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Liberty Media Corp. v. Vivendi Universal

April 2, 2012

LIBERTY MEDIA CORPORATION, LMC CAPITAL LLC, LIBERTY PROGRAMMING COMPANY LLC, LMC USA VI, INC., LMC USA VII, INC., LMC USA VIII, INC., LMC USA X, INC., LIBERTY HSN LLC HOLDINGS, INC., AND LIBERTY MEDIA INTERNATIONAL, INC., PLAINTIFFS,
v.
VIVENDI UNIVERSAL, S.A., AND UNIVERSAL STUDIOS, INC., DEFENDANTS.



The opinion of the court was delivered by: Shira A. Scheindlin, U.S.D.J.

OPINION AND ORDER

I. INTRODUCTION

At a conference held on March 13, 2012, I orally ruled on the vast majority of the parties' motion in limine. This opinion concerns three Daubert motions I orally ruled on at a conference held on March 27, 2012: Defendants' Motion to Exclude the Testimony of Craig T. Elson, Liberty Media Plaintiffs' Motion in Limine to Exclude the Testimony of John Coates, and Liberty Media Plaintiffs' Motion in Limine to Exclude in Part the Testimony of Kenneth Lehn. In addition to the restictions on expert testimony described in this opinion, all of my prior rulings on the motions in limine are equally applicable to the testimony of Elson, Coates, and Lehn. For example, Coates may not testify about certain clauses that were absent from the merger agreement between Liberty Media and Vivendi (the "Merger Agreement").

II. LEGAL STANDARD

The proponent of expert evidence bears the initial burden of establishing admissibility by a "preponderance of proof."*fn1 Rule 702 of the Federal Rules of Evidence states the following requirements for the admission of expert testimony:

If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise, if (1) the testimony is based upon sufficient facts or data, (2) the testimony 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.

Under Rule 702 and Daubert, the district court must determine whether the proposed expert testimony "both rests on a reliable foundation and is relevant to the task at hand."*fn2 The district court must act as "'a gatekeeper to exclude invalid and unreliable expert testimony.'"*fn3 Additionally, expert testimony may not usurp the role of the court in determining the applicable law.*fn4 Although an expert "may opine on an issue of fact," an expert "may not give testimony stating ultimate legal conclusions based on those facts."*fn5 Expert testimony is also inadmissible when it addresses "lay matters which [the trier of fact] is capable of understanding and deciding without the expert's help."*fn6

However, "the Federal Rules of Evidence favor the admissibility of expert testimony, and [the court's] role as gatekeeper is not intended to serve as a replacement for the adversary system."*fn7 In serving its gatekeeping function, the court's focus must be on the principles and methodologies underlying the expert's conclusions, rather than on the conclusions themselves.*fn8 In assessing an expert's methodology, courts may consider (1) "whether [the method or theory] can be (and has been) tested," (2) "whether [it] has been subjected to peer review and publication," (3) "the known or potential rate of error [associated with the technique] and the existence and maintenance of standards controlling the technique's operation," and (4) whether the method has achieved "general acceptance" with the relevant community.*fn9

The courts' gatekeeping function under Daubert applies not only to "scientific" evidence, but also to proffers of "technical, or other specialized knowledge" under Rule 702.*fn10 The objective of this function is to "make certain that an expert, whether basing testimony upon professional studies or personal experience, employs in the courtroom the same level of intellectual rigor that characterizes the practice of an expert in the relevant field."*fn11 However, recognizing that "there are many different kinds of experts, and many different kinds of expertise," the Supreme Court has emphasized that the reliability inquiry "is a flexible one."*fn12 Accordingly, the factors "identified in Daubert may or may not be pertinent in assessing reliability, depending on the nature of the issue, the expert's particular expertise, and the subject of his testimony."*fn13 Ultimately, the inquiry "depends upon the particular circumstances of the particular case at issue."*fn14 In sum, the trial court has "the same kind of latitude in deciding how to test an expert's reliability . . . as it enjoys when it decides whether or not that expert's relevant testimony is reliable."*fn15

III. DEFENDANTS' MOTION TO EXCLUDE THE TESTIMONY OF CRAIG T. ELSON

A. Background

As of the date of Elson's report, he was a Senior Managing Director at LECG, a global expert services and consulting firm.*fn16 Elson received a bachelor's degree and an MBA from Indiana University and has been providing professional consulting services for approximately twenty-five years.*fn17

In Elson's 120-page report, he offers a wide variety of opinions. Initially, he offered an opinion that a material adverse change occurred between December 31, 2000 and December 16, 2001 under the terms of the Merger Agreement. That opinion is now withdrawn.*fn18 Plaintiffs still offer Elson's opinion as to (1) the causes of the deterioration of Vivendi's financial condition and (2) that the amount of rescissory damages incurred by Liberty Media potentially ranged from 1.03 to 1.39 billion euros.*fn19

B. Discussion

1. Vivendi's Financial Deterioration

Defendants' motion focused on Elson's opinions with respect to MACs and rescissory damages. However, defendants now contend that plaintiffs' recharacterization of Elson's opinion as a liquidity opinion does not cure its defects.*fn20 I will admit Elson's opinions concerning the causes of the financial ...


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