Khoday et al v. Symantec Corp. et al
Filing
372
MEMORANDUM OPINION AND ORDER 1. Denying Defendant Symantec's 314 Motion for Summary Judgment; 2. Granting plaintiff's unopposed 360 Motion for Modificiation of Class Order; 3. Grantin g in part and denying in part plaintiffs' 276 Motion to Exclude Expert Testimony of Defendants' Expert Witnesses Bobby Stephens and Kirthi Kalyanam; 4. Denying defendants' 279 Motion to Exclude the Report and Testimony of Plaintiffs' Expert Steven Gaskin; 5. Denying defendants' 285 Motion to Exclude the Report and Testimony of Plaintiffs' Expert Nicholas Taylor; 6. Denying defendant Symantec's 292 Motion to Exclude Portio ns of the Report and Testimony of Plaintiffs' Expert Steven Herscovici. 7. Amending the Court's 274 Order for Class Certification filed on March 31, 2014 (Written Opinion). Signed by Judge John R. Tunheim on March 19, 2015. (DML)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
DEVI KHODAY and DANISE
TOWNSEND, individually and on behalf of
the class they represent,
Plaintiffs,
v.
Civil No. 11-180 (JRT/TNL)
MEMORANDUM OPINION
AND ORDER
SYMANTEC CORP. and DIGITAL RIVER,
INC.,
Defendants.
Douglas J. McNamara and Andrew N. Friedman, COHEN, MILSTEIN,
SELLERS & TOLL PLLC, 1100 New York Avenue Northwest, West
Tower Suite 500, Washington, DC 20005; Kate M. Baxter-Kauf,
LOCKRIDGE GRINDAL NAUEN PLLP, 100 Washington Avenue
South, Suite 2200, Minneapolis, MN 55401, for plaintiffs.
Patrick E. Gibbs, LATHAM & WATKINS, LLP, 140 Scott Drive,
Menlo Park, CA 94025; Steve W. Gaskins, GASKINS, BENNETT,
BIRRELL, SCHUPP, LLP, 333 South Seventh Street, Suite 2900,
Minneapolis, MN 55402, for defendant Symantec Corp.
Charles Smith, Amy Van Gelder, Jessica Frogge, and Marcella L. Lape,
SKADDEN, ARPS, SLATE, MEAGHER & FLOM, 155 North Wacker
Drive, Chicago, IL 60606, for defendant Digital River, Inc.
Named Plaintiffs Devi Khoday and Denise Townsend bring this class action
against Defendants Symantec Corporation (“Symantec”) and Digital River, Inc. (“Digital
River”) (collectively, “Defendants”) for misrepresentations the Plaintiffs allege
Defendants made in connection with the sale of download insurance between 2005 and
2011. The Plaintiffs allege violations of California’s Unfair Competition Law (“UCL”),
California’s Consumers Legal Remedies Act (“CLRA”), the Minnesota Consumer Fraud
Act, and unjust enrichment. This matter is now before the Court on Symantec’s motion
29
for summary judgment, the Plaintiffs’ and Defendants’ motions to exclude expert reports
and testimony, and the Plaintiffs’ unopposed motion to modify the class Order.
Viewing the facts in the light most favorable to the nonmoving party, the Court
finds that genuine issues of material fact remain as to whether Defendants made
misrepresentations or omissions upon which the Plaintiffs relied to their detriment. The
Court also finds that the conclusions of each challenged expert are, at least in part,
permissible under Rule 702 and Daubert. Finally, the Court finds that the two proposed
modifications to the class certification Order are appropriate. Accordingly, the Court will
deny Symantec’s motion for summary judgment, deny or deny in part each of the
pending Daubert motions, and grant the Plaintiffs’ motion to modify the class
certification Order.
BACKGROUND1
I.
PARTIES
Defendant Symantec is a software company that sells internet security software
products under the Norton brand. (Decl. of Patrick E. Gibbs (“Gibbs Decl.”), Ex. 1 at 3,
6, Aug. 23, 2013, Docket No. 217;2 Am. Compl. ¶ 2, Apr. 14, 2011, Docket No. 40.)
Defendant Digital River is an ecommerce website designer for online retailers. (Decl. of
Amy L. Van Gelder (“Second Van Gelder Decl.”), Ex. 1 (Decl. of Andrew Carrane
1
A more complete recitation of the facts is available in this Court’s Order on the
Plaintiffs’ motion for class certification. Khoday v. Symantec Corp., No. 11-180, 2014 WL
1281600, at *1-*13 (D. Minn. Mar. 13, 2014).
2
With the exception of deposition transcripts and documents filed under seal, all page
numbers refer to CM/ECF pagination.
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(“Carrane Decl.”)) ¶ 2, Aug. 23, 2013, Docket No. 215.) From 2000 through June 2010,
Digital River managed the online storefront through which Symantec sold its Norton
products. (Decl. of Douglas J. McNamara (“Second McNamara Decl.”), Tab 1 at 12:1618, 15:3-20, June 26, 2013, Docket No. 183; Gibbs Decl., Ex. 4 at 38:7-39:3.)
During that time, Symantec authorized Digital River to offer a download insurance
product called Electronic Download Service (“EDS”) through the Symantec storefront.
(Second McNamara Decl., Tab 2 at DR-0054170.)
EDS allowed customers who
purchased Norton software to redownload that software for up to one year after purchase
in the event they lost the original software by purchasing a new computer or if their
computer crashed. (Id., Tab 10; Gibbs Decl., Ex. 18 at 197:10-25.) Beginning in
October 2009, when Symantec started the transition from Digital River managing the
Symantec storefront to Symantec managing its own storefront, it began offering a product
called Norton Download Insurance (“NDI”), which operated very similarly to EDS.
(Gibbs Decl., Ex. 4 (Dep. of James P. Renalds) at 38:15-39:3; id., Ex. 5 (Dep. of Krysten
Thompson) at 21:18-22:10; id., Ex. 8 at 39.)
Named Plaintiffs Khoday and Townsend purchased download insurance from
Defendants during the relevant class period, from January 2005 to March 2011. Khoday
v. Symantec Corp., No. 11-180, 2014 WL 1281600, at *36 (D. Minn. Mar. 13, 2014).
Townsend purchased EDS from Defendant Digital River on multiple occasions, including
June 7, 2006. (Second McNamara Decl., Tab 41 at 53.) When she purchased Norton
antivirus software, EDS was automatically added to her shopping cart, and she agreed to
purchase it for $8.99 because she believed it would be necessary if she wanted to
redownload the Norton software after the first sixty days post-purchase. (Id.; id., Tab 42
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at 46:2-20.) For similar reasons, Khoday purchased NDI from Symantec in February
2010 at the time she purchased Norton 360 software. (Id., Tab 43 at 60:3-61:18; id., Tab
44 at 74.)
II.
DOWNLOAD INSURANCE
During the relevant time period, a customer using Symantec’s online storefront to
purchase Norton software would obtain a hyperlink that the customer could click to begin
the software’s automatic download. (Gibbs Decl., Ex. 7 at 56-57; id., Ex. 8 at 60.)
Clicking on the hyperlink, which appeared as a large, electronic “Download” button,
would cause the software to automatically download and install upon the customer’s
computer. (Id., Ex. 8 at 60, 65.) The customer would have sixty days after purchasing
the product to use the hyperlink to download and install the product. (Id., Ex. 14 (Dep. of
James P. Renalds) at 62:9-12; id., Ex. 15 (Dep. of Nat Maple) at 53:11-13.) During this
sixty-day window, customers could redownload the product an unlimited number of
times by logging in to their Norton account and reinitiating the automatic download
process. (Id., Ex. 14 at 62:9-12.)
The function of a download software product like EDS or NDI was to enable
customers to continue to redownload and install a purchased Norton software product
even after the sixty-day window had expired. EDS allowed customers to redownload the
exact version of Norton software they had originally purchased after the original sixtyday period had expired. (Second McNamara Decl., Tab 10; Digital River’s Answer and
Affirmative Defenses to Pls.’ Am. Compl. (“Digital River’s Answer”) at 3-4, Apr. 11,
2012, Docket No. 86; Gibbs Decl., Ex. 19 at 134:12-135:6.) NDI operated almost
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identically to EDS, except customers could select one, two, or three years of extended
redownloads. (Gibbs Decl., Ex. 22 at 26:10-15; id., Ex. 26 at 281:1-10.) Additionally,
NDI would download the most recent edition of the product the consumer had originally
purchased, whereas EDS only redownloaded the exact version of the software the
customer originally purchased. (Id., Ex. 22 at 26:6-15; id., Ex. 23 at 35.)
Download insurance was automatically added to a customer’s shopping cart at the
time a customer purchased Norton software through Symantec’s online storefront. (See
id., Ex. 8 at 74; id., Ex. 29 at 66.) To refrain from purchasing EDS or NDI, a customer
would have to affirmatively “opt out” of the download insurance purchase and remove it
from the cart. (Second Van Gelder Decl., Ex. 12 at 50:4-16; Second McNamara Decl.,
Ex. 2 at DR-0054171.) Defendants charged between $4.99 and $16.99 for the download
insurance products, depending on the value Defendants believed customers would be
willing to pay for download insurance for a particular type of Norton software. (Carrane
Decl. ¶ 4; Second McNamara Decl., Tab 25 at 138; id., Tab 6 at 20.)
When download insurance was automatically added to a customer’s shopping cart,
it was generally displayed along with a link saying, “What’s this” or “What is the
Extended Download Service”. (Gibbs Decl., Ex. 8 at 39; id., Ex. 29 at 66; Second
Van Gelder Decl., Ex. 2 at 23:14-19.)
From 2004 to approximately August 2008,
clicking on the “What’s this” link led to a pop-up description, (Second Van Gelder Decl.,
Ex. 7 at 95:17-25), stating:
What is the Extended Download Service?
When you order a downloadable product from the Symantec Store you are
automatically granted a 60 day window in which your purchase can be
redownloaded at any time. After this 60 day window has passed your
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download will no longer be available unless the Extended Download
Service is also purchased. When this service is purchased, we will keep a
backup copy of your file on our server for one full year after the date of
purchase, meaning that you can redownload whenever necessary during
that extended period.
(Gibbs Decl., Ex. 29 at 66.) In 2008, Digital River amended the description to:
What is the Extended Download Service?
When you purchase downloadable software from Symantec’s online store,
Digital River, Symantec’s authorized online retailer, automatically grants
you 60 days from the date of purchase to download your software order.
If you add Extended Download Service to your downloadable software
purchase order, Digital River will keep a backup of all the software on your
order for ONE YEAR[.] If you need to re-download your software, or
access your Serial Key, it will be available 24 hours a day, 7 days a week
for ONE YEAR from the date of purchase by going to
www.findmyorder.com.
(Gibbs Decl., Ex. 29 at 67 (formatting omitted).)3
3
Symantec’s description of NDI was nearly identical:
Norton Download Insurance
When you purchase downloadable software from the Norton Store you
automatically receive the ability to download your software for 60 days from the
date of purchase. Norton Download Insurance extends the time you can access
your downloadable software by providing you the freedom and flexibility to
download or re-download your software for one year. . . .
Gain flexibility and peace of mind!
If you decide to replace your PC or if your PC has problems, is damaged or stolen
and you need to reinstall your software, with Norton Download Insurance you
have the peace of mind of knowing you can re-download your software at
anytime for one year. Norton Download Insurance may be refunded within 60
days from the date of purchase.
(Second McNamara Decl., Tab 15 at 45.)
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To learn more about download insurance, customers could contact customer
service. (Gibbs Decl., Ex. 32 at 19:8-13; id., Ex. 33 at 19:12-25.) If customers called
customer service, Digital River representatives consistently told customers to purchase
download insurance if they wished to be able to download their software more than sixty
days after purchase. (Second McNamara Decl., Tab 1 at 224:9-14.)
If a customer emailed customer service regarding the purchase of EDS, they
would receive a form e-mail stating:
Thank you for choosing Symantec store. When you order a downloadable
product from the Symantec store, you are automatically granted a 60-day
window in which your purchase can be re-downloaded at any time. After
the 60-day window has passed, your download will no longer be available
unless the Extended Download Service is also purchased. When . . . the
service is purchased, we will keep a backup copy of your file on our server
for one full year after the date of purchase, meaning that you could redownload it whenever necessary during that extended time period.
(Id., Tab 11 at 116:9-117:6; id., Tab 18 at 93.)
In August 2006, Symantec moved from Digital River to third party customer
service vendors. (Gibbs Decl., Ex. 32 at 19:8-13; id., Ex. 33 at 19:12-20:25.) The third
party vendors did not follow a consistent practice with respect to download insurance
inquiries.
Some representatives informed customers that download insurance was
optional, but did not tell customers that other mechanisms were available for
redownloading their software after the sixty-day window elapsed. (See id., Exs. 44-45.)
Other representatives told customers that trialware would allow customers to redownload
a Norton product, explaining that the only advantage of purchasing download insurance
was to save time. (Id., Ex. 46.) Many representatives appear to have attempted to sell
customers download insurance as a first resort, and then suggest trialware or another
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download alternative only if a customer refused to purchase EDS. (Second McNamara
Decl., Tab 11 at 81:24-82:6.) Beginning in November 2007, customers could also visit
Symantec’s “FAQ” website to learn more about download insurance, by clicking on “I
want to re-download my Norton product.” (Gibbs Decl., Ex. 47 at 9.)
III.
ALTERNATIVES TO DOWNLOAD INSURANCE
The Plaintiffs argue that there were multiple alternative options for customers to
redownload purchased Norton software at no cost. One option was trialware, a free
version of Norton software available through Symantec’s website and storefront.
(Second McNamara Decl., Tab 20 at 15:23-17:8; id., Tab 24 at 132.) Trialware was not
available for some software products, however, if the version of the software the
customer purchased was different from the current version offered through trialware.
(Gibbs Decl., Ex. 59 at 81:3-18.)
Second, a customer could purchase EDS later, after the point of sale but before
their Norton software subscription ended. (Second McNamara Decl., Tab 37; id., Tab 40
at 70:11-21.) This option was only available for EDS, as NDI was not available postpurchase. (Gibbs Decl., Ex. 73 at 53:13-25.) Third, customers could call Symantec
customer service, and customer service representatives had discretion to allow free
redownloads of software, even without download insurance, after the sixty-day window
had expired. (Id., Ex. 68 at 86:13-87:20.) After October 2007, a fourth alternative was
for customers to redownload a purchased Norton software product through Symantec’s
support website. (Id., Ex 81 at 127:7-23.)
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IV.
PROCEDURAL HISTORY
On March 31, 2014, the Court granted the Plaintiffs’ motion for class certification,
certifying the following class:
All persons in the United States who [p]urchased Extended Download
Service (“EDS”) for Norton products or Norton Download Insurance
(“NDI”) between January 24, 2005 and March 10, 2011.
January 24, 2005 – October 26, 2009 – Claims against Digital River
under the Minnesota Consumer Fraud Act and False Statement in
Advertising Act, or Unjust Enrichment;
January 24, 2007 – March 10, 2011 – Claims against Symantec under
California Unfair Competition Law, or Unjust Enrichment;
January 24, 2008 – March 10, 2011 – Claims against Symantec under
California Consumer Legal Remedies Act, for only those class members
defined as “consumers” under the CLRA.
Khoday, 2014 WL 1281600, at *36.
In April 2014, the parties filed several motions to exclude expert witness reports
and testimony at trial.
(Pls.’ Mot. to Exclude Certain Testimony of Defs.’ Expert
Witnesses Bobby Stephens and Kirthi Kalyanam, Apr. 15, 2014, Docket No. 276; Defs.’
Daubert Mot. to Exclude the Report & Testimony of Pls.’ Expert, Steven Gaskin,
Apr. 15, 2014, Docket No. 279; Defs.’ Daubert Mot. to Exclude the Report & Testimony
of Pls.’ Expert, Nicholas Taylor, Apr. 15, 2014, Docket No. 285; Symantec’s Daubert
Mot. to Exclude Portions of the Report & Testimony of Pls.’ Expert, Steven Herscovici,
Apr. 15, 2014, Docket No. 292.) This matter is now before the Court on these motions to
exclude expert testimony, along with a motion for summary judgment filed by Symantec
on May 15, 2014, (Symantec’s Mot. for Summ. J., May 15, 2014, Docket No. 314), and
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the Plaintiffs’ motion to modify the class certification Order, (Pls.’ Unopposed Mot. for
Modification of Class Order, Dec. 29, 2014, Docket No. 360).
ANALYSIS
I.
DAUBERT MOTIONS
A.
Standard of Review
Under Federal Rule of Evidence 702, expert testimony must satisfy three
prerequisites to be admitted:
First, evidence based on scientific, technical, or other specialized
knowledge must be useful to the finder of fact in deciding the ultimate issue
of fact. This is the basic rule of relevancy. Second, the proposed witness
must be qualified to assist the finder of fact. Third, the proposed evidence
must be reliable or trustworthy in an evidentiary sense, so that, if the finder
of fact accepts it as true, it provides the assistance the finder of fact
requires . . . .
Lauzon v. Senco Prods., Inc., 270 F.3d 681, 686 (8th Cir. 2001) (citations and internal
quotation marks omitted). The district court has a “gatekeeping” obligation to make
certain that all testimony admitted under Rule 702 satisfies these prerequisites and that
“any and all scientific testimony or evidence admitted is not only relevant, but reliable.”
Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 589, 597 (1993). The proponent of
the expert testimony has the burden of establishing by a preponderance of the evidence
that the expert is qualified, that his methodology is scientifically valid, and that “the
reasoning or methodology in question is applied properly to the facts in issue.” Marmo v.
Tyson Fresh Meats, Inc., 457 F.3d 748, 757-58 (8th Cir. 2006).
The Supreme Court in Daubert outlined particular factors for courts to consider in
assessing reliability, such as (1) whether the opinion is based on scientific knowledge, is
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susceptible to testing, and has been tested; (2) whether the opinion has been subjected to
peer review; (3) whether there is a known or potential rate of error associated with the
methodology; and (4) whether the theory has been generally accepted by the scientific
community.
See Kumho Tire Co. v. Carmichael, 526 U.S. 137, 149-50 (1999)
(summarizing Daubert factors). However, in Kumho Tire, the Court explained that “the
test of reliability is ‘flexible,’ and Daubert’s list of specific factors neither necessarily nor
exclusively applies to all experts or in every case. Rather, the law grants a district court
the same broad latitude when it decides how to determine reliability as it enjoys in
respect to its ultimate reliability determination.” Id. at 141-42. The reliability inquiry is
designed to “make certain that an expert, whether basing testimony upon professional
studies or personal experience, employs in the courtroom the same level of intellectual
rigor that characterizes the practice of an expert in the relevant field.” Marmo, 457 F.3d
at 757 (quoting Kumho Tire, 526 U.S. at 152).
“Courts should resolve doubts regarding the usefulness of an expert’s testimony
in favor of admissibility.” Id. at 758; see also Kumho Tire, 526 U.S. at 152 (“[T]he trial
judge must have considerable leeway in deciding in a particular case how to go about
determining whether particular expert testimony is reliable.”). “Only if the expert’s
opinion is so fundamentally unsupported that it can offer no assistance to the jury must
such testimony be excluded.” Bonner v. ISP Techs., Inc., 259 F.3d 924, 929-30 (8th Cir.
2001) (quoting Hose v. Chi. Nw. Transp. Co., 70 F.3d 968, 974 (8th Cir. 1996)).
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B.
Plaintiffs’ Motion to Exclude Defendants’ eCommerce Experts
The Plaintiffs challenge the Defendants’ experts on “eCommerce,” arguing that
their reports and conclusions fail to satisfy the reliability standards articulated in Federal
Rules of Evidence 702 and 403 and Daubert. These experts are Kirthi Kalyanam, Ph.D.,
and Robert (“Bobby”) C. Stephens.
1.
Kirthi Kalyanam
Kirthi Kalyanam, Ph.D., is a professor in the Department of Marketing at the
Leavey School of Business at Santa Clara University. (Decl. of Douglas J. McNamara
(“Fifth McNamara Decl.”), Ex. 4 (Expert Report of Kirthi Kalyanam (“Kalyanam
Report”) at 6, Apr. 15, 2014, Docket No. 278.) Defendants offer the report and testimony
of Dr. Kalyanam on “eCommerce” and whether EDS and NDI were safe, secure, and
guaranteed ways for Symantec customers to redownload EDS and NDI, as compared to
the alternative options. His report summarizes his conclusions as follows:
1. EDS and NDI belong to a class of add-on products that provide
convenience value to customers. Consumers may be able to achieve
their end goals without them, but these products offer speed, simplicity,
reliability, peace of mind, and other nonmonetary benefits that
consumers value and are willing to pay for.
2. The EDS and NDI pricing methodology employed by Defendants are
consistent with standard pricing methods described in marketing and
retailing textbooks.
3. Automatic pre-population of the customer’s shopping cart with EDS
and NDI follows the standard marketing strategies of (1) preconfiguring
product options, and (2) offering add-on products at the end of the
shopping process, after the customer has committed to the base product.
4. Digital River and Symantec rationally chose to provide a short
description of the EDS and NDI offerings in the shopping cart. This
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type of disclosure is consistent with industry practice of making sure
that the checkout process is succinct and streamlined.
5. During their purchase journey, shoppers can consult or access multiple
sources of information. Thus, the incremental impact of a single
description (such as the “What’s This” description at issue) must be
evaluated in light of the other information the customer reviewed, as
well as shopper characteristics – including but not limited to
demographics, Internet shopping expertise, and prior awareness of the
product category and brand. The impact is therefore different for
different customers.
(Kalyanam Report at 8.)
Khoday and Townsend (“the Plaintiffs”) challenge Dr. Kalyanam’s report and
testimony on multiple grounds. First, they argue that his conclusions are not reliable
because he has never used download insurance or any of the alternatives.
(Fifth
McNamara Decl., Ex. 5 (Dep. of Kirthi Kalyanam (“Kalyanam Dep.”) at 11:11-12:5,
161:23-162:23.) Additionally, he did not perform testing of the Symantec website or the
download insurance alternatives, so he is unable to describe the details of exactly what
steps a consumer would need to take to purchase EDS or NDI after the initial purchase.
(Id. at 12:15-13:9.) The Plaintiffs further maintain that Dr. Kalyanam did not use a
recognizable methodology that could be verified or tested.
The Court finds that at this stage there is adequate support for Dr. Kalyanam’s
conclusions as to eCommerce and marketing strategies, including how he understands
EDS and NDI to be consistent or inconsistent with general marketing practices.
Dr. Kalyanam is eminently qualified through education and experience to testify on the
subjects of eCommerce, retail, and marketing generally. (Kalyanam Report at 6-7, 4053.) To the extent the Plaintiffs challenge his conclusions as to how EDS and NDI in
particular reflect standard marketing practices, they will have ample opportunity to attack
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the basis of Dr. Kalyanam’s opinions through cross-examination. “As a general rule, the
factual basis of an expert opinion goes to the credibility of the testimony, not the
admissibility, and it is up to the opposing party to examine the factual basis for the
opinion in cross-examination.” Bonner, Inc., 259 F.3d at 929-30. “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.” Daubert, 509 U.S. at 596.
The Court cautions, however, that Dr. Kalyanam will not be permitted to testify
about the process of downloading EDS, NDI, or the alternatives – how customers would
have conducted a “purchase journey” and how they might have reacted to specific
features of EDS and NDI versus the alternative options during the download process.
Without ever downloading or using download insurance or any of the alternatives,
Dr. Kalyanam lacks familiarity with those specifics, and to the extent his testimony
purports to describe particular aspects of that process, the Court will exclude it. The fact
that Dr. Kalyanam is personally a frequent downloader of software, and that many of his
conclusions about convenience are based on an application of his knowledge of
eCommerce to his own download experiences, (Kalyanam Dep. at 63:19-64:3), is
insufficient foundation to draw conclusions about a process he has not performed with
respect to EDS and NDI. Given that he has considerable knowledge about the industry,
his testimony as “to an opinion or inference based on facts or data . . . perceived by him
or made known to [him] at or before the hearing,” Davis v. United States, 865 F.2d 164,
168 (8th Cir. 1988) (internal quotation marks omitted), will be permitted, even if it
references EDS and NDI specifically. For example, the Court will permit Dr. Kalyanam
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to testify whether the pricing strategies for EDS and NDI were reflective of standard
marketing practices, even though such a conclusion pertains to specific information about
EDS and NDI. Even without personally using the product, Dr. Kalyanam’s conclusions
about Defendants’ marketing strategies is not “so fundamentally unsupported that it can
offer no assistance to the jury,” Bonner, 259 F.3d at 929-30. If the Plaintiffs feel that
Dr. Kalyanam could have used different methods or that his factual basis in forming
those marketing conclusions was insufficient, they may attack those insufficiencies on
cross-examination. At the Daubert stage, however, “doubts regarding the usefulness of
an expert’s testimony [should be resolved by courts] in favor of admissibility.” Burks v.
Abbott Labs., 917 F. Supp. 2d 902, 920 (D. Minn. 2013) (internal quotation marks
omitted).
Although Dr. Kalyanam is qualified to testify about the development and common
practices of eCommerce and recommendation-based selling, his report goes beyond these
subjects and also critiques the conjoint analysis performed by the Plaintiffs’ expert,
Steven Gaskin. (Kalyanam Report at 21-23.) Conjoint analysis is a marketing research
method that measures customer preferences for particular product features. (Decl. of
Patrick J. Gibbs (“Second Gibbs Decl.”), Ex. 2 (description of “conjoint analysis” from
Sawtooth Software), Apr. 15, 2014, Docket No. 283.) He concludes that “Gaskin’s study
is flawed for several [] reasons,” including the way in which “Gaskin filtered his survey
participants,” his failure to “adjust[] his backcasting for appropriate technology trends or
price erosion,” and his use of “stated preferences of his survey subjects rather than data
on actual choices of online shoppers (revealed preferences).” (Kalyanam Report at 2122.) Although conjoint analysis is based in marketing, the Defendants have offered no
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evidence that Dr. Kalyanam has ever been trained in or performed conjoint analysis, or
that he is qualified to testify about its strengths and weaknesses. As a result, the Court
will allow Dr. Kalyanam to affirmatively testify within his expertise as to what he
believes the value of add-on products like EDS and NDI to be, but the Court will not
allow Dr. Kalyanam to attack the foundation of Gaskin’s analysis as such an attack would
fall outside Dr. Kalyanam’s qualifications.
Therefore, the Court will grant the Plaintiffs’ motion to exclude the report and
testimony of Dr. Kalyanam to the extent it references specifics about how customers
would download EDS, NDI, or the alternative options, or what they would be viewing
and perceiving during that process. The Court will also grant the Plaintiffs’ motion to
exclude Dr. Kalyanam’s testimony to the extent it discusses and critiques Gaskin’s
analysis and valuation of EDS and NDI. The Court will deny the Plaintiffs’ motion to
exclude Dr. Kalyanam’s report and testimony in all other respects.
2.
Robert C. Stephens
Since 2012, Bobby Stephens has been the President and Chief Operating Officer
of BucketFeet, Inc. (“BucketFeet”), a footwear and apparel company selling most of its
products online through “eCommerce.” (Fifth McNamara Decl., Ex. 2 (Expert Report of
Robert (“Bobby”) C. Stephens (“Stephens Report”)) at 5, 39.) Defendants offer Stephens
as an expert in eCommerce practices and operations from 2005 to 2011. Stephens has a
bachelor’s degree in accounting from Indiana University and no advanced degrees. (Id.
at 40; Fifth McNamara Decl., Ex. 3 (Dep. of Robert Stephens (“Stephens Dep.”) at 13:611.) He has four publications on online retailing, (Stephens Report at 40), and worked as
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an eCommerce consultant at Deloitte Consulting in Chicago from 2004 to 2012. (Id. at
39.) In 2012, he left to become a co-owner of BucketFeet, a footwear company with a
significant percentage of its business generated through online retail. (Id.) At Deloitte,
he assisted in developing eCommerce strategies for several major corporations, including
Walmart.com, Officemax.com, Macys.com, TOMS.com, Adobe.com, HP.com, and
Kohls.com. (Id.) He has no prior experience testifying as an expert witness. (Stephens
Dep. at 12:23-25.)
Stephens reaches several conclusions, some of which are focused on general
eCommerce practices and some of which are specific to Symantec’s actions during the
relevant time period. He summarizes his conclusions as follows:
1. The eCommerce landscape has changed rapidly throughout the period at
issue (2005-2011) and continues to change today. Both customers and
corporations were still learning about online shopping behavior and best
practices during the time at issue, and are still learning today.
2. In auto-populating customers’ online shopping carts with NDI and EDS,
and displaying “better value” pop-up offers, Symantec and Digital River
employed the standard eCommerce practice of recommendation-based
selling, including product grouping, cross-selling, and tight bundling,
which was common during the period at issue. Both the delivery
method and contents of these recommendations could elicit a number of
different customer responses, and it would be difficult to determine how
the recommendations impacted each customer.
3. Between 2005 and 2011, different non-expert users would have been
aware of or would have encountered some of the many difficulties
arising from re-downloading software, which reasonably would have led
them to purchase NDI or EDS as protection against those common
problems.
4. Due to the challenges faced in re-downloading a product during much of
the relevant period, many leading companies offered value-add features
to mitigate both customer concerns and operational challenges.
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5. Long in-line information disclosures (i.e., “what’s this” or “more info”
links) that require multiple scrolling or clicking actions from the user
are generally ineffective. Such disclosures and in-line links can lead to
information overload and a resulting loss of customers.
(Stephens Report at 7 (footnote and citations omitted).) Stephens goes on to describe in
greater detail the eCommerce process and compare the value added from EDS and NDI
versus the alternative options. He also briefly comments on what he believes to be the
central weakness of the conjoint analysis conducted by Gaskin – that it does not capture
the value of NDI or EDS to consumers. (Id. at 29-30.)
The Plaintiffs’ attacks on Stephens largely overlap with their attacks on
Dr. Kalyanam: he never purchased or downloaded EDS or NDI, he did not use a reliable
methodology, and he lacks qualifications to critique Gaskin’s conjoint analysis. The
Plaintiffs also argue, more generally, that Stephens lacks adequate experience and
education to reach his expert conclusions and that he did not review many critical pieces
of evidence, such as the chat or call logs between customer service representatives and
customers with respect to download insurance or alternative options, (Stephens Dep. at
24:14-26:16); Symantec’s technical support website, (id. at 153:8-154:18); Symantec’s
market research data, (id. at 96:22-98:8); or customer service scripts and training manuals
on download insurance and alternatives, (id. at 22:17-24:13, 27:1-5).
Although Stephens has less education and experience than Dr. Kalyanam, the
Court finds that he has sufficient experience in online marketing and retail to testify about
those subjects and general eCommerce trends and practices. Stephens goes well beyond
these topics, however, into areas where he has conceded he does not have personal
knowledge. For example, he opines on what he believes to be the primary business goals
- 18 -
of NDI and EDS, (Stephens Report at 16); how “easily” customers could have taken
certain actions with respect to selecting or rejecting EDS and NDI, (id. at 20); and what
customers would have expected from download insurance or other redownloading
software, (id. at 20-24). With respect to the last opinion, Stephens appears to have based
the conclusion in part on “analy[zing] Omniture Analytics data,” without providing an
explanation of what that analysis entailed. (Id. at 10-11, 20).
Nothing in Stephens’s report or deposition testimony indicates that he has any
training or experience with download insurance. His experience with online marketing
and commerce do not confer upon him the expertise necessary to testify about the added
value of one form of redownload software over another or about the process of
downloading EDS or NDI, specifically. See Wheeling Pittsburgh Steel Corp. v. Beelman
River Terminals, Inc., 254 F.3d 706, 715 (8th Cir. 2001) (in steel warehouse flooding
damage case, finding that a witness easily qualified as an expert on flood risks, but that
his testimony on warehouse safety was not appropriate, given that he “sorely lacked the
education, employment, or other personal practical experiences to testify as an expert” on
that issue).
Further, Stephens’s conclusions about consumer expectations appear to be
unfounded in a recognizable scientific or technological method. During his deposition
testimony, in response to a question about the basis for his opinions on what consumers
expected from a download insurance product, Stephens stated:
[C]ommon sense is a portion of it, but really I’m relying much more on my
experience with, you know . . . having worked face to face with customers
quite a bit over time, surveying, focus groups. . . . I think that this is – these
are sort of your bare minimums for interacting with customers in a distance
environment when you’re not standing next to them.
- 19 -
(Stephens Dep. at 94:13-25.)
Common sense and general background interacting with consumers, or previous
experience consulting for e-retailers, may be relevant to Stephens’s qualifications as an
expert, but they are not adequate methods or techniques for formulating specific opinions
about download insurance, the value customers would assign to it, or how easily
customers could have navigated certain online options, especially where the witness has
not personally observed or used the download insurance or websites. See Jaurequi v.
Carter Mfg. Co., 173 F.3d 1076, 1084 (8th Cir. 1999) (affirming that the district court
made the correct decision in excluding experts’ testimony on alternative designs when
they had no prior experience testing or creating such designs). To the extent common
sense or general knowledge about customer preferences offers Stephens insight into any
aspect of EDS and NDI, the Court finds that a jury could reach the same conclusions just
as easily without Stephens’s expert testimony. Lillebo v. Zimmer, Inc., No. 03-2919,
2005 WL 388598, at *6-*7 (D. Minn. Feb. 16, 2005) (in which this Court did not permit
an expert to testify to matters where the jury could “draw that conclusion from the
evidence presented, but it [did] not require expert assistance to do so”). Expert witness
testimony is not necessary where the expert merely “appeared to have made logical
deductions based on the set of assumptions that plaintiff directed them to employ and the
circumscribed universe of data available to them.
Any juror could have employed
common sense to perform the same analysis[.]” R.F.M.A.S., Inc. v. So, 748 F. Supp. 2d
244, 269 (S.D.N.Y. 2010).
- 20 -
Stephens’s experience in eCommerce qualifies him to testify regarding many of
the conclusions described in his report. The Court will permit Stephens to testify to the
changing landscape of eCommerce, the practice of recommendation-based selling and its
prevalence in the industry, and the efficacy of in-line information disclosures and links.
To the extent Stephens’s testimony becomes cumulative at trial, however, the Court will
entertain an objection at that time and restrict his testimony accordingly. The Court will
not allow him to testify to particular redownloading challenges that prompted companies
to offer value-add features, nor will the Court allow Stephens to testify to specifics of
EDS and NDI, including how easily Symantec customers could have opted or rejected
those products, or whether customers would have desired to purchase EDS and NDI to
avoid common problems with redownloading software. Further, the Court will not allow
Stephens to critique the foundation or mechanics of Gaskin’s conjoint analysis, for the
same reason the Court will not allow Dr. Kalyanam to do so – he does not have any
training or experience in conjoint analysis, nor does he have any education in economic
analysis of this sort. The Defendants’ concerns about any infirmities in Gaskin’s analysis
may be explored on cross-examination of Gaskin.
C.
Defendants’ Motions to Exclude Plaintiffs’ Experts
1.
Steven Gaskin
Steven Gaskin is a Principal at Applied Marketing Science, Inc., focusing on
market research. (Second Gibbs Decl., Ex. 1 (Expert Report from Steven Gaskin for
Plaintiffs Khoday and Townsend (“Gaskin Report”)) at 3, 21.) He has worked in the
field of market research and marketing science models for over 30 years. (Id. at 3.) He
- 21 -
holds Bachelor of Science and Master of Science degrees from the Massachusetts
Institute of Technology and has authored numerous articles, papers, and presentations on
the subjects of marketing science and conjoint analysis, an analytic survey method used
to measure customer preferences for specific features of products. (Id. at 3, 22-23;
Second Gibbs Decl., Ex. 2.)
The Plaintiffs offer Gaskin as a damages expert who performed a conjoint
analysis. Using this analysis, Gaskin concluded that the value of the automatic product
key injection feature of EDS and NDI was worth between $00.05 and $00.16 per
transaction to customers. (Gaskin Report at 5, 19.) Defendants previously argued at the
class certification stage that the Court should exclude the results of the conjoint analysis
because the analysis is unreliable. Khoday, 2014 WL 1281600, at *33.
Defendants now challenge the analysis again through a motion to exclude
Gaskin’s testimony. More specifically, Defendants maintain that the conjoint analysis
Gaskin performed is not designed to place a monetary value on a specific product
attribute but rather measure user preferences for particular features and predict interest in
that product.
Citing In re Tobacco Cases II, No. 711400, JCCP-4042 (Super. Ct.
San Diego County, Cal. Sept. 23, 2013), Defendants contend that Gaskin’s analysis
should be excluded on the grounds that “conjoint analysis has not been accepted in the
relevant scientific community as a means of assigning a monetary value to any particular
attribute.” (Second Gibbs Decl., Ex. 5 (In re Tobacco Cases II, JCCP-4042) at 13.)
The Court finds that Gaskin’s conjoint analysis is generally a permissible method
for calculating damages. See, e.g., In re Whirlpool Corp. Front-Loading Washer Prods.
Liability Litig., No. 08-WP-65000, 2014 WL 4954467, at *22-*24 (N.D. Ohio Oct. 3,
- 22 -
2014) (finding conjoint analysis survey as to customers’ “willingness to pay” for various
product attributes to be “reasonably reliable”); TV Interactive Data Corp. v. Sony Corp.,
929 F. Supp. 2d 1006, 1020-27 (N.D. Cal. 2013) (admitting conjoint analysis over
defendant’s Daubert objection as to unreliability, where expert testimony used the
analysis to identify a “value” for specific product attributes). Even where there is a
challenge that the survey “may not perfectly represent the class[,] that does not make it
irrelevant or unhelpful. Sample surveys, by their very nature, are sketches, not exact
replicas, of the examined population.”
Schwab v. Philip Morris USA, Inc., 449
F. Supp. 2d 992, 1170 (E.D.N.Y. 2006) (denying a motion to exclude an expert’s
testimony applying a conjoint analysis), rev’d on other grounds, McLaughlin v. Am.
Tobacco Co., 522 F.3d 215 (2d Cir. 2008). To the extent Defendants believe Gaskin’s
analysis should have included additional factors or that it does not adequately explain the
conclusions Gaskin reached, “[d]irect and cross-examination, testimony by supporting
and opposing witnesses, and argument by plaintiff and defense counsel will provide the
additional guidance ‘needed to justify the inferences’ the parties seek to draw from
[Gaskin]’s survey.” Id. The Court will allow Gaskin to testify to his conclusions reached
by applying a conjoint analysis, and Defendants may cross-examine Gaskin to attempt to
address the weaknesses they perceive in his analysis.
2.
Nicholas Taylor
Nicholas Taylor is the Web Archiving Service Manager for Stanford University
Libraries. (Decl. of Patrick J. Gibbs (“Third Gibbs Decl.”), Ex. 1 (Expert Report from
Nicholas Taylor for Plaintiffs Khoday and Townsend) at 3, Apr. 15, 2014, Docket
- 23 -
No. 289.) He has previously served as a Data Specialist for the Library of Congress Web
Archiving Team and worked at the United States Supreme Court Library. (Id.) Taylor
has experience creating web archives with the Internet Archive’s open-source web
crawler project, Heritrix. (Id. at 4.) He has also “examined hundreds of archived
websites made available through both Wayback [an open source version of the Internet
Archive’s Wayback Machine, a digital archive of the World Wide Web from 1996 to the
present,] and the Internet Archive’s Wayback Machine . . . .” (Id.)
The Plaintiffs offer Taylor’s expert testimony on the process of using Symantec’s
website to redownload previously-purchased Norton software. Taylor used archived
versions of the “I want to re-download my Norton product” web page from the Internet
Archive Wayback Machine (“Wayback Machine”) to describe the historical experience
of a user attempting to re-download a purchased Norton product from Symantec’s
website. (Id. at 6-11.) Specifically, Taylor examined versions of Symantec’s website
from 20054 to at least September 2011. (Id. at 7-10.) Based on his review, he opines that
“from at least November 20, 2007 through at least September 5, 2011, the principal
instructions provided to users looking to re-download purchased software were to
download
and
install
trialware,
find
their
product
key
through
http://www.mynortonaccount.com/, and use the product key to activate the full version.”
(Id. at 11.) Taylor goes on to observe that “[a]t no time during this time frame were EDS
4
Symantec’s link to “I want to re-download my Norton product” did not appear in
archived versions of the Symantec website until April 2007, so from 2005 through April 2007,
Taylor reviewed archived versions of similar pages connected to the topic title “Download
Information.” (Third Gibbs Decl., Ex. 1 at 7-9.)
- 24 -
or NDI presented as a solution for users looking to re-download their purchased
software.” (Id.)
Defendants seek to exclude Taylor’s report and testimony on the grounds that it
merely consists of regurgitating information Taylor saw on selective websites he chose to
examine through the Wayback Machine and speculation about what customers “would
likely” have seen if they were using the website, neither of which constitutes an expert
opinion.
Defendants further argue that Taylor is not qualified to testify about the
websites he viewed through the Wayback Machine, because he did not assist with
creating Symantec’s websites, nor did he work for the Internet Archive to design the
Wayback Machine archives or the web crawler.
Expert testimony that merely repeats information capable of easy comprehension
by a jury is excludable. For it to be admissible, it must go “beyond the ken of people of
ordinary intelligence.” U.S. v. Davis, 457 F.3d 817, 824 (8th Cir. 2006). Where an expert
witness merely describes what he or she hears or sees, and that information is readily
presentable to a jury without the expert’s testimony, the testimony is inadmissible. See,
e.g., Am. Family Mut. Ins. Co. v. Kline, 780 F. Supp. 2d 839, 841-43 (S.D. Iowa 2011)
(excluding expert testimony describing a 911 phone call where the call recording was
available to show the jury). Defendants maintain that Taylor merely describes websites
he saw without drawing conclusions that would require any specialized knowledge, and a
jury could review the same websites without the assistance of his testimony. See Lee v.
Andersen, 616 F.3d 803, 808-09 (8th Cir. 2010) (finding that an expert’s testimony was
not appropriate where it merely described, without any specialized knowledge, images
that “the jury was entirely capable of analyzing” on their own).
- 25 -
The Court finds that Taylor offers conclusions not readily available to the jury
without the assistance of expert testimony.
Whether legitimate alternatives for
redownloading Norton products were available, at no cost, to customers during the
relevant time period is central to the Plaintiffs’ claims, making Taylor’s proffered
testimony highly relevant. James Renalds, Symantec’s website designer, stated in a
deposition that Symantec does not keep all past versions of its website.
(Decl. of
Douglas J. McNamara (“Seventh McNamara Decl.”), Ex. 2 (Dep. of James Renalds) at
18:1-4, May 6, 2014, Docket No. 311.) Further, when asked whether Symantec keeps
copies of the customer support pages specifically, Renalds stated, “Not to my
knowledge.” (Id. at 18:8-10.) Because the websites are no longer readily accessible,
obtaining previous versions of the websites “would require [Taylor] to apply knowledge
and familiarity with computer and the particular [internet archiving] software well
beyond that of the average layperson. This constitutes ‘scientific, technical, or other
specialized knowledge’ within the scope of Rule 702.” U.S. v. Ganier, 468 F.3d 920, 926
(6th Cir. 2006).
In Ganier, the court rejected the argument that expert testimony was not necessary
where the witness was relaying to the jury the results of running commercially-available
software. Id. at 925-26. The court concluded that a layperson may be familiar with
common software programs and “may be able to interpret the outputs of popular software
programs as easily as he or she interprets everyday vernacular,” but testimony from an
expert with specialized knowledge about interpreting software reports was still useful for
the jury. Id. at 926. Similarly, in this case, the jury may be able to easily look at
screenshots of past versions of Symantec’s website and make a determination about what
- 26 -
information customers would have seen upon visiting the site. Because these sites are
only available now through running a web crawler, with which many jurors may not be
familiar, this case presents an even greater necessity for expert testimony than Ganier, in
which the software programs at issue were Microsoft Word and Microsoft Outlook. Id.
The expert in Ganier also ran forensic software programs that generated reports he
interpreted through specialized knowledge. The reports merely indicated that “three
different types of searches were performed [using the forensic software] with particular
search terms at particular times,” but the court found that expert testimony was relevant
to the interpretation of those results. Id. Likewise, Taylor’s testimony is narrowly
focused on describing the searches he performed and explaining how to understand the
results the search produced. Indeed, his testimony offers a specialized perspective on
which previous versions of the Symantec website he collected and how he collected
them, as well as how the versions relate to one another, which is precisely the sort of
information for which expert testimony might be helpful.
The Court concludes, at this stage in the litigation, that Taylor’s testimony would
likely be useful in providing previous versions of the website for the jury’s evaluation.
Taylor’s specialized knowledge of the website archiving and retrieval process would also
likely offer some assistance to the jury in understanding the relationship between various
archived versions of Symantec’s websites.
Because Taylor’s report is focused on
explaining which versions of Symantec’s websites are available from different dates and
what content would have been available to customers visiting those sites, rather than
attempting to make broader conclusions about whether that content constituted a
misrepresentation, it is appropriately limited in scope to Taylor’s area of expertise.
- 27 -
Therefore, the Court will deny Defendants’ motion to exclude the report and testimony of
Taylor.
D.
Symantec’s Motion to Exclude Plaintiffs’ Damages Expert Steven
Herscovici
Steven Herscovici, Ph.D., is a damages expert retained by the Plaintiffs to apply
Steven Gaskin’s conjoint analysis and determine the losses sustained by the Plaintiff class
in connection with the purchase of EDS and NDI. He is an economist at The Brattle
Group consulting firm. (Decl. of Patrick J. Gibbs (“Fourth Gibbs Decl.”), Ex. 1 (Expert
Report of Steven Herscovici, Ph.D. (“Herscovici Report”)) at 3, 13, Apr. 15, 2014,
Docket No. 296.)
Herscovici has provided economic analysis, including damages
analysis, in numerous previous cases. (Id. at 14-18.)
To reach his damages estimate in this case, Herscovici calculated the total
revenues, units, and overall prices for EDS and NDI purchases during the relevant time
period, using sales revenue records provided by Defendants during discovery. (Id. at 45.) He calculates two different types of damages. First, he reaches an amount of what he
calls “Refund Damages” using a refund of the full EDS or NDI purchase price. (Id. at 7,
9-10.) Second, using the highest EDS or NDI valuation from Gaskin’s analysis – $00.16
per transaction – Herscovici opines on what he calls “Convenience Damages,” which is a
measure of damages that takes the full refund, less the money Gaskin found customers
saved in “convenience” from the automatic product key injection. (Id. at 7-10.)
In Daubert, the Supreme Court cautioned that judges “assessing a proffer of expert
scientific testimony under Rule 702 should also be mindful of other applicable rules,”
including Rule 403. Daubert, 509 U.S. at 595. Symantec attacks Herscovici’s analysis
- 28 -
and conclusions under Rules 702 and 403, arguing that his methodology comprises
simple calculations for which an expert is not needed. Rather, the jury can perform them
by looking at the same data Herscovici used. Symantec asks the Court to exclude these
calculations, given that “[t]here is absolutely no reason why the jury cannot do this for
itself; in fact, juries do these types of calculations all the time.” Master-Halco, Inc. v.
Scillia, Dowling & Natarelli, LLC, No. 09-cv-1546, 2010 WL 2978289 (D. Conn. Apr. 9,
2010).
The Court will allow Herscovici to testify to his conclusions based on the
calculations he performed. The Court finds that he did not merely perform basic math
from readily-accessible numbers, but rather he aggregated sales data from across multiple
sources to calculate revenues for EDS and NDI sales, applied Gaskin’s conjoint analysis
results to determine an amount of “Convenience Damages,” and adjusted the historic data
to calculate present value through the application of interest rates. (Herscovici Report at
4-10.) The Court concludes that the testimony of an expert in economics would assist the
jury in performing and understanding these calculations. To the extent that portions of
Herscovici’s analysis constitutes basic addition or multiplication of the numbers he
aggregated, the Court rejects Symantec’s argument that such testimony would be
inadmissible purely because it is a simple calculation. “There is not, as [Symantec]
suggests, an implicit requirement in [Rule] 702 for the proffered expert to make
complicated mathematical calculations.”
WWP, Inc. v. Wounded Warriors Family
Support, Inc., 628 F.3d 1032, 1040 (8th Cir. 2011) (citing In re Prempro Prods. Liab.
Litig., 514 F.3d 825, 831 (8th Cir. 2008) (finding that it was not an abuse of discretion for
a district court to permit expert testimony that was “an exercise in basic math using
- 29 -
simple deductive reasoning”)). Therefore, the Court will deny Symantec’s motion to
exclude Herscovici’s report and testimony.
II.
SYMANTEC’S MOTION FOR SUMMARY JUDGMENT
A.
Standard of Review
Summary judgment is appropriate where there are no genuine issues of material
fact and the moving party can demonstrate that it is entitled to judgment as a matter of
law. Fed. R. Civ. P. 56(a). A fact is material if it might affect the outcome of the suit,
and a dispute is genuine if the evidence is such that it could lead a reasonable jury to
return a verdict for either party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). A court considering a motion for summary judgment must view the facts in the
light most favorable to the non-moving party and give that party the benefit of all
reasonable inferences to be drawn from those facts. Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574, 587 (1986).
Summary judgment is appropriate if the
nonmoving party “fails to make a showing sufficient to establish the existence of an
element essential to that party’s case, and on which that party will bear the burden of
proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). “To defeat a motion
for summary judgment, a party may not rest upon allegations, but must produce probative
evidence sufficient to demonstrate a genuine issue [of material fact] for trial.” Davenport
v. Univ. of Ark. Bd. of Trs., 553 F.3d 1110, 1113 (8th Cir. 2009) (citing Anderson, 477
U.S. at 247-49).
- 30 -
B.
Material Misrepresentations or Omissions
Symantec seeks summary judgment on the basis that Khoday has not shown that
Symantec made any material misrepresentation or omission with respect to NDI. The
burden on the plaintiff raising a claim under California’s Unfair Competition Law
(“UCL”) is “to show that the defendant engaged in a practice that was unlawful, unfair,
or fraudulent and that the defendant may have acquired money or property by means of
that practice.” In re Steroid Hormone Prod. Cases, 104 Cal. Rptr. 3d 329, 336 (Ct. App.
2010).
To prevail on a material misrepresentation theory, Khoday must show that
Symantec’s representations about the necessity of NDI – taken as a whole – had a
tendency to mislead or deceive customers, even if they were partially or even largely true.
McKell v. Wash. Mut., Inc., 49 Cal. Rptr. 3d 227, 239 (Ct. App. 2006).
Khoday maintains that by auto-populating NDI into customers’ shopping carts and
representing that NDI “extends” the sixty-day window to download Norton software,
Symantec mislead customers to believe that there was no other means of re-obtaining the
software after sixty days aside from repurchasing it in full. In other words, once the
sixty-day deadline had passed, a customer could not re-install the software unless they
had the insurance. According to Khoday, this constituted a misrepresentation because
there were at least three alternative means of redownloading the software for free.
Symantec disclaims that anything in the NDI description suggested there were no
alternatives to download insurance. Khoday’s interpretation of the “What’s this?” link,
Symantec argues, is a “strained” interpretation that cannot form the basis for a
misrepresentation action. See Veloff v. Pac. Bell Wireless, No. B156110, 2002 WL
31429802, at *3 (Cal. Ct. App. Oct. 31, 2002) (unpublished) (holding that a
- 31 -
misrepresentation claim “may not be based on a ‘strained and unjustified interpretation of
the [defendant’s] advertisements’” (quoting State Bd. of Funeral Dirs. v. Mortuary in
Westminster Memorial Park, 271 Cal. App. 2d 638, 642 (Ct. App. 1969))). Alternatively,
to the extent the “What’s this?” link indicated there were no redownload alternatives,
Symantec maintains that it is not a misrepresentation because none of the alternative
products were guaranteed to be available for customers to redownload the software.5 As
such, they were not equivalent to NDI, and Symantec was under no obligation to inform
customers about them.6 Only NDI would guarantee a customer the ability to redownload
purchased software beyond the sixty-day window.
Symantec may prove to be correct as to NDI being the only guaranteed
redownload option, but taking the facts in the light most favorable to the nonmoving
party, the Court finds that a genuine issue of material fact remains on the issue of
5
To support this argument, Symantec leans heavily on a segment of a deposition of
Khoday, in which Khoday was asked whether Symantec’s NDI representations would “still be
material omissions if Symantec had the ability to, on a moment’s notice, not provide trialware
versions of its products available for download, to not include downloads on its support Web
site, or not to allow its customer service representatives to assist customers with re-downloading
their product?” (Decl. of Patrick E. Gibbs (“Fifth Gibbs Decl.”), Ex. 12 (Dep. of Devi Khoday
(“Khoday Dep.”) at 124:8-14, May 15, 2015, Docket No. 318.) Khoday replied, “If they had the
right to stop those services, then it wouldn’t be a material omission.” (Id. at 124:17-19.)
Symantec asserts that because it had the right to stop providing the alternatives, Khoday’s
response was an admission that Symantec made no material omissions. The Court will not
consider this evidence at the summary judgment stage, however, because the question sought a
legal opinion from a lay witness and was properly objected to during the deposition. See Murphy
v. Mo. Dep’t of Corr., 372 F.3d 979, 982 (8th Cir. 2004) (explaining that courts, at the summary
judgment stage, “consider only admissible evidence and disregard portions of various affidavits
and depositions that were made without personal knowledge . . . or purport[] to state legal
conclusions as fact”).
6
Symantec argues that, in fact, using trialware to redownload software a customer
already purchased violated the trialware terms of use. (See Fifth Gibbs Decl.”, Ex. 5 (Dep. of
Nat Maple (“Maple Dep.”)) at 295:15-296:1.)
- 32 -
material misrepresentation.
The Court’s inquiry is focused on whether Symantec’s
representations, taken as a whole, had a tendency to mislead customers.
Even if
Symantec is correct that it had the right to revoke the alternative options, a “‘perfectly
true statement couched in such a manner that it is likely to mislead or deceive the
consumer, such as by failure to disclose other relevant information, is actionable under
[the UCL] Section 17200.’” O’Shea v. Epson Am., Inc., No. CV 09-8063, 2011 WL
3299936, at *9 (C.D. Cal. July 29, 2011) (quoting Morgan v. AT&T Wireless Servs., Inc.,
177 Cal. App. 4th 1235, 1255 (2009)); McKell, 49 Cal. Rptr. 3d at 239-40. Where a
technically true fact can still be misleading, an obligation arises “to disclose all other
facts which ‘materially qualify’ the limited facts disclosed.” Randi W. v. Muroc Joint
Unified Sch. Dist., 929 P.2d 582, 592 (Cal. 1996). In Symantec’s case, irrespective of
whether NDI was the only “guaranteed” redownload option, the evidence suggests that
Symantec continued to provide the alternative options like trialware for the duration of
the relevant time period. Further, Symantec representatives counseled at least some
customers during the relevant time period to use the alternatives when they had not
purchased download insurance.
(See, e.g., Decl. of Patrick E. Gibbs (“Fifth Gibbs
Decl.”), Ex. 10 (Call Log ID 899) (advising a customer that trialware was a redownload
option if the customer did not have download insurance), May 15, 2015, Docket
No. 318.); Decl. of Douglas J. McNamara (“Eighth McNamara Decl.”), Ex. 13 (link to,
and transcript of, Symantec’s Norton product redownload video, explaining that
customers can reinstall Norton software by activating a trial period with their original
product key), June 5, 2014, Docket No. 332.)
- 33 -
Construing the facts in the light most favorable to the Plaintiffs, the Court finds
that a genuine issue of fact remains as to whether Symantec represented that download
insurance was necessary for a customer to redownload a Norton product after sixty days
but in fact other options, at no cost, existed. As a result, even a “technically accurate
disclosure” as to the guarantee offered by NDI does not warrant summary judgment for
Symantec. Jordan v. Paul Fin., LLC, 285 F.R.D. 435, 450 (N.D. Cal. 2012) (denying
defendant’s motion for summary judgment because “simply providing technically
accurate disclosure does not excuse the potentially inadequate or misleading character of
other disclosures . . . . [T]here remains a genuine issue of material fact as to whether an
ordinary consumer would be misled by [defendant’s] explanation of the negative
amortization inherent in the loan.”)
Just as in this case, the court in Jordan was
concerned with whether a “representation has played a substantial part, and so has been a
substantial factor, in influencing [the plaintiff’s] decision.” Id. at 454 (quoting In re
Tobacco II Cases, 207 P.3d 20, 39 (Cal. 2009)).
C.
Actual Harm
Symantec contends that even if a material issue of fact remains as to whether
Symantec made misrepresentations on which Khoday relied, the Court should still grant
its motion for summary judgment because Khoday has not demonstrated that she relied
on them to her detriment. Specifically, Symantec asserts that Khoday has not shown
that she suffered any actual harm as a result of purchasing NDI, which is required for her
to recover under each of her causes of action. Under California’s Consumers Legal
Remedies Act (“CLRA”), “[a]ny customer who suffers any damage as a result of the
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use or employment by any person of a method, act, or practice declared to be unlawful by
Section 1770 may bring an action against that person to recover or obtain [damages].”
Cal. Civ. Code § 1780(a) (emphasis added). Unjust enrichment claims operate similarly.
“Under California law, an unjust-enrichment plaintiff must show receipt of a benefit and
unjust retention of the benefit at the expense of another.” In re Baycol Prods. Litig.,
596 F.3d 884, 892 (8th Cir. 2010) (internal quotation marks omitted). Where “there is no
competent . . . evidence showing that [the plaintiff] suffered any harm” from the
defendant’s product or actions, a court should conclude that the plaintiff “received the
benefit of his bargain” and grant summary judgment for defendant. Id.
Symantec contends that Khoday received benefit from NDI in the form of
reassurance that she could redownload her software after the sixty days had expired, and
she has not shown any harm that came as a result of purchasing NDI instead of using one
of the identified alternatives. See In re eBay Litig., No. 07-cv-2198, 2012 WL 3945524,
at *3 (N.D. Cal. Sept. 10, 2012) (granting summary judgment for defendant on breach of
contract and UCL claims because the plaintiff did not provide “substantial evidence
showing that his measure of damages reasonably approximates the sum necessary to
restore him to the status quo ante” (internal quotation marks and alterations omitted)).
Symantec argues that Khoday suffered no economic loss by purchasing NDI, because the
benefit she sought – a guarantee that she would be able to redownload her software
beyond sixty days – is precisely what she received. See Day v. AT&T Corp., 74 Cal.
Rptr. 2d 55, 63-65 (Ct. App. 1998) (denying UCL recovery for plaintiffs who “received
exactly what they paid for”). Symantec contends that because no alternative product
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would guarantee with certainty that Khoday could redownload her software, NDI
provided a unique service for which Khoday paid.
The Court finds that a material issue of fact remains as to whether Khoday
suffered harm from Symantec’s alleged misrepresentations.
A plaintiff may prove
detrimental reliance on a material omission and recover damages if, “had the omitted
information been disclosed [the plaintiff] would have been aware of it and behaved
differently.” Mirkin v. Wasserman, 858 P.2d 568, 574 (Cal. 1993). In this case, when
asked whether she would have purchased NDI if she knew she could redownload the
Norton software without charge through the customer service webpage, Khoday
responded, “I wouldn’t have purchased it.” (Khoday Dep. at 149:21.) When asked the
same question with the added caveat that Symantec could remove the redownload options
on the customer service page at any time, Khoday responded, “I’m not sure. I may or
may not have [purchased NDI in that situation].” (Id. at 150:4-5.) Khoday provided the
same responses when asked whether she would have downloaded NDI if she knew she
could redownload the Norton software without charge through trialware – that she would
not have purchased NDI if redownloading was available through trialware, (id. at 151:711), and that she was unsure whether she would have purchased it if she knew Symantec
could cease offering the trialware option at any time, (id. at 151:18-20).
These alternative redownload options are not merely hypothetical.
Multiple
sources in the record indicate that customers could redownload the Norton software
through both the customer support website and trialware. Although Symantec contends
that it could have ceased offering these options at any time, it has offered no evidence
that the company ever discussed or considered eliminating the alternatives. Because
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Khoday’s deposition suggests that she would have acted differently had she been
apprised of this information, a genuine issue of material fact remains as to whether her
reliance on Symantec’s representations caused her to suffer harm. Even if Symantec had
a right to remove the alternative options, in the absence of evidence demonstrating that
they contemplated removing or actually did remove them, the value of any guarantee or
peace of mind the NDI product may have offered Khoday – and, relatedly, whether she
suffered any actual harm through Symantec’s alleged misrepresentations – is best
determined by a jury. Accordingly, the Court will deny Symantec’s motion for summary
judgment.7
III.
PLAINTIFFS’ UNOPPOSED MOTION FOR MODIFICATION OF CLASS
ORDER
The Plaintiffs seek to make two modifications to the Court’s Order certifying the
class in this case. The Court has discretion, before entering a final judgment, to amend or
alter any “order that grants or denies class certification.” Fed. R. Civ. P. 23(c)(1)(C);
7
In light of the fact that the Court will deny Symantec’s motion for summary judgment,
Symantec requests, alternatively, that the Court enter an order establishing two facts as true.
Fed. R. Civ. P. 56(g) (“If the court does not grant all the relief requested by the motion, it may
enter an order stating any material fact – including an item of damages or other relief – that is not
genuinely in dispute and treating the fact as established in this case.” (emphasis added)). First,
Symantec requests that the Court make a finding that the alternative options identified by the
Plaintiffs did not provide a guaranteed right to consumers to redownload their purchased Norton
product after sixty days. Second, Symantec seeks a determination by this Court that NDI
provided value to consumers. After considering the parties’ arguments and reviewing the
evidence in the record, the Court will deny both of Symantec’s requests. Rule 56(g) grants
district courts discretion to make a finding of fact where an issue is genuinely not disputed, or
“court[s] may conclude that it is better to leave open for trial facts and issues that may be better
illuminated by the trial . . . .” Triple H Debris Removal, Inc. v. Companion Prop. & Cas. Ins.
Co., 647 F.3d 780, 786 (quoting Fed. R. Civ. P. 56 advisory committee’s notes (2010)). The
Court concludes that an order establishing as true either material fact identified by Symantec
could potentially mislead the jury at trial, and the Court will consequently exercise its discretion
to allow both issues to proceed to the jury.
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Gen. Tel. Co. of the Sw. v. Falcon, 457 U.S. 147, 160 (1982) (“Even after a certification
order is entered, the judge remains free to modify it in the light of subsequent
developments in the litigation.”). “A court’s rulings on class certification issues may also
evolve,” In re Zurn Pex Plumbing Prods. Liability Litig., 644 F.3d 604, 613 (8th Cir.
2011), and “Rule 23 empowers district courts to alter or amend class-certification orders
based on circumstances developing as the case unfolds.” Amgen, Inc. v. Conn. Ret. Plans
& Trust Funds, 133 S. Ct. 1184, 1202 n.9 (2013) (internal quotation marks and
alterations omitted).
The Plaintiffs’ first request is for the Court to extend the window for claims
against Digital River. The Class Certification Order established a time frame for claims
against Digital River spanning from January 24, 2005 through October 26, 2009. The
Plaintiffs seek to move back the closing date for such claims by roughly eight months,
with a proposed amended window of January 24, 2005 through June 30, 2010. To
clarify the scope of the liability, the Plaintiffs also request the addition of language
specifying that Digital River would only be liable for sales of EDS for Norton products
during that time.
The original window reflected the date Digital River ceased its
management of Symantec’s online storefront. However, Digital River continued to sell
EDS during a transition period that took place from October 26, 2009 to June 30, 2010.
Accordingly, the Court will account for that transition period and grant the motion to
extend the claim window. The Court will also grant the request to add “regarding sales
of EDS for Norton products” to that section of the Order.
Second, the Plaintiffs ask the Court to shorten the window for unjust enrichment
claims against Symantec. The original window extended from January 24, 2007 through
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March 10, 2011. The Plaintiffs request that the Court narrow the window to January 24,
2008 through March 10, 2011. The initial window was calculated based on a four-year
statute of limitations, but the Plaintiffs discovered that the California statute of limitations
for unjust enrichment claims based on alleged underlying fraud is three years, not four.
Cal. Civ. Proc. Code § 338(d) (providing for a three year statute of limitations on “[a]n
action for relief on the ground of fraud or mistake”); In re Brocade Commc’ns Sys., Inc.
Derivative Litig., 615 F. Supp. 2d 1018, 1036 (N.D. Cal. 2009). Defendants do not
oppose delaying the applicable start date on those claims by one year. Because the
Plaintiffs’ unopposed motion on the unjust enrichment window properly comports with
the California statute of limitations, the Court will exercise its continuing discretion over
the class certification order to grant the motion.
This case will be placed on the Court’s next available trial calendar.
ORDER
Based on the foregoing, and all the files, records, and proceedings herein, IT IS
HEREBY ORDERED that:
1.
Defendant Symantec’s Motion for Summary Judgment [Docket No. 314] is
DENIED.
2.
Plaintiffs’ Motion to Exclude Certain Testimony of Defendants’ Expert
Witnesses Bobby Stephens and Kirthi Kalyanam [Docket No. 276] is GRANTED in
part and DENIED in part as follows:
a.
The motion as to Kirthi Kalyanam is granted to the extent he seeks
to testify to specifics about how customers would download EDS, NDI, or the
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alternative options, what they would be viewing and perceiving during that
process, and to the extent it discusses and critiques Gaskin’s analysis and
valuation of EDS and NDI. The motion as to Kirthi Kalyanam is denied in all
other respects;
b.
The motion as to Bobby Stephens is granted to the extent he seeks
to testify to specifics of EDS and NDI, including how easily Symantec customers
could have opted to purchase or reject those products; whether customers would
have desired to purchase EDS and NDI to avoid common problems with
redownloading software; and his critique of the foundation or mechanics of
Gaskin’s conjoint analysis. The motion as to Bobby Stephens is denied in all
other respects.
3.
Defendants’ Motion to Exclude the Report and Testimony of Plaintiffs’
Expert Steven Gaskin [Docket No. 279] is DENIED.
4.
Defendants’ Motion to Exclude the Report and Testimony of Plaintiffs’
Expert Nicholas Taylor [Docket No. 285] is DENIED.
5.
Defendant Symantec’s Motion to Exclude Portions of the Report and
Testimony of Plaintiffs’ Expert Steven Herscovici [Docket No. 292] is DENIED.
6.
Plaintiffs’ Unopposed Motion for Modification of Class Order [Docket
No. 360] is GRANTED.
a.
The Court grants the motion to extend the class period for claims
against Digital River from October 26, 2009 to June 30, 2010.
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b.
The Court grants the request to add “regarding sales of EDS for
Norton products” to the paragraph specifying the class period for claims against
Digital River.
c.
The Court grants the motion to shorten the class period for
unjust enrichment claims against Symantec from January 24, 2007 to
January 24, 2008.
IT IS FURTHER HEREBY ORDERED that the Court’s Order Granting
Plaintiffs’ Motion for Class Certification [Docket No. 274] is amended as follows:
All persons in the United States who Purchased Extended Download
Service (“EDS”) for Norton products or Norton Download Insurance
(“NDI”) between January 24, 2005 and March 10, 2011.
January 24, 2005 – June 30, 2010 – Claims against Digital River under
the Minnesota Consumer Fraud Act and False Statement in Advertising
Act, or Unjust Enrichment, regarding sales of EDS for Norton products;
January 24, 2008 – March 10, 2011 – Claims against Symantec under
California Unfair Competition Law, or Unjust Enrichment;
January 24, 2008 – March 10, 2011 – Claims against Symantec under
California Consumer Legal Remedies Act, for only those class members
defined as “consumers” under the CLRA.
DATED: March 19, 2015
at Minneapolis, Minnesota.
____s/
____
JOHN R. TUNHEIM
United States District Judge
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