Miguel v. Salesforce.com, Inc.

Background

The defendants moved to exclude the testimony of plaintiffs’ expert Robert E. Conner under Federal Rule of Evidence 702. Rule 702 permits qualified experts to offer opinions when their specialized knowledge would help the factfinder, their testimony is based on sufficient facts or data, and their methods and application of those methods are reliable.

Conner offered opinions that the defendants’ oversight of Salesforce’s 401(k) plan was not consistent with the standard of care for a prudent fiduciary and that plan participants suffered losses because of the fiduciaries’ failure to provide proper oversight. The dispute involved claims under the Employee Retirement Income Security Act, commonly called ERISA.

Experience

The defendants argued that Conner was not qualified because he had never served on a 401(k) or other pension-plan committee and had never testified as an expert when the ERISA fiduciary standard of care was at issue. The plaintiffs pointed to Conner’s decades of experience in the securities industry, including managing pension-plan accounts, managing equity portfolios for pension accounts, managing ERISA plan assets, and working at expert-witness firms.

The court concluded that the defendants’ criticisms of Conner’s experience concerned the weight of his opinions—the importance or credibility the factfinder should give them—rather than their admissibility. The court therefore did not exclude his opinions on that basis.

Methodology and supporting information

Conner criticized the plan’s use of investments and share classes with higher expenses. His opinions addressed the plan’s use of JPMorgan SmartRetirement Target Date Fund share classes and its failure to offer certain Fidelity investments and collective investment trusts, or CITs. The defendants argued that Conner relied on flawed methodology, including an inaccurate understanding of the plan’s share classes, failure to account for revenue sharing, and improper comparisons between mutual funds and CITs.

The court found that an error concerning the JPMorgan share classes could be isolated from the rest of Conner’s analysis and therefore affected the weight of the opinion rather than its admissibility. The court also treated the dispute over revenue sharing as a challenge to the merits of the plaintiffs’ claims, not as proof that the report lacked sufficient facts and data. Regarding CITs, the court found that the defendants’ objections likewise went to the merits rather than admissibility.

Damages calculations

The defendants argued that Conner should be excluded because he relied on data he did not collect himself and did not adequately verify. The court declined to exclude the testimony because Conner testified that he had verified the numbers and formed his own opinions from the data.

The defendants also identified alleged flaws involving the treatment of the JPMorgan share classes, changing expense ratios, and the use of year-end assets rather than monthly asset averages. The court found that the first issue could be separated from the rest of the analysis. It treated the remaining disagreements as factual disputes or disagreements about the weight of competing expert opinions, not grounds for exclusion.

Opinions concerning excluded claims

The defendants separately sought to exclude Conner’s opinions to the extent they concerned claims brought only in a proposed Second Amended Complaint that plaintiffs were not allowed to file, or claims dismissed from the First Amended Complaint whose dismissal the Ninth Circuit had affirmed. The plaintiffs agreed that those opinions could be stricken.

Ruling

The court denied the defendants’ motion to exclude, with the exception of the opinions referenced in Part C concerning the excluded claims. The order does not separately state that those opinions were stricken; it states that the motion was denied except as to those opinions.