Filed: Jul. 08, 2019
Latest Update: Jul. 08, 2019
Summary: ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION IN LIMINE 10 Re: ECF No. 316 LAUREL BEELER , Magistrate Judge . Defendant Oracle Corp. moves to exclude "any new and undisclosed computations of [Grouse River's] lost profits or out-of-pocket damages." 1 Plaintiff Grouse River Outfitters Ltd. filed an opposition, 2 Oracle filed a reply, 3 Grouse River filed a sur-reply, 4 and the court held a hearing. For the reasons stated on the record at the hearing and below, the court gr
Summary: ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION IN LIMINE 10 Re: ECF No. 316 LAUREL BEELER , Magistrate Judge . Defendant Oracle Corp. moves to exclude "any new and undisclosed computations of [Grouse River's] lost profits or out-of-pocket damages." 1 Plaintiff Grouse River Outfitters Ltd. filed an opposition, 2 Oracle filed a reply, 3 Grouse River filed a sur-reply, 4 and the court held a hearing. For the reasons stated on the record at the hearing and below, the court gra..
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ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION IN LIMINE 10 Re: ECF No. 316
LAUREL BEELER, Magistrate Judge.
Defendant Oracle Corp. moves to exclude "any new and undisclosed computations of [Grouse River's] lost profits or out-of-pocket damages."1 Plaintiff Grouse River Outfitters Ltd. filed an opposition,2 Oracle filed a reply,3 Grouse River filed a sur-reply,4 and the court held a hearing. For the reasons stated on the record at the hearing and below, the court grants in part and denies in part Oracle's motion in limine.
1. Governing Law
"[Federal] Rule [of Civil Procedure] 26(a)(1)(A)(iii) requires the disclosure of `a computation of each category of damages claimed by the disclosing party.'" Hoffman v. Constr. Protective Servs., Inc., 541 F.3d 1175, 1179 (9th Cir. 2008). "Rule 26(e)(1)(A) requires disclosing parties to supplement their prior disclosures `in a timely manner' when the prior response is `incomplete or incorrect.'" Id. "`Rule 37(c)(1) gives teeth to these requirements by forbidding the use at trial of any information required to be disclosed by Rule 26(a) that is not properly disclosed.'" Id. (quoting Yeti by Molly Ltd. v. Deckers Outdoor Corp., 259 F.3d 1101, 1106 (9th Cir. 2001)). "Under Rule 37, exclusion of evidence not disclosed is appropriate unless the failure to disclose was substantially justified or harmless." Id. (citing Yeti by Molly, 259 F.3d at 1106). "[This] portion of Rule 37 . . . has been described as a `a self-executing, automatic sanction to provide a strong inducement for disclosure of material.'" Id. at 1180 (quoting Yeti by Molly, 259 F.3d at 1106). "The implementation of the sanction is appropriate `even when a litigant's entire cause of action will be precluded.'" Id. (internal brackets and ellipsis omitted) (quoting Yeti by Molly, 259 F.3d at 1106). "The theory of disclosure under the Federal Rules of Civil Procedure is to encourage parties to try cases on the merits, not by surprise, and not by ambush." Ollier v. Sweetwater Union High Sch. Dist., 768 F.3d 843, 862 (9th Cir. 2014).
"Computation of each category of damages," as used in Rule 26, "contemplates some analysis beyond merely setting forth a lump sum amount for a claimed element of damages." Silver State Broad., LLC v. Beasley FM Acquisition, No. 2:11-CV-01789-APG-CWH, 2016 WL 320110, at *2 (D. Nev. Jan. 25, 2016) (citing City and Cty. of San Francisco v. Tutor-Saliba Corp., 218 F.R.D. 219, 221 (N.D. Cal. 2003) and other cases), aff'd, 705 F. App'x 640 (9th Cir. 2017). A party cannot satisfy its Rule 26 obligation to provide a "computation of each category of damages" simply by producing to the other side the documents or figures the disclosing party claims support its damages claims. "Rule 26(a) . . . requires Plaintiffs to disclose their `computation' of lost profits, and cases have rejected the claim that the mere possession of raw financial data by the opposing party satisfies Rule 26." Bennion and Deville Fine Homes Inc. v. Windermere Real Estate Servs. Co., No. ED CV 15-01921-DFM, 2018 WL 4802011, at *6 (C.D. Cal. July 17, 2018) (quoting Spin Master, Ltd. v. Zobmondo Entm't, LLC, No. CV 06-3459 ABC (PLAx), 2011 WL 13127349, at *6-7 (C.D. Cal. Sept. 15, 2011), vacated on recons. in part, 2011 WL 13127211 (C.D. Cal. Oct. 13, 2011)); accord, e.g., Silver State, 2016 WL 320110, at *4 ("[A] plaintiff cannot shift to the defendant the burden of attempting to determine the amount of the plaintiff's alleged damages. The Defendants are not required to compute damages, Rule 26 requires plaintiffs to do so.") (citations and internal quotation marks omitted). For example, a plaintiff's disclosing "lump sums for each year of decline in its business and a lump sum for lost business opportunities" without "describ[ing] the assumptions required to calculate those lump sums" or "explain[ing] how it calculated its annual lost revenues, or how it calculated damages from lost business opportunities," is insufficient to comply with Rule 26. Valley Surgical Ctr. v. Cty. of Los Angeles, No. CV 13-2265-DDP (AGRx), 2017 WL 10574240, at *3 (C.D. Cal. June 29, 2017).
2. Application
In its motion, Oracle asks the court to exclude Grouse River's claimed damages for its supposed failure to comply with its Rule 26 disclosure obligations. The court therefore addresses only the Rule 26 issue and does not address whether Grouse River has admissible evidence to support its claimed damages.5
Grouse River produced an initial chart of claimed damages with its initial disclosures on December 27, 2016.6 It produced an updated version of this chart on May 19, 2017, during its Rule 30(b)(6) deposition.7 It then produced a spreadsheet that it claims supports the damages figures in its chart.8 The court addresses each category of damages in turn.
PROJECT COSTS
Paid to NetSuite (initially disclosed as Adequately disclosed
$360,000; disclosed on revised chart as
$360,000; disclosed on spreadsheet as The amount that Grouse River paid to NetSuite
$405,690.62) was disclosed on the "Project Costs by Vendor"
and "NetSuite" tabs of the spreadsheet.9
Paid to partners, consultants, systems, and Adequately disclosed
support related to NetSuite (initially
disclosed as $200,000; disclosed on revised Grouse River's computations were disclosed on
chart as $200,000; disclosed on the "Project Costs by Vendor" and subsequent
spreadsheet as $158,548.68) tabs of the spreadsheet.10
Project-related wages (initially disclosed as Inadequately disclosed
$1,000,000; disclosed on revised chart as This number appears to be derived from the
$1,200,000; disclosed on spreadsheet as "Wage Impact" tab of the spreadsheet.11 That tab
$1,342,309.59) takes a column labeled "Wages" and multiplies it
by a column labeled "% Allocation to [NetSuite]
Project & Repercussions" to arrive at a "Wages
Allocated to NetSuite." Assuming without
deciding that the total wages were adequately
disclosed, the spreadsheet provides no explanation
of how the % Allocation column was calculated or
what assumptions went into those percentages.
This is inadequate. Cf. Valley Surgical, 2017 WL
10574240, at *3.
REPERCUSSIONS ON REVENUE, INTRODUCTION OF INEFFICIENCIES, ADDITIONAL COSTS
Lost gross profits (not initially disclosed Inadequately disclosed
(lost revenue was disclosed instead);
disclosed on revised chart as $6500000; This number appears to be derived from the
disclosed on spreadsheet as $6666299.50) "Revenue Impact" tab of the spreadsheet.12 That
tab takes a column labeled "Actual Revenue' (not
profits), and then derives from it a column labeled
"Sales Delta" based on an assumption that Grouse
River's revenue would have grown $1.5 million
per year, and then totals the entries in the Sales
Delta column and multiplies it by 35% (without
explanation) to arrive at a figure labeled "Lost
Gross Profits." This spreadsheet does not provide
any explanation of the assumptions for Grouse
River's continued growth, the 35% rate, or any
other assumptions behind its conversion from an
initial column of "Actual Revenues" (not profits)
to a column of hypothetical "Lost Profits" (not
revenues). This is inadequate. Cf. Valley Surgical,
2017 WL 10574240, at *3 (a plaintiff's disclosing
"lump sums for each year of decline in its
business and a lump sum for lost business
opportunities" without "describ[ing] the
assumptions required to calculate those lump
sums" or "explain[ing] how it calculated its
annual lost revenues, or how it calculated
damages from lost business opportunities," is
insufficient to comply with Rule 26); Frontline
Med. Assocs. v. Coventry Health Care, 263 F.R.D.
567, 569 (C.D. Cal. 2009) (disclosures of
revenues without, e.g., computations of expenses,
are not sufficient to constitute disclosures of lost
profits).13
Write-off of costs associated with business Inadequately disclosed
downsizing (initially disclosed as
$600,000; disclosed on revised chart as This number appears to be derived from the
$600,000; disclosed on spreadsheet as "Equipment" tab of the spreadsheet.14 This tab
$468,868) contains rows labeled "Leaseholds," "Furniture &
Fixtures," and "Computer Equipment," with no
explanation of what these numbers are or how
they relate to any write-off of costs associated
with business downsizing or the assumptions that
went into this computation. This is inadequate.
Lease expenses related to project Adequately disclosed
associated requirements for staffing and
testing of secondary location (not Grouse River's computations were disclosed on
separately listed in initial disclosures or the "Lease" tab of the spreadsheet.15 (The court's
revised chart; disclosed on spreadsheet as holding that Grouse River's computations were
$202,064.72) adequate for Rule 26 purposes does not mean that
that these lease expenses are proper damages that
Grouse River can claim against NetSuite.)
Legal and Financial Expenses incurred Inadequately disclosed
from negative project impact (initially
disclosed as $250,000; disclosed on revise This number appears to be derived from the
chart as $300,000; disclosed on "Finance Costs" and "Legal Fees" tabs of the
spreadsheet as $423,289.79) spreadsheet,16 but this tab simply lists shareholder
loans and interest taken on the loans and apparent
legal fees paid, with no explanation of how these
numbers relate to the "negative project impact" or
the assumptions that went into this computation.
This is inadequate.
Lost co-op and vendor early-pay discounts Inadequately disclosed
(initially disclosed as $450,000; disclosed
on revised chart as $450,000; disclosed on This number appears to be derived from the "Ad
spreadsheet as $258,182.20) Expense Impact" tab of the spreadsheet,17 but this
tab does not adequately explain its computations
(and, among other things, appears to arbitrarily
add $100,000 in additional damages for "Loss of
vendor sponsored ads & access to promo
opportunities," without explaining how this figure
was calculated). This is inadequate.
Inability to address shrinkage, inventory Inadequately disclosed
errors, and margin inefficiencies through
lack of visibility into go-live deliverables It is not clear how or from where these numbers
(initially disclosed as $350,000; disclosed were computed. It is not readily apparent from
on revised chart as $300,000; disclosed on where in the spreadsheet they come (if at all) or
spreadsheet as $500,000) what assumptions went into this calculation. They
appear to simply be lump-sum figures, which is
insufficient. Cf. Valley Surgical, 2017 WL
10574240. Even assuming that these numbers are
somehow derivable from the spreadsheet, it is not
clear how this would be done. This is insufficient;
it is Grouse River's obligation to clearly disclose
its damages computation, not Oracle's (or the
court's) job to try to piece it together for Grouse
River. Cf. Silver State, 2016 WL 320110, at *4.
FUTURE COSTS
NetSuite Future (disclosed initially, on Inadequately disclosed
revised chart, and on spreadsheet as
$45,000) It is not clear how or from where these numbers
were computed. It is not readily apparent from
where in the spreadsheet they come (if at all) or
Partners & Consultants Future (disclosed what assumptions went into this calculation. They
initially, on revised chart, and on appear to simply be lump-sum figures, which is
spreadsheet as $75,000) insufficient. Cf. Valley Surgical, 2017 WL
Wages Future (disclosed initially, on 10574240. Even assuming that these numbers are
revised chart and on spreadsheet as somehow derivable from the spreadsheet, it is not
$325,000) clear how this would be done. This is insufficient;
it is Grouse River's obligation to clearly disclose
Lost co-op and vendor early-pay discounts its damages computation, not Oracle's (or the
(initially disclosed as $550,000; disclosed court's) job to try to piece it together for Grouse
on revised chart as $500,000; disclosed on River. Cf. Silver State, 2016 WL 320110, at *4.
spreadsheet as $500,000)
Inability to address shrinkage, inventory
errors, and margin inefficiencies through
lack of visibility (initially disclosed as
$350,000; disclosed on revised chart as
$500,000; disclosed on spreadsheet as
$500,000)
FUTURE COSTS MIGRATION
Software (disclosed initially, on revised Inadequately disclosed
chart, and on spreadsheet as $150,000)
Implementation & Services (disclosed It is not clear how or from where these numbers
initially, on revised chart, and on were computed. It is not readily apparent from
spreadsheet as $250,000) where in the spreadsheet they come (if at all) or
what assumptions went into this calculation. They
Migration Project Wages (disclosed appear to simply be lump-sum figures, which is
initially, on revised chart, and on insufficient. Cf. Valley Surgical, 2017 WL
spreadsheet as $500,000) 10574240. Even assuming that these numbers are
somehow derivable from the spreadsheet, it is not
Add 20% for Migration Inefficiencies and clear how this would be done. This is insufficient;
Opportunity Costs (disclosed initially, on it is Grouse River's obligation to clearly disclose
revised chart, and on spreadsheet as its damages computation, not Oracle's (or the
$160,000) court's) job to try to piece it together for Grouse
River. Cf. Silver State, 2016 WL 320110, at *4.
ADDITIONAL IMPACTS AND REBUILDING
Morale & Turnover (initially disclosed as Withdrawn
$500,000; disclosed on revised chart as Grouse River agrees to withdraw its claim for
$600,000; disclosed on spreadsheet as these damages.18 The court strikes these damage
$600,000) claims and grants Oracle's motion to exclude
Grouse River's presenting these alleged damages
Decline in market share, search presence, at trial.
and customer satisfaction/retention plus
marketing/loyalty efforts required to
recoup (disclosed initially, on revised
chart, and on spreadsheet as $2,000,000)
Strained and lost relationships with
vendors (initially disclosed as $2,500,000;
disclosed on revised chart as $3,000,000;
disclosed on spreadsheet as $3,000,000)
Personal stress on relationships, family,
finances of executives and key employees
(disclosed initially, on revised chart, and
on spreadsheet as $1,000,000)
Loss of Brand Equity Value and strained
relations with lenders/investors (disclosed
initially, on revised chart, and on
spreadsheet as $3,000,000)
Given that trial starts tomorrow (and was supposed to start today), Grouse River's failure to disclose adequate computations for those categories of damages listed as inadequate above is not harmless error, and it was not substantially justified. The court grants Oracle's motion in limine in part for the categories listed above as inadequately disclosed or withdrawn and excludes Grouse River's evidence and arguments regarding those damages categories. The court denies Oracle's motion for the categories of damages listed above as adequately disclosed.19
IT IS SO ORDERED.
