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7. Ultimately, as is evident from his above quoted deposition testimony, Dr.
Simpson chose not to include any analysis of CB&I’s efficiencies defense in the expert report he
ultimately submitted. Further, Dr. Simpson did not provide any analysis at his deposition,

despite being asked to do so.



Nada S. Sulaiman
Winston & Strawn

1400 L Street, N.W.
Washington, D.C. 20005
(202) 371-5700 (voice)
(202) 371-5950 (fax)
nsulaima@winston.com

Counsel for Respondents

Chicago Bridge & Iron Company N.V.
and Pitt Des-Moines, Inc.

10


appropriate measure for this Court to take. See Sheek v. Asia Badger, Inc., 235 F.3d 687, 694
(Fed. Cir. 2000) (holding that although the district court could have “ruled to exclude all of Dr.
Kennedy’s testimony -- a sanction well within the district court’s scope of discretion” since the
party failed to supplement its expert reports to reflect new expert opinions, the sanction of
exclusion of the undisclosed portions of the testimony was “relatively lenient” and within the
court’s discretion); Bristol-Myers Squibb Co. v. Rhone-Poulenc Rorer, Inc., No 95 CIV 8833
RPP, 2000 WL 356412 (S.D.N.Y. Apr. 5, 2000) (holding that direct testimony by any expert
witness at trial would be limited to the contents of the expert report unless the witness could
show that such material was not available either to him or counsel retaining him as of the date of
his report); Atmel Corp., 189 F.R.D. at 416-17; GEM Realty Trust v. First Nat’l Bank of Boston,
No. CIV. 93-606-SD, 1995 WL 136874 (D.N.H. Mar. 27, 1995) (precluding expert from offering
expert opinion testimony at trial on subject matter not included within expert report because the
offering party had a duty to disclose such opinions, and the bases and reasons therefor, prior to
the close of discovery in the case); Southern Pacific Transp. Co. v. Builders Transport, Inc., Civ.
A. No. 90-3177, 1993 WL 185620, at *16 (E.D. La. May 25, 1993) (“‘It is the practice in within
this district that expert testimony is limited to the scope of the expert’s report.”).

12. Not only does Dr. Simpson’s expert report and rebuttal expert report fail
to set forth any explanation for his view that CB&I’s efficiencies are illegitimate and not merger
specific, he was unable to provide a basis at his deposition. See supra § 5. Nonetheless, Dr.

Simpson plans to testify at trial regarding efficiencies:

? The law regarding the required disclosure of opinions in expert reports is much more developed under the Federal
Rules; accordingly a discussion of the law under the Federal Rules of Civil Procedure has been included.

7



Despite stating in his report that the efficiencies claimed by
CB&I are not merger specific or legitimate, Dr. Simpson would not state which efficiencies fall
into which category and how. Accordingly, Dr. Simpson should not be permitted to give
opinions at trial regarding CB&I’s efficiencies defense that have not been disclosed.

8. Rule 3.31(b)(3) of the FTC Rules of Practice requires Complaint
Counsel’s expert witnesses to disclose in writing “a complete statement of all opinions to be
expressed and the basis and reasons therefore” as well as “the data or other information
considered by the witness in forming the opinions.” FTC Rules of Practice, 16 C.F.R. §
3.31(b)(3).

9. The Commission’s scheduling order also requires that “[e]ach expert
report shall include the subject matter on which the expert is expected to testify and the
substance of the facts and opinion to which the expert is expected to testify and a summary of the
grounds of each opinion.” (Feb. 20, 2002 Scheduling Order (incorporated by reference into
September 10, 2002 Third Revised Scheduling Order), Exhibit 4 hereto). (emphasis added)

10. Similarly, Rules 26(a)(2)(B) and 37(c)(1) of the Federal Rules of Civil
Procedure permit an expert, on direct examination, to rely on no more than that which is
disclosed in his or her Rule 26(a)(2)(B) report.” Fed. R. Civ. P. 26(a)(2)(B); Fed. R. Civ. P.
37(c)(1); see Fed. R. Civ. P. 26 Advisory Committee’s Notes to 1993 Amendment (“Revised
Rule 37(c)(1) provides an incentive for full disclosure, namely, that a party will not ordinarily be
permitted to use on direct examination any expert testimony not so disclosed.”); Atmel Corp. v.
Information Storage Devices, Inc., 189 F.R.D. 410, 416 (N.D. Cal. 1999).

11. Exclusion of all evidence not disclosed in an expert’s reports is an


not believe are merger specific, and which efficiencies Dr. Simpson believes are not legitimate,
and which efficiencies Dr. Simpson believes he needs more information in order to evaluate.

15. Further, Dr. Simpson has provided no explanation whatsoever regarding
the basis for his opinions or how he plans to testify at trial.
If, CONCLUSION

WHEREFORE, Dr. Simpson should be precluded from giving opinions regarding
CB&’s efficiencies due to his failure to make the required disclosures under the FTC Rules of

Practice, the Commission’s Scheduling Order, and the Federal Rules of Civil Procedure.”

Dated: November 20, 2002 Respectfully submitted,

V/s

Dydne M. Kelley
Jeffrey A. Leon

Greg J. Miarecki
Winston & Strawn

35 W. Wacker Drive
Chicago, IL 60601-9703
(312) 558-5600 (voice)
(312) 558-5700 (fax)
dkelley@winston.com
jleon@winston.com
gmiareck@winston.com

5 CB&I is aware that it agreed to not make any Motions in Limine with regards to expert reports, and it does not
view this motion to be a motion in limine. Further, CB&I was unaware until Dr. Simpson's October 22, 2002
deposition that he was planning to testify extensively regarding efficiencies, and that he had actively deleted a
fulsome discussion of efficiencies from a prior draft of the report.


UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION

PITT-DES-MOINES, INC.,

a corporation.

) KERN ADE CO
In the Matter of ) Areceivencocumentse Dm
) HOV 2
CHICAGO BRIDGE & IRON COMPANY N.V., _) ~ 0 2002
) SECRETARL
a foreign corporation, )
)
CHICAGO BRIDGE & IRON COMPANY, )
)
a corporation, ) Docket No. 9300
)
and ) PUBLIC RECORD
)
)
)
)
)

RESPONDENTS’ MOTION TO STRIKE DR. SIMPSON’S OPINION REGARDING
EFFICIENCIES

Respondents (“CB&I”) respectfully request that the Commission enter an Order
prohibiting Complaint Counsel’s economic expert, Dr. John Simpson, from testifying regarding
efficiencies resulting from the integration of CB&I and PDM beyond the one sentence
conclusory statement contained in Dr. Simpson’s expert reports. In support of its motion, CB&I
states the following:

L INTRODUCTION

1. As Complaint Counsel has been aware for some time, CB&I believes that
the integration of CB&I and PDM has resulted in substantial cost-saving efficiencies which
would offset any purported loss of competition. Respondents submitted an extensive efficiencies

presentation (43 pages) to Complaint Counsel on October 10, 2001, and that efficiencies



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CERTIFICATE OF SERVICE
I, Nada S. Sulaiman, hereby certify that on this 20th day of November, 2002, I
served a true and correct copy of the Public Version of Respondent’s Motion to Strike Dr. John

Simpson’s Opinion Regarding Efficiencies, by hand delivery upon:

The Honorable D. Michael Chappell
Administrative Law Judge

Federal Trade Commission

600 Pennsylvania Avenue, N.W.
Washington, D.C. 20580

(two copies)

Secretary of the Commission
Federal Trade Commission

600 Pennsylvania Avenue, N.W.
Room H-159

Washington, D.C. 20580

and by fax and hand delivery upon:

Rhett R. Krulia

Acting Assistant Director
Bureau of Competition

Federal Trade Commission

600 Pennsylvania Avenue, N.W.
Room S-3602

Washington, D.C. 20580

Steven L. Wilensky

Federal Trade Commission.

601 Pennsylvania Avenue, N.W.
Room S-3618

Washington, D.C. 20580

Leet

as S. Sulaiman

1114925.4 lt



Clearly, given the fact that the rest of Dr. Simpson’s
is replete with detailed citations to the record and reasonably detailed analysis,
Dr. Simpson knows that he is required to fully set forth his opinions in his expert reports.

13. If Dr. Simpson is permitted to give his secret opinions at trial regarding
CB&I’s efficiencies defense, CB&I will be unfairly prejudiced by this “surprise” as it will not
have had an opportunity to discover his opinions and prepare accordingly.’ This was clearly a
tactical decision given Dr. Simpson’s testimony that his opinion regarding efficiencies was set
forth in an earlier draft of his report. The underlying purpose of the Rules and the Commission’s
Scheduling Order is to avoid this type of “trial by ambush.” See Congressional Air, Ltd. v.
Beech Aircraft Corp., 176 F.R.D. 513, 516 (D. Md. 1997).

14. CB&I is certainly not taking the position that every minute detail must be
set forth in an expert report; however it is clear that under the rules an expert must at least
provide enough information regarding his opinion to put the opposing party on notice as to what
his opinions at trial will be.* In this case, CB&I has no idea which efficiencies Dr. Simpson does
3 Indeed, CB&I believed that Dr. Simpson was not planning to address efficiencies at all; that is until his remarkable

deposition testimony indicating that he plans to testify at trial regarding efficiencies.

4 Based on statements made by Complaint Counsel at Dr. Simpson’s deposition, it is evident that Complaint

Counsel believes that Dr. Simpson’s conclusory dismissal of CB&I’s efficiencies defense puts CB&I on notice with
regards to any efficiencies opinion.

For the reasons set forth herein, Complaint Counsel is
mistaken. If this did constitute sufficient notice, Dr. Simpson could have simply submitted a one-page report stating
1) This acquisition is anti-competitive, 2) new entry is insufficient, 3) CB&1 and PDM have and still do dominate
the market, and 4) this company should be broken up. Clearly, that would not be a sufficient expert disclosure under
the Rules and the Commission’s Scheduling Order.

8



6. In fact, Dr. Simpson stated that in an earlier draft of his expert report he
had included some basis for his assertion that CB&I’s efficiencies analysis is inadequate, and

intentionally -- CB&I believes tactically -- removed it from the final draft.



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EXHIBIT

a_i



permitted to give expert testimony regarding CB&I’s efficiencies defense.’
IL. ARGUMENT

4. Other than regurgitating The Merger Guideline standards on efficiencies
in his expert report, Dr. Simpson dismisses CB&I's entire 40 plus page

efficiencies analysis and the supporting testimony in the following sentence:

5. At his October 22, 2002 deposition, Dr. Simpson was asked to explain the
basis of the above quoted “opinion” regarding the inadequacy of CB&I’s efficiencies defense,
and to note which claimed efficiencies are not legitimate and which are not merger specific. Dr.

Simpson testified that he was able to provide specific opinions on the efficiencies analysis prior

to filing his expert report:

1 CB&I does not suggest that Complaint Counsel be barred from making legal arguments reparding efficiencies
based on its cross-examination of CB&I witnesses; CB&I only asserts that Dr. Simpson should be barred from
giving economic testimony with regards to efficiencies.

3



presentation was presented to the Commission members in meetings on October 14 and 15,
2001. . When discovery began, more than a half dozen depositions of
CB&I employees were taken regarding this presentation as well as CB&I’s efficiencies defense
generally. The forty-three (43) page efficiencies presentation was marked as an exhibit at six (6)
different depositions and is referred to in Dr. Simpson’s report. It was abundantly clear to both
parties throughout discovery that this report was being used as the primary support for one of
CB&I’s defenses to the Complaint.

2. At each of the CB&I depositions related to efficiencies, Complaint
Counsel involved its senior accountant, Gabe Dagen, either in person or by telephone. Despite
the unorthodox request, CB&I acceded to letting Mr. Dagen, a non-lawyer, ask questions at these
depositions. Complaint Counsel told CB&I’s counsel that Mr. Dagen is the FTC's in-house
efficiencies analysis expert.

3. Despite the extensive discovery effort directed at attacking efficiencies,
Complaint Counsel's expert witness, Dr. John Simpson, summarily dismissed CB&I’s entire
efficiencies defense in a single sentence in his fifty plus page report without providing any
supporting explanation or analysis. Remarkably, and much to CB&I's surprise, Dr. Simpson
stated in his October 22, 2001 deposition that he nonetheless plans to testify at trial as a rebuttal
witness regarding CB&I’s efficiencies defense. This is trial by ambush, as CB&I has not been
informed of this expert's opinion, who apparently is planning to lie in wait before springing his
already formed views on CB&I in rebuttal. This practice unquestionably flies in the face of the
FTC Rules of Practice, the Federal Rules of Civil Procedure, and the Commission’s Scheduling

Order which explicitly warn against such conduct. Accordingly, Dr. Simpson should not be



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