Parkway Neuroscience v. Katz, Abosch, etc., PA

• Court: Court of Special Appeals of Maryland
• Decided: September 30, 2022
• Docket: 0658/21
• Status: Published

Opinion

Parkway Neuroscience and Spine Institute, LLC v. Katz, Absoch, Windesheim, Gershman & Freedman, P.A., et al., No. 658, September Term, 2021, Opinion by Adkins, J.

EVIDENCE-EXPERT TESTIMONY: The admissibility of expert testimony is largely within the discretion of the trial court. Such a ruling, however, may be reversed on appeal if it is founded upon an error of law. Judges making discretionary rulings must apply correct legal standards. EVIDENCE—DAUBERT-ROCHKIND: A trial court, in its gatekeeper role under Rochkind and Daubert, acts improperly in excluding the testimony of a qualified certified public accountant testifying about lost profits of an LLC medical practice―on grounds that the expert’s experience with such analysis, although extensive, had only included one medical practice. Any lack of specialized experience is ripe for cross-examination at trial. EVIDENCE—DAUBERT-ROCHKIND: Trial court erred in holding expert testimony unreliable under the Daubert-Rochkind standard after accepting expert’s methodology— the before-and-after method of calculating lost profits. Court’s rationale was (1) using 2015 as the base year; (2) failing to consider changes in insurance reimbursement rates; (3) failing to articulate standards to define economic impact and treat member draws; (4) changing her calculations while the underlying facts remained the same; and (5) failing to offer calculations for profit loss based on variable jury determinations. None of these criticisms addressed methodology, and they were more appropriate for cross-examination and advocacy at trial. EVIDENCE—MARYLAND RULE 5-702: Maryland Rule 5-702 requirement that there is “a sufficient factual basis” supporting the testimony does not justify a trial court’s exclusion of such testimony based upon the correctness of the expert’s conclusions. “[A]nalytical focus should be on principles and methodology. Trial courts may not reject expert testimony simply because they disagree with the conclusions reached by the witness.” Jack B. Weinstein, Weinstein’s Federal Evidence 702.05[2][a] (2d ed. 1997). Circuit Court for Howard County Case No. C-13-CV-18-000181

REPORTED

IN THE COURT OF SPECIAL APPEALS

OF MARYLAND

No. 0658

September Term, 2021

______________________________________

PARKWAY NEUROSCIENCE AND SPINE INSTITUTE, LLC

v.

KATZ, ABOSCH, WINDESHEIM, GERSHMAN & FREEDMAN, P.A., ET AL.

Berger, Friedman, Adkins, Sally D. (Senior Judge, Specially Assigned),

JJ. ______________________________________

Opinion by Adkins, J. ______________________________________ ______________________________________

Filed: September 30, 2022 In 1978, the Maryland Court of Appeals adopted the Frye standard for expert

testimony, which allowed admission of an expert’s testimony if the basis of that opinion

“ha[d] gained general acceptance in the particular field in which it belongs.” Reed v. State,

283 Md. 374, 381 (1978) (quoting Frye v. U.S., 293 F. 1013, 1014 (D.C. Cir. 1923)). Thus,

Maryland’s Frye-Reed standard was born. During its tenure as the evidentiary standard for

expert testimony admission in Maryland, the Supreme Court adopted a new standard for

admission of scientific expert testimony in federal courts, commonly referred to as the

Daubert1 standard. Rather than focusing on the general acceptance of the expert’s

methodology—like in Frye—the Daubert standard focuses on the reliability of the

methodology. See Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 589–90 (1993).

The Supreme Court later expanded the reach of Daubert by applying the standard

to admission of expert testimony that was non-scientific in nature. Kumho Tire Co., Ltd.

v. Carmichael, 526 U.S. 137, 141 (1999). The supermajority of states had already jumped

aboard the Daubert train when Maryland followed suit. In 2020, our Court of Appeals

overruled Reed v. State and adopted Daubert as the new standard for admission of expert

testimony in Maryland. Rochkind v. Stevenson, 471 Md. 1, 5 (2020). Although Maryland

courts had used a “Frye-Reed Plus” standard2—which considered some of the Daubert

factors—applying the new Daubert-Rochkind standard and sifting through the thousands

1 Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579 (1993). 2 “In the forty years that followed Reed, Maryland experienced a jurisprudential drift: the Frye-Reed standard announced in 1978 slowly morphed into a “Frye-Reed Plus” standard, implicitly and explicitly relying on and adopting several Daubert principles.” Rochkind v. Stevenson, 471 Md. 1, 5 (2020). of cases applying the Daubert standard may pose a challenge to circuit courts—as it did in

the case at hand.

Parkway Neuroscience and Spine Institute, LLC (“PNSI” or “Appellant”) brought

suit against Katz, Abosch, Windesheim, Gershman & Freedman, P.A. (“Katz Abosch”)

and Mark Rapson (collectively, “Appellees”)—its previous accounting firm and main

accountant. As a remedy, PNSI is seeking lost profits damages. In order to establish lost

profits damages, PNSI proffered the expert testimony of Meghan Cardell, a Certified

Public Accountant (“CPA”). Appellees moved to exclude Ms. Cardell’s testimony—

asserting that the methodology she employed was unreliable—and to strike the lost profits

claim. After a Daubert hearing, the Circuit Court for Howard County agreed with

Appellees and granted their motion to exclude Ms. Cardell’s testimony and strike the lost

profits claim. The circuit court—over PNSI’s opposition—granted the Appellees’ motion

for summary judgment on all remaining counts. PNSI timely appealed.

PNSI presents us with the following questions:

1. Did the Trial Court Abuse its Discretion in Granting Defendants’ Renewed Motion to Strike Plaintiff’s Lost Profits Claim and Exclude Plaintiff’s Experts Based on New Daubert Standard and Barring Meghan Cardell from Presenting Expert Testimony Regarding PNSI’s Lost Profits?

2. Did the Trial Court Erroneously Conclude that Ms. Cardell was not Qualified to Render an Expert Opinion Regarding the Lost Profits of a Medical Practice?

3. Did the Trial Court Erroneously Conclude that Ms. Cardell’s Testimony Would Not Assist the Trier of Fact?

For the following reasons, we reverse.

2 FACTS AND PROCEDURAL HISTORY

PNSI is a mixed-specialty medical practice whose practitioners provide treatment

for brain, spine, and peripheral nervous system disorders. Starting in 2011, PNSI began to

expand its operation with the hiring of more physicians and support staff. Between 2013

and 2014, PNSI had ten physician members who owned the practice. Since none of the

members had the necessary background in finance and accounting, PNSI entered into a

written agreement in October 2013 with Katz Abosch to provide tax, accounting, “and

financial guidance and direction to help PNSI continue to grow its practice.”

Appellee, Mark Rapson, is a CPA and Chair of Katz Abosch’s Medical Services

Group. Mr. Rapson—assisted by the CEO of Katz Abosch and another senior

accountant—was in charge of PNSI’s account. PNSI normally reconciled its books at the

end of the year, so Appellees allegedly agreed to prepare the reconciliation beginning at

the end of 2013. According to Appellant, Katz Abosch recommended that PNSI wait to

make its end-of-year reconciliation payments until October 2014. At that time PNSI paid

four members a total of $422,897 in reconciliation payments. PNSI alleged that Katz

Abosch and Mr. Rapson failed to properly evaluate PNSI’s financial position before

making this recommendation.

“Between 2012 and 2014, PNSI received payments totaling over $400,000 as part

of the Medicare and Medicaid Electronic Health Record (EHR) Incentive Program,” which

are also referred to as meaningful use payments. These meaningful use payments are

subject to audit and recovery. Allegedly on the advice of Katz Abosch and Rapson, PNSI

deposited the meaningful use payments in PNSI’s general funds for member distribution.

3 Soon after, PNSI was required to repay over $400,000 in meaningful use payments to the

government. To do so, PNSI alleged, it had to take out a loan.

According to Appellant, Katz Abosch and Rapson proposed a compensation model

to PNSI’s board in early 2014. Under this compensation model, each member, regardless

of their specialty, was allocated an equal portion of two-thirds of PNSI’s net increase or

decrease in fixed expenses and a portion of the remaining one-third of PNSI’s net increase

or decrease in expenses based on that member’s net collections for the period. PNSI

alleged that this model did not address the unique issues of its mixed medical practice. Nor

did it provide a reserve for future expenses or Katz Abosch’s annual accounting fees.

Despite this, PNSI—allegedly relying on Katz Abosch’s advice—adopted the proposed

compensation model.

After following Katz Abosch’s advice on reconciliation payments, meaningful use

payments, compensation models, and future payments, PNSI alleged, it was “deeply in

debt.” Allegedly, as a result of this debt and Appellees’ actions, seven of PNSI’s nine

members3 left the practice, causing further financial difficulty and lost profits.

PNSI sued Katz Abosch and Rapson for accountant malpractice and negligent

misrepresentation in June 2018. In this suit, PNSI included counts against Katz Abosch

for breach of contract and unjust enrichment.

3 PNSI alleged in its complaint that it had ten members between 2013 and 2014 and eight members left as a result of Appellees’ conduct between 2015 and 2016. PNSI stated in its brief, however, that seven of its then-nine members left the practice. This discrepancy does not affect the outcome of this decision.

4 PNSI retained Meghan Cardell as an expert to testify regarding damages and lost

profits. In June 2019, Appellees filed a Motion to Compel Certain Depositions and Request

for Hearing seeking to depose PNSI’s witnesses, including Ms. Cardell. Appellees’ motion

was denied. In July 2019, Appellees moved to strike PNSI’s lost profits claim and exclude

Ms. Cardell’s testimony. Appellees’ motion was again denied. In February 2020,

Appellees moved for leave to take certain depositions, including Ms. Cardell’s. This too

was denied.

When this litigation began in 2018, Maryland followed the Frye-Reed standard for

admissibility of expert witnesses. The Frye-Reed standard required that the principles

underlying an expert’s opinion be generally accepted within their professional community.

Reed, 283 Md. at 381 (holding that “before a scientific opinion will be received as evidence

at trial, the basis of that opinion must be shown to be generally accepted as reliable within

the expert’s particular scientific field”).

In August 2020—as this case was pending—our Court of Appeals overruled Reed

and adopted the United States Supreme Court’s standard set forth in Daubert. Rochkind,

471 Md. at 5. “Daubert . . . refocuses the attention away from acceptance of a given

methodology—although that is not totally removed from the calculus—and centers on the

reliability of the methodology used to reach a particular result.” Id. at 31. The Court set

forth the five Daubert factors and an additional five factors as follows:

(1) whether a theory or technique can be (and has been) tested; (2) whether a theory or technique has been subjected to peer review and publication; (3) whether a particular scientific technique has a known or potential rate of error;

5 (4) the existence and maintenance of standards and controls; . .. (5) whether a theory or technique is generally accepted[;] . . . . (6) whether experts are proposing to testify about matters growing naturally and directly out of research they have conducted independent of the litigation, or whether they have developed their opinions expressly for purposes of testifying; (7) whether the expert has unjustifiably extrapolated from an accepted premise to an unfounded conclusion; (8) whether the expert has adequately accounted for obvious alternative explanations; (9) whether the expert is being as careful as he [or she] would be in his [or her] regular professional work outside his [or her] paid litigation consulting; and (10) whether the field of expertise claimed by the expert is known to reach reliable results for the type of opinion the expert would give.

Rochkind, 471 Md. at 35–36 (citations omitted).

This new standard applies to “‘any . . . cases . . . that [were] pending on direct appeal

when [the Rochkind opinion was] filed, where the relevant question ha[d] been preserved

for appellate review.’ In this context, the ‘relevant question’ is whether a trial court erred

in admitting or excluding expert testimony under Maryland Rule 5-702 or Frye-Reed.” Id.

at 38–39 (internal citations omitted).

Relying on this change to our evidentiary law, Appellees filed a renewed motion to

strike PNSI’s lost profits claim and exclude Ms. Cardell’s expert testimony on May 5,

2021. The circuit court ordered an evidentiary hearing to be conducted on Appellees’

renewed motion in light of the new Daubert-Rochkind standard and allowed Appellees the

opportunity to depose Ms. Cardell. At the hearing, the parties and trial judge questioned

Ms. Cardell about her qualifications and how she calculated PNSI’s lost profits.

6 Ms. Cardell graduated from the University of Richmond with a Bachelor of Science

in Accounting and a Bachelor of Arts in Leadership Studies. She has been a CPA since

2011—having passed all four sections of the CPA exam on her first try—and is also a

Certified Fraud Examiner. Ms. Cardell is also a member of the American Institute of

Certified Public Accountants and the Association of Certified Fraud Examiners, as well as

an associate member of the American Bar Association. She is the Director of her group—

Disputes and Investigations Services—at the consulting firm Alvarez and Marsal. Ms.

Cardell—through her employer—provides litigation services to various entities, typically

about accounting issues, damages, and lost profits calculations. Ms. Cardell has conducted

dozens of economic damages calculations throughout her career—the main type of

calculation being lost profits calculation. Ms. Cardell testified that she had conducted at

least one lost profits analysis regarding a medical practice.

Focusing on methodology, Ms. Cardell explained several well-accepted methods to

calculate lost profits and why she chose the “before-and-after” method. She first explained

why she did not utilize other popular methodologies. She did not use the “contractual

damages” method because such a method is only used when the contract specifies a

formula or method to be used if the contract is breached—which was not present in PNSI

and Katz Abosch’s contract.

Ms. Cardell also considered the “lost business value” or “diminution in value”

method. She explained that such a method is used when the alleged harm causes permanent

impairment to future earnings of the business. Although Ms. Cardell thinks there may be

some evidence of permanent injury due to the loss of doctors and their revenue streams,

7 she believes that over time—by replacing doctors and increasing revenue—the practice

may recover.4

Another method Ms. Cardell considered, the “yardstick” method, is often used for

companies where there is not—or not enough—historical data on lost profits. The

yardstick methodology is not applicable here—according to Ms. Cardell—because PNSI

has historical profit data to analyze.

Ms. Cardell chose the before-and-after method, which, she said, was the most

commonly used method to calculate lost profits. This and the above methods, she said,

have been

commonly used in lost profits calculations, they are written about in literature, and specifically, they are named in what’s called the AICPA Practice Aid for calculating lost profits. And that’s really the, sort of the guiding handbook for damages experts and accountants who are calculating lost profits.

Ms. Cardell further explained that she has used the before-and-after method

“many, many times” and has “seen it used by other experts both in and out of litigation

settings to calculate lost profits.”

[MS. CARDELL]: [U]nder the before and after methodology what happens is that the damages expert looks at the Plaintiff’s performance in two different periods. The first being what we called the benchmark period or the before period. And that’s the period that is unaffected by whatever the alleged harm event, breach is. And then that is [compared] to the after period or the loss period, which is the period that is affected by 4 Ms. Cardell further noted that this methodology is not applicable because the diminution in value method is about future lost profits. Due to the effects of the COVID-19 pandemic, PNSI abandoned its lost profits claims for 2020 through 2025. Cardell subsequently updated her written report to calculate only actual lost profits damages from 2015 through 2019.

8 whatever the alleged harm, breach, or event is. This methodology essentially calculates what the Plaintiff’s profits would have been but for again that alleged breach, harm event.

In this case, the alleged harm event was the exodus of members leaving PNSI’s practice.

Ms. Cardell used the exodus of members from PNSI as the benchmark or “before”

period —a period reflecting PNSI’s profits when all (or most) members were still working

at PNSI. As she testified, the first doctor withdrew in June 2015, a few more doctors at the

end of 2015, and the final three or four left in early 2016. The harm event—the exodus of

PNSI members—occurred during the one-year period from June 2015 to June 2016. Ms.

Cardell explained that because it is difficult to look at a half-year to determine profitability,

she used 2015 as the before period—or the base period. Ms. Cardell further clarified why

she chose 2015 as the base period.

[MS. CARDELL]: So I used 2015 as the before [period], because there was really only [one] doctor who left in June and the others didn’t leave until the end of 2015. So their revenues would have been included in 2015. So 2015 is the before period.

Ms. Cardell opined that 2015 was a good proxy for what future profits would have

been, but for the harm event.

[MS. CARDELL]: [T]his business had profits in 2015 it was growing, the practice had been growing they were investing in growth. The practice had sort of hit its stride in 2015 and if you’re looking at sitting in 2015 what does the market look like for this business? What’s going to happen to this, this industry in the future? You can see a couple things. One that’s important is that this industry is medical care. It’s very different from a consumer good, or some sort of luxury good, or service that might be more subject to swings of consumer preference or economic swings. We’re thinking, we’re talking about, you know, folks getting medical care which is

9 something that is needed, these people need medical care to continue to live their lives in a productive way. So it’s an industry that’s not as open to the swings of consumer preference. Especially this case, when we’re talking about such a niche practice where there wasn’t much else around to be able to service the patients in the same way. You also see, if you’re sitting in 2015 and this continues to be true today, that the medical industry, the medical specialty industry specifically, was projected to grow. Because we have an aging baby boomer population, we have a prevalence of chronic diseases and chronic issues. And so if you look at the market back in 2015 it would tell you that medical practice specialties and medical practices in general were projected to grow. And so I was able to get comfortable with that that 2015 would be a reasonable proxy for the future. It doesn’t even account for the potential growth. I could have grown 2015 over time to say well yes, they were making “X” amount in 2015. But they would have been making “X” plus in ’16, ’17, ’18.

Ms. Cardell noted that she obtained information about PNSI’s business from doctors in

the practice, as well as the company’s accounting manager.

The circuit court asked Ms. Cardell if there was a professional standard for choosing

the base period, especially the length of the base period. Ms. Cardell explained that the

benchmark can be based on a one-year period, so long as it is a reasonable prophecy for

future profits. The judge questioned why Ms. Cardell chose to use 2015 as the base period

and not earlier years, such as 2014.

[THE COURT]: Why did you exclude 2014?

[MS. CARDELL]: I didn’t use 2014 because the company had been in a period of growing and the expenses, when you are growing a business, the expenses tend to grow which makes it look like you have less profit. So I looked at the revenue trends over time and saw that those were growing. And by 2015 I thought the business had really sort of hit its sweet spot in terms

10 of, they had invested the money they needed to be able to continue that growth in a profitable way.

* * *

[THE COURT]: I mean, the – what occurred in 2014 wasn’t unusual, was it?

[MS. CARDELL]: I wouldn’t say it was entirely unusual. There will be other expenses. But once you see in 2015 that they were sort of out of that what I call kind of the squeeze period.

[THE COURT]: Uh-huh.

[MS. CARDELL]: And you get to a point where you are profitable. There will be other expenses, but I thought 2015 was a better representation of what that level of expense would be moving forward as compared to 2014.

After considering Ms. Cardell’s testimony and each party’s arguments, the circuit

court granted Appellees’ motion and ruled that PNSI did not meet the burden necessary to

allow Ms. Cardell’s expert testimony at trial. The circuit court was first concerned with

Ms. Cardell’s lack of experience conducting lost profits calculations for unique medical

practices, such as PNSI.

[THE COURT]: [T]his is not your typical ma and pa hardware store kind of business. This is a business model that deals with a medical practice that has alternate streams of revenue that have alternate considerations when trying to determine expenses and things of that nature. And there was nothing about this witness’s background that showed that she had any special exposure to this.

In addition to concerns about Ms. Cardell’s lack of specialized experience, the

circuit court found her selection of 2015 as the base period to be “speculative.” The court

doubted “the quality of the information that she was using” because she relied heavily on

11 PNSI’s assertions and lacked independent sources. The circuit court also questioned the

usefulness of Ms. Cardell’s testimony to the jury.

The judge distilled his reasons for excluding Ms. Cardell as he walked through the

Daubert-Rochkind factors.

Factor One. The circuit court acknowledged the acceptability of the before-and-

after method of calculating lost profits―calling it “old school” and saying it “certainly can

be tested.” But the court found that Ms. Cardell’s calculations in this case could not be

tested. It believed that Ms. Cardell made too many subjective decisions and assumptions

for the court to determine how to test her calculations—for example, what “economic

impact”5 is and why she chose 2015 as the base year for her calculations.

5 Ms. Cardell explained that the phrase “economic impact” or “financial impact” is a term of art used by experts in her industry to determine the impact that a deduction or adjustment might have on the profitability of the business from an economic perspective. She explained that the phrase is also used outside of litigation, such as in mergers and acquisitions.

[MS. CARDELL]: I have had, [sic] done work in the past in mergers and acquisitions let’s say. So not, not litigation related. And in those situations, when someone’s coming in and buying a business they also do a similar normalizing adjustment to normalize the earnings because you don’t want to pay somebody for a business for earnings that you are not going to get in the future. So it is a, as I said it’s a concept, because you want to get the real economics of the business you’re buying. So it’s not something in my experience that is limited to litigation, it applies across [a] sort of financial principals, economic and financial principles.

Ms. Cardell further noted the economic impact is based solely on accounting records, not causation or what caused lost profits, and was not a part of her analysis.

12 Factors Two and Three. The circuit determined that the peer review factor did not

apply in this case. It found that factor three―whether the technique has a high error

rate―favored exclusion of Ms. Cardell’s testimony. The court noted that Ms. Cardell

changed her calculations even though the facts underlying her calculations remained the

same. Ms. Cardell revised her calculations to get rid of projected lost profits for January

2020 onward, due to the COVID-19 pandemic. She further updated her calculations a

second time shortly before her deposition.

[MS. CARDELL]: [W]hen I was preparing for my deposition I was re-reviewing all the accounting records and I identified an adjustment, a normalizing adjustment that I thought should be made and I made that adjustment. And that lowered the lost profits number for my client. But I believed it was the right answer to do and right adjustment to make regardless of the impact on the number.

[THE COURT]: I’m sorry, what was this adjustment? Which adjustment are we talking about?

[MS. CARDELL]: [I]f you look on schedule two in 2015 and 2016 you’ll see there’s a trauma and on call adjustment.

[THE COURT]: Right.

[MS. CARDELL]: For a positive $319,000.00 in 2015. And a negative $395,000.00 in 2016. And that had to do with certain trauma and on call monies that were paid in a year to which they didn’t relate. And so to normalize that I shifted the expense into the right year which caused lost profits to be reduced. But I, I believe it was the right answer from an economic perspective.

Ms. Cardell assured the circuit court that she again thoroughly reviewed the

documents and details of her calculations so that no other adjustment was likely to be

13 needed in the future. Unmoved, the court considered the calculations to be subjective and

subject to error.

Factor Four. The court determined that there was limited existence of standards or

controls, which favored exclusion. “[T]here was very little evidence of any standards o[r]

controls that exist.” The court said that Ms. Cardell could not articulate standards for

defining “economic impact” or for how to treat member draws in a lost profits calculation.

An interchange between the judge and the expert transpired about treatment of

member draws. Ms. Cardell said that these draws are guaranteed payments that each doctor

receives, which are made up of salary and include, inter alia, revenues from trauma and

on-call payments. She opined that a business can decide to distribute its earnings in

whatever way it wishes for tax purposes, but that these draws are expenses for the

corporation—as the doctors are not going to work for free. The court took issue with this.

[THE COURT]: I guess there’s two ways to look at it, way one is that if I own a business and when I finish paying all my expenses out including my…cashier for widgets if there’s $100.00 left if I don’t take a penny of it that’s a $100.00 profit for my business.

[THE COURT]: It seems to me that there’s a disagreement in this case. That if I take $100.00 as the owner of the business one line of thought is the company has made no profit that year because I paid myself $100.00. The other thought seems to be I’m the owner, I’m not entitled to anything. What I get is what I take and it’s not an expense, it’s not a capital [sic] or anything like that. So it’s irrelevant how much my draw is on the profit. The company itself still made $100.00 profits. And if I take $100.00, all of it is still $100.00 profit. If I take $5.00 it’s $95.00, you know, it’s still $100.00 profit. It seems like there’s

14 the struggle in this case like that. For purposes of calculating lost profits in the accounting industry which is it?

Ms. Cardell explained that she talked with another accounting and lost profits expert

about the treatment of member draws and has researched industry standards on how to treat

member draws. But—according to Ms. Cardell—there is no industry standard for this issue

because the question of how to treat salaries and member draws in lost profits calculations

depends on the business. Based upon her research and understanding of damages theory,

she opined, “if the business makes $100.00 regardless of whether it stays in the business

or is given to a shareholder or an owner, or a member, those are still the business’s profits.”

Factors Five and Six. The court agreed that the before-and-after method of

calculating lost profits has been generally used by qualified professionals for quite some

time. But it decided that factor six favored exclusion because Ms. Cardell developed her

calculations in preparation for litigation, not independently.

Factor Seven. The court believed that the “unjustifiably extrapolated” factor

favored exclusion “if the premise that we’re talking about from which the unfounded

conclusions roles [sic] would be acceptance of 2015 as the benchmark, as the beginning,

as the before.”

Factor Eight. The circuit court found that this factor—whether the expert

accounted for obvious alternative explanations—favored exclusion. The judge criticized

Ms. Cardell’s failure to provide calculations showing each individual doctor’s “inherent

ability to generate revenue over the time periods”—in case the jury found that not all

doctors left because of defendant’s alleged negligence.

15 Ms. Cardell calculated lost profits based on the exodus of members from the practice

as a whole instead of calculating the lost profits attributed to each individual member

leaving. Ms. Cardell readily acknowledged that her calculations were based on what profits

would have been had none of the members left PNSI. The circuit court opined that if the

jury found—for example—that only four of the seven members left because of Appellees’

actions, then Appellees should only be liable for lost profits associated with those four

members leaving, not all seven. Based upon this hypothetical, the circuit court expressed

doubt about the usefulness of Ms. Cardell’s testimony to the jury.

The circuit court also found fault―under factor eight―with Ms. Cardell’s failure

to opine on whether insurance reimbursement rates affected lost profits. Insurance

reimbursement rates are the amount that PNSI—or its members—receive from an

insurance company for services it rendered. These reimbursement rates may differ between

Medicare/Medicaid and vary based on federal legislation passed. Ms. Cardell explained

that she did not account for changes in reimbursement rates because, even though they may

have declined slightly, access to healthcare increased. Such increased access, she said,

would offset any declines in reimbursement rates.

Factor Nine. The circuit court determined that this factor did not apply—or

seemingly favored inclusion of Ms. Cardell’s testimony—because the court had “no reason

to think that she blew [her calculations and testimony] off as an inconsequential project”

and found that “she took this very seriously.”

Factor Ten. In the trial judge’s mind, “whether the field of expertise claimed by

the expert is known to reach reliable results for the type of opinion the expert would

16 give”—favored exclusion because “the mere fact the [calculations] changed in June of

[2021] for fully subjective reasons” and “had nothing to do with any new information”

made “the whole reliability even that much more suspect.”

Considering these ten factors, the circuit court granted Appellees’ motion to exclude

Ms. Cardell’s testimony and motion to strike PNSI’s lost profits claim. Appellees moved

for summary judgment on the remaining counts, which the court granted.6 This timely

appeal followed.

DISCUSSION

“[T]he Daubert hearing’s purpose is only to determine the admissibility of expert

evidence; it is not to determine ‘whether such evidence is sufficient with respect to a matter

upon which the plaintiff has the burden of proof.’” Gannon v. U.S., 571 F. Supp. 2d 615,

621 (E.D. Pa. 2007) (citation omitted). “[T]he admissibility of expert testimony is a matter

largely within the discretion of the trial court, and its action in admitting or excluding such

testimony will seldom constitute ground for reversal.” Rochkind, 471 Md. at 10 (quoting

Roy v. Dackman, 445 Md. 23, 38–39 (2015)). We review exclusion of an expert’s

testimony for abuse of discretion. Rochkind, 471 Md. at 10–11 (citing Blackwell v. Wyeth,

408 Md. 575, 618 (2009)). “Such a ruling, however, may be reversed on appeal if it is

founded on an error of law or some serious mistake, or if the trial court clearly abused its

discretion.” Id. at 11 (quoting Sippio v. State, 350 Md. 633, 648 (1998)). As the Court of

6 PNSI stipulated to the dismissal of its unjust enrichment claim. Appellees moved for summary judgment on the counts of accountant malpractice, negligent misrepresentation, and breach of contract.

17 Appeals recently said, “The standard of appellate review for Frye-Reed determinations is

de novo.” Frankel v. Deane, No. 43, Sept. Term 2021, __ Md. __, slip op. at 17 (filed Aug.

25, 2022); see also Williams v. State, 251 Md. App. 523, 546 (2021) (citations omitted)

(“[E]ven with respect to a discretionary matter, a trial court must exercise its discretion in

accordance with correct legal standards.”), aff’d, 478 Md. 99 (2022); In re Guardianship

of Dory, 244 Md. App. 177, 203 (2019) (quoting Barrett v. Barrett, 240 Md. App. 581, 591

(2019)) (holding that the circuit court’s failure to consider the proper legal standard in

reaching its decision was an abuse of discretion).

PNSI asserts that the circuit court erred and/or abused its discretion in excluding

Ms. Cardell’s lost profits testimony. It avers that the errors occurred in (1) finding Ms.

Cardell unqualified to render an opinion regarding lost profits of its medical practice, (2)

finding Ms. Cardell’s selection of the 2015 base year unreliable, (3) and assessing the

soundness of Ms. Cardell’s data and assumptions as impacting admissibility rather than

weight. We will address each of these assertions in turn.

Ms. Cardell’s qualifications to testify as an expert in this case

The circuit court found that Ms. Cardell “has the capacity to be an expert in some

matters,” but not in this matter. Although Ms. Cardell has experience calculating lost

profits in various industries, the circuit court said, PNSI is “a medical practice that has

alternate streams of revenue that have alternate considerations when trying to determine

expenses and things of that nature. And there was nothing about [Ms. Cardell’s]

background that showed that she had any special exposure to this.” Based on her

testimony, Ms. Cardell could recall conducting a prior lost profits calculation for only one

18 medical practice. The circuit court stated it did not know “what qualifie[d]” Ms. Cardell

to make judgments regarding this “fairly specialized LLC or type of work.”

Appellant asserts that the circuit court erred in considering Ms. Cardell’s experience

with medical practices at the admissibility stage. Admissibility of expert testimony is often

broken down into three factors: (1) whether the expert, based on her skills, knowledge,

experience, and training, is qualified; (2) whether her methods are reliable; and (3) whether

there is a sufficient factual basis to support her testimony and assist the trier of fact. See,

e.g., Md. Rule 5-702; Moore v. Intuitive Surgical, Inc., 995 F.3d 839, 850–51 (11th Cir.

2021); Orbital Eng’g, Inc. v. Buchko, 578 F. Supp. 3d 727, 731 (W.D. Pa. 2022).

The circuit court did not challenge Ms. Cardell’s qualifications as a CPA or her

experience evaluating businesses and their profits. Yet the court decided that a medical

practice like PNSI was so different from other small businesses that a CPA must possess

specialized training or experience before qualifying to testify as to its lost profits. This

conclusion is at odds with decisions applying Daubert. See Maiz v. Virani, 253 F.3d 641,

665 (11th Cir. 2001) (holding that the expert economist’s lack of experience in real estate

development goes “more towards the foundation” of the witness’s testimony than his

qualifications to calculate damages). We agree with the rationale of the Eleventh Circuit

and believe it applies equally to a CPA testifying about lost profits. See also Moore, 995

F.3d at 853 (holding that, in a products liability action, the expert surgeon’s inexperience

with particular surgical tools goes only to reliability and not his qualification to testify as

to causation); Pulse Med. Instruments, Inc. v. Drug Impairment Detection Servs., LLC, 858

19 F. Supp. 2d 505, 512 (D. Md. 2012) (holding that any issues with the expert’s qualifications

in relation to an opposing expert’s testimony may be explored on cross examination).

“[I]t is an abuse of discretion to exclude testimony simply because the trial court

does not deem the proposed expert to be the best qualified or because the proposed expert

does not have the specialization that the court considers most appropriate.” Holbrook v.

Lykes Bros. S.S. Co., Inc., 80 F.3d 777, 782 (3d Cir. 1996) (citation omitted). “If the expert

meets liberal minimum qualifications, then the level of the expert’s expertise goes to

credibility and weight, not admissibility.” Smolow v. Hafer, 513 F. Supp. 2d 418, 426

(E.D. Pa. 2007) (quoting Kannankeril v. Terminix Int’l, Inc., 128 F.3d 802, 809 (3d Cir.

1997)).

Appellees have not cited any decisions supporting the assertion that a trial court—

in its gatekeeper role under Daubert—acts properly in excluding the testimony of a

qualified CPA with significant lost profits expertise on grounds that the expert’s experience

with such analysis had only included one medical practice. We do not accept the premise

that knowledge of the accounting principles and tax laws required to analyze profits for a

limited liability company medical practice differs so markedly from that required for other

small businesses―especially “pass-through” entities like an LLC―that the proffered CPA

must demonstrate particularized experience in medical practice analysis. See, e.g.,

Smolow, 513 F. Supp. 2d at 425–26; Viterbo v. Dow Chem. Co., 826 F.2d 420, 422 (5th

Cir. 1987) (citing Dixon v. Int’l Harvester Co., 754 F.2d 573, 580 (5th Cir. 1985)) (“As a

general rule, questions relating to the bases and sources of an expert’s opinion affect the

weight to be assigned [to] that opinion rather than its admissibility and should be left for

20 the jury’s consideration.”). Here, we are dealing with generally accepted accounting

principles and tax law, not cutting-edge technical developments or scientific theories.7

Because the circuit court found Ms. Cardell unqualified to testify as an expert due to her

lack of medical industry experience, it imposed an unduly high standard. This was error.

A CPA with Ms. Cardell’s experience certainly has the mathematical and analytical skills

to take these specialties into account if she thought it necessary. Her lack of specialized

experience is ripe for cross-examination at trial.

The circuit court also took issue with the reliability of―what it considered― Ms.

Cardell’s methods. We next turn to those issues to determine if the circuit court had a

sustainable alternative ground for excluding the expert testimony.

Methodology employed

The circuit court decided that Ms. Cardell’s methodology was unreliable under the

Daubert-Rochkind standard. In its bench opinion, the circuit court expressed five

weaknesses it saw in Ms. Cardell’s analysis: (1) using 2015 as the base year; (2) failing to

consider changes in insurance reimbursement rates; (3) failing to articulate standards to

7 Generally accepted accounting principles (GAAP) are regularly used in the accounting field and have been recognized in Maryland and other courts. See, e.g., Dabbs v. Anne Arundel Cnty., 458 Md. 331, 360 (2018); Reiger v. Price Waterhouse Coopers LLP, 117 F. Supp. 2d 1003, 1009 (S.D. Cal. 2000) (“[GAAP] comprise a set of basic postulates and broad accounting principles pertaining to business enterprises. These principles, approved by the American Institute of Certified Public Accountants (‘AICPA’), establish guidelines for measuring, recording and classifying the transactions of a business entity.”), aff’d sub nom., DSAM Glob. Value Fund v. Altris Software, Inc., 288 F.3d 385 (9th Cir. 2002); Marksman Partners, L.P. v. Chantal Pharm. Corp., 927 F. Supp. 1297, 1304 (C.D. Cal. 1996) (“[GAAP] are the conventions, rules, and procedures that constitute the professional standards of the accounting profession.”).

21 define economic impact and treat member draws; (4) changing her calculations while the

underlying facts remained the same; and (5) failing to calculate lost profits for each

individual member leaving PNSI.8 Many of the circuit court’s qualms with Ms. Cardell’s

calculations overlap with one another, but we will address them separately in turn.

a. Selection of 2015 as the base year

The circuit court considered Ms. Cardell’s selection of 2015 as the base year for her

lost profits calculations to be speculative. It elaborated by stating “there wasn’t any reason

to believe that she had the training or the experience or the information to [select 2015 as

the base year], it just seems speculative to me.” In applying the Daubert factors, the court

noted that “there’s nothing [the circuit court had] been presented from which . . . the factors

that she used in selecting 2015 could be tested.”

“An expert opinion requires some explanation as to how the expert came to his

conclusion and what methodologies or evidence substantiate that conclusion.” Riegel v.

Medtronic, Inc., 451 F.3d 104, 127 (2d Cir. 2006) (citing Fed. R. Evid. 702). “Unless the

information or assumptions that plaintiff’s expert relied on were ‘so unrealistic and

8 Appellees, relying in part on this Court’s recent opinion in Tallant v. State, 254 Md. App. 665 (2022), assert that since PNSI did not fully address the issues of reimbursement rates and treatment of member draws in its initial brief, PNSI waived any challenge to the circuit court’s findings on those issues. We disagree. In Tallant, we concluded that Appellant lacked in his initial brief and reply brief any support for his request for a different trial judge or for the circuit court’s decision to close the courtroom during a proceeding. 254 Md. App. at 689–90. Here, PNSI adequately briefed and proposed legal arguments on the circuit court’s alleged errors and abuses of discretion in determining the reliability of Ms. Cardell’s methodology in its initial brief. Additionally, unlike in Tallant, PNSI specifically addressed sub-issues of reliability regarding member draws and reimbursement rates in its reply brief. Therefore, we do not agree that PNSI waived any arguments related to these specific reliability sub-issues.

22 contradictory as to suggest bad faith,’ inaccuracies in the underlying assumptions or facts

do not generally render an expert’s testimony inadmissible.” Washington v. Kellwood Co.,

105 F. Supp. 3d 293, 306 (S.D.N.Y. 2015) (cleaned up) (quoting R.F.M.A.S., Inc. v. So,

748 F. Supp. 2d 244, 269 (S.D.N.Y. 2010)).

Here, the circuit court heavily relied on CDW LLC v. NETech Corp., 906 F. Supp.

2d 815 (S.D. Ind. 2012) to support excluding Ms. Cardell’s testimony for selecting 2015

as the base year for her lost profit calculations. Careful examination of that case reveals

important distinctions that demonstrate that this reliance was misplaced. CDW LLC’s

expert asserted that “but for NETech’s alleged wrongful conduct,” its Indianapolis office

would have grown in revenue at the same mean rates experienced by the other CDW

branches in the Great Lakes region. CDW LLC, 906 F. Supp. 2d at 823. CDW’s expert

used the “yardstick” approach for calculating lost profits for the Indianapolis branch. Id.

at 824. In using this approach, the expert took the average revenue growth of the other

CDW Great Lakes branches to project what the profits of the Indianapolis office should

have been—but for defendant’s conduct. See id. The expert did not compare the

Indianapolis branch to its own previous growth rates or “the actual experience of any other

business entity.” Id. The CDW LLC court took issue with this because each branch showed

“wide variations in branch performance from year to year” and the expert “made no (and

did not rely on any) economic analysis of the Indianapolis market or any other market.”

Id.

The CDW LLC court noted that the “expert’s choice in data sampling”—the

sufficiency of the data—"is at the heart of his methodology.” Id. Unlike CDW’s expert,

23 Ms. Cardell relied on PNSI’s accounting records, not records from another comparable

entity. She examined PNSI’s profits and losses from 2010 and onward and explained why

she chose 2015, and not previous years, as the base year for her calculations.

[THE COURT]: I mean isn’t there some understanding within your profession that you have to use a hundred years or five years or something [as the benchmark]? I mean, something period, or is any expert free to pick…as short or as long a period as they feel they want to?

[MS. CARDELL]: So what we are told is to, to pick a before or a benchmark number that is going to be a prophecy for the future. And that can be determined based on one year. That can be determined based on an average if that’s applicable. But if for example you have past years that aren’t going to be representative of the future by including those in your before period you are, you are not getting a reasonable picture of what the earnings would have been.

Unlike the expert in CDW LLC, Ms. Cardell did not sample data from other markets;

she relied on PNSI’s own data to determine the benchmark. She provided an explanation

as to why 2015 was the appropriate base year, and unless the data and assumptions she

made were “so unrealistic and contradictory as to suggest bad faith,” her testimony should

be admissible. See Washington, 105 F. Supp. 3d at 306 (quoting R.F.M.A.S., Inc., 748 F.

Supp. 2d at 269). It is not so unrealistic or contradictory as to suggest bad faith when an

experienced CPA opines that a company reached a reasonably predictable level of profits

in a particular year after several years of enduring extra expenses during a growth period.

The court, acting as gatekeeper, acts outside of its role when it second guesses the expert’s

choice of data to rely on when applying the indisputably legitimate choice of

methodology―the before-and-after method. See Packgen v. Berry Plastics Corp., 46 F.

24 Supp. 3d. 92, 111 (D. Me. 2014) (denying a motion to exclude testimony of a CPA, despite

projecting a 10 years’ lost profits period based on only one profitable year, opining that

“legal sufficiency of the evidence supporting a ten-year loss period” is not a Daubert issue);

Furmanite Am., Inc. v. T.D. Williamson, Inc., 506 F. Supp. 2d 1126, 1132 (M.D. Fla. 2007)

(citation omitted) (“Errors in an expert’s application of a reliable method go to the

credibility of an expert’s opinion rather than the opinion’s reliability under Daubert.”).

Therefore, the circuit court erred.

b. Other data and assumptions

Another prominent concern of the circuit court was Ms. Cardell’s failure to consider

alternatives for lost profits, such as change in insurance reimbursement rates. We agree

that an expert’s failure to consider alternative explanations can be grounds for excluding

her opinions. Wendler & Ezra, P.C. v. Am. Int’l Grp., Inc., 521 F.3d 790, 791 (7th Cir.

2008) (upholding the exclusion of an expert’s testimony for failing to disclose what

software and data he used and how alternative explanations were ruled out); Waytec Elecs.

Corp. v. Rohm and Haas Elec. Materials, LLC, 459 F. Supp. 2d 480, 489 (W.D. Va. 2006)

(citations omitted) (“[I]f an expert utterly fails to consider alternative causes or fails to offer

an explanation for why the proffered alternative cause was not the sole cause, a district

court is justified in excluding the expert’s testimony.”). But see Astra Aktiebolag v. Andrx

Pharms., Inc., 222 F. Supp. 2d 423, 488 (S.D.N.Y 2002) (citation omitted) (holding that

an expert need not “categorically exclude each and every possible alternative cause in order

to render the proffered testimony admissible”).

25 This case, however, is less about failure to consider alternatives for what caused lost

profits—since Ms. Cardell is not a causation expert—and more about alleged failure to

calculate lost profits properly, or at least calculate and present to the court all possible

variables. Ms. Cardell did not include in her calculations the possible changes in insurance

reimbursement rates for PNSI from 2016 to 2019. When presented with an unauthenticated

chart of reimbursement rates at the evidentiary hearing, Ms. Cardell noted that those

reimbursement rates were declining, but said that these decreases would be offset by the

market increase caused by more access in the general population to healthcare, which

would increase revenue overall.

Whether Ms. Cardell failed to consider reimbursement rates is not an issue with the

methodology—the before-and-after method. Rather, it is an issue with the soundness of

the data she used to reach her conclusion.9 The Seventh Circuit in Manpower, Inc. v. Ins.

Co. of Pa., 732 F.3d 796 (7th Cir. 2013), addressed a remarkably similar expert

admissibility issue. In Manpower, one party offered a forensic accounting expert, Mr.

Sullivan, to calculate lost profits. 732 F.3d at 801. Sullivan used the before-and-after

method to calculate lost profits. Id. at 803. The district court was concerned by Sullivan

choosing “such a short base period for calculating lost profits.” Id. at 802.

Sullivan chose a base period of five months—which he used to calculate the

projected revenue growth rate in the after period. See id. at 801–02. He used an estimated

9 Many of the issues overlap in this section. Analyzing reimbursement rates, selecting the base year, and relying on data from and conversations with PNSI all are issues with the soundness of the data.

26 growth rate of 7.76%—calculated by comparing the company’s revenues from January to

May 2006 (before the “collapse”) to the total revenues earned in the same five-month

period in 2005. Id. at 801. The district court thought that the growth rate calculated from

the chosen period was not representative of the company’s historical growth rate. Id. at

801–02.10

The expert reviewed the company’s financial data from 2003 forward and concluded

that the company turned a corner by the end of 2005. Id. at 802. In deciding to use January

to May 2006 as the base period, Mr. Sullivan relied on statements made by the company

managers. Id. Sullivan further noted that the growth rate during this period was a more

conservative estimate than if he had used a longer 12- or 14-month period which would

have yielded growth rates of 20.1% and 13.67%, respectively. Id. at 803.

Despite Sullivan’s growth rate extrapolation being “the simplest and most

frequently used revenue forecasting method,” the district court found his methods

unreliable and excluded his testimony. Id. at 802. The district court criticized Sullivan’s

reliance on conversations with the company managers, using such a short base period, and

failing to consider other indicators that may have impacted the growth rate—thus finding

that his calculations were based on assumptions that caused his calculations to be deemed

unreliable. Id. The Seventh Circuit reversed. Id. at 812. It concluded that Sullivan’s

expert opinion—“although not bulletproof—[was] sufficiently reliable to present to a jury”

10 The company’s average annual growth rate from 2003 to 2009 was negative 4.79% and only 3.8% from January 2005 to May 2006. Manpower, Inc. v. Ins. Co. of Pa., 732 F.3d 796, 801–02 (2013).

27 and the district court abused its discretion by “exercis[ing] its gatekeeping role under

Daubert with too much vigor.” Id. at 805.

Although judges have much flexibility and leeway in determining reliability of

expert testimony, reliability—according to Manpower—“is primarily a question of the

validity of the methodology employed by an expert, not the quality of the data used in

applying the methodology or the conclusions produced.” Id. at 806.11 The Manpower

court relied on another Seventh Circuit decision, Smith v. Ford Motor Co., 215 F.3d 713

(7th Cir. 2000), to explain the same concept: “The soundness of the factual underpinnings

of the expert’s analysis and the correctness of the expert’s conclusions based on that

analysis are factual matters to be determined by the trier of fact, or, where appropriate, on

summary judgment.” Manpower, 732 F.3d at 806 (quoting Smith, 215 F.3d at 718).

Similarly, the Maryland Rule 5-702 requirement that there is “a sufficient factual

basis” supporting the testimony does not justify a trial court’s exclusion of such testimony

based upon “[t]he soundness of the factual underpinnings of the expert’s analysis and the

correctness of the expert’s conclusions.” See Manpower, 732 F.3d at 806. The requirement

11 Our Court of Appeals recently cited Manpower in describing the gatekeeping function under Rule 5-702. State v. Matthews, 479 Md. 278, 316 (2022) (“For these reasons, in exercising its gatekeeping function under Rule 5-702, a trial court generally should be most concerned about the reliability of an expert’s methodology. Once a trial court is satisfied that an expert has applied a reliable methodology to an adequate supply of data, the court should not exclude the expert’s testimony merely because the court is concerned that the expert’s particular conclusions may be inaccurate. See Manpower, Inc. v. Ins. Co. of Pennsylvania, 732 F.3d 796, 806 (7th Cir. 2013) . . . .”). In Matthews, the Court of Appeals concluded that the trial court did not abuse its discretion in admitting the expert’s testimony. Matthews, 479 Md. at 325.

28 outlined in Md. Rule 5-702 means that the “sufficient facts [must] underlie the expert’s

opinions that indicate the use of ‘reliable principles and methodology in support of the

expert’s conclusions’ so that the opinion constitutes more than mere speculation or

conjecture.” Exxon Mobil Corp. v. Ford, 433 Md. 426, 478–81 (2013) (quoting Giant

Food, Inc. v. Booker, 152 Md. App. 166, 182–83, (2003)) (upholding admission of

testimony on diminution in value of real property despite the expert appraiser having

ignored sales of nearby properties).

Ms. Cardell calculated lost profits using the company’s actual accounting data and

used a base period before the exodus of most members occurred. “[T]hese are the kinds of

data that accountants normally rely on in calculating future earnings [and lost profits].”

See Manpower, 732 F.3d at 809. Additionally, “[i]t may be true that using specific

variables”—such as insurance reimbursement rates—“would have resulted in a . . . more

accurate figure. However, . . . . whatever shortcomings existed in [the expert’s]

calculations [goes] to the weight, not the admissibility of the testimony.” See Cummings

v. Standard Reg. Co., 265 F.3d 56, 65 (1st Cir. 2001).

Because the circuit court excluded Ms. Cardell’s testimony―in part―based on

missing variables, the court misapplied the law and thus abused its discretion and usurped

the role of the jury. See Manpower, 732 F.3d at 806 (“[A] court usurps the role of the jury,

and therefore abuses its discretion, if it unduly scrutinizes the quality of the expert’s data

and conclusions rather than the reliability of the methodology the expert employed.”); Jack

B. Weinstein, Weinstein’s Federal Evidence 702.05[2][a] (2d ed. 1997) (“[A]nalytical

29 focus should be on principles and methodology. Trial courts may not reject expert

testimony simply because they disagree with the conclusions reached by the witness.”).

c. Treatment of member draws

The circuit court also criticized Ms. Cardell’s “lack of industry standards” for

treatment of the draws that each individual member takes from PNSI.12 Ms. Cardell noted

that the member draws are part of what accountants consider “guaranteed payments.”

[MS. CARDELL]: The guaranteed payments, in my review are made of two things, the draws that the doctors receive which are essentially salary. And then for some doctors it includes the trauma and on call payments for revenues that they earned working that.

Regardless of whether the owners elected to take a draw or if that money stayed in the

business, the money generated by medical services was still a profit to the business,

according to Ms. Cardell.

The circuit court suggested that the treatment of member draws is a “pretty basic

issue” and seems to be “capable of rearing its head in every case” that involves such owner

draws. We agree that such an issue may arise again, but that is because treatment of

member draws and classifying fixed and variable expenses are fact-laden endeavors. The

trial court seemed to recognize this at one point when—in response to defense counsel’s

cross-examination of Ms. Cardell on this point—it said:

12 The circuit court also found that Ms. Cardell cited no industry standards in defining the term “economic impact.” Defining such a term does not impact the reliability of the methodology Ms. Cardell employed. The issue here is PNSI’s lost profits. Whether Cardell correctly used the broader concept of economic impact―which focuses on effects upon other business and the relevant economy―is not material.

30 [Ms. Cardell’s] view is it doesn’t matter how much these Plaintiffs took out, it doesn’t affect the profits. . . . [I]t may have some legal effect at some point. [Your line of questioning] may mean a lot to a jury, but I’m not really sure where it fits into this hearing.

Yet in announcing its ruling, the trial court appeared to disagree with Ms. Cardell’s

conclusion about how a CPA, in calculating a business’s lost profits, should deal with

correlating reduced expenses. It also required Ms. Cardell to cite a specific accounting rule

governing these particular circumstances and implied that her own professional opinion

based on training, certification, and experience was insufficient. Ms. Cardell testified that

she had researched the accounting literature and determined that there was no established

rule on this issue. In this context, a court’s belief that an experienced CPA’s judgment call

based on accounting principles is not sufficient and that there should be an explicit, citable

accounting rule, has no place in a Daubert-Rochkind ruling.

The Eastern District of Missouri addressed such an issue in the context of a Daubert

hearing. See OCI Chem. Corp. v. Am. Railcar Ind., Inc., No. 4:05CV1506FRB, 2009 WL

890525, at *1 (E.D. Mo. Mar. 30, 2009).13 In OCI Chem., the defendant sought to exclude

13 The Court of Special Appeals allows the citation of unreported opinions from federal courts and courts of other states as long as the jurisdiction where it was issued would allow its citation for persuasive value in its courts. Gambrill v. Bd. of Ed. Of Dorchester Cnty., 252 Md. App. 342, 352 n.6 (2021), rev’d on other grounds, No. 34, Sept. Term 2021, __ Md. __ (2022) (filed Aug. 26, 2022); CX Reinsurance Co. Ltd. v. Johnson, 252 Md. App. 393, 414 n.7 (2021), rev’d on other grounds, No. 47, Sept. Term 2021, __ Md. __ (2022) (filed Aug. 29, 2022). The Eastern District of Missouri permits citation and reliance on its unpublished opinions under certain circumstances. See Federal Trade Commission v. Neiswonger, No. 4:96CV2225SNLJ, 2008 WL 11434564, at *1 n.3 (E.D. Mo. Oct. 16, 2008) (“Although it is not the Court’s usual practice to cite unpublished opinion, it does so in circumstances wherein the unpublished opinion offers legal guidance to the Court in

31 plaintiff’s lost profits expert—Kenneth Giambagno—under Daubert because the defendant

asserted Mr. Giambagno “failed to deduct all applicable expenses.” Id. at *2.

In general, in calculating lost profits damages, lost revenue is estimated, and overhead expenses tied to the production of that income are deducted from the estimated lost revenue. Overhead expenses include both fixed and variable expenses. Fixed expenses are the continuous expenses of the business that are incurred regardless of the loss of a portion of the business, for example rent, taxes, and administrative salaries. Variables expenses, also called direct expenses, are costs directly linked to the volume of business.

Id. at *3 (quoting Ameristar Jet Charter, Inc. v. Dodson Int’l Parts, Inc., 155 S.W.3d 50,

55 (Mo. 2005) (en banc)).

OCI Chem. held that whether expenses are fixed or variable is a factual issue to be

determined on a case-by-case basis. See 2009 WL 890525, at *3. The defendant disagreed

with some of Mr. Giambagno’s determinations on what costs he treated as variable

expenses. Id. at *4. Because the treatment of expenses is a factual issue, it goes to the

credibility of the witness and “such [a] dispute may be brought out at trial by the defendant

through cross-examination and the presentation of contrary evidence.” Id.

Just like in OCI Chem., Ms. Cardell used an approved methodology—the before-

and-after method. She relied on the actual records maintained by PNSI for the period in

question, which enhances reliability. Whether Ms. Cardell should have deducted the

reaching a determination on the issue(s) at hand.”); Burke v. Univar USA, Inc., 354 F. Supp. 2d 1047, 1051 n.4 (E.D. Mo. 2005) (“Although it is not the Court’s customary practice to cite to unpublished opinions, it does so only in those instances wherein the unpublished opinion(s) addresses a significant issue before the Court and contributes to the Court’s decision in a meaningful way.”). We address OCI Chem. for those reasons.

32 member draws from the projected profits is something the Appellees can attack during

cross-examination before a jury—but not at the Daubert-Rochkind hearing. Like the

Eastern District of Missouri, we consider this to be a fact-laden issue—involving

credibility, not reliability. See id. at *2. As such, under Daubert-Rochkind, the court’s

criticism was misplaced.14 See Acker v. Burlington N. and Santa Fe Ry. Co., 347 F. Supp.

2d 1025, 1031 (D. Kan. 2004) (“Although [the expert] does not distinguish hard expenses

from lost profits, the court fails to see how this makes his testimony unreliable.”).

d. Correction of calculations

The circuit court found Ms. Cardell’s testimony to be unreliable under the third

Daubert factor—a “known or potential rate of error.” The court decided Ms. Cardell’s

calculations had a known or potential rate of error because she corrected her calculations.15

After reviewing her work in preparation for her deposition, Ms. Cardell made a

“normalizing adjustment” to her calculations that lowered lost profits, thus reducing the

plaintiffs’ claim. The underlying data did not change―instead she merely corrected a

mistake in her calculations. The circuit court determined that because Ms. Cardell changed

her calculations when the underlying facts remained the same, her calculations had a high

rate of error.

14 We are not deciding that a trial court would be barred from ruling against a plaintiff on grounds that damages had not been proven with sufficient certainty to go to a jury on a motion under Maryland Rule 2-519 or 2-532. 15 First, Ms. Cardell updated her calculations to restrict the period of lost profits through December 31, 2019, because the COVID-19 pandemic would have affected profits from 2020 onward. The circuit court did not take issue with this change.

33 In doing so, the circuit court misinterpreted the third prong of Daubert. The error

rate that Daubert speaks of is the rate of unknown errors in the methodology employed,

not an “error correction rate.” Crowley v. Chait, 322 F. Supp. 2d 530, 540 (D.N.J. 2004)

(emphasis in original).

Daubert does not require that an expert’s testimony be excluded simply because [she] admitted and corrected [her] own mistakes or retracted [her] false statements. In fact, one of the very purposes of a Daubert hearing . . . is to give experts a chance to explain and even correct errors that they made in their reports. . . . There is no stigma attached to such error correction, nor should there be. If anything, it strengthens the quality of the expert report. The known or potential rate of error discussed in the third prong of Daubert more likely refers to the rate at which unknowable mistakes that cannot be corrected have been made in a data or statistical set; the known or potential rate of error then serves as an indication of how reliable or unreliable that data may be.

Id.; see also Moe v. Grinnell Coll., 547 F. Supp. 3d 841, 850 (S.D. Iowa 2021) (analyzing

the known or potential rate of error rate of the techniques and methods used); Janopoulos

v. Harvey L. Walner & Assocs., Ltd., 866 F. Supp. 1086, 1097 (N.D. Ill. 1994) (holding

that the expert satisfied the Daubert standard even though he may not have known “the

known or potential rate of error” because the expert’s methods were generally accepted).

We agree with these cases. Any other rule would be a disincentive to disclose and explain

errors.

The circuit court found a high rate of error even though Ms. Cardell employed a

generally accepted methodology in this case and relied on accounting data from PNSI itself

when conducting her lost profits calculation. This was an error in applying the Daubert-

Rochkind standard.

34 e. Failure to calculate lost profits attributed to each individual member of PNSI

The circuit court took issue with Ms. Cardell calculating lost profits because of all

seven doctors leaving, without also calculating profits lost with respect to each individual

doctor leaving.

[THE COURT]: Well let me cut to what’s interesting to me. Let’s say you testified Plaintiff’s 2, your schedules go into evidence. Your testimony goes swell, it mirrors what you did today, nothing new. And then the jury comes back and finds that three of the seven doctors left for reasons totally unrelated to the Defendants while four of the seven left for reasons caused by the Defendants? What good is your testimony . . . [to] the jury in terms of trying to figure out what that lost profit is? Because it wouldn’t be fair to make the Defendants pay for all seven since they only drove out three, or they only drove out four under my hypothetical. How do you take into account that maybe all seven didn’t leave because of the Defendants?

The circuit court brought up similar issues with causation and PNSI’s damages

theory throughout the Daubert-Rochkind hearing. For example, the circuit court asked Ms.

Cardell, “can you say from your examination of the records that the only reason for the

reduction [in lost profits] is the doctor leaving as opposed to other sources such as the

reimbursement rate from the insurance company declining?” Ms. Cardell emphasized that

she was not a causation expert in this case and did not have an opinion on causation. She

further explained that she “looked at the practice wholistically. So not on a doctor-by-

doctor basis.”

“The purpose of a Daubert hearing is to filter out expert evidence based upon

unreliable expert evidence.” Lenawee Cnty. v. Wagley, 836 N.W.2d 193, 208 (Mich. Ct.

App. 2013).

35 A Daubert-type hearing . . . is not a judicial search for truth. . . . The inquiry is not into whether an expert’s opinion is necessarily correct or universally accepted. The inquiry is into whether the opinion is rationally derived from a sound foundation.

Id. at 208–09 (emphasis in original) (quoting Chapin v. A & L Parts, Inc., 732 N.W.2d 578,

587 (Mich. Ct. App. 2007)); see also Gannon, 571 F. Supp. 2d at 621. “Thus, the question

here is not whether damages for lost profits are proper, but whether the amount of lost

profits to which [Ms. Cardell] contends [PNSI] is entitled is founded on a judicially-

recognized methodology.” See Natchez Reg’l Med. Ctr. v. Quorum Health Res., LLC, 879

F. Supp. 2d 556, 579 (S.D. Miss. 2012) (stating that the before-and-after and yardstick

methodologies are reliable).

The circuit court—by looking to causation of lost profits—circumvented the

purpose of a Daubert hearing. The purpose—in this case—is to determine whether Ms.

Cardell used reliable methodology in coming to her conclusion—not whether PNSI met its

burden of proof on whether Appellees’ conduct caused its lost profits. See, e.g., Gannon,

571 F. Supp. 2d at 621; Natchez Reg’l, 879 F. Supp. 2d at 579. The circuit court can hear

causal evidence and decide later whether there is sufficient evidence of a causal connection

to submit to the jury. See Jacobs v. Flynn, 131 Md. App. 342, 355 (2000) (citing Hughes

v. Carter, 236 Md. 484, 486 (1964)). The circuit court will be able to rule on such causation

issues through a Rule 2-519, 2-532, or other motion. And Ms. Cardell’s failure to compute

the lost profits on a per-doctor basis falls decidedly within the realm of cross-examination

or refutation by opposing expert. The circuit court therefore erred in finding Ms. Cardell’s

36 testimony unreliable because she did not calculate lost profits for each individual member

leaving.

Analytical Gap

Considering the Court of Appeals’ recent Daubert-Rochkind opinion in State v.

Matthews, 479 Md. 278 (2022), Appellees ask us to find that—even if Ms. Cardell’s

methodology is reliable and there is an adequate supply of data—her calculations are full

of “analytical gaps,” and therefore her testimony should still be excluded. Appellees assert

that Ms. Cardell using 2015 as the base year, failing to account for changes in

reimbursement rates, and failing to articulate a standard for treatment of member draws

constitute analytical gaps. We do not agree.

“An ‘analytical gap’ typically occurs as a result of ‘the failure by the expert witness

to bridge the gap between his or her opinion and the empirical foundation on which the

opinion was derived.’” Matthews, 479 Md. at 316 (quoting Savage v. State, 455 Md. 138,

163 (2017)). The Matthews court used the expert testimony in Savage as an example of an

analytical gap because the defense expert failed to “connect the dots between the results of

the psychological tests he had administered on the defendant and his opinion that the

defendant was more likely to have greater difficulty controlling his reactions under

conditions of chaos and stress.” Id. at 318 (internal quotations omitted) (citing Savage,

455 Md. at 164).

In Savage, a trial court barred a neuropsychologist expert from testifying that the

defendant—due to a brain injury resulting from previous gunshot wounds to the head—

was “untrusting” and “hyper-vigilant to possible threats.” 455 Md. at 164. The expert used

37 a reliable methodology—the Personality Assessment Inventory (“PAI”) test—but there

was an “analytical gap” between the PAI test and the expert’s conclusions that the

defendant “tends to view the world in untrusting terms.” Id. at 160–171. The PAI test has

been a reliable clinical tool used to determine “diagnosis, symptom severity, level of risk,

and treatment planning,” as well as being used to “assess factors salient to psycholegal

decision making.” Id. at 167 (quoting Tatiana M. Matlasz et al., Cognitive status and

profile validity on the Personality Assessment Inventory (PAI) in offenders with serious

mental illness, 50 Int’l J.L. & Psychiatry 38, 38–41 (2017)).

The Savage court held that use of the PAI test required application of a rigorous and

complex protocol, and the expert failed to provide evidence or explanation as to how he

reached the conclusion about the defendant using the PAI test. 455 Md. at 169. In this

case, to reach her opinion about lost profits based on the before-and-after method, Ms.

Cardell faced a far simpler task―without so many complex analytical steps. Ms. Cardell

relied on PNSI’s own accounting data and explained why she picked 2015 for the base

year. First, this reflected the timing of the doctors’ exodus. Second, 2015—according to

Ms. Cardell—was the most accurate reflection of the LLC’s predictable profits because the

company had achieved that profitable year after several years of growth. The before-and-

after method utilized by Ms. Cardell is clearly connected to the conclusion she reached,

not simply based on the ipse dixit of the expert. See Gen. Elec. Co. v. Joiner, 522 U.S.

136, 146 (1997) (“[N]othing in . . . Daubert . . . requires a . . . court to admit opinion

evidence that is connected to existing data only by the ipse dixit of the expert.”).

38 Issues with the base year, insurance reimbursement rates, and treatment of member

draws are not “analytical gaps” between the methodology and the conclusion reached.

Rather, they are issues with the actual conclusion reached—a dollar amount measuring lost

profits. As explained above, such issues go to weight and credibility of Ms. Cardell’s

testimony. See Cummings, 265 F.3d at 65. Appellees may utilize all the advantages of the

adversarial process to challenge Ms. Cardell’s lost profit calculation, but—based on the

record before us—her testimony should not have been excluded on grounds that her

testimony is unreliable, filled with analytical gaps, or would not assist the trier of fact.

CONCLUSION

The circuit erred in holding that Ms. Cardell was unqualified to testify regarding

lost profits due to her lack of experience in a particular industry. The circuit court also

erred when it determined that Ms. Cardell’s calculations were unreliable because she used

2015 as the base year, failed to consider insurance reimbursement rates, included member

draws in PNSI’s profits, corrected a mistake in her calculations, and calculated lost profits

of PNSI arising from all the doctors departing, rather than each member individually. Not

one of these issues, however, affects the reliability of Ms. Cardell’s testimony under

Daubert and Rochkind.

The circuit court was troubled with Ms. Cardell’s opinion on an accounting issue

and whether PNSI could prove that Appellees caused all of PNSI’s members to leave. As

to the latter issue, Ms. Cardell disclaimed any role as to causation. Excluding Ms. Cardell’s

testimony on either of these grounds usurps the role of the jury. See Manpower, 732 F.3d

at 806. When a trial court usurps the role of the jury, it makes an error of evidentiary law

39 and abuses its discretion. Id.; Moore, 995 F.3d at 852–53. We reverse the circuit court’s

decisions excluding Ms. Cardell’s testimony, striking the lost profits claim, and granting

summary judgment.

JUDGMENT OF THE CIRCUIT COURT FOR HOWARD COUNTY REVERSED. REMANDED FOR FURTHER PROCEEDINGS CONSISTENT WITH THIS OPINION. COSTS TO BE PAID BY APPELLEES.