"The Apple iPod iTunes Anti-Trust Litigation"

Filing 756

RESPONSE (re 750 Administrative Motion to File Under Seal Plaintiffs' Motion to Strike Supplemental Expert Report of Kevin M. Murphy and Robert H. Topel, dated December 20, 2013 ) filed byApple Inc.. (Attachments: # 1 Declaration of Amir Q. Amiri in Support of Apple's Response, # 2 Proposed Order Granting Plaintiffs' Admin. Motion to Seal, # 3 Apple's (Proposed) Redactions to Plaintiffs' Motion to Strike Suppl. Report of K. Murphy and R. Topel)(Amiri, Amir) (Filed on 1/21/2014)

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1 ROBBINS GELLER RUDMAN & DOWD LLP 2 BONNY E. SWEENEY (176174) THOMAS R. MERRICK (177987) 3 ALEXANDRA S. BERNAY (211068) CARMEN A. MEDICI (248417) 4 JENNIFER N. CARINGAL (286197) 655 West Broadway, Suite 1900 5 San Diego, CA 92101 Telephone: 619/231-1058 6 619/231-7423 (fax) bonnys@rgrdlaw.com 7 tomm@rgrdlaw.com xanb@rgrdlaw.com 8 cmedici@rgrdlaw.com jcaringal@rgrdlaw.com 9 Class Counsel for Plaintiffs 10 [Additional counsel appear on signature page.] 11 UNITED STATES DISTRICT COURT 12 NORTHERN DISTRICT OF CALIFORNIA 13 OAKLAND DIVISION 14 THE APPLE IPOD ITUNES ANTI-TRUST ) Lead Case No. C-05-00037-YGR ) 15 LITIGATION ) CLASS ACTION ) 16 ) PLAINTIFFS’ MOTION TO STRIKE This Document Relates To: ) SUPPLEMENTAL EXPERT REPORT OF 17 ) KEVIN M. MURPHY AND ROBERT H. ALL ACTIONS. ) TOPEL, DATED DECEMBER 20, 2013 18 19 DATE: TIME: CTRM: JUDGE: 20 February 18, 2014 2:00 p.m. 5, 2nd Floor Hon. Yvonne Gonzalez Rogers 21 UNREDACTED VERSION OF DOCUMENT SOUGHT TO BE SEALED 22 23 24 *APPLE'S (PROPOSED) REDACTIONS* 25 26 27 28 906505_1 1 TO: ALL PARTIES AND THEIR ATTORNEYS OF RECORD 2 PLEASE TAKE NOTICE that on February 18, 2014, at 2:00 p.m., in Courtroom 5, 2nd 3 Floor, before the Honorable Yvonne Gonzalez Rogers, of the above-entitled Court, located at 1301 4 Clay Street, Oakland, California 94612, Plaintiffs Melanie Tucker, Mariana Rosen, and Somtai Troy 5 Charoensak (collectively, “Plaintiffs”) will and hereby do, through undersigned counsel, move the 6 Court for an Order striking the Supplemental Report of Kevin M. Murphy and Robert H. Topel, 7 dated December 20, 2013. 8 Plaintiffs request the Court strike the untimely supplemental report written by Professors 9 Murphy and Topel, or in the alternative, also consider Professor Noll’s rebuttal to the supplemental 10 report of Professors Murphy and Topel. 11 I. MEMORANDUM OF POINTS AND AUTHORITIES 12 On December 20, 2013, Apple submitted a new, unauthorized supplemental expert report in 13 support of its motion for summary judgment. This supplemental expert report is in violation of this 14 Court’s scheduling Orders and must be stricken. On June 5, 2013 and November 1, 2013, the Court 15 ordered Defendants to complete expert disclosures by July 19, 2013, and the parties to file any 16 motions for summary judgment by December 20, 2013. Dkt. Nos. 730, 735. The Orders did not 17 contemplate additional expert reports being submitted after July 19, 2013. Yet Apple has flouted the 18 Orders by submitting another expert report by its two economic experts, complete with several new 19 regressions and other analyses. 20 While Apple’s experts claim that their supplemental report is in response to “new” material 21 in the Noll Rebuttal,1 it is not. The only part of the Noll Rebuttal that is “new” is directly responsive 22 to Professors Murphy and Topel’s criticisms or was made necessary by Apple’s belated production 23 of information identifying iPods affected by the challenged conduct. Under the Federal Rules of 24 Civil Procedure, Professor Noll’s Rebuttal, which covers the same subject matter as Apple’s expert 25 reports, is proper and does not justify an untimely additional report by Apple. 26 1 The Rebuttal Declaration of Roger G. Noll on Liability and Damages (“Noll Rebuttal”) is 27 attached as Exhibit 2 to the Declaration of Bonny E. Sweeney in Support of Plaintiffs’ Memorandum of Law in Opposition to Apple’s Motion for Summary Judgment and to Exclude Expert Testimony 28 of Roger G. Noll (“Sweeney Opposition Declaration”), filed concurrently. 906505_1 MOTION TO STRIKE SUPPLEMENTAL EXPERT REPORT OF KEVIN M. MURPHY AND ROBERT H. TOPEL, DATED DECEMBER 20, 2013 - C-05-00037-YGR -1- 1 Plaintiffs will be unfairly prejudiced if this motion to strike is not granted. If Apple is 2 permitted to rely on its supplemental expert report, Plaintiffs respectfully request that the Court also 3 consider a supplemental report by Professor Noll, attached as Exhibit 3 to the Sweeney Opposition 4 Declaration. 5 A. 6 Apple claims that its supplemental expert report is necessary to address new material in the The Noll Rebuttal Report Is a Proper Rebuttal 7 Noll Rebuttal. But Professor Noll’s Rebuttal report is just that – rebuttal. Under Rule 26 of the 8 Federal Rules of Civil Procedure, rebuttal evidence is “evidence [that] is intended solely to 9 contradict or rebut evidence on the same subject matter identified by another party.” Fed. R. Civ. P. 10 26(a)(2)(D)(ii). Thus, a “rebuttal expert may cite new evidence and data so long as the new evidence 11 and data is offered to directly contradict or rebut the opposing party’s expert.” Glass Dimensions, 12 Inc. v. State St. Bank & Trust Co., 290 F.R.D. 11, 16 (D. Mass. 2013); see also Park W. Radiology v. 13 CareCore Nat’l LLC, 675 F. Supp. 2d 314, 326 (S.D.N.Y. 2009) (permitting rebuttal report where 14 “new methodologies used by [expert] in this second report were for the purpose of rebutting or 15 critiquing the opinions of Defendants’ expert witness”). 16 All of the Noll Rebuttal, including the exhibits that report his revised damages estimates, 17 constitute Professor Noll’s response to Professors Murphy and Topel, with the exception of an 18 adjustment required by Apple’s late production of information identifying which iPods were affected 19 by the challenged software updates.2 Specifically: In pages 2 through 12, Professor Noll describes his assignment and summarizes his 20 21 conclusions. In the description of his assignment, he explains that he was asked to review the 22 Murphy and Topel report to “determine whether any of the evidence and analysis in these reports 23 causes me to change the conclusions” in his prior report. Noll also explains that he was asked by 24 counsel “to re-estimate the damages regressions . . . to take into account new information on the iPod 25 26 2 On July 2, 2013, three months after Professor Noll submitted his April 3, 2013 Liability and Damages Report, Apple produced a revised declaration from Augustin Farrugia, which corrected his 27 previous declaration purporting to Sweeney Opp. Decl., Ex. 59. 28 906505_1 MOTION TO STRIKE SUPPLEMENTAL EXPERT REPORT OF KEVIN M. MURPHY AND ROBERT H. TOPEL, DATED DECEMBER 20, 2013 - C-05-00037-YGR -2- 1 models in which iTunes 7.0 was used.” Sweeney Opp. Decl., Ex. 2, Noll Rebuttal at 2. He then 2 summarizes his conclusions. 3 In his summary, Professor Noll states that his revised regression equations take into account 4 the new information provided by Apple in July 2013 as well as some of the criticisms made by 5 Professors Murphy and Topel. Id. at 3 (“I have concluded that the criticisms by defendant’s experts 6 fall into two categories. The first consist of criticisms that have some basis in economics but that 7 overstate the importance of their criticisms. In these cases, regardless of whether I agree that the 8 criticisms warrant changing the procedures, I have adopted [them] and find that these changes have 9 only a small effect on the amount of damages . . . .”). Others of Professors Murphy and Topel’s 10 criticisms, however, “have no basis in economics.” Id. As to these, Professor Noll did not change 11 his analysis or methods. Id. After summarizing his response to Murphy’s criticism of Noll’s 12 analysis of market definition and market power (id. at 2-5), Noll discusses the four Murphy and 13 Topel criticisms that lead him to make adjustments to his regression analysis (use of quantity 14 weights, rather than frequency weights; use of scalar variable of time rather than logarithm of time; 15 adoption of an earlier date that Apple adopted a DRM-free format; and distinction between two 16 versions of the Apple software that disabled Harmony). Id. at 5-6. Noll then explains why Apple’s 17 remaining criticisms of his regression analysis (whether the indicator variable for iTunes 4.7 should 18 be turned off after the introduction of 7.0; the timing of price effect of 7.0; whether the regression 19 should have included additional variables; and clustering) “are not valid and [would] reduce, not 20 increase, the reliability of the regression analysis if they were adopted.” Id. at 6-11. Finally, Noll 21 summarizes his revised damages estimate. Id. at 11-12. 22 In the body of his Rebuttal, Professor Noll explains these conclusions in greater detail and 23 sets forth the bases for them. Even a cursory examination of the remaining 40 pages shows that Noll 24 is not issuing a “new report” as Apple claims, but instead is responding to Murphy and Topel. See, 25 e.g., id. at 13-14 (responding to Murphy’s opinion that closed systems are pro-competitive); id. at 26 14-15 (responding to Murphy’s opinion that Plaintiffs must show that some threshold level of iPod 27 owners used Harmony); id. at 15 (responding to Murphy’s “double marginalization” opinion); id. at 28 15-18 (responding to Murphy’s challenge to Noll’s market definition and market power opinions); 906505_1 MOTION TO STRIKE SUPPLEMENTAL EXPERT REPORT OF KEVIN M. MURPHY AND ROBERT H. TOPEL, DATED DECEMBER 20, 2013 - C-05-00037-YGR -3- 1 id. at 18 (responding to Murphy’s claim that the Noll regressions do not account for other technical 2 features that occurred with 7.0); id. at 18-22 (responding to Murphy and Topel’s criticism that Noll 3 should have used frequency weights, rather than quantity weights, in the regression); id. at 23-32 4 (responding to Murphy and Topel’s criticisms of the specification of the Noll regression equations); 5 id. at 32-47 (responding to Murphy and Topel’s opinion that Noll should have included a cluster 6 correction); id. at 48-51 (explaining the results of the revised regressions that take into account 7 certain criticisms of Murphy and Topel and the revised information about affected iPods). 8 B. Apple’s Supplemental Report Should Be Excluded under Fed. R. Civ. P. 37(c)(1) 9 The Ninth Circuit has identified five factors that should be considered in deciding whether to 10 impose Federal Rule of Civil Procedure 37(c)(1)’s exclusion-of-evidence sanction. Wendt v. Host 11 Int’l, Inc., 125 F.3d 806, 814 (9th Cir. 1997). Courts in this Circuit have used these same factors in 12 considering whether to strike an untimely expert report. AZ Holding, L.L.C. v. Frederick, No. CV13 08-0276-PHX-LOA, 2009 U.S. Dist. LEXIS 74515 (D. Ariz. Aug. 10, 2009). Those factors instruct 14 the court to consider the following: “‘(1) the public’s interest in expeditious resolution of litigation; 15 (2) the court’s need to manage its docket; (3) the risk of prejudice to the [other parties]; (4) the 16 public policy favoring disposition of cases on their merits; and (5) the availability of less drastic 17 sanctions.’” Id. at *15. A finding of willfulness or bad faith is not required in order to impose the 18 exclusion-of-evidence sanction. CCR/AG Showcase Phase I Owner, L.L.C. v. UA Theatre Circuit, 19 Inc., No. 2:08-cv-00984-RCJ-GWF, 2010 U.S. Dist. LEXIS 56137 (D. Nev. May 13, 2010). 20 Here, each of the Wendt factors supports exclusion. This litigation is nearing its ninth year. 21 It should be resolved. Furthermore, Apple has ignored this Court’s scheduling Orders, hindering the 22 Court’s ability to manage its docket. In addition, Plaintiffs will be severely prejudiced if the new 23 material in Apple’s supplemental expert report is considered, particularly given the timing. Apple 24 submitted a new expert report containing new calculations and economic models that Plaintiffs and 25 their experts have had only a few weeks to test, over the winter holidays. Likewise, the fifth factor 26 supports exclusion because even if this Court permits Plaintiffs to submit a short supplemental Noll 27 declaration, vacation schedules of Professor Noll and the support staff at Economists, Inc. impacted 28 906505_1 MOTION TO STRIKE SUPPLEMENTAL EXPERT REPORT OF KEVIN M. MURPHY AND ROBERT H. TOPEL, DATED DECEMBER 20, 2013 - C-05-00037-YGR -4- 1 their ability to produce the declaration. All of the Wendt factors favor exclusion of Apple’s 2 supplemental expert report. See Lindner v. Meadow Gold Dairies, Inc., 249 F.R.D. 625, 642 (D. 3 Haw. 2008) (striking untimely report despite finding that less drastic sanctions were available, 4 because the majority of factors weighed in favor of exclusion). 5 Apple’s untimely supplemental report is improper and should be stricken from the record. 6 See Storage Tech. Corp. v. Cisco Sys., No. C 00-1176 SI, 2001 U.S. Dist. LEXIS 25876, at *10-*11 7 (N.D. Cal. Nov. 27, 2001) (striking submission of untimely expert report where opposing party 8 claimed the late submission prevented it from being able to properly respond to it); see also 9 O’Connor v. Boeing N. Am., Inc., No. CV 97-1554 DT (RCx), 2005 U.S. Dist. LEXIS 46233, at 10 *34-*35 (C.D. Cal. Sept. 12, 2005) (“To permit these reports into evidence would improperly widen 11 the trial issues at the eleventh hour, and would unduly prejudice [the party] in preparing for trial. 12 Moreover, the new opinions appear based on information that was available to these experts at the 13 time of their initial Rule 26 disclosures.”). 14 In sum, Apple should not be rewarded for its failure to comply with the Court’s scheduling 15 Orders. Consideration of the untimely supplemental report would prejudice Plaintiffs and provide 16 Apple an unfair and improper litigation advantage. Plaintiffs’ motion to strike should be granted. 17 DATED: January 13, 2014 Respectfully submitted, 18 ROBBINS GELLER RUDMAN & DOWD LLP BONNY E. SWEENEY THOMAS R. MERRICK ALEXANDRA S. BERNAY CARMEN A. MEDICI JENNIFER N. CARINGAL 19 20 21 22 23 s/ Bonny E. Sweeney BONNY E. SWEENEY 24 26 655 West Broadway, Suite 1900 San Diego, CA 92101 Telephone: 619/231-1058 619/231-7423 (fax) 27 Class Counsel for Plaintiffs 25 28 906505_1 MOTION TO STRIKE SUPPLEMENTAL EXPERT REPORT OF KEVIN M. MURPHY AND ROBERT H. TOPEL, DATED DECEMBER 20, 2013 - C-05-00037-YGR -5- 1 2 3 4 5 6 7 8 9 10 11 12 THE KATRIEL LAW FIRM ROY A. KATRIEL 1101 30th Street, N.W., Suite 500 Washington, DC 20007 Telephone: 202/625-4342 202/330-5593 (fax) BONNETT, FAIRBOURN, FRIEDMAN & BALINT, P.C. ANDREW S. FRIEDMAN FRANCIS J. BALINT, JR. ELAINE A. RYAN 2325 E. Camelback Road, Suite 300 Phoenix, AZ 85016 Telephone: 602/274-1100 602/274-1199 (fax) BRAUN LAW GROUP, P.C. MICHAEL D. BRAUN 10680 West Pico Blvd., Suite 280 Los Angeles, CA 90064 Telephone: 310/836-6000 310/836-6010 (fax) 13 14 15 16 17 18 19 GLANCY BINKOW & GOLDBERG LLP BRIAN P. MURRAY 122 East 42nd Street, Suite 2920 New York, NY 10168 Telephone: 212/382-2221 212/382-3944 (fax) GLANCY BINKOW & GOLDBERG LLP MICHAEL GOLDBERG 1925 Century Park East, Suite 2100 Los Angeles, CA 90067 Telephone: 310/201-9150 310/201-9160 (fax) 20 Additional Counsel for Plaintiffs 21 22 23 24 25 26 27 28 906505_1 MOTION TO STRIKE SUPPLEMENTAL EXPERT REPORT OF KEVIN M. MURPHY AND ROBERT H. TOPEL, DATED DECEMBER 20, 2013 - C-05-00037-YGR -6-

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