EPAC Technologies, Inc. v. Thomas Nelson, Inc.
3:12-cv-00463
M.D. Tenn.Jan 4, 2019Background
- EPAC and Thomas Nelson (later HarperCollins) disputed whether Thomas Nelson had cause to terminate a Master Services Agreement (MSA) for on-demand book printing using EPAC2 technology; termination followed complaints about quality, shipping facility, and capacity.
- Thomas Nelson contracted with Lightning Source, Inc. (LSI) after termination; EPAC later sold EPAC2 assets to LSI. Discovery and evidentiary disputes centered on post-termination performance, an LSI "stress test," and the LSI acquisition.
- EPAC filed multiple motions in limine to exclude post-April 6, 2011 evidence, evidence about the LSI acquisition and stress test, warranty-conformity evidence, and other items; Thomas Nelson filed motions in limine addressing lost-profits timing, CNDA scope, unjust-enrichment damages, witness testimony, and alleged spoliation.
- The Court conducted extensive Rule 37(e) and contempt analysis on alleged spoliation of EPAC2 production data, emails, and financial records; it found no intentional deprivation warranting the most severe sanctions and denied Thomas Nelson’s dispositive sanctions requests.
- Daubert and expert-admissibility disputes: the Court excluded EPAC’s damages expert (Vic Alexander) for insufficient data; denied EPAC’s challenge to Thomas Nelson’s expert (John Conley) finding him qualified and his methodology admissible.
- The Court issued rulings limiting introduction of CNDA evidence to the CNDA’s operative period, excluding spoliation argument/evidence for Thomas Nelson at trial (but adopting curative jury instructions previously ordered), and resolving a range of other in limine requests; several procedural motions (continuance, deposition filings) were denied.
Issues
| Issue | Plaintiff (EPAC) Argument | Defendant (Thomas Nelson) Argument | Held |
|---|---|---|---|
| Admissibility of EPAC post-termination performance evidence | Irrelevant and prejudicial because MSA ended Apr 6, 2011; discovery differs from admissibility standard | Post-termination performance is circumstantial evidence of capabilities and supports justification for termination | Denied — post-termination performance evidence is relevant and admissible under Rules 401/403 |
| Evidence re: LSI acquisition of EPAC2 assets | Irrelevant because sale occurred after anticipatory breach; would mislead re: damages | Relevant to mitigation, ability to perform, and damages calculation | Denied — evidence of LSI acquisition admissible consistent with the rules |
| LSI "stress test" evidence and multiple LSI witnesses | Irrelevant/experimental and not substantially similar; testimony cumulative | Relevant circumstantial evidence of EPAC2 capacity; weight for jury; multiple witnesses may be probative | Denied — stress test relevant; dissimilarities affect weight not admissibility; multiple witnesses allowed subject to Rule 403 |
| Evidence that Work Product did/did not conform to MSA limited warranty | Such evidence is moot if EPAC replaced nonconforming work and Thomas Nelson accepted or destroyed materials | Disputed factual issues about whether limited warranty became operative and testing phase; Cure Letter references testing failures | Denied — factual disputes inappropriate for in limine exclusion; evidence may be presented |
| Spoliation / sanctions for lost EPAC2 data, emails, financials (Rule 37(e)) | EPAC moved to preclude any spoliation argument absent judicial finding against EPAC | Thomas Nelson sought adverse inferences and dispositive sanctions for alleged loss of servers, emails, financials | Thomas Nelson’s sanctions motions denied; Court found negligence but not intent to deprive; allowed curative jury instruction already ordered; excluded further spoliation argument/evidence at trial |
| Exclusion of EPAC’s damages expert (Vic Alexander) | Alexander should be allowed to testify and may supplement when more data obtained; damages may include defendant gains | Alexander lacked sufficient facts/data and did not tie analyses to the alleged misconduct; opinions unreliable | Granted — Alexander’s testimony excluded under Rule 702 for insufficient data |
| Exclusion of defendant’s expert (John Conley) | EPAC challenged qualifications, methodology reliance on post-termination stress test, and asserted omissions | Thomas Nelson asserted Conley’s extensive industry experience and that critiques go to weight not admissibility | Denied — Conley qualified; methodology admissible; factual attacks go to weight |
Key Cases Cited
- Louzon v. Ford Motor Co., 718 F.3d 556 (6th Cir. 2013) (motions in limine should not substitute for summary judgment; scope of in limine review)
- Crown Cork & Seal Co. v. Morton Pharm., Inc., 417 F.2d 921 (6th Cir. 1969) (admissibility of experimental evidence depends on similarity of conditions)
- Persian Galleries, Inc. v. Transcon. Ins. Co., 38 F.3d 253 (6th Cir. 1994) (dissimilarities between experiment and event affect weight, not admissibility)
- United States v. Baldwin, 418 F.3d 575 (6th Cir. 2005) (experimental evidence example and admissibility principles)
- Applebaum v. Target Corp., 831 F.3d 740 (6th Cir. 2016) (Rule 37(e) requires intent to deprive for severe sanctions)
- John B. v. Goetz, 531 F.3d 448 (6th Cir. 2008) (duty to preserve relevant ESI arises when party knows or should know of potential litigation)
- Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (U.S. 1993) (expert testimony must be relevant and reliable under Rule 702)
- Gen. Elec. Co. v. Joiner, 522 U.S. 136 (U.S. 1997) (trial judge’s gatekeeping role on expert testimony)
- American List Corp. v. U.S. News & World Report, 75 N.Y.2d 38 (Ct. App. N.Y. 1989) (wrongful repudiation permits non-repudiating party to claim total breach and damages)