Finance expert witness excluded since opinion did not rely on specialized or technical knowledge

In February 10, 2023, Defendants, consisting of Varsity Brands, LLC; Varsity Spirit, LLC; Varsity Spirit Fashions & Supplies, LLC and U.S. All Star Federation, filed a Motion to Exclude the Testimony of James H. Aronoff. The motion sought to prevent the admission of Aronoff’s expert testimony, which was disclosed by the Indirect Purchasers, Jessica Jones and Christina Lorenzen, on June 20, 2022.

Aronoff’s expert report, submitted by the Indirect Purchasers, comprised three parts. The first part detailed the history of Varsity, encompassing its growth, ownership structure, and product and service offerings. The second part outlined Varsity’s operational model, alleging that the company created barriers to entry and utilized its dominant market share and access to capital to stifle competition in various segments of the Competitive Cheer market. The third part of Aronoff’s report provided specific, pragmatic recommendations for structural relief within the Competitive Cheer market.

In response to arguments propounded by other experts, the Indirect Purchasers disclosed a rebuttal report from Aronoff on December 14, 2022.

Finance Expert Witness

James Aronoff has more than thirty-eight years of professional experience, primarily in the financial services industry. He has held several senior positions within highly regulated financial institutions that operate in competitive markets. He is currently a Managing Director of Cohn Reznick’s Restructuring and Dispute Resolution practice. He provides advisory services to clients, offering guidance on matters related to regulatory compliance, best practices, restructuring and workouts, dispute resolution, and enterprise risk management.

Discussion by the Court

The Defendants’ motion contested the admissibility of Aronoff’s opinions, presenting three main arguments. Firstly, they argued that Aronoff lacked relevant experience. Secondly, they asserted that the majority of his report consisted of factual narration. Lastly, the Defendants contended that Aronoff’s recommendations for structural relief were inappropriate subjects for expert testimony.

The Defendants initially asserted that Aronoff lacked the qualifications to serve as an expert. They argued that Aronoff’s background did not include any relevant experience in sports or sports management, he was not an economist, and had no prior involvement in antitrust litigation before this assignment. Despite Aronoff’s claim of expertise in compliance programs, the Defendants contended that his opinions were not directly linked to those programs but merely suggested potential remedies such as forbidding Varsity and/or USASF from engaging in practices complained about by the Plaintiffs or other proffered experts. In contrast, the Indirect Purchasers argued that Aronoff’s extensive curriculum vitae demonstrated his experience and expertise in corporate governance and compliance within large and complex business organizations. The Court ultimately determined that Aronoff’s background in corporate governance and compliance qualified him to provide testimony on the topic.

The Defendants contended that the majority of Aronoff’s reports constituted a “factual narrative” devoid of any technical or scientific conclusions. In response, the Indirect Purchasers argued that Aronoff’s report not only presented historical facts but also provided context and analysis, making it admissible as expert testimony. The Court, citing cases such as Highland Capital Mgmt., LP v. Schneider, 379 F. Supp. 2d 461, 469 and Tillman v. C.R. Bard, Inc., 96 F. Supp. 3d 1307, 1330 emphasized that expert testimony should not be solely for constructing a factual narrative based on record evidence, as such evidence could be appropriately presented through percipient witnesses and documentary evidence. However, an expert, like Aronoff, was allowed to articulate the “factual underpinning” on which his opinions were based, distinguishing it from a mere recitation of facts.

In the case, the Court noted that Aronoff’s opening report contained a section titled “Background,” constituting nineteen pages out of a total of forty-one. This section provided a comprehensive history of competitive cheer, detailed Varsity’s corporate and acquisition history, discussed Varsity’s interactions with governing bodies in competitive cheer, and outlined the ownership of Varsity by private equity firms. These facts were supported by footnotes to deposition testimony, documents, and Indirect Purchasers’ Complaint.

The Court determined that while this information might be appropriate when presented by fact witnesses or through documentary evidence, it was not relevant or necessary to contextualize or support Aronoff’s opinion testimony in his opening report regarding Varsity’s operational model. As a result, the Court excluded any testimony from Aronoff that intended to cover these factual details.

The Defendants contended that the remaining portion of Aronoff’s opinions, specifically his recommendations for structural relief, should be excluded as they were deemed irrelevant. The Defendants argued that Aronoff’s recommendations, offered in both his opening report and rebuttal reports, failed to meet the requirements of Rule 702, asserting that the testimony lacked relevance and reliability. The Defendants specifically claimed that Aronoff’s opinions, focusing on injunctive relief, did not contribute to the understanding of evidence or the determination of facts in question.

In response, the Indirect Purchasers argued that Aronoff’s recommendations served as guideposts for the trier of fact, aiding in the analysis of the competitive effects of the Defendants’ business practices and proposing mitigating practices grounded in corporate governance to restore and maintain competition in the relevant market.

However, the Court determined that Aronoff’s recommendations did not appear to rely on specialized or technical knowledge. Additionally, the recommendations were deemed non-specific, and Aronoff himself acknowledged during deposition that they were intended as a starting point for crafting actual procedures, lacking specific rules for embodiment in an agreement or order. Consequently, the Court found Aronoff’s testimony not clearly derived from specialized knowledge and lacking specificity, and as a result, excluded his testimony in its entirety. The Court did note the possibility of reconsideration if the Defendants presented proof related to Aronoff’s testimony, with a potential allowance for his testimony as a rebuttal expert at that time.

Held

The Court granted the Defendants’ Motion to Exclude the Testimony of James Aronoff.

The Court has not arrived on an outcome for this case since the remaining issues involved in this case still await resolution.

Key Takeaways:

The admissibility of expert testimony hinges on several key considerations, as illustrated in the case involving Aronoff. First and foremost, the qualifications of the expert play a crucial role. In this instance, the Defendants challenged Aronoff’s expertise, contending that his background lacked relevance to the subject matter. The Court underscored the significance of an expert’s qualifications in determining admissibility. Additionally, the purpose of expert testimony must surpass presenting a mere factual narrative, a task better suited for percipient witnesses or documentary evidence. The Court emphasized that expert opinions should articulate the “factual underpinning” supporting their conclusions. Furthermore, the relevance of information presented in an expert’s report is paramount. In this case, a section of Aronoff’s report providing historical context and corporate details was excluded as irrelevant. Specificity in recommendations is another critical factor; non-specific recommendations lacking in specialized knowledge may be deemed irrelevant and unhelpful to the trier of fact, leading to exclusion. The Court also considered the linkage of recommendations to specialized knowledge, ultimately excluding Aronoff’s testimony as it appeared not to rely on such knowledge.