Free Motion to Strike - District Court of Arizona - Arizona

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Joel L. Herz, Esq. State Bar No. 015105 Law Offices of Joel L. Herz 3573 East Sunrise Drive, Suite 215 Tucson, AZ 85718 Telephone: 520-529-8080 Facsimile: 520-529-8077 Attorneys for Defendant GTFM, LLC UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA MEADOWLARK LEMON, et al., Plaintiffs vs. HARLEM GLOBETROTTERS INTERNATIONAL, INC., et al., Defendants ) ) ) ) ) ) ) ) ) )

Case No. CV 04-0299 PHX-DGC Case No. CV 04-1023-PHX-DGC

MEMORANDUM OF LAW IN SUPPORT OF DEFENDANTS' MOTION TO STRIKE THE NEW ANALYSES OF OLIVER PHIPPS AND PLAINTIFFS' JOINT SUPPLEMENTAL DISCLOSURE STATEMENTS On October 30, 2006, Defendants received a new expert report from Plaintiffs, increasing Plaintiffs' alleged damages from under $2 million to over $12 million and increasing the number of alleged infringing styles from nine to nearly 80, in violation of several court orders. See Sacks Decl. ¶ 7.1 On November 1, 2006, Defendants received a further new expert report from Plaintiffs, adding alleged damages of $92,000 for sales by

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The "Sacks Decl." refers to the declaration of Ira S. Sacks, dated November 1, 2006, submitted herewith.

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someone other than Defendants in Japan, and correcting the October 30 numbers, adding another $1 million in alleged damages. See Sacks Decl. ¶¶ 8, 19. Those new expert reports ­ which violate at least three of this Court's Orders and come 13 months after the

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close of discovery and over 14 months after Plaintiffs' expert disclosures were due ­ must be stricken. Defendant GTFM, LLC ("GTFM" or "FUBU"), along with Defendants Harlem Globetrotters International, Inc., Mannie L. and Catherine Jackson (collectively referred

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to as the "HGI Defendants") (GTFM and the HGI Defendants are collectively referred to as "Defendants"), submit this memorandum of law in support of their Motion to Strike ("Motion to Strike") the New Analyses of Oliver Phipps, dated October 27, 2006 (the "Phipps II Analysis") and October 31, 2006 (the "Phipps III Analysis"), as well as Plaintiffs' Joint Supplemental Disclosure Statement and Second Joint Supplemental Disclosure Statement ("Plaintiffs' New Disclosures"), pursuant to Rules 26 and 37(c) of the Federal Rules of Civil Procedure and this Court's April 8, 2005, August 3, 2005, August 18, 2005 and June 27, 2006 Orders. Defendants respectfully request that the Court grant an order (i) striking the Phipps II and III Analyses in their entirety; (ii) striking the New Disclosures in their entirety; and (iii) imposing sanctions on Plaintiffs and their counsel; or in the alternative, (iv) reopening discovery in this matter for a period of not less than six months so that Defendants can properly analyze the Phipps II and III Analyses and respond thereto.

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Plaintiffs have repeatedly disregarded this Court's orders regarding expert discovery. Plaintiffs' initial expert disclosure was served on July 22, 2005, and was
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found by the Court to be deficient. As a result, this Court ordered that Plaintiffs were required to file full and complete expert disclosures by August 19, 2005, with Defendants permitted to file rebuttal expert disclosures by September 16, 2005.

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Additionally, this Court ordered that "Plaintiffs [were] not permitted to file a rebuttal report [and the] [l]oss of the rebuttal report w[ould] be the sanction Plaintiffs incur for their failure to comply with the Court's orders." See August 3, 2005 Order. This Court reiterated the requirement that Plaintiffs "provide full and complete expert reports by

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August 19, 2005" in its August 18, 2005 Order. See Sacks Decl. ¶¶ 10, 14. That expert report, the Abalos Report, was precluded by this Court's June 27, 2006 summary judgment order (the "June 27 Order"), for failure to include any estimate of damages by individual Plaintiff. Moreover, this Court limited Plaintiffs' proof of damages at trial to the specific years and amounts set forth in two documents ­ referred to as the HGI Letter and the Sales Chart. June 27 Order, at 22-23. The Sales Chart was, in fact, attached as an exhibit to an affidavit by Plaintiffs' Investigator, Oliver Phipps, dated November 23, 2005, and is sometimes referred to herein as the "Phipps I Analysis." It identified sales volumes for nine styles, seeking damages of slightly under $2 million in sales. See Sacks Decl. ¶¶ 11, 16. Discovery in this matter closed on September 30, 2005 and this Court ordered that drafts of the Joint Proposed Pretrial Order were to be exchanged on November 1, 2006. See Orders, dated April 8, 2005 and July 26, 2006. On October 30, 2006, 13 months after

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the close of discovery, over 14 months after Plaintiffs' expert disclosures were due and on the eve of the exchange of draft pretrial orders, Defendants received the first of
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Plaintiffs' New Disclosures, which included the Phipps II Analysis. See Sacks Decl. Exhibits A-C. Two days later, on November 1, 2006, Defendants received the second of Plaintiffs' New Disclosures, which included the Phipps III Analysis. See Sacks Decl.

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Exhibits M-N.

Plaintiffs' service of the Phipps II and III Analyses and the New

Disclosures is in direct violation of several of this Court's orders and greatly prejudices Defendants' ability to try this case. See Sacks Decl. ¶ 12. The Motion to Strike must be granted, and on an expedited basis, because this

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Court's July 26, 2006 Order (the "July 26 Order"), requires the parties to file a joint Proposed Final Pretrial Order by 4:00 p.m. on November 15, 2006 and explains that the "Court will not allow the parties to offer any exhibit, witness, or other evidence that was not disclosed in accordance with the provision of this Order ...except to prevent manifest injustice." See July 26 Order ¶¶ 2, 4. If the Court does not preclude the Phipps II and III Analyses, Defendants will not have sufficient time to properly analyze and respond to the Phipps II and III Analyses, much less include responsive exhibits in the joint Proposed Pretrial Order. For example, in response to the Phipps I Analysis and this Court's June 27 Order, Defendants did a style-by-style and Plaintiff-by-Plaintiff cost and profit analysis, included in our proposed trial exhibits. That analysis took over two months to accomplish. One can only imagine how long it will take to include 69 additional styles in such an analysis. See Sacks Decl. ¶ 13. Indeed, if the Phipps II and III Analyses had been submitted in August 2005,

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instead of the deficient Abalos Report, GTFM would have retained a rebuttal expert (which it did not do with respect to Ms. Abalos because of the nature of her analysis),
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would have done a survey regarding the marketing impact of hangtags (which it did not do because no damages were sought regarding hangtags in the Abalos Report) and would have taken the deposition of Mr. Phipps regarding his analyses (as it did with Ms.

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Abalos). If the Phipps II and III Analyses are not precluded, despite the violation of Court Orders, due process requires the reopening of expert discovery to permit such steps to be taken. See Sacks Decl. ¶¶ 24-27. Plaintiffs have attempted to mask the Phipps II and III Analyses and Supplemental

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Disclosures as mere summaries of data. As we shall demonstrate below, that is wrong. They are expert reports, concededly done in the manner that GTFM suggested in its motion to strike the Abalos Report. See October 27, 2006 Phipps Aff., ¶15, attached to the Sacks Decl. as Exhibit B. And even without discovery, it is clear that the Phipps II and III Analyses are fraught with errors and the false illusion of precision. See Sacks Decl. ¶¶ 28-40. The Court should exclude the Phipps II and III Analyses and the New Disclosures. If it does not, it should give Defendants a fair opportunity to respond to this expert report and reopen expert discovery for at least six months.

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I.

THE PHIPPS II AND III ANALYSES AND THE NEW DISCLOSURES SHOULD BE STRICKEN2

As we noted above, the service of the Phipps II and III Analyses and the New Disclosures is in direct violation of at least three of this Court's previous orders and greatly hinders Defendants ability to try this case on the schedule previously set forth by this Court in its July 26 Order. As a result, the Phipps II and III Analyses and the New Disclosures should be stricken. The violations of this Court's orders are as follows: Pursuant to this Court's August 3, 2005 and August 18, 2005 Orders (Doc. Nos. 143 and 148), Plaintiffs were required to file full and complete expert disclosures by

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August 19, 2005 and were not permitted to supplement those disclosures as a sanction for disobedience with prior Court orders. The Phipps II and III Analyses are additional and supplemental expert disclosures in violation of those Orders. See Sacks Decl. ¶¶ 10, 14. This Court also held that the damages in this action were limited because

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Plaintiffs' prior expert, Ms. Abalos, did not determine damages by individual Plaintiff. Thus, this Court precluded Plaintiffs' expert report and testimony, and further found that damages in this case will be limited to "the specific years and amounts addressed in [two] documents", defined and referred to in the June 27 Order as the HGI Letter and Sales Chart, subject to further evidentiary objections by Defendants at trial. See June 27 Order

The arguments made herein are without prejudice to Defendants' other in limine motions regarding the Phipps I Analysis (the Sales Chart).

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at 22-23, n. 12. This Court further prohibited the Plaintiffs from using the HGI Letter and Sales Chart to extrapolate individual damages from their expert's aggregate numbers or ask the jury to do so. June 27 Order at 23. See Sacks Decl. ¶¶ 11, 15.

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The HGI Letter and Sales Chart in turn reference sales amounts for just nine styles of the apparel: H3002; HGB3002; H3305; H3335; H3345; H3347; H3351; H3352; and H8501.3 The Sales Chart ­ the Phipps I Analysis ­ seeks damages by setting forth amounts of sales of those nine styles in the approximate amount of $ 2 million. In

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violation of that Order, the Phipps II Analysis adds 69 new styles ­ for a total of 78 ­ and sets forth amounts of sales totaling $12 million, six times the amount set forth in the Sales Chart.4 The Phipps III Analysis adds another $1 million in alleged damages for Lemon and $92,000 for Japanese sales. See Sacks Decl. ¶ 16; see also Exhibit F to the Sacks Decl., illustrating the differences in damages between the Abalos Report, the HGI Letter, the Sales Chart and the Phipps II Analysis. If this motion is not granted, Plaintiffs will continue to submit supplemental disclosures and revised expert reports. Indeed, Mr. Phipps admitted in his October 27, 2006 affidavit that he planned on submitting another analysis to include Japanese sales, even though both the HGI Defendants and GTFM submitted information regarding

One of the styles listed in the Sales Chart (the Phipps I Analysis), Style H3003, does not

exist.
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The amount set forth in the HGI Letter was lower and for fewer styles than the Sales

Chart.

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Japanese sales well before the close of discovery on September 30, 2005. See Sacks Decl., Exhibit B ¶ 18. The Phipps III Analysis followed, dated October 31, 2006, and

covered Japanese sales, and corrections to the analysis for Lemon, adding over $1 million
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in alleged damages. See Sacks Decl. ¶¶ 8, 19, 26. The Phipps II and III Analyses and the New Disclosures are not only in violation of Court Orders, they are also highly prejudicial to Defendants.5 On Monday, October 30, 2006, Defendants received the first of the New Disclosures, which included the

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Phipps II Analysis.

The untimely New Disclosures and Phipps II Analysis were

proffered as a prelude to including the Phipps II Analysis on Plaintiffs' list of trial exhibits, which they did that same day, on October 30, 2006. Two days later, on

November 1, 2006, Defendants received the second of the New Disclosures, which included the Phipps III Analysis. Defendants have no ability to timely respond to the Phipps II and III Analyses. Defendants have had no opportunity to prepare responsive analyses before November 15, 2006. Defendants have had no opportunity to prepare responsive expert materials. Defendants have had no opportunity to depose Mr. Phipps on his analyses. Due process requires the exclusion of the New Disclosures and the Phipps II and III Analyses, or reopening of expert discovery. See Sacks Decl. ¶ 17.

This is not the first time Defendants have moved to strike Plaintiffs untimely disclosures. Indeed, throughout this litigation, Plaintiffs have violated the rules of this Court and the Federal Rules of Civil Procedure by submitting additional untimely disclosures revealing new documents, witnesses and affidavits throughout the summary judgment briefing and argument process, adding new materials up to few weeks before the oral argument.

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Plaintiffs offer no justification for the failure to disclose the Phipps II and III Analyses earlier. Much, if not all, of the information set forth in the Phipps II and III Analyses could have been done by Plaintiffs' original expert, but was not. Plaintiffs now

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seek to correct that by submitting a new expert report in the form of an investigator's affidavit as part of untimely supplemental disclosures. Why it took Plaintiffs 13 months to disclose the Phipps II and III Analyses and the New Disclosures is a mystery. Plaintiffs are once again attempting to sandbag Defendants at the last minute and are in

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violation of this Court's previous Orders. See Sacks Decl. ¶ 18. II. THE PHIPPS II AND III ANALYSES ARE EXPERT REPORTS

The Phipps II and III Analyses are clearly expert reports and admittedly attempt to correct the inaccuracies in Plaintiffs' original expert report by Ms. Abalos, which was precluded by the June 27 Order. Indeed, Mr. Phipps states in his 10/27/06 affidavit that he "utiliz[ed] FUBU's methodology outlined in their Reply brief in order to breakdown style numbers and reported sales by individual player. Individual players were matched up to the garments by using the CAD drawings, as the names and numbers of the players can clearly be viewed on the garment. The methodology used is as such (excerpt taken from FUBU's Reply brief Doc #228, page 5-6)..." See Sacks Decl., Exhibit B, ¶¶ 13, 15(d); Sacks Decl. ¶¶ 9, 23. This is in direct violation of this Court's previous orders. Plaintiffs were to "provide full and complete expert disclosures as required by Rule 26(a)(2)(A)-(C) of the

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Federal Rules of Civil Procedure no later than August 19, 2005." See August 3 and August 18 Orders. The Court ordered further that "Plaintiffs will not be permitted to file
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a rebuttal report ... [and the loss] of the rebuttal report will be the sanction Plaintiffs incur for their failure to comply with the Court's roders." See August 3 Order.

Moreover, the Court held that it would "not permit supplementation of [Plaintiffs' expert]
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report." See August 18 Order. These violations are extremely prejudicial to Defendants. Plaintiffs cannot be permitted to violate this Court's orders. See Sacks Decl. ¶¶ 10, 14, 24-26. As set forth more fully below, the Phipps II and Phipps III Analyses do far more

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than summarize voluminous data. The Phipps II Analysis has Schedules A through G for each of the seven Plaintiffs. Schedules A and B repeat the HGI letter and Sales Chart. Schedules C through G, however, repeatedly correct the errors and omission in the Abalos Report for each of the seven Plaintiffs. The Phipps III Analysis adds sales by a Japanese licensee to the claimed damages ­ in the amount of $92,000 ­ and corrects three errors in Schedule E for Lemon, adding another $1 million in claimed damages. See Sacks Decl. ¶ 19. The Phipps II Analysis allegedly corrects the errors in the Abalos Report by: (i) on Schedule C for each of seven Plaintiffs, allocating sales for each player number in particular styles, by dividing total sales by the number of player numbers in the style (as suggested by GTFM in criticizing the Abalos Report); (ii) on Schedule C for each of five Plaintiffs, allocating sales for styles listing nine former players on the garment itself, by dividing total sales by nine and adding that allocation to certain Plaintiffs; (iii) on

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Schedule D(1) for each of seven Plaintiffs, allocating sales for styles that Mr. Phipps omitted in his Phipps I Analysis listing nine former players on the garment itself, by
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dividing total sales by nine and adding that allocation to each Plaintiff; (iv) on Schedule D(2) for each of seven Plaintiffs, assuming that all sales of the styles listed had hangtags listing nine former players, and allocating sales for those styles, by dividing total sales by

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nine and adding that allocation to each Plaintiff; (v) on Schedule E for certain Plaintiffs, allocating sales for each player number in particular styles, by dividing total sales by the number of player numbers in the style (as suggested by GTFM in criticizing the Abalos Report); and (vi) on Schedule F for each of seven Plaintiffs, assuming that all sales of the

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styles listed had hangtags listing nine former players, and allocating sales for those styles, by dividing total sales by nine and adding that allocation to each Plaintiff. See Sacks Decl. ¶¶ 19-20. The Phipps III Analysis allocates sales in Japan among Plaintiffs by allocating sales of styles among the players whose names or alleged numbers are set forth on the styles, by dividing total sales by the number of players' names or alleged numbers used in the style. It does so despite the fact that GTFM and HGI did not sell in Japan. Rather, as Plaintiffs are well aware, the Japanese sales were by a licensee and GTFM only received a royalty, not sales revenues. See Sacks Decl. ¶ 21. The Phipps III Analysis also corrects three errors in the Phipps II Analysis, adding $1 million to Lemon's alleged damages. In so doing, it double counts revenues already included in another of the Lemon charts. See Sacks Decl. ¶ 22. That is not a summary of data. That is an allocation fraught with assumptions and

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calculations of the very type Ms. Abalos could have done and did not do. See Sacks Decl. ¶ 23. As Mr. Phipps admitted, he "utilize[ed] FUBU's methodology outlined in
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their Reply brief [on the motion to strike the Abalos Report] in order to breakdown style numbers and reported sales by individual player. Phipps 10/27/06 Aff. ¶ 15. Mr. Phipps went on: The methodology utilized is as such (excerpt taken from FUBU's Reply brief

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Doc#228, page 5-6): GTFM produced data that reliably quantified sales. Although GTFM did not specifically track the sales of styles by individual Plaintiffs names and/or numbers, Ms. Abalos could have reasonably calculated or estimated sales by individual plaintiff based on GTFM's document production. She chose not to do so. For example, for some styles, the alleged players' numbers were actually shown in the sales detail reports produced by GTFM.6 Ms. Abalos ignored that detail. For some styles, the players' names were used on different color garments, and sales by specific plaintiff could have been tallied from the produced sales detail for each color.7 Ms. Abalos ignored that detail. For some styles, sales could have been allocated among plaintiffs and non-plaintiffs, and Plaintiffs could have only sought to recover profits for that portion of sales fairly attributable to plaintiffs.8 Ms. Abalos ignored that detail. [footnotes renumbered from original] Id. See Sacks Decl. ¶ 23. If Plaintiffs had submitted the Phipps II and III Analyses as an expert report when their expert report was due on August 19, 2005, GTFM would have retained two experts:

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one in rebuttal to the numbers set forth in the Phipps II and III Analyses and one on

For example, Style H3352 (Sacks Decl. Ex. J) identified sales by player's numbers.

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For example, the CAD for Style H3351 (Sacks Decl. Ex. K) illustrates that there are seven players involved ­ only 5 of which are plaintiffs ­ each related to a different color. The sales for each individual color are clearly listed in the Sales Detail Report (Sacks Decl. Ex. L). Ms. Abalos could have used that data to exclude sales of non-plaintiffs and could have used that data to divided sales by individual plaintiff. She did not do so.
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For example, 4 nicknames were used on Style #P266FJ (Sacks Decl., Ex. M) ­ three plaintiffs and one non-plaintiff. Instead of allocating the total sales among the 4 players, and only seeking to recover profits for the 3 plaintiffs, Ms. Abalos sought to recover profits for all sales, including the non-plaintiff.

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causation relating to the effect of hangtags and labels. GTFM did not do so because at that time GTFM could rely on the Abalos deposition to test Plaintiffs' expert's numbers and Ms. Abalos sought no damages regarding the hangtags or labels. Defendants were

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successful in their attempt to preclude the Abalos Report. To permit the Phipps II and III Analyses now would vitiate this Court's prior rulings and be highly prejudicial to Defendants. See Sacks Decl. ¶¶ 24-26. III. THE PHIPPS II AND III ANALYSES GIVE THE FALSE ILLUSION OF ACCURACY

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The Phipps II and III Analyses are expert reports that attempt to give the illusion of accuracy. However, Defendants' cursory review of the analyses ­ without any

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discovery or expert assistance ­ reveals that the Phipps II and III Analyses are filled with inaccuracies. Those inaccuracies are set forth in detail in the Sacks Decl., and will not be repeated herein. See Sacks Decl. ¶¶ 28-40. One example, however: pursuant to a license agreement, Jordache paid GTFM a royalty rate of 15% and GTFM paid HGI an 8%

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royalty rate. Even Ms. Abalos recognized this in the Abalos Report and used a 15% royalty rate. However, Mr. Phipps chose to ignore this fact and instead included the full amount of Jordache sales as GTFM sales, instead of the 15% that Jordache paid GTFM, when calculating GTFM's revenues. See Sacks Decl. ¶ 32. That is clearly incorrect.

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IV.

IF PLAINTIFFS ARE PERMITTED TO RELY ON THE PHIPPS II AND III ANALYSES, EXPERT DISCOVERY MUST BE REOPENED

To date, Defendants have done a cost and profit calculation on the nine styles at
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issue as per the June 27 Order, all of which were referenced in the HGI Letter and the Sales Chart. This analysis took Defendants over two months to complete. A copy of the profit calculation is attached to the Sacks Decl. as Exhibits J-L and listed as Defendants' Exhibits 1094 -1096 in Defendants' Exhibit List. If the Phipps II and III Analyses are not

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precluded, Defendants need sufficient time to redo their cost and profit calculations to include the additional 69 styles. See Sacks Decl. ¶ 25. A list of the additional 69 styles in the Phipps II Analysis is set forth as Exhibit E to the Sacks Decl. and attached as Exhibit H thereto is a chart comparing the styles at issue in the HGI Letter, the Phipps I Analysis and the Phipps II Analysis. Thus, if the Court does not preclude the Phipps II and III Analyses, Defendants respectfully request that expert discovery be reopened in this case for at least six months so that Defendants have an ample opportunity to hire an expert to analyze the Phipps II and III Analyses, hire an expert to do a survey of the significance of the hangtags and labels, redo their cost and profit calculations to include the additional 69 styles and information set forth in the Phipps II and III Analyses, take expert discovery of Mr. Phipps and submit a responsive expert report, all of which will be extremely expensive and time consuming for all of the parties involved. Due process requires no less. See

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Sacks Decl. ¶ 27.

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V.

PLAINTIFFS AND THEIR COUNSEL SHOULD BE SANCTIONED

Finally, Defendants request that the Court impose sanctions against Plaintiffs and their counsel. Fed. R. Civ. P. 37(c)(1) allows for the award of fees and costs incurred by

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the failure to make a timely disclosure. In Paladin Assocs. v. Montana Power Co., 328 F.3d 1145, 1164-65 (9th Cir. 2003), the Ninth Circuit held that the district court did not abuse its discretion in sanctioning the plaintiff for disclosing an expert witness six months after the deadline imposed by the district court. Noting that sanctions include

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reasonable expenses, including attorneys' fees, the Paladin court confirmed the district court's decision to award costs and attorneys' fees associated with the defendants' depositions of the expert witnesses. Id. at 1164 & n. 23. Here, Plaintiffs are attempting to submit expert reports over 14 months after their expert report was due, after their original expert report was excluded and 13 months after the close of discovery, all in violation of at least three Court orders. Such conduct warrants sanctions. CONCLUSION Based on the foregoing, Defendants respectfully request that the Court grant an order (i) striking the Phipps II and Phipps III Analyses in their entirety; (ii) striking the New Disclosures in their entirety; and (iii) imposing sanctions on Plaintiffs and their counsel; or in the alternative, (iv) reopening expert discovery in this matter for at least six months so that Defendants can properly analyze the Phipps II and Phipps III Analyses

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and respond thereto. DATED: November 1, 2006
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DREIER LLP

GARVEY McNEIL & McGILLIVRAY, S.C. By ____/s/ Edward R. Garvey___________ Edward R. Garvey Christa Westerberg 634 W. Main St. #101 Madison, WI 53703 Telephone: 608-256-1003 Ray K. Harris Fennemore Craig, P.C. 3003 North Central Avenue, Suite 2600 Phoenix, AZ 85012-2913 Telephone: 602-916-5000 Attorneys for Defendants Harlem Globetrotters Int'l, Inc. and Mannie L. & Catherine Jackson

By _____/s/ Ira S. Sacks_________ Ira S. Sacks Safia A. Anand 499 Park Avenue New York, New York 10022 Telephone: 212-328-6100 Joel L. Herz, Esq. State Bar Number 015105 La Paloma Corporate Center 3573 E. Sunrise Dr., Suite 215 Tucson, Arizona 85718-3206 Telephone: 520-529-8080 Attorneys for Defendant GTFM, LLC

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