Commercial Division Blog

Posted: February 5, 2014 / Categories Commercial, Damages, Experts

Fact Witness Not Allowed to Channel Expert's Opinion

On January 22, 2014, Justice Ramos of the New York County Commercial Division issued a decision in Wathne Imports, Ltd. v. PRL USA, Inc., 2014 NY Slip Op. 30261(U), excluding testimony of the plaintiff’s chief executive and co-owner on damages for lack of personal knowledge.

In Wathne Imports, the plaintiff held exclusive licenses to sell luggage bearing various Polo and Ralph Lauren trademarks. When the defendants discontinued some of the lines, the plaintiff sued for its lost profits. The lost profits were, in turn, the subject of this opinion; after being unable to offer a qualified expert witness on damages, the plaintiff turned to its chief executive, Berge Wathne, claiming that she had sufficient personal knowledge from her day-to-day job that she could testify to lost profits as a lay witness.

Relying on a case from the Third Circuit, Lightning Lube v. Witco Corp., 4 F.3d 1153 (3d Cir. 1993), the court initially permitted Ms. Wathne to testify as a lay witness. However, after her deposition, the defendants again moved to preclude her testimony. The court granted their motion, finding that

Ms. Wathne’s testimony relies heavily on data and calculations provided to her by an expert, Glenn Newman. While much of the information provided is empirical data regarding sales, the calculation of Profit Margin and, to some extent, the calculation of Lost Sales, is a subjective calculation requiring specialized knowledge. In fact, the 25% profit margin to which Ms. Wathne seeks to testify, came entirely from Newman’s calculations.

The court distinguished Lightning Lube—where the business owner also relied on documents provided by his accountant—on the grounds that

the owner in Lightning Lube had demonstrated that he was capable of independently performing the calculation . . . . Conversely, Ms. Wathne's testimony demonstrates that she lacks personal knowledge of these calculations and would not be capable of making the subjective calculations independent of Newman's reports and counsel’s guidance.

Accordingly, the court excluded Ms. Wathne’s testimony because it "would merely be a conduit for the opinions of experts not subject to cross examination."

For practitioners, this opinion shows that even an apparently qualified and knowledgeable lay witness may not be able to testify in the place of an expert. It is also noteworthy that the court relied on a federal appellate decision in initially permitting the testimony, and this should be kept in mind when researching precedents for commercial cases.