From Forecast to Flawed Assumptions and a Speculative Basis

Court Dismisses Accounting Expert’s Testimony in Packaging Lawsuit

Daubert motions are commonly raised to exclude experts. In this article, the author underscores the importance of questioning a client’s representations and documenting the basis for damages calculations. The failure to do so exposes the expert to challenges on the basis that the opinion is flawed because it is based on speculation and questionable assumptions.

Bon Appetit Danish and Bon Appetit Specialty Snacks, renowned for their baked goods across Los Angeles and beyond, sought to streamline their packaging process through automation. The goal was to modernize the wrapping of items like donuts, muffins, breads, and cakes using advanced equipment.

In September 2021, Bon Appetit approached Delta Systems and Automation, a company recognized for its sophisticated packaging technology. Delta proposed a tailored solution, promising machinery that would enrobe Bon Appetit’s confections in plastic film seamlessly.

The expectations were ambitious. The machines were to:

• Operate continuously, 24 hours a day, six days a week

• Achieve a minimum efficiency of 97%

• Switch between products in under 10 minutes

• Withstand bakery conditions, including fluctuating temperatures and airborne flour

The project’s estimated cost exceeded $4 million, with Bon Appetit paying substantial advances on the understanding that the equipment would be delivered within nine months.

Early Warning Signs and Repeated Delays

The trouble began almost immediately. Delta’s project lead, Thomas Cujak, initially declined to visit Bon Appetit’s site. Only after insistence from Bon Appetit did he agree to a visit, where he reportedly appeared disengaged. Despite concerns—rooted in a failed donut-wrapping attempt years earlier—Delta assured the company their newer systems were more advanced.

Yet, progress stalled. Delta was slow to provide updates, and each delay came with a fresh explanation, leaving Bon Appetit increasingly uneasy.

Testing Fiasco at Delta’s Facility

In late 2022, Bon Appetit sent a team to Arkansas for the Factory Acceptance Test (FAT) of the donut-wrapping system. On arrival, they received an alarming message: “Are your donuts always this sticky?” Upon reaching the site, they discovered Delta had only just begun testing, even though it had received product samples months earlier.

The test was a failure. The equipment jammed. Delta’s machinery could not manage the donuts. Bon Appetit suggested a second round of testing on-site in Los Angeles using fresh donuts.

Disappointment on Home Turf

Once the machinery arrived in Los Angeles, Bon Appetit meticulously prepared compliant donuts for a second trial. Despite this, the system still malfunctioned. Delta shifted the blame, alleging that Bon Appetit’s products were substandard.

More attempts followed. Delta sent technicians to adjust the machinery, but no test proved successful.

Contract Termination and Legal Showdown

Eventually, Bon Appetit walked away. With significant investments already made and two additional systems untested, the company could no longer wait. When they informed Delta of the decision, a senior Delta executive responded bluntly: “I guess we will just have to let the lawyers figure this out.”

Bon Appetit now sought more than $5 million in damages, alleging that Delta:

• Breached the contract by failing to deliver functioning machinery

• Failed to meet express performance guarantees

• Supplied systems unfit for their intended purpose, breaching implied warranties

Delta’s Response: Contract Terms Were Clear

Delta has filed a motion to dismiss. Their argument hinges on the agreements’ terms, which included force majeure clauses. These clauses stated that issues like supply chain delays or pandemic-related disruptions would not count against Delta.

They maintain Bon Appetit was informed of such delays but still expected the original delivery timeline to be honored.

When the machines failed to perform, Delta contends it was due to non-compliant donuts, not defective equipment. They claim they were in the process of resolving the issue when Bon Appetit abruptly canceled all contracts.

Legal Limits and Economic Loss Doctrine

In its defense, Delta invoked the Economic Loss Rule, which bars tort claims for purely financial losses arising from a contractual relationship. They also highlighted limitations of liability in the agreements, which excluded recovery for lost profits or operational disruptions; exactly the kind of damages Bon Appetit seeks.

Expert Witness Analysis of Claimed Losses

To support its claims, Bon Appetit retained Joseph C. Wheat, a forensic expert and CPA with decades of courtroom experience. Wheat, a Senior VP at consulting firm J.S. Held, assessed the financial damage based on the anticipated labor savings that the automated systems were supposed to deliver.

He identified six key areas of loss with a combined total exceeding $9.1 million.

Delta Counters with Expert Challenge: The Battle Over Damages

Delta Systems and Automation did not let Bon Appetit’s claims go unchallenged. The company moved to exclude the testimony of Joseph C. Wheat, Bon Appetit’s expert on damages, specifically targeting his core opinion—referred to as Opinion A—regarding projected labor savings.

Delta’s legal team argued that Wheat’s conclusions were fundamentally flawed, raising three major issues:

1. Speculative Foundations

Wheat’s analysis leaned heavily on verbal accounts from Bon Appetit’s General Manager, Sonny Cutwright, rather than on audited payroll data or financial documentation. During deposition, Wheat acknowledged he had not independently validated Cutwright’s numbers, nor had he conducted a forensic audit of Bon Appetit’s labor expenses.

2. Limited and Generalized Data

According to Delta, Wheat’s calculations were based on just two months of payroll information from a small subset of employees working on one production line. Nevertheless, he extrapolated these figures to encompass 69 employees across three different lines, projecting these estimates over a two-year period. Additionally, instead of using Bon Appetit’s actual employee benefit costs, Wheat relied on generalized U.S. labor statistics.

3. Questionable Assumptions

Wheat pegged the labor cost savings to the “promised delivery dates” of the machinery, dates which he had obtained from Bon Appetit rather than from the contract or Delta. Delta pointed out that these dates merely referred to expected shipment, not to actual installation or start of operation. Wheat also failed to account for severance or termination costs that would naturally arise from workforce reductions, which Delta argued artificially inflated Bon Appetit’s savings projections.

During his deposition, Wheat made several key admissions:

• He had not confirmed the number of workers or wage costs beyond what Bon Appetit told him.

• He omitted severance liabilities that would be incurred from laying off staff.

• He was unaware that issues with another vendor, Gasparin, would have delayed packaging operations regardless of Delta’s performance.

• He conceded that his figures could shift if new information surfaced; casting doubt on their reliability.

Delta’s motion centered on whether Bon Appetit’s claimed $6.2 million in labor savings were recoverable as direct damages. While Bon Appetit insisted that these costs directly flowed from Delta’s failure to perform, Delta argued they were consequential; dependent on Bon Appetit’s internal projections, not on the contract itself.

Parsing Damages Under California Law

California law draws a sharp line between:

• Direct Damages: The immediate and predictable outcome of a contractual breach.

• Consequential Damages: Losses that stem from the specific conditions or operations of the injured party’s business.

Referencing Pomona Unified School District v. Superior Court, the Court underscored that even foreseeable losses can be consequential if they arise from internal business strategies rather than directly from the breach.

Court’s Evaluation and Decision

Reviewing Wheat’s testimony and report, the Court found that the additional labor costs Bon Appetit incurred were not the inevitable result of Delta’s actions. Rather, they were tied to a business strategy; an expectation that automation would allow Bon Appetit to reduce its workforce.

The Court emphasized that this workforce reduction was not a necessary outcome of Delta’s failure. Instead, it was part of Bon Appetit’s broader efficiency goals. Citing precedents like Martin Construction and Wright Schuchart, the Court concluded that keeping employees on payroll due to unfulfilled business plans constituted consequential damages.

Ultimately, the Court granted Delta’s motion. Wheat’s labor savings analysis was excluded on the grounds that it dealt with consequential, not direct, damages; falling outside the scope of what Bon Appetit could recover under the contract’s liability limits.

Trial Outcome: A Partial Victory for Both Sides

When the case reached trial in April 2025, the result was mixed.

Delta prevailed on most fronts. The Court found no liability for fraud, negligent misrepresentation, or breach of express warranty relating to the Donut System. Delta also won on breach of contract claims concerning the Cake and Rheon Systems. The rulings reinforced Delta’s defense strategy and reliance on contractual protections.

However, Bon Appetit achieved a limited victory. On the claim of breach of contract tied to the Donut System, the jury sided with the bakery, concluding that Delta had indeed fallen short of its commitments. The Court awarded $628,777.80 in damages, along with post-judgment interest.

Notably, the judgment did not extend to attorney’s fees, pre-judgment interest, or court costs, though Bon Appetit retained the right to pursue those through separate motions.

In the end, Bon Appetit’s ambitious claims were largely curtailed by the contract’s liability clauses and Delta’s strategic legal response. While the company secured some compensation, it fell far short of the $9 million originally sought.

Key Takeaways for Forensic Experts

The Bon Appetit case offers a stark reminder that courts increasingly scrutinize not only the conclusions of expert witnesses but also the foundational assumptions and data sources used. Experts must independently verify client-supplied figures through supporting documents such as payroll records, financial statements, or audited reports. Reliance on oral representations—no matter how credible—invites challenges on admissibility and damages credibility. Economic damages experts should approach engagements with the same rigor as a forensic audit, particularly when labor cost savings or operational projections are central to the damages model.

Contract Context and the Nature of Damages

Expert witnesses should be alert to the legal distinctions between direct and consequential damages, especially under the governing state law. In this case, Bon Appetit’s labor savings were tied to a strategic initiative—not a contractually guaranteed outcome—placing them outside the scope of recoverable direct damages. Experts need to frame their damages opinions within the boundaries established by contract language, relevant case law, and the foreseeability and causation principles that define compensable losses. Coordination with counsel to understand these constraints can help avoid disqualification and strengthen the overall legal strategy.

Next Steps for Practitioners

Going forward, expert witnesses should consider including a “validation appendix” or “report support” that outlines all the documents reviewed, tests performed, and methods used to corroborate client data. A forensic expert’s role is not to advocate for the client’s desired number, but to present a defensible, evidence-based opinion that survives Daubert scrutiny. The exclusion of otherwise credentialed experts—based solely on weak or overstated assumptions—emphasizes the growing judicial demand for transparency, reliability, and methodological soundness in expert economic testimony.

Conclusion: Expert Testimony is Not Immune to Scrutiny

This case underscores a crucial lesson for litigants relying on expert witnesses: credibility and methodology matter just as much as credentials. While the expert here brought decades of experience and a respected title, the Court ultimately found his analysis unpersuasive, not because of his expertise, but because his assumptions lacked independent verification and his methodology stretched beyond the available data.

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Ashish Arun is the founder and CEO of Exlitem, an AI-powered search engine helping attorneys find and engage expert witnesses. He also leads Expert Witness Profiler, a due diligence firm enabling attorneys to vet both their own and opposing expert witnesses.

Mr. Arun can be contacted at (866) 955-4836 or by e-mail to sales@exlitem.com.

For a more in-depth look at the case—including access to the full expert report, the motion to exclude, the complaint, and additional court filings—visit: https://exlitem.substack.com/p/court-excludes-accounting-experts