Sunstar’s Motion to Bar Alberto’s Damage Evidence

Sunstar has filed a motion styled “Motion to Declare that Alberto May Not Proceed at the
Trial with Any Claim Against Sunstar for Damages.” To the extent Sunstar is seeking judgment with
respect to damages, as the title of its motion suggests, the motion is denied. The Court will not
entertain a summary judgment motion at this late date.

Sunstar fares no better if we construc the motion as one to bar Alberto from presenting any
reasonable royalty evidence at trial. Sunstar says such evidence should be barred because: (1)
Alberto’s royalty evidence is based solely on the royalty rate in the parties’ 1989 agreement, which
the Court previously ruled could not be used as a basis (or a royally in his case; and (2) it is too late
for Alberto to advance any other theory of damages.

The latter contention is true but immaterial. The only damage theory Alberto seeks to pursue
is the one it has disclosed: a reasonable royalty,

The first contention is no more persuasive. Alberto’s damages expert, Aron Levko, used the
royalty rate from the 1989 agreement as a basis for his reasonable royalty calculation. Thus, as
Alberto acknowledges, he cannot testify about that calculation. But Levko does more in his report
than calculate the present day value of the 1989 rate. He also explains the assumptions underlying
his calculations, including that: (1) Sunstar would have been willing to pay a substantial amount for
a license in 1999 because it viewed the redesigned mark as crucial to its business and had already
invested heavily in it; (2) Alberto would have demanded a significant royalty rate in 1999 because
the company was, at that point, focused on consistency in its global brand; (3) a royally in the form
ofan annual payment is appropriate; (4) to calculate the royalty rate, it is appropriate to enhance a
prior royally rate for a license of similar scope by the percentage rise in the Consumer Price Index
for hair care products between the year of the benchmark and 1999; and (5) it is appropriate to

14



issue. Further, any risk that the jury will consider the evidence for other purposes can be vitiated by
limiting instructions. Thus, the Court will not disturb Magistrate Judge Nolan’s determination that
this evidence is not barred by the Court’s previous ruling and is relevant to the partics’ claims.

Alberto also says the Magistrate Judge should have granted its request for judicial notice of

the word “may,” which appears in the license provision Sunstar is alleged to have breached:

“Licensee shall not at any time do, or cause to be done, any act or deed which will or may infringe,
impair or lessen the value or the exclusive right, title, and interest of {Alberto] in Licensed
Trademarks ....” (1980 License Agreement § IV.) Judge Nolan declined Alberto’s request because
she believed it was unnecessary no to offer evidence of such a common word. That was erroneous,
Alberto says, because Federal Rule of Evidence (“Rule”) 201 requires courts to take notice of
adjudicative facts if a party makes the request and provides the appropriate support.

Rule 201 does, indeed, say that judicial notice is “mandatory” when a party requests it and
supplies the necessary supporting information. Fed. R. Evid. 201(d). But facts subject to judicial
notice are not exempt from analysis under the other rules of evidence. See United States v, Falcon,
957 F. Supp. 1572, 1585 (S.D. Fla. 1997) (“[WJhile the Rule . . . [says] the court ‘shall take judicial
notice if requested by a party and supplied with the ncccssary information’... , a court may refuse
to take judicial notice of facts that are irrelevant to the proceeding or (in certain contexts) otherwise
excludable under the Federal Rules.” (quoting Rule 201(d)). Asa result, courts refuse to take even
“mandatory” judicial notice when the fact to be noticed is inadmissible under Rule 403. See, ¢.g.,
Guidi v. Inter-Cont'l Hotels Corp., No. 95 Civ. 9006 (LAP), 2003 WL 1907904, at *1n.1(S.D.NLY.
Apr. 16, 2003) (“Because the evidence is excluded under Rule 403, it is not necessary to determine
whether... Rule 201 otherwise provide[s] for the admissibility of the proffered evidence.”); Cipriani
v. Lycoming County Hous. Auth., 177 F, Supp. 2d 303, 326 (M.D. Pa. 2001) (“I.. . interpret [RJule

5



examination of them would needlessly and substantially increase their deliberation time. Finally,
giving the documents to the jurors creates the risk that they will ignore the testimony introduced by
the parties in favor of their own interpretations of these documents. In short, we agrce with Judge
Nolan that Sunstar exhibits 91-100 are inadmissible.

Sunstar’s next objection concerns the deposition testimony of Dorothy Spencer. Spencer is
a former employee of DGA, the firm that commissioned the rescarch into Japanese consumer
attitudes toward the licensed marks, recommended that Sunstar modernize the VO5 logo and
designed the 1999 mark. As discussed above, Magistrate Judge Nolan found that Spencer’s
testimony is relevant. But she also said that Spencer could testify only as an expert, not a lay,
witness. Sunstar contends that conclusion is wrong because Spencer was not hired for litigation and
is offering opinions based on her work experience and personal involvement in the Sunstar project.

Rule 701, which sets the parameters for lay opinion testimony, provides:

Tf the witness is not testifying as an expert, the witness’ testimony in the form of

opinions or inferences is limited to those opinions or inferences which are (a)

rationally based on the perception of the witness, (b) helpful to a clear understanding

of the witness’ testimony or the determination of a fact in issue, and (c) not based on

scientific, technical, or other specialized knowledge within the scope of Rule 702.
Fed. R. Evid. 701, The Seventh Circuit has explained the difference between lay and expert opinion
testimony as follows:

Lay opinion testimony most often takes the form ofa summary of first-hand sensory

observations, See Asplundh Mfg, Div. v. Benton Harbor Eng’g, 57 F.3d 1190,

1196-1202 (3rd Cir. 1995). The opinion provides the jury with a more complete

picture than would be provided by a recitation of each component fact. “Lay opinion

testimony is admissible only to help the jury or the court to understand the facts about

which the witness is testifying and not to provide specialized explanations or

interpretations that an untrained layman could not make if perceiving the same acts

or events,” United States v. Peoples, 250 F.3d 630, 641 (8th Cir. 2001). Lixpert

opinion, by contrast, need not be based on first-hand knowledge of the facts of the

case, It brings to an appraisal of those facts a scientific, technological or other

specialized knowledge that the lay person cannot be expected to possess.

10


executed may diminish its impact but does not vitiate its relevance. Accordingly, the Court agrees

with Alberto that this testimony is admissible.

Alberto’s last objection to Judge Nolan’s Order concerns Sunstar’s exhibit 22. That exhibit
is a memorandum prepared by an Alberto employee recounting a mecting between Sunstar and
Alberto afier Sunstar started using the 1999 mark. Among other things, the memorandum says that
Alberto “[s]tressed [to Sunstar] our objectives [sic] how to get back trade mark that we consider
core” and that “[o|bjcctive (without time) is to get trademark (VO5) back to our company.” (Sunstar
Ex, 22 at AILB000446, 453.) Sunsiar says those statements are admissible because they suggest that
Alberto’s “lessening-the-value” rhetoric is simply a pretext for it to reclaim the licensed marks.
Judge Nolan agreed.

Alberto says that conclusion is erroneous because the timing of the statements (they were
made afler Sunstar started using the 1999 mark) makes them irrelevant. This is precisely the
argument that Sunstar made, and this Court rejected, with respect to Lavin’s alleged comment. The
fact that these comments were made after Sunstar introduced the 1999 mark may make them less
compelling, but it does not render them irrelevant. Judge Nolan properly concluded that Sunstar

exhibit 22 is admissible.

Bank One's Objections”

The Bank first contends that evidence concerning Alberto’s actions with respect to its

trademarks in places other than Japan — the Lavin deposition at 79:4-9, the Lloyd deposition at

°The Bank objects to much of the same evidence and on the same grounds as Alberto.
Because those objections are addressed in the previous section, in this section the Court will
address only the objections that are unique to the Bank.

7


201’s mandatory language in clause (d), as with all evidence, to be subject to Rule 403. And

even though it doesn’t say that in 201 itself, 403 . . . is a rule that’s applicable almost across the
board, and the basis for my ruling... is 403."); Knap v. Johnson, 667 F. Supp. 467, 485 (W.D. Mich.
1987) ( “[JJudicial notice is an allernative means of proof that is subject, like all other offers of
evidence, to rule[] 403 ....”). Magistrate Judge Nolan concluded that introducing evidence of the
definition of “may” would be a pointless exercise and, thus, she excluded it under Rule 403. That
is a sound decision that we will not disturb,

Next, Alberto argues that Judge Nolan wrongly excluded Malcolm Lloyd’s deposition
testimony at 68:3 to 69:4 and 73:6 to 74:17 as hearsay. In those passages, Lloyd testifies that
sometime before the 1989 license modification was executed, he and others told Mr. Lavin, chairman
of Alberto’s board of directors, that Sunstar was using a mark different from those licensed to it on
packages of Alberto products. Lavin’s response, Lloyd testified, was that “[Sunstar] should not be
doing that,” a message Lavin subsequently conveyed to Sunstar “in no uncertain terms.” (Lloyd Dep.
at 68:15 to 69:4; see id. at 73:6 to 74:17.) Alberto argues that Lloyd's testimony is admissible
because is not offered for the truth of the matter asserted, i.e., that Sunstar was not allowed to use
a modified mark, but to show Alberto’s intent regarding the scope of the 1980 license agreement.

Hearsay or not, Sunstar says the evidence is inadmissible because the belief Lavin expressed
about the terms of the license nearly nine years after it was signed sheds no light on Alberto’s intent
at the time the license agreement was executed. Judge Nolan agreed with Sunstar and recommended
that the testimony be excluded.

This time, we part company with Judge Nolan. Lavin’s belief that the license did not permit
Sunstar to use a modified mark suggests that Alberto’s interpretation of senyo-shiyoken was quite
different from Sunstar’s, ‘Ihe fact that Lavin made the comment nearly a decade afier the license was

6


Lastly, the Bank objects to Judge Nolan’s failure to address its hearsay objections to Sunstar
exhibit nos. 15, 36-39, 42 and 74. Exhibits 36-39 are DGA documents which, as discussed below,
are excluded on other grounds. Thus, we need not address the hearsay objection.

Exhibit 42 is a slightly modified version of Sunstar exhibit 15, the presentation materials
Sunstar created to try to convince Alberto to allow it to use a modified mark. The Bank did not raise
a hearsay objection to exhibit 15 nor did it argue in the hearing before Judge Nolan that cither exhibit
15 or exhibit 42 is inadmissible hearsay. (See 6/5/06 Hr’g Tr. at 352-55, 453-55.) By failing to argue
these hearsay objections to the Magistrate Judge, the Bank has waived them,

The Bank similarly waived its hearsay objection to Sunstar exhibit 74, a chart of VOS sales
from 1966-2001 in Japan. During the hearing before the Magistrate Judge, the only ground for
exclusion the Bank argued was lack of foundation. (See 6/7/06 Hr’g Tr. at 581-82.) [laving failed

to press ils hearsay objection before Judge Nolan, the Bank cannot raise it now.

Sunstar’s Objections

Sunstar takes issue with Magistrate Judge Nolan’s conclusion that its exhibit nos. 91-100,
which are translations of Japanese trademark statutes and cases, are inadmissible, The Court agrees
with Judge Nolan. ‘To the extent these exhibits contain versions of the Japanese Trademark Law that
went into effect after 1980, or cases that interpret them, they are irrelevant.

To the extent the exhibits pertain to the appropriate time period, their relevance is outweighed

by the risk of confusion and delay they will create. Both parties have experts who will opine on the

meaning of senyo-shiyoken, based in part on their knowledge of these materials. Thus, there is no
need for the jurors to review the matcrials themselves, Moreover, if they do, this group of lay people
is likely to misinterpret them. Further, because the materials are lengthy and densc, the jurors’

9



@

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

SUNSTAR, INC,
Plaintiff,
v. No. 01 C 736
ALBERTO-CULVER COMPANY,
TNC. and BANK ONE CORPORATION

f/k/a FIRST NATIONAL BANK OF
CHICAGO,

Judge Ronald A. Guzman

Defendants.

ALBERTO-CULVER COMPANY, a
Delaware Corporation,

Plaintiff,

v. No. 01 C 5825
SUNSTAR, INC., a Japanese
Corporation, SUNSTAR GROUP
COMPANY (f/k/a Alberto-Sunstar Co.,
Ltd.), a Japanese Corporation, KANEDA,)
KASAN, KABUSHIKT KAISHA, a )
Japanese Corporation, and BANK ONE, )
NATIONAL ASSOCTATION, as Trustee )

)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
}
) Judge Ronald A. Guzman
)

)

under Trust Agreement No. 22-81196, )
dated February 27, 1980, a National )
Banking Association, y
)

Defendants. )

MEMORANDUM OPINION AND ORDER
‘These related cases arise from a dispute between Sunstar, Alberto-Culver Company
(“Alberto”) and Bank One (“the Bank”) over Sunstar’s use of a modified trademark (“1999 mark”)

in Japan. The case is before the Court for rulings on: (1) the parties’ objections to Magistrate Judge


“all witnesses who arc to give oxpert testimony under the Fedcral Rules of Evidence must be
disclosed under Rule 26(a)(2)(A)”). A party who fails to do so, “without substantial justification .
. -is not, unless such failure is harmless, permitted to usc as evidence at a trial... any witness or
information not so disclosed.” Fed. R. Civ. P. 37(c)(1). Sunstar did not identify Spencer, or any
other DGA witness, as an expert during the discovery period of this case. Consequently, Sunstar can
introduce her testimony at trial only if there is a substantial justification for its failure to disclose or
that failure is harmless.

Sunstar says it failed to disclose Spencer because it viewed her as a lay witness not an expert.
Sunstar’s erroneous interpretation of Rules 701 and 702, however, is not substantial justification
within the meaning of Federal Rule of Civil Procedure 37, See Musser, 356 F.3d at 758 (“A
misunderstanding of the law does not equate to a substantial justification for failing to comply with
the disclosure deadline.”).

The next question is whether Sunstar’s failure to disclose was harmless. To make that
determination, the Court must consider: “(1) the prejudice or surprise to the party against whom the
evidence is offered; (2) the ability of the party to cure the prejudice; (3) the likelihood of disruption
to the trial; and (4) the bad faith or willfulness involved in not disclosing the evidence at an earlier
date.” Keach v. U.S. Trust Co., 419 F.3d 626, 640 (7th Cir. 2005) (quotation omitted). Sunstar says
these factors militate in favor of allowing Spencer’s testimony to be introduced because its failure

to disclose was innocent and defendants, who deposed Spencer regarding DGA’s documents, her

professional background and her work for Sunstar, will suffer no prejudice.

The Court disagrees. Defendants did indeed depose Spencer, but they did so assuming she
was a fact witness, not an expert, They asked Spencer generally about her experience but did not
conduct the in-depth examination that is required to determine whether she is qualified to provide

12



United States v. Conn, 297 F.3d 548, 554 (7th Cir. 2002) (footnote omitted). Testimony can fall on
the expert side of the line, our court of appeals has said, even if the witness was not specifically
retained to provide testimony:

Expert testimony is designated as such by its reliance on “scientific, technical, or
other specialized knowledge.” Fed. R. Evid. 702. Occurrence witnesses, including
those providing “lay opinions,” cannot provide opinions based on scientific,
technical, or other specialized knowledge within the scope of Rule 702.” Fed. R.
Evid, 701. Thus, a treating doctor (or similarly situated witness) is providing expert
testimony if the testimony consists of opinions based on “scientific, technical, or
other specialized knowledge” regardless of whether those opinions were formed
during the scope of interaction with a party prior to litigation. Cf O'Conner v.
Commonwealth Edison Co., 13 F.3d 1090, 1105 1.14 (7th Cir. 1994) (noting that
treating physicians are not exempt from the requirements of Federal Rules of
Evidence 702 and 703 because “we do not distinguish the treating physician from
other experts when the treating physician is offering expert testimony regarding
causation”).

Musser v. Gentiva Health Servs., 356 F.3d 751, 756 n,2 (7th Cir. 2004).

Spenceris like the treating physician discussed in Musser. Ifshe testifies that DGA was hired
by Sunstar and performed research on its behalf, events that any layman could also recount, she is
alay witness. But that is not the kind of testimony Sunstar seeks to present. Rather, it wants to offer
Spenccr’s testimony about the conclusions DGA drew from the research and the recommendations
it made to Sunstar as a result. Those are not subjects about which an untrained Jayman could opine.

Thus, Spencer is an expert witness.

Alberto & the Bank’s Motion to Bar

Alberto and the Bank ask the Court to bar Sunslar ftom using Spencer’s testimony, or that
ofany other DGA employee, because Sunstar did not disclose them as experts, Federal Rule of Civil

Procedure 26 requires parties to disclose the identities of all expert witnesses in accordance with the

Court’s scheduling orders. See Fed. R. Civ. P. 26(a)(2); Musser, 356 F.3d at 756 (emphasizing that

ll



144:13 to 145:8, 146:19 to 147:6, 148:6 to 151:8, the Schmidt deposition at 104:14-19, 107:1 to

108:17, and the Shakeshaft deposition at 41:21 to 42:20 and 44:15-24 — are irrelevant. The Bank
says this evidence, which generally shows that Alberto uses, or accepts the use of, a variety of
nonconforming VOS5 marks, has no bearing on whether Sunstar’s use of the 1999 mark breached the
license. Judge Nolan disagreed, and so do we. Evidence that Alberto tolerates variations in
the VOS5 mark in places other than Japan tends io refute its claim that it thought Sunstar’s usc of the
1999 mark would lessen the value of the licensed marks. Moreover, as noted above, any temptation
the jury may have to equate ownership and license rights can be cured with jury instructions. As a
result, we will not disturb Magistrate Judge Nolan’s ruling.

The Bank also objects to the introduction of the deposition testimony at pages 84:14-22 and
85:7-16 of Bank employee John Prendiville. In these pages, Prendiville testifies that the Bank sent
a letter to Sunstar in 1999 suspending its right to use the licensed marks, The Bank says this
evidence is barred by the Court’s motion in limine ruling that Sunstar cannot introduce evidence
challenging the reasonableness of the suspension, Judge Nolan believed, incorrectly, that the Bank
had withdrawn this objection. Because she did not address it, this Court will.

Sunstar admits that it is precluded by the Court’s previous ruling from using this evidence
to challenge the substance of the Bank’s decision to suspend the license. But, it says, the evidence
is admissible to show that the suspension notice was deficient in form, ie., that the notice did not
contain all of the information required by suspension provision of the license agreement. In its
amended complaint, however, Sunstar challenges only the substantive reasonableness of the notice,
not its form. Because Sunstar did not raise this issuc until the eve of trial, it is waived. The Bank’s

objection is, therefore, sustained.


potential this evidence may have to mislead can be cured by jury instructions. Ifthe jury is instructed
that both parties’ actions must be measured by the terms of the license, any temptation it may have
to equate license and ownership rights or impose an extra-contractual duty on Alberto will be
eliminated.

Alberto also contends that Judge Nolan should have sustained its objections to evidence

regarding: (1) the pre-1999 recommendations made to Sunstar by the designers of the 1999 mark;

(2) Sunstar’s pre-1999 market research as (o the attitudes of Japanese consumers toward the licensed
marks; (3) the presentation Sunstar made to Alberto before 1999 in an effort to obtain Alberto’s
consent for the mark modification; and (4) historical data on the sales of VOS products in Japan.
Specifically, Alberto says that the Spencer deposition, the Bemick deposition at 826:10-19, 115:14
to 24, 116:1-11, the Lloyd deposition at 127:2 to 128:22, and Sunstar exhibits 15, 18, 22, 36-42, 74

and 84-89 should be excluded because their admission violates the Court’s motion in limine rulings

and the evidence is irrelevant.

Once again, the Court agrees with Judge Nolan. ‘The motion in limine rulings to which
Alberto refers bar Sunstar from introducing evidence of the intent underlying its decision to use (he
1999 mark, Such evidence sheds no light on the parties’ dispute, the Court ruled, because the license
prohibits Sunstar from infringing Alberto’s marks or taking action likely to lessen their value,
regardless of Sunstar’s motivation for doing so. Thus, Sunstar cannot, for example, introduce
evidence that VOS sales in Japan were poor in the late 1990s to show that it had sound business
reasons for adopting the 1999 mark,

That does not mean, however, that such evidence is inadmissible for all purposes. Data on
VO5 sales in Japan before 1999, the reactions of Japanese consumers to the licensed marks, and the
recommendations made by the designer of the 1999 mark arc all relevant to the “lessening-of-value”

4


assume, for the purpose of calculating prejudgment interest, that Alberto would have used the royalty
payments to pay down existing debt, None of this testimony is barred by the Court’s order.

Moreover, Levko’s report shows that, among other things, he reviewed 1999 correspondence
between Sunstar’s Saegusa and Radding and Alberto’s Schmidt in which they discussed prices for
Alberto’s possible purchase of the Japanese VOS marks, Schmidt is listed as a possible witness in
the revised pre-trial order by both Alberto and the Bank. If Schmidt testifies about the prices the
parties discussed in 1999, Levko could, given his expertise in valuing and licensing intellectual
property, testify about the reasonableness of those prices.

In short, Levko cannot testify about the calculation he performed using the 1989 royalty rate
as a benchmark or about a different calculation not disclosed in his report. But he can give testimony
about the overall process of determining a reasonable royalty rate, his opinions about the parties’
positions relative to a hypothetical license negotiation in 1999, and, to the extent such evidence is
introduced, the reasonableness of any monctary value the parties placed on the contested marks at
or before 1999, Taken together, that evidence ~ which may be just a portion of what is available to
Alberto — is a sufficient basis for Alberto to argue its reasonable royalty claim to the jury. See
Georgia-Pacific Corp. v, U.S. Plywood Corp., 318 F. Supp. 1116, 1120 (8.D.N.Y. 1970) (seminal
case on reasonable royalty, stating that expert testimony is one of many factors that is “relevant, in
general, to [determining] the amount of a reasonable royalty,” not a prerequisite to doing so),
modified, Georgia-Pacific Corp. v. U.S. Plywood-Champion Papers, Inc., 446 F.2d 295 (2d Cir.
1971), Sunstar’s motion to bar Alberto from presenting any reasonable royalty evidence al trial is

denied.

15



107:16 to 107:24, 108:12 to 109:1, 109:3 to 109:5, 115:14 to 116:11, 151:9 to 151:23, 152:1 to
152:22, 154:13 to 154:21, 155:21 to 156:3, 156:10 to 156:24, 158:6 to 158:9, 189:23 to 191:9,
299:15 to 299:19, 326:20 to 326:22 and 326:24; (2) Lavin deposition at 77:22 to 79:9, 79:12 to
79:16, 79:22 to 80:2; (3) Lloyd deposition at 127:2 to 128:22, 135:4 to 138:6; (4) Shakeshaft
deposition at 41:13 to 41:20, 42:23 to 43:13, 43:16 to 44:25, 45:12 to 45:21, 55:17 to 56:8, 56:13;
(3) Schmidt deposition at 108:1 to 108:11, 108:17 to 111:23, 112:3 to 113:2, 113:6 10 113313, 113:17
to 114:11; (6) Prendiville deposition at 39:17 to 40:10, 94:3 to 94:7; and (7) Sunstar exhibits 11, 12,
30, 46, 50, 54, 55, 82 and 84-89. In general, this evidence suggests that Alberto uses, or permits its
licensees to use, logos that deviate [rom the licensed marks in markets outside of Japan; Alberto has

registered marks that deviate from the licensed marks in various countries; Alberto takes various

steps, including changing its logo and product packaging, to strengthen its sales and trademarks; and

Alberto did not formally measure the value of its marks in Japan. Alberto says the evidence is
irrelevant because: trademark owners, unlike licensees, ate free to modify or abandon their marks;
Alberto’s activities outside of Japan shed no light on Sunstar’s rights under the license; and the steps
Alberto takes to enhance its sales and trademarks have no bearing on whether Sunstar’s use of the
1999 mark was likely to lessen the value of the licensed marks. Alberto also contends that the
evidence is prejudicial because it would lead the jury to equate license rights with ownership rights
or believe that Alberto had a duty to measure the licensed marks’ valuc in Japan.

Magistrate Judge Nolan properly rejected Alberto’s arguments. Alberto claims that Sunstar’s
use of the 1999 mark breached the license agreement because it was likely to lesscn the valuc of the
licensed marks. Evidence that Alberto registered, used, or acquiesced in the use of, non-conforming
marks in other countries, intentionally changed the marks to increase sales, and believes that its
trademarks are strengthened by increased sales is directly relevant to that claim. Morcover, any

3



Nolan’s August 22, 2006 Report and Recommendation on the admissibility of the exhibits and

deposition testimony the parties’ seck to introduce at trial (“Order”); (2) the motions of Alberto and
the Bank to bar Sunstar from presenting the testimony of Dorothy Spencer, or any other the witness
from Desgrippes, Gobe & Associates (“DGA”), and related exhibits; and (3) Sunstar’s motion to
declare that Alberto may not proceed at the trial with any claim against Sunstar for damages. For the
reasons set forth below, the Court sets aside only two of Judge Nolan’s determinations: (a) that
Malcolm Lloyd’s deposition testimony at 68:3 to 69:4 and 73:6 to 74:17 is inadmissible hearsay; and
(b) that the Bank withdrew its objection to the admissibility of John Prendiville’s deposition
testimony at 84:14-22 and 85:7-16. The Court: (1) adopts Judge Nolan’s Order in all other respects
and overnules the partics’ objections to it; (2) grants the motions of Alberto and the Bank to bar
Sunstar from presenting testimony from Spencer, or other DGA witnesses, and related exhibits; and
(3) denies Sunstar’s motion to declare that Alberto may not proceed at the trial with any claim against

Sunstar for damages.

Discussion’

Alberto’s Objections to the Order

We will modify or set the Order aside only if it is “clearly erroneous or contrary to law.”
Fed, R. Civ. P. 72(a). Among other things, Judge Nolan determined that Sunstar could introduce the
following deposition testimony and exhibits to rebut Alberto’s claim thal Sunstar’s use of the 1999
mark might lessen the value of the licensed marks: (1) Bernick deposition at 36:17 to 37:14, 39:9

to 39:19, 86:10 to 86:19, 89:2 to 89:19, 89:20 to 93:7, 93:9 to 93:13, 94:4 to 94:12, 106:1 to 107:2,

‘The facts of the case have previously been described in opinions by Judge Lindberg,
Magistrate Judge Nolan and this Court and wil! not be repeated here.

2


expert testimony, Defendants also did not ask Spencer whether there is an accepted methodology

for evaluating brand equity and whether DGA used it on the Sunstar project, nor did they delve into
the facts and rationale underlying DGA’s recommendations. Had defendants known Sunstar
intended to call Spencer as an expert, her deposition would have been much different.

Indeed, defendants’ whole discovery plan probably would have been different if they had
known Spencer would be called as an expert, They would likely have taken discovery of the firms
DGA hited to perform the Japanese market research and any other DGA employces involved in the
Sunstar project. They may even have hired a brand equity expert of their own. Their inability to do
So constitutes prejudice for the purposes of Federal Rule of Civil Procedure 37. See Musser, 356
F.3d at 757-58 (stating that defendant was prejudiced by plaintiff's failure to disclose experts
“because there are countermeasures that could have been taken that are not applicable to fact
witnesses, such as attempting to disqualify the expert testimony on grounds set forth in Daubert ..
. , tetaining rebuttal experts, and holding additional depositions to retrieve the information not
available because of the absence of a report.”).

Moreover, because Spencer would testify via deposition, not in person, Alberto and the Bank
could not cure this prejudice through cross-examination, The only other way the prejudice could be
cured is by delaying the trial and reopening discovery, an untenable solution given the age of this
case and its impending trial date.

In short, Sunstar has not shown that its failure to disclose Spencer as an expert was either
substantially justified or harmless, Therefore, it may not introduce at trial her testimony, or that of

any other DGA witness, or Sunstar exhibits 36-41, which depend on her testimony.

13



Conclusion

For the reasons sct forth above, the parties’ objections to Magistrate Judge Nolan’s Order are,
in all but two respects, overruled. The Court sets aside Judge Nolan’s determinations that Malcolm
Lloyd’s deposition testimony at 68:3 to 69:4 and 73:6 to 74:17 is inadmissible hearsay, and that the
Bank withdrew its objection to the admissibility of John Prendiville’s deposition testimony at 84:14-
22 and 85:7-16. In all other respects, the Court adopts Judge Nolan’s Order. The Court grants the
motions of Alberto and the Bank [doc. nos. 337 & 343] to bar Sunstar from presenting testimony
from Spencer, or any other DGA witness, and related exhibits. The Court denies Sunstar’s motion

to bar Alberto from introducing damages evidence [doc. no. 333].

SO ORDERED. ENTERED: /1/, Wa ‘J 06

HON. RONALD A. GUZMAN
United States District Judge

16