UNITED STATES DISTRICT COURT FOR THE

DISTRICT OF NEW HAMPSHIRE

Harris Wayside Furniture

Company, Inc., Harris 

Furniture Company, Inc.,

& Harris Brosthers Furniture

Company, Inc.

v. Civil No. 06-cv-392-JM

Idearc Media Corp.,

f/k/a Verizon Directories Corp.

O R D E R

Defendant has moved to exclude the testimony of plaintiffs’

expert on lost profits damages, Mr. Michael L. Rosten, contending

the testimony is inadmissible under both Fed. R. Evid. 702 and

Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993)

(document no. 29). Plaintiffs intend to use Mr. Rosten’s opinion

to prove the amount of profits they allegedly lost because of

defendant’s failure to publish plaintiffs’ ads in a local Yellow

Pages directory. Defendant argues the opinion is unreliable and,

therefore, inadmissible.

The standard for admitting expert witness testimony is not

disputed. The party seeking to introduce the testimony is

required to demonstrate that the expert is qualified, based on

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the witness’ “knowledge, skill, experience, training, or

education,” and that the opinion is: (1) “based upon sufficient

facts or data,” (2) “is the product of reliable principles and

methods,” and (3) “the witness has applied the principles and

methods reliably to the facts of the case.” Fed. R. Evid. 702. 

These conditions of admissibility require the trial court to

ensure “that proffered expert testimony rests on a sufficiently

trustworthy foundation.” Crowe v. Marchand, 506 F.3d 13, 17 (1st

Cir. 2007) (citing Daubert, 509 U.S. at 597). This “gatekeeping

function extends to all expert evidence, including economic

analysis.” Coastal Fuels of P.R., Inc. v. Caribbean Petroleum

Corp., 175 F.3d 18, 34 n.12 (1st Cir. 1999) (citing Kumho Tire

Co. v. Carmichael, 526 U.S. 137, 119 S. Ct. 1167, 1169 (1999)). 

Although defendant challenges Mr. Rosten’s expertise, I find

that he is certainly qualified to issue the opinion sought by

plaintiffs, as an accountant with several professional

certifications and substantial experience assessing damages like

the lost profits at issue in this case. See Pls.’ Mem. in Opp.

to Def.’s M. in Limine (document no. 33) (“Pls.’ Opp. Mem.”),

Aff. of Michael L. Rosten (“Rosten Aff.”), Exs. A, B & C

(document nos. 34-A, 34-B & 34-C). Defendants also challenge the

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methods Mr. Rosten used to calculate plaintiffs’ lost profits;

however, both the “Yardstick” method and the “Before and After”

method are accepted and reliable methodologies. See Rosten Aff.

¶ 11, Ex. D at 3 & Ex. E at 1; see also Coastal Fuels of P.R.,

175 F.3d at 24 n.3 (explaining both as being “two accepted

methods of economic analysis”); Cambridge Plating Co. v. Napco,

Inc., 85 F.3d 752, 772 (1st Cir. 1996) (finding “before and

after” method as an accepted methodology for demonstrating lost

profits); Home Placement Serv., Inc. v. Providence Journal Co.,

819 F.2d 1199, 1205-06 & n.7 (1st Cir. 1987) (describing both the

yardstick and the “before and after” methods of proving lost

profits in an antitrust case). The critical issue here is

whether Mr. Rosten applied those methodologies reliably to the

facts to enable me to find that his opinion is based on a

sufficiently trustworthy foundation to render it admissible. 

1. The Yardstick Method

The threshold question in any yardstick method valuation is

how comparable are the plaintiff, whose profits were lost, and

the yardstick company, upon whose performance the plaintiff is

basing its projections, to permit a legitimate comparison. See

id. at 1206. The burden of proving comparability lies entirely

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with the plaintiff. See id. at 1207. Among the factors to

consider are: similarity of products sold; respective markets of

the two companies; the capital and organizational structures of

the two firms; and whether the plaintiff and its yardstick

conducted business, administratively and operationally, in the

same way. See id. at 1208. Evidence of the similarities between

the businesses enables reasonable conclusions to be drawn about

how plaintiff may have performed based on the yardstick company’s

performance, but for the alleged intervening cause. See id. at

1205-06 (plaintiff “must attempt to measure its damages with

reference to the performance of one or more closely comparable

firms in the same industry that, unburdened by the [defendant’s

conduct], successfully managed to earn profits.”). 

Defendant correctly argues that Mr. Rosten did not properly

apply the yardstick methodology to this case and that his opinion

based thereon should not be admitted. According to Mr. Rosten,

he primarily relied upon the National Home Furnishing Association

(“NHFA”) 2007 Retail Performance Report to calculate plaintiffs’

lost profits. See Rosten Aff. ¶ 9. He also reviewed plaintiffs’

financial records. See id. ¶ 13. How closely plaintiffs

resembled the companies surveyed in the NHFA Report, however, was

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not determined. See Def.’s M. in Limine (“Def.’s M.”), Exh. 2,

Dep. of Michael L. Rosten (document no. 29-2) (“Ros. Dep.”) at

40-44. 

Mr. Rosten did not know, nor did he investigate to find out,

any characteristics of the NHFA members to develop even a basic

profile of an NHFA member to compare with plaintiffs here. See

id. at 41-42 (no knowledge of size, geographic location, sales

volume or market base of NHFA members). The 2007 NHFA Retail

Performance Report, on which Mr. Rosten based his calculations,

compiled 134 responses to confidential surveys that had been sent

to the “Top 200 retailers identified by Furniture Today in 2006,”

among others. Id. at 43. The responses were broken down into

three groups, in which the top 25% were categorized as high

profit companies, the bottom 25% as low profit companies, and the

remaining 50% comprised the middle profit companies. See id. at

46-49. These profitability categories were not industry-wide,

but were limited to the survey responders. Id. at 49. Mr.

Rosten did not determine into which category plaintiffs would

have fallen, but instead simply compared plaintiffs to the median

profitability. See id. at 49-51. 

Mr. Rosten also did not determine how representative of the

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industry the survey responders were, or what types of retailers

comprised the survey responders. See generally id. at 39-56

(discussing how lost sales and lost profits estimates were done). 

Although the NHFA Retail Performance Report provided “detailed

results” that showed sales volume, geographic region and single

versus multi-store companies, see Def.’s M., Ex. 6 (document no.

29-6) (2007 NHFA report at 51-60), Mr. Rosten did not limit his

comparison to multi-store retailers in the Northeast, but used

national averages. See Pls.’ Opp. Mem., Ex. D, Rosten’s April

14, 2008 Expert Witness Report (document no. 34-D) (“Rosten’s

4/14/08 Expert Report”) at C-3 and D-3; see also Rosten Dep. at

61-62, 100-01. Based on Mr. Rosten’s own admissions, his limited

knowledge about the business structure of the “Yardstick” stores

simply does not justify his use of them to predict plaintiffs’

performance. 

These admissions evince that Mr. Rosten did not undertake to

find a furniture store that was comparable to plaintiffs on any

relevant factor. Although Mr. Rosten testified that his use of

the 2007 NHFA Retail Performance Report was a fair, reasonable

and appropriate measure, and that his opinion was limited to the

New England furniture industry market, id. at 56, plaintiffs have

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failed to demonstrate that the 2007 NHFA Retail Performance

Report contained information regarding similarly sized household

furniture retailers, in comparable markets, that are operated in

a manner like plaintiffs conduct their business. I cannot find

anything in the record that demonstrates whether plaintiffs

shared a common market, in terms of either product or costumers,

with any of the 134 survey responders. The yardstick methodology

requires similarity of enough business characteristics to make

the comparison reasonable and the predictions based thereon

trustworthy. See Home Placement Serv., 819 F.2d at 1205 (“If the

plaintiff’s proffered evidence permits no more than pure

speculation and guesswork, then the damage evidence is

insufficient as a matter of law.” (internal quote omitted)).

Because plaintiffs have not shown how they are similar to

the survey responders that formed the basis of the 2007 NHFA

Retail Performance Report, that report is an unreliable yardstick

and cannot reasonably measure what plaintiffs’ performance would

have been but for defendant’s intervening conduct. I conclude,

therefore, that Mr. Rosten’s opinion based on the 2007 NHFA

Retail Performance Report, that was used as a yardstick to

measure plaintiffs’ lost profits, is not admissible under Federal

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Rule of Evidence 702. 

2. The “Before and After” Method.

The “before and after” method of estimating lost profits

applies to ongoing businesses, like plaintiffs here, by comparing

plaintiffs’ profits before defendant’s offending conduct with

their profits following it. See Home Placement Serv., 819 F.2d

at 1205, n.7; see also 850 Aquidneck Ave. Assoc. v. Aquidneck

Court Assoc., 97 B.R. 139, 148 (Bankr. D.R.I. 1989) (citing

authority accepting the methodology). This method requires

plaintiff to have been in business long enough to compile an

earnings record that allows an estimation of lost profits. See

Home Placement Serv., 819 F.2d at 1205, n.7. Plaintiffs bear the

burden of showing that defendant’s failure to publish their

advertisements caused the loss of their anticipated profits. See

Cambridge Plating Co., 85 F.3d at 771. A “simple before-andafter financial picture of an established company” can suffice to

demonstrate the loss, if causation is also established. See id.

at 772 (prevailing plaintiff where malfunctioning wastewater

treatment system shown to cause lost profits, the amount of which

was shown by comparing profits before and after the malfunction). 

“Lost profits generally need not be proved with ‘mathematical

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exactness,’ but rather with a reasonable degree of certainty.” 

See id. at 771.

Although Mr. Rosten initially reported not to have used the

“before and after” method to calculate plaintiffs’ lost profits,

see Rosten’s 4/14/08 Expert Report at 3, the record demonstrates

that he apparently reconsidered and, in fact, employed that

method. See Pls.’ Opp. Mem. Ex. E, Rosten’s 7/31/08 Supplement

to Expert Witness Report (document no. 35) (“Rosten’s 7/31/08

Expert Report) at 1. Mr. Rosten researched the historical

operating performance of plaintiffs’ stores, from 2000 through

2006, using financial statements and income tax returns. See

Rosten Aff. ¶ 13. He also established that sales fell in the

stores after 2005, when the advertising was initially not

published, and compared sales in 2006 and 2007 to sales before

2005. See id. at ¶ 14. This information is included in his

supplemental expert report. See Rosten 7/31/08 Expert Report,

Exs. F & G (attaching graphs and tables). Unlike the NHFA 2007

Retail Performance Report used in his yardstick method, Mr.

Rosten looked at the actual “historic growth trends of the

individual stores themselves,” Rosten Dep. at 64, to project

plaintiffs’ future performance. Id. at 65, 70-72, 94-97. 

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Because Mr. Rosten’s opinion using the “before and after” method

relied on an analysis of plaintiffs’ three stores, including

actual sales volume, operations, investment in advertising, and

the actual performance of the stores, I find that he both used

sufficient facts and data and properly applied the methodology to

those facts. His opinion regarding lost profits based on the

before and after method of economic analysis is sufficiently

reliable to render it admissible. See Fed. R. Evid. 702. 

3. Other Arguments against Admissibility

Defendants make two additional arguments against admitting

Mr. Rosten’s expert opinion, which are disposed of as follows.

First, defendant argues that plaintiffs failed to prove

causation, asserting that Mr. Rosten’s opinion attributes every

dollar of lost profits to defendant’s failure to print

plaintiffs’ advertising. See Def.’s Mot. at 13. Defendant

contends plaintiffs’ expert’s opinion should be excluded because

Mr. Rosten “simply assumed causation - that [defendant] was

responsible for causing any lost profits . . . ,” Def.’s Reply

Mem. at 10, without considering other factors that could have

caused plaintiffs’ damages, including a declining real estate

market, the overall state of the economy, and other changes in

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plaintiffs’ advertising methods. See id. 

Defendant’s challenge to the “factual underpinnings of [Mr.

Rosten’s] investigation ... go to the weight of the proffered

testimony, not to its admissibility.” Crowe, 530 F.3d at 18. 

Plaintiffs carry the burden of proving that defendant’s failure

to publish the advertising caused their damages, before the

amount of those damages is measured by either the yardstick

method or the before and after method. See Coastal Fuels of

P.R., 175 F.3d at 24 n.3 (differentiating between causation and

economic analysis of what plaintiff’s “but-for” profits would

have been ). Defendant can cross-examine Mr. Rosten about other

factors that may have adversely impacted plaintiffs’ profits,

like the alternative advertising mediums plantiffs used or the

declining economy in general and real estate market in

particular. “These matter are for the jury, not for the court. 

This is as it should be; the district court’s gatekeeping

function ought not to be confused with the jury’s responsibility

to separate wheat from chaff.” Crowe, 506 F.3d at 18. 

Finally, defendant challenges Mr. Rosten’s claim that he

compared plaintiffs’ annual changes in furniture sales with

annual changes in residential home sales in the region from 2001

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through 2007, and found that “no strong correlation exists

between actual retail sales and single-family residential home

sales,” as documented in Exhibit I. See Rosten Aff. ¶ 20 & Ex. I

(part of document no. 35). Defendants point out that Mr.

Rosten’s statement in his affidavit is inconsistent with his

position in his expert report, that “[t]he demand for furniture

is influenced primarily by new and existing home sales and the

overall state of the economy.” Rosten’s 7/31/08 Expert Report at

2. Defendant argues these two statements are in direct conflict

and that the claim that there is no strong correlation between

home sales and furniture sales made in Mr. Rosten’s affidavit

should be excluded because it is untimely and unfounded. See

Def.’s Reply Mem. at 6-7. 

The record does not clearly indicate when the graphs

attached to Mr. Rosten’s affidavit as Exhibit I were first

prepared. While I agree with defendant that Mr. Rosten’s

statement in his affidavit that home and furniture sales are not

correlated is inconsistent with his position in the expert report

that the two are related, I cannot find, based on the record

before me, that the information in Exhibit I should be excluded. 

As the documents were filed with the court, it is not clear

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whether Exhibit I was incorporated into Rosten’s 7/31/08 Expert

Report, or whether it was a new exhibit attached to his October

9, 2008 affidavit. This fact is significant, because plaintiffs

were required to disclose experts and expert reports by April 15,

2008, with supplements filed by July 31, 2008. The challenged

Rosten affidavit is dated October 9, 2008, less than one week

before the deadline for defendant’s challenges to expert

testimony and three weeks after the deadline for summary judgment

motions.

 Also, Mr. Rosten’s position in his expert report was that

demand for furniture is influenced by both home sales and the

overall state of the economy. The graph in Exhibit I focuses

only on home sales, without reflecting the “overall state of the

economy” in any way. It does not, therefore, necessarily,

contradict Mr. Rosten’s opinion in the 7/31/08 expert report,

which acknowledged two distinct influences on furniture sales. 

Defendant’s motion to exclude Mr. Rosten’s opinion evidence

that no correlation between home and furniture sales existed in

the relevant time period is denied, based on the current record. 

This denial is without prejudice to defendant to file a new

motion in limine specifically directed at the issue of when Mr.

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Rosten first opined that there was no correlation between

residential home sales and furniture sales between 2001 and 2007,

to enable a fair evaluation of whether or not plaintiffs complied

with the agreed-upon discovery plan.

Conclusion

For the reasons set forth above, defendant’s motion in

limine (document no. 29) is granted in part and denied in part.

Defendant’s motion is granted, to exclude Mr. Rosten’s

expert opinion to the extent it is based on the yardstick

methodology of projecting plaintiffs’ lost profits, based on the

NHFA 2007 Retail Performance Report calculations. 

Defendant’s motion is denied to the extent that it seeks to

exclude Mr. Rosten’s expert opinion based on the before and after

method of calculating lost profits. That opinion evidence is

admissible. 

Finally, defendant’s motion is denied to the extent it seeks

to exclude Mr. Rosten’s opinion that furniture sales are not

correlated to home sales, without prejudice to defendant to renew

this aspect of the motion based upon a clear record as to when

this opinion was formulated.

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SO ORDERED.

__________________________

James R. Muirhead

United States Magistrate Judge

Date: December 22, 2008

cc: Lawrence M. Edelman, Esq.

Philip A. Brouillard, Esq.

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