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Bazarian International Financial Associates, LLC v. Desarrollos Aerohotelco, C.A.

United States District Court, District of Columbia

April 25, 2018

DESARROLLOS AEROHOTELCO, C.A., et al., Defendants.


          BERYL A. HOWELL Chief Judge

         Pending before the Court is the defendants' Daubert Motion in Limine to Exclude the Testimony & Reports of Williston H. Clover (“Defs.' Mot.”), ECF No. 65. The plaintiff originally offered Clover as an expert to opine on what appears to be eleven distinct topics, for which the plaintiff asserted expert testimony would be relevant and aid the jury in resolving disputed issues between the parties. See generally Pl.'s Opp'n Defs.' Daubert Mot. Lim. Exclude Test. & Report Williston H. Clover (“Pl.'s Opp'n”), ECF No. 69. At the pre-trial conference, as clarified in a subsequent notice, the plaintiff withdrew three of those topics. Pl.'s Notice of Withdrawal of Portions of the Expert Report & Rebuttal Expert Report of Williston H. Clover (“Pl.'s Not.”), at 1-2, ECF No. 95. The defendants assert that Clover is unqualified to offer expert testimony and failed to submit a report that complies with Rule 26(a)(2)(B) of the Federal Rules of Civil Procedure, and, in any event, that Clover's opinions are irrelevant, go to matters of common understanding, rest on unreliable data and methods, and are unduly prejudicial in light of their probative value. See Defs.' Mot. For the reasons that follow, the defendants' motion is granted in part and denied in part.


         The Court's prior Memorandum Opinion denying the defendants' motion to dismiss the plaintiff's breach of contract claim, see Bazarian Int'l Fin. Assocs., LLC v. Desarrollos Aerohotelco, C.A., 168 F.Supp.3d 1, 24 (D.D.C. 2016), as well as the Court's Memorandum Opinion dismissing the plaintiff's prior lawsuit against the defendants' alleged predecessor entity, Bazarian Int'l. Fin. Assocs., LLC v. Desarrollos Aerohotelco, C.A., 793 F.Supp.2d 124, 125-27 (D.D.C. 2011), lay out in detail the present dispute's factual background and, thus, will not be recounted again here. In summary form, the plaintiff alleges that the defendants have breached a written Agreement requiring payment of a fee to the plaintiff for facilitating the financing for construction and operation of the Ritz-Carlton Hotel in Aruba. Under the Agreement, the plaintiff was to “perform exclusive investment banking services, ” requiring the plaintiff to, among other things, (1) “structure the financial package for the Project and prepare [a] self-contained Information Memorandum, including total project costs, proper debt/equity ratios, and projected investor returns, ” and (2) “conduct negotiations with” various institutional lenders “to secure, on a best efforts basis, financing for the project.” Amend. Compl., Ex. A, Agreement §§ 1.C, 1.D, ECF No. 13-1; see also Id. § 1.D (providing that the plaintiff “will act as the Company's exclusive advisor and investment banker in working with financial institutions, investors, and funding sources to raise the debt financing for the Company.”).

         In consideration for these services, the Agreement provided that the plaintiff would receive a “debt fee” to be “based on a flat two percent (2%) of the gross amount of the debt financing provided to the Project, net of” certain amounts not at issue here. Id. § 2.C. Such fees “are due and will become payable only upon the earlier of the first draw-down of funds and/or the first infusion of equity capital, provided that financing has been committed to the Project as a result of the efforts of Bazarian International.” Id. § 2.D. “Bazarian International will still be entitled to the . . . fee[], ” pursuant to the Agreement, “if the financing for the Project is concluded within thirty-six (36) months following the termination of this Agreement from sources introduced to the Project by Bazarian International.” Id. § 3. Finally, the Agreement directed that “[t]he Agreement will immediately become part of the relevant loan documents, management agreements, joint-venture agreements, guaranty agreements, bridge loan facilities and Memorandum of Association for this Project amongst and between the equity shareholders and lenders.” Id.

         The defendants timely filed the pending motion in limine, see Scheduling Order, dated Nov. 14, 2017, and, following oral argument at the final Pre-Trial Conference on April 20, 2018, this motion is now ripe for consideration before the trial scheduled to begin with jury selection, on May 7, 2018.[1]


         The defendants challenge the admissibility of Clover's testimony on four grounds. First, the defendants argue that Clover is unqualified to provide his proposed expert testimony and relies on unsound methodology. Second, the defendants argue that Clover failed to submit a report compliant with Rule 26(a)(2)(B) of the Federal Rules of Civil Procedure, requiring his testimony's exclusion. Third, the defendants argue that the testimony Clover proposes to provide goes to matters that do not call for expert opinion and thus is not relevant. Finally, the defendants argue that Clover's proposed testimony is unduly prejudicial in light of its probative value and thus merits exclusion. Each of these arguments is addressed in turn.


         The defendants challenge Clover's credentials and methodology as a basis for excluding his proposed expert testimony. For the reasons that follow, Clover's qualifications are sufficient to satisfy the requirements of Rules 702 and 703.

         “A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise” only if four conditions are met: (1) “the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue, ” (2) “the testimony is based on sufficient facts or data, ” (3) “the testimony is the product of reliable principles and methods, ” and (4) “the expert has reliably applied the principles and methods to the facts of the case.” Fed.R.Evid. 702. In Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), the Supreme Court articulated a “two-prong analysis” under Rule 702 “that centers on evidentiary reliability and relevancy: the district court must determine first whether the expert's testimony is based on ‘scientific knowledge;' and second, whether the testimony ‘will assist the trier of fact to understand or determine a fact in issue.'” Ambrosini v. Labarraque, 101 F.3d 129, 133 (D.C. Cir. 1996) (quoting Daubert, 509 U.S. at 592)).

         Certainly, a critical aspect of the reliability of a proffered expert's opinion stems from that witness's qualifications. In this regard, “experience” alone can constitute a basis of “reliable principles and methods.” Fed.R.Evid. 702(c); see also Id. advisory committee's note to 2000 amendment (“[T]he text of Rule 702 expressly contemplates that an expert may be qualified on the basis of experience.”); Cedar Hill Hardware & Constr. Supply, Inc. v. Ins. Corp. of Hannover, 563 F.3d 329, 343 (8th Cir. 2009) (holding that an expert's proposed testimony was admissible under Daubert due to the expert's “exhaustive experience in the insurance industry”); First Marblehead Corp. v. House, 541 F.3d 36, 41 (1st Cir. 2008) (determining an expert to be qualified based on “nearly two decades of experience as a consultant in economics, finance, and strategy consulting”); Shaw Grp., Inc. v. Marcum, 516 F.3d 1061, 1068 (8th Cir. 2008) (finding a witness qualified as an expert “based on his experience working with military contracts similar to the” contract at issue); Hangarter v. Provident Life & Accident Ins. Co., 373 F.3d 998, 1016, 1018 (9th Cir. 2004) (recognizing that non-scientific or technical testimony need not be “contingent upon a particular methodology or technical framework, ” so long as an expert's testimony is “reliable based on his knowledge and experience, ” and determining an expert to be qualified based on “twenty-five years' experience working for insurance companies and as an independent consultant”); Kona Tech. Corp. v. S. Pac. Transp. Co., 225 F.3d 595, 611-12 (5th Cir. 2000) (recognizing “that a trial court's reliance on individuals experienced in a particular field for the purposes of obtaining explanation of the technical meaning of terms used in the industry is prudent.” (internal quotations and citation omitted)); Lauria v. Nat'l R.R. Passenger Corp., 145 F.3d 593, 599 (3d Cir. 1998) (recognizing that an expert's knowledge “need not be based on testing or experiments beyond common understanding” so long as the expert's “testimony would be reliable or trustworthy in light of [the expert's] practical background and training”); Thomas v. Newton Int'l Enters., 42 F.3d 1266, 1270 n.3 (9th Cir. 1994) (“[N]on-scientific testimony need only be linked to some body of specialized knowledge or skills” rather than “to the scientific method.”). At the same time, however, an expert witness who “is relying solely or primarily on experience . . . must explain how that experience leads to the conclusion reached . . . and how that experience is reliably applied to the facts, ” rather than expect a court to “simply ‘tak[e] the expert's word for it.'” Thomas v. City of Chattanooga, 398 F.3d 426, 432 (6th Cir. 2005) (internal quotation marks omitted) (quoting Fed.R.Evid. 702 advisory committee's note to 2000 amendment)).

         1. Clover's Qualifications

         At the outset, the defendants' critical assessment of Clover's background falls short of showing that he is unqualified to serve as an expert. The defendants point out that “Clover did not graduate from college and has never held any real estate or investment banking licenses, ” and “has absolutely no background in investment banking.” Defs.' Mot. at 21. This view of Clover's lack of qualifications is bolstered by the fact that “Clover in his reports frequently interchanges the terms investment ‘banker' and ‘broker, '” which the defendants assert “are distinct professions and subject to different standards, licensing requirements, etc.” Id. “This conflation of such a basic principle, ” the defendants argue, “highlights Clover's inadequacies when it comes to investment banking.” Id. Indeed, the defendants complain that Clover identified his industry in his deposition as “[f]inance, development, consulting, marketing, ” rather than investment banking services. Id. at 21 (quoting Williston H. Clover Dep. (“Clover Dep.”) at 5:22-25, ECF No. 66-1).

         The defendants' criticism misses the mark because Clover does not hold himself out as an investment banker. Instead, Clover's Report states that he “ha[s] owned or been a board member of companies involved in United States and international real estate development, finance, consulting, and marketing for more than 50 years, ” and “ha[s] extensive firsthand experience in virtually every aspect of the industry, including finance, brokerage, consulting, development, and property ownership.” Defs.' Mot, Ex. A, Expert Report Williston H. Clover (“Clover's Rpt.”) ¶ 1.1, ECF No. 65-1. His experience appears to be directly related to “[t]he agreement at issue in this case, ” which “relates to securing financing (i.e. investment) from a bank for construction of a hotel.” Pl.'s Opp'n at 18. Thus, Clover is qualified to opine on this subject regardless of the specific terminology used, and his testimony is not excludable merely because the defendants may prefer “a different characterization of his specialization.” Id. Any of the defendants' challenges to Clover's qualifications go to the weight rather than admissibility of Clover's testimony and can be addressed through “[v]igorous cross-examination, presentation of contrary evidence, and careful instruction on the burden of proof.” Daubert, 509 U.S. at 596.

         2. Reliability of Clover's Methodology

         The defendants contend that Clover's proffered expert opinions “fail[] to satisfy the reliability requirement” because Clover “failed to employ any methodology, let alone one that was valid and consistent.” Defs.' Mot. at 16. In this regard, the defendants assert, “Clover merely referred to what he claimed is ‘custom in the industry' or industry standard, but failed to explain how he complied with each to come to his opinions.” Id. Clover's reliance on his extensive experience in the industry is sufficient to support the opinions proffered in his Report.

         A particular example is instructive on this point. In United States v. Vesey, the Eighth Circuit determined that the district court abused its discretion in excluding the testimony of the government's expert witness, “a convicted drug trafficker and a confidential informant for law enforcement” who “sought to present evidence of how illegal drug operations are normally conducted and to counter the testimony of the government's expert witness.” 338 F.3d 913, 916 (8th Cir. 2003). The expert witness had “testified that he had extensive knowledge of the sale, use, and distribution of narcotics as a result of his experience as a drug trafficker and as an informant, ” “used his knowledge to formulate general rules of drug trafficking behavior and to explain the logic and reasoning behind that behavior from the point of view of drug dealers, ” and “then applied both the rules and the reasoning behind them to the behavior of the actors in this case.” Id. at 917-18. Vesey concluded that the expert witness had provided sufficient evidence that such testimony constituted “appl[ication of] principles and methods.” Id. at 918.

         Clover, as in Vesey, has “testified that he had extensive knowledge of, ” id. at 917, “international real estate development, finance, consulting, and marketing, ” Clover's Rpt. ¶ 1.1, “as a result of his experience, ” Vesey, 338 F.3d at 917, “in virtually every aspect of the industry, including finance, brokerage, consulting, development, and property ownership, ” Clover's Rpt. ¶ 1.1. Clover also states that he has “used his knowledge to, ” Vesey, 338 F.3d at 917, formulate his opinions, Clover's Rpt. ¶¶ 4.1-4.11, and that he has “applied both the rules and the reasoning behind them to the behavior of the actors in this case, ” Vesey, 338 F.3d at 918. Specifically, Clover opined, among other things, that (1) the lease proposal that the plaintiff prepared and submitted to the Government of Aruba contained all the components of a typical Information Memorandum, including “total project costs, ” “proper debt/equity ratios, ” and “projected investor returns, ” Clover's Rpt. ¶ 4.4; (2) “Bazarian satisfied the requirement for financial structuring” as that term is understood in the industry, id. ¶¶ 4.5-4.5.2; and (3) “[t]he term ‘commitment' has various potential applications in the industry, and there are both binding commitments and other, lesser types of commitments, including conditional commitments and indicative term sheets, ” with the commitments referred to in Section 2.B of the Agreement being of the latter, non-binding type, id. ¶ 4.8. Clover's proposed testimony thus satisfies Daubert's reliability requirement. To require Clover to go into more painstakingly and minute detail as to how exactly he formulated his understandings of what the terms “Information Memorandum, ” “structuring, ” and “commitments” mean and how precisely he “applied” those terms here would be pedantic and set an impossibly high standard for expert witnesses to satisfy. See, e.g., Kumho Tire Co. v. Carmichael, 526 U.S. 137, 152 (1999) (“Daubert's gatekeeping requirement [merely] . . . make[s] certain that an expert, whether basing testimony upon professional studies or personal experience, employs in the courtroom the same level of intellectual rigor that characterizes the practice of an expert in the relevant field.”).

         The defendants next argue that “Clover constructed his opinions specifically and solely for use in this litigation and based predominantly on information supplied by Plaintiff, factors that weigh in favor of excluding the proffered testimony.” Defs.' Mot. at 17 (footnote omitted). As the plaintiff correctly notes, however, “every expert is asked to opine on factual information supplied to them by a party and, . . . if Defendants contend[] that he failed to adequately consider other facts, such is a basis for cross examination, not exclusion of his opinions altogether.” Pl.'s Opp'n at 24. Indeed, Daubert stated that “[v]igorous cross-examination, presentation of contrary evidence, and careful instruction on the burden of proof are the traditional and appropriate means of attacking shaky but admissible evidence.” 509 U.S. at 596.

         In a similar vein, the defendants assert that “Clover makes multiple factual errors and wrongful assumptions in coming to his opinions, including his narrative regarding the relationship between Plaintiff and AIB Bank and the introduction of AIB to Defendants and the Project.” Defs.' Mot. at 19. The crux of the defendants' argument is that Clover's opinions disregard other witnesses' testimony, which the defendants argue is correct. See Id. at 19-20. This does not constitute a factual error or wrongful assumption, but a dispute of fact properly left to the jury. Furthermore, even if Clover made factual errors or incorrect assumptions, these go only to the weight, not admissibility, of Clover's testimony. See, e.g., Rosenfeld v. Oceania Cruises, Inc., 654 F.3d 1190, 1193 (11th Cir. 2011) (“[I]n most cases, objections to the inadequacies of a study are more appropriately considered an objection going to the weight of the evidence rather than its admissibility.” (quoting Hemmings v. Tidyman's Inc., 285 F.3d 1174, 1188 (9th Cir.2002)); United States v. Jakobetz, 955 F.2d 786, 800 (2d Cir. 1992) (“[W]hether accepted protocol was adequately followed in a specific case . . . go[es] more to the weight than to the admissibility of the evidence.”); Chefs Diet Acquisition Corp. v. Lean Chefs, LLC, Civ. No. 14-8467, 2016 WL 5416498, at *10 (S.D.N.Y. Sept. 28, 2016) (“[C]ontentions that the assumptions are unfounded go to the weight, not the admissibility, of the testimony.” (internal quotation marks omitted)).

         Accordingly, the defendants' objections to Clover's qualifications to serve as an expert are overruled.


         The defendants next contend that Clover's Report fails to satisfy Federal Rule of Civil Procedure Rule 26(a)(2)(B) and thus should be excluded under Rule 37(c). Defs.' Mot. at 7-11. With one exception, Clover's Report satisfies each of Rule 26(a)(2)(B)'s requirements, as the Rule does not require the granularity of detail upon which the defendants insist. Although Clover fails to provide a complete list of all publications authored over the last 10 years, as Rule 26(a)(2)(B)(iii) requires, such error is harmless under Rule 37(c) in light of Clover's offer to provide such a list upon request. Thus, neither Clover's Report nor testimony merit exclusion on this basis.

         1. The Requirements of Fed.R.Civ.P. 26(a)(2)(B)

         Rule 26(a)(2)(B) requires that an expert witness disclosure must be accompanied by a written report containing: (1) “a complete statement of all opinions the witness will express and the basis and reasons for them;” (2) “the facts or data considered by the witness in forming them;” (3) “any exhibits that will be used to summarize or support them;” (4) “the witness's qualifications, including a list of all publications authored in the previous 10 years;” (5) “a list of all other cases in which, during the previous 4 years, the witness testified as an expert at trial or by deposition;” and (6) “a statement of the compensation to be paid for the study and testimony in the case.” Fed.R.Civ.P. 26(a)(2)(B).

         “The purpose of [Rule 26(a)(2)(B)] is to avoid unfair surprise to the opposing party.” Heller v. District of Columbia, 801 F.3d 264, 270 (D.C. Cir. 2015) (internal quotation marks omitted). Rule 26(a)(2)(B), however, “does not limit an expert's testimony simply to reading his report, ” but rather “contemplates that the expert will supplement, elaborate upon, and explain his report in his oral testimony.” Muldrow ex rel. Estate of Muldrow v. Re-Direct, Inc., 493 F.3d 160, 167 (D.C. Cir. 2007) (internal alterations and quotation marks omitted). A report that “recounts in detail the expert's relevant experience” and “contain[s] an explicit statement as to the basis for that witness's opinion”-namely, that the “report was based ‘on my experience, my review of numerous studies and books, [relevant] laws and regulations, and discovery materials from this case made available to me”-satisfies Rule 26(a)(2)(B). Heller, 801 F.3d at 271.

         Rule 37(c)(1), meanwhile, provides that a party who fails to comply with Rule 26(a)(2)(B) “is not allowed to use that information or witness to supply evidence on a motion, at a hearing, or at a trial, unless the failure was substantially justified or is harmless.” Fed.R.Civ.P. 37(c)(1). “In addition to or instead of this sanction, ” however, “the court, on motion and after giving an opportunity to be heard, ” may (1) “order payment of the reasonable expenses, including attorney's fees, ...

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