Valvetech, Inc. v. Aerojet Rocketdyne, Inc.

Filing 334

DECISION AND ORDER: The Court resolves the pending matters as stated herein. SO ORDERED. Signed by Hon. Frank P. Geraci, Jr. on 11/2/2023. (MFM)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
VALVETECH, INC.,
Plaintiff,
v.

Case # 17-CV-6788-FPG
DECISION AND ORDER

AEROJET ROCKETDYNE, INC.,
Defendant.
INTRODUCTION
In advance of the jury trial scheduled to begin on November 6, 2023, the parties have raised
several matters with the Court. The Court addresses these issues below.
DISCUSSION
I.

Deposition Designations
The parties have submitted more than forty pages of deposition designations, along with

associated objections. ECF No. 303-2; ECF No. 308. At the pretrial conference, the Court directed
the parties to meet and confer regarding their objections. Thereafter, the parties notified the Court
that they had been unable to resolve most of their disagreements. ECF Nos. 322, 323.
At this time, the Court declines to address any of the issues raised by the parties regarding
their deposition designations, whether that be the applicability of Rule 32(a)(3), the relevance of
the proposed testimony, hearsay objections, or any other issue raised by the parties in their briefing
or at the pretrial conference. Any motions or requests related to deposition designations are
therefore DENIED WITHOUT PREJUDICE. Instead, the following procedure will be employed:

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II.

•

At least 72 hours before showing the video at trial, the party seeking to use
video deposition at trial shall deliver a copy of the edited video to opposing
counsel. Both parties shall meet and confer regarding all objections to the use
of that video.

•

If there remain any objections after the parties meet and confer, at least fortyeight hours before showing the video at trial, the parties shall file a joint
submission to the Court that (a) identifies the designated deposition testimony,
(b) includes a copy of the video, (c) summarizes the objections raised to the
video, 1 and (d) summarizes the proponent’s response to those objections. 2 Any
objection, whether under the Rules of Evidence, Rules of Civil Procedure, the
Local Rules, or otherwise, that is not included in the joint submission shall be
deemed waived. Any response to said objections, whether under the Rules of
Evidence, Rules of Civil Procedure, the Local Rules, or otherwise, that is not
included in the joint submission shall be deemed waived.

•

The Court will issue a definitive ruling on the objections thereafter. Once the
Court has issued its ruling, neither party may raise any supplemental legal
argument or objection to the video at trial.

ValveTech’s Request for Sanctions (ECF No. 306)
ValveTech’s request for sanctions is DENIED.

III.

Timko’s “Avoided Delay” Opinion
ValveTech intends to call Michael Timko, its technical expert, to testify on several matters

pertinent to this litigation. Among other things, ValveTech intends to proffer Timko’s opinion
that Aerojet avoided additional production delays by misappropriating ValveTech’s trade secrets.
See ECF No. 201-15 at 225-39. In its prior order on the motions in limine, the Court concluded
that Timko’s estimates of production delays would be inadmissible to the extent they were
“grounded in Timko’s subjective view, rather than on an objective methodology or comparison,

Instead of restating any arguments or legal authority already set forth in prior briefing, the parties need only cite their
prior briefing.

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2

See note 1, supra.

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like real-world delays.” ECF No. 290 at 6. The Court did not preclude ValveTech from seeking
to admit Timko’s opinion at trial, if it was “able to present the necessary foundation.” Id.
At the pretrial conference, ValveTech’s counsel indicated that he believed ValveTech
could provide the necessary foundation. Aerojet’s counsel responded that it would be improper to
present a new foundation for Timko’s opinion that was not contained in his expert report.
ValveTech’s counsel replied that the foundation was contained within his report. Insofar as the
parties’ dispute potentially implicated ValveTech’s discovery obligations, the Court asked the
parties to address the issue in writing. See ECF No. 317. However, having reviewed ValveTech’s
supplemental memorandum, it is clear that ValveTech does not intend to proffer any previously
unknown evidence as a foundation for Timko’s production-delays opinion. See ECF No. 326 at
9-14. Therefore, the Court sees no need to further address potential discovery violations. 3
However, some clarification regarding the Court’s prior ruling is necessary. The Court
concluded that it would only permit Timko’s expert opinions on avoided delay to the extent that
they were grounded “on an objective methodology or comparison, like real-world delays.” ECF
No. 290 at 6. Thus, to the extent Timko intends to estimate avoided production delays by reference
to delays that actually occurred during the underlying events, he is permitted to do so. This would
include opinions based on Lisa Peterson’s testimony 4 or the testimony of other witnesses with
personal knowledge of the production delays that occurred.

Aerojet raises several issues of law in its supplemental brief that go beyond the limited scope of the ordered briefing.
See ECF No. 330 at 10-14. The Court will not address those issues at this juncture.

3

Aerojet argues that Lisa Peterson’s deposition testimony constitutes “inadmissible lay opinion” that cannot form the
basis for Timko’s estimates. ECF No. 330 at 15. While the Court agrees with Aerojet that her testimony is framed in
terms of a “confusing hypothetical,” id. at 10, the factual substance of her answers—when production on the test
vehicles began, the timeline for that production, the delays that would arise if a new OMAC isolation valve had to be
re-integrated into a vehicle—do not veer into the realm of impermissible opinion. See generally United States v. Cuti,
720 F.3d 453 (2d Cir. 2013) (discussing circumstances in which hypothetical questions may be asked of lay witnesses).
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By contrast, the Court will not permit Timko to testify regarding his estimates based on a
“development iteration,” which the Court previously intended to exclude for lack of an objective
methodology. Id. ValveTech attempts to revive this aspect of Timko’s opinion by pointing out
that Timko has offered specific examples of his experience. See ECF No. 326 at 12-13. That is
not the flaw in his opinion, however. It is clear that Timko has abundant experience in the technical
areas in which he offers his opinions, and his expert report and deposition establish that experience
in detail. See ECF No. 201-15 at 13-21; ECF No. 326-4 at 4. The flaw is that, notwithstanding
his wealth of experience, Timko does not articulate an objective, reliable method for determining
the length of a development iteration. “[A]n expert relying solely on his experience must explain
how that experience leads to the conclusion reached, why that experience is a sufficient basis for
the opinion, and how that experience is reliably applied to the facts.” ECF No. 290 at 5 (quoting
another source). For example, Timko could have “identif[ied] [] similar projects or other objective
data” and compared it to the development projects at issue here to “estimate” the length of a “full
development iteration.” 5 Id. Instead, Timko relied on his “own subjective ‘sense’ of how long
[each] step[] in the design process could take.” Id. For the reasons previously stated, this aspect
of Timko’s opinion will not be admitted at trial.

During his deposition, Timko referenced a lengthy redesign process that was necessitated by a “life test failure.”
ECF No. 326-4 at 4. Although Timko relies on that experience to estimate a “development iteration” in this case,
absent from his testimony is an objective method of comparison between the life test failure and the specific projects
at issue here. Timko’s testimony amounts to a claim that, because he had that experience with the life test failure, it
gives him an informed “sense” of the potential project delays in this case. This is the sort of “black box” opinion that
is inadmissible under the Federal Rules of Evidence. See ECF No. 290 at 4-5. Timko’s line of reasoning can be
contrasted with the objective method by which he estimates the Starliner’s design life: he identifies a comparator to
the Starliner that shares relevant design characteristics, and from that comparison estimates Starliner’s potential life
span.

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IV.

Blok’s “Avoided Penalty” Theory
One of the theories that Justin Blok, ValveTech’s damages expert, proffers as a measure of

Aerojet’s unjust enrichment is what he calls “avoided penalties.” ECF No. 192-39 at 40.
Specifically, Blok calculates “the potential value of penalty payments due to Boeing that Aerojet
has avoided due to its misappropriation of the ValveTech Trade Secrets.” Id. Blok estimates the
penalties that Aerojet “avoided” by reference to (a) an unsigned claim letter submitted by the
Boeing Company to Aerojet in October 2020, and (b) Timko’s opinion regarding the development
delays that Aerojet averted by relying on ValveTech’s trade secrets.
In the claim letter, Boeing alleged that Aerojet’s delays in connection with the servicemodule project had caused it $94.3 million in costs and resulted in “at least 30 months” of delay
to the Starliner program. ECF No. 258-1 at 20. Blok reduces these amounts to a “penalty per
month” ratio of $3.1 million. ECF No. 192-39 at 43. Blok then multiplies that figure by the
number of months that Timko believes Aerojet saved by misappropriation—10 to 16 months—to
arrive at a valuation of approximately $31.4 million to $50.3 million in “penalties” that Aerojet
avoided by misappropriating ValveTech’s trade secrets. Id.
The Court did not substantively address Blok’s theory at summary judgment, ECF No. 203,
or in its prior order on the motions in limine. 6 ECF No. 290 at 13. However, as discussed in the
October 16, 2023 text order, a “more formal” ruling is warranted under the circumstances. ECF
No. 317; see also ECF No. 290 at 1 (notifying the parties that “[t]he trial court is not bound by an
in limine ruling and can change its determination during the trial where sufficient facts have
developed to warrant the change or even if nothing unexpected happens at trial”). The parties have

Although the Court stated that Aerojet’s objections to Blok’s opinion went “to the weight, not the admissibility, of
[his] testimony,” ECF No. 290 at 13, it did not issue any formal ruling on Aerojet’s objections because Blok’s theory
was inadmissible to the extent it relied on Timko’s inadmissible production-delays opinion.
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submitted supplemental memoranda. ECF Nos. 326, 330. Having reviewed those memoranda, as
well as the prior briefing in this case, the Court concludes that Boeing’s claim letter and Blok’s
avoided-penalty theory are inadmissible.
As an initial matter, ValveTech has failed to articulate how Boeing’s claim letter could be
admitted substantively. The claim letter’s “valuation” of Boeing’s costs is hearsay if offered to
prove the truth of that valuation. 7 See, e.g., Diamond v. Beltman N. Am. Van Lines, 29 F. App’x
49, 50 (2d Cir. 2002) (summary order) (stating that appraisal report and other documents that
described value of property were “properly excluded on hearsay grounds”); Waddell v. C.I.R., 841
F.2d 264, 267 (9th Cir. 1988) (appraisal professionally prepared by appraiser inadmissible as
hearsay); Cole v. Rescia, No. 21-CV-1130, 2022 WL 4536830, at *7 (D. Conn. Sept. 28, 2022)
(document appraising value of antiques inventory inadmissible “to prove the truth of the matter
asserted by the author, i.e., his valuation estimates” (internal brackets and quotation marks
omitted)).
ValveTech responds that the claim letter would be admissible under Rule 803(6) as a
business record. See ECF No. 326 at 22. But, on its face, the claim letter makes clear it was
prepared and furnished in anticipation of litigation and/or claim negotiation. See, e.g., ECF No.
258-1 at 3 (stating that Boeing “looks forward to discussing these issues, and Aerojet’s own
asserted claims, to resolve them on a mutually agreeable basis that is fair to both parties”); id. at
20 (“We welcome discussion between Boeing and Aerojet business leadership as appropriate next

ValveTech has suggested that the significance of the letter is not “whether the claim is true and valid” but merely
“that Boeing made a claim that put a value on the delay for this project.” ECF No. 257 at 12 (emphasis added). If
ValveTech were seeking to admit the claim letter solely to prove, say, Aerojet’s motive to misappropriate in order to
avoid further liability, ValveTech may well have a point. Similarly, if ValveTech were merely seeking to admit the
letter as evidence that there existed a process by which Boeing could take legal action against Aerojet for its delays,
the Court’s analysis may be different. But ValveTech does not propose to admit the claim letter for such limited
purposes.
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steps for resolving these issues on a commercial and mutually agreeable basis.”). Boeing’s letter
is not a dispassionate, neutral appraisal of its incurred costs or a routine record prepared in the
ordinary course of business. The purpose for which the letter was prepared indicates a lack of
trustworthiness that renders the letter inadmissible under Rule 803(6). 8 See United States v. Feliz,
467 F.3d 227, 234 (2d Cir. 2006) (quoting another source for the well-established proposition that
“documents made in anticipation of litigation are inadmissible under the business records
exception”); Certain Underwriters at Lloyd’s, London v. Sinkovich, 232 F.3d 200, 205 (4th Cir.
2000) (“The absence of trustworthiness is clear . . . when a report is prepared in the anticipation of
litigation because the document is not for the systematic conduct and operations of the enterprise
but for the primary purpose of litigating.”). The fact that Boeing is not a party to this litigation is,
contrary to ValveTech’s argument, immaterial. See ECF No. 326 at 23. “The primary motive for
preparing the report in the first place is a better indicator of trustworthiness than the form of the
investigation or the identity of the investigator.” Sinkovich, 232 F.3d at 205. Boeing had an
obvious motive to write the claim letter in a manner favorable to its own interests. For that reason,
Boeing’s claim letter cannot be admitted as a business record. Because ValveTech offers no other
path for the letter’s admission, the Boeing claim letter must be deemed inadmissible. 9
ValveTech contends that, regardless of the underlying admissibility of the claim letter,
Blok may still testify regarding the avoided penalties theory pursuant to Rule 703:
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
ValveTech notes that, under 803(6)(E), it is Aerojet’s burden to prove untrustworthiness. The advisory committee
notes are directly responsive to ValveTech’s argument: “The opponent, in meeting its burden, is not necessarily
required to introduce affirmative evidence of untrustworthiness. For example, the opponent might argue that a record
was prepared in anticipation of litigation and is favorable to the preparing party without needing to introduce evidence
on the point.” Fed. R. Ev. 803 advisory committee notes.
8

ValveTech emphasizes that the claim letter can be properly authenticated. See ECF No. 326 at 19-22. But
“[a]uthentication and hearsay are two separate requirements.” Zafer Taahhut Insaat ve Ticaret A.S. v. United States,
833 F.3d 1356, 1365 (Fed. Cir. 2016).
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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.
The Court is not convinced that Blok’s testimony is admissible on this basis. Although Rule 703
“permit[s] experts some leeway with respect to hearsay evidence, a party cannot call an expert
simply as a conduit for introducing hearsay under the guise that the testifying expert used the
hearsay as the basis of his testimony.” Marvel Characters, Inc. v. Kirby, 726 F.3d 119, 136 (2d
Cir. 2013) (internal quotation marks and citation omitted). “Instead, the expert must form his own
opinions by applying his extensive experience and a reliable methodology to the inadmissible
materials. Otherwise, the expert is simply repeating hearsay evidence without applying any
expertise whatsoever, a practice that allows the [proponent] to circumvent the rules prohibiting
hearsay.” United States v. Mejia, 545 F.3d 179, 197 (2d Cir. 2008); see also Williams v. Illinois,
567 US 50, 80 (2012) (“[T]rial courts can screen out experts who would act as conduits for hearsay
by strictly enforcing the requirement that experts display genuine scientific, technical, or other
specialized knowledge that will help the trier of fact understand the evidence or determine a fact
at issue.” (internal quotation marks and brackets omitted)).
As his report and deposition testimony demonstrate, Blok did not meaningfully employ his
independent expertise to formulate or apply his avoided penalty theory. Indeed, it may be
misleading to frame his theory as one related to “penalties” at all. A “penalty” brings to mind a
definite fine or sanction for a violation. If Boeing’s contract expressly allowed it to assess $3.1
million for every month of delay caused by Aerojet, one might reasonably call such an assessment
a “penalty.” Here, however, Boeing did not allege a distinct “penalty” that is proportional to, or
automatically triggered by, Aerojet’s delay; rather, Boeing is seeking to recoup the costs it incurred
for Aerojet’s alleged breach of, and substandard performance under, their contract. See ECF No.
258-1 at 6-18 (discussing relevant terms of contract and alleges breaches thereof); id. at 19-20
8

(describing the “substantial damages” that Boeing incurred “as a direct result of Aerojet’s
breaches,” including costs related to project sequencing, repair and reinstallation costs, shipping
costs, and testing costs) (emphasis and capitalization omitted)). Blok’s theory is not so much about
avoided penalties as it is about avoided contractual liability.
This distinction is important, because it helps to bring into starker relief the deficiencies in
Blok’s opinion. Unlike the application of a discrete monthly “penalty” for nonperformance, an
appraisal of the potential contractual liability that Aerojet faced for another 10-16 months of delay
would seem to require a far more complex, multi-factored assessment. Cf. Rosenboro v. Kim, 994
F.2d 13, 17 (D.C. Cir. 1993) (“Estimating the maximum potential value of unliquidated damage
claims is an inexact science at best.”). Several questions immediately come to mind. What is the
likelihood that Boeing’s claim for additional costs would have been reduced to a liquidated,
enforceable amount, either by judgment or settlement, such that Aerojet would be held formally
liable for Boeing’s costs? 10 How would Aerojet’s potential liability be impacted, if at all, by the
terms of Boeing’s contract with Aerojet, which included a $60 million limitation of liability except
in cases of “gross negligence, intentional misconduct, including intentional breach of contract, or
fraud”? 11 ECF No. 258-1 at 8. How strong are Boeing’s original claims that Aerojet caused at

This is not an insignificant question. Boeing’s claim letter, which it did not submit to Aerojet until October 2020,
encompasses costs and delays that occurred between 2016 through 2019. It has now been pending for three years,
and there is no evidence that Boeing has sought to pursue its claim more formally against Aerojet. Lisa Peterson,
Boeing’s representative, testified at her deposition that Boeing has no timeline as to when the claim will be resolved.
Peterson Dep. at 234. At this point, there is nothing to suggest that Aerojet has sustained, or will sustain, any
contractual liability for the costs identified in Boeing’s claim letter.
10

Given this history, one would presume that any additional delays associated with the OMAC isolation valve in 2017
would likewise have been incorporated into the claim letter and would likewise remain pending and unliquidated.
Blok does not attempt to account for any of these contingencies; he seems to assume, for unexplained reasons, that
Aerojet would have immediately been held liable for the additional delays in 2017. See Blok Dep. at 66, 68.
Instead of undertaking any analysis of the risk that this clause posed to Boeing’s recovery of additional costs, Blok
disregards it. Blok Dep. at 64. Again, he seems to do so solely on the basis that Aerojet would have obtained the
“benefit” of avoided penalties in 2017. Id. at 66. But if, as Boeing’s actual course of conduct suggests, those additional
costs would have been incorporated into the $94.3 million claim, the liability limit presents at least a potential risk to
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least thirty months of delay and $94.3 million in costs to Boeing?12 Even assuming the accuracy
of Boeing’s claim letter, how comparable are those original claims to the potential claim arising
from additional delays solely due to the OMAC isolation valve? 13
Blok does not undertake a meaningful analysis of the variety of considerations that would
bear on the questions of whether, and to what extent, Boeing would have recouped additional costs
against Aerojet had Aerojet further delayed the Starliner program when developing its own OMAC
isolation valve, or how such additional costs should best be calculated in light of these various

be considered in evaluating the potential value of Boeing’s unliquidated claim against Aerojet for further isolationvalve delays. Furthermore, the Court is not convinced by ValveTech’s suggestion that it can prove Aerojet’s
misappropriation, and therefore the inapplicability of the limit, at trial. ECF No. 236 at 19. That runs directly counter
to the basic premise of Blok’s theory, which is a hypothetical world in which Aerojet did not misappropriate
ValveTech’s trade secrets. See ECF No. 192-39 at 42-43.
Blok candidly admits that he undertook no independent analysis of Boeing’s claims. Blok Dep. at 78, 81. He admits
that he did not have access to any internal Boeing documents that disclose how Boeing estimated its damages, so the
claim letter itself was “all [he had] to work with that’s been produced in this case.” Id. at 82. As Lisa Peterson noted
during her deposition, the claim letter only offers a “[t]op-level summary total dollar amount” of Boeing’s claim.
Peterson Dep. at 226. Boeing has not disclosed the “details on the [] claim content” to Aerojet, id. at 225, and she
was unable to furnish specifics as to what costs were attributable to what delays and deficiencies. Id. at 227-29. Thus,
even if the claim letter can be said to be the best evidence of Boeing’s costs, it is far from good evidence. ValveTech’s
understandable frustration with the evidentiary record does not justify relieving it from the Rules of Evidence. Cf.
Cunningham v. Masterwear Corp., 569 F.3d 673, 676 (7th Cir. 2009) (agreeing with plaintiffs that it was “highly
likely” that contamination caused by defendants “would make the market value” of their property fall, but affirming
dismissal of the case where plaintiffs failed to offer admissible evidence of diminished market value).
12

Blok also suggests that he could adopt Boeing’s estimates because Aerojet had not produced any documentation
suggesting that it had disputed Boeing’s estimates. Blok Dep. at 81, 82. The assumption that Aerojet has, in some
respect, conceded liability is contrary to the record evidence. Lisa Peterson testified that Aerojet has neither made
payments, nor agreed to make payments, on Boeing’s claim. Lisa Peterson Dep. at 236-39. To the extent ValveTech
argues that Aerojet’s silence has some sort of estoppel effect or amounts to a binding admission, it fails to marshal
any legal authority to support such an argument. See ECF No. 326 at 17.
Boeing’s $94.3 million claim arises from three years of hardware deficiencies for a variety of critical subassemblies
and components for which Aerojet was responsible. See ECF No. 258-1 at 6-18. Those deficiencies resulted in serious
delays and failed milestones. Blok does not articulate a reasoned basis for assuming that Boeing’s damages for these
overlapping deficiencies and delays, which related to multiple subassemblies and project milestones, would be the
exact same as one month of delay for the OMAC isolation valve alone. As a general matter, development of Boeing’s
Starliner proceeded in phases, with each phase consisting of “many thousands of tasks and sub-tasks.” Id. at 5. A
one-month delay during one phase, or with respect to one component, would not necessarily cause the same exact
impact as a one-month delay during another phase, or with respect to another component. Cf. Fassberg Constr. Co.
v. Housing Auth. of City of Los Angeles, 152 Cal. App. 4th 720, 755 (Ct. App. 2007) (noting that “[t]he effect of []
delays on the cost of performance could depend on many factors”). On its face, Blok’s theory suggests an “apples
and oranges comparison,” which is properly excluded. Boucher v. Suzuki Motor Corp., 73 F.3d 18, 21 (2d Cir. 1996).
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uncertainties. Believing that Boeing’s claim letter was the best information that he had available,
Blok merely assumed the accuracy of Boeing’s claims, reduced those claims into a simple
“penalty” ratio, and multiplied that figure by Timko’s delay estimate. The Court fails to see how
Blok brought his “expertise to bear in any [] way” in constructing this formula or performing this
straightforward arithmetic. Kirby, 726 F.3d at 136.
Of course, it may be that, despite all of the potential considerations in play, Blok’s formula
is a reasonable method to estimate the potential contractual liability Aerojet faced absent its alleged
misappropriation. The problem is not Blok’s theory per se, but the fact that Blok does not provide
a reasoned basis for calculating Aerojet’s avoided contractual liability in the manner that he did,
let alone for disregarding all the relevant considerations that might bear on calculating Aerojet’s
potential liability. That the evidentiary record was insufficient, which made Boeing’s claim letter
the best proxy by default, is not a reliable basis to use the letter to determine Aerojet’s potential
contractual liability for additional delays.
Under the circumstances, the Court is compelled to conclude that Blok’s avoided “penalty”
theory fails to meet the strictures of Rule 702 and 703, and operates as a mere conduit to introduce
Boeing’s inadmissible damages claim. 14 Accordingly, Blok will be precluded from proffering his
avoided “penalty” theory at trial.

Even if Blok’s opinion could pass muster under Rules 702 and 703, it would be a strong candidate for exclusion
under Rule 403. “Expert evidence can be both powerful and quite misleading because of the difficulty in evaluating
it. Because of this risk, the judge in weighing possible prejudice against probative force under Rule 403 of the present
rules exercises more control over experts than over lay witnesses.” Daubert v. Merrell Dow Pharmas. Inc., 509 U.S.
579, 595 (1993) (quoting another source). It would be difficult to imagine how the jury could be expected to assess
the reliability of Boeing’s claim given the paucity of available evidence concerning its content.
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CONCLUSION
For the reasons discussed above, the Court resolves the pending matters as stated herein.
IT IS SO ORDERED.
Dated: November 2, 2023
Rochester, New York

______________________________________
HON. FRANK P. GERACI, JR.
United States District Judge
Western District of New York

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