Accounting Expert’s Opinion Concerning Labor Costs Excluded
Posted on May 5, 2025 by Expert Witness Profiler
This case arises out of Delta’s delayed donut wrapping system. In late 2021, Bon Appetit Danish, Inc. and Bon Appetit Specialty Snacks, LLC (collectively, “Bon Appetit”) and Delta Systems and Automation, LLC’s (“Delta”) entered into a set of three contracts for Delta to manufacture packaging systems for Bon Appetit’s baked goods.
But the donut packaging system failed to launch. After further testing failed to resolve the performance issue, Bon Appetit terminated all three contacts on April 14, 2023.
Bon Appetit sued Delta over a contract dispute involving Overwrapping Systems, claiming $6,214,505 in labor costs as direct damages resulting from Delta’s alleged breach. Bon Appetit’s expert, Joseph Wheat, testified that these labor costs were directly caused by Delta’s failure to deliver properly functioning systems.
Delta countered, arguing that the labor costs were consequential damages, barred by the Limitation of Liability provision, because they stemmed from Bon Appetit’s internal plan to use the Overwrapping Systems.
Delta moved to exclude Wheat’s testimony, asserting that the labor costs were derivative losses arising from circumstances that are particular to the contract or to the parties.
Additionally, Bon Appetit sought to introduce Lyle Rogalla as an expert to testify about the norms, customs, and practices, of the baked goods overwrapping industry.
Delta opposed, arguing that Rogalla was unqualified to testify specifically about donut overwrapping systems and that his opinions were unreliable under Rule 702.
Accounting Expert Witness
Joseph Wheat, CPA/ABV, CFF, is a Senior Vice President at J.S. Held, a global consulting firm specializing in a wide variety of forensic analysis.
A Certified Public Accountant licensed to practice in California since 1993, Wheat has over 20 years of experience testifying as an expert witness on economic damages issues in both federal and state court matters.
Wheat has performed numerous business valuation related to marital
dissolutions, tax and estate matters and partnership disputes.
Packaging Expert Witness
Lyle Rogalla has led the development of advanced packaging and food processing equipment, delivering innovative, high-value solutions that optimize production processes and reduce costs for clients ranging from small businesses to Fortune 100 companies.
His portfolio is enriched by 29 patents, encompassing both utility and design, for industrial and commercial applications. He has collaborated with over 100 machine manufacturers to deliver extensive automation and equipment solutions tailored to the clients’ specific needs.
Discussion by the Court
A. Motion to Exclude Damages Opinions of Joseph Wheat
The Court considered Delta’s motion to exclude the opinion of Bon Appetit’s expert, Wheat, who attributed $6,214,505 in labor costs to Delta’s alleged breach of contract.
The core issue was whether these costs were direct damages, which may be recoverable, or consequential damages, barred by the the Limitation of Liability provision. Direct damages (also called general damages) flow “directly and necessarily from a breach of contract, or that are a natural result of a breach.”
Consequential damages (also called special damages) are “secondary or derivative losses arising from circumstances that are particular to the contract or to the parties.”
In this case, Bon Appetit’s labor costs are considered consequential damages since they stem from Bon Appetit’s unique plan to use the Overwrapping Systems to streamline production and eliminate certain employee positions, a point Bon Appetit will argue through Wheat’s evidence of the system’s added efficiency.
The Court excluded Wheat’s opinion concerning Bon Appetit’s labor costs pertaining to consequential damages.
B. Motion to Exclude Expert Opinions of Lyle Rogalla
Delta moved to exclude the opinion of Bon Appetit’s expert, Rogalla, arguing that he lacked the necessary qualifications to opine on donut overwrapping systems and that his methodology was unreliable under Daubert and Rule 702 due to an alleged lack of supporting facts or data.
The Court disagreed. It found that Rogalla was qualified to testify based on his decades of experience with “solutions for complex automation and packaging needs . . . with emphasis in the food industry,” including “packaging and process automation, the preparation of specifications for the machines and the goods handled by the machines, testing, and modifying the machines and specifications to address both process quality and efficiency.”
Insofar as the Donut System diverged from Rogalla’s experience with other food packaging systems, the Court held that it concerned the weight of his testimony, not its admissibility.
The Court also found that Rogalla had relied on a sufficient factual basis, including the Complaint, contract documents, Delta’s website, and federal regulations. Challenges to the depth or nature of that evidence, the Court concluded, were issues of credibility and weight, appropriate for cross-examination, not grounds for exclusion.
Held
- The Court granted Delta’s Daubert motion to exclude Joseph Wheat’s opinions.
- The Court denied Delta’s Daubert motion to exclude the testimony of Lyle Rogalla.
Key Takeaway:
- Not all foreseeable damages are direct damages, as consequential damages may be “foreseeable and proximately caused by the breach of a contract.”
- An expert might draw a conclusion from a set of observations based on extensive and specialized experience.
Case Details:
| Case Caption: | Bon Appetit Danish, Inc. v. Delta Sys. & Automation LLC |
| Docket Number: | 2:23cv04305 |
| Court Name: | United States District Court for the Central District of California |
| Order Date: | March 17, 2025 |
