Rieves v. Town of Smyrna, 2024

Before the court in this economic damages case was the plaintiffs’ motion to exclude the testimony of the defendants’ retained expert, Robert Vance, CPA. The defendants sought to have Vance testify as an expert regarding the calculation of the plaintiffs’ damages. The plaintiffs argued that Vance’s testimony did not meet the standards of Rule 702. The motion was granted in part.

Background.

The plaintiffs had employed Top Price, CPA, as an expert to calculate the plaintiffs’ damages in this case. While the defendants had not questioned the admissibility of Price’s testimony, they had employed Vance, a proposed expert in forensic and valuation services, to challenge the basis for Price’s conclusions and to offer his own opinion as to the plaintiffs’ damages.

The plaintiffs did not challenge the qualifications of Vance as an expert nor the relevance of his opinion, but they did challenge the reliability of his opinions as set forth in his report. The Vance report. There were two sections to the Vance report. The first was a critique of the opinions in the Price report, and the second was Vance’s own “damage calculation.” The plaintiffs highlighted three opinions of Vance’s report that it sought to exclude as unreliable:

(1) Vance’s opinion that Price’s opinions were unreliable because he used “national level statistics”;

(2) Vance’s opinion that the Price report “fails to consider lack of capital and credit in [the] damages analysis”; and

(3) Vance’s opinion that the Price report “failed to consider the competition” retail establishments selling CBD product in Smyrna posed when computing damages and failed to take into consideration the potential competition posed by the entry of “big box” stores into the CBD market. In addition, the plaintiffs’ took issue with Vance’s own damages calculation.

Vance’s critiques of Price’s analyses.

The plaintiffs argued that Vance “fails to cite any reliable data source to justify his opinions,” instead relying on “snippets from five opinion news articles, published online, none of which purport[s] to be scholarly and none of which cite[s] legitimate data sources.” The plaintiffs also argued that Vance was under the mistaken impressions that Rieves was a bricks-and-mortar local, storefront retailer of CBD products, but it was actually a manufacturer, wholesaler, and online retailer, and that it only sold locally and was competing on a local level. “On this basis, the plaintiff argues that Vance’s ‘opinion that [the plaintiffs’ business] should only be compared to local retail brick- and-mortar businesses is not supported by the record or any of the documents relied upon by Vance and is insufficiently reliable to be considered by the jury.’”

The court found Vance’s misconception of the plaintiffs’ business undermined and rendered his critiques of Price’s analysis unreliable. Moreover, the article Vance cited “in support of his assertion that these types of establishments operate in different environments is simply an online article by [a] ‘startup consultant’ that outlines very generally ‘5 variables … every business owner should pay attention to, since they all affect how—and what—consumers buy,’ including competition, political climate, ‘state of the economy,’ trends, and technology.” Vance also characterized Price’s projections as “miraculous” but provided no support for that.

The plaintiffs objected to Vance’s critique that Price failed to consider plaintiffs’ lack of capital and credit in his damages analysis. “Vance cites an online article by CNBC.com outlining eleven common reasons small businesses fail, one of which is ‘empty pockets’ resulting from ‘poor cash flow.’” Vance failed to note that the plaintiffs’ poor cash flow and credit problems were alleged to have resulted from the defendants’ seizure of his assets and shuttering his business twice. The court found that all of Vance’s critiques of Price’s analysis were unreliable and inadmissible as a result of Vance’s characterizations. “Vance’s critiques of the Price Report are largely a matter of common sense. Defense counsel does not need an expert to cross-examine Price regarding perceived inadequacies and oversights in his opinions.”

Vance’s damage calculation.

Vance offered his own calculation of the plaintiffs’ damages using the plaintiffs’ income and expenses for a period of eight months prior to the initial seizure. But he uses only three months prior to the seizure for his future earnings over the same 25-month period as Price. His analysis presumed no increase in business over time, due to “the negative trendline, lack of capital and the tremendous increase in competition in the local area and nationally, among the other factors.” He also explained Price’s assertion of $91,000 of damages resulting from the seizure of inventory and materials as “double dipping.” He calculated the plaintiffs’ damages as $319,380 compared to Price’s calculation of gross profit of between $1.27 million and $2.33 million.

While the plaintiffs’ earnings go back to 2015, Vance used only eight months, which projected a negative trend and did not take into account the significant if not extreme growth in CBD products generally. “The court finds that the plaintiff’s critiques of Vance’s damage calculation go to their weight rather than their admissibility.” The plaintiffs may challenge Vance’s assumptions on cross-examination, but his analysis was based on observable facts and data and as such had a reasonable factual basis.

Thus, the motion was granted in part and denied in part.