Opinion
94 Civ. 5693 (KTD)(FM)
July 20, 2000
DISCOVERY ORDER
This discovery order addresses (1) the sanctions motion of plaintiff Dr. Gaus seeking to strike in its entirety the report of John Jarosz, defendant Conair's damages expert, and preclude him from testifying at trial ("Motion to Strike"), and (2) defendant Conair's motion to permit Mr. Jarosz to review documents which Dr. Gaus previously has designated as "Confidential," including the report of Conair's own damages expert.
Motion to Strike
By notice of motion dated June 14, 2000, Dr. Gaus has moved to strike the Jarosz report because Conair allegedly has failed to provide meaningful answers to one of his interrogatories and has permitted Jarosz to rely on documents which were withheld from Gaus.
In or around October 1999, Dr. Gaus served a Fourth Set of Interrogatories, including Interrogatory 38, which asked Conair to identify "by model number and by Market Identification [such as trademarks and trade names] all Conair products, manufactured or sold from May 13, 1986 to the present, that incorporate an IDCI Device. . . ." The Fourth Set of Interrogatories defined an IDCI device as a non-resettable circuit interrupter that disengages an electrical appliance, such as a hair dryer, from its power source when an unacceptable level of conductive fluid, such as water, is present.
Over the years, Conair has manufactured both resettable and non-resettable hair dryers. The Conair non-resettable hair dryers all incorporated an ICDI device manufactured under a license from Leviton Manufacturing Company, Inc., and were assembled exclusively at a Conair plant in Costa Rica. This lawsuit was instituted because Dr. Gaus contends that the Leviton ICDI device used in the Conair hair dryers infringes his own United States patent for a similar device. After this lawsuit was filed, Conair made a business decision to cease manufacturing non-resettable hair dryers, and to sell resettable hair dryers instead. Although the resettable hair dryers were more costly to manufacture, Conair believed that the additional expense was justified by the cost of returns from dissatisfied purchasers of its non-resettable hair dryers.
Since Dr. Gaus's patent involved a non-resettable device, throughout this litigation Conair has objected, on relevance grounds, to the production of any documents relating to its resettable hair dryers. Although that objection went largely uncontested, on December 9, 1999, in response to Dr. Gaus's application during a telephone conference the day before, I entered an order which required Conair to produce any documents that related to its business decision to switch from non-resettable to resettable hair dryers. The order also required Conair to answer Interrogatory 38.
On or about December 17, 1999, Conair served its "Supplemental Response to [Conair's] Interrogatory No. 38" which identified 137 models of Conair hair dryers that incorporated the IDCI non-resettable device. (See letter from Arthur S. Beeman, Esq., to the Court, dated Mar. 28, 2000, at 2 Ex. C). The Supplemental Response was verified by Richard A. Margulies, Esq., Conair's vice president for legal affairs.
After Conair answered Interrogatory 38, Dr. Gaus compared its response to certain information regarding the production of Conair ICDI hair dryers set forth in Jarosz's expert report. As Geoffrey H. Osborne, Gaus's own damages expert, later explained, the Jarosz report seemed to indicate that Conair had manufactured and shipped to the United States 291 different models of IDCI hair dryers, a substantially greater number than was reflected in its interrogatory response. (Id. at 2 Ex. E). As a result, Osborne believed that his own expert report, which relied on Conair's interrogatory response, understated Dr. Gaus's damages by at least $10 million. (Id. at Ex. D (Declaration of Geoffrey H. Osborne, dated Mar. 28, 2000)).
In addition, the Jarosz report contended that resettable devices today "are actually cheaper than non-resettables" when one factors in the cost of returned items. (Motion to Strike Ex. F at 16-17). To the extent that Jarosz based this opinion on records relating to the actual cost of manufacturing resettable hair dryers, he apparently was relying on documents that Conair previously had refused to turn over to Dr. Gaus.
By letter dated March 28, 2000, Dr. Gaus requested a telephone conference to discuss, among other items, its proposed motion to strike the Jarosz report, based upon Conair's allegedly "wilful and deliberate" failure to supply accurate information concerning its production of IDCI hair dryers and Jarosz's alleged reliance upon IDCI cost data which had not been made available to Dr. Gaus.
The requested conference was held by telephone on April 7, 2000. During the conference, Conair conceded that its response to Interrogatory 38 was less than fully accurate, but attributed the shortcomings to inadvertence, promising that corrected figures would be promptly supplied. (4/7/00 Tr. at 4-9). Thereafter, by letter dated April 21, 2000, Conair submitted its "Further Supplemental Response to Interrogatory 38," which it claimed was based upon "intensive further review of the files of its manufacturing facility located in the nation of Costa Rica and its marketing and sales files located in East Windsor, New Jersey and Stamford, Connecticut." The response indicated that some of the confusion arose from the fact that the manufacturing and sales facilities used different product designations which did not fully overlap. Stated somewhat differently, according to Conair, there were times when the same hair dryer was described and inventoried in Costa Rica and, later, the United States using different model numbers.
In mid-June, Dr. Gaus filed a formal Motion to Strike "to protect [his] interests at trial." (See letter from Arthur S. Beeman to the Court, dated June 14, 2000). Thereafter, in response to the filing of Dr. Gaus's motion, Conair served a further Declaration by Mr. Margulies, its in-house counsel, the caption of which noted that it was being submitted "In Lieu of Additiional [sic] Supplemental Response to Interrogatory No. 38." (See letter from Barry G. Magidoff, Esq., to the Court, dated June 23, 2000 Ex. 1 (Declaration of Richard Margulies, Esq., sworn to on June 23, 2000 ("Margulies Decl.")). In his Declaration, Mr. Margulies contended that Conair had acted in good faith but, for various reasons, was unable to reconcile its records regarding the number of hair dryers of each model that had been shipped to the United States with other Conair manufacturing records. As he explained, he now was:
fully convinced that an objectively complete answer to Interrogatory No. 38 cannot be made with a reasonable degree of comfort in its accuracy, without doing the type of cross-checking apparently done by counsel for [Dr.] Gaus. However, that cross-checking is only effective to show up omissions, but does not necessarily result in a complete and correct response.
(Margulies Decl. ¶ 5). Mr. Margulies nevertheless noted that he had been able to determine that the higher number of IDCI models reflected in the Jarosz report reflected a considerable degree of overlap due to the use of different model numbers in Costa Rica and the United States to describe the same hair dryer. (Id. ¶¶ 7-9). Finally, Mr. Margulies made the point that the total number of IDCI hair dryers manufactured by Conair could not exceed its supply of IDCI plugs, and that the minor differences between its records of shipments to the United States and its production of IDCI plugs were readily explained by its destructive testing of hair dryers during the course of the manufacturing process. (Id. ¶ 10). Conair also offered to produce to Dr. Gaus records regarding its purchases of "PC boards" which were an essential component of its IDCI plugs. (Id.).
As both sides recognize, the determination of a motion to preclude evidence is a matter committed to the Court's discretion. See, e.g., Softel, Inc. v. Dragon Med. and Scientific Communications, Inc., 118 F.3d 955, 961 (2d Cir. 1997); Reilly v. Natwest Mkts. Group, Inc., 181 F.3d 253, 269 (2d Cir. 1999). In this case, although the use of a declaration in lieu of a supplemental interrogatory response is plainly unacceptable, Conair appears to have provided as much information concerning its manufacture of hair dryers incorporating IDCI devices as it reasonably could. Moreover, its data concerning the maximum number of hair dryers containing such devices that it could have manufactured and shipped appears to make sense. The fact that Conair may not be able to attribute a particular hair dryer to one or more specific model numbers does not suggest that Mr. Osborne's original calculations were seriously wrong. Indeed, given the confusion in Conair's records, Mr. Osborne could well have assumed that the correct number of IDCI hair dryers is the same as the number of IDCI plugs manufactured or PC boards purchased, leaving it to Conair to explain why that number should be reduced for such reasons as destructive testing during the manufacturing process.
In these circumstances, there does not appear to be any reason to strike the Jarosz report on the basis of the discrepancies between Conair's prior responses to Interrogatory No. 38 and the model numbers set forth in the Jarosz report. On the other hand, Dr. Gaus is entitled to an interrogatory response which reflects Conair's best efforts to respond to the question posed. The information set forth in the Margulies Declaration suggests that Conair's December 17th Supplemental Response may not reflect the current state of Conair's knowledge. For this reason, Conair is directed to file a further Interrogatory Response answering Interrogatory No. 38 to the best of its knowledge by August 4, 2000. Additionally, by that date, if Dr. Gaus so requests, Conair shall turn over its records reflecting its purchases of PC boards. Thereafter, Dr. Gaus will be permitted to submit a revised report by Mr. Osborne on or before August 25, 2000.
Turning to the second branch of Dr. Gaus's motion to strike, the Jarosz report concludes that the availability of several alternative circuit-breaking technologies reduces the amount of money that a reasonable user would be willing to pay to obtain the rights to use Dr. Gaus's patented device. (See Motion to Strike, Ex. J at 15). In the course of that discussion, Mr. Jarosz observes that one available alternative is a resettable IDCI which, while more expensive to manufacture, has "become more attractive" now that the Underwriters Laboratories standard requires hair dryers to incorporate a circuit-breaking device. (Id. at 16-17). As noted above, however, Mr. Jarosz goes on to declare (in a subsequent paragraph of his report) that resettable IDCI's are, in fact, "cheaper than non-resettables" when one factors in the cost of returned non-resettable hair dryers. The sole factual source cited in connection with this conclusion is the deposition testimony of Mr. Margulies. (Id. at 17).
Dr. Gaus's objection to Mr. Jarosz's conclusion regarding the comparative cost of resettable IDCI's is that he has no way of verifying its accuracy since Conair previously argued successfully that its documents regarding resettable IDCI hair dryers were irrelevant to the issues in this case, and therefore should not be produced. On the other hand, Dr. Gaus has received documentation regarding Conair's decision to stop producing hair dryers with non-resettable IDCIs.
Since there is no question that actual cost data regarding resettable IDCIs has not been disclosed, I indicated during the April 7, 2000, telephone conference that I was likely to strike only the paragraph of the Jarosz report dealing with the comparative cost of resettable IDCI hair dryers. (See 4/7/00 Tr. at 11). Significantly, Dr. Gaus's counsel, W. Bruce Baird, Esq., responded at the conference that this more limited relief was "acceptable." Thereafter, however, Dr. Gaus filed its formal Motion to Strike again seeking to preclude any testimony by Mr. Jarosz.
Having reviewed the formal motion papers, I continue to believe that the appropriate remedy here is simply to strike the portion of Mr. Jarosz's report which suggests that resettable IDCIs are cheaper than non-resettable IDCIs. Accordingly, the first full paragraph on page 17 of the Jarosz report will be stricken.
Access to Conair Expert Report
On or about January 25, 1995, the parties entered into a confidentiality stipulation which was "so ordered" by Judge Duffy ("Protective Order"). The Protective Order provided that a party seeking to disclose confidential material to an expert must notify the party that produced that material at least ten days prior to any disclosure. (Protective Order ¶ 6(a)). Thereafter, if the party producing the confidential material served a written objection, the Protective Order provided that no confidential material could be disclosed until the objection was resolved by agreement of counsel or by the Court. (Id. ¶ 6(b)).
For reasons evidently having largely to do with timing, Conair did not show Mr. Jarosz any documents that Dr. Gaus had designated as "Confidential" prior to the date that the Jarosz report was prepared and served upon Dr. Gaus's counsel. (See 5/3/00 Tr. at 27). More recently, however, Conair has notified Dr. Gaus that it wishes to show Mr. Jarosz certain of his "Confidential" documents, including the report of Dr. Gaus's damages expert. Dr. Gaus objects that Conair should not be permitted "a second bite at the apple," in part because any additional disclosures that are made now that the Jarosz report has been prepared may infect Mr. Jarosz's trial testimony with information that he did not rely upon in preparing his report. (See id. at 27-28).
The notification procedure incorporated into the Protective Order was obviously intended to prevent the disclosure of confidential material to an expert who had a conflict of interest. In this case, however, it does not appear that Dr. Gaus has such an objection to Conair's decision to retain Mr. Jarosz. Accordingly, had Conair not delayed its notification to Gaus, it could have had Mr. Jarosz prepare his report without using any confidential material and, once the report was prepared, could then have furnished him with that material without seeking Dr. Gaus's further consent. Under that scenario, of course, the risk of the subsequent disclosures infecting Mr. Jarosz's testimony would be precisely the same as it is now. Dr. Gaus consequently has not shown any reason why the timing of Conair's notification should adversely affect its ability to make the requested disclosure.
More importantly, to preclude Mr. Jarosz from reviewing the report of Dr. Gaus's damages expert would mean that Conair would have to retain a second expert to advise it regarding such subjects as possible areas of expert cross-examination. Dr. Gaus has not shown that the risk that Mr. Jarosz may improperly rely on after-acquired information to alter or shade his testimony justifies the significant additional expense that Conair would have to incur to hire a second damages expert. Moreover, any such problems that do arise can obviously adequately be dealt with by Judge Duffy at trial.
Conair's motion to permit Mr. Jarosz to review Dr. Gaus's confidential materials, including the report of his damages expert, is therefore granted.
CONCLUSION
The motion of Plaintiff, Dr. Gaus, to strike the Jarosz report is granted only to the extent of striking the first full paragraph on page 17 thereof. The cross-motion of Conair to permit its damages expert to review Dr. Gaus's confidential materials is granted. By August 4, 2000, Conair shall file a further response to Interrogatory No. 38 and produce the documents concerning its PC board purchases, if Dr. Gaus so requests. Thereafter, on or before August 25, 2000, Dr. Gaus may submit a revised report by Mr. Osborne
In light of these rulings, the deadline for submission of the final pretrial order will be extended to September 5, 2000. Counsel are directed to contact my Chambers to arrange for a final pretrial conference in early September.
SO ORDERED.