Youngevity International, Corp. v. Smith et al

Filing 526

ORDER Granting Plaintiff's Motion to Exclude Testimony of Timothy L. Fort and Denying Defendants' Motions to Exclude Expert Testimony (ECF Nos. 294 , 306 , 310 , 311 , 312 , 313 , 314 , 315 , 318 ). Signed by Judge Barry Ted Moskowitz on 2/13/2018. (mxn)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 12 Case No.: 16-cv-704 BTM (JLB) YOUNGEVITY INTERNATIONAL, INC. AND JOEL D. WALLACH, 13 14 15 16 17 18 19 ORDER GRANTING PLAINTIFFS’ MOTION TO EXCLUDE TESTIMONY OF TIMOTHY L. FORT AND DENYING DEFENDANTS’ MOTIONS TO EXCLUDE EXPERT TESTIMONY Plaintiffs, v. TODD SMITH et al., Defendants. ECF NOS. 294, 306, 310, 311, 312, 313, 314, 315, 318 ______________________________ AND RELATED COUNTER ACTION. 20 21 On December 6, 2017, Plaintiffs filed a motion to exclude the expert 22 testimony of Timothy L. Fort. (ECF No. 294). Defendants also filed eight motions 23 to exclude the expert testimony of Dr. Philip Michael Bolger (ECF No. 306), Robert 24 Geary (ECF No. 310), Dr. Michael John Glade (ECF No. 311), Dr. Samuel N. Grief 25 (ECF No. 312), Dr. Edward M. Mazze (ECF No. 313), Dr. Arthur J. Miller (ECF No. 26 314), Dr. David Stewart (ECF No. 315), and Brian Bergmark (ECF No. 318). For 27 the reasons below, the Court grants Plaintiffs’ motion to exclude Timothy L. Fort 28 and denies Defendants’ motions. 1 16-cv-704 BTM (JLB) 1 I. STANDARD 2 Federal Rule of Evidence 702 permits expert testimony if: 3 (a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue; (b) the testimony is based on sufficient facts or data; (c) the testimony is the product of reliable principles and methods; and (d) the expert has reliably applied the principles and methods to the facts of the case. 4 5 6 7 8 9 10 11 Under Rule 702, expert testimony must be both relevant and reliable. Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 589 (1993); Kumho Tire Co. v. Carmichael, 526 U.S. 137, 149 (1999). The trial court must act as a “gatekeeper” to exclude expert testimony that does not meet Rule 702's reliability standards. Kumho Tire, 526 U.S. at 147-48. 12 With respect to relevance, there must be a “valid scientific connection to the 13 pertinent inquiry” in order for Rule 702’s “helpfulness” standard to be met. Daubert, 14 15 16 17 18 19 20 21 22 23 24 25 26 27 509 U.S. at 592. As for reliability, the Court must make a preliminary assessment of whether the reasoning or methodology underlying the testimony is scientifically valid and whether that reasoning or methodology can be applied to the facts in issue. Id. at 592-93. In Daubert, the Supreme Court listed several factors that may be pertinent in assessing reliability: (1) whether the scientific theory or technique can be (and has been) tested; (2) whether the theory or technique has been subjected to peer review and publication; (3) whether there is a known or potential error rate; and (4) whether the theory or technique is generally accepted in the relevant scientific community. Id. at 593-94. The inquiry under Rule 702 is a “flexible” one, and the district court has “the discretionary authority . . . to determine reliability in light of the particular facts and circumstances of the particular case.” Kumho Tire, 526 U.S. at 158. Accordingly, the factors identified in Daubert may or may not be pertinent in assessing reliability, depending on the nature of the issue, the expert’s particular expertise, and the 28 2 16-cv-704 BTM (JLB) 1 subject of his testimony. Id. at 150. 2 Importantly, the focus of the court’s gatekeeping inquiry “must be solely on 3 principles and methodology, not the conclusions that they generate.” Daubert, 509 4 U.S. at 595. “When an expert meets the threshold established by Rule 702 . . . the 5 expert may testify and the jury decides how much weight to give that testimony.” 6 Primiano v. Cook, 598 F.3d 558, 565 (9th Cir. 2010). 7 II. DISCUSSION 8 A. 9 Plaintiffs have withdrawn Robert Geary as an expert witness. (ECF No. 385 10 Robert Geary and Timothy L. Fort at 1). Therefore, Defendants’ motion to exclude his testimony is denied as moot. 11 Defendants have offered Timothy L. Fort as an expert witness “to respond to 12 the expert witness report provided by Mr. Robert F. Geary . . . and to testify 13 regarding the nature of fiduciary duty related to defendant William Andreoli.” (ECF 14 No. 294, Exh. B at 2). On the topic of fiduciary duty, Fort’s testimony addresses 15 whether Andreoli complied with Delaware and California law with respect to the 16 duty of care and duty of loyalty, and whether Andreoli breached any contractual 17 duties under California law. Id. at 2-3. To the extent that Fort’s testimony rebuts 18 the testimony of Geary, it is precluded. See Bakst v. Cmty. Mem'l Health Sys., Inc., 19 2011 WL 13214315, at *27 (C.D. Cal. Mar. 7, 2011) (“Because the testimony [the 20 expert] was hired to rebut will not be offered, [the expert] may not testify.”). To the 21 extent that Fort’s testimony concludes that Andreoli complied with California and 22 Delaware law, it is also precluded. See Hangarter v. Provident Life & Acc. Ins. Co., 23 373 F.3d 998, 1016 (9th Cir. 2004) (“an expert witness cannot give an opinion as 24 to her legal conclusion, i.e., an opinion on an ultimate issue of law. Similarly, 25 instructing the jury as to the applicable law is the distinct and exclusive province of 26 the court.”) (internal citations and quotations omitted). Therefore, Plaintiffs’ motion 27 to exclude the testimony of Timothy L. Fort is granted. 28 3 16-cv-704 BTM (JLB) 1 B. 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Dr. Samuel N. Grief, Dr. Michael John Glade, Dr. Arthur J. Miller, and Dr. Philip Michael Bolger Defendants seek to exclude, in their entirety, the testimony of Dr. Samuel N. Grief, who evaluated the scientific validity of weight loss claims for Wakaya’s ketogenic diet program (see ECF No. 312-3, Exh. A), Dr. Michael John Glade, who examined Wakaya’s claims about Octodrine in its dietary supplement product as well as Wakaya’s claims about the health benefits of ginger and turmeric (see ECF No. 311-3, Exh. A), Dr. Arthur J. Miller, who evaluated the food safety risk of Wakaya’s products containing ginger (see ECF No. 314-3, Exh. A), and Dr. Philip Michael Bolger, who evaluated the risks of lead and arsenic exposure from products containing bentonite clay (see ECF No. 306-3, Exh. A). Defendants challenge all four experts on essentially the same two grounds: (1) the expert’s testimony did not provide affirmative evidence that Wakaya’s statements were false or misleading, and (2) the expert relied on incomplete information in forming his opinion. (See ECF No. 312-2 at 1; ECF No. 311-2 at 1; ECF No. 314-2 at 1; ECF No. 306-2 at 1). Both grounds are insufficient to warrant exclusion. The first ground improperly challenges the conclusions of the experts rather than their principles and methodology. See Daubert, 509 U.S. at 595 (the focus of the court’s gatekeeping inquiry “must be solely on principles and methodology, not the conclusions that they generate”). The second ground goes to the weight and credibility of the expert’s testimony rather than its admissibility. See Bergen v. F/V St. Patrick, 816 F.2d 1345, 1352 n.5 (9th Cir. 1987) (“The relative weakness or strength of the factual underpinnings of the expert's opinion goes to weight and credibility, rather than admissibility.”) (internal quotation omitted). Therefore, Defendants’ motions to exclude the testimony of Dr. Samuel N. Grief, Dr. Michael John Glade, Dr. Arthur J. Miller, and Dr. Philip Michael Bolger are denied. C. Dr. David Stewart Defendants seek to exclude the testimony of Dr. David Stewart, who 4 16-cv-704 BTM (JLB) 1 designed a research study to evaluate consumers’ perceptions of claims on 2 Wakaya’s website. (See ECF No. 315-3, Exh. A at 5). Defendants’ first ground for 3 exclusion rests on Stewart’s characterization that Wakaya’s income claims “lack 4 substantiation,” which does not prove that the claims are false or misleading. See 5 id. at 2. As explained above, this is an improper challenge to an expert’s 6 conclusions rather than to his principles and methodology. See Daubert, 509 U.S. 7 at 595. Defendants’ second ground for exclusion challenges the resulting data from 8 Stewart’s consumer survey. (See ECF No. 315-2 at 4). This objection does not go 9 to admissibility. See Hemmings v. Tidyman's Inc., 285 F.3d 1174, 1188 (9th Cir. 10 2002) (“objections to the inadequacies of a study are more appropriately 11 considered an objection going to the weight of the evidence rather than its 12 admissibility. Vigorous cross-examination of a study's inadequacies allows the jury 13 to appropriately weigh the alleged defects and reduces the possibility of prejudice”) 14 (internal citations omitted). Therefore, Defendants’ motion to exclude the testimony 15 of Dr. David Stewart is denied. 16 D. Dr. Edward M. Mazze 17 Defendants seek to exclude the testimony of Dr. Edward M. Mazze, who 18 “evaluate[d] Wakaya Perfection’s multi-level marketing program and provid[ed] an 19 opinion as to whether or not the program [was] a pyramid and endless chain 20 scheme.” (ECF No. 313-3, Exh. A at 2). Defendants argue that Mazze’s testimony 21 is an impermissible legal conclusion and that he relied on an incorrect legal 22 standard. (See ECF No. 313-2 at 2). Mazze’s expert report describes what 23 characteristics of Wakaya’s multi-level marketing program match characteristics of 24 a pyramid scheme. (See ECF No. 313-3, Exh. A). This is permissible testimony. 25 See F.T.C. v. BurnLounge, Inc., 753 F.3d 878, 888 (9th Cir. 2014) (affirming district 26 court’s admission of expert testimony where expert “testified about whether 27 [defendant] was a pyramid”). Further, Mazze’s report includes the correct criteria 28 of the Federal Trade Commission’s test for what constitutes a pyramid scheme. 5 16-cv-704 BTM (JLB) 1 See Webster v. Omnitrition Int'l, Inc., 79 F.3d 776, 781 (9th Cir. 1996) (“payment 2 by participants of money to the company in return for which they receive (1) the 3 right to sell a product and (2) the right to receive in return for recruiting other 4 participants into the program rewards which are unrelated to sale of the product to 5 ultimate users”); ECF No. 313-3, Exh. A at 7. Therefore, Defendants’ motion to 6 exclude the testimony of Dr. Edward M. Mazze is denied. 7 E. Brian Bergmark 8 Defendants seek to exclude the testimony of Brian Bergmark, who calculated 9 damages using a lost-profit analysis and a marketing-cost analysis.1 Defendants 10 object to the underlying facts that Bergmark’s analysis relied upon. (See ECF No. 11 318-2). Bergmark’s report lists the specific financial documents he examined and 12 explains his calculation method. (See ECF No. 318-3, Exh. 2). For example, 13 Bergmark calculated lost profits using Youngevity’s historical quarterly and annual 14 sales in its direct selling segment, Youngevity’s forecasted and actual revenues, 15 combined annual sales experienced by some of the key distributer groups, and 16 financial data from Wakaya, such as sales and sources of revenue. (See ECF No. 17 318-3, Exh. 2 at 7-8). Bergmark’s lost profit damages are supported by “substantial 18 evidence.” See Humetrix, Inc., v. Gemplus S.C.A., 268 F.3d 910, 919 (9th Cir. 19 2001) (“We uphold awards of lost profit damages so long as they are supported by 20 substantial evidence.”); In re James E. O'Connell Co., Inc., 799 F.2d 1258, 1262 21 (9th Cir. 1986) (declining to overturn lost profit award based on expert testimony 22 supported by financial statements, data pertaining to similar businesses, and 23 market forecasts). Defendants’ objections go to the weight and credibility of the 24 25 26 27 28 Defendants also seek to exclude Bergmark’s Supplemental Report as untimely. (See ECF No. 318-2 at 4). Defendants’ rebuttal expert, Richard S. Hoffman, reviewed Bergmark’s supplemental report, sat in on Bergmark’s deposition, and subsequently submitted his own supplemental report. (See ECF No. 369, Exh. D at 70-72). There is no prejudice here. See Celador Int'l, Ltd. v. Walt Disney Co., 2008 WL 11342595, at *8 (C.D. Cal. Dec. 17, 2008) (“a supplemental report, and the testimony thereon, should be excluded only if there is prejudice to the opposing party”) (citing Wendt v. Host International, Inc, 125 F. 3d 806 (9th Cir. 1997)). 1 6 16-cv-704 BTM (JLB) 1 testimony rather than its admissibility. See Humetrix, 268 F.3d at 919 (“To the 2 extent [defendant] sought to challenge the correctness of [plaintiff’s] experts' 3 testimony [on lost profits], its recourse is not exclusion of the testimony, but, rather, 4 refutation of it by cross-examination and by the testimony of its own expert 5 witnesses.”); Wyler Summit P'ship v. Turner Broad. Sys., Inc., 235 F.3d 1184, 1192 6 (9th Cir. 2000) (“Weighing the credibility of conflicting expert witness testimony is 7 the province of the jury.”). Therefore, Defendants’ motion to exclude the testimony 8 of Brian Bergmark is denied. 9 III. CONCLUSION 10 For the foregoing reasons, the Court GRANTS Plaintiffs’ motion to exclude 11 the expert testimony of Timothy L. Fort (ECF No. 294) and DENIES Defendants’ 12 motions to exclude the expert testimony of Dr. Philip Michael Bolger (ECF No. 13 306), Robert Geary (ECF No. 310), Dr. Michael John Glade (ECF No. 311), Dr. 14 Samuel N. Grief (ECF No. 312), Dr. Edward M. Mazze (ECF No. 313), Dr. Arthur 15 J. Miller (ECF No. 314), Dr. David Stewart (ECF No. 315), and Brian Bergmark 16 (ECF No. 318). 17 The Court limits its ruling to the consideration of the expert evidence on the 18 35 pending motions for summary judgment. If the expert is to actually be called as 19 a witness at trial, a party may use one of its allotted motions in limine to seek an 20 evidentiary hearing seeking to exclude the expert’s testimony. 21 IT IS SO ORDERED. 22 Dated: February 13, 2018 23 24 25 26 27 28 7 16-cv-704 BTM (JLB)

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