Opinion
A156337
02-22-2021
ASHBURY HEIGHTS CAPITAL, LLC, Plaintiff and Appellant, v. FACTSET RESEARCH SYSTEMS, INC. et al., Defendants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (San Francisco City & County Super. Ct. No. CGC14-542833)
In this licensing dispute between plaintiff Ashbury Heights Capital, LLC (Ashbury) and defendants FactSet Research Systems Inc. (FactSet), Bede LLC, formerly known as Revere Data, LLC (Revere), and Doug Engmann (collectively, defendants or respondents), a jury awarded Ashbury $50,147 in quantum meruit damages. Ashbury's sole contention on appeal is that the trial court erred in precluding certain testimony regarding the benefit provided to FactSet by Ashbury's technology. We disagree and affirm.
FACTUAL AND PROCEDURAL BACKGROUND
A. Relationship Among Ashbury , Revere , and FactSet
Many of the background facts are taken from this division's prior opinion in the matter. (See generally Ashbury Heights Capital, LLC v. FactSet Research Sys. (Aug. 16, 2016, A145806 [nonpub. opn.] (Ashbury I).)
Ashbury is an investment management and research company. Its founders, Eric McGill and Paul Mingardi, invented an investment analytics technique that enables financial institutions to assess the impact of micro- and macro-economic events on companies and industries. Ashbury claims its analytic tools enable users to more accurately predict the movement of stock prices based on information about company networks and customer-supplier relationships. Revere, which was renamed Bede LLC, was in the business of data mining and sales of related analytic products used in the financial services industry. Engmann was the co-chairman of Revere and Revere's majority owner and debt holder. As discussed further below, FactSet acquired substantially all of Revere's assets and liabilities in August 2013. FactSet sells technology-based products and services in the field of investment management and research.
In August 2010, Ashbury and Revere executed a software licensing agreement to exploit Ashbury's intellectual property. Pursuant to the 2010 agreement, Revere contracted to pay Ashbury $100,000 to develop a "Relationship Analysis Engine" (RAE). Revere also agreed to pay Ashbury a consulting fee comprising 20 percent of the gross receipts from the sale of Revere's Relationships database (Relationships) that incorporated the RAE or any data, products, or services directly derived from the RAE, up to a maximum of $750,000. In January 2011, the parties executed an amendment to the 2010 agreement. Among other things, the 2011 amendment removed the cap on the consulting fee—thus providing for a 20 percent fee in perpetuity—and required Ashbury to develop an additional deliverable (the "Matrix"). The amendment also gave Ashbury the right to examine Revere's books and records to verify the consulting fee payments, and Ashbury was to provide sales support at a fixed retainer of $9,000 per month. The other terms of the 2010 agreement were to remain in full force.
On July 3, 2012, Ashbury sent Revere written notice it was terminating the 2010 agreement as a precursor to renegotiating terms and exploring strategic alternatives. The parties dispute whether subsequent discussions resulted in the formation of a new licensing agreement. According to Ashbury, a new 2012 agreement was memorialized in a series of e-mails exchanged in August and September 2012. An August 2012 e-mail from Engmann to McGill and Mingardi, for example, proposed "paying a 20% commission on the combined pricing of the matrix and relationships if the client takes both, or 20% of the relationships price only if the client doesn't take matrix, but only the relationships." The new commission payment would begin on September 6, 2012 and would apply to "[c]ontract renewals after that date where the matrix had been used to sell relationships to the client at the time of the original sale." Defendants assert that Revere did not agree to a new contract and the e-mails on which Ashbury relies do not reflect an agreement on terms critical to the parties' relationship moving forward. As discussed below, the jury ultimately found no breach of contract in this case.
FactSet acquired the bulk of Revere's assets and liabilities in August 2013. An amendment to the purchase agreement provided that Revere was responsible for any royalties owed to Ashbury for the use of Ashbury products by customers prior to the closing date, and FactSet was responsible for royalties relating to such use after the closing date. In October 2013, FactSet notified Ashbury that it would cut off all customer access to Ashbury's products and terminate any agreement with Ashbury effective October 31, 2013. B. The Complaint
Ashbury filed the instant action in November 2014. Its first amended complaint, the operative pleading in this matter (complaint), asserted five causes of action: (1) breach of contract, (2) fraud, (3) breach of confidence, (4) quantum meruit, and (5) promissory estoppel. Ashbury alleged that Revere concealed sales and revenues related to Ashbury's products to avoid paying Ashbury its 20 percent consulting fee. Ashbury further alleged that Revere shared Ashbury's confidential intellectual property with highly sophisticated hedge funds and other financial institutions. Revere's sales force was allegedly instructed to disclose to customers how "the backend of the . . . Analytics Engine worked during sales pitches. . . . Revere explained that the customers could design their own similar techniques if they purchased Revere's Relationship Data without buying [Ashbury's] Analytics Engine." The complaint further alleged that defendants continued to falsely report sales and misappropriate benefits from Ashbury's intellectual property after the parties executed the purported 2012 agreement and after FactSet acquired Revere's assets. C. Pretrial Damages Discussions
In February 2015, Revere and Engmann filed a motion to compel arbitration. The trial court denied the motion in June 2015. We affirmed the trial court's order in August 2016. (See Ashbury I, supra, A145806.)
During discovery, Ashbury designated Mingardi as its person most knowledgeable with respect to damages. At his deposition in March 2018, Mingardi discussed in general terms Ashbury's view of the damages at issue in these proceedings. When asked to explain "each component" of the $10 million damages claim, Mingardi stated: "So I—at the time, I did not have all the revenue information for relationships. But our agreement in 2012 was that we get paid on all new contracts. All new contracts of relationships regardless of whether the Matrix [was] included or not. And so assuming there's $6 million of revenue and FactSet has a revenue multiple of 6.5, that would put the valuation of the business at over 36 million. [¶] At the time, I thought it was 10 million. So I don't know. Let's assume it's 10 million. But to take 20 percent of $10 million—or sorry—10 million revenue. So times—that's 60 million. So if you took 20 percent of that—I mean, we were kind of working off just those type of revenue multiples." Later, when asked to provide a current damages estimate against the defendants, Mingardi responded: "It would be whatever the revenue is of 20 percent of all relationships or revenue, times whatever the revenue multiple is of FactSet on the public exchange, which would be about 6.5." Mingardi stated the formula would apply to all relationship sales after September 2012, including renewals. It would also apply to relationship customers before September 2012 who had been "sold using Matrix." With respect to Ashbury's improper use claim, Mingardi explained that there were certain customers that he knew had been exposed to Ashbury's technology because he had spoken to them originally. Mingardi also clarified that under the 2012 agreement, Ashbury was to be paid royalties on all new contracts, even for customers who had not been exposed to the Matrix.
Respondents made a demand for simultaneous exchange of expert witness designations pursuant to Code of Civil Procedure section 2034.210. Ashbury did not designate an expert. Respondents designated Julie Knox as their expert damages witness. On May 31, 2018, the trial court addressed respondents' summary judgement motion, in which respondents argued that no evidence established the existence of a contract or any other alleged arrangement for which Ashbury had not been compensated. While discussing the upcoming trial, the trial court asked whether there would be expert testimony. FactSet's counsel indicated it had designated an expert to rebut Ashbury's damages case. Counsel for Ashbury stated it intended to designate a rebuttal expert to FactSet's expert. The trial court filed its order denying the summary judgement motion that same day.
All statutory references are to the Code of Civil Procedure unless otherwise specified.
On June 25, 2018, Ashbury deposed Knox, who testified that she had not seen any calculation or analysis concerning Ashbury's damages model to that point and was therefore unable to form a rebuttal opinion. Knox identified 14 customers who had contracted to use the Matrix tool along with Revere's Relationship data or had tested out the Matrix before contracting only for Relationship data. She estimated that Ashbury could be owed $50,147 in unpaid commissions based on FactSet cutting short the terms of these customer contracts post-acquisition. Respondents deposed Ashbury's rebuttal damages expert on June 28. Respondents learned from the expert that Ashbury would rely on Mingardi to testify regarding Ashbury's damages at trial. At the time of the deposition, approximately two weeks before trial, Ashbury's rebuttal damages expert was unable to disclose the amount of damages Ashbury would be seeking at trial.
On July 6, 2018, the trial court addressed motions in limine, including Ashbury's request to exclude rebuttal testimony by Knox because she had not addressed rebuttal issues at her deposition. The trial court asked how Ashbury could take this position "when [respondents] don't even know your damages theory yet, they say," to which counsel for Ashbury replied: "Your Honor, they do know our damages theory. They deposed our lay witness [Mingardi], who is going to be talking about damages. They asked him what the damages theory was. He explained the methodology and the calculation behind the damages theory." When pressed by the court as to whether Ashbury intended to present a "new way" for calculating damages at trial, Ashbury's counsel replied in the negative and reiterated that respondents had been told at Mingardi's deposition the way he was planning to calculate damages.
Counsel for FactSet expressed that it was "insane that we're in a case where they're going to be asking for millions and millions of dollars and we still have no idea what that is." She twice requested that the court order Ashbury to provide their damages model immediately "so that we know what we're going to walk into." The trial court declined, reasoning: "Then [Ashbury's] going to want [Knox's] analysis and then they're going to want a deposition, and this wasn't asked for in the papers. I'm inclined to leave it the way it is." The court denied Ashbury's motion in limine seeking to limit Knox's rebuttal testimony, noting that Ashbury "apparently plans to reveal its full damages theory for the first time at trial through lay witnesses, and did not designate an affirmative damages expert of its own." D. Damages Evidence at Trial
Jury trial commenced on July 16, 2018. In opening statements, Ashbury's counsel discussed its damages case, indicating it was seeking damages under contract and fraud theories and describing the damages model for both claims. With respect to contract damages, Ashbury's counsel explained that "you have to look at the total amount of sales of Relationship data, and you have to take 20 percent of that, and then you have to subtract out anything that Ashbury has been paid." Counsel asserted that there were $6.4 million in past contract damages and $42.8 million in future losses, for a total of approximately $49 million in contract damages. With respect to fraud damages, Ashbury's counsel suggested that the value of Ashbury's technology to respondents was $244 million, but "we are not asking for that. Ashbury is only asking for 20 percent because that is what it was due under the parties' agreement," a damages claim of $48.82 million. There was no mention of an alternative damages model based on a subset of Revere Relationships database customers who had been exposed to Ashbury's Matrix product by Revere.
On July 23, 2018, FactSet filed a midtrial brief seeking to exclude as speculative any testimony by Mingardi with respect to future contract damages. FactSet argued that Mingardi, as a lay witness, was unqualified to offer testimony in support of such damages and claimed that " 'pick[ing] a number and estimat[ing] an amount how much a continuing revenue stream is going to be worth for eternity' " was not reasonably certain under California law. The court denied the request without prejudice, stating it needed to see the damages theory in evidence "in order to understand what it is."
Mingardi's direct examination concerning Ashbury's damages began on July 24. Mingardi explained that, if Ashbury's view of its agreement with Revere was correct, Ashbury was entitled to damages of approximately $49 million based on a royalty of 20 percent on all past and future sales from September 2012—i.e., after the termination of the 2010 agreement. The next day, Mingardi began to explain a demonstrative he had prepared—Exhibit 119-B—which took all of FactSet's current customers and purported to identify a subset of those customers that had either been acquired from Revere or had been in Revere's "pipeline" at the time of the acquisition and were therefore directly related to Ashbury's work product with Revere. Mingardi testified: "So if I didn't know a customer or I couldn't find a customer in the pipeline report or I couldn't find an interaction e-mail where our . . . technology was either disclosed to the client or the methods were given to them to replicate our technology, I couldn't find any of those items, then I didn't mark them." The exhibit also contained notes listing the evidence that supported the conclusion that the customer had been exposed to Ashbury's technology. FactSet's counsel objected to the materials on hearsay grounds. The court overruled the objection after Ashbury's attorney represented: "Your Honor, these are business records that were produced in this case that witnesses have said are accurate business records. They are already admitted into evidence."
The court then held a sidebar with counsel that was not recorded. Thereafter, the court repeatedly sustained objections to Mingardi's attempts to discuss the demonstrative to the extent he referenced a "new calculation" or a damages metric that was developed "[a]fter the deposition." When asked by FactSet's counsel if he had talked about this calculation at his deposition, Mingardi stated that he could not because he did not have "any information." Finally, in attempting to summarize a number on the demonstrative that—in contrast to the 20 percent royalty calculation—"is just the customers that [Mingardi] could specifically map to [Ashbury] technology and Revere," the court again sustained the objection because it was "something different." Ashbury's counsel then ended Mingardi's direct examination.
On the next trial date, July 30, 2018, Ashbury filed a trial brief contesting the trial court's decision to exclude evidence regarding its alternate theory of damages based on the subset of customers exposed to Ashbury's technology. Ashbury argued that it would be fundamentally unfair to preclude Mingardi from presenting this alternate theory because it was based on documents designated "attorneys' eyes only" that were withheld by respondents until shortly before trial, as well as witness testimony at trial. Ashbury contended that it would not prejudice respondents because the resulting damages figure was lower than the 20 percent royalty calculation, Mingardi's deposition had referenced alternate damage theories based on value, respondents had "opened the door" to the testimony, and respondents never moved to compel further responses from Mingardi.
The trial court explained its reasons for excluding reference to Ashbury's alternate damages theory at trial. The court observed: "I can only surmise . . . that both sides in this case engaged in a tactical game of chicken regarding Mr. Mingardi's damages testimony. That was not appropriate by either side [¶] . . . [¶] . . . This is something that, if it was a dispute, should have been raised a long, long time ago. It shouldn't be a train wreck at trial. It is just not the way that reasonable attorneys operate." Noting that it had reviewed Mingardi's deposition, the trial court explained to Ashbury: "You didn't give them the full-blown damages theory until Mr. Mingardi testified at trial. That's just as clear as day." The court continued: "[Y]ou created a crisis between the sides. I think what I've done is the fair thing to do. He was designated as the person most knowledgeable. He wasn't ready to testify on this, so we would typically exclude that and that's why I did it." Finally, in response to Ashbury's complaint that both sides were responsible but "we're the ones who are getting our testimony excluded," the trial court stated: "You're the ones who wanted him to be able to testify. You obviously knew that this was a problem, right? Because you hadn't—you designated him the person most knowledgeable, yet you didn't have him ready to testify about it in his deposition. You say it was because of this attorneys' eyes only thing. I say you knew about that for—well, a year almost, wasn't it?"
Mingardi's testimony continued through cross-examination and redirect examination. During redirect, Ashbury's attorney asked Mingardi to explain why he delayed doing damage calculations until right before trial, and Mingardi cited delays in receiving discovery materials and financial documents designated attorney eyes only. After FactSet's counsel moved to strike, the trial court addressed the jury, stating: "There's a dispute between the parties about documents that were designated for attorneys' eyes only a long, long time ago. Parties never got together and brought the dispute to me for resolution. . . . This should have been raised much, much earlier, and neither side raised it, so that's why we're not going to be having any more testimony in this particular area. That's a jury instruction."
Respondents' expert witness Julie Knox then took the stand and was qualified as a damages expert by the court. Knox testified why in her view Mingardi's $49.3 million contract damages number was significantly inflated. She opined that Ashbury was not due any more commissions from September 2012 through the time the Matrix was discontinued in October 2013, even under Ashbury's understanding of its interim arrangement with Revere and FactSet. Knox also explained the basis for her calculation of $50,147 in potential commissions owed to Ashbury for the 14 customers who had been exposed to the Matrix and whose contracts had been cut short by FactSet in October 2013. Knox considered the list of customers that Ashbury's other principal, McGill, had testified were also exposed to Ashbury's products and opined that those customers were either already included in her $50,147 calculation or would not have been subject to the September 2012 payment arrangement. She explained that the 2012 arrangement included contract renewals only if the customer had been exposed to the Matrix around the time of the original sale of Relationships data, a smaller pool of qualifying customers than that utilized by Mingardi in calculating damages.
Mingardi, testifying in rebuttal, disagreed with several aspects of Knox's analysis. He stated: "I think that the way we included customers was correct. I spent a lot of time looking at the revenues from 2013 to 2017, and when I looked at it, 76 percent of those revenues were directly derived from our technology." After the close of evidence, FactSet moved for a directed verdict on Ashbury's quantum meruit claim, arguing, among other things, that Ashbury had failed to prove the reasonable value of any goods and services it provided to FactSet. FactSet noted that Ashbury was unable to put up its number because that was "one of the things [the court] said they are not allowed to talk about." The trial court responded: "You don't think you can get reasonable value of goods and services for this case out of all the evidence that is in? That one baffles me." Ashbury's attorney concurred, stating "there is plenty of evidence in the record from which a jury can find the reasonable value of services." The court denied FactSet's motion.
During closing arguments, Ashbury's counsel asked for the jury to award $49.3 million in contract damages, "the number that we started with in the opening." Counsel then discussed the evidence supporting Ashbury's fraud claim and asserted: "Fraud is worse than a breach of contract. And you have seen the value that [McGill] and [Mingardi] created for the defendants. And as the jury, you are free to figure out what that value is. And you can put whatever you want in that form when you subtract out what Ashbury has gotten, which is pretty much nothing." As for the quantum meruit claim, Ashbury's counsel argued: "[I]t means that if you unjustly enrich somebody or somebody gets unjust enrichment [from] you, they have to pay the compensation that you are due. [¶] And in this case, if there is, you know, not any contractual relationship and defendants are still deriving a benefit from it and they have derived a benefit from it, Ashbury needs to be compensated because it would be unjust." In contrast, FactSet's attorney argued that, if FactSet owed Ashbury anything, it was the $50,147 testified to by Knox. E. Jury Verdict and Post-Verdict Matters
During deliberations, the jury sent the court the following question: "Clarification: If we cannot guess at a damages number, are we only to use the numbers provided during the case? Ex. $0, $50,147, 49.3 million or can we compute a number that seems reasonable and backed up with evidence?" The trial court responded: "Yes, you may compute a number that seems reasonable and is backed up with evidence. Also, see the third paragraph of CACI 350."
The third paragraph of CACI No. 350, as provided to the jury in this case, stated: "Ashbury must also prove the amount of its damages according to the following instructions. It does not have to prove the exact amount of damages. You must not speculate or guess in awarding damages."
On August 3, 2018, the jury returned a defense verdict on Ashbury's claims of breach of contract, fraud, and breach of confidence. The jury also rejected Ashbury's quantum meruit claim as to Revere and Engmann. However, the jury found in favor of Ashbury on its quantum meruit claim against FactSet. The jury awarded damages of $50,147, the amount suggested by Knox.
The court next addressed Ashbury's promissory estoppel claim against Revere and FactSet. In its briefing on the issue, Ashbury argued that there was "voluminous" evidence presented at trial that Revere had promised Ashbury a 20 percent royalty on Relationship sales data in perpetuity in return for the exclusive use of Ashbury's intellectual property. Ashbury suggested that the court should rectify the harm caused to it by the failure of Revere and FactSet to honor this promise by awarding the amount it requested in contractual damages—$49.3 million. Ashbury further asserted that it had "also presented evidence for the losses incurred for a second set of customers that were directly exposed to Ashbury's technology." Ashbury calculated that the total past and future losses with respect to this subset of customers was $23,097,436.
The court rejected Ashbury's promissory estoppel claim for three reasons. First, the complaint's claim of promissory estoppel was premised on enforcement of the 2012 contract, which the jury determined did not exist. Second, promissory estoppel claims require "a promise clear and unambiguous in its terms," and the court concluded the purported promises in this case " 'were the antithesis of clear and unambiguous.' " Finally, the trial court noted that promissory estoppel is " 'binding if injustice can be avoided only by enforcement of the promise,' " and stated: "I see no injustice in having given the parties a full and fair opportunity to present their cases to a jury for its verdicts on all issues pled."
The court filed its judgment on November 7, 2018, confirming that Ashbury had prevailed on its quantum meruit claim against FactSet, for which it was entitled to $50,147, plus interest from the date of judgment. In ruling on Ashbury's motion to tax FactSet's costs—which Ashbury was required to pay pursuant to section 998—the trial court refused Ashbury's request to strike the fees FactSet incurred for Knox, its damages expert, stating: "Ashbury's argument that it 'never designated an expert to rebut' is misleading, as Ashbury retained an expert but then had one of its principals, Paul Mingardi, testify at trial as a quasi-expert. Indeed, the hide-the-ball approach Ashbury adopted to damages contributed to Knox's costs." This appeal followed.
At the hearing on the costs motion, the trial court addressed Ashbury's argument that Knox's fees were excessive, stating: "Part of the problem was they didn't know what was necessary because your damage theory was a moving target." The court rejected the argument that Ashbury's damages theory was laid out in Mingardi's deposition, stating: "I read the deposition. It wasn't at all clear to me."
DISCUSSION
On appeal, Ashbury challenges the trial court's decision to prohibit Mingardi from testifying at trial about an alternative damages theory based on a subset of customers that had purportedly been exposed to Ashbury's technology. Ashbury argues that this preclusion order violated the Civil Discovery Act and therefore the trial court lacked the power to impose it. Ashbury also asserts that entering the preclusion order without any advance notice violated its due process rights. Finally, Ashbury contends that, even if the trial court was empowered to exclude the evidence at issue, doing so constituted an abuse of discretion on these facts.
"[A]n appellate court reviews any ruling by a trial court as to the admissibility of evidence for abuse of discretion." (People v. Alvarez (1996) 14 Cal.4th 155, 203; see New Albertson's, Inc. v. Superior Court (2008) 168 Cal.App.4th 1403, 1422 (New Albertson's) ["We review an order imposing discovery sanctions under the abuse of discretion standard."].) "A ruling that constitutes an abuse of discretion has been described as one that is 'so irrational or arbitrary that no reasonable person could agree with it,' " but the trial court must exercise its discretion "within the confines of the applicable legal principles." (Sargon Enterprises, Inc. v. University of Southern California (2012) 55 Cal.4th 747, 773 (Sargon).) To the extent the exclusion of evidence " ' "rests on a matter of statutory interpretation, we apply de novo review." ' " (Cottini v. Enloe Medical Center (2014) 226 Cal.App.4th 401, 422 (Cottini).) A. Court's Authority to Preclude Testimony Concerning a Previously Undisclosed Alternative Damages Theory
We begin with Ashbury's contention that the trial court lacked the authority under the Civil Discovery Act to exclude Mingardi's testimony concerning Ashbury's alternate damages theory. According to Ashbury, the trial court's order was an evidence sanction under the Civil Discovery Act. (See § 2023.030, subd. (c) [stating that a "court may impose an evidence sanction by an order prohibiting any party engaging in the misuse of the discovery process from introducing designated matters in evidence"].) Citing New Albertson's, supra, 168 Cal.App.4th at p. 1422, Ashbury argues that a trial court's power to impose sanctions for discovery misconduct is limited by the statutes governing the discovery method at issue. (See § 2023.030 [providing for sanctions "[t]o the extent authorized by the chapter governing any particular discovery method"].)
Because the trial court's rationale for excluding the testimony was Mingardi's failure to disclose the alternative damages model at his person-most-knowledgeable deposition, Ashbury contends that the statutory provision concerning deposition misconduct should control. (See § 2025.480, subd. (k) [authorizing imposition of "an issue sanction, an evidence sanction, or a terminating sanction," but only "[i]f a deponent fails to obey an order" entered by the court in response to a motion to compel]; see also id., subds. (a)-(c), (h)-(i).) Since Ashbury had not violated any discovery orders, it argues that the trial court's evidence preclusion exceeded its power under the Civil Discovery Act and thus amounted to legal error. We are not persuaded.
As FactSet points out, there is a considerable body of law which recognizes a trial court's inherent authority to preclude evidence in the service of a fair trial process: " ' "Our Supreme Court has recognized that California courts have inherent powers, independent of statute, derived from two distinct sources: the courts' 'equitable power derived from the historic power of equity courts' and 'supervisory or administrative powers which all courts possess to enable them to carry out their duties.' " [Citation.] "The court's inherent power to curb abuses and promote fair process extends to the preclusion of evidence. Even without such abuses the trial court enjoys 'broad authority of the judge over the admission and exclusion of evidence.' . . . [T]rial courts regularly exercise their 'basic power to [e]nsure that all parties receive a fair trial' by precluding evidence." ' " (Cottini, supra, 226 Cal.App.4th at p. 425, quoting Continental Insurance Co. v. Superior Court (1995) 32 Cal.App.4th 94, 107-108.)
In Cottini, supra, 226 Cal.App.4th 401, the appellate court upheld the trial court's pretrial exclusion of expert witness testimony because the proposed expert had not been timely disclosed. (Id. at pp. 405-406, 425-426.) The court noted that section 2034.300 mandates exclusion of expert opinion testimony offered by a party who " 'unreasonably' " failed to comply with certain expert witness discovery requirements " 'on objection of any party who has made a complete and timely compliance' " with the expert disclosure statute. (Cottini, at pp. 422-423, quoting § 2034.300, italics omitted.) Because the objecting party had also failed to comply with the expert disclosure statute in a timely fashion, mandatory exclusion was not available under section 2034.300. (Id. at p. 426.) The Cottini court, however, read "nothing in section 2034.300 to limit the inherent power of the trial court to exclude from evidence the testimony of Cottini's expert witnesses as a remedy for his unreasonable failure to comply with the expert witness exchange requirements prior to the cutoff date for expert discovery." (Cottini, at p. 425.) On the contrary, "[t]he statute does not state . . . that where the objecting party's compliance with section 2034.260 is untimely, the trial court is powerless to exclude such testimony." (Cottini, at p. 425.) The appellate court observed that allowing Cottini's experts to testify at trial without any ability for opposing counsel to depose these witnesses "would be the essence of unfair surprise" and concluded that the trial court's preclusion order was a reasonable exercise of its inherent authority. (Id. at p. 426.)
The objecting party, Enloe Medical Center, attempted to negotiate a mutual exchange of expert witness information after both sides failed to disclose their experts. (Cottini, supra, 226 Cal.App.4th at p. 426.) When that failed, Enloe unilaterally disclosed its expert witness before the close of expert witness discovery. Cottini's disclosure was made after the close of discovery, effectively preventing Enloe from deposing Cottini's experts before trial. (Ibid.)
Other courts have similarly relied on a trial court's inherent power to exclude evidence to ensure a fair trial. (See Reales Investment, LLC v. Johnson (2020) 55 Cal.App.5th 463, 469-473 (Reales) [finding no abuse of discretion in a trial court's order precluding Reales from presenting any evidence or testimony at trial after continued discovery misconduct based on the "court's 'inherent power to curb abuses and promote fair process' "]; Stephen Slesinger, Inc. v. Walt Disney Co. (2007) 155 Cal.App.4th 736, 763 ["the power to impose sanctions under the Civil Discovery Act . . . supplements, but does not supplant, a court's inherent power to deal with litigation abuse"]; Peat, Marwick, Mitchell & Co. v. Superior Court (1988) 200 Cal.App.3d 272, 285, 287-288 (Peat, Marwick) [noting a trial court's "order precluding evidence [was] not a sanction for the abuse of discovery procedures, but [was] a remedy for abuse of the litigation process" and concluding the order was authorized under "[t]he court's inherent power to curb abuses and promote fair process" which has been "flexibly applied in response to the many vagaries of the litigation process"]; Castaline v. City of Los Angeles (1975) 47 Cal.App.3d 580, 592 [exclusion of doctor's testimony based on examination conducted three days before trial was within the trial court's "basic power to insure that all parties receive a fair trial"].)
In Pate v. Channel Lumber Co. (1997) 51 Cal.App.4th 1447 (Pate), for example, the defendant repeatedly assured the plaintiffs it had produced all relevant documents in response to their discovery requests. (Id at p. 1452.) The trial court later barred the defendant from introducing undisclosed documents midtrial, finding that the defendant had deliberately attempted to thwart discovery to gain a tactical advantage at trial, and given the late date in which this issue arose, the only appropriate sanction was to preclude use of this evidence. (Id. at pp. 1453-1454.) In affirming the trial court's order, the appellate court rejected defendant's contention that the trial court was without authority to impose an evidence sanction because the plaintiffs had not filed a motion to compel: "The claim is specious. Defendant has cited no case which holds a party who has received repeated assurances that all relevant documents have been produced must nonetheless file a motion to compel further responses in order to establish a right to sanctions should it turn out the assurances were false." (Id. at p. 1456.)
Indeed, permitting the admission of evidence that had not been produced in discovery may be grounds for reversal. (See, e.g., Crumpton v. Dickstein (1978) 82 Cal.App.3d 166, 172-173 (Crumpton) [reversing judgment where defense doctors not identified until midtrial were allowed to testify, observing that "[i]n denying the at-trial motion to exclude the testimony of these witnesses simply because the omission of their names was not willful, the trial court effectively thwarted a legitimate purpose of the discovery statute by impeding plaintiff's preparation for trial"]; Campain v. Safeway Stores, Inc. (1972) 29 Cal.App.3d 362, 365-366 [defendant entitled to new trial on damages after plaintiff claimed in discovery she would not seek damages for lost or future earnings but was permitted to introduce evidence of earnings at trial].)
As the foregoing authorities make clear, the trial court's inherent authority to curb abuses and administer a fair judicial process exists independent of statutes authorizing sanctions for discovery violations. Trial courts also enjoy broad discretion over the admission and exclusion of evidence at trial. (Peat, Marwick, supra, 200 Cal.App.3d at pp. 287-288.) This authority permits the trial court to order the exclusion of evidence or testimony to prevent surprise or an unfair advantage at trial.
Here, Mingardi was designated as Ashbury's person most knowledgeable with respect to damages and testified at his deposition to a damages theory in which Ashbury was entitled to 20 percent royalties from all customer sales after the termination of the 2010 agreement. Mingardi did not disclose an alternative damages model based on a subset of FactSet customers who were exposed to Ashbury's technology. Contrary to Ashbury's contention at oral argument that this customer subset was not a "new" theory, the deposition transcripts make clear that the damages model described by Mingardi was predicated on a 20 percent royalty payment for "all new contracts," "regardless of whether the Matrix [was] included or not." No testimony discloses Ashbury's intent to calculate a separate measure of damages from a subset of customers exposed to Ashbury's products.
One week before trial, FactSet's counsel complained at a motions in limine hearing that it still did not know what Ashbury's damages theory was based upon or how many millions of dollars Ashbury was seeking, describing it as an "Alice in Wonderland" situation. FactSet requested an order that Ashbury immediately disclose their damages model. Ashbury's counsel assured the trial court that plaintiff's damages methodology had been disclosed in full at Mingardi's deposition. When pressed by the court as to whether Ashbury intended to present a "new way" for calculating damages at trial, Ashbury's stated: "No, your Honor . . . They [FactSet] asked at the deposition the way Mr. Mingardi is planning to calculate the damages in this case, and they got that testimony." It was only in the middle of Ashbury's case-in-chief that Ashbury sought to present evidence of an alternative theory through Mingardi's testimony and demonstrative exhibit. Given Ashbury's failure to disclose this evidence during discovery and its assurances to the trial court that no further damages theory would be forthcoming, the court acted well within its authority to determine whether such evidence should be excluded to ensure a fair and orderly trial.
Furthermore, we question Ashbury's premise that evidence preclusion should be guided by the discovery statutes related to deposition misconduct. Section 2025.480 provides, in relevant part, that "[i]f a deponent fails to answer any question or to produce any document . . . that is specified in the deposition notice or a deposition subpoena, the party seeking discovery may move the court for an order compelling that answer or production." (§ 2025.480, subd. (a).) Any such motion must be filed "no later than 60 days after the completion of the record of the deposition." (Id., subd. (b).) "If the court determines that the answer or production sought is subject to discovery, it shall order that the answer be given or the production be made on the resumption of the deposition." (Id., subd. (i).) Thereafter, "[i]f a deponent fails to obey an order entered under this section . . . the court may make those orders that are just against the disobedient party, or against the party with whom the disobedient deponent is affiliated, including the imposition of an issue sanction, an evidence sanction, or a terminating sanction under Chapter 7 (commencing with Section 2023.010)." (Id., subd. (k).)
Ashbury claims that the reason Mingardi could not provide any numbers during his deposition was because the documents identifying FactSet's customers had been designated attorneys' eyes only. Ashbury faults FactSet for not moving to compel further responses to Mingardi's deposition, even stating that the trial court erred by sanctioning Ashbury for respondents' "failure to timely raise their dissatisfaction with Mr. Mingardi's answers at his deposition."
Ashbury's argument makes no sense. Ashbury contends that Mingardi testified at his deposition "to the best of his ability about Ashbury's damages" but was hampered in providing details at that point by lack of access to relevant documents. Thus, there is no indication that Mingardi "[f]ailed to answer any question or to produce any document" (§ 2025.480, subd. (a)) or that FactSet would have any basis to file a motion to compel regarding a damages model it had no knowledge was even contemplated. (See Pate, supra, 51 Cal.App.4th at p. 1456 [finding similar claim to be "specious"].) As the trial court points out, Ashbury was aware for almost a year that it did not have access to documents designated "attorneys' eyes only" by FactSet, and yet did not move to compel for broader access to these documents and chose to designate Mingardi as its person most knowledgeable despite this problem. Ashbury's failure to prepare its own witness adequately as to its damages theory was a problem of its own making. Ashbury then attempted to gain a tactical advantage at trial by presenting evidence of an undisclosed alternative damages model—something it had assured the trial court it would not do. On these facts, we conclude that the trial court's preclusion order was not a "sanction for the abuse of discovery procedures" but was rather "a remedy for abuse of the litigation process." (Peat, Marwick, supra, 200 Cal.App.3d at pp. 285, 287-288.)
Even if we accept Ashbury's contention that we should be guided by New Albertson's, supra, 168 Cal.App.4th 1403, and the general requirement that "there must be a failure to obey an order compelling discovery before the court may impose a nonmonetary sanction for misuse of the discovery process" (id. at p. 1423), New Albertson's recognized an exception to this rule. After surveying relevant authorities, the New Albertson's court found that "if it is sufficiently egregious, misconduct committed in connection with the failure to produce evidence in discovery may justify the imposition of nonmonetary sanctions even absent a prior order compelling discovery, or its equivalent. Furthermore, a prior order may not be necessary where it is reasonably clear that obtaining such an order would be futile." (New Albertson's, at p. 1426.)
We have no difficulty concluding that Ashbury's conduct was sufficiently egregious to obviate the need for a prior order to compel. As discussed above, the trial court in Pate, supra, 51 Cal.App.4th 1447, found that the defendant "had 'played fast' with the discovery rules," and "given the late date at which the misuse of discovery procedures surfaced, the trial court concluded no other sanction would be appropriate except to preclude defendant from introducing any documents . . . that had not been discovered by plaintiffs prior to trial." (Id. at p. 1453.) The appellate court agreed, finding that a prior order compelling discovery was not necessary to justify the evidence sanction. (Id. at pp. 1455-1456; see Cottini, supra, 226 Cal.App.4th at p. 428 [refusal to disclose expert witness information before the close of discovery was "a sufficiently egregious violation of the expert discovery rules" and obviated the need for a prior violation of a motion to compel]; cf. Bonds v. Roy (1999) 20 Cal.4th 140, 149 [trial court acted well within its discretion under the discovery statutes to reject a defense request late in the trial to expand the scope of expert testimony from that previously disclosed, the defense offered "no excuse" for its failure to address the issue earlier, and the late request offered "no practical opportunity" for the witness to be deposed or for the plaintiff's own experts to rebut the expert testimony].)
The parallels to the instant appeal are self-evident. Although Ashbury argues it was precluded from reviewing necessary documents at an earlier point in the litigation given their designation as attorneys' eyes only, it offered no excuse for not raising that issue with the court before and, in fact, assured the court and respondents on the eve of trial that any damages testimony would be limited to the methodology disclosed by Mingardi in his deposition. Ashbury then sought to introduce testimony with respect to the alternate damages model at trial, offering no practical opportunity for respondents to effectively rebut it. The trial court found that Ashbury had adopted a "hide-the-ball approach . . . to damages." Under these circumstances, a prior order compelling discovery was not necessary to justify the evidence sanction.
In sum, Ashbury cannot establish that the trial court lacked the authority to exclude Mingardi's testimony concerning Ashbury's alternate damages model. B. Due Process Claim
Given our conclusion that the trial court was empowered to issue the preclusion order on these facts, we need not consider FactSet's additional argument that Mingardi should have been considered an expert subject to expert designation rules and his damages opinion excluded on that basis.
Equally unconvincing is Ashbury's assertion that the trial court violated Ashbury's due process rights by issuing the preclusion order with "no notice." Ashbury points out that section 2023.030 authorizes a court to impose discovery sanctions only " 'after notice to any affected party, person, or attorney, and after opportunity for hearing.' " It cites Parker v. Wolters Kluwer United States, Inc. (2007) 149 Cal.App.4th 285, for the proposition that "when a discovery statute requires a notice and opportunity for hearing before the imposition of sanctions the statute requires a written notice served in accordance with the timeframes set out in section 1005." (Id. at p. 296; see § 1005, subd. (b) [generally requiring that written notice be provided 16 court days in advance on any hearing].) Ashbury argues that the preclusion order was entered without adequate notice. We reject this statute-based notice claim for several reasons.
First, Ashbury's notice argument makes clear why the trial court's midtrial preclusion order is properly understood as "a remedy for abuse of the litigation process" rather than as "a sanction for the abuse of discovery procedures." (Peat, Marwick, supra, 200 Cal.App.3d at pp. 285, 287-288.) All of Ashbury's case citations in support of its due process claim relate to disputes involving pretrial discovery sanctions and are therefore inapposite. Next, Ashbury's own authority emphasizes that when a party appears in the court below and contests a matter on its merits—as Ashbury did in this case—that party " 'cannot object on appeal or by seeking extraordinary relief in the appellate court that [it] had no notice of the motion or that the notice was insufficient or defective.' " (Alliance Bank v. Murray (1984) 161 Cal.App.3d 1, 7; see ibid. ["This rule applies even when no notice was given at all."].) Moreover, section 1005, which prescribes the 16-day notice period that Ashbury claims is relevant here, allows "[t]he court, or a judge thereof, [to] prescribe a shorter time." (§ 1005, subds. (b) & (c).) We see no statutory error in the notice provided in this case.
For similar reasons, no due process violation appears on this record. Undoubtedly, "[t]he key elements of procedural due process are notice and an opportunity to be heard." (Garamendi v. Golden Eagle Ins. Co. (2004) 116 Cal.App.4th 694, 706; see O'Brien v. Cseh (1983) 148 Cal.App.3d 957, 961 ["Adequate notice prior to imposition of sanctions is mandated not only by statute, but also by the due process clauses of both the state and federal Constitutions. (Cal. Const., art. I, § 7; U.S. Const., 14th Amend.)"], superseded by statute on other grounds as stated in Calhoun v. Vallejo City Unified School Dist. (1993) 20 Cal.App.4th 39, 44.) Given Ashbury's assurances to the trial court on July 6 that it would not seek to introduce a "new" damages theory at trial, it should have come as no surprise that Ashbury's alternative damages testimony would be precluded. "We cannot accept the notion that due process of law entitles a litigant to present certain evidence after it has compromised its opponent's ability to counter that evidence with the sort of litigation abuse found in this case." (Peat, Marwick, supra, 200 Cal.App.3d at p. 290.)
Furthermore, Ashbury was given an opportunity to contest the ruling as several points in the proceedings, including through written briefing. When the trial court initially issued its preclusion order on July 25, Ashbury presumably had the opportunity to oppose it, although the sidebar conference was not recorded. On the next court day, which was six calendar days later (July 31st), Ashbury filed an extensive brief contesting the preclusion order. After indicating it had read and considered the brief, the court explained its reasons for entering the preclusion order, listened to Ashbury's oral argument, and then declined to change its ruling. We conclude that Ashbury received the process to which it was due. C. Abuse of Discretion Claim
Finally, Ashbury asserts that, even if the trial court had the authority to circumscribe Mingardi's damages testimony at trial, doing so was an abuse of discretion. As stated above, a court abuses its discretion when its order is " 'so irrational or arbitrary that no reasonable person could agree with it.' " (Sargon, supra, 55 Cal.4th at p. 773.) We see no such abuse on this record.
Ashbury claims, for example, that the preclusion order constituted an abuse of discretion because Mingardi did reference customers exposed to Ashbury's technology during his deposition. However, of the two deposition excerpts cited by Ashbury, one relates to its improper use claim, and Mingardi simply stated that he was personally aware of some customers who had seen Ashbury's technology. The other excerpt mentions prior customers in the context of Ashbury's contractual claim under the alleged 2012 agreement, a damages model that was fully presented by Mingardi at trial. Mere reference to customers exposed to Ashbury's technology is insufficient to give notice that Ashbury would seek damages based on a subset of customers exposed to Ashbury's products. The trial court reviewed Mingardi's deposition and repeatedly found it did not sufficiently disclose an alternate damages theory. Nothing we have been given convinces us that this finding was erroneous.
Ashbury also complains that it was an abuse of discretion to enforce the preclusion order even after questioning from FactSet "opened the door" to Mingardi testifying about his efforts to identify FactSet customers who were exposed to Ashbury's technology. However, the trial court dealt with this issue by instructing the jury that the parties failed to bring this matter to the court's attention in a timely manner and it would not be discussed further. Even with this limiting instruction, the trial court permitted Mingardi to testify on rebuttal that he "spent a lot of time looking at the revenues from 2013 to 2017" and concluded that "76 percent of those revenues were directly derived from [Ashbury] technology." This and other evidence presented at trial could have been used by the jury to award damages somewhere between the $50,000 and $49 million numbers presented by the parties.
Indeed, Ashbury made that very point in opposing FactSet's motion for directed verdict on Ashbury's quantum meruit claim. Ashbury argued that "there is plenty of evidence in the record from which a jury can find the reasonable value of services" to support a quantum meruit award, an argument the court acknowledged in its denial of that motion. Ashbury reiterated the point in posttrial briefing on its promissory estoppel claim, arguing it had "presented evidence [at trial] for the losses for a second set of customers that were directly exposed to Ashbury's technology." Given Ashbury's position below about the adequacy of such evidence at trial, we find no abuse of discretion in the court's handling of this issue.
In the end, the crux of Ashbury's complaint seems to be that it was disproportionately sanctioned for pretrial maneuvers from both sides. However, the trial court directly addressed Ashbury's disproportionality argument, explaining that it was Ashbury's burden to provide admissible testimony with respect to damages, Ashbury who was aware that Mingardi had been unable to testify completely during his deposition, and Ashbury who knew about the attorneys' eyes only designation problem for over a year and did nothing to resolve it. As our high court has opined, the purpose of discovery is to " ' "make a trial less a game of blindman's buff and more a fair contest with the basic issues and facts disclosed to the fullest practicable extent." ' " (Crumpton, supra, 82 Cal.App.3d at p. 170, quoting Greyhound Corp. v. Superior Court (1961) 56 Cal.2d 355, 376.) On this record, we cannot say that the trial court acted unreasonably in finding Ashbury primarily to blame for the gamesmanship that occurred here.
DISPOSITION
The judgment is affirmed. Respondents are entitled to their costs on appeal.
/s/_________
Sanchez, J. WE CONCUR: /s/_________
Humes, P. J. /s/_________
Margulies, J.