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Craig v. Xlear Inc.

United States District Court, D. Utah

March 11, 2019

BRIAN CRAIG, an individual, Plaintiff,
v.
XLEAR, INC. a Utah corporation; and NATHAN JONES, an individual, Defendants.

          Dee Benson District Judge.

          MEMORANDUM DECISION AND GRANTING MOTION TO EXCLUDE EXPERT REPORT AND TESTIMONY OF TAD MANCINI ECF NO. 69 AND GRANTING MOTION TO EXCLUDE EXPERT REPORT AND TESTIMONY OF MARK ANDERSON ECF NO. 70

          EVELYN J. FURSE United States Magistrate Judge.

         Before the Court are Plaintiff Brian Craig's Motion to Exclude Expert Report and Testimony of Tad Mancini (ECF No. 69) and Motion to Exclude Expert Report and Testimony of Mark Anderson (ECF No. 70). On September 26, 2018, the District Judge referred these Motions to the undersigned for decision, (ECF No. 101), and on November 5, 2018, the Court held a hearing on the Motions (ECF No. 103).

         Counsel for Defendants Xlear, Inc. (“Xlear”) and Nathan Jones retained as an expert Tad Mancini, a food broker, “to provide an analysis of Brian Craig's (“Mr. Craig's”) actions as it relates to his fiduciary obligations while managing Xlear sales and relationship with brokers.” (Ex. 1 to Mot. to Exclude Expert Report & Testimony of Tad Mancini (“Mancini Mot.”), ECF No. 69, Tad Mancini Expert Witness Report (“Mancini Report”), ECF No. 74-1 at 3-5.)[1] Mr. Craig moves to exclude Mr. Mancini's Report and testimony on the grounds (1) that his opinions improperly state legal conclusions, (2) that Mr. Mancini lacks the qualifications to offer opinions in this case, (3) that his opinions are unreliable, and (4) that Mr. Mancini's opinions on “mass market” damages are irrelevant. (Mancini Mot. 1-2, ECF No. 69.)

         Xlear also retained as an expert Mark Anderson, a certified public accountant, “to provide opinion and testimony regarding financial and economic loss issues in this matter.” (Ex. 1 to Mot. to Exclude Expert Report & Testimony of Mark Anderson (“Anderson Mot.”), ECF No. 70, Expert Report of Mark Anderson (“Anderson Report”) ¶ 1& Attachment One, ECF No. 75-1.)[2] Mr. Craig moves to exclude Mr. Anderson's Report and testimony on the grounds (1) that Mr. Anderson's opinions on “mass market” damages are irrelevant, (2) Mr. Anderson lacks the qualifications to offer opinions in this case, and (3) that his opinions are unreliable. (Anderson Mot. 2, ECF No. 70.)

         Based on the briefing and the hearing, the Court GRANTS both Motions. The Court finds that Mr. Mancini's testimony improperly states legal conclusions concerning Mr. Craig's alleged breach of his fiduciary obligations. The Court also finds that Mr. Mancini, as a food broker, lacks the qualifications necessary to offer opinions on whether a consumer product company officer and shareholder breached his fiduciary obligations to that company, and that Mr. Mancini's opinions do not rest on a reliable foundation since they are speculative and since Mr. Mancini is oblivious to key facts in the case. Moreover, the Court finds that Mr. Anderson would provide unreliable testimony because he makes key factual conclusions based primarily on “facts” provided by Mr. Jones, an interested third party..

         FACTUAL BACKGROUND

         On May 10, 2016, Mr. Craig initiated this lawsuit against Xlear and Mr. Jones. (Compl., ECF No. 2.) Mr. Craig claims that Mr. Jones, “as controlling and majority shareholder, president and chairman of the board of Xlear” breached the fiduciary duties he owed to Mr. Craig “by engaging in bad faith and oppressive tactics in violation of [Mr.] Craig's rights as a minority shareholder.” (Id. at 2, ¶ 6.) Mr. Craig further alleges that Mr. Jones “caused Xlear to terminate [his] employment” and “caused Xlear to materially breach its contractual obligations to [him].” (Id.) Mr. Craig asserts a claim for breach of fiduciary duty against Mr. Jones and claims for breach of contract and breach of the covenant of good faith and fair dealing against Xlear. (Id. 9-13, ¶¶ 53- 76.)

         On July 19, 2016, Xlear and Mr. Jones answered the Complaint, and Xlear asserted counterclaims against Mr. Craig. (Ans. & Countercl., ECF No. 8.) Xlear asserted claims for breach of fiduciary duty and tortious interference with business relationships against Mr. Craig and sought declaratory relief as well. (Id. at 25-27, ¶¶ 59-73.) Xlear asserts, among other things that Mr. Craig

breached his fiduciary duties to Xlear in numerous ways, including, but not limited to: engaging in misconduct, making grossly negligent management decisions, colluding with brokers; withholding information from Xlear; disseminating Xlear's confidential information to brokers and/or third parties; and concealing communications with brokers.

(Id. at 25-26, ¶ 64.)

         On February 3, 2017, Mr. Craig filed a motion seeking summary judgment on his breach of contract claim against Xlear. (Mot. for Summ. J. on 2d Cause of Action for Breach of Contract Against Xlear, ECF No. 12.) On October 25, 2017, the District Judge granted the motion for summary judgment, finding that “there are no disputes of material fact and the Court rules as a matter of law that Xlear materially breached Section 2(a) of the [Restricted Stock Holder's] Agreement when it purported to cancel and void Mr. Craig's shares in April 2016.” (Order Granting Mot. for Summ. J. on 2d Cause of Action for Breach of Contract Against Xlear, Inc. 2, ECF No. 54.)

         On May 11, 2018, Xlear and Mr. Jones filed a motion for partial summary judgment seeking dismissal of Mr. Craig's claim for breach of fiduciary duty against Mr. Jones. (Mot. for Partial Summ. J., ECF No. 64.) Also on May 11, 2018, Mr. Craig filed another motion for summary judgment, this time seeking dismissal of Xlear's counterclaims. (Mot. for Summ. J. on Xlear, Inc.'s Countercl., ECF No. 67.) Among other things, Mr. Craig argued that Xlear could not, as a matter of law, recover damages stemming from Mr. Craig's alleged failure to introduce its products to the “mass market” in 2012 because “Xlear did not timely disclose this theory of liability or damages” in its Counterclaim or otherwise and because “there is no evidence that [Mr.] Craig caused Xlear to incur these speculative, inchoate damages.” (Id. at 31-38.) At the same time, Mr. Craig also filed the Motions to Exclude the reports and testimony of Mr. Mancini and Mr. Anderson currently before the Court. (Mancini Mot., ECF No. 69; Anderson Mot., ECF No. 70.)

         On September 6, 2018, the District Judge issued an Order denying both summary judgment motions. (Mem. Decision & Order, ECF No. 99.) Among other things, the District Judge found Xlear's declaratory judgment counterclaim moot given his prior summary judgment decision but denied Mr. Craig's motion as to the other counterclaims:

Although Xlear will be required to carry its burden at trial of proving damages for its breach of fiduciary duty and tortious interference with business relations claims, the Court finds that Xlear has provided sufficient facts to create a triable issue of fact with respect to its damages at this stage. Plaintiff's Motion for Summary Judgment is accordingly denied.

(Id. at 2-3.)

         LEGAL STANDARD

         The Court has a “gatekeeping obligation” to determine the admissibility of “all expert testimony.” Kumho Tire Co. v. Carmichael, 526 U.S. 137, 147 (1999); see also Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 597 (1993) (discussing the judge's “gatekeeping role”). Federal Rule of Evidence 702 governs the admissibility of expert testimony providing:

A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if:
(a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue;
(b) the testimony is based on sufficient facts or data;
(c) the testimony is the product of reliable principles and methods; and
(d) the expert has reliably applied the principles and methods to the facts of the case.

Fed. R. Evid. 702. “The proponent of expert testimony bears the burden of showing that the testimony is admissible.” Conroy v. Vilsack, 707 F.3d 1163, 1168 (10th Cir. 2013)

         “A two-part test applies to determine admissibility.” Conroy, 707 F.3d at 1168. The Court “must determine ‘whether the expert is qualified by knowledge, skill, experience, training, or education to render an opinion.'” Id. (quoting United States v. Nacchio, 555 F.3d 1234, 1241 (10th Cir. 2009)). Further, the Court “‘must satisfy itself that the proposed expert testimony is both reliable and relevant, in that it will assist the trier of fact, before permitting a jury to assess such testimony.'” Id. (quoting United States v. Rodriguez-Felix, 450 F.3d 1117, 1122 (10th Cir. 2006)).

         DISCUSSION

         A. ...


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