Earlier this year, a bank that purchased a construction loan sued the seller and its parent company for breach of contract, negligence, willful misconduct, and specific performance. The loan purchaser motioned to strike defendants’ expert’s testimony. Several issues in this case illustrate the importance of an expert witness with adequate preparation and coaching by counsel.  The defendant’s banking expert was able to withstand various motions to exclude his expert testimony.

Chief Judge of the U.S. District Court for the Southern District of Alabama heard Plaintiff’s motion to exclude Defendant’s expert testimony. The judge explained that under Daubert, the court must conduct a three-part test to determine the admissibility of expert testimony.

Expert testimony may be admitted into evidence if: (1) the expert is qualified to testify competently regarding the matters he intends to address; (2) the methodology by which the expert reaches his conclusions is sufficiently reliable as determined by the sort of inquiry mandated in Daubert; and (3) the testimony assists the trier of fact, through the application of scientific, technical or specialized expertise, to understand the evidence or to determine a fact in issue.

The Chief Judge explained that Daubert hearings aren’t required, but are many times helpful in complicated cases involving multiple expert witnesses.

Expert Qualifications. Plaintiff argued that Defendant’s banking expert was not qualified to render expert opinions regarding participation loans. The judge stated that the banking expert’s report recited that his background, education, and experience included a significant amount of training in all areas of banking and mortgage banking including participations.  In his deposition, the banking expert testified that he had experience with participation loans, and had been a manager or was involved in the banking industry in some capacity for nearly 20 years. The judge said that the banking expert had plenty of experience with participation loans to offer expert testimony. The judge went on to say that the fact that Plaintiff contended that the banking expert’s qualifying training and experience was dated, it didn’t assert that participation loan practices changed in the past 12–15 years since the expert’s last experience with a participation loan—much less that they were now so radically different as to regard his testimony as an expert on the subject inadmissible. As a result, this challenge to the expert’s qualifications to testify as an expert was rejected.

Opinions Contrary to the Evidence. Next, Plaintiff argued that expert opinions were inadmissible if contrary to the facts of the case, citing a Supreme Court decision. Brooke Group Ltd. v. Brown & Williamson Tobacco Corp. (U.S. 1993) states that “when indisputable record facts contradict or otherwise render the [expert] opinion unreasonable, it cannot support a jury’s verdict.”  The judge held that the banking expert’s opinions rested on assumed facts, and Plaintiff would have an argument for exclusion. However, the two instances the Plaintiff cited weren’t relevant.

Knowledge. Plaintiff claimed that the banking expert could not testify as to the Plaintiff’s knowledge of certain facts, but failed to provide appropriate authority to support the assumption —at least not as long as a jury could find such knowledge.  The judge was aware of the evidence that the Plaintiff knew from prior motions and submissions in the case.

Intent. The Judge also heard Plaintiff’s contention that the banking expert could not testify as to its subjective intent either as a fact (since he does not know Plaintiff’s mental state) or as an opinion (as the expert wasn’t qualified to render such an opinion). Plaintiff identified three alleged instances of the banking expert testifying as to the Plaintiff’s mental state, but the judge did not see it that way. These were examples of Plaintiff’s act or omission, a statement of knowledge, and a prediction of how Plaintiff would have responded had it been informed of the loan’s downgrade. They weren’t concerning Plaintiff’s intent.

Legal Conclusions. Plaintiff did correctly note that an expert could not offer legal conclusions. The banking expert opined that the existence of two liens “caused no damage to the title ultimately received by the Plaintiff,” and Plaintiff objected that this was a legal conclusion as to the effect of a lien upon title.  Stating the effect of a lien upon title was a legal conclusion— which the expert wasn’t allowed to deliver—the motion in limine was granted on this point.

Contract Interpretation. Quoting the Eleventh Circuit, the judge said that a witness cannot testify to the legal implications of conduct, and that the court is the jury’s only source of law. Under this rule, the judge wrote, an expert may not offer an opinion about the scope of an insurer’s duty under an insurance policy, as this too was a legal conclusion. Plaintiff argued that the banking expert’s report repeatedly violated this rule. However, as was the case in some of its prior arguments, most of the instances cited by Plaintiff did not apply—the expert didn’t purport to interpret the participation agreement or any other contract. However, the banking expert claimed that certain conduct did or didn’t constitute a contract. Defendant’s banking expert testified as to whether the construction loan agreement required an increase in construction costs to be borne by the developer. The Chief Judge said that the banking expert made an interpretation of the contract’s requirements.

Given these explanations, Plaintiff’s motion in limine to exclude the banking expert’s testimony was granted only as to his statements constituting legal conclusions and those interpreting the contract. In all other respects, the Chief Judge denied the motion.

By: Kurt Mattson, J.D., LLM

20+ years of Experience in the Legal Industry