United States District Court, D. New Jersey
EZAKI GLICO KABUSHIKI KAISHA and EZAKI GLICO USA CORPORATION, Plaintiffs,
LOTTE INTERNATIONAL AMERICA CORP. and LOTTE CONFECTIONERY CO. LTD., Defendants.
DUNN WETTRE, UNITED STATES MAGISTRATE JUDGE
the Court is the letter application of Ezaki Glico Kabushiki
Kaisha and Ezaki Glico USA Corp. ("Plaintiffs" or
"Glico") to strike the supplemental expert report
of Ambreen Salters and/or for sanctions against Lotte
International America Corp. and Lotte Confectionery Co. Ltd.
("Defendants" or "Lotte") pursuant to
Rule 37(c) of the Federal Rules of Civil Procedure. (ECF Nos.
191, 197). Defendants oppose the application. (ECF No. 195).
The Court heard oral argument on September 28, 2018 and
reserved decision. (ECF No. 245). Having considered the
parties' written submissions and arguments, and for the
reasons set forth below, plaintiffs' application to
strike is DENIED, but the application for sanctions is
with the facts and extensive procedural history of this case
is presumed, and the Court will only discuss those facts that
are relevant to the instant decision. Briefly, this is a
trademark infringement and unfair competition action
involving Glico's Pocky brand and Lotte's Pepero
brand biscuit stick products. Pursuant to 15 U.S.C. §
1117(a), a prevailing plaintiff in such an action is entitled
to recover a defendant's profits. The statute provides
thata[i]n assessing profits the plaintiff shall be
required to prove defendant's sales only; defendant must
prove all elements of cost or deduction claimed."
Id. Thus, plaintiffs retained John Hansen as their
damages expert to establish defendants' sales, and
defendants retained Ambreen Salters as their damages expert
to establish deductible costs and resulting profits. In a
stipulation and order dated February 20, 2018, the Court
approved the parties' proposal that opening expert
reports be served on April 13, 2018 and rebuttal expert
reports be served on May 14, 2018. (ECF No. 153).
served Ms. Salters' rebuttal expert report on May 14,
2018. In this report, Ms. Salters calculated Lotte's
profits by deducting from total Pepero revenues (1) the cost
of goods sold and (2) certain operating expenses. (StoneTurn
Ex. 4, ECF No. 192-7; Hansen Supp. Report ¶ 14, ECF No.
195-2). In determining the amount of deductible operating
expenses, Ms. Salters relied on hundreds of pages of
financial documents that defendants had not produced to
plaintiffs prior to the February 20, 2018 close of fact
discovery or the service of the expert report. Ms. Salters
also relied on previously undisclosed interviews she
purportedly conducted of defendants' employees, including
Lotte's accounting manager, Ms. Joanne Joo Hee Lee, who
provided information about which expenses were "directly
related to Pepero" and thus properly included in the
calculation. (StoneTurn Ex. 4, footnotes (c)-(j), (I)-(o)).
defendants only produced this operating expense financial
information after the close of fact discovery, Mr. Hansen was
not able to consider it in his own analysis in his opening
expert report. (Hansen Decl. ¶ 5, ECF No. 191-1). In an
attempt to mitigate the potential prejudice resulting from
defendants' untimely production of the financial
information on which their expert relied, plaintiffs worked
with defendants in good faith to resolve the issue without
Court intervention. The parties ultimately entered into a
stipulation dated June 11, 2018 whereby defendants agreed to
produce Ms. Lee for a deposition pursuant to Rule 30(b)(6) of
the Federal Rules of Civil Procedure to testify on the
subject of the late-produced operating expense information.
(ECF No. 188). Defendants further agreed to pay for the court
reporter, videographer, and translator for the Rule 30(b)(6)
deposition. (Id.). Finally, the parties agreed that
plaintiffs' economic expert could submit a supplemental
report addressing the newly produced operating expense
documents, Ms. Salters' opinions relating to those
financial documents, and Ms. Lee's Rule 30(b)(6)
deposition testimony on behalf of defendants. (Id.).
The Court extended the deadline for expert depositions to
accommodate the arrangement set forth in the parties'
counsel reviewed the newly produced operating expense
documents in preparation for the Rule 30(b)(6) deposition and
traveled to Los Angeles to depose Ms. Lee on June 15, 2018.
(ECF No. 191). At deposition, Ms. Lee contradicted many of
the facts underlying defendants' own expert's damages
analysis. Plaintiffs' damages expert reviewed the newly
produced financial documents, as well as Ms. Lee's
damaging deposition testimony, and, as agreed, prepared and
delivered to defendants a supplemental report dated July 2,
2018. (Hansen Supp. Report, ECF No. 195-2). Believing that
they finally had all of the information underlying Ms.
Salters' May 14, 2018 expert report, plaintiffs'
counsel turned tiieir attention to preparing for her July 12,
12, 2018, minutes before Ms. Salters' deposition was
scheduled to begin, defense counsel handed to plaintiffs'
counsel a "supplement" to her May 14, 2018 report.
(July 12, 2108 Tr. at 3:15-19, ECF No. 193-8). Defense
counsel explained that "Ms. Salters received Mr.
Hansen's supplemental expert report nine days ago. After
considering and analyzing Mr. Hansen's report and the
deposition of Joanne Joo [Hee] Lee, Ms. Salters made
revisions to her own expert report pursuant to Federal Rule
26 and those revisions were provided to you today."
(Id. at 7:22-8:6).
revisions in the July 12, 2018 supplement were substantial.
They comprised three material changes to her May 14, 2018
expert report. First, whereas the original report calculated
Lotte's Pepero profits by deducting from revenues both
cost of goods sold and certain operating expenses, the
supplemental report deducts only cost of goods sold. (Salters
Decl. ¶ 6, ECF No. 195-1; Hansen Decl. ¶¶
13-14). Next, the supplemental report revises the cost of
goods sold calculation to exclude non-Pepero products she
claims were "erroneously" included in the original
report's analysis. (Salters Decl. ¶ 7; Hansen Decl.
¶ 14; compare StoneTurn Original Workpaper 11,
ECF No. 192-15 with StoneTurn Supp. Workpaper 11,
ECF No. 192-16). Finally, the supplemental report adopts Mr.
Hansen's suggested methodology for estimating cost of
goods sold for the years 2009-2012. (Salters Decl.
¶¶ 8-9). In her original report, Ms. Salters
estimated the cost of goods sold for 2009-2012 by taking the
simple average of cost of goods sold in other years; in her
supplemental report, she adopts Mr. Hansen's opinion that
a weighted average methodology would produce a "more
accurate" estimate of cost of goods sold, "[e]ven
though the methodology used in [the] May 14, 2018 report ...
is reliable and can be used by damages experts."
(Id. ¶ 9). Ms. Salters candidly acknowledges
that she created the supplemental report in response to
"suggestions" in Mr. Hansen's supplemental
report, as well as Ms. Lee's Rule 30(b)(6) deposition
testimony. (W.¶¶7-8, 11). Plaintiffs' counsel
objected to the late-produced supplemental report on the
record at the start of what was to be Ms. Salters' July
12, 2018 deposition:
first notice of this supplement that I or anyone from my team
had was when counsel handed it to me this morning. This
supplement was not authorized by the court or any agreement
of the parties. . . . You've had the report of John
Hansen for ten days. You knew you were preparing something
like this, and you gave us no advance notice. It's
totally unreasonable to expect us to digest this in any
intelligent way and examine and ask questions about it today.
(July 12, 2108 Tr. at 3:20-4:21). Defense counsel
nevertheless insisted that plaintiffs' counsel depose Ms.
Salters on the new report that had been produced with no
advance notice only minutes before. (Id. at 6:1-5).
Plaintiffs' counsel declined to proceed on that
condition, explaining on the record:
I understand from counsel that Ms. Salters intends to refer
to and rely upon the so-called supplement to her rebuttal
report if we go forward with this deposition today. Again,
this is the report that counsel handed me this morning at the
time that the deposition was supposed to begin with no other
advance notice. So it was after the deadline for the
disclosure of Ms. Salters' expert opinion and it's
improper and prejudicial to attempt to supplement now. Lotte
can't force us to take a deposition that will be based on
substance that we have not been able to analyze and that was
disclosed long after the deadline for that opinion.
(Id. at 7:1-15).
now move to strike Ms. Salters' supplemental report or,
in the alternative, for monetary sanctions in the full amount
of the fees, costs, and expenses associated with
plaintiffs' efforts to investigate the operating expense
information on which Ms, Salters no longer relies.
object to monetary sanctions and/or exclusion of the
supplemental report, contending that Ms. Salters had a duty
to supplement her May 14, 2018 expert report to include
"new information" pursuant ...