This is a trademark infringement case involving the trademarked phrase “Freedom Pop”. Plaintiff Proccor Pharmaceuticals, Inc. (“Proccor”) contended that Defendant GAT Sports infringed upon its alleged trademark for a “Freedom Pop” flavored Pre-Rx pre-workout supplement. GAT Sports essentially argued that the phrase was used in a non-trademark, descriptive, way to describe the flavor of its product.
Defendants filed a motion to exclude the testimony of Neil Beaton, whose report states that the Plaintiff retained him to “calculate Defendants’ profits and, separately, Proccor’s damages measure by reasonable royalties.”
Accounting Expert Witness
Neil J. Beaton is a Certified Public Accountant who has performed a reasonable royalty analysis 60 to 70 times during his forty year career and who has testified five times as a trademark damages expert in cases specifically involving nutritional supplements. He has assisted 30 times in negotiating royalties in nonlitigation related licensing engagements.
The Defendants summarized several grounds for their motion:
there was no prior trademark licensing agreement between the parties
Plaintiff has never had a trademark licensing agreement with any party
Beaton’s analysis was based on litigation or prelitigation agreements that are vastly different from trademark licensing agreements
Beaton only addressed one of the applicable fifteen factors for determining what the royalty would have been had there been a hypothetical negotiation
Beaton never actually reviewed any of the alleged agreements that he relied on for data points in his analysis — all information in his analysis was supplied verbally by Plaintiff’s CEO
Beaton’s proposed per unit royalty rate ignores that it doubles the price of the product
Beaton’s damages are over 35 times greater than any amounts Proccor ever earned from litigation and prelitigation settlements — combined
Beaton did no comparability analysis between his hypothetical trademark license agreement and the litigation and prelitigation settlements he relied on, and/or
Absence of a licensing history might affect the persuasiveness of an opinion but not the admissibility of the opinion
The Court explained that many of the Defendants’ objections amount to iterations of the same assertion, which is that in the absence of a licensing history the damages caused by an infringement is not ascertainable with sufficient certainty to warrant admission into evidence of an expert opinion. The absence of a licensing history might complicate the task of formulating an opinion on damages by eliminating certain otherwise available methods of valuation, including the most popular method, the simplest method, or even the most reliable method.
But the absence of a licensing history no more prevents a reasoned and professional opinion on damages than the absence of immediately comparable sales prevents a qualified real estate appraiser from formulating an opinion on real estate value; the appraiser resorts to other useful and available means of appraisal, including more remotely comparable sales. The absence of a licensing history might affect the persuasiveness of an opinion but not the admissibility of the opinion.
The Court held that a review of Beaton’s report and his qualifications establish that he meets the threshold of possessing pertinent specialized knowledge based on training and extensive experience in a pertinent discipline and will assist a jury in determining a fact in dispute. The Defendants fail to demonstrate that Beaton’s method is based on insufficient facts or data (he appears to use the best, or perhaps the only, available in both instances); that his principles or his methods are demonstrably unreliable; or that his application of the announced facts, principles, and methods is demonstrably flawed.
Held
The Court denied the Defendants’ motion in limine to exclude the testimony of Plaintiff’s expert Neil Beaton.
Key Takeaways:
The standard for reviewing the admissibility of Rule 702 expert testimony is familiar, well understood, and explicit in the rule and the leading decisions. In each case, the rigor of the standard adapts to the subject matter of the opinion. An opinion about damages based on the loss of the probable price of something exchanged in the marketplace between a willing buyer under no compulsion to buy and a willing seller under no compulsion to sell is among the simplest and most common topics of expert testimony. Not every expert opinion demands the same level of scientific rigor, peer review, and the like.
Please refer to the blog previously published about this case:
By this suit, Plaintiff Anthony Guernon brought claims of negligence and negligence per se against Defendant Joel Barroso and for vicarious liability against Barroso’s Employer, Stevens Transport, Inc. (“Stevens Transport”), arising out of a motor vehicle accident which occurred on May 3, 2021, In El Paso County, Colorado. Following several extensions, the parties were required to designate rebuttal experts on or before August 26, 2024.
On that date, Defendants submitted a document in which they designated the following expert witnesses:
4. Margot Burns, a rehabilitation specialist and life care planner; and
5. James Desmond, an expert on the standard of care in the trucking industry.
Guernon objected that Karraker, Morgenstern and Stull, and Burns actually are affirmative, not rebuttal, witnesses, and therefore their designations are untimely and should be stricken. He further claimed Karraker and Morgenstern asserted opinions beyond their expertise.
Accounting Expert Witness
Jon Karraker is an expert witness in the field of accounting of personal injury losses in both the private and business sector.
Philip Stull completed his residency in orthopedic surgery at the New York Orthopedic Hospital/Columbia-Presbyterian Medical Center in New York City and graduated in 1993. He then received specialized training in sports medicine by completing a year-long fellowship at the University of Colorado and Aspen Valley Hospital in Aspen, Colorado. He has experience treating professional, collegiate, high school, and all levels of recreational athletes.
Margot Burns is a Clinical Case Manager, Clinical Supervisor, Behavioral and Vocational Specialist encompassing all phases of brain injury rehabilitation from acute neurobehavioral and coma management to post-acute and outpatient, community-based services. Burns holds a Master of Science in Rehabilitation Counseling and a Certificate in Life Care Planning.
James Desmond is a Certified Director of Safety Certificate, an OSHA 30 Hour General Industry Certificate, and a Driver Improvement Instructor/Trainer Certificate. Desmond is a Department of Transportation Designated Employer Representative, holds a Commercial Drivers’ License and is the President of Coastal Carrier Compliance and Consulting.
The Court cannot properly assess these arguments, however, because they are stated at such a high level of generality that they present no argument at all. Essentially, Guernon has done little more than state what he seeks to prove – that the witnesses are actually affirmative experts and/or that their opinions exceed their proper area of expertise. The Court is neither required nor inclined to consider such “cursory, unsupported, or otherwise inadequately briefed arguments.”
Moreover, the Court held that the difficulty in analyzing what little argument is discernable in the motion is compounded by Guernon’s failure to provide the Court with the allegedly problematic defense expert reports, his own experts’ reports for purposes of comparison, or any of the experts’ curriculum vitae.
Guernon’s belated submission of the challenged reports in connection with his reply brief does not cure his initial failure to produce them, especially when the reply does nothing more than invite the Court to peruse the documents itself for evidence in support of his prior, inadequate arguments. As a result, the Court denied the motion to strike the designations of these four experts as improper.
With regard to the fifth expert, Desmond, who will testify to the standard of care in the trucking industry, Guernon asserted his opinion is irrelevant because Stevens Transport has conceded vicarious liability for the actions of Barroso. Guernon pointed to nothing in the record demonstrating Stevens Transport has made such a concession, and Stevens Transport denies it has done anything other than acknowledge that if – and only if –Barroso ultimately is found liable for negligence, it will be vicariously liable for any damages caused thereby. The issues addressed by Desmond’s report therefore appear to remain in play in this lawsuit. Therefore, the Court denied the motion to strike his testimony.
Held
The Court denied the Plaintiff’s motion to strike or exclude the opinions untimely and improperly disclosed.
Key Takeaway:
Guernon objected that Karraker, Morgenstern and Stull, and Burns actually are affirmative, not rebuttal, witnesses, and therefore their designations are untimely and should be stricken. He further claimed Karraker and Morgenstern asserted opinions beyond their expertise. Essentially, Guernon has done little more than state what he seeks to prove – that the witnesses are actually affirmative experts and/or that their opinions exceed their proper area of expertise. The Court is neither required nor inclined to consider such “cursory, unsupported, or otherwise inadequately briefed arguments.”
Case Details:
Case Caption:
Guernon Et Al V. Barroso Et Al
Docket Number:
1:22cv2547
Court:
United States District Court for the District of Colorado
Plaintiff Dick’s Sporting Goods, Inc. (“DSG”) filed a lawsuit against Defendants Forbes/Cohen Florida Properties, L.P. (“Forbes”) and The Gardens Venture LLC (“Gardens Venture”) (collectively “Defendants”).
DSG claimed that Forbes tortiously interfered with its business and contractual relationships, which involved Sears, Roebuck, and Co. (“Sears”) and Transform Operating Stores LLC (“Transform”), specifically regarding the sublease of the second floor of the Sears store at the Gardens Mall (the “Palm Beach Gardens location”). Forbes allegedly refused to sign necessary forms for development applications submitted to the City of Palm Beach Gardens. DSG filed a lawsuit seeking compensatory and punitive damages, including out-of-pocket costs and net cash flows from operations.
To support its claim for damages, DSG presented the opinion and reports of accounting expert witness Louis G. Dudney. In response, Forbes retained accounting expert witness James S. Feltman to counter Dudney’s assertions.
Defendants filed a Daubert motion to exclude Dudney’s testimony. Meanwhile, DSG filed a motion to exclude specific parts of Feltman’s testimony.
Accounting Expert Witnesses
Louis G. Dudney, CPA, CFF, has extensive experience across various areas, including operational, financial, valuation, litigation, bankruptcy, and management consulting. His work encompasses financing, mergers and acquisitions, damages analysis, lost profit assessments, business valuations, solvency evaluations, debtor and credit advisory services, as well as corporate investigations.
He serves on the Management Committee at AlixPartners and is the Global Leader of the Investigations, Disputes, and Risk practice. Before joining AlixPartners, Dudney was a partner in the Financial Advisory Services Group at PricewaterhouseCoopers. He earned a Bachelor of Business Administration in accounting from The College of William & Mary and is a Certified Public Accountant. Additionally, he holds a certification in Financial Forensics from the American Institute of Certified Public Accountants.
James S. Feltman is a Managing Director in the Global Restructuring practice at Kroll, LLC. Kroll operates as a global advisor in valuation, corporate finance, investigations, disputes, cybersecurity, compliance, regulatory matters, and other governance-related issues. The firm employs nearly 3,500 professionals across 28 countries.
Feltman has qualified and testified as an expert witness in various federal and state courts. He focuses on forensic accounting and fraud investigations, bankruptcy, and solvency. Additionally, he provides expertise in commercial damages, business valuations, investment theory, and federal and state income taxation. He also addresses issues related to abusive tax shelters, accounting ethics and standards, and accounting malpractice. Furthermore, he deals with investment advisory matters and a range of other accounting, financial, and tax-related topics.
A. Defendants’ Motion to Exclude DSG’s Expert, Louis G. Dudney
DSG identified Louis G. Dudney as an expert witness on causation. He assessed the damages reasonably attributed to the Defendants’ tortious interference. Dudney submitted an initial expert report in 2021 and a supplemental report in 2024.
1. Defendants’ Arguments
Defendants contended that Dudney should not testify due to unreliable methodology. They cited several reasons:
He relied on outdated data.
He altered the corporate allocation rate in his 2024 report.
He failed to consider the proper cannibalization rate.
He used “skewed or ‘cherry-picked’ ex-post data.”
Dudney reduced the projected corporate allocation expenses in the damages analysis. Dudney says this was done in “accordance with DSG’s updated corporate practice for cost allocation in its pro formas.” Dudney also adopted the cannibalization rate that DSG calculated in his damages model. In his deposition testimony Dudney says he “[used the cannibalization rate] as one of the inputs to evaluate what is the impact and what the best estimate of the impact to Dick’s as a result of [Defendants’] behavior.”
Defendants argued the reduction in allocation expenses inflated DSG’s alleged damages. They claimed Dudney improperly relied on information from DSG, making the damages calculation unreliable.
2. Plaintiff’s Counter-Argument
DSG countered that Defendants had not adequately challenged Dudney’s methodology. Instead, they only criticized certain inputs in his calculations. The Court agreed, noting that the Defendants’ arguments questioned the weight of Dudney’s testimony rather than its admissibility.
3. Analysis
The Court reviewed Dudney’s deposition and expert reports and determined that he met the Daubert standard.
Defendants did not sufficiently challenge the reliability factors required for evaluation. For instance, they argued that he relied on a construction budget from 2015 and that his damages calculation assumed DSG would generate revenue during the COVID-19 pandemic. However, Defendants did not dispute the general acceptance of Dudney’s methodology within the scientific community.
Defendants argued that the reduction in allocation expenses “artificially inflates DSG’s alleged damages…and the damages calculation is unreliable because Dudney improperly relied on information provided to him by DSG.” The Court held that Defendants did not challenge the principles and methodologies Dudney applied to get to his conclusions. And it is not improper for an expert to rely on information given to him or made available to him “if experts in the particular field would reasonably rely on those kinds of fact or data.”
Also, the Court held that Dudney’s approach to calculating lost profits is accepted in the relevant scientific field.
Defendants did not otherwise challenge whether other experts in the field would not have reasonably relied on the facts and or data Dudney relied on. Their remaining objections primarily targeted his conclusions, alleging bias. The Court emphasized that perceived weaknesses in expert testimony should be addressed through vigorous cross-examination, not exclusion.
B. DSG’s Motion to Exclude Certain Opinions Offered by Defendants’ Expert, James S. Feltman
Defendants identified James S. Feltman as a rebuttal expert. He provided an initial report in 2022 and a supplement in 2024. DSG moved to exclude Feltman’s opinions on mitigating damages. Additionally, DSG sought to preclude Feltman from testifying about third-party demographic data or offering any undisclosed opinions under the Federal Rule of Civil Procedure 26.
1. The Third-Party Demographic Data
Feltman’s 2024 report included a section on “Target Market Data.” This discussion consisted of data collected from two third-party software systems. DSG argued that Feltman did not analyze the data to establish a cannibalization rate. They pointed out that he admitted he was not an expert in demographic analysis and lacked formal training. DSG asserted that Feltman possessed no specialized knowledge to apply the demographic data in a way that would assist the trier of fact.
Defendants countered that Feltman did not need to be a demographer to serve as a rebuttal expert on damages. The Court partially agreed.
Feltman was a global advisor in areas such as valuation and corporate finance. He had previously been qualified and testified as an expert in commercial damages. He stated that he had training in analyzing databases and applying them to specific cases. Feltman used resources from two databases, ArcGis and Placer.ai, and applied that information to the facts of this case to reach a conclusion on mitigation of damages.
It was acceptable for Feltman to rely on otherwise inadmissible hearsay when forming his opinion, according to Rule 703. However, he could not serve as a conduit for hearsay. Rule 703 specified that if the facts or data were inadmissible, the proponent of the opinion could only disclose them to the jury if their probative value significantly outweighed their prejudicial effect. Defendants did not sufficiently demonstrate how the third-party demographic data met this requirement.
Therefore, DSG’s motion regarding the third-party demographic data was granted in part and denied in part. Feltman would be allowed to testify about the conclusions he reached using the data, but the data itself was deemed inadmissible hearsay.
2. Feltman’s Opinions on the Mitigation of Damages
DSG claimed that Feltman’s opinions on mitigation were based on unreliable methods. Defendants responded that Feltman was a rebuttal expert who relied on publicly available facts and conducted a comparative analysis. The Court agreed with Defendants. DSG did not challenge the methodology used by Feltman; instead, it suggested additional analyses that could have been performed.
The Court held that DSG’s objections focused on the weight of the evidence rather than its admissibility.
3. Feltman’s Opinions Related to the Sears Bankruptcy and New Opinions at Trial
Given the Court’s Supplemental Order on the bankruptcy issue, DSG’s motion regarding Feltman’s opinions on the bankruptcy was denied as moot. The Court resolved the legal implications of the Sears bankruptcy, and no evidence to the contrary would be allowed.
DSG’s motion to exclude any new or additional opinions was granted. Defendants were prohibited from presenting new opinions through Feltman’s testimony that DSG had not previously been informed of under Federal Rule of Civil Procedure 26.
Held
The Court denied the Defendants’ motion to exclude Plaintiff’s accounting expert witness, Louis Dudney’s testimony.
The Court granted in part and denied in part the Plaintiff’s motion to exclude certain opinions from Defendants’ accounting expert witness, James Feltman.
1. Feltman was prohibited from discussing the legal implications of the bankruptcy as it had already been resolved.
2. Feltman was barred from presenting any new opinions that had not been previously disclosed under Rule 26.
3. Feltman could provide opinions on the mitigation of damages, but he could not testify to otherwise inadmissible hearsay that he relied
Key Takeaway:
Plaintiff did not challenge the methodology that Feltman used; instead, it pointed to additional analyses that could have been done. A methodology is not rendered excludable under Daubert if it fails to include every possible test that could have been conducted.
Moreover, Rule 702 and Daubert are instructive that the Court’s analysis on a Daubert motion is not of the conclusions, rather the principles and methodologies applied to get to those conclusions. Defendants did not challenge the principles and methodologies Dudney applied to get to his conclusions. And it is not improper for an expert to rely on information given to him or made available to him “if experts in the particular field would reasonably rely on those kinds of fact or data.”
Case Details:
Case caption:
Dick’s Sporting Goods, Inc. V. Forbes/Cohen Florida Properties, L.P. Et Al
Docket Number:
9:20cv80157
Court:
United States District Court for the Southern District of Florida
Domski filed this lawsuit on August 11, 2023, alleging that she was wrongfully terminated from her employment by defendant Blue Cross Blue Shield of Michigan after she refused to comply with the company’s COVID-19 vaccination policy. Domski worked for Blue Cross Blue Shield from March 10, 2008 until her termination on January 5, 2022, most recently as an IT Process Specialist II.
She submitted a written religious exemption request, which generally cited a belief that taking the vaccine would be immoral because “[t]he three COVID vaccines were ether developed or tested using fetal cells that originated in abortion.”
The Defendant interviewed Domski regarding her religious beliefs but denied her request for an accommodation shortly thereafter, stating that “she did not meet the criteria for an exemption due to a sincerely held religious belief, practice, or observance.”
On July 5, 2024, the Plaintiff filed a witness list indicating that Dr. Gerald A. Shiener would provide expert testimony regarding the Plaintiff’s psychological damages, and Jeffrey Bagalis would provide expert testimony as to the Plaintiff’s economic damages. The Plaintiff served Bagalis’ report on the Defendant on July 18, 2024. Generally, he opined that the Plaintiff’s economic damages exceed $1.2 million. At oral argument, the Plaintiff stated that she had furnished a report from Shiener on September 12, 2024.
The Defendant asked the Court to exclude the testimony of Bagalis and Shiener because the disclosures were woefully late. Blue Cross maintained that the Plaintiff’s expert disclosures came as a surprise because she did not list either expert on her initial disclosures or include them in her responses to its discovery requests, and Blue Cross did not have an opportunity to depose them during the discovery period.
Psychiatry Expert Witness
Dr. Gerald Shiener, MD, is a board-certified psychiatrist with over 40 years of experience. He is also an Assistant Professor in the Department of Psychiatry at Michigan State University.
Jeffrey Bagalis is the Managing Member of Accurity Group, LLC (“Accurity”), a Certified Public Accountant (CPA), Accredited in Business Valuations (ABV), and Certified in Financial Forensics (CFF) with over 20 years of experience providing a wide range of professional service.
The Court held that the Plaintiff’s expert disclosures in this case plainly were deficient. Under the scheduling order, Domski was obligated to serve her Rule 26(a)(2)(B) and (C) disclosures on or before December 7, 2024. Neither of her proposed expert witnesses was disclosed formally until July 5, 2024, more than half a year past the deadline.
The Plaintiff’s disclosures also were substantively deficient. Because Shiener and Bagalis were retained experts, Rule 26(a)(2)(B) required Domski to furnish a report containing, among other things, a complete statement of the expert’s opinions and their basis, “the facts or data considered by the witness,” a statement of the expert’s experiences and qualifications, and information about the expert’s compensation. She did not provide a report for Bagalis until July 18, 2024 and did not provide a report from Shiener until after the briefing was completed on this motion.
Citing Rule 26(a)(2)(D)(i), the Plaintiff appears to argue that her expert disclosure was timely because that rule establishes a deadline of 90 days before trial. She forgot, however, that this is a default rule, which only applies “[a]bsent a stipulation or a court order.”
Surprise
The Plaintiff argued that its expert disclosures did not surprise the Defendant for two reasons. Initially, she said that her responses to the Defendant’s interrogatories in November 2023 put it on notice of her intention to seek expert testimony regarding her economic and psychological damages. She added that her attorney’s February 4, 2024 email regarding expert discovery in the other cases the attorneys were managing together should have alerted him to her intentions in this case.
Despite the Plaintiff’s representation about her intentions, it is uncontested that she never disclosed information about any expert by the December 7, 2023 deadline. By its own terms, the Plaintiff’s email would seem to exclude Domski’s case because the discovery deadline had already passed, and no dispositive motions had been filed. The Court expressly stated that the scheduling order in this case trumps any inconsistent provision of the consolidation order governing the other cases.
All should have been aware that this case has its own scheduling order and deadlines for expert disclosure, so nothing about the email necessarily alerted the Defendant that the Plaintiff intended to use Bagalis and Shiener in this case.
Therefore, the Court held that these two announcements did not minimize the effect of the Plaintiff’s late disclosures on this case; it was reasonable for the Defendant to believe that the Plaintiff did not anticipate using expert testimony in this matter. And even if the Defendant was informed that expert witnesses might be part of the Plaintiff’s evidentiary presentation, that information was not much use without the detail required by Rule 26(a)(2)(B).
Ability to Cure Surprise and Disruption to Trial
The Plaintiff’s argument that the surprise can be cured takes two paths. First, she says that it was the Defendant that “manufactured” the surprise by not moving to compel the production of the missing expert reports and by not responding to her attorney’s February 4, 2024 email containing her counsel’s “plan.”
However, Rule 26(a)(2) places the disclosure obligation on the party offering the evidence, in this case, the Plaintiff. The Defendant was under no obligation to seek the production of a report it did not know existed and had no reason to suspect would be forthcoming, and the February 4, 2024 email contained no indication that it applied to this case. The Defendant only became aware of the Plaintiff’s intention to use experts for this case in July and filed a motion to exclude these untimely-disclosed witnesses shortly thereafter.
The Plaintiff argued that there is ample opportunity to cure any surprise and only a small likelihood of disrupting the trial date because she can make her experts available for depositions before the trial, or the trial date can be adjusted.
The Court disagreed. For one, taking these depositions is only one step in the Defendant’s likely trial preparation. It is reasonable to anticipate that the Defendant would want to find its own rebuttal experts, provide the factual materials to them, generate reports, and prepare them for trial. At oral argument, Plaintiff’s counsel acknowledged that Schiener actually examined the Plaintiff before completing his report. Presumably, a defense expert would want to do the same. And the Plaintiff forgets that compressing the schedule as she suggests would deprive the Defendant of mounting a Daubertchallenge to the expert witnesses’ testimony.
Certainly, issuing a new scheduling order would cure all of these difficulties. But the Plaintiff must demonstrate good cause for that relief.
Importance of the Evidence
Both sides seem to agree that the testimony of Bagalis and Shiener relates only to the question of damages. Excluding Bagalis and Shiener as witnesses will not make or break the Plaintiff’s liability case.
In this case at least, the Court held that the unimportance of the evidence, when measured against the burden of providing the Defendant an opportunity to take expert discovery and procure rebuttal experts in an otherwise straight-forward case, weighs against the Plaintiff.
Non-Disclosing Party’s Explanation
The Plaintiff’s explanation for failing to disclose her expert reports by the ordered deadline is unclear, which, perhaps, is at least partially attributable to her apparent belief that the reports were submitted timely. The Plaintiff seems to view her lapse within the context of the other ongoing lawsuits against the Defendant being managed by her counsel.
The Court held that this explanation is unpersuasive; it confounds the tasks of litigating wholesale multiple similar claims with producing discovery that is inherently individualized.
And each of those Plaintiffs no doubt will present their own evidence of damages. Domski’s case stands on its own and is subject to its own scheduling order. As the Court has previously reminded the parties, “counsel should have evaluated whether it was prudent to take on this workload if they were not prepared to litigate each case to completion by the dates established in the Court’s scheduling order.”
Held
The Defendant’s motion to exclude the Plaintiff’s proposed expert witnesses Gerald A. Shiener and Jeffrey Bagalis is granted.
Key Takeaway:
Because of the Plaintiff’s late disclosure, the Defendant would be deprived of the opportunity for an evidentiary challenge under Evidence Rule 702 and probably would not be able to marshal rebuttal evidence in a measured and non-rushed manner, which the scheduling order was intended to avoid.
The Plaintiff failed to comply with the deadlines for disclosing expert witness information, and she has not shown that the failure was substantially justified or harmless. The mandatory preclusion sanctions in Rule 37(c)(1) apply here.
This case concerns a trip-and-fall accident. Pedero Sanders alleged that, on November 8, 2022, he was employed by Weeks Marine as a Jones Act seaman assigned to the dredge JS Chatry. He claimed that, in the course of his work, he tripped and fell while retrieving supplies from a shack on land.
According to Sanders, the supply shack is pulled into place at the worksite using “D-rings,” and he tripped over one of the rings that was supposed to be buried, but was not, resulting in bodily injuries.
Sanders filed this suit against Weeks Marine, alleging claims for Jones Act negligence, unseaworthiness, and maintenance and cure.
Weeks Marine filed two motions in limine to exclude the testimony and opinions of Sanders’ experts – one directed at Sanders’ safety expert, Robert Borison, and the other at Sanders’ economic loss expert, Max Lummis.
Safety Expert Witness
Robert Borison brings to the table over 50 years of safety experience in the industries relating to the exploration, production, and transport of oil and gas and the marine, general, and commercial industries. His expertise in safety issues on production platforms, barges, structural, fabrication yards, vessels/boats, commercial and industrial buildings, and building projects is extensive.
Max Lummis is a Certified Public Accountant licensed in Texas and Colorado, a Certified Valuation Analyst and a Certified Fraud Examiner. Lummis has worked as a forensic accounting professional since 2004. He founded LCS Forensic Accounting & Advisory (a certified public accounting firm) in 2012 and has been its managing member since. He has been disclosed as an economic damages expert witness on over 200 matters.
Weeks Marine’s motion to exclude Sanders’ safety expert Robert Borison
Borison reviewed the evidence in this case and performed “root cause” analysis in which he opines that Weeks Marine failed to provide Sanders with a safe vessel to work on because did not remove the shackle and D-ring from the supply shack’s skid after setting it up for service.
Weeks Marine argued that Borison’s testimony and opinions should be excluded because expert testimony is not necessary to understand the issues presented in this simple trip-and-fall case. Defendants contended that a trip-and-fall hazard is within the ordinary understanding of a lay juror and the issues can be resolved by employing common sense. Defendants also pointed out that Borison opined that it failed to provide Sanders with a safe vessel, which amounts to a legal conclusion for the factfinder to make.
Weeks Marine contended that Sanders underestimates the intelligence of the average juror, who can understand, without expert testimony, the circumstances surrounding a trip-and-fall accident and that a pre- task meeting (including a Job Safety Analysis) can be helpful to prevent accidents.
Weeks Marine also urged that Borison should not be permitted to testify about JSAs or why supply shacks are needed and how they are moved and placed because his report does not state any opinions on those topics.
Despite being qualified, Borison’s opinion does not relate to any specialized maritime activity or equipment for which expert testimony would be required. The average juror is certainly familiar with tripping hazards and can resolve the issues presented in this case without expert testimony. Further, Borison’s opinion on tripping hazards does not implicate industry standards that are not also within the understanding of jurors. Moreover, Borison cannot testify about JSAs or the use and movement of supply shacks because he does not discuss them in his report.
Weeks Marine’s motion to exclude or limit Sanders’ economic loss expert Max Lummis
Lummis issued a report with four calculations: (1) Sanders’ past lost wages from the date after the accident (November 9, 2022) to the expected trial date (November 18, 2024) in the amount of $197,153; (2) Sanders’ future lost wages through his average work- life expectancy of 61 years, discounted to present value, in the amount of $2,513,712; (3) Sanders’ future lost wages if he works until age 62, discounted to present value, in the amount of $2,616,386; and (4) Sanders’ future lost wages if he works until age 70, discounted to present value, in the amount of $3,442,865.
To calculate the lost future earnings, Lummis “increased projected pre-tax annual earning capacity each year from 2023 through Plaintiff’s average work life expectancy using an inflation-adjusted ‘real’ wage growth of 0.83%,” then he “discounted back to the expected trial date using an inflation-adjusted risk-free rate of 0.56%.”
Lummis’ Testimony and Opinions regarding Sanders’ Future Lost Wages should be Excluded
Weeks Marine sought to exclude or limit Lummis’ testimony and opinions regarding Sanders’ future lost wages, arguing that he doubly accounts for inflation. It contended that Lummis, without evidence of Sanders’ potential wage growth, speculatively increased Sanders’ annual wages by 0.83%, and then applied a 0.56% discount rate, which allows Sanders to “double-dip” on his future wage loss claim. Weeks Marine further argued that Lummis should not be permitted to testify as to Sanders’ future lost wages beyond his statistical work-life expectancy of 61 years because there is no evidence that he would work longer.
It also argued that Lummis should not be permitted to present evidence of future lost wages beyond Sanders’ statistical work-life expectancy because there is no evidence that Sanders would have worked that long. Finally, Weeks contended that Lummis should not be permitted to amend his report to provide new calculations because the time has passed for providing expert reports and he could have performed the calculations correctly in the first place.
Lummis’s calculations are wrong as a matter of law
The Court held that Lummis’ testimony and opinions on Sanders’ future lost wages are inadmissible because he doubly accounts for inflation. As noted above, Lummis increased Sanders’ annual income by a factor of 0.83%, and then discounted the income stream to present value using a 0.56% discount rate. The supposed annual increase was based entirely on the statistical wage growth rate developed by the Bureau of Labor Statistics (which rate Sanders admits is “inflation-adjusted”), not evidence of Sanders’ actual expected increased earnings due to personal merit or increased experience. In other words, Lummis’ calculations are wrong as a matter of law and must be excluded from trial.
The Court, however, allowed Lummis 14 days to amend his report utilizing the proper methodology.
The Court added that Lummis may testify at trial as to Sanders’ future lost wages up to ages 62 and 70, if Sanders first presents other evidence that he would have continued to work past his statistical work-life expectancy of 61 years. It held that Weeks Marine’s motion in limine to exclude Lummis’s testimony concerning Sanders’ future lost earnings up to ages 62 and 70 is denied.
Held
The Court granted Weeks Marine’s motion in limine to exclude Robert Borison’s testimony but granted in part and denied in part Weeks Marine’s motion in limine to exclude Max Lummis’ testimony.
Key Takeaway:
Borison’s sole opinion is that the exposed D-ring created a tripping hazard. This opinion does not relate to any specialized maritime activity or equipment for which expert testimony would be required.
Lummis’ calculations are wrong as a matter of law because he doubly accounts for inflation. Lummis increased Sanders’ annual income by a factor of 0.83%, and then discounted the income stream to present value using a 0.56% discount rate. The Court held that the supposed annual increase was not based on evidence of Sanders’ actual expected increased earnings due to personal merit or increased experience but on the statistical wage growth rate developed by the BLS, which rate Sanders admits is “inflation-adjusted”.’
Case Details:
Case Caption:
Sanders V. Weeks Marine, Inc.
Docket Number:
2:23cv7317
Court:
United States District Court for the Eastern District of Louisiana
Defendants Dahv Kliner and Roger Farrow were former employees of JDS Uniphase, Plaintiff Lumentum’s predecessor. They had signed an “Employee Proprietary Information and Inventions Agreement” with the company which prohibited them from disclosing JDS Uniphase’s proprietary information to anyone outside the company.
Kliner and Farrow left JDS Uniphase in 2012 and 2013, respectively, to join Defendant nLIGHT. Plaintiff Lumentum later claimed that Kliner and Farrow used JDS Uniphase’s proprietary information to help nLIGHT secure two types of patents: the “adjustable beam patents” and the “triple-clad fiber patents.” Lumentum also alleged that nLIGHT used these patents to develop fiber laser products, including the “Corona” and “AFX” models.
In 2022, Lumentum filed a lawsuit, asserting breach-of-contract claims against Kliner and Farrow.
To support its breach-of-contract claims, Lumentum intended to present testimony from its damages expert witness, Donald Gorowsky, on three topics:
(1) Kliner and Farrow’s total compensation from JDS Uniphase,
(2) their compensation from nLIGHT, and
(3) the total revenues and gross profits from nLIGHT’s Corona fiber laser products.
Defendants nLIGHT, Dahv Kliner, and Roger Farrow moved to exclude Gorowsky’s testimony, arguing that it is unnecessary and unreliable.
Accounting Expert Witness
Donald Alan Gorowsky, C.P.A., J.D., has more than 40 years of combined experience in audit, accounting, finance, general management, financial consulting, and expert witness services. Gorowsky has specialized in financial consulting and expert witness services since 1990. As a financial expert on damages, Gorowsky provides assistance to attorneys in a variety of litigation matters and disputes involving many types of claims including business litigation, employment, intellectual property infringement, misappropriation of trade secrets, breach of contract, insurance claims and forensic accounting. Don also has significant experience with employment disputes involving financial advisors in the securities industry (FINRA).
Defendants sought to exclude Gorowsky’s testimony, arguing it was both unnecessary and unreliable. They contended that Gorowsky’s opinions were irrelevant since Lumentum could not legally claim the types of damages Gorowsky would address. They also pointed out that there was no claim for monetary damages against nLIGHT. Consequently, Gorowsky’s opinions on nLIGHT’s revenues and profits could be misinterpreted as evidence of damages against nLIGHT, rather than the individuals involved in the breach of contract.
B. Plaintiff’s Counterargument
Lumentum countered that Gorowsky’s testimony was essential for proving damages related to unjust enrichment. Lumentum claimed it was entitled to some of Kliner’s and Farrow’s compensation from JDS Uniphase and nLIGHT due to their alleged breach of non-disclosure agreements and the subsequent use of proprietary information. They argued that Gorowsky’s insights on calculating compensation and revenues would assist the jury in determining damages.
C. Defendants’ Rebuttal
Defendants argued that Gorowsky’s testimony was irrelevant and unsupported by both law and fact. They maintained that California law did not allow for recovery of compensation earned during employment for breaches occurring afterward. Additionally, they stated that nLIGHT’s profits did not benefit Kliner and Farrow, and no evidence suggested they received a portion of nLIGHT’s profits.
D. Court’s Analysis
i) Kliner and Farrow’s total compensation from JDS Uniphase
The Court observed that Lumentum’s request could set a troubling precedent by seeking to recover salaries and benefits paid over a decade ago based on a single breached provision. California’s Labor Code prohibits employers from reclaiming wages already paid. The statute broadly defines wages to include all forms of compensation and benefits, and Section 221 prevents recovery of these from past employment.
A relevant case, DHR Int’l Inc. v. Charlson, illustrated that recovery of paid bonuses was barred by the same legal principle. Similarly, since Kliner and Farrow had earned their salaries and benefits from JDS Uniphase, Lumentum could not reclaim these amounts as damages.
The Court also noted that contract damages are generally limited to what was foreseeable at the time the contract was made. California law supports the notion that employers cannot recover wages paid during the period of employment unless expressly stated in the contract. Thus, Lumentum could not claim these as damages.
ii) Kliner and Farrow’s compensation from nLIGHT
Lumentum’s claim for unjust enrichment was also addressed. California law does not support an unjust enrichment claim when an enforceable express contract exists. Lumentum’s complaint did not include a claim under California’s Uniform Trade Secrets Act, nor did it request unjust enrichment damages explicitly. Therefore, Lumentum could not pursue unjust enrichment damages based on the current claims.
Furthermore, Lumentum failed to provide sufficient evidence to support an unjust enrichment claim. Lumentum wanted Gorowsky to testify about the salaries and benefits paid to Kliner and Farrow by nLIGHT. Lumentum would need to prove how much of these payments were related to the intellectual property in dispute. On the existing record, a jury would need to speculate as to how much, if at all, Kliner and Farrow were unjustly enriched by the disclosure of the disputed information. This lack of clarity was insufficient to establish a factual issue for trial.
iii) Kliner and Farrow’s total revenues and gross profits from nLIGHT’s Corona fiber laser products
Lumentum aimed to have Gorowsky testify about nLIGHT’s revenues and gross profits from the Corona series fiber laser products. However, this request was also impermissible. Defendants pointed out that there was no evidence showing that Kliner and Farrow received any portion of the nLIGHT profits that Lumentum sought to reclaim. They emphasized that these benefits belonged to nLIGHT, which was neither a party to the contracts in question nor a defendant in the breach of contract claims. Gorowsky’s testimony regarding nLIGHT’s revenues and profits was deemed irrelevant.
The Court granted the motion to exclude Gorowsky’s testimony as it did not pertain to any claim for damages in this case. However, this decision did not affect the potential for Lumentum to pursue other claims, including nominal damages for breach of contract.
Held
The Court granted the Defendants’ motion to exclude Plaintiff’s damages expert witness, Donald Gorowsky’s testimony.
Key Takeaway:
The Court deemed Gorowsky’s testimony on Kliner and Farrow’s compensation and nLIGHT’s revenues irrelevant to the breach-of-contract claims. California’s Labor Code bars recovering wages and benefits already paid during employment.
Lumentum’s unjust enrichment claim was also invalid, as it neither invoked California’s Uniform Trade Secrets Act nor requested unjust enrichment damages. Furthermore, Lumentum failed to prove how Kliner and Farrow were unjustly enriched, making Gorowsky’s testimony speculative.
The Court excluded Gorowsky’s opinions on nLIGHT’s profits because there was no evidence linking those profits to Kliner and Farrow, and nLIGHT was not a party to the breach-of-contract claims.
In conclusion, the Court held that Gorowsky’s testimony did not pertain to the permissible claims for damages in this case and granted the motion to exclude his testimony.
Case Details:
Case Caption:
Lumentum Operations LLC V. nLIGHT, Inc.
Docket Number:
3:22cv5186
Court Name:
United States District Court for the Western District of Washington
This case arises out of a fee dispute between Defendant, CMR Construction & Roofing, LLC and Plaintiff, Crescent City Remodeling, LLC. CMR contracted Crescent to perform remediation work at Tangipahoa Parish School Board buildings following Hurricane Ida. Crescent later alleged that CMR breached the parties’ Joint Work Agreement by failing to compensate Crescent for its work.
On May 22, 2023, CMR impleaded Third-Party Defendant, Castle, arguing that CMR had paid Castle the full amount due to both Castle and Crescent, but that Castle had failed to pay Crescent its share.
John Theriot is a Certified Public Accountant, Certified Forensic Accountant, and Certified in Financial Forensics. He is a member of the American Institute of Certified Public Accountants, the Louisiana Society of Certified Public Accountants, and the American College of Forensic Examiners. He received his Bachelor of Science in Accounting from Nicholls State University in 1983, and he received his Masters in Accounting from Tulane University in 2004. Theriot began his career in public accounting upon graduating from Nicholls in 1983 as a staff accountant at Malcolm M. Dienes. He is now the managing partner of the firm and has over 30 years of experience in the field of public accounting.
Jason R. Schellhaas is a Partner at Malcolm M. Dienes, LLC. He primarily practices in the areas of tax compliance and tax planning for individuals, entities and estates; forensic accounting and litigation support services; business valuations; and audits, reviews, compilations and preparation of financial statements of small businesses.
To begin with, CMR argued that the experts’ testimony is not reliable, arguing that the assumptions, provided by Crescent’s counsel, informed the experts as to what conclusion they should reach and caused the experts to render legal opinions. Specifically, CMR took issue with the second assumption, which stated: “The project manager fee and sales commissions should not impact the payment due to CCR, as these amounts should be based on CMR’s 50% of the profit, rather than the entire profit which was to be allocated between CCR and CMR 50% / 50%.”
Reliability
First, both individuals are certified public accountants; the Court believes they used reliable methods and have satisfactory skills and training. Second, the Court is not persuaded that this assumption renders the opinion unreliable; the calculations in CMR’s report applied the commission to the profit of the entire job—before the 50-50 split between CMR and Crescent. This report merely assumes a different form of calculation. To the extent that the assumption affects the experts’ reliability, that issue goes to the weight of the evidence, not to its admissibility.
Relevance
CMR also moved to exclude the experts’ report on the basis that it is not relevant. In support, it cited cases in which the trial court barred testimony because it was speculative. CMR also challenged this report based on an allegation that the opinions “are the product of incomplete and inaccurate information, as well as based on incorrect assumptions and the blanket adoption of [Crescent’s] legal position.” The Court found the opinions relevant. First, the opinions are based on data in discovery and from the report it rebuts. Second, the opinions detail what the profit would be if the commission were calculated differently than it was in CMR’s expert report. This challenge goes to the weight of the evidence, not to its admissibility. The opinions expressed by Crescent’s experts satisfy the requirements of Daubert.
Finally, the Court noted that CMR’s report has not been challenged, despite its application of a different interpretation of the underlying contract. The underlying legal issue—the interpretation of the contract—is an issue upon which the Court has not yet ruled. It would be premature to exclude only one expert’s testimony related to damages merely because it assumes a possible interpretation, absent a ruling on the proper interpretation of the contract’s language.
Held
In conclusion, the Court denied CMR’s motion to exclude the opinions of John W. Theriot and Jason R. Schellhaas.
Key Takeaway:
The opinions of Theriot and Schellhaas meet the Daubert standards as they are based on data in discovery and from the report it rebuts. Moreover, the opinions detail what the profit would be if the commission were calculated differently than it was in CMR’s expert report.
Case Details:
Case Caption:
Crescent City Remodeling,Llc V. Cmr Construction & Roofing, Llc
In this alleged fraudulent transfer case, Plaintiff Shuler Drilling Company, LLC (“Shuler”) obtained a judgment in the Western District of Arkansas against Southern Management, a company wholly owned by the Disiere Defendants. After some contentious, post-judgment discovery disputes in Arkansas, Shuler brought the present action under the Texas Uniform Fraudulent Transfer Act (“TUFTA”) against the Disiere Defendants alleging that two asset transfers were fraudulent. According to Shuler, these concealed transfers were made after Shuler obtained a judgment against Southern Management with funds that could and should have paid the judgment. Instead, Shuler alleged that the Disiere Defendants intended to make these transfers so that Southern Management would be unable to pay the judgment against it.
Shuler’s forensic accounting expert witness, Larry Kanter, served two expert reports in 2022 and 2024. The Disiere Defendants move to exclude all Kanter’s expert opinions in his reports, eight opinions in total, as unreliable and irrelevant.
Accounting Expert Witness
Larry Kanter is a CPA with more than 25 years of combined Big 4 and international consulting firm experience. He was a Partner at PwC, EY and was a Managing Director at Alvarez and Marsal. He has served in leadership and testifying expert roles in numerous large, complex engagements involving GAAP, internal control, damage quantification and fraud/forensic investigative issues. Kanter was among the first forensic CPAs to integrate data analytic processes into his practice.
The Disiere Defendants contended that opinion number 1 in Kanter’s 2024 expert report and opinion number six in his 2022 expert report are unreliable and irrelevant because they relied on self-created law. The Court held that these two opinions help assist the trier of fact in understanding the evidence and determining facts in issue. Specifically, they both assist the trier of fact in understanding how the general ledgers are analyzed and reconciling detailed financial statements with those ledgers, which are facts that go to ultimate issues in this case.
Moreover, the Disiere Defendants did not argue that these opinions were inaccurate. Instead, they contended that they are unreliable because Kanter sought to insert his own legal standards instead of those required by TUFTA and controlling precedent. But as Shuler aptly noted, the purpose of these opinions is not to offer legal conclusions on the elements required by TUFTA. And a plain reading of these expert opinions showed that a legal conclusion simply does not exist nor does Kanter ask the jury to disregard precedent.
The Disiere Defendants also objected that the remaining opinions in these two reports are irrelevant. But upon careful review, these opinions are entirely relevant because they assist the factfinder in determining whether the Disiere Defendants’ financial documents are misleading and contradictory. As Kanter repeatedly testified at deposition, these opinions explain how certain financial documents are misleading and cannot be reconciled with the general ledger.
The Court held that testimony regarding misleading financial records, undercapitalization of Southern Management, and contradictory statements by Disiere has the tendency to make the ultimate issue—whether the Disiere Defendants fraudulently transferred assets in order to evade Shuler’s judgment against Southern Management—more probable than it would be without this testimony.
Held
The Court denied the Disiere Defendants’ motion to exclude testimony of expert Larry Kanter.
Key Takeaway:
Expert testimony is relevant if it assists the trier of fact in understanding the evidence or determining a fact in issue. Opinion number 1 in Kanter’s 2024 expert report and opinion number six in his 2022 expert report assist the trier of fact in understanding how the general ledgers are analyzed and reconciling detailed financial statements with those ledgers. The remaining opinions are just as relevant because they assist the factfinder in determining whether the Disiere Defendants’ financial documents are misleading and contradictory.
Case Details:
Case Caption:
Shuler Drilling Company Inc V. Disiere Partners Llc, Et Al
This case arises out of an oil and gas royalty dispute between Flat River Farms and MRC Energy Company. Plaintiffs produced a one-page expert report prepared by George E. McGovern III, CPA, a certified public accountant (“CPA”). Based on his expert report, McGovern was tasked with determining if Plaintiffs’ royalties as determined by the Lease were underpaid. The report contains the following conclusions:
MRC received consistently lower payments for well production than industry standards.
MRC was not charged for expenses related to gas preparation.
The operator’s payment method doesn’t adhere to GAAP standards.
The operator transferred production ownership to a third-party at below-market cost. A third-party marketer then prepared the product for sale.
The gas’s monetary value to MRC and royalty payments were discounted to cover expenses and lease burdens
The Court addressed two motions relating to McGovern filed by Defendant MRC Energy Company (“MRC”). McGovern is Plaintiffs’ expert witness. The first motion is a Daubert motion to exclude the testimony of McGovern. More specifically, MRC seeks to exclude or limit at trial any opinion testimony from McGovern on the element of damages. MRC contends that McGovern’s expert testimony is not based on sufficient facts or data, his testimony is not the product of reliable principles or methods, and he has not reliably applied the principles and methods to the facts of this case. MRC submits that his testimony would only serve to confuse the trier of fact.
The second motion is a motion in limine to exclude McGovern’s expert testimony and report on the grounds that McGovern is unqualified to provide an expert opinion in this case and his testimony is not the product of reliable principles and methods.
Accounting Expert Witness
George E. McGovern III has been a Certified Public Accountant since 1972. He worked for international accounting firm Touche Ross (now Deloitte Touche) and was a full time accounting professor at Centenary College for eight years. He has qualified as an expert in oil and gas accounting, and testified as such in numerous cases across multiple jurisdictions.
McGovern could not explain the basis of his conclusion
During his deposition, McGovern was unable to explain his opinions in conjunction with actual evidence or analysis. He could not recall the prevailing industry rate for the respective time period and did not recollect the documents or information he had or that he used to establish the prevailing industry rate. He also could not explain the basis of his conclusion that MRC was paid at a price that was consistently lower than the prevailing and industry standard price for the respective time period.
MRC contended that McGovern was unqualified to provide an expert opinion in the case
To begin with, McGovern admitted that he had not prepared for the deposition. Based on the contents of the report and McGovern’s deposition testimony, MRC contended that McGovern was unqualified to provide an expert opinion in the case and that his report was not based on any reliable facts or data. MRC submitted that McGovern was unqualified to provide an opinion regarding the various methods of allocating and recouping expenses, and the various methods in which non-operating working interest owners were assessed costs, directly or indirectly, in the oil and gas production process. Besides, MRC maintained that McGovern’s trial testimony would not be the product of reliable principles and methods, and that he had not reliably applied the principles and methods to the facts of the case.
The Court agrees that portions of McGovern’s opinions are not sufficiently grounded in any actual evidence or analysis, thereby rendering them void of the necessary indicia of reliability. Without more reliable methodology and factual support for his analysis, McGovern’s opinion that the per unit monetary value of the gas received by MRC, and upon which it paid royalties to Plaintiffs, does not reflect the true price, but rather a discounted price to account for the deduction of expenses and other lease burdens is inadmissible and would not be helpful to the jury. Rule 702 requires this Court to exercise its role as a gatekeeper and exclude such unreliable expert opinion. McGovern can provide no testimony regarding money, numbers or claimed damages as it relates to the instant matter. Notwithstanding, he is qualified as a CPA to opine on generally accepted accounting principles (“GAAP”) applicable to oil and gas royalty payments. Additionally, assuming the proper foundation is laid, McGovern may be able to opine generally on allocation of production and recouping expenses.
Held
In conclusion, the Court granted in part and denied in part MRC’s motions to exclude McGovern’s expert testimony.
Key Takeaway:
MRC contended that McGovern’s testimony is not based on sufficient facts or data and he is unqualified to provide an expert opinion in this case. The Court held that McGovern can provide no testimony regarding money, numbers or claimed damages as it relates to the instant matter. Notwithstanding, he is qualified as a CPA to opine on generally accepted accounting principles (“GAAP”) applicable to oil and gas royalty payments.
Plaintiff Amy Lee Sullivan is suing Defendant Flora, Inc. for copyright infringement of 33 illustrations that she created for Flora as part of two advertising campaigns.
Sullivan offered the testimony of a financial evaluation expert, Dennis Kleinheinz. Sullivan wanted to present Kleinheinz’s calculations on Flora’s profits but the Court reserved the ruling on Sullivan’s motion regarding the testimony of Dennis Kleinheinz when Flora filed its objections.
Plaintiff also retained Danny Mager and Flora filed objections against his opinion that each additional use of each of Sullivan’s registered illustrations have a market value of between $3,000.00 and $6,000.00.
Marketing Expert Witness
Danny Mager is employed by Staples Marketing, LLC, which does business as AFFIRM Agency. The AFFIRM Agency is a Milwaukee County, Wisconsin full-service advertising agency originally established in 1985. Mager is a principal and the marketing director of AFFIRM. He is a 50% owner of that company as well. Mager has 30 years of creative, marketing and advertising industry experience. He is a member of various advertising and marketing industry professional and trade associations including the American Advertising Federation-Madison Chapter, the Agency Management Institute, Second Wind Agency Network and the Business Marketing Association.
Dennis Kleinheinz is a partner with the Middleton, Wisconsin CPA firm of Meicher CPAs, LLP. He received his Bachelor in Business Administration degree from the School of Business at the University of Wisconsin-Madison. Kleinheinz graduated in 1977 “with distinction”.
The Court held that Sullivan may not rely on Mager to establish that any of the individual illustrations have independent economic value. Mager’s testimony may be relevant to whether or not any individual illustration constitutes a “work,” but it does not conclusively show that any illustration is not nonetheless part of a “compilation.”
Even if Sullivan establishes with other evidence that all of the illustrations have independent economic value, Mager’s opinion would not help to establish the economic value for a particular illustration because Mager did not base his opinion on any independent evaluation of the specific illustrations at issue. So if Sullivan wanted to rely on Mager to place a value on each illustration, Mager would have needed to amend his report to conduct an evaluation of each illustration. Without such an evaluation, the Court held that Mager’s opinion that each use of an illustration has a market value of $3,000 to $6,000 has no foundation and is therefore inadmissible.
Moreover, Flora also filed a motion to exclude expert testimony on statutory damages. The only expert testimony that Sullivan wishes to present on statutory damages is Mager’s opinion that the market value of each illustration is $3,000 to $6,000. The Court explained in its ruling on Sullivan’s motion regarding Danny Mager why that opinion is not admissible. The Court, therefore, granted this motion.
Held
The Court held that Sullivan may not rely on Mager’s opinion that each use of each illustration has a market value of $3,000 to $6,000.
Key Takeaway:
Finding that an illustration is entitled to a separate statutory damages award requires first finding that the illustration has independent economic value. Thus, Mager’s testimony, which assumed that Sullivan’s illustrations were each entitled to a separate statutory damages award (i.e., assumed the illustrations had independent economic value), cannot now (without more) be used to establish that those same illustrations have independent economic value in the first place. Mager’s testimony may be relevant to whether or not any individual illustration constitutes a “work,” but it does not conclusively show that any illustration is not nonetheless part of a “compilation.”
Mager’s testimony assumed that each of the 33 illustrations were entitled to a separate statutory damages award but he did not base his opinion on any independent evaluation of the specific illustrations at issue. Indeed, Mager did not even know how many illustrations there were, stating “I think it was 44 illustrations.”
Case Details:
Case Caption:
Sullivan, Amy V. Flora, Inc.
Docket Number:
3:15cv298
Court:
United States District Court for the Western District of Wisconsin
