LCT Capital, LLC v. NGL Energy Partners LP

This case dealt with motions related to an ongoing case in the court. The court offered both orders and opinions to resolve the issues at hand. The plaintiff had a Daubert motion to exclude the opinions of the defendant’s rebuttal expert, Lori Lancaster, and the defendant’s Daubert motion to exclude the opinions of the plaintiff’s expert, Kevin D. McQuilkin. “The parties have also collectively filed five motions in limine to exclude or admit various evidence, testimony, and argument at trial.”

Analysis.

Delaware Rule 702 governed admissibility of evidence. A witness qualified by knowledge, skill, experience, or training and education may testify if: (1) it was based on sufficient facts or data; (2) it was the product of reliable principles and methods; and (3) the witness had applied the principles and methods reliably to the facts of the case. Additionally, the Delaware Supreme Court had adopted the Daubert (and progeny) doctrine, which requires the trial judge to decide the five Daubert factors. 

The plaintiff’s Daubert motion to exclude the opinions of Lori Lancaster was denied. The plaintiff made three arguments in support of its motion to exclude Lancaster:

1. Lancaster exceeded her scope as a rebuttal expert by:
   1. Rebutting the plaintiff’s rebuttal expert (Adler);
   2. Rehabilitating the defendant’s affirmative expert; and
   3. Presenting new opinions and data.
2. Lancaster’s opinion was unreliable because:
   1. It ignored and rejected the NGL CEO’s letter and trial testimony, etc.; and
   2. “Lancaster never discussed Krimbill’s [the CEO] views on Plaintiff’s services or compensation with Krimbill directly.”
3. Lancaster made a credibility determination on the CEO, which invaded the purview of the jury.

Lancaster did not impermissibly exceed the scope of a rebuttal expert. The court did not find that Lancaster rebutted Adler in any meaningful way. A review of McQuilkin’s and Adler’s testimony showed they did provide similar opinions on the issue of fee runs and investment banking fees. If would be hard for Lancaster to rebut McQuilkin without also rebutting Adler. The court did not find the Lancaster report or anticipated testimony as an impermissible sur-rebuttal.

The fact that Lancaster’s rebuttal happened to corroborate Keller’s affirmative opinions does not mandate its exclusion. The court did not find that the defendants are stacking duplicative experts by presenting one rebuttal and one affirmative expert who share some opinions. Finally, the court did not find that Lancaster was barred from analyzing new data in her role as a rebuttal expert. “If an affirmative expert claims that there is an absence of data, a rebuttal expert is permitted to attempt to rebut that claim by proving the existence and reliability of such data.”

Lancaster’s opinion was reliable. The plaintiff argued that Lancaster was “cherry-picking” evidence by ignoring the CEO’s letter and testimony. Plaintiff had not provided sufficient evidence that neglecting to do so made her opinion unreliable. Additionally, the assertion that she did not consider this information was demonstrably false. “Lancaster’s opinion is not unreliable for electing to not blindly adopt inaccuracies in the October 2014 Letter. To the contrary, Lancaster’s decision is illustrative of her thorough review of the record and additional documents salient to the transaction.” There is also no requirement that an expert conduct an interview with relevant witnesses. Lancaster sufficiently familiarized herself with the CEO’s position by reviewing his 500-page deposition. Finally, Quantum Meruit damages was the sole issue remaining. “A reasonable valuation [of Quantum Meruit damages] is ‘the amount for which such services could have been purchased from one in the plaintiff’s position at the time and place the services were rendered.’”

Lancaster did not make a credibility determination of Krimbill. Krimbill’s assessment of the plaintiff’s services was subjective, and Lancaster was at liberty to disagree. She was not making an accusation that he was untruthful. She arrived at a contrary conclusion. “The fact that Lancaster’s perspective does not support Plaintiff’s claim of damages is irrelevant to her qualifications under Rule 702 or the Daubert standard.” It also did not deprive the jury of its opportunity to weigh Krimbill’s testimony.

The defendants’ Daubert motion to exclude the opinions of Kevin D. McQuilkin was granted in part and the defendants’ motion in limine to exclude evidence of value creation was granted. The defendants argued that McQuilkin did not use reliable methodology because he used ipse dixit, his opinions violated the law of the case, and he relied on the rejected “value creation” theory of damages.

McQuilkin’s opinions that amount to ipse dixit are excluded. The court found that a portion of the McQuilkin report was unreliable as it was ipse dixit. The defendants provided five examples where the report was ipse dixit. “McQuilkin is not permitted to testify to damages based on Plaintiff’s expectation interests in the agreement it purports to have reached with Defendants.” He was allowed to testify to the general proposition that the nature and extent of services justified higher compensation. The court did not find the defendant’s fourth factor to be ipse dixit but did limit his ability to testify to value creation. “McQuilkin affirmed that, in his experience, clients were willing to pay higher fees based on speculative value creation.” The plaintiff had shown that McQuilkin was sufficiently qualified to testify about discussing value creation with clients, but testimony as to a relationship between value creation and investment banking fees was subject to cross-examination. McQuilkin also is not allowed to testify to alleged promised compensation in the October 2014 letter. Additionally, his mathematical computation of Quantum Meruit damages derived from a value creation theory of damages was excluded, as the court here had already ruled it will not allow such testimony since this methodology was contrary to the law of the case and relevant case law.

The plaintiff’s motion in limine to hold the defendants to judicial admissions and exclude evidence suggesting that the value of plaintiff’s services was less than $29 million was denied. The plaintiff asserted that Krimbill’s testimony was a judicial admission of damages of a minimum of $29 million and the defendants should not be permitted to submit evidence or solicit testimony to the contrary. However, the court decided that Krimbill’s statements were not judicial admission. “While it may be a fact that Krimbill believed the parties had reached such an agreement and that he believed the arrangement was fair, it does not necessarily follow that the parties did reach an agreement or that the alleged agreement is in fact fair.”

The plaintiff’s motion in limine to exclude evidence of a ‘typical’ investment banker fee as irrelevant to Quantum Meruit damages was denied. The court found that testimony on typical investment banker fees was relevant to determining the reasonable value of the services that the plaintiff provided in this case. The jury can assess the reliability of fee run evidence through the plaintiff’s cross-examination of the defendants’ experts. Case law did not require exclusion of this evidence. “Plaintiff’s motion to exclude evidence of a typical fee is hereby DENIED.”

The defendants’ motion in limine to preclude evidence or argument regarding any alleged agreement between the parties was granted. The Superior Court had already dismissed the plaintiff’s breach of contract claim. Quantum Meruit damages was the one issue remaining in this case. “Unlike in Pike Creek and Bellanca, in the present case there is no contract and thus no basis to submit evidence of compensation to which the parties allegedly agreed.” Thus, the court excluded any testimony using these terms:

• “an oral contract”;
• “verbal contract”;
• “agreement”;
• “verbal agreement”;
• “agreed to”
• “the [*34] fee agreement”;
• “our deal”;
• “the contract”; and
• “the amount promised.”

The parties may provide evidence as to any fee negotiations. The court believed the jury should weigh evidence of the parties’ discussions of the appropriate fee for the plaintiff’s services. “Defendants’ motion in limine to exclude evidence or argument on an alleged agreement is GRANTED.”

The defendants’ motion in limine to preclude evidence or argument regarding alleged fraud and/or fraudulent statements was granted. The Supreme Court had already stricken the jury’s fraud verdict and held that the plaintiff’s fraud claim failed. “There is no evidentiary basis to submit evidence of fraud, thus Defendants’ motion to exclude this evidence is granted.” The court provided a list of terms and phrases that are excluded as fraud evidence, noting that the list is not exhaustive.