The opinion
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
ALFRED SALVITTI, et al. :
: CIVIL ACTION
Plaintiffs, : NO. 19-00696
:
v. :
:
SCOTT LASCELLES, et al., :
:
Defendants. :
M E M O R A N D U M
EDUARDO C. ROBRENO, J. June 1, 2022
I. INTRODUCTION
Plaintiffs Alfred Salvitti and Nico Salvitti (collectively
“the Salvittis”) patented and designed a knife and partnered
with Plaintiff John-David Potynsky (collectively, “Plaintiffs”)
to produce the knife under the name “Colonel Blades.” At the end
of 2013, Plaintiffs reached out to Defendant Scott Lascelles to
assist with the marketing and sales of Colonel Blades. In March
2014, Lascelles set up a limited liability company to help
manage the production of Colonel Blades. On March 28, 2014,
Lascelles registered The Colonel, LLC (the “LLC”) with the
Pennsylvania Department of State and listed himself as the sole
member. Lascelles then managed the day-to-day operations of
marketing Colonel Blades, including managing internet sales,
working with manufacturers, and distributing the product.
Defendant Lascelles also enlisted his spouse, Defendant Dana
DiSabatino (collectively, “Defendants”), to assist with
developing a business plan.
Defendants previously sought summary judgment with respect
to Plaintiffs’ claims for breach of contract (Count II), breach
of fiduciary duties (Count III), unjust enrichment (Count IV),
conversion (Count V), conspiracy (Count VI), aiding and abetting
(Count VII), and money had and received (Count VIII). Defendants
also sought summary judgment with respect to Plaintiffs’ claims
for injunctive relief and preliminary injunction based on
Plaintiffs’ claims for breach of contract and breach of
fiduciary duties (Counts IX, X, XI, XII). On January 6, 2022,
the Court granted Defendants’ motion for summary judgment with
respect to every claim except Plaintiffs’ claim for unjust
enrichment against Defendants. Thus, Plaintiffs’ claim for
unjust enrichment remains outstanding.
Defendant Lascelles initially brought counterclaims for (1)
breach of contract, (2) unjust enrichment, (3) conversion, and
(4) tortious interference with contractual relations. Defendant
Lascelles has since indicated that he wishes to withdraw his
first three counterclaims and proceed to trial only on his
counterclaim of tortious interference.
Presently before the Court is Defendants’ motion in limine
to exclude the testimony and report of Plaintiffs’ expert
Michael Rountree, C.P.A.1 After holding oral argument, the motion
is now ripe before this Court.
II. LEGAL STANDARD
Motions in limine “allow the trial court to rule in advance
of trial on the admissibility and relevance of certain
forecasted evidence.” United States v. Tartaglione, 228 F. Supp.
3d 402, 406 (E.D. Pa. 2017) (citing Bradley v. Pittsburgh Bd. of
Educ., 913 F.2d 1064, 1069 (3d Cir. 1990)). “The trial court
should exclude evidence on a motion in limine only when the
evidence is clearly inadmissible on all potential grounds.” Id.
(citing Leonard v. Stemtech Health Sciences, Inc., 981 F. Supp.
2d 273, 276 (D. Del. 2013)). The party seeking to exclude
evidence “bears the burden of demonstrating that the challenged
evidence is inadmissible ‘on any relevant ground.’” Apotex, Inc.
v. Cephalon, Inc., No. 2:06-CV-2768, 2017 WL 2362400, at *2
(E.D. Pa. May 31, 2017) (quoting Leonard, 981 F. Supp. 2d at
276).
1 Defendants have also filed motions in limine (1) to
preclude evidence of Plaintiffs’ unjust enrichment claim based
on the statute of limitations, (2) to preclude evidence of
Plaintiffs’ dismissed patent claims, (3) to “follow the law of
the case,” and (4) to preclude post-complaint evidence.
Plaintiffs have filed a motion to compel additional discovery.
These motions will be addressed in a separate order.
III. DISCUSSION
A. The Expert Report of Michael Rountree
Defendants move to exclude the report and testimony of
Plaintiffs’ expert, Michael Rountree, C.P.A. Rountree offers a
forensic analysis of Defendants’ financial activities with
respect to the sale and management of Colonel Blades. Plaintiffs
offer Rountree’s report and testimony to support their claim for
unjust enrichment.2
Plaintiffs specifically offer Rountree’s report for support
that Lascelles deviated from acceptable accounting principles
and, as a result, Lascelles was unjustly benefitting from the
sale of Colonel Blades. According to Plaintiffs, Rountree
reviewed “the various book accounts through which the company
business ran,” e-commerce provider data, invoices, payments, and
“all of the things that underlie a product-based business.” Arg.
Tr. 3:21-25, ECF No. 122. Plaintiffs explain that after
reviewing the aforementioned documents, Rountree discovered “a
delta between what is reflected in the declared revenue of the
company . . . and the amount of product ordered at the price
purportedly offered on [t]hird [p]arty websites.” Arg. Tr. 4:1-
5. Plaintiffs aver that this is evidence that money went
2 Rountree prepared his report before the Court dismissed
Plaintiffs’ claims for breach of contract and breach of
fiduciary duties. Plaintiffs initially sought to use Rountree’s
report to support those claims as well.
missing, which supports their claim that Lascelles was unjustly
enriched.
Rountree provides three opinions in his report: the
“inventory analysis,” the “accounting opinion,” and the
“personal account opinion.” In Rountree’s inventory analysis, he
estimates the retail value of the products sold by the LLC and
compares the amount to the total revenue Lascelles reported on
the LLC’s tax return. Rountree concludes that there are
unaccounted for sales amounting to approximately $736,181.
Rountree’s accounting opinion provides that Lascelles
managed the LLC in an improper manner. He specifically opines
that Lascelles “did not maintain accounting records for [the
LLC’s] underlying financial activities, e.g., no bank registers,
no general ledgers, no tracking of inventory costs or sales,”
that Lascelles improperly used his personal bank account to
manage the LLC’s activities, and that Lascelles should not have
reported the LLC’s alleged profits and losses on his personal
income tax returns. Rountree Rep. at 2-3, ECF No. 105-3.
Rountree’s accounting opinion provides that, overall, Lascelles
did not observe the LLC’s formalities when managing the LLC and
so Lascelles deviated from sound and standard accounting
practices.
Rountree’s personal account opinion provides that issues
with Lascelles’ accounting practices created a need for Rountree
to examine the transactions in Lascelles’ personal bank account.
Rountree claims that the timing of several deposits between 2015
and 2019 “coincide with the production of inventory by The
Colonel, LLC and correspond with a pattern of missing inventory
units, which makes all deposits subject to scrutiny, especially
with the admitted commingling of LLC and personal funds.” Id. at
7. Rountree also opines that on at least seventeen occasions,
Lascelles deposited proceeds from Colonel Blades into his
personal account totaling $36,598.
B. The Report is Neither Reliable Nor a Proper Fit
When considering whether an expert may testify, the trial
judge must:
(1) confirm the witness is a qualified expert; (2) check
the proposed testimony is reliable and relates to
matters requiring scientific, technical, or specialized
knowledge; and (3) ensure the expert’s testimony is
“sufficiently tied to the facts of the case,” so that it
“fits” the dispute and will assist the trier of fact.
UGI Sunbury LLC v. A Permanent Easement for 1.7575 Acres, 949
F.3d 825, 832 (3d Cir. 2020) (quoting Daubert v. Merrell Dow
Pharm., Inc., 509 U.S. 579, 591 (1993)). Defendants’ overarching
argument is that Rountree’s report fails both the requisite
“reliability” and “fit” prongs.
The reliability requirement of Rule 702 provides that “the
expert must testify to ‘scientific, technical or other
specialized knowledge [that] will assist the trier of fact.’” In
re Paoli R.R. Yard PCB Litig., 35 F.3d 717, 742 (3d Cir. 1994)
(quoting Fed. R. Evid. 702). This means that “an expert's
testimony is admissible so long as the process or technique the
expert used in formulating the opinion is reliable.” Id.3 The
expert’s opinion must be based on appropriate methods and
procedures, rather than on “subjective belief or unsupported
speculation.” Id. (quoting Daubert, 509 U.S. at 590).
Additionally, the underlying data must be reliable. “There
will be times when an expert’s methodology is generally reliable
but some of the underlying data is not of a type reasonably
relied on by experts.” Id. at 749 n.19. “In those cases, the
expert can testify so long as he or she does not significantly
rely on the unreliable data, and so long as his or her testimony
3 To assess an expert’s methodology under Rule 702, a
district court should consider, where appropriate, the following
factors:
(1) whether a method consists of a testable hypothesis;
(2) whether the method has been subject to peer review;
(3) the known or potential rate of error; (4) the
existence and maintenance of standards controlling the
technique’s operation; (5) whether the method is
generally accepted; (6) the relationship of the
technique to methods which have been established to
be reliable; (7) the qualifications of
the expert witness testifying based upon the
methodology; and (8) the non-judicial uses to which the
method has been put.
Oddi v. Ford Motor Co., 234 F.3d 136, 145 (3d Cir. 2000)
(quoting Paoli, 35 F.3d at 742 n.8).
survives Rule 702 without any reliance on the excluded data.”
Id. “When a trial judge analyzes whether an expert’s data is of
a type reasonably relied on by experts in the field, he or she
should assess whether there are good grounds to rely on this
data to draw the conclusion reached by the expert.” Id. at 749.
Moreover, “[t]o determine whether an expert’s testimony
‘fits’ the proceedings, this Court asks whether it ‘will help
the trier of fact to understand the evidence or to determine a
fact in issue.’” UGI Sunbury LLC, 949 F.3d at 835 (first citing
Fed. R. Evid. 702(a), then citing Karlo v. Pittsburgh Glass
Works, LLC, 894 F.3d 61, 81 (3d Cir. 2017)). “‘Fit’ is not
always obvious, and scientific validity for one purpose is not
necessarily scientific validity for other, unrelated
purposes.” Id. (quoting Daubert, 509 U.S. at 591). “Thus, even
if an expert’s proposed testimony constitutes scientific
knowledge, his or her testimony will be excluded if it is not
scientific knowledge for purposes of the case.” Id. (quoting
Paoli, 35 F.3d at 743) (emphasis in original).
Defendants primarily argue that Rountree’s accounting
opinion, personal account opinion, and inventory report are not
reliable or a proper “fit” because they fail to consider
pertinent evidence. Defendants contend that Rountree failed to
review and consider Lascelles’ declaration and the deposition
testimony of Lascelles, Potynsky, Salvitti, and the LLC’s
accountant, Joseph Tighe, C.P.A. Defendants maintain that as a
result, Rountree is unable to understand how the business
actually operated.
With respect to Rountree’s “inventory opinion,” in which
Rountree estimated the retail value of the products sold and
compared that amount to the total sales revenue Lascelles
reported on the LLC’s tax returns, Defendants contend that
Rountree incorrectly assumed that every sale was made at the
full retail price when, in reality, some inventory was sold at a
discounted rate and some inventory was given away for free.
Defendants point to Lascelles’ declaration for support. In his
declaration, Lascelles testified that at least one wholesale
customer purchased 1,750 units of inventory for $40 each, while
Rountree’s analysis assumes that the inventory was purchased for
the full retail price of $79.99. Lascelles Decl. ¶ 184, ECF No.
105-9. Defendants argue that as a result, Rountree’s report
overestimates the LLC’s sales by at least $69,982.50.
Further, Lascelles testified that some merchandise was
given away for free as part of a Black Friday promotion. See
Lascelles Dep. 239:18-24, ECF No. 105-7. Lascelles also
testified that four to five percent of the metal knives were
given away for free as part of marketing promotions, see
Lascelles Dep. 446:19-24; 447:15, and other products were sold
in bundles at discounted prices or sold at a “friends/family”
discount. Defendants maintain that by failing to consider this,
Rountree overstated the “unaccounted” inventory valuation by
approximately $222,810.90.
Defendants further argue that there are issues with
Rountree’s accounting opinion and personal account opinion. As
previously noted, these opinions involve the assessment of
Lascelles’ management of the LLC, the accounting practices that
Lascelles used, and whether Lascelles deposited checks for the
LLC’s inventory into his personal bank account. Defendants
explain that though Rountree opines there is “no reason” for
Lascelles to have deposited LLC-related funds into his personal
account, Lascelles explained in his deposition that at one
point, Potynsky wrote a check out to Lascelles rather than to
the LLC, which forced Lascelles to deposit the check into his
personal account. See Lascelles Dep. 164:7-15. Lascelles’
declaration also provides that Lascelles paid suppliers from
funds in his personal bank account when the LLC’s account did
not have sufficient funds available. Lascelles explained that
Plaintiffs did not provide any monetary support to fund the
operation so, at times, Lascelles was required to pay suppliers
from his personal account. Lascelles Decl. ¶ 8, ECF No. 105-9.
According to Lascelles, he then tracked these transactions on a
“dry eraser board” and credited the amounts he paid against sums
he was owed by the LLC. Lascelles Dep. 417:3-11. Defendants
argue that Rountree’s analysis is unreliable because Rountree
failed to consider this pertinent information.
Finally, Defendants contend that Rountree failed to
consider the deposition testimony of the LLC’s accountant,
Joseph Tighe, C.P.A. Tighe testified that Lascelles kept “very
detailed schedules of how much each knife cost and how many he
had left at the end of the year,” that he was able to “verify
the costs of the knives that were purchased as we had all he
invoices from the different purchases of the knives.” Tighe Dep.
43:20-23; 47:16-19, ECF No. 105-13.4
4 Defendants also produced a rebuttal report from Tighe. With
respect to Rountree’s opinion that Lascelles failed to use best
practices when managing the LLC, Tighe concludes that:
Mr. Rountree [states] that the accounting practices we
employed deviate from acceptable accounting standards.
I disagree. Mr. Lascelles’s company, Colonel, is a
single member LLC filing as a sole proprietor using the
tax basis of accounting. That accounting basis is an
acceptable method of accounting for a business like
Colonel. Mr. Lascelles maintained accounting records for
Colonel that were supplied to my firm annually,
accounted for inventory, and provided us with the
information that we needed to file his Schedule Cs and
to create reliable financial statements after they were
requested by Plaintiffs during this litigation.
Tighe Rep. at 3 ¶ 9, ECF No. 105-5. Tighe’s report also provides
that:
Mr. Rountree claims that it was ‘grossly negligent’ for
Mr. Lascelles to ‘commingle’ company and personal
financial accounts. In my experience, it is customary
for a small business owner, whether it be a single member
LLC or a small partnership, to occasionally use a
personal credit card to pay for business expenses and
Overall, Defendants maintain that Rountree’s failure to
review these documents is fatal to his analysis and, as a
result, his methodology is neither reliable nor a proper “fit.”
For support, Defendants point to Baker v. United States, a
case where the Third Circuit affirmed the lower court’s decision
to exclude proffered expert testimony. 642 F. App’x 147, 149 (3d
Cir. 2016). In Baker, the plaintiffs brought a Monell claim
against the City of Camden arguing that the City’s failure to
properly train their SWAT Team resulted in City officers using
excessive force. Id. at 151. The plaintiffs offered an expert to
opine on the City’s failure to train the SWAT Team, and the
expert concluded that “lack of resource[s] led to poor training
by the SWAT Team at the time and caused them not to establish or
properly follow protocols dealing with certain operations such
as entry and searches of residential properties while occupied.”
then seek reimbursement from the company, or to deposit
checks written out personally to the member into a
personal account (because they often cannot be deposited
into the business account) and then issue personal
checks back to the company or otherwise track those
personal transactions against monies owed to the
individual by the company. Contrary to Mr. Rountree’s
opinion, there is nothing per se improper about these
practices, and they do not constitute improper
‘commingling’ as Mr. Rountree suggests by his pejorative
use of that term. Mr. Lascelles has accounted for and
documented each of these instances, many of which appear
to be unavoidable.
Id. at 3 ¶ 8. Plaintiffs do not contest the reliability of
Tighe’s report in their opposition to Defendants’ motion.
Id. The district court ultimately found the expert’s report to
be unreliable because the expert “could provide no basis for his
opinion regarding a lack of training beyond the conduct of the
officers giving rise to this litigation” and because the expert
“admitted that he did not review any materials regarding the
training of the Camden SWAT Team and conceded that, in fact, he
did not know what training the Camden SWAT Team received in the
years preceding the incident at issue.” Id. Given this, the
Third Circuit affirmed the district court’s rejection of the
expert’s testimony. Id.
Defendants similarly point to CareDx, Inc. v. Natera, Inc.,
a case involving allegations that the defendant falsely
advertised their kidney transplant test as superior to the
plaintiff’s kidney transplant test. No. 19-662, 2021 WL 1840646,
at *3 (D. Del. May 7, 2021). The plaintiff sought to introduce
an expert to establish the cost of corrective advertising
efforts. Id. at *2. The expert relied solely on the deposition
testimony of plaintiff’s CEO to calculate the costs of
corrective advertising. Id. at *2-*3. During the CEO’s
deposition, the CEO explained that it spent approximately $30
million on marketing, sales, and investor relations, and
approximately 60-70% of that $30 million was directed towards
defending against the defendant’s advertising claims. Id. at *3.
The plaintiff’s expert then reported that the plaintiff incurred
$18-$21 million in corrective advertising costs, because “$30m *
0.6 = $18m. $30m * 0.7 = $21m.” Id. The CareDx court excluded
the calculations finding that they were not specialized findings
and they would not help the trier of fact. Id. The court found
that the opinions were not reliable because “[t]hey were not
reached by application of a scientific method or procedure and
the underlying rough data supplied by [the CEO’s] testimony does
not provide a reliable basis on which to make a scientific
opinion.” Id.
Defendants further rely on Jacoby Donner, P.C. v. Aristone
Realty Capital LLC, a case where the court excluded an expert’s
calculation of damages of a related settlement agreement because
the expert “fail[ed] to ascertain basic facts about the two
settlement agreements at issue—whether [defendant] paid, or was
obligated to pay, any part of the settlements.” No. 17-2206,
2020 WL 5095499, at *20 (E.D. Pa. Aug. 28, 2020).
In their response, Plaintiffs do not corroborate the
methodology Rountree used and do not distinguish the cases
Defendants rely upon. Instead, Plaintiffs merely argue that
Lascelles is not an accounting expert, that Rountree’s report
should go towards the weight rather than the admissibility of
the evidence, and that because Rountree relies on Defendants’
own records, Defendants cannot “keep admittedly incomplete
records and then complain that Rountree’s analysis suffers
because of it.” Resp. at 10, ECF No. 115.
At oral argument, Plaintiffs repeatedly argued that
Rountree is the only “[a]ccountant among us in [the] room” and
that “he had what he needed to review.” Arg. Tr. 8:6-7; 10:6-7.
However, Rountree’s academic pedigree does not excuse him from
reviewing all relevant materials. Though Rountree did review
Defendants’ own records, the Court still finds that Rountree’s
failure to take into account pertinent testimony is a
significant error that impugns the reliability of his report.
In rendering his opinion, Rountree should have either
relied upon or distinguished the relevant deposition testimony
and Lascelles’ declaration. If Rountree had done so, his report
would have provided a more complete picture of the LLC’s
accounting practices.5 Thus, there are several issues with
respect to the reliability of Rountree’s report. Like in Baker,
CareDx, and Jacoby Donner, the report has failed to consider
pertinent information. The report will also not aid in assisting
the “trier of fact to understand the evidence” and issues in the
5 Defendants also contend that Rountree’s opinions about
whether Lascelles deviated from best accounting practices are no
longer a proper “fit,” because the Court has dismissed
Plaintiffs’ claims for breach of fiduciary duties and breach of
contracts claims. Because the Court has already determined that
Rountree’s opinion should be dismissed, the Court need not reach
this argument.
case. UGI Sunbury LLC, 949 F.3d at 835. Accordingly, Rountree’s
opinion and testimony will be excluded.
IV. CONCLUSION
For the foregoing reasons, Defendants’ motion in limine to
exclude the testimony and expert report of Michael Rountree,
C.P.A. will be granted. An appropriate order follows.