Free Memorandum in Support of Motion - District Court of Connecticut - Connecticut

Case 3:00-cv-00705-CFD Document 129-10 Filed 02/03/2005 Page 1 of 3
LEXSEE 2005 USDISTLEXIS 81
DUPONT FLOORING SYSTEMS, INC., Plaintiff, -against- DISCOVERY ZONE,
INC., Defendant. I
98 Civ. 5101 (SHS)
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK
2005 US. Dist. LEXIS 81
January 4, 2005, Decided
January 5, 2005, Filed
PRIOR HISTORY: Dupont Flooring Sys. v. Discovery SIDNEY H. STEIN, U.S. District Judge.
Zone, Inc., 2004 U.S. Drst. LEXIS 13149 (S.D.N Y., July Dupont Flooring Systems, IHC. brought this action
I3, 2004) . . . . .
against Discovery Zone, Inc. to recover $ 1.1 million in
Dtspssmss. Plaintiffs mm to Sat. .t.t....t.....· damage Stem. ng fem an surged brash of a erm
cx cn rc Ort famed for the provision and installation of flooring materials. In
p p g ' its Amended Answer and Counter-Claims, Discovery
. . Zone asserted counter—claims seeking more than $ 20
LQXISNQXMR) Headnotcs million in damages for destruction of business and lost
profits. Dupont moved for summary judgment, which
COUNSEL: [*1] For Dupont rrssrrttg Systems, nts., thls C°““ g”P“’d On July li, 2005 d‘s“T‘“‘“g
. . _ Discovery Zones fifth counter-claim for destruction of
Plaintiff. Joseph G. Colao, Leader & Berkon, New York, . * .
_ business [ 2] and lost profits, as well as its second and
NY, Joseph I. Fontak, Leader & Berkon, L.L.P., New . . . .
York NY sixth counter-claims sounding in fraud. See Dupont
’ ' Flooring Sys. v. Discovery Zone, Inc., 2004 US. Dist.
For Discovery Zone, Inc., Defendant: George Toplitz, LEXIS I3]49’ 98 CW HOL 2004 WL ]'?74§29 (SUNK
G . . July 14, 2004). The facts relevant to this dispute are set
eorge N. Toplrtz, Max E. Greenberg, Trager, Toplrtz & f th. th C t, J 1 14 2004 O d nd O . .
HCHDSLNCW YOrk’NY· or in e our s uy , r era pinion.
The Court rejected Discovery Zone's fifth counter-
For Discovery Zone, Inc., Counter Claimant: George claim for destruction of business and lost profits because
Toplitz, George N. Toplitz, Max E. Greenberg, Trager, Discovery Zone presented no method of calculating the
Toplitz & Herbst, New York, NY. value of its business and failed to refute Dupont's
showing that a variety of causes contributed to Discovery
For Dupont Flooring Systems, Inc., Counter Defendant: Zone's eventual bankruptcy. Following the dismissal of
Joseph I. Fontak, Leader & Berkon, LLP, New York, its counter—claim for destruction of business and lost
NY. profits, Discovery Zone submitted the report of Michael
P. Murphy, a Managing Director at Mesirow Financial
JUDGES: Sidney H. Stein, U.S.D.J. Consulting, on damages. Plaintiff objected to that report
and moved to strike it on the grounds that "of the four
OPINIONBY: Sidney H. Stein categories of damages expressed in the Expert Report,
the first two are barred by the Court's July 13, 2004
OPINION: Opinion & Order on DFS‘ Motion for Summary
MEMORANDUM ORDER Judgment'.? and the second two are not based upon any
expert opinion at all. (Letter of Joseph I. Fontak to the

Case 3:OO—cv-00705-CFD Document 129-10 Filed O2/O3/2005 Page 2 of 3
Page 2
2005 U.S. Dist. LEXIS 81, *
Court, dated Nov. 10, 2004, at [*3] 1). Defendant Zone's advertising would be exactly evenly divisible
responded that the report should not be stricken because among each Discovery Zone retail location. Indeed, there
it is sufficiently reliable pursuant to Fed. R. Evid. 702 is no basis set forth for any division whatsoever on a
and that the report's probative value outweighs the store-by-store basis. Moreover, Murphy fails to support
danger of unfair prejudice resulting from it pursuant to his assumption that the entire pro rata share of
Fed. R. Evid. 403. (Letter of Kalvin Karrrian to the Corut, advertising cost for each retail location delayed in
dated Nov. 22, 2004). On December 13, 2004, the parties opening was lost without any benefit derived.
$El°£Zii“Z? Selig RHS;.f(Z1§1°§$“Zl°I}0Z;pil`°r.t1rI?E.EY {TM pgms gf ty eipée fcpm °Pi“l“g OH lost
dated Dec. 137 2004, at 1). pro rts an waste. a vertrsrng expenditures- are not
merely methodologrcally unsound, but are also irrelevant
Michael P. Murphy's report outlines four categories to the litigation, given that the Court has already stricken
of damages that Discovery Zone allegedly suffered: 1) defendant's counterclaim for lost profits and destruction
lost profits due to incomplete performance by Dupont, 2) of business damages. See Dupont Flooring Sys. v.
wasted advertising expenditures due to the inability of Discover Zone, Inc., 2004 U.S. Dist. LEXIS 13149, 98
retail locations to open, 3) materials that Discovery Zone Civ. 5101, 2004 WL 1574629 (S.D.Nl€ July 14, 2004);
paid for yet never received and 4) cost overruns. Fed. R. Evid. 401 ("'Relevant evidence' means [*6]
(Michael P. Murphy, The Estate of Discovery Zone, Inc. evidence having any tendency to make the existence of
Estimate of Damages, dated Nov. 4, 2004, at 3). The any fact that is of consequence to the detemrination of
report is stricken because its content is not sufficiently the action more probable or less probable than it would
reliable to be helpful to the jury, see Fed. R. Evid. 702, be without the evidence." (emphasis added)).
and because portions of the report are irrelevant, see Fed. Undclivcred Materials
R. Evid. 401, and unfairly prejudicial, see Fed. R. Evid.
403. Murphy's recounting of the $ 600,000 of undelivered
Lost Proms [*4] flooring materials does not derive from the rendering of
an expert oprnron; rather, he merely relays rnformatron
Murphy's tabulation of lost profit derives from a found in the Nicholson affidavit and in Dupont's
mere subtraction of 1998 EBITDA from 1997 EBITDA response to Discovery Zone's interrogatories. (Michael P.
for Discovery Zone locations that were not opened Murphy, The Estate of Discovery Zone, Inc. Estimate of
punctually, allegedly as a result of Dupont's breach of Damages, dated Nov. 4, 2004, at 10). This is not an
contract. Murphy fails to provide any support for the opinion that will be helpful to the jury, but rather the
assumption in the report that those locations‘ respective provision of a purported expert‘s imprimatur on facts
EBITDA numbers for 1998 would have matched those of regarding which he has no personal knowledge and
1997 absent Dupont's alleged breach. The unfounded which can be presented to the jury by those with
assumption underlying Murphy's calculations render knowledge ofthe facts. See Fed. R. Evid. 702.
them unhelpful and unnecessarily confusing to the jury. C O
See Fed. R. Evid. 702, 403; Kumho Tire Co. v. ost Vcmms
Carmichael, 526 US. 137, 119 S. Ct. 1167, 143 L. Ed. Murphy opines that Discovery Zone suffered from S
2d 238 (1999); Daubert v. Merrell Dow 2.6 million in damages resulting from cost overruns. Yet,
Pharmaceuticals, Inc., 509 U.S. 579, 113 S. Ct. 2786, he acknowledges, "We have not attempted to quantify
125 L. Ed. 2d 469 (1993). these damages in this report." (Michael P. Murphy, The
. . . Estate of Discovery Zone, Inc. Estimate of Damages,
Wasted Advcmsmg Expcndlmrcs dated Nov. 4, 2004, at 11). Given [*7] that Murphy has
Murphy has failed to offer an adequate basis for failed to present a reliable basis or methodology for
tabulating Dupont's liability for Discovery Zone's arriving at that number, the opinion will not be helpful to
purportedly wasted advertising. No reliable methodology the jury. See Fed. R. Evid. 702; Kumho Tire Co., 526
underlies Murphy's allocation factor, which results from U.S. 137, 143 L. Ed. 2d 238, 119 S. Ct. 1167; Daubert,
dividing total advertising expenditures pro rata among 509 US. 579, 125 L. Ed. 2d 469, 113 S. Ct. 2786.
the individual retail locations. (Michael P. Murphy, The C I .
Estate of Discovery Zone, Inc. Estimate of Damages, (mc uslon
[*5] dated Nov. 4, 2004, at 9); See Fed. R. Evid. 702, For the reasons set forth above, Michael P. Murphy's
403; Kumho Tire Co. v. Carmichael, 526 US. 137, 119 expert report is stricken in its entirety. The parties shall
S. Ct. 1167, 143 L. Ed. 2d. 238 (1999); Daubert v. appear for apretrial status conference on January 14 at2
Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S. p.m. to set dates for the filing of pretrial subnrissiorrs and
Ct. 2786, 125 L. Ed. 2d 469 (1993). Nothing in Murphy's for the trial.
report indicates that the costs or benefits of Discovery

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2005 U.S. Dist. LEXIS 81, *
Dated: New York, New York SO ORDERED:
January 4, 2005 Sidney H. Stein, U.S.D.J.