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Rite Aid Corp. v. Liberty Mutual Fire Insurance

February 24, 2006

RITE AID CORPORATION, PLAINTIFF,
v.
LIBERTY MUTUAL FIRE INSURANCE COMPANY, DEFENDANT



The opinion of the court was delivered by: Yvette Kane United States District Judge

(Judge Kane)

MEMORANDUM AND ORDER

THE BACKGROUND OF THE ORDER IS AS FOLLOWS:

This action for declaratory judgment involves Plaintiff Rite Aid's claim for insurance coverage of an employment related claim that was resolved through arbitration. Rite Aid was represented at arbitration by the law firm of Skadden, Arps, Slate, Meagher & Flom LLP ("Skadden").*fn1 (T.R. 33.)*fn2 On November 14, 2002, an arbitration panel issued a ruling awarding Kaplan $15,396,466, plus interest, but finding for Rite Aid on Kaplan's claims for pre-employment misrepresentations and injury to reputation. Rite Aid incurred over $2,000,000 in fees and costs in connection with the arbitration. After Plaintiff and Kaplan entered a confidential settlement agreement, Plaintiff sought reimbursement from Liberty Mutual for the costs incurred in defending itself during arbitration.*fn3

This Court granted in part Plaintiff's motion for summary judgment, holding that Defendants had a duty to defend Plaintiff in the Kaplan arbitration and that Defendant breached its duty in refusing to reimburse Plaintiff for costs incurred in defense of the Kaplan claims.

On July 28 and 29, 2005, the parties litigated the issue of damages at a bench trial. Plaintiff presented testimony regarding the nature and extent of legal services provided to Plaintiff. Defendant countered with but one witness, Susan Cooper. Defendant offered Ms. Cooper as an expert in the area of legal auditing. Plaintiff objects to the testimony of Ms. Cooper and to the admission of Exhibits 218, 219, and 220 proffered by Defendant at trial.*fn4

I. Discussion

A. Expert Opinion

Rule 702 of the Federal Rules of Evidence provides that:

If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise, if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case.

Fed. R. Evid. 702. Under Rule 702, the Court must ensure that the proffered expert's testimony is both relevant and reliable. Kumho Tire Co. v. Carmichael, 526 U.S. 137, 147-49 (1999) (citing Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 589 (1993)) (expanding the court's gatekeeping function to all expert testimony). "In short, an expert must have the requisite qualifications, reliability, and fit." Jaasma v. Shell Oil Co., 412 F.3d 501, 513 (3d Cir. 2005) (internal quotation omitted). In assessing reliability, the District Court is guided by a number of factors, such as:

(1) whether a method consists of testable hypotheses; (2) whether the method has been subject to peer review; (3) the known or potential rate of error; (4) the existence and maintenance of standards controlling the techniques's operation; (5) whether the method is generally accepted; (6) the relationship of the technique to methods which have been established to be reliable; (7) the qualifications of the expert witness based on the methodology employed; and (8) the non-judicial uses to which the method has been put. In assessing reliability, a court need not rely exclusively on this list and may take into account any other relevant factors, however, this list provides an ample starting point.

Calhoun v. Yamaha Motor Corp., 350 F.3d 316, 321 (3d Cir. 2003) (internal citation omitted). The trial court is granted "considerable leeway in deciding in a particular case how to go about determining whether particular expert testimony is reliable." Kumho Tire Co., 526 U.S. at 152. To fit, the expert testimony must be "'relevant for the purposes of the case and must assist the trier of fact.'" Calhoun, 350 F.3d at 321 (quoting Schneider v. Fried, 320 F.3d 396, 405 (3d Cir. 2003)). "'[N]othing in either Daubert or the Federal Rules of Evidence requires a district court to admit opinion evidence that is connected to the existing data only by the ipse dixit of the expert.'" Kumho Tire, 526 U.S. at 157 (quoting General Electric Co. v. Joiner, 522 U.S. 136, 146 (1997)).

Defendant seeks to proffer Ms. Cooper as an expert in the field of "legal auditing" and have the Court consider Ms. Cooper's testimony as to the reasonableness of the legal fees in this case. (T.R. 216-19.) At trial, Ms. Cooper opined that multiple charges by Skadden and Ballard were unreasonable and recommended reducing the reimbursable fees by more than fifty-percent. (T.R. 275; Def. Ex. 220 at 27.) In particular, Ms. Cooper recommended excluding from reimbursement, inter alia: all of the fees charged prior to Liberty Mutual receiving tender on August 27, 2001; all fees charged by Ballard; all fees billed by Skadden's summer clerks; all fees billed by Skadden "transient billers"; and all Lexis Nexis research charges. (T.R. 263-66, 283-88, 291-97.) Ms. Cooper also found unreasonable the amount of time Skadden attorneys spent in depositions, in conferences, and working on ...


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