Mahaska Bottling Co. v. Pepsico, Inc.

441 F.Supp.3d 745

MAHASKA BOTTLING COMPANY, INC. ; Pepsi-Cola Bottling Company of Salina, Inc.; and Pepsi-Cola Bottling Company of Norfolk, Inc., Plaintiffs,

v.PEPSICO, INC.; and Bottling Group, LLC, Defendants.

PepsiCo, Inc., Counterclaim Plaintiff,

v.Mahaska Bottling Company, Inc. ; Pepsi-Cola Bottling Company of Salina, Inc.; and Pepsi-Cola Bottling Company of Norfolk, Inc., Counterclaim Defendants.

No. 4:16-cv-00114–JEG-SBJ

United States District Court, S.D. Iowa, Central Division.

Signed October 23, 2019

Johannes (John) H. Moorlach, Whitfield & Eddy PLC, Des Moines, IA, Angela Belle Kennedy, Pro Hac Vice, Jonathan R. Shulan, Pro Hac Vice, Thomas Blumeyer Weaver, Pro Hac Vice, Armstrong Teasdale LLP, St. Louis, MO, Ernest W. Leonard, Pro Hac Vice, F. Colby Roberts, Pro Hac Vice, James Robert Krause, Pro Hac Vice, Jason H. Friedman, Pro Hac Vice, Lawrence J. Friedman, Pro Hac Vice, Shauna A. Izadi, Pro Hac Vice, Jason H. Friedman, Friedman & Feiger, LLP, Dallas, TX, for Plaintiff/Counterclaim Defendant Mahaska Bottling Company, Inc.

Jason H. Friedman, Pro Hac Vice, Ernest W. Leonard, Pro Hac Vice, F. Colby Roberts, Pro Hac Vice, James Robert Krause, Pro Hac Vice, Lawrence J. Friedman, Pro Hac Vice, Shauna A. Izadi, Pro Hac Vice, Friedman & Feiger, LLP, Dallas, TX, Johannes (John) H. Moorlach, Whitfield & Eddy PLC, Des Moines, IA, Angela Belle Kennedy, Pro Hac Vice, Jonathan R. Shulan, Pro Hac Vice, Thomas Blumeyer Weaver, Pro Hac Vice, Armstrong Teasdale LLP, St. Louis, MO, for Plaintiffs/Counterclaim Defendants Pepsi-Cola Bottling Company of Salina, Inc., Pepsi-Cola Bottling Company of Norfolk, Inc.

Debra Hulett, Spencer S. Cady, Nyemaster Goode PC, Des Moines, IA, Brent Scott Wible, Pro Hac Vice, Laura Cielle Onken, Pro Hac Vice, Lauren Beverly Kaplin, Pro Hac Vice, Thomas Ensign, Thomas Ensign, Pro Hac Vice, Freshfields Bruckhaus Deringer US LLP, Washington, DC, Elena Hadjimichael, Pro Hac Vice, Eric Avery Brandon, Pro Hac Vice, Linda H. Martin, Robert J. McCallum, Pro Hac Vice, Umer Ali, Pro Hac Vice, Linda H. Martin, Pro Hac Vice, Freshfields Bruckhaus Deringer US LLP, New York, NY, for Defendant/Counterclaim Plaintiff Pepsico, Inc.

Debra Hulett, Spencer S. Cady, Nyemaster Goode PC, Des Moines, IA, Brent Scott Wible, Pro Hac Vice, Laura Cielle Onken, Pro Hac Vice, Lauren Beverly Kaplin, Pro Hac Vice, Thomas Ensign, Pro Hac Vice, Freshfields Bruckhaus Deringer US LLP, Washington, DC, Elena Hadjimichael, Pro Hac Vice, Eric Avery Brandon, Pro Hac Vice, Linda H. Martin, Pro Hac Vice, Robert J. McCallum, Pro Hac Vice, Umer Ali, Pro Hac Vice, Freshfields Bruckhaus Deringer US LLP, New York, NY, for Defendant Bottling Group LLC.

ORDER

JAMES E. GRITZNER, Senior Judge This matter comes before the Court on three separate motions to exclude expert testimony. First, Defendants PepsiCo, Inc. (PepsiCo) and Bottling Group, LLC d/b/a Pepsi Beverage Company (PBC) (collectively, Defendants) filed a Motion to Exclude the Expert Opinions and Testimony of Eric Engstrom, ECF No. 137. Plaintiffs Mahaska Bottling Company, Inc., Pepsi-Cola Bottling Company of Salina, Inc., and Pepsi-Cola Bottling Company of Norfolk, Inc. (collectively, Plaintiffs or Mahaska) filed a Motion to Exclude Defendants' Expert Lucy Allen, ECF No. 139, and a Motion to Exclude Defendants' Expert Michael Bellas, ECF No. 140. The opposing parties in all three motions resist. No party requested a hearing, and the Court finds that none is necessary.

I. BACKGROUND

The circumstances of this litigation have been summarized in the Court's prior orders and will not be repeated in detail here. Both parties have asserted various claims and counterclaims against the other based on a half-century-long business relationship. On August 26, 2019, the Court entered an order on the parties' motions for summary judgment, ECF No. 300. For the reasons set forth therein, the Court dismissed the following claims:

1. Mahaska's Count I (only as to Breach of Contract: Territorial Exclusivity Under the EBAs and Mahaska's Right to Price),

2. Mahaska's Count II (Breach of Contract: Syrup and Concentrate Pricing),

3. Mahaska's Count III (Breach of Contract: Syrup and Concentrate Pricing), 4. Mahaska' Count IV (Breach of Duty of Good Faith and Fair Dealing), and

5. Mahaska's Count V (Tortious Interference only as to DPSG and PBC).

6. PepsiCo's Counterclaim II (Breach of Implied Covenant),

7. PepsiCo's Counterclaim III (Unjust Enrichment),

8. PepsiCo's Counterclaim IV (Conversion), and

9. PepsiCo's Counterclaim VI (Unjust Enrichment).

The following claims remain:

1. Mahaska's Count I (only as to Breach of Contract: Paragraph 8 "Offers" and Big Bets Program) and

2. Mahaska's Count V (Tortious Interference only as to Dollar General and Family Dollar).

3. PepsiCo's Counterclaim I (Breach of 1985 Agreement),

4. PepsiCo's Counterclaim V (Breach of Paragraph 8),

5. PepsiCo's Counterclaim VII (Breach of Implied Covenant), and

6. PepsiCo's Counterclaim IX (Tortious Interference).

II. DISCUSSION

A. Daubert Standard and FRE 702

The Federal Rules of Evidence, as interpreted by the Supreme Court in Daubert v. Merrell Dow Pharmaceuticals, 509 U.S. 579, 589, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993), govern this matter. Federal Rule of Evidence 702 governs the testimony of expert witnesses and states:

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. "[T]the trial judge has the gatekeeping responsibility to ‘ensur[e] that an expert's testimony both rests on a reliable foundation and is relevant to the task at hand.’ " Allen v. Brown Clinic, P.L.L.P., 531 F.3d 568, 573 (8th Cir. 2008) (second alteration in original) (quoting Kumho Tire Co. v. Carmichael, 526 U.S. 137, 141, 119 S.Ct. 1167, 143 L.Ed.2d 238 (1999) (quoting Daubert, 509 U.S. at 597, 113 S.Ct. 2786 )). "An expert's testimony to be admissible ‘must be reliable or trustworthy in an evidentiary sense, so that, if the finder of fact accepts it as true, it provides the assistance the finder of fact requires.’ " Kirk v. Schaeffler Grp. USA, Inc., 887 F.3d 376, 391 (8th Cir. 2018) (quoting Johnson v. Mead Johnson & Co., 754 F.3d 557, 561-62 (8th Cir. 2014) ). " Rule 702 is a rule ‘of admissibility rather than exclusion.’ " PFS Distrib. Co. v. Raduechel, 574 F.3d 580, 597 (8th Cir. 2009) (quoting Jenson v. Eveleth Taconite Co., 130 F.3d 1287, 1298 (8th Cir. 1997) ).

As a general rule, the factual basis of an expert opinion goes to the credibility of the testimony, not the admissibility, and it is up to the opposing party to examine the factual basis for the opinion in cross-examination. Only if the expert's opinion is so fundamentally unsupported that it can offer no assistance to the jury must such testimony be excluded.

Hartley v. Dillard's, Inc., 310 F.3d 1054, 1061 (8th Cir. 2002) (quoting

Bonner v. ISP Techs., Inc., 259 F.3d 924, 929-30 (8th Cir. 2001) ); see also Wash Sols., Inc. v. PDQ Mfg., Inc., 395 F.3d 888, 895 (8th Cir. 2005) (finding no abuse of discretion in the district court's admission of expert testimony regarding lost future profits, reasoning other witness testimony verified the accuracy of information relied upon by the economic expert in calculating future lost profits).

The screening requirement of Rule 702 has been boiled down to a three-part test:

First, evidence based on scientific, technical, or other specialized knowledge must be useful to the finder of fact in deciding the ultimate issue of fact. This is the basic rule of relevancy. Second, the proposed witness must be qualified to assist the finder of fact. Third, the proposed evidence must be reliable or trustworthy in an evidentiary sense, so that, if the finder of fact accepts it as true, it provides the assistance the finder of fact requires.

Johnson, 754 F.3d at 561 (quoting Polski v. Quigley Corp., 538 F.3d 836, 839 (8th Cir. 2008)).

B. Defendants' Motion to Exclude Engstrom's Testimony

Eric Engstrom is employed by LWBJ Capital Advisors, LLC, an accounting firm, as a Director of Valuation and Transaction Services. He is a Certified Public Accountant and Chartered Financial Analyst, and he has degrees in accounting from the University of Iowa. He regularly testifies as an expert witness on issues relating to business valuation and economic damages, including involving lost profit calculations. He is qualified to testify regarding damage calculations in this case.

Engstrom's expert report covers three primary topics relating to damages: lost "Dollar Channel" profits, concentrate pricing, and the Big Bets program. Based on the Court's summary judgment ruling dismissing all concentrate pricing claims, Engstrom's expert testimony as to those claims is now moot. Defendants' motion to exclude Engstrom's expert testimony regarding concentrate pricing is granted .

1. Dollar Channel Lost Profits¹

Engstrom's report estimated Plaintiffs' alleged lost profits from Dollar Channel (i.e., Dollar General, Family Dollar, and Dollar Tree) business by calculating lost revenue, avoided expenses, lost profit, and present value of lost profit. Each of the four steps in the process involved numerous assumptions and sub-steps and relied on a variety of factual sources. Defendants argue that Engstrom's calculations are based on unsupported assumptions, ignore relevant facts, and improperly speculate that prior lost profits will continue and create future lost profits. Defendants present a laundry list of facts Engstrom allegedly failed to consider and make numerous assumptions they assert Engstrom inappropriately applied. Defendant...