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analyzing whether expert had experience in relevant market in which plaintiff participated, and not just whether the projects the expert and plaintiff performed were comparable
Summary of this case from Vioni v. Providence Inv. Mgmt., LLCOpinion
01 Civ. 9468 (RWS).
October 29, 2004
WOLF, BLOCK, SCHORR and SOLIS-COHEN New York, NY By: KENNETH G. ROBERTS, ESQ. JENNIFER F. BELTRAMI, ESQ. Of Counsel.
SHAPIRO MITCHELL FORMAN ALLEN MILLER New York, NY By: MICHAEL C. MILLER, ESQ. YORAM J. MILLER, ESQ. Of Counsel.
OPINION
Plaintiff The Economist's Advocate, LLC ("EA") seeks to introduce at trial the opinion testimony of Thomas R. Gramaglia of The Yankee Group ("Gramaglia") as to the value of the e-learning services EA allegedly performed for defendants Insead and Insead Online (collectively, "Insead") and Cognitive Arts, testimony being offered in support of EA's quantum meruit claim. According to EA, Gramaglia has been and will be offered as an expert in internet business strategies, media planning services, analysis of competitive service providers, product management, high technology strategies, and market research. Insead has movedin limine to exclude Gramaglia's testimony and report.
Federal Rule of Evidence 702 governs the admissibility of expert testimony and provides:
If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise, if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case.
F.R.E. 702. The party seeking to introduce expert testimony "bears the burden of establishing its admissibility." Baker v. Urban Outfitters, Inc., 254 F. Supp. 346, 353 (S.D.N.Y. 2003).
The first step in determining the admissibility of expert testimony is determining "whether the proposed witness qualifies as an expert." Id. at 352. The trial court is required to "decide whether th[e] particular expert ha[s] specialized knowledge to assist jurors `in deciding the particular issue in the case.'" Kuhmo Tire Co. v. Carmichael, 526 U.S. 137, 157 (1999). While Gramaglia's general expertise and qualifications are not in question, his expertise in certain matters as to which he would opine has not been demonstrated, as set forth below.
Second, the trial court must determine "whether the scientific, technical or other specialized testimony provided by the expert is both relevant and reliable." Baker, 254 F. Supp. 2d at 353;see also Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 596-97 (1993) (describing the trial court's "gatekeeping" function in applying Rule 702). As the Second Circuit has explained,
In fulfilling this gatekeeping role, the trial court should look to the standards of Rule 401 in analyzing whether proffered expert testimony is relevant, i.e., whether it ha[s] any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence.Amorgianos v. Nat'l R.R. Passenger Corp., 303 F.3d 256, 265 (2d Cir. 2002) (internal quotation marks and citation omitted and alteration in original).
In assessing whether the foundation of the proffered testimony is sufficiently reliable,
[T]he district court should consider the indicia of reliability identified in Rule 702, namely, (1) that the testimony is grounded on sufficient facts or data; (2) that the testimony "is the product of reliable principles and methods"; and (3) that "the witness has applied the principles and methods reliably to the facts of the case."Id. (quoting F.R.E. 702). It is "critical that an expert's analysis be reliable at every step." Id. at 267. In other words,
As Chief Judge Becker of the Third Circuit has explained, the Daubert "requirement that the expert testify to scientific knowledge — conclusions supported by good grounds for each step in the analysis — means that any step that renders the analysis unreliable under the Daubert factors renders the expert's testimony inadmissible." In re Paoli R.R. Yard PCB Litig., 35 F.3d 717, 745 (3d Cir. 1994); see also Heller [v. Shaw Indus., Inc.], 167 F.3d [146,] 155 [(3d Cir. 1999)] ("[T]he reliability analysis applies to all aspects of an expert's testimony: the methodology, the facts underlying the expert's opinion, the link between the facts and the conclusion, et alia.").Id. (emphasis in original). "In deciding whether a step in an expert's analysis is unreliable, the district court should undertake a rigorous examination of the facts on which the expert relies, the method by which the expert draws an opinion from those facts, and how the expert applies the facts and methods to the case at hand." Id. (noting that evidence should only be excluded if the flaw is sufficiently large "that the expert lacks good grounds for his or her conclusions") (internal quotation marks and citation omitted).
While the relevance of Gramaglia's proposed expert testimony is not in doubt, its reliability is. Gramaglia proposes to render an expert opinion on the reasonable value of the work that was performed by EA in the marketing, design and development of online executive education modules. In opining as to the reasonable value of the work performed, Gramaglia depends on a "detailed estimate of labor days associated with each of the tasks" involved as well as what he estimates is the reasonable rate for such labor. (Report of Thomas R. Gramaglia, dated Dec. 18, 2002 (the "Report"), at 2.) In arriving at the labor rate to be employed in his analysis, Gramaglia states in the Report:
I have estimated the price of each labor day at $3,000 per person, a discount of $500 from our standard rates for non-clients. The competitiveness of this labor rate is confirmed by the Yankee Group's experience in winning competitive bids and executing comparable consulting projects with comparable personnel.
(Id. at 3.) Put simply, Gramaglia has testified that his opinion "is based on what we, as The Yankee Group, would do, the activities we would perform and the fees that we would charge for those activities to produce the work output provided by [EA]." (Transcript of the Deposition of Thomas R. Gramaglia of Feb. 14, 2003 ("Tr."), at 25-26; see also Tr. at 30 ("We valued the services based upon the activities that we would perform to successfully complete the task and the associated charges with those tasks that The Yankee Group would perform.").)
The Yankee Group, according to the Report, is "internationally recognized as a leading market research and consulting firm specializing in high technology" with more than one thousand client companies worldwide and a subsidiary of the Reuters Corporation. (Report at 4.) There is no indication in the Report that The Yankee Group provides e-learning services or has "experience in winning competitive bids" in that market. Moreover, while Gramaglia has testified that The Yankee Group has put on large conferences, he has not demonstrated that he is an expert in putting on such conferences; indeed, he has testified that he relied upon the assistance of his colleagues at The Yankee Group in understanding the tasks performed by The Yankee Group with respect to planning large conferences. Gramaglia has specifically disclaimed that he is an expert in e-learning development.
Although Gramaglia testified at deposition that The Yankee Group had performed "comparable" consulting projects consisting of many of the activities identified with regard to EA's work and had succeeded in winning projects based on the labor rate in question, testimony as to what the market will bear with respect to an established, reputable company offers no basis for determining the reasonable rate for a start-up company such as EA without such credentials, even assuming the projects were, indeed, comparable in their content and attracted a comparable client base. In fact, Gramaglia did not determine the amount EA expended, and made no distinction between services rendered for the benefit of EA, the EA/Cognitive Arts joint venture or Cognitive Arts, and those for the benefit of Insead.
As the United States Supreme Court has explained in the context of valuing legal services, the rate appropriate for one provider of legal services is only relevant to the value of the similar services performed by another person of "reasonably comparable skill, experience and reputation." Blum v. Stenson, 465 U.S. 886, 895 n. 11 (1984). The same logic holds here.
Moreover, even assuming the comparison just described were both analytically apt and reliable, no justification — whether factual or analytical — has been offered to explain why the magnitude of the $500 discount from The Yankee Group's rate is appropriate with respect to determining the rate applicable to the services purportedly provided by EA. Absent such an explanation, the labor rate underpinning Gramaglia's opinion is simply arbitrary.
EA argues that no formal market analysis need be performed, and that numerous courts have upheld the validity of a practitioner opining as to the reasonable value of services in his field without mentioning a market analysis. The cases cited by EA, however, only suggest that a formal market analysis may not be necessary where the expert has relied upon knowledge of the billing practices in the market at issue or of comparable work performed by others in conjunction with the same project. See Wrench LLC v. Taco Bell Corp., No. 98 Civ. 45, 2003 U.S. Dist. LEXIS 7608, at *16-17 (W.D. Mich. May 2, 2003) (permitting experts to opine as to the reasonableness of the terms of the subject licensing proposal "based upon their experience in licensing deals"); In re Holocaust Victim Assets Litig., 270 F. Supp. 2d 313, 316 (E.D.N.Y. 2002) (allowing an attorney with considerable experience with class actions in general and intimate involvement with the subject class action as to opine as to the relative quality and importance of the contributions of other attorneys who worked on the litigation); R.B. Ventures, Ltd. v. Shane, No. 91 Civ. 5678 (CSH), 2000 WL 520615, at *5 (S.D.N.Y. May 1, 2000) (allowing experienced real estate brokers who had been working in the New York real estate market during the relevant period to opine as to the reasonable value of real estate brokerage services in that market); U.S.E. Telecomms., Inc. v. U.S.W. Info. Sys., Inc., No. 87 Civ. 2924 (KTD) (THK), 1993 WL 385810, at *29 (S.D.N.Y. Sept. 30, 1993) (allowing expert's opinion comparing work performed and charges billed by subcontractors working on the same project as the defendant subcontractor), aff'd, 38 F.3d 1289 (2d Cir. 1994). As Gramaglia has not established that he has knowledge of the relevant market in which EA participates and has not offered any opinion as to the reasonable labor rate for companies comparable to EA, the cases cited fail to support EA's position.
GSGSB, Inc. v. New York Yankees, No. 91 Civ. 1803 (SWK) (JCF), 1996 WL 456044 (S.D.N.Y. Aug. 12, 1996), aff'd, 122 F.3d 1056 (2d Cir. 1997) (unpublished), is not on point, as the defendants in that action did not contest the reasonableness of the hourly rate employed by the expert witness. See GSGSB, 1996 WL 456044, at *18.
As Gramaglia's opinion as an expert with regard to a reasonable labor rate for the services allegedly provided by EA is based on unreliable analysis, it is inadmissible. Gramaglia may testify as a fact witness to the rates charged for comparable conferences and may be deposed on that basis.
It is so ordered.