When a party has a second chance for its experts to make a first impression on a court, it’s best to not plan on there being a third.

In Vitaform, Inc. v. Aeroflow, Inc.¸ 2023 NCBC 20A, the Business Court afforded plaintiff a redo on expert disclosures it found insufficient. The Court sanctioned plaintiff for designations that did little more than identify the witnesses, and which lacked the necessary support of reports and damages calculations. But it extended expert discovery anyway, “to permit Plaintiff to remedy its incomplete disclosures.” Id. ¶ 7.

The Court’s ultimate order striking a newly named expert’s report faulted it not for being incomplete, but instead for relating “solely to a non-issue” because it made a case for damages that flowed from claims the Court already had dismissed. Id.  ¶ 16.

The parties’ dispute centered around Vitaform’s efforts to expand sales of a special line of maternity clothes. A short relationship ensued, ostensibly by oral contract, under which Aeroflow purchased and sold Vitaform products. But when an Aeroflow subsidiary, defendant Motif Medical, LLC, began selling its own competitive line of maternity clothes, Vitaform cried foul. “The crux of this action,” Judge Bledsoe noted, “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.  ¶¶ 4-5.

By the time of the expert exclusion motion, the crux of plaintiff’s case was gone. The Court had earlier dismissed claims for misappropriation of trade secrets and for breach of the covenant of good faith and fair dealing. Key to that determination was the Court’s conclusion that Vitaform’s business plan wasn’t a trade secret and was actually available in the public domain. Id.  ¶ 6, 20.

Because state Rule of Evidence 702 incorporates its federal analog, Judge Bledsoe decided the exclusion motion under the Daubert standard. See Earnest v. Sanofi U.S. U.S. Servs., 26 F.4th 256, 268 (2022) (FRE 702 “effectively codified” Daubert analysis). The Court’s consideration of the report of Scott Barnes didn’t get past the first Daubert prong: “specialized knowledge that will assist the trier of fact to understand the evidence or determine a factual issue.” That couldn’t happen here, Judge Bledsoe noted, because the Barnes report was premised on damages “suffered as a result of” Aeroflow’s alleged trade secret misappropriation and good faith/fair dealing breach. That is, “upon claims that have already been dismissed.” Id. ¶¶ 11, 18.

Meeting Scheduling Commitments: In considering whether Vitaform should be permitted to introduce an alternate damages theory when trial was about 5 weeks away, Judge Bledsoe continued the Court’s emphasis on full and frank disclosures during discovery that protect parties against prejudice and avoid “trial by ambush.” The Court underscored that:

“Plaintiff had approximately eighteen months between the filing of its complaint and the close of discovery to provide to Defendants any other evidence of Plaintiff’s damages. Plaintiff failed to do so, and accordingly should not be permitted to introduce new theories or evidence of damages at the eleventh hour.”

The linchpin “is not whether Plaintiff could offer other evidence of its damages,” the Court held, “but whether Plaintiff did so when asked during discovery.” Id.  ¶¶ 31-32.

Takeaways

  • “As a general matter, an expert should be excluded when the expert’s damages calculations do not match the theories of liability presented.” Id. ¶ 20.
  • A new damages theory appearing five weeks before trial was, it seemed, a judicial layup on the “ambush” front. But the Court cited authority for excluding new theories as far as eight months before trial. ¶ 36.