Opinion
Case No. 16-cv-02954-LB
07-08-2019
GROUSE RIVER OUTFITTERS LTD, Plaintiff, v. ORACLE CORPORATION, Defendant.
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION IN LIMINE 10
Re: ECF No. 316
Defendant Oracle Corp. moves to exclude "any new and undisclosed computations of [Grouse River's] lost profits or out-of-pocket damages." Plaintiff Grouse River Outfitters Ltd. filed an opposition, Oracle filed a reply, Grouse River filed a sur-reply, 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.
Def. Mot. - ECF No. 316. Citations refer to material in the Electronic Case File ("ECF"); pinpoint citations are to the ECF-generated page numbers at the top of documents.
Pl. Opp'n - ECF No. 318.
Def. Reply - ECF No. 324.
Pl. Sur-Reply - ECF No. 325.
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." Oilier 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.
For example, the court does not address in this order whether Grouse River produced evidence to support the damages claimed in its disclosures because that is a separate issue from whether it provided adequate damages computations. Contra Def. Reply - ECF No. 324 at 4. Similarly, the court does not address whether Grouse River's former CEO Glen Fallis can lay the foundation for his testimony (or is otherwise competent to testify) about Grouse River's claimed damages or whether NetSuite (as opposed to other factors) caused the damages. Contrary to Grouse River's claim, contra Pl. Opp'n - ECF No. 318, Oracle has not waived the right to object to Mr. Fallis's testimony on damages. The court remains skeptical that Mr. Fallis can lay a foundation to testify about damages and causation. Cf. Final Pretrial Order - ECF No. 292 at 18. In sum, the court does not further address the evidentiary questions about Mr. Fallis's testimony in this order because its analysis is confined to Rule 26.
Grouse River produced an initial chart of claimed damages with its initial disclosures on December 27, 2016. It produced an updated version of this chart on May 19, 2017, during its Rule 30(b)(6) deposition. It then produced a spreadsheet that it claims supports the damages figures in its chart. The court addresses each category of damages in turn.
Def. Mot. Ex. B (Pl. Initial Disclosures) - ECF No. 316-2 at 7.
Pl. Opp'n - ECF No. 318 at 3; Pl. Opp'n Ex. 2 (Pl. updated damages chart) - ECF No. 318-1 at 9-10. The fact that Grouse River produced this updated chart as a deposition exhibit as opposed to as part of an updated set of initial disclosures is not per se disqualifying. Cf. Aspect Sys., Inc. v. Lam Research Corp., 404 F. App'x 136, 139 (9th Cir. 2010) (affirming district court's decision that damages disclosure made as part of a mediation statement satisfied Rule 26's damages-disclosure obligation).
Pl. Opp'n - ECF No. 318 at 3; Pl. Opp'n Ex. 4 (Pl. spreadsheet) - ECF No. 318-1 at 18-46 (GRN00022231-59). Grouse River provided the court with a copy of this spreadsheet in native format.
| REPERCUSSIONS ON REVENUE,INTRODUCTION OF INEFFICIENCIES, ADDITIONAL COSTS | |
|---|---|
| Lost gross profits (not initially disclosed(lost revenue was disclosed instead);disclosed on revised chart as $6,500,000;disclosed on spreadsheet as $6,666,299.50) | Inadequately disclosedThis number appears to be derived from the"Revenue Impact" tab of the spreadsheet. Thattab takes a column labeled "Actual Revenue" (notprofits), and then derives from it a column labeled"Sales Delta" based on an assumption that GrouseRiver's revenue would have grown $1.5 millionper year, and then totals the entries in the SalesDelta column and multiplies it by 35% (withoutexplanation) to arrive at a figure labeled "LostGross Profits." This spreadsheet does not provideany explanation of the assumptions for GrouseRiver's continued growth, the 35% rate, or anyother assumptions behind its conversion from aninitial column of "Actual Revenues" (not profits)to a column of hypothetical "Lost Profits" (notrevenues). This is inadequate. Cf. Valley Surgical,2017 WL 10574240, at *3 (a plaintiff's disclosing"lump sums for each year of decline in itsbusiness and a lump sum for lost businessopportunities" without "describ[ing] theassumptions required to calculate those lumpsums" or "explain[ing] how it calculated itsannual lost revenues, or how it calculateddamages from lost business opportunities," isinsufficient to comply with Rule 26); FrontlineMed. Assocs. v. Coventry Health Care, 263 F.R.D.567, 569 (C.D. Cal. 2009) (disclosures ofrevenues without, e.g., computations of expenses,are not sufficient to constitute disclosures of lostprofits). |
| Write-off of costs associated with businessdownsizing (initially disclosed as$600,000; disclosed on revised chart as$600,000; disclosed on spreadsheet as$468,868) | Inadequately disclosedThis number appears to be derived from the"Equipment" tab of the spreadsheet. This tabcontains rows labeled "Leaseholds," "Furniture &Fixtures," and "Computer Equipment," with noexplanation of what these numbers are or howthey relate to any write-off of costs associatedwith business downsizing or the assumptions thatwent into this computation. This is inadequate. |
|---|---|
| Lease expenses related to projectassociated requirements for staffing andtesting of secondary location (notseparately listed in initial disclosures orrevised chart; disclosed on spreadsheet as$202,064.72) | Adequately disclosedGrouse River's computations were disclosed onthe "Lease" tab of the spreadsheet. (The court'sholding that Grouse River's computations wereadequate for Rule 26 purposes does not mean thatthat these lease expenses are proper damages thatGrouse River can claim against NetSuite.) |
| Legal and Financial Expenses incurredfrom negative project impact (initiallydisclosed as $250,000; disclosed on revisedchart as $300,000; disclosed onspreadsheet as $423,289.79) | Inadequately disclosedThis number appears to be derived from the"Finance Costs" and "Legal Fees" tabs of thespreadsheet, but this tab simply lists shareholderloans and interest taken on the loans and apparentlegal fees paid, with no explanation of how thesenumbers relate to the "negative project impact" orthe assumptions that went into this computation.This is inadequate. |
| Lost co-op and vendor early-pay discounts(initially disclosed as $450,000; disclosedon revised chart as $450,000; disclosed onspreadsheet as $258,182.20) | Inadequately disclosedThis number appears to be derived from the "AdExpense Impact" tab of the spreadsheet, but thistab does not adequately explain its computations(and, among other things, appears to arbitrarilyadd $100,000 in additional damages for "Loss ofvendor sponsored ads & access to promoopportunities," without explaining how this figurewas calculated). This is inadequate. |
| Inability to address shrinkage, inventoryerrors, and margin inefficiencies throughlack of visibility into go-live deliverables(initially disclosed as $350,000; disclosedon revised chart as $300,000; disclosed onspreadsheet as $500,000) | Inadequately disclosedIt is not clear how or from where these numberswere computed. It is not readily apparent fromwhere in the spreadsheet they come (if at all) orwhat assumptions went into this calculation. Theyappear to simply be lump-sum figures, which isinsufficient. Cf. Valley Surgical, 2017 WL10574240. Even assuming that these numbers aresomehow derivable from the spreadsheet, it is notclear how this would be done. This is insufficient;it is Grouse River's obligation to clearly discloseits damages computation, not Oracle's (or thecourt's) job to try to piece it together for GrouseRiver. Cf. Silver State, 2016 WL 320110, at *4. |
|---|---|
| FUTURE COSTS | |
| NetSuite Future (disclosed initially, onrevised chart, and on spreadsheet as$45,000) | Inadequately disclosedIt is not clear how or from where these numberswere computed. It is not readily apparent fromwhere in the spreadsheet they come (if at all) orwhat assumptions went into this calculation. Theyappear to simply be lump-sum figures, which isinsufficient. Cf. Valley Surgical, 2017 WL10574240. Even assuming that these numbers aresomehow derivable from the spreadsheet, it is notclear how this would be done. This is insufficient;it is Grouse River's obligation to clearly discloseits damages computation, not Oracle's (or thecourt's) job to try to piece it together for GrouseRiver. Cf. Silver State, 2016 WL 320110, at *4. |
| Partners & Consultants Future (disclosedinitially, on revised chart, and onspreadsheet as $75,000) | |
| Wages Future (disclosed initially, onrevised chart, and on spreadsheet as$325,000) | |
| Lost co-op and vendor early-pay discounts(initially disclosed as $550,000; disclosedon revised chart as $500,000; disclosed onspreadsheet as $500,000) | |
| Inability to address shrinkage, inventoryerrors, and margin inefficiencies throughlack of visibility (initially disclosed as$350,000; disclosed on revised chart as$500,000; disclosed on spreadsheet as$500,000) |
Pl. Opp'n Ex. 4 (Pl. spreadsheet) - ECF No. 318-1 at 24-25 (GRN00022237-38).
Id. at 24 (GRN00022237), 26-30 (GRN00022239-43), 33-35 (GRN00022246-48), 38-46 (GRN00022251-59).
Id. at 22 (GRN00022235).
Id. at 21 (GRN00022234).
Grouse River cannot now revert to claiming lost-revenue (as opposed to lost-profit) damages. While its initial disclosures listed a "Lost Revenue" figure, Def. Mot. Ex. B (Pl. Initial Disclosures) - ECF No. 316-2 at 7, its later disclosures removed its claim for "Lost Revenue" and replaced it with a claim for "Lost gross profits." Pl. Opp'n Ex. 2 (Pl. updated damages chart) - ECF No. 318-1 at 9; Pl. Opp'n Ex. 4 (Pl. spreadsheet) - ECF No. 318-1 at 18 (GRN00022231). Having removed "Lost Revenues," Grouse River cannot change its theory on the eve of trial and claim lost-revenue damages now. Cf. Vivint, Inc. v. Northstar Alarm Servs., LLC, No. 2:16-cv-00106-JNP-EJF, 2019 WL 1098986, at *9 (D. Utah Mar. 8, 2019) (holding that damages categories were not adequately disclosed for Rule 26 purposes where plaintiff removed the categories in its later supplemental disclosures).
Pl. Opp'n Ex. 4 (Pl. spreadsheet) - ECF No. 318-1 at 31 (GRN00022244).
Id. at 36 (GRN00022249).
Id. at 32 (GRN00022245), 37 (GRN00022250).
Id. at 23 (GRN00022236).
Pl. Sur-Reply - ECF No. 325 at 4.
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.
This does not mean that evidence regarding those damages categories necessarily is admissible. (Among other things, Grouse River must lay a foundation for its claimed damages.)
IT IS SO ORDERED.
Dated: July 8, 2019
/s/_________
LAUREL BEELER
United States Magistrate Judge