Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_15-cv-00595/USCOURTS-casd-3_15-cv-00595-23/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 

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UNITED STATES DISTRICT COURT 

SOUTHERN DISTRICT OF CALIFORNIA 

OBESITY RESEARCH INSTITUTE, 

LLC, 

 Plaintiff, 

Case No. 15-cv-595-BAS(MDD) 

ORDER OVERRULING ORI’S 

OBJECTION TO MAGISTRATE 

JUDGE’S JUNE 7, 2016 ORDER 

[ECF No. 282] v. 

FIBER RESEARCH 

INTERNATIONAL, LLC, et al., 

 Defendants. 

AND RELATED COUNTERCLAIM. 

Presently before the Court is Plaintiff Obesity Research Institute, LLC’s 

(“ORI”) meritless objection to the magistrate judge’s June 7, 2016 Order. (ECF No. 

271.) In that order, the magistrate judge considered Defendant Fiber Research 

International, LLC’s (“FRI”) request to strike portions of the supplemental expert 

report of Neil J. Beaton, who is an expert witness ORI called to testify about damages. 

Paragraph 5(a) of Mr. Beaton’s initial expert report, dated October 15, 2015, 

presented the following opinion: “FRI has produced no documents at this time that 

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would allow an analysis or calculation of any lost profits.” (Beaton Expert Report ¶ 

5(a), ECF No. 177-3.) In the following paragraph, Mr. Beaton added that he 

“anticipates responding to any expert opinions on damages, should any be 

submitted.” (Id. ¶ 6.) 

ORI then sought to supplement the initial expert report with Mr. Beaton’s 

supplemental expert report, dated March 7, 2016, where, in Paragraph 6(a), he 

opined: 

FRI has produced no evidence establishing a material, 

causal nexus between the alleged false claims made by 

ORI and any customer sales, i.e., FRI has not shown that 

the alleged false claims were material to any single 

customer who purchased Lipozene. Therefore, FRI has not 

established a basis for any economic damages. 

(Beaton Suppl. Expert Report ¶ 6(a), ECF No. 177-2.) The magistrate judge 

concluded that Paragraph 6(a) of the supplemental expert report “has nothing to do 

with damages, instead opining regarding materiality.” (June 7, 2016 Order 6:14-18.) 

 With respect to Paragraphs 6(d)-(f), ORI does not dispute the magistrate 

judge’s characterization of the paragraphs as “relat[ing] to a determination of ORI’s 

profits potentially subject to recovery by FRI,” or using “financial information 

provided by ORI” to determine ORI’s profits. (June 7, 2016 Order 6:19-7:7.) The 

magistrate judge explained: 

Regardless of the discovery dispute, ORI had to know that 

if it wanted its damages expert, Mr. Beaton, to opine 

regarding potential damages recoverable to FRI, it would 

have to provide information to Mr. Beaton. ORI, however, 

decided not to have Mr. Beaton opine regarding the extent 

to which ORI’s profits may be recoverable by FRI in his 

initial report. That decision, tactical at best, malevolent at 

worst in attempting to later sandbag FRI, is at the heart of 

this dispute. 

If Mr. Beaton believed he ultimately was to provide an 

opinion regarding ORI’s profits he could have said, as he 

did regarding FRI, that he lacked the necessary 

information to provide an opinion. As that information 

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was available to ORI and could have been provided to Mr. 

Beaton, the Court must conclude that ORI either had no 

intention of having Mr. Beaton opine regarding its profits 

or intended to have him do so beyond the discovery 

deadline in this case. 

(Id. at 7:1-7.) Based on these observations, the magistrate judge ultimately concluded 

that ORI’s supplementation was improper under Rule 26(e)(1). (Id. at 7:15-17.) 

Having determined these paragraphs of Mr. Beaton’s supplemental expert 

report to be improper under Rule 26(e), the magistrate judge proceeded to determine 

whether the improper supplementation was substantially justified or harmless under 

Rule 37(c)(1). He concluded they were not. With respect to substantial justification, 

the magistrate judge explained that “ORI had to know that FRI was entitled to certain 

financial discovery, including cost of goods, from ORI and could have avoided this 

entire controversy, and others, by providing the information that it knew was subject 

to disclosure.” (June 7, 2016 Order 9:4-8.) And with respect to harmlessness, the 

magistrate judge explained: 

This is not a “no harm, no foul” scenario. There has been 

harm. FRI has been prejudiced by disclosure, just five days 

prior to the close of discovery, of information exclusively 

in the possession of ORI. FRI has been prejudiced by the 

decision of ORI not to have its damages expert timely 

provide an opinion on FRI’s damage theory—recovery of 

ORI’s profits. FRI has been prejudiced by having to have 

its damages expert provide a rebuttal opinion to new 

opinions, not previously disclosed, in the short time period 

ordered by the Court necessitated by ORI’s decision to 

withhold information from its expert. 

(Id. at 10:8-16.) 

The magistrate judge ultimately concluded that the opinions proffered by Mr. 

Beaton in his supplemental expert report in Paragraphs 6(a) and (d)-(f) were improper 

supplements under Rule 26(e), and that ORI had failed to carry its burden that the 

improper supplements were substantially justified or harmless under Rule 37(c)(a). 

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(June 7, 2016 Order 10:22-11:2.) He, accordingly, precluded the opinions presented 

in the aforementioned paragraphs from use as evidence in motions, hearings, or at 

trial. (Id.) 

For the following reasons, the Court OVERRULES ORI’s objection. 

I. LEGAL STANDARD 

A party may object to a non-dispositive pretrial order of a magistrate judge 

within fourteen days after service of the order. See Fed. R. Civ. P. 72(a). The 

magistrate judge’s order will be upheld unless it is “clearly erroneous or contrary to 

law.” Id.; 28 U.S.C. § 636(b)(1)(A). The “clearly erroneous” standard applies to 

factual findings and discretionary decisions made in connection with non-dispositive 

pretrial discovery matters. F.D.I.C. v. Fid. & Deposit Co. of Md., 196 F.R.D. 375, 

378 (S.D. Cal. 2000); Joiner v. Hercules, Inc., 169 F.R.D. 695, 697 (S.D. Ga. 1996) 

(reviewing magistrate judge’s order addressing attorney-client issues in discovery for 

clear error). Review under this standard is “significantly deferential, requiring a 

definite and firm conviction that a mistake has been committed.” Concrete Pipe & 

Prods. of Cal., Inc. v. Constr. Laborers Pension Tr. of S. Cal., 508 U.S. 602, 623 

(1993) (internal quotation marks omitted). 

 On the other hand, the “contrary to law” standard permits independent review 

of purely legal determinations by a magistrate judge. See, e.g., Haines v. Liggett Grp., 

Inc., 975 F.2d 81, 91 (3d Cir. 1992) (“[T]he phrase ‘contrary to law’ indicates plenary 

review as to matters of law.”); Gandee v. Glaser, 785 F. Supp. 684, 686 (S.D. Ohio 

1992), aff’d, 19 F.3d 1432 (6th Cir. 1994); 12 Charles A. Wright, et al., Federal 

Practice and Procedure § 3069 (2d ed., 2010 update). “Thus, [the district court] must

exercise its independent judgment with respect to a magistrate judge’s legal 

conclusions.” Gandee, 785 F. Supp. at 686. “A decision is contrary to law if it fails 

to apply or misapplies relevant statutes, case law, or rules of procedure.” United 

States v. Cathcart, No. C 07-4762 PJH, 2009 WL 1764642, at *2 (N.D. Cal. June 18,

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2009). 

II. ANALYSIS1

A party who has made a disclosure under Rule 26(a) “must supplement or 

correct its disclosure or response . . . in a timely manner if the party learns that in 

some material respect the disclosure or response is incomplete or incorrect, and if the 

additional or corrective information has not otherwise been made known to the other 

parties during the discovery process or in writing.” Fed. R. Civ. P. 26(e)(1)(A). “The 

supplementation requirement of Rule 26(e)(1) is not intended . . . to permit parties to 

add new opinions to an expert report based on evidence that was available to them at 

the time the initial expert report was due.” Toomey v. Nextel Commc’ns, Inc., No. C03-2887 MMC, 2004 WL 5512967, at *4 (N.D. Cal. Sept. 23, 2004). “Rather, 

‘[s]upplmentation under the Rules means correcting inaccuracies, or filling the 

interstices of an incomplete reported based on information that was not available at 

the time of the initial disclosure.’” Luke v. Family Care & Urgent Med. Clinics, 323 

F. App’x 496, 500 (9th Cir. 2009) (quoting Keener v. United States, 181 F.R.D. 639, 

640 (D. Mont. 1998)). 

 1

 “Non-dispositive matters include ‘evidentiary rulings, pretrial discovery matters, and the 

imposition of sanctions for discovery abuses.’” Estakhrian v. Obenstine, No. CV 11-03480 

GAC(CWx), 2012 WL 12884889, at *3 (C.D. Cal. Nov. 9, 2012) (quoting Kounelis v. Sherrer, 529 

F. Supp. 2d 503, 518 (D.N.J. 2008)); see also Bhan v. NME Hosps., Inc., 929 F.2d 1404, 1414 (9th 

Cir. 1991) (“Nondispositive issues include discovery sanctions”); Grimes v. City & Cnty. of San 

Francisco, 951 F.2d 236, 240 (9th Cir. 1991) (discovery sanctions are non-dispositive pretrial 

matters that are reviewed for clear error under Rule 72(a)); Hoar v. Sara Lee Corp., 900 F.2d 522, 

525 (2d Cir. 1990) (“Matters concerning discovery generally are considered ‘nondispositive’ of the 

litigation”); F.D.I.C. v. Fid. & Deposit Co. of Md., 196 F.R.D. 375, 378 (S.D. Cal. 2000) (Whelan, 

J.) (“The ‘clearly erroneous’ standard applies to factual findings and discretionary decisions made 

in connection with non-dispositive pretrial discovery matters[.]”). There is no doubt that the dispute 

currently before the Court involves a pretrial-discovery matter because it is based on ORI’s 

noncompliance with pretrial-disclosure and supplementation requirements governed by Rules 26 

and 37. See Fed. R. Civ. P. 72(a). Thus, the Court rejects ORI’s contention that the magistrate 

judge’s June 7, 2016 Order should be reviewed de novo. 

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Rule 26(e)(2) extends the duty to supplement to expert reports and expert 

deposition testimony. “[A] supplemental expert report that states additional opinions 

or seeks to ‘strengthen’ or ‘deepen’ opinions expressed in the original expert report 

is beyond the scope of proper supplementation and subject to exclusion under Rule 

37(c).” Plumley v. Mockett, 836 F. Supp. 2d 1053, 1062 (C.D. Cal. 2010) (citing 

Cohlmia v. Ardent Health Servs., LLC, 254 F.R.D. 426, 433 (N.D. Okla. 2008)). 

Rule 37(c)(1) “gives teeth” to Rule 26(a) and (e)’s requirements “by forbidding 

the use at trial of any information required to be disclosed by Rule 26(a) that is not 

properly disclosed.” Yeti by Molly, Ltd. v. Deckers Outdoor Corp., 259 F.3d 1101, 

1106 (9th Cir. 2001). To avoid sanction, a party must show the failure to disclose 

information was either “substantially justified” or “harmless.” Id. A district court has 

“particularly wide latitude” to determine whether a failure to disclose is 

“substantially justified” or “harmless.” Hoffman v. Constr. Protective Servs., Inc., 

541 F.3d 1175, 1180 (9th Cir. 2008). 

In reviewing the magistrate judge’s June 7, 2016 Order, the Court addresses 

whether the following conclusions were either contrary to law or clearly erroneous: 

(1) Paragraphs 6(a) and (d)-(f) of Mr. Beaton’s supplemental expert report were 

improper supplementations under Rule 26(e); and (2) the supplementations sought 

were neither substantially justified nor harmless under Rule 37. See Fed. R. Civ. P. 

72(a). 

A. Supplementation Under Rules 26(e) 

1. Paragraph 6(a) 

“In general, an expert may only testify as to ‘scientific, technical, or other 

specialized knowledge [that] will assist the trier of fact to understand the evidence or 

determine a fact in issue[.]’” United States v. Tamman, 782 F.3d 543, 553-54 (9th 

Cir. 2015) (citing Fed. R. Evid. 702(a); Aguilar v. Int’l Longshoremen’s Union Local 

No. 10, 966 F.2d 443, 447 (9th Cir. 1992)). “An opinion is not objectionable just 

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because it embraces an ultimate issue.” Fed. R. Evid. 704(a). “That said, an expert 

witness cannot give an opinion as to her legal conclusion, i.e., an opinion on an 

ultimate issue of law.” Nationwide Transpo. Fin. v. Cass Info. Sys., Inc., 523 F.3d 

1051, 1058 (9th Cir. 2008) (quoting Hangarter v. Provident Life & Accident Ins. Co., 

373 F.3d 998, 1016 (9th Cir. 2004)); see also Solid 21, Inc. v. Hublot of Am., — F. 

App’x —, 2017 WL 1101102, at *1 (9th Cir. 2017) (applying Nationwide’s 

proposition regarding expert witnesses and legal conclusions following the 2011 

Amendment to Federal Rule of Evidence 704); Tamman, 782 F.3d at 553-54 (“[A]n 

expert cannot testify to a matter of law amounting to a legal conclusion.”). 

Here, Mr. Beaton’s initial opinion went from “FRI has produced no documents 

at this time that would allow an analysis or calculation of any lost profits” and “I 

anticipate responding to any expert opinions on damages, should any be submitted” 

(Beaton Expert Report ¶¶ 5-6) to the following opinion: 

FRI has produced no evidence establishing a material, 

causal nexus between the alleged false claims made by 

ORI and any customer sales, i.e., FRI has not shown that 

the alleged false claims were material to any single 

customer who purchased Lipozene. Therefore, FRI has not 

established a basis for any economic damages. 

(Beaton Suppl. Expert Report ¶ 6(a)). There is no doubt that the crux of the opinion 

in Paragraph 6(a) of Mr. Beaton’s supplemental expert report is about materiality, 

which, by ORI’s own recognition, is an element of the substantive Section 43(a) 

claim for false advertising. See Skydrive Ariz., Inc. v. Quattrocchi, 673 F.3d 1105, 

1110 (9th Cir. 2012) (One of the elements of a Section 43(a) claim for false 

advertising is that “the deception is material, in that it is likely to influence the 

purchasing decision.”). And though the opinion does mention damages in the 

concluding sentence, that conclusion derives solely from his legal opinion about 

materiality. 

 As the magistrate judge concluded, Mr. Beaton’s opinion in Paragraph 6(a) 

“has nothing to do with damages, instead opining regarding materiality.” (June 7 

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2016 Order 6:14-18.) Furthermore, just as the magistrate judge reasoned, any opinion 

about materiality is outside the scope of Mr. Beaton’s expert testimony because there 

was no indication in the initial report that he would testify about materiality. As an 

added layer impropriety, Mr. Beaton’s opinion regarding materiality, at least insofar 

as the way it is presented, is an opinion regarding a legal conclusion that is wholly 

inappropriate, especially for an expert witness called to testify about damages.2 See 

Nationwide Transpo. Fin., 523 F.3d at 1058. 

 Needless to say, the Court agrees with the magistrate judge’s conclusion that 

Paragraph 6(a) of Mr. Beaton’s supplemental expert report is improper under Rule 

26. Mr. Beaton’s opinion is not only outside the scope of the initial expert report, but 

is also an improper legal conclusion provided by an expert witness called to calculate 

damages. 

2. Paragraphs 6(d)-(f) 

As the Court previously emphasized, ORI does not dispute the magistrate 

judge’s characterization of Paragraphs 6(d)-(f) of Mr. Beaton’s supplemental expert 

report that these paragraphs “relate to a determination of ORI’s profits potentially 

subject to recovery by FRI.” (June 7, 2016 Order 6:19-22.) ORI also does not dispute 

that the information used to determine ORI’s profits is financial information provided 

by ORI and that this information was available to ORI prior to the completion of Mr. 

Beaton’s initial expert report. (Id.) 

ORI reargues the point that “the parties were still engaged in a discovery 

dispute as to whether such [financial] information was discoverable[,]” and that 

“[t]here is nothing improper about refusing to surrender sensitive, private financial 

information until . . . the Court had trimmed the breadth of Fiber’s overbroad 

 

2 Had the Court reviewed the propriety of Mr. Beaton’s supplemental expert report de novo, 

as ORI requested, it may have been inclined to strike all statements or opinions regarding 

materiality from the report. Because review here is not de novo, the Court limits its review to the 

contrary-to-law or clearly-erroneous standards under Rule 72(a).

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demands[.]” (ORI’s Obj. 12:9-23.) The magistrate judge previously rejected ORI’s 

argument that its discovery obligations were somehow halted by a “good faith 

discovery dispute regarding the discoverability of its finances.” (June 7, 2016 Order 

6:19-7:7.) He further explained that despite the ongoing discovery dispute, ORI knew 

since March 2015 that ORI’s profits would be a measure for damages, and even 

setting aside the dispute, “ORI had to know that if it wanted its damages expert, Mr. 

Beaton, to opine regarding potential damages recoverable to FRI, it would have to 

provide information to Mr. Beaton.” (Id.) Ultimately, the magistrate judge concluded 

that, “[a]s that [financial] information was available to ORI and could have been 

provided to Mr. Beaton . . . ORI either had no intention of having Mr. Beaton opine 

regarding its profits or intended to have him do so beyond the discovery deadline in 

this case.” (Id. at 7:8-14.) 

ORI does not add any new relevant information in attacking the magistrate 

judge’s determination other than to say in a conclusory manner that it disagrees with 

his conclusion. From the Court’s review of the docket, there does not appear to have 

been a stay imposed on the parties’ discovery obligations pending the resolution of 

the discovery dispute. Nor has ORI identified an order or any applicable rule staying 

discovery. 

Furthermore, returning to Mr. Beaton’s initial opinion—“FRI has produced no 

documents at this time that would allow an analysis or calculation of any lost profits” 

and “I anticipate responding to any expert opinions on damages, should any be 

submitted” (Beaton Expert Report ¶¶ 5-6)—it is suggested that Mr. Beaton’s expert 

opinion is conditioned upon FRI presenting its own damages expert or “lost profit” 

evidence. ORI fails to provide any information that either of these conditions were 

satisfied to permit Mr. Beaton to give his opinion. Rather, Mr. Beaton’s 

“supplemental” expert report effectively is an affirmative opinion rather than a 

responsive one. In giving an affirmative expert opinion based on information that has 

been in ORI’s possession from the onset of this litigation, it is disingenuous to later 

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contend that any delay on ORI’s part was the result of a discovery dispute. If ORI 

planned to put forth affirmative expert testimony all while possessing the information 

to do so, it should have timely done produced its expert report instead of attempting 

to surreptitiously present the new opinions as a supplement. 

With respect to Paragraphs 6(d)-(f), the Court agrees with the magistrate 

judge’s conclusion that the supplementation is improper. 

B. Substantial Justification and Harmlessness under Rule 37 

Even though the magistrate judge concluded that ORI’s supplementation is not 

substantially justified, and ORI attempts to now argue to the contrary, it is clear that 

ORI failed to meet its burden to demonstrate substantial justification. This is evident 

from the fact that ORI did not argue in the underlying briefing that it was substantially 

justified in supplementing Mr. Beaton’s initial expert report. (See March 25, 2016 

Joint Brief 6:1-11:1, ECF No. 177.) Unsurprisingly, this Court finds no defect in the 

magistrate judge’s conclusion that ORI failed to carry its burden to demonstrate that 

the inclusion of paragraphs at issues in Mr. Beaton’s supplemental expert report was 

substantially justified. 

Relying exclusively on Cedar Petrochemicals, Inc. v. Dongbu Hannong 

Chemical Co., Ltd., 769 F. Supp. 2d 269 (S.D.N.Y. 2011), which is non-binding 

persuasive legal authority, ORI argues that its supplementation was harmless 

because: (1) “Mr. Beaton’s reports have been exchanged in a timely manner on the 

ordered deadlines”; (2) “Mr. Beaton’s opinion analyzing ORI’s profits is extremely 

important”; (3) “neither prejudice nor harm to Fiber exists in refusing to strike Mr. 

Beaton’s opinions regarding ORI’s profits”; and (4) “there is no need for a 

continuance[.]” (ORI’s Obj. 13:9-15:2.) None of these arguments presented by ORI 

directly address the magistrate judge’s reasoning in reaching his conclusion that the 

supplementation was not harmless. Moreover, even if the Court considered Cedar 

Petrochemicals to determine whether the sanction imposed unwarranted, the case is 

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distinguishable because Cedar Petrochemicals addressed whether precluding an 

entire expert report was warranted. See Cedar Petrochemicals, 769 F. Supp. 2d at 

277-79. This case involves striking only four paragraphs from a supplemental expert 

report. (See June 17, 2016 10:17-20 (“The opinions of Mr. Beaton, presented for the 

first time in his supplemental report at ¶ 6(a)(d-f), however are stricken.”). 

In sum, ORI fails to persuade this Court that there was any error in the 

magistrate judge’s conclusion that the inclusion of Paragraphs 6(a) and (d)-(f) in Mr. 

Beaton’s supplemental expert report was neither substantially justified nor harmless. 

III. CONCLUSION & ORDER 

ORI presents numerous arguments attempting to justify the propriety of Mr. 

Beaton’s supplemental expert report. Clearly, ORI has chosen quantity over quality. 

Many of these remaining arguments blatantly lack merit, and as such, the Court need 

not discuss them any further. On a final note, and in response to ORI’s hyperbolic 

representations about the severe impact of striking the four paragraphs from the 

supplemental expert report, the Court reminds ORI that it is not prohibited from 

presenting evidence in mitigation on any damages theory presented by FRI. 

In light of the foregoing, the Court finds that ORI fails to demonstrate the 

magistrate judge’s June 7, 2016 Order was either contrary to law or clearly erroneous. 

See Fed. R. Civ. P. 72(a). Accordingly, the Court OVERRULES ORI’s objection to 

the magistrate judge’s June 7, 2016 Order in its entirety. (ECF No. 282.) 

IT IS SO ORDERED. 

DATED: August 4, 2017 

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