and calculation that is
impermissible as a matter of law. It is not merely that the definition was not peer reviewed, not
tested, and not generally accepted, as Loeffel correctly argues.’ In addition, Mr. Dohmeyer’s
theory and methodology led him to exclude as a component of “economic loss” any amount
attributable to the diminished value of the Line, itself.

Both contract law and the UCC provide the appropriate remedy for “economic loss”

7 While Daubert applies to valuation testimony, whether offered by people like Mr. Dohmeyer,
certified public accountants, or economists, Frymire-Brinati v. KPMG Peat Marwick, 2 F.3d 183
(7" Cir. 1993), the Daubert factors are not to be rigidly applied in this or any other context. In some
context, they may not be applicable at all or may have diminished utility as measures of reliability.
Loeffel Steel Products v. Delta Brands, 2005 WL 1388076 at *6. Some courts have held they
“do not conform easily to an analysis of economic theory.” Bailey v. Allgas, Inc., 148 F.Supp.2d
1222, 1235 (N.D.Ala. 2000). In determining the admissibility of expert testimony with respect to
future lost profits, a trial judge has considerable leeway in determining the testimony’s reliability. /D
Security Systems Canada, Inc. v. Checkpoint Systems, Inc., 249 F.Supp.2d 622, 690 (E.D.Pa.
2003).

12


a
Mr. Dohmeyer’s Definition Of Economic Loss

The Analysis defined “economic loss” as: “the dollar sum, exclusive of prejudgment
interest and professional fees, required as payment in full necessary to make the damaged party
equal on an economic basis.” The definition, at least semantically, seems straightforward and
consistent with the general Uniform Commercial Code (“UCC”) and contract damage theory
that the fundamental purpose of any damage award is to place the plaintiff in the position it
would have been in had there been no breach, but not to place it in a better position or provide
it with a windfall. Platinum Technology, Inc. v. Federal Insurance Co., 282 F.3d 927, 932 (7
Cir. 2002).°

This apparent consonance was delusive, however, for Mr. Dohmeyer boasted in his
deposition that “many years ago” he and his boss devised the definition: “this is our definition
of what we believe the question is, what answer we are giving.” (Dohmeyer Dep., at 19)
(Emphasis supplied). If this definition of economic loss were faithful to basic damage theory,
there would have been no need for Mr. Dohmeyer to have devised and employed his own
definition. Cf Schenck v. United States, 249 U.S. 47, 48 (1919)(Holmes, J.)("Of course the
document would not have been sent unless it had been intended to have some effect. . . 7);

United States v. Ladish Malting Co., 135 F.3d 484, 490 (7th Cir. 1998)("The prosecutor must

6 Accord 810 ILCS 5/2-106(1)(UCC remedies “shall be liberally administered to the end that
the aggrieved party may be put in as good a position as if the other party had fully performed.”);
Dynamic Recycling Services, Inc. v. Shred Pax Corp., 210 Ill. App.3d 602, 615, 569 N.E.2d 570,
578 (1" Dist. 1991).

i


Mr. Dohmeyer’s appraisal. Jd, at 289.

I need not decide why the curriculum vitae failed, with but two exceptions, to list the
names of the 116 cases. Whatever the reason, given Mr. Dohmeyer’s extensive experience and
the defendants’ lawyer’s sophistication, the skeletal format employed was indefensible and
severely compromised Loeffel’s ability to investigate Mr. Dohmeyer’s involvement in any but
a handful of the 116 matters he listed.

But this omission is insignificant compared to Mr. Dohmeyer’s failure to disclose that
the Analysis of Economic Loss was based entirely upon a theory given to him by the defendants,
namely that the claimed deficiencies with the Line could be cured by the simple expedient of
adding two additional workers and running the Line longer. While the theory, itself, might be
deducible from the content of the arithmetic schedules that comprise the Analysis of Economic
Loss Report, the source of the theory was not. Nothing in the “Limiting Conditions,” which
purported to state the “general assumptions and general limiting conditions” on which the “value
opinion report has been prepared,” hinted that the core assumptions on which all of Mr.
Dohmeyer’s endeavors were predicated came from his employers. Indeed, Mr. Dohmeyer’s
report conveyed precisely the opposite impression.

In the “Appraisal Certification” attached to his report, Mr. Dohmeyer “certiflied] that,
to the best of our knowledge and belief,” the “reported analyses, opinions, and conclusions are
limited only by the reported assumptions and limiting conditions, and are our personal,
unbiased professional analyses, opinions, and conclusions.” He went on to say that “/nJo one

provided significant professional assistance to the person signing this report.” (Emphasis

44


indoor soccer arenas. The court rejected soccer arenas in general as comparable businesses
where there was no evidence offered regarding geographical location, size or attractiveness of
those facilities, the size and type of the market that they served, the relative costs of operation,
the amounts charged, or the number years the facility was run. Id. at 208. The Fifth Circuit
stressed that employing such a broad category was like “arguing that because McDonald’s
franchises earn a certain average rate of return, a particular franchise will perform to the
average.” Id. at 208-09. See also, Kinesoft Development Corp. v. Softbank Holdings Inc.,
139 F.Supp.2d 869, 910 (N.D.III. 2001) (rejecting damages calculation where expert gave no
consideration to any analysis of a comparable company selling comparable products).

It cannot be too often repeated or too strongly emphasized that “nothing in either
Daubert or the Federal Rules of Evidence requires a district court to admit opinion evidence
that is connected to existing data only by the ipse dixit of the expert. A court may conclude that
there is simply too great an analytical gap between the data and the opinion proffered.” Kumho
Tire, 526 U.S. at 157. That caution applies with singular force to Mr. Dohmeyer’s conclusion
that the eight publicly traded companies were comparable to Loeffel for purposes of assessing
lost future business and profits.

Mr. Dohmeyer lacked the qualifications to conclude that merely because all nine
companies could be classified as “service centers,” they necessarily competed with Loeffel or
that they were comparable. Spending a few minutes on the internet does not make one an expert
on any “industry” or on any topic. Cf Charter National Bank & Trust v. Charter One

Financial, Inc., 2001 WL 1035721 at *6 (N.D.IIl. September 4, 2001)(assistant professor of

32


and services, not offered by Loeffel. Assume further that unlike Loeffel with its localized
customer base in the Midwest, the eight companies had nationwide or worldwide operations.
In that event, the companies could scarcely be said to be comparable, and comparing their
undifferentiated sales and income figures to those of Loeffel, would prove absolutely nothing.
Cf. Bailey v. Aligas, Inc., 148 F.Supp.2d 1222, 1232 (N.D.Ala. 2000)."4

Mr. Dohmeyer at his deposition admitted he knew nothing about the respective
geographic or product markets or customer bases of the eight companies or of the quality of
service or any other relevant factor that would bear upon the question of comparability. See
Home Placement Svc., Inc. v. The Providence Journal Co., 819 F.2d 1199, 1206 (1* Cir.
1987). And the charts he compiled do not break out financial data by product or services.
Hence, the raw financial data does not tell anything about the performance of the eight
companies as to those products and services that they had in common with Loeffel. And it is
only with respect to those products that they would be competitors -- at least for the purposes
relevant to this case.

Even in cases involving far more comparability than is apparent here, courts have refused
to allow the seemingly comparable companies to be used as a yardstick. In Eleven Line, Inc.

y. North Texas State Soccer Ass'n, Inc., 213 F.3d 198 (5" Cir. 2000), the plaintiff owned

'4 Tn antitrust cases, proof of the relevant product and geographic market is absolutely essential.

The relevant geographic market is generally defined as the area of effective competition, that is the area

in which the product or its reasonably interchangeable substitutes are traded. A determination of the

geographic market must entail an analysis of several factors including the location of competitors and
price data. Id. Although this case presents different issues, for purposes of determining comparability,
the analysis is much the same.

31


13).4 He has lectured on the valuation of privately held businesses, and he has given expert
testimony in 32 cases involving “economic loss.” (See Analysis, Qualifications of Principal
Appraisers). At his deposition, Mr. Dohmeyer testified that DVC was primarily in the business
of appraising privately held businesses and analyzing economic loss, which, Mr. Dohmeyer
conceded could include the loss of profits due to poorly manufactured products. Mr.
Dohmeyer estimated that perhaps one in ten of the economic loss cases he had handled involved
equipment that failed to perform as the seller had promised. (Dohmeyer Dep., at 8-12).

Mr. Dohmeyer was assisted in his analysis by Kevin Morrison and Sontwa Sinkala. Mr.
Morrison has a bachelor’s degree in business administration, accounting, and finance. Sontwa
Sinkala has a master’s degree in business administration, specializing in corporate finance, and
a doctorate in economics and geography. Nonetheless, Loeffel contends that all three are
unqualified to testify in this case since none is a certified public accountant, none has any
expertise in the steel industry, none has experience in cases dealing with lost profits due to
faulty machinery, and the USPAP guidelines were not followed in preparing the Analysis of
Economic Loss. (P].Mem., at 6-9).

The argument that only a CPA with expertise in the steel industry — preferably, with
regard to multi-blanking machines and a prior history of expert testimony in a case involving

lost profits due to a poorly performing piece of machinery — is inconsistent with the liberal

4 The requirements for accreditation are completion of five years’ experience in business
appraisals, passing three technical exams, an ethics and the Uniform Standards of Professional
Appraisal Practice (“USPAP”) exam, and the submission of two appraisals for evaluation. (Dohmeyer
Dep., at 13).


decedent carelessly.

Id. The problem, then, is that the expert is vouching for the truth of what another expert told
him — he is merely that expert’s spokesman. But, “[a] scientist, however well credentialed he
may be, is not permitted to be the mouthpiece of a scientist in a different specialty. That would
not be responsible science.” Id. at 614, See also Grant v. Chemrex, Inc., No. 93 C 0350, 1997
WL 223071, *8 (N.D.II. Apr. 28, 1997) (expert’s “professional knowledge and ability” were
not adequate to evaluate calculations and opinions upon which he based his opinion)."'

That is precisely the situation here: If allowed to testify, Mr. Dohmeyer would be
“hid[ing] behind” Messrs. Barron, King and DaClue and acting as their “mouthpiece.” /d. at 615.
He would, in effect, be vouching for their labor-added methodology, when he has absolutely no
knowledge of whether the theory is valid and reliable. See also TK-7 Corp., 993 F.2d 722.
Thus, Mr. Dohmeyer’s testimony cannot be used to prove that additional labor and shifts were
in fact the medicament for the Line’s ills. In re James Wilson Associates, 965 F.2d 160, 173
(7" Cir. 1992)(Posner, J.)

The example posed by Judge Posner in James Wilson Associates demonstrates the

problem with Mr. Dohmeyer’s testimony:

"| By way of example, the court in Dura Automotive said that a theoretical economist, who
relied on the findings of an econometric study conducted by another economist, would not be allowed
to testify if he lacked expertise in econometrics, and the study raised questions that only an
econometrician could answer. 285 F.2d at 614. Even Judge Wood, who dissented, agreed with this
example. Id. at 620. See also TK-7 Corp., 993 F.2d at 732 (the rationale of Rule 703 “is certainly not
satisfied in this case where the expert failed to demonstrate any basis for concluding that another
individual’s opinion on a subjective financial prediction was reliable, other than the fact that it was the
opinion of someone he believed to be an expert who had a financial interest in making an accurate
prediction.”).

22


Toczyl’s expert opinion. It was inappropriate there. Loeffel Stee! Products, supra. It is,
however, appropriately applied to the sampling of supposedly comparable companies compiled
by DVC. Mr. Dohmeyer’s testimony will not be allowed. The oft-repeated caution that courts
should be particularly wary of unfounded expert opinion when causation is the issue applies
here. See In re Agent Orange Product Litigation, 611 F.Supp. 1223, 1249 (E.D.N.Y. 1985),
aff'd, 818 F.2d 187 (2TM Cir. 1987), cert. denied sub nom., Lombardi v. Dow Chemical Co.,
407 U.S. 1234 (1988); Thomas v. FAG Bearings, 846 F Supp. 1382, 1394 (W.D.Mo. 1994).

B
Assessment of Relevance

To be admissible, expert testimony must be not only reliable, but relevant. Daubert, 509
USS. at 597; United States v. Allen, 390 F.3d 944, 949 (7" Cir. 2004). Testimony is relevant
if it assists the trier of fact in understanding the evidence or in determining a fact at issue. An
expert, who, like Mr. Dohmeyer, supplies nothing but a bottom line supplies nothing of value
to the judicial process. Minasian v. Standard Chartered Bank, PLC, 109 F.3d 1212, 1216 (7
Cir. 1997).

I
MR. DOHMEYER’S REPORT CRITIQUING MR. WIERSEMA’S
ANALYSIS VIOLATED RULE 26(a)(2)

We come then to the argument that the defendants’ failure to comply with the

requirements of Rule 26(a)(2)(B), Federal Rules of Civil Procedure, requires barring testimony

by Mr. Dohmeyer critical of Mr. Wiersema’s conclusions. Recognizing that secrecy is not

congenial to truth seeking, the Rule requires that an expert report must disclose “a complete

39


statement of all opinions to be expressed and the basis and reasons therefor . . "8 Hoffman
v. Caterpillar, Inc., 368 F.3d 709, 714 (7" Cir. 2004)(Emphasis supplied).'”

Mr. Dohmeyer’s critique of Mr. Wiersema’s report is his one page letter of February
27, 2004. Despite the clarity of Rule 26, and the fact that Mr. Dohmeyer was engaged
specifically to analyze Mr. Wiersema’s conclusions (Defendants’ Response at 2), his report

consisted of but five unadorned conclusions, set forth in bullet- point format:

° the Report’s model has multiple incorrect premises of damages;
. The Report’s model fails to incorporate risk/cost of capital procedures;
. The Report’s model adds the alleged lost profits of the equipment as represented

and the cost of the machine;
. The Report’s model’s methodology; and
. The Report’s model has [sic] other assumptive and methodological errors.
The letter concludes: “As a result of the foregoing, Mr. Wiersema’s model and related opinions

are not reliable.”

'8 Rule 26(a)(2)(B) provides, in pertinent part:

Except as otherwise stipulated or directed by the court, this disclosure shall, with respect to a
witness who is retained or specially employed to provide expert testimony in the case or whose
duties as an employee of the party regularly involve giving expert testimony, be accompanied by
a written report prepared and signed by the witness. The report shall contain a complete
statement of all opinions to be expressed and the basis and reasons therefor; the data or

other information considered by the witness in forming the opinions, [and] any exhibits to

be used as a summary of or support for the opinions;. . .. (Emphasis supplied).

'9 Mr. Wiersema’s report referred to approximately 1800 pages of exhibits, detailing expenses

Loeffel claims to have incurred as a result of the Line’s malfunctioning and the damages from claimed
losses of current and prospective customers.

40


The figures showed, among other things, declines in median total sales for the 8 companies
from 2001 to 2002. But Loeffel had a 5.3% increase in 2002, while the 8 companies had a
median loss of 2.2%. Similarly, while the median decline from 2000 to 2001 in gross profit
margins of the 8 companies was 5.8%, Loeffel had a 1.4% increase. From 2001 to 2002, there
was a median increase in gross profit margin of the 8 companies of 6.7%, while Loeffel’s
increased 23.9%.

In order for the sampling chosen by DVC comparison to have the requisite predictive
capacity and the reliability Daubert demands, Mr. Dohmeyer had to “select samples that are
truly comparable. To put it another way, care must be taken to be sure that the comparison is
one between ‘apples and apples’ rather than one between ‘apples and oranges.” Donnelly v.
Rhode Island Board of Governors for Higher Education, 929 F.Supp 583, 591 (D.R.I. 1996).

In calculating lost future profits or lost business, the measure of damages is guided by
analysis of “comparable businesses in the area.” Cates v. Morgan Portable Bldg. Corp., 591
F.2d 17, 21 n.7 (7 Cir. 1979)(Emphasis supplied). “[{T]he business used as a standard must be
as nearly identical to the plaintiffs as possible.” Lehrman v. Gulf Oil, 500 F.2d 659, 667 (5"
Cir. 1974), cert. denied, 420 U.S. 929 (1975). Accord In re James O'Connell Co. Inc., 799
F.2d 1258, 1269 (9" Cir. 1986); National Farmers Organization, Inc. v. Associated Milk
Producers, Inc., 850 F.2d 1286, 1292 (8" Cir. 1989). This is often referred to as the “yardstick
approach.” Absent the requisite showing of comparability, a damage model that predicts either
the presence or absence of future profits is impermissibly speculative and conjectural. Cf

Home Placement Sve., Inc. v. The Providence Journal Co., 819 F.2d 1199, 1209 (1* Cir.

28


methodology, and based on his conclusions about “industry” conditions between 1999 and 2002
— as reflected by the financial data of eight publicly traded companies ~ Mr. Dohmeyer
concluded that Loeffel’s lost profits could not exceed $50,000.

The Analysis begins with an estimate of the hourly wages of the two additional workers,
based upon the rates in Texas, where the defendants were located. Adjusting those rates —
$13.00 for an operator and $7.50 for a helper — to what would be comparable in the Chicago
area, Mr. Dohmeyer arrived at a total of $26.65 for both positions. Factoring in benefits left
the combined rate at $39.98, which Mr. Dohmeyer arbitrarily increased to $50.00 per hour.
Over the 702 days Loeffel ran the machine prior to August of 2003, based upon one eight-hour
shift per day, Mr. Dohmeyer arrived at a maximum “economic loss” figure of $280,000, the
amount that would compensate the two additional workers for the relevant period. (Analysis
at 2; Dohmeyer Deposition at 26, 30, 33).

Mr. Dohmeyer then calculated future damages over a ten-year life of the Line, beginning
in August of 2003. He began with the assumption, again based on what he was told by the
defendants’ employees, that Loeffel could process ten coils of steel on the Line every eight-
hour shift, The “economic loss” figure was based on the defendants’ assessment of the
processing time. (Dohmeyer Deposition at 63-64). For this period, he was told by the
defendants that an additional five minutes of labor per coil would alleviate any problems

remaining with the Line during that period.’ Once again this was based on the twin assumptions

3 Each coil of steel weighs as much as 60,000 Ibs.

4


27" critique or in Mr. Dohmeyer’s curriculum vitae; nor do they attempt to argue that the
omissions are harmless. Instead, they say that Mr. Dohmeyer has “satisfie[d] all the
requirements of Rule 26,” and that Loeffel’s only objection relates to the “format” of the
February 27" letter. (Response at 17). Any argument of harmlessness is therefore forfeited.
See Hammel v. Eau Galle Cheese Factory, 407 F.3d 852, 869 (7 Cir. 2005); Musser v.
Gentiva Health Servs., 356 F.3d 751, 758 (7" Cir. 2004); Rule 37(c)(1), Federal Rules of
Civil Procedure. To the extent the Declaration repeats Mr. Dohmeyer’s deposition testimony,
it is irrelevant. To the extent it seeks to explain the basis for his opinions either in his
deposition or in his reports, it is improper and untimely and will not be considered. Bailey v.
Aligas, 148 F .Supp.2d at 1236. Cf Dura Automotive.
IV
CONCLUSION

The plaintiff's motion to bar the testimony of Mr. Dohmeyer [77] is GRANTED, and the
plaintiff's motion to strike exhibits A and C to the Response [93] is also GRANTED. The
defendants’ unamplified request for a “full Daubert hearing to determine the admissibility of
Mr. Dohmeyer’s testimony,” made in the last sentence of their Response brief, is denied. I have
before me the deposition of Mr. Dohmeyer and his reports. No more is needed to determine
reliability. Kumho Tire, 526 U.S. at 152; Group Health Plan, Inc. v. Philip Morris USA, Inc.,
344 F.3d 753, 761 n..3 (8" Cir. 2003); Oddi v. Ford Motor Co., 234 F.3d 136, 153-154 (3"
Cir.), cert. denied 532 U.S. 921 (2000); In re Handford Nuclear Reservation Litigation, 292

F.3d 1124, 1138-39 (9" Cir. 2002); Kirstein v. Parks Corp., 159 F.3d 1065, 1067 (7" Cir.

47


supplied). This was untrue: the defendants’ employees had provided the salient “assumption”
on which the Analysis Of Economic Loss was based, and nothing played a more “significant”
role in that analysis.

Mr. Dohmeyer attempted at his deposition to distance himself from the “Statement of
Limiting Conditions” by claiming that the attachment was “boilerplate that we use in. . . all of
our assignments,” and that the Appraisal Certification wasn’t particularly meaningful since his
report was not a business appraisal, but an economic loss analysis. (Dohmeyer deposition at
21, 15-17). In his belatedly filed Declaration, he said that the appraisal certification was
attached in error to the Analysis. Jd. at 2.

Some six months after the deposition, Loeffel filed the instant motion and raised the
issue of the non-compliance with Rule 26(a)(2)(B). In response, the defendants filed a nine-
page declaration from Mr. Dohmeyer anda paragraph from a book on valuation by Sharron Pratt.
The breezy squib cites no authority, either scholarly or legal for its conclusion. Ms. Pratt,
according to her internet site, is the owner of Business Valuation Resources, a company
dedicated to “high-quality valuation related resources” for all manner of professionals.”

The Declaration echoed much of Mr. Dohmeyer’s deposition testimony. But it went
substantially beyond that and attempted to make the case against Mr. Wiersema that the

February 27" “critique” did not. Not surprisingly, Loeffel objects to the Declaration and to the

4 The defendants’ Response calls Ms. Pratt a “highly regarded economist,” but does not
identify the basis for the representation. (Response at 7). An internet search reveals that she writes on
valuation of businesses. www.bvresources.com. Ms. Pratt is apparently in the same field as Mr.
Dohmeyer.

4S


The measure of damages under Loeffel’s fraud claim (Count V) is the same. The victim
of a fraudulent misrepresentation is entitled to recover as damages those losses caused by the
misrepresentation, “including (a) the difference between the value of what he has received in
the transaction, and its purchase price or other value given for it. . . .” Restatement (2d) Torts
§ 549 (1977). Accord DiRose v. PK Management Corp., 691 F.2d 628 ,631 (2TM Cir. 1982);
FDIC vy, Palmero, 815 F.2d 1329, 1341 (10" Cir. 1987); Four S Alliance Inc .v. American
National Bank, 104 Ill. App.3d 636, 432 N.E.2d 1213 (1" Dist. 1982); Dobbs, Remedies, §
9.2 at 594-95 (1973)(“If a plaintiff has been induced to buy a house because of an intentional
false representation that it is free from termites, the plaintiff is entitled to recover the
difference between the value of the house as it actually exists and the value it would have had
if it had not had termites. This rule puts him in the same financial position as if the fraudulent
representations had been true.”).

An examination of Mr. Dohmeyer’s deposition testimony reveals the likely reason for
the omission from the Moorman quotation. He testified that his assessment of economic loss
necessarily omitted any consideration of the difference between the value of the Line as
warranted and its diminished value resulting from the Line’s flaws. He attempted to illustrate
the point with the following hypotheticals.

A: Well, if you paid — if you bargain to buy a machine for $10 and you allege

once you got it you only paid nine because you hold back a dollar until it works
right, but you say, hey, this machine doesn’t work right; in fact, the damages on

8(,..continued)
damages available under Illinois law — which the defendants concede controls this case — would have
been a starting point.

15


In his belatedly filed Declaration, Mr. Dohmeyer claimed what he had never claimed at
his deposition, namely that his analysis of economic loss relied on a “benefit of the bargain
theory,” which he defined this way: ““But for’ the defendant’s allegedly defective machine,
Loeffel would have had a faster machine, (one capable of producing at the rates provided in the
contract specifications.” (Parenthesis in original). Mr. Dohmeyer’s newly claimed allegiance
to the benefit of the bargain rule, is belied by and incompatible with his conclusion that
diminution in value of a faulty piece of equipment and lost profits are mutually exclusive. The
benefit of the bargain rule provides that the measure of damages is the difference between the
actual value of what plaintiff received and its value had the representations been true. See Gerill
Corp. v. Jack L. Hargrove Builders, Inc., 128 Ill.2d 179, 538 N.E.2d 530, 537-38, cert. denied
493 U.S. 894 (1989); Out of Pocket or Benefit of the Bargain As Proper Rule of Damages
for Fraudulent Representations Inducing Contract for the Transfer of Property, 13 A.L.R.
3d 875 (1967)(collecting cases).

Expert opinions that are contrary to law are inadmissible. Langehennig v. Sofamor,
Inc., 1999 WL 1129683 at n.6 (D.Kan. 1999); Bailey v. Allgas, Inc., 148 F.Supp.2d 1222,
1245-46 (N.D.Ala. 2000). They cannot be said to be scientific, to be reliable, or to be helpful
to the trier of fact. Indeed, “it is not an ‘expert’ opinion, but rather a personal opinion about
what [damages Mr. Dohmeyer] believes should apply” in this case. In re Diet Drugs Products
Liability Litigation, 2001 WL 454586 at *18 (E.D.Pa. 2001).

Whatever the motivation for the Response’s misquotation or Moorman, it is deeply

troubling. Loeffel Steel Products, 2005 WL 1388076 at *11 “There is more in membership

17


fiscal years ending November 30, 1999 through November 30, 2002, reviewed the deposition
testimony of Loeffel’s president, Maurice Loeffel and that of Mr, Wiersema, compiled
financial data from annual 10k reports and Standard & Poor’s Stock Reports on eight large
publicly traded companies in what Mr. Dohmeyer categorized as the “(steel) metals industry,”
and interviewed the defendants’ employees.? As we shall see, these interviews would play a
pivotal role in Mr. Dohmeyer’s analysis of Loeffel’s “economic loss.”

The Analysis concluded that Loeffel had damages prior to August of 2003 of $280,000,
damages thereafter of $142,339, and lost profits of $50,000. The Analysis itself has no textual
elaboration or explanation, and the reader is left to divine its meaning from the headings,
captions, and the figures on its charts and spreadsheets. A meaningful understanding can only
be gained by reference to Mr. Dohmeyer’s deposition testimony. The Analysis’s damage
spreadsheets differentiated between pre- and post-August 2003 because, as Mr. Dohmeyer later
explained, he assumed — based upon what he had been told by the defendants’ employees — that
the trouble with the magnets in the stacker had been alleviated or nearly so. (Dohmeyer Dep.,
at 39, 42-43). The Analysis then discounted the figures by $225,000, which represented the
amount of the purchase price held back by Loeffel.

The Analysis’s second and core assumption was provided by defendants’ employees, who
assured Mr. Dohmeyer that the various deficiencies in the Line could be offset by adding two

additional workers to production runs and increasing the number of shifts. Using this

2 Although its title suggested that a more comprehensive and edifying analysis was to come, the
“preliminary critique” underwent not a single change.

3


Finally, Worthington Industries, is a global company that processes steel for use in the
automotive, construction, hardware, aerospace and many other industries. With some 8,000
employees, Worthington operates 65 facilities in 10 countries across North America and
Europe. It manufactures metal products such as metal framing, pressure cylinders, automotive
past model service stampings, metal ceiling grid systems and laser welded blanks.
Worthington’s metal framing subsidiary produces steel studs, floor joists, roof trusses, and
other metal accessories for wholesale distributors and commercial and residential building
contractors. Its pressure cylinder business caters to customers in the liquified petroleum gas
and refrigeration industries, and manufactures cylinders to hold everything from acetylene for
welding to oxygen for breathing. (www.worthingtonindustries.com).

Daubert requires that trial judges must ensure that any and all expert testimony is not
only relevant, but reliable. To that end, a judge must undertake a preliminary assessment of
whether the reasoning or methodology underlying the testimony is scientifically valid and
whether that reasoning or methodology properly can be applied to the facts at issue. Frymire-
Brinati, 2 F.3d at 186. The judge must look behind the expert’s ultimate conclusion and analyze
the adequacy of its foundation. Mid-State Fertilizer, 877 F.2d at 1339. Expert opinion that is
speculative is inadmissible. Cf Target Market Pub., Inc. v. ADVO, Inc., 136 F.3d 1139, 1143
(7" Cir. 1998).

Mr. Dohmeyer’s opinion that the financial performance of the eight companies in the
period 1999-2002 can be used in evaluating Loeffel’s lost profits or business in that period is

unreliable and speculative. The defendants’ use the phrase, “junk science,” to refer to Mr.

38


claim for lost profits and business resulting from deficiencies in the Line. The Analysis of
Economic Loss was accompanied by a letter of transmittal containing a 1 page discussion of
the “(steel) metals industry,” under the caption, “Industry Discussion.” (Parenthesis in original).
It summarized isolated bits of information that Mr. Dohmeyer or one of his colleagues had read
on “money.msn.com and cnnfn.com.” (See letter of February 27, 2004). As one would expect
given Mr. Dohmeyer’s admitted lack of expertise in the steel/metals industry and the sources
of the information on which he relied, the 1 page discussion is superficial, generalized, and
inexpert.

The discussion began by noting that the steel industry is made up of three tiers: primary
metals producers, metals processors and/or service centers, and end users. The primary
producers are the source of steel for the service centers, which “undertake value-adding
services such as precision design and other pre-production processing as may be required by
specific customers.” These service centers, according to DVC, were formerly mostly
distribution centers performing little processing. By the 1980s, however, they began to add
processing capabilities that allowed them to add a broad range of value-added services.

Concurrently, the primary metals producers began concentrating on high volume
production. As these industry changes continued, the discussion explained, many service
centers found themselves unable to obtain processed products and had to begin outsourcing
their customized metal processing to service centers with value-added capabilities. Recent
challenges in the industry include the recession and frequent, unpredictable increases in

domestic steel prices.

26


calculations of the $248,000 economic loss he concluded was suffered by Loeffel, and 2)
charts and graphs reflecting financial data for the period 1999 - 2002 for Loeffel and for eight,
large, publicly traded companies, which were supposed to depict the economic conditions in
the steel industry at that time.

Loeffel’s present motion challenges Mr. Dohmeyer’s qualifications to offer expert
opinion on economic loss and his methodology and definition of economic loss, which
Loeffel argues did not comply with the four, non-definitive factors that Daubert said a court
could use in determining testimonial reliability. Daubert v. Merrell Dow Pharmaceuticals,
Inc., 509 U.S. 579 (1993). Loeffel also contends that Mr. Dohmeyer should not be allowed
to testify because of his unquestioning reliance on the defendants’ theory that the deficiencies
in the Line could be cured by the addition of extra workers and additional shifts.’ Lastly, the
motion contends that Mr. Dohmeyer should not be allowed to testify about Mr. Wiersema’s
damage analysis, because his critique of February 27, 2004 did not comply with Rule
26(a)(2)(B).

I
FACTUAL BACKGROUND

Prior to preparing his February 27" “preliminary critique” and his Analysis, Mr.

Dohmeyer (and/or his two assistants at DVC) reviewed Loeffel’s financial statements for the

' Literally every facet of this labor-added theory and every bit of information regarding
alleviation of the Line’s problems — as well as information regarding prior claimed fixes — came from the
defendants’ employees. (Dohmeyer Dep., at 26-39, 42-45, 55-57, 61-63, 109). The Line is the
Rotary Shear Multi-blanking machine that Loeffel purchased from Delta Brands.

2


comparability. It also reveals the “fundamentally unsound basis [and] fatally deficient amount
of data” on which Mr. Dohmeyer based his conclusion that the eight companies and Loeffel
were comparable. Thomas v. FAG Bearings Corp., 846 F.Supp. 1382 (W.D.Mo. 1994)."”

Even a cursory search reveals that steel service centers are not monolithic and offer an
extraordinary array of services and products, most of which are not offered by Loeffel, but are
offered by the eight companies DVC selected.

In addition to cutting and slitting, coil processing, decoiling, bending, (and perhaps blade
decambering) — the services offered by Loeffel — service centers also offer many services that
Loeffel does not, such as: polishing, plasma profiling, grinding, gun drilling, tempering, stress
relieving, annealing, heat treating, burning, abrasive and carbide blade sawing, computerized
plasma cutting and automatic splice welding, piercing, notching, edging, ribbon and oscillate
winding, punching, drilling, flame cutting, beam splitting. See www.steelvillage.com. Similarly,
the same internet site reveals a varied array of products offered by service centers, but not
offered by Loeffel, including: pipe, rod, bar, aluminum, brass, bronze, tubing, carbon, alloy, high
speed steels, alloy heat treated, abrasion resistant, high strength, HSLA plate, valves, fitting and
flanges. Id.

Further dissimilarities abound. Loeffel is a small company with offices in the greater

17 Even where a witness is an expert in the relevant field, the evidentiary reliability demanded by
Daubert is not present when his or her opinion is speculative or rests on an unsound basis. See
American Bearing Co. v. Litton Industries, Inc., 540 F.Supp. 1163, 1173 (E.D.Pa. 1982), aff'd on
other grounds, 729 F.2d 943 (3" Cir.), cert. denied 469 U.S. 854 (1984); Lithuanian Commerce
Corp Ltd. y. Sara Lee Hosiery, 179 F.R.D. 450 (D.N.J. 1998)(assumptions of a certified public
accountant with several advanced degrees).

34


(August, 2002).” As to the 33 entries that topically were relevant to Mr. Dohmeyer’s
testimony, involving as they did, “economic loss,” the only case name listed was Ellis v.
Walker, (Qualifications of Principal Appraisers, at 1-6). The others are listed as “Analysis of
Economic Loss” or “Economic Loss,” followed by the kind of business involved: a restaurant
franchise, a weekly newspaper, a mobile home park, an aircraft maintenance facility, medical
industry, residential building company, real estate agent, law firm, printing company, software
developer, retail dress shop, real estate developer, and so on. As to these entries, their format
made impossible, any meaningful investigation of Mr. Dohmeyer’s background as an expert
witness.”

Significantly, Mr. Dohmeyer did not list Jn Matter of Dunham, 110 F.3d 286 (5" Cir.
1997). There, Mr. Dohmeyer was engaged to testify regarding the value of an insurance
agency’s book of business. He concluded that the value was $26,000; his opposite number in
the case, Mr. Phillips, concluded the figure was closer to $200,000. The district court held that
Mr. Dohmeyer was not only inexperienced in the insurance industry, but his computations
rested on the “erroneous assumption” that no non-competition agreements had been executed.
110 F.3d at 288. The district court did not find Mr. Dohmeyer’s assessment credible. The Fifth

Circuit agreed that the district court was right in attributing little or no probative value to the

® Only a handful of the entries contain the designation “trial” or “deposition.” Even as to those
that did, it was impossible to tell anything about the engagement or Mr. Dohmeyer’s testimony since the
entry did not contain sufficient information to enable Loeffel to conduct an appropriate inquiry.

23 The only conceivable reference to the Dunham case in the curriculum vitae is the terse
entry, “Bankruptcy — Valuation of an insurance agency,” which was buried in the middle of the 116
entries.

43


1987); ABA Section of Antitrust Law, Antitrust Law Developments, 877-879 (5" ed. 2002)(and
cases cited).

Of course, exact correlation is not necessary but the samples must be fair congeners.
If they are not, the comparison is manifestly unreliable and cannot “‘logically advance[ ] a
material aspect of the proposing party’s case. The Supreme Court {in Daubert] referred to this
second prong of the analysis as the fit requirement.’” Loeffel Steel Products v. Delta Brands,
2005 WL 1388076 at *16 (quoting Judge Kozinski’s opinion on remand from the Supreme
Court . Daubert v. Merrell Dow Pharmaceuticals, Inc., 43 F.3d 1311, 1315 (9" Cir.), cert.
denied, 516 U.S. 869 (1995)).

Undiscriminatingly labeling all nine companies “steel service centers,” Mr. Dohmeyer
tacitly assumed that they are necessarily monolithic, that they necessarily compete for the same
customers, and thus the past financial profile of the eight is a reasonable predictor of how
Loeffel would have performed. Stated more simply, Mr. Dohmeyer’s argument runs this way:
1) Loeffel and the eight companies are in the same “industry;” 2) all participants in “an industry”
are necessarily competitors; 3) therefore, the financial performance of the eight companies in
1999-2002 is relevant to determining Loeffel’s prospect for new business had the Line

performed properly.'? (Dohmeyer Dep., at 124). Here as always, “[w]e must think things, not

'3 When asked at his deposition how, since he knew nothing about the customer base of Loeffel
or the eight publicly traded companies, he could have concluded that Loeffel served the same customer
market as the eight other service centers, Mr. Dohmeyer said:

Oh they have to. I mean it’s — you’re in that industry, you're competing. You can’t

help — once you’re in an industry, you can’t help but compete with other people in your

industry. (Dohmeyer Dep., at 124).

29


occasioned by diminished commercial expectations, not coupled with injury to person or
property. See In re Chicago Flood Litigation, 176 Il1.2d 179, 200, 680 N.E.2d 265, 275
(1997); Mars, Inc. v. Heritage Builders of Effingham, Inc., 327 Ill.App.3d 346, 351, 763
N.E.2d 428, 434 (4" Dist. 2002).

“Generally speaking, a defective product can cause three types of injury: personal injury,
property damage, and economic loss.” Trans State Airlines v. Pratt & Whitney Canada, Inc.,
177 Ill.2d 21, 27, 682 N.E.2d 45, 48 (1997). In Moorman Mfg. Co. v. National Tank Co., 91
Ill.2d 69, 82, 435 N.E.2d 443, 449 (1982), the Illinois Supreme Court held that “economic
loss”

“has been defined as ‘damages for inadequate value, costs of repair and

replacement of the defective product, or consequent loss of profits — without any

claim of personal injury or damage to other property’ (Note, Economic Loss in

Products Liability Jurisprudence, 66 Colum. L.Rev. 917, 918 (1966)(economic

loss)) as well as ‘the diminution in the value of the product because it is

inferior in quality and does not work for the general purposes for which it

was manufactured and sold.’”

91 Ill.2d at 82, 435 N.E.2d at 449 (Emphasis supplied)(Parentheses in original).

In their Response to Loeffel’s motion, the defendants have “changed positions as nimbly
as if dancing a quadrille.” Orloff v. Willoughby, 345 U.S. 83, 87 (1953), for they now insist that
Mr. Dohmeyer’s definition is “entirely consistent” with traditional breach of contract damages
theory, as expressed in Moorman. However, the Response ignores Mr. Dohmeyer’s testimony
in which he said that he created the definition years ago, and that it was to be found nowhere

else. Nor does it attempt to explain why he would have insisted on using such a definition if it

was consistent with the traditional and legal definition. (Response at 10).

13


the machine the way it doesn’t work are $2.00. So pay me the two. Well, he’s

going to go, I’m not going to pay you the two, Ill pay you one, because you

already owe me one.

Q: Right. But couldn’t I also take the position in your analogy that, hey, I paid

you a million two hundred fifty thousand in the purchase price and a million five

and the line I got isn’t worth $100,000.

A: No, because you'd be double-counting . . . you can only get your damages.
(Dohmeyer Dep., at 133; see also id. at 134).

Mr. Dohmeyer’s second hypothetical is even more convoluted. He posited a machine
sold for four dollars that was warranted to print one dollar every year for five years.
(Dohmeyer Dep., at 135). Then he continued:

A: Allright. So it doesn’t print — it doesn’t even print the dollars for you. Okay?

So you say, I want my $5.00, because the machine is defective, it didn’t print

money like you said it does. You want the machine back, too. That doesn’t make

any sense.

Q:1—1-what I’m saying is, I’m not disagreeing with your contention. There’s

no way I can say, hey, I have lost profits, and I can’t say, I needed the machine to

create the profits I lost. I understand this. What I’m saying is, you’re — you’re

assuming in your analogy, that because we didn’t pay the other two hundred and

fifty grand, the machine must have been worth a a[sic] million two hundred and

fifty, and that’s the part I’m disagreeing with.

A: Absolutely, it’s worth that because your damages get you whole to make it
worth that.

By its selective misquotation, the Response allowed the defendants to argue that Mr.
Dohmeyer’s definition of economic loss was “consistent” with basic damage theory, without
simultaneously revealing that it wasn’t and without thereby revealing the unreliability of his

methodology and his deposition testimony.