Fail–safe v. A.O. Smith Corp..

• Decision Date: 23 December 2010
• Docket Number: Case No. 08–CV–310.
• Parties: FAIL–SAFE, L.L.C., Plaintiff,v.A.O. SMITH CORPORATION, Defendant.
• Court: U.S. District Court — Eastern District of Wisconsin

744 F.Supp.2d 870

FAIL–SAFE, L.L.C., Plaintiff,

v.A.O. SMITH CORPORATION, Defendant.

Case No. 08–CV–310.

United States District Court, E.D. Wisconsin.

Dec. 23, 2010.

George Stephen Long, Nicole A. Westbrook, Reid A. Page, Gretchen E. Lipman, Cash K. Parker, Polsinelli Shughart PC, Denver, CO, John R. Schreiber, Patrick G. McBride, Gregory W. Lyons, O'Neil Cannon Hollman DeJong & Laing SC, Milwaukee, WI, for Plaintiff.J. Donald Best, Michael Best & Friedrich LLP, Madison, WI, Melanie J. Reichenberger, Richard H. Marschall, S. Edward Sarskas, Michael Best & Friedrich LLP, Milwaukee, WI, for Defendant.

ORDER

J.P. STADTMUELLER, District Judge.

On November 24, 2010, this court issued a trial scheduling order in this matter, with the goal of resolving a case that has been pending on this court's docket for nearly three years. (Docket # 204). The court set a trial date of January 24, 2011, and invited the parties to submit early motions in limine. Heeding the court's invitation, on December 6, 2010, the defendant, A.O. Smith Corporation (“AOS”), filed a motion in limine (“first motion in limine ” OR “ Daubert motion”) to exclude certain expert testimony and to exclude testimony regarding future damages, a renewal of an earlier motion before the court. (Docket # 205). The following day AOS filed another motion in limine (“second motion in limine ”) to exclude certain portions of the same testimony Fail–Safe, L.L.C. (“FS”) wishes to present for reasons separate from the first motion in limine.¹ (Docket # 216). The court addresses the first motion in limine in this order with the hope of clarifying issues for the parties before the trial occurs.²

In deciding the motion in limine, the court broadly notes that federal courts have the power to exclude evidence in limine pursuant to the inherent authority of a court to manage trials. Luce v. United States, 469 U.S. 38, 41 n. 4, 105 S.Ct. 460, 83 L.Ed.2d 443 (1984). The court notes that motions in limine are frequently directed “toward limiting the subjects about which testimony may be offered, or about which particular witnesses may testify.” 3–16 Moore's Federal Practice—Civil § 16.77. The court will exercise its discretion, noting the important function of the motion in limine, namely that it permits the court to eliminate from further consideration evidence that clearly should not be presented to the jury. See Jonasson v. Lutheran Child and Family Serv., 115 F.3d 436, 440 (7th Cir.1997). However, if the evidence cannot be evaluated accurately or sufficiently by the court in such a procedural context, it may be necessary to defer rulings until trial. Id. Having said that, such a determination depends on the specific context of the motion and does not exist as a matter of right for a given party. Id.

I. PLAINTIFF'S ENTITLEMENT TO A JURY TRIAL

Before addressing the substance of the first motion in limine, the court will determine the matter of whether FS is entitled to a jury trial, an issue on which the court requested additional submissions from the parties. (Docket # 230). The parties' filed simultaneous briefs on December 17, 2010 (Docket # 231, # 232), with opposite conclusions: the plaintiff maintains that it is “entitled to a jury trial under the Seventh Amendment,” (Pl.'s 12/17/10 Br. at 11), whereas the defendant argues that FS is “not entitled to a jury trial” on its remaining claim. (Def.'s 12/17/10 Br. at 1). Given that the matter of entitlement to a jury trial is now disputed, the matter is best resolved at the outset.

The court begins by noting broadly the Supreme Court's familiar quote that the “maintenance of the jury as a fact-finding body is of such importance and occupies so firm a place in our history and jurisprudence that any seeming curtailment of the right to a jury trial should be scrutinized with the utmost care.” Beacon Theatres, Inc. v. Westover, 359 U.S. 500, 501, 79 S.Ct. 948, 3 L.Ed.2d 988 (1959). The right to a jury trial in a civil matter stems from the Seventh Amendment of the United States Constitution, which preserves the right to a jury trial in “suits at common law.” “To determine whether a particular action will resolve legal rights,” as opposed to an equitable claim, a court must examine: (1) the nature of the issues involved, comparing the action to “18th century actions brought in the courts of England prior to the merger of the courts of law and equity”; and (2) “the remedy sought,” determining whether “it is legal or equitable in nature.” Chauffeurs, Teamsters & Helpers, Local No. 391 v. Terry, 494 U.S. 558, 565, 110 S.Ct. 1339, 108 L.Ed.2d 519 (1990).

With respect to the first issue, there is no simple answer to the exact nature of the modern unjust enrichment claim. Compare Fotta v. Trustees of the UMW Health & Ret. Fund of 1974, 165 F.3d 209, 213–14 (3d Cir.1998) ( “Restitution—the traditional remedy for unjust enrichment—is widely, if not universally, regarded as a tool for equity”) and 8–38 Moore's Federal Practice—Civil § 38.31 (“Restitution is [an] equitable remedy affording no right to [a] jury trial”) with Great–West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 212, 122 S.Ct. 708, 151 L.Ed.2d 635 (2002) (“[N]ot all relief falling under the rubric of restitution is available in equity.”). As the Seventh Circuit noted in Medtronic, Inc. v. Intermedics, Inc., 725 F.2d 440 (7th Cir.1984), “the origins of unjust enrichment are both legal and equitable.” Id. at 443. Ultimately, the court finds that FS's claim sounds in quasi-contract: FS claims it provided a benefit to AOS under circumstances that AOS's retaining of the benefit would be unjust. Such a claim is premised on the legal fiction that the person receiving the benefit had promised to pay for it. See Restatement of Restitution § 5(a) (1937). “Claims for quasi-contract arose and developed under the common law writ of assumpsit and, as a result, were historically brought in the courts of law.” Fischer Imaging Corp. v. Gen. Elec. Co., 187 F.3d 1165, 1172 (10th Cir.1999). As such, the court holds that, irrespective of how unjust enrichment claims are commonly referred to as in Wisconsin case law, in this case, the nature of the issues involved are legal in nature.

Moreover, the court finds that the remedy sought is legal in nature, as well. FS is seeking disgorgement of the benefit FS allegedly provided to AOS. While typically damages are equitable in actions for disgorgement of improper profits, Terry, 494 U.S. at 570, 110 S.Ct. 1339, the court is guided by dicta in the case of First Nat'l Bank v. Warren, 796 F.2d 999 (7th Cir.1986), where the Seventh Circuit described the disgorgement remedy as legal in nature when a “plaintiff seeks money for its own coffers.” Id. at 1000. Such is the situation in this matter, and the court finds that, given the dicta in First Nat'l Bank, the Seventh Circuit would likely conclude that the remedy sought in this matter is legal in nature. As a consequence, the court holds that FS is entitled to a jury trial on its unjust enrichment claim.

II. THE DAUBERT MOTION

With the jury trial issue resolved, the court moves to an extended discussion of the defendant's pending motion in limine to: (1) precluding FS “from presenting any testimony, opinions or argument that references or relies on future sales of the Guardian”; and (2) excluding Dr. Warren Keegan (“Keegan”) and Mr. Shawn Fox (“Fox”) from testifying with regard to damages for future profits.³ (Docket # 207). The defendant's brief in support of its motion reveals that the motion raises what the court views as three distinct issues that the court must address. First, AOS argues that the proposed testimony of both Dr. Keegan and Mr. Fox regarding the damages for the unjust enrichment claim are unreliable. Second, the defendant contends that any testimony regarding references to AOS's potential future sales respecting the Guardian, an AOS product, do not assist the trier of fact. Third, AOS argues that even if the testimony would somehow assist the jury, the prejudicial effects of hearing the evidence far outweighs the probative value of the evidence. However, before examining the legal efficacy of the defendant's motion, the court first looks to the expert reports and relevant deposition testimony that form the basis of precisely what FS's two experts are prepared to testify regarding. See Fed.R.Civ.P. 26(a)(2)(B)(i) (requiring that the expert report contain “a complete statement of all opinions the witness will express and the basis and reasons for them”) (emphasis added).

A. The Proposed Testimony

FS has proffered two experts to discuss the issue of damages for the unjust enrichment claim: (1) Dr. Keegan; and (2) Mr. Fox.

1. Dr. Keegan's Testimony

The court reviews Dr. Keegan's testimony, looking at his two expert reports and his deposition testimony.

a. Dr. Keegan's November 3, 2009 Report

According to his initial expert report dated November 3, 2009 (Docket # 214–3),⁴ Dr. Keegan, who possesses a Masters in Economics from Kansas State University and an M.B.A. and a doctorate from the Harvard Business School, teaches at Pace University in New York City. Id. at 1. The witness has taught for over forty years at various business schools and has founded a consulting firm, in which context he has served as an expert “on a variety of issues in federal and state courts.” Id. at 2. Dr. Keegan's initial report begins by examining the pool and spa industry and the role of AOS within that industry. Id. at 3–4. Specifically, the witness discusses the growing public interest in equipping pools with safety devices, including Safety Vacuum Release System (“SVRS”) equipped motors, that prevent pool suction entrapment. Id. at 3–4. Dr. Keegan also notes AOS's prominent role in the pool industry, citing to internal AOS documents to support the claim that the defendant “holds approximately 95 percent and 51 percent ... market share” in the swimming pool and the hot tub pump market....