The opinion of the court was delivered by: Hughes, U.S.M.J.
These matters have come before the Court by Defendants' News America Marketing In-Store Services, Inc., et al. ("Defendants") for Motions in Limine to exclude the trial testimony of Floorgraphics, Inc.'s ("Plaintiff") proposed Experts Willard Bishop [dkt. entry no. 148]; William Carrington [dkt. entry no. 149]; Luke Cats [dkt. entry no. 150]; Edward McLaughlin [dkt. entry no. 151]; John Wills [dkt. entry no. 152]; and Paul Farris [dkt. entry no. 152], returnable October 15, 2007. Plaintiff filed opposition to all of these motions on September 17, 2007. Defendants replied on October 1, 2007. The Court conducted oral argument on November 16, 2007.*fn1
For the reasons stated herein, Defendants' motions with regard to Edward McLaughlin and Willard Bishop are granted. Defendants' motions with regard to Luke Cats, William Carrington, John Wills, and Paul Farris are denied.
II. BACKGROUND AND PROCEDURAL HISTORY
Plaintiff and Defendants compete in the in-store marketing industry. They both enter into exclusive contracts with retail and wholesale grocery stores, drug stores, and mass merchandisers ("retailers") to install ads on the shelves and floor of the retailers' stores. Both Plaintiff and Defendants then sell and place ads on the shelves and floor of their stores. They also sell and place ads for consumer packaged goods manufacturers (CPGs) in those retailers' stores.
In this lawsuit, Plaintiff alleges that Defendants engaged in a variety of illegal and tortious practices designed to oust Plaintiff from its retailer contracts, poison Plaintiff's relationships with CPG advertising clients, and run Plaintiff out of business. Defendants' conduct allegedly includes providing false and misleading information about Plaintiff's business and products to clients. Plaintiff also alleges Defendants unfairly structured its bids to retailers in order to falsely portray Defendants' bids as more attractive than Plaintiff's. Plaintiff also alleges tortious interference because Defendants "allegedly hacked into" its password-protected website. Defendants dispute each of Plaintiff's allegations.
In order to prove its case, Plaintiff has attempted to offer these six witnesses as experts pursuant to Federal Rule of Evidence 702. Defendants objected to every one of Plaintiff's proposed experts with these five in limine motions. Each expert will be discussed in turn.
Dr. Carrington is being offered as an expert to discredit Defendants' 2002 audit that measured placement compliance of Plaintiffs, specifically by comparing Plaintiff's contractual obligations to place floor advertisements in supermarkets and other retail stores against Plaintiff's actual performance in doing what it was contracted to do. Here, Defendants argue that Dr. Carrington is not qualified pursuant to Federal Rule of Evidence 702.
Dr. Carrington is an accomplished economist and statistician with a plethora of professional and academic experiences. He received his doctorate degree in economics from the University of Chicago and his Bachelor of Arts degree in economics from Duke University. (Carrington Rep. at ¶ 4.) In addition, he has taught economics and statistics at both the graduate and undergraduate levels at both the University of Chicago and Johns Hopkins University. (Pl.'s Carrington Opp. Br. at 3.) Dr. Carrington also worked for two years as an economist for the Bureau of Labor Statistics, where he developed questionnaires and other survey methodology for the Bureau's data collection programs. (Carrington Rep. at ¶ 4.) Dr. Carrington has published widely on economic analysis in various journals on a variety of industries, principally applying economic and statistical principles to the context of labor economics. (Pl.'s Carrington Opp. Br. at 4.)
Mr. Cats is being offered as an expert to determine whether Defendants "gained unauthorized access to the content of a password-protected website owned by Plaintiff that contained pictures of floor ads that Plaintiff either had placed in past advertising cycles or intended to place in future cycles. (See Cats Rep. at 1.) Plaintiff provided Mr. Cats with a CD containing four files that purported to be copies of the original data that resided on Plaintiff's computer network. Id. at 3.
The first file is a compressed archive of Plaintiff's web server logs for the period from September 8, 2003 to September 8, 2004. Id. at 3. Mr. Cats, relying on this data, concluded that Defendants accessed Plaintiff's password-protected website eleven (11) times on seven (7) days from October 6, 2003 through January 13, 2004 and viewed images of the floor ads. Id. at 7-8; 12. Furthermore, Mr. Cats concluded that Plaintiff's website must have been password-protected. Id. at 5; 7-8; 12. Mr. Cats further opined that the investigation that Defendant conducted after it learned of from Plaintiff about the access to Plaintiff's website was deficient. Id.
Mr. Cats did not create the CD that was provided to him by Plaintiff. Mr. Cats marked the CD "for identification purposes with the client property number 0203-0004; CP000001," made an "exact copy" of the CD, "downloaded the CD to a server," and stored the Plaintiff's provided original in a safe. (See Cats Rep. at 3-4.) Cats relied solely upon the deposition testimony of Michael Povoski, a former employee of Plaintiff. (See Def.s' Cats Br. at 3.) Mr. Cats did not discuss with Mr. Povoski the steps that Mr. Povoski took to create the CD. Id.
In Mr. Cats' report, he ran a program to compare the data in the "apache-logs-040908-all.tar.gz" file with the data that Mr. Povoski had saved to the Plaintiff's network in September of 2004. (Cats Rep. at 4.) The data matched, which led Mr. Cats to believe that the file on the CD "is a complete and accurate copy of the compressed log file saved to the network." Id. Mr. Cats did nothing, however, to ensure or confirm that the data on the network was itself unaltered and complete. (See Cats Dep. at 56-57.) Mr. Cats conceded that the logs could have been altered before he received them. Id. at 54-55.
The second file is called "illegal-access.txt." It purports to be an excerpt from the apache-logs file that contained all of the "logs files showing access to Plaintiff's password protected site" from an IP address that Mr. Cats links to Defendant. (Def.s' Cats Br. at 4.) He submitted this program without running a program to compare the data in the "illegal-access.ext" file with the data that Mr. Povoski previously saved to the Plaintiff's network. (Cats Dep. at 64.) After Mr. Cats read the report of Defendants' computer expert, he did perform the comparison. Mr. Cats did not conduct "any analysis to determine whether there had been any alteration or modification to the data on that log prior to it being saved." Id. at 64-65. Mr. Cats also noted that the data on the file could have been manipulated "fairly easily". Id. at 65.
The third and fourth files are (1) a file called "login-screen.jpg" that purports to be a screen capture of a web browser requesting the website www.floorgraphics.com/clients and (2) a file called "old-clients-website.tar.gz," which Mr. Cats identified as a compressed archive of the entire contents of the www.floorgraphics.com/clients website. (Cats Rep. at 3.) Mr. Cats did not run a comparison program on these files to confirm that the underlying data from the network was both unaltered and complete. (Def.s' Cats Br. at 5.) Mr. Cats opines that Defendants "could have downloaded and saved files in a short period of time, and subsequently printed or e-mailed the files to others while offline." (Cats Rep. at 9.) He could not, however, determine from the logs what the user did with the information. (Cats Dep. at 74.) Mr. Cats also conceded that he did not have "any idea" of the types of images that Defendant allegedly viewed on the website, but rather he simply "reconstructed" his conclusions from the admittedly unverified logs, instead of actually viewing the web pages that formed the basis of those conclusions. (Def.s' Cats Br. at 6.)
Mr. Cats also concludes that Plaintiff's website was password-protected because the data on the CD reflected a "pop-up box requesting a user name and password" to enter Plaintiff's website. (Cats Rep. at 5.) Mr. Cats, however, did not determine the adequacy of the password protection of Plaintiff's website and did not independently conclude that the alleged access by Defendants was "unauthorized". (Def.s' Cats Br. at 6; Cats Dep. at 48-50; 74-75.)
Mr. Cats also criticized the internal investigation that Defendants conducted after their management was informed that someone with Defendants had allegedly accessed Plaintiff's website. (Cats Rep. at 11-12.) Mr. Cats conceded, however, that he did not know much about the circumstances surrounding Defendants' investigation and that his initial conclusions about the investigation were inaccurate because Defendants had actually completed at least one of the investigatory steps that Mr. Cats faulted them for not taking. (Cats Dep. at 126-28.)
Although Mr. Cats did not assess the reliability of four underlying files that were provided to him from Plaintiff, there is uncontradicted evidence from Plaintiff's head of information technology, Mr. Povoski, that shows that Plaintiff's computer logs were unaltered and entirely reliable. (Pl.'s Cats Opp. Br. at 1.) Also, Defendants' own computer expert, Mr. Brill, admitted that there was no evidence that the server logs and files were altered or manipulated. Id. Defendants' expert further opines that, assuming the evidence is authentic, Defendants accessed Plaintiff's password-protected website on the dates and times that Mr. Cats identified. Id. Furthermore, in response to requests for admissions, (1) Defendants admits the it was never given permission to access Plaintiff's computers, (2) admits that the internet address of the computer that accessed Plaintiff's password-protected site was owned by Defendants, and (3) claims that despite an internal investigation, Defendants cannot admit or deny whether Defendants' computers accessed the password-protected areas of Plaintiff's website. Id. at 2.
Mr. Wills was retained by Plaintiff's counsel and asked to review relevant information pertaining to the claims in the case and quantify damages, if any, related to such claims. (Wills Rep. at 1.) Moreover, Mr. Wills was asked to compute an estimate of such losses if his analyses demonstrated lost profits attributable to the Defendants. Id. at 1-2. Mr. Wills, who assumed that Defendants were found liable on every count in the Complaint, concluded that the combined effect of the improper conduct by Defendant alleged in those counts "negatively impacted the sales of Plaintiff" between 2003 and 2007 by $180.2 million, resulting in lost profits, after interest was accounted for, of $55.64 million. (See Wills Rep. at 3.)
Mr. Wills is a managing director in the consulting firm of Dispute Analytics LLC. Id. at 1. He is a Certified Public Accountant, a Certified Valuation Analyst, and a former partner of Pricewaterhouse Coopers with over thirty years of experience. (Pl.'s Wills Opp. Br. at 8.) He has spent the last thirteen years providing services to law firms, corporate counsel, government, and non-profit organizations. Id. Mr. Wills currently serves as an adjunct professor at Georgetown University where he has taught courses at the undergraduate and graduate level at the McDonough School of Business. Id. He has testified as a witness on over thirty-five occasions. Id.
Dr. Farris was retained by Plaintiff to opine as to whether Defendants' alleged improper actions caused Plaintiff to lose value as a business concern. (Farris Rep. at 44-49.) Dr. Farris is the Managing Director of Dispute Analytics, a former partner of PricewaterhouseCoopers, and a member of the adjunct account faculty at the Darden School of Business at the University of Virginia. (Pl.'s Wills Opp Br. at 1.)
He concluded that the combined result of Defendants' action, specifically the alleged unauthorized access to Plaintiff's computer information and misleading statements about Plaintiff's compliance rates and financial stability, caused Plaintiff's base of retailed and CPG customers to significantly deteriorate in the amount of $178,000,000. Id. at 4.
Dr. Farris relied on Mr. Wills 2006 estimates of lost revenue and earning before interest, taxes, depreciation, and amortization ("EBITDA") as the basis for his own damage analysis. (Def.s' Wills Br. at 5.) Mr. Farris arrived at his damage estimate by multiplying Mr. Wills' estimates of lost revenue at three (3) percent and lost EBITDA for 2006 at eleven point five (11.5) percent, and choosing the midpoint of the resulting figures. (Farris Rep. at 47.) He based those multiples on the ratios of enterprise value to revenue for Catalina Marketing ("Catalina") and Insignia Systems ("Insignia") and EBITDA for only Catalina as of March 31, 2007. (Def.s' Wills Br. at 5.) Dr. Farris used those companies as benchmarks for estimating an appropriate value of a revenue earnings multiple for Plaintiff. Id. At his deposition, Dr. Farris stated that he selected both Catalina and Insignia because the investment banking firm CIBC use those two companies as comparables in its valuation of Plaintiff when CIBC was trying to sell Plaintiff "in or about 2001". (See Farris Rep. at 46-47.) Dr. Farris also stated that "[i]n their 2001 valuation, CIBC used guideline companies that operated in the in-store marketing segment or which had similar growth prospects and valued [Plaintiff] based on multiples of revenue and of earnings before [EBITDA]." Id. at 47.
CIBC, in its 2001 valuation, used three comparables: Catalina, Insignia, and Lamar Advertising ("Lamar"), all of which are publicly traded companies. Id. Dr. Farris did not include Lamar because he felt that "it was less comparable as it does not rely on any major retailers for advertising space." Id. Dr. Farris stated in his deposition that Catalina and Insignia were in many respects different from Plaintiff. (Farris Dep. at 288-91; 294-99; 302.) For instance, Plaintiff's sales, which were $25,000,000 in 1999, were significantly lower than Catalina's sales, which totaled $264,000,000 in 1999. (Def.s' Wills Br. at 6.) Dr. Farris does not know whether Plaintiff and Catalina were similar in regard to debt-to-equity rations, value of fixed assets, organizational structures, number of employees, cash flows, levels of external funding required to fund future growth, dividend payouts, debt service obligations, or EBITDA to relative sales. (See Farris Dep. at 288-91; 294-303.)
Dr. McLaughlin was retained by Plaintiff to provide background on industry standard operations and practices and to analyze the impact of Defendants' alleged misconduct. (Pl.'s McLaughlin Opp. Br. at 5.) Specifically, he opined that Defendants' conduct, if true, "would have substantially impaired [Plaintiff's] ability to conduct business successfully and indeed could have led to the ruination of [Plaintiff's] business." Id. Furthermore, he opined that, if the allegations were true, "it was [his] opinion that the impact of Plaintiff's business [from false and misleading audits] is likely to have been detrimental, or even ruinous." Id. In addition, "it was [his] opinion that these written communications [from NAM to Retailers] would have received a great deal of written attention among retailers and would have likely created a very negative impression of [Plaintiff]." Id. at 6. Lastly, Dr. McLaughlin concluded that "such negative information [about Plaintiff's insolvency] is likely to have caused considerable damage to [Plaintiff's] reputation and thus their ability to conduct business." Id.
Dr. McLaughlin has his masters and doctorate degrees in Agricultural Economics from the University of Vermont and Michigan State University, respectively. Dr. McLaughlin specializes in food marketing economics and policy analysis. Id. at 3. He has published over one hundred peer-reviewed books, articles, research reports and other papers pertaining specifically to food retailers, wholesalers, manufacturers, and food industry marketing and decision-making. Id. at 3-4. At Cornell University, he is the Robert Tobin Professor of Marketing University, the Director of the Undergraduate Business Program, the Director of the Food Industry Management Program, and the Director of the Food Executive program. Id.
In reaching his conclusions, Dr. McLaughlin developed an "industry survey instrument" which he used in interviewing twenty-eight (28) individuals. (McLaughlin Rep. at 7.) Of these twenty-eight (28) individuals, fourteen (14) were employees of retailers, nine (9) were employees of CPGs, and the other five (5) interviewees were from entities that Dr. McLaughlin described as "adjacent companies that provide support to or are involved with in-store-like promotion material." Id.; McLaughlin Dep. at 153-54. Of these interviewees, Dr. McLaughlin identified one person who was responsible for deciding whether to contract with Plaintiff or Defendant. See McLaughlin Dep. at 168. Dr. McLaughlin either knew the interviewees personally or they were recommended to him by people whom he knew personally. Id. at 144-45; 147-48.
Defendants argue that Dr. McLaughlin did not use a standard questionnaire in conducting his interviews, did not record verbatim either the questions that he asked or the answers that he received, did not retain his notes from the interviews, failed to interview people from companies that were geographically representative, and used an unreasonably small sample of people from whom to interview. (See Def.s' McLaughlin Br. at 3-8.) Specifically, although Dr. McLaughlin concludes that "although a limited sample, every person interviewed . . . that had had previous personal knowledge of the dealings and performance of [Plaintiff] and [Defendants] confirmed that their opinions of the financial and operating soundness of [Plaintiff] had been negatively influenced by information provided by [Defendants'] agents," (McLaughlin Rep. at 16), he was not able to identify a single interviewee who supported that "conclusion" or had that reaction. (Def.s' McLaughlin Br. at 6.)
Defendants contends that there is no explanation in Dr. McLaughlin's Report as to why none of the interviewees led Dr. McLaughlin to the conclusion that the interviewees' opinions were influenced by the alleged business disparagement. Id. Indeed, the only interviewee that Dr. McLaughlin identified who indicated that he was familiar with both of Plaintiff and Defendant was Dan Dmochowski of Safeway. Id. at 6-7. Mr. Dmochowski apparently did not tell Dr. McLaughlin that his opinions about Plaintiff had been negatively influenced by Defendant. Id. at 7. Rather, he said that "his opinion of [Plaintiff] was based on other completely different factors -- namely that the owner and senior executives of [Plaintiff] were "bizarre to deal with". Id.; McLaughlin Dep. at 167; 257; 346-47. Moreover, Dr. McLaughlin's interview notes expressly stated that the interviewees would not likely be influenced by negative comments that one marketing services company made about another, and would not terminate a contract based on hearing such comments unless there was substantial evidence that a vendor had failed to comply with its contractual obligations. (Def.s' McLaughlin Br. at 7.)*fn2
Plaintiff argues that Dr. McLaughlin's expert testimony was not a "public opinion poll" or "survey" that was meant to be quantified. (Pl.'s McLaughlin Opp. Br. 8-9.) Moreover, Plaintiff stresses that Dr. McLaughlin's opinions are based upon his vast experience in the industry. Id. at 6.
Plaintiff retained Dr. Bishop in July 2007 to "provide an opinion on the May 7, 2007 report of Dr. McLaughlin and the June 28, 2007 report of Dr. Ericksen, Defendants' comparable expert, that criticized Dr. McLaughlin's report." (Bishop Rep. at 1.) Plaintiff named Dr. Bishop pursuant to the Court's Order allowing Plaintiff the option of naming an additional expert to respond to Defendants' additional expert. (Pl.'s Bishop Opp. Br. at 2.) Dr. Bishop reviewed Dr. McLaughlin's report, Dr. Ericksen's report, and Dr. McLaughlin's deposition in undertaking his analysis. (Bishop Rep. at 3.) Based on those three documents, Dr. Bishop opined that Dr. McLaughlin's work reflected his specialized knowledge of the grocery industry. Id. at 3-5. He also opined that Dr. McLaughlin properly conducted "executive interviewing," which, according to him, is a method that "is accepted as reliable by academics, consultants, and executives in the U.S. grocery industry" to "gather information about trade practices." Id. at 3-4, 6.
Dr. Bishop asserts that "executive interviewing" differs from survey research in several ways. First, he asserts that "executive interviewing" does not require random selection, but instead may be conducted with an intentionally defined population." (Def.s' Bishop Br. at 3.) He contends that Dr. McLaughlin's selection of interviewees accord with "principles relied upon by most practitioners of executive interviewing in the grocery business." (Bishop Rep. at 7.) Dr. Bishop also justifies Dr. McLaughlin's decision to include interviewees with whom he had prior personal or business relationships. (Def.s' Bishop Br. at 3.) He states that this approach "involves principles that are relied upon by others doing executive interviewing in the grocery business." (Bishop Rep. at 7-8.) He opines that Dr. McLaughlin is "uniquely well-positioned" to conduct the interviews because executives are typically "very busy" and "not motivated" to speak with executive interviewers. Id. at 8. He further opines that Dr. McLaughlin's work as director of the Food Executive Program at Cornell University "gives him the access and the ability to personally interview an unparalleled number of individuals." Id. Moreover, he states that the ...