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Obeslo v. Great-West Capital Management, LLC

United States District Court, D. Colorado

April 17, 2019

JOAN OBESLO, JAMES DIMAGGIO, ANNE HALL, CAROL A. REYNON-LONGORIA, CYNTHIA BERNAL, TINA GORRELL-DEYERLE, on behalf of Great West Funds, Inc., Plaintiffs,
v.
GREAT-WEST CAPITAL MANAGEMENT, LLC, Defendant.
v.
DUPLASS, ZWAIN, BOURGEOIS, PFISTER & WEINSTOCK APLC 401 K PLAN, Plaintiff,
v.
GREAT-WEST CAPITAL MANAGEMENT, LLC, Defendant. JOAN OBESLO, JAMES DIMAGGIO, ANNE HALL, CAROL A. REYNON-LONGORIA, CYNTHIA BERNAL, and TINA GORRELL-DEYERLE, on behalf of Great-West Funds, Inc., Plaintiffs,
v.
GREAT-WEST LIVE & ANNUITY INSURANCE CO, and GREAT-WEST CAPITAL MANAGEMENT, LLC, Defendants.

          ORDER DENYING DEFENDANTS' MOTIONS TO STRIKE PLAINTIFFS' EXPERT WITNESSES

          CHRISTINE M. ARGUELLO, UNITED STATES DISTRICT JUDGE

         This matter is before the Court on Defendants Great-West Capital Management, LLC and Great-West Life & Annuity Insurance Company, LLC's Motion to Strike Plaintiffs' Proffered Expert Brian Henderson (Doc. # 287) and Motion to Strike Plaintiffs' Proffered Expert J. Chris Meyer (Doc. # 288). Both Motions have been fully briefed.[1] (Doc. ## 294, 296, 299, 301.) For the reasons that follow, the Court denies both Motions.

         I. BACKGROUND

         The Court detailed the factual background of this case at the September 27, 2018 hearing at which the Court denied Defendants' Motion for Summary Judgment. (Doc. # 272.) That order is incorporated by reference, and the facts explained therein need not be repeated. The Court recounts only the facts necessary to address Defendants' Motions to Strike.

         Great-West Funds, Inc. is an entity composed of over 60 mutual funds. (Doc. # 248 at 10.) The mutual funds include actively managed funds, index funds, and asset allocation funds. (Id. at 10-11.) Defendant Great-West Capital Management, LLC (GWCM) provides investment advisory services for Great-West Funds for all series of its shares. (Doc. # 252-1 at 13.) Great-West Funds compensates GWCM based on a percentage of the total value of assets under management for each fund. (Id.) Defendant Great-West Life & Annuity Insurance Co. (GWLA) provides administrative services for various Great-West Funds plans. (Id. at 12.) Great-West Funds compensates GWLA through an administrative services fee of 0.35% (35 “basis points” or “bps”) for certain share classes of the Great-West Funds. (Id.)

         Plaintiffs are shareholders in the mutual funds managed by Defendants. (Doc. # 230-1 at 2.) Plaintiffs filed this suit on behalf of themselves individually as well as all other shareholders of Great-West Funds, alleging that Defendants violated § 36(b) of the Investment Company Act of 1940 (the “ICA”). (Id.) Plaintiffs argue Defendants charged excessive fees, and, therefore, violated the ICA's “fiduciary duty [on investment advisers] with respect to the receipt of compensation for services.” 15 U.S.C. § 80a-35(b).

         In support of their arguments, Plaintiffs intend to call J. Chris Meyer and Brian Henderson as expert witnesses. Mr. Meyer has “24 years of experience working for advisers to four different mutual fund families[, ] and [he] was involved in the processes by which those advisers satisfied their statutory fiduciary duties under . . . the [ICA] in informing and obtaining approval from mutual fund boards of their compensation.” (Doc. # 294 at 1.) Mr. Meyer's proffered opinions relate to “the lack of care and conscientiousness of Great-West Funds' Board of Directors . . . in connection with its approval of fees paid by Great-West Funds to GWCM and GWLA . . . and how disproportionate those fees were to the services actually rendered.” (Doc. # 288-1 at 5.)

         Plaintiffs intend to call Dr. Henderson as a rebuttal witness to opine on the testimony of Dr. Glenn Hubbard, who is one of Defendants' expert witnesses. Defendants “retained Dr. Hubbard to assess, from an economic and comparative perspective, the fees Defendants charged the Great-West mutual funds.” (Doc. # 282 at 45.) Defendants expect that Dr. Hubbard “will offer expert testimony that the fees of the Great-West mutual funds are consistent with the fees of their respective peer funds.” (Id.) Plaintiffs expect that Dr. Henderson-a professor of Finance-will identify analytical and methodological errors in Dr. Hubbard's analysis. (Doc. # 296 at 1.) Additionally, Plaintiffs anticipate that Dr. Henderson will adjust Dr. Hubbard's methodology “with more prudent assumptions” which will show that the fees at issue are comparatively higher than Dr. Hubbard suggests. (Doc. # 287-1 at 6.)

         Defendants filed the instant Motions to Strike Dr. Henderson's and Mr. Meyer's testimony on February 11, 2019. (Doc. ## 287-88.) Plaintiffs filed Responses on March 4, 2019 (Doc. ## 294, 296), and Defendants filed Replies on March 18, 2019 (Doc. ## 299, 301).

         II. LEGAL STANDARD

         Under Daubert, the trial court acts as a “gatekeeper” by reviewing a proffered expert opinion for relevance pursuant to Federal Rule of Evidence 401, and reliability pursuant to Federal Rule of Evidence 702. See Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 589-95 (1993); see also Goebel v. Denver & Rio Grande W. R.R. Co., 215 F.3d 1083, 1087 (10th Cir. 2000). The proponent of the expert must demonstrate by a preponderance of the evidence that the expert's testimony and opinion are admissible. United States v. Nacchio, 555 F.3d 1234, 1241 (10th Cir. 2009); United States v. Crabbe, F.Supp.2d 1217, 1220-21 (D. Colo. 2008); F.R.E. 702 advisory comm. notes. This Court has discretion to evaluate whether an expert is helpful, qualified, and reliable under Rule 702. See Goebel, 214 F.3d at 1087; United States v. Velarde, 214 F.3d 1204, 1208-09 (10th Cir. 2000).

         Federal Rule of Evidence 702 governs the admissibility of expert testimony. Rule 702 provides that a witness who is qualified as an expert by “knowledge, skill, experience, training, or education” may testify 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.

F.R.E. 702.

         In deciding whether expert testimony is admissible, the Court must make multiple determinations. First, it must first determine whether the expert is qualified “by knowledge, skill, experience, training, or education” to render an opinion. Nacchio, 555 F.3d at 1241. Second, if the expert is sufficiently qualified, the Court must determine whether the proposed testimony is sufficiently “relevant to the task at hand, ” such that it “logically advances a material aspect of the case.” Norris v. Baxter Healthcare Corp., 397 F.3d 878, 884, 884 n.2 (10th Cir. 2005). “Doubts about whether an expert's testimony will be useful should generally be resolved in favor of admissibility unless there are strong factors such as time or surprise favoring exclusions.” Robinson v. Mo. Pac. R.R. Co., 16 F.3d 1083, 1090 (10th Cir. 1994) (quotation omitted).

         Third, the Court examines whether the expert's opinion “has ‘a reliable basis in the knowledge and experience of his [or her] discipline.'” Norris, 397 F.3d at 884, 884 n.2 (quoting Daubert, 509 U.S. at 592). In determining reliability, a district court must decide “whether the reasoning or methodology underlying the testimony is scientifically valid.” Id. (quoting Daubert, 509 U.S. at 592-93). In making this determination, a court may consider: “(1) whether a theory has been or can be tested or falsified, (2) whether the theory or technique has been subject to peer review and publication, (3) whether there are known or potential rates of error with regard to specific techniques, and (4) whether the theory or approach has general acceptance.” Norris, 397 F.3d at 884 (citing Daubert, 509 U.S. at 593-94).

         The Supreme Court has made clear that this list is neither definitive nor exhaustive. Kumho Tire Co. v. Carmichael, 526 U.S. 137, 150 (1999). In short, “[p]roposed testimony must be supported by appropriate validation-i.e., ‘good grounds,' based on what is known.” Daubert, 509 U.S. at 590.

         The requirement that testimony must be reliable does not mean that the party offering such testimony must prove “that the expert is indisputably correct.” Bitler v. A.O. Smith Corp., 400 F.3d 1227, 1233 (10th Cir. 2004) (quoting Mitchell v. Gencorp Inc., 165 F.3d 778, 781 (10th Cir. 1999)). Rather, the party need only prove that “the method employed by the expert in reaching the conclusion is scientifically sound and that the opinion is based on facts which sufficiently satisfy Rule 702's reliability requirements.” Id. Guided by these principles, this Court has “broad discretion” to evaluate whether an expert is helpful, qualified, and reliable under the “flexible” standard of F.R.E. 702. Velarde, 214 F.3d at 1208-09; Daubert, 509 U.S. at 594.

         III. ...


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