Banking Expert Witness Evaluates Floor-Plan Financing Lawsuit

Case: Tri-Eagle Enterprises v. Regions Bank Court of Appeals of Arkansas.January 20, 20102010 Ark. App. 64373 S.W.3d 399

Background: Lender filed a suit against borrower for amounts past due under floor-plan financing agreement. Tri–Eagle operated a used-car business and financed its inventory through a floor-plan arrangement with Regions Bank. On February 3, 2000, Tri–Eagle and Regions executed a $1,800,000 financing agreement that contained the following clause:

For advances for new goods, your interest rate is equal to the Commercial Base Rate plus 9.00% fixed percentage points. For advances for used goods, your interest rate is equal to the Commercial Base Rate plus 9.00% fixed percentage points.Your interest rate is dependent upon the Commercial Base Rate announced by Regions Financial Corp. When the Commercial Base rate changes, your rate will increase or decrease correspondingly

According to Randall Blythe, the president of Tri–Eagle, he understood that the 2001 floor-plan agreement contained a variable interest rate. He later realized that Regions was charging Tri–Eagle a fixed rate, and he complained to Regions on several occasions. Regions insisted that the floor-plan agreement contained a fixed-interest rate, and this conflict persisted through 2005, after which Tri–Eagle defaulted on the floor-plan agreement and other obligations to Regions.

The bank sued Tri-Eagle for payment past due on the floor-plan agreement. Plaintiff, in return, filed the counterclaim alleging fraud, interference with prospective advantage, violation of federal backing laws and lender liability.

Expert witness: Tri-Eagle offered testimony of two expert witnesses, Dan Wojcik and Michael Woody, who interpreted the 2001 floor plan as having a variable interest rate. The circuit court (lower instance) excluded Wojcik’s and Woody’s testimony, based on Regions’s arguments that the experts were not qualified and their opinions were unreliable. The main concern was the fact that they testifying solely on their experience and witnesses’ testimony had not been peer reviewed. Plaintiff appealed. The the Court of Appeals reviewed de novo whether experts’ witness testimony should be admitted.

Conclusion: The court conclude that the lower court abused its discretion by applying too rigid a standard in excluding the experts’ testimony. Mr. Wojcik’s curriculum vitae reflects his thirty-five-year career in international, commercial, and retail banking, which included his service as president of National Bank of Arkansas from 2000 to 2005, senior vice president of Mercantile Bank in Arkansas from 1997 to 2000, and as a bank executive in Texas and Indiana. He possessed an MBA from Indiana University and graduated from two banking schools. According to Wojcik’s deposition, his schooling provided him with no training regarding automobile floor-plan financing or contract interpretation, but he had practical experience with floor-plan financing for automobile dealerships and oversaw floor-plan lending during his tenure at Mercantile Bank. Mr. Woody also had thirty-five years’ experience as a banker. He served as CEO and president of several banks and held high positions in others. He also held faculty positions in banking at numerous universities and performed eighty educational presentations per year to bankers, lawyers, and CPAs, including presentations in Arkansas. Though Woody stated in his deposition that he had not taught a class on floor planning per se, he stated that he had practical experience as a floor-plan lender for used cars and that he had taught “generalities relating to floor plan financing in Arkansas.” Woody stated further that he had not attempted to determine standards for floor-plan banking in Arkansas because such standards were “universal.” He also testified that he based his interpretation of the parties’ floor-plan agreement on the document itself and not on the parties’ intentions. Woody’s curriculum vitae contains numerous instances of his expert testimony having been given between 2000 and 2007. As shown by the above, these witnesses possessed greater-than-ordinary knowledge of floor-plan lending and banking in general and could have assisted a fact-finder in interpreting this ambiguous interest-rate clause. Both witnesses were veteran bankers with practical experience in commercial lending and floor-plan financing, and they were no strangers to Arkansas banking practices.

The concern that they testified based on their experience only is unreasonable. Arkansas Rule of Evidence recognizes that an expert’s testimony may be based on experience in addition to knowledge and training. Further peer review is not necessary in this case because the experts’ opinions did not depend on novel scientific evidence.

Court also addressed the statement that one of the experts was disqualified as an expert in a federal court case in another state. The court concluded that disqualification was based on particular facts and law involved in that case, which was not applicable in this case.