Case Background
James Rieves’s (“Mr. Rieves,”) Platinum Vapor, LLC (“Cloud 9”) was raided by the Town of Smyrna Police Department (“SPD”) along with twenty-three other stores selling cannabidiol (“CBD”) products because they falsely believed that such products were illegal under state drug laws. The charges were dropped, as the products were legal under both state and federal law. The shop owners then sued the responsible law enforcement agencies, asserting violations of their constitutional rights and conspiracy to violate those rights. All of the shop owners ultimately settled except for Mr. Rieves, who decided to progress to trial on his claims against the Town of Smyrna (“Smyrna”).[1]
Smyrna’s Expert and Rebuttal[2]
Mr. Rieves engaged a financial expert to prepare a lost profits damages calculation. Smyrna engaged an expert to rebut Mr. Rieves’s expert and to put forth his own lost profits damages calculation. In his rebuttal of Mr. Rieves’s expert, Smyrna’s expert proffered three opinions challenged by the Plantiff: 1) Mr. Rieves’s expert’s calculations are unreliable, because he uses “national level statistics” and applies them to Mr. Rieves’s “small, local CBD store and his online business,” 2) Mr. Rieves’s expert’s report “failed to consider the competition” posed by retail establishments in Smyrna selling CBD product when computing damages and failed to take into consideration the potential competition posed by entry of “big box” stores into the CBD market, and 3) Mr. Rieves’s expert report “fails to consider lack of capital and credit in [the] damages analysis.”
Mr. Rieves’s Motion in Limine[3]
Mr. Rieves sought to exclude all three rebuttal opinions of Smyrna’s expert. First and foremost, Mr. Rieves argued that Smyrna’s expert was under the impression that 1) Cloud 9 was a “brick-and-mortar, local, storefront retailer” of CBD products, when it was actually “a manufacturer, wholesaler, and online retailer”; and 2) that Cloud 9 only sold locally and was competing on a local level, even though Mr. Rieves testified in his deposition that only a small percentage of his sales were to Tennessee residents. Mr. Rieves argued that Smyrna’s expert’s “opinion that [Mr. Rieves’s business] should only be compared to local retail brick-and-mortar businesses is not supported by the record or any of the documents relied upon by Vance and is insufficiently reliable to be considered by the jury.”
The court found that Smyrna’s expert had a “fundamental misconception” of Mr. Rieves’s “business as a small brick-and-mortar store that did some online business undermines and renders unreliable his critiques of [Mr. Rieves’s expert’s] analysis.”
Last, Mr. Rieves objected to Smyrna’s expert’s critique of Mr. Rieves’s expert for purportedly failing to consider Mr. Rieves’s lack of capital and credit in his damages analysis. However, the Court determined that Smyrna’s expert failed to acknowledge that Mr. Rieves’s cashflow and credit problems “are alleged to have stemmed directly from Smyrna’s seizure of his assets and shuttering his business twice.”
Holding[4]
The Court found that Smyrna’s expert’s critiques of Mr. Rieves’s expert report were “unreliable and inadmissible as a result of [his] mischaracterization, or misunderstanding, of the type of business at issue,” among other issues.
The Lesson Learned
The Court granted Mr. Rieves’s motion to exclude the opinions critiquing Mr. Rieves’s expert due to Smyrna’s expert’s fundamental misunderstanding of Cloud 9’s business operations. Communication is critical for the client/counsel/expert team, which includes communicating on assumptions made and positions taken in the expert’s report. It is difficult to determine if the outcome would have differed if Smyrna had accurately understood the basic facts, such as the nature of the business at issue.
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[1] https://expertwitnessprofiler.com/accounting-expert-witness-testimony-found-to-lack-understanding-of-the-type-of-business-at-issue
[2] James Swain Rieves et al., v. Town of Smyrna, Tennessee, et al., United States District Court, Middle District of Tennessee, Case No. 3:18-cv-00965, MEMORANDUM and ORDER, filed February 2, 2024. (“Memorandum”), pages 4 to 5.
[3] Memorandum, pages 5 to 7.
[4] Memorandum, page 7.
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