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Risk Management ExpertThe owner of a meat processing plant who had entered into an agreement with a cattle broker to procure, feed, and slaughter cattle, filed suit in state court against the cattle broker, alleging breach of contract. The cattle broker removed the case and filed counterclaim for breach of contract, breach of implied duty of good faith and fair dealing, and breach of fiduciary duty. Inter alia, the owner of the meat processing plant moved to exclude the cattle broker’s risk management expert testimony.

Defendants specialized in procuring, feeding, and selling cattle. They contracted with Plaintiff to process and slaughter cattle through its processing plants. The agreement was part of the Cattle Procurement and Feeding Arrangement (“CPFA”). Under the CPFA, Plaintiff and the Defendants were to jointly hold title to all cattle purchased pursuant to the agreement; share equally in the cattle profits or losses; and jointly operate to procure, feed, and toll process the cattle. The contract also contained a risk management provision that said, “The Parties agree that Plaintiff will be solely responsible for determining and implementing any risk management (i.e. hedging) strategies for the Cattle on feed with the Feedlot Vendor, and the grain associated with feeding the Cattle.”

Plaintiff implemented hedges on cattle as early as March 2011, but didn’t implement hedges on corn until August 2011. Plaintiff’s employee who handled the risk management for Plaintiff, stated that he would not typically wait so long to implement corn hedges but explained that he was “being patient” because corn prices were high.

The CPFA resulted in significant losses for Defendants, and because of this, they couldn’t pay their debts on time. When Defendants failed to pay Plaintiff their share of the losses, Plaintiff brought suit alleging breach of the CPFA. Plaintiff moved to exclude the opinions of the Defendants’ risk management expert. Plaintiff argued that the expert’s opinions on risk management were improper legal conclusions—inadmissible under Federal Rule of Evidence 702.

U.S. District Court Judge Eric F. Melgren agreed with the Plaintiff to some extent. He wrote in his opinion that an expert may not apply the law to the specific facts of the case to form legal opinions, and that Defendant’s expert’s report was “littered with such opinions.” As an example, the risk management expert opined that Plaintiff’s conduct “is a violation of Section 4 of the Agreement.” This testimony, the judge explained, would be an improper attempt to tell the jury the result they should reach. This type of expert testimony is excluded because it states a legal conclusion, usurps the jury’s function of deciding the facts, or interferes with the court’s function of instructing the jury on the law. In other words, Defendants couldn’t present an “expert opinion” that Plaintiff breached the CPFA. That was only for the jury to decide, Judge Melgren held. As a result, Plaintiff’s motion to exclude expert testimony was granted to the extent of Defendants attempting to present this improper expert testimony.

Nonetheless, the judge noted that Defendants weren’t completely precluded from presenting expert testimony about risk management. Expert evidence as to the parties’ intent on the risk management provision may be relevant, he noted. Rule 702(a) of the Federal Rules of Evidence requires that an expert’s opinion “help the trier of fact to understand the evidence or to determine a fact in issue.” If a fact is not at issue, then expert testimony on that is unnecessary.

Thus, Plaintiff was correct that the risk management expert may not testify as to the meaning of an unambiguous contract, because that determination is one of law for the court. However, the judge had already determined that the CPFA was ambiguous regarding Plaintiff’s risk management obligations. So evidence was permitted to determine the parties’ intent—an issue of fact. Expert opinion about risk management, the judge found, generally may help the trier of fact to determine a fact in issue.

In light of this reasoning, Defendants were allowed to present evidence of the parties’ intent regarding the risk management provision of the contract, but Defendant’s expert’s opinions applying the law to the specific facts of the case and which sought to tell the jury what decision to reach wasn’t allowed. Defendants were permitted to file a redacted expert report consistent with the judge’s order. But since all discovery deadlines had passed, Judge Melgren reminded Defendants that the report was to be limited to previously expressed opinions—nothing new could be added. If Plaintiff still objected to Defendants’ redacted report, it was free to request a Daubert hearing on the matter.

Plaintiff’s Motion to Exclude Expert Testimony was granted in part. The judge held that expert testimony that owner breached the contract stated a legal conclusion, and thus, was inadmissible. However, the expert testimony as to ambiguous contract term was admissible.

 

 

Cargill Meat Solutions Corporation v. Premium Beef Feeders, 2016 WL 827753, Case No. 13-1168-EFM-TJJ (D. Kan. March 2, 2016)