Athena, a specialty lender engaged in the business of providing loans secured by high-value fine art, extended a loan to a borrower, using the 1982 painting by Jean-Michel Basquiat titled “Humidity” (the “Basquiat”) as collateral. Subsequently, on March 2, 2020, the New York County Supreme Court entered a judgment for Athena in the amount of $14,306,800.47 after the borrower defaulted on the loan. Based on this judgment and with the loan and security agreement terms in mind, Athena asserts its entitlement to sell the Basquiat without regard to outstanding claims from any third parties asserting ownership interests in the painting.
On July 31, 2020, Interested Party and Intervenor-Plaintiff Satfinance intervened, filing a complaint against Athena based on its claimed interest in the Basquiat.
In this in rem action to foreclose a lien and to obtain an order permitting the sale of a painting by Jean-Michel Basquiat, Athena Art Finance Corporation, acting as both Plaintiff and Intervenor-Defendant, submitted a motion to strike the expert opinions of Satfinance’s expert Michael Plummer, set forth in his February 23, 2023 report, pursuant to Federal Rule of Civil Procedure 26 and Federal Rule of Evidence 702.
Satfinance engaged Plummer to provide insights into: (1) the general nature and conditions of business and credit in the art market; (2) standards of reasonable business practice and due diligence in the art market relative to the operative loans made by Athena; and (3) specifics of the diligence conducted by Athena on such loans.
Finance Expert Witness
Michael Plummer is a leading authority on art finance. Plummer worked as an advisor in the art market for 13 years, providing guidance on a range of issues, including the general landscape of the art market, art-based lending, and best business practices. Plummer has advised on, articles in the New York Times, the Wall Street Journal, the Financial Times, and the Art Newspaper on the subjects of art market performance, trends, economic factors, investment practices and structures, and liquidity and valuation in an “opaque” market. Plummer also has lectured on panels for continuing education courses and graduatedegree programs on the same subjects discussed in the articles at the Wharton School, New York University, the Appraisers Association of America, Sotheby’s Institute and Christie’s Education.
Discussion by the Court
First, Athena argued that finance expert witness Plummer failed to disclose, under Federal Rule of Civil Procedure 26, a prior expert report that served as the “starting point” for his opinions in this case and also failed to disclose a prior client relationship he had with Athena. And second, Athena contended that Plummer was not qualified to serve as an expert “on secured finance and asset-backed lending” and had not followed an appropriate methodology to form his opinions.
Plummer is qualified to serve as an expert in this case
Athena objected to Plummer’s lack of formal training and education in secured lending, asserting that Plummer lacked the relevant licensing or credentials common in the field of secured lending and never received formal training in that field.
Satfinance retained Plummer to opine on the adequacy of Athena’s due diligence when extending a loan secured by a piece of art, given the conditions, norms, and practices of the art market and the art finance industry. The Court found Plummer unquestionably qualified to testify as an expert in this case, with his extensive experience in the field of analyzing art market economics, valuations, art purchases and sales, and art lending practices.
Plummer’s lack of formal education and professional licenses in the field of secured lending did not suffice to render him unqualified in this case.
Satfinance was not attempting to have Plummer opine on subject matters unrelated to his area of expertise, such as general asset-backed lending. The opinions in the Plummer Report were limited to the art market, the art finance industry, and the best business practices therein.
The Court deemed Plummer qualified to serve as an expert on art industry standards for underwriting asset-back loans secured by pieces of art.
Plummer followed an appropriate methodology
According to the Court, Plummer sufficiently explained how his experience led to the conclusions reached, why that experience was a sufficient basis for his opinion, and how that experience was reliably applied to the facts.
Plummer described the art market in general and outlined the standards and conditions of the art market to provide context for evaluating the loans made by Athena. Plummer provided background on private art sales, art advising versus art dealing, and pricing in the art market, all based on his experience advising and working in that market.
He also opined on the standards for Athena’s diligence on artwork collateral and the “macro business issues” impacting Athena’s due diligence. In concluding that Athena’s due diligence was inadequate, Plummer based his conclusion on his former experience working in Sotheby’s treasury department, where he approved dealer credit arrangements and managed Sotheby’s first long-term, asset-backed dealer loan.
The Court held that Plummer’s testimony on these points provided relevant context of the market in which Athena made the operative transactions—a landscape which lay individuals may have possessed little or no knowledge about. Plummer’s testimony also outlined what he opined to be best practices in that market and what red flags should have been apparent when performing diligence on a transaction like the ones at issue here.
Plummer failed to disclose a prior expert report
Plummer served as an expert in another case, Overton v. Art Finance Partners LLC, Case No. 15-CV-3927, and issued a report in that case upon which he relied here.
The Court noted Plummer’s reliance on the Overton Report to prepare his own report. A comparison of the two reports also revealed substantial similarities in the sections regarding the general nature and conditions of business in the art market, confirming Plummer’s reliance on specific information from the Overton Report in creating his Report here.
The Court held that Athena, however, did not suffer any prejudice from the failure to disclose the Overton Report, such that exclusion of the Plummer Report was required. First, Athena knew about the Overton Report before Plummer’s deposition. Indeed, it questioned Plummer about that report at the deposition. Athena thus had an opportunity to question Plummer about the Overton report and to have its own expert challenge the conclusions reached by Plummer in that report. Rule 26’s disclosure obligation intends to prevent “surprise” or “trial by ambush,” but this was not the case here.
Athena also contended that Plummer failed to disclose that he relied upon “personal interactions” he had with Athena personnel that formed the basis of his opinions in his Report. The Court held that though Plummer had to disclose any facts or data that informed the opinions he reached in his Report, Athena knew of these interactions and conversations before Plummer’s deposition and thus had a chance to question Plummer about the interactions, and in fact did so.
Plummer failed to disclose a prior relationship with Athena
Lastly, Athena cited Plummer’s prior relationship with Athena, that Athena claims did not end well. Athena asserted that it affected Plummer’s ability to be an impartial expert in this case.
Plummer testified that he disagreed with Athena’s characterization of how the relationship ended, and he further testified that when the “disagreement” arose between him and Athena, Plummer “immediately turned the art fair matter over to another member of his team.” In short, the deposition testimony Athena relied on was too thin a basis from which to conclude that Plummer felt that his relationship with Athena ended so acrimoniously that it rendered Plummer biased.
Held
The Court denied Athena’s motion to strike the opinions of Finance Expert Witness Michael Plummer.
The Court, subsequently, terminated the motion. It has not arrived on an outcome for this case since the remaining issues involved in this case still await resolution.
Key Takeaways:
Plummer’s Qualifications: Despite Athena’s objections regarding Plummer’s lack of formal training and education in secured lending, the Court found Plummer unquestionably qualified to testify as an expert in the case due to his extensive experience in analyzing art market economics, valuations, art purchases and sales, and art lending practices.
Scope of Expert Opinion: Plummer’s expertise was limited to the art market and the art finance industry, and he was not expected to opine on subject matters unrelated to his area of expertise.
Methodology: Plummer followed an appropriate methodology in forming his opinions, explaining how his experience led to his conclusions and how this experience was reliably applied to the facts. He provided relevant context and outlined best practices in the art market, based on his extensive experience.
On July 1, 2020, Officer Jack Gilboy (“Gilboy”) of the St. Charles Parish Sheriff’s Office approached Plaintiff Cedric Otkins (“Otkins”) while Otkins was sitting alone in his parked car at the East Bank Bridge Park in St. Charles Parish, Louisiana. Otkins filed this civil rights action alleging a violation of his Fourth Amendment right to be free from unreasonable search and seizure.
Officer Gilboy claimed that he smelled marijuana emanating from Otkins’ vehicle after Otkins exited his vehicle.
Plaintiff sought to exclude the Defendant’s expert witness, Craig Wiles, from testifying at trial. In his expert report, Wiles opined that under the circumstances of the traffic stop on July 1, 2020, Gilboy could smell marijuana odors emanating from the interior of Plaintiff’s vehicle.
Law Enforcement Expert Witness
Craig M. Wiles is a career law enforcement officer and narcotics agent with over forty years of experience. He joined the Drug Enforcement Administration as a special agent in 1995. He has been a part of several such investigations which have resulted in hundreds of arrests for drug violations, including marijuana possession and trafficking.
Discussion by the Court
Wiles is a career law enforcement officer and narcotics agent retained to opine on Defendant Gilboy’s ability to detect the odor of marijuana.
The Court Cannot Test Wiles’ Determination of Whether Gilboy Smelled Marijuana
In Wiles’ expert report, he opined that marijuana had an unmistakable odor that “became part of the user’s life” and that Gilboy “could smell the odor of marijuana coming from the interior of Otkins’ vehicle.” Because this opinion was not based on any reliable principles or methods and did not assist the trier of fact, the Court excluded Wiles from testifying at trial in this matter.
Moreover, Wiles’ purported expertise stemmed from his years working in law enforcement as a narcotics agent. Plaintiff questioned the Defendant’s statement claiming that Wiles was an expert in olfactory science despite not being proffered as such by the Defendant. Plaintiff argued that even if Wiles relied upon his own experience in law enforcement, the Defendant still had to demonstrate that Wiles applied a methodology that was reliable, verifiable, and generally accepted in the relevant community. Instead, Defendant claimed that Wiles was not rendering a “scientific expert opinion” but an opinion based on his specialized knowledge and expertise.
The Court held that Defendant failed to show that Wiles is an expert in the olfactory sciences or in the human ability to detect certain odors.
Wiles’ expert report lacks any discernable methodology or principle
Wiles’ opinions were based on what he deemed a “vacuum effect” caused by the opening and closing of Plaintiff’s car door, allegedly pushing the odors toward Gilboy, as well as the weather conditions at the time of the stop, which allegedly helped to enhance the smell. He provided no support for either of these opinions other than a general invocation of his years of experience. Wiles also relied on and quoted at length a blog post from a hydroponics company regarding the smell of cannabis plants without considering how the odor of cannabis plants, the subject of the article, might differ from the odor of marijuana fit for consumption.
Wiles’ opinions were not helpful to the trier of fact
Although couched as expert opinion based on years of experience, much of Wiles’ report mainly consisted of commonsense conclusions that did not require expert testimony.
For example, Wiles’ opinion that marijuana has a distinct and strong odor is not an expert opinion. Indeed, as Wiles recognizes in his report, “all who visit” New Orleans can receive “an education on the smells of marijuana” whether through “[a] drive on the Interstate through the City, a walk through the streets or a day shopping in a grocery store,” underscoring that his opinions are based on common sense and practical experiences within the realm of the average juror. Further, his opinions that the odor of marijuana can remain trapped on the clothing and skin of a user and in a user’s vehicle was likewise a common sense opinion that did not require expert testimony, especially where, as here, Wiles provided no evidence or sources to support his claims or to provide greater detail.
Wiles’ opinions that the closing of Plaintiff’s car door could have fanned marijuana odors toward Gilboy and that “the environmental conditions of a light to mild wind at night in a secluded area, under a bridge in the Park would enhance the smells for two people at a distance of 3–15 feet” were similarly unhelpful to the jury. It followed that this opinion was within the common sense of the jury as well. Likewise, Wiles’ opinion about the wind blowing and enhancing any odors required no expertise and thus was unhelpful to the jury.
The Court held that they were essentially lay opinions that do not require any expertise to reach.
Held
The Court excluded the testimony of Defendant’s expert witness, Craig Wiles. It has not arrived on an outcome for this case since the remaining issues involved in this case still await resolution.
Key Takeaways:
Lack of Demonstrated Expertise: The court scrutinized the qualifications of the expert, highlighting the necessity for a demonstration of expertise in the relevant field. In this case, Wiles’ background as a law enforcement officer did not inherently qualify him as an expert in olfactory science.
Absence of Reliable Methodology: Wiles’ expert report lacked a discernible methodology or principle, with opinions often based on subjective observations rather than verifiable principles. This underscored the importance of experts employing reliable and verifiable methodologies in their analyses.
Commonsense Conclusions vs. Expert Opinions: The Court distinguished between commonsense conclusions and expert opinions, emphasizing that expert testimony should offer insights beyond what an average juror could discern. The Court deemed Wiles’ opinions, such as the distinct odor of marijuana, common knowledge rather than expert analysis.
Limited Utility to the Trier of Fact: The Court deemed many of Wiles’ opinions unhelpful to the trier of fact, as they either echoed common knowledge or were based on subjective assessments that did not require specialized expertise. The Court emphasized the need for expert testimony to provide insights beyond lay understanding.
Plaintiff Nathan Cottrill (“Plaintiff” or “Cottrill”) filed a lawsuit against Defendant Tricam Industries, Inc. (“Defendant” or “Tricam”), alleging product liability and breach of implied warranty.
Nathan Cottrill, a Best Buy Geek Squad employee, went to a client’s house on December 22, 2019, to mount two Sonos 5 speakers in an indoor basketball court. To carry out the installation, Cottrill utilized a ladder manufactured by the Defendant, a GLMPX-26 articulating ladder (“accident ladder”). After successfully ascending and descending the accident ladder twice, Cottrill proceeded to climb it for a third time, standing about 11 to 12 feet off the ground. Unexpectedly, he fell to the ground. According to Cottrill, the accident ladder was bent near a rivet point.
Cottrill stated that Mechanical Engineering Expert Witness, Kurt Whitling had identified the manufacturing defect that caused his fall.
Whitling authored an expert report on October 19, 2021, following his inspection of the accident ladder on September 15, 2021, twenty-two months after the incident. Whitling’s findings indicated that the failure seemed to have originated at a rivet hole on the left side of the ladder, proceeding almost entirely through the U channel. Additionally, he noted that the rivet hole was oblong in shape, and the oblong portion extended beyond a section of the U channel that measured 1/16” thick, into an edge that was 1/8” thick.
Tricam filed a motion to exclude Whitling’s opinions, along with a motion for summary judgment.
Tricam also filed a motion to exclude opinions contained in Kurt Whitling’s second and third Reports. Oral argument was held on October 19, 2023, during which Plaintiff withdrew Whitling’s second and third reports. The Court, therefore, denied as moot Defendant’s motion to exclude opinions contained in Kurt Whitling’s second and third Reports.
Mechanical Engineering Expert Witness
Kurtis G. Whitling is a mechanical engineer with experience in forensic engineering, and product design. Whitling has work experience in a wide range of fields and prides himself in applying sound engineering principles in every investigation.
Discussion by the Court
In addition to inspecting the ladder, Whitling stated that he reviewed the manual for the Gorilla Model GLMPX-13-17-22-26 and the technical specifications for that ladder from the Gorilla Ladder website.
Finally, Whitling articulated the following conclusions “to a reasonable degree of engineering certainty” based on his inspection and review:
At the time of the accident, Cottrill’s weight was much less than the ladder’s rated capacity of 375 pounds.
Cottrill properly set up the ladder as an extension ladder at the time of the accident.
Gorilla Ladders modified the hole in the left U channel portion of the ladder in order to install a rivet for the cross brace piece due to some unknown manufacturing issue. By modifying the U channel, the hole protruded into the thicker portion of the U channel. This significantly weakened the U channel and caused a large stress concentration in that area. Gorilla Ladders’ modification to the U Channel caused the failure of the ladder.
When Cottrill attempted to climb the ladder, the weakened U channel cracked, then twisted. The failure threw Cottrill from the ladder and caused the injuries.
Motion to Exclude the Opinions in the Whitling Report
Tricam asserted the following arguments in support of its motion to exclude the opinions in the Whitling Report: (1) the report did not comply with the requirements of Federal Rule of Civil Procedure 26(a)(2)B); (2) the report provided insufficient evidence to show that Whitling was qualified to offer his opinions; and (3) the opinions in the report were not based on a reliable methodology.
Should Mechanical Engineering Expert Witness’ Report be Excluded Under Rule 26(a)(2)(B)
Tricam argued first that the Court should exclude Whitling Report from evidence because it did not set forth Whitling’s “experience or purported qualifications” and did not attach “a CV, rate sheet, or testimony list” as required under Federal Rule of Civil Procedure 26(a)(2)(B). In response, Cottrill explained that he had received both the Whitling Report and a separate document containing Whitling’s CV and testimony list in August 2021, but that his counsel had inadvertently failed to forward the document containing the CV and testimony list to Tricam when he served the Whitling Report. Here, the Court found that Cottrill had met his burden to show that his failure to timely disclose Whitling’s CV, rate sheet, and list of prior testimony was a harmless violation of Rule 26(a)(2)(B).
Whether Mechanical Engineering Expert Witness is Qualified to Offer His Expert Opinion
Tricam argued that Whitling lacked the necessary qualifications because “there is no evidence that he has ever designed, tested, manufactured or assessed ladders for purposes of defect or causation.”
In opposition, Cottrill noted that Whitling was a mechanical engineer and a registered professional engineer in Ohio. He explained that “the cause at issue here is two pieces of aluminum which were fastened by a steel rivet and that failed and pulled apart,” and asserted that this was an issue any engineer would be qualified to assess. As to specific experience relevant to Whitling’s opinions, Cottrill highlighted Whitling’s past work at a defense-oriented engineering firm and his asserted expertise in testing and analysis, origin and cause, and critical fastening – bolted joint failure analysis. The Court found the evidence sufficient to demonstrate that Whitling was qualified to offer an opinion as to whether a manufacturing defect was evident from a ladder with an elongated rivet hole.
Whether Mechanical Engineering Expert Witness Used a Reliable Methodology
Tricam argued that visual inspection was insufficient to support Whitling’s opinions, including his opinion that Tricam “modified the hole in the left U channel portion of the ladder . . . due to some unknown manufacturing issue.” As to this opinion, Tricam noted that Whitling did not, for example, compare the accident ladder to an exemplar or design drawings to confirm what “unknown manufacturing issue” spurred the contemplated modification to the hole. As to Whitling’s additional opinion that a modification to the rivet hole “significantly weakened the U channel and caused a large stress concentration in that area,” Tricam further argued that Whitling did not perform calculations to determine the stress concentration or assess the increased amount of stress caused by the modification.
The Court concluded that there was too great an analytical gap between Whitling’s stated findings and observations and his ultimate conclusions as to causation. His testimony was based on visual observations without calculations or testing and lacked comparison to design drawings or other ladders to explain and support his conclusions.
The Court granted the motion for summary judgment that Tricam filed before dismissing Cottrill’s complaint.
Held
The Court excluded the testimony of Mechanical Engineering Expert Witness Kurt Whitling for being unreliable. Then, the Court dismissed Cottrill’s complaint.
Key Takeaways:
Importance of Evidence Support: Tricam emphasized the necessity for comprehensive evidence supporting expert opinions. The Court deemed visual inspection alone insufficient to validate Whitling’s conclusions.
Analytical Gap Concerns: Tricam raised concerns about the analytical gap between Whitling’s observations and his ultimate conclusions regarding causation. The Court emphasized the need for a clearer connection between the evidence presented and the conclusions drawn.
Exemplars and Design Comparisons: Tricam highlighted the absence of comparisons between the accident ladder and exemplars or design drawings to confirm assertions regarding manufacturing issues. This suggests that thorough comparative analysis can strengthen expert opinions.
Plaintiffs are 31 professional models, actresses, and social media influencers who each earn a living promoting and licensing their image, likeness, and/or identity (collectively, “Image”) to select clients, commercial brands, and media and entertainment outlets, which rely on Plaintiffs to promote, endorse, and sponsor agreed-to goods and services. Plaintiff filed a lawsuit against Orange Lantern, Inc. and Mark Pessolano, alleging violations of the Lanham Act.
Orange Lantern previously operated the Magic Lantern night club and Pessolano was one Orange Lantern’s owners. Plaintiffs have alleged that Defendants posted images of Plaintiffs to Magic Lantern’s Facebook page between July 16, 2012, and November 21, 2018, without their consent or knowledge, making Defendants liable.
Plaintiffs retained Stephen Chamberlin as the Image Consulting and Valuation Expert Witness and Thomas Maronick as the Marketing Expert Witness in this case. Defendant filed a motion to exclude the expert opinions of both Chamberlin and Maronick which the Court subsequently denied.
Both parties also filed motions for summary judgment, each side arguing that there were no disputes of material fact and asserting entitlement to judgment as a matter of law.
Image Consulting and Valuation Expert Witness
Stephen Chamberlin has over thirty years of experience as an agent for professional models and has negotiated numerous contracts for models to appear in advertising. He served in leadership roles at prominent talent agencies including LA Models Management, Warning Management Inc., and Michele Pommier Models. Chamberlin has also represented high-profile celebrity models and talent including Tyra Banks, Claudia Schiffer, and Paris Hilton.
Marketing Expert Witness
Thomas Maronick is an Emeritus Professor of Marketing at Towson University College of Business and Economics where he taught marketing, strategy, and research courses from 1987 to 2017. He also held faculty positions at the University of Baltimore School of Business and Virginia Commonwealth University. Maronick served as the Director of the Office of Impact Evaluation at the Federal Trade Commission from 1980 to 1997. Since 1997, he has worked as a marketing consultant and expert witness, providing services in over 150 cases involving consumer litigation, advertising, trademarks, and survey research.
Discussion by the Court
Chamberlin testified about the rates the Plaintiff would have charged to appear on the Facebook postings. Maronick analyzed the consumer confusion created by the social media postings.
Plaintiffs contended that the opinions offered by Chamberlin and Maronick met the admissibility requirements of Rule 702, and Defendants’ arguments, while framed as objections to methodology, actually concerned questions of weight and credibility that could not be resolved at summary judgment.
Motion to Strike Chamberlin
When the Defendant argued that Chamberlin lacked professional experience negotiating contracts with strip clubs, the Court noted that Chamberlin’s professional background qualified him to opine considering he has negotiated numerous contracts for models to appear in advertising. Moreover, Plaintiffs did not agree to license their images to any strip clubs during the relevant period.
Chamberlin admitted that he did not apply an objective formula to arrive at his opinions but asserted that the methods he used were still reliable. Defendants did not dispute that modeling contracts were negotiated based on an individualized balancing of multiple criteria. Chamberlin listed the criteria he used and explained various assumptions he made when negotiating rates for individual models to appear in specific advertising. It was clear that Chamberlin had reviewed the posted images, spoke with each of the Plaintiffs, and reviewed the Plaintiff’s work history before reaching his opinions.
Court’s Ruling on the Motion to Strike Chamberlin
The Court held that objections to the accuracy of Chamberlin’s statements about the criteria he considered when negotiating modeling rates or the sufficiency of the facts reviewed before rendering his opinion may be presented to the trier of fact, but they did not warrant his disqualification at this stage of the litigation.
Motion to Strike Maronick
The Court deemed Marketing Expert Witness Maronick more than qualified to design and conduct consumer surveys and interpret the results.
He designed an online survey that could administer to “a sample of consumers in the target market for gentlemen’s clubs in Massachusetts” and used it to determine the perceptions of consumers regarding women shown in social media postings by the Magic Lantern.
Specifically, the survey aimed to ascertain whether the women had any affiliation with the club, approved the use of their images, were paid for the use of their images by the Magic Lantern Club, and participated in some or any of the events or activities at the Magic Lantern Club.
Maronick listed the following conclusions:
a large majority of consumers considering whether to visit a gentleman’s club consider the women working there to be an important factor in their decision;
consumers are likely to believe that women shown in ads posted by the Magic Lantern have agreed to endorse or sponsor the Magic Lantern, have a connection with the Magic Lantern, have approved the use of their images, have been paid to promote the Magic Lantern, and have participated in activities at the Magic Lantern
such consumers are likely to believe the Magic Lantern posted images of women in order to convey to potential consumers that they would see similar looking women if they visited the Magic Lantern
Court’s Ruling on the Motion to Strike Maronick
The Court held that Marketing Expert Witness Maronick designed the survey and administered it in a way that gathered data consistent with the limited scope of the inquiry. The Court found Maronick’s opinions to be within the scope of the inquiry and well-supported by the survey data.
Defendants were free to take up any objections they had with regard to Maronick’s survey data at trial but the Court found no basis to exclude Maronick’s testimony.
The Court denied Plaintiff’s motion for summary judgment but granted in part and denied in part the Defendant’s motion for summary judgment.
Held
The Court denied the Defendant’s motions to exclude the testimony of Stephen Chamberlin and Thomas Maronick.
The Court stayed the case because it certified a question to the Massachusetts Supreme Judicial Court (“SJC”) regarding how the Massachusetts discovery rule should apply to Plaintiffs’ defamation claims based on Facebook postings made more than three years before they filed their original complaint.
Key Takeaways:
Reliability: The Court considered Chamberlin’s methods, although lacking an objective formula reliable due to his thoroughness in considering various criteria and reviewing relevant facts. The Court also deemed Maronick’s survey methodology and conclusions consistent with the limited scope of the inquiry and well-supported by the survey data.
Qualifications: The Court held that Chamberlin’s background negotiating numerous contracts for models to appear in advertising was relevant.
Plaintiffs James and Roxanne Thomas (“Plaintiffs”), on behalf of themselves and all others similarly situated, brought suit against GEICO Casualty Company, GEICO Indemnity Company, and GEICO General Insurance Company (collectively “GEICO” or “Defendants”) for violating the Illinois Consumer Fraud and Deceptive Business Practices Act (“ICFA”).
Since 2013, Plaintiffs have been GEICO customers. Plaintiffs renewed their insurance policy with GEICO from January 22, 2020, to July 22, 2020. They asserted that GEICO had charged “excessive” premiums during the pandemic. Plaintiffs alleged that the premiums failed to account for the dramatic reduction in driving during that time. In other words, the premiums were not reflective of driving risks, which insurance companies assess when determining policy holders’ premium rates.
GEICO instated a Giveback program, which offered a potential premium credit of 15% upon new and renewal of customers 6- or 12-month policies. Plaintiffs alleged that the discount inadequately accounted for the diminished insurance risk pool during the pandemic. According to Plaintiffs, GEICO provided no retroactive relief for consumers who had paid excessive premiums since the start of the pandemic and provided no additional premium relief as the pandemic continued.
In their FAQ section, GEICO explained the Giveback program was created because “shelter in place laws have reduced driving,” and they were “passing these savings on to [their] auto, motorcycle, and RV customers.” Plaintiffs found this description misleading because it implied that customers would receive all the savings, whereas in reality, customers only received a 15% discount, while GEICO received a windfall of revenue.
To determine what Plaintiffs’ refund should have been, or damages were, Plaintiffs relied on the testimony of Bernard “Birny” Birnbaum (“Birnbaum”). The parties disagreed on whether Birnbaum’s methodology was reliable, as required under Daubert, and whether it was admissible in this case. Plaintiffs also filed a motion for class certification.
Economics Expert Witness
Bernard Birnbaum is a consulting economist and former insurance regulator whose work focuses on insurance regulatory issues. Birny has served as an expert witness on a variety of economic and actuarial insurance issues in administrative and judicial proceedings.
Discussion by the Court
Plaintiffs sought GEICO to issue a refund for the “excessive” premiums, seeking monetary damages for the following:
policies they entered or renewed with GEICO that had a start date of effectiveness before March 21, 2020, and before GEICO’s Giveback program, but continued past March 21, 2020
policies they entered or renewed with GEICO after GEICO created its Giveback program
In his report, Birnbaum explained that the purpose of his methodology was to calculate what refunds/damages Plaintiffs should have received for paying “excessive” insurance rates since the 2020 pandemic.
Motion to Strike
The Court separated the methodology employed by Birnbaum into two points for clarity. First, Birnbaum calculated the rate GEICO should have charged for policies effective on or after March 21, 2020, using information available at the time. This included policies initiated before the pandemic and those renewed or initiated after GEICO’s Giveback program launch. Termed the reasonable rate, this initial step mirrored a standard calculation for a private passenger automobile (“PPA”) insurance rate. While PPA rates typically consider future risks, Birnbaum’s approach was retroactive, determining 2020 rates today. Nonetheless, both methods analyzed risk transfers. Birnbaum justified his reasonable rate calculation with references to actuarial principles and model laws rooted in PPA ratemaking.
Second, Birnbaum subtracted the reasonable rate from the rate GEICO charged Plaintiffs. The difference between the first and second steps was what GEICO would refund Plaintiffs. Birnbaum labeled this refund reasonable premium relief.
The end date of the calculation was uncertain, as Birnbaum needed to assess GEICO’s records at the merits stage. Birnbaum performed his methodology to correspond with the relevant class members’ policy dates of effectiveness. The relevant class members are divided in the Unfairness Class and the Deception Class.
Arguments Presented by Defendant
Defendants argued that Birnbaum’s methodology was unreliable and therefore could not satisfy Federal Rule of Evidence 702. According to Defendants, the reasonable premium relief the Plaintiffs sought was applied retroactively, unlike other insurance calculations that were applied prospectively. Defendants argued that such a method allowed Birnbaum to determine what he believed GEICO should have charged for insurance rates based on what he knew then, whereas insurers usually issued premiums by assessing future risks based on information they knew at that given time.
The Defendants supported their assertions by showing that Birnbaum failed to cite relevant examples, case law that found the method reliable, statutes, actuarial standards, model laws, or treatises that recognized reasonable premium relief.
Arguments Presented by Plaintiff
Plaintiffs explained that Birnbaum cited industry standard and actuarial principles as the roots of his methodology. They asserted that the standard Birnbaum used was the same methodology that GEICO had developed to create the Giveback program. Plaintiffs specified that the standards Birnbaum relied on explained that PPA rates might not be excessive and thus should reflect the cost of the transfer of risks. Plaintiffs further attempted to clarify that they applied the method prospectively, based on information GEICO knew at the time it decided the criteria and discount of the GEICO Giveback program, rather than retroactively.
Court’s Decision on the Motion to Strike
The Court deemed it imperative for Birnbaum’s methodology to be sound as a whole. The only time Plaintiffs cited a standard to support their arguments was when referring to ordinary PPA insurance ratemaking and/or determining what a reasonable rate would have been. The methodology before the Court at that time was not an ordinary PPA insurance rate. Instead, determining the PPA rate was only one part of the methodology, as Birnbaum first determined what the PPA rate or reasonable rate should have been and then subtracted that rate from the rate GEICO charged the Plaintiffs. Avoiding semantics, PPA rates determined future costs, while Birnbaum’s methodology sought to calculate returns. The Court concluded that Plaintiffs only attempted to support half of his methodology.
The Court held that the Plaintiffs failed to raise in their briefing and oral argument that Birnbaum’s report cited a recognized methodology that mirrored the reasonable premium relief methodology. It could not simply rely on Plaintiffs’ assertions that Birnbaum said his methodology was rooted in industry standards. As for the Plaintiffs’ damages methodology, the Court made it clear that it did not “recognize” the Plaintiffs’ damages theory as truth.
The Court denied the motion for class certification filed by the Plaintiffs, acknowledging commonalities with regard to the unfairness class but not the deception class, among other reasons.
Held
The Court granted Defendants’ motion to strike Birnbaum’s expert report and denied Plaintiffs’ motion for class certification.
The Court has not arrived on an outcome for this case since the remaining issues involved in this case still await resolution.
Key Takeaways:
Reliability: The Court stressed the importance of Birnbaum’s methodology being sound overall. It highlighted the complexity of the methodology, which involved determining reasonable rates and calculating what returns Plaintiffs should receive. The Court found that Plaintiffs failed to fully support their argument, particularly regarding recognized methodologies and damages theory.
Plaintiff Ernst Nicolas suffered severe injuries to his cervical spine, lumbar spine, right knee, and left shoulder in a motor vehicle accident that took place on September 1st, 2018, on JF Kennedy Blvd at the intersection with 63rd Street, in Jersey City. Nicolas was a rear seat passenger in a Lyft vehicle when a truck owned by Defendant ABF Freight Systems, and driven by Randy Rivers, rear-ended a Chevrolet Cobalt, which then collided with the Lyft vehicle.
Defendant conceded liability when Plaintiff filed a lawsuit. The only remaining issue in this case is to determine the extent of damages resulting from the accident.
Defendant retained a biomechanical engineer, William Bussone to assess the following:
the severity of the collision
the forces imparted to the body of the Plaintiff as a result of the accident
the absence of any mechanism to cause any permanent injury to the cervical spine, thoracic spine, lumbosacral spine and/ or extremities
whether the subject accident caused the alleged injuries
Plaintiff filed a Daubert motion challenging Bussone’s testimony because he is not a licensed medical doctor. For the reasons set forth below, the Court rejected the Daubert challenge against Bussone’s testimony.
Biomechanical Engineering Expert Witness
William Bussone is a biomechanical engineer with an M.S. in Mechanical Engineering (from Virginia Tech) and a B.S. in Biomedical Engineering (from Michigan Tech). He has testifying experience and more than 15 years research experience in biomechanics, accident reconstruction, and human injury / tolerance to mechanical load.
Discussion by the Court
Plaintiff alleged that Bussone lacked the requisite qualifications to comment on the diagnosis, treatment or prognosis of an injured person. According to the Plaintiff, Bussone was unqualified to provide testimony as to medical causation.
Bussone is Unqualified to Comment on any Area of Medicine
The Court noted Bussone’s significant experience in the field of biomechanical engineering. After all, Bussone engaged in research regarding injury biomechanics for more than fifteen years. He read and analysed the medical records to evaluate the extent, distribution and severity of injuries as they related to biomechanical analysis. Bussone has a bachelor’s degree in biomedical engineering and a master’s degree in mechanical engineering. He has conducted research on “human tolerance to impact and acceleration loading in vehicles” and published the findings in peer-reviewed articles.
The scope of Bussone’s proposed testimony concerned the general causation of injuries in motor vehicle accident cases, such as this one. Defendant asserted that it had no intention to have Bussone opine about the diagnosis, treatment or prognosis of any injury.
The Court subsequently held that Bussone’s expert testimony was permissible as biomechanical experts are permitted to opine as to general causation since he will not be opining on Plaintiff’s particular alleged injuries and medical care.
Bussone’s Opinions are not Based on Sufficient Facts and Data
Both parties disagreed about whether Plaintiff’s alleged injuries were caused by the accident. Plaintiff was of the opinion that Bussone’s conclusions warranted exclusion on that basis. The Court, citing In re Fosamax Products Liability Litigation 645 F. Supp. 2d 164 (S.D.N.Y. 2009), observed that the jury will be the judge of whether Plaintiff’s alleged injuries were caused by the accident and it was the jury’s responsibility to assess what weight to be given to the proffered testimony.
Expert testimony is excluded when speculative, conjectural, or based on unrealistic assumptions implying bad faith. The Court found Bussone’s opinions grounded in adequate facts and data, lacking signs of bad faith
Held
The Court denied Plaintiff’s motion to strike the testimony of William Bussone.
The Court has not arrived on an outcome for this case since the remaining issues involved in this case still await resolution.
Key Takeaways:
Expertise and Qualifications Matter: The Court noted Bussone’s significant experience in biomechanical engineering, including over fifteen years of research in injury biomechanics. His educational background in biomedical and mechanical engineering further solidified his qualifications.
Scope of Testimony: Bussone’s testimony focused on the general causation of injuries in motor vehicle accident cases, avoiding specific diagnoses, treatments, or prognoses of injuries, which were beyond the scope of his proposed testimony.
Sufficiency of Facts and Data: Expert testimony must be based on sufficient facts and data to be admissible. The Court found no indications of speculation, conjecture, or bad faith in Bussone’s conclusions.
On May 5, 2021, Timothy Shannon allegedly sustained personal injuries while he was a passenger aboard M/V MR LLOYD. The vessel traveled from a dock in Fourchon, Louisiana to a Talos Oil & Gas LLC production platform in the Gulf of Mexico. Rodi Marine, LLC owned and operated M/V MR. LLOYD while Talos was the time charterer of the vessel pursuant to a Master Service Contract (“Talos-Rodi Contract”). Plaintiff filed a lawsuit on account of the injuries he allegedly sustained when the vessel encountered rough seas during the Voyage.
Plaintiff hired Captain Gregg Daley to opine about the supposed legal duties that Talos owed to Plaintiff. Daley served as the marine operations and marine safety expert. Daley stated that Talos breached his duty to prevent the Rodi captain from leaving the dock considering the forecasted sea conditions were extremely rough.
Talos moved to exclude Captain Daley’s opinions regarding Talos’ alleged liability to Plaintiff arguing that they consisted of legal conclusions, were unreliable under Federal Rule of Evidence 702 and Daubert, and lacked factual support. The Court denied the motion to strike Daley’s opinions.
Maritime Expert Witness
Gregory Daley has extensive experience as a captain of oilfield offshore supply vessels spanning ten years. In addition to his practical experience, he holds a Bachelor’s and Master’s degree in Mechanical Engineering, as well as a Master’s degree in Nuclear Engineering from the Massachusetts Institute of Technology (MIT). Moreover, he has earned an MBA from Oklahoma State University.
Discussion by the Court
Daley submitted a 116-page Expert Report on August 11, 2023 consisting of four separate opinions. He claimed to have hands on experience with regard to similar vessels in adverse weather conditions. He assessed the vessel’s responses to various weather conditions, including the adverse conditions of this incident.
Daley opined that the actual weather encountered by the M/V MR LLOYD during the voyage on the morning of May 5, 2021, was six-foot significant wave height seas, which produced twelve-foot maximum wave height waves approximately once per hour. He added that a speed of 20 knots was too fast for the M/V MR LLOYD to be traveling when there were six-foot significant wave heights. He argued that Rodi should have had access to the DTN WeatherOps forecasts received by Talos, which were more informative than the Advanced Logistics forecasts received by Rodi, either by direct subscription, forwarding from Talos, or by reviewing them with the Talos dispatcher prior to departure. Moreover, Talos should not have dispatched the M/V MR LLOYD into seas with a six-to-nine-foot significant wave height and a twelve-to-eighteen-foot maximum wave height.
Talos did not direct the Court to any portion of Daley’s report that offered a legal conclusion.
Talos contested the foundation of Daley’s opinions concerning the supposed legal duties owed by Talos to Plaintiff which allegedly constituted legal conclusions. Plaintiff argued that Daley’s opinions are the type of testimony Federal Rule of Evidence 704 permits.
Daley testified that Talos, as time charterer, should have prevented Captain Jordan from making this Voyage because Talos was aware of the forecasted sea conditions on May 5, 2021. Talos responded by asserting that the captain of the vessel decided whether to begin or complete a voyage, not the time charterer. The Court found the testimony of Daley was helpful to determine facts in dispute, which were:
Whether Talos exercised control over the timing and the means by which a crew change is accomplished
Whether Talos was negligent in failing to postpone the crew change or conduct the crew change via helicopter
Talos argued that there was no evidence to prove Daley’s assertion that Talos was liable for dispatching M/V MR. LLOYD to the GC-18 Platform. The Court rejected Talos’ argument and held that cross-examination served as an adequate safeguard against Daley’s testimony.
Daley’s Opinions are Inadmissible Because they are Ipse Dixit
The Court rejected Talos’ assertion that Daley’s opinions concerning Talos’ alleged duties as the time-charterer of the M/V MR LLOYD should be excluded as ipse dixit. The Court noted, however, that Talos’ Reply brief did not mention the phrase “ipse dixit.”
The Court found Daley’s report to be based upon his maritime training and experience.
Held
The Court denied Talos Oil and Gas LLC’s Motion to Strike the Testimony of Plaintiff’s Liability Expert, Gregg Daley.
The Court has not arrived on an outcome for this case since the remaining issues involved in this case still await resolution.
Key Takeaways:
Expertise and Experience: Expert witnesses, such as Gregg Daley, are expected to possess hands-on experience and specialized knowledge relevant to the subject matter of the case. In this instance, Daley’s expertise in maritime operations was highlighted.
Opinions Based upon Assessment of Facts: Daley’s opinions were based upon his assessment of factual information, including the actual weather conditions encountered during the voyage and the appropriateness of the vessel’s speed given those conditions.
Challenges to Opinions: The opposing party may challenge the admissibility or credibility of expert opinions. Talos challenged Daley’s opinions on grounds such as constituting legal conclusions, lacking factual basis, and being mere assertions (“ipse dixit“).
Role of Expert Testimony in Determining Facts: Expert testimony can help the Court determine disputed facts, particularly when it comes to technical or specialized matters. Daley’s testimony assisted the Court in assessing whether Talos exercised control over certain aspects of the voyage and whether it was negligent in its actions.
Cross-Examination and Safeguarding: Cross-examination serves as a mechanism for testing the credibility and reliability of expert testimony. While Talos argued against the admissibility of Daley’s opinions, the Court found that cross-examination provided an adequate safeguard against any potential shortcomings in Daley’s testimony.
Basis for Opinions: Expert opinions should be grounded in the expert’s training, experience, and the available evidence. The Court found Daley’s opinions to be based upon his maritime training and experience, which bolstered their admissibility.
Plaintiffs, Julie Jenkins and James Gunn asserted claims under the Clean Water Act and various Georgia Environmental Statutes, including the Georgia Erosion and Sedimentation Act, arising from wholly past conduct that occurred in 2020. Plaintiffs alleged that “red clay” was deposited on Daniel Bruce’s farmland as part of the farm’s operations and that an unspecified amount of the red clay was alleged to have washed off the farm during rain events in 2020.
However, Defendants Daniel Bruce, Plateau Excavation, Inc., and Alif Transport, Inc., argued that the Complaint was premised on allegations of runoff from agricultural operations, despite the Clean Water Act specifically exempting such runoff from its statutory scheme. The Defendants also alleged that the Court lacked jurisdiction to hear Plaintiffs’ allegations as they concerned only “wholly past” actions.
Defendant Alif Transport filed a motion to exclude the testimony of Plaintiff’s expert Brian Wellington. Before the Plaintiffs retained Wellington, Alif’s defense counsel, Andrea Pawlak, had discussions with Wellington about serving as Alif’s expert. Moreover, attorney Pawlak asserted that she had known and worked with Wellington for at least fourteen years. The Court found that Pawlak’s broad discussions related to this case and working relationship on other cases with Wellington were insufficient to warrant Wellington’s exclusion as Plaintiffs’ expert.
Civil Engineering Expert Witness
Brian Wellington is a Senior Engineer and Partner with NewFields. Wellington has over 30 years of experience as a consultant in civil and environmental engineering. He holds a Ph.D. in Civil and Environmental Engineering from Syracuse University. He is a licensed Professional Engineer in five (5) states including Georgia.
Discussion by the Court
Attorney Pawlak elaborated on the communication she had with Brian Wellington with regard to this case. Attorney Pawlak stated that she had emailed Wellington initially about this case on November 9, 2022, and had given him a list of names to do a conflict check. Wellington confirmed that he had no conflicts. Attorney Pawlak’s November 14th billing records showed she had “conferred with Brian Wellington on the expert role” and had asked Wellington about an engagement letter; he had replied with a blank retention letter saying he was “looking forward to working with you too.” Pawlak never executed the retention letter.
Pawlak emailed Wellington twice in the following 13 months. First, in February 2023, Pawlak emailed Wellington about another case and mentioned the present case in passing. Seven months later, in September 2023, Plaintiffs retained Wellington. Pawlak contacted Wellington one further time in October 2023 about an unrelated case and mentioned the present case. Wellington replied but did not mention this case or his recent retention.
It was worth noting that Plaintiffs had received invoices totaling $8,889.08 for the work Wellington had done thus far. Wellington could not recall Pawlak ever retaining him for this case. Pawlak had never completed Wellington’s retention form. He added that the only information he received from Pawlak was not confidential. Pawlak informed Wellington “that it was a Clean Water Act case, the names of the parties, and the address of the property.”
In determining whether to disqualify a party’s expert . . . a district court may consider such factors as:
Whether the other party had a confidential relationship with the expert
Whether it was objectively reasonable for the other party to believe that it had such a relationship
Whether the other party did, indeed, disclose confidential information to the expert.
The Court noted Pawlak’s early communication with Wellington and the length of their professional history. Defendant argued that it was “objectively reasonable” to believe Wellington was Alif’s consulting expert based on the same. Plaintiffs countered Wellington had no memory or record of the Defendants providing him with any privileged or confidential information. Plaintiff asserted that Defendant never retained Wellington.
The Court, citing Wyatt v. Hanan, 871 F. Supp. 415, 419 (M.D. Ala. 1994), held that any substantial ambiguity regarding the existence of a confidential relationship between an attorney and an expert should be resolved against the attorney seeking to invoke the relationship.
Both parties agreed that Alif did not sign Wellington’s retention letter. Despite Wellington’s professional history as a consulting expert with Pawlak, Pawlak failed to from such a relationship in this case. The Court held that Pawlak had not shown she actually disclosed any confidential or privileged information to Wellington.
Held
The Court denied Defendant’s motion to exclude the testimony of Plaintiff’s expert Brian Wellington.
The Court has not arrived on an outcome for this case since the remaining issues involved in this case still await resolution.
Key Takeaways:
Clear Communication: It’s crucial for attorneys to clearly communicate the terms of engagement with expert witnesses, including the completion of retention forms and formal engagement letters.
Formal Engagement: Merely discussing a case with an expert witness or exchanging general information may not be sufficient to establish a formal engagement.
Expert Testimony Disqualification: Courts may consider various factors, including the existence of a confidential relationship and the disclosure of privileged information, when determining whether to disqualify an expert witness.
Maker’s Mark entered into a Licensing Agreement with Spalding Group gransting an exclusive license to use its trademarks to create and sell cigars seasoned with its bourbon (the “Licensed Cigars”). After renewing the agreement a few times, in 2013, Maker’s Mark notified Spalding that it was terminating the license effective December 31, 2015. Spalding Group had until June 28, 2016, to dispose of its remaining inventory of Licensed Cigars.
Following the termination of the license, Spalding Group began selling a cigar also seasoned with Maker’s Mark bourbon (the “Bourbon Cigar”). Maker’s Mark alleged the packaging of the Bourbon Cigar was intentionally designed to “evoke an association by customers between [t]he Bourbon Cigar on the one hand and Maker’s Mark and the prior Licensed Cigars on the other.”
Maker’s Mark further claimed Spalding Group advertised the Bourbon Cigar in a variety of ways to associate it with Maker’s Mark and the Licensed Cigars, despite Maker’s Mark’s demand that Spalding Group cease and desist.
Maker’s Mark brought this action against Defendants, asserting claims of trademark infringement; false designations, descriptions, and representations; and trademark dilution in violation of the Lanham Act.
It also brought breach of contract, trademark infringement, and false designation and unfair competition claims under Kentucky common law.
Defendants filed a counterclaim alleging various state law claims related to the licensing agreement and seeking to cancel some of Maker’s Mark’s trademark registrations.
To support its trademark infringement claims, Maker’s Mark retained Ran Kivetz (“Dr. Kivetz”), a professor at Columbia University Business School with experience in consumer psychology and surveys. Dr. Kivetz conducted a survey to estimate the likelihood that consumers would mistake the Bourbon Cigars for a Maker’s Mark product.
To rebut Maker’s Mark’s trademark dilution claims, Defendants retained Hal Poret (“Poret”), a public opinion researcher with a master’s degree in mathematics and a law degree from Harvard Law School. Poret conducted surveys to evaluate whether the words “Marker’s Mark” and the red wax design are famous. Defendants later asked Poret to review Kivetz’s likelihood-of-confusion survey and conduct his own.
Neither party challenged the qualifications of the other’s expert; they each argued that the opposing party’s expert’s likelihood-of-confusion surveys were unreliable. Because the challenges were similar, the Court addressed both Daubert challenges together.
Maker’s Mark also retained Michael A. Einhorn (“Dr. Einhorn”) to calculate Defendants’ profits that may be recoverable under 15 U.S.C. § 1117(a). Defendants moved to exclude Einhorn’s testimony regarding the deductions and resulting net profits calculation; they did not challenge his gross profits or royalties calculations, contending that Einhorn was unqualified to calculate Defendants’ deductions and that his testimony was unreliable.
Survey Research Expert Witness
Hal Poret (“Poret”) is a public opinion researcher with a master’s degree in mathematics and a law degree from Harvard Law School. Since 2004, Poret has personally designed, supervised, and implemented over 350 consumer surveys concerning consumer perception, opinion, and behavior, including surveys relating to false advertising, claim substantiation, and trademark/trade dress matters. He has personally designed numerous studies that have been admitted as evidence in legal proceedings and has testified as an expert in over 50 proceedings before U.S. District Courts, the Trademark Trial and Appeal Board, and NAD.
Marketing Expert Witness
Ran Kivetz is the Philip H. Geier Professor of Marketing at Columbia University Business School. He earned a Ph.D. in Business from Stanford University, Graduate School of Business; a Master’s degree in Psychology from the Stanford University Psychology Department; and a Bachelor’s degree from Tel Aviv University with majors in Economics and Psychology. His field of expertise encompasses consumer psychology and behavior; survey methods; marketing management; behavioral economics; human judgment, perception, and decision making; consumer and sales incentives; and branding. Professor Kivetz’s research has won many prestigious awards, including multiple “Best Paper” awards, being a recipient of the New York Times annual “Best Idea” award, and being ranked as the third most prolific scholar in his field during 1982–2006.
Economic Damages Expert Witness
Michael A. Einhorn has a Bachelor of Arts in Economics from Dartmouth College (summa cum laude) and a Ph.D. in Economics from Yale University. Since receiving his Ph.D. in 1981, he has worked as a Member of Technical Staff at Bell Telephone Laboratories, an economist at the United States Department of Justice (Antitrust Division), and a staff economist at Broadcast Music Inc., a collection agency that licenses performance rights in music to major broadcasters, including television networks, local stations, cable companies, and radio stations. He has worked as a testifying expert since 2001. He is also a former professor of economics at Rutgers University (Newark), where he taught courses on macroeconomics, microeconomics, industrial organization, and corporate finance. He is the author of Media, Technology and Copyright: Integrating Law and Economics (2004), which applies economic reasoning to a number of issues in American copyright law with regard to media, entertainment, and technology.
Discussion by the Court
With regard to Defendants’ motion to exclude certain testimony and opinions of Ran Kivetz, the Court analysed Kivetz’s likelihood-of-confusion survey in depth.
Kivetz’s survey was divided into a test group and a control group. The test group participants saw three-dimensional, 360-degree viewable graphics of Defendants’ Bourbon Cigars, first the box, then an individual cigar. The control group participants saw three-dimensional, 360-degree viewable graphics of the box, then an individual cigar, all with the words “Seasoned with Maker’s Mark” on the cigar band replaced with “Seasoned with Bourbon” and the red wax-dipped caps replaced with red plastic caps. Participants could manipulate the images until they were ready, then they proceeded to answer question sets about the product’s source, affiliation, and sponsorship. The first question set was on the product’s source and was open-ended, with participants instructed to write what company they think made the product in a text box below the question (the “source question”), followed by other open-ended questions asking participants to explain their answers. At the beginning of the survey, participants read instructions not to guess and that “don’t know” was an acceptable answer that they could select or type. The other questions asked participants to name companies, products, or brands that the participants thought were affiliated with or sponsored the cigars. Each of those questions had an explicit “don’t know” option, except the open-ended questions asking participants to explain their answers if they provided one. Throughout the survey, an image of the single cigar, either the test or control version depending on the group, remained on the page for participants to view. This image was of the front of the cigar, was not rotatable, and displayed only half of the cigar band, with the test group cigar displaying the words “Seasoned” and “Maker’s,” while “with” and “Mark” on the band and the “ted’s” on the red seal were cut off. Poret conducted likelihood-of-confusion surveys intended to rebut Kivetz’s survey, and it replicated it in all but three ways. First, the participants could view the images, which Poret took from Kivetz’s report, from several angles of the side, top, and bottom, but not a 360-degree view. Second, Poret removed the image of the single cigar from the question pages. Third, Poret provided an express “don’t know” option to the otherwise open-ended source question.
Both the parties filed motions to exclude based on how the opposing party’s expert used images in his likelihood-of-confusion survey and whether it accurately simulated marketplace conditions.
Defendants argued that repeatedly showing participants the single cigar turned Kivetz’s survey into a “reading test,” where they would answer based on the words “Seasoned” and “Maker’s” visible in the repeated image instead of the Ted’s Cigars branding they saw on the cigar box or the branding that was not visible on the single cigar because of the angle. Kivetz’s survey was accused of creating demand effects, or suggesting a “correct” answer to the participants, by leaving an image of the single cigar for participants to view as they answered questions.
Maker’s Mark responded that Poret’s first likelihood-of-confusion survey was an unreliable “memory test” where participants were not continually exposed to the product while they evaluated it like they would have been in the marketplace. Maker’s Mark demanded exclusion of Poret’s survey since the memory test was based on blurry images from limited angles that did not show “Maker’s Mark.”
The Court held that such challenges amounted to little more than professional disagreement about methodology, which concerned the weight and not the admissibility of the surveys considering neither Maker’s Mark nor Defendants cited any authority suggesting either method was uniformly unreliable and instead each cited articles supporting its expert’s method, which indicated that the disagreement existed within the field and the choice was within the expert’s discretion.
Further, the parties’ more specific concerns about the images appeared unfounded. Defendants argued that 33% of Kivetz’s respondents wrote that “Seasoned Maker’s” produced the cigar because it was all that was visible on the individual cigar image, which showed that Kivetz’s survey inflated the level of confusion. Kivetz, however, did not include the “Seasoned Maker’s” responses as evidence of confusion in his calculations. Maker’s Mark argued that because Poret’s survey did not use 360-degree viewable images, participants could not see the words “Maker’s Mark,” but participants could rotate the individual cigar and see “Maker’s” in one image then “er’s Mark” in the next. Defendants similarly asserted that Kivetz’s survey was flawed because no Ted’s Cigars branding was visible in the single cigar image which remained on the page during the survey, but Maker’s Mark’s name was not visible on the cigar either, only “Seasoned” and “Maker’s”. Moreover, before entering the question portion, participants examined the cigar box and single cigar from 360 degrees for at least 30 seconds each until indicating that they could clearly see the images. Respondents who could not clearly see the image were removed from the survey. Accordingly, the Court found that none of these concerns warranted exclusion and the parties were allowed to explain to the factfinder how each expert used images and whether, in their views, those images accurately replicated marketplace conditions and produced accurate results.
One of the other reasons the parties moved to exclude the other’s likelihood-of-confusion surveys was whether or not the initial source question included a “don’t know” answer option. Defendants insisted on the unreliability of Kivetz’s survey because it did not include a “don’t know” answer option for the source question like it did for the other questions. Maker’s Mark conversely argued that an explicit “don’t know” option was inappropriate for an open-ended question, so Poret’s survey, which had an explicit “don’t know” option, artificially increased the number of participants who selected it, thus erroneously reducing the net confusion rate.
The Court noted that Diamond’s article appeared to be discussing a “don’t know” option in the context of closed-ended questions, so Poret’s survey may have been less accurate, but his choice did not mean the entire survey was so informally designed and conducted that it failed key tests of professionalism and reliability. Henceforth, the Court refused to exclude not only Kivetz’s likelihood-of-confusion survey but also Poret’s rebuttal survey.
Poret conducted a second likelihood-of-confusion survey that tested whether the red wax seal itself and not the “Seasoned with Maker’s Mark” label on the Bourbon Cigars was likely to cause confusion. The second survey again replicated the Kivetz Survey with some exceptions: the images were viewable from several angles but not 360 degrees, and the control cigars and the test cigars kept the “Seasoned with Maker’s Mark” band instead of a “Seasoned with Bourbon” band. Maker’s Mark contended that the survey should be excluded because controls must not be infringing and because the survey results could not explain whether participants were confused by the band or the wax seal. The purpose of avoiding infringing or allegedly infringing controls was to be able to tell whether any reported confusion was the result of actual confusion or the flawed control and the fact that the parties highly disputed whether the use of “Maker’s Mark” on the cigar band was likely to cause confusion made it all the more crucial. Defendants did not adequately respond to this concern with Poret’s survey, noting that “Maker’s Mark” on the cigar band may have been non-infringing or a fair use, actively ignoring the fact that even an allegedly infringing element was problematic in the process besides waiving the fair use defense. They cited only Poret’s explanation that his purpose was to isolate the red wax element. The Court noted that Defendants did not carry their burden to prove that Poret’s wax confusion survey was reliable.
Coming to Defendants’ motion to exclude certain opinions and testimony of Michael A. Einhorn, it was noted that Einhorn submitted a report and two supplemental reports in which he calculated Defendants’ gross revenue and deducted Defendants’ costs to arrive at their net profits from the sale of the Bourbon Cigar, besides calculating what royalties would have been due under the licensing agreement. Defendants targeted Einhorn’s testimony regarding the deductions and resulting net profits calculation instead of his gross profits or royalties calculations. Defendants stated that Einhorn was no expert in cost accounting and highlighted his lack of relevant experience in accounting.
The Court, citing Mannino v. Int’l Mfg. Co., 650 F.2d 846, 851 (6th Cir. 1981), held that Einhorn met the minimal qualifications requirement based on his Ph.D. in economics from Yale University as well as decades of experience calculating damages in intellectual property cases. Even though much of his experience has been related to copyright, trademark damages estimations were well-represented on his resume.
When Defendant argued that Einhorn was not qualified to perform the specific calculations in this case, which involved determining which of Defendants’ costs should be deducted from the gross profits to reach the net profits, the Court noted that Einhorn has been admitted to testify regarding essentially the same calculation in copyright cases. The Court deemed Einhorn qualified to express opinions regarding Defendants’ net profits.
Defendants objected to Einhorn’s use of the “incremental approach” in his calculations as opposed to their expert’s use of the “full absorption” approach. The incremental approach subtracts only direct production costs from a Defendant’s gross profits, while the full absorption approach also subtracts the proportion of overhead costs attributable to the product.
While some courts have adopted one method or the other, the Sixth Circuit appears to have not. In a patent case, the Sixth Circuit declined to adopt a uniform rule about whether overhead costs should be deducted from profits because it depends on the facts of each case. The Court observed that trademark remedies authority suggested that the incremental approach is an acceptable method. The Court declined Defendant’s request to exclude Einhorn’s testimony on that basis.
Defendants moved to seal their motion to exclude Einhorn and the attached Exhibits 1-5, 8, and Maker’s Mark moved to seal its response to the motion and Exhibit 1, which included Einhorn’s report and supplemental reports. The documents contained Defendants’ profit margins, sales data, and other financial information. The Court denied the motions filed by both parties.
Held
The Court issued the following rulings:
1. Defendants’ motion to exclude certain testimony and opinions of Ran Kivetz was denied.
2. Plaintiff’s motion to exclude certain expert testimony of Hal Poret was granted in part and denied in part.
3. Defendants’ motion to exclude certain opinions and testimony of Michael A. Einhorn was denied.
4. Defendants’ motion for leave to file under seal was denied.
5. Plaintiff’s motion for leave to file under seal was denied.
The Court has not arrived on an outcome for this case since the remaining issues involved in this case still await resolution.
Key Takeaways:
The Court emphasized that challenges to expert testimony often revolve around methodological differences rather than the admissibility of the evidence itself. Disagreements within the field are common and do not necessarily render expert testimony unreliable.
Regarding the use of images in likelihood-of-confusion surveys, concerns about methodology and the simulation of marketplace conditions were raised by both parties. However, the Court determined that these concerns did not warrant exclusion of the surveys, allowing the parties to present their arguments about the validity of the methodology to the factfinder.
The absence of a “don’t know” option in certain survey questions was debated, with one party arguing that its inclusion artificially affected the results. The Court noted that the survey in question did not fail key tests of professionalism and reliability and refused to exclude the surveys based solely on this issue.
Expert qualifications were also scrutinized, particularly regarding calculations of net profits. Despite challenges to the expert’s qualifications and methodology, the Court deemed the expert sufficiently qualified based on relevant experience and education.
Differences in calculation methods, such as the incremental approach versus the full absorption approach, were considered by the Court. While some courts may have preferences for certain methods, the Court in this case declined to adopt a uniform rule, emphasizing that the appropriateness of a method depends on the specific circumstances of each case.
Case Details:
Case Caption:
Maker’s Mark Distillery, Pbc V. Spalding Group, Inc. Et Al
In this pending lawsuit, which was the product of consolidated cases: Case No. 20-1074, the Lead Case, and Case No. 22-1186, the Member Case, Fazio filed a second amended complaint in the Lead Case against Metropolitan Casualty Insurance Company (“Metropolitan Casualty”), Naihomi Figueroa Fontánez (“Ms. Figueroa”), and Isaías Soto Reyes (“Mr. Soto”) on September 29, 2020. In the complaint, Fazio alleged that while being transported in an Uber ride, his vehicle was struck from behind while stopped at a traffic light, resulting in damages. Fazio contended that all Defendants were jointly and severally liable, entitling him to compensation in excess of one million dollars ($1,000,000). Fazio further alleged that James River breached the provisions of the uninsured motorist coverage as part of a policy issued to Uber “for the benefit of Uber drivers and passengers” by denying coverage and by failing to compensate him for his injuries. Additionally, in the Lead Case, Fazio brought five additional causes of action against James River alone: breach of contract, contractual breach of the implied covenant of good faith and fair dealing, tortious breach of the implied covenant of good faith and fair dealing, bad faith, and unfair claim adjustment practices. In the Member Case, on June 22, 2022, Fazio filed an amended complaint against James River alone, alleging violations of Article II, Section 8 of the Constitution of the Commonwealth of Puerto Rico; violations of the Puerto Rico Libel and Slander Act of 1902, 32 L.P.R.A. §§ 3141-3149; and violations of the general tort provisions of Puerto Rico Civil Code Articles 1536 and 1538, 31 L.P.R.A. §§ 10801 and 10803. In this 2022 lawsuit, Fazio alleged that James River defamed him during the pendency of the Lead Case. On October 6, 2022, James River filed a motion to dismiss all claims in the Member Case, resulting in the Court dismissing with prejudice one of the three causes of action: Fazio’s claim that James River defamed him with its use of the word “extort” during an email exchange between the parties. On September 30, 2022, the Court consolidated both cases. On February 23, 2024, the Court granted James River’s motion for summary judgment as to the remaining two causes of action in the Member Case.
Fazio requested that Fernando Cabrera Jr.’s testimony, whom Defendant James River Insurance Company (“James River”) had declared as an expert witness, be excluded from trial on Daubert grounds and because it violated the Court’s orders.
Psychiatry Expert Witness
Fernando Cabrera is a distinguished and proven expert psychiatrist who has various decades of experience testifying in the Puerto Rico State and Federal Courts. He has over 42 years of experience in the medical field. He graduated from Universidad Central Del Caribe School of Medicine in 1981.
Discussion by the Court
Fazio argued that Cabrera’s report should be excluded on Daubert grounds. Fazio first contended that Cabrera’s opinions in his expert report were not reliable because his methodology and analysis were flawed. The Court found that Fazio did not provide any specificity in his argument that cast a shadow on the methodology used in Cabrera’s report. The methodology behind Cabrera’s report was composed of Fazio’s biodata, description of present illnesses, family history, mental status, and Diagnostic and Statistical Manual of Mental Disorders (“D.S.M.-5”) information, and Cabrera’s observations from a one-and-a-half-hour interview with Fazio and conclusions. Fazio cited various jurisprudence examples of when an expert’s methodology was erroneous but did not apply the principles outlined in the jurisprudence that he cited to Cabrera’s report. For example, Fazio did not explain what facts Cabrera failed to consider, why his conclusions could not have been reached from conducting a one-and-a-half-hour interview, how his methodology was erroneous, or how he conducted a faulty investigation.
Fazio also asserted that Cabrera’s testimony should be excluded because it related almost entirely to the Lead Case, in violation of the Court’s orders. At the time Cabrera was retained, his interview with Fazio was conducted, and his report was produced, discovery in the Lead Case had concluded and the parties were ordered to continue discovery for only the Member Case. However, contrary to what Fazio was suggesting, the facts and damages relating to the Member Case, that is Fazio’s defamation claims, could not be considered in isolation apart from the Lead Case. To accurately determine Fazio’s pain and suffering relating to his defamation claims, a jury would have to be made aware of any pain and suffering Fazio had before the alleged defamation happened, so it could discount said pain and suffering and ensure that Fazio was only being awarded damages relating to the defamation claims. Therefore, it was not improper that Cabrera’s report discussed predefamation pain and suffering. Moreover, it was Fazio who brought the Lead Case and moved to consolidate. Thus, the Court held that Fazio cannot complain that information relating to the Lead Case was being discussed to provide a clear and complete picture of the Member Case.
However, there were two other concerns that needed further discussion warranting Cabrera’s testimony to be excluded at trial. First, Fazio’s motion asserted that Cabrera’s expert report failed to comply with the expert disclosures required under Fed. R. Civ. P. 26(a)(2)(B). The Court observed that James River did not address this failure to provide expert disclosures in its opposition. Nor could Cabrera’s report, on its face, satisfy all of the requirements under Fed. R. Civ. P. 26(a)(2)(B). For example, the report did not refer to compensation paid for Cabrera’s testimony, any publications in the last decade, and previous testimony during the last four years.
Second, even if James River had provided the expert disclosures, the Court declared it was apparent that Cabrera was retained solely for the Member Case. The discovery phase of the Lead Case had closed on August 31, 2021. On November 8, 2022, the Court reiterated that the discovery phase in the Lead Case had closed and set deadlines for further discovery relating solely to the Member Case. Thereafter, on December 30, 2022, James River informed the Court that it had retained Cabrera, among others. Therefore, because discovery of the Lead Case was already closed, James River retained Cabrera solely for the Member Case. Moreover, the only medical opinion that Cabrera gave was regarding the Member Case: “My medical opinion is that Fazio has no emotional conditions that are secondary [to], or related to, the supposed defamation h[e] is alleging in his Complaint against [James River] and its lawyers.” Cabrera’s report, although it made references to circumstances surrounding the Lead Case, was prepared solely for the Member Case, not the Lead Case. In light of the Opinion and Orders dismissing Fazio’s defamation claims entirely, the need to have Cabrera testify about the damages suffered as a result of said claims is moot. Accordingly, Cabrera was not allowed to testify at trial, and Fazio’s motion in limine was granted.
Held
The Court granted Plaintiff’s motion to exclude Fernando Cabrera Jr.’s testimony.
The Court has not arrived on an outcome for this case since the remaining issues involved in this case still await resolution.
Key Takeaways:
When challenging expert testimony on Daubert grounds, specific arguments regarding methodology’s reliability are crucial, as generalized criticisms may not suffice to exclude the testimony. Additionally, expert testimony should be directly relevant to the case at hand, and even if certain aspects relate to other cases, they may be admissible if they contribute to a clear understanding of the current case. It’s imperative for expert reports to comply with legal requirements outlined in the Federal Rules of Civil Procedure, as failure to meet these requirements can be grounds for exclusion. Moreover, experts should be retained within the appropriate scope of the case, and their involvement should align with the specific aspects they are retained for. If expert opinions are not directly relevant to the issues in the case, they may be deemed inadmissible. Lastly, if certain aspects of the case become moot or irrelevant due to court rulings or other developments, expert testimony related to those aspects may be excluded. Overall, careful consideration of the reliability, relevance, compliance with legal requirements, and scope of retention of expert testimony is essential to ensure its meaningful contribution to the case resolution.
