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model, the court cannot conclude that the use of [Expert’s] proprietary model is a sufficiently re-
liable methodology. fn 37

Moreover, the expert made an adjustment to his model, increasing the actual gaming seats in the casino
from 1,320 to 1,920. Trustee’s expert testified that this 600-seat adjustment was made to take into con-
sideration that the demand for gaming in Chicago greatly exceeded the supply, resulting in higher than
normal non-gaming revenues. Once again, however, the court was critical of this proprietary adjustment.

Defendants note that the "[Expert] Effect" has not been published, is not used by anybody else in
the casino industry, and has never been empirically tested for reliability... [Expert] conceded that
"nobody else uses the [Expert] Effect," though he believes "that they have their own proprietary
elements that make modifications to allow for" the additional revenue sources. He admitted, as
well, that the [Expert] Effect has not been tested empirically by anyone outside of his company...
[Expert] has not explained why or how he selected the 600-seat increase, however; nor has he
explained why this approach is more reliable or accurate than other methods of calculating addi-
tional revenues... The court concludes, therefore, that the use of [Expert’s] baseline equalizer is
not sufficiently reliable under Daubert. fn 38

Reliance by the damages expert on proprietary data that cannot be examined by the opposing party or
parties or proprietary methodologies that have not been subject to peer review may present challenges
with respect to their admissibility, even if the underlying analysis is sound.

Best Evidence and Damages Expert’s Reliance on Facts Supplied by the Parties

As part of the data-gathering exercise, the damages expert is frequently provided information by the par-
ties that may serve as the foundation for the damages calculation and its underlying assumptions. The
expert must determine the extent to which he or she can rely upon this information and the actions nec-
essary to test the reasonableness of such information, if any.

Courts have been divided, as shown in the following cases, on an expert’s reliance of information sup-
plied by the parties. Some courts hold an expert to a higher standard, demanding independent corrobora-
tion of material facts and assumptions, whereas others have concluded that such reliance will be subject
to cross-examination and, therefore, is simply a matter of the weight it should be accorded by the trier of
fact. However, because the use of such information may form the basis of a Daubert challenge or rigor-
ous cross-examination, damages experts should consider the nature and extent of the evidence available
and make careful assessment of the its reliability based on the facts and circumstances of each case.

TK-7 Corp. v. Estate of Barbouti, 993 F.2d 722 (10th Cir. 1993)

TK-7 was engaged in the development, manufacture, distribution, and marketing of fuel additives. After
a meeting between its president and a potential suitor, TK-7 entered into an agreement with IBI, Inc.,
Barbouti’s company, whereby IBI, Inc. would acquire an interest in TK-7. Subsequent to the agreement,
TK-7 learned that Barbouti was the architect and procurer of materials for a chemical weapons plant in
Libya and that he was intent on using TK-7 to supply some of the needed materials, in violation of U.S.

fn 37 Id. at 221.

fn 38 Id. at 220.

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