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J & M Distributing, Inc. v. Hearth & Home Technologies, Inc.

United States District Court, D. Minnesota

January 9, 2015

J & M Distributing, Inc., Plaintiff,
Hearth & Home Technologies, Inc. and Magnotti and Sons, Inc. d/b/a The FirePlace and ThePatioPlace, Defendants.

George G. Eck and Jaime Stilson, Dorsey & Whitney, LLP, 50 South Sixth Street, Suite 1500, Minneapolis, Minnesota 55402, and Ray C. Stoner, Jackson Kelly, PLLC, Three Gateway Center, 401 Liberty Avenue, Suite 1340, Pittsburgh, Pennsylvania 15222, for Plaintiff.

Kelly W. Hoversten and Quentin R. Wittrock, Gray Plant Mooty Mooty & Bennett, PA, 80 South Eighth Street, Suite 500, Minneapolis, Minnesota 55402, for Defendant Hearth & Home Technologies, Inc.

Cory D. Olson and Courtland C. Merrill, Anthony Ostlund Baer & Louwagie, PA, 90 South Seventh Street, Suite 3600, Minneapolis, Minnesota 55402, and D. Scott Lautner, Law Offices of D. Scott Lautner, PC, 68 Old Clarton Road, Pittsburgh, Pennsylvania 15236, for Defendant Magnotti and Sons



This matter is before the Court on cross-Daubert motions filed by Defendant Hearth & Home Technologies, Inc. ("HHT") and Plaintiff J & M Distributing, Inc. ("J&M"): HHT's Motion to Exclude the Expert Testimony and Opinions of Michael DeProspero [Doc. No. 133] and J&M's Motion to Exclude Certain Testimony and Opinions of Melissa Snelson [Doc. No. 139]. For the reasons set forth herein, HHT's motion is denied and Plaintiff's motion is granted. Also before the Court is HHT's Motion to Strike the Supplemental Testimony of Michael DeProspero and for an Expedited Hearing [Doc. No. 148], which is denied in part and denied as moot in part, as discussed herein.


The specific details of this lawsuit are documented in other orders and will not be recounted here. (See, e.g., Mem. Op. & Order of 7/8/14 at 1-31 [Doc. No. 120].) In brief, J&M is a former HHT distributor of fireplace and hearth products. Following HHT's termination of the parties' distribution relationship, J&M filed this suit against HHT and one of HHT's dealers, Defendant Magnotti and Sons, Inc. ("Magnotti"). In light of the Court's ruling on Defendants' summary judgment motions, the following four claims remain in suit: (1) breach of contract, which includes a claim for the breach of the duty of good faith and fair dealing (Am. Compl., Count I [Doc. No. 50]; (2) tortious interference with business relations (id., Count II); (3) civil conspiracy (id., Count IV); and (4) violations of Section 1 of the Sherman Act, 15 U.S.C. § 1 (id., Count V). Plaintiff seeks the fair market value of its business and lost profits among its damages. (Id. ¶¶ 60, 67.) Trial on this matter is scheduled to begin on January 12, 2015.

Plaintiff contends that any compensation that it receives in this case must be tied to the fair market value of J&M's business, prior to any harmful effects that it experienced based on the Defendants' alleged conduct. (Pl.'s Opp'n Mem. at 17 [Doc. No. 146].) That value, Plaintiff asserts, is derived from "what a buyer would have been willing to pay for J&M's business." (Id.) After this litigation began, J&M retained Michael DeProspero as its damages expert. Specifically, J&M asked DeProspero to: (1) value J&M's business as of December 31, 2011 - a date prior to the March 2012 termination of J&M as a two-step distributor; and (2) determine net profits associated with certain sales that Plaintiff intends to prove it was required to make as a result of HHT's conduct. (Pl.'s Opp'n Mem. at 2 [Doc. No. 146].) After reviewing documents and data, [1] and applying his methodology, DeProspero concluded that: (1) J&M's valuation at the end of 2011 was $3, 487, 664 (DeProspero Report at 5, Ex. 1 to Hoversten Decl. [Doc. No. 136-1]); and (2) J&M sustained lost net profits totaling approximately $175, 000. (Id. at 5-6, Table 1.)

HHT moves to strike DeProspero as an expert for Plaintiff, arguing that DeProspero is not qualified to render his opinion and that his opinion is inadmissable at trial because it is not relevant and his methodology is flawed. (HHT's Mem. Supp. Mot. to Exclude DeProspero at 1-2 [Doc. No. 135].) In response, J&M contends that DeProspero is qualified to proffer opinions in this matter, his valuation opinions are relevant and reliable, and will assist the jury in determining the total value of J&M's losses. (Pl.'s Opp'n Mem. at 11-25 [Doc. No. 146].) In support of its opposition memorandum, J&M filed the Declaration of Michael DeProspero [Doc. No. 147]. HHT also moves to strike the DeProspero Declaration, arguing that both the Declaration, as well as the information contained in Footnote 6 in J&M's opposition brief, should have been previously disclosed pursuant to Fed.R.Civ.P. 26. (HHT's Motion to Strike at 1 [Doc. No. 148].)

For its rebuttal expert, HHT hired Melissa Snelson to respond to DeProspero's Report. (Snelson Report at 1, Ex. 1 to Stilson Decl. [Doc. No. 142-1].) Snelson challenges the relevance and reliability of DeProspero's methodology. (Id. at 3-15.)

J&M moves to strike portions of Snelson's opinion. (Pl.'s Mot. to Exclude Portions of Snelson Testimony & Opinions at 9 [Doc. No. 141].) Specifically, J&M seeks to exclude portions of Snelson's opinion that address liability. (Id. at 5-6.) J&M does not challenge Snelson's qualifications, nor does J&M seek to exclude Snelson's opinion in its entirety. (Id. at 2, n.1.) In response, HHT argues that the underlying facts and assumptions that support Snelson's opinion are not subject to exclusion. (HHT's Opp'n Mem. at 1 [Doc. No. 145].)


A. Motion to Strike

As an initial matter, the Court addresses HHT's Motion to Strike the DeProspero Declaration [Doc. No. 148], because Plaintiff relies on the DeProspero Declaration [Doc. No. 147] in opposing HHT's Daubert motion. HHT moves to strike the Declaration [Doc. No. 147], which contains additional information regarding DeProspero's qualifications, and also moves to strike Footnote 6 in J&M's opposition memorandum [Doc. No. 146], which describes DeProspero's basis for applying a 2.029 multiplier in determining J&M's book value.[2] (HHT's Motion to Strike at 1 [Doc. No. 148].) HHT argues that by relying on the DeProspero Declaration and the information in Footnote 6, J&M impermissibly attempts to expand DeProspero's opinions and the basis therefor. (Id.) HHT contends that this contravenes Federal Rule 26(a)(2) (id.), which requires the timely disclosure of expert reports, and requires that such reports contain a complete statement of all opinions the witness will express and the basis for those opinions. Fed.R.Civ.P. 26(a)(2)(B)(i).

Pursuant to Fed.R.Civ.P. 26(a)(2)(B), an expert witness is required to disclose a complete statement of all opinions that the witness will express, along with the basis for them, and the facts or data considered by the witness, as well as the witness's qualifications. Where a party fails to comply with Rule 26(a), "the party is not allowed to use that information or witness to supply evidence... at trial, unless the failure was substantially justified or is harmless." Fed.R.Civ.P. 37(c)(1).

The Court finds that while this supplemental information should have been timely disclosed pursuant to Rule 26, the failure to do so was harmless. Although the DeProspero Declaration provides greater detail concerning DeProspero's qualifications than that found in his expert report, the expert report nevertheless contains information concerning DeProspero's background and experience in this respect. (Cf. DeProspero Decl. ¶¶ 4-14 [Doc. No. 147] with DeProspero Report at 2, Ex. 1 to Hoversten Decl. [Doc. No. 136-1].)

Regarding the information in Footnote 6 of Plaintiff's opposition memorandum, this information explains, as a factual matter, why Plaintiff believed that it had previously disclosed the requested information concerning the multiplier that DeProspero used in determining J&M's book value. (Pl.'s Opp'n Mem. at 20, n.6 [Doc. No. 146].) In light of HHT's contention that the information was not disclosed, Footnote 6 also details how DeProspero determined the appropriate multiplier. (Id.) At the Court's request, Plaintiff provided DeProspero's more detailed explanation in a sworn statement. (Supp'l DeProspero Decl. [Doc. No. 154].) The Court likewise finds that the late disclosure of this information was harmless, as DeProspero provided the documents that he considered in deriving the multiplier, and the additional information was disclosed prior to trial. Unlike the cases on which HHT relies in which evidence was excluded, see, e.g., Claar v. Burlington N.R.R. Co., 29 F.3d 499, 502 (9th Cir. 1994), RFMAS, Inc. v. Mimi So., 748 F.Supp.2d 244, 277 (S.D.N.Y. 2010), DeProspero has explained his reasoning and methodology. The sanction of excluding this information from DeProspero's opinion is not warranted under the circumstances here.

Accordingly, HHT's Motion to Strike is denied. As to HHT's request for an expedited hearing on the motion, because the hearing was timely held, that ...

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