United States District Court, W.D. Missouri, Western Division
ORDER DENYING DEFENDANTS' MOTION TO EXCLUDE THE
EXPERT REPORT AND TESTIMONY OF STEVE POMERANTZ
KAYS, CHIEF JUDGE UNITED STATES DISTRICT COURT.
case concerns allegations Defendants violated various
provisions of the Employee Retirement Income Security Act of
1974 (“ERISA”), 29 U.S.C. § 1001 et
seq. Plaintiffs are former employees of Defendants'
and participated in the company's 401(k) retirement plan.
Plaintiffs allege Defendants, in their roles as employer,
plan sponsor, plan fiduciary, and investment manager of the
funds in the plan, breached their duties of loyalty and
prudence and caused the retirement plan to pay excessive
before the Court is Defendants' motion to exclude the
expert report and testimony of Steve Pomerantz (Doc. 137),
Plaintiffs' expert witness for damages. For the reasons
below, the motion is DENIED.
to the First Amended Complaint (Doc. 28), Plaintiffs assert
claims against Defendants, the fiduciaries of the American
Century Retirement Plan (the “Plan”), for breach
of fiduciary duty and engaging in prohibited transactions
under ERISA. Pertinent to this motion, from the beginning of
the class period until September 2016, Defendants maintained
a menu of investment options for the Plan that consisted
exclusively of proprietary American Century funds. Plaintiffs
allege these proprietary funds underperformed relative to
their marketplace competitors and charged higher than average
investment management fees. In 2010, a consultant, Hewitt
EnnisKnupp (“Hewitt”) provided Defendants an
analysis of the Plan identifying features of the Plan that
were inconsistent with other comparable plans, including the
high number of investment options, the exclusive use of
proprietary funds, high investment management fees, high
administrative expenses, the lack of a stable value fund, and
the limited use of index funds. Despite the Hewitt
report's findings and recommendations, Defendants'
only action was to reduce the number of investment options by
a net of four. Defendants retained an all-proprietary-funds
lineup and did not add non-proprietary funds until after this
case was filed.
Pomerantz's is a mathematician whose qualifications
include 30 years' experience in the investment field
including working as a portfolio manager and providing
investment management services to mutual funds as both an
investment advisor to a fund and as a sub-advisor. He has
testified in the numerous 401(k) cases in federal court on
the topic of prudent investment processes.
Pomerantz proposed testimony covers two topics. First, he
opines on the Committee's management of the Plan's
core lineup including the Plan's exclusive use of
proprietary funds, the number of investment options in the
Plan, the number of overlapping funds, and the failure to
procure revenue sharing rebates. Second, he presents four
damages models illustrating how alternative plan lineups
would have performed relative to the Plan's actual
performance. Model 1 approximates how the Plan would have
performed had it earned a market rate of return while
preserving the asset allocation decisions of the Plan's
participants. Model 2 reduces the number of investment
options and is modeled on the federal government's Thrift
Savings Plan. Model 3 replaces every investment in the Plan
with the most popular mutual fund among fiduciaries managing
plans comparable to the Plan, in the same Morningstar
category. Model 4, also called the “Hewitt Model,
” streamlines the investment menu and adds two index
funds and a stable value fund, while retaining a significant
number of American Century-affiliated funds. In addition, Dr.
Pomerantz calculated other miscellaneous components of the
Plan's damages, including losses associated with the
failure of the Plan's fiduciaries to procure revenue
sharing rebates from American Century.
expert witness may testify if he satisfies four general
requirements. First, he must be “qualified as an expert
by knowledge, skill, experience, training, or
education.” Fed.R.Evid. 702. Second, his expert
testimony must “help the trier of fact to understand
the evidence or to determine a fact in issue.”
Fed.R.Evid. 702(a). Third, the expert's testimony must
reflect reliable and scientifically valid reasoning and
methodology. Fed.R.Evid. 702(c); Daubert v. Merrell Dow
Pharm., Inc., 509 U.S. 579, 592-94 (1993). Fourth, the
expert must have “reliably applied the principles and
methods” to “sufficient facts or data.”
Fed.R.Evid. 702(b), (d).
party seeking admission of expert testimony has the burden of
establishing admissibility by a preponderance of the
evidence. Lauzon v. Senco Prods., Inc., 270 F.3d
681, 686 (8th Cir. 2001). A court should exclude expert
testimony “only if it is so fundamentally unsupported
that it can offer no assistance to the jury.”
Johnson v. Mead Johnson & Co., 754 F.3d 557, 562
(8th Cir. 2014).
seek to exclude the testimony and expert report of Dr.
Pomerantz, a mathematician hired by Plaintiffs. Dr.
Pomerantz's goal was to quantify Plaintiffs' damages
by offering different permutations of a hypothetical plan
lineup correcting for the various allegedly imprudent aspects
of the Plan. Defendants object to the admission of this
evidence on three bases: (1) Dr. Pomerantz is not qualified
to give opinions he propounds; (2) Dr. Pomerantz's
calculations of damages do not match up with his theories of
breach; and (3) each of the damages models is based on an
unreliable methodology and is unsupported by the record.
Dr. Pomerantz is qualified to testify about prudent
Defendants argue Dr. Pomerantz is not qualified to give
opinions on the processes that an investment fiduciary must
establish, and that the Plan's fiduciaries were imprudent
in selecting ...