Expert Article Library

CPA Can Testify About Damages in Snack Food Feud

Case Name: Matthew Headley Holdings, LLC, d/ba/ Heartland Snacks v. McCleary, Inc. et al. (http://www.ca8.uscourts.gov/opndir/06/05/052122P.pdf)

Court: United States Court of Appeals for the Eighth Circuit; on appeal from the District Court for the Western District of Missouri

Date: May 19, 2006

Expert: Economic Consulting--Accounting. Ed Crumm, CPA

Issue: Factual assumptions in expert’s damage projections in a breach of distributorship agreement

Summary of case: Snack food company Heartland sued distributor McCleary Inc. for not meeting contractual obligations to distribute Guy’s brand snack foods, a business Heartland had acquired in 2001. The jury awarded Heartland damages consistent with what its expert had projected as damages.

Role of the expert: Plaintiff Heartland’s expert witness was a Certified Public Accountant who testified about the extent of damages plaintiff suffered. The expert had 27 years experience forecasting and projecting future business performance, as well as two years auditing and accounting for Guy’s snack foods. He testified that plaintiff suffered roughly $8,660,000 in damages. The jury returned an award for almost $10 million.

Expert analysis: Defendant challenged the factual assumptions the expert used to calculate the damages, including his estimates of potential market share, level of market penetration and cost of entering markets for the snack foods. The court held the expert’s assumptions were not the product of mere conjecture with no factual basis; they were estimates generated through consideration of Guy’s brand past performance and potential for future performance, given current accepted market conditions. The expert testimony was properly admitted. Unless the facts or methodology used by the expert are false or unreliable, the testimony is allowable and the jury can decide how useful it is.

Summary prepared by K. Tanner, Student, University of California, Hastings College of Law