Parkway Neuroscience and Spine Institute, LLC v. Katz, Absoch, Windesheim, Gershman & Freedman, P.A., et al., No. 658, September Term, 2021, Opinion by Adkins, J.
On
September 30, 2022, the Appellate Court of Maryland overturned the Howard County
Circuit Court’s decision to strike the testimony of a “lost profits” expert.
Parkway Neuroscience and Spine Institute (“PSNI”) brought a professional
malpractice suit against its prior accounting firm: Katz, Abosch, Windesheim,
Gershman & Freedman, P.A. (“Katz Abosch”). In essence, PNSI claimed to Katz
Abosch’s proposed compensation model plunged PNSI “deeply in debt,” causing
several members to leave the practice and further causing a significant loss in
earnings. PNSI retained a certified public accountant (CPA) as a damages expert
on the issue of lost profits.
The
case was initiated in 2018, when Maryland still employed the Frye-Reed
standard to govern the admissibility of expert testimony. The Frye-Reed
standard largely considered whether an expert’s opinion was “generally
accepted” within the scientific community. See Reed v. State, 283 Md.
374, 381 (1978) (quoting Frye v. U.S., 293 F. 1013, 1014 (D.C. Cir.
1923)). While PNSI’s case was pending, the Supreme Court of Maryland abandoned Frye-Reed
as the controlling standard in favor of Daubert. See Rochkind v.
Stevenson (Stevenson II), 471 Md. 1, 35–36 (2020). The Stevenson
II court recognized that “Daubert . . . refocuses the attention away
from acceptance of a given methodology—although that is not totally removed
from the calculus—and centers on the reliability of the methodology used to
reach a particular result.” Id. at 31; Daubert v. Merrell Dow
Pharms., Inc., 509 U.S. 579, 589–90 (1993).
Based
on the substantive change in the in the law, Katz Abosch renewed their motion
to strike PSNI’s CPA expert. After a hearing, the trial granted the motion and excluded
the testimony of the CPA, taking issue with the CPA’s lack of experience in evaluating
the finances of medical practices, her methodology in using a “before and
after” method to calculate lost profits, her reliance on “subjective”
decisions, and her selection of 2015 as the year from which to base her
opinions.
On
appeal, the Appellate Court disapproved of the trial court’s decision to
exclude the CPA’s testimony based on her lack of experience with medical
practices such as PSNI. The appellate court considered it “an abuse of
discretion to exclude testimony simply because the trial court does not deem
the proposed expert to be the best qualified or because the proposed expert
does not have the specialization that the court considers most appropriate.” See
also Holbrook v. Lykes Bros. S.S. Co., Inc., 80 F.3d 777, 782 (3d
Cir. 1996) (citation omitted). The Appellate Court also found fault in the
trial court’s decision to exclude the testimony over what the trial
court considered an unreliable methodology.
Though the trial court questioned whether the expert’s chosen
methodology (the “before and after” method) was the best method to
calculate lost profits, this method was nevertheless an “indisputably
legitimate choice of methodology.”
Ultimately,
the Appellate Court acknowledged that the issues raised with the expert’s
qualifications and methodology go to the weight of her testimony, not
necessarily its admissibility. The Appellate Court formally reversed the trial
court’s decision to exclude the lost profits expert and remanded the case to
the trial court. While this case is somewhat specific to CPA related experts,
it provides a helpful framework for practitioners applying Maryland’s new Daubert/Stevenson
standard to evaluate the admissibility of expert testimony.
