Viamedia, Inc. v. Comcast Corporation et al

Northern District of Illinois, ilnd-1:2016-cv-05486

ORDER Signed by the Honorable Amy J. St. Eve on 3/27/2018: The Court grants in large part Comcast's motion to strike certain untimely opinions of Dr. Lys {{216}}. [For further details, see Order.]Mailed notice

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Case: 1:16-cv-05486 Document #: 283 Filed: 03/27/18 Page 1 of 6 PageID #:11184 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION VIAMEDIA, INC.,)) Plaintiff,) Case No. 1:16-cv-05486) v.) Hon. Amy J. St. Eve) COMCAST CORPORATION and) COMCAST SPOTLIGHT, LP,)) Defendants.) ORDER Defendants Comcast Corporation and Comcast Spotlight, LP (together, "Comcast") filed a motion to strike as untimely the Supplemental Expert Report of Thomas Z. Lys, Ph.D. ("Report"), served on January 18, 2018. (R. 216.) For the following reasons, the Court grants Comcast's motion in large part.1 BACKGROUND2 On April 25, 2017, the Court ordered the parties to serve expert disclosures by October 16, 2017, and rebuttal expert disclosures by November 30, 2017. The Court further ordered expert discovery to close on January 5, 2018. (R. 98.) Pursuant to that plan, on October 16, 2017, Viamedia, Inc. served the Expert Report of Thomas Z. Lys, Ph.D., its damages expert (R. 221-5), and Comcast served the Report of Dennis W. Carlton, its liability expert (R. 221-10). Dr. Lys, in his initial report on damages, offered his analysis of what profits Viamedia would have made in the but-for world, where Comcast did not commit allegedly anticompetitive conduct. He did so, in part, by calculating the value Viamedia lost from certain contracts over certain periods and applying a particular revenue-sharing assumption—that is, the agreed-to split between MVPDs and their Spot Cable Ad Reps for advertising revenue—which management had informed Dr. Lys was a "line-in-the-sand figure that represents maximum revenue percentage given to a partner that still enables Viamedia to make a profit." Dr. Lys's damages theory also incorporated an analysis of Viamedia's weighted average cost of capital ("WACC"). On November 30, 2017, Comcast served the Rebuttal Report of Dr. Mark A. Israel, responding to Dr. Lys's first report. (R. 221-13.) Among other points, Dr. Israel criticized Dr. 1 The Court will address Comcast's motion to exclude the remainder of Dr. Lys's opinions (R. 212) after his forthcoming Daubert hearing. 2 The Court assumes familiarity with this litigation. Case: 1:16-cv-05486 Document #: 283 Filed: 03/27/18 Page 2 of 6 PageID #:11185 Lys's estimated WACC as inconsistent with contemporaneous estimates. He also asserted that Dr. Lys's report did not account for the fact that the revenue-sharing rate it effectively applied was lower, and less favorable to MVPDs, than what Comcast generally offered and could have offered. As a result, according to Dr. Israel, there was no economic reason to think that Viamedia would have won the contracts Dr. Lys's damages analysis claimed. Also on November 30, 2017, Comcast served a rebuttal report from Professor Carlton, responding to Viamedia's liability expert, Dr. Harold Furchtgott-Roth. (R. 221-11.) That report similarly cited Dr. Lys's revenue-sharing rate as supposed evidence that Viamedia was an inefficient competitor. Dr. Lys later revised his initial report to recalculate ultimate damages numbers, but he did not address those criticisms. On January 2, 2018, Comcast served Dr. Lys's Amended Report. (R. 221-6.) Comcast deposed Dr. Lys on January 3, 2018. During his deposition, Dr. Lys testified that criticisms about the revenue-sharing rate he applied were unfounded because they did not, among other things, account for the fact that MVPDs may have chosen to work with Viamedia despite less favorable terms (for example, because Comcast was an MVPD competitor or because Viamedia enjoyed incumbency) and that the revenue-sharing number his initial report sometimes applied was not, necessarily, the number at which Viamedia would lose profit (as evidenced by the fact that applying it resulted in positive damages). He also responded to Dr. Israel's criticisms of his WACC estimates. On January 5, 2018—the last day of discovery—Comcast served a supplemental report from Professor Carlton. In part, Professor Carlton's supplemental report calculated additional revenue-sharing figures for Comcast Spotlight. On January 10, 2018, the parties appeared before the Court. The Court noted that expert discovery had closed. Counsel for Viamedia responded, "there are some sort of loose ends, but for the most part, we do agree that the expert discovery is behind us." (See R. 220-5 at 4.) On January 18, 2018, however, Viamedia served the Report. LEGAL STANDARD Federal Rule of Civil Procedure 26 governs expert discovery. Under Rule 26(a)(2), a party must disclose by the court-ordered time a written report of a retained expert that includes "a complete statement of all opinions the witness will express and the basis and reasons for them." Fed. R. Civ. P. 26(a)(2)(B)(i), (D). Rule 26(a)(2) further requires that parties disclose rebuttal reports—that is, "evidence [that] is intended solely to contradict or rebut evidence on the same subject matter identified by another" expert—by the court-ordered time, or if no such time is set, 30 days after the other expert's disclosure. Fed. R. Civ. P. 26(a)(2)(D)(ii). Apart from initial expert reports and rebuttal expert reports, Rule 26 also contemplates supplemental expert filings. Rule 26(e) requires that, if an expert "learns that in some material respect the disclosure. . . is incomplete or incorrect, and if the additional or corrective information has not otherwise been made known to the other parties during discovery," he must supplement his disclosure by the time pretrial disclosures are due. Fed. R. Civ. P. 26(e)(1)(A), (2). Federal Rule of Civil Procedure 37 governs the consequences of failures to comply with Rule 26. Under Rule 37(c), a party "is not allowed to use" an untimely disclosure "unless the failure was substantially justified or is harmless." Fed. R. Civ. P. 37(c)(1). The party seeking to 2 Case: 1:16-cv-05486 Document #: 283 Filed: 03/27/18 Page 3 of 6 PageID #:11186 excuse its delay bears the burden of showing justification and harmlessness. See, e.g., S.E.C. v. Nutmeg Grp., LLC, No. 09 C 1775, 2017 WL 4925503, at *1 (N.D. Ill. Oct. 31, 2017). In deciding whether a party's failure was justified or harmless, courts "consider and weigh the following factors: (1) the prejudice or surprise to the party against whom the evidence is offered; (2) the ability of that party to cure the prejudice; (3) the likelihood of disruption to the trial; and (4) the bad faith or willfulness involved in not disclosing the evidence at an earlier date." Karum Holdings LLC v. Lowe's Cos., Inc., No. 15 C 380, 2017 WL 5593318, at *3 (N.D. Ill. Nov. 21, 2017) (citing David v. Caterpillar, Inc., 324 F.3d 851, 857 (7th Cir. 2003)). But ultimately, "[t]he determination of whether a Rule 26(a) violation is justified or harmless is entrusted to the broad discretion of the district court," King v. Ford Motor Co., 872 F.3d 833, 838 (7th Cir. 2017), and it "need not make explicit findings concerning the existence of a substantial justification or the harmlessness of a failure to disclose," Caterpillar, 324 F.3d at 857. Even if a late disclosure is not justified or harmless, Rule 37(c) empowers courts to order alternative sanctions or remedies for a party's failure to comply with Rule 26. Id.; Dura Auto. Sys. of Indiana, Inc. v. CTS Corp., 285 F.3d 609, 616 (7th Cir. 2002) (in certain circumstances, "a judge's failure to impose a lighter sanction might be an abuse of discretion even if the party could not show that missing the deadline was justified or harmless."). That decision, too, is left to the district court's "broad discretion." See Dynegy Mktg. & Trade v. Multiut Corp., 648 F.3d 506, 514 (7th Cir. 2011) ("Whether a failure to comply with Rule 26(a) or (e) is substantially justified, harmless, or warrants sanctions is left to the broad discretion of the district court."); see also Ball v. City of Chicago, 2 F.3d 752 (7th Cir. 1993)) (Rule 37 "gives the judge discretion to match a remedy to the wrong"). ANALYSIS Comcast has moved to strike the entirety of the Report. The Court considers first whether the Report's opinions are timely, and second, whether any delay is substantially justified or harmless. I. The Report is Untimely Dr. Lys's Report proffers two categories of opinions—those asserting that Professor Carlton's supplemental disclosure "confirms" his but-for world damages analysis, and those asserting that Dr. Israel's criticisms of his WACC calculation are "unfounded and fundamentally flawed." The timeliness of both categories turns on the same question: Are the opinions offered "supplemental" (in which they case they are timely) or are they new or rebuttal (in which case they are not)? A. The But-For World Opinions Are Not Supplemental Dr. Lys offers three opinions in support of his ultimate conclusion that Professor Carlton's supplemental report "confirms that economic evidence of the 'but-for' world supports [Dr. Lys's] damages analysis." (R 221-8 at 1.) He submits: first, that Professor Carlton's revenue-sharing opinions indicate that Viamedia claimed a "premium" over Comcast Spotlight; second, that such a "premium" refutes Dr. Israel's damages-related opinion that Viamedia could not compete based on its less favorable financial terms; and third, that Viamedia's "breakeven" 3 Case: 1:16-cv-05486 Document #: 283 Filed: 03/27/18 Page 4 of 6 PageID #:11187 revenue-sharing percentage for certain accounts was actually higher than the number upon which he relied in his first report, further supporting his belief that Viamedia could have competed for MVPD contracts in the but-for world. None of those opinions are supplemental within the meaning of Rule 26(e). See Callpod, Inc. v. GN Netcom, Inc., 703 F. Supp. 2d 815, 823 (N.D. Ill. 2010) ("Supplemental expert reports are permitted if they are based upon information discovered after the initial disclosure or upon the realization that the original disclosure was incorrect or incomplete."). Instead, they aim to "contradict, impeach or defuse the impact of" Professor Carlton's and Dr. Israel's opinions. See Peals v. Terre Haute Police Dep't, 535 F.3d 621, 630 (7th Cir. 2008); see also Butler v. Sears Roebuck & Co., No. 06–7023, 2010 WL 2697601, at *1, (N.D. Ill. July 7, 2010). The "premium" opinion, for example, is a new attempt to undermine Professor Carlton's supplemental opinion on revenue sharing. The only remotely new information or data Dr. Lys received was Professor Carlton's revised revenue-sharing numbers. But those are expert opinions. Notwithstanding Viamedia's matter-of-fact assertions about being "entitled to respond" (R. 241 at 8), supplemental opinions do not automatically render an opposing expert's opinions incomplete and justify corresponding supplementation under Rule 26(e). Accord Sloan Valve Co. v. Zurn Indus., Inc., No. 10 C 204, 2013 WL 3147349, at *4 (N.D. Ill. June 19, 2013) ("Because the other arguments in Bero's Reply Report are responsive to Mr. Hofmann's rebuttal report as noted above, Zurn does not have the right to supplement Mr. Hofmann's report to address them"). Were the law otherwise, expert discovery would last ad infinitum. Similarly, the latter two opinions, refuting Dr. Israel and computing new "breakeven" rates, look to discredit Dr. Israel by new means. Dr. Lys leverages the "premium" Professor Carlton's supplemental opinions purportedly revealed, with other considerations like "superior value, experience goods, and switching costs," to highlight supposed gaps in Dr. Israel's conclusions about Viamedia's ability to compete. Dr. Lys, again, did not rely on any new or corrective data in forming those opinions. As to the breakeven rates, they are offered to rebut Professor Carlton's and Dr. Israel's criticisms of Dr. Lys's revenue-sharing assumptions. If Dr. Lys needed those breakeven calculations to support his own opinions, there was no reason for him not to include them in his initial report. Viamedia's arguments miss the mark. It argues, for example, that the Report was timely "because it was served promptly after the service of Dr. Carlton's untimely supplemental report." (R. 241 at 7.) But the question is not how soon after Dr. Carlton's supplemental report Viamedia served the Report; Viamedia had no right to serve expert discovery outside of the expert cutoff (especially without leave of the Court) unless it was a supplemental disclosure under Rule 26. Viamedia argues further that the Report was "wholly proper" because Rule 26(e) "contemplates supplementation. . . upon revelation of new information." (R. 241 at 8.) As already explained, however, a supplemental expert report does not necessarily constitute "new information" justifying a response. That is especially true here, where the opposing expert (Dr. Lys) was never offered as a rebuttal expert and his opinions respond on a topic that his initial report did not address (causation). (See R. 243 at 1 ("Once Comcast opened the door to an economic debate about causation, Professor Lys was entitled to respond").) The cases Viamedia cites, moreover, provide no support to its timeliness arguments. In re Fluidmaster, Inc., Water 4 Case: 1:16-cv-05486 Document #: 283 Filed: 03/27/18 Page 5 of 6 PageID #:11188 Connector Components Prod. Liab. Litig., No. 14-CV-5696, 2017 WL 1196990, at *16 (N.D. Ill. Mar. 31, 2017), pertains to only the permissibility of clarifying reports submitted during Daubert briefing, and Callpod, 703 F. Supp. 2d at 824, actually held that a report issued after discovery's close was untimely (but permitted it in part as justified and harmless). What is more, Viamedia concedes that "Professor Lys was not fixing his own mistakes," see Fed. R. Civ. P. 26(e) (supplemental disclosures are appropriate where an opinion is "incomplete or incorrect"), but rather, "responding to Dr. Carlton's belated analysis," see Fed. R. Civ. P. 26(a)(2)(D)(ii) (rebuttal disclosures are appropriate to "contradict or rebut" another's opinions); (R. 241 at 9). It elsewhere admits that the Report is a "proper rebuttal." (R. 241 at 13.) Accordingly, the Report's opinions focused on the but-for world are not supplemental and are thus untimely. B. The Responses to Dr. Israel's Criticisms Are Not Supplemental The Report also opines on Dr. Israel's previous criticisms of Dr. Lys's WACC calculations. Specifically, Dr. Lys asserts that he based his initial report's WACC calculations on solid, scientific approaches, and that Dr. Israel's reliance on the Lake Capital discount rate despite its "shortcomings" was "irresponsible." Again, those opinions are not supplemental under Rule 26(e). On their face and in substance, they are responses to Dr. Israel's November 30, 2017 rebuttal opinions. Dr. Lys, again, identifies no new data or corrective information in making these responses. Indeed, here too, Viamedia essentially admits that the opinions are not supplemental under Rule 26(e): "because he was serving a supplemental report anyway," Viamedia reasons, "Professor Lys chose to include certain opinions he had already offered at his deposition in response to other criticisms that Comcast's experts" had made against him. (R. 241 at 1.) Viamedia provides no law or reasoning supporting the notion that "formalizing" deposition testimony constitutes a "supplemental" disclosure under Rule 26(e). If Viamedia wanted Dr. Lys to respond in writing to Dr. Israel's criticisms, it had, at latest, until the close of expert discovery to do so. The Report's responses to Dr. Israel's WACC criticisms are therefore also untimely. II. The Report's Delay Is Neither Substantially Justified Nor Harmless Viamedia submits that even if the Report was untimely, the Court should excuse its delay as justified and harmless under Rule 37. It lays blame for the delay on Comcast, which served Professor Carlton's supplemental report on the last day of discovery, and argues that Comcast incurred no prejudice because the Report merely formalized deposition testimony. It also asserts that the delay will not disrupt trial, as no trial date has yet been set, and that it "plainly acted in good faith" in serving the Report. The Court disagrees. The Report offers new opinions, including by calculating—for the first time, but based on old data—breakeven rates and compensating differences. Viamedia's description of those opinions as "modest[ ] elaborat[ions]" of already-disclosed views is a stretch. Despite previously testifying on those topics generally, Dr. Lys never made those opinions viable with data, math, and reasoning. Comcast, moreover, has no way to respond to those new opinions, with expert discovery closed. Even if the Court reopened discovery to permit a response, summary- judgment briefing has already begun and Comcast would have to incur the costs of having both 5 Case: 1:16-cv-05486 Document #: 283 Filed: 03/27/18 Page 6 of 6 PageID #:11189 Dr. Carltton and Dr. LysL analyze and respond d to the Repoort. See Mussser v. Gentiiva Health Servs., 3556 F.3d 751,, 759 (7th Ciir. 2004) ("itt is not an abbuse of discrretion to connclude that thhe additionaal costs to [aa party] of prreparing a neew summaryy judgment m motion and fu further delayy in extending g the trial daate are not haarmless"). Viamedia's V bblaming of C Comcast ringgs hollow. M Most of the Reeport respond ds not to neww opinions from f Professsor Carlton'ss supplementtal report, buut to long-knoown criticism ms from Proffessor Carlto on and, as is more often tthe case, Dr.. Israel. Viamedia V is correct c that no n trial date has been sett in this casee. Summary--judgment briefing, however, haas already started. Cf. Centagon, C Incc. v. Bd. of D Dirs. of 12122 Lake Shoree Drive Co onsominium Ass'n, A No. 00 0 C 1110, 2002 2 WL 3566483, at *4 ((N.D. Ill. Maar. 5, 2002) ("The fun ndamental purpose of Ru ule 37 is to ensure e that thhe merits off the case cann be addressed at trial (o or on summaary judgmentt), without any party sufffering prejuddice"). Delaaying summary y-judgment briefing b in a case of this size will cerrtainly resultt in a significant delay oof this case's resolution. Th he Court alsoo need not ch haracterize VViamedia's ffaith in serviing the Repoort to find that its delay waas neither jusstified nor haarmless. Viaamedia had oopportunity and reason tto submit most m of the Report's R opin nions well beefore expert discovery cllosed. Evenn as to those opinions that respond d directly to Professor Carlton's C suppplemental reeport, Viameedia sought tto enter whaat it now callls a "proper rebuttal" un nder the guisse of a suppllemental repoort and did sso without leave l from thhe Court. Fiinally, as to alternative rremedies, Viiamedia asseerts that "anyy prejudicee can be read dily cured," but b it identiffies no such cures. The C Court, likewwise, sees nonne that are appropriate a here. h Fairness would req quire that anny such remeedy include tthe resetting of summary y-judgment briefing, b whiich would reesult in signiificant burdeens and delayy. The T Court theerefore strikees the Reporrt as untimelly and not juustified or haarmless. Thee Court does not, howeever, bar Dr.. Lys from offering opinnions on sum mmary judgm ment or at triaal that he acctually offerred in his inittial and ameended report or in his depposition. Dooing so—barrring timely annd properly disclosed d opinions simplly because aan expert lateer also put reelated opinioons in an untimely report— —would be peerverse. Thee Court will address wheether to excluude otherwisse those opiinions in decciding Comccast's Daubeert motion too bar the entiirety of Dr. L Lys's opinioons. CON NCLUSION N For the forego oing reasonss, the Court grants g in largge part Com mcast's motioon to strike. Dated: March M 27, 2018 ENTERED D _________________________________ AMY J. STT. EVE United Stattes District Court Judgge 6