In re C2R Glob. Mfg., Inc., Case No. 18-30182-beh

In re: C2R Global Manufacturing, Inc., Debtor.

Case No. 18-30182-beh

UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF WISCONSIN

March 30, 2021

Chapter 11

DECISION AND ORDER ON C2R'S MOTION IN LIMINE TO EXCLUDE CERTAIN TESTIMONY FROM JASON SUNDBY

Verde Environmental Technologies, Inc. has designated its current CEO, Jason Sundby, as a non-retained expert witness under Federal Rule of Civil Procedure 26(a)(2)(C), to testify at trial in support of Verde's Lanham Act claim against C2R. In its expert witness disclosures, Verde states that Sundby may offer opinions on topics including, inter alia: (1) "customer requirements for drug disposal devices"; (2) "the effect of misrepresentations and ineffective drug disposal product offerings on the drug disposal market as a whole"; (3) "industry expectations for drug disposal devices"; (4) "customer reliance and industry expectations with respect to representations about deactivation capabilities for drug disposal devices"; and (5) "the various factors that affect purchasing decisions in the marketplace including cost and efficacy." See ECF Doc. No. 311-1 ("Piery Decl. Ex. A"), at 4.

C2R has moved to exclude Sundby's proposed testimony on these topics, at least to the extent he intends to offer any opinions regarding "consumer perceptions." By "consumer perceptions," the Court understands C2R to mean consumers' mental impressions when presented with C2R's advertisements, including how consumers are likely to interpret those advertisements, whether the advertisements are likely to confuse or deceive consumers, and whether consumers are likely to rely on the advertisements in making purchasing decisions. See, e.g., ECF Doc. No. 364, at 10 ("Verde seeks to use the unsupported testimony of Sundby to take another evidentiary shortcut to meet its burden to prove consumer deception."); id. at 14 ("None of these cases [cited by Verde] stand for the proposition that an industry expert is qualified through experience alone to opine on customer perceptions, including how customers interpret advertisements or make purchasing decisions."); id. at 15 ("Notably absent [from the bases of Sundby's opinions] is any research or study into how customers interpret C2R's advertising or considerations that affect purchasing decisions.").

C2R asserts that such testimony is not permissible as expert testimony under Federal Rule of Evidence 702 because (1) Sundby is not qualified to offer opinions on consumer perception and (2) such opinions are based on an unreliable methodology; that the opinions are inadmissible hearsay under Federal Rule of Evidence 802; and that such opinions are inadmissible as lay testimony under Federal Rule of Evidence 701.

Verde argues, in response, that C2R has requested to prohibit Sundby from testifying on a broad range of topics prematurely, "[b]ased entirely on C2R's own speculation about what opinions [Sundby] may offer at trial." ECF Doc. No. 342, at 1. But to the extent C2R has made educated guesses at the precise contours of Sundby's intended testimony, that appears to be partly because Verde has not disclosed what Sundby's opinions actually are. See Fed. R. Civ. P. 26(a)(2)(C)(ii) (for non-retained expert witnesses, a party must disclose "a summary of the facts and opinions to which the witness is expected to testify") (emphasis added). In its Rule 26 disclosures, rather than summarize Sundby's actual opinions, Verde recites only a list of potential topics on which Sundby might testify, and then "incorporates as a further summary of facts and opinions those set forth in" two other documents: (1) Sundby's February 12, 2020 deposition, and (2) Sundby's February 17, 2020 declaration in support of Verde's motion for a preliminary injunction in Adversary No. 20-2028.

Neither party has apprised the Court of any opinions disclosed in Sundby's February 12 deposition. As for Sundby's February 17 declaration, the Court reads it as expressing the following opinions relevant to this motion:

• "[C]ustomers rely and depend on drug deactivation products to actually deactivate the pills and tablets that the products are advertised as being able to deactivate."

• "[T]he drug-deactivation market as a whole is harmed by C2R's continued misrepresentations regarding the Rx Destroyer™ product capacity" because "when C2R advertises a product using activated carbon that does not work as represented, that casts doubt on all products using activated carbon" and "customers lose faith that any products are capable of deactivating medications as advertised."

• "Customers losing faith in the market and in the ability of activated carbon to deactivate medication as advertised harms Verde because both repeat and potential customers become deterred from purchasing any drug deactivation products, including Deterra."

• "Cost is a central factor in the purchasing decision and it is directly related to the capacity of the products available to the customer."

• "One of the metrics actual and prospective customers use to evaluate Verde's and C2R's products is the price per pill deactivated."

• "Because C2R substantially overstates the capacity of its products, upon comparison, it appears to consumers that C2R's Rx Destroyer™ products can deactivate a significantly higher quantity of medication at a lower 'price per pill' than Verde's Deterra system."

• "As a result"—because consumers read C2R's capacity advertisements to indicate that Rx Destroyer products deactivate medication at a lower price-per-pill than the Deterra system—"consumers choose to purchase RX Destroyer™ rather than Deterra."

See ECF Doc. No. 311-2 ("Piery Decl. Ex. B"), 2/17/20 Sundby Decl., ¶¶ 12, 19-21.¹

Given the broadly-worded topics in Verde's Rule 26 disclosures, it is possible that Sundby intends to offer additional opinions other than those identified above. C2R appears to think so, asking the Court to exclude opinions by category ("consumer perceptions"), rather than by specific opinion. But neither C2R nor the Court should have to speculate about the content of Sundby's proposed expert opinions. Verde's Rule 26 disclosures identify—by reference to Sundby's declaration—only the seven opinions listed above (at least for purposes of this motion, see supra n.1), so the Court will limit its discussion to those opinions.² For the reasons explained below, the Court will grant C2R's motion in part, and reserve ruling on the remainder of the motion until trial.

ANALYSIS

A. Expert Testimony

The admissibility of expert testimony is governed by Federal Rule of Evidence 702 and Daubert v. Merrell Dow Pharmaceuticals, 509 U.S. 579 (1993). Together, Rule 702 and Daubert require a trial court to act as a "gatekeeper" and engage in a three-part analysis before admitting expert testimony, determining whether (1) the witness is qualified, (2) the methodology is reliable, and (3) the testimony is relevant, i.e., it will help the trier of fact understand the evidence or determine a fact in issue. Gopalratnam v. Hewlett-Packard Co., 877 F.3d 771, 779 (7th Cir. 2017).

A trial judge has "'broad latitude' to determine how to evaluate expert testimony" in any particular case. United States v. Hill, 818 F.3d 289, 297 (7th Cir. 2016). That latitude is particularly broad in a bench trial, because the primary reason for the court's gatekeeping function—to ensure that unreliable expert testimony does not carry too much weight with the jury, Smith v. Ford Motor Co., 215 F.3d 713, 718 (7th Cir. 2000)—is not present. See, e.g.,Metavante Corp. v. Emigrant Sav. Bank, 619 F.3d 748, 760 (7th Cir. 2010) ("[T]he usual concerns of [Rule 702]—keeping unreliable expert testimony from the jury—are not present" in a bench trial.).

For this reason, the Seventh Circuit has observed that a trial court's gatekeeping role is "necessarily different," and thus its Rule 702 inquiry may vary slightly, in the case of a bench trial:

Where the gatekeeper and the factfinder are one and the same—that is, the judge—the need to make such decisions prior to hearing the testimony is lessened. That is not to say that the scientific reliability requirement is lessened in such situations; the point is only that the court can hear the evidence and make its reliability determination during, rather than in advance of, trial. Thus, where the factfinder and the gatekeeper are the same, the court does not err in admitting the evidence subject to the ability later to exclude it or disregard it if it turns out not to meet the standard of reliability established by Rule 702.

In re Salem, 465 F.3d 767, 777 (7th Cir. 2006) (internal citation omitted), disapproved of on other grounds by In re Anderson, 917 F.3d 566 (7th Cir. 2019); see also United States v. Ozuna, 561 F.3d 728, 737 (7th Cir. 2009) ("Judges . . . are less likely to be swayed by experts with insufficient qualifications."); United States v. Brown, 415 F.3d 1257, 1269 (11th Cir. 2005) ("There is less need for the gatekeeper to keep the gate when the gatekeeper is keeping the gate only for himself."). In other words, "the judge in a bench trial may choose to allow the presentation of borderline testimony, subject the testimony to the rigors of cross-examination, and decide later whether the testimony is entitled to some consideration or whether it should be excluded as irrelevant, unreliable, or both." Mintel Int'l Grp., Ltd. v. Neergheen, 636 F. Supp. 2d 677, 682-83 (N.D. Ill. 2009).

At the same time, the Court is aware that addressing challenges to expert opinions before, rather than during, trial will allow the parties to prepare for trial more efficiently and ensure that valuable trial time is not spent resolving threshold challenges to the admissibility of expert testimony. With these considerations in mind, the Court will address C2R's two challenges to Sundby's proposed "consumer perception" opinions under Rule 702: (1) thatSundby is not qualified to offer such opinions, and (2) that such opinions are not based on a reliable...