Donnelly v. Linden Capital Partners III L.P.

• Decision Date: 28 June 2022
• Docket Number: C. A. 2:20-cv-3719-RMG
• Parties: Patrick K. Donnelly, Plaintiff, v. Linden Capital Partners III, L.P., Linden Capital Partners IV, L.P., Defendants.
• Court: U.S. District Court — District of South Carolina

Patrick K. Donnelly, Plaintiff, v. Linden Capital Partners III, L.P., Linden Capital Partners IV, L.P., Defendants.

C. A. No. 2:20-cv-3719-RMG

United States District Court, D. South Carolina, Charleston Division

June 28, 2022

ORDER AND OPINION

Richard M. Gergel United States District Judge

The matter before the Court is Plaintiff, Patrick K Donnelly's motion to strike the expert opinion and report of Defendants' expert Anthony Ecock pursuant to Rule 702 of the Federal Rules of Evidence. (Dkt. No. 84). For the reasons stated below, the motion is granted in part, denied in part.

I. Background

This is a breach of contract and unjust enrichment action in which Patrick K. Donnelly (“Plaintiff”) alleges Linden Capital Partners III, L.P. and Linden Capital partners IV, L.P. (collectively “Linden”) owe him fees for services he performed as an operating partner for Linden. Linden is a private equity firm that focuses on the healthcare sector, and Plaintiff is an experienced executive in the medical device and pharmaceutical development industries. In 2015, Plaintiff and LCP III executed an Operating Partnership Agreement (“OPA”) where Plaintiff agreed to provide Linden certain advisory and consulting services. The OPA provides that operating partners would receive compensation in the form of consulting fees along with transaction fees. The OPA states that an operating partner is eligible to receive transaction fees, “upon the completion of an equity investment by Linden in a Target Company for which Operating Partner has significantly contributed to sourcing, winning and/or performing due diligence as determined solely by Linden in its own discretion, Operating Partner will receive a cash fee of 10 % of the transaction fee related to the capital invested by Linden Capital Partner III LP and Linden Capital Partners III-A LP as determined solely by Linden.” (Dkt. No. 89-5 at § 2). In 2017, Linden formed Advarra. In November 2017, Plaintiff signed an Employment Agreement with Advarra and agreed to become its CEO. Plaintiff alleges he served as an operating partner for Linden while serving as CEO of Advarra, for which Linden owes him compensation.

Plaintiff moved to strike the opinion of Linden's expert, Anthony Ecock. Defendants oppose Plaintiff's motion to strike. The matter is ripe for the Court's review.

II. Legal Standard

Rule 702 of the Federal Rules of Evidence governs expert witness testimony and provides:

A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if:

(a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue;

(b) the testimony is based on sufficient facts or data;

(c) the testimony is the product of reliable principles and methods; and

(d) the expert has reliably applied the principles and methods to the facts of the case.

Fed. R. Evid. 702(a)-(d). “Implicit in the text of Rule 702 is a district court's gatekeeping responsibility ‘to ensur[e] that an expert's testimony both rests on a reliable foundation and is relevant to the task at hand.' ” Nease v. Ford Motor Co., 848 F.3d 219, 229 (4th Cir. 2017) (emphasis in original) (quoting Daubert v. Merrell Dow Pharms., 509 U.S. 579, 597 (1993)). First, “[w]ith respect to reliability, the district court must ensure that the proffered expert opinion is based on scientific, technical, or other specialized knowledge and not on belief or speculation, and inferences must be derived using scientific or other valid methods.” Nease, 848 F.3d at 229 (internal quotation marks omitted). “As the Supreme Court has repeatedly explained, Daubert v. Merrell Dow Pharmaceuticals, Inc. [ ] offers district courts several guidepost factors that the court ‘may consider' in assessing an expert's evidentiary reliability to the extent that the factors are relevant to the specific facts of the case at hand.” McKiver v. Murphy-Brown, LLC, 980 F.3d 937, 959 (4th Cir. 2020) (emphasis in original). The “emphasis on the word ‘may' [ ] reflects Daubert's description of the Rule 702 inquiry as ‘a flexible one.' ” Kumho Tire Co. v. Carmichael, 526 U.S. 137, 149 (1999) (quoting Daubert, 509 U.S. at 594). Factors that the district court may consider include: (1) “[w]hether a theory or technique ... can be (and has been) tested”; (2) “whether the theory or technique has been subjected to peer review and publication”; (3) its “known or potential rate of error”; (4) the “existence and maintenance of standards controlling the technique's operation”; and (5) whether the theory or technique has garnered “general acceptance.” Daubert, 509 U.S. at 593-94; accord United States v. Hassan, 742 F.3d 104, 130 (4th Cir. 2014).

“These factors may or may not be pertinent in assessing reliability, depending on the nature of the issue, the expert's particular expertise, and the subject of his [or her] testimony.” McKiver, 980 F.3d at 959 (alteration in original) (internal quotation marks omitted). The Daubert list of factors is not “definitive or exhaustive.” United States v. Crisp, 324 F.3d 261, 266 (4th Cir. 2003). Instead, “the law grants a district court the same broad latitude when it decides how to determine reliability as it enjoys in respect to its ultimate reliability determination.” Kumho Tire Co., 526 U.S. at 142. For instance, courts have also considered whether experts “developed [their] opinions expressly for the purposes of testifying,” Wehling v. Sandoz Pharms. Corp., 162 F.3d 1158 (Table), 1998 WL 546097, at *3 (4th Cir. Aug. 20, 1998) or “though research they have conducted independent of the litigation,” Daubert v. Merrell Dow Pharms., Inc., 43 F.3d 1311, 1317 (9th Cir. 1995) (on remand). This is because, at bottom, the “objective of [the Daubert gatekeeping requirement] ... is to make certain that an expert, whether basing testimony upon professional studies or personal experience, employs in the courtroom the same level of intellectual rigor that characterizes the practice of an expert in the relevant field.” Kumho Tire Co., 526 U.S. at 152.

The reliability inquiry requires the district court to heed “two guiding, and sometimes competing, principles.” Westberry v. Gislaved Gummi AB, 178 F.3d 257, 261 (4th Cir. 1999). “On the one hand, ... Rule 702 was intended to liberalize the introduction of relevant expert evidence,” id., and “the trial court's role as a gatekeeper is not intended to serve as a replacement for the adversary system,” United States v. Stanley, 533 Fed.Appx. 325, 327 (4th Cir. 2013) (citing Fed.R.Evid. 702 advisory committee's note), cert. denied, 134 S.Ct. 1002 (2014). Indeed, “[a]s with all other admissible evidence, expert testimony is subject to being tested by ‘[v]igorous crossexamination, presentation of contrary evidence, and careful instruction on the burden of proof.' ” Westberry, 178 F.3d at 261 (quoting Daubert, 509 U.S. at 596)). On the other hand, “[b]ecause expert witnesses have the potential to be both powerful and quite misleading, it is crucial that the district court conduct a careful analysis into the reliability of the expert's proposed opinion.” Fultz, 591 Fed.Appx. at 227 (internal quotation marks omitted). Thus, “given the potential persuasiveness of expert testimony, proffered evidence that has a greater potential to mislead than to enlighten should be excluded.” Westberry, 178 F.3d at 261. For this reason, the “proponent of the testimony” bears the burden of proving it is reliable. Cooper v. Smith & Nephew, Inc., 259 F.3d 194, 199 (4th Cir. 2001). This reliability standard does not require proof “that the opinion is objectively correct, but only that the witness has sufficient expertise[.]” TBL Collectibles, Inc. v. Owners Ins. Co., 385 F.Supp.3d 1170, 1179 (D. Colo. 2018).

Second, in addition to being reliable, the testimony must be relevant, which, “of course, is evidence that helps ‘the trier of fact to understand the evidence or to determine a fact in issue.' ” Nease, 848 F.3d at 229 (quoting Daubert, 509 U.S. at 591). The district court's decision on the admissibility of expert testimony is reviewed for abuse of discretion. United States v. Campbell, 963 F.3d 309, 313 (4th Cir. 2020).

III. Discussion

Defendants offer Ecock as expert in the private equity field. (Dkt. No. 94 at 10). Plaintiff does not dispute that Ecock is sufficiently experienced as a private equity business executive. (Dkt. No. 84 at 1). Ecock offers four opinions that relate to the parties' disagreement over whether the OPA was terminated after Plaintiff became the CEO of Advarra and if the OPA was in effect, whether Plaintiff continued to perform services as an operating partner that would entitle him to consulting fees and certain transaction fees for deals Plaintiff alleges he significantly contributed to. From this dispute arises the parties' interest in litigating, through dueling expert opinions, the topic of whether Plaintiff is entitled to compensation from Defendants.

Ecock provides four opinions in this case that can be summarized as follows:

1) Opinion One: “The OPA was terminated and no longer in effect after November 7, 2017.” (Dkt. No. 84-1 at ¶¶ 98-124);

2) Opinion Two: “Even assuming the OPA had been in effect, the disputed transactions would not have satisfied the conditions for Plaintiff to be entitled to a percentage of transaction fees under the terms of the OPA.” (Id. at ¶¶ 125-153);

3) Opinion Three: “[Plaintiff's] involvement in the disputed transactions was pursuant to his primary role as chairman, CEO or board member, not as an operating partner and in those roles he would be conflicted in asking for or receiving a separate transaction fee.” (Id. at

...