Federal Appeals Court Overturns Multi-Million Dollar Damages Award in Breach of Contract Case Due to Erroneously Admitted Expert Witness

Denver, Colorado – A multi-million dollar damages award in a breach of contract case may be in jeopardy after a federal appeals court ruled that an expert witness was improperly classified and admitted as a lay witness. The U.S. Court of Appeals for the Tenth Circuit found that the damages verdict for recycling company A-1 Organics, in its lawsuit against Heartland, relied on testimony from A-1’s chief financial officer (CFO) that should have been classified as expert testimony instead.

According to the court, the CFO’s testimony involved more than basic math and required complicated assumptions and projections about the market. The testimony in question was given during a trial to determine the damages verdict, where A-1 CFO Travis Bahnsen provided economic forecasts relating to the company’s expected return on a $14 million investment over a 20-year term.

A-1 Organics plans to petition for a rehearing following the court’s ruling. Heartland’s attorney has not yet responded to the decision.

The lawsuit between A-1 Organics and Heartland arose from two agreements where A-1 would have supplied substrates to Heartland for 20 years. However, after Heartland shut down its facility due to regulatory issues, A-1 terminated the agreements, claiming Heartland had failed to comply. As a result, A-1 sued Heartland for breach of contract.

While U.S. District Judge Raymond P. Moore of the District of Colorado initially entered summary judgment in favor of A-1 Organics, a jury later awarded the company $6 million in damages. However, the Tenth Circuit upheld the summary judgment ruling while finding that the testimony from A-1’s CFO violated the federal rules of evidence.

The panel of judges noted that A-1 had argued that the CFO’s lay opinion was based on particularized knowledge, as stated in Rule 701. However, the court disagreed, citing that Bahnsen based his projections on his past work as a certified public accountant, not his role as A-1’s CFO. By admitting Bahnsen as a lay witness, A-1 bypassed the requirement under Rule 702 for a judge to determine the reliability of expert testimony before trial.

As a result, the Tenth Circuit vacated the damages award and remanded the case for further consideration. The court stated that the district court, which has already issued multiple rulings in this case, is best suited to determine whether a new trial on damages or judgment for Heartland is warranted.

In the case of A-1 Organics v. Heartland, No. 22-1184, the Tenth Circuit ruled that the damages award should be reconsidered, questioning the basis upon which the jury made its decision. The court’s decision hinges on the correct classification of the CFO’s testimony and its compliance with the federal rules of evidence.