Howard v. Tanium, Inc.

Background

Daniel Howard sued his former employer, Tanium, Inc., for fraud. He alleged that Tanium misrepresented the value of its stock to persuade him to leave Fortinet and join Tanium in 2016. Tanium offered Howard a $165,000 salary, bonuses, and 30,000 restricted stock units vesting over four years. The offer letter did not state a value for those units.

Howard contends Tanium represented that the stock was worth $5 per share. He relies in part on a Grant Thornton valuation that placed Tanium common stock at $2.01 per share as of December 31, 2015. The court considered four motions to exclude expert testimony under Federal Rule of Evidence 702, which requires expert testimony to be helpful, based on sufficient facts or data, produced through reliable methods, and reliably applied.

Jennifer Cohen

Tanium moved to exclude the report of Jennifer Cohen, a financial and valuation consultant. The court granted Tanium’s motion in part.

Cohen may testify about Part A of her report, which explains differences between Tanium’s preferred and common stock, including differences in dividends, liquidation rights, voting rights, and other rights. She may also testify that Tanium’s preferred stock had more favorable rights and therefore could be worth more than common stock.

Cohen may not testify that $5 per share was the fair value of Tanium’s preferred stock, that $2.01 was the value of Howard’s common stock or restricted stock units, or that Tanium inaccurately represented the value of Howard’s compensation. The court found those opinions unreliable because Cohen did not independently analyze the $2.01 valuation and relied on insufficient support for the $5 valuation. The question whether Tanium accurately represented the stock’s value was also for the jury.

Phillip Allman

Tanium moved to exclude the report of Phillip Allman, an economist who calculated damages based on stock and employee stock purchase benefits Howard allegedly lost by leaving Fortinet. The court granted the motion and excluded Allman’s report.

The court found Allman’s use of Fortinet’s February 10, 2025 stock price arbitrary and inconsistent with the principles the court discussed for calculating fraud damages. The court also found problems with his calculations for unvested restricted stock units, future restricted stock grants, and the employee stock purchase program. Among other things, the unvested-unit calculation did not account for income taxes; the future-grant calculation lacked reliable data and specialized methodology; and the employee-stock-purchase calculation measured later stock appreciation rather than the value of the discount Howard allegedly lost.

Neil Beaton

Howard moved to exclude the report and rebuttal report of Neil Beaton, a business-valuation and economic-analysis expert. The court granted the motion in part.

Beaton may testify about Fortinet’s stock value and annual restricted stock grants, and about the role of 409A valuations in determining stock value. The court rejected Howard’s arguments that Beaton’s remaining opinions were inadmissible because he did not perform a March 2016 valuation, did not address every financial record, or discussed later transactions.

Beaton may not testify that Howard would not have remained at Fortinet for five or ten years, or that a decline in Fortinet’s stock price or grants would have caused Howard to seek other employment. The court found that opinion outside Beaton’s expertise. Beaton may testify about paragraph 15 of his rebuttal report, concerning common and preferred stock. Other challenges to his rebuttal testimony were moot because the opinions he intended to rebut had been excluded.

Marcia Wagner

Tanium moved to exclude the report of Marcia Wagner, an attorney specializing in employee benefits and executive compensation. The court granted Tanium’s motion in part.

Wagner may generally testify in rebuttal to Beaton’s opinions about 409A valuations, fair market value, and the use of recent transactions. She may not testify that Tanium used the $2.01 valuation to calculate Howard’s tax withholding when his restricted stock units vested. The court found that the relevant account statement and Wagner’s testimony showed the withholding calculations used release prices instead.

Wagner also may not testify about hypothetical tax-law violations, penalties, or related consequences. The court found those opinions irrelevant, unsupported by the record, and likely to mislead the jury. The remainder of her opinions may be offered to rebut Beaton’s testimony.

Disposition

The court granted Tanium’s motion to exclude Allman’s expert report and testimony. It granted in part Tanium’s motions to exclude Cohen’s and Wagner’s expert reports and testimony. It granted in part Howard’s motion to exclude Beaton’s expert report. The experts’ testimony must comply with the order, which disposed of Docket Nos. 104, 105, 106, and 107.