DE LAGE LANDEN OPERATIONAL SERVICES, LLC v. THIRD PILLAR SYSTEMS, INC.
MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE HARVEY BARTLE, III ON 2/2/2012. 2/2/2012 ENTERED AND COPIES E-MAILED.(sg, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
DE LAGE LANDEN OPERATIONAL
THIRD PILLAR SYSTEMS, INC.
February 2, 2012
Plaintiff De Lage Landen Operational Services, LLC
("DLL") has sued defendant Third Pillar Systems, Inc. ("Third
Pillar") for breach of contract and violation of the California
Uniform Trade Secrets Act ("CUTSA"), Cal. Civ. Code § 3426 et
Before the court is DLL's motion in limine to introduce in
its case in chief the deposition testimony of Third Pillar's
expert James Woods in support of unjust enrichment damages and/or
to introduce evidence of a reasonable royalty for Third Pillar's
misappropriation of DLL's trade secrets.
As part of its
response, Third Pillar has also filed a renewed motion for
summary judgment based on the ground that DLL cannot establish
damages on any theory and consequently there is nothing more to
1. Other claims were dismissed by orders dated August 26, 2009
and March 5, 2010.
DLL's claims stem from a series of agreements in which
DLL engaged Third Pillar to develop and customize a software
platform, known as the "Beacon" project, for use in DLL's vendor
finance lending and leasing business.
After a three-day
permanent injunction hearing,2 the court found that under DLL's
contracts with Third Pillar DLL owned twelve "use cases," which
are detailed step-by-step models of DLL's trade secret business
practices that were created in the course of the Beacon project.
The court further found that Third Pillar had misappropriated
DLL's trade secrets in the twelve use cases that DLL owned, and
in doing so, breached its contracts with DLL.
Finally, the court
concluded that "mere pecuniary compensation would not afford
adequate relief" and issued a permanent injunction requiring that
Third Pillar "return and/or destroy ... all copies ... of the
foregoing twelve Beacon Use Cases."3
De Lage Landen Operational
Servs., LLC v. Third Pillar Sys., 693 F. Supp. 2d 423, 441-42
(E.D. Pa. 2010).
The remainder of the case was scheduled for trial on
May 11, 2011.
However, the trial was postponed because the
parties revived settlement discussions and negotiated for several
2. The parties had agreed to forego a hearing on a motion for a
preliminary injunction and to proceed to a hearing for a
3. DLL also moved for contempt sanctions against Third Pillar
for allegedly violating this permanent injunction. After a
hearing on the matter, the court found that Third Pillar had
violated the permanent injunction and imposed sanctions. De Lage
Landen Operational Servs., LLC v. Third Pillar Sys., 2011 U.S.
Dist. LEXIS 7634 (E.D. Pa. Jan. 26, 2011).
months under the court's supervision.
When the parties failed to
reach a settlement, the court entered a Fifth Scheduling Order,
calling for plaintiff's motions in limine to be served on or
before December 22, 2011 and defendant's motions in limine to be
served on or before January 9, 2012.
Under CUTSA, three kinds of damages are available.
Cal. Civ. Code § 3426.3.
This section of the CUTSA provides in
(a) A complainant may recover damages for the
actual loss caused by misappropriation. A
complainant also may recover for the unjust
enrichment caused by misappropriation that is
not taken into account in computing damages
for actual loss.
(b) If neither damages nor unjust enrichment
caused by misappropriation are provable, the
court may order payment of a reasonable
royalty for no longer than the period of time
the use could have been prohibited.
Accordingly, depending on the circumstances of the
case, a plaintiff may recover damages for actual loss, unjust
enrichment, or a reasonable royalty.
Reasonable royalty damages,
however, are only available if both actual loss and unjust
enrichment are unprovable.
See Cal. Civ. Code § 3426.3; Ajaxo,
Inc. v. E*Trade Fin. Corp., 115 Cal. Rptr. 3d 168, 179 (Cal. Ct.
DLL and Third Pillar have agreed that damages in the
form of actual losses cannot be proven.
DLL's expert Barry
Sussman opined in his report that there was insufficient evidence
to prove unjust enrichment damages and then proceeded to
calculate a reasonable royalty to be paid to DLL.
Third Pillar's expert James Woods set forth in his report in
response that DLL's unjust enrichment damages were calculable and
Accordingly, based on this part of Woods' report, DLL
would have no basis to obtain a reasonable royalty.
each expert was deposed.
In an Order dated May 9, 2011, the court granted the
motion of Third Pillar in limine to exclude the testimony of
Sussman regarding a reasonable royalty.
The court explained that
Sussman's opinion was unreliable because it lacked a "factual
foundation in the record" for the point in time when Third
Pillar's misappropriation of DLL's trade secret information
See De Lage Landen Operational Servs., LLC v. Third
Pillar Sys., LLC, 2011 U.S. Dist. LEXIS 49438 (E.D. Pa. May 9,
With no expert testimony on the issue of a reasonable
royalty, DLL has now moved to introduce the deposition testimony
of Woods, Third Pillar's expert, to prove unjust enrichment
The weight of authority favors allowing DLL to
introduce the opinion testimony of Third Pillar's expert.
e.g., Peterson v. Willie, 81 F.3d 1033 (11th Cir. 1996); Penn
Nat'l Ins. Co. v. HNI Corp., 245 F.R.D. 190 (M.D. Pa. 2007);
House v. Combined Ins. Co. of Am., 168 F.R.D. 236 (N.D. Iowa
Rule 26(b)(4)(A) of the Federal Rules of Civil Procedure
provides that "[a] party may depose any person who has been
identified as an expert whose opinions may be presented at
See Fed. R. Civ. P. 26(b)(4)(A); 245 F.R.D. at 193.
Under this Rule, DLL deposed Woods months ago.
Clearly, a party
may introduce the deposition testimony of its expert at trial
should the expert become unavailable and such testimony may be
used for impeachment purposes.
See Penn Nat'l Ins., 245 F.R.D.
The Penn National court reasoned persuasively that
because an expert's deposition would already be admissible at
trial in these circumstances, there is no reason not to allow a
party to call the opposing party's expert witnesses to testify at
Id. at 194-95.
We also agree with the analysis of other courts that
either party may introduce the deposition of an opposing party's
expert if the expert is identified as someone who may testify at
trial because "those opinions do not belong to one party or
another but rather are available for all parties to use at
See, e.g., Olsen v. Delcore, No. 2:07-CV-334 TS, 2009
U.S. Dist. LEXIS 88263 at *2-3 (D. Utah 2009) (citations
Allowing one party to use the testimony of the
opponent's expert witness causes no "undue prejudice"
particularly when timely notice of the intention to call the
expert has been given.
See Penn Nat'l Ins., 245 F.R.D. at 194.
Here, DLL listed Woods in its pre-trial memorandum on April 21,
2011 when it identified witnesses from whom it "reserve[d] the
right to present direct or rebuttal testimony ... either live or
via videotaped deposition testimony or transcript from
depositions or hearings."
DLL had named Woods before this court
excluded the testimony of Sussman on May 9, 2011.
any of Woods' testimony which is presented at trial will
necessarily be limited to his deposition, to which both Third
Pillar and DLL have had access for months.
Third Pillar contends that DLL should be barred from
using Woods' testimony because judicial estoppel prevents parties
from changing their positions in legal proceedings.
Court has found that judicial estoppel should generally only be
invoked where three factors are present:
First, a party's later position must be
clearly inconsistent with its earlier
position ... Second, courts regularly inquire
whether the party has succeeded in persuading
a court to accept that party's earlier
position, so that judicial acceptance of an
inconsistent position in a later proceeding
would create the perception that either the
first or the second court was misled ... A
third consideration is whether the party
seeking to assert an inconsistent position
would derive an unfair advantage or impose an
unfair detriment on the opposing party if not
New Hampshire v. Maine, 532 U.S. 742, 750-751 (U.S. 2001)
(internal citations omitted).
Although DLL's current effort to
put on evidence of unjust enrichment may be inconsistent with its
earlier position that it was entitled to a reasonable royalty
since unjust enrichment was not provable, this court has never
accepted this earlier position.
Further, DLL will not derive an
unfair advantage if it is allowed to use Woods' expert testimony
since both parties have had access to this testimony and both
parties named Woods in their witness lists.
Thus, DLL is not
precluded from introducing evidence of unjust enrichment because
of judicial estoppel.
Third Pillar has suggested that Woods' testimony does
not meet the requirements of Daubert v. Merrell Dow
Pharmaceutical, 509 U.S. 579 (1993).
However, Third Pillar filed
no motion in limine to exclude Woods' testimony based on Daubert
by the deadline set by the Fifth Scheduling Order.
Third Pillar's minimalist Daubert argument is not convincing.
merely states that Woods does not meet the Daubert standard
because Third Pillar intended to offer his testimony to rebut
Sussman's opinion testimony that unjust enrichment damages are
not provable4 and not as an affirmative damages opinion.
Pillar does not explain why Woods and his testimony would not
conform to the three requirements of Rule 702 of the Federal
Rules of Evidence that our Court of Appeals has repeatedly noted:
qualification, reliability, and fit.
Pineda v. Ford Motor Co.,
520 F.3d 237, 244 (3d Cir. 2008).
Accordingly, DLL may introduce evidence of unjust
enrichment damages through the expert testimony of Woods.5
DLL, in the alternative, seeks to obtain payment of a
It may not do so because under CUTSA, a
Presumably DLL will not seek to call Sussman on this point.
5. We recognize the unfair prejudice to Third Pillar if DLL
reveals to the jury that Woods was hired to be Third Pillar's
expert. See House v. Combined Ins. Co. of Am., 168 F.R.D. 236,
248 (N.D. Iowa 1996). Thus, evidence of how Woods became
involved in the case will be excluded.
party is not entitled to a reasonable royalty where, as here,
unjust enrichment damages are provable.
See Cal. Civ. Code
§ 3426.3; Ajaxo, Inc. v. E*Trade Fin. Corp., 115 Cal. Rptr. 3d
168, 179 (Cal. Ct. App. 2010).
Finally, the renewed motion of Third Pillar for summary
judgment will be denied.
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