Tech Pharmacy Services, LLC v. Alixa Rx LLC et al
MEMORANDUM OPINION AND ORDER re 184 SEALED MOTION Defendants' Daubert Motion to Exclude Testimony of Plaintiff's Expert Keith R. Ugone on Disgorgement Damages filed by Golden Gate National Senior Care, Fillmore Strategic In vestors, LLC, Fillmore Strategic Management, LLC, Fillmore Capital Partners, LLC, Alixa Rx LLC. Defendants Daubert Motion to Exclude Testimony of Plaintiffs Expert Keith R. Ugone on Disgorgement Damages (Dkt. #184) is DENIED. Signed by Judge Amos L. Mazzant, III on 8/7/17. (cm, )
United States District Court
EASTERN DISTRICT OF TEXAS
TECH PHARMACY SERVICES, LLC
ALIXA RX LLC, GOLDEN GATE
NATIONAL SENIOR CARE LLC d/b/a
GOLDEN LIVINGCENTERS, FILLMORE
CAPITAL PARTNERS, LLC, FILLMORE
STRATEGIC INVESTORS, LLC, and
Civil Action No. 4:15-CV-766
MEMORANDUM OPINION AND ORDER
Pending before the Court is Defendants’ Daubert Motion to Exclude Testimony of
Plaintiff’s Expert Keith R. Ugone on Disgorgement Damages (Dkt. #184). After reviewing the
relevant pleadings, the Court denies Defendants’ motion.
On March 10, 2017, Defendants filed the present motion (Dkt. #184). On March 24,
2017, Tech Pharmacy Services, LLC (“Tech Pharmacy”) filed a response (Dkt. #204). On April
3, 2017, Defendants filed a reply (Dkt. #222). On April 7, 2017, Tech Pharmacy filed a surreply (Dkt. #233).
Federal Rule of Evidence 702 provides for the admission of expert testimony that assists
the trier of fact to understand the evidence or to determine a fact in issue. Fed. R. Evid. 702. In
Daubert v. Merrell Dow Pharmaceuticals, Inc., the Supreme Court instructed courts to function
as gatekeepers, and determine whether expert testimony should be presented to the jury.
509 U.S. 579, 590–93 (1993). Courts act as gatekeepers of expert testimony “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.” Kuhmo Tire Co. v. Carmichael, 526 U.S. 137, 152 (1999).
The party offering the expert’s testimony has the burden to prove that: (1) the expert is
qualified; (2) the testimony is relevant to an issue in the case; and (3) the testimony is reliable.
Daubert, 509 U.S. at 590–91. A proffered expert witness is qualified to testify by virtue of his or
her “knowledge, skill, experience, training, or education.” Fed. R. Evid. 702. Moreover, to be
admissible, expert testimony must be “not only relevant but reliable.” Daubert, 509 U.S. at 589.
“This gate-keeping obligation applies to all types of expert testimony, not just scientific
testimony.” Pipitone v. Biomatrix, Inc., 288 F.3d 239, 244 (5th Cir. 2002) (citing Kuhmo,
526 U.S. at 147).
In deciding whether to admit or exclude expert testimony, the Court should consider
numerous factors. Daubert, 509 U.S. at 594. In Daubert, the Supreme Court offered the
following, non-exclusive list of factors that courts may use when evaluating the reliability of
expert testimony: (1) whether the expert’s theory or technique can be or has been tested; (2)
whether the theory or technique has been subjected to peer review and publication; (3) the
known or potential rate of error of the challenged method; and (4) whether the theory or
technique is generally accepted in the relevant scientific community. Id. at 593–94; Pipitone,
288 F.3d at 244. When evaluating Daubert challenges, courts focus “on [the experts’] principles
and methodology, not on the conclusions that [the experts] generate.” Daubert, 509 U.S. at 595.
The Daubert factors are not “a definitive checklist or test.” Id. at 593. As the Supreme
Court has emphasized, the Daubert framework is “a flexible one.” Id. at 594. The test for
determining reliability can adapt to the particular circumstances underlying the testimony at
issue. Kuhmo, 526 U.S. at 152. Accordingly, the decision to allow or exclude experts from
testifying under Daubert is committed to the sound discretion of the district court. St. Martin v.
Mobil Expl. & Producing U.S., Inc., 224 F.3d 402, 405 (5th Cir. 2000) (citations omitted).
Defendants move to exclude the testimony of Dr. Keith R. Ugone, Tech Pharmacy’s
expert on disgorgement damages. Defendants argue Dr. Ugone’s opinion is not based on a
legally correct measure of damages for Tech Pharmacy’s claims 1 and thus is unreliable,
irrelevant, and confusing to the jury.
Dr. Ugone opines that Defendants were “unjustly enriched” by their $100 million
investment in Alixa Rx, LLC (“Alixa”) (Dkt. #184, Exhibit 1 at ¶ 178). He determined that
Defendants’ $100 million investment is subject to disgorgement because the investment was a
financial benefit traceable to Defendants’ alleged wrongful conduct (i.e., misappropriation of
trade secrets) (Dkt. #184, Exhibit 1 at ¶ 185). Defendants disagree with Dr. Ugone’s opinion.
Defendants contend that their $100 million investment was neither derived from any wrongful
conduct or nor caused by any wrongful conduct from Alixa. Instead, Defendants argue “[t]he
investment of working capital in Alixa was made using funds provided by the Fillmore
Defendants, investors who did not obtain that money from any activity in any way connected to
the conduct at issue in this case” (Dkt. #222 at p. 4). Defendants further argue that Alixa could
not have committed any wrongdoing because it did not exist at the time of the alleged trade
secret misappropriation (Dkt. #222 at p. 4).
The Court finds that Dr. Ugone may testify on disgorgement damages based on the
standard set forth in Federal Rule of Evidence 702 and Daubert. Dr. Ugone meets each of the
Dr. Ugone does not advance that Tech Pharmacy may recover disgorgement for its fraud and breach of contract
claims (Dkt. #184, Exhibit 1 at ¶ 185). As such, Defendants’ arguments regarding disgorgement and Tech
Pharmacy’s fraud and breach of contract claims do not apply.
requirements to testify as an expert witness: (1) he is qualified to testify competently regarding
disgorgement damages for Tech Pharmacy’s trade secret misappropriation claim; (2) the
methodology used to reach his conclusions is reliable under Daubert; and (3) his testimony
assists the jury to understand the evidence or to determine a fact in issue.
Defendants’ disagreements with Dr. Ugone’s conclusion go to the weight of his
testimony and not its admissibility. The Court considers vigorous cross-examination and the
presentation of contrary evidence as appropriate vehicles to challenge Dr. Ugone’s testimony.
Accordingly, it is therefore ORDERED that Defendants’ Daubert Motion to Exclude
Testimony of Plaintiff’s Expert Keith R. Ugone on Disgorgement Damages (Dkt. #184) is
SIGNED this 7th day of August, 2017.
AMOS L. MAZZANT
UNITED STATES DISTRICT JUDGE
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