Court Opinion

ID: 873517
Source: CourtListenerOpinion
Date Created: 2013-06-01 00:00:37.763793+00
Date Added: 2024-06-11T15:26:36.549539
License: Public Domain

UNPUBLISHED

                   UNITED STATES COURT OF APPEALS
                       FOR THE FOURTH CIRCUIT

                               No. 12-1287

MYGALLONS LLC,

                 Plaintiff - Appellee,

           and

ZENACON LLC; STEVEN VERONA,

                 Plaintiffs,

           v.

U.S. BANCORP; VOYAGER FLEET SYSTEMS, INC.,

                 Defendants - Appellants,

           and

K.E. AUSTIN CORP.,

                 Defendant.

Appeal from the United States District Court for the Eastern
District of North Carolina, at Wilmington.    W. Earl Britt,
Senior District Judge. (7:09-cv-00057-BR)

Argued:   March 20, 2013                     Decided:   May 31, 2013

Before NIEMEYER, MOTZ, and KEENAN, Circuit Judges.

Affirmed in part, vacated in part, and remanded by unpublished
opinion. Judge Niemeyer wrote the opinion, in which Judge Motz
and Judge Keenan joined.
ARGUED:   Johnny Morgan Loper, WOMBLE CARLYLE SANDRIDGE & RICE,
PLLC, Raleigh, North Carolina, for Appellants.      Gary Walker
Jackson, JACKSON & MCGEE, LLP, Charlotte, North Carolina, for
Appellee.    ON BRIEF:    Lewis A. Remele, Jr., Christopher R.
Morris,   BASSFORD  REMELE,   PA, Minneapolis,  Minnesota,  for
Appellants.   Marcus S. McGee, JACKSON & MCGEE, LLP, Charlotte,
North Carolina; Sherrie R. Savett, Douglas M. Risen, Russell D.
Paul, Jacob M. Polakoff, BERGER & MONTAGUE, PC, Philadelphia,
Pennsylvania, for Appellee.

Unpublished opinions are not binding precedent in this circuit.

                                2
NIEMEYER, Circuit Judge:

        MyGallons LLC, a Florida company that had not yet begun

doing    business,        sent    out    a    press      release       on   June    30,   2008,

announcing the launch of a nationwide prepaid gas program using

the Voyager payment network operated by Voyager Fleet Systems,

Inc.    (“Voyager”),        a    subsidiary        of    U.S.    Bancorp         (collectively

“USB”).      MyGallons and USB had been in discussions about using

the Voyager network to back the issuance of prepaid gas cards

but    had   not    yet     reached       final     agreement.              In    response    to

MyGallons’     press       release,          USB   released        a     series     of    “desk

statements”        that,         in     effect,         denied     any       connection       or

affiliation        with    MyGallons.              As    a   consequence,           MyGallons’

announcement was distrusted, and it subsequently received an “F”

rating from the Better Business Bureau of Southeast Florida; was

labeled a “scam” in the media; and was unable to secure another

payment processor for its prepaid gas program.

       MyGallons commenced this action for defamation, breach of

contract, and related claims, and after a trial, a jury awarded

MyGallons $4 million in damages on the defamation claim.                                     USB

now appeals, contesting both the jury’s finding of defamation

and its award of damages.

       We conclude that sufficient evidence was presented to the

jury to enable a reasonable jury to have found that USB defamed

MyGallons.         But    we     also    conclude        that    the     damage     award    was

                                               3
either excessive or unsupported because the expert testimony at

the heart of the award was admitted in violation of Daubert v.

Merrell    Dow       Pharmaceuticals,          Inc.,     509      U.S.    579     (1993).

Accordingly,     we    affirm      the   verdict       on    liability,      vacate    the

award of damages, and remand for a new trial on damages.

                                           I

      In early 2008, Steven Verona contacted Voyager to discuss

piloting his prepaid consumer gas program.                        Under the program,

members would pay an annual fee and be able to purchase a card

prepaying gas at a designated price and thus be able to buy gas

later at the prepaid price.              Voyager, a wholly-owned subsidiary

of U.S. Bank National Association ND, in turn a wholly-owned

subsidiary      of    U.S.    Bancorp,     operated          a    payment     processing

network   for    commercial        and   fleet    gas       purchases,      using   fleet

cards.    Its program focused on commercial and government fleets,

and   about     95%    of    the   service      stations         nationwide      accepted

payment through Voyager’s network.                     Voyager was not, however,

set up to provide the disclosures necessary for the issuance of

consumer gas cards.

      After     Verona      explained    his     prepaid         gas   program    to   USB

executives, the executives explained that USB would not work

directly with Verona or any company of his until the program

reached a certain size.             One of the executives directed Verona

                                           4
to work with a “channel partner,” an authorized reseller of the

Voyager     payment       processing             system,    specifically             recommending

USB’s channel partner K.E. Austin Corp., operating as “GoGas.”

     In March 2008, Verona submitted a fleet card application to

GoGas    through       Zenacon       LLC,     a    company     that       he    had       previously

created        for    ownership        of    his       various      inventions.              Verona

informed GoGas that this was the pilot program for a larger

consumer venture.             GoGas forwarded Zenacon’s application to USB,

which approved it.              USB then issued Zenacon several dozen cards

using the Voyager payment network, which Verona distributed to

family    and        friends,    who       had    been    identified           as   employees      in

Zenacon’s application.                 These individuals thereafter used the

fleet cards to purchase gas.

        Soon    thereafter,          Verona       decided      to    brand          his    consumer

prepaid    gas        program    “MyGallons,”            and   on    April          14,    2008,   he

formed     MyGallons          LLC,     a    Florida       limited     liability             company.

GoGas    then        requested       that    USB       transfer     Zenacon’s          account     to

MyGallons.              The      account,          however,         was        never        formally

transferred.           But an internal USB communication from June 2008

stated that “MyGallons is an approved Voyager fleet card account

under the K.E. Austin GoGas channel partner program,” and “we

are working to expand the program to a direct relationship with

U.S. Bank and provide MyGallons with its own account to offer

prepaid relationship[s] to its members.”                             And by June 27, USB

                                                   5
was in the process of drafting a new contract for its direct

relationship with MyGallons.                 In the meantime, USB employees

worked with GoGas and Verona to design fleet cards with the

logos of both MyGallons and Voyager on them, even though up

until that time the only cards in active use were those that had

been issued pursuant to the agreement between GoGas and Zenacon.

      On June 30, 2008, MyGallons publicly announced the launch

of   its     prepaid      gas     program        with   a   press    release        titled

“MyGallons Provides Americans with a Solution to Fight Rising

Gas Prices:        Fixed Price Gas Savings Program Allows Consumers to

Save Money by Buying Tomorrow’s Gas at Today’s Prices.”                                 The

press      release       stated     that     “MyGallons       offers    its       members

convenience and freedom as the gas redemption program uses the

Voyager fleet network, operated by U.S. Bank, which is accepted

at   over    95%    of    gas     stations    nationwide.”          Verona    did      not,

however, alert USB to the press release in advance, and USB

stated      that   it     was     unaware    of     the     consumer,      rather      than

commercial, nature of MyGallons’ business plan until the press

release.

      The    MyGallons      announcement          was   widely    picked     up   by    the

media, including Time Magazine, U.S. News and World Report, CBS

Early Show, ABC Evening News, and CNN International, and Verona

was interviewed on Good Morning America.                         Within days of the

launch, MyGallons had over 6,000 members who had paid the annual

                                             6
fee,   and   even   after   MyGallons     stopped    accepting   memberships

because it lacked a payment processor, approximately 25,000 to

30,000 additional people attempted to sign up.

       The day after MyGallons’ announcement, on July 1, 2008,

USB’s counsel emailed Verona, stating in relevant part:

            This communication is to inform you that there is
       no agreement in place between MyGallons and U.S. Bank
       or Voyager for such a program as described on the
       MyGallons website.   MyGallons had not communicated to
       Voyager that any potential program between MyGallons
       and Voyager was or is for consumer use.       MyGallons
       also has no approval from U.S. Bank or Voyager to use
       Voyager’s marks, or to issue a press release naming
       either U.S. Bank or Voyager. . . . U.S. Bank further
       informs MyGallons that neither U.S. Bank nor Voyager
       will enter into any agreement with MyGallons as
       contemplated and described on MyGallons’ website.

            We also understand you executed, as the president
       and chairman of a company called Zenacon, LLC, a GoGas
       Commercial Fleet Card application and agreement in
       April, 2008 (the “Agreement”).   We further understand
       that Zenacon may be issuing cards to consumers, under
       a similar model to the program described on the
       MyGallons website.   This constitutes an unauthorized
       use of commercial fleet cards, and a breach of the
       terms and conditions set forth in the Commercial Fleet
       Card. We are terminating this Agreement immediately.

Later that day, USB held a telephone conference call with Verona

to inform him that USB could not participate in the venture

because Voyager did not deal in direct consumer transactions.

       Concerned    over    being   associated      with   a   fuel   hedging

program, USB decided to prepare a “desk statement” to respond to

media inquiries, which it subsequently shared with a number of

                                      7
media    outlets.      Its   initial   statement,      dated    July       1,   2008,

provided:

     U.S. Bank Voyager Fleet Systems does not have a
     contract to do business with MyGallons.com.    We did
     not authorize the use of our name in association with
     this venture and we are not affiliated with this
     company.

After counsel for MyGallons requested that the “no affiliation”

phrase be removed, Voyager revised the statement to provide:

     Neither U.S. Bank National         Association    ND, nor Voyager
     Fleet Systems, Inc. have          a contract      to do business
     with MyGallons.com, LLC,           and there      are no ongoing
     negotiations  to   enter          into   any      agreement  with
     MyGallons.

Voyager then revised the statement a final time, to provide:

     Neither U.S. Bank National Association ND, nor Voyager
     Fleet Systems, Inc. has a contract to do business with
     MyGallons LLC, and there are no ongoing negotiations
     to enter into any agreement with MyGallons.

     We did have a commercial fleet fuel card contract with
     Zenacon LLC through our partnership with third-party
     marketer GOGAS Universal, however it was for the
     exclusive   purpose  of   providing  commercial    fleet
     fueling and maintenance cards, not consumer cards.

     Negative press about MyGallons ensued.              The Better Business

Bureau    of    Southeast    Florida   gave    MyGallons       an   “F”     rating,

warning consumers to “beware.”             Similar Internet postings and

articles       followed,    with   MyGallons   being     labeled       a    “scam.”

MyGallons stopped signing up members and refunded all monies

that had been collected from members.

     Despite contacting numerous companies during the days that

followed,       including     Visa,    MasterCard,      Discover,          American

                                       8
Express, NYC Network, Comdata, and Legacy, MyGallons was unable

to    secure    a    replacement           payment      processing      network.     Verona

testified       that       a    number       of   companies       refused    immediately,

without meeting or engaging in further communication.                                Verona

also    asked        Melody         Wigdahl,      an    independent       contractor       who

specialized in payment solutions for corporate clients, to help

find an alternate payment processor.                       Wigdahl’s communication to

Verona at the time of her search emphasized the barriers that

had    been    created         by    the   negative       publicity     about     MyGallons.

When    testifying         in       deposition,        however,   she    focused     on    the

obstacles created by the type of platform sought by MyGallons

and    its    lack    of       funding.        She     also   testified     that   Verona’s

reputation was a problem.

       On     July    7,       2008,    GoGas     authorized       Verona    to    issue     a

statement which provided:

       GoGas had agreements in place with Zenacon LLC and
       MyGallons LLC in order to provide support for the
       MyGallons program through the use of the Voyager
       payment processing network.   We believe the MyGallons
       program is an innovative business and it could offer
       Americans relief at the pump. . . . We are sorry that
       MyGallons and their launch have been harmed by the
       release   of   incorrect  information   and  confusing
       statements resulting in negative press.

       Verona,       MyGallons,        and     Zenacon     commenced      this    action    in

August 2008 against U.S. Bancorp, Voyager, and GoGas for breach

of contract, promissory estoppel, and tortious interference with

contract and prospective contractual relations.                            The plaintiffs

                                                  9
alleged additional claims against U.S. Bancorp and Voyager for

defamation, disparagement/injurious falsehood, and false light

publicity.        Voyager filed counterclaims against the plaintiffs,

including     a    claim    for   breach   of     contract   against     Verona   and

Zenacon for failing to pay the charges made on the issued gas

cards.

      The action was initially filed in the Eastern District of

Pennsylvania.          When GoGas filed a motion to dismiss for lack of

personal jurisdiction, the court transferred the case to the

Eastern District of North Carolina.                 Thereafter, the plaintiffs

amended their complaint to add claims for unfair and deceptive

trade practices.           They ultimately dismissed their claims against

GoGas.

      Prior       to    trial,    the   district    court    dismissed     Verona’s

individual claims for breach of contract and promissory estoppel

and all claims for tortious interference, false light publicity,

and unfair trade practices.               It also denied USB’s motion filed

under Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579

(1993), to exclude the testimony of the plaintiff’s two expert

witnesses, Dr. Anca Micu and Paul Seitz.

      At the conclusion of the plaintiffs’ case at trial, the

district court granted USB’s motion for judgment as a matter of

law   on   all     of    Zenacon’s      claims,    except    for   its   breach    of

contract claim, and all of Verona’s claims.                  The court submitted

                                           10
the   remaining      claims           to    the    jury,       which       included      MyGallons’

claims against USB for (1) breach of contract, (2) promissory

estoppel,     and    (3)     defamation;               Zenacon’s       claim       for     breach     of

contract; and Voyager’s counterclaim against Verona and Zenacon

for breach of contract.

      In    its    verdict,       the        jury      found    for       USB     on    Zenacon      and

MyGallons’        breach         of        contract         claims        and      on    MyGallons’

promissory        estoppel       claim.           It     found       for        MyGallons      on    its

defamation        claim    against          U.S.       Bancorp       and        Voyager,      awarding

MyGallons $4 million in damages.                            And it found for Voyager on

its breach of contract counterclaim against Verona and Zenacon,

awarding it $1,096 in damages.

      USB    moved    for        judgment         as    a    matter        of    law,    or    in    the

alternative, for a new trial on damages or for a remittitur.

The court denied the motion.                           It upheld the defamation claim

because “[a] reasonable jury could have found one or more of the

defendants’       statements           to    be    false.”           The    court       declined      to

alter the damages, finding that although it was unclear whether

the jury gave any special damages, if they did award special

damages,     “[a]         reasonable          jury          could     have        concluded         that

defendants’ defamatory statements caused MyGallons’s inability

to secure an alternative card processing network which, in turn,

caused     MyGallons       to    suffer       pecuniary         loss.”            The    court      did,

however,     state        that    “[i]f        the       jury       had    awarded       $4,000,000

                                                  11
exclusively for general damages, the court might be inclined to

agree with defendants’ position that such award is excessive

given    MyGallons’s      relatively     short    existence        and   compared      to

awards in similar defamation cases.”                    The court rejected the

defendants’ renewed argument that the plaintiff’s experts should

not have been allowed to testify.               And finally, the court denied

the motion for remittitur because it was inappropriate given

that “the jury was not asked to separately identify what amount

it was awarding for reputational harm, lost profits, or other

monetary loss.”

        USB filed this appeal on March 2, 2012, challenging (1) the

jury’s finding of defamation and (2) its award of $4 million in

damages.

                                         II

      USB contends that on the defamation finding, it is entitled

to   judgment    as   a   matter   of    law    because      its    desk    statements

issued    in   response    to    MyGallons’      June   30    press      release     were

substantially true and any resulting “sting” was caused by the

true statement that MyGallons did not have a contract with USB.

In response, MyGallons contends that having no contract was not

the entire message of the desk statements and that when the

statements      are   considered    as   a     whole,    they      communicated       the

false     impression      that   there    had     not    been      any     contact     or

                                         12
association       between      the    companies.          Thus,    MyGallons        contends

that there was sufficient evidence from which the jury could

have concluded that one or more of the statements in the desk

statements were false.

       We review the district court’s denial of the motion for

judgment as a matter of law de novo.                          See Konkel v. Bob Evans

Farms,    Inc.,     165     F.3d     275,    279       (4th    Cir.     1999).       And    in

conducting our review, we take the evidence in the light most

favorable to MyGallons and draw all reasonable inferences in its

favor.    See id.

       The parties agree that the defamation claim is governed by

Minnesota    law       because       the    alleged       defamation      originated       in

Minnesota.         They   also       agree      that     under    Minnesota        law,    the

elements     of    a    defamation         claim    are:         “(1)    the     defamatory

statement was communicated to someone other than the plaintiff;

(2) the statement is false; (3) the statement tends to harm the

plaintiff’s       reputation         and   to     lower    [the    plaintiff]        in    the

estimation of the community; and (4) the recipient of the false

statement    reasonably         understands         it    to     refer   to    a    specific

individual.”        McKee v. Laurion, 825 N.W.2d 725, 729-30 (Minn.

2013)    (alteration      in     original)        (internal       quotation        marks   and

citations omitted).             A defamation claim cannot be based on a

true     statement.         Id.      at    730.          “True    statements”        include

statements that are “true in substance” and contain only “minor

                                             13
inaccuracies of expression or detail.”                            Id.     In articulating

this standard, the Minnesota courts explain that “substantial

truth” means that “the substance, the gist, the sting, of the

libelous charge [is] justified” and the statement “would have

the same effect on the mind of the reader or listener as that

which the pleaded truth would have produced.”                             Id. (alteration

in     original)          (emphasis       added)        (internal        quotation        marks

omitted).          Finally, the determination of truth or falsity is

generally a question for the jury.                      Id.

       In        this     case,     USB’s        desk        statements        contain      four

significant statements:              (1) USB “does not have a contract to do

business with MyGallons.com”; (2) USB “did not authorize the use

of its name in association with this venture”; (3) USB is “not

affiliated         with    this     company”;       (4)        “there     are    no     ongoing

negotiations to enter into any agreement with MyGallons.”

       The       jury     determined,       by     implication,          that     the     first

statement was true because it found against MyGallons on its

breach      of    contract       claim.     But,        in    concluding       that   USB   had

defamed MyGallons, it found necessarily that one of the other

statements        or    the   statements     “as        a     whole”    were    false.      See

Jadwin v. Minneapolis Star & Tribune Co., 390 N.W.2d 437, 443

(Minn. Ct. App. 1986).

       Even though USB’s statement that it did not have a contract

with     MyGallons         was    true,     the     remaining           statements       fairly

                                             14
communicated a total disassociation of the companies.                        USB used

language to suggest that there had been nothing ongoing between

the parties, stating that it “did not authorize the use of its

name” in connection with MyGallons’ venture; that it was “not

affiliated”    with    MyGallons;    and    that    “there      were    no    ongoing

negotiations.”      Yet, the evidence showed that USB executives had

heard from Verona about his concept for MyGallons, had met with

MyGallons,    and   had    indeed   directed      MyGallons     to     establish    a

pilot program though GoGas.               While there may have been some

confusion about whether the proposed business relationship was

to be a commercial one or consumer oriented, it cannot be said

that the parties had not been negotiating or that they had no

relationship.       USB employees had been working with GoGas and

Verona   to   design      fleet   cards    that    used   the    logos       of   both

MyGallons and Voyager, and there was evidence that USB was, as

of June 27, 2008, a few days before MyGallons issued its press

release, in the process of drafting a contract to implement a

direct relationship between it and MyGallons.                    The suggestions

that there had been no contact between the parties implied that

what MyGallons had reported publicly in its press release was a

complete fabrication, leading public commentators to refer to

MyGallons as a fraud or a sham.            While MyGallons may have jumped

the gun with its announcement on June 30, 2008, USB’s response

was an overreaction that the jury could conclude gave a false

                                      15
description of the relationship.               We conclude that a jury could

reasonably    have      found   that     one    or    more      of    the   statements

contained in USB’s desk statements were false, thus satisfying

that essential element of a defamation claim.

       USB contends that even if one of the statements was false,

any “sting” was caused by the true statement that MyGallons did

not have a contract with USB for a nationwide consumer program.

USB,    however,     does   not       present    evidence        to    support       this

argument,    and   it    does   not    explain       why   we   should      reject    the

jury’s conclusion that the sting was caused by the falsity of

one or more of the other statements or the message communicated

by the other statements taken “as a whole.”

       Accordingly, we conclude that the district court did not

err in refusing to set aside the verdict on the ground that

there was no substantial evidence to support the verdict.

                                         III

       USB also contends that the jury’s award of $4 million in

damages was excessive and unsupportable.                     It argues that a $4

million award “for general damages alone would be excessive,

[so] the verdict cannot be upheld unless it is deemed to be

comprised, at least in part, of special damages.”                             And with

respect to special damages, it argues that MyGallons failed to

prove the requisite causation.                 Alternatively, it argues that

                                         16
the    special        damages        award    was     unsupported,       inasmuch     as

“MyGallons         should    not     have    been    allowed     to   present     expert

testimony seeking $208 million in lost profits” when the company

had just started up and had no financing or profits.

       In defense of the award, MyGallons contends that (1) that

“the jury’s lump sum award for all damages [must be] presumed to

be a mix of general and special damages in the proportion most

favorable to MyGallons”; (2) that there was sufficient evidence

of causation for special damages; (3) that even if the award was

entirely for general damages, it would not have been excessive;

and (4) that the expert testimony was properly admitted in the

discretion of the trial judge.

       Under Minnesota law, damage awards in defamation cases can

be    for   (1)     general    damages       for    harm    to   reputation,    wounded

feelings, and humiliation; or (2) special damages for “the loss

of something having economic or pecuniary value.”                         Longbehn v.

Schoenrock, 727 N.W.2d 153, 160 (Minn. Ct. App. 2007) (quoting

Restatement (Second) of Torts § 575 cmt. b (1977)); see also

Stuempges v. Parke, Davis & Co., 297 N.W.2d 252, 258-59 (Minn.

1980).         Moreover,        Minnesota          courts    have     concluded     that

“corporate plaintiffs stand on the same footing as individuals

in defamation actions.”              Advanced Training Sys., Inc. v. Caswell

Equip.      Co.,    352     N.W.2d    1,     10    (Minn.   1984).      Consequently,

corporations may not only receive awards for special damages in

                                              17
defamation cases, but also for general damages for reputational

harm.      See, e.g., Imperial Developers, Inc. v. Seaboard Sur.

Co., 518 N.W.2d 623, 627 (Minn. Ct. App. 1994).

     In this case, the jury returned a general verdict awarding

MyGallons     $4    million    in   damages      for    defamation     without

specifying whether the $4 million was for general or special

damages, or both.

     We begin our inquiry by assuming first, for purposes of

analysis, that the jury award was only for general damages based

on reputational injury.        On that assumption, we agree with USB

that the award would have been excessive because a $4 million

award for reputational harm to a startup company that had only

publicly launched its business a few days before the defamation

would be “so exorbitant as to shock the sense of the court.”

Scott Fetzer Co. v. Williamson, 101 F.3d 549, 555 (8th Cir.

1996)   (applying      that   standard     to   defamation   damages    under

Minnesota law).        Even though MyGallons did receive extensive

media attention with its startup announcement on June 30, 2008,

and some 30,000 individuals enrolled or attempted to enroll in

the program shortly thereafter, it was a nascent company with no

capital, no financing, no customers who had yet used its planned

consumer    program,    and   no    profit.       Any   public   reputation,

therefore, was established only in the few days extending from

June 30, 2008, into early July 2008.            We find no support in the

                                      18
record or in the case law that a company in those circumstances

would be entitled to millions of dollars in reputational damage.

We   therefore     conclude        that    if    the   award    were    entirely       for

general damages, it would have been excessive.

        Because   the   award      fails    if    based      completely    on    general

damages, we will assume, as we must, that the award included at

least some special damages, thus presenting the issues raised by

USB about any award of special damages. USB argues that any

special damages award could not stand because the plaintiffs

failed    to   prove    causation         and,    in   any    event,    were    able    to

justify such an award only with inadmissible expert testimony.

      Under Minnesota law, special damages are recoverable only

for “actual and special pecuniary loss.”                      Stuempges, 297 N.W.2d

at 258.     To recover such damages, a plaintiff must show (1) the

“loss of something having economic or pecuniary value” and (2)

sufficient     causation      --    that    the    defamatory      statement      was    a

“substantial factor in bringing about the harm.”                        Longbehn, 727

N.W.2d at 160 (internal quotation marks omitted).

      In support of its argument that the plaintiffs failed to

prove    causation,     USB   points       to    the   facts    (1)    that    MyGallons

failed    to   call     any   of    the     “potential       replacement       [payment]

processors”       as    witnesses;         (2)     that       Melody    Wigdahl,        an

independent contractor retained by MyGallons to help find an

alternative payment processor, identified other factors as the

                                            19
impediments       to     MyGallons’           securing        an     alternative          payment

network;    and       (3)    that    Verona       could       not     testify      as     to    the

influence       of     the     defamation           on       the     alternative          payment

processors because the district court sustained objections to

that line of questioning as hearsay and without foundation.

       Even so, we conclude that there was sufficient evidence

from    which     a    jury       could    have      found         causation.           The    desk

statements      issued       by    USB     ignited       a    wave     of    bad    press       for

MyGallons, with MyGallons labeled as a “fraud” and a “scam.”

Verona testified that although there were alternative payment

networks    and       that    he    believed        that     securing       another       network

“wasn’t going to be that much of a challenge . . . with Wright

Express which is Voyager’s biggest competitor or with Comdata

and    MasterCard       or    Visa       or    another        payment       network,”         every

network refused to work with MyGallons and that he “couldn’t

even name all of the companies that didn’t have meetings with

[us]    that    just        turned    us      down       immediately.”             He     further

testified that alternative payment processors would ask about

“the series of events that led up to us calling them.”                                        Verona

concluded that “it was apparent that we weren’t going to be able

to get anywhere as long as we had all of this press directed at

us and [were] being portrayed as a fraud.”

       The evidence showed further that Wigdahl had sent an email

to MyGallons during the period following the defamation stating

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that “unfortunately, the negative information online is being

brought up in every call back so far. . . .                                  What would you

suggest    as    a   response    to    the       negative      information            available

online about MyGallons?”              In addition, Wigdahl testified that,

as to Sutton Bank, a potential payment processor, “the issue

[was] the fact that U.S.B. had cancelled the program.”

     From    this     evidence,       we    conclude         that    a    reasonable         jury

could   draw     reasonable      inferences         of    causation.                See,    e.g.,

DeJarnette v. Corning, Inc., 133 F.3d 293, 297 (4th Cir. 1998)

(noting that juries can draw “reasonably probable” inferences to

establish causation); Lovelace v. Sherwin-Williams Co., 681 F.2d

230, 241 (4th Cir. 1982) (“[T]he question of sufficiency goes

simply to the reasonableness of drawing the necessary inference

of causation from the indirect evidence”); Stuempges, 297 N.W.2d

at 259 (finding that it was reasonable for a jury to find that

the plaintiff’s inability to find employment was caused by a

supervisor’s poor recommendation).

     We    agree,     however,    with       USB    that      any    award          of   special

damages    was    influenced     by    the       expert      testimony         of    a   witness

improperly       allowed   to    testify,         in     violation           of     Daubert    v.

Merrell    Dow    Pharmaceuticals,          Inc.,      509    U.S.       579      (1993).      To

provide evidence of lost profits, MyGallons used the testimony

of   two    expert     witnesses,          Dr.     Anca      Micu,       a     professor       of

marketing, and Paul Seitz, a certified public accountant.                                     Dr.

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Micu projected that over a three-year period beginning July 1,

2008, Mygallons could have achieved about 3.3 million members

“if they would have been in business as planned.”                           Based on that

projected      membership,       Seitz      estimated      that    MyGallons          suffered

$208 million in lost profits.                 USB argues that because Dr. Micu

lacked       experience     in   forecasting          sales    and    used       an    overly

optimistic and flawed method to predict membership, she should

not have been allowed to give her opinions.

       Dr.      Micu’s      experience          was        centered        on     marketing

effectiveness.        She had a Ph.D. in strategic communications, an

MBA in marketing, and a BS in finance and was a professor of

marketing at Sacred Heart University, where she taught courses

in     advertising,       marketing         research,      digital        marketing,      and

consumer       behavior.         She        acknowledged,         however,       that      her

expertise was not in sales forecasting and that “sales [are] not

used    as    an    effectiveness        measure      of    advertising         efforts     or

spending.”         Nonetheless, she claimed that she was qualified to

give    her    opinions     based      on    her   expertise         in    “communication

effectiveness or persuasion with purchase intent.”

       To project the future membership of MyGallons and therefore

its profits, Dr. Micu employed a “funnel approach.”                              Under this

approach      she   began    with   the       market’s      overall       size    and     then

narrowed it to an estimate of actual memberships by considering

those who were aware of the MyGallons brand, the traffic to its

                                              22
site, actual signups, and a projected growth rate and attrition.

She benchmarked MyGallons’ growth against industry giants such

as   Apple,   Costco,    Netflix,    and    eHarmony,       and    she     did    not

reference any startup companies.             In using the experience of

those large, successful companies as benchmarks, Dr. Micu did

not consider whether MyGallons had the resources, financing, or

experience    necessary    for     such    growth    or,     indeed,      even    as

necessary to carryout its own business plan.                 She also did not

consider    the   real   circumstances      that    could    cause       MyGallons’

business plan to fail.         For instance, Dr. Micu did not take into

account the viability of MyGallons’ plan if gas prices dropped,

a puzzling omission given the fact that gas prices actually fell

in the months after MyGallons announced its business plan.                        Of

course, with falling gas prices, the whole purpose of MyGallons’

gas payment plan would be defeated, as it was designed to hedge

against rising gas prices.

     In sum, we conclude that far from resting on the requisite

“reliable foundation” that was required for such testimony, Dr.

Micu’s    projections    ignored    business   realities          and    relied   on

sheer    speculation.     We    therefore    conclude       that   the     district

court abused its discretion in admitting Dr. Micu’s testimony

under the standards required by both Federal Rule of Evidence

702 and Daubert.

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      Without Dr. Micu’s projected membership, Seitz had no basis

for    his   estimate     that      MyGallons      suffered         $208       million   in

damages.      And without this figure, we find no basis in the

record   from   which     a    jury     could    conclude       that,     as    a   startup

company without prior experience in consumer hedging and with

only days of publicity, MyGallons sustained a loss justifying a

substantial special damages award.                 See Boucher v. U.S. Suzuki

Motor Corp., 73 F.3d 18, 21 (2d Cir. 1996) (“Where lost future

earnings are at issue, an expert’s testimony should be excluded

as    speculative    if       it   is    based     on   unrealistic            assumptions

regarding    the    plaintiff’s         future     .    .   .    prospects”);        Tyger

Constr. Co. v. Pensacola Constr. Co., 29 F.3d 137, 142-43 (4th

Cir. 1994) (concluding that baseless expert testimony should not

have been admitted).

      In sum, we conclude that a $4 million award would have been

excessive if entered for only general damages and that a $4

million award of special damages or some combination of general

and special damages would have been unsupported by admissible

evidence.       Accordingly,       we     vacate    the     award    of    damages       and

remand for a new trial on damages.

      For the reasons given, the judgment of the district court

is

                                           AFFIRMED IN PART, VACATED IN PART,
                                        AND REMANDED FOR FURTHER PROCEEDINGS.

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