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Caribbean Utilities Co., Ltd. v. Howard Industries, Inc.

United States District Court, S.D. Mississippi, Eastern Division

November 8, 2019

HOWARD INDUSTRIES, INC., a Mississippi profit corporation, DEFENDANT



         This cause came before the Court on Defendant's Motion to Exclude Ken Lefoldt's Damages Opinions [106]. The motion has been fully briefed [122, 136]. Having reviewed the parties' submissions, the relevant legal authority and otherwise being fully advised in the premises, the Court finds that the motion will be granted in part.

         I. BACKGROUND

         This case arises from electrical transformers manufactured by the Defendant, Howard Industries, Inc. (“Howard”), which Plaintiff, Caribbean Utilities Company, Ltd. (“CUC”), alleges are defective. At issue presently is expert testimony provided by CUC's expert, Kenneth Lefoldt, Jr., a CPA who has provided opinions regarding CUC's damages in a report dated March 1, 2019 and who was deposed on May 15, 2019. He has opined regarding a method for quantifying the damages CUC has incurred because of transformers that were allegedly defective. It is Mr. Lefoldt's opinion that the remaining book value is an appropriate method for capturing the value lost, which he computes using a “straight line depreciation” approach. Straight line depreciation is calculated by taking the initial installed cost of an asset and spreading that cost equally throughout the presumed useful life of the asset. The net book value remaining when the asset is taken out of service is arguably the amount of value in the asset that CUC was unable to realize and for which it seeks recovery.

         In his report, Mr. Lefoldt assumed a 30-year life expectancy[1] for the transformers and for his damage calculations presumed that the 3, 856 Howard pole-mounted transformers[2] and the 582 pad-mounted transformers[3] at issue were taken out of service by December 31, 2016.[4]However, deposition testimony from CUC corporate representative, David Watler, reveals that as of March 7, 2019, there were only approximately 1, 000 pole-mounted transformers that had been taken out of service.[5] CUC's Clifton Rose testified that when he left CUC in August 2018, the removal of Howard pad-mounted transformers had not begun. CUC's expert, Bastiaan E. Cornelissen testified that in about May 2019 he observed close to 200 pad-mounted transformers “all over the island.”[6] CUC states in its opposition brief that the replacement of all Howard transformers is currently scheduled to conclude “around 2021 or 2022.” [122] at p. 2. Mr. Lefoldt testified, “this is ---a snapshot is a point in time. I think as we get closer to trial, I think my numbers would have to be revised to reflect the reality of what's actually . . . taking place up until trial.” [106-2] at 41:1-20.

         Howard argues that Mr. Lefoldt was required to provide a complete statement of all of his opinions pursuant to Federal Rule of Civil Procedure 26(A)(2)(B)(i). The report was inaccurate at the time it was authored, and because of that, Mr. Lefoldt's opinions should be excluded. CUC responds that Howard's motion is untimely; that there is no basis for excluding Mr. Lefoldt's testimony regarding the methodology used; no supplementation was required; and that Mr. Lefoldt's testimony as to the damage numbers, while helpful to the jury, is not required.

         II. ANALYSIS

         A. Timeliness of Howard's Motion

         CUC argues that Howard's motion is untimely because it did not challenge the adequate disclosure of the expert witness within the thirty days before the discovery deadline as required by Local Uniform Civil Rule 26(a)(3). However, CUC's argument misses the mark. Howard is not complaining that the disclosure of Mr. Lefoldt was either improper or incomplete. The disclosure apparently was done appropriately. The gravamen of Howard's complaint with Mr. Lefoldt's opinions is that they are unreliable and CUC is now precluded from supplementing. Parties may challenge other parties' experts prior to the deadline set forth for dispositive motions, which Howard has done. On May 31, 2019, the deadline for dispositive motions was reset to July 8, 2019 [98]. Howard's motion challenging these opinions was filed on July 8, 2019. Therefore, the motion is not untimely.

         B. The Reliability Mr. Lefoldt's Opinions Regarding Total Damages

         1. Proper Standard

         Howard argues that Mr. Lefoldt's opinions of multi-million dollars in losses should be excluded because they are inaccurate in that they do not reflect the reality of the situation based on testimony from CUC's own representatives. The Court finds that the argument is one of reliability. When evaluating expert testimony, the overarching concern is whether the expert testimony is “relevant” and “reliable.” Smith v. Goodyear Tire & Rubber Co., 495 F.3d 224, 227 (5th Cir. 2007) (citing Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993)). The standards set forth in Daubert fittingly align with Federal Rule of Evidence 702, which states that an expert witness may testify .

[i]f 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 on 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.[7]

         Expert testimony “must be reliable at each and every step or it is inadmissible. The reliability analysis applies to all aspects of an expert's testimony: the methodology, the facts underlying the expert's opinion, the link between the facts and the conclusion, et alia.” Pearson v. Wal-Mart Stores, Inc., No. 2:17-CV-144-KS-MTP, 2019 WL 2373201, at *2 ...

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