Opposition ObjectionsCal. Super. - 6th Dist.September 21, 2016JAMES McMANIS(40958) TYLERATKINSON (257997) JAMES GIACCHETTI (307117) McMANISFAULKNER a Professional Corporation 50 West San Fernando Street, 10'" Floor San Jose, California 95113 Telephone: (408) 279-8700 Facsimile: (408) 279-3244 Email: jgiacchettimcmanislaw.corn Attorneys for Plaintiff, MICHAELHANNEKEN 10 SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF SANTA CLARA 12 MICHAELHANNEKEN, Case No.: 16CV300285 13 14 vs. Plaintiff, PLAINTIFF'S OPPOSITION TO MOTIONINLIMINETO EXCLUDE PLAINTIFF'S MODEL OF LOST PROFITS DAMAGES 15 16 17 18 19 20 21 22 23 24 25 26 27 LELANDSTANFORD JUNIOR UNIVERSITY,WILLIAMJ. PERRY, DOES 1-50, Defendants. Date: January 28, 2019 Time: 9:00 a.m. Dept.: 3 Judge: The Hon. Patricia Lucas Date Action Filed: September 21, 2016 Trial Date: January 28, 2019 28 I PLAINTIFF'S OPPOSITION TO MOTIONINLIMINETO EXCLUDE PLAINTIFF'S MODELOF LOST PROFIT DAMAGES, CASE NO. 16CV300285 Electronically Filed by Superior Court of CA, County of Santa Clara, on 1/28/2019 9:14 AM Reviewed By: A. Barnard Case #16CV300285 Envelope: 2437162 16CV300285 Santa Clara - Civil A. Barnard TABLE OF CONTENTS 2 3 4 5 6 10 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 INTRODUCTION LEGALARGUMENT I. RESS Is An Established Business With Annual Pre-Breach Profits In The Millions ofDollars, And Defendants Knew This At The Time of the Contract.. II. Defendants Mischaracterize Ms. Heinemann's Damages Analysis.. III.Defendants Mischaracterize Mr. Fellers's Testimony, and Misconstrue Ms. Heinemann's Reliance on Mr. Fellers....... A. Mr. Fellers Is An Expert In The Commercial Real Estate Construction Industry, With Experience In The San Francisco Bay Area.. B. Defendants Falsely Assert That Mr. Fellers Only Performed "One Hour" OfWork.. C. Defendants Mischaracterize Mr. Fellers's Testimony.... IV. The Experts'pinions Are Admissible. A. The Issue Is Beyond The Common Experience of the Jury.. B. The Experts Are Qualified. C. The Opinions Are Based on Reliable Matter, And The Case- Specific Facts Are Admissible. 1. Ms. Heinemann Relies on Matters That Reasonably May Be Relied Upon By Experts..... 2. The Sargon Opinion Supports Plaintiffs Position..... 3. The Expert Opinions Are Based on Admissible Evidence 4. Defendants'riticisms Go to Weight, Not Admissibility. V. Defendants'otion Is Procedurally Improper And Exceeds Page Limits..................... VI.IfNecessary, PlaintiffRequests An Evidentiary Hearing Pursuant to Evidence Code Section 402. CONCLUSION.. ... I0 .... I0 ....12 ....12 ...14 .... I 5 ... 15 16 16 ... I 6 27 28 2 PLAINTIFF'S OPPOSITION TO MOTIONJNLIMINETO EXCLUDEPLAINTIFF'S MODELOF LOST PROFIT DAMAGES, CASE NO. 16CV300285 1 2 3 4 TABLE OF AUTHORITIES CASES Amtower v. Photon Dynamics, Inc. (2008) 158 Cal.App.4th 1582. Asahi Kasei Pharma Corporation v. Actelion Ltd. (2013) 222 Cal. App. 4th 945.... ..... 1 6 .....14, 15 5 6 7 8 9 13 14 13 960...13 Avivi v. Centro Medico Urgente Med. Ctr. (2008) 159 Cal.App.4th 463 ............................. Berge v. International Harvester Co. (1983) 142 Cal.App.3d 152. Cooper v Takeda Pharmaceuticals Am., Inc. (2015) 239 Cal.App.4th 555 .......................... Grupe v. Glick (1945) 26 Cal.2d 680 Lewis Jorge Const. Management, Inc. v. Pomona Unified School Dist. (2004) 34 Cal.4th 10 11 12 13 14 15 16 17 18 19 20 Lewis Jorge Constr. Mgmt., Inc. v. Pomona Unified Sch. Dist. (2004) 34 Cal.4th 960.... Mann v. Cracchiolo (1985) 38 Cal.3d 18 .. Meister v. Mensinger (Cal. App. 6th Dist. 2014) 2014 WL 4961092 ............................... People ex rel. Dept. ofTransp. v. Clauser/Wells Partnership (2002) 95 CA4th 1066 ..... People v. Davis (1965) 62 Cal.2d 791. People v. McDonald (1984) 37 Cal.3d 351 . People v. Mendoza (2000) 23 Cal.4th 896 People v. Rodriguez (2014) 58 Cal.4th 587. People v. Sanchez (2016) 63 Cal.4th 665 .. People v. Stoll (1989) 49 Cal.3d 1136. Perry v. Bakewell Hawthorne, LLC (2017) 2 Cal.5th 536 . ... 1 3 ....12 .... 1 2 ....... 1 5 21 22 23 24 25 Evid. Code ( 720. 26 Evid. Code I'I 801(b). 27 '. C. Anderson, Inc. v. Bank ofAm. (1994) 24 Cal.App.4th 529. Sargon Enterprises, Inc. v. Univ. ofS. California (2012) 55 Cal. 4th 747..... Sinaiko v. Sup. Ct. (2004) 122 Cal.App.4th 1133.. STATUTES Evid. Code $ 405(b)(2). ....13, 14, 15 .....12 ....... 1 5 28 Evid. Code. I'I 801 3 PLAINTIFF'S OPPOSITION TO MOTIONINLIMINETO EXCLUDEPLAINTIFF' MODEL OF LOST PROFIT DAMAGES, CASE NO. 16CV300285 .....12 10 1 INTRODUCTION Defendants'otion mischaracterizes the opinions ofplaintiffs experts, and misunderstands the holdings ofSargon and Sanchez. Plaintiffs business, Real Estate Strategies and Solutions ("RESS"), was fullyestablished at the time the parties entered the contract at issue. RESS had generated millions ofdollars of profits up to the actionable period, including more than $7,000,000 of profits in a single year. Plaintiffintends to call a certified public accountant, Suzanne Heinemann, who has extensive background in lost profit analysis and damages calculations. Ms. Heinemann's opinions are based, inter alia, on admissible industry data, several years ofRESS financial records -also 10 admissible -and information Ms. Heinemann obtained in consultation with both plaintiffand plaintiffs real estate industry expert, BillFellers. Both plaintiffand Mr. Fellers willtestify at 12 trial. There is no "Sanchez problem" in this case. 13 Defendants'otion amounts to a late-filed motion for summary judgment on the issue of 14 damages. Defendants argue that any damages would be speculative, and that defendants were 15 not on notice ofplaintiffs potential losses. These are questions of fact not suitable for a motion 16 in limine. The evidence shows that defendants had ample notice that plaintiffwould forego 17 running his highly profitable real estate business in reliance on the contract. Further, the expert 18 opinions offered by plaintiffwillhelp the jury understand the damages issues. Indeed, 19 defendants have their own damages expert. The expert opinions are based on reliable methods, 20 and to the extent they concern case-specific facts, these facts are based on admissible evidence. 21 Therefore, defendants'otion should be denied. 22 23 24 25 26 27 LEGALARGUMENT I. RESS Is An Established Business With Annual Pre-Breach Profits In The Millions of DoHars. And Defendants Knew This AtThe Time of the Contract. RESS is an established business. The company generated approximately $ 25,000,000 in revenues in the years preceding the breach of contract at issue, through more than a dozen contracts with parties seeking its services. 28 4 PLAINTIFF'S OPPOSITION TO MOTIONINLIMINETO EXCLUDEPLAINTIFF'S MODEL OF LOST PROFIT DAMAGES, CASE NO. 16CV300286 Defendants'otion to exclude damages testimony fails to acknowledge that plaintiff- the only employee and sole proprietor ofRESS -was deployed to Afghanistan shortly before the actionable period in this case. Defendants seek to highlight the company's financial performance during this war period to argue that RESS was not a profitable venture. The evidence shows RESS was a successful business: 10 12 13 14 15 YEAR 2005 2006 2007 2008 2009 2010 2011 2012 NET PROFITS $240,117 $ 704,086 $ 2,211,308 $ 7,123,539 Loss: $ 132,589 (Real Estate Market Crash) War in Afghanistan 1 War in Afghanistan War in Afghanistan 16 17 18 19 20 21 22 23 24 In 2013, relying on his contract with defendants, plaintiffrefrained from re-entering the real estate market full time. Defendants were aware ofplaintiffs successful real estate business, (See, e.g., S00485-S00497 (plaintiffs application to Stanford).) The parties entered an oral agreement at a meeting between Col. Hanneken and Secretary Perry on November 21, 2013. Before this meeting took place, Col. Hanneken provided Secretary Perry additional documentation giving notice ofplaintiffs successful business. (See, e.g., S00029-S00034.) Col. Hanneken's introductory letter to Secretary Perry specifically discussed Col. Hanneken's business. (S00030.) Col. Hannken and Secretary Perry further discussed this business at their November 21, 2013, meeting. (See, e.g., Deposition ofMichael Hanneken, p. 25 26 27 28 I Plaintiffis a Lieutenant Colonel with the United States Army. In 2010, as he has previously testified, he scaled down his business operations in anticipation of imminent deployment. He was deployed to Afghanistan in 2011, where he saw active combat. He was then stationed in Taiwan until March 2013. 5 PLAINTIFF'S OPPOSITION TO MOTIONINLIMINETO EXCLUDE PLAINTIFF'S MODELOF LOST PROFIT DAMAGES, CASE NO. 16CV300285 1 217:1-220:6.) Defendants were on notice that plaintiffwould forego these business opportunities in reliance on the oral agreement that he had with Secretary Perry. Col. Hanneken's damages are the profits he would have obtained from participating full time in the real estate market, but for his agreement with the defendants. See Lewis Jorge Constr. Mgmt., Inc. v. Pomona Unified Sch. Dist. (2004) 34 Cal.4th 960, 977 ("Damages may be awarded for breach of contract for those losses which naturally arise from the breach, or which might reasonably have been foreseen by the parties at the time they contracted, as the probable result of the breach." [Citation.]); S. C. Anderson, Inc. v. Bank ofAm. (1994) 24 Cal.App.4th 529, 536 ("It is enough to demonstrate a 10 reasonable probability that profits would have been earned except for the defendant's conduct.") II. Defendants Mischaracterize Ms. Heinemann's Damages Analvsis. 12 Ms. Heinemann presents three (3) alternative models to compute damages. Using these 13 models, Ms. Heinemann offers estimated damages based on two scenarios: (a) damages incurred 14 15 16 from contract inception to when plaintiffwas notified the contract would not be honored; and (b) damages incurred from contract inception to near the time ofplaintiffs graduation. As addressed in detail below, it is entirely appropriate to offer alternative calculations, and for the 17 finder of fact determine which ifany calculation is the correct one. 18 Ms. Heinemann's primary approach is a Market Index Approach based on research into 19 square feet of construction and development in the San Francisco Bay Area. This approach 20 21 22 specifically measures the historic "Design Build as-Risk" ("DBR")performance ofRESS in the pre-damages period as a basis for estimating RESS performance during the damages period. Under this model, Ms. Heinemann gives consideration for the revenues and profits earned by 23 RESS from approximately 14 business contracts, into which RESS entered during the five year 24 period from 2005 through 2009 time period. 25 Among the admissible sources used by Ms. Heinemann, she relied on industry data 26 generated by Jones Lang LaSalle ("JLL"): Office Insight, Office Statistics, and Office Highlights 27 Quarterly Reports for San Francisco, San Francisco Peninsula and Silicon Valley for 2007 and 28 6 PLAINTIFF'S OPPOSITION TO MOTIONINLIMINETO EXCLUDE PLAINTIFF'S MODELOF LOST PROFIT DAMAGES, CASE NO. 16CV300285 Ql 2014 through Ql 2018. Defendants'xpert acknowledges JLL is a reputable source. (Deposition of Steven J. Hazel Deposition, p. 242:14-24.) While Defendants claim that Ms. Heinemann "did no analysis"2 and "relied on statements from Plaintiffto determine how much DBR work RESS would get" during the damages period (MIL,p. 15), these statements are false. First, using the Market Index Approach, Ms. Heinemann directly measures RESS's relative market share of square feet under construction in the pre-damages period and uses this as the basis ofher estimates for RESS construction revenues during the damage period (i.e., the Market Index Approach is a market share approach). Any assessment ofRESS's market share 10 during the damages period would be irrelevant-this was a period during which Mr. Hanneken was a full time Stanford Ph.D. student who was specifically restricted from operating a full time 12 business. 13 Throughout Ms. Heinemann's deposition, she referenced her study ofqualitative data as 14 well, including her qualitative research into RESS's historical performance (see, e.g., Deposition 15 of Suzanne Heinemann ("Heinemann Depo."), 136:11-16), the breadth and scope ofwork at 16 Plantronics (see, e.g., id. 63:4-7) and qualitative research in the San Francisco commercial real 17 estate industry during the damages period, all as bases for her calculations (see, e.g., id. 112:18- 18 25). Ms. Heinemann held numerous discussions with BillFellers, an industry expert, who will 19 also testify in this case. 20 In addition to the Market Index Approach, Ms. Heinemann offered two (2) other models. 21 The second is an alternate DBR approach that limits RESS damages to those levels of 22 23 24 25 26 27 28 construction engaged in by RESS in pre-damages periods ("Historic Approach" ). This approach is significantly more conservative than the Market Index Approach as it disregards empirical market-based data that shows demand for construction during the damages period was far greater 2 Defendants claim: "She admits she did no analysis to support the fundamental premise ofher model - that Plaintiffwould have actually obtained any business (or made any profits) as projected in her model. Heinemann instead says she relied on an industry expert, William Fellers, for that critical link" (MIL,p. 3.) 7 PLAINTIFF'S OPPOSITION TO MOTIONINLIMINETO EXCLUDE PLAINTIFF'S MODEL OF LOST PROFIT DAMAGES, CASE NO. 16CV300286 than in pre-damages periods. Ms. Heinemann provided a third approach that excluded DBR entirely, and is based on RESS focusing on consulting services only ("Consulting Only"). The Consulting Only approach is based on RESS consulting rates and staffing ratios observed during the damages period and are projected to increase based on industry research related to commercial real estate activity in the San Francisco Bay Area and its link to real estate consulting opportunities, including "owner representative" work that is often a precursor to construction. While Defendants take issue with the fact that Consulting Only model revenues are "20 times" RESS's actual revenues in the damage period-this is not a valid criticism. During the 10 damages period, Col. Hanneken has only been able to work eight (8) hours per month while pursuing a Ph.D. Defendants caused plaintiffto leave the marketplace. They should not be 12 permitted to capitalize on this fact. For damages calculations, the more reliable reference is the 13 period when Col. Hanneken was fullyemployed 14 15 III. Defendants Mischaracterize Mr. Fellers's Testimonv. and Misconstrue Ms. Heinemann's Reliance on Mr. Fellers. 16 17 18 19 20 21 22 23 24 25 26 27 A. Mr. Fellers Is An Expert In The Commercial Real Estate Construction Industry, With Experience In The San Francisco Bay Area. Mr. Fellers has more than 30 years of experience in real estate development, including development management, government privatization, project management, design, construction and facilities management. Mr. Fellers received a B.S. in Architectural Studies from North Dakota State University. He is a Registered Professional Architect in California and a member of the National Council ofArchitects Registration Board. At deposition, Mr. Fellers detailed his personal experience concerning private sector design-build projects in the Bay Area. (Deposition ofWilliamFellers ("Fellers Depo."), p. 17- 18) He testified that he considered himself an expert in this field, based on his background, which includes multiple real estate projects in the Bay Area, involving, inter alia: "Evaluating [the] market sector by picking the strongest team members in the local area and pair that with our 28 8 PLAINTIFF'S OPPOSITION TO MOTIONINLIMINETO EXCLUDE PLAINTIFF'S MODEL OF LOST PROFIT DAMAGES, CASE NO. 16CV300285 experience doing development, which includes design-build, construction, design, financing, negotiating contracts, buying the land, property management." (Id. at 19-20.) B. Defendants Falsely Assert That Mr. Fellers Only Performed "One Hour" OfWork. Defendants erroneously argue that Fellers'ork was limited to a one-hour review of Plaintiffs website and to provide feedback to Heinemann on whether her assumptions were reasonable. (MIL,p. 2.) This assertion is false. Mr. Fellers spent numerous hours in discussions with Ms. Heinemann and Mr. Hanneken, the details ofwhich were discussed at length in Mr. Fellers's deposition. As indicated on invoices produced to defendants, in addition to discussions with Ms. Heinemann and plaintiff, 10 Mr. Fellers spent many hours reviewing recordings, including RESS financial statements, RESS contracts with clients, and RESS communications and letters of recommendations from RESS 12 clients. 13 Mr. Fellers testified that, based on the information he reviewed, he had "an understanding of 14 the types of work that RESS had performed prior to Mr. Hanneken enrolling at Stanford." 15 (Fellers Depo., 97.) 16 C. Defendants Mischaracterize Mr. Fellers's Testimony. 17 Defendants mischaracterize Mr. Fellers's testimony. At deposition, Mr. Fellers provided 18 opinions related to (I) the nature of commercial real estate development and consulting 19 opportunities, (2) the factors that customers of commercial development find to be important in 20 21 selecting, and (3) opinions on time lags that RESS would have experienced ifCol. Hanneken had resumed his work full time in the real estate industry. For each of these opinions, Mr. Fellers 22 clearly stated a contractor that his opinions are based on his years of experience in the real estate 23 industry and his understanding of the facts of the case. Defendants'ontention, that Mr. Fellers 24 has performed no "analysis," is unpersuasive. 25 26 Ms. Heinemann -who willfurnish the damages opinion testimony at issue -relied upon Mr. Fellers as an industry expert to provide supplemental information about the industry. 27 (Heinemann Depo., 180-181.) Ms. Heinemann used this input in conjunction with admissible 28 9 PLAINTIFF'S OPPOSITION TO MOTIONINLIMINETO EXCLUDE PLAINTIFF'S MODEL OF LOST PROFIT DAMAGES, CASE NO. 16CV300285 financial documentation and business data. As Ms. Heinemann testified, she used Mr. Fellers as a source of data to determine that a 15-month lag was appropriate to incorporate in her damages model. (See, e.g., id. at 79:4-21.) Mr. Fellers was also a source for the 18-month ramp-up period calculated by Ms. Heinemann. (See, e.g., id.) As Mr. Fellers testified, that period was reasonable, based on plaintiffs "track record and he's got high speed rail going and the ability to get other consulting hours like that is just a focus ofnetworking 'and pursuing additional clients." (Fellers Depo., p. 191-192.) Mr. Fellers also discussed with Ms. Heinemann her methodology for calculating leveraged consulting hours. (Fellers Depo., 204- 205) At deposition, based on his review ofRESS's experience and client references, Mr. 10 Fellers disputed the notion that RESS would have had trouble competing for business in the San Francisco Bay Area: 12 13 14 Q. So in using your experience in the marketplace in determining the reasonableness of Miss Heinemann's projections of revenues from the 2014 to '18 period in the design build at-risk marketed in the San Francisco Bay Area, did you draw any conclusions that distinguished RESS from any other competitor in that market? 15 16 17 18 19 20 A. Any distinctions are -you know, I would -I would take exceptions to when you say "any other competitor in the market." The client reference that he has are from leading companies. And so come out ofprojects with those types ofreferences is very valid to me. And there are a lot ofpeople out in this marketplace that don't have those kind of references. (Fellers Depo., 144-145.) IV. The Exnerts'ninlons Are Admissible. 21 22 23 24 25 For expert opinion to be admissible, (1) the subject matter must be "sufficientlybeyond common experience" that the opinion would assist the jury; (2) the witness must have appropriate qualifications; and (3) the opinion must be based on reliable matter. Evid. Code. $ 801. Allof these requirements are met. A. The Issue Is Bevond The Common Exnerlence of the Jurv. 26 27 28 The use ofexperts is liberally permitted. Even ifthe jury has some knowledge of the subject matter, an expert opinion is admissible ifit would "assist" the jury. People v. Rodriguez 10 PLAINTIFF'S OPPOSITION TO MOTIONIN LIMINETO EXCLUDE PLAINTIFF'S MODEL OF LOST PROFIT DAMAGES, CASE NO. 16CV300285 (2014) 58 Cal.4th 587, 639. Expert opinion is to be excluded "only when it would add nothing at all to the jury's common fund of information." People v. McDonald (1984) 37 Cal.3d 351, 367 (emphasis added), overruled on other grounds by People v. Mendoza (2000) 23 Cal.4th 896. As a general matter, courts trust that "jurors may temper their acceptance of his testimony with a healthy skepticism born of their knowledge that all human beings are fallible." People v. McDonald, supra, 37 Cal.3d at 372-373. 8 9 10 Here, the issue of lost business profits is beyond the common experience of the jury such that an accountant with Ms. Heinemann's background would add to the jury's information. Defendants -who have retained their own damages expert-effectively concede that the calculation of damages in this case is appropriate for expert testimony. 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 B. The Exuerts Are Oualified. A person is qualified to testify as an expert only ifhe or she has sufficient knowledge, skill, experience, training or education to qualify as an expert on the subject matter of his or her testimony. Evid. Code $ 720; see CACI 219. Mr. Fellers's qualifications as an expert in the real estate industry are addressed above. Ms. Heinemann is also qualified as an expert in accounting and damages. Ms. Heinemann is a Certified Public Accountant. She is accredited in Business Valuation. She has a B.B.A. in Finance from the College ofWilliam tk Mary. There are no hard and fast rules for expert qualification. The determinative issue is whether the witness has sufficient knowledge, skill or experience in the field so that his or her testimony would be likely to assist the jury in its search for the truth. (Mann v. Cracchiolo (1985) 38 Cal.3d 18, 37-38, overruled on other grounds by Perry v. Bakewell Hawthorne, LLC (2017) 2 Cal.5th 536, 543. Whether a particular person has sufficient expertise to testify as an expert witness depends upon the facts of the particular case, the questions propounded0 to the witness, and the witness's specific qualifications. See People v. Davis (1965) 62 Cal.2d 791, 801. An otherwise qualified expert is not prohibited from testifying solely on the basis that the location ofhis or her practice is not the location of the incident at issue. Avivi v. Centro Medico Urgente Med. Ctr. (2008) 159 Cal.App.4th 463, 470. 11 PLAINTIFF'S OPPOSITION TO MOTIONINLIMINETO EXCLUDE PLAINTIFF'S MODEL OF LOST PROFIT DAMAGES, CASE NO. 16CV300285 Ms. Heinemann has an extensive understanding of the admissible financial information in this case. However, even ifshe were not as well versed as she is, an expert's lack ofcomplete familiaritywith a case does not necessarily render the expert unqualified to give expert testimony. Any objections go to the weight, not the admissibility, of the testimony. See Sinaiko v. Sup. Ct. (2004) 122 Cal.App.4th 1133, 1142 (Board's argument "that the experts were not qualified because they did not review the individual cases in sufficient detail and offer opinions specific to the allegations ... go[es] to the weight, not to the admissibility, of the expert testimony.") 10 C. The Omnions Are Based on Reliable Matter. And The Case-SneciTic Facts Are Admissible. 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 An expert's opinion may be based on his or her own observations and examinations, or on matters "made known to him at or before the hearing, whether or not admissible, that is of a type that reasonably may be relied upon" by experts in forming opinions on the particular subject .. "unless an expert is precluded by law from using such matter as a basis for his opinion." (Evid. Code ) 801(b).) The "reasonableness of an expert's reliance is a question ofdegree and may well vary with the circumstances." People ex rel. Dept, ofTransp. v. Clauser/Sells Partnership (2002) 95 CA4th 1066, 1085 (internal quotes omitted). While experts may rely on hearsay, the record before the court must contain admissible evidence of the case-specific facts on which the expert relies; i.e., facts "relating to the particular events and participants alleged to have been involved in the case being tried." People v. Sanchez (2016) 63 Cal.4th 665, 676. By contrast, experts may rely on and testify to non-case-specific facts and general background information, even ifit is hearsay, provided that the information is within their general knowledge in the field of expertise. Id. at 677-679. 1. Ms. Heinemann Relies on Matters That Reasonablv Mav Be Relied Unon Bv Exnerts. "Lost profits to an established business may be recovered iftheir extent and occurrence can be ascertained with reasonable certainty; once their existence has been so established, recovery willnot be denied because the amount cannot be shown with mathematical precision. 12 PLAINTIFF'S OPPOSITION TO MOTIONINLIMINETO EXCLUDE PLAINTIFF'S MODEL OF LOST PROFIT DAMAGES, CASE NO. 16CV300285 [Citations.] Historical data, such as past business volume, supply an acceptable basis for ascertalning lost future profits. [Citations.] In some instances, lost profits may be recovered where plaintiffintroduces evidence of the profits lost by similar businesses operating under similar conditions. [Citations.]" Berge v. International Harvester Co. (1983) 142 Cal.App.3d 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 152, 161-162. Further, "damages for the loss ofprospective profits that otherwise might have been made f'rom [a business] operation are generally recoverable for the reason that their occurrence and extent may be ascertained with reasonable certainty from the past volume of business and other provable data relevant to the probable future sales." Grape v. Glick (1945) 26 Cal.2d 680, 692; see Lewis Jorge Const. Management, Inc. v. Pomona Unified Schoo! Dist. (2004) 34 Cal.4th 960, 975. In the present case, Ms. Heinemann has testified she has performed lost profit calculations on "probably 50 to 100 different companies, industries, et cetera, using benchmarks to understand what lost profits would be." (Heinemann Depo., 19.) She stated that, "I consider myself a damages expert who reasonably relies on industry research, data benchmarks compiled by others in the industry, and I rely typically on industry experts." (Heinemann Depo, 20.) RESS was an established business with a track record of generating millions ofdollars of profits. Even ifRESS had not been an established business -and the evidence demonstrates it was an established business -courts have held that when a business is new, damages may be established with reasonable certainty with the aid ofexpert testimony, economic and financial data, market surveys and analyses, business records of similar enterprises, and the like. Meister v. Mensinger (Cal. App. 6th Dist. 2014) 2014 WL 4961092. As the California Supreme Court has warned: "Courts must not be too quick to exclude expert evidence as speculative merely because the expert cannot say with absolute certainty what the profits would have been." Sargon Enterprises, Inc. v. Univ. ofS. California (2012) 55 Cal. 4th 747, 775. "Courts must not eviscerate the possibility of recovering lost profits by too broadly defining what is too speculative." Id. For example, in Asahi Kasei Pharma Corp., where a damages expert presented two different lost profit estimates, the testimony was not too 13 PLAINTIFF'S OPPOSITION TO MOTIONINLIMINETO EXCLUDEPLAINTIFF'S MODEL OF LOST PROFIT DAMAGES, CASE NO. 16CV300285 speculative to support the jury's finding of the amount of damages for a competitor's intentional interference. Asahi Kasei Pharma Corporation v. Actelion Ltd. (2013) 222 Cal. App. 4th 945, as modified on denial ofreh'g, (Jan. 16, 2014). The expert's testimony was properly admitted, notwithstanding the presentation of alternative damage calculations, because the expert specified the different assumptions on which the damages calculations were based, and explained how the two figures were calculated. Id. 9 10 2. The Saran Oninion Suooorts Plaintiffs Position. The Sargon opinion, which is cited approvingly by defendants, explicitlywarns that: "[T]he trial court's task is not to choose the most reliable of the offered opinions and exclude the others...." Sargon, supra, 55 Cal.4th at 772. Further, "[t]he court must not weigh an opinion's 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 probative value or substitute its own opinion for the expert's opinion." Id. Instead, the judge' gatekeeping role is simply to exclude "clearly invalid and unreliable" expert opinion. Idd see Cooper v Takeda Pharmaceuticals Am., Inc. (2015) 239 Cal.App.4th 555, 571 -572, 577-578, 581 (judge exceeded boundaries ofgatekeeping function in determining admissibility ofcomplex scientific testimony by striking testimony ofplaintiffs expert and requiring expert to rule out all other possible causes for plaintiffs cancer, even though there was no substantial evidence that other causes might be relevant). While the guidance ofSargon therefore supports plaintiffs position, the facts ofSargon are distinguishable from the present facts, and underscore precisely why expert testimony is appropriate in the present case. In Sargon, a small dental implant company sued U.S.C. for breach of contract because the university did not complete clinical testing of a new implant the company had patented. The company-which had only previously garnered about $ 100,000- sought lost profits varying from $ 200 million to over a billion dollars. After an evidentiary hearing, the trial court acted within its discretion as a gatekeeper to exclude testimony that, but for the university's breach, the company would have profited millions yearly and would have been "a worldwide leader" in the industry. Sargon, supra, 55 Cal.4th at 753. 28 14 PLAINTIFF'S OPPOSITION TO MOTIONINLIMINETO EXCLUDEPLAINTIFF'S MODEL OF LOST PROFIT DAMAGES, CASE NO. 16CV300285 Here, unlike in Sargon, plaintiffs business has a proven track record. While defendants 2 insist that any damages would be speculative, the Court in Sargon acknowledged that, when lost 3 profits are at issue, the query "is always speculative to some degree." Even though the expert 4 witness is unable to state with unqualified certainty what the profit would have been, a court 5 "must not eviscerate the possibility of recovering lost profits by too broadly defining what is too 6 speculative. A reasonable certainty only is required, not absolute certainty." Sargon, supra, 55 7 Cal.4th at 753; see Asahi Kasei Pharma Corp, supra, 222 Cal.App.4th 945, 969, 975-976 8 (concluding lost profits award was supported by substantial evidence). 9 3. The Exuert Omnions Are Based on Admissible Evidence. 10 Defendants'rgument that Sanchez limits plaintiffs'xpert testimony is also unavailing. 11 Mr. Fellers and Mr. Hanneken willtestify to foundational facts at trial. Allof the case-specific 12 facts-statements ofMr. Fellers, statements ofMr. Hanneken, industry data, and RESS financial 13 documents -are admissible evidence. 14 To the extent Ms. Heinemann's opinions also draws from her considerable experience 15 and background as an accountant, this fact is ofno moment. Sanchez recognizes that an "expert 16 may still rely on hearsay in forming an opinion, and may tell the jury in general terms that he did 17 so.... Evidence Code section 802 properly allows an expert to relate generally the kind and 18 source of the 'matter'pon which [her] opinion rests. There is a distinction to be made between 19 allowing an expert to describe the type or source of the matter relied upon as opposed to 20 presenting, as fact, case-specific hearsay that does not fall under a statutory exception." Sanchez, 21 63 Cal.4th at pp. 685 -686. 22 4. Defendants'riticisms Go to Weieht. Not Admissibilitv. 23 Attacks on the soundness of the opinion, and the adequacy ofmethodology used, 24 generally go to the weight ofan expert's opinion, not to its admissibility. The jury ultimately 25 determines whether the expert's opinion is based upon reliable information. Evid. Code $ 26 405(b)(2). The jury may reject the expert's opinion ifit questions matters upon which the 27 expert's conclusions were based. People v. Stoll (1989) 49 Cal.3d 1136, 1155. 28 15 PLAINTIFF'S OPPOSITION TO MOTIONliVLIMINETO EXCLUDE PLAINTIFF'S MODEL OF LOST PROFIT DAMAGES, CASE NO. 16CV300285 To this end, defendants have retained their own expert, Steven J. Hazel, to address plaintiffs'ost profits calculations. V. Defendants'otion Is Procedurally Improper And Exceeds Page Limits. Defendants'otion exceeds the page limits, in violation of the Rules of Court. California Rules of Court, Rule 3.1113. Therefore, the Court should decline to rule on the motion. See Local CivilRule 11. As a separate matter, the motion in limine is effectively a summary judgment motion, a practice strongly disfavored. Amtower v. Photon Dynamics, Inc 8 (2008) 158 Cal.App.4th 1582, 1593 ("What in limine motions are not designed to do is replace 9 10 11 12 13 14 15 16 17 18 19 the dispositive motions prescribed by the Code of CivilProcedure.") (emphasis in original). VI. IfNecessary, PlaintiffRequests An Evidentiary Hearing Pursuant to Evidence Code Section 402. Ifthe Court is inclined to grant defendants'otion, plaintiffrequests a hearing pursuant to Evidence Code section 402. CONCLUSION For the foregoing reasons, defendants'otion in limine to exclude expert testimony should be denied. The experts'pinions are based on admissible evidence. Plaintiffs lost profits calculations are not speculative. Defendants'riticisms go-at most-to the weight of the opinion testimony, not its admissibility. 20 21 22 23 24 25 26 Dated: January 28, 2019 McMANISFAULKNER \~~ JPAES McMANIS ~+TYLER ATKINSON JAMES GIACCHETTI Attorneys for Plaintiff, MICHAELHANNEKEN 27 28 16 PLAINTIFF'S OPPOSITION TO MOTIONINLIMINETO EXCLUDEPLAINTIFF'S MODEL OF LOST PROFIT DAMAGES, CASE NO. 16CV300285
