The Segerdahl Corp. v. Ferruzza et al
Filing
726
MEMORANDUM OPINION AND ORDER Signed by the Honorable Martha M. Pacold on 2/22/2023: (rao, )
Case: 1:17-cv-03015 Document #: 726 Filed: 02/22/23 Page 1 of 9 PageID #:93367
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
THE SEGERDAHL CORP. d/b/a
SG360°,
Plaintiffs,
Case No. 17-cv-3015
v.
Judge Martha M. Pacold
ANTHONY FERRUZZA ET AL.,
Defendants.
MEMORANDUM OPINION AND ORDER
Plaintiff Segerdahl Corp. has moved to exclude the testimony, opinions, and
report of Matthew Scott, an expert witness for defendant American Litho, Inc.
[588]. Segerdahl contends that Scott is unqualified and his opinions are unreliable.
Segerdahl also seeks to preclude defendants Anthony Ferruzza, Michael Ferruzza,
Daniella Tucci, Christopher Knoll, Erica Knoll, and Eugene Czech (together,
“Individual Defendants”) from relying upon Scott because they did not disclose him
as an expert witness. As explained below, Segerdahl’s motion is granted in part and
denied in part.
BACKGROUND
Scott’s report describes him as “an expert in commercial printing, having
worked in the printing industry for over 40 years.” [644-1] at 2. 1 Over that time, he
has held a variety of different positions working in different industry segments and
with different types of products. Id. at 2, 10–11. He served on the Board of
Directors for the Association of Graphic Communications from 1998 to 2001, as the
Treasurer for the Association for an unspecified period of time, and he was on the
Board of Directors for the National Association of Printers and Lithographers from
1998 to 2000. Id. at 3, 11. Scott has also worked as an expert on print
manufacturing in litigation and performs consulting work related to the printing
business. Id.
In his expert report, Scott provides an overview of the printing industry. He
observes that “[t]he printing industry is highly specialized and unique” and requires
significant capital investment, resulting in “a limited number of companies with the
Bracketed numbers refer to docket entries and are followed by page and / or paragraph
numbers. Page numbers refer to the CM/ECF page number.
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resources . . . to manufacture substantial print volume.” Id. at 3. Scott asserts that
“[p]rinting companies run the same or similar equipment and use the same
processes, but are otherwise unique” and that “standard expertise . . . is developed,
shaped, and shared through” the movement of individual workers “from company to
company.” Id. at 3–4; see also id. at 5 (“Top printing companies use the same
techniques, equipment, suppliers, standards, paper, and subcontractors.”).
According to Scott, printers “prepare a set of written procedures based on
their knowledge of the process.” Id. at 5. “As the standards are the same, so are the
Standard Operating Procedures different printing companies use.” Id.; see also id.
(“SOP’s are generally the same from printer to printer.”).
Scott also states that “[m]ost customers maintain a ‘go to’ roster of qualified
printers and” use “Master Supply agreements” with printers.” Id. at 4. “Almost all
Master Supply agreements contain ‘work for hire’ provisions, such that the
customer owns all of the print company’s work for that customer.” Id.
Based upon his review of various documents, Scott reaches four general
conclusions: (1) R.J. Reynolds “artwork, templates and forms are considered
customer supplied information, [and] therefore owned by the customer.” Id. at 8.
(2) Quality Assurance forms “in use [by Segerdahl] are standard in nature, various
forms of which are in use at larger printing companies. These forms are completely
adequate for the purpose and are generally known in the industry.” Id. (3) “The
Segerdahl SOP’s contain nothing commercially advantageous or unique. Similar, if
not identical[,] SOP’s can be found in every large print company.” Id. And (4)
“[b]lanks, partial, and incomplete templates contain little information helpful in
determining their ownership or proprietary nature.” Id.
After reviewing the briefs and Scott’s report, the court held a Daubert
hearing focused on the reliability of Scott’s methodology. [714], [717], [722].
LEGAL STANDARD
“Federal Rule of Evidence 702 and Daubert [v. Merrell Dow Pharmaceuticals,
Inc., 509 U.S. 579 (1993),] govern the admissibility of expert testimony.” Timm v.
Goodyear Dunlop Tires N. Am., Ltd., 932 F.3d 986, 993 (7th Cir. 2019). “Under this
framework, a trial judge, as a gatekeeping matter, is responsible for ensuring that
proposed expert testimony ‘is not only relevant, but reliable.’” Id. (quoting Daubert,
509 U.S. at 589). “An expert’s testimony qualifies as relevant under Rule 702 so
long as it assists the jury in determining any fact at issue in the case.” Stuhlmacher
v. Home Depot U.S.A., Inc., 774 F.3d 405, 409 (7th Cir. 2014).
The court “must engage in a three-step analysis before admitting expert
testimony. It must determine whether the witness is qualified; whether the
expert’s methodology is scientifically reliable; and whether the testimony will assist
the trier of fact to understand the evidence or to determine a fact in issue.”
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Gopalratnam v. Hewlett-Packard Co., 877 F.3d 771, 780 (7th Cir. 2017) (internal
quotation marks omitted). “The proponent of the expert bears the burden of
demonstrating that the expert’s testimony would satisfy the Daubert standard.”
Lewis v. CITGO Petroleum Corp., 561 F.3d 698, 705 (7th Cir. 2009).
DISCUSSION
Scott’s Qualifications
Segerdahl first challenges Scott’s qualifications. “For a witness to be
considered an ‘expert,’ Rule 702 requires that person to be qualified as such ‘by
knowledge, skill, experience, training, or education.’” Lewis, 561 F.3d at 705
(quoting Fed. R. Evid. 702). “Whether a witness is qualified as an expert can only
be determined by comparing the area in which the witness has superior knowledge,
skill, experience, or education with the subject matter of the witness’s testimony.”
Gayton v. McCoy, 593 F.3d 610, 616 (7th Cir. 2010) (internal quotation marks
omitted). The court “must look at each of the conclusions [an expert] draws
individually to see if he has the adequate education, skill, and training to reach
them.” Id. at 617; see, e.g., Hall v. Flannery, 840 F.3d 922, 928–30 (7th Cir. 2016)
(expert was qualified to offer some opinions but not others).
Here, Segerdahl lumps all of Scott’s opinions together and asserts that he is
unqualified to offer any opinions “on the business of large printers [like Segerdahl]
because he has never worked for such a company.” [589] at 7. American Litho
responds that Scott need not have specialized experience with large printers and
that having over forty years of experience in the printing industry is sufficient.
Scott is qualified to offer opinions about the printing industry. As recounted
above, Scott has over forty years of experience holding a variety of roles across the
industry and at companies he himself owns. [644-1] at 2–3, 10–11. Segerdahl does
not challenge that Scott has significant experience and knowledge of the printing
industry in general, but instead contends that he needs specific experience with
large printers. Segerdahl, however, does not explain why Scott must have specific
work experience with large printers and why the experience he does have is
inadequate. See Baugh v. Cuprum S.A. de C.V., 845 F.3d 838, 845 (7th Cir. 2017)
(denying Daubert motion where movant “fail[ed] to explain how Dr. Vinson’s . . .
lack of experience within the ladder industry render[ed] him unqualified”); In re
Fluidmaster, Inc., Water Connector Components Prods. Liab. Litig., No. 14-cv-5696,
2017 WL 1196990, at *6 (N.D. Ill. Mar. 31, 2017) (“Plaintiffs fail to explain why the
experience that Meek actually possesses is insufficient to qualify him to offer his
opinions, and that failure dooms their Daubert challenge.”). Regardless, courts
generally “impose no requirement that an expert be a specialist in a given field,” so
the fact that Scott has not worked at a large printer “goes to the weight to be placed
on [his] opinion[s], not [their] admissibility.” Hall, 840 F.3d at 929 (internal
quotation marks omitted). Scott’s general experience in the printing industry is
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sufficient to qualify him as an expert regarding the opinions he offers about what
information, forms, procedures, and practices are commonly known or typical in the
industry. See Smith v. Union Pac. R.R., No. 11-cv-986, 2017 WL 2656583, at *4–5
(N.D. Ill. June 20, 2017) (vocational counselor was qualified to testify about
plaintiff’s ability to return to work even though lacked expertise on substance abuse
and had not previously worked with locomotive engineers like plaintiff).
Reliability Of Scott’s Opinions
Segerdahl next argues that Scott’s opinions are unreliable. To assess
reliability, the court must “determine whether the expert is qualified in the relevant
field and . . . examine the methodology the expert has used in reaching his
conclusions.” Smith v. Ford Motor Co., 215 F.3d 713, 718 (7th Cir. 2000).
Reliability is “assessed case by case,” although the non-exhaustive list of factors
identified in Daubert and its progeny can be instructive. 2 Timm, 932 F.3d at 993.
“Rule 702’s reliability elements require the district judge to determine only that the
expert is providing testimony that is based on a correct application of a reliable
methodology and that the expert considered sufficient data to employ the
methodology.” Gopalratnam, 877 F.3d at 780 (emphasis omitted). “[T]he correct
inquiry focuses not on ‘the ultimate correctness of the expert’s conclusions,’ but
rather on ‘the soundness and care with which the expert arrived at her opinion.’”
Timm, 932 F.3d at 993 (quoting Schultz v. Akzo Nobel Paints, LLC, 721 F.3d 426,
431 (7th Cir. 2013)). Ultimately, to be reliable, an expert must “show that his
conclusions were the fruit of a rigorous, objectively-verifiable approach—something
more than mere speculation.” Id. at 994. Even when an expert relies upon his
experience, he “still need[s] to show how his experience or expertise led to his
conclusions.” Varlen Corp. v. Liberty Mut. Ins. Co., 924 F.3d 456, 459 (7th Cir.
2019).
Here, Segerdahl contends that Scott’s opinions that Segerdahl’s SOPs,
Quality Assurance process forms, and Press and Finishing Waste Worksheet are
generally known in the industry lack any reliable basis. Separately, Segerdahl
asserts that Scott’s opinion about the ownership of R.J. Reynolds-related documents
is an inadmissible and unsupported legal opinion.
These factors include, for example, “(1) whether the proffered theory can be and has been
tested; (2) whether the theory has been subjected to peer review; (3) whether the theory has
been evaluated in light of potential rates of error; and (4) whether the theory has been
accepted in the relevant scientific community.” Krik v. Exxon Mobil Corp., 870 F.3d 669,
674 (7th Cir. 2017) (quoting Baugh v. Cuprum S.A. de C.V., 845 F.3d 838, 844 (7th Cir.
2017)).
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A.
Opinions Regarding Segerdahl’s SOPs, Quality Assurance
Process Forms, and Waste Worksheet
Segerdahl asserts that four of Scott’s opinions are unreliable: (1) that, based
upon Scott’s review, Scott “did not discovery any [Segerdahl SOPs] that were not
readily available in any larger printing operation”; (2) that the SOPs “appear to be
the same as generally available in the industry”; (3) that Segerdahl’s Quality
Assurance process forms are “in use at larger printing companies” and “generally
known in the industry”; and (4) that Segerdahl’s “Press and Finishing Waste
Worksheet” uses “basic standard percentage formulations used throughout the
industry.” [644-1] at 7–8; see [589] at 9–12.
American Litho responds that experts such as Scott may testify based on
their experience and that Scott’s opinions “result from Scott’s experience, his
general opinions on and observations of the printing industry, and his
comprehensive review and analysis of the 248 documents alleged to contain
Segerdahl trade secrets in light of that experience.” [644] at 11.
American Litho has shown that Scott’s opinions are based on reliable
principles, namely his experience. Scott may rely upon his experience to reach his
conclusions, but he must “show how his experience or expertise led to his
conclusions.” Varlen, 924 F.3d at 459; Fed. R. Evid. 702 (2000 advisory committee
notes). Scott’s report does not cleanly connect his experience to his opinions. The
report does not, for example, explain how he knows that Segerdahl’s SOPs are
“readily available in any larger printing operation,” nor did he give specific reasons
why he knew that the Quality Assurance forms were “generally known in the
industry.” [644-1] at 7–8.
However, Scott’s testimony at the Daubert hearing filled in these gaps. Scott
testified that he did not need to conduct surveys and research as to his conclusions
because they were based on “knowledge and experience that [he] ha[s].” Further,
Scott explained that he drew his conclusions based on conversations he has had
with the CEOs and presidents of large printing companies from when he was on the
board of the Association of Graphic Communications. As to the SOPs, Scott
testified that he drew the conclusion that the SOPs he reviewed were the same as
those generally available in the industry by comparing those reviewed to ones that
Scott drafted at his own printing companies. Scott further explained that although
he would have been unhappy had an employee taken SOPs when leaving one of
Scott’s companies, the SOPs would not have any value to a competitor because they
would be the same in the competitor’s shop. Scott similarly based his conclusion
that the Quality Assurance forms were generally in use at larger printing
companies on his experience as a consultant.
Experts may utilize their experience in a particular field as the basis for their
opinions, not just surveys and methodological research. See Kumho Tire Co. v.
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Carmichael, 526 U.S. 137, 147–48 (1999). Though the connection between Scott’s
experience and his ultimate opinions on Segerdahl’s SOPs, Quality Assurance
process forms, and Waste Worksheet may be thin, that connection can be attacked
through “vigorous cross-examination, presentation of contrary evidence, and careful
instruction on the burden of proof” along similar lines as Segerdahl’s questioning at
the Daubert hearing. Schultz, 721 F.3d at 431 (quoting Daubert, 509 U.S. at 596).
Scott’s four opinions on these documents clear Daubert’s gatekeeping threshold and
are thus admissible at this stage.
B.
Opinion Regarding R.J. Reynolds-Related Documents
Segerdahl next challenges Scott’s opinion that R.J. Reynolds “artwork,
templates and forms are considered customer supplied information, [and] therefore
owned by the customer.” [664-1] at 8. Segerdahl maintains that this is an
impermissible legal opinion and, even if it was not a legal opinion, it is unreliable
because Scott did not review Segerdahl’s agreements with R.J. Reynolds, making
his opinion pure speculation. American Litho argues that Scott is merely opining
that, typically, these documents would be owned by R.J. Reynolds and not that the
documents in Segerdahl’s possession are R.J. Reynolds’s property. Alternatively,
American Litho argues that Scott is correct because Segerdahl’s R.J. Reynoldsrelated documents are in fact owned by R.J. Reynolds and not Segerdahl.
Scott’s opinion is inadmissible because it is an impermissible legal
conclusion. Scott does not opine in his report that R.J. Reynolds-related work
documents are typically owned by R.J. Reynolds; he concludes that the specific R.J.
Reynolds documents that Segerdahl asserts are Segerdahl’s trade secrets are owned
by R.J. Reynolds. [644-1] at 6–8 (Scott stating that he reviewed Segerdahl’s “RJR
Templates” and concluding “[r]elative to the exhibits” that the “artwork, templates
and forms” were “owned by the customer”). American Litho does not dispute that
this is a legal conclusion on which Scott cannot opine. See United States v. Sinclair,
74 F.3d 753, 757 n.1 (7th Cir. 1996) (“Federal Rules of Evidence 702 and 704
prohibit experts from offering opinions about legal issues that will determine the
outcome of a case. That is, they cannot testify about legal issues on which the judge
will instruct the jury.”). This holding does not, however, prevent Scott from
testifying about the general custom in the printing industry, as Segerdahl’s motion
does not seek to exclude testimony on that topic. 3
Because the court holds that Scott cannot testify as to whether R.J. Reynolds
in fact owned the “artwork, templates, and forms,” the court does not address
whether Scott presented a reliable basis for this opinion.
Because this category of testimony is not at issue, the court does not address its
admissibility.
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The Individual Defendants’ Reliance On Scott
Finally, Segerdahl seeks to preclude the Individual Defendants from relying
upon Scott due to their alleged violation of Federal Rule of Civil Procedure 26(a)(2)
by not disclosing that they intended to rely upon him as a witness. American Litho
does not dispute that the Individual Defendants violated Rule 26(a)(2), and instead
argues that it did not violate Rule 26(a)(2) and asserts that any party can rely upon
Scott’s opinions and testimony. [644] at 14–15. The Individual Defendants did not
file a separate response and, instead, joined American Litho’s opposition. [649].
Because neither American Litho nor the Individual Defendants refuted (or
even addressed) Segerdahl’s contention that the Individual Defendants violated
Rule 26(a)(2), they have conceded it. See 7241 W. 100th Place Corp. v. Vill. of
Broadview, No. 13 C 4336, 2014 WL 517961, at *3 (N.D. Ill. Feb. 6, 2014) (collecting
cases); Komal v. Arthur J. Gallagher & Co., 833 F. Supp. 2d 855, 863 (N.D. Ill.
2011) (same); see also Varlen, 924 F.3d at 460 (“[C]ourts do not have to scour the
record or make a party’s argument for it.”). With respect to the arguments
defendants did raise, whether American Litho did or did not violate Rule 26(a)(2) is
not at issue, and American Litho does not explain how its compliance with the
Rule—or the general principle that any party may rely upon the testimony of any
witness—addresses whether the Individual Defendants violated the Rule or
whether precluding the Individual Defendants from relying upon Scott is an
appropriate sanction for such a violation.
Even if American Litho and the Individual Defendants had not waived their
opposition on this issue, the Individual Defendants do appear to have violated Rule
26(a)(2). The Rule requires that “a party must disclose to the other parties the
identity of any witness it may use at trial to present evidence under Federal Rule of
Evidence 702, 703, or 705.” Fed. R. Civ. P. 26(a)(2)(A). Again, there is no dispute
that the Individual Defendants did not disclose Scott as a witness they intended to
use at trial. Thus, they appear to have violated Rule 26(a)(2).
It could be argued (but was not) that American Litho’s disclosure of Scott
somehow relieved the Individual Defendants of their obligation to do so under Rule
26(a)(2). Courts that have addressed this circumstance (where one defendant
properly discloses an expert but another defendant does not and then relies upon
that expert) are in agreement that this violates Rule 26(a)(2). Stafford v. Carter,
No. 17-cv-00289, 2018 WL 4361639, at *2–3 (S.D. Ind. Sept. 13, 2018) (“Rule 26 does
not create an implicit ‘co-defendant’ exception to the disclosure requirement.”);
Smith v. Hrynkiw, No. 05-CV-1759, 2008 WL 8700457, at *11 (N.D. Ala. Apr. 28,
2008) (rejecting argument that it was “appropriate for [one defendant] to piggyback
onto” a co-defendant’s disclosure of an expert because “Rule 26(a)(2) obligates ‘a
party’ to disclose, not ‘a side’”); see also Kaepplinger v. Michelotti, No. 17 CV 5847,
2022 WL 1404832, at *5–6 (N.D. Ill. May 4, 2022) (holding that defendants violated
Rule 26(a)(2) by not disclosing expert that had already been disclosed by former co7
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defendant, even though defendants included a footnote “adopting all of their codefendants’ disclosures”); Ill. Comput. Rsch, LLC v. Harpo Prods., Inc., No. 08 C
7322, 2010 WL 2136665, at *10 (N.D. Ill. May 26, 2010) (defendant violated Rule
26(e) by not timely supplementing its disclosures to add witness who had previously
been disclosed by former co-defendant).
“Failure to comply with Rule 26(a)(2)’s requirements results in sanction: the
offending party is not allowed to introduce the expert witness’s testimony as
‘evidence on a motion, at a hearing, or at a trial.’” Ciomber v. Coop. Plus, Inc., 527
F.3d 635, 641 (7th Cir. 2008) (quoting Fed. R. Civ. P. 37(c)(1)). “This sanction is
automatic and mandatory unless the offending party can establish that its violation
of Rule 26(a)(2) was either justified or harmless.” Id. (internal quotation marks
omitted); Fed. R. Civ. P. 37(c)(1).
Here, neither the Individual Defendants nor American Litho assert that the
Individual Defendants’ violation of Rule 26(a)(2) was justified or harmless. So,
again, their opposition on this issue is waived. That said, it seems the Individual
Defendants may have a good argument that their violation was harmless given that
Scott was disclosed by American Litho, see Fed. R. Civ. P. 37, 1993 advisory
committee notes (observing that Rule 37(c)(1)’s exceptions for substantially justified
and harmless violations can apply to “the failure to list as a trial witness a person
so listed by another party”), but again this issue has not been briefed (because it
was not raised) so the court cannot reach any firm conclusion. Nevertheless,
because defendants did not argue that the Individual Defendants’ violation was
harmless or justified, the court will not make that argument for them.
The only question then is the remedy. Typically, exclusion of the expert
witness for all purposes, including both summary judgment and trial, is the proper
sanction. Ciomber, 527 F.3d at 641. Here, however, that is complicated by the fact
that American Litho disclosed Scott and therefore may rely on him (to the extent
his opinions are admissible). Allowing Scott to testify at trial but simply preventing
the Individual Defendants from examining him is a strange circumstance, and,
given the paucity of briefing, no party has addressed exactly how this would play
out at trial and what complications or problems such a remedy might create.
Accordingly, at present the court only disregarded the Individual Defendants’ use of
Scott’s report and his testimony for purposes of their summary judgment motion,
see [711], and reserves ruling on whether and how they may use Scott’s testimony at
trial. See Smith, 2008 WL 8700457, at *11 (striking affidavit at summary judgment
stage). The parties may raise this issue in their pretrial filings.
CONCLUSION
Segerdahl’s motion, [588], is granted in part and denied in part. Scott may
testify as to all matters in his report save for his opinion that R.J. Reynolds owned
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the “artwork, templates, and forms.” The parties may brief any proposed remedy
for the Rule 26 violation discussed in Part III, supra, in their pretrial filings.
Dated: February 22, 2023
/s/ Martha M. Pacold
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