Lauer, Steven v. NIC Industries, Inc.

Filing 54

OPINION AND ORDER granting in part and denying in part 26 Motion to Strike the Smith Report. Defendant may disclose its rebuttal expert and serve the accompanying report, if any, within thirty (30) days. Consistent with the parties' stipulation (dkt. # 51 ), within seven days, the parties shall advise the court when defendant's summary judgment reply is due. Signed by District Judge William M. Conley on 5/17/18. (jat)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN
STEVEN M. LAUER d/b/a
LAUER CUSTOM WEAPONRY,

v.

Plaintiff & Counter-Defendant

OPINION AND ORDER
17-cv-655-wmc

NIC INDUSTRIES, INC.,
Defendant & Counterclaimant.

Steven Lauer d/b/a Lauer Custom Weaponry and NIC Industries, Inc. are
competitors in the firearm finishing market. 1 Lauer is suing NIC in this lawsuit for false
advertising under the Lanham Act and Wisconsin law. Following a stipulation by the
parties, Lauer’s remaining Lanham Act claims arise out of alleged statements that NIC
made about the Cerakote Elite Series coating, and NIC’s remaining Lanham Act
counterclaim concerns alleged statements by Lauer concerning the post-UV exposure of
the Cerakote Black product. (See dkt. #42 at 1-2.) This opinion will address and grant in
part NIC’s motion to strike the expert report of Brian R. Smith. (Dkt. #26.) 2

While the parties do not explain what “firearm finishes” are, the court generally understands they
are protective coatings designed for and applied to firearms.
1

In its motion, NIC requested that the court strike Smith’s report or prevent him from
supplementing it. (Dkt. #26.) Judge Crocker previously addressed the second half of the motion,
granting the motion to preclude supplementation. (See dkt. #52.) Because the parties agreed to
dismiss with prejudice NIC’s Lanham Act claims arising out of the allegation that Lauer relabels
and repackages Sherwin-Williams products, the court need not address NIC’s request to strike
Lauer’s rebuttal expert report, which can be summarized as promising to “offer expert testimony to
explain why defendant's product is bad and his product is good.” (See dkt. #35; see also dkt. ##36,
40.) Likewise, the court will focus its analysis on the portions of Smith’s expert report relating to
remaining claims.
2

BACKGROUND 3
Lauer and NIC are competitors in the firearm finishing market. Before filing suit,
Lauer sent a cease and desist letter to NIC in May 2017, demanding NIC “immediately
cease and desist making false claims” that overstate the performance characteristics of its
products. (Cease & Desist Letter (dkt. #28-2) 1.) In particular, the letter identified two
representations about the Cerakote Elite Series coating that Lauer claimed “[i]ndependent
testing” had shown to be inaccurate: that it “withstands (i) 8,000 Taber abrasion wear
cycles (ASTM D4060); and (ii) 3,000 hours of corrosion resistance (ASTM B117).” (Id.)
According to Lauer’s letter, independent testing showed that the coating instead
“withstands: (i) 4,000 taber abrasion wear cycles . . .; and (ii) 185 hours of corrosion
resistance.”

(Id.)

When NIC continued to claim its products achieved greater

performance, this suit resulted.
The court’s preliminary pretrial conference order in this case required plaintiff to
disclose its experts on or before February 9, 2018, and for the disclosures to comply with
Rule 26(a)(2). 4 (Prelim. Pretrial Conference Order (dkt. #9) 2.) The order also provided
that supplementation under Rule 26(e) must be: “limited to matters raised in an expert’s
first report”; “in writing”; and “served no later than five calendar days before the expert’s
deposition, or before the general discovery cutoff if no one deposes the expert.” (Id.)

Facts are drawn from defendant’s memorandum supporting its motion to strike or exclude
supplementation of plaintiff’s expert report (dkt. #27), unless otherwise noted.
3

Defendant’s expert disclosures were initially due on March 23, 2018. (Prelim. Pretrial Conference
Order (dkt. #9) 2.) In light of defendant’s pending motion, however, the court stayed that deadline
until the court ruled. (Mar. 23, 2018 Order (dkt. #31).)

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2

Lauer later produced a timely expert report by Brian R. Smith, the vice president of
technology and business development for Assured Testing Services. (Smith Rpt. (dkt. #281) 1.) Assured Testing Services is an independent laboratory that “specializ[es] in the
testing of coatings and their physical properties, corrosion resistance, weathering, and
chemical resistance performance.” (Id.) Smith was retained to and did opine in writing
about the accuracy of four of NIC’s claims concerning the Cerakote H and Cerakote Elite
Series coatings.

OPINION
Rule 26(a)(2)(B) details what must be included in an expert’s written report: “a
complete statement of all opinions . . . and the basis and reasons for them”; “the facts or
data considered”; summary or supporting exhibits; the expert’s qualifications, including
publications from the past decade and prior expert experience in the past four years; and a
compensation disclosure. Fed. R. Civ. P. 26(a)(2)(B). “Rule 26 is designed to avoid
surprise and give the opposing party a full opportunity to evaluate the expert’s
methodology and conclusions and to respond appropriately.” Gicla v. U.S., 572 F.3d 407,
411 (7th Cir. 2009). If violated, exclusion under Rule 37 “is automatic and mandatory
unless the sanctioned party can show that its violation of Rule 26(a) was either justified or
harmless.” Salgado by Salgado v. General Motors Corp., 150 F.3d 735, 742 (7th Cir. 1998)
(citing Finley v. Marathon Oil Co., 75 F.3d 1225, 1230 (7th Cir. 1996)). That said, Salgado
recognizes that “less severe” sanctions are available, such as restricting an expert to testifying to the
incomplete opinions contained in his report. Id. at 741 n.6.

Defendant argues that the Smith Report should be struck under Rule 37 on three
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grounds: (1) it did not attach the exhibits on which Smith purports to rely; (2) the Smith
Report does not support, but rather undermines plaintiff’s claims; and (3) the Smith
Report is a preliminary, not a final, report. Defendant’s first argument requires little
discussion.

(See Pl.’s Opp’n (dkt. #37) at 3.) While this failure is a literal violation of

Rule 26(a)(2)(B), defendant “readily” determined that the report was based on previous
testing, the reports of which plaintiff had already produced in discovery. (See Mot. Strike
Br. (dkt. #27) 3.) Defendant having been prejudiced in no discernable way by this
technical violation, striking the report would obviously be too harsh a sanction.
Next, defendant argues that the Smith Report “undermines” plaintiff’s claims.
More specifically, defendant argues the Smith Report is inadequately or improperly
supported, “predicated upon assumptions and unknowns,” and relies on unreliable prior
testing. (Id. at 9.) Most of these concerns were obviated by the parties’ stipulation to
dismiss certain claims with prejudice. 5 (See Stipulation (dkt. #42) 1.) As to the remaining
claims, Smith opines that:
•

“To [his] knowledge based on the reports reviewed no samples were tested to
8,000 cycles therefore it is not possible to address the claim given the data
available from previous testing.”

•

The earlier testing results are “not directly comparable to results obtained by
Assured or those posted on NIC Industries’ website.”

•

“Based on the Assured Testing Services’ TR 14006A test results . . . where all
samples exhibited some rust at approximately 500 hrs, Product ‘1’ or ‘2’ samples
are not compliant to the 3,000 hr claim of withstanding ASTM B117 Salt Spray
without red rust.”

For instance, defendant’s concerns about Smith’s assumption that the samples remained the same
across earlier testing are not asserted in the two remaining, admissible relevant portions of Smith’s
report.
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4

•

“Regarding the results in the Touchstone Testing Laboratory LLC (TTL) report
20284, . . . the (apparent) Cerakote Elite samples are not compliant with the
3,000 hr claim of withstanding ASTM B117 Salt Spray without red rust.”

•

“Additional testing is being conducted” concerning the two remaining
challenged statements.

(Smith Rpt. (dkt. #28-1) 4-5.)
Nevertheless, defendant argues that Smith’s plan for additional testing, combined
with his criticisms of the prior testing, “impl[ies] that his testing would cure the flaws in
the earlier reports” and that the Smith Report is based on inadmissible hearsay. (Def.’s
Reply (dkt. #40) 6.) Plaintiff responds that defendant’s concerns as to inadmissible
hearsay would only apply “to the extent that Lauer does not call representatives of the
underlying reporting companies as fact witnesses to confirm the validity of what they
reported, thereby confirming the veracity of the reports relied upon by Smith.” (Pl.’s
Opp’n (dkt. #37) 8.) Rule 703 permits an expert to rely on inadmissible evidence “[i]f of
a type reasonably relied upon by experts in the particular field,” and to render appropriate
opinions that may be helpful to the jury. Fed. R. Evid. 703. While Smith obviously cannot
act as a mouthpiece for inadmissible hearsay, he purports to rely on the prior reports in
rendering his opinions in this case. (See Smith Rpt. (dkt. #28-1) 4-5.) Plaintiff represents
that it is his intention to call the testers to testify at trial. (Pl.’s Opp’n (dkt. #37) 8-9.)
Whether or not those who conducted the tests are called to testify about the actual results,
Smith may testify as to the relevance of those tests to the matter in dispute, including that
there is a lack of data for an expert to opine or that there is no comparison.
Expert testimony must satisfy the following three-part test to be admissible:
[1] the witness must be qualified “as an expert by knowledge,
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skill, experience, training or education,” Fed. R. Evid. 702;
[2] the expert’s reasoning or methodology underlying the
testimony must be scientifically reliable, Daubert [v. Merrill
Dow Pharmaceuticals, Inc., 509 U.S. 579, 592-93 (1993)]; and
[3] the testimony must assist the trier of fact to understand the
evidence or to determine a fact in issue. Fed. R. Evid. 702.
Ervin v. Johnson & Johnson, Inc., 492 F.3d 901, 904 (7th Cir. 2007). Here, there is no
argument that Smith is not qualified, by his education, training, experience, or knowledge.
Likewise, there is no argument that the few opinions he offers are unreliable. Finally, his
testimony may assist the jury in understanding the testing performed.
In fairness defendant does object to the “preliminary” nature of the Smith Report
-- itself titled “Interim Report TR21596” -- which advises that “[a]dditional testing is being
conducted,” projecting completion “on or about 30 March 2018” or “on or about 16 July
2018,” and promising supplementation “as appropriate when the testing is complete.”
(Smith Rpt. (dkt. #28-1) 5.) Plaintiff argues that the report’s “indication that additional
testing is ongoing” and the future supplementation are permissible because: (1) the report
“identifies the methodology applicable with that testing, as well as the reasoning for it”;
(2) the “supplementation will be provided a soon as the additional tests are completed”;
and (3) defendant “is not harmed” by this proposed methodology. (Pl.’s Opp’n (dkt. #37)
5, 7.)

The parties’ dispute is pointless since this court has already precluded

supplementation.
Rule 26(a)(2) requires “a complete statement of all opinions.”
26(a)(2) (emphasis added).

Fed. R. Civ. P.

This means that the expert’s report “must include the

substance of the testimony which an expert is expected to give on direct examination” and
cannot “be sketchy, vague or preliminary in nature.” Salgado, 150 F.3d at 741 n.6 (citing
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Fed. R. Civ. P. 26 Advisory Committee’s note). Pointing to future testing -- the results of
which are unknown -- by definition cannot provide “a complete statement of all opinions.”
Further, plaintiff’s proposed supplementation is inappropriate and does not solve this
problem because allowing him to “continue to run tests and generate new test results after
his deadline . . . would force defendant's expert(s) to shoot at a moving target. This is the
sort of uncertainty -- which could also be characterized as sandbagging -- that Rule 26(a)(2)
and this court's preliminary pretrial conference order are designed to prevent.” (Apr. 27,
2018 Order (dkt. #52).)
While plaintiff contends that the remaining tests “are time-intensive” and that
“[s]upplementation will occur well prior to the close of discovery and will not wreak havoc
upon the Court’s schedule” (Pl.’s Opp’n (dkt. #37) 7), he fails to establish justification or
harmlessness for the delay. Plaintiff cannot show justification: he “received all the time he
asked for to conduct testing and report the results (which logically could -- should have -been done before he filed his lawsuit last summer).” (Apr. 27, 2018 Order (dkt. #52).)
As to harmlessness, the court has already precluded plaintiff from supplementing his
expert’s report because permitting him to do so “would force defendant’s expert(s) to shoot
at a moving target.” (See id.) However, striking what remains of the Smith report is
unnecessary. See Salgado, 150 F.3d at 741 at n.6 (recognizing that “less severe” sanctions are
available, such as restricting an expert to testifying to the incomplete opinions contained in his
report). Smith may testify to the limited opinions contained in his report in its current state. He
will not be permitted to testify to other opinions, including any supplemental testing he may have
conducted after his report or the results of those tests.

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ORDER
IT IS ORDERED that:
1) Defendant’s motion to strike the Smith Report (dkt. #26) is GRANTED IN
PART AND DENIED IN PART as set forth above.
2) Defendant may disclose its rebuttal expert and serve the accompanying report,
if any, within thirty (30) days.
3) Consistent with the parties’ stipulation (dkt. #51), within seven days, the
parties shall advise the court when defendant’s summary judgment reply is due.
Entered this 17th day of May, 2018.

BY THE COURT:
/s/
__________________________________
WILLIAM M. CONLEY
District Judge

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