Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_13-cv-01946/USCOURTS-cand-5_13-cv-01946-5/pdf.json

Nature of Suit Code: 160
Nature of Suit: Stockholder's Suits
Cause of Action: 28:1332 Diversity-Stockholders Suits

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

FITEQ INC,

Plaintiff,

v.

VENTURE CORPORATION, et al.,

Defendants.

Case No. 13-cv-01946-BLF 

ORDER ON DEFENDANTS’ MOTION 

TO EXCLUDE EVIDENCE

[Re: ECF 165]

Defendants move, pursuant to Federal Rule of Civil Procedure 37, for an order excluding 

evidence of Plaintiff’s lost profits and valuation and further preventing Plaintiff from asserting 

damages claims at trial based on lost profits and valuation. Defendants contend that Plaintiff’s 

computations of these damages disclosed pursuant to Rule 26 are inadequate. See ECF 165 at 13-

16. Plaintiff, in opposition, argues that its computations are adequate and that, because trial in this 

case is not scheduled to begin until August 2015, Defendants have not suffered any prejudice. See

ECF 179 at 3-13, 16-20.

The Court heard oral argument on this motion on January 15, 2015. Having reviewed the 

governing law and the arguments of the parties, the Court finds Plaintiff’s lost profits and 

valuation damages computations to be inadequate under Rule 26, but that the remedy Defendants 

request – exclusion of evidence of these damages at trial – is too severe, and that any prejudice can 

otherwise be corrected by adequate disclosure and a partial re-opening of fact discovery. As such, 

the Court DENIES Defendants’ motion. 

Rule 37 permits a Court to exclude evidence when a party “fails to provide information or 

identify a witness as required by Rule 26(a), . . . unless the failure was substantially justified or 

harmless.” Fed. R. Civ. P. 37(c)(1); see also Hoffman v. Construction Protective Servs., Inc., 541 

Case 5:13-cv-01946-BLF Document 194 Filed 01/16/15 Page 1 of 3
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United States District Court

Northern District of California

F.3d 1175, 1179-80 (9th Cir. 2008). This Rule was “intended to foster stricter adherence to 

discovery requirements and to broaden the power of the district courts to sanction violations of 

Rule 26.” Lanard Toys Ltd. v. Novelty, Inc., 375 Fed. App’x 705, 713 (9th Cir. 2010). Rule 26 

requires a party to provide opposing counsel with “a computation of each category of damages 

claimed by the disclosing party.” Fed. R. Civ. P. 26(a)(1)(A)(iii). District courts are granted wide 

latitude to issue sanctions under Rule 37(c)(1) when a party is non-compliant with the Rule and 

deficient in its disclosure obligations. See, e.g., Yeti by Molly, Inc. v. Deckers Outdoor Corp., 259 

F.3d 1101, 1106-07 (9th Cir. 2001). 

A review of Plaintiff’s third supplemental Rule 26 disclosures, produced to Defendants on 

December 5, 2014, reveals that Plaintiff has not provided sufficient description of its claim for 

$50-$110 million in lost profit damages that it seeks to recover from Defendants. See Barker 

Decl., ECF 165-4 Exh. 17. This third supplemental disclosure is the first time Plaintiff provided 

Defendant with any purported calculation as to its lost profits figure, previously stating in its 

second supplemental disclosure that its “calculation is based upon the information and analysis 

currently available,” but providing no further breakdown of the lost profits figure. See id. Exh. 16 

at 8. 

With its third supplemental disclosure, Plaintiff provided Defendants with three one-page 

exhibits, which included three charts containing some figures regarding lost profits. Id. Exh. 17 

exhs. A-C. These figures are wholly inadequate for purpose of disclosing an actual computation of 

damages – Plaintiff provides Defendants with no description of how it has calculated the numbers 

contained in these charts. A computation of damages must be more than just a chart of numbers 

with no greater explication. Cf. Hoffman, 541 F.3d 1175, 1179-80. Plaintiff claims in its 

opposition to Defendants’ motion that it has provided Defendants with “considerable detail” about 

its lost profits case in response to Defendants’ interrogatories, see Opp., ECF 179 at 12-13, but it 

fails to show any way in which it has actually disclosed the “how” or “why” behind its contention 

that it is owed up to $110 million in lost profits damages consistent with Rule 26’s requirements.

A court may consider several factors in determining whether a party’s failure to disclose is 

justified or harmless, including “(1) prejudice or surprise to the party against whom the evidence 

Case 5:13-cv-01946-BLF Document 194 Filed 01/16/15 Page 2 of 3
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United States District Court

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is offered; (2) the ability of the party to cure the prejudice; (3) the likelihood of disruption to trial; 

and (4) bad faith or willfulness involved in not timely disclosing the evidence.” Hoffman, 541 F.3d 

at 1179 (citing David v. Caterpillar, Inc., 324 F.3d 851, 857 (7th Cir. 2003)). These factors, 

particularly the ability of Plaintiff to cure the prejudice and the unlikelihood of disruption to trial, 

which is not scheduled to begin until August 31, 2015, see ECF 138, augur strongly in favor of 

fashioning a remedy short of completely excluding the evidence. In recognition of its prerogative 

under this circuit’s governing law to impose sanctions on non-compliant parties, the Court will 

order Plaintiff to pay reasonable attorneys’ fees to Defendants for any duplicative discovery they

must now conduct regarding damages calculations, including but not limited to costs relating to redeposing certain fact witnesses. See Yeti by Molly, 259 F.3d 1101, 1107.

Having discussed possible remedies and scheduling with the parties at the January 15, 

2015 hearing, the Court HEREBY ORDERS the following:

1. No later than January 29, 2015, Plaintiff shall supplement its damages computation

disclosures and provide those computations to Defendants.

2. No later than February 12, 2015, Defendants shall provide to Plaintiff a discovery 

plan, including in that plan any further discovery needed regarding damages computations and 

identifying any discovery that would be duplicative of prior efforts.1

3. Prior to February 19, 2015, the parties shall meet and confer regarding a discovery 

plan, and provide the Court with a joint report by February 23, 2015 outlining a proposed reopening of fact discovery and relevant deadlines. 

4. Upon receipt of the parties’ joint report, the Court shall, if necessary, set a further 

case management conference to reset dates. 

IT IS SO ORDERED.

Dated: January 16, 2015

______________________________________

BETH LABSON FREEMAN

United States District Judge

 

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Plaintiff, as always, reserves the right to challenge the reasonableness of any fees sought by 

Defendants. 

Case 5:13-cv-01946-BLF Document 194 Filed 01/16/15 Page 3 of 3