December 2006 Newsletter

Inclusion of Expert Testimony

Case: Kinetic Concepts, et al v. Bluesky Medical Corp, et al

Questions arise as to the statistical and methodological bases for surveys used in litigation. A recent case finds that non-statistical surveys, which do not lead to statistically significant inferences about the population, may still be used in litigation.

A convenience sample is exemplified by a shopper’s experience being stopped in a mall and asked some questions by a person collecting data.

Defendants in this case filed a Motion to Exclude Expert Testimony based on the convenience survey used by the expert witness. Plaintiffs use expert’s survey to show that the defendants’ marketing materials are misleading. The defendants asserted methodological errors with the convenience sample, and cited that the survey could not be reproduced with any degree of certainty.

The judge permitted the expert’s survey on the grounds that any potential ambiguity on the survey does not obfuscate the survey’s results into irrelevancy. The expert’s survey could still assist the jury in deciding the question of whether the advertisements mislead a potential class of customers.

Exclusion of Expert Testimony

Case: United States of America v. Kerr-McGee Chemical Worldwide, LLC.

An expert report should reproduce “‘what’ the expert saw, heard, considered, read, thought about or relied upon in reaching the conclusions and opinions to be expressed”. (Reed v. Binder)

Plaintiff alleged defendant sold federal lease crude oil production at rates significantly below established market prices. The plaintiff’s expert witness calculated the unpaid oil royalties at $12,000,000. N.B. this case has been in the news recently.

The defendant argued that the expert witness did not disclose confidential pricing data used to support the unpaid royalty amount. The expert witness claimed that he neither had custody over, nor could he produce the confidential pricing data. The court ruled that the expert witness must withdraw the particular opinion dependent upon the confidential data or comply with his obligation to supplement his disclosures.

Detailed Analysis Necessary to Prove Lost Profits

Case: Ramco Oil & Gas Ltd. V. Anglo-Dutch (Tenge) L.L.C.

Texas 14th Court of Appeals

No. 14-04-00433-CV

The trial court awarded plaintiff $6.4 million in lost profits from its interest in developing a Russian oil and gas field. The present appeal of a summary judgment focused on whether the evidence proved with reasonable certainty the profits plaintiff claimed to have lost as a result of defendant’s breaches of contract. An appeals court found no evidence to prove with reasonable certainty the profits Plaintiff lost as a result of the breaches of contract.

The damage model assumed that Plaintiff would have been able to (i) finance oil & gas development and (ii) purchase other parties’ interests in the oil field. The model also assumed that (iii) the oil field would produce in accordance with the expert’s production plan, and (iv) operate productively and profitably for the life of the contract. However, most if not all of the reserves were not categorized as proved reserves. The damage model depended upon production from the initial drilling prospects to fund future development without quantifying the risk of failure to produce in this early stage of development. Moreover, the existence of a defendant’s own speculative projections does not obviate the need for courts to apply the “reasonable certainty” test.

Noteworthy is the unusually rigorous analysis applied by the appellate court to the damage assumptions (i–iv).

Sales and Use Transactions - Taxability

The Texas State Comptroller’s Office will issue written responses as to the taxability of transactions within several days of a request. Allen Wendler obtains these responses regularly for clients and recently avoided substantial taxes for an operator arising from offshore production platform removal services that the contractor thought were taxable but the Comptroller determined not to be.

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