City of Fort Collins v. Open Int’l, LLC, 2023 

Before the U.S. District Court—Colorado are five motions to exclude certain witnesses by  both parties.  

Facts

“This is a breach-of-contract case arising from Defendants’ alleged failure to deliver  Open SmartFlex (OSF), a Customer Information System (CIS) software product intended  for use in administering Plaintiff’s broadband utility services.” The opinion briefly covered the legal standards for Rule 26 (applying to the Michelle Frey motion) and Rule 702 (applying  to the other motions). 

Analysis 

Plaintiff’s nonretained hybrid expert, Michelle Frey. The defendants moved to strike Frey’s  testimony for failure to disclose her opinions properly under Rule 26, specifically for failure  to provide “a summary of the facts and opinions to which [Dr. Frey] is expected to testify.” The defendants claimed to be unable to prepare to cross-examine her. The plaintiff counters  that the defendants are already familiar with her opinions and facts in this case as both  parties listed her initially as a fact witness, and the defendants made numerous allegations  of Frey’s opinions in their counterclaims. 

Disclosures under Rule 26 cannot be ignored. However, there is “scant case law outlining what constitutes a sufficient disclosure under Rule 26(a)(2)(C).” (Seely v. Home Depot USA,  Inc.) A brief account of the principal facts supporting the opinions must be provided. 

The plaintiff’s disclosure was a six-bullet-point outline of Frey’s testimony but lacked any  account of the principal facts, but the plaintiff was amendable to supplementing the  disclosure. The court thus denied the defendants’ motion to exclude Frey, but the plaintiff was ordered to supplement the disclosures by May 26, 2023. 

Plaintiff’s retained damages expert, Ronald Seigneur. Ronald Seigneur’s report identified and calculated eight categories of damages the plaintiff incurred due to the defendants’ failure to provide OSF. The defendants argued that Seigneur’s testimony regarding  categories 1 to 6 should be excluded because they were consequential damages not  allowed under the master professional services agreement (MPSA) or they exceeded “the  fees paid or payable by customer … during the twelve (12) months prior to the event giving  rise to liability,” in violation of the MPSA. 

The plaintiff countered that the defendants’ argument presented disputed questions about  available damages. Did they qualify as consequential damages and what was the precise “event giving rise to liability”? The court agreed with the plaintiff that the proper way to  resolve these questions was through a motion for summary judgment and not a motion to  exclude expert testimony. (Colton Crane Co. v. Terex Cranes Wilmington, Inc.) Motions in limine were not “an appropriate means to resolve factual disputes or weigh evidence” and  “should not be used as disguised motions for summary judgment.” 

The defendants also argued that categories 5 to 8 should be excluded because these damages were only available in the event of recission, and the plaintiff waived its right to rescission by failing to seek rescission promptly upon learning of the defendants’ alleged  misrepresentations. The plaintiff responded that the defendants’ argument presented a disputed question: whether recession was an available remedy here. The defendants have  already raised that question in a prior motion for summary judgment. The court “will not  entertain this improper second attempt at a motion for summary judgment.” 

The defendants finally contended Seigneur’s report was deficient. It failed to identify his  methodology for calculating damages, misapplied certain concepts of damages and lost profits, and relied on insufficient facts and data. None of these was persuasive. The court noted that Seigneur’s report sufficiently explained his methodology for all eight categories  of damages. “He further provides thorough explanations of the rationale underlying his lost  net revenue calculation, why he employed an ex-post approach to account for the time value  of money in his calculations, and the discount rates and growth rates he employed in his calculations.” The court found that he sufficiently followed the desired disclosures under  Rule 702 and was, therefore, qualified to testify. 

The remaining contentions about accuracy and sufficiency of data that he relied on went to  the weight and not to the admissibility of the testimony. The court denied the defendants’ motion to exclude Seigneur. 

The plaintiff’s retained technical expert, Jon Brock. The plaintiff retained Brock to opine on  “relevant industry standards and how [Defendants] failed to meet those standards” while  implementing OSF. The defendants cited numerous reasons and moved to block his testimony. The defendants argued he used the wrong industry standard for replying to an RFP. The defendants’ expert, John Hutchinson, disagreed with Brock on the standard to be  used. The defendants had identified a “battle of the experts,” which is the subject for cross examination before a jury and not for a Daubert motion. 

The defendants argued that Brock’s opinion on whether the defendants met the industry  standard for an RFP was an improper attempt at contract interpretation, since their response  was incorporated into the MPSA. “Brock’s opinions on this point do not interpret a contract  but are instead directed toward Plaintiff’s fraudulent inducement and negligent  misrepresentation claim.” 

The defendants also argued that Brock’s account of the relevant standard and whether the  defendants failed to meet it were irrelevant. This was inaccurate since the plaintiff had alleged negligent misrepresentation. 

The defendants also argued that Brock’s opinions regarding the defendants’ failure to meet  industry standards were unreliable. “Specifically, Defendants claim that Mr. Brock’s  testimony as to Defendants’ defective functional matrix grading relies on the wrong  numbers.” To the extent that the defendants’ perceive shortcomings in Brock’s assessment of the defendants’ functional matrix grading, those were matters for cross-examination. 

The defendants also argued that Brock’s opinions relied on “ISG’s Project Estimation as a  Service (PEaaS) tool” without an explanation of the PEaaS tool’s methodology. The court agreed with the plaintiff that the methodology was adequately explained. OSF was compared in scope and complexity to similar projects drawn from a database of over 13,000 completed projects. Given that, this was a subject for cross-examination but not exclusion. 

The defendants argued that several of Brock’s opinions constitute impermissible legal conclusions. With respect to Brown’s assertions regarding the defendants’ misrepresentations in this case, the court agreed. The plaintiff claimed that Brock’s assertions of misrepresentations were not improper attempts to apply the facts to the law  but attempts to apply the facts to the industry standard of “respond[ing] accurately and  factually to the RFP.” An expert witness’s testimony went into an improper legal conclusion  when the witness over relied on terms that “have a separate, distinct, and specialized meaning in the law different from that present in the vernacular.” (United States v. Richter  and United States v. Schneider) Brock may testify factually about the defendants’ conduct during the RFP process and whether it comported with industry standards, but “any  references to Defendants’ ‘misrepresentations’ will be excluded.” 

Further, the defendants argued that Brock’s opinions on an industry standard of “vendor  transparency, honesty, experience, and accountability” was unreliable as it read as  something Brock created out of whole cloth, and it was unhelpful to the jury because whether  the defendants violated this industry standard had little bearing on breach of contract in this case. The court was unpersuaded. Review of Brock’s report showed that reference to this  industry standard was shorthand for “a standard and expectation that the vendor, as the expert, will staff the project with individuals that have expertise in the field and industry being  deployed,” as well as a “standard in the industry to have a risk register and associated risk  mitigation that is released with the weekly status.” In this light, this industry standard was proper and was relevant to the plaintiff’s misrepresentation claim. 

Further, the defendants argued that Brock’s opinions about OSF not being highly  configurable or ready for the U.S. market were not reliable because Brock never examined, used, or evaluated OSF, and he had not explained how OSF’s lack of certain functionalities “means the entire OSF product was not ‘ready’ for the entire U.S. market.” These arguments  were also unpersuasive. His experience and familiarity with the industry can form the basis  of his opinions. 

Finally, the defendants argued that Brock’s various other opinions about the defendants’ state of mind, credibility of the defendants’ experts, and promise to deliver by a certain date  were all improper. As to the defendants’ state of mind, the court agreed it was improper. “Thus, any of Mr. Brock’s references to Defendants’ intent or state of mind will be excluded.” The defendants’ motion to exclude Brock’s opinion was denied in part and granted in part. 

The defendants’ retained damages expert, Peter Schulman. In his rebuttal report, Schulman  opined that, in the event of recission, the plaintiff would be entitled to zero damages based  on an offset of the defendants’ costs. Further, he assumed damages would be limited under  the MPSA to a 12-month period from July 3, 2020, to July 2, 2021. The plaintiff argued that  Schulman’s recission damages should be excluded. Schulman failed to consider the defendants’ liability when assessing recission damages. Further, his opinion that Seigneur’s report “misses the mutuality of the recission remedy” was an improper legal conclusion.  Neither argument “holds water.” The Seigneur criticisms, faulty assumptions, or omissions  went to the weight and not exclusion. Schulman’s criticism of Seigneur’s report was not a  legal conclusion but rather “garden variety rebuttal testimony.” 

The plaintiff also argued that Schulman’s opinions regarding damages should be excluded  because he assumed the relevant look back date as July 2, 2021. The plaintiff noted the true look back date was in dispute. The court was unpersuaded. Schulman did not opine on  the applicability of the MPSA nor the true look back date, only that his firm was “instructed  to use July 2, 2021,” the date the city filed its complaint. If the July 2, 2021, look back date  was rejected at trial, the failure of this assumption might vitiate Schulman’s opinion on  contract assumptions. For now, however, Schulman’s opinion had sufficient foundation  under Rule 702. The motion to exclude Schulman’s opinions was denied. 

The defendants’ retained technical expert, John Hutchinson. Hutchinson was retained to  opine on the primary causes of the OSF project’s failure. The plaintiff moved to exclude him  for various reasons. 

The plaintiff argued his opinions were unreliable. He failed to identify his methodology for  conducting a causation analysis, and he failed to conduct an audit or account for all issues  affecting the project. However, like Brock, Hutchinson relied on his experience and  knowledge from implanting CISs for over 20 years to assess reasons for the project’s failure. That was an acceptable methodology. See Kumho Tire. “[T]he reliability inquiry may be  satisfied based upon a non-scientific expert’s personal knowledge or experience.” As to his not considering certain facts during his analysis, that was best left to cross-examination. 

The plaintiff also argued that Hutchinson’s opinions about deployment of broadband  services were unreliable. He failed to identify his methodology, and broadband services  were outside of his expertise. The court agreed with the defendants that his opinions on broadband services “depend not on application-specific expertise in broadband, but on  expertise in billing and customer-care system implementation projects.” 

The plaintiff further argued that Hutchinson’s opinions about whether either of the parties  breached the contract were improper. Based on statements the plaintiff challenged, it appeared that Hutchinson was not attempting to interpret the MPSA. Instead, he discussed reasons why the OSF project failed. This was acceptable expert reliance on language  contained in the parties’ contract. (Bethel v. Berkshire Hathaway Homestate Ins. Co.) 

The plaintiff further argued that Hutchinson’s opinions that the defendants’ state of mind and  credibility were improper. For example, his report said that the defendant “always intended to modify the portal code purchased from Milestone” and that “the parties planned for this  [testing to occur] all along”. For the same reasons as for Brock, references to the defendants motives, plans, or intentions during the OSF project will be excluded. 

Finally, the plaintiff argued that Hutchinson’s various other opinions should be excluded as  either conclusory or based on unspecialized knowledge. The court found this unavailing and will not discuss them here.  

“For these reasons, Plaintiff’s motion to exclude Mr. Hutchinson’s opinion is DENIED IN  PART and GRANTED IN PART.” 

Conclusion

The conclusions the court reached were explained in the digest above and  summarized in this section of the opinion.