520 F.Supp.3d 872
E.D. Mich.2021Background
- This is a long‑running breach‑of‑contract suit over defendants’ manufacture/sale of energy shots allegedly violating a Settlement Agreement with plaintiff Innovation Ventures (maker of 5‑Hour Energy).
- On appeal the Sixth Circuit held plaintiff may use market‑share evidence to quantify lost‑profits and defendants may present rebuttal evidence. Innovation Ventures, LLC v. Custom Nutrition Laboratories, LLC, 912 F.3d 316 (6th Cir. 2018).
- Plaintiff proffers Rodney Crawford as its lost‑profits expert (category‑share methodology); defendants proffer Dr. Christopher Pflaum to rebut Crawford.
- The parties filed competing Daubert motions to exclude each other’s experts; Frye (another defense analyst) will not be offered so his challenge is moot; Crawford’s 2017 report was superseded by an October 2020 report.
- The court held evidentiary hearings and applied Rule 702/Daubert gatekeeping, but concluded the challenges mainly attacked weight and factual assumptions rather than foundational reliability.
- Ruling: both motions to exclude were DENIED — Crawford and Pflaum may testify; disputes go to cross‑examination and jury weight.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Admissibility of Crawford (plaintiff) as lost‑profits expert | Crawford used an accepted market‑share/category‑share method to estimate lost profits; qualified CPA and damages expert. | Crawford is unqualified for relying on "mere arithmetic," failed to perform market studies or cross‑elasticity analyses, used imperfect data and made unwarranted assumptions about but‑for market share. | Denied. Crawford is qualified; market‑share methodology is permissible (per Sixth Circuit); challenges to data/method go to weight, not admissibility. |
| Admissibility of Pflaum (defendant) as rebuttal expert | Pflaum relied on unscientific, anecdotal data (Appendix 3), delegated report drafting, and used hearsay (media/FDA reports); thus unreliable. | Pflaum is a qualified economist; relied on law‑of‑one‑price and Mintel market data (also used by plaintiff); report authorship and use of secondary sources are proper for experts. | Denied. Pflaum is qualified and applied a reliable method; factual collection and hearsay issues affect weight and are governed by Rule 703/703 balancing, not exclusion. |
| Whether an expert must establish but‑for causation at Daubert stage | N/A (plaintiff argues expert need not carry entire burden). | Defendants argue Crawford must prove but‑for causation in his report (citing Federal Circuit lost‑profits cases). | Denied as a basis for exclusion. Experts need not prove the litigant’s entire case at the admissibility stage; but‑for causation is a merits issue for the jury and other trial evidence. |
Key Cases Cited
- Daubert v. Merrell Dow Pharms., 509 U.S. 579 (1993) (trial courts act as gatekeepers to exclude unreliable expert testimony)
- Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999) (Daubert gatekeeping applies to non‑scientific experts)
- Scrap Metal Antitrust Litig., 527 F.3d 517 (6th Cir.) (2008) (Sixth Circuit adopts a liberal admissibility standard: factual errors typically go to weight, not admissibility)
- Innovation Ventures, LLC v. Custom Nutrition Labs., 912 F.3d 316 (6th Cir. 2018) (appellate holding that market‑share evidence may be used to quantify lost profits)
- Panduit Corp. v. Stahlin Bros. Fibre Works, 575 F.2d 1152 (6th Cir.) (1978) (factors for proving lost profits)
- State Indus., Inc. v. Mor‑Flo Indus., 883 F.2d 1573 (Fed. Cir. 1989) (market‑share lost‑profits discussion and but‑for causation in patent context)
- BIC Leisure Prods., Inc. v. Windsurfing Int’l, 1 F.3d 1214 (Fed. Cir. 1993) (but‑for causation required to award lost profits when evidence is insufficient)
- Grain Processing Corp. v. Am. Maize‑Prods. Co., 185 F.3d 1341 (Fed. Cir. 1999) (availability of noninfringing substitutes can defeat lost‑profits awards)
- Gen. Elec. Co. v. Joiner, 522 U.S. 136 (1997) (expert must show a reliable connection between data and opinion)
- McClain v. Metabolife Int’l, Inc., 401 F.3d 1233 (11th Cir. 2005) (expert reliance on uncontrolled anecdotal data can render testimony unreliable)