Cruickshank Ex Rel. Estate of Environmental Careers Organization v. Cook (In Re Environmental Careers Organization, Inc.) ( 2015 )

Not for publication in West's Federal Reporter
United States Court of Appeals
For the First Circuit
No. 14-1697
IN RE: THE ENVIRONMENTAL CAREERS ORGANIZATION, INC.
Debtor
GARY W. CRUICKSHANK, as Trustee of the Chapter 7 Estate of the
Environmental Careers Organization,
Plaintiff, Appellant,
v.
JOHN R. COOK, JR.,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. George A. O'Toole, Jr., U.S. District Judge]
Before
Lynch, Chief Judge,
Souter,* Associate Justice,
and Stahl, Circuit Judge.
*
Hon. David H. Souter, Associate Justice (Ret.) of the
Supreme Court of the United States, sitting by designation.
Andrew M. Jacobs, with whom Charles R. Bennett, Jr., Theodore
J. Folkman, and Murphy & King, P.C. were on brief, for appellant.
Sara A. Colb, with whom Barry C. Klickstein and Day Pitney LLP
were on brief, for appellee.
March 13, 2015
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PER CURIAM. This appeal arises out of an adversary
proceeding initiated in bankruptcy court by Plaintiff-Appellant
Gary W. Cruickshank, the trustee of the Chapter 7 estate of
Environmental Careers Organization, Inc. ("ECO"), against ECO's
former president, Defendant-Appellee John R. Cook, Jr. ECO, a
nonprofit corporation organized under the laws of Massachusetts,
maintained government contracts with various agencies, including
the federal Environmental Protection Agency ("EPA"), whereby it
received compensation for the costs of placing students in agency
internships. The crux of Cruickshank's complaint is that Cook
breached his fiduciary duty of care to the organization, insofar as
he ignored warnings from his staff that he had been misinterpreting
government contracts by treating certain reimbursement rates as
"fixed" rather than "provisional," and had improperly retained
surpluses. As a result, the complaint alleges, the EPA eventually
audited ECO and sought recovery of payments of over $6 million from
ECO. Subsequently, ECO filed for bankruptcy.
Before the district court — which had withdrawn the
reference to the bankruptcy court — Cook moved for judgment as a
matter of law, arguing that Cruickshank could not make out his case
where he had failed to proffer, in advance of trial, expert
witnesses who would testify to the applicable standard of care.
After a round of briefing on the issue, the district court agreed,
reasoning that a jury would be capable of assessing the veracity of
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Cruickshank's allegations only with the help of an expert in the
area of accounting and/or corporate management practices. The
court observed that whether Cook had "'failed' to take 'corrective
action' after being warned that ECO was 'misinterpreting government
contracts,' or to 'sufficiently inquire' into company practices, or
to 'ensure' that 'proper policies' were implemented," were matters
that could not reliably be assessed without an expert qualified
under Federal Rule of Evidence 702; without testimony as to such
matters, Cruickshank would be unable to satisfy his burden of proof
as to his only claim, breach of fiduciary duty. Cruickshank v.
Cook, No. 13-11247-GAO, 2014 WL 2615364, at *1 (D. Mass. June 12,
2014) (quoting Pl.'s Mem. in Opp'n to Def.'s Mot. in Limine and
Mot. for J. as a Matter of Law, at 2).
Applying de novo review, we affirm. See Palmquist v.
Shinseki, 689 F.3d 66, 70 (1st Cir. 2012) (reviewing district
court's disposition of judgment as a matter of law under de novo
standard). While expert testimony is generally inappropriate where
a matter is within the realm of common experience, it may be
"required in certain circumstances in which a factfinder cannot
reasonably be expected to make a judgment without the benefit of
technical expertise or an informed understanding of professional
standards." Downey v. Bob's Discount Furniture Holdings, Inc., 633
F.3d 1, 10 (1st Cir. 2011) (citing Atlas Tack Corp. v. Donabed, 47
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Mass. App. Ct. 221, 226 (1999); Brown v. Gerstein, 17 Mass. App.
Ct. 558, 566 (1984)).
Although Massachusetts law does not categorically require
expert testimony to elucidate the professional standard of care
applicable to officers of a nonprofit corporation, the district
court properly concluded that this particular case could not be
resolved without specialized knowledge. As the district court
determined, the peculiar factual issues underlying the claim,
involving technical areas of government contracting and corporate
financial management, are "substantive matters beyond the ken of
lay jurors." Cruickshank, 2014 WL 2615364, at *1 (citing LeBlanc
v. Logan Hilton Joint Venture, 463 Mass. 316, 328–29 (2012)). As
such, Cruickshank could not prove that Cook had deviated from the
relevant standard of care without expert assistance. See Fed. R.
Evid. 701 (prohibiting lay witnesses from testifying to opinions
"based on scientific, technical, or other specialized knowledge
within the scope of Rule 702"); cf. Hochen v. Bobst Grp., Inc., 290
F.3d 446, 450–51 (1st Cir. 2002) (in product liability case
applying Massachusetts law, affirming grant of summary judgment to
defendant where particular issues raised were "complex and thus
appropriately the subject of expert testimony," which plaintiff
failed to offer).
Thus, the district court, which has primary familiarity
with the evidentiary nuances of this case, did not err in granting
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Cook's motion for judgment as a matter of law. We accordingly
AFFIRM the judgment of the district court.
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