Agricann v. Total

NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

AGRICANN LLC, Plaintiff/Appellant,

v.

TOTAL ACCOUNTABILITY SYSTEMS I, INC., Defendant/Appellee.

No. 1 CA-CV 25-1043
FILED 10-27-2026

Appeal from the Superior Court in Maricopa County
No. CV2019-000351
The Honorable Frank W. Moskowitz, Judge

AFFIRMED

COUNSEL

Ahwatukee Legal Office, P.C., Phoenix
By David L. Abney
Counsel for Plaintiff/Appellant

Papetti Samuels Weiss McKirgan LLP, Scottsdale
By Robert McKirgan, Lawrence Kasten, Todd D. Erb
Co-Counsel for Defendant/Appellee

David A. Weatherwax P.C., Phoenix
By David A. Weatherwax
Co-Counsel for Defendant/Appellee

AGRICANN v. TOTAL
Decision of the Court

MEMORANDUM DECISION

Chief Judge Randall M. Howe delivered the decision of the Court, in which
Presiding Judge Andrew J. Becke and Judge James B. Morse Jr. joined.

H O W E, Judge:

¶1 Agricann LLC appeals the superior court’s grant of summary
judgment for Total Accountability Systems I, Inc. (“TAS”). For the
following reasons, we affirm.

FACTS AND PROCEDURAL BACKGROUND

¶2 In 2013 Agricann was formed to grow and cultivate medical
marijuana and related products. TAS held a certificate authorizing it to
dispense medical marijuana under the Arizona Medical Marijuana Act. See
A.R.S. § 36-2801. In May 2013, Agricann and TAS entered into a
memorandum of understanding (“the Agreement”) under which Agricann
agreed to operate a medicinal marijuana cultivation facility and provide
TAS with marijuana products for sale. The Agreement was to last five years
and included a term whereby Agricann and TAS “promise[d] each other
that they w[ould] not sever the relationship . . . within the contractually
agreed upon 5-year period.” The Agreement further detailed how the
parties would organize and share profits.

¶3 Agricann began operations in late 2013. In February 2014,
TAS notified Agricann that it intended to end the Agreement and terminate
their relationship, giving Agricann until mid-2014 to associate with a new
dispensary. The relationship ended in May 2014.

¶4 In 2019, Agricann sued TAS for lost profits, alleging breach of
contract and breach of the duty of good faith and fair dealing. Agricann
retained and disclosed a damages expert. The expert provided a five-page
report. The report noted that it “could not accurately determine
[Agricann]’s actual production costs prior to May 2014” because Agricann
did not provide the expert with financial statements during the relevant
period. The report also noted that “[the expert] did not receive records
sufficient to determine what additional offsetting expenses were incurred
in 2014 and therefore, only utilized Agricann’s 2015 net income as
mitigating income.” The expert estimated revenue using “estimated

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monthly production and rampup assumptions provided by [Agricann].”
The report further noted that Agricann “requested that [the expert]
calculate Lost Profits using [] production assumptions” Agricann supplied,
and that the expert used the assumptions, without “opin[ing] on their
achievability or reasonableness” because Agricann “assert[ed] that it
w[ould] prove the reasonableness of its production assertions at trial.” The
report concluded—relying on these assumptions—that “Agricann’s lost
profits net of mitigation range between approximately $9.5 million to
approximately $2.9 million based on the assumed average production that
could have been achieved.”

¶5 TAS deposed the expert. At the deposition, the expert
confirmed that he relied on the financial statements Agricann provided but
was not familiar with the accounting procedures that produced the
statements. The expert also explained that much of the information
Agricann provided him consisted of projections that “frequently var[ied]
from reality,” and that some projections he was provided and relied on
were ultimately proved incorrect. He confirmed that Agricann did not
provide him all the financial information he requested to prepare his report.

¶6 TAS then moved to exclude the expert’s report and testimony,
arguing that it lacked “reliable foundation,” under Arizona Rule of
Evidence 702 (“Rule”) and Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579,
597 (1993). TAS argued that (1) the report was based on “speculative
assumptions and unsubstantiated projections” one of Agricann’s owners
provided; (2) the expert was unaware who had prepared the projections,
financial statements, and other documents Agricann provided on which he
based his opinion; and (3) the expert did not verify the materials on which
he based his opinion. Agricann opposed the motion, arguing that the expert
was “a highly qualified expert in his field” and that “[t]he deficiencies of
expert-witness testimony should not be addressed by exclusion, but by
cross-examination.” Agricann argued that “[t]he intention of [Rule 702] is
to prevent ‘junk science’ from entering in as admissible evidence to be
considered by a jury,” not “to prevent expert testimony by an expert using
recognized methodology with which the opposing party disagrees.”

¶7 The court excluded the expert’s testimony and report. It
found “too gre[at] of an analytical gap between the data and the opinion
proffered” in the expert’s testimony and report. (Citing McAlister v. Loeb &
Loeb, LLP, 2024 WL 372214 (Ariz. App. Feb. 1, 2024) (mem. decision)
(McAlister I), aff’d in part in by McAlister v. Loeb & Loeb, LLP, 260 Ariz. 97, 108
¶¶ 48–49 (2025) (affirming on reliability requirements for expert witnesses)
(McAlister II).)

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¶8 The court later found that “the exclusion of Plaintiff’s expert
witness on damages is dispositive and that judgment in favor of [TAS]
[wa]s proper.” It entered final judgment for TAS and awarded attorney’s
fees and costs. See Ariz. R. Civ. P. 54(c); 56(f). Agricann timely appealed and
we have jurisdiction. A.R.S. § 12-120.21(A)(1), -2101(A)(1).

DISCUSSION

I. The Expert’s Report and Testimony

¶9 This Court reviews the superior court’s decision on the
admissibility of expert evidence for an abuse of discretion. Sampson v.
Surgery Ctr. of Peoria, LLC, 251 Ariz. 308, 311 ¶ 12 (2021); State ex rel.
Montgomery v. Miller, 234 Ariz. 289, 297 ¶ 15 (App. 2014). We find that the
court did not abuse its discretion in excluding the expert’s report and
testimony.

a. Rule 702

¶10 Agricann first argues that the superior court erred in
excluding the expert’s testimony under Rule 702, which governs the
admissibility of expert evidence. Rule 702 allows a qualified expert to testify
“if the proponent demonstrates” that “(a) the expert’s . . . specialized
knowledge will help the trier of fact to understand the evidence;” “(b) the
testimony is based on sufficient facts or data; (c) the testimony is the
product of reliable principles and methods; and (d) the expert’s opinion
reflects a reliable application of the principles and methods to the facts of
the case.”

¶11 The expert’s proponent has the burden to prove the offered
evidence is admissible by a preponderance of the evidence. See State v.
Salazar-Mercado, 234 Ariz. 590, 593–94 ¶ 13 (2014); Fed. R. Evid. 702,
Advisory Committee Notes, 2000 amend.; see also State v. Bernstein, 237 Ariz.
226, 228 ¶ 9 (2015) (“Because Rule 702 mirrors its federal counterpart, we
may look to the federal rule and its interpretation for guidance.”).

¶12 TAS claims that Agricann waived its claim on appeal that its
expert’s opinions met the requirements of subsection b and d of Rule 702
because they failed to sufficiently develop the argument to the superior
court. See Cont’l Lighting & Contracting, Inc. v. Premier Grading & Utils., LLC,
227 Ariz. 382, 386 ¶ 12 (App. 2011) (an argument raised for the first time on
appeal is waived). In its reply brief, Agricann notes that it cited Rule 702 to
the superior court in support of its expert and claims that TAS waived its
waiver argument by failing to raise it below.

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AGRICANN v. TOTAL
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¶13 To be sure, Agricann develops its Rule 702 argument further
in its opening brief than it did before the superior court. But it did raise Rule
702 to the superior court. Though we are unconvinced by Agricann’s
“waiver in waiver” argument, we decline to find its Rule 702 argument
waived in our discretion because it raised Rule 702 to the superior court and
we prefer to decide cases on the merits. Noriega v. Town of Miami, 243 Ariz.
320, 326 ¶ 27 (App. 2017) (“[W]aiver is discretionary.”); see also United States
v. Macias, 789 F.3d 1011, 1017 n.3 (9th Cir. 2015) (“waiver in waiver” is also
discretionary); Adams v. Valley Nat. Bank of Ariz., 139 Ariz. 340, 342 (App.
1984) (“courts prefer to decide each case upon its merits”).

¶14 TAS has not argued that the expert was unqualified, only that
his opinion and report were unreliable because they lacked sufficient
foundation. For opinions a qualified expert offers, the court decides
whether the expert’s opinion and the data and information underlying it
are reliable. See Daubert, 509 U.S. at 597; Miller, 234 Ariz. at 298 ¶ 22–23. An
expert may make “projections based on reliable methodology,” but the
testimony cannot be “wholly speculative or unfounded,” Elosu v. Middlefork
Ranch Inc., 26 F.4th 1017, 1025 (9th Cir. 2022), nor may it rely on unrealistic
or facially contradicted assumptions, Boucher v. U.S. Suzuki Motor Corp., 73
F.3d 18, 21–22 (2d Cir. 1996).

¶15 Agricann retained the expert to provide an opinion on lost
profit damages. It provided the expert with projected assumptions of its
production per month and requested that he use these assumptions to form
his opinion. The expert disclaimed any opinion on the reasonableness of the
production figures, confirmed that these assumptions were not accurate
production figures, and stated that he was unaware of who or how these
figures were calculated. The expert was also provided with revenues and
sales projections for several months, all of which were inaccurate. To
prepare his report, the expert requested Agricann’s monthly financial
statements and data, which it failed to give him. The expert also testified
during his deposition that he never validated the financial statements he
was provided.

¶16 The superior court noted that the expert’s opinions were
based on incorrect production assumptions and that he did not corroborate
the “achievability or reasonableness” of Agricann’s assumptions on which
he relied. The superior court expressed concerns about the reliability of the
information the expert relied on, highlighting the lack of backup
documentation, the missing financial information, and the expert’s
disclaimer about the assumptions’ achievability and reliability. Given the
circumstances, the superior court did not err in finding the analytical gap

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between the data and his opinion was too great, Miller, 234 Ariz. at 299
¶ 26, and excluding the expert’s testimony and report under Rule 702.

b. Rule 403

¶17 Agricann also argues that the superior court erred in
excluding the expert’s testimony under Rule 403. Even if the expert’s
testimony and report met the threshold for admissibility under Rule 702,
the superior court did not err in precluding the evidence under Rule 403.
Rule 403 allows the court to exclude admissible evidence if its probative
value is substantially outweighed by the danger of misleading the jury.
Ariz. R. Evid. 403. The superior court has “considerable discretion in
deciding whether to exclude evidence under [403].” State v. Cooperman, 232
Ariz. 347, 351 ¶ 17 (2013).

¶18 Here, the court found that the expert was not provided with
documentation to support the assumptions on which he based his opinion
and that he expressly did not confirm the assumptions’ “achievability or
reasonableness.” The court found that given these circumstances, the
expert’s testimony would be misleading to a jury. Ariz. R. Evid. 403. These
findings were within the court’s discretion, Cooperman, 232 Ariz. at 351
¶ 17, and Agricann has not shown how the superior court erred in
excluding the expert’s testimony under Rule 403.

II. Dismissal

¶19 Agricann also argues that because the superior court erred in
excluding the expert’s testimony, it also erred in granting TAS summary
judgment under Arizona Rule of Civil Procedure 56(f).

¶20 Although Arizona law allows the recovery of lost profit
damages for a new business, the plaintiff has the burden of proving such
lost profits “with reasonable certainty and a reasonable degree of
accuracy.” McAlister II, 260 Ariz. at 103 ¶ 23 (cleaned up). The superior
court “should carefully scrutinize a new business’s claim that a defendant’s
. . . breach of contract prevented it from profiting from an enterprise in
which it has no experience and should bar that claim unless it can be proven
with reasonable certainty.” Id. at 104 ¶ 27 (cleaned up).

¶21 Because the superior court did not err in excluding the
expert’s testimony and report, and Agricann had no remaining disclosed
damages expert, the court did not err in finding exclusion of the expert
dispositive. Ariz. R. Civ. P. 56(f)(3); see also Quinn v. Cardenas, 256 Ariz. 77,
82 ¶¶ 13–14 (App. 2023).

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III. Attorney’s Fees and Costs.

¶22 Agricann and TAS each request attorney’s fees and costs on
appeal under A.R.S. § 12-341.01(A). We award TAS a reasonable portion of
its attorney’s fees under A.R.S. § 12-341.01(A) and its costs as the prevailing
party on appeal upon compliance with Arizona Rule of Civil Appellate
Procedure 21.

CONCLUSION

¶23 We affirm.

MATTHEW J. MARTIN • Clerk of the Court
FILED: JR

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