Economics Expert Was Not Allowed to Opine on Other Speculative Consequential Damages

This action arises from Eat Well’s sale of its Sapientia business for $10 million. Eat Well alleged that under the governing documents, it was entitled to receive $8.5 million in common stock in TRxADE (n/k/a Scienture). Instead, Eat Well received Series B Preferred Stock – a newly created class of stock carrying no voting rights, no dividend rights, no liquidation preference, and no ability to convert at the holder's option. Conversion of those preferred shares required a shareholder vote that Defendants refused to schedule. Meanwhile, Defendants sold the company's operating assets for $22.5 million, sold Superlatus for $1, and distributed special dividends totaling nearly $2 million to CEO Suren Ajjarapu personally.

Eat Well retained a damages expert, Erick West, in support of its claims. Scienture sought to exclude West’s expert testimony. Scienture hired a rebuttal damages expert, Peter Gampel. Eat Well sought to disqualify Gampel and to exclude his testimony on substantive grounds.

Economics Expert Witness

Erick C. West attended Washington State University where he completed a Bachelor’s degree and a Master’s degree in Economics. West received formal training in the field of forensic economics and business valuation as well as valuable on-the-job experience working on hundreds of litigation cases involving economic damages. West also has extensive trial experience, which involves the ability to simplify complex financial subject matter and explain it to a jury in the most effective way possible.

Get the full story on challenges to Erick West’s expert opinions and testimony with an in-depth Challenge Study.

Valuation Expert Witness

Peter Gampel has been fully engaged and has worked exclusively in the specialized fields of business valuation and litigation support for over 40 years. Gampel is a a Certified Public Accountant and an Accredited Senior Member in Business Valuation (“ASA”) from the American Society of Appraisers.

Want to know more about the challenges Peter Gampel has faced? Get the full details with our Challenge Study report.

Discussion by the Court

Eat Well's damages expert, Erick West, provided eight opinions in his report. Of these, four pertain to damages from claims or theories that are no longer part of this action. West's eighth opinion, which was a nascent, still 'pending' opinion regarding other speculative consequential damages, failed to comply with Federal Rule of Civil Procedure 26(a)(2)(B)(i).

The remaining three calculate the damages from the Defendants' purported failure to pay the cash and debenture consideration for the sale of Sapientia or the other promissory notes allegedly due to Eat Well.

Because these three opinions are the only remaining relevant opinions, the Court will limit its analysis to them.

The Defendants put forth multiple arguments for excluding West and his testimony. The Defendants averred that West's "testimony would not be helpful to the jury," and thus his opinions should be excluded. Eat Well contended that West's testimony "will assist the jury by synthesizing complex financial information into a coherent damages figure" because the "calculations require specialized knowledge that a lay juror would not possess."

This might have been accurate for the opinions on liquidating common stock, but it is not for the remaining opinions, which require only straightforward interest rate calculations based on the unpaid cash and debenture from the sale of Sapientia to Superlatus and the unpaid promissory notes. Such "testimony is based on simple math," rather than "scientific, technical, or other specialized knowledge."

Although Eat Well may be able to recover damages from its unjust enrichment claim for the uncompensated post-closing assistance to Scienture, its breach of fiduciary duty claims regarding the sale of Superlatus for one dollar, or its fraudulent transfer claim, West did not provide opinions related to these claims.

The Court disagreed with Eat Well's contention that the determining damages is beyond the jury without West's "sourcing the applicable prejudgment interest rates" and "correctly calculating compounding interest on multiple debt instruments with different maturity dates."

Because West's opinions that are relevant to the surviving claims would not use scientific, technical, or other specialized knowledge to help the jury to understand the evidence or to determine a fact in issue, the Court granted the Defendants' Daubert motion and excluded West's testimony. Because West is barred from testifying, the Court denied as moot Eat Well's Daubert motion and motion to strike the testimony of Defendants' rebuttal expert, Peter Gampel.

Held

• The Court granted Defendants’ Daubert motion to exclude the testimony of Erick West.

• The Court denied as moot Eat Well’s Daubert motion and motion to strike the testimony of Defendants’ rebuttal expert, Peter Gampel.

Key Takeaway

West offers nothing more than what lawyers for the parties can argue in closing arguments. It should be noted that West's opinions that are relevant to the surviving claims would not use scientific, technical, or other specialized knowledge to help the jury to understand the evidence or to determine a fact in issue.

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