IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

MAKOR ISSUES & RIGHTS, LTD., )

CHRIS BROHOLM, RICHARD LEBRUN, )

et al., )

Plaintiffs, )

) Case No. 02 C 4356

v. )

) Honorable Judge Amy J. St. Eve

TELLABS, INC., MICHAEL J. BIRCK, )

RICHARD C. NOTEBAERT, et al., )

)

Defendants. )

MEMORANDUM OPINION AND ORDER

AMY J. ST. EVE, District Court Judge:

Before the Court is Defendants’ motion to exclude the expert testimony of Dr. Arthur

Brody. Specifically, Defendants have moved to strike Dr. Brody’s testimony regarding what

conclusions Tellabs should have drawn from publicly available information regarding its sales

forecasts and guidance because 1) he is not qualified to render such opinions; 2) he did not

follow an appropriate methodology in reaching his opinions; and 3) he did not follow or apply

his methodology in any reliable or scientific manner. As discussed in detail below, Defendants’

motion is granted in significant part.

BACKGROUND

I. Background of Dr. Brody

Dr. Brody has a Ph.D. in physics from Stony Brook University in 1978. From 1981 to

1985, Dr. Brody worked at AT&T Bell Laboratories as a Technical Manager where he was “lead

engineer in R&D area where he was responsible for network Operations, Administration,

Maintenance and Provisioning products and procedures for leased line service assurance.” (R.
304-2, Curriculum Vitae (“CV”), at 11.) From 1985 to 1988, Dr. Brody worked at Technicom

Systems, Inc. as Vice President of Marketing and Sales. (Id.) Technicom was a subsidiary of

TIE/communications and provided network monitoring, cable pressurization and loop test

products. From 1988 to 1990, he was the Director, New Products at ADK Pressure Equipment

Corp., where he directed development and release of four new products resulting in several large

contracts and entrance into new markets. (Id.) Starting in 1990 through the present, Dr. Brody

was the Principal Consultant at A.T. Brody & Associates, Inc. (“A.T. Brody”), a “high tech

consulting firm specializing in telecommunications, networking and multimedia issues, business

and engineering management, and market analysis.” (Id.) Dr. Brody is the sole owner and

employee of A.T. Brody. (R. 310-2, Deposition of Dr. Brody (“Dep.”) at 6-7.) Approximately

80%-90% of Dr. Brody’s income over the past year has come from testifying and consulting in

intellectual property cases. 

In addition, Dr. Brody is a member of the Institute for Electrical and Electronics

Engineers (“IEEE”), the IEEE Communications Society, the Product Development &

Management Association, the American Physical Society, the American Association for the

Advancement of Science, and the Sigma Chi Scientific Research Society. (R. 304-2, CV.) 

Dr. Brody is not an expert in economics, did not train in economics, and has not taken

any courses in company forecasting. (Dep. at 345.) While he has served as an expert witness in

other cases, in each of these cases he was an expert in intellectual property issues. He has never

served as an expert in the area of forecasting, and no court has qualified him as such. In

addition, Dr. Brody has never rendered an opinion on the subject matter of company forecasting. 

(Dep. at 128-29.) Dr. Brody also conceded that he has never been involved in giving guidance

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for a public company. (Dep. at 279.). 

From approximately 2002 to 2005, Dr. Brody, along with another individual, taught

classes at Sequent Learning Networks, a private training and consulting firm. Dr. Brody taught

an introductory course to product management at Sequent Learning that lasted approximately

three days. (Transcript of Hearing on Motion to Exclude Expert Testimony of Dr. Brody (“Tr.”).

at 16-20) He taught this course three or four times during the 2002 to 2005 time period. (Tr. at

52.) During this introductory course, he taught product forecasting for approximately two or

three hours. (Tr. at 155.) Dr. Brody prepared the materials for this course based on his

background. (Tr. at 156.) 

II. Dr. Brody’s Opinions In this Case

Plaintiffs have disclosed Dr. Arthur Brody as their expert witness to opine on the

reasonableness of Tellabs’ financial forecasts given the publicly available information during the

time Tellabs issued its forecasts. Plaintiffs contacted Dr. Brody on approximately May 18, 2009

to issue his report by June 30, 2009. Dr. Brody issued his report on June 30, 2009. As he

testified, he had approximately six weeks to familiarize himself with the case, research his

opinions, and issue his report. He also issued a supplement report on September 11, 20091

. 

As Dr. Brody notes in his report: 

I have been asked to provide in this report a description of the overall

telecommunications market conditions that Tellabs, its customers and its competitors

were subject to for the relevant time frame and I have also been asked to identify

information publicly available to Tellabs during the relevant time frame, and to opine

on what conclusions Tellabs should have drawn from this information with respect

to its sales forecasts and guidance to the investing public.

1

 On October 6, 2009, the Court struck portions of Dr. Brody’s rebuttal report.

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(R. 304-1 at 1.) In his report, Dr. Brody summarized his conclusions as follows:

Summary of Conclusions: 

As early as the third quarter of calendar year 2000, telecommunications market

analysts were warning investors that CAPEX spending by TSPs and dot.com

companies could not continue. The return on investment did not justify the

continued expenditures. Moreover, the telecommunications regulatory environment

of the late 1990s in the United States had increased competition in many market

segments resulting in pricing pressures that would moderate revenue growth. In the

second half of calendar year 2000 and continuing into 2001, many of Tellabs’ TSP

customers warned of slower revenue growth, shrinking earnings and reduced

CAPEX spending. Tellabs’ competitors, competing for the same customers with

similar products, also issued downward guidance, many revising revenue and

earnings estimates downward during this period, or missing analyst estimates in their

quarterly reports. Tellabs was subject to the same deteriorating market conditions

that were adversely affecting its competition (and its customers) in 2000 and 2001

despite Tellabs’ statements to the contrary. 

On December 11, 2000, Tellabs reconfirmed its objectives of 30 percent revenue

growth and 30 percent earnings per share (“EPS”) growth (30/30) for 2001. From

December through March 2001, Tellabs maintained its 30/30 guidance to the public

as the telecommunications market collapse accelerated. On April 6, 2001, Tellabs

lowered both its revenue and EPS guidance for the first quarter of 2001, but provided

no guidance for the remainder of 2001. Following the first quarter, sales plummeted

sequentially in the second and third quarters of 2001. On July 18, 2001, Tellabs

reported a sequential quarterly revenue decrease of over 30 percent and a quarterly

loss per share, while not providing any guidance for third quarter 2001. 

Based on the information publicly available, Tellabs should have known throughout

the Class Period that revenue and earnings growth of 30 percent for 2001 were not

achievable and had no realistic basis.

(R. 304-2 at 6.) 

On May 20, 2010, the Court held a hearing on Defendants’ motion. During that hearing,

Dr. Brody testified for over three hours. 

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III. Rule 702 and Daubert Standards

Federal Rule of Evidence 702 provides that “[i]f 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 opinion or otherwise.” Fed. R. Evid. 702. Rule 702 “also requires that: (1)

the testimony must be based upon sufficient facts or data; (2) it must be the product of reliable

principles and methods; and (3) the witness must have applied the principles and methods

reliably to the facts of the case.” Happel v. Walmart Stores, Inc., 602 F.3d 820, 824 (7th Cir.

2010). It requires that the district court serve as a “‘gate-keeper’ who determines whether

proffered expert testimony is reliable and relevant before accepting a witness as an expert.” 

Winters v. Fru-Con Inc., 498 F.3d 734, 741-42 (7th Cir. 2007) (quoting Autotech Tech. Ltd.

P’ship v. Automationdirect.com, 471 F.3d 745, 749 (7th Cir. 2006)). The purpose of the court’s

gate-keeping function is “to make certain that an expert, whether basing testimony upon

professional studies or personal experience, employs in the courtroom the same level of

intellectual rigor that characterizes the practice of an expert in the relevant field.” Kumho Tire

Co. v. Carmichael, 526 U.S. 137, 152, 119 S. Ct. 1167, 143 L. Ed. 2d 238 (1999).

The parties dispute the appropriate standard to apply to experts whose opinions are nonscientific. Plaintiffs suggest that the Court’s “admissibility analysis is more liberal when

proposed expert testimony, such as Dr. Brody’s proposed testimony, is based on judgments and

assessments derived from professional experience and knowledge” rather than well-recognized

scientific discipline. (R. 322, Pls.’ Mem. at 4.) To the contrary, non-scientific expert testimony

does not alter the Court’s gatekeeping function. “Daubert, as extended to all expert testimony

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including non-scientific expert testimony, requires the district court to perform the role of

gatekeeper and to ‘ensure the reliability and relevancy of expert testimony.’” Naeem v.

McKesson Drug Co., 444 F.3d 593, 607 (7th Cir. 2006), quoting Kumho, 526 U.S. at 152, 119 S.

Ct. 1167. Indeed, an expert’s testimony must rest “on a reliable foundation” and be “relevant to

the task at hand.” Kumho, 526 U.S. at 141, 119 S. Ct. 1167 (citations and quotations omitted). 

In assessing whether an expert’s testimony is reliable, Daubert lists a number of

considerations — including testing, peer review, error rates, and acceptability in the relevant

scientific community. Daubert v. Merrell Dow Pharm., 509 U.S. 579, 593-94, 113 S. Ct. 2786,

125 L. Ed. 2d 469 (1993). The Supreme Court, however, has clearly stated that “the test of

reliability is flexible, and Daubert’s list of specific factors neither necessarily nor exclusively

applies to all experts or in every case.” Kumho, 526 U.S. at 141, 119 S. Ct. 1167 (internal

quotation omitted). This is especially true when the expert’s opinions are non-scientific in

nature and do not follow traditional scientific testing. “[T]he test for reliability for nonscientific

experts is ‘flexible’ and ... Daubert’s list of specific factors neither necessarily nor exclusively

applies to all experts or in every case.” United States v. Romero, 189 F.3d 576, 584 (7th Cir.

1999), quoting Kumho Tire, 536 U.S. at 141. “Rather the law grants a district court the same

broad latitude when it decides how to determine reliability as it enjoys in respect to its ultimate

reliability determination.” Id. at 142, 119 S. Ct. 1167 (emphasis in original). 

In addition, the 2000 Advisory Committee’s Notes to Rule 702 suggest additional criteria

for gauging expert reliability, including whether: (1) “maintenance standards and controls” exist;

(2) the testimony relates to “matters growing naturally and directly out of research they have

conducted independent of the litigation,” or developed “expressly for purposes of testifying”; (3)

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“the expert has unjustifiably extrapolated from an accepted premise to an unfounded

conclusion”; (4) “the expert has adequately accounted for obvious alternative explanations”; (5)

“the expert is being as careful as he would be in his regular professional work outside his paid

litigation consulting”; and (6) “the field of expertise claimed by the expert is known to reach

reliable results for the type of opinion the expert would give.” Fuesting v. Zimmer, Inc., 421

F.3d 528, 535 (7th Cir. 2005) (citations omitted), vacated in part on other grounds, 448 F.3d 936

(7th Cir. 2000) (quoting Fed. R. Evid. 702 advisory committee’s note (2000)). See also

American Honda Motor Co., Inc. v. Allen, 600 F.3d 813, 817 (7th Cir. 2010). “The proponent of

the expert bears the burden of demonstrating that the expert’s testimony would satisfy the

Daubert standard” by a preponderance of the evidence. Lewis v. CITGO Petroleum Corp., 561

F.3d 698, 705 (7th Cir. 2009).

An expert may be qualified to render opinions based on experience alone. “In certain

fields, experience is the predominant, if not the sole basis for a great deal of reliable expert

testimony.” Advisory Committee Notes to Rule 702. The Seventh Circuit has repeatedly stated

that “genuine expertise may be based on experience or training.” United States v. Conn, 297

F.3d 548, 556 (7th Cir. 2002), quoting Tyus v. Urban Search Mgmt., 102 F.3d 256, 263 (7th Cir.

1996). “[W]hile extensive academic and practical expertise in an area is certainly sufficient to

qualify a potential witness as an expert, Rule 702 specifically contemplates the admission of

testimony by experts whose knowledge is based on experience.” Trustees of Chicago Painters

and Decorators Pension, Health and Welfare, and Deferred Sav. Plan Trust Funds v. Royal

Intern. Drywall and Decorating, Inc., 493 F.3d 782, 787-88 (7th Cir. 2007) (citations and

quotations omitted). As such, courts “consider a proposed expert’s full range of practical

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experience as well as academic or technical training when determining whether that expert is

qualified to render an opinion in a given area.” Id., quoting Smith v. Ford Motor Co., 215 F.3d

713, 718 (7th Cir. 2000). 

Furthermore, “possessing requisite credentials alone is not enough to render expert

testimony admissible.” Fuesting v. Zimmer, Inc., 421 F.3d 528, 535 (7th Cir. 2005) (citations

omitted), vacated in part on other grounds, 448 F.3d 936 (7th Cir. 2006). A district court must

“assess the reliability of the methodology the expert has employed in arriving at his opinion.” 

Id.

ANALYSIS

I. Dr. Brody’s Methodology Was Unreliable 

Defendants contend that Dr. Brody’s methodology is flawed.2

 The Court agrees. In

reaching his opinions, Dr. Brody relied on his “background and experience-based knowledge.” 

(R. 304-2 at 6.) In order to determine the reasonableness of Tellabs’ forecasts, Dr. Brody

“searched the Internet using ‘Google’ and ‘Bing’ search engines for background articles on the

state of the telecommunications and related dot.com industries to determine what information

was publicly available during the relevant time period.” (Tr. at 25-26.) His search focused on

the second half of 2000 and the first half of 2001. In addition, he “searched for similar publicly

available information from Tellabs’ customers and competitors, and relied on publicly available

information regarding them in reaching his opinions.” (R. 304-2 at 7.) While Dr. Brody had

access to “all documents and discovery obtained in discovery,” (id. at 6), he made clear during

2

 Because the Court is striking Dr. Brody’s opinions based on his unreliable methodology, the Court need

not address whether Dr. Brody is qualified to render such opinions in this case. 

8
his deposition and the Daubert hearing that he did not review the majority of the documents 

provided to him from the discovery materials. (R. 310-2 at 47.) He only “scanned through” the

depositions of Mr. Notebaert and Ms. Ryan (Tellabs’ CFO), and conceded that he did not read

them. (Id. at 49.) He did not look at the other 21 depositions in this case to which he had access. 

(Tr. at 46-47.) Significantly, Dr. Brody testified that he did not find anything Mr. Notebaert or

Ms. Ryan had to say relevant to his opinions. In addition, Dr. Brody did not even read the

deposition transcript of Chris Pfefferle, the head of Tellabs’ Global Forecasting Organization. 

(Id. at 52.) He conceded that he did not read any testimony about how Tellabs prepared its

forecast. (Tr. at 124.) Furthermore, Dr. Brody did not read any of the deposition exhibits from

the discovery in this case in reaching his opinions. (Dep. at 52.) 

Dr. Brody admitted during his deposition that he “frankly didn’t have time to read most”

of the documents produced from the Brieger case, a related ERISA case, which raised issues

regarding the reasonableness of Tellabs’ projections. (Id.; Tr. at 103.) He did not read the

analysts reports provided during discovery, and could not recall if he read the newspaper articles

regarding Tellabs provided during discovery, although he may have found the articles

independently. (Id. at 58-59.) 

During his deposition, Dr. Brody explained that he “was looking for articles that showed

that there was turmoil both in the dot-com and telecom industries, even as early as the beginning

of 2000.” (R. 310-2 at 70.) Significantly, he conceded that while he may have reviewed articles

that contained positive statements about the industry at the time, he did not cite to any such

articles in his report. (Id. at 70-71.) Dr. Brody only relied on articles with some negative

component regarding the industry. (Tr. at 124.) During the Daubert hearing, Dr. Brody

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conceded that he did not cite any positive articles from one of Tellabs’ closest competitors,

Alcatel. (Tr. at 129-31.) During the same time period, Alcatel officials said its telecom units

would post sales growth of 35 to 40 percent in 2000 and 25 percent in 2001. (Tr. at 132-36.) 

Yet, Dr. Brody did not include this positive information in reaching his opinions. Neither did he

include other positive information from the telecom industry. (Tr. at 161-62.) Dr. Brody failed

to adequately explain why he ignored these positive articles and press release. Cummins v. Lyle

Indus., 93 F.3d 362, 368 (7th Cir. 1996) (“An expert scientific opinion ... must consist of more

than simply subjective belief or unsupported speculation.”) (citations and quotations omitted). 

He admitted that he was looking simply for articles to support his opinion – which included only

negative articles about the industry. 

Furthermore, although he opined on the reasonableness of Tellabs’ financial forecasts,

Dr. Brody neither knew the process that Tellabs followed in making its forecasts, nor reviewed

any aspects of that process in connection with his opinions. (Dep. at 152-54, 302-03.) He is not

aware of what information Ms. Pfefferle had, what she looked at in the public marketplace, or

how she rendered the forecasts. (Dep. at 302.) In reaching his opinions, Dr. Brody also did not

rely on any internal Tellabs’ documents describing how Tellabs put its forecasts together. (Dep.

at 154.) 

In addition, Dr. Brody offered nothing to support this methodology, other than his rather

limited experience and training in the area.3

 Yet as addressed below, even Dr. Brody did not

follow the methodology that he employs when teaching forecasting and creating his own

3 As Defendants point out, Dr. Brody did not record what articles he reviewed or what search terms he

used during his review. He failed to keep track of the documentation that he reviewed and could not

remember precisely what he looked at. As a result, Defendants cannot replicate his methodology. Lang

v. Kohl’s Food Stores, Inc., 217 F.3d 919, 924 (7th Cir. 2000). 

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forecasts. In essence, there is nothing to support Dr. Brody’s methodology of looking only to

publicly-available information to determine the reasonableness of a company’s public guidance. 

Plaintiffs – who bear the burden of establishing the admissibility of Dr. Brody’s testimony –

have not identified any evidence that Dr. Brody’s methodology of looking only to publiclyavailable information to determine the reasonableness of a company’s public guidance is

generally accepted and employed by experts in the field. See Deimer v. Cincinnati Sub-Zero

Prods., 58 F.3d 341, 344-345 (7th Cir. 1995) (district court properly held that expert’s opinion

was unreliable where there was “no supporting methodology or protocol of any kind to render

his opinion reasonable or credible”). Even Dr. Brody did not know whether market participants

used similar sources in preparing their forecasts. (Dep. at 75-76.) Plaintiffs also failed to submit

any evidence to support simply focusing on negative publicly available information when

applying this methodology. 

Furthermore, Plaintiffs have not offered any articles, texts, studies, literature, or other

published writings to support this one-sided methodology. Dr. Brody conceded that he is not

aware of any literature or treatises in the field of forecasting that recommend evaluating the

reasonableness of a company’s sales forecasts for existing products based solely on public

information, much less only negative publicly available information. (Tr. at 109.) There is no

evidence that Dr. Brody’s methodology has ever been used, much less recognized as appropriate. 

Plaintiffs contend that the Court should let the jury assess Dr. Brody’s credibility and his

potential bias. This argument, however, ignores the gatekeeper function of the Court under

Daubert. Dr. Brody’s one-sided methodology does not meet the mandates of Daubert. Because

Dr. Brody’s methodology is fundamentally flawed and his opinions in this area are inherently

11
unreliable, he may not opine at trial regarding the state of the telecom industry during the 2000-

2001 time period or the reasonableness of Tellabs’ forecasts during that period. 

II. Dr. Brody Did Not Follow His Own Methodology

Significantly, Dr. Brody relied solely on his experience and knowledge in giving his

opinions in this case. He testified about his teaching experience at Sequent Learning. Dr.

Brody, however, did not even follow the methodology in this case that he teaches. Dr. Brody

testified that he teaches a “best of breed” methodology for developing and evaluating companyspecific forecasts at Sequent Learning Networks. The best of breed methodology relies on an

overall assessment of numerous data points, including market data as well as internal sales data. 

Dr. Brody teaches “several different approaches to sizing a market and determining your sales. 

So that’s bottom up where you take your forecast from your salespeople and then you’re top

down when you look at the market as a whole and try to derive sales for products based on

general economic factors, technology factors and other issues.” (Dep. at 141-42.) Dr. Brody has

never recommended to his class that they perform only top down sales forecasts without

conducting a “bottoms-up” forecast. Instead, he “said that you should be relying on what’s

called a cross-functional team approach where marketing has a dual function. Marketing should

both be looking at the market information in general, providing you – and this is inbound

marketing - providing you information in general from the marketplace, and going in and

actually talking to customers themselves, separate from the salespeople, asking them about what

their problems are and what issues can be solved as opposed to trying to sell them products.” 

(Dep. at 147-48). As he explained, he teaches that proper sales forecasting techniques rely “on

the quality of the data you’re getting in and the ability of the product manager themselves to put

12
it together properly.” (Dep. at 151.) Furthermore, Dr. Brody admitted that he would never tell

one of his students to just look at publicly available market data when putting together sales

forecasts. (Id.) It is important, according to Dr. Brody, to take all available information into

account. (Tr. at 136-37.) Yet, he failed to follow that process here. 

Similarly, when at Technicom and at ADK in the 1980s, Dr. Brody prepared some

forecasts for specific products. He did not prepare or evaluate these forecasts, however, using

the method he employed here. When he reviewed the business plan for MSI in 2002, including

the forecasts, he did not employ the methodology he used here. In fact, Dr. Brody did not

identify a single instance where he followed the methodology he applied in this case, even

though he claims that the methodology he employed here is based on his experience. Dr. Brody

admitted that he has never written an objective report for a client that only contained negative

market information. (Tr. at 71-72.) 

Dr. Brody further admitted that he has never taught his students that forecasts can be

challenged solely on the basis of publicly available information. (Tr. at 137.) Nonetheless, Dr.

Brody did precisely that in reaching his opinions on Tellabs’ forecasting. He simply looked at

publicly available information – almost exclusively negative information – and rendered his

opinions. He did not look at or rely on any data from Tellabs’ salespeople or any other internal

Tellabs’ data, even though he testified that Tellabs should have taken its internal information

into account when making its forecasts. (Tr. at 138.) Dr. Brody did not rely on any internal

documents that described how Tellabs put its forecasts together. (Dep. at 154.) In sum, he

certainly has not “employed in the courtroom the same level of intellectual rigor that

characterizes the practice of an expert in the relevant field.” Kumho Tire Cov., 526 U.S. at 152. 

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See Winters v. Fru-Con Inc., 498 F.3d 734, 742 (7th Cir. 2007). See also In re Fosamax

Products Liability Litig., 645 F.Supp.2d 164, 187-88 (S.D.N.Y. 2009) (excluding expert opinions

on causation where expert failed to apply “the same level of intellectual rigor that characterizes

his work ... in the field”). Indeed, “[t]he Daubert standard and Rule 702 are designed to ensure

that, when expert witnesses testify in court, they adhere to the same standards of intellectual

rigor that are demanded in their professional work.” Chapman v. Maytag Corp., 297 F.3d 682,

688 (7th Cir. 2002). Accordingly, the Court excludes his opinions. 

III. Dr. Brody’s “Other” Opinions

Plaintiffs claim that Dr. Brody should be permitted to testify about his remaining

opinions. These opinions amount to general background information regarding how the

telecommunications industry works. Plaintiffs, however, have failed to identify precisely what

disclosed opinions fall within this category. Plaintiffs must submit their proposal as to these

disclosed opinions with the final pre-trial order in this case.

CONCLUSION

For the foregoing reasons, the Court grants in significant part Defendants’ motion to

strike the expert report of Dr. Brody.

Dated: June 23, 2010

______________________

AMY J. ST. EVE

U.S. District Court Judge

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