Mahli, LLC v. Admiral Ins. Co.

• Decision Date: 18 August 2015
• Docket Number: CIVIL ACTION NO. 1:14cv175-KS-MTP
• Court: U.S. District Court — Southern District of Mississippi
• Parties: MAHLI, LLC PLAINTIFF v. ADMIRAL INSURANCE COMPANY DEFENDANT

MAHLI, LLC PLAINTIFF v. ADMIRAL INSURANCE COMPANY DEFENDANT

CIVIL ACTION NO. 1:14cv175-KS-MTP

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF MISSISSIPPI SOUTHERN DIVISION

August 18, 2015

MEMORANDUM OPINION AND ORDER

This matter is before the Court on the Plaintiff Mahli, LLC's Motion to Preclude the Proposed Testimony and Strike the Expert Report of Defendant's Expert Steven Dockens ("Motion to Strike Dockens") [64], Motion to Preclude the Proposed Testimony and Strike the Expert Report of Defendant's Expert Joseph LaHatte ("Motion to Strike LaHatte") [66], and Motion for Summary Judgment [68]. Also pending before the Court are the Defendant Admiral Insurance Company's Motion in Limine to Exclude Expert Testimony and Report of John Michael Agosti ("Motion to Exclude Agosti") [70] and Motion for Summary Judgment [72]. Having considered the submissions of the parties, the record, and the applicable law, the Court finds that:

1) Mahli, LLC's Motion to Strike Dockens [64] should be granted in part and denied in part;

2) Mahli, LLC's Motion to Strike LaHatte [66] should be denied;

3) Mahli, LLC's Motion for Summary Judgment [68] should be denied;

4) Admiral Insurance Company's Motion to Exclude Agosti [70] should be granted; and

5) Admiral Insurance Company's Motion for Summary Judgment [72] should be granted in part and denied in part.

BACKGROUND

This action involves a dispute regarding insurance coverage for a fire loss occurring at the Howard Johnson Hotel (the "Hotel" or "Subject Property") in Ocean Springs, Mississippi. Mahli, LLC ("Mahli") owned and operated the Hotel at all times relevant to the Complaint. The Hotel is an insured premises under Policy No. PR000008459-02 (the "Policy"), which was issued by Admiral Insurance Company ("Admiral") to Mahli. The Policy provides commercial property coverage and specifies a policy period from February 22, 2012 to February 22, 2013.

On October 17, 2012, a fire significantly damaged the Hotel. On October 18, Admiral acknowledged receipt of Mahli's fire loss claim. Admiral subsequently investigated the claim, taking such measures as retaining Trinity Insurance Services to act as its local adjuster and determine the extent of damages, hiring EFI Global to investigate the origin and cause of the fire, and taking the examination under oath ("EUO") of Surjit Singh, Mahli's owner and managing member. On July 9, 2013, Admiral sent Mahli written notice of its decision to deny the claim. Admiral advised Mahli that its claim for coverage was void or excluded under the Policy because the investigation showed "that the fire was of incendiary origin for which you are responsible, or had knowledge of . . . ." (Denial Letter [67-1] at p. 1.)

Prior to Admiral's denial of coverage, Economy Inns, Inc. ("Economy")¹ filed suitagainst Mahli, Singh, Darshan Kaur,² Admiral, and The Peoples Bank ("Peoples")³ in the Circuit Court of the First Judicial District of Harrison County, Mississippi (the "State Action"). (See State Compl. [72-9].) Economy sought, inter alia, a judgment declaring that it and Peoples are entitled to $4,000,000.00 in building coverage. In or around December of 2013, Admiral agreed to pay Economy and Peoples $1,702,583.61, representing the actual cash value of the loss minus the deductible. (See State Order [72-10] at ¶ 9.) Economy and Peoples accepted the payment, but disputed that $1,702.583.61 was the actual cash value of the Subject Property and reserved the right to seek additional payments from Admiral. (See State Order [72-10] at ¶¶ 9, 16.) It appears that the State Action remains pending as of the date of this opinion and order.

On April 21, 2014, Mahli filed suit against Admiral in this Court. (See Compl. [1].) The Complaint asserts seven counts: (1) declaratory judgment; (2) negligence/gross negligence/reckless disregard for the rights of plaintiff; (3) specific performance; (4) waiver and estoppel; (5) indemnity; (6) unjust enrichment/constructive trust; and (7) bad faith. Mahli demands a judgment awarding actual damages for the amounts it should have been paid under the Policy, extra-contractual damages, punitive damages, costs, pre-judgment and post-judgment interest, and attorneys' fees. Subject matter jurisdiction is asserted on the basis of diversity of citizenship between the parties. See 28 U.S.C. § 1332.

Admiral's Motion to Exclude Agosti [70] and Motion for Summary Judgment [72], as well as Mahli's Motion to Strike Dockens [64], Motion to Strike LaHatte [66], and Motion for Summary Judgment [68] were all filed on April 17, 2015. The motions have been fully briefed and the Court is ready to rule.

DISCUSSION

I. Motions to Exclude Expert Testimony

A. Standard of Review

Federal Rule of Evidence 702 provides that:

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 trial judge has a "gatekeeping obligation" under Rule 702 to ensure that all expert testimony is both reliable and relevant. Kumho Tire Co. v. Carmichael, 526 U.S. 137, 147, 119 S. Ct. 1167, 143 L. Ed. 2d 238 (1999) (citing Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 589, 113 S. Ct. 2786, 125 L. Ed. 2d 469 (1993)). Rule 702's "relevance prong requires the proponent to demonstrate that the expert's 'reasoning or methodology can be properly applied to the facts in issue.'" Johnson v. Arkema, Inc., 685 F.3d 452, 459 (5th Cir. 2012) (quoting Curtis v. M&S Petroleum, Inc., 174 F.3d 661, 668 (5th Cir. 1999)). In order to be reliable underRule 702, the expert opinion must "be grounded in the methods and procedures of science and . . . be more than unsupported speculation or subjective belief." Id. (citations omitted).

Daubert set forth several factors bearing on the admissibility of expert testimony, including, but not limited to, whether the expert's theory or technique can be tested, whether the theory or technique has been published or subjected to peer review, and the general acceptance of the theory or method in the applicable community. 509 U.S. at 593-94. The Supreme Court later recognized that Daubert's factors "may or may not be pertinent in assessing reliability," since the specific issue, the subject of the expert's testimony, and the expert's area of expertise will vary from case to case. Kumho Tire Co., 526 U.S. at 150 (citation omitted). Nonetheless, "a trial court should consider the specific factors identified in Daubert where they are reasonable measures of the reliability of expert testimony." Id. at 152.

The court's responsibility "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." Id. However, the judge's role as gatekeeper is not meant to supplant the adversary system since "[v]igorous cross-examination, presentation of contrary evidence, and careful instruction on the burden of proof are the traditional and appropriate means of attacking shaky but admissible evidence." Daubert, 509 U.S. at 596 (citation omitted). "The proponent need not prove to the judge that the expert's testimony is correct, but she must prove by a preponderance of the evidence that thetestimony is reliable." Johnson, 685 F.3d at 459 (quoting Moore v. Ashland Chem. Inc., 151 F.3d 269, 276 (5th Cir. 1998)). Although the court's focus should be on the expert's principles and methodology, as opposed to the conclusions they generate, "nothing in either Daubert or the Federal Rules of Evidence requires a district court to admit opinion evidence that is connected to existing data only by the ipse dixit of the expert." Gen. Elec. Co. v. Joiner, 522 U.S. 136, 146, 118 S. Ct. 512, 139 L. Ed. 2d 508 (1997).

B. Mahli's Motion to Strike Dockens [64]⁴

Steven Dockens is a certified public accountant and manager at Alexander, Van Loon, Sloan, Levens & Favre, PLLC. Admiral has designated Dockens to provide expert testimony regarding Mahli's financial ability to operate as a going concern at the time of the fire and during the months and years leading up to fire. Dockens is also expected to provide testimony concerning Mahli's loss in business income that might be covered under the Policy. Dockens' written report contains the following opinions pertinent to the subject motion:

Opinion #1

It is my opinion that events occurring prior to the October 17, 2012 fire created such significant financial difficulties for both Mahli, LLC (the "hotel" or "Mahli") and its owner, such that there would be substantial doubt of the hotel's ability to continue as a going concern prior to the time of the fire. . . .

Opinion #2

It is also my opinion that said owner of Mahli [Surjit Singh] was experiencing significant personal financial difficulties as a result of the poor financial position of Mahli . . . .

(Dockens Rep. [65-3] at pp. 5, 6.)

1. Whether Dockens' Opinions Invade the Province of the Jury

Mahli argues that Dockens fails to offer any methodology for interpreting complex financial data. Rather, Dockens purportedly takes basic facts from financial records and concludes that Mahli suffered from financial distress. According to Mahli, Dockens' opinions are inadmissible under Rule 702 because the jury can take the facts and draw its own conclusions as to whether Mahli or Sing possessed a financial motive to commit arson.

The finances of Mahli and its principals at the time of the fire are at issue in this case given Admiral's reliance on civil arson as a defense...