Free Order on Motion to Exclude - District Court of Colorado - Colorado

Case 1:03-cv-01973-PSF-MJW

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Filed 09/07/2005

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Judge Phillip S. Figa Case No. 03-cv-01973-PSF-MJW (Consolidated with 04-cv-02112-PSF-MJW) J.E.H. KNUTSON, Plaintiff, v. WALKER AND ASSOCIATES, INC., Defendant.

Civil Action No. 04-cv-02112-PSF-MJW (Consolidated with 03-cv-01973-PSF-MJW) WALKER GROUP, INC., Plaintiff, v. FIRST LAYER COMMUNICATIONS, INC.; and J.E.H. KNUTSON, Defendants.

ORDER ON WALKER GROUP' MOTION TO EXCLUDE EXPERT TESTIMONY S

These consolidated cases come before the Court on the motion of Walker Group, Inc. (" Walker" filed February 28, 2005 (Dkt. # 114) requesting the Court to Exclude the ) Expert Evidence and Testimony of Lari Masten, who was tendered as an expert on valuation by J.E.H. Knutson. The Court has reviewed the opposition to the motion filed by Knutson on March 28, 2005, and the reply filed by Walker on April 15,

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2005. The Court has determined that the motion can be ruled on without a hearing. For the reasons set forth below, the motion is GRANTED. By Order entered August 12, 2005, the Court granted in part and denied in part Walker' Motion for Partial Summary Judgment. In that Order the Court considered the s expert report and deposition testimony provided by Ms. Masten regarding the valuation issue, and concluded: In fact, by the time of her deposition in January 2005, Ms. Masten acknowledged that she did not know " what Walker received from First Layer." Id. It is clear from her deposition testimony that notwithstanding the statements in her report, Ms. Masten did not value what Walker in fact received from First Layer. Rather, she " valued"what she understood was the collateral securing the promissory note, without regard to what Walker actually received from First Layer. See Masten deposition excerpts attached as Exhibit A to Walker' Motion to Exclude Expert Evidence and s Testimony of Lari Masten, at 82-85. The value calculated by Ms. Masten, which is a hypothetical value of what First Layer was " worth"at the time the directors voted on dissolution, and what Walker might have received had it foreclosed on its security interest, is not the issue here. The issue is what value, if any, was actually received by Walker as a payment or partial payment of the First Layer note. Ms. Masten' report does not shed light s on that issue, and therefore does not provide admissible evidence that the note was paid in full, as Knutson contends in his complaint for declaratory judgment. Order at 23. The Court now expressly grants Walker' Motion to exclude Ms. Masten' s s opinion testimony for the same reasons. As the Supreme Court stated in Daubert v. Merrell Dow Phamaceuticals, Inc., 509 U.S. 579, 589 (1993), under the Federal Rules of Evidence the trial judge must " ensure that any and all scientific testimony or evidence admitted is not only relevant, 2

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but reliable." The criteria for evaluating the admissibility of expert testimony under Daubert and its progeny, including Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999) and Dodge v. Cotter Corp., 328 F.3d 1212 (10th Cir. 2003), apply equally to the softer sciences of valuation, accounting, economics and financial services. See e.g. Kumho, supra, 526 U.S. at 150 and the 2000 amendment to Federal Rule of Evidence 702. Rule 702, F.R.E., requires that the expert evidence or testimony " assist the trier of fact" to determine a relevant issue. As the Supreme Court stated in Daubert, " [e]xpert testimony which does not relate to any issue in the case is not relevant and, ergo, non-helpful." 509 U.S. at 591. In the instant case, the opinions of Ms. Masten are not relevant or helpful because they do not address the value of the assets actually at issue. Although an expert' methodological approach may be sound in a particular circumstance, that does s not mean that the methodology can be employed where the facts do not fit the method. Or as the Court stated in Daubert, scientific validity for one purpose is not necessarily scientific validity for another unrelated purpose. Id. Thus, in Atlantic Richfield Co. v. Farm Credit Bank of Wichita, 226 F.3d 1138, 1167 (10th Cir. 2000), the Tenth Circuit affirmed the exclusion of an expert opinion on " market value"where it found the expert " strayed too far from the available sales data"and used hypothetical sales instead. Here, too, Ms. Masten' opinions of value stray too far from the particular assets that s need to be valued before the finder of fact, and therefore the opinions are deemed not helpful or relevant.

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For these reasons, the motion of Defendant Walker Group to exclude the expert evidence and testimony of Lari Masten (Dkt. # 114) is GRANTED. DATED: September 7, 2005 BY THE COURT:

s/ Phillip S. Figa ________________________________ Phillip S. Figa United States District Judge

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