Free Motion in Limine - District Court of Arizona - Arizona

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LAW OFFICES One Arizona Center, 400 E. Van Buren Phoenix, Arizona 85004-2202 (602) 382-6000

Dan W. Goldfine (#018788) Richard G. Erickson (#019066) SNELL & WILMER L.L.P. One Arizona Center 400 East Van Buren Street Phoenix, AZ 85004-2202 Telephone: (602) 382-6000 Facsimile: (602) 382-6070 [email protected] [email protected] Attorneys for Plaintiffs and Grant Woods, Esq. (#006106) GRANT WOODS, P.C. 1726 North Seventh Street Phoenix, Arizona 85006 Telephone: (602) 258-2599 Facsimile: (602) 258-5070 [email protected] Attorneys for Plaintiffs and Counterdefendants and Third Party Defendants

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA Meritage Homes Corporation, et al., Case No. CV-04-0384-PHX-ROS Plaintiffs, v. Ricky Lee Hancock, et al., Defendants. AND RELATED COUNTERCLAIMS AND THIRD PARTY CLAIMS The Court should strike Barbara Sorget-Stanton ("Sorget") as an expert because her report and testimony are unreliable and because the remaining defendants failed to disclose Sorget properly under the Federal Rules of Civil Procedure. Sorget selected her data in a biased manner that will in no way assist the fact finder on any issue of consequence. Further, Sorget was disclosed as an expert only by Defendant Rick (Assigned to the Honorable Roslyn O. Silver) PLAINTIFFS' MOTION IN LIMINE RE: BARBARA SORGETSTANTON

Hancock, who has since been dismissed by Stipulation and Order of the Court.

Case 2:04-cv-00384-ROS

Document 527

Filed 08/31/2007

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MEMORANDUM OF POINTS AND AUTHORITIES I. Background Sorget testified without equivocation that she was hired as an expert witness for Defendant Rick Hancock, not co-Defendant Greg Hancock, who has never listed Sorget as his witness on any disclosure statement. See June 27, 2007 Deposition of Barbara SorgetStanton ("Sorget Depo."), Exhibit 1 hereto at 13:18-23, 14:9-10. Rick Hancock is no longer a defendant in the case. See Order (Aug. 22, 2007) (Item # 518), Exhibit 2 hereto. A review of the disclosures in this case establishes that Defendant Greg Hancock did not comply with the expert disclosure rules as set forth in the Federal Rules of Civil Procedure or this Court's Orders. This failure was identified in earlier briefing, and Defendant Greg Hancock did not deny his failure to disclose and did not cure his failure to comply with the Rules and this Court's Orders. See, e.g., Plaintiffs' Objections to

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Defendant Greg Hancock's Updated Statement of Facts (Item # 435), Exhibit 3 hereto at ¶ 15. Sorget is unaccustomed to providing an expert opinion of any kind in litigation, is not an expert in her field, and is merely a biased longtime employee of the Hancocks. She has never been a testifying or other expert, never published an article on marketing, never took advertising, public relations, marketing or communications graduate courses, nor does she hold a professional license of any kind. See Sorget Depo., Exhibit 1 at 13:5-8; 53:25-54:15; 76:17-20; 83:17-21. Sorget has been Greg Hancock's and his brother's primary advertising agent for years. See id. at 14:11-18; 25:5-16; 42:13-45:8; 46:13-21; 61:14-63:22; 86:8-13. Sorget engaged in selection bias and employed incomplete data. Sorget's entire study looked solely at newspaper articles in the Arizona Republic and further limited her review to the Saturday New Homes section. See id. at 20:21-3, 21:4-19, 147:9-148:4, 148:6-8, 148:16-22, 206:5-10. She ignored other sections of the newspaper, television, radio, collateral material, other print media, and indirect advertising through sponsorships such as the Suns. See id. at 147:9-148:8, 148:16-22, 149:4-10. She otherwise conducted
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no interviews or investigation of any kind. See id. at 40:3-15. Sorget acknowledged that, due to the expense involved, she neglected important studies like focus groups and surveys. See id. at 79:13-80:24. She also agreed that, from her very limited investigation, her conclusion about diminished awareness of the Hancock name was based upon her assumptions and not reliable and statistically-significant data. See id. at 81:3-82:11, 150:15-21, 152:23-25, 153:1-7, 212:14-17, 212:25-213:4. Instead of relying on a commonly used or peer review tested methodology, Sorget invented her own novel and untested "point test" to allegedly determine the awareness of the Hancock name. See id. at 154:1-20. Sorget noted that she never saw the "point test," or anything like it, in a magazine or trade periodical being used to discern the impact on name awareness. See id. at 166:20-23. She also acknowledged that she never conducted a survey of consumers, builders, or vendors. See id. at 156:10-157-12, 160:14-19. She simply did not test her findings against any form of statistical analysis such as a regression analysis, natural experiment through surveys or focus groups, or peer review. See id. at 150:15-21, 152:23-25, 153:1-7, 153:24-25. Even within her invented methodology, her analysis was not sufficiently thorough to be meaningful. Sorget admitted neglecting other important factors that would

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contribute to name awareness, including newspaper circulation, page position of the ad, headline/tagline, visual effect, creative design, and composition. See id. at 175:10-12, 176:14-16, 180:10-14, 182:4-12, 182:23-183:18, 184:13-24, 184:3-8, 184:9-12. She

agreed that her cost-expenditure analysis was nothing more than an elementary display of costs of advertising expenditures over time. See id. at 212:14-17. Her "point test" failed to account for advertising expenditures despite acknowledging that name awareness could stay constant or increase despite the fall of advertising expenditures. See id. at 153:16-23, 212:25-213:4. Sorget left her report without any supplementation or addition whatsoever. II. The Expert Witness Standard in Federal Court Federal Rule of Evidence 702 governs the admissibility of expert testimony. Fed. R. Evid. 702 ("Rule"); Heary Bros. Lightning Prot. Co. v. Lightning Prot. Inst., 287 F.
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Supp. 2d 1038, 1063 (D. Ariz. 2003). Expert testimony is admissible if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case. Rule 702. Under Rule 702, the Court acts as a "gatekeeper" with the responsibility to "screen" expert testimony to ensure that expert testimony is relevant and reliable. See, e.g., Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993); Heary Bros., 287 F. Supp. 2d at 1063; Martinez v. Terex Corp., 241 F.R.D. 631, 635-37 (D. Ariz. 2007); Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 897 (1990). (a "litigant's failure to buttress its position of confidence in the strength of that position is always indulged in at the litigant's own risk"). The proposed expert testimony `must be supported by appropriate validation--i.e., `good grounds,' based on what is known.' [Daubert, 509 U.S.] at 590. The Court explained that the trial judges must determine reliability by engaging in a `preliminary assessment of whether the reasoning or methodology properly can be applied to the facts in issue.' Id. at 592-93. The Court provided factors that might be relevant to the inquiry, including `whether it can be (and has been) tested,' `whether the theory or technique has been subjected to peer review and publication,' `the known or potential rate of error,' and the `degree of acceptance within [a relevant scientific] community.' Id. at 593-94. `The focus, of course, must be solely on principles and methodology, not on the conclusions that they generate.' Id. at 595. Nonetheless, the Court emphasized that `the inquiry envisioned by Rule 702 is . . . a flexible one,' and the Court did `not presume to set out a definitive checklist or test.' Id. at 593-94. Heary Bros., 287 F. Supp. 2d at 1064.

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"`[C]onclusions and methodology are not entirely distinct from one another,'" and 20 care should be taken to ensure that there is not "`simply too great an analytical gap 21 between the data and the opinion proffered.'" Id. at 1064 (quoting Joiner v. Gen. Elec. 22 Co., 522 U.S. 136, 146 (1997). The Daubert standard requires that the Court find a "valid 23 . . . connection to the pertinent inquiry . . . and a reliable basis in the knowledge and 24 experience of [the relevant] discipline." Daubert, 509 U.S. at 592. In performing its 25 "gatekeeper" or screening role, the trial court is not obligated to conduct a separate 26 evidentiary hearing on the admissibility of the proffered expert testimony. See, e.g., U.S. 27 v. Alatorre, 222 F.3d 1098, 1102 (9th Cir. 2002). 28
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The Daubert Court articulated the following four non-exclusive factors to be considered for reliability: (1) whether the scientific theory or technique can be (or has been) tested; (2) whether the theory or technique has been subjected to peer review and publication; (3) whether a particular technique has a known potential rate of error; and (4) whether the theory or technique is generally accepted in the relevant scientific community. Daubert, 509 U.S. at 593-594; Martinez, 241 F.R.D. at 635-37. A "very significant fact to be considered is whether the experts are proposing to testify about matters growing naturally and directly out of research they have conducted independent of the litigation, or whether they have developed their opinions expressly for purposes for testifying." Daubert v. Merrell Dow Pharm. Inc., 43 F.3d 1311, 1317 (9th Cir. 1995) ("Daubert II"). III. Sorget's Opinions Are Unreliable and Inadmissible. A. Insufficient Facts and Data

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To be admissible, Defendant Greg Hancock must establish that Sorget's opinions are "based on sufficient facts or data." Heary Bros., 287 F.Supp.2d at 1066 (quoting Rule 702). He has not met that burden. Indeed, Sorget admits as much. Sorget only selected one form of advertising on a single day in one section of a single newspaper (i.e., the New Home section of the Saturday Arizona Republic), and then based solely on her single selection of one form of media, she extrapolated an opinion that the Hancock name recognition and awareness, among an entire universe of consumers, declined. See Sorget's Advertising Analysis, Exhibit 4 hereto at MER038868-71, see also Sorget Depo., Exhibit 1 at 20:21-3, 21:4-19, 147:9-148:22, 206:5-10. She ignored

television, radio, other days and sections of the Arizona Republic other print media, collateral material, and indirect advertising through sponsorships such as the Suns and the Miracle of Homes. See id. She did not test her extrapolation by conducting interviews or investigation of consumers, by engaging in focus group, by surveying consumers, or by analyzing the data to determine if it was statistically-significant. See Sorget Depo., Exhibit 1 at 40:3-15; 79:13-80:24; 81:3-82:11, 150:15-21, 152:23-25, 153:1-7, 153:16-25,
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156:10-157:12, 160:14:14-19, and 212:25-213:4. Sorget neglected other important factors that would contribute to name awareness, including newspaper circulation, page position of the ad, headline/tagline, visual effect, creative design, and composition. See id. at 175:10-12, 176:14-16, 180:10-14, 182:4-12, 182:23-183:18, 184:13-24, 184:3-8, 184:912. Sorget's conclusion is not only biased by selective and incomplete data but is contrary to the fact that after July 2004, Meritage sold more than $100 million in homes under the Hancock name. See Declaration of Roger Zetah in Support of Meritage's Opposition to Greg Hancock's Motion for Stay and Request for Relief from Operation of Order, Exhibit 5 hereto at ¶ 3; see also Various Income Statements, attached as Exhibit D to Plaintiffs' (1) Objections to Defendant Greg Hancock's Updated Statement of Facts and (2) Controverting Statement of Facts at MER003209, MER003448, MER003776, MER005340, and MER005373 (Item # 435).1 Further, and even more tellingly, Defendant Greg Hancock testified that the Hancock name brand grew and "built itself" as a result of the great product, land, and financing. See November 11, 2006 Deposition of Greg Hancock, Exhibit 6 hereto at 28:14-22. But advertising under the Hancock name, aside from the Phoenix Suns

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sponsorship and signs around town, was minimal. See id. at 28:25-29:17. Instead, "word of mouth" contributed to the building of the Hancock brand. See id. at 29:16-17. Thus, Sorget's conclusion that there was less name recognition of the Hancock name as a result of fewer instances of advertising in a single section of the Arizona Republic on Saturdays has no merit. In this light, no reasonable jury could find Sorget's extrapolation from selective data to be based on sufficient facts and data. See, e.g., Rule 702; Heary Bros., 287 F. Supp. 2d at 1066. Instructive is the recent decision of Leelanau Wine Cellars, Ltd. v. Black & Red, Inc., 452 F.Supp.2d 772 (W.D. Mich. 2006). There, the Court agreed that an expert's analysis "(1) failed to identify the relevant consumer universe or used a consumer The Income Statements were previously filed under seal in Plaintiff's Objections to Defendant Greg Hancock's Updated Statement of Facts (Item # 435) so they are not attached here.
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universe that was substantially overbroad; (2) failed to replicate conditions as consumers would encounter them in the marketplace; and (3) was highly suggestive and leading. Id. at 781-82. All three of these same concerns apply to Sorget's analysis of name awareness. Sorget limited her analysis to consumers reading the Arizona Republic Home Section on Saturdays. She did not survey consumers traveling around the Valley while shopping for homes, navigating signage, and observing billboards and brochures. She did not investigate other print media, television or magazine advertisement. She did not consider any other means by which a home builder could appeal to the buying public. Sorget not only ignored the relevant consumer universe, but she also failed to replicate advertising as home buyers see it in the marketplace. In order to be reliable, Sorget was required to show how Meritage advertised the Hancock name ­ beyond just looking at one section of one newspaper on one day. B. Methodology Is Not Tested

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As noted above, Sorget offers what she claims to be a scientific methodology ­ the "point test."2 With respect to scientific methodologies, Daubert and Rule 702 require testing, peer review scrutiny, analysis of rate of error, or degree of acceptance within the expert community. See, e.g., Daubert, 509 U.S. at 592-94; Heary Bros., 287 F. Supp. 2d at 1064. Sorget concedes that she did not test her methodology, subject it to peer review, conduct any statistical analysis to determine rate of error, or identify any acceptance within the advertising or marketing communities. See Sorget Depo., Exhibit 1 at 40:3-15, 79:13-80:24, 150:15-21, 152:23-25, 153:1-7, 153:16-25, 154:1-20, 156:10-157:12, 166:20-23. For this reason as well, Sorget's opinions are not admissible. Rule 702. C. Sorget's "Point Test" Is Misleading

Sorget's assumption that the association of Hancock with Meritage reduces the name recognition of Hancock is mistaken ­ rendering her opinion inadmissible. The absorption of Hancock Communities into Meritage (much like the recent absorption of America West Airlines into U.S. Airways) actually increases recognition and value to the 2 Sorget testified that she believed her "point test" was scientific and technical in nature. See Sorget Depo., Exhibit 1 at 149:21-150:7.
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Hancock name. See Expert Report of Joe Perez, Exhibit 7 hereto at 8. Because Sorget's analysis was clearly meant to reach one conclusion, however, she cannot be allowed to mislead the fact finder that her opinions are reliably based on a fair portrayal of the home building market. See Daubert II, 43 F.3d at 1317 (expert opinions are improper when developed " ... expressly for the purposes for testifying.") Sorget even noted in her deposition that it was possible that despite the fall of advertising expenditures, name awareness could remain constant or actually increase. See Sorget Depo., Exhibit 1 at 153:16-23. But instead of actually testing to see if name awareness changed, Sorget simply assumed her conclusion. See id. at 81:3-82:11. Sorget should be struck as an expert witness. D. Sorget Is Not Qualified

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Defendant Greg Hancock has the burden of establishing that Sorget is qualified to offer expert opinion on name recognition. There is no evidence that Sorget has ever studied the subject or taken any graduate classes in marketing or advertising, let alone specifically relating to name awareness or recognition. See Sorget Depo., Exhibit 1 at 53:25-54:15. She has never written or been published, let alone written on the subject of name awareness or recognition. See id. at 83:17-21. She has not tested her theories or subjected her test to peer review. See id. at 153:24-154:20, 166:7-16, 166:20-23. She has only worked for Defendant Greg Hancock for more than 15 years; that is not the type of experience that is helpful to juries as an expert. See id. at 42:13-45:8; see also Rule 702. IV. Sorget Has Not Been Timely Disclosed By Greg Hancock. Former co-Defendant Rick Hancock, and he only, offered Sorget to testify about name recognition of the Hancock name as Rick Hancock was trying to market that name at Rick Hancock Homes in Buckeye, Arizona. Greg Hancock never disclosed Sorget as his expert in compliance with Rule 26 and this Court's Orders. Sorget was hired as an expert witness by and for Rick Hancock, not by Greg Hancock. See Sorget Depo., Exhibit 1 at 13:18-23, 14:9-10. This Court was clear that failure to disclose implicated the

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exclusion remedies under "Fed. R. Civ. P. 37, Local Rules of the District Court, and the
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inherent power of the Court." See Amended Joint Rule 16 Scheduling Order at 3:22-26 (Feb. 23, 2006). Greg Hancock, indeed, did not even appear when Rick Hancock deposed Ms. Sorget's rebuttal expert, Joe Perez. See June 29, 2007 Deposition of Joe Perez, Exhibit 9 at 2. This demonstrates even more that Greg Hancock did not intend to rely upon Sorget's opinions, and Meritage has prepared for trial accordingly.3 Sorget's opinions are no longer relevant or timely for Greg Hancock to offer them at trial. The Court can grant Meritage's Motion in Limine on this basis alone. V. Sorget's Testimony Exceeds Permissible Scope of Expert Testimony For the first time in Section J of the Joint Proposed Pretrial Order, Greg Hancock disclosed that he intends to offer Sorget as an expert on additional topics (a) that were never previously disclosed and (b) that are not permissible areas of expert opinion: · "Ms. Stanton (Sorget) will testify regarding her work for Greg Hancock in his companies prior to employment at Meritage." · "She will testify as to her employment through the Martz Agency in changing the name Hancock Communities to Meritage." · "She will testify that she would not have assisted in the name change campaign had she been informed of the "go dark" memo and the restrictive language of the License Agreement between Greg Hancock and Meritage." None of these topics are appropriate for expert testimony under Rule of Evidence 702 and should be barred. It is not expert opinion. It is not based on "scientific, technical, or other specialized knowledge [that] will assist the trier of fact." Accordingly, even if the Court It should be further noted that, in response to Meritage's discovery requests more than two years ago asking for all marketing reports on the "Hancock" name, Greg Hancock denied having any such reports. Defendant Greg Hancock's Amended Responses to Plaintiff's Requests for Production of Documents, Exhibit 8 hereto, at p. 6. Hancock had a duty to amend and supplement his discovery responses to include Sorget's marketing report, assuming Hancock ever intended to rely upon his co-defendant's expert in the first place. See Rule 26(e), Fed.R.Civ.P; Amended Joint Rule 16 Scheduling Order at 3:22-26 (Feb. 23, 2006) (observing that the exclusion of related evidence as a remedy for failure to disclose). Hancock's failure to supplement his written discovery responses is just one of many examples showing how Meritage has been and will be prejudiced by Hancock's recent revelation that he will call Sorget as an expert.
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LAW OFFICES One Arizona Center, 400 E. Van Buren Phoenix, Arizona 85004-2202 (602) 382-6000

were to permit Sorget's expert opinion, an order in limine to exclude testimony on the above-listed topics should be granted. CONCLUSION Based on the forgoing, Meritage respectfully requests that the Court grant this Motion in Limine by striking the expert report and deposition, and precluding the testimony by Barbara Sorget-Stanton. RESPECTFULLY SUBMITTED this 31st day of August, 2007. SNELL & WILMER L.L.P. By s/ Dan W. Goldfine Dan W. Goldfine Richard G. Erickson Snell & Wilmer, L.L.P. One Arizona Center 400 E. Van Buren Street Phoenix, Arizona 85004-2202 Attorneys for Meritage and By s/ Grant Woods Grant Woods, Esq. GRANT WOODS, P.C. 1726 North Seventh Street Phoenix, Arizona 85006 Attorneys for Meritage CERTIFICATE OF SERVICE I hereby certify that on August 31, 2007, I electronically transmitted the foregoing document to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: Robert M. Frisbee Frisbee & Bostock, PLC 1747 East Morton Avenue Suite 108 Phoenix AZ 85020 Attorneys for Greg Hancock s/ Deborah Yanazzo
2033754.3

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Case 2:04-cv-00384-ROS

Document 527- 10 Filed 08/31/2007

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