UNITED STATES DISTRICT COURT WESTERN DISTRICT OF NEW YORK
December 19, 2012
SECURED SYSTEMS TECHNOLOGY, INC., PLAINTIFF
FRANK LILL & SON, INC., DEFENDANT
FRANK LILL & SON, INC., THIRD-PARTY PLAINTIFF
SHARED SYSTEMS TECHNOLOGY, INC. THIRD-PARTY DEFENDANT.
The opinion of the court was delivered by: Charles J. Siragusa United States District Judge
DECISION AND ORDER
This action involves a dispute arising from a construction contract. Now before the Court is Defendant's motion (Docket No. [#95]) to preclude the testimony of Plaintiff's and Counterclaim-Defendant's expert w itness, R. Michael Loew ke. The application is granted.
The reader is presumed to be familiar w ith the Court' s prior Decisions and Orders in this action. See, Docket Nos. [#73, 85, 114]. This action arises from disputes over construction w ork that w as performed at the Bridgeport Harbor Station in Connecticut. Stone & Webster Construction, Inc. (" Stone & Webster" ) w as the prime contractor, and Defendant, Frank Lill & Son, Inc. (" Lill" ), w as a subcontractor. On or about January 9, 2007, Plaintiff Secured Systems Technology, Inc. (" Secured" ) and Lill entered a subcontract, pursuant to w hich Secured agreed to install insulation at the project, in exchange for $3,101,725.00.
Secured maintains that it performed the w ork required by the subcontract, as w ell as additional w ork that Lill requested, but Lill refused to pay for the w ork. Additionally, Secured contends that Lill interfered w ith its w ork in various w ays. Specifically, Secured alleges that Lill refused to provide necessary w ork space and electrical pow er, issued change orders and then refused to make accommodations for Secured to perform the w ork, refused to make timely approvals of materials, and forced Secured to install insulation on duct w ork that w as already erected and elevated, rather than on the ground as per the subcontract and common industry practice. Secured further maintains that Lill intentionally w ithheld payments in order to harm Secured. In the Amended Complaint, Secured asserts claims for breach of contract, breach of implied covenant of good faith and fair dealing, unjust enrichment, quantum meruit, fraud, and violation of Connecticut General Statute § 42-158j (providing for timely payment of contractors, subcontractors and suppliers).
Lill denies those allegations, and contends that Secured abandoned the project before completing its w ork, performed some w ork improperly and failed to pay its subcontractors and suppliers. Lill also maintains that Secured failed to comply w ith the subcontract's claims procedures and dispute resolution procedures. Lill asserts counterclaims against Secured, and against Counterclaim-Defendant Shared Systems Technology, Inc. (" Shared" ), w hich Lill maintains is Secured's alter ego.
Shared has asserted its ow n counterclaims against Lill, asserting the same claims raised by Secured, namely: Breach of contract, breach of implied covenant of good faith and fair dealing, unjust enrichment, quantum meruit, fraud and violation of Connecticut General Statute § 42-158j. In addition, Shared asserts counterclaims for " intentional interference w ith contract," " intentional interference w ith prospective economic and contractual advantage" and " third party beneficiary" breach of contract.
During pretrial discovery, Secured and Lill obtained reports from their respective expert w itnesses. Secured's expert is Edw ard Mislavsky (" Mislavsky" ), w ho prepared a report dated July 14, 2009. (See, Mislavsky Report [#99-8]). Based on his detailed review of the record, Mislavsky offers a number of opinions, including the follow ing:
1) Lill did not properly manage the project w ork schedule, w hich caused Secured to incur damages for lost productivity and unabsorbed overhead; 2) Lill obstructed Secured's ability to perform its w ork, by failing to release ductw ork to be insulated, installing ductw ork prior to it being insulated and failing to provide Secured w ith an appropriate pow er source and w ork area; 3) Lill ow es Secured approximately $5 million in damages.
Lill's expert is Christopher Beirise (" Beirise" ) of the Kenrich Group, LLC. In rebuttal to Mislavsky's report, Beirise offers opinions including the follow ing: 1) it w as not Lill's responsibility to create a project schedule; 2) many of the delays w ith the project w ere caused by parties other than Lill, including Secured; 3) Mislavsky has not show n that Secured sustained damages for lost productivity and unabsorbed overhead; 4) Lill paid Secured's invoices; 5) Lill incurred damages as a result of Secured actions, in the amount of $842,395.40; and 6) Mislavsky's calculations of Secured's damages are incorrect, and overstate Secured's damages by approximately $1.7 million.
Shared also obtained a report from its expert, R. Michael Loew ke (" Loew ke" ). See, Docket Nos. [#95-4, #95-5]. Loew ke indicates that his report is based on his review of the record and the reports by Mislavsky and Beirise. Loew ke's report states that it w ill " provide a different focus on the legitimacy of the theories and opinions expressed" by Mislavsky. More specifically, Loew ke states that he has review ed Beirise's " 'methods' of calculating damages and costs," and that Mislavsky's opinion is flaw ed and " disingenuous at best." See, [#95-5] at pp. 5-6, 3. Loew ke offers opinions including the follow ing: 1) the delays on the job w ere beyond the control of Lill and Secured; 2) both Lill and Secured suffered severe losses in productivity due to the delays; 3) Lill initially attempted to obtain payments from Stone & Webster to compensate Secured for the delays, but later discontinued those efforts; 4) Lill received payment from Stone & Webster, but w ithheld payment from Secured; 5) Lill directed Secured to perform additional w ork, but did not prepare the proper change orders; 6) Lill failed to provide Secured w ith a proper w ork area and equipment; 7) Secured completed its scope of w ork under the contract; 8) Beirise did not properly calculate Lill's alleged damages; 9) Beirise incorrectly asserts that Secured never presented a claim for delay costs; and 10) Secured is entitled to $4.8 million in damages, exclusive of interest and consequential damages.
Follow ing the completion of discovery, Secured and Lill each filed motions for partial summary judgment. Lill also subsequently filed the subject motion to preclude Loew ke's expert testimony, on the grounds that it " attempt[s] to usurp the role of the jury in this matter, [and] also w ill not assist the trier of fact and is inherently unreliable." Connolly Decl. [#95-1] at ¶ 1.
Lill's Daubert Motion
Defendant maintains that Loewke's testimony should be precluded. The applicable legal principles are clear:
The admissibility of expert testimony in the federal courts is governed principally by Rule 702 of the Federal Rules of Evidence:
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.
Fed.R.Evid. 702. It is a well-accepted principle that Rule 702 embodies a liberal standard of admissibility for expert opinions, representing a departure from the previously widely followed, and more restrictive, standard of Frye v. United States, 293 F. 1013, 1014 (D.C.Cir.1923). See, e.g., Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 588, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993) (holding that the Frye test of general acceptance in the scientific community was superceded by the Federal Rules); Amorgianos v. Nat'l R.R. Passenger Corp., 303 F.3d 256, 265 (2d Cir.2002) (observing departure, under Federal Rule, from the Frye standard).
The shift under the Federal Rules to a more permissive approach to expert testimony, however, did not represent an abdication of the screening function traditionally played by trial judges. To the contrary, as Daubert explained, Rule 702 governs the district court's responsibility to ensure that "any and all scientific testimony or evidence admitted is not only relevant, but reliable." Daubert, 509 U.S. at 589, 113 S.Ct. 2786. In Kumho Tire Co. v. Carmichael, 526 U.S. 137, 152, 119 S.Ct. 1167, 143 L.Ed.2d 238 (1999), the Court clarified that, whether a witness's area of expertise was technical, scientific, or more generally "experience-based," Rule 702 required the district court to fulfill the "gatekeeping" function of "mak[ing] 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."
Daubert enumerated a list of factors that, while not constituting a "definitive checklist or test," a district court might consider in evaluating whether a proffered expert opinion has the required indicia of scientific reliability: whether a theory or technique had been and could be tested, whether it had been subjected to peer review, what its error rate was, and whether scientific standards existed to govern the theory or technique's application or operation. See Daubert, 509 U.S. at 593-94, 113 S.Ct. 2786. In addition to setting forth these criteria for testing an expert's methodology, the Supreme Court has also stated that reliability within the meaning of Rule 702 requires a sufficiently rigorous analytical connection between that methodology and the expert's conclusions. "[N]othing in either Daubert or the Federal Rules of Evidence requires a district court to admit opinion evidence which is connected to existing data only by the ipse dixit*fn1 of the expert. A court may conclude that there is simply too great an analytical gap between the data and the opinion proffered." General Electric Co. v. Joiner, 522 U.S. 136, 146, 118 S.Ct. 512, 139 L.Ed.2d 508 (1997) [("Nothing in either Daubert or the Federal Rules of Evidence requires a district court to admit opinion evidence that is connected to existing data only by the ipse dixit of the expert.")].*fn2 Thus, we have previously stated that "when an expert opinion is based on data, a methodology, or studies that are simply inadequate to support the conclusions reached, Daubert and Rule 702 mandate the exclusion of that unreliable opinion testimony." Amorgianos, 303 F.3d at 266.*fn3
Even after determining that a witness is "qualified as an expert" to testify as to a particular matter, Fed.R.Evid. 702, and that the opinion is based upon reliable data and methodology, Rule 702 requires the district court to make a third inquiry: whether the expert's testimony (as to a particular matter) will "assist the trier of fact." We have consistently held, in that respect, that expert testimony that "usurp[s] either the role of the trial judge in instructing the jury as to the applicable law or the role of the jury in applying that law to the facts before it," United States v. Bilzerian, 926 F.2d 1285, 1294 (2d Cir.1991), by definition does not "aid the jury in making a decision"; rather, it "undertakes to tell the jury what result to reach," and thus "attempts to substitute the expert's judgment for the jury's," United States v. Duncan, 42 F.3d 97, 101 (2d Cir.1994).
In addition to the requirements of Rule 702, expert testimony is subject to Rule 403, and "may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury." Fed.R.Evid. 403. Indeed, the Supreme Court, echoed by members of our own court, has noted the uniquely important role that Rule 403 has to play in a district court's scrutiny of expert testimony, given the unique weight such evidence may have in a jury's deliberations. See, e.g., Daubert, 509 U.S. at 595, 113 S.Ct. 2786 (" 'Expert evidence can be both powerful and quite misleading because of the difficulty in evaluating it. Because of this risk, the judge in weighing possible prejudice against probative force under Rule 403 of the present rules exercises more control over experts than over lay witnesses.' " (quoting Jack B. Weinstein, Rule 702 of the Federal Rules of Evidence Is Sound; It Should Not Be Amended, 138 F.R.D. 631, 632 (1991))); United States v. Young, 745 F.2d 733, 766 (2d Cir.1984) (Newman, J., concurring) (noting that "the very breadth of the discretion accorded trial judges in admitting [the expert opinion of a detective testifying as to the criminal nature of a defendant's activities] under Rules 702 and 403 should cause them to give the matter more, rather than less, scrutiny. A trial judge should not routinely admit opinions of the sort at issue here and should weigh carefully the risk of prejudice.").
Nimely v. City of New York, 414 F.3d 381, 395-397 (2d Cir. 2005) (footnote omitted). "The inquiry is a flexible one, and district courts enjoy considerable discretion in deciding on the admissibility of expert testimony." U.S. v. Farhane, 634 F.3d 127, 158 (2d Cir. 2011) (citations and internal quotation marks omitted).
Lill maintains that Loew ke's opinions in this action should be excluded, since they are not reliable and w ill not assist the trier of fact. In that regard, Lill contends that Loew ke's reports " do nothing more than offer 'an opinion of an opinion.'" Lill Memo [#95-8] at p. 1. Lill further states that Loew ke's opinions are " unreliable because [he] fails to use any identifiable principles or methods to arrive at his opinion on damages." Id. at 9. The Court agrees.
Mr. Loew ke indicated that he has little formal education in calculating or analyzing damages, and that his know ledge w as attained from having w orked in the plumbing and construction trade. Loew ke's deposition testimony, though, w as vague insofar as it pertained to connecting such w ork experience to the issues in this case. See, e.g., Loew ke Dep. at 100. Loew ke's expert reports w ere similarly vague and his analysis in most respects w as cursory and unsupported.
Loew ke's deposition testimony shed further doubt on the reliability of his reports. In that regard, Loew ke w as unaw are of many pertinent details concerning the subject project. In fact, Loew ke stated that he w as not sure w hat w ork Secured actually performed for Lill on the project. Id. at 94-95. Loew ke further stated that he did not know w hether the payment applications that Secured submitted to Lill w ere accurate. Id. at 162.
Loew ke attributed this lack of know ledge to the fact that his " focus" in preparing his expert reports w as not on the construction project itself, but on review ing the reports prepared by the other tw o experts. Loew ke Dep. at 61; see also, id. at 90 (Indicating that his engagement by Shared's attorneys w as " limited to a review of the reports" by Lill's and Secured's experts); 105 (" The scope of [my] w ork w as to take a look at both the expert reports and see if I can come up w ith an understanding of w hat both of them said and the issue related to both." ); 103; 154 (" We took his [Beirise' s] calculations at face value. We didn't argue w ith his calculations. I w as only asked to compare the reports." ). In other w ords, Loew ke relied on the facts set forth in the other experts' reports, w ithout independently verifying them. Id. at 11-112, 115.
Loew ke states that he w as hired merely to review the other experts' reports and then " put them in simple English," w ithout critiquing them or deciding w hich expert had the more correct position. Id. at 105-107. In fact, though, Loew ke did purport to decide w hich expert's view s w ere correct. Specifically, Loew ke's reports expressly indicate that Secured's expert is more credible. See, Loew ke Supp. Report at p. 3 (" [O]ur findings are that the report from Secured has validity . . . w hile the report from Lill contains a flaw ed view of the impacts to Lill on the project, as w ell as several mathematical errors in the damage calculations." ). As to one disputed point in the competing reports, Loew ke accepted Secured's argument and rejected Lill's argument, even though it w as " absolutely unclear" to him w ho w as right. Id. at 198. Furthermore, Loew ke described Beirise's opinions as alternately " disingenuous," " completely false and misleading" and being in " bad faith." See, Lill's Motion [#95], Ex. D.
How ever, Loew ke's opinions as to the credibility of the other expert w itnesses are not admissible. See, Highland Capital Mgt., L.P. v. Schneider, 551 F.Supp.2d 173, 180 (S.D.N.Y. 2008) (" Duval' s opinion as to the credibility of w itnesses is inadmissible. Duval may not testify regarding the credibility of . . . other w itnesses. Such subjective review of the evidence is improper, and Duval does not have personal know ledge of the underlying facts." ) (citations and internal quotation marks omitted);
Deutsch v. Novartis Pharmaceuticals Corp., 768 F.Supp.2d 420, 481 (E.D.N.Y. 2011) (" " In general, expert opinions w hich assess or critique another expert' s substantive testimony are relevant, but opinions w hich attack an expert' s credibility ( e.g., testimony than an expert is lying) are not." ) (citation omitted).
It further appears that Loew ke's opinions as to damages are not based on any reliable methodology. To the extent that Loew ke purportedly performed his ow n calculations of damages, he merely compared Mislavsky's and Beirise's reports and chose the result that made more sense to him, that is, the result that he found to be more credible, w ithout having actually performed the calculations necessary to determine w hether either one's conclusions w ere correct.
Loew ke's reports are also affected by other errors that make his opinions unreliable. For example, Loew ke agreed at deposition that he had used the w rong dates w hen calculating delay damages in his reports, but stated that he did not intend to amend his reports unless specifically asked to do so. Id. at 185. Loew ke also mistakenly described several clearly disputed key issues as being " undisputed," w hich renders his analysis on those points unreliable. Id. at 203-204.
For all of these reasons, the Court finds that Loew ke's opinions in this action are neither reliable nor w ell-supported, and are therefore inadmissible pursuant to FRE 702. Additionally, the Court finds that such evidence should be excluded under Rule 403, since its probative value is substantially outw eighed by the danger of unfair prejudice, confusion of the issues, and misleading the jury.
For the foregoing reasons, Lill's motion (Docket No. [#95]) to preclude the testimony of Plaintiff's and Counterclaim-Defendant's expert w itness, R. Michael Loew ke, is granted.
Charles J. Siragusa