Page 17 - Acertaining Economic Damages Calculation

fendant moved to exclude plaintiffs’ experts’ reports and testimony due, in part, to the experts’ failure to
perform any independent analyses or verification, or both, of the pro forma sales projections underlying
their analyses. Defendant also contended that the pro forma projections, which it had prepared, were in-
flated relative to actual sales data.

In granting the defendant’s motion, the district court first addressed the allegation that the plaintiffs’ ex-
perts failed to perform any independent analyses of defendant’s pro forma sales projections. The district
court cited numerous representations by plaintiffs’ experts in deposition and at the Daubert hearing evi-
dencing their reliance on defendant’s projections without performing any corroborating analyses to de-
termine the reasonableness of the data. Plaintiffs’ experts suggested that defendant’s own preparation of
the projections provided credibility to the projected sales numbers. In evaluating this aspect of the ex-
perts’ approach, the district court quoted Legendary Art, LLC v. Michael Godard, 2012 U.S. Dist.
LEXIS 116270:

Rule 703 "is certainly not satisfied... where the expert failed to demonstrate any basis for con-
cluding that another individual’s opinion on a subjective financial prediction was reliable, other
than the fact that it was the opinion of someone he believed to be an expert who had a financial
interest in making an accurate prediction."

The analysis in Legendary Art comfortably fits the facts at hand, and this court finds that case
highly instructive. Legendary Art and the decisions upon which it relies stand for the proposition
that blind adherence to data absent any sort of independent investigation stops short of the type
of reliability contemplated by Daubert and Paoli II. Like the expert in Legendary Art, Plaintiffs’
experts here admittedly relied solely on Defendant’s pro forma projections, conducted no inde-
pendent investigations into the validity of those projections, and had no knowledge of the details
surrounding their generation. They, like the excluded Legendary Arts expert, ‘assumed the valid-
ity of the projections.’ fn 6

The district court then considered the issue of the reliability of the damage estimate, specifically evaluat-
ing the revenue figures derived from the pro forma projection considering the actual operating results of
the plaintiffs’ business. In their initial expert report, the plaintiffs’ experts estimated the base year sales
at $7.8 million based on the pro forma projections. Subsequent to adopting these projections and submit-
ting their report, plaintiffs produced additional financial data, which covered the fiscal year immediately
preceding the alleged breach of contract. According to this data, actual annual sales for the business to-
taled $6.2 million, which was the revenue figure reflected on the final tax return filed by the plaintiffs
prior to the alleged actions in this matter. Moreover, in connection with other issues in dispute in this
matter, one of plaintiffs’ experts filed an affidavit affirming annual sales of $6.2 million. However, de-
spite the production of actual sales results that one of plaintiffs’ experts acknowledged in an affidavit,
plaintiffs’ experts did not revise the base year sales figure when the expert submitted the supplemental
expert report, and, instead, continued to rely on the higher base year amount from the pro forma projec-
tion. As the district court noted:

Plaintiffs’ experts’ projections essentially proceeded from a base year whose sales figures were
wholly overstated in reality. That decision is unquestionably the most troubling one made by
plaintiffs’ experts, and the one that gave this court the most pause when deliberating on the mat-

fn 6 Bruno, 311 F.R.D. at 137-38.

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