Opinion ID: 214359
Heading Depth: 1
Heading Rank: 3

Heading: Decision to Exclude Testimony from Dr. O'Neal

Text: Plaintiffs next argue that the district court abused its discretion when it struck plaintiffs' designation of Dr. Edward O'Neal as an expert witness on relevance grounds. See Fed.R.Evid. 402; see also United States v. Dooley, 578 F.3d 582, 591 (7th Cir.2009) (stating that a relevance determination is reviewed for abuse of discretion). Plaintiffs describe O'Neal as an expert on mutual funds and state that they sought to introduce his testimony in order to show that defendants paid excessive fees to the managers of the Growth Equity Fund and the Balanced Fund. Both of these funds were actively managed, meaning that the manager of each fund attempted to beat the market through the selection of securities for inclusion in the fund. Active management can be contrasted with passive managementor indexingin which fund managers simply replicate the performance of the market as measured by an index such as the S & P 500. Because active managers monitor, research and trade the holdings of the fund, they charge more for their services than passive managers. One of the claims that plaintiffs sought to raise through their amended complaint was that the defendants imprudently allowed participants to invest their contributions in actively managed funds. Plaintiffs argued, and Dr. O'Neal opined, that active management is of dubious value, and that therefore the Plan should have offered only passively managed index funds to Plan participants. Because the district court denied the motion to amend, however, this claim did not become part of the case. Nonetheless, plaintiff still designated O'Neal as an expert, arguing that his opinion was relevant to the issue of whether the Plan paid excessive fees to the managers of the Growth Equity Fund and the Balanced Fund. Plaintiffs' theory was that because active management generally does not produce higher returns than passive management, any fee charged by an active manager in excess of the fee charged by a comparable passive manager would be excessive. The district court refused to allow plaintiffs to pursue this theory, finding that plaintiffs were attempting to sneak their claim regarding the prudence of actively managed funds back into the case. On appeal, plaintiffs do not dispute that O'Neal's opinion as to excessive fees depended on his opinion as to the imprudence of actively managed funds. Moreover, we have reviewed plaintiffs' original complaint and can find no allegations giving defendants fair notice that plaintiffs would be pursuing a claim premised on the imprudence of actively managed funds. Thus, we conclude that the district court did not abuse its discretion in concluding that O'Neal's opinions were not relevant to any issue in the case.