Innovation Ventures, LLC v. Custom Nutrition Laboratories, LLC et al
ORDER denying 423 Plaintiff's Motion to Exclude Testimony of Christopher C. Pflaum; denying 425 Defendants' Motion to Exclude Testimony of Rodney Crawford. Signed by District Judge Terrence G. Berg. (AChu)
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29155 Filed 02/16/21 Page 1 of 42
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
L.L.C. f/d/b/a LIVING
LABORATORIES, L.L.C., ALAN
MOTION TO EXCLUDE
CHRISTOPHER C. PFLAUM
(ECF NO. 423)
MOTION TO EXCLUDE
TESTIMONY OF RODNEY
CRAWFORD (ECF NO. 425)
Opinion testimony by a qualified expert may be admitted in court
if it is helpful to the trier of fact in understanding the evidence or
determining the facts in issue, based on sufficient facts or data, and the
product of reliable principles and methods that have been reliably
applied to the facts of the case. Fed. R. Evid. 702.
In this longstanding breach of contract case, the parties offer
opposing experts to opine on the question of what damages, if any,
Defendants owe to Plaintiff Innovation Ventures for breach of contract.
Plaintiff’s expert offers testimony about how to calculate lost profits
based on Plaintiff’s market share. In rebuttal, Defendants offer their
expert’s opinion as to the weaknesses in Plaintiff’s expert’s calculations.
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29156 Filed 02/16/21 Page 2 of 42
Each party has moved to exclude the other’s expert witness under
Daubert and the Federal Rules of Evidence. These cross-motions (ECF
Nos. 423 and 425) are now before the Court for decision.
On appeal, the Sixth Circuit held that Plaintiff “may introduce
testimony that uses market share to quantify its lost profits.” Innovation
Ventures, LLC v. Custom Nutrition Laboratories, LLC, 912 F.3d 316, 345
(6th Cir. 2018). The Court of Appeals added, “Defendants may then
submit rebuttal evidence concerning the weaknesses of this specific
In accordance with that ruling, Plaintiff offers Rodney Crawford as
its damages expert witness to testify concerning Plaintiff’s lost profits. In
rebuttal, Defendants seek to present Dr. Christopher Pflaum as their
damages expert who will testify as to the weaknesses in Plaintiff’s
calculations and opinions on damages.
Each party seeks to exclude the expert testimony of the opposing
party. Before the Court are the following motions: (1) Defendant’s
Daubert motion to exclude the expert testimony of Rodney Crawford, See
ECF No. 425, and (2) Plaintiff’s Daubert motion to exclude the expert
testimony of Dr. Christopher Pflaum and Eric C. Frye. See ECF No. 423.
These matters are fully briefed, and a hearing was held on January 22,
2021. At that hearing, Defendants disclosed that they do not plan to offer
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29157 Filed 02/16/21 Page 3 of 42
Frye’s opinions at trial. Plaintiff responded that it would no longer
maintain its challenge to Frye so long as Defendants do not offer him as
a witness of any kind, whether lay or expert. As Defendants have stated
that they will not present his testimony, the issue of whether Frye should
be excluded as an expert witness is moot.
The Court also learned that although in the present motion
Defendant moves to exclude Crawford’s 2017 expert report and opinion,
Crawford’s 2017 expert report has been superseded by an October 2020
expert report, which will be the operative document for the purposes of
trial. Accordingly, Defendants’ motion to exclude Crawford’s 2017 expert
report is moot. But Plaintiff further indicated that Crawford’ analysis in
his October 2020 expert report relies on the same methodologies and
principles at issue in the present motion and that the substance of the
changes in the October 2020 expert report merely relate to the data. As
such, the Court’s analysis and conclusions here about whether, under
Daubert, the opinions offered by Crawford and Pflaum could be admitted
remains applicable. For the following reasons, the Court will DENY both
In determining whether to admit expert testimony, district courts
serve a “gatekeeping role” to “ensure that any and all scientific testimony
or evidence admitted is not only relevant, but reliable.” Daubert v.
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29158 Filed 02/16/21 Page 4 of 42
Merrell Dow Pharmaceuticals, 509 U.S. 579, 589 (1993). This
gatekeeping function applies to scientific expert testimony and other
expert testimony involving technical or specialized knowledge. Kumho
Tire Co. v. Carmichael, 526 U.S., 137, 147 (1999). The Federal Rules of
Evidence later codified these court-made requirements by adopting Fed.
R. Evid. 702, which provides as follows:
A witness who is qualified as an expert by knowledge,
skill, experience, training, or education may testify in the
form of an opinion or otherwise if:
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;
The testimony is based on sufficient facts or data;
The testimony is the product of reliable principles and
The expert has reliably applied the principles and methods
to the facts of the case.
Fed. R. Evid. 702.
In evaluating the reliability of expert testimony, Daubert provided
a non-exclusive list of factors, which include: “testing, peer review,
publication, error rates, the existence and maintenance of standards
controlling the technique’s operation, and general acceptance in the
relevant scientific community.” United States v. Langan, 263 F.3d 613,
621 (6th Cir. 2001) (citing Daubert, 509 U.S. at 593-94)). A district court
“has ‘considerable leeway in deciding…how to go about determining
whether particular expert testimony is reliable.’” United States v.
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29159 Filed 02/16/21 Page 5 of 42
Sanders, 59 Fed. App’x 765, 767 (6th Cir. 2003) (quoting Kumho, 526 U.S.
at 152). Daubert’s factors are not dispositive in every case and should be
applied only “‘where they are reasonable measures of reliability of expert
testimony.’” In re Scrap Metal Antitrust Litigation, 527 F.3d 517, 529 (6th
Cir. 2008). “[R]ejection of expert testimony is the exception, rather than
the rule.” Id. at 530. “Vigorous cross-examination, presentation of
contrary evidence, and careful instruction on the burden of proof are the
traditional and appropriate means of attacking shaky but admissible
evidence.” Daubert, 509 U.S. at 596.
The parties have each filed motions to exclude the testimony of
their opponent’s damages expert. ECF Nos. 423, 425. Specifically,
Defendants move to exclude the lost profits testimony of Plaintiff’s
expert, Rodney Crawford, on the ground that he is not qualified, he did
not perform certain underlying market analyses, and he failed to consider
certain evidence in his analysis. ECF No. 25, PageID.26933. On the other
side, Plaintiff moves to exclude Defendants’ expert, Dr. Christopher C.
Pflaum, offered to rebut Crawford’s testimony, because it contends that
his opinions were based primarily on insufficient evidence, he did not
prepare his report, his report does not reflect his views, and his opinions
relied on inadmissible evidence. ECF No. 424, PageID.26427.
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29160 Filed 02/16/21 Page 6 of 42
A. Defendants’ motion to exclude Plaintiff’s Expert
Testimony by Mr. Crawford.
Crawford concludes in his Expert Report and Supplemental Report
that Plaintiff has suffered lost profits from Defendants’ sales of energy
shots containing Choline Family ingredients, which was conduct in
violation of their Settlement Agreement. ECF No. 429, PageID.28146. To
calculate lost profits, Crawford used a “category share methodology.” Id.
at PageID.28147 (citing ECF No. 426-3, PageID.27143-46). As a way to
show the methodology behind the analysis, Plaintiff explains that
(1) determined the total Choline Family-containing bottles
NSL sold; (2) computed [Plaintiff’s] lost sales by multiplying
the violative sales by [Plaintiff’s] five-year average, 85%
product-category…; and (3) multiplied [Plaintiff’s] lost sales
by its average per-bottle profit.
ECF No. 429, PageID.28147 (citing ECF No. 429-2).
Plaintiff adds that this methodology “thus accounts for other factors
that might affect sales, such as consumer preferences and price
elasticity.” ECF No. 429, PageID.28147 (citing ECF No. 429-5).
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29161 Filed 02/16/21 Page 7 of 42
Crawford’s background establishes “knowledge,
skill, experience, training, or education” in the
Defendants assert that Crawford is not qualified because his report
is “mere arithmetic” and because he assumes Plaintiff’s market share
“without performing any of the necessary analysis to support the
conclusions.” ECF No. 425, PageID.26943. Defendants misunderstand
the first prong under Federal Rule of Evidence 702, which only requires
that the expert witness “be qualified by ‘knowledge, skill, experience,
training or education.’” Scrap Metal, 527 F.3d at 529 (citing Fed. R. Evid.
As to his qualifications, Crawford has been licensed in Michigan as
a Certified Public Accountant since 1979. ECF No. 429-2, PageID.28176.
He founded Crawford & Winiarski, a firm engaged in “economic damages
analysis, financial consulting and investigative accounting in the context
of commercial disputes.” Id. Prior to starting his own economic consulting
firm, for over twenty-five years Crawford was a partner with Arthur
Andersen LLP, now defunct but formerly a large accounting firm. Id. In
addition, Crawford holds numerous licenses and certifications relating to
fraud, financial forensics, and business valuation. Id. He has served as a
“consultant or expert in several hundred matters involving forensic
accounting investigations and claims of economic damages in connection
with commercial disputes.” Id. at PageID.28176. These qualifications
demonstrate knowledge, skill, experience, training or education in the
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29162 Filed 02/16/21 Page 8 of 42
relevant field. See Fed. R. Evid. 702. Therefore, Crawford qualifies as an
expert witness. See Scrap Metal, 527 F.3d at 529.
Crawford’s testimony is relevant and will assist
the trier of fact to understand the evidence or
determine a fact in issue.
The method for proving damages is a key issue that was addressed
on appeal by the Sixth Circuit. Plaintiff prevailed in that appeal in that
the Court of Appeals held that it could try to prove its damages resulting
from Defendants’ breach of their contract by using its market share to
prove its lost profits. Innovation Ventures, 912 F.3d at 344. The Sixth
Circuit opined that under Michigan law, “‘lost profits resulting from a
breach of contract may be considered by a jury in determining damages.’”
Id. (citing Eastland Partners LP v. Village Green Mgmt. Co. (In re
Brown), 342 F.3d 620, 632 (6th Cir. 2003) (citations omitted)). The court
reasoned that “forbidding the submission of market-share based
estimates to a jury as a matter of law runs afoul of [Michigan law] and
impermissibly limits the scope of the jury’s inquiry.” Id. at 345. As such,
on remand, Plaintiff is permitted to present market-share based
calculations of lost profits as a theory of damages, while Defendants may
offer “rebuttal evidence concerning the weaknesses of this specific
Under Daubert, the expert testimony must assist the trier of fact to
“understand the evidence or to determine a fact in issue,” a test which is
met when the testimony is relevant and relates to an issue in the case.
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29163 Filed 02/16/21 Page 9 of 42
509 U.S. at 591. Furthermore, “Rule 702’s ‘helpfulness’ standard requires
a valid scientific connection to the pertinent inquiry as a precondition to
admissibility.” Id. at 592.
Here, Plaintiff offers Crawford as a damages expert to determine
its lost profits and to testify as to his calculations and methodology. ECF
No. 429. Crawford’s testimony will help the trier of fact understand the
issue of damages, and specifically, how Defendants’ violative conduct in
breaching their restrictive covenant affected Plaintiff’s profits. For
instance, Crawford’s calculations considered “that Defendants’ products
were formulated and marketed to usurp” Plaintiff’s sales, Id. at
PageID.28146, and “the fact that the product was sold in some cases side
by side with 5-Hour Energy.” ECF No. 426-3, PageID.27155. Crawford
further stated that his conclusions “rely on the facts that are established
in terms of the actions of the parties.” Id. Crawford’s testimony relates to
market-share based calculations of lost profits, which the Sixth Circuit
has already ruled to be a valid methodology applicable to the facts of this
case. Such testimony will be helpful—whether ultimately accepted or
not—to the trier of fact in understanding the issue of damages.
Crawford’s testimony therefore satisfies the relevant and helpful prong
under Daubert. See 509 U.S. at 591-92.
iii. Crawford’s expert testimony is
reliable under the Daubert factors.
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29164 Filed 02/16/21 Page 10 of 42
The thrust of Defendants’ motion to exclude Crawford’s expert
testimony is whether his opinions have “reliable factual support.” ECF
No. 425, PageID.26952-53. Many of Defendants’ contentions can be
characterized as attacks on what Crawford failed to consider in his lost
profits analysis. For example, Defendants attack Crawford’s assumption
that, “if [Defendants] had never entered the market, the Plaintiff would
have otherwise realized 85% (or any other share) of [Defendants’] sales.”
Id. at PageID.26953. Defendants further argue that Crawford “must first
show that [Plaintiff] and the products produced by [Defendants] are
substitutes for each other in the same market segment.” Id.
Defendants’ position, however, is premised upon a reading of the
threshold for reliability under Daubert that is much stricter than what
Sixth Circuit case law requires. Expert testimony may be deemed reliable
so long as the witness’s premises have a reliable foundation, rather than
being based on unsupported speculation. For example, Scrap Metal
considered whether an expert witness’s testimony is reliable even when
the expert witness used an inaccurate database and therefore necessarily
reached “erroneous conclusions.” 527 F.3d at 529. There, a jury found a
defendant liable for antitrust violations and awarded plaintiffs damages
exceeding $20 million. Id. at 523.
The main issue on appeal in Scrap Metal was whether plaintiffs’
damages expert was reliable and whether the district court had erred in
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29165 Filed 02/16/21 Page 11 of 42
admitting his testimony. Defendant did not challenge the expert
witness’s qualifications, the relevancy of his testimony, or the general
reliability of the method he used to determine damages. Id. at 529.
Rather, defendant’s challenge was limited to the expert witness’s use of
an inaccurate price index and alterations to the index’s prices. In other
words, defendant argued that the expert witness “used erroneous data
and necessarily produced an erroneous conclusion.” Id. As a result,
defendant contended that the district court should have excluded the
expert witness’s testimony as insufficiently reliable under Federal Rule
of Evidence 702. Id. The Court of Appeals rejected this argument because
“it fundamentally confuses the credibility and accuracy of [expert
witness’s] opinions with reliability.” Id. (emphasis in original). Instead,
“a determination that proffered expert testimony is reliable does not
indicate, in any way, the correctness or truthfulness of such an opinion.”
Scrap Metal ruled that reliability requires that the expert’s
testimony “be supported by appropriate validation—i.e., ‘good grounds,’
based on what is known.” Id. (citing Daubert, 509 U.S. at 590). In a
Daubert motion, district courts are merely required to assess whether the
expert testimony “rests upon a reliable foundation, as opposed to, say,
unsupported speculation.” Id. at 529-30. Although Scrap Metal cautioned
that a significant error in application may still render expert testimony
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29166 Filed 02/16/21 Page 12 of 42
inadmissible, “we will generally permit testimony based on allegedly
erroneous facts when there is some support for those facts in the record.”
Id. at 530. (italics added). Because the expert witness offered a
foundation for how and why he analyzed the data the way he did, that
was enough to establish that he performed his analysis according to a
reliable method and reliably applied that method to the facts of the case.
Id. The court concluded that the district court did not err in admitting
the expert’s testimony because defendant’s contentions went to the
weight of the evidence, not its admissibility. Id. The weight of the
evidence is a question for the trier of fact at trial, not for courts
considering a Daubert motion.
The Sixth Circuit similarly considered the question of an expert’s
reliability in Dilts v. United Group Services, LLC, where the district court
granted a defendant’s motion to exclude plaintiff’s proposed expert
witness testimony. 500 Fed. App’x 440, 445 (6th Cir. 2012). There, the
district court excluded the expert witness’s testimony because the expert
“failed to use valid and reliable principles” that explained how a piece of
machinery malfunctioned and caused injuries to several workers. Id. The
district court also noted how the expert witness “failed to explain his
conclusion in his report.” Id.
The Sixth Circuit reversed the lower court, reasoning that the
expert witness performed “the necessary calculations and sufficiently
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29167 Filed 02/16/21 Page 13 of 42
relied on the laws of physics and mathematics generally employed.” Id.
at 446. Although defendant asserted that the expert witness did not have
the relevant experience with the specific concepts at issue, the appellate
court found that “[a]n expert’s lack of experience in a particular subject
matter does not render him unqualified so long as his general knowledge
in the field can assist the trier of fact.” Id. (citing Surles ex rel. Johnson
v. Greyhound Lines, Inc., 474 F.3d 288, 293-94 (6th Cir. 2007)). Daubert
and Federal Rule of Evidence 702 “require only that the expert testimony
be derived from inferences based on a scientific method and that those
inferences be derived from the facts on the case at hand.” Id. There is no
requirement that an expert witness “know the answer to all the questions
a case presents—even to the most fundamental questions.” Id. (citing
Jahn v. Equine Servs., PSC, 233 F.3d 382, 390 (6th Cir. 2000)).
Here, as did those of the defendants in Scrap Metal and Dilts,
Defendants’ arguments miss the mark. In the Sixth Circuit, the threshold
for indicia of reliability in a Daubert motion is a liberal one. The proper
question for Defendants’ motion to exclude expert testimony because it is
unreliable is whether the record shows that Crawford performed his
analysis “according to a reliable method and then reliably applied that
method to the facts of this case,” Scrap Metal, 527 F.3d at 531, and
whether his opinions rest “upon a reliable foundation, as opposed to, say,
unsupported speculation.” See id.
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29168 Filed 02/16/21 Page 14 of 42
In its opinion remanding the case to this Court, the court of appeals
made it clear that the method for quantifying lost profits using marketshare based estimates was an acceptable method for proving damages in
this case. Innovation Ventures, 912 F.3d at 345. The record shows that
Crawford’s expert testimony meets that burden because he performed an
analysis that used “market share to quantify its lost profits.” See id. In
order to mount a successful Daubert motion to exclude, Defendants need
to attack the reliability of Crawford’s method and whether he reliably
applied his method to the facts of the case. Instead, Defendants insist
that Crawford’s expert testimony is not reliable because there are
arguably better methods available, such as the “trend analysis”. ECF No.
426-3, PageID.27103-05. But Daubert does not require nor can this Court
find support for the proposition that an expert testimony’s chosen
methodology must be the most appropriate in order to be found reliable.
See Scrap Metal, 527 F.3d at 529 (“[A] determination that proffered
expert testimony is reliable does not indicate, in any way, the correctness
or truthfulness of such an opinion.”). Instead, Sixth Circuit case law
allows for experts to have reasonable differences in their choice in
methodology. See Dilts, 500 Fed. App’x at 445 (“Rule 702 does not require
an expert to have absolute certainty in formulating his opinion.”).
The only argument of Defendants that approaches the proper
inquiry is their attack on Crawford’s reliance in conducting his lost
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29169 Filed 02/16/21 Page 15 of 42
profits analysis on the principles articulated in State Indus. v. Mor-Flo
Indus. ECF No. 426-1, PageID.26977 (citing 883 F.2d 1573 (Fed. Cir.
1989)). Defendants assert that Crawford relies on State Indus. to make
the assumption that, “if the offending products were not on the market,
the Plaintiff would capture its market share of [Defendants’] sales.”
Defendants insist that, because he relies upon that case, Crawford must
adhere to the exact principles used in that case in order for his
methodology to be considered reliable. The thrust of Defendants’ position
is that Crawford’s testimony is subject to attack if it does not prove butfor causation, as the infringed patent owner was required to do in State
Indus. But the holding of that case was that the party with the burden of
proof is responsible for proving but-for causation, not that any single
witness, such as the plaintiff’s expert, must meet that test before being
allowed to testify.
In State Indus., the Federal Circuit Court of Appeals considered
whether a district court erred in awarding an infringed patent owner
damages based on the market share of the defendant’s infringing
product. 883 F.2d at 1576. The court stated that in order to calculate lost
profits, “the patent owner must demonstrate that there was a reasonable
probability that, but for the infringement, it would have made the
infringer’s sales.”1 Id. at 1577. In a two-competitor market, it is
The standard method for proving lost profits requires that the patent
owner prove “(1) demand for the patented product, (2) absence of
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29170 Filed 02/16/21 Page 16 of 42
reasonable to assume, provided that the patent owner can meet the
manufacturing and marketing demand, “that it would have made the
infringer’s sales.” But where, as in State Indus., there are multiple
competitors, it was appropriate for the district court to credit “all the
other competitors with their market shares as [plaintiff] requested.” Id.
at 1578. In doing so, the question becomes “whether an established
market share combined with the other Panduit factors is sufficient to
show [plaintiff’s] loss to a reasonable probability.” Id. The Federal Circuit
Court of Appeals concluded yes, finding that in addition to plaintiff’s
ability to “meet its market share of the demand,” plaintiff produced
specific evidence that it had lost sales to [defendant’s] infringing products
in various regional markets. For example, plaintiff offered testimony
from several retailers stating how plaintiff’s products lost sales to
defendant’s products. Id. at 1579. Stated another way, at trial the
plaintiff used multiple witnesses and pieces of evidence to prove its
theory that, but-for the patent infringer’s violative conduct, it would have
made those sales. Based on such testimony, the Federal Circuit Court of
Appeals held that it was “eminently reasonable for the district court to
acceptable noninfringing substitutes, (3) his manufacturing and
marketing capability to exploit the demand, and (4) the amount of the
profit he would have made.” Panduit Corp. v. Stahlin Bros. Fibre Works,
575 F.2d 1152, 1156 (6th Cir. 1978).
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29171 Filed 02/16/21 Page 17 of 42
infer that [plaintiff] could have sold its market share of [defendant’s]
infringing sales wherever the opportunity occurred.” Id.
The Federal Circuit Court of Appeals revisited the issues raised in
State Indus. in BIC Leisure Products, Inc. v. Windsurfing Intern., Inc., 1
F.3d 1214 (Fed. Cir. 1993). There, the court also considered whether the
evidence supported the district court’s award for lost profits in a patent
infringement case. Id. at 1216. The court opined that the market-share
methodology is inappropriate where the products are fundamentally
different and therefore do not compete in the same market. To establish
that products compete in the same market in the context of a patent
infringement claim, the infringed patent owner must show that
consumers would have bought its products if the infringer had not been
in the market. Id. at 1218. In other words, but-for the infringer, the
infringed patent owner would have increased its sales. See id. In ruling
that patent owners must prove a causal relation between the
infringement and its lost profits, the court concluded that “the district
court clearly erred by failing to apply the ‘but for’ causation test before
awarding lost profits.” Id.
Relying on these cases, Defendants insist that in order for
Crawford’s methodology to be found reliable, it must include proof of butfor causation—as stated in State Indus. and clarified in BIC. If
Crawford’s methodology does not prove but-for causation as required by
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29172 Filed 02/16/21 Page 18 of 42
Federal Circuit precedent, Defendants argue that Crawford’s opinions
must be excluded. But such a result is not compelled by those cases.
State Indus. sets the bar for what the plaintiff must prove in order
for the district court to award lost profits using a patent infringing
product’s market share. There, the court found that testimony from
multiple retailers attesting to how plaintiff’s products lost sales to
defendant’s violative products was sufficient for a district court to infer
that in a multi-competitor market, plaintiff “could have sold its market
share of [defendant’s] infringing sales wherever the opportunity
occurred.” See State Indus., 883 F.3d at 1579. State Indus. says nothing
about whether a single expert witness’s opinion is made less reliable
when such proofs are absent from his expert report. Rather, State Indus.
makes clear that it is the responsibility of the litigant offering a lost
profits theory of damages to show but-for causation as part of meeting its
burden of proof, not that any single witness must do so. For example, it
was the litigant in that case that offered testimony from multiple
retailers to establish “but-for” causation. See id. at 1579. The court did
not even consider any challenge to a party’s expert testimony discussing
lost profits based on market share, let alone require that such an expert’s
methodology include proof of but-for causation.
Furthermore, BIC stands for the proposition that the district court
erred by “failing to apply the ‘but for’ test before awarding lost profits.”
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29173 Filed 02/16/21 Page 19 of 42
Id. at 1218. There, the evidence as a whole was insufficient to support
damages based on lost profits because the party propounding the theory
did not prove but-for causation. But the Federal Circuit said nothing
about whether an expert’s testimony on damages should be rejected as
unreliable because the testimony failed to prove the “but-for causation”
required as an element at issue in the case. Litigants, not expert
witnesses, bear the burden of proving each element at issue.
In addition, BIC fails to control here because its procedural posture
is different. Here, the question is whether Crawford’s expert testimony
should be admitted after considering Rule 702 and the Daubert factors.
In BIC, the Federal Circuit Court of Appeals reversed the district court’s
decision because the district court itself committed reversible error when
it failed to consider the but-for causation standard when it determined
the damage award. 1 F.3d at 1219. The district court had the benefit of
reviewing the entirety of the record that was developed in the course of a
trial before calculating damages based on a theory of lost profits. See id.
Here, Crawford’s testimony does not represent Plaintiff’s only
opportunity to prove the element of but-for causation. Indeed, at the
January 22, 2021 hearing, Plaintiff stated that it would be offering
additional evidence tending to establish but-for causation. It would
therefore be premature to exclude Crawford’s testimony for the reasons
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29174 Filed 02/16/21 Page 20 of 42
In addition, at the same hearing, Defendants argued that while
expert witnesses are permitted to make assumptions, it is unreasonable
to assume that if Defendants were not in the market, several “club
retailers” (such as Sam’s Club or Costco) would not have proceeded to
bring other private-label generic energy shots to the market. This
assumption, Defendants contend, constitutes an analytical gap too great
“between the data and the opinion offered.” See Everlight Electronics Co.,
Ltd. v. Nichia Corp., 2014 WL 4707053 at *2 (E.D. Mich. 2014) (citing
Gen. Elec. Co. v. Joiner, 522 U.S. 136, 146 (1997)). In this argument,
Defendants effectively insist that but-for causation must be proven before
market-share evidence may even be used, and rely on the Federal
Circuit’s decision in Grain Processing Corp. v. America Maize-Products
Co., 185 F.3d 1341 (Fed. Cir. 1999) for support.
But a review of Grain Processing reveals Defendants’ reliance to be
misplaced. In that case, the Federal Circuit Court of Appeals considered
whether the existence of noninfringing substitutes in the market—that
is, products that could be sold and that would cut into a patent-holder’s
market without infringing on his rights—would be enough to preclude an
award of lost profits. Id. at 1341. It is presumed that the availability of
noninfringing substitutes may defeat an award of lost profits because “a
rational would-be infringer is likely to offer an acceptable noninfringing
alternative, if available, to compete with the patent owner rather than
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29175 Filed 02/16/21 Page 21 of 42
leave the market altogether.” Id. at 1351. The rationale is that, even if a
patent infringer were selling products in violation of a patent, the patent
owner should not be awarded damages based on a theory of lost profits if
the patent infringer could have produced a similar but noninfringing
product anyway. However, the court also held that patent owners have
“significant latitude to prove and recover lost profits for a wide variety of
foreseeable economic effects of the infringement.” Id. at 1350. The court
further opined that “[t]o recover lost profits, the patent owner must show
‘causation in fact.’” Id. at 1349. (emphasis added). The closest statements
approximating Defendants’ position is that when a patent owner raises a
theory of lost profits on lost sales, “the patent owner has an initial burden
to show a reasonable probability that he would have made the asserted
sales ‘but for’ the infringement.” Id. (emphasis added). Once that is
established, the burden shifts to the accused infringer to show that the
but-for causation claims are unreasonable. Id.
But again, as with the other cases cited by Defendants, Grain
Processing says nothing about an expert witness’s need to make a
preliminary finding establishing but-for causation for his opinion to be
deemed reliable. See id. Accordingly, this argument fails. As previously
stated, the burden of proving but-for causation rests with litigants
seeking to prove they are entitled to lost profit damages, not with their
individual expert witnesses. Plaintiff’s ability to meet its burden of proof
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29176 Filed 02/16/21 Page 22 of 42
in establishing but-for causation of the kind illustrated in Grain
Processing is a question for the jury at trial, not a matter of pre-trial
qualification of an expert under Daubert.2 See id.
Next, Defendants contend that because Crawford cites to State
Indus. as the basis for his calculations, his expert report is unreliable
unless it adheres to the exact reasoning of that case. ECF No. 425,
PageID.26943. But the Sixth Circuit did not require following the
principles in State Indus., BIC, or any other case.3 See Innovation
Ventures, 912 F.3d at 345. It simply held that Plaintiff shall be allowed
to “introduce testimony that uses market share to quantify its lost
Furthermore, both the Sixth Circuit’s reasoning and the expert
report of Defendants’ witness Pflaum show that there are multiple
methodologies using market share to quantify lost profits. For instance,
Pflaum’s declaration admits that “there are many approaches to
At the January 22, 2021 hearing, Defendants also cited the cases Fuji
Photo Film Co. Ltd. v. Jazz Photo Corp., 249 F. Supp. 2d 434 (D.N.J.
2003) and Stryker Sales Corp. v. Siroonian, 2017 U.S. Dist. LEXIS
225268 (W.D. Mich. 2017). These cases also support the rule that Plaintiff
bears the burden of proving but-for causation as to its lost profits. But
they do not address the issue of whether an expert witness’s reliability
under Daubert can be called into question for failing to establish an
element that the party must prove.
3 Indeed, neither State Indus. nor BIC were contemplated by the Sixth
Circuit, let alone held out as containing the model methodology for
determining lost profits by market share.
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29177 Filed 02/16/21 Page 23 of 42
computing” lost profits. See ECF No. 427-7, PageID.23038. And as an
example, the Sixth Circuit states “[a]t least one Michigan court has
determined that testimony related to market share can help quantify lost
profits with sufficient certainty.” Innovation Ventures, 912 F.3d at 345.
(citing Fabbrini Family Foods, Inc. v. United Canning Corp., 90 Mich.
App. 80 (1979) (per curiam)). The court went on to cite several other cases
using some variation of the lost profits theory of damages. See id.
Therefore, Defendants’ argument that Crawford’s analysis is unreliable
because it did not adhere to the principles stated in either State Indus.
or BIC is without merit.
The remainder of Defendants’ arguments attack the weight, not the
admissibility, of Crawford’s testimony. Such alleged deficiencies are
better tested under the rigors of cross-examination at trial and resolved
by the trier of fact. See Daubert, 509 U.S. at 596. For instance, even
though at the January 22, 2021 hearing both parties admitted that
neither of their own expert witnesses performed such calculations,
Defendants assert that Crawford performed no market studies or crosselasticity studies, and offered no way to “know if the market for Plaintiff’s
products is elastic or not.” ECF No. 425, PageID.26947. Defendants also
contend that Crawford has not “considered the number of energy shots
that otherwise compete with the Plaintiff’s product” or “the potential that
another private label manufacturer, unburdened by [the Settlement
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29178 Filed 02/16/21 Page 24 of 42
Agreement], would step in and manufacture the private label energy
shots at issue in this case.” Id. at PageID.26947-48. Finally, Defendants
insist that Crawford’s reliance on the Mintel Reports (showing energy
shot sales) render his opinion unreliable because the data establishing
market-share is based on retail sales dollars rather than units. Id. at
But Sixth Circuit case law does not require that Crawford know
certain facts or conduct certain analyses in order for his testimony to be
considered reliable. See Dilts, 500 Fed. App’x at 445. There is no
requirement that an expert witness “know the answer to all the questions
a case presents—even to the most fundamental questions.” See id. While
Defendants stress that Crawford performed neither market studies nor
cross-elasticity studies, Crawford testified that his analysis “is the
mechanism for taking these variables into account.” ECF No. 429,
Putting aside that Defendants’ argument is contradicted by
Crawford’s testimony, the problem with it is that it merely attacks the
factual sufficiency of Crawford’s expert testimony by disputing the
variables underlying his analysis. See Scrap Metal, 527 F.3d at 531; see
also Everlight Electronics, 2014 WL 4707053, at *2 (“[Defendant’s]
complaints that [Plaintiff’s expert witness] only analyzed a subset of the
Accused Products are appropriate for cross-examination on accuracy and
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29179 Filed 02/16/21 Page 25 of 42
the weight.”). Furthermore, such attacks on “‘weaknesses in the factual
basis of an expert witness’ opinion…bear on the weight of the evidence
rather than on its admissibility.’” See Scrap Metal, 527 F.3d at 531.
(citing McLean v. 988011 Ontario, Ltd., 224 F.3d 797, 801 (6th Cir. 2000)
(citations omitted)). Similarly, Defendants argue that Crawford’s
opinions are unreliable because he relies on erroneous data in the Mintel
Reports. This is the exact argument that the Sixth Circuit considered and
rejected in Scrap Metal. Id. at 530 (“[W]e will generally permit testimony
based on allegedly erroneous facts when there is some support for those
facts in the record.”).
The remaining arguments about what Crawford failed to consider
in his calculations, such as the number of energy shots that otherwise
compete with the Plaintiff’s product and whether another manufacturer
would have made energy shots for the retailers anyway, are unavailing
for the same reasons. ECF No. 425, PageID.26947-48; See Scrap Metal,
527 F.3d at 531; see also Daubert, 509 U.S. at 596 (“Vigorous crossexamination, presentation of contrary evidence, and careful instruction
on the burden of proof are the traditional and appropriate means of
attacking shaky but admissible evidence.”) (emphasis added). All of these
purported weaknesses in Crawford’s analysis and conclusions can be
considered by the jury in deciding how much weight to give his testimony,
and whether it chooses to accept it or not.
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29180 Filed 02/16/21 Page 26 of 42
For the reasons stated above, Defendants have failed to establish
that Plaintiff’s expert witness on damages should be excluded under
Federal Rule of Evidence 702 and the Daubert factors.
B. Plaintiff’s motion to exclude Defendants’ expert
testimony of Dr. Christopher Pflaum.
Defendants’ expert, Dr. Christopher Pflaum, concludes in his
deposition testimony and in his Expert Report that Plaintiff’s 5-Hour
Energy product and Defendants’ generic energy shots—manufactured for
retailers as “house brands”—do not actually compete with one another in
the same economic market. ECF No. 424-2, PageID.26452-53. Pflaum
reaches this conclusion in part based on an analysis of “the law of one
price.”4 ECF No. 424-4, PageID.26540. Because the two products do not
In his deposition testimony, Pflaum refers to a case, cited in Defendant’s
motion as United States v. Archer-Daniels-Midland Co., for the
proposition that although two products are functionally identical, they do
not compete in the same market when one product is 10-30% more
expensive than the other. ECF No. 424-4, PageID.26540; ECF No. 431,
PageID.28570; see also 866 F.2d 242, 246 (8th Cir. 1988). This
proposition, however, is not what the case says. In Archer-DanielsMidland, the Eighth Circuit outlined the factors relevant in determining
reasonable interchangeability, which in turn is used to determine
“competition, or the lack of competition, to the extent such exists.” Id. at
246. The court found that “a price differential, even a substantial one, is
irrelevant for purposes of determining reasonable interchangeability.” Id.
(emphasis added). However, “a large price differential as a result of a
government price support raising the price of one product, but not the
other…is a relevant factor.” Id. The court then held that sugar and highfructose corn syrup were not in the same relevant product market
because the government was subsidizing the price of sugar, but not highfructose corn syrup. The government subsidies prevented sugar from
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29181 Filed 02/16/21 Page 27 of 42
compete in the same market, Defendants’ theory is that Plaintiff incurred
no damages from the breach of the restrictive covenant. ECF No. 431,
PageID.28562; see also ECF No. 424-4, PageID.26540.
Plaintiff asserts that the expert testimony of Pflaum should be
excluded for three main reasons. See ECF No. 424. First, his opinions are
based on data collected by “unscientific and unreliable” means. Id. at
PageID.26430. Second, Pflaum did not sufficiently participate in the
preparation of his own report. Id. at PageID.26437. Finally, Pflaum’s
opinions rely on inadmissible evidence. Id. at PageID.26435.
Defendants respond that the expert testimony of Pflaum is
admissible because his report relies on objective and verifiable facts. See
ECF No. 431. They also counter that certain data collected for the expert
report that Plaintiff questions as unreliable and unscientific are in fact
not essential to Pflaum’s opinions and were disclosed in the interest of
transparency. Id. at PageID.28567-68.
competing in the same market as high-fructose corn syrup because the
latter’s producers could always price below the government’s predetermined floor for the price of sugar. In other words, there must be
artificially high prices in one product for differences in price between
functionally comparable products to be a relevant factor for determining
whether products compete in the same market. In contrast, this case
involves neither government subsidies of energy shots nor artificially
high prices of any sort. As such, the facts and reasoning of ArcherDaniels-Midland are out of place here.
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29182 Filed 02/16/21 Page 28 of 42
As the Court best understands Plaintiff’s position, it does not
dispute the first two Daubert factors relating to the witness’s expertise
and the relevancy of his testimony to an issue in the case. Plaintiff does
not dispute that Pflaum has sufficient background and expertise. The
record shows that Pflaum holds a Ph.D. in Finance and Operations
Management and a Master of Business Administration in Finance. ECF
No. 424-2, PageID.26475. Pflaum is the president of an economics
analysis firm and has consulted and testified in civil cases involving
antitrust, breach of contract, business valuation, and lost profits. These
are qualifications and experience sufficient to qualify as an expert
witness in this case. Id.
As such, the remaining question before the Court is whether
Pflaum’s expert testimony has sufficient reliability under Daubert and
the Federal Rule of Evidence 702.
Pflaum’s expert testimony is sufficiently reliable
under the Daubert factors.
The main thrust of Plaintiff’s arguments focuses on Appendix 3 of
Pflaum’s expert report. ECF No. 424, PageID.26430; see also ECF No.
424-2, PageID.26495-506. Appendix 3 consists of Pflaum’s product
research and bases of comparison among the different energy shots in
market. It also serves as Pflaum’s basis for making conclusions about
consumer behavior, the comparative prices and ingredients of energy
shots, and ultimately, whether Plaintiff incurred any damages. ECF No.
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29183 Filed 02/16/21 Page 29 of 42
424-4, PageID.26607. But at the January 22, 2021 Daubert hearing, the
parties admitted that neither of them will offer their respective expert
witness’s expert report to the jury at trial. In light of such clarification,
the appropriate question here is whether the opinions and conclusions of
the expert witnesses themselves are admissible, not the expert reports.
As such, Plaintiff’s arguments to exclude Pflaum’s testimony because of
the contents of his expert report are misplaced.
First, Plaintiff asserts that Appendix 3 is unscientific and
unreliable because of how the data was gathered. According to Pflaum’s
deposition testimony, an intern at Pflaum’s firm was instructed to “go
forth to the Internet and find everything you can in terms of customer
reviews of any energy shots” and “she just mucked about in the Internet.”
ECF No. 424-4, PageID.26607. Plaintiff alleges that the intern merely
perused the internet, employed no known criteria, and cherry-picked
certain information. ECF No. 424, PageID.26433. Plaintiff further
alleges that because Appendix 3 is not based on a controlled, scientific
study or objective criteria, Pflaum’s expert testimony is inadmissible
under Daubert. Id. at PageID.26432.
Plaintiff relies on McClain v. Metabolife Intern., Inc. for the
proposition that expert testimony that relies on uncontrolled anecdotal
information which is not based on sufficient data is inadmissible under
Daubert. 401 F.3d 1233 (11th Cir. 2005). In McClain, the Eleventh
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29184 Filed 02/16/21 Page 30 of 42
methodology to prove that the use of an herbal weight-loss supplement
causes strokes or heart attacks. Id. at 1240. As to one of the expert
witnesses, the court determined that he “failed to rely upon reliable
sources and data and that his overall methodology falls short.” Id. at
1255. The court of appeals concluded that the medical literature did not
support their opinions and that the experts “took leaps of faith and
substituted their own ipse dixit for scientific proof on essential points.”
Id. (italics in original).
Here, McClain neither controls nor persuades. First, as an out-ofcircuit case, McClain’s holding does not completely align with Sixth
Circuit case law. The Eleventh Circuit appears to impose a stricter
requirement on its expert witnesses for establishing indicia of reliability
by permitting district courts broader latitude to assess the factual
accuracy underpinning an expert’s analysis. In contrast, Sixth Circuit
has expressly held that testimony based on allegedly erroneous facts is
generally admissible “when there is some support for those facts in the
record.” Scrap Metal, 527 F.3d at 530. In other words, so long as the
expert witness testimony is not based on speculation, the methodology
may be deemed reliable. Moreover, the Sixth Circuit has stressed the
distinction that reliability “does not indicate, in any way, the correctness
or truthfulness of such an opinion.” Id. at 529. As such, Plaintiff’s
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29185 Filed 02/16/21 Page 31 of 42
assertion that Pflaum’s expert testimony is inadmissible because he fails
to meet a more demanding standard under non-controlling case law must
Second, Plaintiff’s argument addresses the wrong question. The
appropriate inquiry is not whether Pflaum’s expert report relied on
factual assertions and survey results that were collected accurately and
in accordance with scientific principles. Rather, the inquiry under
Daubert and Sixth Circuit case law is whether Pflaum “performed his
analysis according to a reliable method…and reliably applied that
method to the facts of this case.” See Scrap Metal, 527 F.3d at 531. Here,
the record shows that Pflaum’s analysis hinged on the “law of one price.”5
ECF No. 424-4, PageID.26540. An example of a credible attack would cite
to case law, academic literature, or both, discussing the law of one price
and its principles and formulas. Then, such expositions would be followed
by arguments about how the expert witness’s opinions are the result of a
misunderstanding of said principles, how his application of the analysis
falls short, or is inappropriately applied to the facts of the case. Stated
According to Pflaum’s testimony, the law of one price means “You cannot
have the same good—or you cannot have two identical goods, two
identical products, selling for different prices in the same geographical
market because all the demand would go to the lower-priced product.”
ECF No. 424-4, PageID.26540.
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29186 Filed 02/16/21 Page 32 of 42
another way, Plaintiff needed to address Pflaum’s application of the law
of one price analysis to the facts of this case.
But Plaintiff did not do that. Instead, much of Plaintiff’s argument
focuses on the factual sufficiency of Pflaum’s analysis, which, again, goes
to its weight, not admissibility. See Scrap Metal, 527 F.3d at 530. The
most glaring example is Plaintiff’s emphasis on how Appendix 3’s data
was researched and assembled by an intern. Plaintiff takes issue with
how Pflaum was unable to provide a methodology or explanation as to
why the intern ignored some reviews of energy shots, or why her selection
criteria for the database appeared to lack an objective basis. ECF No.
424, PageID.26434. And Plaintiff relies on Recreational Devs. of Phx., Inc.
v. Phoenix for the proposition that anecdotal evidence derived from
random interviews is non-systematic and non-generalizable. Thus,
methodologies that rely upon them are rendered unreliable. Id. at
PageID.26436 (citing 220 F. Supp.2d 1054, 1061 (D. Ariz. 2002) (citations
omitted)). Plaintiff insists that Pflaum’s expert testimony as to Appendix
3 is similarly unreliable because he drew conclusions “based on anecdotal
evidence,” e.g., online customer reviews of various energy shots, and
which was collected in a manner that appears to be non-systematic and
non-generalizable. ECF No. 424, PageID.26435.
But as previously discussed, Sixth Circuit case law states that
expert testimony is reliable for the purposes of assessing admissibility
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29187 Filed 02/16/21 Page 33 of 42
even if the analysis relies on factually erroneous premises so long as the
principles of the analysis itself were correctly applied. See Scrap Metal,
527 F.3d at 530. While the soundness of such data collection
methodologies appears to warrant closer scrutiny, ultimately, the issues
Plaintiff raises here are best clarified under cross-examination and
resolved by the trier of fact.
Next, Plaintiff argues that Pflaum is merely acting “as a conduit for
an improper narrative of otherwise inadmissible hearsay from
anonymous sources.” ECF No. 424, PageID.26436. Furthermore,
Pflaum’s use of customer reviews of energy shots is an attempt to “put
his imprimatur on what is essentially nothing more than unreliable
information and inadmissible hearsay.” Id. at PageID.26437. Plaintiff
cites SEC v. Tourre for the proposition that expert witnesses are
prohibited from acting as a vehicle for factual narrative and from
repeating facts without any expert analysis. 950 F. Supp.2d 666, 675
But the record contradicts Plaintiff’s characterization that Pflaum
contributed little to the expert report and that he is merely repeating
facts without expert analysis in order to act as a vehicle for presenting
otherwise inadmissible factual narrative. As the named author of the
expert report, Pflaum testified that he “[w]rote the final, and I reviewed
the final.” ECF No. 424-4, PageID.26529. Furthermore, he would “shoot
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29188 Filed 02/16/21 Page 34 of 42
emails to people and go, what does this mean, what does that mean, why
don’t you cite something here, that sort of thing.” Id. In terms of process,
“I outlined it, [Frye] wrote the first draft, and then it bounced back and
forth between us.” Id. at PageID.26528. When asked whether Pflaum
merely adopted the opinions of others in his report, he replied “No.” Id.
at PageID.26529. This testimony leads to the conclusion that Plfaum is
an expert who is not acting as a mere conduit for factual narrative and
certainly offers more than the mere repetition of facts without expert
analysis. See Tourre, 906 F. Supp.2d at 675; see also In re Prempro Prods.
Liabl. Litig., 554 F. Supp.2d 871, 888 (E.D. Ark. 2008) (citations omitted);
Law v. Nat’l Collegiate Athletics Ass’n, 185 F.R.D. 324, 341 (D. Kan.
In a related argument, Plaintiff contends that Pflaum’s admissions
and his apparent lack of knowledge regarding his expert report lead to
the conclusion that the expert report and supplement were not prepared
by him, but by others. ECF No. 424, PageID.26441. Plaintiff
characterizes certain admissions, such as Pflaum stating that he
delegated certain sections of his report to specialists, as evidence that
Pflaum “had very little involvement in preparing the Report and forming
the opinions he adopted.” Id. at PageID.26439.
Plaintiff points to Numatics, Inc. v. Balluff, Inc. for the proposition
that an expert must substantially participate in the preparation of his
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29189 Filed 02/16/21 Page 35 of 42
report. Id. at PageID.26439 (citing 66 F. Supp.3d 934, 942 (E.D. Mich.
2014)). There, the court granted the plaintiff’s motion to exclude certain
testimony of a damage expert witness. Id. It was undisputed that the
damage expert witness merely reviewed the draft “for only a couple of
hours before signing it.” Id. at 941. The court held that because it was
defense counsel, not the damage expert witness, who had written the
expert report, such expert witness testimony must be excluded. Id.
But the facts in Numatics are a far-cry from the facts here. As
stated above, the record shows that Pflaum significantly contributed to
the preparation of the expert report as the named author and supervisor
of the various analysts. It is understandable that in such a lengthy report
detailing complicated matters involving economics and business
valuation, an expert witness would delegate sections of the report to
various specialists. But ultimately, the record shows that in preparing
the expert report, Pflaum created the outline of the report, helped
generate concepts, and provided meaningful feedback to his assistants.
See ECF No. 424-4. Plaintiff offers no evidence, nor even alleges that the
expert report was actually prepared by defense counsel and that Pflaum
merely reviewed the draft “for only a couple of hours before signing it.”
See Numatics, 66 F. Supp.2d at 941. As such, Numatics is not on all fours
and this contention also fails.
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29190 Filed 02/16/21 Page 36 of 42
Plaintiff’s next argument is that Pflaum is unreliable because he
lacks certain knowledge and was unable to answer specific questions
about the contents of his expert report. ECF No. 424, PageID.26435.
Plaintiff also assails the fact that Pflaum did no further independent
study to confirm his assumption that if Defendants had not entered the
energy shots market, another manufacturer would have done so. Id. at
PageID.26436-37. For instance, as proof that Pflaum did not review the
data he uses for his analysis, Plaintiff points to Pflaum’s inability to
answer questions about Figure 1 of the expert report or about the thirdparty industry sales data from Figure 2. Id. at PageID.26438.
Plaintiff cites to Gen. Elec. Co. v. Joiner for the rule that a damages
expert witness must be able to “show his work” in order to meet the
burden of demonstrating a sound methodology. ECF No. 424,
PageID.26438-39 (citing 522 U.S. 136, 144 (1997)). There, the Supreme
Court considered whether the district court abused its discretion in
excluding the testimony of an expert witness because it believed that the
“testimony of respondent’s experts…did not rise above ‘subjective belief
or unsupported speculation.’” Joiner, 522 U.S. at 140. After reviewing the
animal studies on which the experts relied and determining that “the
studies were so dissimilar to the facts presented” in their case, the Court
affirmed the district court’s ruling. The Court also determined that the
various epidemiological studies on which the experts relied were not a
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29191 Filed 02/16/21 Page 37 of 42
sufficient basis for the experts’ opinions, and that even some of the
findings in the studies contradicted the experts’ conclusions. Joiner
reasoned that “nothing in either Daubert or the Federal Rules of
Evidence requires a district court to admit opinion evidence that is
connected to existing data only by the ipse dixit of the expert.” Id. at 146.
Joiner’s requirement that an expert’s opinions must be supported
by the data is satisfied here because Defendants have sufficiently
established how the underlying data supports Pflaum’s expert report and
opinions. See 522 U.S. at 140.
Indeed, the record shows a reliable
connection between the existing data underlying Figures 1 and 2 in
Pflaum’s expert report because they are taken from the Mintel Reports,
ECF No. 426-6, which is the same factual basis upon which Plaintiff’s
expert witness, Crawford, relies. For example, when asked whether the
products included in the Mintel Reports are included in Figure 1 of the
expert report, Pflaum replied, “correct.” ECF No. 424-4, PageID.26542.
Here, unlike in Joiner where the studies relied upon did not support the
experts’ conclusions, the relevance of the Mintel Reports to the opinion
evidence is substantiated through its use by both parties’ expert
witnesses. See ECF No. 426-6 PageID.27655. Moreover, the Mintel
Reports’ stated objective is to quantify the market of energy shots and
energy drinks, which are at issue here. Id. The other data points, such as
those found in Appendix 3, were assembled for the purpose of addressing
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29192 Filed 02/16/21 Page 38 of 42
the issue of Plaintiff’s lost profits. Thus, the nature of such data connects
to Pflaum’s expert opinions by more than mere “ipse dixit.” See Joiner,
522 U.S. at 146.
Finally, Plaintiff argues that Pflaum’s reliance on the fact that
Plaintiff was under FDA investigation between 2011 and 2013
constitutes inadmissible evidence for concluding that Defendants’ “sales
of violative products did not impact [Plaintiff’s] sales.” ECF No. 424,
PageID.26441. Plaintiff asserts that the “citation of a 2012 newspaper
article, a 2012 television news story, and a 2013 journal article” should
be excluded for three reasons. First, it is not relevant because the safety
of Plaintiff’s energy shots has no bearing on the contract at issue and
because Plaintiff’s expert witness’s lost profits damages model is based
on Defendants’ sales, not Plaintiff’s. Id. at 26441. Second, it would be
unfairly prejudicial because the FDA investigation corresponds to only a
portion of the timeframe of the breaches and would therefore mislead the
trier of fact because the investigation did not lead to a conclusion that
Plaintiff’s products were unsafe. Id. Third, the news of the investigation
is hearsay. Id.
As to the first argument, news articles about the FDA investigation
against Plaintiff are relevant in addressing whether there were
confounding variables that affected Plaintiff’s sales of energy shots, and
therefore its market-share. Moreover, evidence that the safety of
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29193 Filed 02/16/21 Page 39 of 42
Plaintiff’s energy shots was under investigation relates to both witness’s
analysis regarding consumer behavior. ECF No. 424-4, PageID.26607.
For example, in opining about what variables factor into a market-share
analysis, Plaintiff’s witness Crawford said, “Based on my knowledge of
this industry, everything is ultimately driven by the sale to the consumer.
And consumers are all out there making choices on what product they
buy.” ECF No. 426-3, PageID.27121-22. And in discussing what factors
go into a consumer’s preference for certain energy shots, Crawford stated,
“It’s brand recognition, a desire for the product itself, and…somewhere
in that list of factors price comes into play.” Id. at PageID.27310-11. As
such, evidence about news articles regarding the FDA investigation is
relevant to the issues of consumer preference and market-share.
Plaintiff’s second argument relies on Park West Galleries, Inc. v.
Global Fine Art Reg., LLC as an example of when a district court excluded
evidence about a television news report about the plaintiff because it was
unfairly prejudicial. 732 F. Supp.2d 727 (E.D. Mich. 2010). But again,
Plaintiff’s reading of the case is not applicable to the facts here. In Park
West Galleries, the district court granted plaintiff’s motion in limine to
exclude questions about a television news story relating to plaintiff. Id.
at 737. During cross-examination of a witness, defense counsel violated
the district court’s in limine orders by asking about the television news
story. Id. The district court found that the questioning, by itself, was not
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29194 Filed 02/16/21 Page 40 of 42
prejudicial. Id. Rather, it was the totality of the sequence of events during
the cross-examination, including the line of questioning, the misconduct
attributable to defense counsel, and plaintiff’s need to make repeated
objections, that “gave the appearance that [plaintiff] was trying to hide
information from the jury.” Id. The district court then held that it was
unfairly prejudicial for plaintiff “to have to repeatedly object to attempts
to introduce such information.” Id. So, the case does not stand for the
proposition that the mere admission of a news article detailing
unfavorable information about a party is per se unfairly prejudicial. Even
less does the case hold that an expert may not rely on such media reports
in forming his opinion. The district judge clearly stated that such
evidence, by itself, is permissible. See id.
In short, Park West does not support Plaintiff’s argument. In that
case the district court was considering a motion for a new trial, whereas
here the Court is reviewing expert testimony under a Daubert motion.
More critically, the district court stated that it was not the substance of
the television news story that rendered it unfairly prejudicial. Rather, it
was the totality of the sequence of events during the line of questioning
that led the district court to conclude that plaintiff had suffered unfair
prejudice. Park West, 732 F. Supp.2d at 737. Here, there has been no
trial, and in any trial a proper jury instruction could guard against any
possible prejudice by cautioning the jury not to consider such news
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29195 Filed 02/16/21 Page 41 of 42
articles as relevant to the actual safety of Defendant’s product but only
as information that was available to consumers during the relevant time
period. So, Park West neither controls nor persuades the Court.
inadmissible hearsay relies upon Federal Rule of Evidence 801, which
defines what hearsay statements are excludable. However, Federal Rule
of Evidence 703 states:
An expert may base an opinion on facts or data in the case that
the expert has been made aware of or personally observed. If
experts in the particular field would reasonably rely on those
kinds of facts or data in forming an opinion on the subject, they
need not be admissible for the opinion to be admitted. But if the
facts or data would otherwise be inadmissible, the proponent of
the opinion may disclose them to the jury only if their probative
value in helping the jury evaluate the opinion substantially
outweighs their prejudicial effect.
(emphasis added). It is reasonable for experts in the field of economics
and business valuation to ascertain confounding variables affecting a
product’s market-share, such as whether the fact that a product is under
investigation for its safety influences consumer behavior and preferences
for that product. As such, evidence like the news articles about an FDA
investigation fall within Federal Rule of Evidence 703. In any event,
Plaintiff’s proposition that experts may not rely on hearsay statements
to form their opinions is inconsistent with the text and rationale of the
Rule. The Federal Rules of Evidence relax the hearsay rule on opinion
Case 4:12-cv-13850-TGB-MJH ECF No. 446, PageID.29196 Filed 02/16/21 Page 42 of 42
testimony for experts and allows an expert to base an opinion on “facts or
data in the case that the expert has been made aware of,” rather than
just what the witness has “personally observed.” See Fed. R. Evid. 703.
Prohibiting expert witnesses from relying on hearsay statements, such
as academic studies and publications, defeats the purpose of the rule.
Accordingly, this argument fails.
For the reasons stated above, Defendants’ motion to exclude the
expert witness testimony of Crawford is DENIED. Likewise, Plaintiff’s
motion to exclude the expert witness testimony of Pflaum is DENIED.
IT IS SO ORDERED.
Dated: February 16, 2021
s/Terrence G. Berg
TERRENCE G. BERG
UNITED STATES DISTRICT JUDGE
Certificate of Service
I hereby certify that this Order was electronically filed, and the
parties and/or counsel of record were served on February 16, 2021.
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?