United States District Court, N.D. Texas, Dallas Division
EVERETT FINANCIAL, INC. d/b/a SUPREME LENDING, Plaintiff-counterdefendant,
PRIMARY RESIDENTIAL MORTGAGE, INC., Defendant, and BARRY G. JONES, JAMES DURHAM, and SHANNON FORTNER, Defendants-counterplaintiffs. SCOTT EVERETT, individually, Counterdefendant.
This memorandum opinion and order was filed under seal on May
14, 2018. Because the parties do not request that any part
remain under seal, this public version is now being filed.
MEMORANDUM OPINION AND ORDER
A. FITZWATER, UNITED STATES DISTRICT JUDGE.
motion to exclude and strike testimony of plaintiff's
designated experts presents the question whether testimony
regarding projected profits by a company's founder and
president, as well as a company's chief financial
officer, constitute lay testimony or expert testimony under
the Federal Rules of Civil Procedure. Concluding that the
testimony at issue qualifies as lay testimony, the court
denies the motion.
an action by plaintiff-counterdefendant Everett Financial,
Inc. d/b/a Supreme Lending (“Supreme”) against
defendant Primary Residential Mortgage, Inc.
(“PRMI”) and defendants-counterplaintiffs Barry
G. Jones, James Durham, and Shannon Fortner (collectively,
the “Branch Managers”) arising from conduct
related to the Branch Managers' resignations from Supreme
and moves to PRMI. Supreme's founder and President, Scott
Everett (“Everett”), is a counterclaim
defendant. Because this case is the subject of prior
memorandum opinions and orders-see, e.g.,
Everett Financial, Inc. v. Primary Residential Mortgage.,
Inc., 2017 WL 784766, at *1 (N.D. Tex. Feb. 28, 2017)
(“Everett III”)-the court recounts only
the background facts and procedural history that are
pertinent to the pending motion.
Fed.R.Civ.P. 26(a)(1)(A)(iii), Supreme was required to
disclose its damages computations. Supreme's initial
disclosure, made in August 2014, briefly listed the
categories of damages sought, including lost profits. Supreme
supplemented this disclosure in November 2015 with the
statement that a computation of its lost profits damages was
contained in the expert report of Jeffrey Matthews
designated Matthews as a retained expert on lost profits
damages. Supreme also designated Everett, Supreme chief
financial officer Tony Schmeck (“Schmeck”), and
Supreme executive Rick Hogle (“Hogle”) as
nonretained experts on lost profits. Supreme's
nonretained experts were deposed in this case, but their
depositions did not focus on lost profits damages.
Supreme's counsel later agreed to limit the testimony of
Schmeck and Hogle, but not Everett, on the subject of lost
profits opinions. Discovery in this case closed in December
December 2016 the court excluded Matthews' opinion
testimony for lack of reliability under the
Daubert standard. In apparent response to the
court's ruling, Supreme supplemented its Rule 26(a)(1)
disclosures with a different damages calculation and
different expert witnesses who would testify about the
calculation. The supplemental disclosure computes lost
profits by comparing Supreme's Southeast Region
financials before and after the actions complained of in this
case. It takes the difference between the region's 2013
and 2014 loan volume and multiplies this difference by
Supreme's company-wide profit margin, which is its profit
per dollar of loan volume. This formula yields a lost profits
figure of approximately $5 million. Supreme sought to introduce
evidence of these damages through Everett and Schmeck.
and the Branch Managers filed motions to exclude evidence of
the undisclosed “lost profits” computation. The
court denied the motions to exclude, holding that
Supreme's lost profits computation had not materially
changed because it still computed lost profits by comparing
Supreme's Southeast Region loan volumes before and after
the Branch Managers' departures. The court also held,
however, that because the witnesses testifying to lost
profits were completely different, Supreme was required to
make its experts, Everett and Schmeck, available for
depositions. Supreme was further required to “reimburse
PRMI and the Branch Managers for their reasonable
attorney's fees, taxable costs, and nontaxable expenses
incurred in taking these depositions and obtaining the
transcripts.” Everett III, 2017 WL 784766, at
*4. PRMI has taken the depositions of Everett and Schmeck.
and the Branch Managers now move to exclude and strike
Everett and Schmeck as unreliable expert witnesses under
Fed.R.Evid. 702. Supreme opposes the motions and objects to
the declaration of PRMI's retained damages expert, Scott
W. Carnahan (“Carnahan”), in support of
PRMI's motion to exclude and strike Everett and Schmeck.
PRMI also objects to and moves to strike the declarations of
Everett and Schmeck submitted in support of Supreme's
response to PRMI's and the Branch Managers' motions
to exclude and strike Everett and Schmeck. Supreme opposes
the motion to strike.
the court's ruling on PRMI's objection to and motion
to strike the declarations of Everett and Schmeck determines
the evidence the court considers, the court turns first to
that motion. PRMI contends that Supreme is improperly
attempting to rehabilitate Everett's and Schmeck's
lack of reliability by executing sham declarations explaining
a new methodology. PRMI points to a number of alleged
contradictions between statements in Everett's and
Schmeck's declarations and depositions and moves to
strike the declarations filed in support of Supreme's
opposition to PRMI's motion to strike experts.
court disagrees with PRMI's characterization of the
declarations. PRMI cites a non-binding case, Pluck v. BP
Oil Pipeline Co., 640 F.3d 671, 681 (6th Cir. 2011), in
which the Sixth Circuit affirmed the district court's
exclusion of expert witness testimony disclosed after the
court-imposed deadline. The panel held that the untimely
supplemental declaration was a “transparent attempt to
reopen the Daubert inquiry after the weaknesses in the
expert's prior testimony have been revealed.”
Id. The result and reasoning of Pluck are
inapplicable here, however, because the declarations of
Everett and Schmeck were timely submitted in support of
cases that PRMI cites, see, e.g., Kennedy v.
Allied Mutual Insurance Co., 952 F.2d 262, 266 (9th Cir.
1991), address questions in the context of motions for
summary judgment. These cases generally hold that a party
cannot create an issue of material fact and escape summary
judgment by submitting an affidavit that contradicts prior
deposition testimony. See, e.g., Galvin v. Eli Lilly
& Co., 488 F.3d 1026, 1030 (D.C. Cir. 2007)
(“Virtually every circuit has adopted a form of the
so-called ‘sham affidavit rule, ' which precludes a
party from creating an issue of material fact by
contradicting prior sworn testimony[.]”). Although the
Fifth Circuit has a similar rule, see, e.g., S.W.S.
Erectors, Inc. v. Infax, Inc., 72 F.3d 489, 495 (5th
Cir. 1996) (“It is well settled that this court does
not allow a party to defeat a motion for summary judgment
using an affidavit that impeaches, without explanation, sworn
testimony.”) (citing Fifth Circuit cases), PRMI has
failed to demonstrate that this rule has equal force in the
context of a motion such as the instant motion to exclude.
the court denies PRMI's objections to and motion to
strike the declarations of Everett and Schmeck, and it will
consider the declarations when deciding PRMI's and the
Branch Managers' motions to exclude and strike the expert
testimony of Everett and Schmeck.
court now addresses PRMI's and the Branch Managers'
motions to exclude.
parties focus on Everett's calculation of lost profits
stemming from the Branch Managers' departure from
Supreme. Everett and Schmeck calculated lost profits by
multiplying the difference in projected 2014 loan volume and
actual 2014 loan volume by a net variable profit margin
(“NVPM”). Everett defines “loan
volume” as the total dollars lent by Supreme to
borrowers through loans originated by Supreme loan
originators. In a declaration attached to Supreme's
response to PRMI's motion, Everett avers that he
determined, based on historical Supreme data, that but for
the Branch Managers' departure, the Southeast Region
would have generated loan volume in 2014 at least equal to
the volume generated in 2013. Everett confirmed this
projection by comparing it against the 2013 to 2014 change in
loan volume for Supreme nationwide as well as the
“Flood Region, ” a neighboring Supreme
region. Schmeck ...