Testimony of Accounting Expert Witnesses Admitted Despite Using a Different Form of Calculation
Posted on August 29, 2024 by Expert Witness Profiler
This case arises out of a fee dispute between Defendant, CMR Construction & Roofing, LLC and Plaintiff, Crescent City Remodeling, LLC. CMR contracted Crescent to perform remediation work at Tangipahoa Parish School Board buildings following Hurricane Ida. Crescent later alleged that CMR breached the parties’ Joint Work Agreement by failing to compensate Crescent for its work.
On May 22, 2023, CMR impleaded Third-Party Defendant, Castle, arguing that CMR had paid Castle the full amount due to both Castle and Crescent, but that Castle had failed to pay Crescent its share.
CMR filed a motion to exclude the report and opinions of Crescent’s experts John W. Theriot and Jason R. Schellhaas because it did not comply with Federal Rule of Evidence 702.
Accounting Expert Witnesses
John Theriot is a Certified Public Accountant, Certified Forensic Accountant, and Certified in Financial Forensics. He is a member of the American Institute of Certified Public Accountants, the Louisiana Society of Certified Public Accountants, and the American College of Forensic Examiners. He received his Bachelor of Science in Accounting from Nicholls State University in 1983, and he received his Masters in Accounting from Tulane University in 2004. Theriot began his career in public accounting upon graduating from Nicholls in 1983 as a staff accountant at Malcolm M. Dienes. He is now the managing partner of the firm and has over 30 years of experience in the field of public accounting.
Jason R. Schellhaas is a Partner at Malcolm M. Dienes, LLC. He primarily practices in the areas of tax compliance and tax planning for individuals, entities and estates; forensic accounting and litigation support services; business valuations; and audits, reviews, compilations and preparation of financial statements of small businesses.
Discussion by the Court
To begin with, CMR argued that the experts’ testimony is not reliable, arguing that the assumptions, provided by Crescent’s counsel, informed the experts as to what conclusion they should reach and caused the experts to render legal opinions. Specifically, CMR took issue with the second assumption, which stated: “The project manager fee and sales commissions should not impact the payment due to CCR, as these amounts should be based on CMR’s 50% of the profit, rather than the entire profit which was to be allocated between CCR and CMR 50% / 50%.”
Reliability
First, both individuals are certified public accountants; the Court believes they used reliable methods and have satisfactory skills and training. Second, the Court is not persuaded that this assumption renders the opinion unreliable; the calculations in CMR’s report applied the commission to the profit of the entire job—before the 50-50 split between CMR and Crescent. This report merely assumes a different form of calculation. To the extent that the assumption affects the experts’ reliability, that issue goes to the weight of the evidence, not to its admissibility.
Relevance
CMR also moved to exclude the experts’ report on the basis that it is not relevant. In support, it cited cases in which the trial court barred testimony because it was speculative. CMR also challenged this report based on an allegation that the opinions “are the product of incomplete and inaccurate information, as well as based on incorrect assumptions and the blanket adoption of [Crescent’s] legal position.” The Court found the opinions relevant. First, the opinions are based on data in discovery and from the report it rebuts. Second, the opinions detail what the profit would be if the commission were calculated differently than it was in CMR’s expert report. This challenge goes to the weight of the evidence, not to its admissibility. The opinions expressed by Crescent’s experts satisfy the requirements of Daubert.
Finally, the Court noted that CMR’s report has not been challenged, despite its application of a different interpretation of the underlying contract. The underlying legal issue—the interpretation of the contract—is an issue upon which the Court has not yet ruled. It would be premature to exclude only one expert’s testimony related to damages merely because it assumes a possible interpretation, absent a ruling on the proper interpretation of the contract’s language.
Held
In conclusion, the Court denied CMR’s motion to exclude the opinions of John W. Theriot and Jason R. Schellhaas.
Key Takeaway:
The opinions of Theriot and Schellhaas meet the Daubert standards as they are based on data in discovery and from the report it rebuts. Moreover, the opinions detail what the profit would be if the commission were calculated differently than it was in CMR’s expert report.
Case Details:
| Case Caption: | Crescent City Remodeling,Llc V. Cmr Construction & Roofing, Llc |
| Docket Number: | 2:22cv859 |
| Court: | United States District Court, Louisiana Eastern |
| Order Date: | August 27, 2024 |
