Opinion ID: 164803
Heading Depth: 4
Heading Rank: 1

Heading: Mr. Livingston's Testimony

Text: 53 LifeWise argues that the district court erred in failing to admit Mr. Livingston's damages testimony as an expert opinion under Rule 702, and as a lay witness opinion under Rule 701. 54
55 Rule 702 allows expert testimony only where the witness [is] qualified as an expert by knowledge, skill, experience, training, or education to offer such opinions. To qualify as an expert, Mr. Livingston was required to possess such skill, experience or knowledge in that particular field as to make it appear that his opinion would rest on substantial foundation and would tend to aid the trier of fact in his search for truth. Graham v. Wyeth Labs., 906 F.2d 1399, 1408 (10th Cir.1990) (quoting Bridger v. Union Ry. Co., 355 F.2d 382, 387 (6th Cir.1966)). The heart of expert testimony is the foundation. Whether a witness can parrot the results of a model does not mean that he is qualified to explain how the model works or to opine on the statistical validity or interpretation of the results. See Wilkins v. Univ. of Houston, 662 F.2d 1156, 1157 (5th Cir. Dec.1981) (Since multiple regression analysis is subject to misuse, courts cannot be expected to accept at face value conclusions derived from such a model absent expert testimony concerning the validity of the model itself. ) (emphasis added). 56 However, Mr. Livingston was not an expert in damages analysis or in any of the techniques used to create the September 13, 2002, damages model. He admitted that he had never used the methods used to create the September 13, 2002, damages model; he even confessed that I am not a [damages] modeler. IX Aplt.App. at 3994; see also XI Aplt.App. at 4850 (I'm not an accountant and I'm not an academic); id. at 4851 (I'm not an expert on regression analysis.); id. at 4852 (I am not a statistician and I'm not an expert about regression analysis.). Indeed, Mr. Livingston took a single undergraduate class in economics. But he took no accounting or finance courses, had no training in damage analysis, had never testified as a damages expert or prepared an expert damages report, had never taught a course or lectured on damages, and has never been published in the field. Id. at 4855-56. As the district court noted, Mr. Livingston is not a trained economist and cannot legitimately educate a jury on many of the complex economic aspects of [the damages model] such as `S-curves.' XIII Aplt.App. at 5634 n. 10; see also TK-7 Corp. v. Barbouti, 993 F.2d 722, 728 (10th Cir.1993) (affirming exclusion of witness who was not qualified as an expert); Broadcort Capital Corp. v. Summa Med. Corp., 972 F.2d 1183, 1195 (10th Cir.1992) (holding that witness with some general experience and education in the field lacked sufficient qualifications to qualify as expert in the area); Brown v. Am. Honda Motor Co., 939 F.2d 946, 952 (11th Cir.1991) (concluding that statistics, without an analytic foundation, are virtually meaningless.). Given Mr. Livingston's utter lack of any familiarity, knowledge, or experience with damages analysis, the district court did not abuse its discretion in ruling that he could not testify as an expert regarding such a complex subject matter as LifeWise's fourth damages model. 57 Moreover, the district court also held that LifeWise's fourth damages model failed to meet the standard set forth in Daubert v. Merrell Dow Pharmaceuticals, 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993), and Kumho Tire Co. v. Carmichael, 526 U.S. 137, 119 S.Ct. 1167, 143 L.Ed.2d 238 (1999), because (1) Mr. Livingston was not qualified as an expert in most of the methodology used in the statement, (2) the methodology is misleading, not reliable, and unsupported by use in any other comparable setting, (3) the methodology does not fit the present case because three month rolling averages are not appropriate for making profit predictions beyond one period, and S-curves are not appropriate for a young company such as LifeWise that claims to have a vast untapped market in need of its unique loan product, and (4) the model was not helpful to a jury but would tend to confuse, mislead, and waste time. XIII Aplt.App. at 5634-35. 58 Lifewise does not challenge any of the district court's bases for excluding the damages model itself under Daubert and Kumho Tire except by arguing that the district court improperly weighed evidence. Aplt. Br. at 55-56. However, the court found that LifeWise's use of three-month rolling averages, step-down methodologies, compounded monthly growth rates, S-Curves, and a 13% discount rate was unique to this case and not based on any recognized standard. XIII Aplt.App. at 5630. Moreover, the methodology was not in regular usage for predicting future profits, was not peer reviewed, has no uniform usage in any known industry, and is capable of manipulation to achieve virtually any desired result. Id. LifeWise does not challenge any of these points. The district court did not abuse its discretion. 59
60 The district court did not analyze Mr. Livingston's testimony as lay opinion testimony under Rule 701. LifeWise, however, argues that Mr. Livingston's position as CEO of LifeWise gives him personal knowledge to testify as to its lost profits. 61 When the subject matter of proffered testimony constitutes scientific, technical, or other specialized knowledge, the witness must be qualified as an expert under Rule 702. Rule 701 applies only [i]f the witness is not testifying as an expert. Fed.R.Evid. 701. Indeed, the rule expressly prohibits the admission of testimony as lay witness opinion if it is based on specialized knowledge. Id. In other words, a person may testify as a lay witness only if his opinions or inferences do not require any specialized knowledge and could be reached by any ordinary person. Doddy v. Oxy USA, Inc., 101 F.3d 448, 460 (5th Cir.1996). 62 In this case, Mr. Livingston testified only regarding LifeWise's fourth damages model. The model concerned moving averages, compounded growth rates, and S-curves. Mr. Livingston could not testify about these technical, specialized subjects under Rule 701. 63 The cases string-cited by LifeWise allowing a business owner to opine as to value do not support its position. In one group of cases, the courts found business owners' testimony admissible under Rule 701 because the owners had sufficient personal knowledge of their respective businesses and of the factors on which they relied to estimate lost profits. See Malloy v. Monahan, 73 F.3d 1012, 1015-16 (10th Cir.1996); Lightning Lube, Inc. v. Witco Corp., 4 F.3d 1153, 1174-75 (3d Cir.1993); In re Merritt Logan, Inc., 901 F.2d 349, 360 (3d Cir.1990); MCI Telecomms. Corp. v. Wanzer, 897 F.2d 703, 706 (4th Cir.1990). In other cases, the owners offered valuations based on straightforward, common sense calculations. See Securitron Magnalock Corp. v. Schnabolk, 65 F.3d 256, 265 (2d Cir.1995) (business owner calculated past lost profit damages for defamation based on actual decrease in sales); State Office Sys., Inc. v. Olivetti Corp. of Am., 762 F.2d 843, 847 (10th Cir.1985) (business owner calculated that its lost profits equaled its lost profit per computer times 29 lost sales); Teen-Ed, Inc. v. Kimball Int'l, Inc., 620 F.2d 399, 402-03 (3d Cir.1980) (plaintiff, an authorized dealer of defendant's product for five years, used historical gross profit margin and historical gross sales to determine lost profits). Mr. Livingston's proposed expert testimony does not fit either circumstance. 64 In the present case, although Mr. Livingston was the president of the company, he does not have personal knowledge of the factors used by LifeWise's fourth damages model to estimate its lost profits. On the other hand, the district court acknowledged that Mr. Livingston could have testified solely as a businessperson based on his personal knowledge and his experience as president of the company. He could have given a straightforward opinion as to lost profits using conventional methods based on LifeWise's actual operating history. Indeed, the court essentially invited LifeWise to have him so testify. See XIII Aplt.App. at 5639. 65 Instead of limiting Mr. Livingston's testimony to his experience as a businessperson and president of the company, however, LifeWise had him enter [ ] into the realm of rolling averages, S-curves, and compound growth rates that appear to be an amalgam of logic, hope, and economic jargon. Id. at 5636-37. But Mr. Livingston himself admitted that he can't recall any prior instances where he used such methods at LifeWise. XI Aplt.App. at 4961. Such subject matters fail to be rationally based on Mr. Livingston's perception, and therefore cannot be admissible as lay opinion testimony. 66