Chandler Gas and Store Incorporated, et al. v. Treasure Franchise Company LLC, et al.

1   WO                                                                   
2                                                                        
3                                                                        
4                                                                        
5                                                                        
6                 IN THE UNITED STATES DISTRICT COURT                    
7                     FOR THE DISTRICT OF ARIZONA                        

8                                                                        

9   Chandler Gas and Store Incorporated, et al.,  No. CV-23-00400-PHX-KML 

10             Plaintiffs,              ORDER                             

11   v.                                                                   

12   Treasure Franchise Company LLC, et al.,                              

13             Defendants.                                                
14                                                                        
15        The  upcoming  trial  between  plaintiffs  (collectively  “Chandler  Gas”)  and 
16   defendants (collectively “Marathon”) centers on alleged point-of-sale machine operating 
17   system  malfunctions  at  Chandler  Gas.  Both  sides  filed  expert-exclusion  motions: 
18   Chandler Gas moves to exclude the opinions of John Umbeck and Marathon moves to 
19   exclude  the  opinions  of  Max  McDevitt.  (Docs.  186;  192.)  The  motion  to  exclude 
20   Umbeck’s  testimony  is  granted  in  part  and  denied  in  part.  The  motion  to  exclude 
21   McDevitt’s testimony is denied.                                      
22     I.   Legal Standard                                                
23          a.  Daubert Motions                                           
24        Federal Rule of Evidence 702 governs the admission of expert testimony. The rule 
25   permits a qualified expert to offer opinions if the proponent shows “it is more likely than 
26   not” that the testimony rests on sufficient facts or data, reliable methods, and a reliable 
27   application of those methods to the case and the expert’s scientific, technical, or other 
28   specialized knowledge will help the trier of fact. See Fed. R. Evid. 702. The proponent 
1   bears the burden of establishing admissibility. Bldg. Indus. Ass’n of Wash. v. Wash. State 
2   Bldg. Code Council, 683 F.3d 1144, 1154 (9th Cir. 2012).             
3        Rule 702 embraces a broad understanding of expert qualifications. Hangarter v. 
4   Provident Life & Acc. Ins. Co., 373 F.3d 998, 1015 (9th Cir. 2004). Relevant professional 
5   experience may establish the “minimal foundation” required. Id. at 1015–16. “Unlike an 
6   ordinary witness, an expert is permitted wide latitude to offer opinions, including those 
7   that are not based on firsthand knowledge or observation.”  Daubert v. Merrell Dow 
8   Pharm.,  Inc.,  509  U.S.  579,  592  (1993)  (internal  citation  omitted).  That  latitude  “is 
9   premised on an assumption that the expert’s opinion will have a reliable basis in the 
10   knowledge and experience of his discipline.” Id.                     
11        The Rule 702 inquiry is flexible and focuses on principles and methodology, not 
12   the  conclusions  drawn  from  them.  Id.  at  594–95.  The  inquiry  has  two  components: 
13   relevance and reliability. Id. at 589–92. Evidence is relevant if it has “any tendency to 
14   make the existence of any fact that is of consequence to the determination of the action 
15   more  probable  or  less  probable  than  it  would  be  without  the  evidence.”  Id.  at  587 
16   (quoting Fed. R. Evid. 401) (simplified). This relevance standard is liberal. Id. 
17        The reliability threshold is likewise broad. “Shaky but admissible evidence is to be 
18   attacked by cross examination, contrary evidence, and attention to the burden of proof, 
19   not  exclusion.”  Primiano  v.  Cook,  598  F.3d  558,  564  (9th  Cir.  2010).  Courts  must 
20   “screen the jury from unreliable nonsense opinions, but not exclude opinions merely 
21   because they are impeachable.” Alaska Rent-A-Car, Inc. v. Avis Budget Grp., Inc., 738 
22   F.3d 960, 969 (9th Cir. 2013).                                       
23        The  court  has  broad  discretion  in  assessing  reliability  and  deciding  how  to 
24   evaluate it. United States v. Hankey, 203 F.3d 1160, 1168 (9th Cir. 2000). Considerations 
25   may include whether the theory or technique can be tested, whether it has been subject to 
26   peer review, its known or potential rate of error, and its general acceptance in the relevant 
27   field. Daubert, 509 U.S. at 593–94. These factors are not exhaustive, nor must they apply 
28   in every  case. Hankey, 203 F.3d at 1168.  When reliability depends primarily on an 
1   expert’s experience, these factors may carry less weight. Id. at 1169 (“[T]he Daubert 
2   factors . . . simply are not applicable to [testimony] whose reliability depends heavily on 
3   the  knowledge  and  experience  of  the  expert,  rather  than  the  methodology  or  theory 
4   behind it.”). Ultimately, the court must determine whether the proffered testimony is 
5   grounded in an accepted body of knowledge and supported by reliable reasoning rather 
6   than speculation.                                                    
7     II.  Chandler Gas’s Motion to Exclude Umbeck                       
8          a.  Umbeck’s Opinions                                         
9        Umbeck is a professor of economics at Purdue University who has more than 40 
10   years of experience researching the petroleum industry and the marketing of petroleum 
11   products. (Doc. 186-1 at 6.) Umbeck explains he was retained by Marathon to determine 
12   whether Chandler Gas was profitable and the amount of damages the business might have 
13   incurred due to the alleged point-of-sale problems. (Doc. 186-1 at 7.) Based on his review 
14   of  “all  of  the  available  information”  (Doc.  186-1  at  34),  Umbeck  drew  eight 
15   “conclusions,” which the court will treat as the opinions Umbeck hopes to offer at trial: 
16     1.  The Chandler station was profitable when operated by Prima Investments.  
17     2.  The Chandler station was profitable when operated by the McCullochs. 
18     3.  The financial data shows no evidence of any significant financial harm to the 
19        station during the time of the alleged failure of the operating system. 
20     4.  The actual computer problems, using Verifone data, shows no evidence of any 
21        significant loss of gasoline sales.                             
22     5.  The  customer  reviews  show  no  evidence  of  customers  being  upset  about  any 
23        inconvenience caused by the computer problems.                  
24     6.  Based on opinions 3–5, the alleged failure of the operating system would have no 
25        significant negative impact on the expected future revenues or the market value of 
26        the business when sold.                                         
27     7.  The business experienced a significant decrease in the volume of fuel it sold, 
28        compared to the sales when operated by Prima. However, these lost fuel sales 
1        were caused by the new retail pricing policy implemented by the McCullochs and 
2        not the alleged problems with the operating system.             
3     8.  Any loss in value the business might have incurred during this time period was 
4        caused by the plaintiffs.                                       
5   (Doc.  186-1  at  9.)  Chandler  Gas  appears  to  seek  the  exclusion  of  all  of  Umbeck’s 
6   testimony because he “is not qualified, his opinions are not reliable, and they would not 
7   be helpful to the jury.” (Doc. 186 at 5.) But Chandler Gas focuses on excluding what it 
8   identifies as Umbeck’s “causation opinions” involving what damage was caused by the 
9   operating system failures. (Doc. 186 at 5, 10–21.) Additionally, Chandler Gas seeks to 
10   fully exclude Umbeck’s rebuttal report on the basis it merely rehashes his original expert 
11   report rather than contradicting or rebutting McDevitt’s report. (Doc. 186 at 20.) 
12          b.  Analysis                                                  
13        Umbeck holds a doctorate in economics, has taught in that field for more than four 
14   decades,  and  has  an  extensive  background  in  petroleum  industry  economics  and 
15   marketing. (Doc. 186-1 at 6.) He has published scholarship in economics, consulted with 
16   industry participants, and previously testified as an expert in matters involving petroleum 
17   marketing  and  profitability.  (Doc.  186-1  at  6.)  These  qualifications  are  sufficient  to 
18   establish the “minimal foundation” required under Rule 702 for testimony regarding 
19   business profitability, pricing decisions, market forces, and other related economic issues 
20   affecting fuel sales. See Hangarter, 373 F.3d at 1015–16.            
21        Opinions 1 and 2 Regarding Profitability                        
22        Chandler Gas argues Umbeck’s first two opinions should be excluded because 
23   they are not relevant. (Doc. 186 at 8.) Those opinions address the profitability of the 
24   station under its prior owner (Prima) and then once Chandler Gas took over. Chandler 
25   Gas claims hundreds of thousands of dollars in damages based on alleged lost sales 
26   volume. (Doc. 205 at 10.) Umbeck’s opinion that the station was profitable during the 
27   relevant  period  and  that  observed  volume  declines  are  more  consistent  with  pricing 
28   decisions than computer outages bears directly on causation and damages.  
1        Evidence of profitability is relevant because it provides economic context against 
2   which the jury can assess the plausibility and magnitude of  Chandler Gas’s claimed 
3   losses. A central issue to this case is whether any alleged operating system outages 
4   actually caused a measurable financial impact. Evidence showing the operations before 
5   Chandler  Gas  assumed  control  and  that  the  business  remained  profitable  during  the 
6   relevant period will assist the jury in understanding the evidence or determining a fact in 
7   issue. Daubert, 509 U.S. at 591; see also Hangarter, 373 F.3d at 1017. And although 
8   profitability alone does not disprove damages, it is probative of whether the alleged 
9   operating system issues caused significant economic harm, and the weight to be given to 
10   that evidence is a matter for the jury, not a basis for exclusion. See Primiano, 598 F.3d 
11   558,  564  (9th  Cir.  2010)  (holding  issues  of  weight  and  credibility  are  for  cross-
12   examination  and  not  exclusion).  This  testimony  provides  relevant  background  and 
13   probative evidence that may assist the jury in evaluating the scale of Chandler Gas’s 
14   claimed damages.                                                     
15        Accordingly,  Umbeck’s  Opinions  1  and  2  on  profitability  are  relevant  and 
16   admissible.                                                          
17        Opinions 3 and 4 Regarding Operating System Failures            
18        Umbeck  concludes  the  alleged  failures  of  the  operating  system  did  not  cause 
19   significant financial harm or loss of gasoline sales. (Doc. 186-1 at 9.) Chandler Gas 
20   argues Umbeck failed “to consider probative information regarding the frequency and 
21   severity of Operating System failure/outages, rendering his opinions unreliable.” (Doc. 
22   186  at  10–11.)  Chandler  Gas  also  contends  Umbeck’s  purported  methodology  is 
23   unreliable  because  the  Verifone  logs  are  incomplete,  the  fifteen-minute  threshold 
24   Umbeck used is arbitrary, and Umbeck is not qualified to interpret technical outage data. 
25   (Doc. 186 at 12.)                                                    
26        To  determine  the  impact  the  operating  system  had  on  sales,  Umbeck  looked 
27   exclusively to “a Verifone log” that included 75 problems each assigned a unique case 
28   number. (Doc. 186-1 at 16.) He does not explain why he only looked at Verifone logs and 
1   did not consider other sources that could have demonstrated system outages. (Doc. 186-3 
2   at 15.) The majority of Verifone problems were, according to Umbeck, “resolved in 5 
3   minutes or less.” (Doc. 186-1 at 16.) Apparently based solely on his personal experience 
4   with computer problems, Umbeck contends customers do not leave a station and go 
5   elsewhere if a problem can be resolved within five minutes. (Doc. 186-1 at 16.) Umbeck 
6   provides no evidentiary basis for this five-minute view of consumer behavior. Umbeck 
7   then identified the problems that “took more than 15 minutes to resolve.” (Doc. 186-1 at 
8   19.) (He does not explain why he ignores those problems that took between five and 
9   fifteen minutes to resolve.) Of the problems lasting fifteen minutes or more, Umbeck 
10   concludes “[m]ost of these events do not appear to stop customers from buying fuel or 
11   store items. They may not be able to pay at the pump but they can still pay in the store.” 
12   (Doc. 186-1 at 20.) Neither Marathon nor Umbeck’s report itself meaningfully explain 
13   how Umbeck is qualified to offer these opinions.                     
14        Umbeck’s  opinions  based  on  his  “analysis  of  the  actual  computer  problems” 
15   cannot be admitted. Umbeck admitted he has no expertise or specialized knowledge to 
16   understand computer system issues. (Doc. 186-3 at 11 (Umbeck stating he is “definitely 
17   not” an IT expert and would not hold himself out as qualified to interpret system outage 
18   logs  or  related  technical  evidence).)  And  Marathon’s  attempt  to  offer  Umbeck  as 
19   qualified  on  this  front  is  inexplicable.  Without  some  technical  understanding  of  the 
20   “Verifone logs” and precisely what they were reflecting, Umbeck has no basis for his 
21   alleged “analysis” of those problems.                                
22        But even assuming Umbeck were qualified to analyze computer problems, he has 
23   not explained how he has any expertise in consumer behavior and provides no basis for 
24   his assumption that a delay of less than five minutes would have no impact. Similarly, the 
25   record reveals no proper basis for Umbeck’s unexplained decision to impose an arbitrary 
26   fifteen-minute cutoff for identifying potentially impactful events. Even more, Umbeck 
27   fails to conduct any analysis to demonstrate a connection between his fifteen-minute-or-
28   longer problem list and Chandler Gas’s fuel sales or finances. The closest he comes to 
1   connecting his questionably-identified Verifone issues to  financial consequences is a 
2   single reference to OPIS data showing Chandler Gas sold fuel each day between May 13, 
3   2022 and May 16, 2022 (a period of one of his fifteen-plus-minute outages). (Doc. 186-
4   1.)  And  beyond  failing  to  tie  the  Verifone  issues  to  any  financial  outputs,  Umbeck 
5   provides zero support for the reliability of his methodology. His background alone will 
6   not overcome such an astounding failure. See United States v. Valencia-Lopez, 971 F.3d 
7   891, 898–900 (9th Cir. 2020).                                        
8        Finally, Umbeck seems to expect the court and factfinders to draw meaningful 
9   conclusions from a chart containing gross fuel sales revenue, C-store revenue, and total 
10   sales revenue. (Doc. 186-1 at 14.) Umbeck presents a chart with these figures and blankly 
11   states “the table shows no significant decline in revenues from fuel sales or store sales.” 
12   (Doc. 186-1 at 15.) Yet there is zero explanation or analysis to show why differences the 
13   chart shows in revenue should be considered insignificant. Umbeck thus provides no 
14   reliable reasoning supporting his conclusion that no significant loss of revenues occurred 
15   over  the  relevant  time  period.  Valencia-Lopez,  971  F.3d  at  898.  In  sum,  Umbeck 
16   inadequately  described  his  methodology,  failed  to  show  how  his  methodology  is 
17   supported in his field and reliable, did not establish the meaning of a “significant” loss or 
18   financial harm, did not explain why his fifteen-minute Verifone threshold is appropriate, 
19   and  did  not  tie  any  of  his  (questionably-selected)  computer  issues  to  any  finances 
20   whatsoever.                                                          
21        For these reasons, Umbeck’s Opinions 3 and 4 are excluded.      
22        Opinion 5 Regarding Customer Reviews                            
23        Umbeck obtained 36 customer reviews through Google Maps from the relevant 
24   period and concludes there is no evidence of customers being upset about the computer 
25   problems, and thus “no evidence of a significant loss of business . . . due to the alleged 
26   computer  problems.”  (Doc.  186-1  at  21–22.)  Umbeck’s  discussion  of  the  customer 
27   reviews is unusually scant and confusing. He says that clicking on the station on Google 
28   Maps “open[s] up a website with all kinds of information about the station, including the 
1   experiences of customers who like to leave comments and reviews about the visit.” (Doc. 
2   186-1 at 21–22.) It is unclear whether this “website” is Google Maps or another platform. 
3   Rather than select comments exclusively from the relevant period, Umbeck includes 
4   reviews from 2021 to 2023 to “see the comments.” (Doc. 186-1 at 22.) He offers no real 
5   explanation  why  he  chose  a  broader  period.  He  requests  the  court  read  through  the 
6   reviews  in  the  appendix  of  his  report  to  see  “very  positive”  and  “not  positive” 
7   descriptions of things. (Doc. 186-1 at 22.) He notes that in the 36 reviews he obtained, 
8   there was not one comment mentioning computer problems or clerks being on the phone 
9   to report computer issues. (Doc. 186-1 at 22.) From these facts alone, Umbeck concludes 
10   the  customer  complaints  provide  “no  evidence  of  a  significant  loss  of  business  at 
11   [Chandler Gas] due to the alleged computer problems.” (Doc. 186-1 at 22.) 
12        This conclusion by Umbeck does not meet the Daubert standard. Even assuming 
13   the accuracy of the customer reviews themselves, Umbeck provides no reliable method 
14   for extrapolating economic harm from qualitative anecdotal feedback. His methodology 
15   appears to have consisted of reading through a relatively arbitrary collection of consumer 
16   reviews of Chandler Gas, and nothing more. There is no part of Umbeck’s background 
17   that qualifies him to conduct a qualitative analysis of customer reviews retrieved through 
18   his own unexplained research on Google Maps. See Hankey, 203 F.3d 1160, 1168–69 
19   (9th Cir. 2000); see also 11333 Inc., 261 F. Supp. 3d at 1027. Even if his background 
20   demonstrated expertise to conduct such a qualitative analysis, Umbeck does nothing to tie 
21   these consumer reviews to any impacts on the business of Chandler Gas. Umbeck also 
22   fails to consider other resources that could provide a fuller picture of customer sentiment 
23   (Doc. 186 at 14) and ultimately provides no reason why his methodology is sound or 
24   proper.                                                              
25        For these reasons, Opinion 5 is excluded.                       
26        Opinion 6                                                       
27        Opinion 6 relies entirely on excluded Opinions 3 through 5, and therefore depends 
28   on  unreliable  and  inadmissible  testimony.  Although  inadmissible  evidence  may  be 
1   considered in formulating expert opinions, Fed. R. Evid. 703, Umbeck may not rely on 
2   evidence that itself is unreliable. See Daubert, 509 U.S. at 589; see also Gen. Elec. Co. v. 
3   Joiner, 522 U.S. 136, 146 (1997). Here, Umbeck’s conclusion depends substantially on 
4   Opinions 3-5, which have been excluded as methodologically unreliable. Because the 
5   foundation  for  Opinion  6  is  unreliable  and  that  opinion  is  otherwise  broad  and 
6   unsupported by independent valuation methodology, it is excluded.    
7        Opinion 7 Regarding the Causation of Lost Profits               
8        Umbeck’s Opinion 7 concludes that any decrease in fuel sales volume during the 
9   relevant period was caused by Chandler Gas’s pricing decisions and not  the alleged 
10   operating system failures. (Doc. 186-1 at 35.) Chandler Gas argues this opinion—which 
11   is based primarily on price differentials between Chandler Gas and the nearby Circle K 
12   station—should be excluded because it is “flawed and unreliable” and prejudicial. (Doc. 
13   186 at 19.)                                                          
14        To provide support for Opinion 7, Umbeck uses data on the station’s average 
15   monthly retail prices before, during, and after Chandler Gas’s ownership. (Doc. 186-1 at 
16   23.)  Umbeck  first  compares  Chandler  Gas’s  prices  with  those  of  its  eight  closest 
17   competitors, which seems to show nearly identical pricing between 2018 and 2024. (Doc. 
18   186-1  at  23.)  But  then  Umbeck  provides  stronger  support  for  his  conclusions.  He 
19   demonstrates a gradual decline in monthly average gasoline sales for Chandler Gas (Doc. 
20   186-1 at 25) and a gradual increase in the differential between the retail price offered by 
21   Chandler Gas and the wholesale price at which it purchased the gasoline (Doc. 186-1 at 
22   28). Finally, Umbeck compares the monthly price of Chandler Gas with a competitor 
23   Circle K station just under one mile away. (Doc. 186-1 at 30.) Umbeck’s data shows that 
24   Chandler Gas’s average monthly retail price was often a few cents below Circle K’s price 
25   for the last half of 2021, but several cents higher than Circle K’s in 2022 (and even up to 
26   more than fifteen cents higher in November 2022). (Doc. 186-1 at 30.) In the same chart, 
27   Umbeck also shows a mostly-gradual decline in the average monthly volume of gasoline 
28   sold by Chandler Gas. (Doc. 186-1 at 30.)                            
1        From this data, Umbeck concludes the retail prices set by Chandler Gas—and not 
2   the computer problems—caused the volume of gasoline sales to drop. (See Doc. 186-1 at 
3   31,  35.)  This  testimony  is  relevant  to  causation  and  damages  because  it  offers  an 
4   alternative explanation for the decline in sales volume, which is a key contested issue in 
5   the case. Expert testimony that helps the jury evaluate competing causal explanations for 
6   damages claims is within the scope of Rule 702. See Hangarter, 373 F.3d at 1016. The 
7   methodology employed by Umbeck is also sufficiently reliable. Economic experts like 
8   Umbeck may rely on historical price data and market comparisons to form opinions about 
9   the effect of pricing on sales. Here, Umbeck presents data showing evidence of patterns 
10   between price changes and volume shifts. Since the analysis is informed by Umbeck’s 
11   background as an economist and relevant experience within the petroleum industry, it 
12   sufficiently satisfies the Daubert standard. Primiano, 598 F.3d at 564. Though Umbeck’s 
13   causal  conclusion  regarding  lost  fuel  sales  is  sweeping,  the  court  does  not  find  the 
14   analytical gap between the data and opinion proffered “too great.” See Gen. Elec., 522 
15   U.S. at 146. Any weaknesses in the scope of the comparative analysis or the inference 
16   drawn by Umbeck in Opinion 7 may be addressed through cross-examination. 
17        Accordingly, the motion to exclude Opinion 7 is denied.         
18        Opinion 8 Regarding Plaintiffs Having Caused All Loss in Value  
19        Umbeck’s  Opinion  8  states  that  “any  loss  in  value  the  business  might  have 
20   incurred during this time period was caused by the plaintiffs.” (Doc. 186-1 at 9.) Unlike 
21   Umbeck’s  pricing  analysis  in  Opinion  7,  Umbeck  does  not  identify  a  valuation 
22   methodology or provide an evidentiary basis for this opinion. Umbeck does not perform a 
23   discounted  cash  flow  analysis,  comparable  sales  analysis,  or  any  other  recognized 
24   valuation technique. Nor does he provide an economic model linking the alleged causes 
25   (e.g.,  pricing  decisions)  to  any  measurable  diminution  in  business  value.  In  fact, 
26   Umbeck’s report includes essentially no discussion or reasoning to support this opinion: 
27   there is not a single sentence about the business value or how Chandler Gas may have 
28   caused any loss in value. This opinion is too unreliable to satisfy the necessary standard 
1   because it does not have an adequate analytical or methodological basis. See Gen. Elec., 
2   522 U.S. at 146 (holding courts may exclude expert testimony supported only by ipse 
3   dixit).                                                              
4        Accordingly, Opinion 8 is excluded.                             
5        Rebuttal Report                                                 
6        Chandler  Gas  also  objects  to  portions  of  Umbeck’s  rebuttal  report,  arguing 
7   Umbeck  impermissibly  exceeds  the  scope  of  proper  rebuttal.  (Doc.  186  at  20–21.) 
8   Rebuttal testimony must be “intended solely to contradict or rebut evidence on the same 
9   subject matter identified by another party’s expert.” Fed. R. Civ. P. 26(a)(2)(D)(ii); see 
10   also Daly v. Fesco Agencies NA Inc., 108 F. App’x 476, 480 (9th Cir. 2004). Expert 
11   rebuttal may respond to, analyze, or critique the opinions of an opposing expert, but it 
12   may not be used to advance new arguments, theories, or analyses that should have been 
13   disclosed in the rebutting expert’s original report. See Baker v. SeaWorld Ent., Inc., 423 
14   F. Supp. 3d 878, 896 (S.D. Cal. 2019) (“[r]ebuttal testimony cannot be used to advance 
15   new  arguments  or  new  evidence”)  (internal  quotation  marks  omitted).  Accordingly, 
16   Umbeck  will  be  permitted  to  offer  rebuttal  testimony  only  to  the  extent  it  directly 
17   responds to or contradicts McDevitt’s opinions. See Puente v. City of Phoenix, No. CV-
18   18-02778-PHX-JJT, 2021 WL 1209302, at *2 (D. Ariz. Mar. 31, 2021) (applying Fed. R. 
19   Civ.  P.  26(a)(2)(D)(ii)).  Any  testimony  beyond  the  proper  scope  of  rebuttal  will  be 
20   excluded.                                                            
21          c.  Conclusion                                                
22        Umbeck may offer Opinions 1, 2, and 7. Opinions 3, 4, 5, 6, and 8 are excluded. 
23   To be clear, Umbeck cannot offer testimony regarding the technical functioning of the 
24   operating  system,  the  Verifone  records,  or  the  actual  cause  of  any  system  outages. 
25   Additionally, Umbeck must not offer opinions based on personal feelings or unexplained 
26   assumptions rather than reliable principles and methods. (See, e.g., Doc. 186-1 at 16 
27   (“Having experienced numerous computer problems myself, I’m sure these problems 
28   were  very  annoying  for  the  individuals  operating  the  station.  However,  if  it  can  be 
1   resolved by making a 5-minute phone call, it will probably not cause your customers to 
2   leave your station and go somewhere else for their fuel and store items.”).) 
3     III.  Marathon’s Motion to Exclude McDevitt                        
4        Unlike  Umbeck’s  opinions,  McDevitt’s  opinions  will  not  be  addressed 
5   individually. McDevitt’s six opinions are not independent conclusions on distinct topics. 
6   Rather, they are different numerical outputs of an economic damages model estimating 
7   lost profits and business value over a defined period. His methodology, assumptions, and 
8   input  materials  are  common  to  all  six  opinions.  To  avoid  redundancy,  McDevitt’s 
9   opinions are analyzed at once, with a focus on whether his qualifications, methodology, 
10   and underlying assumptions satisfy the necessary Daubert standard.   
11          a.  McDevitt’s Opinions                                       
12        Max McDevitt is an economist at the consulting firm, The Fontana Group, Inc., 
13   and has “assisted with” over two dozen cases related to franchisee issues, generally in the 
14   automotive industry. (Doc. 192-1 at 5.) Chandler Gas hired Fontana and McDevitt to 
15   provide  relevant  economic  analysis  for  this  case.  (Doc.  192-1  at  6.)  Specifically, 
16   McDevitt has been retained to produce an expert report estimating the lost profits for 
17   Chandler Gas between June 2021 and July 2024 and the loss of value on the sale of 
18   business  assets  for  Chandler  Gas  due  to  the  alleged  point-of-sale  operating  system 
19   malfunctions. (Doc. 192-1 at 6–7.) McDevitt intends to introduce the following opinions 
20   at trial:                                                            
21     1.  Chandler Gas lost an estimated 907,708 gallons of fuel sales between June 2021 
22        and July 2024                                                   
23     2.  Chandler Gas lost an estimated $1,731,972 in C-Store sales between June 2021 
24        and July 2024                                                   
25     3.  Chandler Gas lost an estimated $333,040 in fuel profits between June 2021 and 
26        July 2024                                                       
27     4.  Chandler Gas lost an estimated $388,532 in C-Store profits between June 2021 
28        and July 2024                                                   
1     5.  Chandler Gas lost an estimated $721,572 in total profits (combined fuel and C-
2        Store) between June 2021 and July 2024                          
3     6.  Chandler Gas’s estimated loss of value on the sale of business assets was $784,604 
4   (Doc. 192-1 at 7.)                                                   
5          b.  Analysis                                                  
6        McDevitt is an economist with a doctorate in economics from Boston University. 
7   (Doc. 192-1 at 5.) He has experience with applied economics and statistics, especially 
8   within the retail automotive industry. (Doc. 192-1 at 20–22.) He consults and performs 
9   analyses on topics like applied econometrics, economic harm, franchise economics, and 
10   spatial sales distribution and market behavior. (Doc. 192-1 at 20–21.) As part of his work 
11   with Fontana, McDevitt has worked on cases regarding lost profits and lost sales, among 
12   other  related  economic  topics.  (Doc.  192-1  at  5.)  Marathon  challenges  McDevitt’s 
13   qualifications on the basis he lacks specialized experience in retail gasoline markets and 
14   the petroleum industry. (Doc. 192 at 1.)                             
15        McDevitt’s  educational  background  and  professional  experiences  provide  the 
16   minimal foundation required under Rule 702 for testimony regarding basic economic-
17   damages  calculations.  See  Hangarter,  373  F.3d  at  1015–16.  There  is  generally  no 
18   requirement for an expert to be a specialist in a given field. Doe v. Cutter Biological, Inc., 
19   a Div. of Miles Lab’ys, Inc., 971 F.2d 375, 385 (9th Cir. 1992). An expert is qualified to 
20   offer opinions so long as he does not go beyond his knowledge and experience. See 
21   Gorney v. Safeway Inc., No. CV-23-01413-PHX-SHD, 2025 WL 2586133, at *5 (D. 
22   Ariz. Sept. 8, 2025). Here, McDevitt is not going beyond his specialized field of applied 
23   economics. Though he does not appear to have extensive experience in the petroleum 
24   industry, he does have the necessary background to conduct damages modeling and offer 
25   opinions  on  lost  profits,  sales,  and  value.  (See  Doc.  192-1  at  20–21.)  Any  lack  of 
26   specialized  industry  experience  for  McDevitt  would  merely  go  to  the  weight—not 
27   admissibility—of his testimony. See Hangarter, 373 F.3d at 1015–16; see also United 
28   States v. Garcia, 7 F.3d 885, 890 (9th Cir. 1993). Therefore, Marathon’s arguments 
1   surrounding McDevitt’s qualifications fail.                          
2        Marathon  also  takes  issue  with  McDevitt’s  methodology.  Marathon  argues 
3   McDevitt’s damages opinions rest on biased assumptions—particularly that all lost sales 
4   were attributable to operating system glitches rather than price increases or competition. 
5   (Doc. 192 at 10.) But McDevitt’s assumptions, which he makes very clear, do not stray 
6   into terrain that would preclude his testimony. He reviewed historical data, incorporated 
7   alternative pricing scenarios, and grounded his damage calculations in the station’s actual 
8   financial records. Nuveen Quality Income  Municipal Fund, Inc.  v. Prudential  Equity 
9   Group, LLC, 262 F. App’x 822, 824 (9th Cir. 2008) (“[a]n expert opinion is properly 
10   excluded where it relies on an assumption that is unsupported by evidence in the record 
11   and is not sufficiently founded on facts”); cf. Guidroz-Brault v. Missouri Pac. R. Co., 254 
12   F.3d 825, 830 (9th Cir. 2001) (excluding expert opinion based on insufficiently-supported 
13   assumption). And experts are allowed to rely on records created by others if they disclose 
14   their assumptions and use those records to apply their own specialized expertise. See Fed. 
15   R. Evid. 703; see also Hyer v. City & Cnty. of Honolulu, 118 F.4th 1044, 1056 (9th Cir. 
16   2024). Ultimately, if an assumption has a reasonable basis in the record, an economics 
17   expert like McDevitt may stretch the assumption to extremes so long as he does not veer 
18   into “unreliable nonsense.” See Unknown Party v. Arizona Bd. of Regents, 641 F. Supp. 
19   3d 702, 727 (D. Ariz. 2022); see also Alaska Rent-A-Car, 738 F.3d at 969–70 (holding 
20   that  expert’s  reliance  on  assumptions  affects  weight,  not  admissibility,  where 
21   methodology is otherwise  sound). Since the record indicates at  least some basis for 
22   McDevitt’s assumptions that the operating system malfunctions resulted in declined sales 
23   and values, his testimony may be offered. Disagreements with McDevitt’s assumptions 
24   and opinions are best left for cross-examination. Marsteller v. MD Helicopter Inc., No. 
25   CV-14-01788-PHX-DLR, 2018 WL 3023284, at *2 (D. Ariz. May 21, 2018). 
26        Marathon further asserts McDevitt ignored basic principles of economics like the 
27   law of demand. (Doc. 192 at 11.) In making this argument, Marathon relies on cases 
28   featuring  experts  whose  analyses  rested  on  assumptions  contrary  to  basic  economic 
1   principles. See, e.g., Crystal Semiconductor Corp. v. TriTech Microelectronics Int’l, Inc., 
2   246 F.3d 1336, 1359 (Fed. Cir. 2001) (court stating it would have excluded minimally-
3   qualified expert who failed to account for price elasticity of demand). But that argument 
4   essentially restates Marathon’s complaint that McDevitt failed to conduct a wholistic 
5   causation analysis incorporating the price of fuel. That McDevitt did not conduct an 
6   independent causation analysis is no basis for exclusion. A damages expert may assume 
7   liability and opine solely on the amount of damages. See Calyxt Inc. v. Tri-Rotor LLC, 
8   No.  CV-20-01221-PHX-DLR,  2024  WL  2699938,  at  *4  (D.  Ariz.  May  24,  2024) 
9   (permitting  expert  to  assume  causation  when  providing  approximate  estimation  of 
10   damages). An expert opinion must rest on more than speculation but need not eliminate 
11   all competing explanations, see Stephens v. Union Pacific Railroad Co., 935 F.3d 852, 
12   856  (9th  Cir.  2019),  and  the  reasonableness  of  the  assumptions  is  a  matter  for  the 
13   factfinder. Though Marathon may contend McDevitt’s analyses were flawed because 
14   Chandler  Gas  raised  its  prices  above  competitors,  this  argument  does  not  render 
15   McDevitt’s testimony inadmissible. He did not rely on unsupported speculation and the 
16   fact that he did not conduct independent causation analysis is no issue. 
17        Lastly,  Marathon  argues  McDevitt’s  opinions  should  be  excluded  because  the 
18   opinions would mislead the jury and cause unfair prejudice. (Doc. 192 at 8.) Under Rule 
19   403, otherwise admissible expert testimony should be excluded if the probative value of 
20   the evidence is substantially outweighed by “the danger of unfair prejudice, confusion of 
21   the issues, or misleading the jury, or by considerations of undue delay, waste of time, or 
22   needless  presentation  of  cumulative  evidence.”  Fed.  R.  Evid.  403.  This  is  an 
23   extraordinary remedy in the context of otherwise-admissible expert testimony and would 
24   be inappropriate here. McDevitt’s calculation of damages has probative value given the 
25   issues at hand, and any risk of prejudice or confusion can be mitigated through cross-
26   examination,  the  presentation  of  Umbeck’s  competing  analysis,  and  appropriate  jury 
27   instructions. See United States v. Pritchard, 993 F. Supp. 2d 1203, 1213 (C.D. Cal. 
28   2014),  aff’d,  692  F.  App’x  349  (9th  Cir.  2017).  The  probative  value  of  McDevitt’s 
 1 ||  testimony is not substantially outweighed by the danger of unfair prejudice, so the motion 
  ||  to exclude under Rule 403 is denied. 
3             c.  Conclusion 
4          In all, McDevitt’s economic damages opinions are supported by relevant expertise, 
       employ  a  methodology  that  is  sufficiently  reliable  under  Rule  702,  and  rest  on  an 
6||    adequate  factual  basis.  The  issues  Marathon  raises—the  validity  of  McDevitt’s 
7||    assumptions  and  scope  of  his  analysis—are  properly  addressed  through  cross- 
  ||  examination   and  competing   expert  testimony,   not  through  Daubert  exclusion. 
9||    Accordingly, Marathon’s motion to exclude the testimony of McDevitt is denied. 
10          Accordingly, 
11          IT IS ORDERED the Motion to Exclude the Testimony of Umbeck (Doc. 186) is 
      GRANTED  IN  PART  and  DENIED  IN  PART.  The  motion  to  exclude  Umbeck’s 
13 ||  Opinions 3, 4, 5, 6, and 8 is GRANTED. The motion to exclude Umbeck’s Opinions  1, 
       2, and 7 is DENIED. 
15          IT IS FURTHER ORDERED the Motion to Exclude the Testimony of McDevitt 
16]}    (Doc. 192) is DENIED. 
17          Dated this 29th day of October, 2025. 
18 

20                                         ah AE 
                                                 Honorable Krissa M. Lanham 
21                                                  United States District Judge 
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