Nguyen v. Raymond James Financial, Inc.

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF FLORIDA

TAMPA DIVISION

KIMBERLY NGUYEN,

Plaintiff,

v. Case No: 8:20-cv-195-CEH-AAS

RAYMOND JAMES & ASSOCIATES,

INC.,

Defendant.

ORDER

This matter comes before the Court on the following motions: Defendant’s

Daubert Motion to Exclude Opinions and Testimony of Douglas J. Schulz (Doc. 160),

Defendant’s Daubert Motion to Exclude Opinions and Testimony of Arthur Olsen

(Doc. 161), Plaintiff’s respective responses in opposition (Docs. 171, 172), Plaintiff’s

Daubert Motion to Exclude Reports and Opinions of Peter J. Klouda (Doc. 174), and

Defendant’s response in opposition (Doc. 187). A hearing on the motions was

conducted on February 28, 2022, and March 3, 2022.1 The Court, having considered

the motions, heard argument of counsel, and being fully advised in the premises, will

1 The hearing also addressed Plaintiff’s Daubert motion to Exclude Reports and Opinions of

Joseph J. Thomas (Doc. 173), Plaintiff’s Motion to Strike the Declaration of Alfred Caudullo

(Doc. 175), and Defendant’s respective responses in opposition (Docs. 186, 185). The Court

entered oral orders on these motions (Docs. 173, 209). The hearing also addressed Plaintiff’s

Motion for Class Certification (Doc. 147), Defendant’s response in opposition (Doc. 162),

and Plaintiff’s reply (Doc. 170). The Order resolving the class certification motion will be

entered separately.

grant the motions to exclude the opinions of Schulz and Olsen (Docs. 160, 161), and

grant-in-part and deny-in-part the motion to exclude the opinions of Klouda (Doc.

174).

I. BACKGROUND

A. Factual Allegations

Plaintiff Kimberly Nguyen brings this action on behalf of herself and all

similarly-situated individuals against Defendant Raymond James & Associates, Inc.

(RJA), for breach of fiduciary duty and negligence (Doc. 117).

Plaintiff has been a client of RJA, a broker-dealer and investment advisor firm

that is registered with the Financial Industry Regulatory Authority (FINRA) and the

United States Securities and Exchange Commission (SEC), since 2015. Id. ¶¶ 25-26.

Plaintiff’s assets with RJA were initially held in a commission-based account that

charged a modest fee per trade. Id. ¶¶ 2, 27. Because her investment strategy was to

“buy and hold,” meaning she did not execute many trades, she paid very little in

commissions. Id. ¶¶ 2, 27, 29. In 2016, RJA’s registered representative advised

Plaintiff to transfer her assets into a fee-based “Freedom Account.” Id. ¶¶ 30. Freedom

Accounts charge an annual fee based on the percentage of assets in the account rather

than the number of transactions; the fee is therefore the same regardless of trading

activity. Id. ¶ 4. Plaintiff alleges that the RJA registered representative did not conduct

an analysis of the suitability of this type of account for her investment profile before

advising her to switch or at any time thereafter. Id. ¶¶ 30, 51. Because of her low

trading activity, Plaintiff was charged substantially more in fees once she switched to

a Freedom Account than she would have been if her assets had remained in a

commission-based account. Id. ¶¶ 52-55.

Plaintiff further alleges that RJA’s policies and practices were designed to

strongly encourage its registered representatives to advise clients to switch to Freedom

Accounts regardless of suitability. Id. ¶¶ 59-85. Consequently, a number of other RJA

customers with low trading activity, like Plaintiff, were transferred into Freedom

Accounts that were inherently unsuitable for them, resulting in the customers paying

much higher fees than they would have otherwise. Id. ¶¶ 33-34. Plaintiff asserts that

RJA’s actions constituted negligence and a breach of its fiduciary and regulatory duties

as to her and to all similarly-situated individuals. Id. ¶¶ 8-11.

B. Expert Opinions Regarding Class Certification

Plaintiff has moved for class certification pursuant to Rule 23 of the Federal

Rules of Civil Procedure (Doc. 147). Defendant opposes this motion (Doc. 162). Each

party seeks to offer expert opinions in support of their respective positions (Docs. 148-

44, 148-50, 160-11).

First, Plaintiff seeks to offer the expert opinion of Douglas J. Schulz. Docs. 148-

44, 148-48. Schulz has served as an expert in more than 1100 securities-related

disputes, including many related to the specific issues raised in the instant action. Id.

at 9-14. He carries the highest-level certification in securities regulations offered by

FINRA, and has previously held licenses as a Registered Investment Advisor, a

FINRA series 7 registered stockbroker, and a General Principles license series 24

supervisor. Id. at ¶¶ 7, 9. In addition to his experience as a stockbroker, money

manager, and vice president of major investment firms, Schulz has owned his own

investment advisor firm. Id. ¶¶ 7-8. He is also a published author. Id. ¶¶ 9, 11, 12, 17.

Schulz explains that minimum industry standards require broker-dealers to

ensure and document that an account type is and remains suitable for a particular

customer. Id. ¶ 20(a). He asserts that account-type suitability can be determined using

two objective metrics that calculate an investor’s trading volume. Id. ¶ 20(c). For

customers who are low trading volume, or “buy and hold,” a fee-based account such

as the Freedom Accounts is inherently unsuitable. Id. ¶ 20(b). Schulz developed an

objective formula which he contends can identify the putative class members of the

instant action: those RJA customers who were transferred to Freedom Accounts that

were unsuitable to them. Id. ¶ 20(j). He also developed a formula to calculate class

members’ damages, which are the excessive fees incurred in the fee-based accounts

that would not have been incurred if the customers had remained in commission-based

accounts. Id. ¶ 20(k).

Plaintiff’s second proposed expert, Arthur Olsen, is a database expert and data

analyst with over 25 years of experience in the field of information technology. Doc.

148-50 ¶ 3. Along with providing database consulting services for companies, he has

served as a data expert in class action lawsuits. Id. ¶¶ 7-9. Olsen was instructed by

Schulz to analyze the data RJA produced in connection with the instant litigation and

apply Schulz’s formulas for identification of class members and damages. Id. ¶ 12.

Applying the formula for class member identification to a sample of 34,000 Freedom

Accounts that were opened with assets from commission-based accounts, Olsen

identified over 70% of the sample as meeting the standard for inclusion in the class

(Doc. 147 at 21). He projected that the total class likely exceeds 25,000 members. Id.

at 22.

Olsen then applied the damages formula to Plaintiff and to a sample of other

putative class members. Doc. 148-50 ¶¶ 31, 36. He determined that Plaintiff’s annual

damages amounted to $2,702 and the average class member’s were $3,768 per account.

Id. Olsen also applied the formula to a larger data set to verify that the sample was

representative of the larger population. Id. ¶ 37. He concluded that he would be able

to calculate damages programmatically once he received the full data set and the

appropriate return metric. Id. ¶ 38.

Based on Schulz’s and Olsen’s expertise, Plaintiff argues in her motion for class

certification that she satisfies the Rule 23 factors of numerosity, commonality, and

typicality. Doc. 147 at 22-24.

In opposing class certification, Defendant seeks to offer the expert opinion of

Peter J. Klouda (Doc. 160-11). Klouda is a financial services consultant with over 20

years of experience in the financial services arena. Id. at 14-15. After previously

working for a broker-dealer, he is now a director at an expert services firm. Id. He has

consulted on thousands of FINRA-related matters and offered expert testimony in

more than 30 matters. Id. at 15.

Klouda reviewed Plaintiff’s motion for class certification, Schulz’s reports, and

the second amended complaint. He concluded that Schulz’s test for account-type

suitability and class membership is “not recognized as a legitimate test for suitability

in the securities industry,” describing it as “fabricate[d].” Id. at 5-6. Moreover, he

asserts that the test is over-inclusive, improperly encompassing “many purported class

members for whom a Freedom Account was and is suitable.” Id. at 6.

Turning to Schulz’s damages model, Klouda describes it as “novel and

unsupportable” because it is based on “pure speculation” regarding what fees or

commission an individual investor would have incurred in a commission-based

account. Id. at 3. He asserts that the window Schulz used to derive the hypothetical

future trading numbers is too short to be able to predict future activity. Id. at 4. Klouda

further points out that the model fails to account for any class members who would

have zero damages because their Freedom Accounts outperformed the hypothetical

performance of a commission-based account. Id. at 6-7.

C. Daubert Motions

Each party argues that the other’s experts should be excluded under Federal

Rule of Evidence 702 and Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579,

113 S. Ct. 2786, 125 L. Ed. 2d 469 (1993) (Docs. 160, 161, 174).

First, Defendant argues that Schulz does not satisfy any prong of the Daubert

standard (Doc. 160). He is unqualified, in Defendant’s view, because he has not

worked for a broker-dealer or held a license for over 30 years, and he has no expertise

or training in statistics or data analytics that would qualify him to create the models in

the instant case. Id. at 12-13. Defendant next argues that Schulz’s opinions are

unreliable for a number of reasons, including that they are contradicted by the myriad

authorities holding that suitability requires an individualized determination. Id. at 14-

16. To demonstrate the unreliability of his conclusions, Defendant points to several

instances in which Schulz allegedly erred in his analysis, his underlying assumptions,

or his understanding of the situation. Id. at 17-19, 20-25. The lack of peer review or

scientific methodology in the creation of these formulas further diminishes their

reliability. Id. at 19-20. For similar reasons, Defendant also asserts Schulz’s expertise

is not helpful to the Court. Id. at 25.

Responding in opposition, Plaintiff first explains that Schulz is fully qualified to

develop these models and to provide his expertise in the instant action. Doc. 171 at 5-

6. Contrary to Defendant’s assertions, Schulz has both supervisor qualifications and

extensive experience analyzing data. Id. Further, Defendant’s own expert, Klouda,

agreed that the formulas on which Schulz’s models are based are often used in

securities litigation. Id. at 6.

Plaintiff next responds to the reliability arguments. According to Schulz, while

suitability is inherently individual, unsuitability may be determined through objective

metrics. Id. at 7-8; Doc. 148-48 ¶¶ 28-81. Nor did the authorities Defendant relies on

concern account type suitability, versus the suitability of an individual investment;

Plaintiff argues that the caselaw is otherwise inapposite to the instant litigation. Doc.

171 at 6-13. Plaintiff further disagrees with Defendant’s claims that Schulz has erred,

and points out that peer review and error rate are not applicable to all forms of expert

testing. Id. at 13-20.

Defendant also seeks to exclude the opinions of Arthur Olsen, Plaintiff’s data

expert (Doc. 161). Defendant argues that Olsen’s opinions are neither relevant nor

reliable because they are exclusively based on Schulz’s opinions, which Olsen has not

analyzed for their validity. Id. at 12-17. Defendant further asserts that Schulz’s and

Olsen’s opinions are so interlinked that each must be excluded, even if it could

independently withstand Daubert scrutiny, purely because the other is excludable. Id.

at 18-22. Defendant also identifies a second ground for exclusion under Federal Rule

of Civil Procedure 26, because Olsen’s report does not fully disclose the materials on

which Olsen relied. Id. at 22-24.

Opposing the motion, Plaintiff contends that Olsen’s application of

mathematical formulas to multiple fields of data is beyond the ken of the average

layperson, and is therefore relevant and helpful to the question of class certification

even though Olsen does not have independent knowledge of the formulas’ validity.

Doc. 172 at 11-16. In fact, courts have routinely permitted Olsen to testify as a data

expert to accompany an underlying subject-matter expert whose expertise Olsen does

not share. Id. at 5, 13-14. Contrary to Defendant’s arguments, Plaintiff asserts that

Olsen has demonstrated that the method of calculating damages is not speculative and

is both reliable and reasonable, able to be adapted to any data set. Id. at 18, 20-21.

Plaintiff agrees, however, that Schulz’s and Olsen’s respective admissibility goes hand

in hand with the other’s. Id. at 18-19, 22. Finally, Plaintiff disagrees that Olsen’s report

violated Rule 26, but argues that any error would be harmless because Defendant was

not prejudiced and did not try to resolve the error in good faith. Id. at 22-24.

In turn, Plaintiff seeks to exclude the opinions of Defendant’s expert, Peter

Klouda, regarding the damages calculations, the reasonableness of the charged fees,

and the value of account rebalancing (Doc. 174). Plaintiff first argues that Klouda is

unqualified to offer these opinions because his primary experience is in being an expert

witness, and he does not possess any experience or training in the subtopics about

which he opines. Id. at 9-10, 20-21. Klouda’s conclusions are unreliable and unhelpful

because they are premised on his flawed or incomplete understanding of topics in the

field, such as the prevalence of the disgorgement model of damages for breach of

fiduciary duty claims or the burden of proof in an offset analysis. Id. at 13-16, 22-23.

Overall, Plaintiff contends his opinions are not helpful because, at best, they lack

foundation and amount to arguments that Defendant’s attorneys could make; at worst,

they are misleading to the court. Id. at 18-19, 24-25, 28-29. Plaintiff also notes that a

declaration by Klouda should be stricken because it is untimely. Id. at 6 n.1; see Docs.

162-9, 161-4, 160-8.

In opposition, Defendant argues that Klouda is fully qualified because he has

not only conducted tens of thousands of forensic reviews of investment accounts, but

also conducted suitability analyses in his previous role at Merrill Lynch. Doc. 187 at

6-7, 10-12. An expert may be qualified even if their experience does not precisely

match the matter at hand, and Klouda’s lack of familiarity with class action matters

and legal standards does not detract from the expertise he provides. Id. at 9, 13-14.

Defendant asserts that Klouda’s experience alone establishes the reliability of his

opinions, and that Plaintiff’s arguments largely relate to the merits rather than the

reliability of Klouda’s methodology. Id. at 15-16. In any event, his opinions are not

lacking or misleading, and will help the court understand the evidence. Id. at 16-23.

Finally, Defendant contends that Klouda’s declaration should not be stricken because

it contains no new information and did not prejudice Plaintiff. Id. at 23-24.

D. LEGAL STANDARD

The admissibility of expert testimony is governed by Federal Rule of Evidence

702, which provides:

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. Rule 702 is a codification of the United States Supreme Court’s

decision in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993). In Daubert,

the Supreme Court described the gatekeeping function of the district court to “ensure

that any and all scientific testimony or evidence is not only relevant, but reliable.” Id.

at 589; see also United States v. Frazier, 387 F.3d 1244, 1260 (11th Cir. 2004) (en banc).

The Supreme Court extended its reasoning in Daubert to non-scientist experts in Kumho

Tire Co. v. Carmichael, 526 U.S. 137, 141 (1999).

In performing its gatekeeping function, the Court must consider whether:

(1) the expert is qualified to testify competently regarding the matters he

intends to address, (2) the methodology by which the expert reaches his

conclusions is sufficiently reliable as determined by the sort of inquiry

mandated in Daubert, and (3) the testimony assists the trier of fact,

through the application of scientific, technical, or specialized expertise,

to understand the evidence or to determine a fact in issue.

Frazier, 387 F.3d at 1260 (quoting City of Tuscaloosa v. Harcros Chems., Inc., 158 F.3d

548, 562 (11th Cir. 1998)). Thus, the three discrete inquiries to determine the

admissibility of expert testimony are qualifications, reliability, and relevance. Quiet

Tech. DC-8, Inc. v. Hurel-Dubois UK Ltd., 326 F.3d 1341 (11th Cir. 2003). Although there

is some overlap among these inquiries, they are distinct concepts that the Court and

litigants must not conflate. Id.

“The burden of laying the proper foundation for the admission of expert

testimony is on the party offering the expert, and the admissibility must be shown by

a preponderance of the evidence.” Hall v. United Ins. Co. of Am., 367 F.3d 1255, 1261

(11th Cir. 2004) (citation omitted). “Presenting a summary of a proffered expert’s

testimony in the form of conclusory statements devoid of factual or analytical support

is simply not enough.” Cook ex rel. Est. of Tessier v. Sheriff of Monroe Cty., 402 F.3d 1092,

1113 (11th Cir. 2005). The admission of expert testimony is a matter within the

discretion of the district court, which is afforded considerable leeway in making its

determination. Frazier, 387 F.3d at 1258.

The gatekeeper role, however, is not intended to supplant the adversary system

or the role of the jury: “[v]igorous cross-examination, presentation of contrary

evidence, and careful instruction on the burden of proof are the traditional and

appropriate means of attacking shaky but admissible evidence.” Daubert, 509 U.S. at

596. The judge’s role is to keep unreliable and irrelevant information from the jury

because of its inability to assist in factual determinations, its potential to create

confusion, and its lack of probative value.” Allison v. McGhan Med. Corp., 184 F.3d

1300, 1311–12 (11th Cir. 1999).

E. DISCUSSION

The Court first concludes that, although Douglas Schulz is well-qualified, the

opinions he has offered with respect to class certification are not sufficiently reliable

and must be excluded. Plaintiff concedes that the Court’s ruling as to Schulz renders

Arthur Olsen’s opinions inadmissible as well. Evaluating Peter Klouda

independently, the Court concludes that his opinions regarding damages are

admissible, but that his opinions regarding the reasonableness of the account fees must

be stricken.

A. Defendant’s Motion to Exclude Opinions and Testimony of Douglas Schulz

Douglas Schulz is Plaintiff’s main expert witness, offering opinions about both

liability and damages in the context of class certification. Initially, the Court finds that

Schulz is qualified to render his opinions. Defendant does not make a serious

challenge to Schulz’s qualifications. It is undisputed that Schulz has spent 40 years

working in and studying the securities industry, including as a Vice President of Merrill

Lynch and Bear Sterns, and has testified as an expert hundreds of times. See, e.g., Doc.

171 at 7-8. His background also includes a supervisory license as well as experience

in analyzing data, see id. at 9-10; cf. Doc. 160 at 17-18, in addition to the myriad

qualifications Defendant does not challenge. Schulz is fully qualified to render expert

opinions in this action.

Similarly, Defendant does not make a substantive challenge to the question of

helpfulness, instead simply reciting a summary of its arguments regarding reliability.

Doc. 160 at 30. Schulz’s opinions are relevant and helpful to the Court on the issue of

class certification because they are beyond the ken of the average non-expert. In order

for an expert opinion to assist the trier of fact, it must “concern[] matters that are

beyond the understanding of the average lay person.” U.S. v. Frazier, 387 F.3d 1244,

1262 (11th Cir. 2004). Expert opinions that offer nothing more than what lawyers for

the parties can argue in closing arguments generally do not assist the trier of fact. Id.

Here, Schulz’s opinions draw on his extensive experience to provide methods of

identification of the prospective class of individuals impacted by RJA’s alleged breach

of duty and calculation of their damages. If his opinions are reliable, then they are

undoubtedly relevant and helpful to the Court in rendering its determination on the

motion for class certification.

The reliability of Schulz’s opinions is the topic of true contention between the

parties. The inquiry into a proffered expert's reliability is “flexible”; the Court must

focus on the expert's principles and methodology, not on his conclusion. Chapman v.

Procter & Gamble Distributing, LLC, 766 F.3d 1296, 1305 (11th Cir. 2014). However,

“conclusions and methodology are not entirely distinct from one another.” General

Elec. Co. v. Joiner, 522 U.S. 136, 146 (1997). “[W]hen an expert purports to apply

principles and methods in accordance with professional standards, and yet reaches a

conclusion that other experts in the field would not reach, the trial court may fairly

suspect that the principles and methods have not been faithfully applied.” Fed. R.

Evid. 702 advisory committee’s note to 2000 amendment; see also Allison v. McGhan

Medical Corp., 184 F.3d 1300, 1316 (11th Cir. 1999) (district court did not abuse its

discretion in excluding conclusions in studies that were out of sync with the

conclusions in the overwhelming majority of the studies presented); Wheat v. Sofamor,

S.N.C., 46 F.Supp.2d 1351, 1359 (N.D. Ga. 1999) (excluding expert conclusions that

were based on generally accepted methods but were not shared by any other expert).

The reliability analysis therefore applies to all aspects of an expert’s testimony,

including the methodology, the facts underlying the expert’s opinion, and the link

between the facts and the conclusion. Knight v. Kirby Inland Marine Inc., 482 F.3d 347,

354–355 (5th Cir. 2007); see also General Elec. Co., 522 U.S. at 146 (“A court may

conclude that there is simply too great an analytical gap between the data and the

opinion proffered.”).

Here, Defendant asserts that Schulz’s opinions regarding class certification are

not reliable because account suitability cannot be determined by an objective, two-

factor test. Doc. 160 at 19-22. Plaintiff responds that it is possible to determine account

unsuitability in such a manner. Doc. 171 at 7-8; 148-48 ¶¶ 28-81. The parties agree,

and the Court finds, that suitability is an inherently individualized analysis, whether

applied to an investment or an account type. Under FINRA Rule 2111(a),

“[s]uitability…must be determined on an investor-by-investor basis, with reference to

the specific facts and circumstances of each investor.” Similarly, the SEC has

recommended adding a provision of the Securities Exchange Act of 1934 regarding

broker-dealers’ obligation to act in their customers’ best interest, which emphasizes

that recommendations—expressly including account type recommendations—must

be based on the customer’s “investment profile,” a holistic term that encompasses a

variety of factors. See SEC Release No. 34-86031, 2019 WL 2420297, *279-80 (June

5, 2019) (text of future §§ 240.15/-1(a)(1), (a)(2)(ii)(B), (b)(2)). Explaining the new

provision, the SEC instructed that “cost is only one of many important factors to be

considered regarding the recommendation… we are emphasizing the need to consider

costs in light of other factors and the retail customer’s investment profile.” Id. at *13.

The FINRA and SEC rules are not consistent with a theory that conclusively

determines suitability or unsuitability by considering only the cost of fees and the

customer’s past trading history.

In light of this contrary authority, the singularity of Schulz’s unsuitability model

undermines its reliability. Plaintiff is correct that the lack of peer-reviewed

methodology and error rate is irrelevant to expert opinions that, like these, do not

apply the scientific method. See Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 150

(1999); Doc. 171 at 20; cf. Doc. 160 at 24-25. However, Plaintiff has not offered

external support for Schulz’s models from any source. While the metrics Schulz

applied may be “standard formulas,” see 171 at 20-21, his application of those metrics

in the context of an unsuitability test is novel and unsupported by any authority other

than Schulz himself. See Allison, 184 F.3d at 1316; Wheat, 46 F.Supp.2d at 1359, supra.

Plaintiff argues that the settlement proceedings in a 2018 SEC matter and 2005

NASD (now FINRA) matter buttress Schulz’s methodology because they involved

“substantially similar if not identical” methodologies in the context of account-type

suitability. Doc. 171 at 17. Schulz states in his rebuttal report that both agencies’

conclusions demonstrate it is possible to make findings regarding unsuitability without

performing an individual analysis. Doc. 148-48 at 9-10. The Court does not agree.

Both the SEC and the NASD concluded that RJA had failed to review their customers’

accounts for suitability, which was of particular concern for low-trading customers

because “fee-based accounts may not have been appropriate for them.” Id. (emphasis

added). The theory of liability in those proceedings was similar to Plaintiff’s theory in

this action, see Doc. 117 at, e.g., ¶¶ 6-13, but it is not clear that the methodology aligned

with Schulz’s. Neither agency concluded that the accounts were per se unsuitable

because of the customers’ trading history. Rather, they concluded that low-trading

customers might be unsuitable for these accounts, and RJA was obligated to conduct a

review of their suitability. See also Doc. 217 at 115 (Plaintiff’s counsel explaining

NASD recommendation that a broker provide documentation when a customer opts

for a higher-fee account for reasons other than cost). Based on the limited information

that is available regarding these proceedings, they do not provide support for Schulz’s

opinion that per se unsuitability may be calculated in the aggregate using only a two-

factor test.

Defendant also contends that the SEC and NASD matters are inapposite

because they involved different account types than the Freedom Accounts at issue

here. Doc. 160 at 22-23. Although Plaintiff argues that there is no material difference

between the accounts, Doc. 171 at 18-19, the Magistrate Judge previously recognized

that a distinction may exist. See Doc 92 (denying motion to compel production of

documents related to SEC proceedings because, among other reasons, the SEC

proceedings involved different types of accounts and were subject to different claims).

Overall, in the absence of external support, the Court concludes that Schulz’s opinions

regarding the two-part test for liability are unreliable and will be excluded from

consideration with respect to the class certification issue.

For similar reasons, Schulz’s opinions regarding damages must also be excluded

from consideration on the motion for class certification. His damages model stems

from his conclusion that Freedom Accounts were per se unsuitable for the group of

customers identified by his two-factor test, which the Court finds is unreliable.

Moreover, the damages model relies on additional assumptions, including that no

putative class member would have opted for a Freedom Account despite the increased

fees, and that they would have continuously engaged in the same volume of trading

had they not switched to a Freedom Account. But these assumptions are speculative

and unsupported by external authority. See Doc. 217 at 84-86; Doc. 160 at 17-18, 23,

25. The Court will therefore strike Schulz’s opinions regarding class-wide liability and

damages for the purpose of the motion for class certification.

B. Defendant’s Motion to Exclude Opinions and Testimony of Arthur Olsen

Arthur Olsen’s expertise is offered by Plaintiff in order to apply Schulz’s models

regarding liability and damages to databases of Defendant’s clients. The parties agree

that Olsen’s opinions are inextricably linked with those of Schulz, such that if Schulz’s

opinions are inadmissible, then Olsen’s opinions based on Schulz’s formulas are also

not admissible. Doc. 161 at 18-21; Doc. 172 at 18-19. Accordingly, because the Court

finds that Schulz’s opinions must be excluded as unreliable, it will exclude Olsen’s

opinions as well.2

C. Plaintiff’s Motion to Exclude Reports and Opinions of Peter Klouda

Peter Klouda is Defendant’s damages expert. Plaintiff objects to three aspects

of Klouda’s opinions: damages, the reasonableness of fees, and the value of account

rebalancing.3 The Court need not determine whether Klouda’s opinions regarding

Schulz’s damages model or the value of account rebalancing are admissible, because

they were offered only in rebuttal to Schulz’s opinions that have been excluded. See

Doc. 160-11 3-10, 18-20. But Klouda’s opinions regarding the damages suffered by

Plaintiff and other putative class members and the reasonableness of the fees Plaintiff

was charged are offered independently of Schulz, and will therefore be analyzed

2 The Court’s ruling as to the inadmissibility of Olsen’s opinions renders Defendant’s

allegation of a Rule 26 violation moot. See Doc. 161 at 22-24. For the same reason, the Court

need not make a finding as to Olsen’s qualifications and the relevance of his opinions.

3 The Court declines to strike Klouda’s declaration as belated. See Doc. 174 at 6 n.1.

Defendant states that the declaration is merely a summary of his reports, Doc. 187 at 23-24,

and Plaintiff has not identified any information in the declaration that is “new or inconsistent

with his reports and deposition testimony.” Doc. 174 at 6 n.1.

independently. See Doc. 160-11 at 1 (in addition to assessing the validity of Schulz’s

damages model, Klouda was tasked with opining on “whether Ms. Nguyen and any

purported class members may have suffered damages while invested in Freedom

Accounts at RJA”).

First, as with Schulz, the Court finds that Peter Klouda is qualified to provide

expert testimony in this action. As other courts have noted, “[t]he qualification

standard for expert testimony is ‘not stringent’ and ‘so long as the expert is minimally

qualified, objections to the level of the expert's expertise [go] to credibility and weight,

not admissibility.” Vision I Homeowners Ass'n, Inc. v. Aspen Specialty Ins. Co., 674 F.

Supp. 2d 1321, 1325 (S.D. Fla. 2009). While Plaintiff takes issue with the fact that

Klouda worked as a broker-dealer for only three years, 20 years ago, see Doc. 174 at 9-

10, Klouda has spent the intervening decades doing work that is highly relevant to his

opinions in the instant action: conducting quantitative analyses of investment

accounts. Doc. 187 at 6-7. Defendant is also correct that an expert may be qualified

even where his experience does not precisely match the matter at hand. Furmanite

America, Inc. v. T.D. Williamson, Inc., 506 F.Supp.2d 1126, 1129 (M.D. Fla. 2007)

(citing Maiz v. Virani, 253 F.3d 641, 665 (11th Cir. 2001) (the subject matter of expert’s

testimony was sufficiently within his expertise; objection to lack of other experience

“goes more to the foundation for [his] testimony than…to his qualifications”)); see

Doc. 187 at 9; cf. Doc. 174 at 20-21. Klouda’s qualifications therefore surpass the

minimal standard under Daubert.

With respect to reliability, the Court will first consider Klouda’s opinions

regarding any damages that Plaintiff and other prospective class members

experienced.4 Plaintiff’s objections to Klouda’s conclusions on these topics largely go

to the weight that should be given to them rather than their admissibility. See, e.g.,

Rosenfeld v. Oceania Cruises, Inc., 654 F.3d 1190, 1193 (11th Cir. 2011) (“[I]n most cases,

objections to the inadequacies of [expert evidence] are more appropriately considered

an objection going to the weight of the evidence rather than its admissibility.” (internal

quotation marks omitted)); Hangarter v. Provident Life & Accident Ins. Co., 373 F.3d 998,

1017 n.14 (9th Cir. 2004) (“The factual basis of an expert opinion goes to the credibility

of the testimony, not the admissibility, and it is up to the opposing party to examine

the factual basis for the opinion in cross-examination.”); Hurst v. United States, 882 F.2d

306, 311 (8th Cir. 1989) (“Any weaknesses in the factual underpinnings of [the

expert’s] opinion go to the weight and credibility of his testimony, not to its

admissibility.”). For example, Plaintiff criticizes Klouda for not offering his own

damages model or addressing the issue of offsets to Plaintiff’s disgorgement model.

Doc. 174 at 11-12, 15-17. Plaintiff also objects to Klouda’s application of a benefit-of-

the-bargain lens to damages rather than adopting Plaintiff’s disgorgement theory. Id.

at 14. But these arguments primarily constitute disagreement with his conclusions

4 The Court disagrees with Plaintiff’s characterization of Klouda’s opinions about damages

as being based—impermissibly and “solely”—on his conclusion that the fees charged to

Plaintiff were not excessive. See Doc. 174 at 18, 9 n.7. Further, because his opinions clearly

relate to the issue of damages, the Court need not decide whether Klouda is permitted to

opine about liability. See id.; Doc. 187 at 18 n.17.

rather than a grounded attack on the reliability of his methodology. The Court is not

permitted to compare the persuasiveness of the proffered evidence, only ensure that its

foundation is sound. See, e.g., Quiet Technology DC-8, Inc. v. Hurel-Dubois UK Ltd., 326

F.3d 1333, 1341 (11th Cir. 2003).

Here, Klouda applied his experience and knowledge of investment accounts to

opine that a client’s damages must be assessed based on the fee they agreed to pay in

addition to the services they received, an analysis he characterized as highly

individual. Doc. 160-11 at 14-20, 23-27. He further explained that the services

provided by RJA’s Freedom Accounts likely impacted the trades that were made,

meaning that it is impossible to assume the same trading activity would have occurred

in a commission-based account. Id. The Court concludes that Klouda’s opinions

regarding damages are sufficiently reliable. His opinions are also relevant and helpful

to the question of class certification, addressing topics that are inaccessible to a

layperson such as the nature and comparative value of services that are offered in

various types of investment account. Id.; see, e.g., U.S. S.E.C. v. Big Apple Consulting

USA, Inc., 6:09-cv-1963-Orl-28GJK, 2011 WL 3753581, *4 (M.D. Fla. Aug. 25, 2011)

(the ability to understand and synthesize investment records is helpful to the trier of

fact). Klouda’s opinions regarding damages are admissible.

On the other hand, Klouda’s opinions about the reasonableness of the account

fees must be struck because they are neither reliable nor helpful to the trier of fact.

Klouda concludes that the account fees charged to Plaintiff were not excessive solely

because she received a discount from the maximum fee rate RJA could have charged

her. Doc. 160-11 at 11-12, 22. Klouda offers no basis for his conclusion that a discount

is the only factor in determining whether account fees are excessive—contrary to

Defendant’s statements, he does not base his conclusion on his experience with other

accounts or the services rendered. Cf. Doc. 187 at 18; see Yellowpages Photos, Inc. v. YP,

LLC, 8:17-cv-764-T-36JSS, 2019 WL 6033084, *6-7 (M.D. Fla. Nov. 14, 2019)

(Honeywell, J.) (excluding expert who did not provide any explanation of the

underlying analysis or methodology for his opinions). The Court cannot find that his

opinions on this topic result from reliable methodology or are outside of the ken of the

average layperson such that they add to the arguments Defendant’s attorneys could

make from the same evidence. See Frazier, 387 F.3d 1244, 1262-63. The Court will

therefore disregard Klouda’s opinions regarding the reasonableness or excessiveness

of the account fees when considering the motion for class certification.

F. CONCLUSION

Accordingly, it is ORDERED:

1. Defendant’s Daubert Motion to Exclude Opinions and Testimony of

Douglas J. Schulz (Doc. 160) is granted;

2. Defendant’s Daubert Motion to Exclude Opinions and Testimony of Arthur

Olsen (Doc. 161) is granted, and

3. Plaintiff’s Daubert Motion to Exclude Reports and Opinions of Peter J.

Klouda (Doc. 174) is granted-in-part and denied-in-part. Klouda’s

opinions regarding the reasonableness of the account fees will be stricken,

and thus, not considered by the Court. The motion is in all other respects

denied.

DONE and ORDERED in Tampa, Florida on August 1, 2022.

C hakene □□□ GLA, ds No As, ft yell

Charlene Edwards Honeywell

United States District Judge

Copies furnished to:

Counsel of Record

Unrepresented Parties