Chevron TCI, Inc. v. Capitol House Hotel Manager, LLC

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF LOUISIANA

CHEVRON TCI, INC. CIVIL ACTION

VERSUS

CAPITOL HOUSE HOTEL MANAGER, NO. 18-00776-BAJ-RLB

LLC, ET AL.

RULING AND ORDER

Before the Court is Plaintiff’s Partial Renewed Motion In Limine To

Exclude Or Limit The Expert Report And Testimony Of Harold A. Asher

(Doc. 203) and Defendants’ Motion In Limine To Exclude The Testimony And

Report Of Plaintiff’s Expert, John W. Theriot (Doc. 201). Both motions are

opposed. (Doc. 208; Doc. 209). For the reasons stated herein, Plaintiff’s Motion

(Doc. 203) is GRANTED IN PART and DENIED IN PART. Defendants’ Motion

(Doc. 201) is DENIED.

I. FACTS

The facts of this case have been well-chronicled in prior rulings of the Court.

Nonetheless, the relevant facts are herein repeated. This case centers on a

contractual dispute arising from a failed real estate venture. Defendants

Capitol House Hotel Manager, LLC (“Manager”), and The Wilbur Marvin Foundation

(“WMF”) (collectively, “Defendants”) sought to restore an old, abandoned hotel in

downtown Baton Rouge. (Doc. 110-1, ¶¶ 8–10; Doc. 135, ¶¶ 8–10).

To accomplish the rehabilitation and restoration of the Hotel, additional

capital was needed over and above conventional bank financing and other funding

sources. (Doc. 163-1, ¶ 2; Doc. 132-1, ¶ 2). The use of historic tax credits and

associated capital contributions, generated as a result of obtaining such credits, was

sought to bridge the gap between the total cost of the project and the sum that a

traditional lender would be willing to advance pursuant to a loan secured by a

mortgage. (Doc. 163-1, ¶ 2; Doc. 132-1, ¶ 2). On November 4, 2004, Plaintiff expressed

interest in investing in the “rehabilitation of the historic Capitol House Hotel in

Baton Rouge, Louisiana.” (Doc. 121-29).

a. Entities Involved

Gary J. Elkins, Esq. (“Elkins”), an attorney “specializing in tax credits

available through programs of the federal government,” was hired to assist in

securing financing. (Doc. 163-1, ¶ 3; Doc. 132-1, ¶ 3). In doing so, Elkins formed the

following LLCs: (1) Defendant Manager; (2) Capitol House Hotel Operating

Company, LLC (“Operator”); and (3) Capitol House Hotel Development Company,

LLC (“Owner”).1 (Doc. 163-1, ¶¶ 1, 7; Doc. 132-1, ¶¶ 1, 7). Owner owned the real estate

and bricks and mortar of the Hotel. (Doc. 163-1, ¶ 8; Doc. 132-1, ¶ 8). Operator leased

the Hotel from Owner pursuant to a Master Lease Agreement, and owned the

furniture, fixtures, and equipment. (Doc. 163-1, ¶¶ 8, 40; Doc. 132-1, ¶¶ 8, 40).

Plaintiff and Manager, Defendant herein, became co-owners of Operator.

(Doc. 110-1, ¶ 20; Doc. 135, ¶ 20).

1 Manager is a subsidiary of Capitol House Hotel, L.L.C. (Doc. 110-1, ¶ 2; Doc. 135, ¶ 2;

Doc. 94-1). Capitol House Hotel, L.L.C. is a subsidiary of WMF. (Doc. 110-1, ¶ 2; Doc. 135, ¶ 2;

Doc. 94-1).

b. Contracts in Place

Operator filed its Articles of Organization and Initial Report with the

Louisiana Secretary of State on December 13, 2005. (Doc. 110-1, ¶ 23; Doc. 135, ¶ 23).

After more than one year of negotiations, the parties executed the relevant documents

for the “Capitol House transaction” on December 29, 2005. (Doc. 132-1, ¶ 8;

Doc. 144, ¶ 8).

On December 29, 2005, Plaintiff and Manager executed the Operating

Agreement for Operator, pursuant to which Plaintiff, as the “Investor Member,”

became the owner of 99.9% of the membership interests in Operator, and Manager,

as the “Managing Member,” became the owner of .1% of the membership interests in

Operator. (Doc. 163-1, ¶ 11; Doc. 132-1, ¶ 11).

Also on December 29, 2005, Plaintiff and Manager executed a “Purchase

Agreement,” containing “put” rights in favor of Plaintiff, and “call” rights in favor of

Manager.2 (Doc. 163-1, ¶ 10; Doc. 132-1, ¶ 10). On May 31, 2007 Plaintiff and

Manager executed an Amended and Restated Purchase Agreement (the “May 31

Amended Purchase Agreement”). The May 31 Amended Purchase Agreement was

subsequently amended multiple times. (Doc. 121-5). The Court has held that “the

parties are bound by the clear and unambiguous terms of the contracts they

voluntarily executed.” (Doc. 198, p. 19).

2 Generally, a “put option” is an “option to sell something (esp. securities) at a fixed price even

if the market declines; the right to require another to buy.” Option, Black's Law Dictionary

(11th ed. 2019). Generally, a “call option” is an “option to buy something (esp. securities) at a

fixed price even if the market rises; the right to require another to sell. — Often shortened to

call.” Option, Black's Law Dictionary (11th ed. 2019).

Also relevant here, Plaintiff and WMF executed a Guaranty Agreement on

December 29, 2005, whereby WMF, as guarantor, guaranteed various obligations set

forth in the Purchase Agreement. (Doc. 163-1, ¶ 12; Doc. 132-1, ¶ 12; Doc. 121-3).

Similarly, the Court held that “WMF is bound by the Guaranty it signed.”

(Doc. 198, p. 26–27).

c. Sale of Hotel

During July and August 2012, Manager was “working on” selling the Hotel.

(Doc. 163-1, ¶ 23; Doc. 132-1, ¶ 23). On September 5, 2012, the Hotel was sold to a

third party. (Doc. 163-1, ¶ 38; Doc. 132-1, ¶ 38). To accomplish the sale, the Master

Lease between Owner and Operator had to be terminated. (Doc. 163-1, ¶ 39;

Doc. 132-1, ¶ 39). Plaintiff consented to the sale and to the termination of the Master

Lease. (Doc. 163-1, ¶ 39; Doc. 132-1, ¶ 39). Substantially all of Operator’s assets were

thereafter sold to the third-party purchaser of the Hotel. (Doc. 163-1, ¶¶ 40–41;

Doc. 132-1, ¶¶ 40–41).

d. IRS Involvement

The parties structured the historic tax credit financing through a two-tiered

transaction, wherein the tax credits available to Owner were passed from it to

Operator and then allocated to Plaintiff pursuant to a historic tax credit Pass-

Through Agreement. (Doc. 163-1, ¶ 13; Doc. 132-1, ¶ 13).

In 2012, the United States Court of Appeals for the Third Circuit issued a

decision casting doubt on whether such structures qualified for historic tax credits.

See Historic Boardwalk Hall, LLC v. Comm’r, 694 F.3d 425 (3d Cir. 2012),

cert. denied, 133 S.Ct. 2734 (2013). In the same year, the IRS sent a Notice of

Proposed Adjustment (“NOPA”) to Manager’s power of attorney, KPMG, regarding

Operator’s federal taxes for the years 2006 through 2011, challenging Operator’s

partnership structure for tax purposes. (Doc. 110-1, ¶¶ 62–63; Doc. 135, ¶¶ 62–63;

Doc. 121-25).

Elkins appeared at Manager’s Federal Rule of Civil Procedure 30(b)(6)

deposition and testified, on behalf of Manager, that the transaction at issue in this

case was a pre-Boardwalk structure, and the “[IRS] was “attacking pre-[Boardwalk]

transactions exactly like this” because the IRS “took the position that under this

structure [. . .], a tax credit investor that had everything guaranteed and everything

backstopped from the developer was not a partner in the partnership, did not have

up side potential or down side risk, that everything was capped and protected and

packaged.” (Doc. 120-4, p. 8). Separately, in an Affidavit, Elkins stated: “The issue

presented by the NOPAs was whether [Plaintiff] was a true partner with risk of loss

as presented by the structure of the deal that closed on December 29, 2005 . . .”

(Doc. 120-5, p. 5–6).

During July and August 2012, around the time that Manager was “working on

selling the Hotel,” Plaintiff’s counsel, Holland & Knight, and KPMG were working on

a response to the June 4, 2012 NOPA. (Doc. 163-1, ¶¶ 23; 31; Doc. 132-1, ¶¶ 23; 31).

Manager hired Elkins to assist KPMG in the response to the June 4, 2012 NOPA on

behalf of Operator. (Doc. 163-1, ¶ 32; Doc. 132-1, ¶ 32). The parties ultimately sent

their response to the IRS on December 1, 2012. (Doc. 163-1, ¶ 31; Doc. 132-1, ¶ 31).

Ultimately, the parties’ involvement with the Hotel effectively came to an end

when the Hotel was sold in 2012, along with the furniture, fixtures, and equipment.

(Doc. 163-1, ¶ 38, 40–41; Doc. 132-1, ¶ 38, 40–41). However, after this time, the

parties continued to regularly renew their May 31 Amended Purchase Agreement.

(See Doc. 121-5).

II. PROCEDURAL HISTORY

On August 17, 2018, Plaintiff initiated this action against Defendants Manager

and WMF. (Doc. 1).

On May 1, 2020, the parties filed their cross-Motions for Summary Judgment.

(Doc. 110; Doc. 163).

On March 29, 2021, the Court issued a Ruling and Order on the parties’

Motions for Summary Judgment. (Doc. 198). The Court held that Defendants owe the

Put to Plaintiff in the sum of $2,347,138.60, plus interest; WMF is a Guarantor of the

Put; and Defendants owe Plaintiff a prorated Asset Management Fee in an amount

to be determined at trial for the year 2012. (Id. at p. 26).

The following issues remain to be tried at the upcoming bench trial: (1) Priority

Returns—specifically, which years Priority Returns were or are owed, which years

Priority Returns were unpaid, whether the amount owed exceeded $366,293 during

relevant years, and whether Louisiana Revised Statutes § 12:1327(A) bars Priority

Returns owed to Plaintiff (Id. at p. 21); (2) Plaintiff’s Applicable Tax Rate in the

calculation of the Special Tax Distribution (Id. at p. 23); (3) attorney’s fees, interest,

and costs (Id. at p. 26); and (4) the amount of the prorated Asset Management Fee for

the year 2012 (Id.).

The Court has excluded extrinsic evidence intended to: (1) vary, alter, or add

to the terms of the Operating Agreement, May 31 Purchase Agreement, or

Amendments thereto; (2) suggest that the contracts at issue should be construed

against Plaintiff; (3) suggest unequal bargaining power among the parties; or

(4) prove any alleged oral agreements outside of the Operating Agreement, May 31

Purchase Agreement, and Amendments thereto. (Doc. 213, p. 16–17). The Court has

also ordered that “[Nadine] Barroca is not permitted to testify as a corporate

representative to matters outside her own personal knowledge to the extent that such

testimony is hearsay not falling within one of the authorized hearsay exceptions.”

(Doc. 219, p. 15).

III. LEGAL STANDARD

The admissibility of expert testimony is governed by Rule 702 and Daubert v.

Merrell Dow Pharmaceuticals, Inc., which require the Court to serve as a gatekeeper,

ensuring all scientific testimony is relevant and reliable. This gatekeeping role

extends to all expert testimony, whether scientific or not. Kumho Tire Co., Ltd. v.

Carmichael, 526 U.S. 137, 147 (1999).

Under Rule 702, the Court must consider three primary requirements in

determining the admissibility of expert testimony: (1) qualifications of the expert

witness; (2) relevance of the testimony; and (3) reliability of the principles and

methodology upon which the testimony is based. Fayard v. Tire Kingdom, Inc.,

No. 09-171-BAJ, 2010 WL 3999011, at *1 (M.D. La. Oct. 12, 2010). In Daubert, the

U.S. Supreme Court listed factors to consider when determining reliability of expert

methodology, to include “whether a theory or technique can be (and has been) tested,

whether it has been subjected to peer review and publication, the known or potential

rate of error, and the existence and maintenance of standards controlling the

technique’s operation, as well as general acceptance.” Watkins v. Telsmith, Inc.,

121 F.3d 984, 989 (5th Cir. 1997) (internal alterations omitted) (quoting Daubert,

509 U.S. at 593–594).

This list is merely illustrative, however, and the Supreme Court has also

emphasized that “the Daubert analysis is a ‘flexible’ one, and that ‘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.” Pipitone v. Biomatrix, Inc., 288 F.3d 239, 244 (5th Cir. 2002) (quoting

Kumho Tire, 526 U.S. at 150). “The district court’s responsibility 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.’” Id. (quoting Kumho Tire,

526 U.S. at 152).

Notably, Daubert motions are not appropriate when they attack “the

underlying facts upon which [an expert’s] opinion was based. That approach is not

contemplated under a Daubert challenge.” In re Katrina Canal Breaches Consol.

Litig., No. 10-866, 2012 WL 4328354, at *1 (E.D. La. Sept. 20, 2012). Rather, the

reliability of data underlying an expert’s opinion goes to the weight of the evidence,

and is subject to cross-examination, but should not serve as basis for its exclusion.

See Tyler v. Union Oil Co. of California, 304 F.3d 379, 393 (5th Cir. 2002) (“Unocal

instead attempts to show that the underlying data—provided by Unocal—was itself

unreliable. This is an issue that Unocal could—and did—raise in cross-

examination.”); In re Katrina Canal Breaches, 2012 WL 4328354, at *1 (“Courts

should not be lured by arguments disguised as Daubert challenges that actually

attack the weight of the expert testimony, not its admissibility.”). The validity or

correctness of an expert’s conclusions are issues for the jury to determine after the

Daubert analysis. See Pipitone, 288 F.3d at 250 (“The fact-finder is entitled to hear

Dr. Coco’s testimony and decide whether it should accept or reject that testimony

after considering all factors that weigh on credibility, including whether the predicate

facts on which Dr. Coco relied are accurate.”).

Ultimately, the Court has broad discretion in deciding whether to admit expert

opinion testimony. Hidden Oaks Ltd. v. City of Austin, 138 F.3d 1036, 1050 (5th Cir.

1998). “Notwithstanding Daubert, the Court remains cognizant that ‘the rejection of

expert testimony is the exception and not the rule.’” Barnett v. Nat’l Cont’l Ins. Co.,

No. 3:17-CV-153-JWD-EWD, 2019 WL 126732, at *3 (M.D. La. Jan. 8, 2019) (quoting

Johnson v. Samsung Elecs. Am., Inc., 277 F.R.D. 161, 165 (E.D. La. 2011)).

For purposes of the Daubert analysis here, it is also important to note that

these cases will be tried to the Court, not a jury. “[S]ince Rule 702 is aimed at

protecting jurors from evidence that is unreliable for reasons they may have difficulty

understanding, in a bench trial there is greater discretion regarding procedure and

even the stringency of gatekeeping.” 29 Victor J. Gold, Federal Practice & Procedure

§ 6270 (2d ed. 2020).

In a bench trial, the principal reason for the Court's gatekeeping

function is not implicated, namely to guard against jury confusion which

may result from irrelevant and/or unreliable expert opinion testimony.

The purpose of the Court's gatekeeping function required by Daubert is

“to ensure that only reliable and relevant expert testimony is presented

to the jury.” “Most of the safeguards provided for in Daubert are not as

essential in a case such as this where a district judge sits as the trier of

fact in place of a jury.”

Hunters Run Gun Club, LLC v. Baker, No. 17-176, 2019 WL 2516876, at *1

(M.D. La. June 18, 2019) (Dick, J) (citations omitted); see also Nassri v.

Inland Dredging Co., No. 11-853, 2013 WL 256747, at *1 (M.D. La. Jan. 23, 2013).

Or, stated another way, “[t]here is less need for the gate keeper to keep the

gate when the gatekeeper is keeping the gate only for himself.” United States v.

Brown, 415 F.3d 1257, 1269 (11th Cir. 2005); see also Gibbs v. Gibbs, 210 F.3d 491,

500 (5th Cir. 2000) (“Most of the safeguards provided for in Daubert are not as

essential in a case such as this where a district judge sits as the trier of fact in place

of a jury.”).

With these principles in mind, the Court turns to the parties’ Daubert

challenge.

IV. DISCUSSION

Plaintiff seeks to exclude Defendants’ expert, Harold A. Asher, and Defendants

seek to exclude Plaintiff’s expert, John W. Theriot, pursuant to

Federal Rule of Evidence 702 and Daubert v. Merrell Dow Pharmaceuticals, Inc.,

509 U.S. 579 (1993). (Doc. 201; Doc. 203). The Court will address each in turn.

a. Plaintiff’s Motion in Limine to Exclude Harold A. Asher

Defense expert Harold A. Asher is a Certified Public Accountant, “[c]ertified in

Financial Forensics.” (Doc. 209, p. 14). Defendants assert that Asher provides

financial calculations that will assist the trier of fact in this case. (See generally id.).

Plaintiff seeks to exclude Asher on the following grounds: (1) Asher’s opinions

are unreliable because they ignore critical provisions in the parties’ agreements and

applicable Louisiana law and are contrary to the Court’s summary judgment ruling;

(2) Asher’s opinions are improper legal conclusions; and (3) Defendants are seeking

to use Asher as a conduit for their baseless accusations that Plaintiff intentionally

deceived Defendants. (Doc. 203-1, p. 2). For the reasons set forth below, Plaintiff’s

motion is granted in part and denied in part.

i. Asher’s Report and Testimony Will Be Permitted

Plaintiff contends that Asher’s opinions and testimony are unreliable,

unhelpful, and irrelevant because they are based on Asher’s misinterpretation of the

governing contracts, evaluation of selective and inaccurate evidence, and pure

speculation. (Doc. 203-1, p. 11). Specifically, Plaintiff argues that Asher failed to

reference key provisions in the relevant contracts. (Id. at p. 14). Plaintiff further

contends that Asher’s reliance on federal tax law is irrelevant to this dispute because

dissolution of an entity is governed by state law, while the termination of a

partnership for federal tax purposes is controlled by federal law. (Id. at p. 12).

Defendants respond that Plaintiff may challenge Asher’s conclusions on

cross-examination, but there is no basis to exclude his conclusions at trial.

(Doc. 209, p. 7). Defendants allege that Asher is a “Certified Public Accountant (CPA)

with 45 years of experience, has been Accredited in Business Valuation (ABV) since

2007, Certified in Financial Forensics (CFF) since 1995, a Certified Valuation Analyst

(CVA) since 1995, a Certified Fraud Examiner (CFE) since 1995, and a Forensic CPA

(FCPA) since 2006,” and has testified in 198 cases. (Id. at p. 12). Defendants argue

that Asher’s report conducts calculations based on the audited financials of Operator

and arrives at factual conclusions regarding sums due, which would assist the Court.

(Id. at p. 8–9).

Plaintiff takes issue with the data underlying Asher’s opinion.

Daubert motions are not appropriate, however, when they attack “the underlying

facts upon which [an expert’s] opinion was based. That approach is not contemplated

under a Daubert challenge.” In re Katrina Canal Breaches Consol. Litig., No. 10-866,

2012 WL 4328354, at *1 (E.D. La. Sept. 20, 2012). Rather, the reliability of data

underlying an expert’s opinion goes to the weight of the evidence, and is subject to

cross-examination, but should not serve as basis for its exclusion. See Tyler v.

Union Oil Co. of California, 304 F.3d 379, 393 (5th Cir. 2002) (“Unocal instead

attempts to show that the underlying data—provided by Unocal—was itself

unreliable. This is an issue that Unocal could—and did—raise in cross-

examination.”); In re Katrina Canal Breaches, 2012 WL 4328354, at *1 (“Courts

should not be lured by arguments disguised as Daubert challenges that actually

attack the weight of the expert testimony, not its admissibility.”).

It bears reminding that “the trial court's role as gatekeeper [under Daubert] is

not intended to serve as a replacement for the adversary system.” Pipitone v.

Biomatrix, Inc., 288 F.3d 239, 250 (5th Cir. 2002) (citing Daubert v. Merrell Dow

Pharmaceuticals, Inc., 509 U.S. 579, 596 (1993)). Rather, as Daubert makes clear,

“[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.” Thus, while exercising its role as a

gate-keeper, a trial court must take care not to transform a Daubert hearing into a

trial on the merits. Id. Additionally, in the context of a bench trial, “the trial judge is

in a unique position to hear the evidence and decide whether to disregard it altogether

or to just consider the criticisms of the testimony as relevant to the weight the

evidence is ultimately given.” Schmidt v. United States, No. A-18-CV-00088-DAE,

2019 WL 2090695, at *6 (W.D. Tex. May 10, 2019).

Here, the Court notes Plaintiff’s concerns, but finds that such concerns are

more properly addressed on cross-examination. Accordingly, the Court will not

exclude Asher’s report and testimony altogether. Plaintiff’s Motion is denied in part.

ii. Limitations to Asher’s Report and Testimony

The Court will, however, limit Asher’s testimony as follows.

1. Legal Conclusions

Plaintiff argues that Defendants are attempting to use an accountant to make

legal arguments and usurp the Court’s role in resolving legal issues. (Doc. 203-1, p. 2).

Specifically, Plaintiff asserts:

Asher’s report is littered with inadmissible legal opinions and

conclusions of law designed to prop up certain affirmative defenses

raised by Defendants. To illustrate, the opinions and conclusions

rendered in Asher’s report includes: (1) his subjective interpretation of

the governing contracts, contractual language, and scope of the parties’

obligations; (2) the contract provisions and federal tax law he believes

are applicable to Defendants’ affirmative defense of dissolution,

liquidation and termination; (3) a legal analysis advocating Defendants’

position on the issue of dissolution, liquidation and termination; and

(4) a legal analysis and determination on the merits of CTCI’s contract

claims.

(Id. at p. 10).

Defendants respond that “Asher is not testifying about the law or offering legal

opinions or conclusions of law.” (Doc. 209, p. 5). Rather, Defendants contend that

Asher provides useful information regarding the contractual relationship between

the parties and applicable calculations of contract liability. (Id. at p. 5–6).

The Federal Rules of Evidence allow an expert to offer opinions that “embrace

an ultimate issue to be decided by the trier of fact.” Fed. R. Evid. 704(a). An expert

witness may not offer opinions, however, that amount to legal conclusions.

Feld Motor Sports, Inc. v. Traxxas, LP, No. 4:14-CV-463, 2015 WL 4722144, at *3

(E.D. Tex. Aug. 7, 2015) (citing C.P. Interests, Inc. v. Cal. Pools, Inc.,

238 F.3d 690, 697 (5th Cir. 2001); Calderon v. Bank of America, N.A.,

941 F. Supp. 2d 753, 759–60 (W.D. Tex. 2013) (noting that the law is not a proper

subject of expert opinion testimony); Orthoflex, Inc. v. ThermoTek, Inc.,

986 F. Supp. 2d 776, 811 (N.D. Tex. 2013) (“Both opinions attribute legal significance

to certain facts, which is not helpful to the trier of fact and must be excluded under

Rule 702.”)).

Accordingly, the Court will not permit Asher to testify regarding legal

conclusions and will not consider legal conclusions contained in Asher’s expert report.

The Court reminds the parties that as the trier of fact, the Court will make all legal

conclusions required in this case.

2. Conflicts with Summary Judgment Ruling

Plaintiff argues that Asher offers conclusions that conflict with the Court’s

summary judgment Ruling. (Doc. 203-1, p. 15–17). As the parties are aware, the

Court previously rendered a summary judgment Ruling, precluding the need for

Asher to opine on certain issues.3 (Doc. 198). The Court will not permit Asher to opine

regarding issues already resolved by the Court. To the extent Asher’s expert report

renders conclusions contradicting the Court’s previous Ruling, the Court will not

consider such conclusions. The Court cautions the parties that it will not relitigate

issues the Court has previously resolved during the upcoming bench trial.

3. Opinion Regarding Intent of Parties

Finally, Plaintiff asserts that Asher impermissibly opines on the intent of the

parties. (Doc. 203-1, p. 17). Plaintiff contends that Asher’s report repeatedly asserts

improper commentary on Plaintiff’s knowledge, intent, and state of mind. (Id.).

Defendants respond that such phrases could be removed, and Asher’s testimony

would still assist the trier of fact. (Doc. 209, p. 16–17).

3 The following issues remain to be tried at the upcoming bench trial: (1) Priority Returns—

specifically, which years Priority Returns were or are owed, which years Priority Returns

were unpaid, whether the amount owed exceeded $366,293 during relevant years, and

whether Louisiana Revised Statutes § 12:1327(A) bars Priority Returns owed to Plaintiff

(Doc. 198, 21); (2) Plaintiff’s Applicable Tax Rate in the calculation of the Special Tax

Distribution (Id. at p. 23); (3) attorney’s fees, interest, and costs (Id. at p. 26); and (4) the

amount of the prorated Asset Management Fee for the year 2012 (Id.).

The Court previously issued an evidentiary Ruling precluding extrinsic

evidence in certain instances.4 (Doc. 213). Additionally, the Court’s summary

judgment Ruling enforced the unambiguous contracts as written, rendering

testimony regarding Plaintiff’s intent irrelevant. (See Doc. 198); see also

La. Civ. Code art. 2046 (“When the words of a contract are clear and explicit and lead

to no absurd consequences, no further interpretation may be made in search of the

parties' intent.”). Testimony barred or rendered moot by the Court’s previous Rulings,

including evidence regarding Plaintiff’s knowledge, intent, or state of mind, is

excluded.

Accordingly, Plaintiff’s Motion is granted in part.

b. Defendants’ Motion in Limine

Plaintiff’s rebuttal expert John W. Theriot is a “credentialed certified forensic

accountant and certified in financial forensics.” (Doc. 208, p. 4). Theriot has “practiced

as a certified public accountant for more than 20 years, [and] is a member of

numerous business organizations, including the American Institute of Certified

Public Accountants.” (Id.).

Defendant seeks to exclude Theriot’s testimony and expert report for the

following reasons: (1) Theriot has relied solely on legal assumptions and failed to

4 The Court held: Defendants are not permitted to introduce extrinsic evidence to: (1) vary,

alter, or add to the terms of the Operating Agreement, May 31 Purchase Agreement, or

Amendments thereto; (2) suggest that the contracts at issue should be construed against

Plaintiff; (3) suggest unequal bargaining power among the parties; or (4) prove any alleged

oral agreements outside of the Operating Agreement, May 31 Purchase Agreement, and

Amendments thereto. (Doc. 213, p. 16–17).

apply sound methodology; (2) Theriot failed to adhere to the “General Standard

Rules” set forth by the American Institute of Certified Public Accountants, Inc.;

(3) Theriot did not properly limit his opinions to rebuttal testimony. (Doc. 201-1).

i. Methodology

Defendants argue that Theriot relied solely on assumptions provided by

Plaintiff’s counsel. (Doc. 201-1, p. 8). Defendants contend that the facts underlying

Theriot’s opinions are not “facts,” but rather, are conclusory assumptions provided by

Plaintiff’s counsel, many of which contradict the plain reading of the contracts

between the parties. (Id.). Additionally, Defendants assert that Theriot’s failure to

conduct an independent review of facts runs afoul of the accepted “General Standards

Rule” set forth by the American Institute of Certified Public Accountants, Inc.

(Id. at p. 13).

Plaintiff responds that Defendants challenge the weight of the evidence rather

than admissibility. (Doc. 208, p. 7). Plaintiff asserts that these are issues to be

presented to the trier of fact and are improper under the guise of a Daubert challenge.

(Id.). The Court agrees. Similar to Asher’s testimony, the reliability of data

underlying Theriot’s opinion goes to the weight of the evidence and may be challenged

on cross-examination. See Tyler v. Union Oil Co. of California, 304 F.3d 379, 393

(5th Cir. 2002).

A review of Theriot’s expert report shows that Theriot relied on assumptions

provided by Counsel but performed independent analysis to make financial

calculations based on the alleged contractual liability Counsel identified. (Doc. 119).

Notably, the Court has held that experts are not prohibited from relying on

assumptions when reaching their opinions. Nkansah v. Martinez, No. 3:15-CV-00646,

2017 WL 2798520, at *4 (M.D. La. June 28, 2017) (internal citations omitted).

Additionally, “[e]xperts are permitted to assume the fact of liability and opine about

the extent of damages.” Orthoflex, Inc. v. ThermoTek, Inc., 986 F. Supp. 2d 776, 792

(N.D. Tex. 2013); see also Terrell v. Household Goods Carriers' Bureau,

494 F.2d 16, 23–25 (5th Cir. 1974) (affirming decision to admit testimony from

certified public accountant who had prepared net profit analysis based on assumption

of liability, and noting that party objecting to expert testimony had opportunity on

cross-examination to challenge the bases for expert's opinion regarding lost sales).

The Court previously denied a Daubert challenge based on allegedly faulty

assumptions, and held that “the credibility and amount of weight that should be

applied to the opinions of the countervailing experts are better left to the

consideration of the trier of fact.” Nkansah, 2017 WL 2798520, at *4 (citing Arceneaux

v. Lexington Ins. Co., No. 11-423, 2013 WL 5839325, at *2 (M.D. La. Oct. 30, 2013));

see also U.S. v. 14.3 Acres of Land More Or Less Situated in Lefore Cnty., Miss.,

80 F.3d 1074, 1077 (5th Cir. 1996) (“As a general rule, questions related to the bases

and sources of an expert's opinions affect the weight to be assigned that opinion

rather than its admissibility and should be left for the jury's consideration.”);

St Joseph Abbey v. Castille, No. 10-2717, 2011 WL 2182046, at *1

(E.D. La. June 3, 2011) (“The reliability of data underlying an expert's opinion goes

to the weight of this evidence, but should not serve as a basis for its exclusion.”)

(additional citations omitted). Indeed, the “most appropriate place to challenge the

assumptions made by an expert is at trial on cross-examination and with

countervailing expert testimony.” Nkansah, 2017 WL 2798520, at *4. “Matters left

for the [trier of fact’s] consideration include the [expert's] alleged miscalculations,

erroneous assumptions and inconsistencies . . .” Id. (internal citations omitted).

As the trier of fact, the Court will identify “erroneous assumptions” on which

Theriot’s calculations are based, if any, and disregard Theriot’s resulting conclusion

if necessary.

ii. Rebuttal Testimony

Finally, Defendants argue that Theriot did not properly limit his opinions to

rebuttal testimony and contend that Theriot’s expert report was untimely.

(Doc. 201-1, p. 16). Defendants’ argument lacks merit. Although Theriot relies on

assumptions independent of Asher’s report, as Defendants assert, Theriot opines

regarding the same contractual provisions that are the subject of Asher’s report—the

Priority Return, Asset Management Fee, and Special Tax Distribution.

(See Doc. 114-1; Doc. 119). Further, Defendants themselves contend that Theriot

began work on this case on November 19, 2019, nearly two years ago.

(Doc. 201-1, p. 16). Defendants are not prejudiced by any alleged untimeliness of

Theriot’s expert report and have had a full opportunity to depose Theriot. If

Defendants deemed it necessary, they could have requested leave to identify a

sur-rebuttal expert in the two years that have passed since Plaintiff identified

Theriot.

Accordingly, Defendants’ Motion in Limine is denied.

V. CONCLUSION

Accordingly,

IT IS ORDERED that Plaintiff’s Partial Renewed Motion In Limine To

Exclude Or Limit The Expert Report And Testimony Of Harold A. Asher

(Doc. 203) is GRANTED IN PART and DENIED IN PART in accordance with this

Ruling and Order. Harold A. Asher will not be permitted to testify regarding the

following: (1) legal conclusions; and (2) issues barred or rendered moot by the Court’s

previous summary judgment Ruling (Doc. 198) and evidentiary Ruling (Doc. 213),

including Plaintiff’s knowledge, intent, or state of mind. (Doc. 213).

IT IS FURTHER ORDERED that Defendants’ Motion In Limine To Exclude

The Testimony And Report Of Plaintiff’s Expert, John W. Theriot (Doc. 201) is

DENIED.

IT IS FURTHER ORDERED that Defendants’ Motion For Leave To File

Reply Memorandum In Support Of Defendants’ Motion In Limine To

Exclude The Testimony And Report Of Plaintiff’s Expert, John W. Theriot

(Doc. 210) is DENIED.

Baton Rouge, Louisiana, this 25th day of June, 2021

_____________________________________

JUDGE BRIAN A. JACKSON

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF LOUISIANA