Free Reply Brief - District Court of Delaware - Delaware

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE ----------------------------------DEUTSCHER TENNIS BUND (GERMAN TENNIS FEDERATION), ROTHENBAUM SPORT GMBH, and QATAR TENNIS FEDERATION, X : : : : : Plaintiffs, : : against : : ATP TOUR, INC., ETIENNE DE VILLIERS, : CHARLES PASARELL, GRAHAM PEARCE, : JACCO ELTINGH, PERRY ROGERS, and IGGY : JOVANOVIC, : : : Defendants. ----------------------------------- X

C.A. No. 07-178-GMS

DEFENDANTS' REPLY BRIEF IN SUPPORT OF MOTION IN LIMINE NO. 3 TO EXCLUDE EXPERT OPINIONS PROFFERED BY GARY G. KLEINRICHERT ASHBY & GEDDES Philip Trainer, Jr. (I.D. #2788) Carolyn S. Hake (I.D. #3839) Tiffany Geyer Lydon (I.D. #3950) 500 Delaware Avenue, 8th Floor P.O. Box 1150 Wilmington, Delaware 19899 (302) 654-1888 [email protected] [email protected] [email protected] Attorneys for Defendants Of Counsel: Bradley I. Ruskin Colin A. Underwood Jennifer R. Scullion Evan S. Greene PROSKAUER ROSE LLP 1585 Broadway New York, NY 10036-8299 (212) 969-3000 Dated: June 2, 2008

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In opposing Defendants' motion to exclude the opinion testimony of Gary G. Kleinrichert, Plaintiffs failed to rebut Defendants' showing that Kleinrichert's damages calculations are totally disconnected from Plaintiffs' legal theories and the facts of the case. Indeed, Plaintiffs essentially acknowledge that Kleinrichert made no effort to explain how his proposed damages calculations relate to and arise out of any of the challenged conduct at issue in this action. (See Opp. Br., p. 2). Nevertheless, Plaintiffs attempt to justify this failure -- and sidestep the "fit" component of the Daubert inquiry, which requires expert testimony to be connected to the disputed facts at issue in the case -- by asserting that Kleinrichert "need not provide strict causational proofs" because Plaintiffs' alleged antitrust injury cannot be "disaggregated" to reflect damages caused by the various challenged acts. (Id., at p. 3). Plaintiffs miss the point. Kleinrichert's methodological breakdown lies not in his failure to provide a specific damages figure for each purportedly anticompetitive act at issue. Rather, Kleinrichert's critical error is that he provided just one calculation (i.e., an entire business devaluation) to serve as a measure of damages for each of Plaintiffs' legal claims -- even though he acknowledged that the "but for world" (used to assess damages) might need to change depending upon how the Court resolves each of the different claims. (D.I. 124, Ex. 3, p. 43). To illustrate just one example of the fallacy of this approach, Kleinrichert stated at his deposition that his "entire business devaluation" -- estimating damages at over $70 million -- could be used to assess damages for both Plaintiffs' antitrust and tortious interference with contract claims. (Ex. A, p. 44). However, as discussed in detail in Defendants' Motion In Limine No. 4, Plaintiffs are now asserting that their tortious interference damages should be measured at approximately $3.5 million -- separate from, and in addition to, Kleinrichert's damages calculations. Putting aside Defendants' challenge to the belated disclosure of the $3.5

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million in damages, Plaintiffs' assertion that their tortious interference claims should now be valued independently at $3.5 million demonstrates that Kleinrichert's calculations cannot be "fit" to measure damages for each of Plaintiffs' legal claims.1 Kleinrichert's failure to tie his damages calculations to Plaintiffs' different legal claims is fatal under Daubert, since his opinions provide no meaningful basis for the jury to render a damages award under Plaintiffs' various claims.2 The cases cited by Plaintiffs concerning the disaggregation of antitrust damages are inapposite.3 Furthermore, Plaintiffs do not dispute that Kleinrichert's damages assessment is based upon a "but for world" that assumes that the Hamburg tournament would remain a top-tier ATP tournament and enjoy the benefits of ATP rules that existed prior to the calendar/rule changes that ultimately evolved into the Brave New World plan. (Opp. Br., p. 5, fn. 7). As such, the damages analysis is directly at odds with Plaintiffs' allegations that these rules are

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In fact, Kleinrichert admitted that "the core" of his damages assessment is based on Plaintiffs' ability to show a wrongful misappropriation of their claimed rights (Ex. A, pp. 71-72), which, if anything, relates to Plaintiffs' conversion claim, for which no damages have even been alleged.

See D.I. 124, p. 2, fn. 3; see also Fashion Boutique, Inc. v. Fendi USA, Inc., 314 F.3d 48, 60 (2d Cir. 2002) (expert's generalized findings regarding the value of plaintiff's business was irrelevant to assessing damages in a product disparagement claim under New York law); Kozak v. Medtronic, Inc., 512 F. Supp. 2d 913, 915-17 (S.D. Tex. 2007) (Plaintiff's disclosure of expert witness opinion concerning damages for breach of contract claim was insufficient to permit expert to testify on future damages for misappropriation of trade secrets). Bonjorno v. Kaiser Aluminum & Chem. Corp., 752 F.2d 802, 813 (3d Cir. 1985), In re Lower Lake Erie Iron Ore, 998 F.2d 1144, 1176 (3d Cir. 1993), and Lepage's Inc. v. 3M, 324 F.3d 141, 166 (3d Cir. 2003) stand for the proposition that antitrust damages need not be "disaggregated" if based upon a series of anticompetitive actions, which, taken together, had the effect of destroying the plaintiffs' business interests. In contrast here, Kleinrichert improperly tied one damages calculation to all of Plaintiffs' legal claims (both antitrust and non-antitrust), even though he understood that the "but for" world could change depending upon the Court's findings with respect to the different claims. Moreover, Plaintiffs' antitrust allegations here are separable, in that the jury might well find that some of the alleged restraints are not in fact anticompetitive, in which case damages might need to be attributed to specific restraints. For example, if the jury were to find for Plaintiffs only on their claim for "agreeing" on the amount of prize money paid to players, Plaintiffs would need to show how that alleged restraint alone caused them damage.
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anticompetitive (D.I. 124, p. 3), and Plaintiffs' liability expert's opinion that Plaintiffs have been operating as part of a cartel for the past decade. (Ex. B, pp. 131-32). Kleinrichert's opinions are thus disconnected from Plaintiffs' legal theory, and cannot serve as a basis to award damages.4 Finally, even if Kleinrichert's damages assessment could properly be based upon estimating the value of the Hamburg tournament as a top-tier ATP tournament going forward, the valuation must be based upon a relevant benchmark.5 Plaintiffs do not dispute this point. (Opp. Br., p. 4). Nevertheless, Plaintiffs fail to address the fact that the ATP/Shanghai transaction -- i.e., Kleinrichert's benchmark for measuring the value of Plaintiffs' purportedly damaged rights -- involves payments by Shanghai for both a new ATP tournament membership and the right to operate the tournament as part of ATP's top-tier over a ten-year period. Shanghai's payment for its new ATP tournament membership is not a "like" transaction that can be used to benchmark the alleged harm to Plaintiffs' purported rights, as there can be no dispute that Plaintiffs still hold their ATP membership for the Hamburg tournament, and the related right to operate the tournament as part of the ATP Tour (pursuant to ATP's governing documents).6 In addition, putting aside the fact that the ATP/Shanghai transaction is not "like" Plaintiffs' allegedly harmed rights at issue, Kleinrichert admitted that it is "intuitive" that the value of operating a given tournament is affected by its site, season, and surface (D.I. 124, Ex. 3, p. 129) -- but he failed to consider any of these factors.

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See D.I. 124, p. 4, fn. 6.

D.I. 124, p. 5, fn. 8; cf. Elcock v. Kmart Corp., 233 F.3d 734, 754-56 (3d Cir. 2000) (trial court abused its discretion in admitting estimate of lost future earnings based on assumptions without foundation in trial record); McMillan v. Weeks Marine, Inc., 478 F. Supp.2d 651, 657-58 (D. Del. 2007) (expert's estimate of lost future earnings excluded as based on unrealistic assumptions). Kleinrichert's use of other tournament membership transactions to provide additional support for his damages assessment (see e.g., Opp. Br., p. 4, fn. 4, p. 5, fn. 8) is similarly misplaced.

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ASHBY & GEDDES /s/ Tiffany Geyer Lydon ________________________ Philip Trainer, Jr. (I.D. #2788) Carolyn S. Hake (I.D. #3839) Tiffany Geyer Lydon (I.D. #3950) 500 Delaware Avenue, 8th Floor P.O. Box 1150 Wilmington, Delaware 19899 (302) 654-1888 [email protected] [email protected] [email protected] Of Counsel: Bradley I. Ruskin Colin A. Underwood Jennifer R. Scullion Evan S. Greene PROSKAUER ROSE LLP 1585 Broadway New York, NY 10036-8299 (212) 969-3000 Dated: June 2, 2008 Attorneys for Defendants

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