Experts are not obligated to present invoices, statements and documents in support of their testimony; Court refuses to exclude the testimony of Finance Expert Witness
Posted on October 16, 2023 by ewp_staff_writer
Plaintiffs Rearden LLC and MOVA LLC (collectively “Rearden”) sued Defendants The Walt Disney Company and related entities Walt Disney Motion Pictures Group, Inc.; Walt Disney Pictures; Buena Vista Home Entertainment, Inc.; Marvel Studios LLC; Mandeville Films, Inc.; Infinity Productions LLC; and Assembled Productions II LLC (collectively “Disney”) for contributory copyright infringement, vicarious copyright infringement, and trademark infringement.
The record-breaking success of Disney’s Beauty and the Beast was expressly attributed to a unique Oscar-winning visual effects (“VFX”) technology called MOVA Contour Reality Capture. MOVA was used to do the facial capture of the Beast, the romantic hero at the emotional center of the film. Everyone, from the director to the actors, acknowledged how crucial a role MOVA played in grasping every human subtlety of the beast’s facial performance.
Plaintiff, Rearden accused Disney of stealing its patented and copyright-protected MOVA Contour technology. Between February 2013 and March 2017, Disney contracted with DD3 to use the patented MOVA Contour system and copyrighted Contour Program for availing facial performance capture services. This included capturing actor Dan Stevens’ performance as the Beast character in Disney’s projects. Rearden alleged that Digital Domain 3.0 (“DD3”) directly infringed on Rearden’s copyright to its MOVA Contour Reality Capture program (“MOVA”). Rearden claimed Disney contracted with DD3 to use MOVA to create the character Beast in the 2017 film Beauty and the Beast without authorization.
Disney moved for summary judgment on all of Rearden’s claims related to Beauty and the Beast. Disney intended to offer expert testimony from Robert Wunderlich on apportionment of profits and damages. Rearden tried to prevent Wunderlich from testifying about Disney’s net income after taxes for “Beauty and the Beast” and Disney’s income taxes linked to the film, calculated based on federal corporate tax rates for each relevant year.
Finance Expert Witness
Robert Wunderlich is an experienced expert witness who has testified in over 150 cases. He has obtained his B.A. from Columbia University. He has a PhD in chemical physics from Harvard University and a MBA in finance from UCLA Anderson School of Management. Robert Wunderlich is currently the Principal and Co-Founder of Discovery Economics, Inc. and he is also the Lecturer of Corporate Finance at the University of California, Los Angeles, School of Law. He has worked for over 25 years in economic, financial, and accounting analysis, including as a senior manager at the consulting firm Deloitte and Touche LLP.
Discussions by the Court
Rearden moved to exclude portions of Disney expert Robert Wunderlich’s expert report and testimony. The Court applied the Federal Rules of Evidence 702 and Daubert standards in assessing admissibility of expert testimony. Under these standards, the proponent of expert testimony has the burden to establish its reliability and relevance. The Court serves as a gatekeeper, ensuring expert opinions have a valid connection to the issues in the case and a reliable factual basis. The focus is on the soundness of the methodology rather than the correctness of the conclusions.
In his opening expert report, Wunderlich provided a chart that calculated Disney’s net income after taxes for “Beauty and the Beast,” excluding consumer products and music. He stated that these figures were obtained from Disney’s “SAP accounting system,” where revenue and expenses were recorded in a general ledger. These records were subject to regular audits by PricewaterhouseCoopers (“PwC”) to verify internal controls. Additionally, Wunderlich noted that revenues were audited by various guilds, and production costs were audited by production incentive authorities in different locations.
During his deposition, Wunderlich testified that the numbers in the chart came from Disney’s system, although he did not have access to the underlying data for certain calculations and expense breakdowns. Rearden contested the substantiation of Wunderlich’s expert report, arguing that he did not independently verify specific financial figures. In response, Disney maintained that Wunderlich had explained his reasoning, reviewed documents from the SAP accounting system, and interviewed Disney employees.
The key question revolved around whether Wunderlich had relied on the type of facts or data that experts in his field typically use. It appeared to the Court that he had met this standard, and there was no requirement for him to independently validate the figures. The First Circuit rejected arguments against admissibility that sought detailed supporting data, citing the principle that an expert’s factual basis goes to the testimony’s credibility, not its admissibility. This view aligned with the Ninth Circuit’s stance that it was the opposing party’s responsibility to examine the factual basis during cross-examination as was held in International Adhesive Coating v. Bolton Emerson.
Wunderlich calculated Disney’s income taxes for “Beauty and the Beast” each year using federal corporate tax rates. He defended this approach by stating that it was appropriate since the film’s tax liability wouldn’t be influenced by Disney’s overall corporate losses or gains. Rearden disputed the relevance of this tax deduction, arguing it was against the law, while Disney countered that the real dispute was over Disney’s internal tax accounting methodology.
Both parties acknowledged that Disney could only deduct the taxes it actually paid. Wunderlich explained the method he used to determine Disney’s actual tax payments related to the film and why he considered it reasonable. Rearden’s objection centered on the belief that Disney, as a corporation, paid only one tax rate.
Rearden contended that the exclusion of Wunderlich’s opinions in eight previous cases was relevant to the reliability of his expert report and testimony in this case. However, as there was no indication that the opinions rejected in those prior cases were the same as the one Wunderlich presented here, this argument was deemed irrelevant.
The Court denied Rearden’s motion to exclude Robert Wunderlich’s expert testimony. The Court has not arrived on an outcome for this case since the remaining issues involved in this case still await resolution.
This case illustrates several important principles regarding admissibility of expert witness testimony.
- Experts are not required to independently verify or provide documentation for the facts and data they rely on, as long as it is the type reasonably relied upon in their field. The accuracy of the underlying information goes to credibility, not admissibility.
- Disagreements with an expert’s facts or conclusions are issues for cross-examination, not exclusion. The court serves a gatekeeping role focused on methodology, not conclusions. As long as the expert explains their reasoning and relies on sound methodology, exclusion is unwarranted.
- An expert’s exclusion in other cases does not automatically render their testimony inadmissible in a different case with different issues. The analysis depends on the specific opinions offered and issues in the instant case.
- Framing disagreements with an expert’s factual assumptions as a Daubert challenge usually fails. Methodological soundness is key, not accuracy of underlying facts. The appropriate way to contest shaky assumptions is through cross-examination and presentation of contrary evidence at trial.
Posted In: Expert Challenges, Finance Expert Witness
Tagged In: Accounting, Calculations, Expert Testimony, Reliable