MICHAEL IANNONE JR NICOLE JAMES v. AUTOZONE INC (2023)

ORDER GRANTING IN PART AND DENYING IN PART MOTIONS TO EXCLUDE EXPERT TESTIMONY

Before the court are three motions to exclude expert testimony: the defendants' Motions to Exclude Proposed Experts Wendy Dominguez and Christopher Tobe (ECF Nos. 247, 249) and the plaintiffs' Motion to Exclude Testimony of Russell R. Wermers. (ECF No. 251.) These motions are before the undersigned by order of reference. (ECF No. 255.) For the reasons below, the defendants' motions are GRANTED in part and DENIED in part. The plaintiffs' motion is DENIED.

I. BACKGROUND

A. Underlying Claims

The present case involves claims arising under the Employee Retirement Income Security Act of 1974 (“ERISA”) that are brought against AutoZone, Inc. (“AutoZone”), Northern Trust Corporation (“Northern Trust”), members of the AutoZone investment committee, and the investment fiduciaries of the AutoZone 401(k) plan. (ECF No. 85 at PageID 1168-69.) In brief, the plaintiffs, who were participants in the plan, allege that the defendants breached their fiduciary duties under ERISA by failing to monitor the fees and performance of the plan's investments. (Id. at PageID 1170.) Non-party Prudential is an insurance company that provided administrative and investment services for the plan. (ECF No. 140 at PageID 1845.) Plaintiffs claim that Prudential is the principal beneficiary of the excessive administrative and service fees. (ECF No. 112-1 at PageID 1462.) Non-party Willis Towers Watson (“WTW”) is a former investment advisor for the plan. (ECF No. 218 at PageID 5121.)

B. Opinions at Issue

1. Wendy Dominguez

In their first motion, defendants challenge several portions of the expert opinions offered by Wendy Dominguez. Dominguez is the president and co-founder of Innovest Portfolio Solutions, LLC, an investment advising firm. (ECF No. 248 at PageID 6459.) In that role, she provides investment consultation services to fiduciaries, trustees and investment committees of retirement plans, foundations, endowments, and nonprofit organizations. (Id.) She holds a BSBA in Finance and a Master of Business Administration from the University of Denver. (Id.) In addition to providing consultation services, Dominguez has authored numerous articles on fiduciary-related matters, spoken on the subject at national conferences, and testified at trial or deposition in six cases. (Id. at PageID 6460-61.) She was retained in this case to “evaluate the fiduciary process implemented by the fiduciaries of the AutoZone, Inc. defined contribution plan.” (Id. at PageID 6459.)

Dominguez's report sets forth her opinions as a series of breaches of fiduciary duty that she asserts the defendants committed. (Id. at PageID 6462.) She summarizes her conclusions as follows:

The Plan's Fiduciaries breached their fiduciary duties to the Plan and its participants in a host of ways, including but not limited to:

(i) failing to have an Investment Policy Statement;

(ii) failing to monitor the fees and costs of the Plan's mutual fund and separate account investment options, including the funds utilized by the [ ] Plan's Qualified Default Investment Alternative (QDIA), the GoalMaker model asset allocation service;

(iii) failing to monitor the fees, including spread and asset charges, of the Plan's single largest investment option, a $100 million stable value fund, the Prudential Guaranteed Income Fund (“GIF”);

(iv) failing to monitor the compensation of the Plan's recordkeeper, including direct and indirect; and,

(v) failing to monitor the share class of the funds in the plan.

(Id. at PageID 6462.)

The first section of Dominguez's report criticizes the plan's fiduciaries for failing to maintain an investment policy statement (“IPS”), which is “a written statement that provides fiduciaries who are responsible for plan investments with guidelines or general instructions concerning various types of categories of investment management decisions.” (Id. at PageID 6465-66.) Dominguez cites to a Department of Labor Interpretive Bulletin as well as an authoritative handbook and a book that is a “fundamental and leading” resource for fiduciaries for the proposition that maintaining an IPS is a best practice for fiduciaries. (Id. at PageID 6465-67.) She goes on to summarize testimony from AutoZone employees who stated that their investment committee did not maintain an IPS despite receiving advice from Prudential to do so. (Id. at PageID 6467-68.) According to Dominguez, this conduct is “inconsistent with the standard of care of prudent investment fiduciaries.” (Id. at PageID 6472.)

In the second section of her report, Dominguez opines that the defendants breached their fiduciary duties by failing to monitor the fees and costs of the GoalMaker Fund. (Id. at PageID 6473.) The GoalMaker Fund was AutoZone's Qualified Default Investment Alternative (“QDIA”), meaning that AutoZone employees were “defaulted into” investing in the fund. (Id. at PageID 6477.) Dominguez states that this configuration was imprudent for a number of reasons. (Id.) For one, the investments that made up the GoalMaker Fund were selected by Prudential and generated significant revenue for Prudential. (Id.) The investment fees charged by the GoalMaker Fund were also “substantially higher than the investment fees of other funds invested in the same asset class,” an assertion Dominguez supports with a chart comparing the GoalMaker Fund's fees to investment alternatives. (Id.) Dominguez goes on to opine that, based on testimony and documents made available in this litigation, AutoZone's investment committee knew that the fees were too high to be commensurate with the Fund's performance, but took no action to alter course. (Id. at PageID 6478-87.) This was due to a lack of proper monitoring and a decision-making process that was motivated by revenue sharing. (Id.) Finally, she believes that the fiduciaries should have taken steps to determine proper benchmarks and improve the plan's share classes, but failed to sufficiently do so. (Id. at PageID 6487-94.)

In the final section of Dominguez's report, she identifies problems with the maintenance of the Prudential Guaranteed Income Fund (“GIF”), which is a general account stable value fund of approximately $100 million and the plan's single largest investment option. (Id. at PageID 6494.) The GIF is backed by “assets in a broadly-diversified, fixed-income portfolio within [Prudential's] general account.” (Id.) These investments generate revenue, some of which is paid out to participants at a rate of return, called a crediting rate, set by Prudential. (Id.) The difference between the total returns generated by the investments and the amount paid to participants is called the “spread.” (Id.) The spread is retained by Prudential. (Id.) Dominguez opines that AutoZone should have compared Prudential's crediting rate to other providers through a process called requests for proposals (“RFP”). (Id. at PageID 6495.) This would have permitted the fiduciaries to evaluate the reasonableness of their current investments. (Id.)

The fourth section of Dominguez's report discusses the plan's recordkeeping fees. (Id. at PageID 6495.) At AutoZone, recordkeeping fees were paid as direct and indirect compensation to Prudential. (Id. at PageID 6496.) Dominguez cites to documents and testimony showing that AutoZone was informed that it should monitor these fees, but did not do so. (Id. at PageID 6496-502.) Furthermore, she states that AutoZone relied on Northern Trust to monitor and evaluate recordkeeping fees, while Northern Trust claimed that it did not bear this responsibility. (Id. at PageID 6513-16.) She cites testimony indicating that fiduciaries did not read documentation that was available to them regarding recordkeeping fees. (Id. at PageID 6518.) As a result of all this, Dominguez claims that AutoZone paid relatively high recordkeeping fees. (Id. at PageID 6522-23.) In support of this, Dominguez compares the AutoZone plan's recordkeeping fees to the fees of seventeen plans belonging to undisclosed clients for whom she had recently negotiated RFPs. (Id. at PageID 6522.) Based on this confidential data, she concludes that “AutoZone paid over two times the highest fee in our database.” (Id. at PageID 6523.)

Dominguez also prepared a rebuttal report for this litigation. (ECF No. 248-1.) In this report, Dominguez responds to the reports submitted by the plaintiffs' expert witnesses. (Id.) According to Dominguez's testimony at her deposition, much of the rebuttal report was written with the assistance of plaintiffs' counsel. (ECF No. 247-7 at PageID 6424-28.) When asked about this, Dominguez stated, “I read and approved and stand by every word in the rebuttal report.” (Id. at PageID 6428.)

2. Christopher Tobe

Defendants also move to strike several areas of testimony presented by Christopher Tobe. Tobe is a professional consultant who provides services as the Chief Investment Officer for Hackett Robertson Tobe Group. (ECF No. 250 at PageID 6760.) In that role he provides investment services to public funds, retirement plan sponsors, fiduciaries, and private wealth clients. (Id.) Tobe has worked with stable value funds for over twenty years. (Id.) This has included working directly with “large synthetic stable value fund managers providing services to 401(k) and 457 plans” and consulting for clients with stable value pools ranging from $100 million to $10 billion in value. (Id. at PageID 6761.) He is the author of several articles on the subject and has also published a book titled, “The Consultants and Plan Sponsors Guide to Stable Value.” (Id.) In his report, Tobe writes that his assignment included three areas of focus:

(i) providing industry specific information about stable value investments and the GIF in particular; (ii) opining as to whether AutoZone followed a prudent process in monitoring the Plan's stable value option and the GIF in particular; and, (iii) determining the amount by which the gross crediting rate of the GIF was lower than the market rate for a comparable product from 2013 to the present.

(Id. at PageID 6763.)

Speaking to the first point, Tobe writes that he considers Prudential's GIF and plans like it to be particularly risky due to “single entity credit risk.” (Id. at 6765) This refers to “the risk of a black swan event in which Prudential defaults.” (Id. at PageID 6773.) The GIF is unsecured, meaning that in the case of insolvency proceedings, there is a greater risk of total or partial nonpayment. (Id. at PageID 6765.) This makes the plan riskier than a synthetic stable value product, where the credit risk is diversified instead of concentrated in a single entity. (Id. at PageID 6773.) For that reason, Tobe says that this configuration was largely abandoned by the “vast majority” of large plans by the early 2000s. (Id.) In retaining the Prudential GIF, AutoZone is “an outlier among plans with plan assets of more than $500 million in assets.” (Id.) An additional concern associated with these plans is the “lack of flexibility and control over the funds invested” because the plan sponsor lacks control over how the funds are invested. (Id. at PageID 6766.) They also lack liquidity at the plan level because these contracts “limit the amount of funds that may be withdrawn in any given year.” (Id.)

As to AutoZone, Tobe criticizes it for failing to monitor the Prudential GIF. He writes that the AutoZone fiduciaries lacked the competence and knowledge necessary to properly monitor its performance. (Id. at PageID 6780.) He emphasizes their failure to consider the single entity credit risk posed by the GIF. (Id. at PageID 6781.) He believes that AutoZone's benchmarking process was insufficient for monitoring the fund and that AutoZone should have engaged in competitive bidding via RFPs to increase the GIF's crediting rate. (Id. at PageID 6781-82.) Tobe opines that Prudential's spread was excessive. (Id. at PageID 6782.) In addition, Tobe criticizes AutoZone for retaining the Prudential GIF after observing that its crediting rate was well below market rate and there were other, more competitive stable value funds available. (Id. at PageID 6768.)

Tobe goes on to discuss the hypothetical impact that conducting competitive bidding would have had on the AutoZone GIF. To do so, Tobe “identified five comparator products each with [crediting] rates in excess of 4% over the class period.” (Id. at 6785.) Tobe then compares the crediting rates of those plans to AutoZone's GIF. (Id.) While AutoZone experienced a range of 1.3% to 1.8% in returns over the relevant time period, these five comparators experienced rates that averaged between 4.03 and 4.12%. (Id. at PageID 6785.) Based on this difference, Tobe concludes that “I have never come across a clearer case of breach of fiduciary duty than in this case.” (Id. at PageID 6786.)

3. Dr. Russell R. Wermers

Plaintiffs challenge the expert testimony of Dr. Russell R. Wermers. Dr. Wermers is Chairman of the Department of Finance at the Smith School of Business, University of Maryland at College Park. (ECF No. 251-9 at PageID 6957.) In that role, he has taught courses on “Quantitative Equity Portfolio Management, Corporate Finance Theory, Security Analysis, Investment Theory and Practice, and other topics at both the undergraduate and graduate (including Ph.D.) levels.” (Id.) His research focuses on “fund performance evaluation, quantitative equity strategies, factors that drive bond returns, the drivers of mutual fund and hedge fund investor flows, security market efficiency, and the role of institutional investors in contributing to the price discovery of stocks and bonds.” (Id.) He has authored over thirty peer-reviewed publications and has previously been retained as an expert and testified in federal court “in various matters involving 401(k) and other defined contribution plans.” (Id. at PageID 6959.)

In connection with this case, Dr. Wermers writes that he was “asked to evaluate the economic reasonableness of the GIF and the GoalMaker Funds during the periods that they were made available to Plan participants.” (Id. at PageID 6960.) He was also asked to “review and respond to certain opinions and analyses expressed by Dr. Brooks, Ms. Dominguez, and Mr. Tobe regarding the economic reasonableness of the Prudential Guaranteed Income Fund and the allegedly excessive fees of the GoalMaker Fund.” (Id.)

Dr. Wermers's report sets forth three opinions. First, Dr. Wermers concludes that “the GIF is an economically reasonable investment option for the Plan.” (Id. at PageID 6962.) This is because participants in the plan had low balances and needed to preserve their retirement assets within the plan, a function which a stable value fund like the GIF fulfills. (Id.) In addition to safety of principal, the GIF was successful in that it provided positive returns to plan participants every year and permitted participants to withdraw their principal value at any time. (Id.) According to Dr. Wermers, the GIF had an appropriate crediting rate and did not charge excessive fees. (Id.) He further notes that the plan was commonly selected by plan fiduciaries and that it posed a minimal credit risk. (Id. at PageID 6962.) Second, Dr. Wermers concludes that “it was economically reasonable for the Plan to make the GoalMaker Funds available to Plan participants.” (Id. at PageID 6964.) He criticizes Dominguez's conclusion that the funds were “poorly performing” investment options and states that the fund's net-of-fee returns compare favorably to similar funds. (Id.) He also disputes Dominguez's characterization of the funds as overpriced, writing that the GoalMaker Fund's fees were “in line with their mutual fund peers.” (Id. at PageID 6965.) Finally, Dr. Wermers opines that the plaintiffs' expert, Dr. Robert Brooks (who has not been challenged by defendants), performed a flawed calculation of the GoalMaker Fund's losses. (Id.) He asserts that Dr. Brooks improperly compared the GoalMaker Fund to passively-managed funds in order to conclude that the Fund charged excessive fees. (Id.) Dr. Wermers explains that his own calculations result in millions of dollars of negative losses to the plan participants, meaning they suffered no damages. (Id.)

C. Procedural History

The defendants filed their motions to exclude the testimony of Dominquez and Tobe on January 13, 2023. (ECF Nos. 247, 249.) The plaintiffs filed responses to these motions on January 27, 2023. (ECF Nos. 257, 258.) The defendants filed replies to both responses on February 3, 2023. (ECF Nos. 263, 264.) The plaintiffs filed their motion to exclude the testimony of Dr. Wermers on January 14, 2023. (ECF No. 251.) The defendants responded to this motion on January 30, 2023. (ECF No. 260.) The undersigned heard oral argument on all three motions on April 17, 2023. (ECF No. 323.)¹

II. ANALYSIS

A. Legal Standard

All three motions argue that portions of the experts' testimony should be excluded because they do not comply with Rule 702 of the Federal Rules of Evidence. That rule states:

A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if:

(a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue;

(b) the testimony is based on sufficient facts or data;

(c) the testimony is the product of reliable principles and methods; and

(d) the expert has reliably applied the principles and methods to the facts of the case.

Fed. R. Evid. 702. Courts are tasked with gatekeeping the admissibility of expert testimony. Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 597 (1993). That said, “[b]ecause the parties have agreed to a bench trial of this matter, traditional gatekeeping concerns that might arise in a jury trial are diminished.” United States v. City of Eastpointe, 378 F. Supp. 3d 589, 613 (E.D. Mich. 2019); see also Deal v. Hamilton Cty. Bd. of Educ., 392 F.3d 840, 852 (6th Cir. 2004) (“The ‘gatekeeper’ doctrine was designed to protect juries and is largely irrelevant in the context of a bench trial.”); In re Flint Water Cases, 558 F. Supp. 3d 459, 524 (E.D. Mich. 2021); Kentucky Waterways All. v. Kentucky Utilities Co., 539 F. Supp. 3d 696, 710 (E.D. Ky. 2021), appeal dismissed, No. 21-5600, 2021 WL 6197328 (6th Cir. Sept. 16, 2021). A trial judge is “presumed capable of weighing evidence” in circumstances that might warrant exclusion from a jury. UAW v. Gen. Motors Corp., 235 F.R.D. 383, 387 (E.D. Mich. 2006); see also Hobart Corp. v. Dayton Power & Light Co., No. 3:13-CV-115, 2020 WL 614041, at *2 (S.D. Ohio Feb. 10, 2020) (“[R]ather than excluding challenged expert witness testimony altogether, it often makes sense for the court to hear all of the evidence, and then determine how much weight to give the expert witness opinions, if any.”). However, even when conducting a bench trial, the court must rely on admissible and reliable expert testimony. Gonzales v. Nat'l Bd. of Med. Exam'rs, 225 F.3d 620, 635 (6th Cir. 2000); see Hobart, 2020 WL 614041, at *2 (“Certainly, during a bench trial, the court can never rely on expert witness testimony that does not satisfy the requirements of Fed. R. Evid. 702.”).

B. Admissibility of Dominguez's Testimony

1. Legal Conclusions

Defendants first argue that Dominguez impermissibly testifies to legal conclusions. (ECF No. 247-1 at PageID 6342.) Federal Rule of Evidence 704 provides that “[a]n opinion is not objectionable just because it embraces an ultimate issue.” Fed. R. Evid. 704. Experts are permitted to “testify to the facts supporting a legal conclusion without testifying about the ultimate legal conclusion.” Numatics, Inc. v. Balluff, Inc., 66 F. Supp. 3d 934, 944 (E.D. Mich. 2014). However, testimony “offering nothing more than a legal conclusion — i.e, testimony that does little more than tell the jury what result to reach — is properly excludable under the Rules.” Twin K Constr., Inc. v. UMA, Geotechnical Constr., Inc., 597 F. Supp. 3d 1204, 1211 (E.D. Tenn. 2022) (quoting Woods v. Lecureux, 110 F.3d 1215, 1220 (6th Cir. 1997)). An expert testifies to a legal conclusion when they “define[ ] the governing legal standard or appl[y] the standard to the facts of the case.” Keyes v. Ocwen Loan Servicing, LLC, 335 F. Supp. 3d 951, 959 (E.D. Mich. 2018) (quoting United States v. Melcher, 672 F. App'x 547, 552 (6th Cir. 2016)); see also Berry v. City of Detroit, 25 F.3d 1342, 1353 (6th Cir. 1994) (“It is the responsibility of the court, not testifying witnesses, to define legal terms. The expert's testimony in this regard invaded the province of the court.”).

Both Dominguez's primary and rebuttal reports frame her conclusions as a list of ways the defendants breached their fiduciary duties. (ECF Nos. 248, 248-1.) Such a finding is subject to a “governing legal standard.” Melcher, 672 F. App'x at 552. The duties of plan fiduciaries are defined by ERISA. 29 U.S.C. § 1104. Liability arises when a fiduciary breaches one of the duties created by ERISA. 29 U.S.C. § 1109. Testimony stating that the defendants violated their fiduciary duty would constitute an application of this standard to the facts of the case. Thus, while Dominguez may describe the defendants' conduct in relation to the duties imposed on fiduciaries, she may not testify that a fiduciary duty was breached. Because of this distinction, the undersigned will not exclude Dominguez's testimony altogether. Instead, Dominguez will be limited to testifying to the actions taken by the defendants and whether, based on her experience and analysis, they were prudent.

2. Authorship of Rebuttal Report

Defendants next argue that Dominguez's supplemental report should be excluded in its entirety because it was written with the assistance of counsel. (ECF No. 247-1 at PageID 6344.) Under Federal Rule of Civil Procedure 26(a)(2)(B), expert witnesses must provide a written report “prepared and signed by the witness.” Fed R. Civ. P. 26(a)(2)(B). Exclusion of a report for violating this requirement occurs under Federal Rule of Civil Procedure 37. See Bekaert Corp. v. City of Dyersburg, 256 F.R.D. 573, 579 (W.D. Tenn. 2009).

Rule 26 permits expert witnesses to rely on, to some degree, assistance from counsel in authoring their reports. See Numatics, 66 F. Supp. 3d at 942-43 (“Nothing in the rule prohibits counsel from helping the witness prepare the report.”). The advisory committee notes for Rule 26 provide:

Rule 26(a)(2)(B) does not preclude counsel from providing assistance to experts in preparing the reports ․ Nevertheless, the report, which is intended to set forth the substance of the direct examination, should be written in a manner that reflects the testimony to be given by the witness and it must be signed by the witness.

Fed. R. Civ. P. 26 advisory committee's note to 1993 amendment. Thus, some participation by counsel in the drafting of an expert report is acceptable, but “preparing the expert's opinion from whole cloth and then asking the expert to sign it if he or she wishes to adopt it” is not. Bekaert, 256 F.R.D. at 578 (quoting In re Jackson Nat. Life Ins. Co. Premium Litig., No. 96–MD–1122, 2000 WL 33654070, at *3 (W.D. Mich. Feb. 8, 2000)).

The question of whether an expert report comports with Rule 26 “usually turns on whether counsel's participation so exceeds the bounds of legitimate assistance as to negate the possibility that the expert actually prepared his own report[.]” Reber v. Lab'y Corp. of Am., No. 2:14-CV-2694, 2017 WL 3888351, at *5 (S.D. Ohio Sept. 6, 2017) (quoting Bekaert, 256 F.R.D. at 578) (excluding an expert report where the witness “did not write or edit any draft of her report; rather, she went over the report after Plaintiff's counsel drafted it[.]”); see also Numatics, 66 F. Supp. 3d at 944 (granting a motion to exclude where counsel “drafted the report and gave it to [the witness] to review and sign,” where the expert “made ‘fairly minor’ changes and otherwise adopted the attorney's report,” and where he was unable to discuss any of the documents listed in his report); James T. Scatuorchio Racing Stable, LLC v. Walmac Stud Mgmt., LLC, No. CIV.A. 5:11-374-DCR, 2014 WL 1744848, at *6 (E.D. Ky. Apr. 30, 2014) (finding a report deficient where ninety percent of the report was prepared by counsel during a sixty to ninety minute meeting and where the expert admitted he had not reviewed the documents referenced in the report). But see McDonald v. City of Memphis, No. 2:12-CV-2511-SHL-DKV, 2016 WL 8201168, at *11 (W.D. Tenn. Aug. 26, 2016) (denying a motion to exclude where counsel assisted the expert in preparing and drafting this report, but it was “ultimately the result of an interactive process through which specific language was discussed and then included or excluded to reflect [the expert's] opinions.”).

The undersigned finds that the assistance provided to Dominguez by counsel did not exceed the limits permitted by Rule 26. During her deposition, Dominguez testified, “I worked on this draft collectively with counsel ․ it was a collective effort.” (ECF No. 247-7 at PageID 6423.) During questioning, she pointed to various sentences and whole paragraphs for which she provided the first draft. (Id. at PageID 6424-28.) These sections amounted to a significant portion of the report as a whole. (Id.) Furthermore, there is no requirement that an expert author the first draft of their report; counsel “can reduce an expert's oral opinion to writing so long as the report reflects the actual views of the expert.” United States v. Kalymon, 541 F.3d 624, 638 (6th Cir. 2008). Dominguez also testified, “I read and approved and stand by every word in the rebuttal report.” (Id. at PageID 6428.) Notably, the defendants do not argue that Dominguez is unfamiliar with or in disagreement with any aspect of her rebuttal report, and the undersigned does not find evidence of such in the parties' briefs. Compare Reber, 2017 WL 3888351, at *6 and Numatics, 66 F. Supp. 3d at 944 with ECF No. 247-1. This is not an instance where Dominguez “could not actually point to any portion of the [report], which could be said to have been [her] testimony” or where her testimony “was wholly prepared by counsel with [Dominguez's] participation amounting to [her] signature after reviewing the document.” Bekaert, 256 F.R.D. at 579. The defendants' motion to strike the rebuttal report is therefore DENIED.

3. Testimony Based on Undisclosed Client Data

Defendants argue that Dominguez's opinions on recordkeeping fees should be excluded because she has insisted that the data underlying those opinions is confidential and cannot be disclosed. (ECF No. 247-1 at PageID 6355.) In the section of her report dedicated to the plan's recordkeeping fees, Dominguez writes, “I identified 17 RFP's or RFI's between 2016 and 2017 that were somewhat similar to AutoZone.” (ECF No. 248 at PageID 6522.) She then draws several conclusions based on comparisons between those plans and the AutoZone plan. (Id.) However, Dominguez does not disclose the names of the plans to which she is comparing AutoZone's. (Id.) This is because she claims that the information is confidential and may not be disclosed. (ECF No. 247-5 at PageID 6367-70, 6392.) The defendants argue that Dominguez's refusal to disclose that information is grounds for exclusion of the opinion, because it means they are unable to replicate or challenge her analysis. (ECF No. 247-1 at PageID 6355.)

Federal Rule of Civil Procedure 26(a)(2)(B) requires experts to disclose “the facts or data considered by the witness in forming” their opinions. Fed. R. Civ. P. 26(a)(2)(B). Although the defendants are moving to exclude Dominguez's recordkeeping fee analysis under Federal Rule of Evidence 702, failure to make a required disclosure under Federal Rule of Civil Procedure 26 may also warrant exclusion under Federal Rule of Civil Procedure 37(c)(1). City of Owensboro v. Kentucky Utilities Co., No. CIV.A.4:04CV-87-M, 2008 WL 4542674, at *2 (W.D. Ky. Oct. 8, 2008) (citing Fed. R. Civ. P. 37(c)(1)). The Sixth Circuit has read the requirements of Rule 26(a)(2)(B) broadly, joining the “ ‘overwhelming majority’ of courts” in finding that Rule 26(a)(2)(B) requires “disclosure of all information provided to testifying experts.” Reg'l Airport Auth. of Louisville v. LFG, LLC, 460 F.3d 697, 716 (6th Cir. 2006) (quoting Herman v. Marine Midland Bank, 207 F.R.D. 26, 29 (W.D.N.Y. 2002)) (emphasis in original). “[T]he rule was worded specifically to provide the opposing party with access to all materials reviewed or considered by the expert, whether or not the expert report ultimately refers to those materials as a basis for his or her opinions.” United States v. Am. Elec. Power Serv. Corp., No. CIV.A. 2:99-CV-1182, 2006 WL 3827509, at *1 (S.D. Ohio Dec. 28, 2006) (citing Reg'l Airport, 460 F.3d at 716). This approach allows parties to better prepare for effective cross-examination of an expert witness. City of Owensboro, 2008 WL 4542674, at *2 (citing Fed. R. Civ. P. 26(a)(2)(B) advisory committee's note to 1970 amendment).

This Circuit's broad reading of Rule 26(a)(2)(B) weighs against permitting Dominguez to testify without disclosing the information she deems confidential. That finding is further supported by factually similar cases from this Circuit and others. In one case, the Northern District of California ruled on a motion to exclude testimony proffered by an internet marketing consultant retained as an expert. In re Google Adwords Litig., No. C08-03369 JW HRL, 2010 WL 5185738, at *1 (N.D. Cal. Dec. 8, 2010). Like Dominguez, the expert witness provided a report in which he based his conclusions on data for four of his clients but redacted their identities from disclosures to the opposing party. Id. The district court stated:

Indeed, as Plaintiffs state, “[b]y redacting the identities of the four clients, Mr. Mothner has foreclosed the opportunity for Plaintiffs to obtain additional information relating to those clients' AdWords experiences that would (1) test the accuracy of Mr. Mothner's opinions and (2) might undermine his assumptions ․ ” (Reply at 3–4.) Indeed, requiring the disclosure of the clients' identities and allowing Plaintiffs to challenge Mothner's opinions in this way is in line with the underlying purpose of Rule 26(a)(2)(B)(ii) to provide a party “a reasonable opportunity to prepare for effective cross examination and perhaps arrange for expert testimony from other witnesses.”

Id. at *3. The court ordered the defendant to disclose the identities of the four clients at issue. Id. at *5; see also Burrows v. BMW of N. Am., LLC, No. CV 17-6960-R, 2018 WL 6314187, at *2 (C.D. Cal. Sept. 24, 2018) (excluding an expert witness's testimony in part because plaintiffs did not produce the documents underlying his opinions and he refused to discuss them during deposition); In re Benicar (Olmesartan) Prod. Liab. Litig., 319 F.R.D. 139, 142 (D.N.J. 2017) (ordering expert witnesses to provide the medical records they considered in reaching their expert opinions); Brdar v. Cottrell, Inc., No. 306-CV-00729, 2007 WL 2254710, at *3 (M.D. Tenn. Aug. 3, 2007) (striking an expert witness who refused to disclose information about her employer because doing so would subject her to liability under trade secret laws).

In this case, Dominguez has had the opportunity to produce the information in question. At her deposition, she testified to the following:

Q. By the way, are you willing to describe who are the plan sponsors set out in the first column?

A. No, I don't have -- I mean, I have masked those clients, and I don't recall who they are.

Q. But if you knew, would you tell me, given the confidentiality concerns you've expressed previously?

MR. CLARK: Object to the form. She's asserted that time and time again. She's not going to disclose who those people are.

BY MR. ORTELERE:

Q. Can you answer my question?

A. No, I won't disclose.

Q. So again, we can't -- we can't vet any of this without the sponsor names, correct?

A. Correct. But I'm, I guess, under oath, and I'm telling you that it's true.

(ECF No. 247-5 at PageID 6392.) According to Dominguez's testimony here, she “won't disclose,” and has asserted as much “time and time again.” (Id.) Moreover, in response to the motion to exclude Dominguez's testimony, the plaintiffs have steadfastly refused to produce this confidential data. (ECF No. 257 at PageID 7451.) It would be fruitless to now grant Dominguez yet another opportunity to refuse disclosure. Thus, the motion to exclude the testimony regarding recordkeeping fees is GRANTED. Dominguez may not testify to any conclusions arising from her use of her seventeen clients' data.

4. Testimony About GoalMaker's Performance

The defendants state that “Dominguez opines that the GoalMaker Funds were poor performers.” (ECF No. 247-1 at PageID 6349.) They assert that this opinion should be excluded because she performed no qualitative analysis to support that conclusion. (Id.) Upon review of Dominguez's report and her testimony, the undersigned finds that she does not state such an opinion. During her deposition, counsel asked Dominguez, “Did I hear you say you didn't look at performance, just fees, correct?” (ECF No. 247-5 at PageID 6377.) Dominguez replied, “My schedules were built on just looking at fees. I did look at performance generally, but I didn't really comment on it.” (Id.)

Dominguez's report bears this out. At certain points she criticizes AutoZone's failure to act based on its own observations that its actively managed funds were underperforming. For example, she quotes an email from a committee member that states, “whether you look at 3 months or 3 years, the equities are all under-performing the index, correct?” (ECF No. 248 at PageID 6480.) She critiques AutoZone for doing “nothing” about this. (Id.) However, Dominguez does not at any point draw her own conclusions about the funds' performance. Her report merely asserts that AutoZone had its own suspicions about the funds' performance and did not act. She is permitted to make observations about that inaction. Because there is no actual opinion about the funds' performance to be stricken, the motion to exclude on this basis is DENIED.

5. Testimony About GoalMaker's Fees

The defendants argue that Dominguez's opinion about the GoalMaker Fund's fees is unreliable “because it runs counter to Sixth Circuit authority.” (ECF No. 247-1 at PageID 6350.) To draw her conclusions about the GoalMaker Fund's fees, Dominguez “compares the GoalMaker Funds' fees to those of a slate of hand-picked passively-managed index funds.” (Id.) But according to the defendants, “the Sixth Circuit recently held that comparing actively-managed funds to passively-managed funds is an inappropriate apples-to-oranges comparison,” and thus, Dominguez's comparison of the same should be stricken. (Id.)

This assertion is an over-reading of Sixth Circuit authority. The court in Smith v. CommonSpirit Health, 37 F.4th 1160 (6th Cir. 2022) analyzed the dismissal of a complaint under Federal Rule of Civil Procedure 12(b)(6). Id. at 1164. The complaint in question claimed that the defendant-employer “breached its duty of prudence by offering several actively managed investment funds when index funds available on the market offered higher returns and lower fees.” Id. The Sixth Circuit affirmed the dismissal, holding that the plaintiff had not “plausibly pleaded that this ERISA plan acted imprudently merely by offering actively managed funds in its mix of investment options.” Id. at 1165. However, the fact that a plaintiff cannot satisfy pleading standards using solely a comparison between actively and passively managed funds does not mean that such a comparison is irrelevant for determining whether there was a breach of fiduciary duty. In CommonSpirit Health, the court observed that “a fund's underperformance, as compared to a ‘meaningful benchmark,’ may offer a building block for a claim of imprudence[.]” CommonSpirit Health, 37 F.4th at 1167 (citing Meiners v. Wells Fargo & Co., 898 F.3d 820, 822 (8th Cir. 2018)). That is the purpose that Dominguez's testimony regarding fee comparisons serves here. There is nothing barring the plaintiffs from asserting that the discrepancy in fees is one building block in a series of mistakes that, together, amount to a breach of fiduciary duty. If defendants wish to demonstrate that this comparison is inapt, they may do so using cross-examination. The motion to exclude on this basis is DENIED.

6. Other Testimony

The defendants' remaining arguments must be denied because all go to the weight, and not the admissibility, of the testimony at issue. Several times, the defendants argue that Dominguez's opinions are “contrary to law.” (ECF No. 247-1 at PageID 6345.) For example, they argue that Dominguez's opinion that AutoZone should have operated with a formal, written IPS is contrary to law because ERISA does not require a formal IPS. (Id. at 6346.) But as the plaintiffs point out, “[s]imply because ERISA does not require an IPS does not make the failure to have one prudent.” (ECF No. 257 at 7443.) The undersigned agrees. Dominguez is permitted to opine that failure to have an IPS statement, combined with the other deficiencies she discusses, constitutes a breach of fiduciary duty. In the same vein, defendants argue that Dominguez's opinion that AutoZone should not have used revenue sharing to pay recordkeeping fees is contrary to law because ERISA does not ban the practice. (ECF No. 247-1 at PageID 6351.) A practice that is not illegal may still constitute a breach of fiduciary duty in a given circumstance. Dominguez may opine about the imprudence of such an arrangement.

Defendants further argue that “Dominguez offers an inadmissible opinion that is ‘contrary to the law’ ” (id.) with her testimony that not conducting an RFP every three to five years is a breach of fiduciary duty. (ECF No. 247-5 at PageID 6398-99.) This is because ERISA “does not require plan fiduciaries to conduct competitive bids for recordkeeping services, much less to do so at any specific interval.” (ECF No. 247-1 at PageID 6352.) While this is technically true, plaintiffs are still permitted to offer an expert opinion that an employer breached its fiduciary duty by failing to engage in competitive bidding to secure lower fees, which is what Dominguez's testimony is being offered to show. See, e.g., Garcia v. Alticor, Inc., No. 1:20-CV-1078, 2021 WL 5537520, at *8 (W.D. Mich. Aug. 9, 2021), reconsideration denied, No. 1:20-CV-1078, 2022 WL 19919753 (W.D. Mich. Aug. 23, 2022); Cassell v. Vanderbilt Univ., 285 F. Supp. 3d 1056, 1064 (M.D. Tenn. 2018).² Dominguez is permitted to testify to opinions that support this allegation.

The defendants also argue that several of Dominguez's opinions are “inconsistent with” her work with her clients. (Id. at PageID 6345.) For example, in response to Dominguez's criticism of AutoZone's monitoring process, defendants write that AutoZone “employed a virtually identical process and used substantively similar investment monitoring criteria that Dominguez does as an investment consultant.” (Id. at 6347.) Although the defendants believe these two approaches are “remarkably similar,” Dominguez's methodology is different than AutoZone's. (Id.) The defendants' disagreements about the importance of those differences goes to the weight of her testimony, not its admissibility. Defendants make the same argument about Dominguez's conclusion that AutoZone should not have retained a particular fund or engaged in revenue sharing to pay for recordkeeping fees. (Id. at PageID 6348, 6351.) However, the fact that these practices might be inadvisable under some circumstances does not mean that they are under all circumstances or for all plans. The fact that Dominguez found these actions to be permissible for certain clients is not necessarily inconsistent with her opinion that they were imprudent for AutoZone. The defendants may explore the significance (or lack thereof) of those differences using cross-examination.

Lastly, regarding Dominguez's opinion on share class reviews, defendants argue that “Dominguez fails to explain why a formal annual review is the only prudent way to monitor share classes.” (Id. at PageID 6356.) However, Dominguez states that this opinion arises from her experience as an investment consultant. In her report, she writes:

In my practice, we produce annual share class reviews for our clients. These reports detail each investment in the plan and the other share classes available. We include minimums, CIT options if applicable and compare all investments net of revenue sharing. This way we can easily identify opportunities to reduce investment costs. This is a process a prudent fiduciary would follow.

(ECF No. 248 at PageID 6494.) This is sufficient foundation for her belief that performing a share class review is part of being a prudent fiduciary. If the defendants disagree, they may cross-examine her. For all the above reasons, the remainder of the defendants' motion to exclude Dominguez's testimony is DENIED.

C. Admissibility of Tobe's Testimony

1. Testimony Comparing Industry Crediting Rates

Defendants first argue that Tobe's testimony comparing the AutoZone GIF to “four stable value funds offered by Mass Mutual and an annuity offered by TIAA” should be excluded. (ECF No. 249-1 at PageID 6615.) Tobe uses this comparison to draw several conclusions, including that the AutoZone GIF had a relatively low crediting rate and that plan participants experienced losses as a result of their investment in the GIF. (ECF No. 250 at PageID 6785-86.) The defendants assert that the comparison is improper because Tobe based this opinion on “cherry-picked comparator investments using the benefit of hindsight.” (ECF No. 249-1 at PageID 6614.) As such, they argue his methodology is unreliable and his opinions formed on the basis of this method should be excluded. (Id.)

To be sure, Tobe admits to cherry-picking the data he used in this part of his analysis. When asked why he compared the AutoZone GIF's crediting rate to these five funds in particular, Tobe testified, “I did cherry pick, I did pick the highest --I picked the highest [crediting] rates[.]” (ECF No. 249-6 at PageID 6690.) In his calculation of participants' losses, Tobe compared the AutoZone GIF not to all five of these funds, but to one in particular, the MassMutual Diversified SAGIC II. (Id. at PageID 6705.) This was because that fund represented “the stable value product that had the highest [crediting] rate for that period.” (Id.)

The Sixth Circuit has observed that “cherry-picking data is just as bad as omitting it or making it up altogether.” United States v. Lang, 717 F. App'x 523, 536 (6th Cir. 2017) (citing EEOC v. Freeman, 778 F.3d 463, 468–71 (4th Cir. 2015) (Agee, J., concurring)). Thus, “[t]here is some merit to [the] argument that an expert cannot ‘cherry-pick’ only favorable data.” Id. As one district court has put it:

Result-driven analysis, or cherry-picking, undermines principles of the scientific method and is a quintessential example of applying methodologies (valid or otherwise) in an unreliable fashion. [C]ourts have consistently excluded expert testimony that “cherry-picks” relevant data. This is because such an approach does not reflect scientific knowledge, is not derived by the scientific method, and is not “good science.”

In re Onglyza (Saxagliptin) & Kombiglyze XR (Saxagliptin & Metformin) Prod. Liab. Litig., No. 5:18-MD-2809-KKC, 2022 WL 43244, at *18 (E.D. Ky. Jan. 5, 2022) (internal citations and quotations omitted). Relying on this reasoning, courts in this Circuit have excluded testimony based on data that was purposefully selected, or cherry-picked, with no reason other than to support a particular conclusion. See Sheffield v. Int'l Paper Co., No. 2018-cv-02701-JPM-cgc, 2020 WL 1882906, at *2 (W.D. Tenn. Feb. 26, 2020) (excluding testimony where an expert's conclusions demonstrated “cherry-picking an isolated and self-serving data point rather than responding to the reality of the case.”); Seawell v. Brown, No. C-1-08-614, 2010 WL 11561287, at *8 (S.D. Ohio Sept. 9, 2010) (holding that an expert in an ERISA case who identified the highest performing fund managers and determined their average rates of return in hindsight had not used reliable methodology to determine the plaintiffs' losses).

The undersigned has concerns about the methodology employed by Tobe in rendering these comparisons. By his own admission, Tobe selected these comparators because they represented the highest possible crediting rates over the relevant time period. This generated the greatest differential in crediting rates when compared to the AutoZone GIF, and therefore the largest total losses. However, given the presumption in bench trials that a judge is presumed capable of weighing testimony, the undersigned will not exclude the testimony as unreliable at this time. Gen. Motors Corp., 235 F.R.D. at 387.

The defendants raise other issues about these comparators, namely that Tobe “failed to show that his five comparator products are meaningful benchmarks for the GIF.” (ECF No. 249-1 at PageID 6618.) However, these arguments go to the weight of Tobe's testimony, not its admissibility. The defendants may explore the differences between the GIF and Tobe's comparators using cross-examination. The defendants' motion to exclude this testimony is DENIED.

2. Testimony Regarding Prudential's Spread

Defendants criticize Tobe's analysis of Prudential's spread as “pure conjecture.” (ECF No. 249-1 at PageID 6622.) In his report, Tobe opines that Prudential's spread is “excessive.” (ECF No. 250.) However, he notes that “Prudential itself does not disclose the spread to its clients.” (Id.; see ECF No. 249-6 at PageID 6716.) Thus, in order to draw conclusions about Prudential's spread, Tobe substituted data about spread from a general account offered by a Prudential competitor named Voya (Id.) Tobe writes that “[t]he Voya and Prudential general account returns are likely very similar.” (Id.) Tobe admits that Voya “is a completely separate company and completely separate general account” and that it has “some differences in investment.” (ECF No. 249-6 at PageID 6718.) However, “it was the only comparison I could find.” (Id. at PageID 6719.)

The undersigned finds that the availability of Voya's spread data is not sufficient justification for using that information as a substitute for Prudential's spread data. Although Tobe stated without explanation that the accounts are similar, he also testified that the investments included in the Voya general account are different than those in Prudential's. (ECF No. 249-6 at PageID 6718.) This is an important difference, as an account's investments are what generate its spread. (ECF No. 250 at PageID 6782.) Tobe's use of Voya's data to generate an estimate of Prudential's spread, which he refers to as a “guess,” is not based on reliable methodology. (ECF No. 249-6 at PageID 6718.) For that reason, the defendants' motion to exclude Tobe's testimony about Prudential's spread is GRANTED.

3. Testimony Comparing Prudential Plans' Crediting Rates

Defendants argue that Tobe's testimony that “higher crediting rates were available to AutoZone because other plans, such as the WEA and Cigna retirement plans, offered exactly the same stable value product while obtaining a better return” is inadmissible because it is based on undisclosed confidential information. (ECF No. 249-1 at PageID 6623.) In his initial report, Tobe displays a chart of WEA's crediting rates compared to the AutoZone GIF from 2013 to 2020 and then notes that “the rate north of 3 was available for the entire period for one Prudential client WEA in the same product.” (ECF No. 250 at PageID 6783-84.) Then, in his rebuttal report, Tobe conducts a similar analysis using a comparison of AutoZone to Cigna. (ECF No. 250-1 at PageID 6799.) Again, he notes that “Prudential offers better crediting rates on the same product to its best customers than it has offered to AutoZone.” (Id.)

The crediting rates themselves are not at issue here. Tobe's comparisons are based on publicly available information. (ECF No. 258 at PageID 7548.) Plaintiffs assert, and defendants do not dispute, that this public information was provided to defendants as part of the present litigation. (Id.; ECF No. 264-1 at PageID 8062.) Instead, the data at issue is the supporting evidence for Tobe's claims that the Prudential plans offered to WEA and Cigna are “the same product” as the AutoZone GIF. (ECF No. 250 at PageID 6783-84; ECF No. 250-1 at PageID 6799.) As the defendants point out, “an investment's returns shed no light on any other features, including its underlying investments, guaranteed minimum rate, risk profile, or ‘investment structure.’ ” (ECF No. 264-1 at PageID 8062.) During his deposition, Tobe was asked, “So how do you know [Cigna is] the very same product?” (ECF No. 249-6 at PageID 6726.) Tobe responded:

A. The - it was all part of the - the PRIAC - it - it was part of the PRIAC general account pool that I know through this case, and then the second - again, I did that second Prudential case where I spent hundreds of hours on PRIAC on this particular product. So, I mean, this -- I don't know how many I spent on this one, 20 or 30, I mean, substantial amount, but then I spent hundreds of hours, essentially, in the next - I can't even - I'm sorry. I can't remember the name, the other - the other Prudential case, Wood, I think, verse Prudential. And so sometimes my memory kind of fades between those two cases. So it's a lot of where I remember, but I just know consistently through that it was the same product through there, through with that case, and then all the way up to AutoZone, it was the same general account product that came out of that Connecticut office of - of - of Prudential.

Prudential has - Prudential, when they bought Cigna, you know, that - that operation was out of the Hartford, Connecticut office, and that line of GICs was kind of kept together there. It's changed the name to, I think, PRIAC because I think it was during the period of this Cigna case that Prudential purchased them. So it was - so - so they are part of that same general account pool out of that group of Connecticut. And I think they're all - because a lot of the other Prudential GICs are issued out of the State of New Jersey.

Q. All right.

A. So this - this is - this is the same family of traditional GICs issued out of that Connecticut office.

(Id. at PageID 6726-28) (emphasis added.) Tobe was then asked if he had produced any of that material to the defendants. (Id. at PageID 6728.) Tobe responded,

A. No. I mean, I don't have any - you know, this - most of this stuff is by memory that I have and so, you know, I don't - I don't - say it again, looking at the case again, it seems to be the same - it's the same - same set - same type of products. Same family of products ․ And, again, I would consider all Prudential general accounts to be generally generically the - the same, even if it was issued out of a different state. So I don't think it really makes any difference in the - in the picture from my perspective is that, you know, you can make little bitty differences, and they're - they're all immaterial to me. The material thing is that it's a general account issued by Prudential and what is the rate. And those are the material things, and that's what the report says. And it shows that - that AutoZone got, you know, almost half the rate that they gave their better clients.

(Id. at PageID 6729) (emphasis added.)

According to Tobe's testimony, his conclusion regarding the similarity of the plans is based on his memory of his experiences working on previous court cases. Experts are permitted to rely on experience in forming their opinions. Fed. R. Evid. 702 advisory committee's note to 2000 amendment. However, when deciding whether to admit testimony based on an expert's experience, “the expert's bald assurance of validity is not enough.” Daubert v. Merrell Dow Pharms., Inc., 43 F.3d 1311, 1316 (9th Cir. 1995) (on remand); see Gen. Elec. Co. v. Joiner, 522 U.S. 136, 146 (1997) (“But nothing in either Daubert or the Federal Rules of Evidence requires a district court to admit opinion evidence that is connected to existing data only by the ipse dixit of the expert.”). Courts must do more than “simply take ‘the expert's word for it’ ” when determining whether to admit expert testimony. Cook v. Erie Ins. Co., 478 F. Supp. 3d 658, 662 (S.D. Ohio 2020) (quoting Thomas v. City of Chattanooga, 398 F.3d 426, 432 (6th Cir. 2005)). Here, Tobe is simply asking the court to take him at his word that, based on his admittedly faded memory, the products are the same. (ECF No. 249-6 at PageID 6727.) Neither the defendants nor the court have any way of verifying that this is actually true. The testimony regarding Cigna and WEA's crediting rates as compared to the AutoZone GIF must therefore be stricken. The defendants' motion to exclude this testimony is GRANTED.

4. Testimony About Proper Benchmarks

Defendants take issue with Tobe's testimony regarding the proper benchmarks by which to measure the AutoZone GIF's crediting rate. (ECF No. 249-1 at PageID 6627.) Tobe's report contains a section criticizing the benchmarks used by Northern Trust, WTW, and Prudential to monitor the GIF's crediting rate and faulting AutoZone for not performing benchmarking whatsoever. (ECF No. 250 at PageID 6774-77.) In this section, he notes that “[t]he Prudential general account is particularly difficult to benchmark because of the private debt holdings and holdings of alternative investments such as private equity, hedge funds, and real estate with unknown maturities.” (Id. at PageID 6774.) He then states, “That said, some securities-based benchmarks for the GIF are better than others.” (Id.) Tobe lists four benchmarks used by WTW, Northern Trust, and Prudential to monitor the GIF, explaining his reasons why each one was insufficient for the GIF's fiduciaries. (Id. at PageID 6774-75.) He underscores this point in his deposition testimony, saying of the benchmarks that “they're almost all problematic ․ there are problems with every one of these benchmarks there.” (ECF No. 249-6 at PageID 6676.)

According to Tobe, “If I had to select a securities-based benchmark it would be the 5-year Treasury + 500 basis points for the additional risk.” (ECF No. 250 at PageID 6775.) This benchmark is based on Tobe's “general feel.” (ECF No. 249-6 at PageID 6682.) But even regarding this benchmark, he notes, “But again, this is a very - like all these benchmarks, they're very - they're very approximate and all have, have, you know, they're - they're - none of them are perfect.” (Id.) Elsewhere, he states, “again, all these benchmarks are problematic.” (Id. at PageID 6679-80.) Counsel for the defendants asked Tobe:

Q. Okay. So is it your opinion, then, that no investment consultant should use any of these benchmarks identified on pages 15 and 16 for quarterly performance monitoring?

MR. WHITE: Object to form. You can answer.

A. Most investment consulting - consultants who are monitoring things are in synthetics.3 So in synthetics, it's very appropriate to use the - the - the Hueler Universe is a - an appropriate - appropriate benchmark. But it's - I really can't - that's, you know - I really can't speak on the fact of - of - of what you use for - for general [ac]count.

(Id. at PageID 6676-77.) Finally, Tobe notes in his rebuttal report, “the Benchmark Debate is not key to my findings or the damage calculations since we have investable options[.]” (ECF No. 250-1 at PageID 6802.)

It is difficult to square Tobe's criticisms about the benchmarking of the AutoZone GIF with his own admission during his deposition that he cannot speak to the subject. Under Federal Rule of Evidence 702(a), a witness may testify to an expert opinion if “the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue[.]” Tobe's testimony appears to be that he lacks the specialized knowledge needed to form an opinion on the proper benchmarking of crediting rates for general accounts. (ECF No. 249-6 at PageID 6676-77.) Yet this is exactly what his report purports to do. (ECF No. 250 at PageID 6774-77.) “[T]he ‘knowledge’ requirement of Rule 702 requires ‘more than subjective belief or unsupported speculation[.]’ ” Tamraz v. Lincoln Elec. Co., 620 F.3d 665, 670 (6th Cir. 2010) (citing Daubert, 509 U.S. at 590). Based on Tobe's testimony at his deposition, the undersigned finds that Tobe is not qualified to render opinions on the proper benchmarking of general stable value fund accounts. The defendants' motion to exclude this testimony is GRANTED.

5. Other Testimony

The defendants' remaining arguments go to the weight, not the admissibility, of Tobe's testimony, and therefore their motions as to that testimony are DENIED. Defendants argue that Tobe is not qualified to opine about the 401(k) fiduciary process because he has no experience as a fiduciary or a fiduciary committee member. (ECF No. 249-1 at PageID 6626.) While Tobe has not been a fiduciary himself, the firm for which he is the chief investment officer provides consulting services to fiduciaries as well as retirement plan sponsors. (ECF No. 250 at PageID 6760.) He has also provided training to multiple fiduciary investment advisors, entities who in turn advise fiduciary committees. (Id. at PageID 6761.) Tobe has significant expertise and experience with stable value products in general. (Id. at PageID 6760-62.) All of this makes him qualified to testify as to the proper handling of stable value products by a fiduciary committee. Any deficiencies with Tobe's qualifications may be handled using cross-examination.

Defendants disagree with Tobe's opinion that AutoZone should have renegotiated its crediting rate with Prudential. (ECF No. 249-1 at PageID 6627.) Tobe mentions the need to negotiate the AutoZone GIF's crediting rate as one of many steps AutoZone and Northern Trust could have taken to competitively bid for a better product for AutoZone's employees. (ECF No. 250 at PageID 6779-80.) The prudence of engaging in the competitive bidding process is well-documented in Tobe's report. (Id. at PageID 6777, 6781-82.) Additionally, while defendants seem to argue that there is no evidence that an employer can renegotiate a crediting rate, Tobe cites to an email that purports to show a representative of Prudential doing just that. (Id. at PageID 6779.) Tobe's conclusion is sufficiently supported by facts. He is permitted to testify about negotiating the AutoZone GIF's crediting rate.

Finally, defendants take issue with Tobe's conclusion that the Prudential GIF carried significant single entity credit risk. (ECF No. 249-1 at PageID 6621.) They write that “[a]t its core, this opinion rests on Tobe's beliefs that general account products are per se imprudent and that offering one of these funds automatically amounts to a fiduciary breach.” (Id.) (internal citations omitted.) However, Tobe explains in detail his reasoning for identifying the AutoZone GIF's single-entity backing as a source of risk for the plan. In one part of his report, he writes:

The GIF is structured as a general account fixed annuity contract. It is an insurance contract backed by a piece of paper, not a mutual fund where the investor retains an ownership interest in the fund assets. If the insurance company goes into rehabilitation or liquidation, the plan is left holding this piece of paper with an unsecured claim in the insolvency proceedings.

(ECF No. 250 at PageID 6765.) He further opines that “[t]here [is] no reason to take single entity credit risk when better products [are] available.” (Id.) Because of the risk posed by a plan like the Prudential GIF, “[l]eading consultants such Willis Towers Watson (WTW) and Mercer warn against the use of general account products such as the GIF.” (Id. at 6781.) Tobe has sufficiently supported his opinion. His testimony regarding the AutoZone GIF's single entity credit risk is not excludable.

D. Admissibility of Dr. Wermers's Testimony

1. Dr. Wermers's Qualifications

Plaintiffs first argue that Dr. Wermers is unqualified to offer the testimony contained in his report, and his testimony should therefore be excluded under Rule 702. (ECF No. 251.) Specifically, they dispute whether Dr. Wermers has the specific expertise in the field of stable value products to offer an opinion. (Id. at PageID 6819.) They assert that he is “an academic who regularly provides industry favorable testimony about mutual fund performance” and “does not have any relevant knowledge, training, or experience specific to stable value.” (Id. at PageID 6820.)

In the Sixth Circuit, courts “take a liberal view of what ‘knowledge, skill, experience, training, or education’ is sufficient” to satisfy Rule 702. Bradley v. Ameristep, Inc., 800 F.3d 205, 208–09 (6th Cir. 2015) (citing Pride v. BIC Corp., 218 F.3d 566, 577 (6th Cir. 2000) and quoting Fed. R. Evid. 702). An expert need not be a specialist in every subject to which their testimony might relate. Counts v. Gen. Motors, LLC, 606 F. Supp. 3d 547, 568 (E.D. Mich. 2022). Experts are also not required to have “complete knowledge about the field in question.” Buren v. Crawford Cnty., No. 13-CV-14565, 2016 WL 5369597, at *2 (E.D. Mich. Sept. 26, 2016) (citing Mannino v. Int'l Mfg. Co., 650 F.2d 846, 850 (6th Cir. 1981)). Instead, lack of experience in a specialized area within a field goes to the weight, not the admissibility, of expert testimony. Ross v. Am. Red Cross, No. 2:09-CV-905, 2012 WL 1656995, at *4 (S.D. Ohio May 10, 2012), aff'd, 567 F. App'x 296 (6th Cir. 2014); see also First Tennessee Bank Nat. Ass'n v. Barreto, 268 F.3d 319, 333 (6th Cir. 2001).

Dr. Wermers has significant professional experience researching, writing, and teaching about a variety of investment products. (ECF No. 251-9 at PageID 6957-59.) He has also been accepted as an expert and allowed to testify in federal court regarding defined contribution plans on several occasions. (Id. at PageID 6959.) The defendants have succeeded in demonstrating that Dr. Wermers has the “knowledge, skill, experience, training, or education” to offer the conclusions contained in his report. Fed. R. Evid. 702. To the extent that Dr. Wermers lacks expertise in the specific field of stable value products, the undersigned finds that this goes to the weight of his testimony, not its admissibility.

2. Testimony Regarding Participants' Damages

Next, the plaintiffs argue that Dr. Wermers's damages calculations are “faulty” because “(i) Dr. Wermers is playing games with math; and, (ii) Dr. Wermers has substituted a different benchmark for a critical benchmark.” (ECF No. 251 at PageID 6830.) The first assertion relates to the formula that Dr. Wermers used to conclude that plan members experienced millions of dollars in negative losses. The plaintiffs argue that Dr. Wermers improperly placed a premium on the early performance of the funds that he analyzed. (Id. at PageID 6831.) Thus, even if two funds finished a particular time period with the same “price,” the fund with superior performance earlier in that time period would generate a finding of greater negative losses. (Id.) However, the fact that the formula places greater emphasis on earlier returns than later ones does not necessarily render it “faulty.” According to Dr. Wermers, this is by design. (ECF No. 262 at PageID 8041.) He states that a failure to consider differences in timing is actually a critical omission of a variable that is an important input into any damages calculation. (Id.) By incorporating timing into his calculations, Dr. Wermers accounts for participants who may have different dollar amounts invested in a given fund at different points in time. (Id.) Even if two funds resulted in the equal returns at the end of an entire time period, a “participant may have realized more of a benefit from his investment in the ‘Active’ fund due to the fact that he had more dollar assets in the fund during the subperiod of relatively higher returns.” (Id.) Furthermore, a participant who experienced higher returns during an earlier subperiod would have a greater opportunity to reinvest those returns and recognize an even larger benefit over the total time period; a participant who only experienced higher returns later would have been deprived of that opportunity. Taking these possibilities into account does not render his opinion unreliable. The undersigned finds that the formula utilized by Dr. Wermers is admissible under Rule 702(b). If plaintiffs dispute that Dr. Wermers's method is proper, then they may do so using cross-examination.

The same is true for the plaintiffs' other criticism of Dr. Wermers's damages calculation. Plaintiffs claim that Dr. Wermers used an improper benchmark when performing these calculations. (Id. at 6834.) They state:

Dr. Wermers' methodology also plays on a well known problem with benchmarking American Funds Europacific Growth. This fund originally designated the MSCI EAFE (international) Index, but is known to track the MSCI EAFE Growth Index. This is not in dispute: AutoZone's 404(a) filings, that, beginning in March of 2015, designated the fund as an International Growth Fund and benchmarked the fund using the MSCI EAFE Growth Index ․ Dr. Wermers claims to report the returns against both indices (MSCI EAFE and MSCI EAFE Growth) in his report ․ But, his negative loss calculation using the wrong benchmark: MSCI EAFE instead of MSCI EAFE Growth.

(Id. at PageID 6834-35.) Plaintiffs do not provide evidence to support their assertion that the fund is “known to track the MSCI EAFE Growth Index” or that this poses a “well known problem with benchmarking.” (Id. at PageID 6834.) Furthermore, the benchmark utilized by Dr. Wermers was set forth in the fund's prospectus. (ECF No. 262 at PageID 8042.) Dr. Wermers states in his declaration:

Contrary to Plaintiffs' assertion, it is common and appropriate to evaluate a fund's performance relative to its prospectus benchmark. A fund's prospectus is a document that mutual funds file with the SEC to disclose information about the fund to investors. A fund's prospectus includes information about the fund's performance, and often includes a “comparison to a more narrowly based index the fund believes serve as a better benchmark for comparative purposes.” Prospectus benchmarks are disclosed in a fund's prospectus ex-ante, and, thus, are not subject to hindsight bias.

(Id. at PageID 8042-43.) The plaintiffs do not dispute this. Based on this showing, the undersigned finds that Dr. Wermers's methodology is sufficiently reliable to clear the hurdle of Rule 702(b). Questions about the proper benchmark may be raised on cross-examination. Plaintiffs' motion to exclude the testimony of Dr. Wermers is DENIED.

III. CONCLUSION

For the reasons stated above, the defendants' motions are GRANTED in part and DENIED in part. The plaintiffs' motion is DENIED.

IT IS SO ORDERED.

FOOTNOTES

1.   Plaintiffs filed a Motion to Supplement the Record on August 7, 2023. (ECF No. 336.) However, the undersigned finds that the proposed supplemental records have no bearing on the issues raised in the present motions.

2.   Defendants cite Vellali v. Yale Univ., 2022 WL 13684612, at *9 (D. Conn. Oct. 21, 2022), for the proposition that “ERISA does not require competitive bidding.” (ECF No. 247-1 at PageID 6352.) The entirety of that quote actually states: “While the defendants are correct that ERISA does not require competitive bidding, a fiduciary's failure to use reasonable means to determine whether administrative fees are reasonable, such as through a competitive bidding process, can constitute a breach of the duty of prudence.” Vellali, 2022 WL 13684612, at *9.

3.   The word “synthetics” refers to synthetic account stable value fund products, as opposed to general account stable value fund products, such as the Prudential GIF. (ECF No. 250 at PageID 6765.)

TU M. PHAM Chief United States Magistrate Judge