Brief in Support of Motion to Strike Expert Reports — Greathouse v. Capital Plus (TXND) (N.D. Tex., 2023-02-02)

Record facts

U.S. District Court for the Northern District of Texas, Fort Worth Division · No. 4:22-cv-00686-P · Doc. 72 · 2023-02-02 · Docket on CourtListener

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IN THE UNITED STATES DISTRICT COURT 
FOR THE NORTHERN DISTRICT OF TEXAS 
FORT WORTH DIVISION 
Eric Greathouse et al., individually and  
on behalf of all others similarly situated,  
Plaintiffs,  
v.  
Capital Plus Financial, LLC et al.,  
Defendants. 
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Case No. 4:22–CV–00686–P 
 
______________________________________________________________________________ 
Brief in Support of Defendants’ Omnibus Motion to Strike  
Plaintiffs’ Class Certification Expert Reports and to Exclude Expert Testimony 
______________________________________________________________________________ 
Attorneys for Defendants Capital Plus Financial, LLC;  
Crossroads Impact Corp.; Eric Donnelly; and Robert Alpert 
 
Submitted:     February 2, 2023 
Katherine G. Treistman 
Tex. Bar No. 00796632 
Andrew D. Bergman 
Tex. Bar No. 24101507 
ARNOLD & PORTER KAYE SCHOLER LLP 
700 Louisiana Street, Suite 4000 
Houston, Texas 77002–2755 
Tel.: (713) 576–2400 
Fax: (713) 576–2499 
Katherine.Treistman@arnoldporter.com 
Andrew.Bergman@arnoldporter.com 
 
Eric N. Whitney 
Tex. Bar No. 00785241 
ARNOLD & PORTER KAYE SCHOLER LLP 
250 West 55th Street 
New York, New York 10019–9710 
Tel.: (212) 836–8000 
Fax: (212) 836–8689 
Eric.Whitney@arnoldporter.com 
 
Michael P. Lynn 
Tex. Bar No. 1273800 
Christopher J. Schwegmann 
Tex. Bar No. 24051315 
LYNN PINKER HURST & SCHWEGMANN, LLP 
2100 Ross Avenue, Suite 2700 
Dallas, Texas 75201 
Tel. (214) 981–3800 
Fax: (214) 981–3839 
mlynn@lynnllp.com 
cschwegmann@lynnllp.com 
 
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INTRODUCTION 
Plaintiffs’ class certification motion is accompanied by reports of four experts that have no 
relevance to class certification.  The Court should both strike Plaintiffs’ expert reports for purposes 
of class certification and exclude the testimony of those experts from any class certification 
hearing.  Their attempt to include these expert reports is, by all appearances, an attempt to deceive 
the Court into believing that there is sufficient evidence to support class certification when there 
plainly is not.  Indeed, the four experts—Jason Koontz, William Manger, Steven Feinstein, and 
William Briggs—all purport to opine on legal issues regarding the merits of the case which are 
never proper subjects of expert testimony, let alone at the class certification stage.  These types of 
grossly improper expert opinions are inadmissible under Daubert and have no place in the class 
certification record.  Defendants respectfully request that the Court strike Plaintiffs’ expert reports 
and exclude their testimony from any class certification hearing.  
RELEVANT BACKGROUND 
Without addressing the merits of Plaintiffs’ class certification motion to which Defendants 
will file a separate opposition, this Motion to Strike addresses Plaintiffs’ attempt to use improper 
and irrelevant expert opinions to seek class certification.  To support their class certification 
motion, Plaintiffs offer proposed testimony of four expert witnesses, whose reports are provided 
in Plaintiffs’ Appendix to their Class Certification Motion (ECF 69) (“Plfs.’ App’x”):   
(1) Jason D. Koontz (Plfs.’ App’x Tab 2 at 0015–39);  
(2) William M. Manger, Jr. (Plfs.’ App’x Tab 3 at 0040–49); 
(3) Steven P. Feinstein (Plfs.’ App’x Tab 4 at 0050–76); and 
(4) William Briggs (Plfs.’ App’x Tab 5 at 0077–86).  
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I. 
Jason Koontz 
Koontz purports to be an expert in the area of “commercial lending” and his CV indicates 
that he held positions at various banks in West Virginia and Ohio from 1991–2012.  Plfs.’ App’x 
Tab 2 at 0016, 0031–32.  His report discusses his qualifications and recounts what he believes are 
“[b]ackground [f]acts” about this case, which are based principally on Plaintiffs’ complaint.  See 
id. at 0018–20, 0030.  He then offers essentially three opinions:  
(1) A promissory note is a lender’s offer of a loan, which the borrower can accept by 
signing it.  Id. at 0024.1 
(2) A lender has to fund a loan after the borrower signs the promissory note or provide 
notice to the borrower for the decision not to fund.  Id. at 0025. 
(3) “It is irregular and inconsistent with standard lending practice” for lenders to provide 
misleading information to government agencies.  Id. at 0025. 
The only argument for which Plaintiffs cite Koontz’s expert report in their class 
certification briefing is their claim that “[t]he fact that all class members signed identical Loan 
Document contracts … and otherwise had little contact with CPF prior to CPF’s breaching those 
contracts establishes predominant issues central to the case.”  Plaintiffs’ Brief in Support of Motion 
for Class Certification (ECF 68) (“Plfs.’ Cl. Cert. Br.”) at 14.  Yet, Koontz’s report does not 
address any of these issues and nowhere does he even purport to opine that all class members 
signed the same documents or the extent of any class members’ contact with CPF.  See Plfs.’ App’x 
Tab 2 at 0016–25. 
 
1 Koontz also opines that Plaintiff Greathouse’s Promissory Note was a form of closed-end credit, which he 
distinguishes from open-end credit.  Plfs.’ App’x Tab 2 at 0022–23, 0025.  But this is not material, because Defendants 
are unlikely to dispute that PPP loans are a form of closed-end credit, as opposed to open-end. 
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II. 
William Manger  
Manger is a former SBA employee who served as Chief of Staff and in different 
administrator roles.  Id., Tab 3 at 0041–42.  He does not specifically state his proffered area of 
expertise, but claims to have been “responsible for promulgating PPP-specific rules and guidance, 
implementing PPP-specific processes at SBA, and communicating with lenders, trade associations, 
government agencies, and members of Congress.”  Id. at 0041.  Manger recounts some of the 
history of the SBA, the Section 7(a) Loan Program, the CARES Act, and the PPP.  Id. at 0042–44.  
He then goes on to offer essentially three opinions as to the obligations of PPP lenders under 
promissory notes for PPP loans and requirements under SBA policies and under the PPP itself: 
(1) A PPP lender who sends a borrower a promissory agreement to sign has entered into 
an agreement to make the loan.  Id. at 0045 ¶ 18.  
(2) SBA regulations require a PPP lender to make a one-time full disbursement of a PPP 
loan for which they are the lender after the loan is approved by the SBA.  Id. at 0045 ¶ 19.  
(3) A PPP lender would violate SBA regulations if it submitted a Form 1502 to the SBA 
for an approved loan but had not disbursed the loan.  Id. at 0046 ¶ 22. 
As with Koontz, Plaintiffs also cite Manger’s expert report for their argument that class 
members signed the same notes and had little contact with CPF (Plfs.’ Cl. Cert. Br. at 14), although 
his report does not opine on any of these issues except to assert that “[i]t is [his] understanding that 
CPF utilized the SBA standard Promissory Note for its lending transactions under PPP.”  Id. at 
0045 ¶ 18.  Plaintiffs also cite Manger’s report for the proposition that a PPP lender was required 
to keep an accurate record of loans it makes and to submit periodic SBA Form 1502 reports 
regarding the status of those loans, Plfs.’ Cl. Cert. Br. at 7, although this is just a parallel citation 
to an SBA Procedural Notice setting out these requirements.  See id.  Finally, Plaintiffs cite 
Manger’s report, in addition to their other expert, William Briggs’s report, as “discussing PPP 
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context” in support of their argument that the case raises common questions to all class members.  
Id. at 9–10.  But neither the paragraphs in Manger’s report that Plaintiffs cite for this point, 
paragraphs 12 and 13, nor anything else in Manger’s report addresses any common issues to all 
class members.  Indeed, paragraphs 12 and 13 of Manger’s report are just general background 
information about the PPP.  Plfs.’ App’x Tab 3 at 0034 ¶¶ 12–13.  
III. 
Steven Feinstein 
Feinstein is an economist.  Id., Tab 4 at 0053 ¶¶ 5–6.  His report recounts certain purported 
facts about the case and about Defendants (id. at 0056–57 ¶¶ 17–21) and offers basically four 
opinions:  
(1) Damages in this case can be calculated on a class-wide basis consistent with Plaintiffs’ 
theory of the case.  Id. at 0056 ¶ 16.   
(2) Each Class member’s damages are at minimum the amount of the PPP loan that they 
did not receive, minus the amount they did receive (if any).  Id. at 0058 ¶ 25.   
(3) The above measure of damages is “conservative” in that it excludes other categories of 
damages that class members might otherwise claim, such as the value of potential lost 
opportunities and consequential damages.  Id. at 0058 ¶¶ 27–28.   
(4) Punitive damages, if awarded in this case, “can be allocated to Class members on a pro-
rata basis, commensurate with their proportion of total economic damages.”  Id. at 0059 ¶ 29.  
The only argument for which Plaintiffs cite Feinstein’s report is their assertion that 
damages calculation would be straightforward for all class members based on Plaintiffs’ theory of 
liability.  Plfs.’ Cl. Cert. Br. at 14.  However, it is unclear, either from Feinstein’s report or from 
Plaintiffs’ brief why an expert is needed to make any of these calculations.  See Plfs.’ App’x Tab 
4 at 0058 ¶ 25.   
 
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IV. 
William Briggs 
Briggs, like Manger, is another former SBA employee who served in various administrator 
roles during his time with the agency.  See id., Tab 5 at 0078.  His expert report does not state a 
precise area of expertise in which he is being offered, however, he does claim that he is “an expert 
on the [PPP] program from its inception through January 20, 2021 including its operations, its 
designs, and many facets of the program and its execution” and that his “testimony is focused on 
aspects of the Paycheck Protection Program that were administered by the Small Business 
Administration.”  Id. at 0078–79.  
Briggs’s report recounts some background information regarding the PPP and the policies 
behind it (id. at 0079–80) and then offers essentially four opinions: 
(1) SBA policies required PPP lenders to timely disburse approved PPP loans and that for 
non-disbursed loans lenders had to work with the borrower to resolve any issues or otherwise 
cancel the loan.  Id. at 0082–83.   
(2) SBA policies prevented borrowers with PPP loans pending from seeking PPP loans 
from other lenders;  
(3) Lenders were required to report PPP loans to the SBA to receive processing fees and 
were not entitled to processing fees for loans that were not disbursed.  Id. at 0083–85.   
(4) If a borrower did not receive a PPP loan, and did not apply for forgiveness, they could 
be “incorrectly designated by the SBA’s systems as being required to start making payments to 
satisfy the original loan promissory note conditions” and that a borrower would “theoretically” 
lose money by repaying a loan they did not receive.  Id. at 0086.   
Similar to Koontz and Manger, Plaintiffs’ class certification arguments cite Briggs’s report 
only for the propositions that there are issues common to all class members (Plfs.’ Cl. Cer. Br. at 
10) and that “[a]ll class members signed identical Loan Document contracts … and otherwise had 
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little contact with CPF prior to CPF’s breaching those contracts establishes predominant issues 
central to the case.”  Id. at 14.  In neither instance do Plaintiffs cite any particular part of Briggs’s 
report which support these statements; and, in any event, Briggs’s report does not speak to 
commonality or predominance of any issues.   
LEGAL STANDARD 
A plaintiff seeking class certification must submit “evidentiary proof” of their compliance 
with Rule 23.  Comcast Corp. v. Behrend, 569 U.S. 27, 33–34 (2013).  This means there must be  
“adequate admissible evidence to justify class certification.”  Unger v. Amedisys, Inc., 401 F.3d 
316, 318 (5th Cir. 2005) (emphasis added).  Thus, when a plaintiff offers expert opinions in support 
of class certification, those opinions must be admissible under Federal Rule of Evidence 702 and 
the governing standards under Daubert.  Prantil v. Arkema Inc., 986 F.3d 570, 575 (5th Cir. 2021).  
Daubert, in turn, requires that expert testimony “is not only relevant, but reliable.”  Daubert v. 
Merrell Dow Pharmaceuticals, Inc., 509 U.S. 589 (1993); see also Kumho Tire Co., Ltd. v. 
Carmichael, 526 U.S. 137, 147–48 (1999) (clarifying that the Daubert requirements apply to both 
scientific and non-scientific experts). 
ARGUMENT AND AUTHORITIES 
The Court should strike Plaintiffs’ expert reports offered in support of their class 
certification motion and exclude any testimony those experts might offer in support of class 
certification because they purport to offer testimony on the merits which has no relevance to any 
of the class certification requirements under Rule 23.  The experts’ opinions are also improper and 
excludable on the basis that they purport to offer impermissible legal opinions. 
I. 
Plaintiffs’ Proposed Expert Opinions are Irrelevant to Class Certification 
The Court should strike and exclude Plaintiffs’ four expert opinions, because none of these 
opinions are relevant to class certification.  Under Daubert’s relevance prong, the proponent of 
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expert testimony must “demonstrate that the expert’s reasoning or methodology can be properly 
applied to the facts in issue.” United States v. Kuhrt, 788 F.3d 403, 419 (5th Cir. 2015) (internal 
quotation marks omitted).  As the Supreme Court in Daubert explained:  
The [relevance requirement] has aptly been described … as one of 
‘fit.’  ‘Fit’ is not always obvious, and scientific validity for one 
purpose is not necessarily scientific validity for other unrelated 
purposes.  The study of the phases of the moon, for example, may 
provide valid scientific ‘knowledge’ about whether a certain night 
was dark, and if darkness is in fact an issue, the knowledge will 
assist the trier of fact.  However (absent creditable grounds 
supporting such a link), evidence that the moon was full on a certain 
night will not assist the trier of fact in determining whether an 
individual was unusually likely to have behaved irrationally on that 
night.  Rule 702’s ‘helpfulness’ standard requires a valid scientific 
connection to the pertinent inquiry as a precondition to 
admissibility.”   
Daubert, 509 U.S. at 591–92; see also Goswami v. DePaul Univ., 8 F. Supp. 3d 1019, 1031 (N.D. 
Ill. 2014 (“Stephen Hawking would be a stunning witness in a case involving theoretical physics, 
but would never see the light of day in an accounting malpractice case.”).   
Plaintiffs’ class certification motion raises the familiar issues under Rules 23(a) and 
23(b)(3):  numerosity, commonality, typicality, adequacy, predominance, and superiority.  Plfs.’ 
Cl. Cert. Br. at 7–25.  Also at issue is whether the classes, as Plaintiffs define them, are sufficiently 
ascertainable and whether Plaintiffs and the putative class have standing.    
Yet Plaintiffs’ proposed experts speak to none of these issues and are merely merits experts 
inappropriately being offered for purposes of class certification.  Koontz’s report offers 
generalized opinions about practices in the lending industry (Plfs.’ App’x Tab 2 at 0015–39); 
Manger’s and Briggs’s reports concern the PPP and SBA policies (Plfs.’ App’x Tab 3 at 0040–
0049 and Tab 5 at 0077–0086); and Feinstein’s report concerns potentially recoverable damages.  
Plfs.’ App’x Tab 4 at 0050–0076.  This type of merits expert testimony is inappropriate at this 
stage of the case and should be stricken and excluded.  See, e.g., Schafer v. State Farm & Fire 
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Cas. Co., 2009 WL 799978, at *4 (E.D. La. Mar. 25, 2009) (expert opinions that were “irrelevant 
to class certification” and “go to the merits” were “stricken in their entirety for the purposes of 
class certification.”). 
And Plaintiffs’ briefing does next to nothing to show why these experts are relevant to class 
certification—often citing to the expert reports generally without reference to any particular page, 
paragraph, of discussion in those reports.  See, e.g., Plfs.’ Cl. Cert. Br. at 10, 14, 22.  Otherwise, 
Plaintiffs’ citations to their expert reports are principally for points those reports do not address, 
including that class members signed the same promissory notes or that there are otherwise issues 
common to the class.  See id. at 9–10, 14.   
II. 
Plaintiffs’ Proposed Experts Impermissibly Opine on Legal Issues 
Even if the Court finds that Plaintiffs’ experts’ opinions have some relevance to class 
certification (and they do not),  their opinions should still be stricken as they will not “assist the 
trier of fact to understand or determine a fact in issue,” as required for admissibility under Daubert.  
509 U.S. at 592; accord FED. R. EVID. 702(a).  To that end, “[e]xperts cannot render conclusions 
of law or provide opinions on legal issues.”  Renfroe v. Parker 974 F.3d 594, 598 (5th Cir. 2020) 
(internal quotation marks omitted).  Yet all four of Plaintiffs’ experts do precisely that.   
First, Koontz opines the borrower’s signing of a promissory note, like the notes at issue, 
creates a contract under which the lender is required to tender the loan funds (Plfs.’ App’x Tab 2 
at 0024–0025).  Manger similarly opines that PPP lenders whose borrowers signed promissory 
notes were required to issue loan funds.  Plfs.’ App’x Tab 3 at 0045.  These are purely legal 
opinions, which are unsupported by any legal authority and contradict the plain language of the 
notes, which lacks any promise to fund the loans.  See CPF Mot. to Dismiss Br. (ECF 37) at 10.  
Whether documents formed a contract is a disputed question of law for the Court to decide based 
on the text of the documents and governing law, not the self-serving opinions of Plaintiffs’ experts.  
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Second, Manger’s other opinions, and all of Briggs’s opinions, address requirements for 
lenders and borrowers under the PPP and SBA policies.  Plfs.’ App’x Tab 3 at 0044–46, Tab 5 at 
0080–0086.  These too are purely legal opinions which should be stricken.  That these individuals 
used to work for the SBA is at best immaterial and at worst biased, because the agency’s 
interpretation of its controlling statutes and policies would be expected to favor the agency rather 
than regulated parties.  Indeed, Manger cites as purported SBA “policy” non-codified commentary 
in the federal register.  Plfs.’ App’x Tab 3 at 0044–0045. 
Third, Feinstein opines that if liability is proven, each class member would be entitled to 
damages in the amount of loan funds they did not receive.  Plfs.’ App’x Tab 4 at 0057–0059.  
Whether Plaintiffs may recover the damages in the amount of their PPP loans is a question of law 
presently at issue in the case, see CPF Mot. to Dismiss Br. (ECF 37) at 15–16, and the Court should 
not permit Plaintiffs to submit argument on this issue disguised as an “expert” opinion. 
III. 
Feinstein’s Opinions Fail to Satisfy Daubert’s Helpfulness Requirement.  
The opinions of Plaintiffs’ damages expert, Feinstein, should be stricken and excluded for 
the additional reason that they are simply not helpful to the Court as required under Daubert and 
Rule 702.  See Fed. R. Evid. 702(a).  Feinstein’s opinion that each class member would be entitled 
to damages in the amount of the loan funds they did not receive is not—contrary to Feinstein’s 
assertions—consistent with Plaintiffs’ theory of liability.  This matters because “a model 
purporting to serve as evidence of damages in [a] class action must measure only those damages 
attributable to [plaintiffs’] theory [of liability]” in the case.  Comcast Corp. v. Behrend, 569 U.S. 
27, 35 (2013).  Feinstein’s opinion fails this requirement for two reasons. 
First, Plaintiffs’ principal theory of liability—breach of contract—does not allow for 
recovery of loan proceeds in a case where a loan contract is allegedly breached; rather, the measure 
of damages for breach of a loan contract is simply the cost of obtaining a replacement loan.  See 
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CPF Mot. to Dismiss Br. (ECF 37) at 15–16 (citing authorities); CPF Mot. to Dismiss Reply (ECF 
51) at 6–7 (citing authorities).  Feinstein’s opinion ignores the applicable law and merely parrots 
Plaintiffs’ unsupported assertions  that Plaintiffs can recover loan proceeds.  Feinstein’s “opinion” 
is no substitute for legal authority that Plaintiffs have never been able to provide for this position.   
Second, Feinstein’s opinion is inconsistent with Plaintiffs’ theory of liability because, by 
his own admission, his damages model jettisons multiple categories of damages that might be 
available to class members should they elect to bring individual suits, including consequential 
damages and loss of business opportunities.  Plfs.’ App’x Tab 4 at 0058 ¶¶ 27–28.  An expert’s 
choice to offer a damages model that excludes potentially recoverable damages—ostensibly to 
avoid individualized issues those damages categories create—is unreliable because it does not 
comport with Plaintiffs’ theory of liability as required under Comcast.  See 569 U.S. at 35.  Put 
another way, just because the Named Plaintiffs and their expert may want to disclaim 
individualized damages categories in the case in the interest of seeking class certification—it is  
neither helpful nor reliable for Feinstein to assume in his damages model that unnamed class 
members would do the same. 
CONCLUSION 
For the foregoing reasons, Defendants respectfully request that the Court strike the expert 
reports of Jason Koontz, William Manger, Steve Feinstein, and William Briggs at pages App’x 
0015–0086 of Plaintiffs’ Appendix in support of their Motion for Class Certification at ECF 69.  
Defendants further request that the Court exclude the testimony of those experts from any hearing 
on class certification and grant any such other relief to which Defendants may justly be entitled. 
Dated: February 2, 2023 
Respectfully submitted, 
 s/ Katherine G. Treistman                                  
Katherine G. Treistman 
Tex. Bar No. 00796632 
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Andrew D. Bergman 
Tex. Bar No. 24101507 
ARNOLD & PORTER KAYE SCHOLER LLP 
700 Louisiana Street, Suite 4000 
Houston, Texas 77002–2755 
Tel.: (713) 576–2400 
Fax: (713) 576–2499 
Katherine.Treistman@arnoldporter.com 
Andrew.Bergman@arnoldporter.com 
 
Eric N. Whitney 
Tex. Bar No. 00785241 
ARNOLD & PORTER KAYE SCHOLER LLP 
250 West 55th Street 
New York, New York 10019–9710 
Tel.: (212) 836–8000 
Fax: (212) 836–8689 
Eric.Whitney@arnoldporter.com 
 
Michael P. Lynn 
Tex. Bar No. 1273800 
Christopher J. Schwegmann 
Tex. Bar No. 24051315 
LYNN PINKER HURST & SCHWEGMANN, LLP 
2100 Ross Avenue, Suite 2700 
Dallas, Texas 75201 
Tel. (214) 981–3800 
Fax: (214) 981–3839 
mlynn@lynnllp.com 
cschwegmann@lynnllp.com 
 
Attorneys for Defendants Capital Plus 
Financial, LLC; Crossroads Impact Corp.; 
Eric Donnelly; and Robert Alpert 
 
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