Viamedia, Inc. v. Comcast Corporation et al

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

REDACTED TRANSCRIPT OF PROCEEDINGS held on 4/4/18 before the Honorable Amy J. St. Eve. Court Reporter Contact Information: Joseph Rickhoff, 312-435-5562, joseph_rickhoff@ilnd.uscourts.gov. <P>IMPORTANT: The transcript may be viewed at the court's public terminal or purchased through the Court Reporter/Transcriber before the deadline for Release of Transcript Restriction. After that date it may be obtained through the Court Reporter/Transcriber or PACER. For further information on the redaction process, see the Court's web site at www.ilnd.uscourts.gov under Quick Links select Policy Regarding the Availability of Transcripts of Court Proceedings.</P> Redaction Request due 8/22/2018. Redacted Transcript Deadline set for 9/4/2018. Release of Transcript Restriction set for 10/30/2018.

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Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 1 of 171 PageID #:17212 1 1 IN THE UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS 2 EASTERN DIVISION 3 VIAMEDIA, INC.,) Docket No. 16 C 5486 4) Plaintiff,) 5) vs.) 6) COMCAST CORPORATION AND) 7 COMCAST SPOTLIGHT, INC.,) Chicago, Illinois) April 4, 2018 8 Defendants.) 1:30 o'clock p.m. 9 TRANSCRIPT OF PROCEEDINGS - MOTION & DAUBERT HEARING 10 BEFORE THE HONORABLE AMY J. ST. EVE 11 APPEARANCES: 12 13 For the Plaintiff: KELLOGG, HANSEN, TODD, FIGEL & FREDERICK, PLLC 14 BY: MR. MR. DEREK T. HO MR. COLLIN R. WHITE 15 MR. JAMES M. WEBSTER, III 1615 M Street, NW, Suite 400 16 Washington, D.C. 20036 17 RICHARD J. PRENDERGAST, LTD. BY: MR. RICHARD J. PRENDERGAST 18 111 W. Washington St., Suite 1100 Chicago, Illinois 60602 19 20 For the Defendants: DAVIS, POLK & WARDWELL BY: MR. ARTHUR BURKE 21 MR. DAVID B. TOSCANO 450 Lexington Street 22 New York, New York 10017 23 JENNER & BLOCK, LLP BY: MS. SALLY K. SEARS CODER 24 MR. DANIEL T. FENSKE 353 North Clark Street 25 Chicago, Illinois 60654 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 2 of 171 PageID #:17212 2 1 APPEARANCES (Cont'd): 2 For Charter Comm.: HOLLAND & HART, LLP 3 BY: MR. JAMES HARTLEY 1800 Broadway, Suite 300 4 Boulder, Colorado 80302 5 THOMPSON COBURN, LLP BY: MR. PATRICK MORALES-DOYLE 6 55 East Monroe Street, 37th Floor Chicago, IL 60603 7 8 Court Reporter: MR. JOSEPH RICKHOFF Official Court Reporter 9 219 S. Dearborn St., Suite 1232 Chicago, Illinois 60604 10 (312) 435-5562 11 * * * * * * * * * * * * * * * * * * 12 PROCEEDINGS RECORDED BY MECHANICAL STENOGRAPHY 13 TRANSCRIPT PRODUCED BY COMPUTER 14 15 16 17 18 19 20 21 22 23 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 3 of 171 PageID #:17212 3 1 THE CLERK: 16 C 5486, Viamedia vs. Comcast. 2 THE COURT: Good afternoon. 3 MR. HO: Good afternoon. 4 THE COURT: Put your names on the record, please. I 5 know most of you, but for Joe's benefit, would you put your 6 names on the record, please. 7 Mr. Ho. 8 MR. HO: Good afternoon, your Honor, Derek Ho from 9 Kellogg, Hansen for plaintiff Viamedia. To my right is 10 Professor Thomas Lys. 11 MR. WHITE: Collin White of Kellogg, Hansen also for 12 Viamedia. 13 MR. WEBSTER: Jim Webster from Kellogg, Hansen for 14 Viamedia. 15 MR. PRENDERGAST: Good afternoon, Richard Prendergast 16 for Viamedia. 17 MR. FENSKE: Dan Fenske for Comcast. 18 MR. TOSCANO: Good afternoon, your Honor, David 19 Toscano from Davis, Polk for Comcast. 20 MR. BURKE: Good afternoon, your Honor, Art Burke 21 from Davis, Polk for Comcast. 22 MS. SEARS CODER: Good afternoon, Sally Sears Coder 23 on behalf of Comcast. 24 And I just wanted to say, your Honor, that we have a 25 number of folks from our team who have worked really hard on Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 4 of 171 PageID #:17212 4 1 this case and these Daubert issues. So, they're here today in 2 court, but we're not going to bill the client for it. But I 3 just wanted to let you know. 4 (Laughter.) 5 THE COURT: That is not my issue. 6 (Laughter.) 7 MS. SEARS CODER: But they are all here. And all the 8 folks from our side are subject to the protective order and 9 are available and entitled to hear highly confidential 10 information. 11 THE COURT: Okay. Thank you. 12 Do you want to put their names on the record for any 13 reason? That is up to you. 14 MS. SEARS CODER: No. That's okay, your Honor. 15 MR. HARTLEY: Your Honor, I'm the interloper. James 16 Hartley from Holland & Hart in Denver representing Charter 17 Communications. 18 THE COURT: Good afternoon, Mr. Hartley. 19 MR. HARTLEY: Also here is Patrick Morales-Doyle, who 20 is our Chicago counsel. 21 MR. MORALES-DOYLE: Good afternoon, your Honor. 22 THE COURT: Good afternoon. 23 I am going to start with the protective order. So, 24 if you want to come forward. 25 And, Mr. Ho, I have your motion challenging the Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 5 of 171 PageID #:17212 5 1 designations. 2 MR. HO: Your Honor, Mr. Prendergast is going to 3 address that issue for us. 4 THE COURT: Okay. 5 Two questions for you. And I received the responses 6 and I have not -- because they came in -- the courtesy copy 7 came in this morning. I have been in court all day. I have 8 not been able to go through all of the attachments. 9 But the first question for you, Mr. Prendergast: Why 10 doesn't the agreed confidentiality order in this case at 11 Record 44 cover these ? 12 Page 2, Paragraph 2, under "Confidential 13 Information," specifically says that it is proper to designate 14 as highly confidential the. And it 15 seems to me this is a. 16 MR. PRENDERGAST: Yes, your Honor. I think it's -- I 17 believe the process is that if you in good faith believe it's 18 confidential or highly confidential, you designate the 19 document as such. But that doesn't relieve the Court of the 20 opportunity -- either party the opportunity -- to challenge 21 that. Not necessarily because it doesn't fit within the four 22 corners of the order, but because of the considerations that 23 would warrant not accepting as highly confidential, 24 particularly in this case. 25 THE COURT: So, you are saying it falls -- you agree Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 6 of 171 PageID #:17212 6 1 it falls -- within the four corners of Paragraph 2; because it 2 is a, you still have the right to 3 challenge it? 4 MR. PRENDERGAST: Yeah, I think -- 5 THE COURT: It seemed to me from your submission to 6 the Court you were saying it did not fall here in the first 7 place. 8 MR. PRENDERGAST: Well, your Honor, I don't know if 9 this is a distinction without a difference or not, and I'm not 10 trying to be evasive. I think you can literally read the 11 order 12 that party can designate it 13 highly confidential and, then, the issue is brought to the 14 Court and -- to determine whether or not that designation 15 should be honored. 16 Let's suppose it literally falls within the four 17 corners of the document because it falls within one of the 18 examples. That nonetheless does not preclude a party from 19 asking for an exception to it or, in fact, obliging the Court 20 to consider that, because the standards are such that -- and 21 in this case particularly, as I think I could discuss with you 22 this afternoon -- just plain inequitable not to let us use 23 this document in the limited way we want to use it. 24 I want to stress one thing, which I will stress in 25 the argument, but just to make the point. We're not asking Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 7 of 171 PageID #:17212 7 1 for a complete absolution from any obligations with respect to 2 the use of this document. We want to -- 3 THE COURT: You want to show it to your CEO? 4 MR. PRENDERGAST: And probably one other officer who 5 is knowledgeable. But with very strict restrictions that they 6 can use it for no purpose other than to discuss it with 7 counsel. They can't -- 8 THE COURT: Why is it that -- because your experts 9 have access to this. Why is it that you think the CEO and 10 this other officer, that there is a real need for them to see 11 it? 12 And why isn't the compromise in Charter's submission 13 at Paragraph 3 sufficient to address what it seemed like you 14 were saying you needed it for? 15 MR. PRENDERGAST: Your Honor, the clients in this 16 case have particular market expertise. If they're not going 17 to use this in any way competitively, they're only going to 18 use it to consult with their attorneys, then they ought to be 19 able to do that, because they're entitled to be represented by 20 attorneys that are fully knowledgeable. 21 What we need is the market expertise of our client to 22 help us determine the full extent of any defense to Comcast's 23 argument based on. I think it's important to 24 keep in mind that is a basis cited by Comcast 25 for knocking out -- Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 8 of 171 PageID #:17212 8 1 THE COURT: I understand. 2 MR. PRENDERGAST: 3 THE COURT: I understand from the briefings. 4 MR. PRENDERGAST: But if they're going to put it in 5 their summary judgment motion and we're supposed to respond to 6 it, there should be no limitation unless there is some strong 7 justification; and, the burden is on Charter to make that 8 justification for keeping it out. 9 THE COURT: Do you want to file a reply -- a brief 10 reply -- to the responses? 11 MR. PRENDERGAST: If the Court would -- 12 THE COURT: I am leaving it up to you. If you want 13 to, I will give you the opportunity to; and, if you do not 14 want to, I am fine ruling and addressing what has been 15 submitted to the Court. It is up to you. 16 MR. PRENDERGAST: Your Honor, I think we're prepared 17 to argue this today. 18 THE COURT: Okay. 19 I am not ready to rule right now because, as I said, 20 I have not had the opportunity to complete going through the 21 submission that I got today, as I have been in court all day. 22 But I will take it under advisement and rule shortly. 23 MR. PRENDERGAST: Well, if you're going to do that, 24 your Honor, then we would like a very short time to file a 25 reply, because there's nothing lost by doing so. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 9 of 171 PageID #:17212 9 1 THE COURT: When can you file your reply? 2 MR. PRENDERGAST: We could have it by early next 3 week. 4 THE COURT: Okay. 5 Why don't you file your reply by Monday, and I will 6 rule quickly. Monday is April 9th. 7 MR. PRENDERGAST: Will you be hearing argument? 8 THE COURT: Only if I feel like I need it. 9 MR. PRENDERGAST: Fine. 10 THE COURT: Katie will let you know if I feel like I 11 need it. 12 MR. PRENDERGAST: That's fine, your Honor. Thank you 13 very much. 14 THE COURT: But I will give you, Mr. Hartley -- since 15 you are in from Colorado, if there is anything you want to put 16 on the record today or anything further you want to elaborate 17 on, you are welcome to do so. 18 MR. HARTLEY: Thank you, your Honor. I appreciate 19 the Court's indulgence. 20 MR. PRENDERGAST: Your Honor, I really don't want to 21 waive an opportunity to reply to what he has to say, however. 22 I mean -- 23 THE COURT: How are you waiving an opportunity? 24 MR. PRENDERGAST: I mean, if he speaks, I'd like to 25 be able to reply. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 10 of 171 PageID #:17212 10 1 THE COURT: I have not said anything indicating 2 otherwise. 3 MR. PRENDERGAST: Oh, fine, Judge. I just didn't 4 want my -- our previous discussion to suggest that I was just 5 waiving any argument today if somebody was going to argue. 6 THE COURT: No, I -- 7 MR. PRENDERGAST: That's fine. 8 THE COURT: I am not sure what led you to believe 9 that; but, no, I -- 10 MR. PRENDERGAST: I'm just highly suspicious. 11 THE COURT: Of me? 12 (Laughter.) 13 MR. PRENDERGAST: Not you, Judge. 14 Thank you very much. 15 MR. HARTLEY: Certainly not of me. I'm the new kid 16 in town. 17 (Laughter.) 18 MR. HARTLEY: Your Honor, just a couple of things to 19 clarify our position in light of the colloquy you just had 20 with Mr. Prendergast. 21 We obviously are not relying solely on the fact that 22 this is a. But it is culled out for 23 treatment as a highly confidential document in the 24 confidentiality order, as you pointed out; and, there's a good 25 reason for that. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 11 of 171 PageID #:17212 11 1 If you look at the other language surrounding that 2 specific example, 3 4 5 6 All of those factors are present 7 And that's exactly why 8 is a very good example of what should 9 be considered highly confidential. 10 The other thing I wanted to mention briefly is just 11 two cents worth of additional detail about some of the terms 12 in case it isn't immediately clear. We wrote our brief and, 13 frankly, the declarations trying not to get very specific. It 14 was obvious that we needed to have these filed under seal, but 15 we defeat the purpose if we put too much detail in the 16 documents. 17 18 19 20 21 22 23 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 12 of 171 PageID #:17212 12 1 2 Lastly, on the staleness point, from our brief you 3 know. 4 THE COURT: Yes. 5 MR. HARTLEY: 6 7 8 9 10 11 The addressed some of the issues that 12 are pertinent here 13 14 15 16 17 18 19 20 21 22 23 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 13 of 171 PageID #:17212 13 1 2 3 4 5 So, again, 6. So, the -- 7 THE COURT: Are all of those amendments attached as 8 exhibits to your submission? I have not had the opportunity 9 to -- 10 MR. HARTLEY: They are not. 11 THE COURT: Okay. 12 MR. HARTLEY: All that was sought was the 13 re-designation. We have produced, I 14 think, way back the I'm not sure that 15 we had produced I made sure they went 16 out earlier this week just to be certain we had that base 17 covered. But they have not been submitted to the Court. 18 Obviously, we can do that if need be. 19 THE COURT: Okay. If I believe I need them, I will 20 issue an order and let you know. 21 MR. HARTLEY: Unless there are questions, your Honor, 22 I'm all set. 23 THE COURT: No. As I said, I have not had the 24 opportunity to go through the attachments, but I will wait and 25 see the reply and I will issue a ruling shortly. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 14 of 171 PageID #:17212 14 1 MR. HARTLEY: Have a strong cup of coffee with you as 2 you dig through that very lengthy, very detailed 3 4 (Laughter.) 5 THE COURT: Thank you for the recommendation. 6 MR. HARTLEY: Thank you, your Honor. 7 THE COURT: Did you want to briefly comment on 8 anything, Mr. Prendergast? 9 MR. PRENDERGAST: Yes, please, your Honor. 10 I want to say I'm actually suspicious. It's not of 11 the Court. 12 Your Honor, when we file a reply, we'll address the 13 question of why have no current value. 14 THE COURT: Okay. 15 MR. PRENDERGAST: In terms of the harm, just speaking 16 to the Charter objections -- the Charter insistence on this 17 designation of highly confidential -- I do believe that when 18 you see what we have to say, you will understand that Charter 19 won't be harmed at all by the manner in which this information 20 will be disclosed and the extent to which it will be 21 disclosed. 22 And I think if you -- once you are satisfied that 23 there is no harm to Charter, there will be no reason not to 24 allow the document to be used, because the importance to us is 25 we have an opportunity to glean from our client -- we have the Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 15 of 171 PageID #:17212 15 1 market expertise to address some issues here to help us 2 determine the full extent of any defense to Comcast's argument 3 I mean, they raised it. And 4 we're trying to develop the arguments against it. And they 5 are, in large part, informed by knowledgeable people, as 6 knowledgeable as Mr. Lieberman and Mr. Solomon, our financial 7 officer. 8 Without that expertise, we have to sort of speculate 9 as to the possible defense based on our client's knowledge of 10 the market. 11 12 13 14 15 16 17 Those are two questions that we can develop, but I 18 assure you that Mr. Lieberman, I'm sure, is going to be able 19 to develop five or six others because of his knowledge of the 20 market. 21 If there was some harm to Charter here, there would 22 be consider- -- there would be fair consideration to whether 23 or not this document should be disclosed in the very limited 24 way we're disclosing it. 25 And I should add one other thing you're going to see Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 16 of 171 PageID #:17212 16 1 in our reply; and, that is, that while this document is I 2 don't know how many pages long -- it's lengthy; it's 80 pages, 3 I believe -- we want to show them about four-and-a-half pages, 4 maybe five. 5 THE COURT: Okay. Clarify in your reply, then, 6 exactly what it is -- 7 MR. PRENDERGAST: Yes. 8 THE COURT: -- you want to show them. 9 MR. PRENDERGAST: We'll do that, your Honor. 10 Other than that, I think we'll wait for the reply 11 rather than take your time. 12 THE COURT: Okay. 13 MR. PRENDERGAST: Thanks very much, your Honor. 14 THE COURT: Thank you. 15 Mr. Ho, please call your witness. It is your burden. 16 MR. HO: Your Honor, I think the parties have 17 requested opening statements. We obviously defer to the Court 18 as to whether it would like to have them or not. 19 THE COURT: I have read all of this. I do not feel 20 like I need them. I think I will save it for any closing. 21 So, I do not feel like I need them. 22 MR. HO: Very well, your Honor. 23 We call Professor Thomas Lys. 24 THOMAS LYS, PLAINTIFF'S WITNESS, SWORN 25 MR. HO: Your Honor, we are going to have some Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 17 of 171 PageID #:17212 Lys - direct 17 1 slides. Would the Court like hard copies, as well as -- 2 THE COURT: That would be wonderful. 3 Do you have an extra set for my clerk, please. 4 MR. HO: We do. 5 Would you prefer binder clips or staples? 6 THE COURT: Either way. Binder clips are fine. 7 MR. HO: Okay. 8 (Document tendered.) 9 THE WITNESS: May I have one, too? 10 THE COURT: Your witness wanted to know if he could 11 have one, too. 12 (Document tendered.) 13 DIRECT EXAMINATION 14 BY MR. HO: 15 Q. Would you please state and spell your name for the record, 16 please? 17 A. My name is Thomas Z. Lys. 18 Q. And could you give the Court your address for the record? 19 A. I live at 25300 North Nektosha Way -- Nektosha is 20 N-e-k-o-t-s-h-a, Way -- in Mettawa, M-e-t-t-a-w-a, Illinois. 21 Q. Professor Lys, you were asked to offer an opinion 22 regarding Viamedia's damages in this case, correct? 23 A. Correct. 24 Q. And you have some witness binders in front of you. Could 25 I ask you to turn to what's been premarked as Exhibit 2. It Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 18 of 171 PageID #:17212 Lys - direct 18 1 should be in Volume 1 of 2 in the binders there in front of 2 you on the ledge. 3 A. This is the Jenner? 4 Q. Yes. Those are joint exhibits, so -- 5 A. Oh, I see. 6 It's in Binder 2, you say? 7 Q. Binder 1, Exhibit No. 2. 8 A. Thank you. 9 Q. Do you recognize this as your amended expert report in 10 this case? 11 A. I do. 12 MR. HO: Your Honor, we move to admit the report, 13 Exhibit 2, for purposes of this hearing. 14 THE COURT: Any objection? 15 MS. SEARS CODER: No, your Honor. 16 THE COURT: Since they are joint exhibits, do you 17 want to just jointly move them all in for purposes of the 18 hearing only? 19 MS. SEARS CODER: Or maybe jointly move them at the 20 end of the examination. 21 THE COURT: Whatever you want. It does not matter to 22 me. 23 MR. HO: Okay. 24 THE COURT: Or you can do it one by one. It does not 25 matter. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 19 of 171 PageID #:17212 Lys - direct 19 1 But I will admit Exhibit 2. 2 MR. HO: Thank you, your Honor. 3 (Joint Exhibit No. 2 received in evidence.) 4 BY MR. HO: 5 Q. Professor Lys, you've also prepared some slides to assist 6 you in today's testimony, correct? 7 A. To assist the Court, yes. 8 Q. Okay. 9 MR. HO: Could you please put those up on the screen. 10 BY MR. HO: 11 Q. First of all, Professor Lys -- 12 A. My screen is blank. 13 THE COURT: Hold on. We will see if we can -- 14 (Brief pause.) 15 THE COURT: Somebody is coming to hopefully hook 16 these up, but you can display them on the large screen and you 17 have the slides. 18 BY MR. HO: 19 Q. Professor Lys, could you give the Court a brief overview 20 of your qualifications? 21 A. Yes. 22 So, my education first, I have a degree in economics 23 and business from the University of Berne in Switzerland -- 24 it's a little bit more than a bachelor, a little bit less than 25 a master, somewhere in between -- summa cum laude. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 20 of 171 PageID #:17212 Lys - direct 20 1 I then went to the University of Rochester and got a 2 Ph.D. in accounting and finance from University of Rochester. 3 While I was in my last year, I interviewed for jobs 4 in the U.S. and in Europe. I received nine offers. One of 5 them was at the Kellogg School at Northwestern, which I viewed 6 as the most attractive, so I took that. This was in 1981. I 7 have been at Kellogg the entire period until 2015. I had two 8 absent- -- two leaves. 9 In 1986-'87, I spent one year at the University of 10 Chicago or, as we refer to it as, that other school for the 11 south. And, then, in '97, I spent another leave of absence at 12 Stanford, at the business school there. But other than that, 13 I have been my entire career at Kellogg. 14 At Kellogg, I moved through the ranks from assistant 15 professor in 1981 through tenure, through full professor, 16 through chair; and, in 2015 -- shall I stop? 17 THE COURT: No, you can keep going. 18 In 2015 -- 19 BY THE WITNESS: 20 A. In 2015, I decided that there was more to life and I 21 approached the dean and negotiated an exit package. She 22 agreed and with one hiccup, I also demanded some special 23 consideration. I still had two Ph.D. students. My No. 35 24 Ph.D. student Rita Nevada Gunn, G-u-n-n, and the 37th -- '6th 25 or '7th -- I may be mistaken by one -- Brandon Locke. And as Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 21 of 171 PageID #:17212 Lys - direct 21 1 an emeritus professor, there would have been a problem of me 2 being able to shepherd them through the process and to 3 essentially make them graduate. And, so, they created this 4 position called emeritus in service. I've never heard of it, 5 but they created that. That allows me -- 6 THE COURT: Sorry. 7 (Brief pause.) 8 BY THE WITNESS: 9 A. That allowed me to do that. Rita graduated last year and 10 found a job at Vanderbilt, which is a very nice placement. 11 And Brandon was just hired by the City University of New York, 12 and he will begin next year holding -- his defense -- 13 dissertation defense -- is scheduled for, I believe, May 14th 14 of this year. 15 So, that's that period. 16 Also while at Kellogg, for 11 years I was the editor 17 of -- one of the editors of one of the top three journals in 18 my field in financial economics, the Journal of Accounting and 19 Economics. I reviewed approximately 650 manuscripts, an 20 estimate. I'm not quite sure what the number, but it's a very 21 large number. 22 It's not the job I would recommend to anybody. You 23 tend to make only enemies. The acceptance rate of the JAE is 24 between four and five percent, meaning that 95 to 96 percent 25 of the papers are rejected. So, these people, of course, hate Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 22 of 171 PageID #:17212 Lys - direct 22 1 you off the bat. And the four to five percent that you do 2 accept don't like you either because the average paper goes 3 through roughly four revisions, and everybody believes that 4 that's bad treatment. So, I made that mistake, but I served 5 the field. 6 So, that's essentially my academic career. 7 BY MR. HO: 8 Q. Have you served as an expert witness before? 9 A. Oh, one more thing. I also had a change of direction in 10 the last ten years before 2015. I worked on more the 11 psychology side of behavioral finance. In 2015, that was 12 culminated in a negotiations book with my partner Margaret 13 Neale at Stanford, and that book was published 2015. That 14 gave another reason to say, well, it's only going to be 15 downhill from now, so let's step out. 16 The book was published. My teaching obligation right 17 now, only some executive classes at Kellogg and a negotiations 18 class -- a weeklong negotiations class -- at Stanford with 19 Professor Neale. 20 I'm sorry. 21 Q. You served as an expert witness before? 22 A. Yes, I did. 23 Q. How many times? 24 A. Since about 2000, I served approximately 45 engagements. 25 Q. And of those engagements, how many involved opinions Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 23 of 171 PageID #:17212 Lys - direct 23 1 relating to damages? 2 A. So, they're virtually all damages. There are few that 3 have aspects of damages, but not are spot on. Like I 4 testified three times at the Library of Congress on what 5 different companies could afford to pay under different rate 6 regulations. It's not directly damages, but it's essentially 7 the same analysis. So, I would say the vast majority are 8 damage analyses. 9 Q. Have you had repeat clients over time? 10 A. Yes, I did. My biggest repeat client is actually in the 11 room here. It's Jenner. I had, including current engagement, 12 a total of nine engagements, six official and three that kind 13 of settled very quickly. I was working on the report while 14 the settlement occurred. 15 My second largest client is the Department of Justice 16 and the Department of the Treasury, depending on the settings. 17 Together they account for seven engagements. 18 Q. Has your opinion ever been excluded as unreliable? 19 A. No. 20 Q. You've reviewed Comcast's motion to exclude your testimony 21 in this case, correct? 22 A. Correct. 23 MR. HO: Let's put Slide No. 1 up. 24 BY MR. HO: 25 Q. What do you understand the main disagreements between the Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 24 of 171 PageID #:17212 Lys - direct 24 1 parties to be? 2 A. After studying and trying to see why we are even in court 3 here, I concluded that there are really two substantive 4 disagreements in this case. One relates to causation. And 5 although it wasn't, as we'll discuss in a moment, my 6 assignment, the allegation is that the causation that I rely 7 upon is simply irrational from an economics perspective. And 8 I strongly disagree with that, as I will explain. 9 The second issue -- major issue -- is the revenue 10 share in the contracts that I value. And the question is what 11 would have been the but-for revenue share and that I simply -- 12 the allegation is -- that I also do not agree with -- that I 13 simply relied on management on this and I am no more than a 14 mouthpiece for management. And that is simply incorrect. 15 Q. Okay. 16 Let's look at the second slide. Could you explain 17 what your assignment was in this case? 18 A. So, essentially, like any antitrust damage case -- or any 19 damage case -- there are really three legs to it: Is the 20 liability -- and that has -- that I rely on Dr. 21 Furchtgott-Roth analysis and -- but I am computing my damages 22 under the assumption that the Court, the jury, the fact finder 23 will find that liability has been established. 24 The second is causation. And, typically, causation 25 is either part of the liability report or a separate report, a Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 25 of 171 PageID #:17212 Lys - direct 25 1 part of the damage report. So, it can be anywhere between. 2 But that's the linkage. 3 And here I -- I have two things to add. Number one, 4 I relied reasonably on management. And reasonably meaning 5 that I was not simply a spokeperson (phonetic). I did poke 6 and I brought my toolkit to bear to -- whenever possible to -- 7 say that this makes sense to me; it's essentially a question 8 of fact; and, therefore, I may rely on it. 9 I, also, having seen Dr. Israel's rebuttal report, 10 analyzed that, and I come to the conclusion that his causation 11 analysis is fundamentally flawed, is simply -- does not pass 12 the muster that is required. 13 And, so, as I hope I will get the chance to explain, 14 even after reading Dr. Israel's rebuttal report -- which 15 actually goes to the question of irrationality, that previous 16 slide that you saw, your Honor -- I don't think he's right, 17 and I will explain that in a moment. 18 And, so, relying on causation, I then was asked to 19 compute the damages that resulted. And I did that using 20 standard state-of-the-art techniques in my field. 21 Q. Professor Lys, in your opinion, would it have been 22 possible for you as an economist to offer an economic opinion 23 on causation? 24 A. In general, the answer is yes, but not in this specific 25 case. So, if your question is in this specific case, it Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 26 of 171 PageID #:17212 Lys - direct 26 1 doesn't lend itself for an economic analysis. 2 And the reason is that, essentially, causation is 3 established by facts that were only known to the party that 4 were negotiating. And the question is: What were the 5 negotiations and what were the sticking points in those 6 negotiations? Why would or wouldn't have some contract been 7 awarded in the but-for world? The world that we've never 8 seen. So, that's the first difficulty. 9 It's also complicated by the fact that economists -- 10 the economist toolkit, my training, my craft, works very well 11 when you deal with commodities. And what I mean by that is 12 that a good or service only depends on price, and this is 13 really where economists do extremely well. The further away a 14 market or a good or a service deviates from a commodity only, 15 the less useful is the economics toolkit. 16 And I came very quickly to the conclusion that this 17 service -- this representation service -- is not a commodity. 18 And, therefore, the economic toolkit is not particularly 19 useful in deciding whether a contract would be awarded or not. 20 It's not just price. 21 Or to put it differently, your Honor, the question of 22 how far away you are from a commodity is: What weight does 23 price have in the purchase decision or the award decision? 24 And in this particular market, I came to the conclusion in the 25 representation that price is quite far away from being Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 27 of 171 PageID #:17212 Lys - direct 27 1 important. And, therefore, this is not primarily the field 2 where economists are well-equipped to make that decision -- to 3 make that determination. 4 Q. Could you elaborate on why you -- in your opinion, this 5 market or this service is far from being a commodity? 6 A. So, a representation market depends on the relationship 7 between the parties. So, one aspect that is very important 8 here is the independence of Viamedia. 9 Let me give you an analogy. I am an expert witness. 10 If you look at the expert witness that do similar work, you 11 will find a very large range of hourly rates. In the field 12 that I compete in, the range is from one to three. So, the 13 top end is three times the bottom end. 14 If this were a commodity, there's something in 15 economics called the law of one price. So, in commodity 16 markets, the moment you have a deviation among competing 17 suppliers, arbitrage or competition drives that down to its -- 18 the bottom end. That's the commodities market. 19 In this market, in the market like expert witnessing, 20 that's not happening. Why isn't it happening? Well, what 21 matters is experience. 22 The reason I had, I assume, so many repeats is 23 because people have experience and you don't want to find out 24 at the end of the trial that you got the wrong expert. And 25 this is not something you can evaluate ex ante unless you are Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 28 of 171 PageID #:17212 Lys - direct 28 1 faced with it before. 2 The other is confidentiality, for example. It's a 3 perfect analog to this market. The first thing that I've been 4 asked on an engagement, your Honor, is: Do you have a 5 conflict, and would you sign a confidentiality agreement? 6 It's the same thing here. 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 In my discussions with management, very quickly I Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 29 of 171 PageID #:17212 Lys - direct 29 1 came convinced that this is such a market; that we are far 2 away from a commodities market; that it is experienced good; 3 that independence matters; and, it's not a commodity. 4 And, so, we had a discussion how to do causation in 5 this case. And I said, simply, this is a question of fact. 6 This is not a question of -- where economic analysis can 7 significantly move the needle. And the decision was made that 8 I should do the damages. And I did that and as we'll discuss. 9 But I didn't simply accept anything that I was told. 10 I poked, I triangulated and, as I hope I'll convince you, I 11 did what is reasonable due diligence in such a situation. 12 Q. So, Professor Lys, let's look, then, at your damage model. 13 MR. HO: Could we put up Slide 3. 14 BY MR. HO: 15 Q. Could you please explain the basic formula that drives the 16 damage model? 17 THE COURT: Can I -- well, go ahead. I will let you 18 finish. I will interrupt later. Go ahead. 19 THE WITNESS: Your Honor, I am a former professor. I 20 am used to being interrupted all the time. 21 THE COURT: I will let counsel -- 22 THE WITNESS: It's mostly my students playing 23 solitaire, but -- 24 THE COURT: I will let Mr. Ho do his examination. If 25 I have questions, I will ask at the end, because he may be Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 30 of 171 PageID #:17212 Lys - direct 30 1 getting to what I am going to ask. 2 Go ahead. 3 THE WITNESS: Thank you. 4 BY THE WITNESS: 5 A. So, the damage model -- 6 MS. SEARS CODER: Your Honor, may I make one 7 objection just for the record? 8 THE COURT: Yes. 9 MS. SEARS CODER: It appears to us that Professor Lys 10 is testifying beyond the scope of what was in his first and 11 second reports and deposition. I don't want to interrupt 12 every question and answer, so I am just going to interpose a 13 standing objection -- 14 THE COURT: Okay. 15 MS. SEARS CODER: -- on the record. 16 THE COURT: I will note that for the record. 17 MS. SEARS CODER: Thank you. 18 THE WITNESS: May I take some water? 19 (Brief pause.) 20 MR. HO: And, your Honor, for the record, we 21 obviously do not agree with the characterization. 22 THE COURT: I assumed that, and I will sort it out 23 later if necessary. 24 MR. HO: Thank you. 25 THE WITNESS: Thank you. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 31 of 171 PageID #:17212 Lys - direct 31 1 BY THE WITNESS: 2 A. So, my damage model is just a standard approach. You 3 have, essentially, two values, and the damages are the 4 difference between those two values. And the first part of 5 the value -- the first part of the damage report, the first 6 value, is the but-for value. 7 Now, it is very important to understand what 8 "but-for" means. The "but-for" relates to a world that 9 actually never existed. And, so, the economist has to 10 recreate the world that would have existed but for the 11 anticompetitive acts, and commonly accepted and rightfully 12 accepted standard that "but-for" cannot contain anything that 13 was not known or knowable before the anticompetitive acts 14 occurred. 15 And one of the disagreements -- the two major points 16 of disagreement is that Dr. Israel uses information in the 17 actual world to show what would have happened in the but-for 18 world. And that's simply wrong. 19 20 21 22 23 24 The second one is much easier. The actual is what 25 actually happened. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 32 of 171 PageID #:17212 Lys - direct 32 1 Now, this equation has three components in this 2 particular case. I needed to proj- -- and that's the last 3 line on this slide. I needed to project revenue for the 4 but-for world; I needed to adjust then for some mitigation 5 efforts that Viamedia did; and, I needed to subtract from that 6 the expenses of achieving these revenue. Okay? 7 And that's simply standard damage methodology. And, 8 so, that's what I did for each of the seven categories of 9 damages that I was asked to opine on. 10 BY MR. HO: 11 Q. Professor Lys, when you say projected revenue and 12 projected expenses, projected as of what date? 13 A. Again, this is really the very important distinction, your 14 Honor. The projection has to only be based on anything that 15 was known or knowable before the anticompetitive acts in this 16 particular case in 2012 -- or May, 2012. Anything else is 17 actually the actual world, not the but-for world; and, 18 therefore, cannot help you to establish what the but-for value 19 is. 20 And, by the way, this is not my conviction. This is 21 standard damage methodology. Any number of books will confirm 22 that. 23 Q. Professor Lys, in trying to figure out what inputs to use 24 in applying this formula, what materials did you consider? 25 A. So, I considered whenever possible anything that was Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 33 of 171 PageID #:17212 Lys - direct 33 1 available at 2011 -- only things that were available in 2011. 2 I considered management's view of the future. I considered 3 external forecasts that I relied upon. But these were all 4 things that were available as of 2011. Some of the management 5 inputs that I got, I couldn't verify that they were available 6 in 2011, but I poked as much as I could to make sure that they 7 were. 8 Q. So, let's talk about your use of management information, 9 if we could pull up the next slide. 10 In your opinion, as an economist, is it appropriate 11 to use information from management to model the but-for world? 12 A. Absolutely. Management's knowledge -- and I'm talking now 13 more generally, not just this case -- is probably the single 14 best source of information about the company. And I can give 15 you several examples, but I've just picked a few. 16 First of all, if you look at financial statements 17 produced by the company -- 18 THE COURT: Produced by -- 19 THE WITNESS: By the company. 20 BY THE WITNESS: 21 A. -- like GAAP statement, annual reports, quarterly reports, 22 these are financial statement of management. The auditor's 23 role in that -- they are audited financials, too, but the 24 auditor's role is primarily to make sure that the computations 25 of the financial statements conform to GAAP. In fact, every Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 34 of 171 PageID #:17212 Lys - direct 34 1 audited financial statement for a publicly traded company has 2 a disclaimer, and the disclaimer says these are management's 3 statements. These are -- we did not produce these statements. 4 Okay? 5 If you look at the market -- the capital market's 6 reaction to financial statement, the single biggest 7 determinative of stock price -- and I've actually studied it; 8 I have a paper that publishes -- that analyzed that -- is the 9 issuance of management financial statement and management's 10 forward-looking statement. Forward-looking means management's 11 forecast about the future. 12 And, in fact, these statements, these 13 forward-looking -- that forward-looking knowledge is so 14 important that the SEC has ruled or produced -- promulgated a 15 whole set of rules to encourage management to actually issue 16 these statements. 17 So, for example, there's something called the safe 18 harbor provision, that, yes, management, we want you to tell 19 you what you know about the future, but, you know, if you turn 20 out to be wrong, if this was in good faith, you are immune to 21 pros- -- to lawsuits. Okay? That's referred to as safe 22 harbor provision. 23 In my work, both academic and as an expert witness, I 24 always, whenever possible and whenever appropriate, of course, 25 I rely on management forecasts as one, if not the most -- as Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 35 of 171 PageID #:17212 Lys - direct 35 1 one and almost often -- always -- the most important source of 2 information. In some cases, more so; in some cases, less so. 3 So, it is, in my expert opinion, simply incorrect to 4 say that management is an unreliable source. 5 Now, there are some special deviation of that in this 6 particular case. And one of the difficulties in this 7 particular case, that in some instances there are no 8 contemporaneous management forecasts. So, some of the 9 information that I relied upon, that I received from 10 management, was conveyed to me in 2017; but, there was no 11 exact representation of that information as of 2011. 12 Whenever that was the case, I did poke. Okay? And, 13 ultimately, it's a question of fact whether this is true that 14 that was what would have been known in 2011. Okay? I simply 15 don't have a crystal ball on that. But whenever there was a 16 possibility of poking, I did, and I will explain how I did 17 that. 18 BY MR. HO: 19 Q. So, let's look at the way in which management inputs play 20 a role in your damage model. 21 MR. HO: If we could turn to Slide 5. 22 BY MR. HO: 23 Q. Could you explain to the Court what this slide shows? 24 A. So, this slide shows all the seven damage categories. And 25 the purpose of the slide is to show for which damage category, Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 36 of 171 PageID #:17212 Lys - direct 36 1 to what extent did I actually rely on management input and 2 when did I not rely on management input. Okay? 3 And you'll see that the broad-brush statement that I 4 relied on management is simply not true. The vast majority of 5 the inputs in this slide will show you that actually I did not 6 rely on management input. Okay? 7 So, the rows that represent the seven damage 8 categories -- and, by the way, because -- because -- these 9 damage categories are independent, I presented my damage model 10 in a modular fashion. So, if the jury for some reason 11 disagrees with No. 5, that can be -- based on facts, not based 12 on my analysis -- that can be simply ignored and based on the 13 facts as they rule them. 14 So, the columns represent the three buckets of my 15 damage model that I explained before. So, you have revenue, 16 mitigation and projected expenses. There is a fourth column 17 called "Renewals," and I'll come back to that, too, because 18 some contracts, management strongly believe that they would 19 have been renewed. 20 This is also one of the cases -- one of the reason 21 why this case so deviates from the cookie-cutter damage model. 22 The typical damage model is constructed on the enterprise 23 value basis, which means it goes to infinity. This damage 24 model is based -- or this case is based -- on individual 25 contracts. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 37 of 171 PageID #:17212 Lys - direct 37 1 And, so, I did not simply assume that these contracts 2 would be renewed to infinity. Had I done that, of course the 3 damages would have been way higher. But I actually tried to 4 determine, based on management inputs, how many renewals there 5 would have been. But we'll get to that. 6 So, if we go down now column by column, your Honor, I 7 would be able to explain to you where I did or did not and to 8 what extent I did rely on management inputs. 9 So, if we first go for projected revenues, your 10 Honor, so one -- the first row is the Chicago and Detroit 11 Interconnect. Okay? That revenue figure has nothing to do 12 with management inputs. It is the 2011 financials, which were 13 clearly known or knowable as -- known, actually -- not even 14 knowable, they were known -- as of 2011. 15 There is -- and then I used something called a Kagan 16 report. It's an industry publication. It's an S&P 17 publication. That provided me with forecasts for the future. 18 Again, zero management input into that. 19 If we go to the second, that second row, your Honor, 20 that is the Hartford Interconnect. There, again, I used a 21 contemporaneous pro forma and Kagan, again, for 2015 onwards. 22 Okay? Again, no management input. 23 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 38 of 171 PageID #:17212 Lys - direct 38 1 2 and 3 we'll talk about that in a second. And here, again, I used 4 the actual financials and the Kagan report. Again, zero 5 management input. 6 Same thing for Category 4, 5 -- again, actual 7 financials; 6, contemporaneous pro forma and Kagan. Okay? 8 And 7, actual financials. 9 So, it is fair to say that the entire Column 1, okay, 10 had nothing to do with management input. 11 Q. What about Column 2? 12 A. Okay. So, now let's go to Column 2, which is the 13 "Mitigation" column. The "Mitigation" column is based on 14 actual financials which the accounting staff of Viamedia 15 extracted for me from the financials. Again, no management 16 input. 17 The second one is -- we never in the but-for -- we 18 never saw the but-for world for mitigation in Hartford. So, 19 what I did is I used the mitigation model from Category 1 and 20 applied exactly the same ratios to Category 2 saying, look, 21 this was a successful mitigation effort; I assume they did the 22 best they could; let's assume they do it again for Hartford. 23 Again, zero input. 24 And, then, for all the others, there was no 25 mitigation, so it's not applicable. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 39 of 171 PageID #:17212 Lys - direct 39 1 So, again, Category 2 -- or Column 2, excuse me -- 2 again, has no management input in any way, shape or form. 3 Now, let's talk to the projected expenses, which is 4 essentially the revenue share. This is what you heard of 5 before. This would be the equivalent in this case to being 6 price in any other sort of antitrust matter. 7 So, for Category 1, again, I'm simply going about the 8 contractual revenue share. So, no management input. 9 For Row 2, I have now bifurcation. For the first 10 half, 2015 through 2019, again, no management input whatever. 11 So, 12 again, zero management input. 13 Now, for the period 2020 onwards, I needed to know 14 what would be the revenue share going forward. And here, I 15 create a projection model that has some -- that is based on 16 and simply then projects that forward. 17 Okay? 18 These sorts of models -- actually, let me explain 19 that when I talk about 3 and 4. 20 So, in 3, I have, again, my revenue projection model, 21 and that revenue projection model is called a time series 22 forecast model. The specific model that I used -- and it 23 is -- has been disclosed to the defendants in the spreadsheets 24 that I turned over to them; so, this is simply an explanation 25 what the spreadsheets do -- is called a random walk or Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 40 of 171 PageID #:17212 Lys - direct 40 1 sub-martingale model. What this -- and this is a model that 2 is commonly used in financial economics. 3 What these models do is they say the future price, 4 the future revenue share, will be the last revenue share plus 5 some drift term. A drift term is kind of an annual 6 adjustment. Okay? 7 And -- but I didn't know what that drift term would 8 be. So, in financial markets, you take stock returns as being 9 the drift term. Okay? Here, it would have been the change 10 from one contract to the next of the revenue share. So, I 11 asked management from a contract-to-contract renegotiation 12 basis, what would be the change in the revenue share that you 13 anticipate in the future? 14 And they told me two things. They first told me, 15 well, it's And I looked at the few data 16 points that I had and it was roughly consistent with that. 17 18 19 The model that I've used has, however, a problem 20 because if you keep on 21 you could hit or you could 22 hit 23 24 So, I asked management, is there a 25 where this revenue share -- because it's a percentage. It's Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 41 of 171 PageID #:17212 Lys - direct 41 1 not a price per se. It acts like a price, but it's not a 2 price per se. And they told me; that once it 3 reaches, it will. 4 And, so, I constrained my time series model, my 5 random walk with a drift model, to stop at if and when it 6 reached. Okay? 7 It turns out that that was only an issue for. 8 That's the only time I even reached that. 9 THE COURT: Did you do anything to confirm that 10 one way or the other or perform any economic -- 11 THE WITNESS: Yes. 12 THE COURT: -- or accounting analysis? 13 THE WITNESS: There is -- the only thing that gave me 14 a little bit of comfort -- and it's just that -- is that I saw 15 16 17 THE COURT: 18 THE WITNESS: 19 THE COURT: In what context? 20 THE WITNESS: For the period 2015 to 2019. 21 Stipulates that. 22 BY THE WITNESS: 23 A. And the second instance was Category 6. The -- I saw -- 24 my analysis is based on contemporaneous presentation -- 25 PowerPoint presentation -- and pro forma that Viamedia made to Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 42 of 171 PageID #:17212 Lys - direct 42 1. And in that presentation, they are 2 offering 3 Other than that, I didn't see anything that would 4 confirm. So, I think this is ultimately something for the 5 fact finders to decide whether it would have gotten higher or 6 lower than that. 7 THE COURT: Do you still think it is a solid 8 assumption? 9 THE WITNESS: Yes. Yes, I do think so. 10 BY THE WITNESS: 11 A. Having said that, your Honor, in preparation for today's 12 hearing, I actually analyzed what would happen if I were to 13 drop that assumption. Okay? 14 Now, admittedly, this was not in any report. This is 15 simply in preparation to give your Honor an order of magnitude 16 sense. 17 18 19 20 21 22 23 24 25 Now, again, this was not in my analysis. This is Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 43 of 171 PageID #:17212 Lys - direct 43 1 something I did in preparation because I anticipated that your 2 Honor wanted to know how important that assumption was. And 3 it is actually, from a damage perspective, third order. Okay? 4 BY MR. HO: 5 Q. Professor Lys, you've -- oh, did you -- 6 A. Well, I wanted to talk about the last category. 7 Q. Okay. Please. 8 A. The last category for 1 and 2 has no management input, and 9 for 7 has no management input in any way, shape or form. 10 For Categories 2, 3, 4, 5, and 6, it does, because, 11 as I said, I was not going to go to infinity. I asked 12 management, because it's on a contract-by-contract basis, how 13 many of those contracts would have been renewed in the future, 14 in the but-for world, under your experience with the clients. 15 16 17 18 19 Now, this is something that is very difficult to 20 verify whether this is reasonable or not. It's essentially a 21 question of fact. So, what I did is, for each one of these 22 rows in my original report, I not only reported the damages 23 based on these renewals, but on any number of renewals up to. 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 44 of 171 PageID #:17212 Lys - direct 44 1 2 And at that 3 point, I have to leave it to the trier of fact to decide 4 whether they believe management's representation to me and to 5 them. 6 I thought hard whether an economist could somehow 7 create a model. And I simply think that in this specific 8 case, the number of renewals is not something that lends 9 itself to the economic toolkit. 10 Q. So, to be clear, Professor Lys, the number of renewals is 11 not part of your expert opinion in this case, correct? 12 A. No. I simply relied hundred percent on management 13 representation. But because that is the case, your Honor, and 14 because ultimately I believe it's a question of facts and not 15 economic analysis, I give a myriad of options. And depending 16 on how the jury decides whether two is believable or not, they 17 can pick the number. 18 Q. Professor Lys, you've referred on a number of occasions to 19 your discussions with management. Could you explain to the 20 Court what those discussions entailed? 21 A. Yes. So -- and this -- I was actually surprised. In 22 preparation for this meeting, I actually tallied up how much 23 I'd actually talked to management. What I did is both my 24 assistant and I -- associate and I -- independently started 25 adding up from our timesheets and from my phone records. I -- Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 45 of 171 PageID #:17212 Lys - direct 45 1 so, I did timesheets and phone records. He did simply his 2 timesheets. 3 Turns out I spent 28 hours talking to management over 4 the course of this engagement. They include six hours that 5 both he and I spent in Lexington and -- 6 THE COURT REPORTER: I'm sorry? 7 THE WITNESS: Lexington, Kentucky. 8 BY THE WITNESS: 9 A. This is the headquarters of Viamedia. 10 And we spoke with the entire C-level office. Entire 11 C-level office. It was the CEO, CFO, the director of finance, 12 the chief operating officer, the chief revenue officer, and a 13 few more people that I don't remember. 14 And the purpose of that meeting was for me to get a 15 understanding of the operations of Viamedia. What was the 16 product, how were they operating, et cetera. 17 I also had discussion during those six hours that 18 related to their theory of damages. Why did they believe that 19 they were damaged? What happened? Why did they not get 20 renewals when they were hoping to get renewals? 21 The second bucket of calls -- of management contact 22 was telephonic. And, so, these were 21-and-some-change hours. 23 It was a little bit less than 28. So, 21-and-a-half hours, 24 let's say. The bulk of this was before my first contract. 25 BY MR. HO: Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 46 of 171 PageID #:17212 Lys - direct 46 1 Q. Report? 2 A. Report. I'm sorry. My first report. 3 I apologize, your Honor. My first report. 4 And they dealt with two issues. One, we had 5 discussions about the assumptions or the information that they 6 were giving to me. And that was about a third of that bulk. 7 And two-thirds were data issues. So, they were 8 giving -- extracting data for us from the financial 9 statements, and we had questions back and forth to make sure 10 that this data is correct. And it took quite a bit of time. 11 Again, I have the number. I could give you the exact number. 12 I don't remember. But these were maybe five to six -- excuse 13 me, 28 -- that was maybe two-thirds of that time. 14 I spent about maybe another hour-and-a-half after the 15 Israel rebuttal report that I received. Maybe one-and-a-half 16 hours. And the purpose of that was to really question 17 management about the revenue share, whether the revenue share 18 that they gave me in the -- for the but-for world, the 19 increment, that delta that I talked about within my model, 20 whether it was inaccurate and whether that was the reason why 21 they lost the contracts. 22 23 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 47 of 171 PageID #:17212 Lys - direct 47 1 2 3 4 5 6 7 8 Now, why is that important? 9 10 11 12 13 14 15 16 17 18 19 20 21 Now, this did not enter my original model because I 22 didn't know that at the time. But after that discussion, it 23 confirmed that I credible -- that I reasonably had relied on 24 his representation, and that my assessment that this is not a 25 commodity -- Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 48 of 171 PageID #:17212 Lys - direct 48 1 -- is, in fact, correct. 2 So -- and I said that actually on deposition. Okay? 3 BY MR. HO: 4 Q. Professor Lys, let's drill down into your model by looking 5 at Category No. 1, the lost Interconnect revenue for Chicago 6 and Detroit. 7 A. Okay. 8 Q. This is Slide 6. 9 A. Yes. 10 Q. Could you explain, first of all, what this category 11 entails? 12 A. So, this is simply Chicago and Detroit Interconnect for 13 the existing contract. So, this is not the representation 14 agreement. This is only the Interconnect portion of the 15 representation agreement. It's entire -- as I said before, 16 it's entirely based on existing contracts. 17 Q. So, let's turn to the next slide. If you could explain 18 what the first step was that you took in computing damages for 19 this category? 20 A. So, for this category, I first had to determine what the 21 but-for revenue would have been. Now, I have 2011, which was 22 the actual. But the actual and but-for world are the same 23 world in 2011 because the anticompetitive actions did not 24 occur. So, I used that as a base. 25 And, then, I had to forecast that in the future. And Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 49 of 171 PageID #:17212 Lys - direct 49 1 what you see here is my internal forecast of the revenues that 2 Viamedia would have received in the but-for world. 3 Q. And what information did you use to make that projection? 4 A. I used two pieces of information. The first one was the 5 2011 revenue, which clearly was known as of May, 2012. And 6 number two, I used an industry forecast. As I mentioned 7 before, it's called Kagan. And, so, I got this Kagan report 8 and I went through it. And Figure 16 of that Kagan report 9 gives me industry forecasts for the future. 10 Now, this is cable industry local ad revenue metrics 11 for the U.S. They don't report it by market. And, so, the 12 question is, is this the right number? 13 Among the options that I had, the one that seemed 14 most appropriate was the industry local spot revenue, the one 15 that's highlighted. So, I zeroed in on that and used that. 16 But before applying it -- now, you see, it's a very 17 complicated market, your Honor, because it's cyclical. 18 Election years have spikes. I mean, obviously politicians 19 advertise a lot. So, it's very difficult to model that 20 outside without any industry knowledge. So, I relied on this 21 Kagan report. 22 But I just want to make sure that it's the right 23 thing to do. So, the way I convince myself that this was the 24 right thing to do, I said, well, you know what, let's test it. 25 Let's test it on data. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 50 of 171 PageID #:17212 Lys - direct 50 1 And, so, what I did -- 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 51 of 171 PageID #:17212 Lys - direct 51 1 2 3 4 5 6 But that's the metric I used throughout. So, all 7 revenue forecasts that you're going to see throughout my 8 report and throughout my damage model are following this 9 methodology. 10 Q. So, if we turn to the next slide, after you project -- 11 compute projected revenue in Row A, what do you do next? 12 A. So, then, I say, okay, well, 13 But they 14 also had some Interconnect expenses to replace that revenue 15 because they couldn't place it through the Interconnect. So, 16 what they did is they tried to place it nationally and 17 regionally, also, to some extent. 18 So, we had extensive discussions about that. But the 19 numbers you see is the actual revenue in this period for the 20 Interconnect slice of their business of Chicago and Detroit 21 minus the extra effort to achieve that because they couldn't 22 rely on the Interconnect. Okay? 23 So, if you subtract these two, you get to Row 6. 24 Okay? So, Row 6 is the difference and that's the incremental 25 Interconnect revenue loss. Okay? Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 52 of 171 PageID #:17212 Lys - direct 52 1 Q. What did you do at that point? 2 A. Well, that's the revenue. And now I need to have what 3 Viamedia refers to as cost of goods sold. So, this is, okay, 4 how much do we have to give to partners? The blended rate 5 here -- but I did it on a contract-by-contract basis. This is 6 just a summary of three buckets: and Chicago and 7 Detroit. But it's done on each one separately and aggregated. 8 This is a weighted average. Okay? 9 And the weighted average partnership contractual for 10 this period was the Row D. So, if you take one minus Row D 11 and multiply that by Row C, you have Viamedia's share. Okay? 12 So, Row E is really the cost of goods sold. And now 13 I'm going to subtract -- I'm going to multiply -- excuse me -- 14 Row C by one minus D, and that gives me Row C. That's the 15 revenue that's left for Viamedia. 16 But there was actually also some expenses in that. 17 Turns out they were trivial. 18 That's from the accounting system. 19 20 21 22 23 24 25 The reason 2012, your Honor, is smaller is because Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 53 of 171 PageID #:17212 Lys - direct 53 1 the anticompetitive act occurred in May -- as of May 31. So, 2 the first five months of 2012 actually they did -- they 3 suffered no losses. 4 5 6 7 And, so, that's the first step. Now I need to value 8 that. Okay? Now I need to put a dollar figure to that. 9 In order to put a dollar figure to that, I need two 10 things. First I need to have a discount rate. In finance, 11 this is called a weighted average cost of capital or WACC. 12 So, I compute WACC. And WACC has several components. One is 13 the capital structure. That's E divided by D plus E. So, 14 equity divided by debt and equity and debt divided by debt and 15 equity. These are the two weights. 16 There are two costs: The cost of equity, RE; and, RD, 17 the cost of debt. And there's the tax rate. Okay? This is 18 standard operating procedure. This is simply, you know, 19 Corporate Finance 101. 20 All of the inputs come from the financials except RE, 21 the cost of equity. The cost of equity I had to estimate 22 externally. So, I used something called the capital asset 23 pricing model. 24 And the version of the capital asset pricing model 25 that I use is called the Fama-French Capital Asset Pricing Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 54 of 171 PageID #:17212 Lys - direct 54 1 Model. It's a three-factor model. I can get into at detail 2 if that's an issue, but let me just assure you, your Honor, 3 it's state of the art. The advantage of that model is that it 4 not only adjusts for risk, but also adjusts for size and 5 market-to-book ratios, which have been shown to affect 6 returns. 7 I estimate that model using -- since Viamedia is not 8 publicly traded, I estimated that model using two comparable 9 firms. 10 Now, you may ask, well, why did I use two comparable 11 firms? In capital markets, you have -- want to control for 12 risk. Everything is perfect substitutes. So, I am actually 13 in that world of the -- where economists do best. I have a 14 perfect substitute; namely, two companies of equal size and 15 equal risk because they're in the same industry or similar 16 industry. And I estimated that model because Viamedia's not 17 publicly traded. So, I can't estimate it using Viamedia data. 18 19 20 21 22 23 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 55 of 171 PageID #:17212 Lys - direct 55 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 The second input I needed is I needed to convert 17 EBITDA into free cash flows. And the way to do that is to 18 adjust EBITDA for capital investments and working capital 19 investments, and that gives you free cash flows. Again, 20 standard approach. And, so, I did that. And that's the 21 second part of the analysis. 22 Q. So, if you turn to the next slide, what was the 23 bottom-line damage number for Category 1? 24 A. So -- well -- so, let me just say -- 25 MS. SEARS CODER: Your Honor, I'm sorry, may I just Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 56 of 171 PageID #:17212 Lys - direct 56 1 interpose an objection before the witness starts answering 2 this question. 3 We understand the Court in a Daubert hearing has wide 4 latitude under 104 and, you know, the authorities in this 5 district to hear, you know, whatever evidence the Court deems 6 is necessary. But for the record, we just wanted to say 7 Professor Lys appears to be getting far afield of some of the 8 issues that are at issue in the Daubert motion. So, I just 9 wanted to interpose that objection for the record. 10 THE COURT: Okay. I will note your objection. 11 MS. SEARS CODER: Thank you, your Honor. 12 BY THE WITNESS: 13 A. So, remember, your Honor, I mentioned free cash flows. 14 That's Row A. And the WACC is the present-value factor. And 15 if you multiply -- and the reason the numbers kind of look 16 funny is because I used what is called a half-year convention. 17 So, within a year, when do the cash flows occur? And -- 18 because it matters for value, right, whether you get it at the 19 front or in the back. And, so, standard assumption in finance 20 is -- in valuation theory -- is that you assume they appear in 21 the middle of the year. 22 And, so, this is the present-value factor using the 23 halfway convention -- half-year convention. And if you 24 multiply Row A by the equivalent number in Row B, you get Row 25 C, which is the present value of those cash flows. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 57 of 171 PageID #:17212 Lys - direct 57 1 2 3 4 5 Again, just to summarize, your Honor, zero management 6 input. 7 BY MR. HO: 8 Q. So, let's look at Categories 3 and 4 where, as you 9 testified earlier, there is some management input. 10 A. Yes. 11 MR. HO: If you can go to Slide 18. 12 BY MR. HO: 13 Q. If you could just tell us Row A revenue -- 14 A. So, revenue -- 15 Q. -- is that projected revenue? 16 A. That's projected revenue using Kagan. 17 Q. And is that based on the same method that you described 18 with respect to Category 1? 19 A. It's the same model that so well-explained Comcast's. You 20 know, when I backtested it against Comcast, that's the same 21 model. 22 Q. Okay. 23 MR. HO: Let's put up Slide 19. 24 BY MR. HO: 25 Q. Could you explain now how you computed the projected Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 58 of 171 PageID #:17212 Lys - direct 58 1 expense or projected revenue share? 2 A. So, remember, your Honor, I said I testified that I am 3 going to use a time series model of the revenue share. The 4 random walk was a drift model. And I need two parts. I need 5 the starting value and I need the annual -- the contractual 6 increment, the delta, the drift term. 7 So, for the first, I looked at the existing 8 contracts. And you see the revenue share? 9 10 11 12 13 14 15 16 17 Q. Let's look at Slide 20, which I think illustrates this 18 graphically. Can you walk us through that? 19 A. 20 21 22 23 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 59 of 171 PageID #:17212 Lys - direct 59 1 2 3 4 5 6 A. Yes, I did. 7 Q. So, let's go to Slide 22. 8 A. 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 60 of 171 PageID #:17212 Lys - direct 60 1 Q. So, let's go to the next slide, Slide 23. This is the 2 summary of damages model inputs that we saw earlier. Could 3 you just explain how Category 2 relates to Categories 1, 3 and 4 4, which we went to in more detail? 5 A. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 61 of 171 PageID #:17212 Lys - direct 61 1 2 3 4 And, finally, the last category has nothing to do 5 with management input because it's simply an out-of-pocket 6 that they had that Viamedia represented to me were the result 7 of them having to deal with the anticompetitive acts. That's 8 my damage model. 9 Q. Professor Lys, does your model permit a sensitivity 10 analysis to be run if the fact finder were to decide that a 11 different revenue share would have applied? 12 A. Yes. 13 Q. Could you explain? 14 A. Well, so, what I turned over to the defendants was a live 15 model, a model where you can plug in numbers. So, if -- if -- 16 for some reason for one or multiple of these contracts the 17 fact finder believes a different revenue share, my model 18 completely accommodates that. I or the defendants can -- or 19 both can -- plug in, you know, if that's 20 what the fact finders find. And we will arrive at the same 21 number because, essentially, I turn to them a calculator. 22 I hope you understand what I'm trying to say. This 23 is preprogrammed and it gives you the numbers based on the 24 inputs. So, it is a calculator and they can verify whatever 25 revenue share they want. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 62 of 171 PageID #:17212 Lys - direct 62 1 I also did, as I said already, two other safeguards. 2 I computed for different number of renewals, and I reported it 3 also modularly, you know, contract by contract. 4 5 6 Q. If we could go back to the very first slide that we talked 7 about today, you said that there were, in your view, two 8 points of disagreement: Causation and the but-for revenue 9 share? 10 A. Yes. This is -- I'm sorry. 11 Q. On causation, do you agree with Dr. Israel's opinion that 12 13 14 A. This is completely wrong. I completely -- excuse me. 15 This is too harsh. I completely disagree with that assessment 16 on three levels. 17, it appears that the defendants interpret 18 the as a. Okay? This logically 19 can't be true because with the 20 21 22 23 24 This is a 25 mischaracterization. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 63 of 171 PageID #:17212 Lys - direct 63 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 64 of 171 PageID #:17212 Lys - direct 64 1 2 3 4 5 It's simple economic logic. 6 Now, it's not clear what would have won and whether 7 Comcast would have been able to offer such a number that would 8 have won. But all I can say is that his economic 9 irrationality analysis, which is his alternative causation 10 analysis, is wrong. It's wrong because it relies on actual 11 and not but-for; and, it's wrong because relying on but-for -- 12 on actual -- shows that the but-for would not have won the 13 day. And that's the economic logic that I just explained to 14 you. 15 16 17 18 And, again, one of the distinguishing things that -- 19 in Dr. Israel's mind, this is a commodity and all you have to 20 do is offer epsilon more and you win. But it's not. And 21 that's why his analysis is wrong. 22 23 24 25 So, the fact pattern that he produces, if anything, Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 65 of 171 PageID #:17212 Lys - cross 65 1 proves my point, justifies my point, as opposed to challenges 2 it. Okay? 3 Q. Professor Lys, do Dr. Israel's opinions change your view 4 about the reasonableness of the drift term that you used in 5 your model? 6 A. No. He doesn't challenge that at all. There's nothing in 7 his report that says that was 8 inappropriate. 9 MR. HO: We pass the witness. 10 THE COURT: Okay. 11 Cross-examination. 12 Do you need a break? 13 MS. SEARS CODER: That would be terrific. Thank you. 14 THE COURT: Okay. We will pick up in ten minutes. 15 (Brief recess.) 16 THE COURT: Whenever you are ready. 17 MS. SEARS CODER: Okay. Thank you. 18 CROSS-EXAMINATION 19 BY MS. SEARS CODER: 20 Q. Good afternoon, Professor Lys. My name is Sally Sears 21 Coder, and I'm an attorney at Jenner & Block and represent 22 Comcast in this matter. 23 I'd like to start by talking for a few minutes about 24 your assignment and role in this case. 25 Now, you were retained by counsel for Viamedia, Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 66 of 171 PageID #:17212 Lys - cross 66 1 correct? 2 A. Correct. 3 Q. And the Kasowitz firm represented -- excuse me. 4 The Kasowitz firm actually was the firm who retained 5 you; is that right? 6 A. No. 7 Q. Kasowitz did not retain you? 8 A. No, Kasowitz did not retain me. 9 Q. But you first spoke with Kasowitz, correct? 10 A. That's correct. 11 Q. Okay. 12 And that was back early last year? 13 A. I don't recall the date, but it was way before June. It 14 may have been end of 2016. 15 Q. Okay. 16 And then -- 17 A. I got a call from Dean Pamphilis. 18 Q. Uh-huh. 19 A. And he told me that he had a case that he would like to 20 hire me for, details to follow. And a few weeks or months 21 later, I get a phone call from him and said -- and he said 22 that, unfortunately, they cannot represent Viamedia and so -- 23 but I was never hired or there was no contract. I didn't sign 24 a confidentiality agreement. 25 Q. Okay. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 67 of 171 PageID #:17212 Lys - cross 67 1 A. I didn't receive any data. 2 Q. Okay. 3 And, then, you have been working with Viamedia's 4 counsel Kellogg, Hansen, correct? 5 A. Yes. 6 Q. And your role in this case is to calculate damages, right? 7 A. Correct. 8 Q. And you've never offered an opinion in this case on 9 liability; is that right? 10 A. On liability, no, of course not. 11 Q. And now, in your first and second reports, you didn't 12 offer an opinion on causation, correct? 13 A. No. 14 Q. And you instead have the understanding that fact witnesses 15 will establish causation; is that right? 16 A. That is correct, yes. 17 Q. Okay. 18 And for your part, you reasonably assumed causation. 19 That was your assignment here; is that right? 20 A. Yeah. I don't understand why you put it in quotes; but, 21 yes. 22 Q. Okay. 23 24 25 A. No, no, no, I -- Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 68 of 171 PageID #:17212 Lys - cross 68 1 Q. 2 3 A. Correct. 4 Q. Okay. 5 6 7 8 A. Correct. 9 Q. 10 11 12 13 14 A. Vaguely, yes. 15 Q. Okay. 16 17 18 19 20 21 Q. And you spoke to Mark Lieberman and other members of 22 Viamedia management, correct? 23 A. It is correct, I did speak with them, yes. 24 Q. Okay. 25 And during your deposition -- and, Professor Lys, Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 69 of 171 PageID #:17212 Lys - cross 69 1 this is at Tab 5, Page 377, Line 2, if you'd like to read 2 along with me. 3 You explain -- 4 A. Could I find it? 5 Q. Sure. Go right ahead. 6 A. Which page? 7 Q. Tab 5, Page 377, starting at Line 2. 8 (Brief pause.) 9 BY THE WITNESS: 10 A. Yes. 11 BY MS. SEARS CODER: 12 Q. Let's actually start on the preceding page with a 13 question, Page 376. 14 15 16 17 18 Do you see that question? 19 A. Yes. 20 Q. 21 22 23 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 70 of 171 PageID #:17212 Lys - cross 70 1 2 3 Do you see that? 4 A. Yes. 5 Q. And that's what you testified to in your deposition? 6 A. Yes. 7 8 9 10 Q. Okay, but that's what you said in your deposition? 11 A. 12 13 14 MR. HO: Your Honor, could I just say for the record 15 that the answer does go on, for completeness sake. 16 MS. SEARS CODER: Yes, that's fine. And it's 17 reflected there in the record, because we'll be moving this 18 exhibit into evidence. 19 BY MS. SEARS CODER: 20 Q. During your deposition, Professor Lys, 21 22 23 24 25 A. I am not sure I understand what you're asking. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 71 of 171 PageID #:17212 Lys - cross 71 1 Q. Sure. 2 Do you want to take a look at Page 395 of your 3 transcript. 4 A. 5 6 7 8 9 Q. Okay. We'll get back to that -- 10 A. Okay. 11 Q. -- passage again. 12 A. Okay. 13 Q. But let's take a look at this one now, 395. 14 A. 395? 15 Q. Yes. 16 A. Okay. Which line? 17 Q. Let's start at Line 22 -- or, excuse me, 17 -- where the 18 question starts. 19 A. That's the last line of 395? 20 Q. Yes. 21 A. When assuming that -- 22 Q. Yes. 23 And the question is: 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 72 of 171 PageID #:17212 Lys - cross 72 1 2 3 4 5 Do you see that? 6 A. Yes, I do. 7 Q. Okay. 8 And that's what you did in this case. 9 10 A. Yes. 11 Q. Okay. 12 A. Let me just read -- 13 Q. I can read -- and we can read the rest of your answer, as 14 well. 15 16 17 18 19 20 21 22 23 24 25 Correct? Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 73 of 171 PageID #:17212 Lys - cross 73 1 A. Correct. 2 Q. Now, let's turn for a moment back to your methodology for 3 calculating damages. 4 Now, your second report is up in your binder at Tab 5 2. Can you please take a look at that. Just let me know when 6 you have that in front of you. 7 A. Okay. I'm there. 8 Q. Okay. So, let's look at Point I.B.1.b. of your report. 9 A. You're talking about Page 2? 10 Q. We should be on Page 4. It's Paragraph 25. 11 A. Paragraph 25. Okay. 12 THE COURT: It is Page 4. 13 THE WITNESS: Yes. 14 BY MS. SEARS CODER: 15 Q. Yes, sorry. Page 4, Paragraph 25. 16 Do you have that in front of you, sir? 17 A. Yes. 18 Q. Could you read Paragraph 25 for the record, please? 19 A. Aloud? 20 Q. Uh-huh. 21 A. Yes. 22 23 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 74 of 171 PageID #:17212 Lys - cross 74 1 2 3 4 5 6 7 8 9 10 11 Q. Okay. 12 And can you turn to Tab 44 in your binder, please? 13 A. This is Binder 2? 14 Q. Correct. 15 A. Yes. 16 Q. Okay. 17 And this is the publication proving antitrust 18 damages? 19 A. Yes. 20 Q. You have that in front of you? 21 A. Yes. 22 Q. Okay. 23 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 75 of 171 PageID #:17212 Lys - cross 75 1 2 3 4 5 6 A. Yes. 7 Q. Okay. 8 And that's the same standard that you applied in this 9 case, correct? 10 A. Yes. 11 Q. Okay. You can set that aside. 12 A. Okay. 13 Q. And as you explained in your reports, 14 15 16 17 A. Correct. 18 Q. Okay. 19 Now, do you agree with the ABA that the -- in 20 constructing the hypothetical but-for world, it's necessary to 21 isolate the effect of the violation on the plaintiff from the 22 effects of all other events? 23 A. Do I agree with that premise? 24 Q. Yes. 25 Do you agree with the ABA that isolating the effects Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 76 of 171 PageID #:17212 Lys - cross 76 1 of the conduct is a necessary step in computing antitrust 2 damages? 3 A. I would have to think about it. I mean, what I mean -- 4 what I understand you asking me is if I were king and I were 5 to design this, would I write it the same way. And I may or 6 may not. I just don't know. 7 Q. I see. 8 So, do I understand your testimony that you're not 9 opining or you're not stating whether you agree with what the 10 ABA says, but that's what you did here? 11 A. I think it's reasonable, but, you know -- I'm not quite 12 sure what the question is. Whether if I were to design this, 13 if I wrote a standard set for damages, would -- I would write 14 it this way. I'm not -- I think that's something that would 15 require deeper thought than I can do on the spot. 16 Q. Now, would you agree, Professor Lys, that if a damages 17 methodology in an antitrust case does not isolate the effect 18 of the violation on the plaintiff from the effects of other 19 events, that the methodology is not reliable? 20 A. Hard for me to answer kind of in a general sense. It 21 would be very useful if you gave me some concrete examples and 22 maybe I can zero in that way. 23 Q. Well, in particular, if a damages model doesn't isolate 24 the effects of a violation on the plaintiff from other things 25 that happen -- so, for example, from other lawful conduct; Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 77 of 171 PageID #:17212 Lys - cross 77 1 from poor customer service; from the plaintiff burning bridges 2 with its customers -- isn't it true that awarding measured 3 damages, then, would not place the plaintiff in the same 4 position that it would have been in but for the alleged 5 violation? 6 A. Well, so, there could be events, but I'm not sure these 7 events are for an economist to determine. 8 So, partly, like you mentioned the question of 9 burning bridges. If the conduct of the plaintiffs was 10 inappropriate -- you know, they simply were incompetent and 11 they lost the contract for that reason -- that's not something 12 that an economist is really equipped to determine. It's a 13 question of fact, whether is it the anticompetitive conduct or 14 the incompetence. 15 Let me put it this way: If Viamedia loses a 16 contract, it suffered damages. There's no question about 17 that. I think the question that I understand you asking, but 18 I may misunderstand, is, is whether the defendants are liable 19 for it. 20 So, let's say that Viamedia was simply incompetent 21 and it lost a contract. It suffered damages. I think it 22 would -- these are still damages. It just a question of 23 liability whether, in fact, it is your client who is liable 24 for them or whether, in fact, they should sue management for 25 incompetence or dereliction of duty, or what have you. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 78 of 171 PageID #:17212 Lys - cross 78 1 So, the damage approach that I use would not be 2 changed as such. It's just the question is who cuts the 3 check. 4 Q. Okay. 5 Well, Professor Lys, let's turn now to one of the 6 fundamental assumptions which forms the basis for all your 7 damage calculations. 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 A. Yes. 23 Q. Okay. 24 Now, Professor Lys, before we got to the expert phase 25 of this case, the parties and the Court spent a lot of time Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 79 of 171 PageID #:17212 Lys - cross 79 1 litigating Viamedia's refusal-to-deal claim; and, you're aware 2 that the Court has issued two orders addressing Viamedia's 3 refusal-to-deal claim, correct? 4 A. Only vaguely. I -- I think it's hearsay what I know. 5 Q. 6 7 8 A. Yes, but, you know, I -- I don't think I rely anywhere on 9 -- on -- this. 10 Q. Okay. 11 But you're aware that the -- my only question is: 12 You're aware that the orders exist, correct? 13 A. I have heard that, yes. 14 Q. Okay. 15 16 17 18 19 20 21 22 23 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 80 of 171 PageID #:17212 Lys - cross 80 1 2 3 4 5 6 Q. Okay. 7 And, Professor -- 8 A. So, for example, if -- I'm sorry for interrupting. 9 Q. No, go ahead. I'm sorry. I thought you were finished. 10 A. Assume hypothetically that somehow you conclude that this 11 resulted because of dereliction of duty, fiduciary 12 responsibility, duty of care of Mr. Lieberman. I can very 13 well imagine that there would be a subsequent lawsuit suing 14 Mr. Lieberman for violation of his duty of care, and I would 15 be called as damage expert and I would arrive at the same 16 number. 17 So, it's not the damage computation per se that 18 depends on this, it's just simply who is responsible for them. 19 Q. Okay. 20 But my -- 21 A. And that wasn't my assignment. 22 Q. 23 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 81 of 171 PageID #:17212 Lys - cross 81 1 2 3 4 5 6 7 8 Q. Now, during your deposition, you were asked some 9 questions -- can you look at Page 99 to 100 of your 10 deposition, please? 11 A. 99? 12 Q. Yes. 13 A. And that's which tab, again? 14 Q. Tab 3. No, excuse me. Tab 5. 15 A. Tab 5. Okay. I'm sorry. 16 And page, again? I'm sorry. 17 Q. Sure. 18 A. I'm focusing on one thing at a time. 19 Q. No, I'm on Tab 5, Page 99. 20 A. Page 99. 21 (Brief pause.) 22 BY MS. SEARS CODER: 23 Q. Just let me know when you have that in front of you. 24 A. I am on Page 99. 25 Which line? Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 82 of 171 PageID #:17212 Lys - cross 82 1 Q. Line 77. 2 So, you were asked -- 3 A. Line 77? 4 Q. Oh, I'm sorry. I misspoke. 17. 5 A. Oh, I'm sorry. Yeah, okay. 6 Q. Are you with me? 7 A. Okay. 8 Q. Okay. 9 10 11 12 13 That's what we just talked about, correct? 14 A. Yes, exactly. 15 Q. And you did not? 16 A. Yes. 17 Q. You just testified here today you did not. 18 19 20 21 22 Do you see that? 23 A. Yes. 24 Q. Okay. 25 And that's the answer you gave during your Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 83 of 171 PageID #:17212 Lys - cross 83 1 deposition, correct? 2 A. Yeah. 3 I don't think that's accurate. I probably misspoke. 4 I think the correct answer to this question is the one I just 5 gave you now. 6 7 8 9 10 But, again, this -- in my mind, I just don't see how 11 this goes to damages. This goes to liability. But maybe I'm 12 missing something. 13 Q. Let's turn to a different topic now. 14 15 16 A. Correct. 17 Q. Now, in your second report -- now, you had issued the 18 first report, correct? 19 A. Yes. 20 Q. 21 22 A. Correct. 23 Q. And, then, Dr. Israel issued his report -- his rebuttal 24 report -- correct? 25 A. Correct. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 84 of 171 PageID #:17212 Lys - cross 84 1 Q. And, then, the day before your deposition, you issued your 2 second report, correct? 3 A. Correct. 4 Q. 5 6 7 8 9 10 11 12 13 14 Q. Okay. 15 A. But, again, Dr. Israel pointed out to some errors, partly 16 mine, partly from the accounting system; and, I corrected 17 that. My amended report simply reflected things that I think 18 is correct. I mean, we're not going to dispute over something 19 that's factually correct. 20 Q. Okay. 21 22 23 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 85 of 171 PageID #:17212 Lys - cross 85 1 2 A. From memory. 3 Q. Yeah. 4 A. It is whatever it is. 5 Q. And we can look at your report if you need to refresh 6 memory. 7 A. I -- 8 Q. That's no problem. 9 10 11 12 Q. -- correct? Okay. 13 14 15 16 17 18 19 20 A. Correct. 21 Q. Okay. 22 Now, let's take those two management statements one 23 at a time. 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 86 of 171 PageID #:17212 Lys - cross 86 1 2 3 4 5 6 A. Correct. 7 Q. -- is that right? 8 A. That, but there's also a second element. I also asked 9 them how did it manifest itself. And they said that they 10 were -- now I have to remember. 11 12 13 14 I'm talking from memory from those discussions. 15 16 17 18 19 20 21 Q. Okay. 22 23 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 87 of 171 PageID #:17212 Lys - cross 87 1 2 Q. Okay. 3 So, you looked at Viamedia's financials and you 4 talked to Viamedia's management, correct? 5 A. Yes. 6 Q. Now -- 7 A. And I looked at the financial, yes. 8 Q. Okay. 9 And you did not do a solvency analysis of Viamedia? 10 A. No. 11 Q. And you didn't perform a liquidated analysis either? 12 A. No. 13 14 15 Q. Okay. 16 But -- and that's information that post-dates the 17 date of damage, correct? 18 A. Well, it takes a while for this thing to work. Remember 19 that -- 20 Q. I understand. My only question is: That's information 21 that post-dates the date of damage, correct? 22 A. Post-dates -- yes. 23 Q. Okay. 24 And, now, you described in your deposition that -- 25 A. But just because I spoke -- I'm sorry. I really Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 88 of 171 PageID #:17212 Lys - cross 88 1 apologize, Ms. Sears. 2 Q. Uh-huh. 3 A. I think it's important that -- I didn't rely on that 4 information in my but-for analysis. This was simply a review 5 that I did to make sure that what management told me -- 6 -- that 7 actually I saw some data. That's something I do as a matter 8 of my training. And I look -- 9 THE COURT: Professor, I have been giving you some 10 leeway here, but -- 11 THE WITNESS: I'm sorry. 12 THE COURT: -- she is asking specific questions and 13 you are going way beyond what she is asking. 14 THE WITNESS: I'm sorry. 15 THE COURT: She did not suggest that you relied on 16 this. She did not ask that. 17 We have been here a while already. I want to finish 18 this tonight. 19 THE WITNESS: Okay. 20 THE COURT: So, please just listen to what she is 21 asking and answer her question. If Mr. Ho wants to come back 22 and ask you a follow-up, he certainly will. But almost every 23 question now you are giving additional information that is not 24 responsive to the question. 25 So, just listen to what she is asking. And, again, Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 89 of 171 PageID #:17212 Lys - cross 89 1 if she wants to ask a follow-up, she will; or, if Mr. Ho wants 2 to come back on redirect, he will, as well. 3 THE WITNESS: I apologize, your Honor. I will try to 4 do better. 5 THE COURT: Thank you. 6 BY MS. SEARS CODER: 7 Q. Now, Professor Lys, as you described in your deposition, 8 9 10 11 12 A. Correct. 13 Q. Now, 14 and let's 15 turn just to the second management statement that you 16 mentioned -- 17 18 19 A. Correct. 20 Q. 21 22 23 24 A. Correct. 25 Q. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 90 of 171 PageID #:17212 Lys - cross 90 1 A. That's correct. 2 Q. 3 4 5 6 A. That's correct. 7 Q. Okay. 8 And just so it's clear -- 9 A. Again, some -- your Honor, some of these answers are 10 literally true but misleading. 11 I understand. 12 THE COURT: Again, your job is to answer the 13 questions that are posed. 14 THE WITNESS: I'm doing that. 15 THE COURT: If Mr. Ho wants to come back, he 16 certainly can do that. And if it is a "did you or did you not 17 do this" and it is a "Yes" or "No," I do not know how that is 18 misleading. If you think there is some legal significance or 19 economic significance to that, then Mr. Ho can come back and 20 ask that. 21 BY MS. SEARS CODER: 22 Q. 23 24 25 A. Correct. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 91 of 171 PageID #:17212 Lys - cross 91 1 Q. 2 3 A. Correct. 4 Q. 5 A. I don't know that. 6 Q. Okay. 7 8 9 10 11 12 A. That was an error. 13 Q. 14 15 16 17 A. I accepted what -- I'm not quite sure what you're asking. 18 Q. 19 20 A. Correct. 21 Q. Okay. 22 23 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 92 of 171 PageID #:17212 Lys - cross 92 1 2 3 A. I don't know. 4 Q. We can't tell that from your model, can we? 5 A. I know how much they lost from losing this contract. I 6 didn't proration it into the subsec- -- 7 THE COURT REPORTER: Say again, please. 8 BY THE WITNESS: 9 A. I didn't apportion it to any subcategories. 10 BY MS. SEARS CODER: 11 Q. 12 13 14 15 16 Q. Okay. 17 18 19 20 A. That's what he says, yes. 21 Q. Right. 22 And I'd like to direct your attention to what's 23 marked as Exhibit 14, Tab 14, in that first binder there. 24 Just let us know when you have that in front of you, please, 25 sir. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 93 of 171 PageID #:17212 Lys - cross 93 1 A. I have it. 2 Q. Okay. 3 4 5 6 7 8 A. Correct. 9 Q. Okay. 10 11 12 13 14 15 A. I do. 16 Q. Okay. 17 18 19 20 21 A. I believe that's true, yes. 22 Q. Okay. 23 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 94 of 171 PageID #:17212 Lys - cross 94 1 2 3 4 BY THE WITNESS: 5 A. Okay. 6 BY MS. SEARS CODER: 7 Q. Okay. 8 9 10 A. Where are you? On Page 29? 11 Q. Yeah. 12 A. Okay. 13 Q. Section -- 14 A. (c)? 15 Q. Yes. 16 Do you see it there? 17 A. Yes, I see it. 18 Q. Okay. 19 20 21 22 23 24 A. Yes. 25 Q. Okay. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 95 of 171 PageID #:17212 Lys - cross 95 1 2 3 MS. SEARS CODER: Well, let me strike that and ask a 4 different question. 5 BY MS. SEARS CODER: 6 Q. 7 8 9 Q. Okay. 10 11 12 13 A. Correct. 14 Q. Okay. 15 16 17 18 A. I believe that's true, yes. 19 Q. Okay. 20 21 22 A. I don't remember. 23 Q. Had you -- 24 A. I -- the answer is probably not, but -- 25 Q. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 96 of 171 PageID #:17212 Lys - cross 96 1 2 A. I don't recall seeing it, no. 3 Q. Now, even though Dr. Israel issued a rebuttal report that 4 5 6 7 A. Yes. 8 Q. 9 10 A. Had I, what? 11 Q. 12 13 A. Did I or had -- if I had, I would have done something 14 differently? I don't understand the question. 15 Q. My question just is: 16 17 A. 18 are you referring to the supplemental 19 report? 20 Q. No, I'm referring to the report that was dated January, 21 2018. The one that you -- 22 A. I did not. 23 Q. -- served the day before your deposition. 24 A. I did not. 25 Q. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 97 of 171 PageID #:17212 Lys - cross 97 1 2 A. I don't recall seeing it. 3 Q. Okay. 4 A. 5 6 7 8 Q. Now, I'd like to now direct your attention to the second 9 binder, Tab 30. And just for the interest of time, why don't 10 you take a look at Tabs 30, 31 and 32. 11 A. I have Tab 30. 12 Q. Okay. 13 14 15 16 A. Yes. 17 Q. 18 19 20 A. Yes. 21 Q. 22 23 24 Q. Do you see that? 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 98 of 171 PageID #:17212 Lys - cross 98 1 2 3 4 5 6 Do you see that? 7 A. No, I didn't read this. 8 Q. Okay. 9 I'll represent to you that that's what the letters 10 say for purposes of this exam. Okay. 11 12 13 14 15 16 A. I believe not, no. 17 Q. 18 19 A. No. 20 Q. 21 22 23 A. I am not sure I did. 24 Q. Okay. 25 Why don't we take a look at Page 428 of your Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 99 of 171 PageID #:17212 Lys - cross 99 1 deposition and see if that refreshes your recollection, 2 please. That's Tab 5. 3 A. Where? 4 Q. Tab 5 in the first binder, Page 428. Please read 5 paragraph -- excuse me, Lines 1 through 16, and 6 7 8 A. Which -- I am sorry, you're going too fast. 9 Q. Sure. Let me slow down. 10 First binder, Tab 5. 11 A. I'm on Tab 5. 12 Q. Okay. 13 Page 428, starting at the top of the page, Line 1. 14 And, actually, for context, you may want to read Page 15 427, as well, to help refresh your recollection. 16 BY THE WITNESS: 17 A. Okay. 18 BY MS. SEARS CODER: 19 Q. Okay. 20 A. That refreshes it. 21 Q. Okay. 22 23 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 100 of 171 PageID #:17212 Lys - cross 100 1 2 Q. Okay. 3 And Mr. Lieberman was one of the folks at Viamedia 4 you spoke with, correct? 5 A. Correct. 6 Q. 7 A. I don't recall. I think at that time it was -- I don't 8 know whether the CFO was present. I can't -- I would have to 9 go back to my time logs and talk to my associate. 10 Q. Okay. 11 So, we'll just focus on Mr. Lieberman, then. 12 A. Yes. That's for sure. 13 Q. Okay. 14 15 16 A. No. 17 Q. 18 19 A. No. 20 Q. 21 22 A. I have no way of knowing that. 23 Q. Okay. 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 101 of 171 PageID #:17212 Lys - cross 101 1 A. 2 3 4 5 A. How can I talk to him about something I've not seen? I 6 mean, this is -- 7 Q. Well -- 8 A. I'm losing the logic here. 9 The answer is no. The short -- 10 Q. Okay. 11 A. The first question is no. But I just don't see the logic. 12 Q. I will represent it's a logical question and move on. We 13 don't need to necessarily debate about that. 14 15 16 A. No, he was not, no. 17 Q. 18 19 A. I don't know that. 20 Q. 21 22 A. Yeah. I didn't know that at the time. 23 Q. Okay. 24 But my only question is: Was Mr. Lieberman at 25 Viamedia in 2013? Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 102 of 171 PageID #:17212 Lys - cross 102 1 A. No, not -- 2 Q. He started in 2014? 3 A. Correct. 4 Q. Okay. 5 So, what possible insight, then, could Mr. Lieberman 6 shed on this issue? 7 A. 8 9 10 11 12 Again, this is a question of fact. This is not 13 something that an economist brings anything to the table. 14 Q. Okay. 15 16 17 18 A. Yes. 19 Q. 20 21 22 23 24 A. Correct. 25 Q. Okay. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 103 of 171 PageID #:17212 Lys - cross 103 1 Now, at your deposition -- 2 MS. SEARS CODER: Or let me strike that. 3 BY MS. SEARS CODER: 4 Q. 5 6 7 A. I issued no -- 8 MS. SEARS CODER: Let me strike that. I'm sorry, I 9 misspoke. That was an imprecise question. 10 BY MS. SEARS CODER: 11 Q. 12 13 14 A. I simply don't know how to answer that. I issued no more 15 damage numbers after Israel. So -- 16 Q. Well -- and you didn't delete any either, after your 17 second report, correct? 18 A. It was a question of fact. It was not a question of 19 analysis. And there was no report that I issued about 20 damages. So, it was not to me to agree or disagree. And even 21 if they were to me, I didn't issue a report. 22 So, I simply don't know what mechanism I could have 23 had, 24 25 Well, it's in my report. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 104 of 171 PageID #:17212 Lys - cross 104 1 2 It's all in my report. 3 Q. Okay. 4 Now -- 5 A. It's a question of fact. It's not a question of analysis. 6 Q. But in assessing Viamedia management's assumptions about 7 how many representation agreements Viamedia would have won in 8 the but-for world, including agreements with you 9 didn't consider causation, but you didn't want to include 10 contracts that didn't "pass the laughability test," correct? 11 A. Correct, yes. 12 Q. 13 14 15 16 17 A. I have no opinion on that. 18 19 20 21 22 23 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 105 of 171 PageID #:17212 Lys - cross 105 1 2 3 4 Q. Now, let me direct your attention to your deposition 5 transcript, again, Exhibit 5, Page 427. 6 A. 427? 7 Q. Yes. 8 Just let me know when you have that in front of you. 9 A. We are on Page 427. 10 Q. You have it still in front of you? 11 A. Yes. 12 Q. I can't see behind the desk. I didn't know if you closed 13 it. 14 15 16 17 18 19 20 21 22 23 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 106 of 171 PageID #:17212 Lys - cross 106 1 2 Now, that was the question and answer, correct? 3 A. I think we just discussed this. 4 Q. I understand. I'm laying the foundation for a separate 5 line of questioning. 6 A. Okay. Yes. 7 Q. I just wanted to redirect you back to that testimony. 8 A. Yes. 9 Q. Okay. 10 11 12 13 A. That's marked "highly confidential." 14 Q. 15 A. I don't know that. 16 Q. Well, let me direct you to a passage in your deposition on 17 Page 151. 18 A. My deposition? 19 Q. Yes, your deposition, Tab 5, Page 151. 20 A. Okay. 21 Q. Now, there's a question starting at Line 2. 22 Do you see that? 23 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 107 of 171 PageID #:17212 Lys - cross 107 1 2 3 4 5 6 7 8 9 10 11 12 13 A. Yes. 14 Q. And the answer: 15 16 17 18 19 20 21 22 23 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 108 of 171 PageID #:17212 Lys - cross 108 1 A. No. 2 Q. You did not? 3 A. I did not talk to Mr. Israel about the -- 4 Q. 5 6 A. Yes. 7 MS. SEARS CODER: I'll strike that. So -- okay. 8 BY THE WITNESS: 9 A. Yes, of course. 10 BY MS. SEARS CODER: 11 Q. And the -- 12 A. I testified already previously in my direct. 13 Q. 14 15 A. Yes. 16 Q. And do you know one way or another whether Mr. Lieberman 17 is one of the types of people under the protective order who 18 may have access to highly confidential information? 19 MR. HO: Objection, your Honor. I think counsel is 20 trying to use this deposition -- this testimony as a sort of 21 discovery deposition on a discovery motion. It's pretty far 22 afield from the Daubert issue. 23 THE COURT: What is the relevance of that question? 24 MS. SEARS CODER: I will just strike it and move on. 25 THE COURT: Sustained. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 109 of 171 PageID #:17212 Lys - cross 109 1 MS. SEARS CODER: That's not a problem. 2 BY MS. SEARS CODER: 3 Q. Professor Lys -- 4 A. Yes. 5 Q. 6 7 You explained earlier today that the price the MVPD 8 would pay in the real world -- in, excuse me, the but-for 9 world is determined by a rev share, correct? 10 A. Correct. 11 Q. And from the ad rep firm's perspective, the higher your 12 rev share, the lower your profits, correct? 13 A. From the representation firm, like Viamedia? 14 Q. Yes. 15 A. Correct. 16 Q. Okay. 17 18 19 20 21 A. That's not correct, no. 22 Q. 23 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 110 of 171 PageID #:17212 Lys - cross 110 1 2 3 4 Q. Okay. Let me come at this a different way. 5 6 7 MS. SEARS CODER: Let me strike that. 8 BY MS. SEARS CODER: 9 Q. 10 11 12 13 14 15 16 17 A. That -- this is verbatim. But we had a long discussion 18 and explained that there's a disagreement between your 19 interpretation and what actually I understood this to be. 20 Q. I'm just asking, this is what you said in your report, 21 correct? 22 A. Correct. 23 Q. Okay. 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 111 of 171 PageID #:17212 Lys - cross 111 1 A. Correct. 2 Q. Okay. 3 4 5 6 7 A. I believe that's true, yes. 8 Q. Okay. 9 Now -- 10 A. I'm talking from memory. I -- but I don't see why that -- 11 Q. Okay. If you'd like to look, it's totally fine. 12 A. No, that's fine. I'll -- I'm willing to -- this is 13 certainly my recollection. 14 Q. Okay. 15 16 17 18 A. Yes. 19 Q. Okay. 20 21 22 A. He did not. 23 Q. Okay. 24 It was just based on what he believed to be true? 25 A. Yeah. Well, believed. I mean, he's a market participant, Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 112 of 171 PageID #:17212 Lys - cross 112 1 right? So, you know, this is not something that he 2 represented to me he just came up with. 3 Q. 4 5 A. Correct. 6 Q. 7 8 A. Yes. 9 Q. Okay. 10 11 12 A. Yes. 13 Q. Okay. 14 15 16 A. I believe that's true; but, again, it's a question -- if 17 this is import- -- the date is important, we can go and check. 18 Q. Okay. 19 But it's after 2012, correct? 20 A. Correct. 21 Q. Okay. 22 Now, both of those documents post-date your damages 23 date, correct? 24 A. Well, not for -- not for these categories. I have 25 different damage dates for each category. I then discount Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 113 of 171 PageID #:17212 Lys - cross 113 1 everything back to May, 2012, but the damage -- if you look at 2 my, I think, Exhibit 2 -- 3 Q. Uh-huh. 4 A. -- you can see that each category has a different date. 5 Q. Okay. Understood. 6 7 8 9 10 A. I don't know. If they aren't, it's an omission. 11 Q. Okay. Well, you can take a look in your -- 12 A. No, no, I -- if they aren't, I'm telling you it's an 13 omission. They should have been. I saw them. I relied upon 14 them. 15 Q. Now, isn't it true, Professor Lys, that you testified 16 during your deposition that you -- 17 MS. SEARS CODER: Let me strike this. 18 BY MS. SEARS CODER: 19 Q. 20 21 22 23 24 25 Do you remember that? Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 114 of 171 PageID #:17212 Lys - cross 114 1 A. Yes. 2 Q. 3 4 5 6 7 8 9 Q. Okay. 10 Let's take a look at again Tab 5, Page 229 of your 11 deposition, please. 12 (Brief pause.) 13 BY THE WITNESS: 14 A. Yes, I'm there. 15 BY MS. SEARS CODER: 16 Q. Starting at Line 8 on Page 229: 17 18 19 20 21 22 23 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 115 of 171 PageID #:17212 Lys - cross 115 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 And that's the answer and the testimony you gave 16 during your deposition, correct? 17 A. Correct. 18 Q. Now, after your first and second reports were issued -- 19 MS. SEARS CODER: Or let me strike that. 20 BY MS. SEARS CODER: 21 Q. 22 23 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 116 of 171 PageID #:17212 Lys - cross 116 1 A. Correct. 2 Q. And then after that, you were deposed, right? 3 A. Yes. 4 Q. 5 6 7 8 A. I describe it differently from, what? I'm not sure what 9 you're asking. 10 MS. SEARS CODER: Let me strike the question and ask 11 a different question. 12 BY MS. SEARS CODER: 13 Q. 14 15 16 A. Yes. 17 Q. Okay. 18 19 20 21 22 23 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 117 of 171 PageID #:17212 Lys - cross 117 1 2 3 4 5 6 7 8 9 10 11 12 13 14 A. Yeah. 15 Q. Okay. 16 And equilibrium's an economic concept, correct? 17 A. Yes. 18 Q. And economists use equilibrium to refer to the point at 19 which the supply curve and the demand curve meet and intersect 20 for a particular market, correct? 21 A. And that's my model. That is my model. 22 That time series model that I described earlier, your 23 Honor. 24 Q. Now, to be clear, you're not, yourself, offering any 25 opinion on what the market equilibrium is for the revenue Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 118 of 171 PageID #:17212 Lys - cross 118 1 shares in this case, correct? 2 A. No, I am. I am. That's the model. That's the model 3 that's embedded in the spreadsheets. That's exactly the 4 point. 5 Q. Well, you weren't assigned to study the issue of what the 6 market price would be in the but-for world, were you? 7 A. I had to have a number. 8 Q. Okay. 9 And you got that number from Viamedia management, 10 correct? 11 A. No, I did not. I just showed you. I used the time series 12 model to forecast that number. In financial economics, that 13 model is used a lot. It's a stan- -- the random walk model 14 with a drift is a standard financial economics model of 15 predicting prices. 16 Q. But in terms of the revenue share number that you're using 17 and plugging into the model, you got that number from Viamedia 18 management, correct? 19 A. No, I did not. 20 Q. 21 22 23 24 Q. Do you still have your slides -- 25 A. Yes, I do. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 119 of 171 PageID #:17212 Lys - cross 119 1 Q. -- from your counsel in front of you? 2 Will you look at Page 20, please, Slide 20, 3 Categories 3 and 4, 4 A. Page 20, you say? 5 Q. Yes. 6 A. Yes. 7 Q. Just let me know when you have that in front of you. 8 A. I have it. I do. 9 Q. Okay. 10 11 12 A. Yes. 13 Q. 14 A. Yes. 15 Q. And you -- 16 A. No, no, no, no. No, it's not. 17 Q. Okay. 18 19 20 21 Q. I'm sorry, I missed your answer. 22 A. 23 24 (Brief pause.) 25 BY MS. SEARS CODER: Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 120 of 171 PageID #:17212 Lys - cross 120 1 Q. Professor Lys, could you please turn to your second 2 report, Tab 2. 3 A. That's Tab 2? 4 Q. Yes. 5 A. Which paragraph? 6 Q. 247, Page 70 -- well, I'm looking at the redline, so don't 7 quote me on the page number. Paragraph 247. 8 A. I am there. 9 Q. Okay. 10 Can you read for the record the paragraph -- portion 11 of Paragraph 247 that starts at 12 A. 13 14 15 16 17 18 19 20 21 Do you want me to continue or -- 22 Q. No, that's fine. 23 24 25 A. Yeah, but that's -- this is what it is. A random walk is Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 121 of 171 PageID #:17212 Lys - cross 121 1 PT equals PT minus 1, plus delta, plus an error term that has 2 an expected value of zero. That's exactly a random walk with 3 a drift, and that's what it is. 4 Q. Let's take a look at Paragraph 224 of your report. 5 A. 224. 6 Okay. Which -- the entire paragraph? 7 Q. You have that in front of you? 8 A. I have -- I do, yes. 9 Q. Okay. 10 And in Paragraph -- this is under a section titled, 11 correct? 12 A. Yes. 13 Q. Okay. 14 And -- 15 A. 16 17 And in Paragraph 224, you state, 18 19 20 A. Correct. 21 Q. Now, Professor Lys, you testified earlier today that the 22 price in the but-for world is based on what's known or 23 knowable at the date of damage, correct? 24 A. Correct. In the but-for world, yes. 25 Q. In the but-for world. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 122 of 171 PageID #:17212 Lys - cross 122 1 And let's take a look at just a few documents that 2 predate the May 31st, 2012, damages date? 3 A. Okay. 4 Q. Okay. 5 A. Is it in my binder? 6 Q. No. I'm going to hand this up to you. 7 MR. HO: Your Honor, we have a procedural objection. 8 It was our understanding the cross exhibits were to be 9 disclosed on the joint report. As the joint report states, 10 defendants disagreed with that; but, we lodged an objection to 11 using new documents. We haven't seen any of these documents 12 before. 13 THE COURT: Do you want to respond? 14 MS. SEARS CODER: Sure. 15 Well, first, this is cross-examination and there's 16 generally not a duty to disclose documents that you're not 17 moving into evidence and just using for cross-exam or 18 impeachment purposes. 19 And, second of all, we, as Mr. Ho knows, corresponded 20 with the Court's clerk on this very issue and was advised that 21 that was, in fact, the rule. 22 THE COURT: The objection is overruled. 23 There is no requirement to turn over in advance 24 materials for cross-examination, especially it sounds like 25 this is going to be used for impeachment purposes. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 123 of 171 PageID #:17212 Lys - cross 123 1 There is no requirement in the rules or in my 2 standing order for that. 3 MR. HO: Thank you, your Honor. 4 MS. SEARS CODER: I'm going to hand up to the Court 5 and the witness a copy of -- 6 (Document tendered to the Court and witness.) 7 THE WITNESS: Thank you. 8 BY MS. SEARS CODER: 9 Q. Now, do you have that in front of you, sir? 10 11 12 A. Yes. 13 Q. Okay. 14 15 16 Do you see that? 17 A. Correct. 18 Q. 19 20 21 22 Q. Okay. 23 But you didn't know that -- 24 A. No. 25 Q. -- before now? Okay. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 124 of 171 PageID #:17212 Lys - cross 124 1 Please direct your attention to Page 523. 2 A. Page 5- -- 3 THE COURT: Bates number 523. 4 MS. SEARS CODER: Bates number at the bottom -- thank 5 you -- 523. 6 BY MS. SEARS CODER: 7 Q. It should say "Exhibit 2" at the top. 8 A. I am there. 9 Q. Do you have that in front of you, sir? 10 A. Page 523, I do. 11 Q. Yes. 12 13 14 A. Correct. 15 Q. And let's now look back at Page Bates No. 503. 16 A. 503? 17 Q. Yes. 18 And I'll direct your attention to 19 20 A. Yes. 21 Q. Do you see that? 22 A. Yes. 23 Q. Okay. 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 125 of 171 PageID #:17212 Lys - cross 125 1 Do you see that? 2 A. I see that. 3 Q. Okay. 4 And had you seen this document prior to issuing your 5 reports? 6 A. No. I don't think it's pertinent, but the answer is no. 7 Q. We'll just set aside our opinions about the relevance of 8 the material. The only question is had you seen this 9 before -- 10 A. No. 11 Q. -- and you haven't. Okay. 12 I'm going to hand you another document. 13 (Document tendered to the Court and witness.) 14 BY MS. SEARS CODER: 15 Q. For the record this is 16 It has two Bates numbers at the 17 bottom. So, I'll use the lowest number for the record. 18 THE COURT: Could you actually mark these with an 19 exhibit number, please -- 20 MS. SEARS CODER: Sure. 21 THE COURT: -- for the record. I do not care if you 22 handwrite it. 23 MS. SEARS CODER: Sure. 24 THE COURT: That will be cleaner. 25 MS. SEARS CODER: We'll mark this Defendants' Exhibit Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 126 of 171 PageID #:17212 Lys - cross 126 1 2 and the preceding document Defendants' Exhibit 1. 2 THE COURT: Thank you. 3 MS. SEARS CODER: Sure. 4 BY MS. SEARS CODER: 5 Q. 6 7 Do you see that? 8 A. Yes. 9 Q. Okay. 10 11 Do you see that? 12 A. 13 Q. Okay. 14 Let's look at the page that is Bates numbered 15 17731771 at the bottom. 16 A. 3177 and then? 17 Q. At the bottom. 18 THE COURT: 1. 19 BY MS. SEARS CODER: 20 Q. It's Page 20 of the actual agreement, sir, Schedule A. 21 A. Okay. 22 Q. 23 24 25 Do you see that? Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 127 of 171 PageID #:17212 Lys - cross 127 1 A. Yeah. 2 Q. And now let's look to Page 7 of the contract numbering. 3 A. Page 7? 4 Q. 5 6 A. Yes. 7 Q. Okay. 8 9 10 A. Yes. 11 Q. Okay. 12 For the sale of -- 13 A. But this is market. I mean, we're not talking -- both of 14 these documents do neither address Chicago, Detroit, Hartford. 15 I don't see the relevance of that. 16 Q. Okay. Again, sir, I appreciate that you may disagree with 17 me on the relevance, and your counsel can argue that or you 18 can talk about it later. 19 My only question is: 20 21 22 23 A. That's what it reads. I don't know what it refers to; 24 but, yes. 25 Q. Okay. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 128 of 171 PageID #:17212 Lys - cross 128 1 And you hadn't seen this document or included it in 2 your -- 3 A. No. 4 Q. -- report? 5 So, in the interest of time, Professor Lys, is it 6 fair to say, then, you didn't consider any representation 7 agreements predating May, 2012, and the revenue shares 8 contained in those rev -- in those agreements outside of 9 Detroit and Chicago when you issued your report? 10 A. And Hartford. 11 Q. And Hartford. Okay. 12 A. And -- and -- Yes. 13 Q. Okay. Thank you. 14 Let's shift now and talk about some of the inputs to 15 your damages model. 16 Now, in calculating damages, you relied on a number 17 of assumptions provided by Viamedia management, correct? 18 A. If you would specify what you mean by that, I could answer 19 it more precisely. 20 Q. Sure. 21 So, why don't I run through some topics that -- and 22 facts and assumptions that Viamedia management provided you, 23 and then we'll talk just about a few of those in a little more 24 detail. Okay? 25 A. Okay. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 129 of 171 PageID #:17212 Lys - cross 129 1 Q. 2 3 4 5 A. I don't recall that. It's possible. I simply can't 6 recall that. 7 Q. Okay. 8 And you're assuming in the but-for world that 9 Viamedia would have access to those Interconnects, correct? 10 A. 11 12 13 14 15 16 A. Correct. 17 Q. Okay. 18 A. Was paying historically and would pay, yes. 19 Q. I'm sorry, I could not hear. 20 A. Was paying historically up to that point and would pay in 21 the future, yes. 22 Q. 23 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 130 of 171 PageID #:17212 Lys - cross 130 1 A. Correct. 2 Q. Okay. 3 4 5 6 A. Correct. 7 Q. Okay. 8 And -- 9 A. But we had a detailed discussion about that. 10 Q. 11 12 13 14 A. Could you repeat your question? It's so broad. You know, 15 I'm hesitant to miss something. 16 Q. Sure. 17 As part of -- 18 MS. SEARS CODER: Let me strike that. 19 BY MS. SEARS CODER: 20 Q. 21 22 23 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 131 of 171 PageID #:17212 Lys - cross 131 1 2 3 4 5 6 7 8 9 A. Correct, yes. 10 Q. 11 12 13 A. Yes. 14 Q. 15 16 17 A. Correct. 18 Q. 19 20 21 A. Correct. 22 Q. 23 24 A. Correct. 25 Q. Okay. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 132 of 171 PageID #:17212 Lys - cross 132 1 2 3 4 A. Yes. 5 Q. 6 7 8 A. Correct. 9 Q. 10 11 12 A. It's in my model, yes. Yes. 13 Q. 14 15 16 A. I believe that's true, but we can verify it. 17 Q. 18 19 A. No. 20 Q. Correct? 21 A. It's in 22 23 Q. Okay. 24 But let's take a look at Page 401 of your deposition, 25 Tab 5. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 133 of 171 PageID #:17212 Lys - cross 133 1 A. Which page? 2 Q. 401. 3 A. 401. Thank you. 4 Q. Do you have that in front of you? 5 A. I am turning pages. 6 Q. Okay. 7 (Brief pause.) 8 BY MS. SEARS CODER: 9 Q. Do you have that in front of you now, sir? 10 A. Yes. 11 Q. Okay. 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. HO: Your Honor, again, I just ask for Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 134 of 171 PageID #:17212 Lys - cross 134 1 completeness that the subsequent Q and A be entered into the 2 record. 3 THE COURT: I have it. So, in the interest of time, 4 I will certainly read it. 5 MR. HO: Thank you, your Honor. 6 BY MS. SEARS CODER: 7 Q. Okay. At your deposition, Professor Lys, you testified 8 that -- 9 A. It says -- by the way, it says how -- it says right here. 10 Q. If I'm missing something, I apologize. I'm not intending 11 to omit anything. 12 A. Look at Line 15 on 402. We're talking about it. 13 Q. For purposes -- I just don't -- I'm going to move on; and, 14 then, if time permits and we want to, we can come back to 15 this. 16 17 18 19 A. Yes. 20 Q. And that they told you that 21 except for this issue with the Interconnect, correct? 22 A. Correct. 23 Q. Okay. 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 135 of 171 PageID #:17212 Lys - cross 135 1 2 3 4 5 A. No, they didn't instruct me to assume that at all. 6 Q. Okay. So, let me rephrase it. 7 8 9 10 11 12 A. Correct. 13 Q. Okay. 14 15 16 17 A. I -- it possible. I don't remember that computation. I 18 don't believe I did it. 19 20 21 22 23 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 136 of 171 PageID #:17212 Lys - cross 136 1 2 3 A. Correct. 4 Q. Okay. 5 6 7 8 9 10 11 12 13 14 15 16 17 MS. SEARS CODER: I'm just going to check my notes 18 but I think I'm at the end here. 19 THE COURT: Okay. 20 (Brief pause.) 21 BY MS. SEARS CODER: 22 Q. Actually, Professor Lys, I'm going to ask just a couple 23 questions about your compensating differences analysis or 24 opinion that you talked about today here. Okay? 25 A. I did not quantify today the compensating differences. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 137 of 171 PageID #:17212 Lys - cross 137 1 Q. 2 3 4 5 A. No. 6 Q. No? 7 A. No. 8 Q. Okay. 9 10 11 12 13 Q. Okay. 14 So, your -- thank you for clarifying that for me. 15 16 17 18 A. Was not. 19 Q. Okay. 20 And you testified that the product or the services 21 being offered here, I should say, are not a commodity, 22 correct? 23 A. Correct. 24 Q. 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 138 of 171 PageID #:17212 Lys - cross 138 1 A. It probably -- whether it does or does not, I mean, you 2 never asked me about. If it doesn't appear, that means I was 3 not asked about that. That's all it means. 4 Q. My only question -- and I'll just let the record speak for 5 itself, because your deposition will be moved into evidence. 6 7 8 9 10 11 12 13 14 A. Correct. And I testified to them on deposition, yes. 15 Q. Now, by the date of your deposition, you did not -- 16 MS. SEARS CODER: Let me just strike that. 17 And give me one second. 18 BY MS. SEARS CODER: 19 Q. 20 21 22 23 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 139 of 171 PageID #:17212 Lys - cross 139 1 2 3 4 THE COURT REPORTER: I'm sorry, what's that? 5 BY MS. SEARS CODER: 6 Q. 7 8 9 10 11 12 13 A. No, I did. 14 Q. You only talked to Viamedia management? 15 A. 16 17 18 19 20 Q. I'll just show you this document. I'll mark this as 21 Defendants' Exhibit 3. 22 (Document tendered to the Court and witness.) 23 BY MS. SEARS CODER: 24 Q. Professor Lys, what we've just marked as Defendants' 25 Exhibit 3, which is a Viamedia document Bates numbered Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 140 of 171 PageID #:17212 Lys - cross 140 1 V454289, 2 3 A. I don't have such good memory. 4 Q. You can cross-reference -- 5 A. If you say it's not -- I've learned early on that you 6 don't debate facts. 7 Q. Now, I'm going to direct your attention to the page 45293, 8 Bates numbered page there. 9 A. Okay. 10 Q. Let me know when you have that in front of you. 11 Now, Professor Lys, this is a document sent from 12 Chris Black of Viamedia. Do you know who Mr. Black is? 13 A. He is apparently the chief financial officer. He was not 14 the CFO that I met. 15 Q. But in two thou- -- 16 A. So, he's an ex- -- 17 Q. Oh, excuse me. 18 A. He's an ex-CFO. 19 Q. Thank you. 20 A. I've never spoken to him or met him. 21 Q. 22 23 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 141 of 171 PageID #:17212 Lys - cross 141 1 Q. Now, on Page 454293 -- do you have that in front of you 2 now? 3 A. 4 -- 454293? 4 Q. Uh-huh. 5 A. Correct, I do. 6 Q. Okay. 7 8 9 10 11 12 13 14 Do you see that? 15 A. Yes. 16 Q. 17 18 19 A. Yeah, I -- I don't know what is; I don't 20 know what he's trying to say; and, I don't know what his 21 qualification or bases are for that. So, if you're asking me 22 is this written here, my answer is yes. If you're asking me, 23 "Does that change your opinion?" and I say not in the least. 24 Q. 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 142 of 171 PageID #:17212 Lys - redirect 142 1 A. Well, obviously not, no. 2 Q. Okay. 3 A. By the way, for the record, the document is dated 2013. 4 MS. SEARS CODER: I don't have anything else. Thank 5 you. 6 THE COURT: Do you have redirect? 7 MR. HO: Your Honor, I'm sensitive to the hour, so 8 I'm going to be very, very short. 9 THE COURT: Okay. 10 MR. HO: If that's okay. 11 THE COURT: Sure. 12 MR. HO: Professor Lys -- 13 (Brief pause.) 14 THE COURT: Go ahead. 15 (Brief pause.) 16 REDIRECT EXAMINATION 17 BY MR. HO: 18 Q. Professor Lys, you were asked about Defendants' Exhibits 1 19 and 2, 20 A. Yes. 21 Q. I think you began to comment about whether you thought 22 that these changed your opinions in any way. Could 23 you tell me if they do? 24 A. They do not. 25 Q. Why is that? Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 143 of 171 PageID #:17212 Lys - redirect 143 1 A. Because you can't simply take things out of context. 2 These are different markets and different players. And these 3 documents don't tell me anything about the market conditions, 4 whether the players are independent or affiliates, by whom 5 they are owned and what the market conditions are in that 6 market. These are not commodities. 7 You know, if this were gasoline, you can't sell 8 gasoline in Chicago far away of what it is in Milwaukee. Why? 9 Because people can drive. But this is not a commodity. These 10 are segregated markets. And if you want to do such a 11 comparison, you need to do an incredible amount. 12 And on top of that, I don't know whether these are 13 independents, whether they're owned by each other, who else is 14 playing. This is a Hail Mary that was not caught. 15 Q. 16 17 18 19 20 21 22 23 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 144 of 171 PageID #:17212 Lys - recross 144 1 2 3 4 And, so, I had a discussion with Mr. Lieberman, and 5 he explained to me that 6 7 And all of the contracts that I analyzed in this 8 damage report were existing contracts or continuation of 9 existing contracts. And, therefore, in that discussion with 10 Mr. Lieberman, he indicated to me that there was -- 11 12 13 And, so, that satisfied me that I need -- 14 15 16 17 MR. HO: Nothing further, your Honor. 18 THE COURT: Recross? 19 MS. SEARS CODER: Just a couple questions. 20 RECROSS EXAMINATION 21 BY MS. SEARS CODER: 22 Q. 23 24 25 A. No. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 145 of 171 PageID #:17212 Lys - recross 145 1 Q. 2 3 4 5 6 Q. And doesn't operate in the Chicago or 7 Detroit markets, correct? 8 A. No, it's the market, yes. 9 Q. 10 11 A. I was -- these are not These 12 are 13 Q. Is it your testimony that agreements with the Interconnect 14 operator are not representation agreements? 15 A. I don't want to put labels on this, but -- I have no 16 opinion on that. 17 Q. 18 19 20 A. 2000 and -- 21 Q. '3. 22 A. Tell me. 23 Q. Do you know one way or another? 24 A. No. 25 MS. SEARS CODER: No other questions. Thank you. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 146 of 171 PageID #:17212 146 1 THE COURT: You may step down, Professor. 2 (Witness excused.) 3 THE COURT: Let's take about a ten-minute break, and 4 then I will come back and hear brief closings from you and 5 probably have a few questions. 6 Professor, you are excused. You do not need to wait. 7 I will see you in about ten minutes. 8 MR. HO: Your Honor, could you offer any guidance on 9 the order in which you'd like to hear closing arguments? 10 THE COURT: It is your burden, so you go first. 11 (Brief recess.) 12 MR. WEBSTER: Judge, while we're waiting, I just 13 wanted to confirm that we are not due back here in the morning 14 for a status conference. 15 THE COURT: You are not due back here in the morning. 16 MR. WEBSTER: Great. 17 THE COURT: Thank you for confirming that. 18 MR. WEBSTER: Thank you. 19 THE COURT: And I really do not need to see you again 20 until after I rule on your summary judgment. 21 (Brief pause.) 22 THE COURT: Ready, Mr. Ho? 23 MR. HO: Yes. I'm sorry to be late. 24 MS. SEARS CODER: Your Honor, may we have -- for a 25 moment of housekeeping, we do have the exhibits that we agreed Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 147 of 171 PageID #:17212 147 1 to identify and move into evidence. So, would you like us to 2 do that now -- 3 THE COURT: Sure. 4 MS. SEARS CODER: -- before the closings start? 5 THE COURT: Sure. 6 MS. SEARS CODER: We intend -- we offer into evidence 7 Exhibits 1, 2, 3, 5, 6, 7, 8, 9, 14, 15, 16, 17, 18, 19, 20, 8 21, 22, 23, 26, 30, 31, 32, and 44 from the agreed exhibit 9 list in the joint report. 10 THE COURT: Any objection to the admission of those 11 documents, Mr. Ho? 12 MR. HO: No, we have no objection. 13 THE COURT: All right. I will admit those documents. 14 (Aforementioned exhibits received in evidence.) 15 THE COURT: I am striking -- one last housekeeping -- 16 tomorrow's status and setting you over for status on June 20th 17 at 8:30. 18 MS. SEARS CODER: Your Honor, just one other bit of 19 cleanup on the record from my exam. I'd like to identify 20 Defendants' Exhibit 1, 21 22 and Defendants' Exhibit 2 23 24 Thank you. 25 THE COURT: Okay. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 148 of 171 PageID #:17212 148 1 MR. HO: Thank you, your Honor. 2 May it please the Court. 3 Thank you for your time today and for the opportunity 4 to present Professor Lys' testimony. 5 I think what the Court heard today is that the 6 characterization of Professor Lys in the motions that were 7 filed by Comcast are essentially a caricature. They paint 8 Professor Lys as essentially an empty vessel who modelled 9 damages solely based on blind acceptance of management's 10 assumptions about what the but-for world looked like. And I 11 think if you look at his actual model, that's quite far from 12 the truth. 13 THE COURT: And just to confirm, Mr. Ho, you are only 14 seeking to admit Professor Lys as a damages expert, correct? 15 MR. HO: That's right. 16 And we make no bones about the fact that he was not 17 asked to opine on causation. He was not offered as an 18 affirmative causation expert. The only limited extent to 19 which he addresses causation is he offers rebuttal to 20 Dr. Israel's attempt to prove causation through his own 21 economic analysis. 22 Dr. Israel, as I think your Honor knows, argues that 23 because 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 149 of 171 PageID #:17212 149 1 THE COURT: Professor Lys does assume causation for 2 purposes of giving some of his opinions certainly. How do you 3 plan on proving causation at trial? Do you have any causation 4 expert? 5 MR. HO: We do not have a causation expert. We 6 plan -- as I think Professor Lys said from an economic 7 perspective -- and we share this view from the legal 8 perspective -- causation here is a matter of fact testimony by 9 people who have firsthand knowledge about actual negotiations 10 of deals that broke down. 11 THE COURT: So, it is your opinion that under the 12 law, you do not have to have an expert to prove causation in 13 an antitrust case? 14 MR. HO: I'm not -- I wouldn't -- I don't think we 15 need to adopt that broad a proposition. 16 I think what we are saying is that in this kind of a 17 case where we are not trying to argue for, for example, loss 18 of enterprise value but we are saying that there are specific 19 deals that were lost because of anticompetitive conduct, that 20 causation is not the stuff of economic analysis, for the very 21 reasons that Professor Lys gave. You can't look at the -- 22 THE COURT: Is he qualified to give an opinion on 23 what is or is not causation in an antitrust case like this? 24 MR. HO: No, I'm not suggesting that he was offering 25 a legal opinion. But what he was -- Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 150 of 171 PageID #:17212 150 1 THE COURT: Legal or otherwise, is he qualified to 2 give an opinion? You have offered him as a damages expert. 3 Is he qualified to give an opinion as to what would 4 constitute causation in an antitrust case? 5 MR. HO: I think what he is qualified to say is what 6 he said on the stand today, which is that in this context, an 7 economist cannot provide the answer to the question of would 8 this deal have succeeded rather than failed if Comcast had not 9 engaged in the anticompetitive conduct. 10 This is a relational issue between Viamedia and MVPD 11 partners that, it 12 had existing relationships with. And, so, the types of 13 testimony that would be relevant to the question of causation 14 are who said what to whom in these negotiations. 15 THE COURT: So, what is -- again, because I know this 16 will come up in summary judgment. But because the professor's 17 opinions -- many of them -- are assuming causation, 18 specifically, what witnesses do you plan on using to prove 19 causation? 20 MR. HO: They would be Viamedia's witnesses who could 21 testify to what the negotiations were between the parties. 22 There will be deposition testimony from the MVPDs who -- and 23 I'm happy to preview some of that, if your Honor is 24 interested. 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 151 of 171 PageID #:17212 151 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 So, that's one building block of -- 19 20 21 22 23 Or to put it a different way, in the 24 language of the antitrust causation cases, that the inability 25 to compete at full strength was a substantial contributing Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 152 of 171 PageID #:17212 152 1 factor to the loss of these deals. So -- 2 THE COURT: Do you have any case law to support your 3 argument that in this type of case you do not need an expert 4 to prove causation? 5 MR. HO: Well, I don't think -- I think there is case 6 law that we cited in our brief that antitrust damages experts 7 can assume causation. And I don't think that there is -- 8 THE COURT: But that is a separate issue. And I know 9 you were relying on one of my breach-of-contract cases, which 10 is factually different. 11 But it is true that an expert can assume certain 12 facts and rely on certain facts in issuing an opinion, as long 13 as those are going to come in at trial otherwise. 14 MR. HO: Right. 15 THE COURT: So, to say that an expert can presume 16 causation, that does not mean that he can presume causation 17 and give opinions relying on causation when there is nothing 18 else that is going to support it. 19 So, my question is different. I am aware of that 20 line of cases, including my own. 21 The question for you is: Do you have any case law 22 that would support that an expert does not have to prove 23 causation, specifically the causation that the professor is 24 relying on here? 25 MR. HO: I think the general proposition -- and it's Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 153 of 171 PageID #:17212 153 1 stated not just in antitrust cases, but in a variety of 2 different areas of the law -- is that expert testimony is 3 required where the issue in question is outside the competence 4 of an ordinary lay juror. 5 And here the point that we're making is the question 6 of whether and broke up with us because of the fact 7 that we couldn't give them access to these Interconnects, 8 that's not a question that a lay juror can't resolve. And 9 more than that, it's not a question that an economist really 10 can resolve, because you can't just look at outside data -- 11 you can't look at market prices, for example -- to try to 12 figure out whether or not that deal would have been 13 consummated. 14 And Dr. Israel's attempt to do that is, as Professor 15 Lys testified to today, profoundly flawed precisely because he 16 doesn't recognize the difference between this kind of a case 17 where -- 18 THE COURT: And we do not have to go down through 19 Professor Israel now. I am just trying to get the support for 20 your -- the premise and -- 21 MR. HO: What I would -- 22 THE COURT: -- what the professor is relying on in 23 rendering his opinions. 24 MR. HO: What I would say in addition is we have 25 conceptualized the question that your Honor is asking really Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 154 of 171 PageID #:17212 154 1 as a question about summary judgment. So, we didn't so much 2 brief that question in the Daubert motion because, from our 3 standpoint, it's sufficient to resolve the Daubert motion to 4 say Professor Lys is a damages expert, not a causation expert. 5 He's allowed to assume causation. 6 The actual method that he uses with respect to the 7 opinions that he's actually offering are reliable and rely on 8 assumptions that are reasonable. 9 And, then, as you say, if there's some argument that 10 there is some evidentiary gap with respect to causation, 11 that would be 12 an issue for summary judgment. And if there is no genuine 13 issue of material fact on some aspect of our causation -- you 14 know, some causation with respect to one or another of the 15 categories of damage, then he wouldn't be permitted to testify 16 with respect to damages on that category. 17 But that wouldn't be a reliability issue. That would 18 be a relevance issue, in light of the fact that we have no 19 case to try on that category. 20 THE COURT: Okay. Go ahead. 21 MR. HO: So, as I said, Professor Lys developed, I 22 think, a very thorough damage report. And the two criticisms 23 that are offered of him are really simply not true. The first 24 is that he didn't isolate the effects of the anticompetitive 25 conduct. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 155 of 171 PageID #:17212 155 1 As he explained today, that is the whole point of -- 2 and the whole structure of -- his damage model. By doing an 3 analysis of the but-for world and by focusing on what was 4 known or knowable before the anticompetitive conduct occurred, 5 he has, economically speaking, isolated the effects of the 6 but-for world. That's the whole point of doing the analysis 7 the way that he did. 8 So, to say that he didn't isolate those effects by 9 looking at things that happened afterward, after the 10 anticompetitive conduct occurred, in an actual world is simply 11 to confuse matters and not to understand what the antitrust 12 treatise that the defendants are relying on really means. 13 The second criticism is that he blindly accepted 14 management assumptions. And I think what his testimony showed 15 today is that, for the most part, with respect to a 16 significant part -- probably the majority -- of his model, 17 there was no reliance on assumptions provided by management or 18 counsel whatsoever. That was true of the projection of 19 revenue. That was the first column that he went through as to 20 all categories. That's true as to mitigation as to all 21 categories. 22 And with respect to projected expense, he did rely, 23 to a limited extent, on management inputs. And he explained: 24 A, that was to a very limited extent. It was only with 25 respect to his revenue share projection model and, even with Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 156 of 171 PageID #:17212 156 1 respect to that model, only with respect to what he called the 2 drift term. In other words, not the starting point for the 3 model, which he relies on his actual historical data, but the 4 forecast of how those historical prices might have changed 5 over time. 6 And as you can imagine, what we're talking about here 7 is trying to figure out in a but-for world what a forecast of 8 future prices would have been. That's not something that 9 is -- there's going to be a lot of actual data for. And, so, 10 when there wasn't actual data -- when he couldn't find 11 contemporaneous forecasts, when he couldn't find industry 12 data -- he went to management. 13 And as he explained: A, reliance on management is a 14 perfectly appropriate thing for economists to do. The entire 15 securities market depends on forecasts of management. 16 And he didn't blindly rely on those forecasts. He 17 had extensive discussions with management to make sure that he 18 thought that what they were saying made sense from the 19 standpoint of business logic and economics; and, then, he 20 looked at the available data and said, does this conform to 21 what I can see about the real world? 22 And I think under your Honor's decision in the System 23 Development case and other cases, that is a -- more than 24 sufficient for an expert to rely on that kind of an 25 assumption. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 157 of 171 PageID #:17212 157 1 And I thought Ms. Sears Coder did an able job on 2 cross-examination, but really that was a cross-examination for 3 trial. Of course at trial, the defendants are entitled to 4 test whether or not his reliance on those assumptions is 5 reasonable, but the inputs to his damage model really are not 6 fundamentally the stuff of Rule 702, as the Seventh Circuit 7 has said in the Manpower and Tuf cases. 8 THE COURT: Did he also rely on management for the 9 MVPD contracts? 10 MR. HO: I'm sorry, what aspect of the -- 11 THE COURT: Does he rely on management for the 12 contracts themselves -- for the MVPD contracts? 13 MR. HO: The existing contracts? 14 THE COURT: Yes. 15 MR. HO: No. He relied in no way on management for 16 the existing contracts, because with respect to the existing 17 contracts, the revenue share is set by contract. So, these 18 are contracts that were in existence at the time of the 19 anticompetitive conduct and extended past the anticompetitive 20 conduct for some set of years. 21 22 The contracts were in force at that 23 time. So, all he had to do to project the revenue shares for 24 those contracts was to look at what the contract actually 25 provided for. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 158 of 171 PageID #:17212 158 1 THE COURT: And what about the renewals? Did he rely 2 on management for that or the DMAs? 3 MR. HO: What he did with the renewals was he said -- 4 he had a discussion with management and, as he testified, the 5 typical discounted cash flow model would project revenues into 6 infinity. That's just the way that the math works on a DCF 7 model typically. 8 But Professor Lys, being conservative, said, well, it 9 doesn't seem right that you could say in this kind of 10 environment that these contracts would just have lasted 11 forever. That doesn't seem plausible. 12 So, what he said is, "Management, I would like to get 13 your best estimate of how long you think those renewals would 14 have -- how many renewals you think you would have gotten, and 15 that will be the outer limit of what I'm going to model." 16 THE COURT: And that was from management, though, 17 right? That is -- 18 MR. HO: Yes, yes. 19 THE COURT: -- the question. 20 And what about the DMAs? Did he rely on management 21 for those? 22 MR. HO: The DMA -- I'm not entirely sure I 23 understand what you mean by "the DMAs." 24 THE COURT: The agreements -- 25 MR. HO: He -- Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 159 of 171 PageID #:17212 159 1 THE COURT: I think they were referenced as DMAs. 2 Anyway, go ahead and I will see if I can find the 3 example. 4 MR. HO: He was provided by management with a list 5 of -- what happened is that at the outset of the case, we all 6 got together and management said, "We think that we may have 7 lost these contracts because of the anticompetitive conduct." 8 And there was a lengthy discussion which Professor Lys alluded 9 to and testified about where he and management spent a lot of 10 time trying to figure out, okay, which ones of these are 11 plausible and should be modeled as damages? 12 And Professor Lys was only willing to model, because 13 he's kind of a fastidious academic, the ones that he thought 14 were plausible. 15 THE COURT: That was based on input from management, 16 right? He is not an expert in that area. 17 MR. HO: That's right. He was provided with -- 18 management said, "We think that these are the candidates." 19 They had a discussion. There was essentially an agreement 20 that these would be the ones that he would model based on that 21 discussion. 22 THE COURT: Okay. 23 MR. HO: Again, as I was saying, I think under 24 Manpower and Tuf and System Development, these are all inputs 25 into the model that are, as those cases put it, proper subject Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 160 of 171 PageID #:17212 160 1 of cross-examination, but not really the core question in the 2 Rule 702 context, which is the reliability of his method. 3 And there, I think that there's really no doubt that 4 the method that he applied is a reliable one. It's a standard 5 discounted cash flow method where -- and I know there have 6 been some criticisms about his weighted average cost of 7 capital and things like this, but I think all those are really 8 matters for cross-examination indeed, not really the subject 9 of the Daubert motion at all. 10 Unless the Court has further questions -- 11 THE COURT: I do not. Thank you. 12 MR. HO: Thank you. 13 MR. BURKE: Good afternoon, your Honor. 14 THE COURT: Good afternoon. 15 MR. BURKE: It's been a long day. 16 THE COURT: Almost evening. 17 MR. BURKE: I know. I'm going to try -- 18 THE COURT: You finally get to stand up and talk. 19 MR. BURKE: I'm going to try to be concise. 20 I was going to refer a few times to Dr. Lys' report. 21 I don't know if you have it. 22 THE COURT: I do. 23 MR. BURKE: It's Tab 2. 24 THE COURT: Correct. I do. 25 MR. BURKE: So, if you could -- let's start with the Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 161 of 171 PageID #:17212 161 1 fit of Dr. Lys' model to the facts and the allegations of the 2 case. And let's begin by looking at Page 4 where Dr. Lys laid 3 out his methodology. 4 And it's the quote that we've talked about: 5 6 7 8 9 10 11 That is the key language. 12 13 14 That's obviously the Supreme 15 Court's holding from the Comcast v. Behrend case, and it's the 16 holding of the Seventh Circuit in the MCI case. 17 We heard today that indisputably Dr. Lys did not do 18 that. 19 20 21 22 23 Now, your Honor spent a lot of time in the first 24 decision in this case carefully distinguishing between, on the 25 one hand, tying and exclusive dealing and, on the other hand, Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 162 of 171 PageID #:17212 162 1 a unilateral refusal to deal. Dr. Lys' model absolutely 2 conflates those two things. He makes no effort to 3 differentiate between them. He concedes that he makes no 4 effort to differentiate between them. 5 The most telling point about his model is that the 6 point from which he -- you know, his sort of -- the center of 7 his universe is May, 2012. That's the point at which 8 everything else flows. That's the period where the but-for 9 world and the real world diverge. 10 What happened in May, 2012? Comcast did not renew 11 its contract with Viamedia in Chicago and Illinois. The 12 conduct that your Honor not only held was lawful, but actually 13 was a prototypical pro-competitive vertical integration. 14 So, not only -- it would be improper for Dr. Lys not 15 to differentiate between just random causes and 16 anticompetitive effects, but he's not just conflating 17 marketplace conduct or other developments or GDP changes. 18 He's actually conflating conduct that your Honor has held is 19 pro-competitive and basing that as a damages claim. So, 20 that's Flaw No. 1 in the model. 21 And there's no way that you can -- you know, there's 22 no sensitivity analysis in this model. We talked a lot about 23 the things you can pull out. I 24 think Dr. Lys understands that that's a pretty shaky claim and 25 it probably is going to have to fail. You can maybe pull that Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 163 of 171 PageID #:17212 163 1 out, but you can't pull out unilateral refusal to deal. 2 There's no sensitivity analysis anywhere in the model for 3 that. 4 So, that's Flaw No. 1. I think that is game over for 5 this model. 6 Flaw No. 2: Dr. Lys indisputably relies on 7 management for key inputs and did not do anything material to 8 test those inputs. So -- 9 THE COURT: Would that be an issue of weight for the 10 jury? The fact that he relied on management as long as they 11 come in and give testimony with respect to what he relied on, 12 is that something that would be for the jury to determine what 13 weight to put on that? 14 MR. BURKE: I think your Honor's decision in Sloan 15 Valve addresses that question exactly. There, you had -- they 16 were trying to essentially use management to establish what 17 the market price would be. And what your Honor held was 18 that's not management's role. They aren't an expert or 19 qualified to do that. What they can tell you is what they 20 aspire to charge. They can tell you what their strategy is, 21 what their aim is, what their philosophy is. They can give 22 their subjective views about what they're attempting to 23 charge. But what the market equilibrium would be is 24 quintessentially testimony that an expert gives. 25 That's what an economist determines. What's the Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 164 of 171 PageID #:17212 164 1 supply? What's the demand? Where do those intersect? Dr. 2 Lys did not do that. 3 He took -- and the two key variables we're talking 4 about here are really both price variables. 5 6 7 8 What's his basis for that? He spoke to Mr. Lieberman. He 9 poked them. That was his word. 10 Now, I don't doubt that, you know, Professor Lys 11 spent a lot of time -- 28 hours -- on this case. 12 13 14 15 16 17 18 19 20 The other big component is the revenue share that 21 Viamedia pays to its MVPD customers. Again, this is 22 indisputably a number that was given to Professor Lys by 23 management. And what management told him was take whatever 24 they're charged currently and make it go up every four or five 25 years, whenever there's a contract renewal. And I think Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 165 of 171 PageID #:17212 165 1 that's, you know, reflected -- if we still have this document. 2 THE COURT: I do. 3 MR. BURKE: Yeah. 4 5 6 And that's just 7 straight from management. That's what management told him to 8 do. That's what he did. He did nothing to validate that, to 9 establish that 10 That is not, again, under your 11 own -- I think under your Honor's decision in Sloan Valve, 12 that's not proper. 13 I will note that we heard for the very first time 14 today from Dr. Lys 15 16 17 18 19 20 21 22 23 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 166 of 171 PageID #:17212 166 1 2 3 That doesn't sound like very sophisticated 4 econometrics to me. It's a plug value he's been given by 5 management. He's done nothing to validate that. 6 And, again, 7 8 So, that's not econometrics. 9 I don't think that's worthy of scientific validation. 10 That proves that, I think, what we are saying is that 11 Dr. Lys is -- he's a distinguished professor. He has great 12 credentials. That's the problem. That's the risk. He's 13 created a damages machine and he has done nothing to validate 14 the inputs to that damages machine, yet he gives great 15 credibility to that to the jury if they hear him on these 16 subjects. In a way, that's very prejudicial because 17 management has all the incentives in the world to provide 18 slanted estimates of these subjects to validate and to magnify 19 the damages that they're going to have. 20 A few more points, your Honor, and I'll try to bring 21 this to a close. 22 We heard from Mr. Ho that Dr. Lys, in fact, was 23 mischaracterized in our papers; that we -- it was a caricature 24 of him; that he actually did all this great work and it was 25 actually a misstatement. Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 167 of 171 PageID #:17212 167 1 Let's just take an example here, though, of what 2 happened in his deposition and here today. 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 168 of 171 PageID #:17212 168 1 2 So, it wasn't a caricature of Dr. Lys. The truth is, 3 is that again and again -- and we quote those things 4 repeatedly in our brief -- his response when asked, whenever 5 pressed, to validate where he got those assumptions and why 6 they were valid, he didn't remember. He said, "I thought 7 these guys were credible. I poked them again." That was his 8 verb. But that is not a sufficient level of diligence, I 9 think, to justify admission of an expert report. 10 11 12 13 14 15 16 17 18 19 THE COURT: And do you agree that is something that 20 would be a question for the jury on the weight to challenge 21 his reliance on that? 22 MR. BURKE: Again, it seems strange. He's been told 23 by management who he's telling -- otherwise relying on for a 24 whole bunch of others' inputs, by the way. All these other 25 things, management assures him, "We're going to win those -- Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 169 of 171 PageID #:17212 169 1 we would have won those contracts." He's confronted with 2 evidence that shows that's just not true, that there was an 3 absolute -- there was a cause that had nothing to do with 4 Comcast that is a -- you know, conclusively breaks the chain 5 of causation. "Does that cause you to reevaluate anything?" 6 His answer is really kind of throwing up his hands to say, 7 "I'm a damages machine. I have this model." 8 And, by the way, his suggestion is sort of almost 9 like let's give this model to the jurors and they can run 10 sensitivity analyses and they'll change the number of years 11 12 I mean, that's obviously not appropriate. 13 And, so, I think that shows kind of a distancing from 14 the facts in this case by Dr. Lys that is inappropriate. He's 15 got to own this. It doesn't mean he has to own every -- at 16 least he has to do some diligence to validate the assumptions 17 that he's made. 18 Finally, on, I think, the question of experts and 19 causation. This really is, I think, we're going to -- it's 20 going to be ultimately a question more linked to summary 21 judgment. But I do think that this is a case where it's an 22 interesting case. There's a liability expert who disclaims 23 causation. There's a damages expert who disclaims causation. 24 And what we're going to see on summary judgment is some 25 self-serving declarations from Mr. Lieberman and some other Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 170 of 171 PageID #:17212 170 1 people saying, "We would have won these contracts in the 2 but-for world." 3 That sounds like inappropriate speculation to me. I 4 don't know how you prove that. I mean, normally you would 5 have somebody who is an expert who tries to control for other 6 factors who -- I think in all of my experience of antitrust 7 litigation, there's been an expert who opines on damages. 8 I think it shows the fundamental weakness in 9 plaintiff's case that they can't find an expert who can do 10 that, but instead are going to rely on self-serving 11 declarations by their executives who -- to sort of speculate 12 that they would have won these cases in the but-for -- rather 13 these contracts in the but-for world. I think there will be 14 more briefing on that in connection with summary judgment. 15 So, I think unless your Honor has any further 16 questions, I will stop there. 17 THE COURT: I do not. Thank you. 18 MR. BURKE: Thank you. 19 THE COURT: Okay. I am going to take this under 20 advisement. 21 I do not want any more briefing unless I ask for it. 22 I will tell you right now you will waste your clients' money, 23 because I am not going to read anything else, unless I ask for 24 it. So, please do not give me any more briefing on the 25 Daubert issues. If I need it, I will ask for it. I know you Case: 1:16-cv-05486 Document #: 354 Filed: 08/01/18 Page 171 of 171 PageID #:17212 171 1 are still briefing summary judgment. So, keep doing that, but 2 nothing else on Daubert. 3 My hope is before your next status in June to have 4 everything ruled on so that we know where we are going. If I 5 have not ruled yet, I will likely move that out. But my hope 6 is to get it done by then. That is my plan. 7 Anything else we need to take up this almost-evening? 8 MS. SEARS CODER: I don't think so, your Honor. 9 MR. HO: Nothing here, your Honor. 10 THE COURT: All right. Thank you. 11 Have a good night. 12 MR. HO: Thank you. 13 * * * * * 14 I certify that the foregoing is a correct transcript from the record of proceedings in the above-entitled matter. 15 16 /s/ Joseph Rickhoff April 23, 2018 17 Official Court Reporter 18 19 20 21 22 23 24 25