Citation. KW Plastics v. United States Can Co., 131 F. Supp. 2d 1289, 2001)
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Brief Fact Summary.
United States Can Co. (Plaintiff) asserted claims for breach of contract, misappropriation of trade secrets and tortious interference against KW Plastics (Defendant). The Defendant moved to exclude the expert testimony of a financial officer of the Plaintiff.
Synopsis of Rule of Law.
The burden of proving an unjust enrichment claim rests upon a sufficient factual basis and reliable application of economic principles to the facts.
McGowan is a financial advisor of Plaintiff, which brings a claim of breach of contract, misappropriation of trade secrets and tortious interference against Defendant. McGowan calculated damages to Plaintiff as a result of Defendant’s misdeeds. McGowan’s testimony was in reference to the calculation of lost profits and to the damages allegedly caused by Defendant’s misappropriation of Plaintiff’s trade secrets. Defendant brought a motion to exclude the expert testimony of McGowan.
Whether Plaintiff satisfied its burden of showing that their expert testimony was admissible?
No. Motion granted.
The party that offers testimony bears the burden of showing that it is admissible. Here, the Defendant did not satisfy this burden. Testimony based on technical or specialized knowledge is admissible if the expert is qualified to testify competently regarding the matters he discusses; his methodology is sufficiently reliable and the testimony will assist the trier of fact by bringing the expert’s knowledge to bear upon a fact in issue.
In terms of McGowan’s calculation of lost profits, many points of his testimony are speculative. He maintained that Defendant’s capacity was a guess on his part and it was something in excess of 20 million. Further, McGowan’s deposition testimony and his expert report are in conflict with each other, thereby leaving the court to guess as to the basis of his calculations. The court cannot find that McGowan applied sound economic principles in a reliable way to determine lost profits. He also failed to offer foundation for his calculation of the costs of the new facility and new equipment. He also failed to produce any documents corroborating his conclusions. An in-house employee must exercise the same professionalism and thoroughness as any other expert in the field. Plaintiff has not persuaded the court of the proposition that a legitimate damages expert would not have sought or reviewed extrinsic evidence to support his claims, especially when the evidence was at his disposal. Ther
efore, the cumulative effect of McGowan’s errors renders the lost profits calculation speculative, without foundation, and had an unknown error rate. Thus, the testimony should be excluded.
In terms of McGowan’s testimony regarding unjust enrichment, the evidence is unreliable and irrelevant. Unjust enrichment damages measure the benefits, profits, or advantages gained by the Defendant in its use of a trade secret. A report which extrapolates damages for ten years is reliable and relevant only if the expert has considered whether the particular trade secrets misappropriated caused Plaintiff to obtain a 10-year contract for cans, rings, and plugs, rather than a contract in and of itself. However, McGowan never reflected on this issue nor did he attempt to determine the value of the specific trade secrets used. His projection assumes that every dollar Defendant gained constitutes unjust enrichment. Therefore, Plaintiff has not met its burden of showing that McGowan’s unjust enrichment claim rests upon a sufficient factual basis and reliable application of economic principles to the facts of the case. These unjust enrichment calculations should also be excluded because th
ey constitute an eleventh-hour ambush upon the Defendant.
Prior to the court’s decision, the Defendants filed a Motion to Exclude McGowan’s expert testimony and the court ordered McGowan to prepare an expert report and submit to a second deposition. Defendant then renewed its motion to exclude the testimony.