United States District Court, S.D. Texas, Victoria Division
In re QUALITY LEASE AND RENTAL HOLDINGS, LLC, Debtor.
v.
QUALITY LEASE AND RENTAL HOLDINGS, LLC, et al., Defendants. GRETA YVETTE MOBLEY, et al., Plaintiffs,
MEMORANDUM AND ORDER
NANCY
F. ATLAS SENIOR UNITED STATES DISTRICT JUDGE
This
fraud, tort, and breach of contract case is before the Court
on the Motion to Exclude E. Allen Jacobs (“Motion to
Exclude”) [Doc. # 35] filed by Greta Yvette Mobley
(“Yvette Mobley”), David Michael Mobley
(“Michael Mobley”), QLS HoldCo, Inc.
(“HoldCo”), Texas Quality Mats, LLC (“TQ
Mats”), and Texas Quality Gate Guard Services, LLC
(“TQ Gate”) (collectively, the “Mobley
Parties”).[1] Quality Lease and Rental Holdings, LLC
(“QLRH”), Quality Lease Rental Service, LLC
(“QLRS”), Quality Lease Service, LLC
(“QLS”) (collectively, the “Quality
Companies”), and Rocaceia, LLC (“Rocaceia”)
(collectively, “Debtors”) filed an Opposition
[Doc. # 39], and the Mobley Parties filed a Reply [Doc. #
46]. The Court has reviewed the record and the applicable
legal authorities. Based on that review, the Court
grants the Motion to Exclude only as to any
new opinions offered for the first time in the Rebuttal
Opinion, and denies the Motion to Exclude in
all other respects.
I.
BACKGROUND
In
1989, Michael Mobley and Yvette Mobley formed QLS, an
oilfield services company. They later formed QLRS and QCE,
related companies that provided services to the oil field
industry. QLS leased or rented oil field equipment, while
QLRS performed related services such as transporting the rig
housing, cleaning the houses, and servicing the shower
houses.
In
December 2012, Michael Mobley and Yvette Mobley[2] sold QLS and QLRS
to a newly-created company, QLRH, pursuant to the terms and
conditions of a Purchase and Contribution Agreement
(“Purchase Agreement”). First, they formed HoldCo
for the sole purpose of completing the transaction. Then they
used HoldCo to complete the sale of QLS and QLRS to QLRH.
Rocaceia had formed QLRH to be the entity that would purchase
QLS and QLRS. Rocaceia was owned by a group of investors led
by Allan Martin.
Pursuant
to the terms of the Purchase Agreement and through a series
of transactions, Michael Mobley and Yvette Mobley transferred
80% of their interest in QLS and QLRS in exchange for
approximately $40 million in cash and a $20 million
promissory note. Michael Mobley entered into an employment
agreement with QLRH (“Employment Agreement”) to
serve as the President of QLRH. Yvette Mobley and sons David
Russell Mobley and Cody Blane Mobley were at-will employees
of QLRH. The Purchase Agreement contained certain covenants
to prevent Michael Mobley and Yvette Mobley from competing
with or interfering in the business of QLRH.[3]
QCE was
not included in the Purchase Agreement. Michael Mobley
continued to operate QCE and other Mobley-controlled
companies.
Soon
after the sale of QLS and QLRS to QLRH was completed, Allan
Martin complained that Michael Mobley was devoting his time
and attention to QCE, and that he was using QCE to compete
with QLRH.
On
March 22, 2013, David Russell Mobley and Cody Blane Mobley
formed SLS. On April 5, 2013, they resigned from their
employment with QLRH. On April 6, 2013, Yvette Mobley was
fired by QLRH and Michael Mobley was placed on administrative
leave. On April 17, 2013, the Mobley sons, through SLS,
purchased QCE from their parents for $3.6 million. On April
19, 2013, the Mobley sons formed SLRS which, together with
SLS, performed services similar to those provided by QLRH.
Following
the purchase of QLS and QLRS, net sales by QLRH fell $16
million from net sales by the composite companies the prior
year, and QLRH's EBITDA[4] fell $12.1 million. QCE's
total invoiced work, on the other hand, increased
dramatically. Almost all of the increase in QCE's
business was attributable to services that were offered by
QLRH.
Debtors
filed a Chapter 11 bankruptcy petition on October 1, 2014. On
October 8, 2014, a lawsuit filed in Texas state court by some
of the Mobley Parties was removed as this adversary
proceeding. In connection with this adversary proceeding,
Debtors filed a counterclaim against the Mobley Parties and
designated E. Allen Jacobs as an expert witness on
Debtors' alleged damages and on causation. Jacobs
submitted an extensive Expert Report (“Original
Report”) dated July 25, 2018, attached as Exhibit B to
the Response. On October 22, 2018, Jacobs submitted a
Rebuttal Report, attached as Exhibit C to the Response.
While
the Adversary Proceeding was pending before the Bankruptcy
Court, the Mobley Parties and the Third Party Defendants
moved to exclude Jacobs as an expert witness. By Order [Doc.
# 328 in Adv. No. 14-6005] entered May 15, 2019, the
Bankruptcy Court denied the motion to exclude. Although the
Bankruptcy Court's ruling is not binding on this Court,
it is well-reasoned and persuasive.
Following
withdrawal of the reference to the Bankruptcy Court and
reinstatement of the case on this Court's active docket,
see Order [Doc. # 23], the Mobley Parties and Third
Party Defendants filed their Renewed Motion to Exclude E.
Allen Jacobs [Doc. # 35]. The Motion has been fully briefed.
The Court has reviewed the record on the Motion to Exclude,
and all pertinent documents. The Motion is now ripe for
decision.
II.
APPLICABLE LEGAL STANDARD
Witnesses
who are qualified by “knowledge, skill, experience,
training or education” may present opinion testimony to
the jury. Fed.R.Evid. 702; see, e.g., Whole Woman's
Health v. Hellerstedt, __ U.S. __, 136 S.Ct. 2292, 2316
(2016); Moore v. Ashland Chem., Inc., 151 F.3d 269,
276 (5th Cir. 1998) (en banc); Huss v.
Gayden, 571 F.3d 442, 452 (5th Cir. 2009). To be
admissible, an expert's proffered testimony must be both
relevant and reliable. See Daubert v. Merrell Dow
Pharms., Inc., 509 U.S. 579, 591-92 (1993); Carlson
v. Bioremedi Therapeutic Sys., Inc., 822 F.3d 194, 199
(5th Cir. 2016).
The
expert testimony must be relevant and the expert's
proposed opinion must be one that would assist the trier of
fact to understand or decide a fact in issue. See
Weiser-Brown Operating Co. v. St. Paul Surplus Lines Ins.
Co., 801 F.3d 512, 529 (5th Cir. 2015); Bocanegra v.
Vicar Servs., Inc., 320 F.3d 581, 584 (5th Cir. 2003)
(citing Daubert, 509 U.S. at 591-92). “A party
seeking to introduce expert testimony must show (1) the
testimony is based upon sufficient facts or data, (2) the
testimony is the product of reliable principles and methods,
and (3) the witness has applied the principles and methods
reliably to ...