Grouse River Outfitters Ltd v. NetSuite, Inc.

Filing 327

ORDER by Judge Laurel Beeler granting in part and denying in part 316 Defendant's Motion in Limine 10. The court grants Oracle's motion in limine with respect to damages categories other than the categories "paid to NetSuite," "paid to partners, consultants, systems, and support related to NetSuite," and "lease expenses." (lblc1S, COURT STAFF) (Filed on 7/8/2019)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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San Francisco Division

United States District Court
Northern District of California

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GROUSE RIVER OUTFITTERS LTD,

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Plaintiff,
v.

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ORACLE CORPORATION,
Defendant.

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Case No. 16-cv-02954-LB
ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANT’S
MOTION IN LIMINE 10
Re: ECF No. 316

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Defendant Oracle Corp. moves to exclude “any new and undisclosed computations of [Grouse

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River’s] lost profits or out-of-pocket damages.”1 Plaintiff Grouse River Outfitters Ltd. filed an

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opposition,2 Oracle filed a reply,3 Grouse River filed a sur-reply,4 and the court held a hearing. For

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the reasons stated on the record at the hearing and below, the court grants in part and denies in part

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Oracle’s motion in limine.

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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.
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Pl. Opp’n – ECF No. 318.

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Def. Reply – ECF No. 324.

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Pl. Sur-Reply – ECF No. 325.

ORDER – No. 16-cv-02954-LB

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1. Governing Law
“[Federal] Rule [of Civil Procedure] 26(a)(1)(A)(iii) requires the disclosure of ‘a computation

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of each category of damages claimed by the disclosing party.’” Hoffman v. Constr. Protective

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Servs., Inc., 541 F.3d 1175, 1179 (9th Cir. 2008). “Rule 26(e)(1)(A) requires disclosing parties to

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supplement their prior disclosures ‘in a timely manner’ when the prior response is ‘incomplete or

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incorrect.’” Id. “‘Rule 37(c)(1) gives teeth to these requirements by forbidding the use at trial of

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any information required to be disclosed by Rule 26(a) that is not properly disclosed.’” Id.

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(quoting Yeti by Molly Ltd. v. Deckers Outdoor Corp., 259 F.3d 1101, 1106 (9th Cir. 2001)).

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“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]

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United States District Court
Northern District of California

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portion of Rule 37 . . . has been described as a ‘a self-executing, automatic sanction to provide a

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strong inducement for disclosure of material.’” Id. at 1180 (quoting Yeti by Molly, 259 F.3d at

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1106). “The implementation of the sanction is appropriate ‘even when a litigant’s entire cause of

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action will be precluded.’” Id. (internal brackets and ellipsis omitted) (quoting Yeti by Molly, 259

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F.3d at 1106). “The theory of disclosure under the Federal Rules of Civil Procedure is to

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encourage parties to try cases on the merits, not by surprise, and not by ambush.” Ollier v.

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Sweetwater Union High Sch. Dist., 768 F.3d 843, 862 (9th Cir. 2014).

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“Computation of each category of damages,” as used in Rule 26, “contemplates some analysis

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beyond merely setting forth a lump sum amount for a claimed element of damages.” Silver State

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Broad., LLC v. Beasley FM Acquisition, No. 2:11-CV-01789-APG-CWH, 2016 WL 320110, at *2

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(D. Nev. Jan. 25, 2016) (citing City and Cty. of San Francisco v. Tutor-Saliba Corp., 218 F.R.D.

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219, 221 (N.D. Cal. 2003) and other cases), aff’d, 705 F. App’x 640 (9th Cir. 2017). A party

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cannot satisfy its Rule 26 obligation to provide a “computation of each category of damages”

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simply by producing to the other side the documents or figures the disclosing party claims support

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its damages claims. “Rule 26(a) . . . requires Plaintiffs to disclose their ‘computation’ of lost

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profits, and cases have rejected the claim that the mere possession of raw financial data by the

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opposing party satisfies Rule 26.” Bennion and Deville Fine Homes Inc. v. Windermere Real

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Estate Servs. Co., No. ED CV 15-01921-DFM, 2018 WL 4802011, at *6 (C.D. Cal. July 17, 2018)
ORDER – No. 16-cv-02954-LB

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(quoting Spin Master, Ltd. v. Zobmondo Entm’t, LLC, No. CV 06-3459 ABC (PLAx), 2011 WL

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13127349, at *6–7 (C.D. Cal. Sept. 15, 2011), vacated on recons. in part, 2011 WL 13127211

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(C.D. Cal. Oct. 13, 2011)); accord, e.g., Silver State, 2016 WL 320110, at *4 (“[A] plaintiff

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cannot shift to the defendant the burden of attempting to determine the amount of the plaintiff’s

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alleged damages. The Defendants are not required to compute damages, Rule 26 requires plaintiffs

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to do so.”) (citations and internal quotation marks omitted). For example, a plaintiff’s disclosing

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“lump sums for each year of decline in its business and a lump sum for lost business

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opportunities” without “describ[ing] the assumptions required to calculate those lump sums” or

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“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

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United States District Court
Northern District of California

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Angeles, No. CV 13-2265-DDP (AGRx), 2017 WL 10574240, at *3 (C.D. Cal. June 29, 2017).

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2. Application
In its motion, Oracle asks the court to exclude Grouse River’s claimed damages for its

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supposed failure to comply with its Rule 26 disclosure obligations. The court therefore addresses

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only the Rule 26 issue and does not address whether Grouse River has admissible evidence to

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support its claimed damages.5
Grouse River produced an initial chart of claimed damages with its initial disclosures on

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December 27, 2016.6 It produced an updated version of this chart on May 19, 2017, during its

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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.
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Def. Mot. Ex. B (Pl. Initial Disclosures) – ECF No. 316-2 at 7.

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ORDER – No. 16-cv-02954-LB

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Rule 30(b)(6) deposition.7 It then produced a spreadsheet that it claims supports the damages

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figures in its chart.8 The court addresses each category of damages in turn.

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PROJECT COSTS

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Paid to NetSuite (initially disclosed as
$360,000; disclosed on revised chart as
$360,000; disclosed on spreadsheet as
$405,690.62)
Paid to partners, consultants, systems, and
support related to NetSuite (initially
disclosed as $200,000; disclosed on revised
chart as $200,000; disclosed on
spreadsheet as $158,548.68)

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Adequately disclosed

Project-related wages (initially disclosed as
$1,000,000; disclosed on revised chart as
$1,200,000; disclosed on spreadsheet as
$1,342,309.59)

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Adequately disclosed

Inadequately disclosed

The amount that Grouse River paid to NetSuite
was disclosed on the “Project Costs by Vendor”
and “NetSuite” tabs of the spreadsheet.9

Grouse River’s computations were disclosed on
the “Project Costs by Vendor” and subsequent
tabs of the spreadsheet.10

United States District Court
Northern District of California

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This number appears to be derived from the
“Wage Impact” tab of the spreadsheet.11 That tab
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.

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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).
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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.
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Pl. Opp’n Ex. 4 (Pl. spreadsheet) – ECF No. 318-1 at 24–25 (GRN00022237–38).

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Id. at 24 (GRN00022237), 26–30 (GRN00022239–43), 33–35 (GRN00022246–48), 38–46
(GRN00022251–59).
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Id. at 22 (GRN00022235).

ORDER – No. 16-cv-02954-LB

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REPERCUSSIONS ON REVENUE,
INTRODUCTION OF INEFFICIENCIES, ADDITIONAL COSTS

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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)

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United States District Court
Northern District of California

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Inadequately disclosed
This number appears to be derived from the
“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

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Id. at 21 (GRN00022234).

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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).

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ORDER – No. 16-cv-02954-LB

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Write-off of costs associated with business
downsizing (initially disclosed as
$600,000; disclosed on revised chart as
$600,000; disclosed on spreadsheet as
$468,868)

Inadequately disclosed

Lease expenses related to project
associated requirements for staffing and
testing of secondary location (not
separately listed in initial disclosures or
revised chart; disclosed on spreadsheet as
$202,064.72)

Adequately disclosed

Legal and Financial Expenses incurred
from negative project impact (initially
disclosed as $250,000; disclosed on revised
chart as $300,000; disclosed on
spreadsheet as $423,289.79)

Inadequately disclosed

Lost co-op and vendor early-pay discounts
(initially disclosed as $450,000; disclosed
on revised chart as $450,000; disclosed on
spreadsheet as $258,182.20)

Inadequately disclosed

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United States District Court
Northern District of California

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This number appears to be derived from the
“Equipment” tab of the spreadsheet.14 This tab
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.

Grouse River’s computations were disclosed on
the “Lease” tab of the spreadsheet.15 (The court’s
holding that Grouse River’s computations were
adequate for Rule 26 purposes does not mean that
that these lease expenses are proper damages that
Grouse River can claim against NetSuite.)

This number appears to be derived from the
“Finance Costs” and “Legal Fees” tabs of the
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.

This number appears to be derived from the “Ad
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.

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Pl. Opp’n Ex. 4 (Pl. spreadsheet) – ECF No. 318-1 at 31 (GRN00022244).

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Id. at 36 (GRN00022249).

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Id. at 32 (GRN00022245), 37 (GRN00022250).

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Id. at 23 (GRN00022236).

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ORDER – No. 16-cv-02954-LB

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Inability to address shrinkage, inventory
errors, and margin inefficiencies through
lack of visibility into go-live deliverables
(initially disclosed as $350,000; disclosed
on revised chart as $300,000; disclosed on
spreadsheet as $500,000)

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United States District Court
Northern District of California

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NetSuite Future (disclosed initially, on
revised chart, and on spreadsheet as
$45,000)
Partners & Consultants Future (disclosed
initially, on revised chart, and on
spreadsheet as $75,000)

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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
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

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Inadequately disclosed

Wages Future (disclosed initially, on
revised chart, and on spreadsheet as
$325,000)
Lost co-op and vendor early-pay discounts
(initially disclosed as $550,000; disclosed
on revised chart as $500,000; disclosed on
spreadsheet as $500,000)

Inadequately disclosed
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
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.

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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)

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ORDER – No. 16-cv-02954-LB

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FUTURE COSTS MIGRATION

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Software (disclosed initially, on revised
chart, and on spreadsheet as $150,000)
Implementation & Services (disclosed
initially, on revised chart, and on
spreadsheet as $250,000)
Migration Project Wages (disclosed
initially, on revised chart, and on
spreadsheet as $500,000)
Add 20% for Migration Inefficiencies and
Opportunity Costs (disclosed initially, on
revised chart, and on spreadsheet as
$160,000)

United States District Court
Northern District of California

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Inadequately disclosed
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
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.

ADDITIONAL IMPACTS AND REBUILDING
Morale & Turnover (initially disclosed as
$500,000; disclosed on revised chart as
$600,000; disclosed on spreadsheet as
$600,000)
Decline in market share, search presence,
and customer satisfaction/retention plus
marketing/loyalty efforts required to
recoup (disclosed initially, on revised
chart, and on spreadsheet as $2,000,000)

Withdrawn
Grouse River agrees to withdraw its claim for
these damages.18 The court strikes these damage
claims and grants Oracle’s motion to exclude
Grouse River’s presenting these alleged damages
at trial.

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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)

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Pl. Sur-Reply – ECF No. 325 at 4.

ORDER – No. 16-cv-02954-LB

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Given that trial starts tomorrow (and was supposed to start today), Grouse River’s failure to

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disclose adequate computations for those categories of damages listed as inadequate above is not

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harmless error, and it was not substantially justified. The court grants Oracle’s motion in limine in

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part for the categories listed above as inadequately disclosed or withdrawn and excludes Grouse

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River’s evidence and arguments regarding those damages categories. The court denies Oracle’s

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motion for the categories of damages listed above as adequately disclosed.19

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IT IS SO ORDERED.

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Dated: July 8, 2019
______________________________________
LAUREL BEELER
United States Magistrate Judge

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United States District Court
Northern District of California

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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.)
ORDER – No. 16-cv-02954-LB

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