United States District Court, N.D. Illinois, Eastern Division
LA PLAYITA CICERO, INC., d/b/a Serenata Restaurant and Bar, and GERARDO MEZA, Plaintiffs,
TOWN OF CICERO, ILLINOIS, a municipal corporation, LARRY DOMINICK in his official and individual capacities, PAUL DEMBOWSKI, LARRY POLK, and SERGE ROCHER, Defendants. LA PLAYITA CICERO, INC., d/b/a Serenata Restaurant and Bar, and GERARDO MEZA, Plaintiffs,
TOWN OF CICERO, ILLINOIS, a municipal corporation, Defendant.
MEMORANDUM OPINION AND ORDER
Z. Lee United States District Judge.
2005 to 2009, Gerardo Meza owned La Playita Cicero, Inc.,
d/b/a Serenata Restaurant and Bar (“Serenata”), a
restaurant in Cicero, Illinois, that is now closed. Beginning
in 2006, municipal officials from the Town of Cicero cited,
fined, and summarily closed Serenata numerous times. Meza and
Serenata allege that these officials targeted them because
Meza is Hispanic and was politically unsupportive of Larry
Dominick, who was the Town President and Liquor Commissioner.
By contrast, the Town of Cicero and its officials claim that
the citations and fines were merely the legal consequences of
local liquor code violations.
Meza and Serenata have sued the Town of Cicero under 42
U.S.C. § 1983, alleging violations of the First and
Fourteenth Amendments of the federal Constitution (Case No.
11-cv-5561). They have also brought these same
constitutional claims against the Town of Cicero in a
separate lawsuit in which they further allege several state
law claims and add Larry Dominick, Paul Dembowski, Larry
Polk, and Serge Rocher as individual defendants (Case No.
anticipation of trial, Plaintiffs have offered expert
witnesses Dr. Gregory Green and Dr. Louise Fitzgerald, and
Defendants have offered expert witness Dr. Alan Jaffe. The
parties have filed motions in limine to bar or
strike the opposition's expert testimony. For the reasons
set forth below, Defendants' motions to bar Green 
 are denied. Plaintiffs' cross-filed motions to bar
Jaffe in Case No. 11-cv-5561  and Case No. 11-cv-1702
 are granted in part and denied in part. Defendants'
motion to bar Fitzgerald  is also granted in part and
denied in part.
the Federal Rules of Evidence do not explicitly authorize the
practice of making in limine rulings, “the
practice has developed pursuant to the district court's
inherent authority to manage the course of trials.”
Luce v. United States, 469 U.S. 38, 41 n.4 (1984).
Motions in limine allow courts to “ensure the
expeditious and evenhanded management of the trial
proceedings” by barring evidence that will be clearly
inadmissible for any purpose. Jonasson v. Lutheran Child
& Family Servs., 115 F.3d 436, 440 (7th Cir. 1997).
Rulings on motions in limine are “subject to
change when the case unfolds.” Luce, 469 U.S.
at 41; see also Farfaras v. Citizens Bank & Trust of
Chi., 433 F.3d 558, 565 (7th Cir. 2006). Indeed,
“even if nothing unexpected happens at trial, the
district judge is free, in the exercise of sound judicial
discretion, to alter a previous in limine
ruling.” Luce, 469 U.S. at 41-42.
admissibility of expert testimony is governed by Federal Rule
of Evidence (FRE) 702 and the Supreme Court's seminal
decision in Daubert v. Merrell Dow Pharmaceuticals,
Inc., 509 U.S. 579 (1993). See United States v.
Parra, 402 F.3d 752, 758 (7th Cir. 2005) (“At this
point, Rule 702 has superseded Daubert, but the
standard of review that was established for Daubert
challenges is still appropriate.”). FRE 702 allows the
admission of testimony by an expert-that is, someone with the
requisite “knowledge, skill, experience, training, or
education”- to help the trier of fact “understand
the evidence or [ ] determine a fact in issue.”
Fed.R.Evid. 702. An expert witness is permitted to testify
when (1) the testimony is “based on sufficient facts or
data, ” (2) the testimony is “the product of
reliable principles and methods, ” and (3) the witness
has “reliably applied the principles and methods to the
facts of the case.” Id.
Daubert, the district court must act as the
evidentiary gatekeeper, ensuring that FRE 702's
requirements of reliability and relevance are satisfied
before allowing the finder of fact to hear the testimony of a
proffered expert. See Daubert, 509 U.S. at 589;
see also Kumho Tire Co. v. Carmichael, 526 U.S. 137,
147- 49 (1999). District courts have broad discretion in
determining the admissibility of expert testimony. See
Gen. Elec. Co. v. Joiner, 522 U.S. 136, 142 (1997);
Lapsley v. Xtek, Inc., 689 F.3d 802, 810 (7th Cir.
2012). In considering whether to admit expert testimony,
district courts employ a three-part framework that inquires
whether: (1) the expert is qualified by knowledge, skill,
experience, training, or education; (2) the reasoning or
methodology underlying the expert's testimony is
reliable; and (3) the expert's testimony will assist the
trier of fact in understanding the evidence or determining a
factual issue. See Bielskis v. Louisville Ladder,
Inc., 663 F.3d 887, 893-94 (7th Cir. 2011).
regard to the reliability of an expert's methodology,
courts consider factors such as whether the methodology can
and has been tested, whether it has been subject to peer
review, whether it has a known or potential rate of error,
and whether it is generally accepted among the relevant
community. See Smith v. Ford Motor Co., 215 F.3d
713, 719 (7th Cir. 2000) (citing Daubert, 509 U.S.
at 593-94). Under this framework, “shaky expert
testimony may be admissible, assailable by its opponents
through cross-examination, ” and criticisms of the
testimony's quality speak not to admissibility but to the
weight that the testimony should be accorded by the trier of
fact. Metavante Corp. v. Emigrant Savings Bank, 619
F.3d 748, 762 (7th Cir. 2010) (quoting Gayton v.
McCoy, 593 F.3d 610, 616 (7th Cir. 2010)).
proponent of an expert witness bears the burden of
demonstrating that the expert's testimony would satisfy
the Daubert standard by a preponderance of the
evidence. Lewis v. CITGO Petroleum Corp., 561 F.3d
698, 705 (7th Cir. 2009).
Defendants' First Motion to Bar Damages Expert Dr.
have offered economist Dr. Gregory Green to opine on the
economic damages sustained by Serenata as a result of
Defendants' conduct. In his Initial Report from September
2011, Green offers two principal opinions. First, he opines
on Serenata's lost business profits from 2007 until 2009.
Green's calculation of these lost profits is based on
estimates of Serenata's expected revenues and costs,
which in turn are based on Serenata's actual revenues and
costs from 2005 to 2009 as well as comparisons to the
revenues and costs of Dona Cuca, Inc., a similar restaurant
owned by Meza's niece and located approximately 1.5 miles
from Serenata. See Def.'s Mot. Bar Green, Ex. A
(“Green Initial Report”), at 1, 6-8, ECF No. 123.
Second, because Serenata ceased operations in December 2009,
Green opines on the lost value of Serenata's business as
a going concern from 2010 forward. This opinion is based on
Green's use of the Capital Asset Pricing Model, which
Green describes as “a method for determining the
risk-adjusted discount rate to be used to reduce
Serenata's estimated lost profits to their 2011 present
value.” Id. at 1, 10-13.
response to Green's Initial Report, Defendants obtained
rebuttal experts, who criticize Green's Initial Report.
See Def.'s Mot. Bar Green, Ex. B. Green then
prepared a second report, entitled “Rebuttal
Report.” See id., Ex. C (“Green Rebuttal
Report”). Green's Rebuttal Report is dated December
first motion in limine seeks to bar Green's
Initial Report and Rebuttal Report. Primarily, Defendants
challenge Green's use of the Capital Asset Pricing Model.
They also argue that Green lacks qualifications to testify as
an expert. Lastly, they contend that Green's Rebuttal
Report should be barred because it is a sur-rebuttal report
that is not permitted under the Federal Rules of Civil
Procedure. For the reasons explained below, the Court rejects
these arguments and denies Defendants' motion.
Capital Asset Pricing Model
challenging Green's use of the Capital Asset Pricing
Model (CAPM), Defendants first argue that the model is
methodologically unsound. Relatedly, they challenge the
factual assumptions underlying Green's application of the
CAPM as unreliable. They also argue that Green's
discussion of the CAPM reveals that his testimony will not
assist the trier of fact as required by FRE 702. The Court
finds none of these arguments persuasive.
Reliability of the Methodology
explained in Green's Initial Report, the CAPM is an
economic model that can be used to estimate a company's
going-concern value. The CAPM estimates this value as a
function of (1) the rate of return on default-free assets,
such as U.S. Treasury securities, (2) the risk measure of the
company, (3) the expected risk premium on the overall market
portfolio, and (4) the company's size premium. Green
Initial Report at 11-13. Courts have long recognized the
reliability of the CAPM as a valuation methodology and have
routinely permitted expert witnesses to rely upon the CAPM.
See, e.g., Fish v. Greatbanc Trust Co., No.
09 C 1668, 2016 WL 5923448, at *28, *35 (N.D. Ill. Sept. 1,
2016) (discussing expert witnesses' use of the CAPM);
In re Bachrach Clothing, Inc., 480 B.R. 820, 869
(Bankr. N.D.Ill. 2012) (same); In re Pullman Constr.
Indus. Inc., 107 B.R. 909, 921 (Bankr. N.D.Ill. 1989)
(same); see also Buchwald v. Renco Grp., 539 B.R.
31, 44 (S.D.N.Y. 2015) (“[I]t is undisputed that the
Capital Asset Pricing Model generally, and the use of
company-specific risk premium in general, are part of
accepted methodologies in corporate valuation.”).
Tellingly, Defendants cite no case law to the contrary. The
Court therefore finds that the CAPM is a sufficiently
reliable and well-accepted methodology to form the basis of
nevertheless argue that even if the CAPM can reliably
estimate the going-concern value of publicly held companies,
it is an unreliable method of valuating privately held
companies like Serenata because it is impossible to calculate
precise risk measures for such companies. Indeed, Green's
Initial Report acknowledges this weakness, explaining that
“[b]ecause Serenata is not and never has been a
publicly traded entity, no [ ] risk measure can be calculated
directly for Serenata.” Green Initial Report at 11. To
work around this issue, Green estimates Serenata's risk
measure by averaging the risk measures of three publicly
traded but otherwise comparable restaurant businesses:
Chipotle Mexican Grill (whose risk measure is 0.95),
Chili's Restaurants (whose risk measure is 1.25), and
Texas Roadhouse, Inc. (whose risk measure is 1.00). The
average of these businesses' risk measures is 1.07, which
Green then rounds to 1.15 in order to make his final estimate
more conservative. Id. at 11-13.
to Defendants' assertion, Green's methodology appears
to be an accepted means of using the CAPM to estimate a
privately held company's going-concern value. See,
e.g., Pullman, 107 B.R. at 921 (describing use
of CAPM by expert witnesses and noting that, because it is
impossible to obtain the risk measure of a privately held
company, the risk measure must be estimated by way of
comparison to publicly traded companies). To the extent
Defendants believe that Green's estimate is unsound or
contend that the three restaurants used by Green are not
comparable to Serenata, they can explore these issues on
cross-examination. Cf. LoggerHead Tools, LLC v. Sears
Holdings Corp., No. 12-CV-9033, 2016 WL 5112025, at *4
(N.D. Ill. Sept. 20, 2016) (“[T]he fact that [an expert
witness] cannot calculate the specific amount of lost profits
goes to weight, not admissibility.”); Davis v.
Duran, 277 F.R.D. 362, 366 (N.D. Ill. 2011)
(“Vigorous cross examination, presentation of contrary
evidence and careful jury instructions, Daubert
stressed, are the traditional and appropriate means of
attacking shaky but admissible evidence.”). Green is
therefore permitted to give testimony based on his use of the
Reliability of Underlying Factual Assumptions
also argue that Green's testimony regarding the CAPM
should be barred as unreliable because his opinions are based
on unsupported factual assumptions that constitute hearsay.
For example, Defendants take issue with Green's
assumption that Serenata's earnings would have grown by
30 percent per year until reaching normal operating capacity,
as well as his assumption that normal operating capacity
would have brought in $1.4 million to $1.5 million in annual
revenues. See Reply Supp. Mot. Bar Green at 4-5, ECF
No. 167 (citing Green Initial Report at 6).
reliability of such factual assumptions, however, is not to
be weighed by the Court in limine, but rather is to
be “tested by the adversarial process and determined by
the jury.” Manpower, Inc. v. Ins. Co. of Pa.,
732 F.3d 796, 808 (7th Cir. 2013); see also Wilbern v.
Culver Franchising Sys., Inc., No. 13 C 3269, 2015 WL
5722825, at *11-12 (N.D. Ill. Sept. 29, 2015) (denying motion
to strike damages expert and noting that “the validity
of the expert's factual assumptions is not the focus
under a pre-trial Daubert inquiry”). And it is
well established that an expert witness may base an opinion
on otherwise inadmissible facts, including hearsay.
Fed.R.Evid. 703; Daubert, 509 U.S. at 595. As such,
Defendants' challenges to Green's underlying
assumptions are not a basis for barring Green's
Assisting the Trier of Fact
addition, Defendants argue that Green's testimony is
unnecessary to assist the trier of fact because his Initial
Report demonstrates that damages can be calculated simply by
plugging numbers into a formula using the CAPM. This argument
is meritless. As explained above, the methodologies that
Green employs to estimate Serenata's going-concern value
from 2010 forward, as well as to calculate its lost profits
from 2007 to 2009, require the use of numerous steps and the
input of multiple variables. The Court thus finds that expert
testimony explaining the application of these methodologies
will clearly assist the jury in determining the issue of
damages in this case.
Defendants challenge Green's qualifications to testify as
an expert witness. Because Green's expertise focuses on
macro-level economic analysis, Defendants argue, he is
unqualified to conduct the type of micro-level analysis
involved in valuating an individual business such as
Serenata. In response, Plaintiffs assert that Green is indeed
qualified, pointing out that he has provided consulting
services as an economist and taught university courses in
macro- and microeconomics since 1997. See Pls.'
Resp. Mot. Bar Green, Ex. 3, ECF No. 140.
Seventh Circuit has warned, “[t]he notion that
Daubert . . . requires particular credentials for an
expert witness is radically unsound.” Tuf Racing
Prod., Inc. v. Am. Suzuki Motor Corp., 223 F.3d 585, 591
(7th Cir. 2000). A witness is qualified to testify as an
expert as long as he has “relevant expertise enabling
him to offer responsible opinion testimony helpful to the
judge or jury.” Id. (citing Fed.R.Evid. 702).
As such, an expert witness is not required to have an
academic degree in economics, statistics, or mathematics-much
less a specialization in a specific subfield of those
areas-to be qualified to opine on the calculation of damages.
See Id. Here, Green has relevant ...