Erhart v. Bofi Holding, Inc.

445 F.Supp.3d 831

Charles Matthew ERHART, Plaintiff,

v.BOFI HOLDING, INC., Defendant.

and Consolidated Case

Case No. 15-cv-02287-BAS-NLS consolidated with 15-cv-02353-BAS-NLS

United States District Court, S.D. California.

Signed April 1, 2020

Filed April 2, 2020

Carol Gillam, Sara Heum, The Gillam Law Firm, Los Angeles, CA, for Plaintiff.

Heather Lynn Plocky, Martin David Katz, Andre J. Cronthall, Polly Towill, Sheppard Mullin Richter and Hampton LLP, Los Angeles, CA, for Defendant.

ORDER GRANTING IN PART AND DENYING IN PART CHARLES ERHART'S MOTION TO EXCLUDE EXPERT TESTIMONY

(ECF No. 128)

Cynthia Bashant, United States District Judge

Presently before the Court is Charles Erhart's motion to exclude the opinions of two experts that BofI Federal Bank plans to call at trial. (ECF No. 128.) BofI opposes. (ECF No. 152.) The Court finds this motion suitable for determination on the papers submitted and without oral argument. See Fed. R. Civ. P. 78(b) ; Civ. L.R. 7.1(d). For the following reasons, the Court GRANTS IN PART and DENIES IN PART Erhart's motion.

BACKGROUND

The Court and the parties are well versed in the background of these consolidated actions. The Court incorporates its summary of the parties' evidence and their remaining claims from the Court's order resolving the cross-motions for summary judgment ("Summary Judgment Order"). (See ECF No. 192.) The Court further provides below a snapshot of the parties' claims and additional background regarding the two proposed experts.

Charles Erhart was an internal auditor for BofI Federal Bank.¹ After Erhart discovered conduct he believed to be wrongful, he reported it to BofI's principal regulator. BofI responded by allegedly defaming and terminating him. Erhart then brought federal and state whistleblower retaliation claims against the Bank. At the heart of Erhart's federal claims is whether he reasonably believed the conduct he was reporting violated certain enumerated laws. His state law retaliation claims are broader; they hinge on whether Erhart disclosed a reasonable belief of a violation of any law. For the reasons explained in the Summary Judgment Order, there are triable issues on all of Erhart's whistleblower retaliation claims.

To confront these claims, BofI has designated a retained expert, Guido van Drunen, as its "Internal Audit Expert." (Rule 26 Expert Disclosure (Nov. 26, 2018), ECF No. 188-1.) Van Drunen is expected to offer various opinions at trial, including his opinion that Erhart's allegations of wrongdoing "are not supported with information and/or evidence." (Id. Ex. A.) Erhart moves to exclude all of van Drunen's testimony, arguing he is unqualified to render these opinions. (Mot. 14:8–16:4.) Erhart also claims van Drunen's opinions are improper because they impermissibly invade the province of the jury, contain disguised legal conclusions, and speculate about Erhart's motivations. (Id. 8:6–21:17.)

In addition, after Erhart sued the Bank, it filed a countersuit against him, which the Court has consolidated with Erhart's action. The Bank's countersuit portrays Erhart as an internal auditor gone rogue—a loose cannon who recklessly handled confidential information and conducted unauthorized investigations. BofI claims it suffered harm when Erhart took confidential information outside the Bank's controlled systems, disclosed confidential information to third parties, and deleted data from a Bank-owned computer. The Court similarly determined there are triable issues on the Bank's lone federal claim and all but one of its barrage of state law claims.

To support these claims, the Bank has disclosed that its Chief Financial Officer ("CFO"), Andrew Micheletti, is expected to testify as an expert at trial. (Rule 26 Expert Disclosure (Nov. 5, 2018), ECF No. 135-2.) The proposed expert testimony will involve the damages the Bank has purportedly suffered due to Erhart's conduct. (Id. ) Erhart moves to exclude this testimony, arguing it is not expert testimony, Micheletti is not qualified to testify as an expert, and his damage assessments are improper. (Mot. 17:22–19:9.)

ANALYSIS

Both of Erhart's challenges involve the requirements for expert opinion testimony under Federal Rule of Evidence 702. However, in resolving his challenge to Micheletti's testimony on damages, the Court reasons that some of the proposed testimony may be admitted as lay witness opinion testimony under Rule 701. Hence, the Court reviews the two types of opinion testimony before assessing BofI's proposed experts.

I. Opinion Testimony

A. Lay Witnesses

The Federal Rules of Evidence differentiate between opinion testimony provided by lay and expert witnesses. Fed. R. Evid. 701, 702. Under Rule 701, a lay witness may provide opinion testimony if it is: "(a) rationally based on the witness's perception; (b) helpful to clearly understanding the witness's testimony or to determining a fact in issue; and (c) not based on scientific, technical, or other specialized knowledge within the scope of Rule 702." Id. 701.

" Rule 701(a) contains a personal knowledge requirement." United States v. Lopez , 762 F.3d 852, 864 (9th Cir. 2014) ; see also Fed. R. Evid. 602 (noting that except for expert testimony under Rule 703, "[a] witness may testify to a matter only if evidence is introduced sufficient to support a finding that the witness has personal knowledge of the matter"). "In presenting lay opinions, the personal knowledge requirement may be met if the witness can demonstrate firsthand knowledge or observation." Lopez , 762 F.3d at 864. "A lay witness's opinion testimony necessarily draws on the witness's own understanding, including a wealth of personal information, experience, and education, that cannot be placed before the jury." United States v. Gadson , 763 F.3d 1189, 1209 (9th Cir. 2014). "But a lay opinion witness ‘may not testify based on speculation, rely on hearsay or interpret unambiguous, clear statements.’ " United States v. Lloyd , 807 F.3d 1128, 1154 (9th Cir. 2015) (quoting United States v. Vera , 770 F.3d 1232, 1242 (9th Cir. 2014) ).

B. Expert Witnesses

Whereas Rule 701 governs lay opinion testimony, Rule 702 covers expert opinion testimony. Fed. R. Evid. 702. This rule establishes several requirements for this testimony: (1) the witness must be sufficiently qualified as an expert by knowledge, skill, experience, training, or education; (2) the scientific, technical, or other specialized knowledge must "assist the trier of fact" either "to understand the evidence" or "to determine a fact in issue"; (3) the testimony must be "based on sufficient facts and data"; (4) the testimony must be "the product of reliable principles and methods"; and (5) the expert must reliably apply the principles and methods to the facts of the case. Id.

Under Daubert and its progeny, the trial court is tasked with assuring that expert testimony "both rests on a reliable foundation and is relevant to the task at hand." Daubert v. Merrell Dow Pharm., Inc. , 509 U.S. 579, 597, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993). "Expert opinion testimony is relevant if the knowledge underlying it has a valid connection to the pertinent inquiry. And it is reliable if the knowledge underlying it has a reliable basis in the knowledge and experience of the relevant discipline." Primiano v. Cook , 598 F.3d 558, 565 (9th Cir. 2010). Shaky but admissible evidence is to be attacked by cross-examination, contrary evidence, and careful instruction on the burden of proof, not exclusion. Daubert , 509 U.S. at 596, 113 S.Ct. 2786. The court is "to screen the jury from unreliable nonsense opinions, but not exclude opinions merely because they are impeachable." Alaska Rent–A–Car, Inc. v. Avis Budget Grp., Inc. , 738 F.3d 960, 969 (9th Cir. 2013). In its role as gatekeeper, the court "is not tasked with deciding whether the expert is right or wrong, just whether his [or her] testimony has substance such that it would be helpful to a jury." Id. at 969–70.

The tests for admissibility in general, and reliability in particular, are flexible. Primiano , 598 F.3d at 564. The court "has discretion to decide how to test an expert's reliability as well as whether the testimony is reliable, based on the particular circumstances of the particular case." Id. (quoting Kumho Tire Co. v. Carmichael , 526 U.S. 137, 150, 119 S.Ct. 1167, 143 L.Ed.2d 238 (1999) ). "[T]he test under Daubert is not the correctness of the expert's conclusions but the soundness of [the expert's] methodology." Daubert v. Merrell Dow Pharmaceuticals, Inc. , 43 F.3d 1311, 1318 (9th Cir. 1995). Once the threshold established by Rule 702 is met, the expert may testify and the fact finder decides how much weight to give that testimony. Primiano , 598 F.3d at 565.

Further, Rule 703 "relaxes, for experts, the requirement that witnesses have personal knowledge of the matter to which they testify." Claar v. Burlington N. R. Co. , 29 F.3d 499, 501 (9th Cir. 1994). Experts may offer opinions based on otherwise inadmissible testimonial hearsay if "experts in the particular field would reasonably rely on those kinds of facts or data in forming an opinion on the subject," Fed. R. Evid. 703, and if they are "applying [their] training and experience to the sources before [them] and reaching an independent judgment," as opposed to "merely acting as a transmitter for testimonial hearsay," United States v. Gomez , 725 F.3d 1121, 1129 (9th Cir. 2013) (quoting United States v. Johnson , 587 F.3d 625, 635 (4th Cir. 2009) ).

II. The Proposed Damages Expert—Micheletti

The Court first considers Erhart's challenge to BofI's non-retained expert CFO Micheletti. BofI discloses that Micheletti "is expected to present evidence under Federal Rules of Evidence 702, 703, or 705" on the subject matter of "BofI's damages." (Rule 26 Expert Disclosure (Nov. 5, 2018) 1:26–2:1.) There are two parts to this testimony.

BofI's Expenses and Costs. First, Micheletti seeks to testify regarding the economic injury BofI suffered "in...