United States District Court, N.D. Texas, Dallas Division
MEMORANDUM OPINION AND ORDER
Lindsay, United States District Judge
Jacked Up, LLC (“Jacked Up”) has filed Objections
to the Magistrate Judge's February 15, 2018 Memorandum
Opinion and Order granting Defendant Sara Lee
Corporation's (“Sara Lee”) Amended Motion to
Exclude Testimony of Plaintiff's Damages Expert. Sara Lee
has filed a Response to Jacked Up's Objections. Because
the Magistrate Judge's decision is not dispositive of
Jacked Up's claims, the question before the court is
whether the decision is “clearly erroneous or contrary
to law.” Fed.R.Civ.P. 72(a); 28 U.S.C. §
636(b)(1)(A). For the following reasons, the court
overrules in part and sustains in
part Jacked Up's Objections;
concludes the Magistrate Judge's
decision to exclude the testimony of Jacked Up's damages
expert is neither clearly erroneous nor contrary to law; and
affirms the Magistrate Judge's decision.
around September 2011, after several months of negotiations
and product development, Jacked Up and Sara Lee entered into
a licensing agreement (the “Licensing
Agreement”), in which Jacked Up agreed to license its
brand name and proprietary energy ingredients to Sara Lee in
exchange for royalties. The initial term of the Licensing
Agreement was five years, followed by a three-year renewal
term. The Licensing Agreement, however, contained a number of
termination clauses, triggered by various dates and events.
In or around October 2011, Sara Lee announced the sale of its
North American Beverage Division to J.M. Smucker Company
(“Smucker”), and, because of concerns that
Smucker would not assume the Licensing Agreement with Jacked
Up, the deal broke down.
November 7, 2011, before Sara Lee sent Jacked Up a formal
termination letter, it brought a breach of contract claim
against Sara Lee in Texas state court. On November 18, 2011,
Sara Lee provided Jacked Up written notice of its intention
to terminate the Licensing Agreement. Sara Lee then removed
the action to this court, and Jacked Up added Smucker as a
defendant, alleging, among other things, that Smucker
interfered with the Licensing Agreement. Jacked Up later
added a claim against Smucker for common law trade secret
misappropriation and added claims against Sara Lee for breach
of fiduciary duty, fraud, and fraudulent inducement.
close of discovery, Smucker, Sara Lee, and Jacked Up each
moved for summary judgment and asked the court to strike
certain summary judgment evidence. The undersigned granted
Smucker's and Sara Lee's motions for summary judgment
and entered judgment in favor of Sara Lee and Smucker.
Jacked Up, L.L.C. v. Sara Lee Corp., 2015 WL 3513195
(N.D. Tex. June 4, 2015) (Lindsay, J.). Jacked Up appealed.
appeal, the United States Court of Appeals for the Fifth
Circuit affirmed the court's decision insofar as it
granted summary judgment in favor of Smucker, and in favor of
Sara Lee on Jacked Up's breach of fiduciary duty claim,
but reversed the court's decision granting summary
judgment in favor of Sara Lee on Jacked Up's claims for
breach of contract, fraud, and fraudulent inducement.
Jacked Up, L.L.C. v. Sara Lee Corp., 854 F.3d 797,
817 (5th Cir. 2017). The Fifth Circuit remanded Jacked Up's
claims for breach of contract, fraud, and fraudulent
inducement for further proceedings. Id.
note, the Fifth Circuit declined to affirm summary judgment
on the alternative ground that Sara Lee and Smucker had
asserted, namely, “that Jacked Up's evidence of
lost profits is speculative.” Id. at 816. It
stated that “Jacked Up's evidence of lost
profits-an expert report prepared by EJ Janik (‘Janik
Report')-is critical to its claim for damages. Indeed
this expert report is the only evidence of damages in the
record.” Id. The Fifth Circuit, however, left
“it to the district court to determine whether Jacked
Up has put forth sufficient evidence of damages, ”
further explaining that:
[t]he district court may choose to conduct a Daubert
inquiry to determine whether the Janik Report is admissible.
Indeed, Sara Lee and Smucker moved to exclude the Janik
Report, and this motion was still pending when the district
court granted the summary judgment. We leave it to the
district court to determine whether the Janik Report is
admissible, and if it is admissible, whether it establishes
lost profits with reasonable certainty.
Id. at 817.
remand, Sara Lee sought leave to refile its Motion to Exclude
the Testimony of Plaintiff's Damages Expert (see
Doc. 85), which the court had previously denied as moot in
its order granting summary judgment in favor of Smucker and
Sara Lee. After considering Sara Lee's motion for leave,
Jacked Up's response, and the Fifth Circuit's
opinion, including its recognition that, on remand, the court
may choose to conduct a Daubert inquiry to determine
whether the Janik Report is admissible opinion evidence under
Federal Rule of Evidence 702 (“Rule 702”), the
court granted Sara Lee's motion for leave. On November
27, 2017, Sara Lee filed its Amended Motion to Exclude
Testimony of Plaintiff's Damages Expert (the
“Motion to Exclude”) (Doc. 188). On November 28,
2017, pursuant to 28 U.S.C. § 636(b), the court referred
the Motion to Exclude to United States Magistrate Judge David
Horan. On February 15, 2018, after the Motion to Exclude was
fully briefed by the parties, Judge Horan granted Sara
Lee's Motion to Exclude, concluding that the opinions of
Jacked Up's damages expert, E.J. Janik, were inadmissible
under Rule 702. On March 1, 2018, Jacked Up filed Objections
to the Magistrate's Order Granting Defendant's Motion
to Exclude Testimony of Plaintiff's Damages Expert
(“Objections”) (Doc. 202). On March 26, 2018,
Sara Lee filed its Response to Plaintiff's Objections to
the Magistrate's Order Granting Defendant's Motion to
Exclude Testimony of Plaintiff's Damages Expert (Doc.
Standard for Reviewing Magistrate Judge's
magistrate judge's determination regarding a dispositive
matter is reviewed de novo if a party timely objects. 28
U.S.C. § 636(b)(1)(C); Fed.R.Civ.P. 72(b). A magistrate
judge's determination regarding a nondispositive matter,
as in this case, is reviewed under the “clearly
erroneous or contrary to law” standard. 28 U.S.C.
§ 636(b)(1)(A); Fed.R.Civ.P. 72(a) (“The district
judge in the case must . . . modify or set aside any part of
the order that is clearly erroneous or is contrary to
law.”). This highly deferential standard requires the
court to affirm the decision of the magistrate judge unless
“on the entire evidence [the court] is left with a
definite and firm conviction that a mistake has been
committed.” Baylor Health Care Sys. v. Equitable
Plan Servs., Inc., 955 F.Supp.2d 678, 689 (N.D.
Tex. 2013) (Lindsay, J.) (quoting United States v. United
States Gypsum Co., 333 U.S. 364, 395 (1948)).
As explained by anther district court in this Division:
The clearly erroneous standard applies to the factual
components of the magistrate judge's decision. The
district court may not disturb a factual finding of the
magistrate judge unless, although there is evidence to
support it, the reviewing court is left with the definite and
firm conviction that a mistake has been committed. If a
magistrate judge's account of the evidence is plausible
in light of the record viewed in its entirety, a district
judge may not reverse it. The legal conclusions of the
magistrate judge are reviewable de novo, and the district
judge reverses if the magistrate judge erred in some respect
in [his] legal conclusions. [T]he abuse of discretion
standard governs review of that vast area of choice that
remains to the [magistrate judge] who has properly applied
the law to fact findings that are not clearly erroneous.
Arters v. Univision Radio Broadcasting TX, L.P.,
2009 WL 1313285, at *2 (N.D. Tex. May 12, 2009) (Fitzwater,
C.J.)) (citations and internal quotations marks omitted).
Admissibility of Expert Testimony - Federal Rule of Evidence
diversity case, the admissibility of evidence is a procedural
issue governed by federal law. See Reed v. General Motors
Corp., 773 F.2d 660, 663 (5th Cir. 1985). Rule 702
governs the admissibility of expert testimony and 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
(d) the expert has reliably applied the principles and
methods to the facts of the case.
Fed. R. Evid. 702.
trial court acts as a “gatekeeper” to ensure that
“any and all scientific evidence admitted is not only
relevant, but reliable.” Daubert v. Merrell Dow
Pharms., Inc., 509 U.S. 579, 589 (1993).
“Daubert's general holding-setting forth
the trial judge's general ‘gatekeeping'
obligation-applies not only to testimony based on
‘scientific' knowledge, but also to testimony based
on ‘technical' and ‘other specialized'
knowledge.” Kumho Tire Co. v. Carmichael, 526
U.S. 137, 141 (1999).
gatekeeping role, the court determines the admissibility of
expert testimony based on Rule 702 and Daubert and
its progeny. “The court may admit proffered expert
testimony only if the proponent, who bears the burden of
proof, demonstrates that (1) the expert is qualified, (2) the
evidence is relevant to the suit, and (3) the evidence is
reliable.” E.E.O.C. v. S &B Indus., Inc.,
2017 WL 345641, at *2 (N.D. Tex. Jan. 24, 2017) (Fitzwater,
J.) (internal quotation marks omitted) (citing Kumho Tire
Co., 526 U.S. at 147). Here, the parties dispute only
the relevance and reliability of Janik's opinions.
relevant, “expert testimony [must] ‘assist the
trier of fact to understand the evidence or to determine a
fact in issue.'” Pipitone v. Biomatrix,
Inc., 288 F.3d 239, 245 (5th Cir. 2002) (quoting
Daubert, 509 U.S. at 591). “Relevance depends
upon ‘whether [the expert's] reasoning or
methodology properly can be applied to the facts in
issue.'” Knight v. Kirby Inland Marine
Inc., 482 F.3d 347, 352 (5th Cir. 2007) (quoting
Daubert, 509 U.S. at 593); see also Fed. R.
Evid. 702(d) (requiring that an “expert has reliably
applied the principles and methods to the facts of the
is determined by assessing ‘whether the reasoning or
methodology underlying the testimony is scientifically
valid.'” Knight, 482 F.3d at 352 (quoting
Daubert, 509 U.S. at 592-93); see also Fed.
R. Evid. 702(c) (requiring that “testimony [be] the
product of reliable principles and methods”).
“The reliability analysis applies to all aspects of an
expert's testimony: the methodology, the facts underlying
the expert's opinion, the link between the facts and the
conclusion, et alia.” Knight, 482 F.3d at 355.
“The reliability prong mandates that expert opinion be
grounded in the methods and procedures of science and . . .
be more than unsupported speculation or subjective
belief.” Johnson v. Arkema, Inc., 685 F.3d
452, 459 (5th Cir. 2012) (internal quotation marks omitted).
“[T]here is no requirement that an expert derive his
opinion from firsthand knowledge or observation.”
Deshotel v. Wal-Mart La., L.L.C., 850 F.3d 742, 746
(5th Cir. 2017) (internal quotation marks omitted).
focus, of course, must be solely on principles and
methodology, not on the conclusions that they
generate.” Daubert, 509 U.S. at 595.
“The proponent need not prove to the judge that the
expert's testimony is correct, but she must prove by a
preponderance of the evidence that the testimony is
reliable.” Johnson, 685 F.3d at 459 (internal
quotation marks omitted). If “there is simply too great
an analytical gap between the [basis for the expert opinion]
and the opinion proffered, ” the court may exclude the
testimony as unreliable. General Elec. Co. v.
Joiner, 522 U.S. 136, 146 (1997).
consider the following non-exclusive list of factors when
conducting the reliability inquiry:
(1) whether the theory or technique has been tested; (2)
whether the theory or technique has been subjected to peer
review and publication; (3) the known or potential rate of
error of the method used and the existence and maintenance of
standards controlling the technique's operation; and (4)
whether the theory or method has been generally accepted by
the scientific community.
Johnson, 685 F.3d at 459 (internal quotation marks
burden is on the proponent of the expert testimony to
establish its admissibility by a preponderance of the
evidence. See Daubert, 509 U.S. at 592 n.10; see
also Johnson, 685 F.3d at 459. The court's inquiry
is flexible in that “[t]he relevance and reliability of
expert testimony turns upon its nature and the purpose for
which its proponent offers it.” United States v.
Valencia, 600 F.3d 389, 424 (5th Cir. 2010) (citation
omitted). “As a general rule, questions relating to the
bases and sources of an expert's opinion affect the
weight to be assigned that opinion rather than its
admissibility and should be left for the [trier of
fact's] consideration.” Viterbo v. Dow Chem.
Co., 826 F.2d 420, 422 (5th Cir. 1987). “Vigorous
cross-examination, presentation of contrary evidence, and
careful instruction on the burden of proof are the
traditional and appropriate means of attacking shaky but
admissible evidence.” Daubert, 509 U.S. at
Summary of Parties' Contentions as to Admissibility of
Motion to Exclude, Sara Lee argued that Janik's opinions
were unreliable because he: (1) failed to test or verify the
reliability of the Sara Lee's pro forma on which he
relied (the “Sara Lee Pro Forma”); (2) made other
untested and unverified assumptions to increase Jacked
Up's purported damages; (3) failed to consider or explain
conflicting evidence and other relevant considerations; and
(4) failed to deduct Jacked Up's expenses. Sara Lee also
argued that Janik's opinions were irrelevant because: (1)
Jacked Up was not entitled to lost profits under Illinois
law; and (2) the Licensing Agreement limited Jacked Up's
potential recovery to only one year.
response to Sara Lee's Motion to Exlcude, Jacked Up
argued that Janik's opinions were reliable because: (1)
the Sara Lee Pro Forma was objectively reliable given that it
was created and used by Sara Lee in entering the Licensing
Agreement; (2) Janik did not rely exclusively on the Sara Lee
Pro Forma to develop his opinions; (3) Janik accounted for
Jacked Up's expenses; and (4) Janik applied a discount to
his model. Jacked Up further contended that Sara Lee's
arguments about the reliability of Janik's opinions went
to the weight, and not the admissibility, of Janik's
expert testimony, and that “these are issues to be
resolved by the trier of fact, not through a . . .
Daubert [m]otion.” Jacked Up's Resp. to
Mot. to Exclude 27 (Doc. 192). Finally, with respect to the
relevance of Janik's opinions, Jacked Up argued that its
recovery of lost profits is not ...