Vitaform, Inc. v. Aeroflow, Inc.

1

2023 NCBC 20A.

VITAFORM, INC. d/b/a BODY AFTER BABY, Plaintiff, v. AEROFLOW, INC. and MOTIF MEDICAL, LLC, Defendants.

No. 19 CVS 3707

Superior Court of North Carolina, Buncombe

March 13, 2023

Smith DeVoss, PLLC, by Jeffrey J. Smith and John R. DeVoss, Wimer & Snider, P.C., by Jake A. Snider, and Caulk Legal, PLLC by Taylor Caulk, for Plaintiff Vitaform, Inc. d/b/a Body After Baby.

Ward and Smith, P.A., by Joseph A. Schouten, Hayley R. Wells, and Jordan M. Spanner, for Defendants Aeroflow, Inc. and Motif Medical, LLC.

AMENDED ORDER AND OPINION ON CROSS-MOTIONS TO EXCLUDE EXPERTS ^[1]

Louis A. Bledsoe, III Chief Judge

1. THIS MATTER is before the Court on Defendants' Motion to Exclude Expert Report of Scott Barnes ("Barnes") and Limit Plaintiff's Evidence of Damages, (ECF No. 149), and Plaintiff's Motion to Exclude Defendants' Expert Witness, (ECF No 152) (each a "Motion" and together, the "Motions").

2. Having considered the Motions, the briefs, exhibits, and affidavits in support of and in opposition to the Motions the arguments of counsel at the hearing on the Motions, and other appropriate matters of the record, the Court GRANTS Defendants' Motion and GRANTS Plaintiff's Motion for the reasons set forth below.

I. FACTUAL AND PROCEDURAL BACKGROUND

3. This action arises from a dispute over products developed by Don Francisco ("Francisco"), the founder and president of Plaintiff Vitaform, Inc. d/b/a Body After Baby ("Plaintiff" or "Vitaform"). See generally Vitaform, Inc. v. Aeroflow, Inc., 2022 NCBC LEXIS 128 (N.C. Super. Ct. Oct. 27, 2022) (the "October Opinion").^[2] Francisco developed three garments designed to address medical conditions associated with pregnancy. Id. at *2. Vitaform began selling these products sometime in 2012 or 2013, and eventually decided to work with a medical supply provider with national reach in 2017. Id. at *3.

4. On 19 July 2018, Francisco pitched Vitaform's products to Evan Israel ("Israel"), the director of emerging markets for Aeroflow, Inc. ("Aeroflow" or "Defendant") via telephone (the "Call"). Id. at *3-4. Francisco claimed that the parties reached an oral agreement on the Call concerning Aeroflow's sale of Vitaform's products and that Israel agreed that Defendants would maintain the confidentiality of Vitaform's business plan in agreeing to sell Vitaform's products. Id. at *4. The parties never entered into a written contract but Aeroflow did purchase and sell Vitaform's products for a short time. Id. at *5. In 2019, Motif, a wholly- owned subsidiary of Aeroflow, began manufacturing its own maternity garments in competition with Vitaform. Id. at *5-6.

5. On 23 August 2019, Vitaform filed suit against Aeroflow and Motif. Id. at *6. The crux of this action is Vitaform's contention that Aeroflow wrongfully revealed Vitaform's confidential information and trade secrets to Motif, which unfairly allowed Motif to compete with Vitaform. Id. at *6-8. After extensive motions practice and the amendment of Vitaform's complaint, this Court issued the October Opinion on 27 October 2022. See generally id.

6. In the October Opinion, the Court dismissed most of Vitaform's claims and permitted only the following claims to proceed to trial: (1) fraudulent misrepresentation insofar as the claim is based on Aeroflow's alleged promise during the Call to maintain the confidentiality of Vitaform's business plan; (2) fraudulent concealment arising from the Call; (3) common law unfair competition and violation of North Carolina's Unfair and Deceptive Trade Practices Act (the "UDTPA") insofar as they are based on Aeroflow's alleged promise during the Call to maintain the confidentiality of Vitaform's business plan; and (4) unjust enrichment. Id. at *57-58. The Court specifically dismissed Vitaform's claims for misappropriation of trade secrets and for breach of the covenant of good faith and fair dealing in their entirety. Id. at *57, *60.

7. Relevant here is Plaintiff's identification on 6 September 2021 of three expert witnesses on damages: certified public accountant Gary Durham, BAB's founder and principal Don Francisco, and Francisco's wife, who also is a certified public accountant. However, contrary to the requirements of the Court's Case Management Order, the designation included little information about the witnesses besides their identities, and did not provide their expert reports or damages calculations.^[3] After motions practice, the Court concluded that Plaintiff's failure had prejudiced Defendants and therefore sanctioned Plaintiff,^[4] but extended the expert discovery period to permit Plaintiff to remedy its incomplete disclosures.^[5] Thereafter, on 5 November 2021, Plaintiff filed a new expert designation, which designated Barnes as Plaintiff's lone damages expert, and which expressly "withdr[ew] all prior expert witness designations [Plaintiff] has made in this case."^[6] Plaintiff served Barnes's expert report (the "Barnes Report") that same day.^[7] 8. Defendants thereafter retained Mickey Ferri ("Ferri") as an expert witness to rebut Barnes's opinions and produced his report (the "Ferri Report") on 6 December 2021.^[8]

9. Each party moved to exclude the other's expert witness on 11 January 2023.^[9]

10. The Court held a hearing on the Motions on 21 February 2023, at which all parties were represented by counsel (the "Hearing"). Following the Hearing, the Court ordered the parties to submit post-hearing supplemental briefs on the Motions by 1 March 2023.^[10] The parties timely filed their supplemental briefs,^[11] and the Motions are now ripe for determination.

II. LEGAL STANDARD

11. The Court evaluates a motion to exclude an expert's testimony under North Carolina Rule of Evidence 702. The Supreme Court of North Carolina has held that our State's Rule 702 incorporates the standard set by Federal Rule of Evidence 702. State v. McGrady, 368 N.C. 880, 888 (2016). For the most part, Federal Rule 702 incorporates the standard for expert testimony established by Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579 (1993). See, e.g., Earnest v. Sanofi U.S. Servs., 26 F.4^th 256, 268 (5th Cir. 2022) (noting that Daubert is "effectively codified" in Rule 702); United States v. Brown, 973 F.3d 667, 704 (7th Cir. 2017) (stating that Rule 702 "largely reflects" the Daubert standard). In turn, Daubert established a three-element test for the admission of expert testimony: first, the area of proposed testimony must be based on specialized knowledge that will assist the trier of fact to understand the evidence or determine a factual issue; second, the witness must be qualified as an expert by knowledge, skill, experience, training, or education; and third, the testimony must be reliable, through a foundation in sufficient facts or data, and the application of reliable principles and methods to the facts of the case. See McGrady, 368 N.C. at 889-90 (summarizing the Daubert standard and its application under North Carolina law).

12. Evidence that does not relate to any issue in the case is not relevant and "ergo, non-helpful" under the first element. Daubert, 509 U.S. at 591. The relevancy requirement under Rule 702 is more stringent than the ordinary relevance standard of Rule 401. See, e.g., United States v. Ford, 481 F.3d 215, 219 n.6 (3d Cir. 2007).

13. Within this framework, the disposition of a motion in limine seeking to exclude an expert witness is within the discretion of the trial court. See Crocker v. Roethling, 363 N.C. 140, 143 (2009).

III. ANALYSIS

A. Defendants' Motion

14. The Court examines Defendants' Motion first. Defendants argue that Barnes's expert opinions are both irrelevant and unreliable under the Daubert standard.^[12] Defendants further argue that if the Court excludes Barnes's expert opinions, Plaintiff should be barred from introducing any other evidence of Plaintiff's damages.^[13]

1. Exclusion of Barnes's Opinions and Testimony

15. The Court turns first to the relevance of Barnes's expert opinions. Defendants argue that Barnes's proffered testimony is irrelevant under both Daubert and the more forgiving standard of Rules 401 and 402.^[14] N.C. R. Evid. 401; N.C. R. Evid. 402.

16. The first prong of the Daubert standard requires expert testimony to relate to an issue in the case, and to have sufficient connections to the facts to aid the jury in deciding factual disputes. Daubert, 509 U.S. at 591. Expert testimony that relates solely to a non-issue is therefore inherently unhelpful and irrelevant under the Daubert standard. Id.

17. In particular, this rule excludes expert testimony addressing issues that have already been decided before trial. See, e.g., Kenney v. Watts Regul. Co., 512 F.Supp.3d 565, 579 (E.D. Pa. 2021); Resco Prods. v. Bosai Mins. Grp., No. 06-235, 2015 U.S. Dist. LEXIS 124930, at *10 n.5 (W.D. Pa. Sept. 18, 2015); Campbell v. CONRAIL, 1:05-CV-1501, 2009 U.S. Dist. LEXIS 810, at *19-20 (N.D.N.Y. Jan. 6, 2009); Optimum Techs., Inc. v. Henkel Consumer Adhesives, Inc., No. 1:04-CV-1082, 2006 U.S. Dist. LEXIS 42891, at *11-18 (N.D.Ga. June 14, 2006).

18. Here, Barnes premises his analysis upon claims that have already been dismissed. In the October Opinion, the Court dismissed Plaintiff's claims for misappropriation of trade secrets and breach of the duty of good faith and fair dealing in their entirety. Vitaform, 2022 NCBC LEXIS 128, at *57. These claims are no longer in this case, and will not be heard at trial. Yet Barnes states in the introduction to his Report that he analyzes lost profits and unjust enrichment suffered as a result of misappropriation of trade secrets and breach of the duty of good faith and fair dealing.^[15] Barnes goes on to discuss damages arising from those claims at length.^[16]Barnes's...