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Andersen v. Thor Motor Coach, Inc.

United States District Court, N.D. Indiana, South Bend Division

July 11, 2019




         Defendant Thor Motor Coach moves to exclude the opinions of Tom Bailey, whom plaintiffs offer principally as an expert about the diminished value of a new RV they bought from Thor that the plaintiffs claim was riddled with defects. Before getting into the substance of Bailey's opinions and his qualifications to render them, I'll start with some basics about the rules governing the admissibility of expert testimony.

         Federal Rule of Evidence 702 states, in relevant part, 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 the expert's scientific, technical or other specialized knowledge will assist the trier of fact to understand the evidence or determine a fact in issue.” Fed.R.Evid. 702. The Rule “also requires that: (1) the testimony must be based upon sufficient facts or data; (2) it must be the product of reliable principles and methods; and (3) the witness must have applied the principles and methods reliably to the facts of the case.” Happel v. Walmart Stores, Inc., 602 F.3d 820, 824 (7th Cir. 2010).

         The district court must perform a “gatekeeping” function before admitting scientific testimony in order to ensure that “all scientific testimony or evidence admitted is not only relevant, but reliable.” Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 589 (1993). As a threshold matter, the district court must determine (1) whether the expert would testify to valid scientific knowledge, and (2) whether that testimony would assist the trier of fact with a fact at issue. Smith v. Ford Motor Co., 215 F.3d 713, 718 (7th Cir. 2000).

         The first step is to analyze the reliability of the expert. In doing so, the role of the court is to determine whether the expert is qualified in the relevant field and to examine the methodology the expert has used in reaching his conclusions. Id. Rule 702 contemplates that an expert may be qualified by “knowledge, skill, experience, training, or education.” Fed.R.Evid. 702. Thus, in determining whether a proposed expert is qualified, a court may consider the proposed expert's full range of practical experience, as well as academic or technical training. Smith, 215 F.3d at 718. But “even a supremely qualified expert cannot waltz into the courtroom and render opinions unless those opinions are based upon some recognized scientific method.” Id. (internal quotation marks and brackets omitted). This means that a court “must rule out subjective belief or unsupported speculation.” Cummins v. Lyle Indus., 93 F.3d 362, 368 (7th Cir. 1996) (internal quotation marks omitted).

         In Daubert, the Supreme Court identified four factors that are pertinent to the reliability inquiry: (1) whether the theory has been tested; (2) whether the theory has been subjected to peer review and publication; (3) the known or potential rate of error; and (4) whether it has been generally accepted within the relevant scientific community. 509 U.S. at 593-94. The inquiry is flexible and must focus solely on the principles and methodologies, not the conclusions they generate. Id. at 594. No. single factor is either required in the analysis or dispositive as to the outcome. See Kumho Tire Co. v. Carmichael, 526 U.S. 137, 141 (1999). Expert testimony from technical fields is subject to the same “concerns and criteria” as scientific expert opinion, but the Supreme Court has explained that with technical testimony the “gatekeeper” function of the court adjusts “to fit the facts of the particular case at issue, with the goal of testing the reliability of the expert opinion.” United States v. Brumley, 217 F.3d 905, 911 (7th Cir. 2000) (citing Kumho Tire Co., 526 U.S. 137, 149 (1999)).

         If the district court is satisfied that the expert's testimony is reliable, the next step is to determine whether the testimony is relevant. In making this determination, the court must consider whether the testimony assists the trier of fact in understanding the evidence or in determining a fact at issue. Cummins, 93 F.3d at 368.

         First, I note that Thor does not question whether Bailey is qualified to give expert valuation testimony. This may be, in part, because Thor has itself used Bailey as an expert in other litigation, as plaintiffs are fond of pointing out and Thor does not dispute. [DE 33 at 1, 3; DE 33-1 at ¶¶12-16.] In any event, a review of his CV reveals that Bailey has conducted more than 2, 000 specialized RV and bus appraisals, been retained as an expert in number of similar appraisal and defect cases, and has been in the RV industry for more than 50 years. [DE 53-2.] This experience makes him more than qualified to testify as an expert under Rule 702.

         Appraisal/Diminished Value Report

         Bailey has provided three expert reports. The first of Bailey's reports is entitled an “Appraisal/Diminished Value Report.” [DE 26-2.] The report states that the “fair market value determinations will be determined as of the day of purchase.” [DE 26-2 at 11.] Noting that the purchase price of the RV was $292, 559.20, and given all of the defects identified by Baily, he opines that its fair market value at the time was actually only $125, 000, resulting in a diminished value of $167, 559.20. [DE 26-2 at 32-33.]

         Thor argues that this report should be excluded because the measure of damages in the case is the cost of repair or replacement, not diminution of value. [DE 26-1 at 1, 15.] But Thor's argument does not reflect my disposition of Thor's summary judgment motion, resulting in the survival of the plaintiffs' claims for breach of the Texas Deceptive Trade Practices Act and breach of the implied warranty of merchantability. The attempts in Thor's limited warranty to limit remedies don't work against those claims, which are not based on the express warranty. And Thor itself acknowledges that under Indiana law, “the fair market value of the good as warranted at the time of acceptance less the fair market value of the good as received at the time of acceptance” is an available measure of damages for a breach of warranty. [DE 26-1 at 15, quoting Schroeder v. Barth, Inc., 969 F.2d 421, 423-24 (7th Cir. 1992) and I.C. §26-1-2-714(2).] So this argument doesn't support exclusion of Bailey's diminished value opinion.

         Thor also challenges Bailey's valuation opinion as ipse dixit (basically Latin for “because I said so”), because Bailey summarily explains his valuation conclusion only as “[t]he inherent feeling belief a buyer mostly likely will pay.” [DE 26-2 at 32.] Despite this impressionistic language, Bailey's approach is somewhat systematic. His appraisal report contains several lists of factors that can affect the value of an RV. [DE 26-2 at 5, 31.] Thor complains that some of the factors are irrelevant to Thor's manufacture of the RV or have no impact on fair market value at the time of delivery. [DE 26-1 at 4.] The lists Thor refers to are offered in the context of Bailey's explanation of general valuation principles. The lists are essentially background information for the reader that describe as non-exhaustive and as factors that can (and therefore may or may not) impact the value of a particular RV. In light of that explanation of their role and purpose in the valuation, that every factor in these lists is not applicable to the RV in this case is not a basis for finding Bailey's report to be unreliable.

         One particular example of an irrelevant consideration highlighted by Thor is the raccoon damage that the RV incurred during its extended stay at a dealership for repairs. [DE 26-1 at 7.] In response, plaintiffs cite Bailey's affidavit, in which he explains his deposition testimony to mean that he “considered” the raccoon damage, but dismissed it from his appraisal and gave it no weight. [DE 33 at 20; DE 33-1 at 28.] The matter may be one for cross-examination, but does not compel the exclusion of Bailey's valuation report and opinion.

         I find that Bailey's methodology and valuation opinions are reliable. Although Thor argues that Bailey's opinion fails to show how he arrived at the fair market value and diminished value calculations, and instead simply provided a conclusory number, I disagree. In his Appraisal/Diminished Value Report, Bailey set forth 15 forces that can affect the value of an RV (including, among others, deterioration of constructed material, the existence of defects and malfunctions, and time out of service which could substantially impair the use or value of the RV), he defined an appraisal, he set forth the accepted methods to determine fair market value (FMV), he consulted sources such as the NADA (National Automobile Dealer Association) guide book which is ...

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