E

EXHIBIT

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF FLORIDA

Case No.: 17-cv-80432-M lDDLEBROO KS

ADT LLC, and ADT US HOLDW GS, INC.,

Plaintiffs,

VIVW T, m C.,

Defendant.

/

ORDER ON DEFENDANT'S M OTION TO EXCLUDE TESTIM O NY AND REPO RT OF

JOHN GO ODM AN AND DAVID STEW ART

THIS CAUSE comes bcfore the Court upon Defendant Vivint, lnc.'s (Cdvivinf') M otion

to Exclude Expert Reports and Testimony of John Goodm an and David Stewart, filed October

10, 2017. (DE 126). Plaintiffs ADT LLC, and ADT US Holdings, Inc. (collectively CSADT'')

filed a response on October 16, 2017 (DE 136), to which Vivint replied on October 23, 2017 (DE

149).

1.

Si-l-he adm ission of expert evidence is governed by Federal Rule of Evidence 702, as

explained by Daubert and its progeny.'' Rink p. Cheminova, fna, 400 F.3d 1286, 1291 (1 1th Cir.

LEGAL STANDARD

2005). isunder Rule 702 and Daubert, district courts must act as tgatekeepers' which admit

expert testimony only if it is both reliable and relevant.'' 1d. (citing Daubert v. M errell Dow

Pharmaceuticals, Inc., 509 U.S. 579, 589 (1993)). StDistrict courts are charged with this

gatekeeping function ;to ensure that speculative, unreliable expert testimony does not reach the

jury' under the mantle of reliability that accompanies the appellation Sexpert testimony.''' Id

(quoting Mccorvey v. Baxter Healthcare Corp., 298 F.3d 1253, 1256 (1 1th Cir. 2002)).

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Although iigujnder Rule 702, a district court acts as a gatekeeper to keep out irrelevant or

unreliable expert testim ony

adversary system or the role of the jury: vigorous cross-examination, presentation of contrary

. , (tlhis gatekeeping role,g) is not intended to supplant the

evidence, and careful instruction on the burden of proof are the traditional and appropriate means

of attacking shaky but adm issible evidence.'' United States v. Alabama Power Co., 730 F.3d

1278, 1282 (1 1th Cir. 2013) (citations omitted).

di'ro fulfill their obligation under Daubert, district

inquiry to detennine whether'.

COURS mtlst Cngage in a rigorotls

$(1) the expert is qualified to testify competently regarding the

matters he intends to address; (2) the methodology by which the expert reaches his conclusions is

sufficiently reliable as determined by the sort of inquiry mandated in Daubertk and (3) the

testim ony assists the trier of fact, through the application of scientific, technical, or specialized

expertise, to understand the evidence or to determ ine a fact in issue.''' Rink, 400 F.3d at 1291-92

(quoting t7/y of Tuscaloosa v. Harcros Chems., lnc. , 158 F.3d 548, 562 (1 1th Cir.1998)). $$The

party offering the expert has the burden of satisfying each of these three elem ents by a

preponderance of the evidence.'' 1d. at 1292 (citing Allison v. M cGhan Med Corp., 184 F.3d

1300, 1306 (1 1th Cir. 1999)).

tiln ascertaining reliability under the second Daubert prong, we have identifed several

factors which can be considered: (1) whether the expert's methodology can be tested; (2)

whether the expert's scientifc technique has been subjected to peer review and publication; (3)

whether the method has a known rate of error; (4) whether the technique is generally accepted by

the scientitic community.'' Rink, 400 F.3d at 1292 (citing Quiet Tech. DC-8, Inc. v. HurelDubois UK L /2 , 326 F.3d 1333, 134 1 (1 1th Cir. 2003:. iç-l-his list of factors, however, ddoges)

not exhaust the universe of considerations that may bear on . . . reliability.''' Id (citing Quiet

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Teck, 326 F.3d at 1341; Kumho Tire Co. v. Carmichael, 526 U.S. 137, 150 (1999); Daubert, 509

U.S. at 594). SfDistrict courts fhave substantial discrction in deciding how to test an expert's

reliability . . . .''' 1#. Lquoting United States v. Majors, 196 F.3d 1206, 1215 (1 1th Cir. 1999$.

Even if proposed exptrt testimony is adm issible undtr Rule 702, that evidence m ay be

excluded if it is irrelevant or if çfits probative value is substantially outweighed by a danger of . . .

unfair prejudice, confusing the issues, gorj misleading the jury.'' Fed. R. Evid. 403. Because

iiexpert testimony may be assigned talismanic signifcance in the eyes of 1ay jurorss'' a district

court çtm ust take care to weigh the value of such evidence against its potential to m islead or

confuse.'' United States v. Frlz/er, 387 F.3d 1224, 1263 (1 1th Cir. 2004).

II. Discussion

a. M ultiplier

Vivint moves to exclude ADT'S experts, John Goodm an and David Stewart lifrom

testifying as to the percentage of ADT custom ers who received false sales pitches from Vivint

salts agtnts, who likely rtported tht incidtnt to ADT.'' (DE 136 at 1).ADT responds that both

experts will testify to ftwell-known and unrem arkable proposition that custom ers who complain

are vastly outnumbered by customers who do not complain.'' (DE 136) (citing ADT LL C v.

Alarm Protection LLC, No. 9:15-cv-80073, 2017 W L 2212541, *7 (S.D. Fla. 2017) (Rosenberg,

J.)). Further, ADT intends to call Stewart to Gtexplain why Vivint's defenses relating to its postsale disclosures do not protect consumers from the confusion caused in the earlier stages of a

sale.'' (DE 136 at 1).

Goodman opines that the 900 ADT custom ers who allegedly contacted ADT only

represent between 5%-10% of the Siactual'' number of ADT custom ers who experienced

3

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ti imilar'' conduct.l (DE 126 at 2). In reaching th s eir opinions, Goodman and Stewart relied upon

a spreadsheet provided thenn by ADT which purports to identify approxim ately 900 ADT

customers coupled with ADT'S characterization

salesperson told the customer. (DE 126 at 4).

accurate without interviewing any of the customers. (1d.4.

of what a custom er said a purported Vivint

Goodm an's conclusion assumes that this data is

Goodm an review s entries for only

310 of the 900 custom ers and testified that he Sûperform ed no subsequent analysis'' to detennine

whether the 3 10 custom ers were representative of the population from which they were drawn.

(DE 126-2 at 84). Upon review of the entries for those 310 customers, Goodman testified that

he ma e a df d best guess as to whether (Vivint'sj scnm was successful or not.''2 (DE 126-2 at 59).

Based on these %'best guesslesl'' Goodman concluded that 37% of the customers were

successfully solicited. (DE 126 at 4).

' 3 h dology Vivint argues that Goodman s m et o , and the application of that methodology to

the data are unreliable. Citing its own expert report, Vivint argues that to determ ine the ratio of

a11 ADT customers who experienced a deceptive sales practice by a Vivint salesperson, an

independent researcher would follow a four-step process:

representative sample of a11 ADT customers; (2) determine how many of these customers were

survey a statistically

visited by a Vivint salesperson; (3) determine how many from this group experienced a deceptive

sales practice; and (4) out of this subset, detennine how many reported the conduct to ADT.''

(DE 126 at 6). Further, Goodman has published a book in which he explained that ç'the best

approach to quantifying the m ultiplier for key problem s is to execute a one-tim e survey of a

1 Stewart opines that these 900 customers rcpresent only between 4% and 9% of customers

affected.

2 h fu1 scam is one in which the custom er signs a c success ontract with Vivint.

3 vivint states that iigbqecause all of the defects in Goodman's data and methodology apply

equally to Stewart's opinions, this M otion will address Goodm an's deficiencies in detail and

Stewart's in more concise tenns.'' (DE 126 at 3).

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random sam ple of your entire custom er base. Use this to determ ine the ratio

custom ers encounter to those reported to each company touch point or social media tool.''

of problems

(DE

126 at 7). Goodman recommended this approach to ADT; however, ADT chose to not conduct a

survey and instead providtd Goodman with tht spreadsheet it created.

ADT argues that it was appropriate for the experts to rely on A DT'S spreadsheet because

Sflalccording to Dr. Stewart, it would have been impossible to design and implement a

meaningful survey to inform any expert's opinion on the likely num ber of nonreporting ADT

customers who were slm med by Vivint sales agents.'' (DE 136 at 9). The Supreme Court has

stated:

gA1 key question to be answered in determining whether a theory or technique is

scientisc knowledge that will assist the trier of fact will be whether it can be tand

has been) tested. Scientific methodology today is based on generating hypotheses

and testing them to see if they can be falsifed; indeed, this methodology is what

distinguishes science from other fields of hum an inquiry.

Daubert v. Merrell Dow Pharm., lnc. , 509 U.S. 579, 593 (1993) (internal quotations omitted).

The fact that the experts were unable to ttdesign and im plem ent a meaningful survey'' does not

give them license to rely on less reliable data. Instead, it suggests that the question of how m any

custom ers who were affected by Vivint's alleged deceptive practices m ay not be amenable to

reliable testing using a ltscientitsc m ethodology.''

Another factor considered in whether expert testimony is reliable is dilwlhether the expert

is being as careful as he would be in his regular professional work outside his paid litigation

consulting,'' Fed. R. Evid. 702 cmt. See also Kumho Tire Co. Ltd. v. Carmichael, 526 U.S. 137,

1 52 (1 999) (noting that the court must ensure that Csan expert . . . employs in the courtroom the

same level of intellectual rigor that characterizes the practice of an expert in the relevant ûe1d'').

Here, Goodm an has opined as to the best way for a business to calculate a multiplier and

5

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recommended that method to ADT. ADT chose not to follow Goodm an's expert advice and

instead required Goodm an to rely on a spreadsheet that purports to sum m arize what an ADT

customer told the ADT representative. Further, ADT has conceded in num erous filings and at

Calendar Call that the Parties have discovered that the spreadsheet upon which both Goodm an

and Stewart relied inaccurately characterizes what certain customers told ADT representatives.

This is problematic considering that Goodm an testiûed at his deposition that if ADT'S

characterization of a custom er complaint was incorrect, his corresponding extrapolation estimate

would also be incorrect. (DE 126-2). Based on the foregoing, Vivint's M otion to exclude thv

expert report and testim ony of Goodm an is granted and Vivint's M otion to cxclude Stewart's

report and testimony relating to his opinion of the percentage of ADT customers who received

falst salts pitches from Vivint sales agents, who likely reported the incident to ADT is granted.

b. Stewart's Theory Regarding Initial Confusion

ADT also plans to introduce Stewart's opinion as to a second topic, (çgtlhe ineffectuality

of Vivint's post-sale efforts to dispel the pre-sale custom er confusion that its agents cause with

their false claims of ADT affliation.'' (DE 136 at 14). Prior to installing an alarm system in a

customer's hom e, Vivint requires the customer to complete a Ctpre-install survey'' in which the

customer affinns that she understands that Vivint is not afûliated with any other company. 4 (DE

136 at 14). In his report, Stewart opines that the pre-install surveys are insufscient to dispel

customer confusion because by that time, çlgtlhe consumer's emotional and motivational

comm itmtnt to the transaction is compltte. If the latt disclosure gives the consum er paust, the

eonsum er will likely rationalize it away as an oversight that she should have recognized earlier in

the transaction.'' (DE 126-15 at 12).

4 ADT argues that Vivint only requires som e, not all, custom ers to complete the pre-install

survey. (DE 136 at 14).

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Vivint m oves to exclude this testim ony on the basis that Stewart's theory ûtthat initial

confusion cannot be rectifed and is an independent basis for a legal rem edy fails under law.

''

(DE 126 at 20). Vivint argues that déstewart opintd that any occasion of dinitial confusion' is an

independent basis for dam ages, and that any correction of such confusion cannot remedy the

initial confusion.'' Vivint cites this Court's opinion in Vital Pharms., Inc. v. Am. Body Bldg.

Prod LL C, 51 1 F. Supp. 2d 1303 (S.D. Fla. 2007). There, the plaintiff attempted to show that

the trade dress of Defendant's sports drink caused actual confusion am ong customers as to

whether it was produced by the plaintiff. 1d. The plaintiff attempted to prove actual confusion

through the testimony of two individuals, M r. Bukovic and M r. Hanson. M r. Bukovic testifes

that he dtseleded a bottle of gDefendant's sports drink) with the initial impression that it was

(Plaintiff'sj product'' but realized that the drink was Defendant's product before purchasing it.

ld. M r. Hanson testifies that he saw people drinking Defendant's sports drink Ssand due to the

shape of the bottlt, he believed it to be'' produced by Plaintiff.Id He then testifed that lsupon

looking at the bottle more closely, he determ ined that it was in fact not'' produced by Plaintiff.

I noted that the Eleventh Circuit has not embraced the principle that initial interest

confusion is suffcient to fsnd a likelihood of confusion and that 1 find tht theory unptrsuasive. I

notcd that figwlhen the bottom line is salts of a particular product, initial confusion prior to and

concluding before the point of purchase does not seem dispositive in a likelihood of confusion

analysis.'' Id

Stewart's theory appears to be distinguishable from the initial confusion doctrine

discussed in Vital Pharms. There, the custom ers were confused upon first sceing Defendant's

product; however, that confusion was dispelled upon closer review and before purchasing the

product. Here, Stewart opines that the statements of Vivint agents Stin the initial stages of their

7

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&

approaches to ADT'S customers created a likelihood of consum er confusion'' and that fslater

efforts to clarify the agent's affiliation cannot undo the dam age caused by the initial confusion

that enabled the rest of the Vivint agent's pitch to be heard and succeed.'' ADT states that this

testim ony is ttcritical to refute Vivint's defense that the tpre-install survey' . . . cures any earlier

customer confusion. ( ''5 DE 136 at 15). Therefore, it appears that ADT will use Stewart's

opinion to prove that the customers remained confused at the tim e of the purchase, unlike Vital

Pharms. where the custom ers testified that they were no longer confused by the time of

purchase. Therefore, Vivint's argument that M r. Stewart's theory fails under the 1aw is

unpersuasive. Accordingly, it is hereby

ORDERED AND ADJUDGED that Vivint's M otion to Exclude (DE 126) is

GRANTED IN PART and DENIED IN PART. M r. Goodm an's report and testim ony is

excluded. M r. Stewart's report and testimony is excluded to the extent he opines as to the

percentage of ADT customers who received false sales pitches from Vivint sales agents, who

likely reported the incident to ADT. M r. Stewart's report and testim ony relating to the

effectiveness of post-sale effortsto cure pre-sale confusion is not excluded

DONE AND ORDERED in Chambers in West Pa1 ach, F1o 'da, this Z day of

Decem ber, 2017.

LD M . M IDDLEBROOK S

ITED STATES DISTRICT JUDGE

Copies to: Counsel of Record

5 ADT notes that it 'lhas not asked the Court to impose liability on Vivint based on the initial

interest confusion doctrine'' but proceeds to argue that Slif the Court fsnds it relevant, it should

recognize the doctrine in this case.'' (DE 136 at 17). Plaintiff's Response to a M otion to

Exclude is not the proper vehicle by which to assert a new theory of liability, and thus the Court

will not address this argum ent here.

8

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