Court Opinion

ID: 4237432
Source: CourtListenerOpinion
Date Created: 2018-01-18 17:04:01.516651+00
Date Added: 2024-06-11T14:43:17.037527
License: Public Domain

In the United States Court of Federal Claims
                                   Nos. 06-387C & 13-988C
                                     CONSOLIDATED
                                   (Filed: January 18, 2018)

                                             )
 INFORMATION SYSTEMS &                       )
 NETWORKS CORPORATION,                       )     Motion for Modification; Motion in
                                             )     Limine; Exclusion of Expert Reports
                      Plaintiff,             )     and Testimony; Fed. R. Evid. 702
                                             )
 v.                                          )
                                             )
 THE UNITED STATES,                          )
                                             )
                      Defendant.             )
                                             )

  ORDER DENYING PLAINTIFF’S MOTION FOR MODIFICATION AND TO
     EXCLUDE THE TESTIMONY OF JOEL LESCH AND GRANTING
 DEFENDANT’S MOTION TO EXCLUDE THE TESTIMONY OF JOHN FORD

      I.   INTRODUCTION

        These consolidated cases involve a long-running dispute between Information
Systems & Networks Corporation (“ISN”) and the government over the indirect rates that
should be applied to close out numerous flexibly priced contracts held by ISN during
fiscal years 1982 through 2000. Presently pending before the court are three motions
associated with the discovery in this case and in particular the use of experts. These
include: (1) Plaintiff’s Motion for Modification of the Court’s August 23, 2017 Order
Denying Plaintiff’s Motion for Reconsideration and Granting the Defendant’s Request
for Discovery Sanctions (ECF No. 196); (2) Defendant’s Motion In Limine to Exclude
the Expert Report and Testimony of John H. Ford, Esq. (ECF No. 198); and (3)
Plaintiff’s Motion for Protective Order and In Limine to Exclude the Testimony of the
Government’s Expert, Joel E. Lesch (ECF No. 210).

       These three motions stem from the court’s August 23, 2017 order, (ECF No. 193),
granting the government’s request for discovery sanctions after ISN failed to produce its
revised expert reports after ISN received three extensions of time from court-ordered
deadlines, (ECF Nos. 183, 185, 187), and then failed to file its report on the day ordered.
The court found that ISN’s repeated failure to meet the court-ordered deadlines for
producing revised expert reports was unjustified and when ISN failed to produce the
reports on the last date ordered, the court, upon the government’s motion for sanctions,
determined that “plaintiff shall proceed in this matter without an expert or expert report in
its affirmative case.” (ECF No. 193). ISN did not file a response to the government’s
motion for sanctions. The August 23, 2017 order went on to provide that ISN would be
allowed to file a “non-expert report regarding Counts I, II, III and IX” along with
“schedules, spreadsheets, and calculations in native-file format that specify and set forth
all of plaintiff’s damages and claimed indirect cost rates for each of the fiscal years and
rates for which there are no signed indirect rate agreements from 1982 through 2000.”
ISN was also required to identify one or more Rule 30(b)(6) witnesses to address (1)
plaintiff’s calculation of rates, claims for contract payments, offsets and credits; and (2)
any other claims being asserted by ISN. The “non-expert” reports were due to be filed on
September 22, 2017. 1

    II.    Plaintiff’s Motion for Modification and Government’s Motion to Exclude
           the Expert Report and Testimony of John Ford, Esq.

       ISN, in its motion for modification (ECF No. 196), seeks permission to rely at trial
upon the expert report of John H. Ford, Esq. in support of the claims in its affirmative
case. ISN argues that John Ford’s Expert Report was not one of the expert reports
subject to the requests for extensions of time and that the government is not prejudiced by
the request because the government has had Mr. Ford’s report since November 2016. In
such circumstances, ISN argues, Mr. Ford’s expert report should be considered outside
the scope of the August 23, 2017 order.

       The government objects to ISN’s request. In its response to ISN’s motion, the
government has moved to exclude Mr. Ford’s report on the grounds that it is within the
scope of the court’s August 23, 2017 order and is otherwise excludable under Fed. R.
Evid. 702 as containing principally expert “legal” opinions, which are not the proper
subject of expert testimony. The government also argues that the opinions stated in the
report are barred under the principles of res judicata on the grounds that they are contrary
to prior court decisions involving the same parties.

       The court has reviewed ISN’s motion, the government’s response and request for a
motion in limine to exclude Mr. Ford’s report and ISN’s reply. For the following reasons
ISN’s motion for modification is DENIED and the government’s motion to exclude the
expert report and testimony of John Ford, Esq. is GRANTED.

       The court’s August 23, 2017 order was plain. ISN is foreclosed from relying on
expert testimony to establish its claims in Counts I, II, III and IX of its complaint. Thus,
unless modified, ISN cannot rely upon Mr. Ford’s report. ISN argues that Mr. Ford’s
report should be allowed because the government has had the report since November
2016 and has had ample opportunity to review and consider the report. The government

1
  ISN filed “non-expert” reports on September 22, 2017. (ECF No. 195). Also pending before
the court, but currently stayed, is the government’s motion to strike those reports. See
Defendant’s Motion to Dismiss Counts I, II, III, and IX or in the alternative to Strike Plaintiff’s
Non-Expert Reports and Preclude the Testimony of Cheryl Anderson and Bill Foote (ECF No.
203).

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argues that regardless of whether it had the Ford Report, the sanctions sought included all
expert reports and testimony and when ISN did not respond to the government’s request
for sanctions, ISN effectively conceded the correctness of the government’s request,
citing Phila. Auth. For Indus. Dev. v. United States, 114 Fed. Cl. 519, 527 (2014) and
Winnemucca Indian Colony v. United States, No. 13-874, 2014 WL 3107445 at *4 (Fed.
Cl. July 8, 2014).

        The court agrees with the government that the sanction order should not be
modified to allow ISN to rely on Mr. Ford’s expert report in its case in chief. Regardless
of whether the government had the Ford report, the government sought a sanction to
preclude ISN from relying on any expert reports or testimony to support its affirmative
case regarding Counts I, II, III, and IX. ISN did not respond to the government’s
sanction motion. It is therefore presumed that ISN conceded the motion. If ISN wanted
the sanction limited to only the revised expert reports it should have filed a timely
response to the government’s motion. Having failed to do so, the court finds the
government would be prejudiced by a modification of the sanctions order. In addition,
the court agrees with the government that because Mr. Ford has been presented by ISN as
a “legal expert” his report is properly excluded under Fed. R. Evid. 702 as well. Expert
testimony on issues of law are not admissible for the purposes of proving that the
government’s interpretation of the Cost Accounting Standards (“CAS”) and Federal
Acquisition Regulations (“FAR”) are not correct. Spartan Corp. v. United States, 77 Fed.
Cl. 1, 7-8 (2007). 2 Nonetheless, to the extent that Mr. Ford’s legal positions are not
barred by the principles of res judicata, and the case proceeds, nothing in the sanctions
order precludes ISN from arguing in its legal memoranda that its interpretations of the
applicable regulations are correct and that the government’s interpretations of the
applicable regulations are wrong.

    III.    Plaintiff’s Motion to Exclude the Testimony of Joel E. Lesch

       Turning to the plaintiff’s motion to exclude the testimony of Joel E. Lesch, the
court finds for the reasons that follow ISN’s motion must be DENIED. 3 The government
submitted Mr. Lesch’s expert report in support of its counterclaim against ISN.
Specifically, the government is relying upon Mr. Lesch, along with government
witnesses, to support its claim for approximately $400,000 in payments and interest

2
  Mr. Ford, according to his expert report, was retained to “opine on whether Ms. Malkani’s
compensation from ISN would be considered reasonable and therefore allowable.” Def.’s Mot. in
Limine, App. at 3, Expert Report of John Ford, Esq.
3
  Mr. Lesch is a director in LitCon Group LLC, a consulting firm specializing in financial
analysis and damage calculations and forensic accounting. Pl.’s Mot. in Limine, App. at 1-17,
Expert Report of Joel Lesch. He was retained to provide financial, accounting and damage
analysis arising from ISN’s claims against the government and the government’s counterclaim
against ISN. Id. He is a Certified Public Accountant and is certified in financial forensics and is
also a certified fraud examiner. He states in his report that over the course of 30 years of
calculating damages and forensic accounting he has applied the government’s cost accounting
standards (“CAS”) and Federal Acquisition Regulations (“FAR”).

                                                3
associated with some but not all of the contracts at issue in ISN’s case in chief.
Depending on the outcome of the government’s pending motion to dismiss (ECF No.
203; see fn.1), Mr. Lesch may be asked to opine on whether ISN’s indirect rates on the
remaining contracts at issue are supported. For now, however, the sole issue before the
court is whether Mr. Lesch is qualified to calculate the amount the government claims it
is owed based on the indirect rates the government determined were applicable.

       The court has reviewed Mr. Lesch’s qualifications and finds ISN’s objections to
Mr. Lesch’s expertise are without merit. In the copy of his report attached to ISN’s
motion, Mr. Lesch lays out his areas of expertise. Mr. Lesch is a Certified Public
Accountant, he is certified in financial forensics, and he is a certified fraud examiner.
Mr. Lesch states in his report that over the course of 30 years in calculating damages and
performing forensic accounting tasks that he has applied the CAS and the FAR. Mr.
Lesch explains in his report how he prepared his calculations. He explains that he based
his calculations on the Defense Contract Audit Agency (“DCAA”) audit reports and the
decisions of the contracting officers he reviewed and applied his accounting expertise to
calculate the amount owed to the government.

       The court finds that Mr. Lesch’s background in the CAS and FAR together with
his knowledge of forensic accounting make him qualified as an expert to explain and
opine on the amount of damages the government claims it is owed. ISN’s argument that
Mr. Lesch’s report should be excluded because he does not endeavor to examine whether
the DCAA and contracting officers made proper legal calls regarding the CAS or FAR is
not supported. Mr. Lesch was asked to calculate damages based on the government’s
interpretations of the applicable regulations. ISN will have the opportunity to show with
its own expert testimony why it believes Mr. Lesch’s calculations are wrong and why it
contends it does not owe the government money. Ultimately, however, it is the role of
the court and not the role of the experts to opine on the law. The court has no grounds to
exclude Mr. Lesch’s testimony or report on the grounds that he did not perform a legal
analysis on the DCAA or contracting officer’s interpretations of the applicable
regulations. Therefore, ISN’s motion to exclude the expert testimony of Joel E. Lesch is
DENIED.

                                     CONCLUSION

       For the reasons set forth above, the plaintiff’s motions for modification of the
court’s August 23, 2017 order and to exclude the testimony of Joel Lesch are DENIED.
(ECF Nos. 196, 210). The government’s motion to exclude the expert report and
testimony of John Ford, Esq. is GRANTED. (ECF No. 198).

         In view of these rulings, the stay of the Defendant’s Motion to Dismiss Counts I,
II, III, and IX or, in the alternative, to Strike Plaintiff’s “Non-Expert Reports” and
Preclude the Testimony of Cheryl Anderson and Bill Foote filed on November 14, 2017
(ECF No. 203) is hereby LIFTED. Accordingly the briefing schedule is as follows:

                                             4
       February 12, 2018                  The plaintiff shall file its response to the
                                          government’s motion to dismiss or in the
                                          alternative motion to strike.

       February 26, 2018                  The government shall file its reply in support of
                                          its motion to dismiss or in the alternative
                                          motion to strike.

       The court will not entertain motions for extensions of time absent evidence of
extraordinary circumstances outside the control of counsel. A revised schedule for
rebuttal expert reports, if necessary, will be issued after the court has resolved the
government’s motion to dismiss or in the alternative motion to strike.

        IT IS SO ORDERED.

                                                           s/Nancy B. Firestone
                                                           NANCY B. FIRESTONE
                                                           Senior Judge

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