Court Opinion

ID: 4204766
Source: CourtListenerOpinion
Date Created: 2017-09-20 16:03:49.819474+00
Date Added: 2024-06-11T14:41:15.325696
License: Public Domain

In the United States Court of Federal Claims
                                            No. 15-16C
                                   (Filed: September 20, 2017)

    **************************
                                  *                    Motion In Limine; Expert
    AUTHENTIC APPAREL GROUP, LLC, *                    Disclosures; Fed. R. Evi. 701, 702;
                                  *                    RCFC      26(a)(2);    Distinction
              Plaintiff,          *                    Between Lay and Expert Opinion
                                  *                    Testimony.
              v.                  *
                                  *
    THE UNITED STATES,            *
                                  *
              Defendant.          *
                                  *
    **************************

       J. Joseph Bainton, Barclay Damon LLP, 1270 Avenue of the Americas, Suite 600, New
York, N.Y. 10020, for Plaintiff.

       Chad A. Readler, Robert E. Kirschman, Jr., Douglas K. Mickle, and Alexander Orlando
Canizares, United States Department of Justice, Commercial Litigation Branch, Civil Division,
P.O. Box 480, Ben Franklin Station, Washington, D.C. 20044, for Defendant. James M. Ives and
Laurel Q. Simmons, United States Army Legal Services Agency, 9275 Gunston Road, Fort
Belvoir, V.A. 22060, Of Counsel.

               ______________________________________________________

    MEMORANDUM OPINION AND ORDER DENYING DEFENDANT’S MOTION IN
                                 LIMINE
          ______________________________________________________

WILLIAMS, Judge.
       This matter comes before the Court on Defendant’s motion in limine to preclude Plaintiff
from introducing expert testimony at trial that has not been properly disclosed as required by Rule
26(a)(2)(B) of the Rules of the United States Court of Federal Claims. 1

1
        Plaintiff also sought sanctions against Defendant in its response brief on the ground that
Defendant had taken an “objectively unreasonable legal position” that was not made in “good
faith.” Because Defendant’s motion implicated a thorny legal issue and was designed to prevent
the improper eliciting of expert testimony, the motion had a reasonable basis in law and fact.
       Because Plaintiff’s witnesses may testify based upon their industry experience to the extent
allowed under Federal Rule of Evidence 701, Defendant’s motion in limine is denied.

                                            Background
         For purposes of this litigation, Defendant has retained Stuart Seltzer, a purported expert in
the licensing industry, to provide his opinions on whether the Army’s position on Plaintiff’s use
of its trademarks was commercially reasonable and consistent with trademark licensing practice.
Mr. Seltzer also opined on whether the Army prevented Plaintiff from fully utilizing the
trademarks or rendered Plaintiff’s products unmerchantable, and on whether the Army’s rejection
of 8.4% of Plaintiff’s submissions was reasonable and consistent with the approval ratio in
trademark licensing arrangements within Mr. Seltzer’s experience. Additionally, Defendant asked
for Mr. Seltzer’s opinion regarding the extent to which factoring agreements are used by Licensees
who sell licensed products. Mr. Seltzer’s expert report containing his opinions was sent to
Plaintiff.
        On July 13, 2017, Plaintiff sent Defendant its “Notice of Expert Disclosure.” In it, Plaintiff
identified three witnesses - - Robert Stock, John La Lota, and Michael Setola - - some or all of
whom Plaintiff “may call” at trial as rebuttal witnesses to Mr. Seltzer. Although Plaintiff
denominated this filing as an “Expert Disclosure,” Plaintiff does not intend to elicit expert opinion
testimony from these witnesses. Rather, depending on Mr. Seltzer’s testimony, Plaintiff may call
these witnesses “to testify about their personal observations in the industries in which they have
worked for their entire lives.” Pl.’s Resp. 2.
        According to Plaintiff’s disclosure, Robert Stock is currently CEO of Robert Graham and
has worked in the fashion industry, including as an award-winning designer, for over 50 years.
Since 1979, Mr. Stock has been involved with the licensing of clothing, menswear accessories,
and home goods around the world. John La Lota is currently President of the Factoring and Trade
Finance Division at Sterling National Bank. He has overseen the acquisition of two factoring
businesses in recent years and has previously held positions at Heller Financial and Congress
Talcott. He is an active member of the International Factoring Association and has over 35 years
of experience in the factoring and asset based lending industry. Michael Setola is President and
CEO of Tharanco Lifestyles, LLC. He has over 35 years of experience in consumer brands,
primarily in the apparel sector. Since 2009, he has served as a Partner and President/CEO of
Lifestyle Brands Holdings and Tharanco Lifestyles LLC. Among other services, his company
provides brand management and licensing consultation. Previously, Mr. Setola served as President
of Oxford Industries, whose brands held licenses for Tommy Hilfiger, Nautica, and other designer
labels.
       Plaintiff represented that these three rebuttal witnesses would “testify about matters that
they have rationally perceived during the courses of their respective careers in the apparel,

Plaintiff’s motion for sanctions is denied. See Tokai Corp. v. Eaton Enters., Inc., 632 F.3d 1358,
1366 (Fed. Cir. 2011) (explaining that “attempts to proffer expert testimony without compliance
with Rule 26 violate both the rules and principles of discovery, and the obligations lawyers have
to the court. Exclusion and forfeiture are appropriate consequences to avoid repeated occurrences
of such manipulation of the litigation process” (internal quotation marks and citation omitted)).
licensing and/or finance industries, including without limitation what they have personally
observed to be the ordinary custom and practice in those industries.” Def.’s Mot. Ex. A, at 1.
        On July 14, 2017, Defendant’s counsel asked Plaintiff’s counsel to clarify whether Plaintiff
intended to provide expert rebuttal reports for these witnesses by the July 19, 2017 deadline. Def.’s
Ex. B. After Plaintiff confirmed that it would not provide expert rebuttal reports, Defendant filed
the instant motion in limine.

                                             Discussion
        Defendant asserts that Plaintiff was required to provide expert rebuttal reports for the three
witnesses Plaintiff identified in its “Notice of Expert Disclosure,” under Rule 26(a)(2)(B), and
because Plaintiff failed to do so, the Court should preclude testimony from these witnesses.
Alternatively, Defendant argues that even if Plaintiff’s “experts” are not required to provide
written reports under Rule 26(a)(2)(B), Plaintiff’s disclosure was deficient, because, under Rule
26(a)(2)(C), Plaintiff was required to include in its disclosure the (i) subject matter on which each
witness is expected to present evidence under Federal Rules of Evidence 702, 703, or 705, and (ii)
a summary of the facts and opinions to which each witness is expected to testify.
         In response, Plaintiff asserts that it was not required to provide expert rebuttal reports for
its “Rule 701 Expert Witnesses,” 2 because these witnesses will “express no opinions.” Pl.’s Resp.
1. Plaintiff represents that none of its three potential rebuttal witnesses “have (a) read any papers
filed in this action; (b) read any pre-trial testimony of any witness; or (c) been asked to express
any opinion about any matter relating to this case.” Id. Additionally, Plaintiff attached to its
response the first 30 pages of Defendant’s Expert Witness, Mr. Seltzer’s report, and with it
included an example of the kind of testimony that these rebuttal witnesses would provide. Plaintiff
points to Mr. Seltzer’s statement in his report, that in his experience, factoring agreements “rarely
come[] up in the Licensee-Licensor relationship” and that in his 25 years of experience, his
involvement has been limited to “one factoring agreement which was a broader, more complex,
financing arrangement that required consent from the Licensor.” Id. at 2 (emphasis omitted).
Plaintiff represents that it anticipates that Mr. La Lota would testify that, according to his
observations, factoring agreements are quite common in the License-Licensor relationship. Id. at
2-3. Plaintiff argues that this type of testimony, is “not an opinion” but rather is “personal
observation and experience of an industry professional” and is thus admissible under Federal Rule
of Evidence 701. In its reply, Defendant argues that Plaintiff’s “reliance upon Rule 701 of the
Federal Rules of Evidence is unavailing” because Plaintiff’s witnesses “are being called upon to
testify as experts.” Def.’s Reply 2.
         Rule 26(a)(2) governs the disclosure of expert testimony. Specifically, Rule 26(a)(2)(A)
provides that “a party must disclose to the other parties the identity of any witness it may use at
trial to present evidence under Federal Rule of Evidence 702, 703, or 705.” Rule 26(a)(2)(B)
further provides for a written expert report stating:
       Unless otherwise stipulated or ordered by the court, [expert] disclosure must be
       accompanied by a written report – prepared and signed by the witness – if the

2
        Federal Rule of Evidence 701 governs “Opinion Testimony by Lay Witnesses,” although
Plaintiff refers to its witnesses as Rule 701 “Expert” Witnesses throughout its response.
       witness is one retained or specially employed to provide expert testimony in the
       case or one whose duties as the party’s employee regularly involve giving expert
       testimony.
       In circumstances where an expert witness is not required to provide a written report, the
disclosure must state “the subject matter on which the witness is expected to present evidence
under Federal Rule of Evidence 702, 703, or 705” and “a summary of the facts and opinions to
which the witness is expected to testify.” RCFC 26(a)(2)(C).
        Federal Rules of Evidence 701 and 702 govern the admissibility of opinion testimony
offered by lay witnesses and expert witnesses respectively. While the line between lay witness
opinion testimony and expert witness testimony is not always clear, drawing such a distinction is
crucial in order to ensure that Rule 26’s disclosure requirements for experts are properly applied.
       Federal Rule of Evidence 701 provides:
       If a witness is not testifying as an expert, testimony in the form of an opinion is
       limited to one that is:
       (a) rationally based on a witness’s perception;
       (b) helpful to clearly understanding the witness’s testimony or to determining a fact
           in issue;
       (c) not based on scientific, technical, or other specialized knowledge within the
           scope of Rule 702.
Fed. R. Evid. 701. If a witness’s testimony fails to meet any one of the three foundational
requirements, it is not admissible. See id. “The burden is on the proponent to provide adequate
foundation for the testimony.” United States v. Freeman, 730 F.3d 590, 595-96 (6th Cir. 2013)
(citing United States v. Grinage, 390 F.3d 746, 749 (2d Cir. 2004)). Lay opinion testimony is
permitted under Rule 701 because it describes something a trier of fact could not otherwise
experience by “drawing upon the witness’s sensory and experiential observations that were made
as a first-hand witness to a particular event.” United States v. Jayyousi, 657 F.3d 1085, 1120 (11th
Cir. 2011) (Barkett, J., concurring in part and dissenting in part).
       Conversely, Federal Rule of Evidence 702 provides:
       A witness who is qualified as an expert by knowledge, skill, experience, training,
       or education may testify in the form of an opinion or otherwise if:
       (a) the expert’s scientific, technical, or other specialized knowledge will help the
           trier of fact to understand the evidence or to determine a fact in issue;
       (b) the testimony is based on sufficient facts or data;
       (c) the testimony is the product of reliable principles and methods; and
       (d) the expert has reliably applied the principles and methods to the facts of the
           case.
Fed. R. Evid. 702.
        The Advisory Committee Notes to the 2000 Amendment of Rule 701 provide additional
guidance on the distinction between lay witness opinion testimony and expert testimony, stating
that “the distinction between lay and expert witness testimony is that lay testimony ‘results from a
process of reasoning familiar in everyday life,’ while expert testimony ‘results from a process of
reasoning which can be mastered only by specialists in the field.’” RP1 Fuel Cell, LLC v. United
States, 120 Fed. Cl. 288, 319 (2015) (quoting 2000 Advisory Committee Notes). The Advisory
Committee Notes further discuss the requirements of Rule 701, explaining that “(a) is the familiar
requirement of first-hand knowledge or observation,” see Jayyousi, 657 F.3d at 1120-21 (emphasis
omitted) (citing 2000 Advisory Committee notes), and that “the addition of section (c) is intended
to ‘eliminate the risk that the reliability requirements set forth in Rule 702 will be evaded through
the simple expedient of proffering an expert in lay witness clothing’ thereby avoiding the
requirement of disclosing expert witnesses.” See First Annapolis Bancorp, Inc. v. United States,
72 Fed. Cl. 204, 207 (2006) (internal footnote omitted) (citing 2000 Advisory Committee Notes).
In United States v. Henderson, the Court held that the “essential difference” between expert and
lay opinion witnesses is the expert’s ability to answer hypothetical questions. 409 F.3d 1293, 1300
(11th Cir. 2005) (internal alteration, quotation marks, and citation omitted).
        It appears that Plaintiff anticipates eliciting these witnesses’ personal observations based
upon their experience in the industry to counter or clarify factual assumptions made by
Defendant’s expert. This type of lay testimony is acceptable under Rule 701. The fact that a
witness has specialized knowledge does not necessarily preclude the witness from testifying under
Rule 701, but the testimony must not be “rooted exclusively in [the witness’s] expertise . . . .”
Bank of China, N.Y. Branch v. NBM LLC, 359 F.3d 171, 181 (2d Cir. 2004) (excluding testimony
of an employee assigned to investigate defendant when the testimony reflected the employee’s
specialized knowledge in international banking rather than knowledge gained in the course of his
investigatory work); Teen-Ed, Inc. v. Kimball Int’l, 620 F.2d 399, 402-03 (3d Cir. 1980)
(explaining “[t]he fact that [the witness] might have been able to qualify as an expert witness on
the use of accepted accounting principles in the calculation of business losses should not have
prevented his testifying on the basis of his knowledge of appellant’s records about how lost profits
could be calculated from the data contained therein”).
        The Federal Circuit, in Union Pacific Resources Co. v. Chesapeake Energy Corp.,
recognized that lay opinion testimony based upon extensive experience in an industry is admissible
under Rule 701 and permitted eight witnesses with experience in the drilling industry to testify
based on their own personal experiences as employees of major oil drilling companies. 236 F.3d
684, 693 (Fed. Cir. 2001); see also Farner v. Paccar, Inc., 562 F.2d 518, 529 (8th Cir. 1977) (“We
agree with the trial court that [the witness], who had been in the trucking business almost thirty
years [,] . . . could testify as to the simple use of the safety chains . . . as a lay witness speaking
within his own knowledge and perception . . . .”).
        In a similar vein, the Second Circuit held that where “a witness derives his opinion solely
from insider perceptions of a conspiracy of which he was a member, he may share his perspective
as to aspects of the scheme about which he has gained knowledge as a lay witness subject to Rule
701, not as an expert subject to Rule 702.” United States v. Yannotti, 541 F.3d 112, 126 (2d Cir.
2008). There, the court found testimony of the witness to be rationally based on his own perception
because “it derived from his direct participation in the loansharking activities of the charged
enterprise,” but “not on participation in the loansharking activities of some unrelated criminal
scheme.” Id. at 125-26. So too has the First Circuit allowed lay witnesses to express opinions
about a business when the opinions were “based on the witness’s own perceptions and knowledge
and participation in the day-to-day affairs of [the] business.” United States v. Munoz-Franco, 487
F.3d 25, 35 (1st Cir. 2007) (alteration in original) (internal quotation marks and citations omitted).
        Courts have admitted opinion testimony from lay witnesses even when based on the
witnesses’ experience or knowledge obtained in their profession, rather than on their own
“observations and personal perceptions respecting the incident in question . . . .” 4 Jack B.
Weinstein & Margaret A. Berger, Weinstein’s Federal Evidence § 701.03[1]. In Global Computer
Enterprises, Inc. v. United States, the Court of Federal Claims accepted lay opinions regarding
contracts related to audit-supporting financial management systems as factual in nature and “based
entirely upon personal experience and observations obtained through the declarants’ line of work.”
88 Fed. Cl. 52, 68 (2009). The Court held that “where the testimony is based upon personal
knowledge of the facts underlying the opinion and the opinion is rationally related to the facts, a
lay witness may ‘under certain circumstances[,] express an opinion even on matters appropriate
for expert testimony.’” Id. at 67 (alteration in original) (quoting Soden v. Freightliner Corp., 714
F.2d 498, 511 (5th Cir. 1983)). Here, Plaintiff designates its three rebuttal witness as “Rule 701
Expert Witnesses” who will express no expert opinions. Pl.’s Resp. 1.

                                            Conclusion
        Defendant’s motion in limine to preclude Plaintiff from introducing the testimony of
Robert Stock, John La Lota, and Michael Setola is DENIED. These witnesses’ testimony shall be
limited to their personal observations and knowledge derived from their experience within their
industries.
       Plaintiff’s motion for sanctions is DENIED.

                                                       s/Mary Ellen Coster Williams
                                                       MARY ELLEN COSTER WILLIAMS
                                                       Judge