Swierczynski v. Arnold Foods Co., Inc., 01-70455.

• Court: United States District Courts. 6th Circuit. United States District Court (Eastern District of Michigan)
• Writing for the Court: Zatkoff
• Citation: 265 F.Supp.2d 802
• Parties: KEVIN SWIERCZYNSKI, Plaintiff, V. ARNOLD FOODS COMPANY, INC., a Delaware corporation, d/b/a best foods baking Company, as successor to Bestfoods Baking Group; Entenmann's, a Delaware corporation, d/b/a S.B. Thomas, INC.; and Bestfoods Baking Distribution Company, a Delaware corporation, Defendants.
• Docket Number: No. 01-70455.,01-70455.
• Decision Date: 21 April 2003

265 F.Supp.2d 802 KEVIN SWIERCZYNSKI, Plaintiff,
V.
ARNOLD FOODS COMPANY, INC., a Delaware corporation, d/b/a best foods baking Company, as successor to Bestfoods Baking Group; Entenmann's, a Delaware corporation, d/b/a S.B. Thomas, INC.; and Bestfoods Baking Distribution Company, a Delaware corporation, Defendants. No. 01-70455. United States District Court, E.D. Michigan, Southern Division. April 21, 2003.

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COPYRIGHT MATERIAL OMITTED

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Alan D. Penskar, Smith, Harris, Flint, MI, for Plaintiff.

Craig M. Halseth, Honigman, Miller, Bingham Farms, MI, David A. Ettinger, Honigman, Miller, Detroit, MI, for Defendants.

OPINION AND ORDER

ZATKOFF, Chief Judge.

I. INTRODUCTION

This matter is before the Court on Defendants' Motion to Exclude Plaintiffs Damage Estimate and for Summary Judgment on Damages, The Plaintiff has responded and the Defendant has replied to the response. The Court finds that both parties have had the opportunity to argue the admissibility of Plaintiffs Expert Witness Report and that the facts and legal arguments are adequately presented in the parties' briefs. Accordingly, the Cou finds that the record before the court is adequate and that the decisional process would not be significantly aided by oral argument. therefore, pursuant to E.D.MICH. LR 7.1(e)(2) and John v. Equine Services, PSC, 233 F.3d 382, 393 (6th Cir.2000), it is hereby ORDERED that the motion be resolved on the briefs submitted. For the reasons set forth below, Defendants' Motion to Exclude Plaintiffs Damage Estimate is DENIED IN PART and GRANTED IN PART; furthermore, Defendants' Motion for Summary Judgment on Damages is DENIED.

II. BACKGROUND

Plaintiff is a former distributor of the Defendants' bakery products in the Jackson, Michigan, area. Plaintiff distributed Defendants' products from sometime in the early 1990s until the parties' business relationship terminated in August 2000. From March 27, 1995, until the termination of the business relationship, the relationship between the parties was governed by an Independent Distributor Agreement (the "Agreement"). See Independent Distributor Agreement; Plaintiffs Resp. Br. Ex. 3. This Agreement was entered into between Plaintiff Kevin Swierczynski and Best Foods Baking Group. The Agreement set out the parties' rights and obligations, and forms the basis of the Plaintiffs present action. The Plaintiff alleges that the Defendants terminated the Independent Distributor Agreement in breach of that Agreement and have thereby caused injury to the Plaintiff.

Plaintiff seeks damages, in part, for lost profits and lost equity value arising from the Defendants' alleged termination of the Agreement. The Plaintiff intends to prove his damages by relying upon an Expert Witness Report (the "Report") prepared by Plaintiffs Expert Witness Mr. Norman K. Baczkiewicz. Baczkiewicz's Report estimates

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Plaintiffs damages to be $742,236. This amount is made up of three components. The first component is made up of the lost value of Plaintiffs non-equity interest in the Agreement as an independent contractor. Specifically, this component is intended to measure Plaintiffs lost profits in his capacity as a non-equity independent contractor. The second component is made up of Plaintiffs equity interest as an independent contractor. This component is intended to measure Plaintiffs lost profits in his capacity as an equity independent contractor. Lastly, the third component is made up of Plaintiffs equity interest as owner-operator. According to Baczkiewicz, this component is intended to measure the lost value of the Plaintiffs equity investment in the distribution route.

To place a dollar amount on these three components, Baczkiewicz first established Plaintiffs year 2000 gross and net profits, and determined the rate of growth of Plaintiffs gross and net profits from 1996-2000.¹ Then, by applying that rate of growth to Plaintiffs 2000 numbers, Baczkiewicz projected these numbers out to Plaintiffs retirement. Having estimated Plaintiffs lost profits for each year leading up until retirement, Baczkiewicz then applied a discount rate to establish the present value of Plaintiffs lost profits for those years. After this present value was determined, Baczkiewicz divided this amount into the three components that make up his estimation of Plaintiffs damages. To place a dollar amount on each of these three components, Baczkiewicz first divided the present value of Plaintiffs lost profits between equity and non-equity interests.² Baczkiewicz then determined the value of the owner-operator equity interest by comparing Plaintiffs business to the value of similar businesses, and subtracted this amount from the equity interest portion of Plaintiffs estimated lost profits to determine the independent contractor equity interest.³ Baczkiewicz's Expert Witness Report provides the following:

OPINION

Lost Value

Based upon my review of the information listed in Attachment B, I have the following opinion of lost value or damages:

 Non-equity 45% interest
                 (independent contractor) $ 334,006
                 Equity 55% interest
                 (independent contractor) 343,355
                 Equity 55% interest
                 (owner operator) 64,875
                 _________
                 Total $ 742,236
                 _________
                

See Baczkiewicz Engagement Report, Att. A; Defendants' Br. in Support, Ex. 4. Baczkiewicz's Expert Witness Report is the second such report that he prepared. Initially, Baczkiewicz had prepared a preliminary report that relied upon the same methodology and that came to the same conclusions as the final Expert Witness Report. Baczkiewicz prepared the preliminary report at the request of Plaintiff to estimate damages for settlement negotiation purposes. After settlement negotiations

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ended, Baczkiewicz changed the preliminary report into a final Expert Witness Report, to be used by Plaintiff for trial purposes.

The Defendants have filed a Motion to Exclude Plaintiffs Damage Estimate and for Summary Judgment on Damages. With this Motion, and pursuant to FED. R. EVID. 702, Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993), and Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 119 S.Ct. 1167, 143 L.Ed.2d 238 (1999), the Defendants seek to exclude Baczkiewicz's damages estimate because, according to the Defendants, the final report is unreliable since it is really just a preliminary report, unsuitable for litigation purposes. In addition, the Defendants also seek to exclude any testimony by the Plaintiff himself regarding damages. If this relief is granted, the Defendants ask that the Court grant the Defendants summary judgment as to the issue of damages since, the Defendants argue, the Plaintiff would have presented no admissible evidence to prove his claims of lost profits and lost business value.

In response, the Plaintiff takes issue with the fact that the Defendants have brought out that the Expert Witness Report was originally prepared for settlement negotiations. The Plaintiff argues that reference to settlement negotiations by the Defendants violates FED. R. EVID. 408, and that the Defendants' motion should, therefore, be struck. In addition, the Plaintiff argues that this is an issue that is best left to the jury to decide.

III. ANALYSIS

A. Defendants' Motion to Exclude Plaintiffs Damage Estimate

The Defendants argue that the Expert Witness Report prepared by Plaintiffs Expert Witness Norman K. Baczkiewicz is inadmissible under the standards set forth by FED. R. EVID. 702, Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S.Ct. 2786,125 L.Ed.2d 469 (1993), and Kumho Tire Co., Ltd v. Carmichael, 526 U.S. 137, 119 S.Ct. 1167, 143 L.Ed.2d 238 (1999). FED. R. EVID. 702 provides:

Rule 702. Testimony by Experts

If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of opinion or otherwise, if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case.

FED. R. EVID. 702. In Daubert, the Supreme Court held that FED. R. EVID. 702 imposed upon a district court a special obligation to "ensure that any and all scientific testimony ... is not only relevant, but reliable." Daubert, 509 U.S. at 589, 113 S.Ct. 2786. "This entails a preliminary assessment of whether the reasoning or methodology underlying the [expert's] testimony is scientifically valid and of whether the reasoriing or methodology properly can be applied to the facts in issue." Daubert, 509 U.S. at 592-93, 113 S.Ct. 2786. In Kumho, the Supreme Court extended Daubert's holding to expert matters other than matters solely considered "scientific." See Kumho, 526 U.S. at 152, 119 S.Ct. 1167. In addition, Kumho clarified that where the reasonableness of a particular methodology is challenged, this Court is to evaluate not the reasonableness in general of that particular methodology, but the reasonableness of using that methodology to draw a conclusion regarding the "particular matter to which the expert testimony is directly

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relevant." Id. at 154, 119 S.Ct. 1167 ("The relevant issue was whether the expert could reliably determine the cause of this tire's separation."). This Court must ensure not that the expert's testimony is known to a "certainty" but that the testimony is based on "the same level of intellectual rigor that characterizes the practice in the relevant field." Id. at 152, 119 S.Ct. 1167.

In the present case, and as described above, the Plaintiff intends to rely upon Baczkiewicz's Report to prove his claim of damages. Specifically, the Plaintiff intends to use the Report to prove his amount of lost profits and the value of the lost equity...