Softketeers, Inc. v. Regal W. Corp.
Softketeers, Inc. v. Regal W. Corp.
2021 WL 10312423 (C.D. Cal. 2021)
June 30, 2021
Holcomb, John W., United States District Judge
Summary
The court considered a motion in limine from the Defendants to exclude certain ESI from the trial. After considering the motion, opposition, and other documents, the court determined that the ESI was important to the case and must be considered in the trial. The court also determined that the jury was unlikely to draw negative inferences from the attempt to memorialize or renegotiate the contract with Softketeers in 2011 and 2018.
Additional Decisions
SOFTKETEERS, INC., Plaintiff,
v.
REGAL WEST CORPORATION dba Regal Logistics, Vu Ho Inc., Thai Tran Inc., Don Mai Inc., Randy Neeves, Vu Ho, Thai Quoc Tran, Don Mai, Trun Ngoc Doan, and Dong Bao Pham, Defendants.
Regal West Corporation D/b/a Regal Logistics, a Washington Corporation; Vu Ho Inc., a California Corporation; Thai Tran Inc., a California Corporation; Don Mai Inc., a California Corporation; Randy Neeves, an Individual; Vu Ho, an Individual; Thai Quoc Tran, an Individual; Don Mai, an Individual; Trung Ngoc Doan, an Individual; and Dong Bao Pham, an individual, Counterclaimants,
v.
Softketeers, Inc., a California corporation, and Minh Khai Nguyen, an individual, Counterdefendants
v.
REGAL WEST CORPORATION dba Regal Logistics, Vu Ho Inc., Thai Tran Inc., Don Mai Inc., Randy Neeves, Vu Ho, Thai Quoc Tran, Don Mai, Trun Ngoc Doan, and Dong Bao Pham, Defendants.
Regal West Corporation D/b/a Regal Logistics, a Washington Corporation; Vu Ho Inc., a California Corporation; Thai Tran Inc., a California Corporation; Don Mai Inc., a California Corporation; Randy Neeves, an Individual; Vu Ho, an Individual; Thai Quoc Tran, an Individual; Don Mai, an Individual; Trung Ngoc Doan, an Individual; and Dong Bao Pham, an individual, Counterclaimants,
v.
Softketeers, Inc., a California corporation, and Minh Khai Nguyen, an individual, Counterdefendants
Case No. 8:19-CV-00519-JWH (JDEx)
United States District Court, C.D. California
Signed June 30, 2021
Counsel
Michael I. Katz, Buchalter, A Professional Corporation, Irvine, CA, Erynn Leong Embree, Lannie Rex Sears, Maschoff Brennand Laycock Gilmore Israelsen and Wright PLLC, Irvine, CA, R. Parrish Freeman, Pro Hac Vice, Maschoff Brennan Laycock Gilmore Israelsen and Wright PLLC, Park City, UT, for Plaintiff.Christopher M. Bruno, Pro Hac Vice, Ian B. Brooks, Pro Hac Vice, McDermott Will and Emery LLP, Washington, DC, James M. Lockerby, Pro Hac Vice, Nicole M Jantzi, Pro Hac Vice, Paul M Schoenhard, Pro Hac Vice, Kristin M. Whidby, Pro Hac Vice, Fried Frank Harris Shriver and Jacobson LLP, Washington, DC, Sarah P. Hogarth, Pro Hac Vice, McDermott Will and Emery LLP, Washington, DC, Jason S. Kanterman, Pro Hac Vice, Fried Frank Harris Shriver and Jacobson LLP, New York, NY, Matthew J Hawkinson, Hawkinson Yang LLP, Los Angeles, CA, for Defendant Regal West Corporation., Dong Bao Pham.
Paul M Schoenhard, James M. Lockerby, Pro Hac Vice, Kristin M. Whidby, Pro Hac Vice, Nicole M Jantzi, Fried Frank Harris Shriver and Jacobson LLP, Washington, DC, Christopher M. Bruno, Pro Hac Vice, Ian B. Brooks, Pro Hac Vice, Sarah P. Hogarth, Pro Hac Vice, McDermott Will and Emery LLP, Washington, DC, Jason S. Kanterman, Pro Hac Vice, Fried Frank Harris Shriver and Jacobson LLP, New York, NY, Matthew J Hawkinson, Hawkinson Yang LLP, Los Angeles, CA, for Defendant Vu Ho Inc., Thai Tran Inc., Vu Ho, Thai Quoc Tran, Trung Ngoc Doan.
Don Mai Inc., Santa Ana, CA, Pro Se.
Sarah P. Hogarth, Pro Hac Vice, McDermott Will and Emery LLP, Washington, DC, for Defendant Don Mai Inc., Rand Neeves., Don Mai.
Holcomb, John W., United States District Judge
ORDER REGARDING PLAINTIFF'S MOTIONS IN LIMINE [ECF Nos. 541, 542, 552, 545, 546, 553, & 554] AND DEFENDANTS' MOTIONS IN LIMINE [ECF Nos. 531, 532, 535, 536, 537, & 551]
*1 Before the Court are seven motions in limine[1] filed by Plaintiff Softketeers, Inc. and Counterdefendant Minh Khai Nguyen (jointly, “Softketeers”) and six motions in limine filed by Defendants Regal West Corporation (“Regal”), Vu Ho Inc., Thai Tran Inc., Randy Neeves, Vu Ho, Thai Quoc Tran, and Trung Ngoc Doan (collectively, “Defendants”[2]).[3]
The parties are familiar with the factual and procedural background of this case. Accordingly, the Court relates only those facts germane to the instant Motions.
I. LEGAL STANDARD
A. Motions in Limine
Motions in limine are a well-recognized judicial practice authorized under case law. See Ohler v. United States, 529 U.S. 753, 758 (2000). The Court's power to rule on motions in limine stems from “the court's inherent power to manage the course of trials.” Luce v. United States, 469 U.S. 38, 41 n.4 (1984).
Regardless of its initial decision on a motion in limine, a court may revisit the issue at trial. See Fed. R. Evid. 103, advisory committee's note to 2000 Amendment (“Even where the court's ruling is definitive, nothing in the amendment prohibits the court from revisiting its decision when the evidence is to be offered.”); Luce, 469 U.S. at 41–42 (“[E]ven if nothing unexpected happens at trial, the district judge is free, in the exercise of sound judicial discretion, to alter a previous in limine ruling.”). “The Supreme Court has recognized that a ruling on a motion in limine is essentially a preliminary opinion that falls entirely within the discretion of the district court.” United States v. Bensimon, 172 F.3d 1121, 1127 (9th Cir. 1999) (citing Luce, 469 U.S. at 41–42).
B. Daubert Motions
Expert witness testimony is governed by Rule 702 of the Federal Rules of Evidence, which provides:
A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if:
(a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue;
(b) the testimony is based on sufficient facts or data;
(c) the testimony is the product of reliable principles and methods; and
(d) the expert has reliably applied the principles and methods to the facts of the case.
Fed. R. Evid. 702.
Rule 702 of the Federal Rules of Evidence should be applied consistent with the “liberal thrust” of the Federal Rules of Evidence and their “general approach of relaxing the traditional barriers to ‘opinion testimony.’ ” Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993) (citing Beech Aircraft Corp. v. Rainey, 488 U.S. 153, 169 (1988)). A trial court's “gatekeeping” obligation to admit only expert testimony that is both reliable and relevant is especially important “considering the aura of authority experts often exude, which can lead juries to give more weight to their testimony.” Mukhtar v. Cal. State Univ., 299 F.3d 1053, 1063–64 (9th Cir. 2002). Nevertheless, “[s]haky but admissible evidence is to be attacked by cross examination, contrary evidence, and attention to the burden of proof, not exclusion.” Primiano v. Cook, 598 F.3d 558, 564 (9th Cir. 2010).
*2 The trial court is accorded wide discretion when acting as a gatekeeper for the admissibility of expert testimony. Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 151–52 (1999). First, the court must determine if a witness has the required expertise, whether it be “knowledge, skill, experience, training, or education” under Rule 702(a) of the Federal Rules of Evidence. Fed. R. Evid. 402. Next, courts must ensure that “any and all scientific testimony or evidence admitted is not only relevant, but reliable.” Daubert, 509 U.S. at 589. The expert's opinion must be based on “scientific knowledge”; opinions based on unsubstantiated generalizations or opinions not derived by the scientific method must be excluded. Daubert, 43 F.3d at 1316.
II. DISCUSSION
A. Softketeers' Motions in Limine
1. Softketeers' Motion in Limine 1
Softketeers moves to preclude Defendants from introducing at trial any evidence or argument relating to Defendants' alleged damages in relation to their counterclaim.[4] Defendants' First Supplemental Initial Disclosures disclose Defendants' alleged wrongful enjoinment damages and attorneys' fees.[5] Softketeers argues that Defendants' timely expert reports on damages compute reliance, restitution, and unjust enrichment damages, but not wrongful enjoinment damages.[6] Softketeers alleges that Defendants served their expert report on enjoinment damages after the close of fact discovery.[7] Defendants oppose the exclusion of their damages calculations, contending that expert reports may be broader than initial disclosures and that the closure of fact discovery does not preclude the filing of expert damage reports.[8] Softketeers filed a reply in support of its motion.[9]
Rule 26(a)(1)(A)(iii) of the Federal Rules of Civil Procedure requires initial reports to contain “a computation of each category of damages claimed by the disclosing party.” Fed. R. Civ. P. 26(a)(1)(A)(iii). However, Rule 26 also contains a provision for supplementation: “A party who has made a disclosure under Rule 26(a) ... must supplement or correct its disclosure or response: (A) in a timely manner if the party learns that in some material respect the disclosure or response is incomplete or incorrect, and if the additional or corrective information has not otherwise been made known to the other parties during the discovery process ....” Fed. R. Civ. P. 26(e).
Defendants served their initial disclosures on June 7, 2019.[10] Defendants did not file a counterclaim until July 12, 2019.[11] Thus, Defendants could not have included in their initial disclosures the categories of damages pertaining to their counterclaim. Under the supplementation provision of Rule 26(e), Defendants had a responsibility to “supplement or correct its disclosures” unless “the additional or corrective information has not otherwise been made known to the other parties during the discovery process.” Fed. R. Civ. P. 26(e). Defendants supplemented their initial disclosures on or around February 11, 2020, without proposing additional categories of damages.[12] Not until May 4, 2020, did Defendants serve the report of their damages expert, Michele Riley, which finally identified the additional categories of damages.[13]
*3 Technically, then, Defendants notified Softketeers of their full damages calculations late. But Rule 37 allows this Court to excuse disclosure failures that are “harmless.” Fed. R. Civ. P. 37(c)(1). Softketeers argues that Defendants' failure to disclose its categories of damages in a timely manner was prejudicial because, in essence, Softketeers disagrees with those categories and might have pursued other lines of questioning had it understood Defendants' intended arguments.[14] Defendants' tardy disclosure can be rendered harmless in ways less drastic than barring Defendants from any recovery on their counterclaim: Softketeers may conduct one deposition pertaining to this issue. The Court will issue a separate order regarding discovery deadlines arising from this Order.
Furthermore, Defendants' transmission of an expert report regarding their wrongful enjoinment damages after the close of fact discovery qualifies as harmless under Rule 37: whether or not Defendants filed the expert report regarding wrongful enjoinment damages late, Softketeers has now had it for nearly a year and a half, but Softketeers identifies no prejudice.[15] The Court therefore DENIES Softketeers' Motion in Limine 1.
2. Softketeers' Motion in Limine 2
Softketeers moves to preclude Defendants from introducing at trial any evidence contained in Regal's general ledger but not included in its financial disclosures.[16] Softketeers alleges that Defendants failed to comply with an order requiring Regal to produce its general ledger; instead, Regal produced only higher-level summary reports.[17] Specifically, Softketeers alleges that Defendants produced information about Regal's 2020 performance only through their damages expert.[18] Defendants oppose, contending that they complied with the Financial Disclosure Order and that all relevant information has been disclosed.[19] Softketeers replied in support of its motion.[20]
Softketeers does not identify prejudice or harm resulting from the manner in which Defendants disclosed information concerning Regal's 2020 performance,[21] and Defendants have a reasonable explanation: they did so in order to provide up-to-date information.[22] To the extent that Defendants seek to introduce information contained in Regal's general ledger but not disclosed in the financial statements that Regal did produce, the Court GRANTS Softketeers' Motion in Limine 2. The Court otherwise DENIES Softketeers' Motion in Limine 2.
3. Softketeers' Motion in Limine 3
Softketeers moves to preclude Defendants from presenting at trial the testimony of, and an email from, Regal's Vietnamese software developer Khang Nguyen regarding the origins of the source code in Regal's possession.[23] Softketeers alleges that Defendants did not identify Khang Nguyen as a witness or an expert witness.[24] Softketeers additionally contends that Khang Nguyen's email is based upon Defendants' source code, which Defendants failed to produce.[25] Finally, Softketeers contends that both are hearsay.[26] Defendants oppose.[27] Softketeers replied in support of its motion.[28] The Court's February 10, 2021, order imposing sanctions renders this Motion moot.[29]
4. Softketeers' Motion in Limine 4
5. Softketeers' Motion in Limine 5
Softketeers moves to exclude approximately 250 computer files disclosed by Defendants in conjunction with a supplemental report by their expert, Zaydoon “Jay” Jawadi, after the deadline for expert disclosures.[33] Defendants oppose, contending that the files were produced when necessary to support Jawadi's rebuttal report.[34] Softketeers replied in support of its motion.[35]
As the Court discusses below,[36] Jawadi's opinion that Softketeers did not properly obfuscate its code may properly be characterized as a rebuttal expert opinion because it responds to, and was discovered in, the course of Defendants' investigation of the assumption of Softketeers' expert, Ronald Alepin, that Softketeers had properly protected its trade secrets. The computer files at issue in this motion, then, were not required to have been produced by the initial expert disclosure deadline. To the extent that the supplemental expert disclosures that these computer files underpin were untimely, the Court determines that allowing Softketeers to submit a sur-rebuttal expert report properly cures any prejudice.[37] Softketeers additionally may re-depose Jawadi. The Court will issue a separate order regarding discovery deadlines arising from this Order.
The Court therefore DENIES Softketeers' Motion in Limine 5.
6. Softketeers' Motion in Limine 6
Softketeers first argues that Defendants failed to disclose Jawadi as an expert witness in a timely manner.[41] Initial expert witness disclosures were due May 4, 2020; rebuttal expert witness disclosures were due May 26, 2020; and the expert discovery cutoff was June 5, 2020.[42] Defendants disclosed Jawadi's opinions on May 25, 2020, in connection with the rebuttal deadline.[43] Jawadi's expert declaration identifies and opines on topics that Jawadi believes Alepin should have discussed.[44] Softketeers argues that these portions of the Jawadi expert report should be excluded because they are not rebuttals to Alepin's expert report.[45]
*5 Rule 26(a)(2) requires a party to disclose a written report from each expert witness. Fed. R. Civ. P. 26(a)(2)(B). The advisory notes to Rule 26 explain that “in most cases the party with the burden of proof on an issue should disclose its expert testimony on that issue before other parties are required to make their disclosures with respect to that issue.” See Rule 26(a)(2) advisory committee's notes to 1993 amendment. Courts have interpreted this note to mean that “there should not be a rule prohibiting providing only rebuttal expert opinion on an anticipated portion of the opponent's case-in-chief”; rather, a party may respond to expert testimony on issues in which the opposing party bears the burden of proof through rebuttal expert testimony. TCL Commc'ns Tech. Holdings Ltd. v. Telefonaktenbologet LM Ericsson, 2016 WL 7042085, at *4 (C.D. Cal. Aug. 17, 2016) (citing Theoharis v. Rongen, 2014 WL 3563386 (W.D. Wash. July 18, 2014)). While Rule 26(a)(2)(D)(ii) requires those rebuttal expert reports to be on the “same subject matter” as the other party's initial disclosure, “nothing about Rule 26 or the nature of rebuttal prohibits offering independent opinions or utilizing other methodologies.” TCL Commc'ns Tech. Holdings Ltd., 2016 WL 7042085, at *4.
Jawadi's rebuttal report[46] comports with these standards. Alepin's expert report[47] compares Softketeers' source code with Defendants' source code in support of Softketeers' contention that Softketeers has authored[48]—and therefore owns—the source code in question, an issue on which Softketeers bears the burden of proof. Jawadi's rebuttal report performs the same analysis but comes to different conclusions—which necessarily involves identifying omissions in Alepin's export report.
Softketeers additionally argues that the portion of Jawadi's supplemental expert report alleging that Softketeers' source code was not obfuscated should be excluded as untimely and not in rebuttal.[49] This latter point is quickly disposed of: Softketeers bears the burden of proving that it properly protected its code as a part of its trade secret claim. As Defendants summarize, Alepin's expert report relies on this assumption; it is thus a proper topic for a rebuttal expert report.[50] Softketeers makes more headway with its argument that the supplemental Jawadi disclosures were untimely. But Defendants suggest a remedy more appropriate than the complete exclusion of this issue: allowing Softketeers to serve a sur-rebuttal expert report.[51]
Softketeers' remaining arguments attack Jawadi's testimony on Daubert grounds. Softketeers contends that some portions of Jawadi's testimony are unsupported.[52] Softketeers has had the opportunity to depose Jawadi on these topics, so these portions of Jawadi's testimony are best viewed as “[s]haky but admissible evidence [best] attacked by cross examination, contrary evidence, and attention to the burden of proof, not exclusion.” Primiano, 598 F.3d at 564.
Softketeers contends that several of Jawadi's opinions are unhelpful because they are not the product of Jawadi's analysis or are unmoored from the facts of the case.[53] Not so. Jawadi's opinions regarding the number of times various words appear in Softketeers' source code are not confusing; they may support Defendants' theories that Neeves directed production of the software. Jawadi need not opine that the source code was auto-generated or derived from Regal's software in order to criticize Alepin for failing to consider the same. Jawadi's opinion that the source code at issue was dictated by Regal's business logic and rules is admittedly not a strongly supported conclusion, but that weakness is best exposed by cross-examination, not by exclusion. Regal's admission that it did not decompile source code in no way precludes Jawadi from noting that the source code was not obfuscated, nor does it preclude Defendants from arguing that Softketeers failed to protect its trade secrets.[54] Finally, to the extent that Jawadi relies solely on Khang Nguyen's declaration for his saboteur theory, the Court has already determined that the issue is moot.
*6 The Court therefore DENIES Softketeers' Motion in Limine 6 in its entirety. Softketeers may submit a sur-rebuttal export report. The Court will issue a separate order regarding the deadline for Softketeers to serve this report.
7. Softketeers' Motion in Limine 7
Softketeers attempts the same two arguments throughout the motion: Riley's report should be excluded because Softketeers disagrees with either Defendants' legal conclusions or Riley's math. Neither of these grounds compels exclusion. It is improper for this Court “essentially [to] convert[ a] motion in limine into a motion for summary judgment.” Meyer Intell. Properties Ltd. v. Bodum, Inc., 690 F.3d 1354, 1378 (Fed. Cir. 2012). The Court therefore disregards arguments founded on claims about legal conclusions or on disagreement over the accuracy of Riley's methods. The Court discusses several of these arguments below for illustrative purposes. Softketeers, of course, may object to any legal conclusions that Riley may draw when she testifies at trial.
Second, Softketeers moves to exclude Riley's damages calculations because they are premised on an oral agreement, rather than the written transfer of ownership required by the Copyright Act.[59] This contention misapprehends Defendants' argument: Defendants' counterclaims are premised on a breach of an agreement to deliver software, not to transfer copyright ownership.[60] Softketeers may disagree with this argument. But Softketeers must prove the contents of the oral contract at the heart of this case at trial, not sideways through a motion in limine.
Third, Softketeers moves to exclude Riley's testimony because Softketeers disagrees with the way in which Riley calculated damages.[61] Softketeers claims that Riley should not be allowed to offer a reliance damages figure, because it contends that Defendants' claims do not merit reliance damages.[62] Defendants may not call Riley for her legal opinion that reliance damages are warranted. But Defendants may call Riley for her mathematical calculation of reliance damages if Defendants attempt to prove that reliance damages are warranted. Softketeers also claims that Riley should not be allowed to offer a restitution damages figure, because restitution is an inappropriate remedy.[63] Again, while Riley may not offer her legal opinion regarding the propriety of any certain damage calculation, Defendants are entitled to call her for her mathematical calculations. Softketeers' fraud and replacement arguments are similarly unsuccessful.[64]
*7 Fourth, Softketeers argues that Riley should not be allowed to opine with respect to damages related to the VB.NET software.[65] This contention appears to stem from a disagreement over whether the VB.NET software was “completed” such that it is covered by Defendants' counterclaim.[66] This issue is a factual dispute for the jury, not a barrier to entry for Defendants' damages expert. Similarly, Softketeers' criticism of Riley's calculation methods is an issue for cross-examination, not a reason to exclude the entire report.[67] This latter analysis applies also to Softketeers' criticism of Riley's calculation of breach-of-warranty damages.[68]
Fifth, Softketeers argues that Riley's opinions about Regal's 2020 performance should be excluded because Defendants did not produce Regal's general ledger.[69] As discussed supra, Softketeers did not identify prejudice from Regal's failure to produce this ledger in its stand-alone motion on the topic. Here, however, Softketeers contends that its expert attempted to forecast Regal's 2020 financial performance and that Riley should not be allowed to argue with that forecast.[70] Defendants allege that the general ledger “does not exist.”[71] Elsewhere, however, Defendants have acknowledged the existence of a general ledger.[72] The inconsistency of each party's arguments across the two sets of motions and oppositions is puzzling. It is Softketeers, however, who deserves the benefit of the doubt, as Defendants have already been sanctioned for withholding information during discovery by pretending that it does not exist.[73] The Court therefore GRANTS Softketeers' Motion in Limine 7 with respect to any discussion of Regal's 2020 profits and otherwise DENIES it.
B. Defendants' Motions in Limine
1. Defendants' Testimony Motion
Defendants move to exclude the testimony of Softketeers' damages expert, Scott Cragun, contending that Cragun miscalculated Softketeers' damages.[74] Softketeers opposes.[75] Defendants have replied in support of their motion.[76] This is a meaty, thorough motion, and the Court laments giving it short shrift. But this motion presents the same argument that the Court rejected from Softketeers:[77] that disagreement with the legal propriety of a certain category of damages is reason to exclude the calculation of those damages. The Court therefore DENIES Defendants' Testimony Motion.
2. Defendants' Motion in Limine 1
Defendants move to exclude “any mention or implication—via argument, testimony, evidence, or otherwise—regarding the existence, the import, or the substance of the preliminary injunction” in this case.[78] Defendants allege that any discussion of the preliminary injunction is irrelevant under Rule 402 of the Federal Rules of Evidence and unfairly prejudicial under Rule 403.[79] Softketeers opposes, arguing that the actions that Defendants took while the preliminary injunction was in place are relevant to its claims for trade-secret misappropriation.[80]
*8 The Court is sensitive to Defendants' argument that mention of the preliminary injunction may be prejudicial. As Defendants aver, the Court issued that preliminary injunction on a limited record.[81] Accordingly, as Defendants demonstrate, courts regularly grant motions to exclude at trial any mention of a preliminary injunction.[82] However, in these circumstances, the Court finds meritorious Softketeers' argument in opposition. Softketeers has plausibly alleged that Defendants misappropriated its software during the course of litigation; indeed, the Court has imposed issue sanctions to that effect.[83] The Court therefore DENIES Defendants' Motion in Limine 1. Additionally, the Court declines to bifurcate the trial, as Defendants have urged. Defendants may propose jury instructions aimed at curing any prejudice.
3. Defendants' Motion in Limine 2
Defendants move to preclude Softketeers from presenting any argument, evidence, or testimony at trial referencing any discovery dispute or other pretrial litigation dispute, including any reference to Defendants' counsel's withdrawal of their representation of Defendants Don Mai and Don Mai, Inc.[84]
Softketeers states that it does not intend to refer to Defendants' counsel's past representation of Defendants Don Mai and/or Don Mai, Inc.[85] Softketeers additionally represents that Don Mai is on its witness list.[86] Defendants respond that they do not oppose Softketeers calling Don Mai as a witness.[87] The Court therefore GRANTS Defendants' Motion in Limine 2 regarding the mention of Defendants' counsel's prior representation of Defendants Don Mai and/or Don Mai, Inc.
Once again, the Court appreciates Defendants' contention that discovery disputes are normally excluded from trial.[88] However, once again, this case is unique. Softketeers alleges not only that Defendants misappropriated Softketeers' trade secrets prior to the commencement of this action, but also that Defendants continued to do so through the pendency of litigation. Discovery disputes, here, are not mere sideshows to the central issue; they, in fact, tend to prove or disprove the central issue of this case. The Court therefore DENIES the remainder of Defendants' Motion in Limine 2.
4. Neeves' Motion in Limine 3
Neeves moves to exclude references to his personal and family wealth, including but not limited to a non-party temporary staffing agency named Sunrise Staffing, a group of companies that leases property referred to as the Rangar entities (collectively, “Rangar”), and the Neeves family trust.[89] First, Softketeers avers that it will not discuss the Neeves family trust at trial.[90] Neeves' Motion in Limine 3 is therefore GRANTED with respect to the Neeves family trust.
Additionally, Softketeers contends that it will introduce evidence regarding Rangar at trial only “if the defendants try to portray Softketeers's damages case as excessive.”[91] Neeves characterizes this response as a “non-opposition.”[92] The Court understands Neeves to be agreeing to Softketeers' terms and GRANTS Neeves' Motion in Limine 3 with respect to Rangar unless “defendants try to portray Softketeers's damages case as excessive.”
*9 The issue of Sunshine Staffing is more complex. Softketeers alleges that these figures are necessary to calculate the correct figure for its claim for disgorgement of profits and unjust enrichment, because Neeves has obfuscated that total by “running it through a side business.”[93] Softketeers alleges that Rangar leases warehouse space to Regal and that Sunrise Staffing is a temp agency whose sole client is Regal.[94] Softketeers contends that:
If Regal were not using Sunrise Staffing as a middleman[,] then the profit that Sunrise Staffing generates ... would either remain with Regal, in which case Softketeers could recover it from Regal, or would be paid out more directly to the Neeves brothers, in which case Softketeers could still recover Rand[y] Neeves's share from him.[95]
Neeves responds that Sunshine Staffing payments are speculative and, in any case, that the information is prejudicial because it will allow Softketeers to paint a picture of Neeves as a rich con man.[96]
Softketeers is correct that the information may be useful for calculating damages. Defendants are correct that the information may be prejudicial. Ultimately, the Court has thus far erred on the side of including all damages facts and calculations, even those that are somewhat shaky; the opposing party may explore and expose such “shakiness” through cross-examination at trial. The Court therefore DENIES the remainder of Neeves' Motion in Limine 3.
5. Regal's Motion in Limine 4
Regal moves to exclude any argument by Softketeers that Softketeers is entitled to all of Regal's profits in damages, contending that Softketeers' argument that all of Regal's profits are attributable to the software at issue is incorrect.[97] Softketeers opposes.[98] Regal has replied in support of its motion.[99] This is, in essence, a causation question: Softketeers must prove that all of Regal's profits are caused by its purported trade secret misappropriation in order to recoup those profits as damages.[100] As discussed supra § II.G, arguments about the legal propriety of certain types of damages are inappropriate for motions in limine. The Court therefore DENIES Regals' Motion in Limine 4.
6. Regal's Motion in Limine 5
This case has arisen because the parties did not memorialize their contract for software and software services. In 2011 and 2018, the parties attempted, without success, to do so.[101] Regal moves to exclude argument, evidence, or testimony concerning these negotiations as expressly inadmissible, irrelevant, and prejudicial.[102] Softketeers opposes.[103]
Regal first moves to exclude discussion of these contract negotiations under Rule 408 of the Federal Rules of Evidence,[104] which provides, in relevant part:
*10 Evidence of the following is not admissible—on behalf of any party—either to prove or disprove the validity or amount of a disputed claim or to impeach by a prior inconsistent statement or a contradiction:
(1) furnishing, promising, or offering—or accepting, promising to accept, or offering to accept—a valuable consideration in compromising or attempting to compromise the claim; and
(2) conduct or a statement made during compromise negotiations about the claim ....
Fed. R. Evid. 408(a). As Softketeers acknowledges,[105] Rule 408 may apply to settlement negotiations that took place prior to commencement of a lawsuit.
When determining whether such application is appropriate, “[t]he threshold question courts ask to determine whether a particular communication was part of a settlement negotiation is whether there was a live dispute between the parties at the time the communication was made.” Emelianenko v. Affliction Clothing, 2011 WL 13176755, at *15 (C.D. Cal. July 28, 2011) (emphasis in original); see also, e.g., Alpex Computer Corp. v. Nintendo Co., Ltd., 770 F. Supp. 161, 164 (S.D.N.Y. 1991) (“the point of threatened litigation [is] a clear cut-off point for the application of the Rule 408 privilege”) (internal citations and quotations omitted).
The 2011 and 2018 meetings were not the type of compromise meeting—where two sides are present in an attempt to find a middle ground between clearly-held and disputed legal positions—that the court excluded in Emelianenko. See Emelianenko, 2011 WL 13176755, at *16. Rather, as currently alleged,[106] they were ordinary business negotiations in which Regal presented Softketeers with a contract purporting to redefine their ongoing relationship, and Softketeers did not sign that contract.[107] The current claims over software ownership were not yet “disputed,” such that litigation was on the horizon; rather, Softketeers (in its view) simply declined to redefine the ongoing relationship.
Regal additionally argues that these contract negotiations are irrelevant and prejudicial.[108] Neither argument is successful. The central question of this lawsuit concerns the terms of the oral contract. Any attempts to memorialize or to define that understanding, then, are central to the resolution of this case. And that centrality outweighs the prejudice that Regal claims.[109] The Court therefore DENIES Regals' Motion in Limine 5.
III. CONCLUSION
For the reasons stated above, the Court hereby ORDERS as follows:
*11 1. Softketeers' Motion in Limine 1 [ECF No. 541] is DENIED.
2. Softketeers' Motion in Limine 2 [ECF No. 542] is GRANTED with respect to information contained in Regal's general ledger but not disclosed in financial statements. That Motion is otherwise DENIED.
3. Softketeers' Motion in Limine 3 [ECF No. 552] is DENIED as moot. moot.
4. Softketeers' Motion in Limine 4 [ECF No. 545] is DENIED as
5. Softketeers' Motion in Limine 5 [ECF No. 546] is DENIED.
6. Softketeers' Motion in Limine 6 [ECF No. 553] is DENIED.
7. Softketeers' Motion in Limine 7 [ECF No. 554] is GRANTED with respect to discussion of Regal's 2020 profits. That Motion is otherwise DENIED.
8. Defendants' Testimony Motion [ECF No. 551] is DENIED.
9. Defendants' Motion in Limine 1 [ECF No. 531] is DENIED.
10. Defendants' Motion in Limine 2 [ECF No. 532] is GRANTED with respect to the mention of Defendants' counsel's prior representation of Defendants Don Mai and/or Don Mai, Inc. That Motion is otherwise DENIED.
12. Regal's Motion in Limine 4 [ECF No. 536] is DENIED.
13. Regal's Motion in Limine 5 [ECF No. 537] is DENIED.
IT IS SO ORDERED.
Footnotes
Default has been entered with respect to Defendants Don Mai and Don Mai Inc., who did not participate in the filing of the instant motions. See Order Striking Def. Don Mai's Ans. [ECF No. 734].
Id. at 1:19-1:22 (citing Defs.' Rule 26(a)(1) First Supplemental Initial Disclosures (“Defendants' Initial Disclosures”) [Ex. A, ECF No. 541]).
Defs.' Answer to Am. Compl. and Countercls. [ECF No. 114].
Defendants' Initial Disclosures at 13.
Id. at 1:2-4 (citing Order Regarding Objections to the Special Master's Report (the “Financial Disclosure Order”) [ECF No. 517]).
Order on Defs.' Objections to Report and Recommendation of Special Master Regarding Softketeers, Inc.'s Mot. for Evidentiary and Issue Sanctions (“Issue Sanctions Order”) [ECF No. 693] (imposing the following issue sanction: “If you conclude that Regal's Vietnam-based developers used or had in their possession source code for the software at issue, then you must presume that the Vietnam-based developers received that source code from Regal.”).
Order Granting Softketeers, Inc.'s Ex Parte Application to Further Modify Expert Discovery Deadlines [ECF No. 405].
As Defendants note, Alepin's report appears to assume the fact of Softketeers' ownership – an assumption that Jawadi may necessarily rebut. (Softketeers' Motion in Limine 6 Opposition at 4-8.)
Defendants' Testimony Motion at 1:6-24.
Pl. and Counterdef.'s Opp'n to Defs.' Mot. to Exclude [ECF No. 591].
Defs.' Reply in Supp. of Defs.' Mot. to Exclude [ECF No. 606].
See generally Issue Sanctions Order.
Regal does not describe the meetings in detail in its motion.
Regal argues that the jury will draw negative inferences from the attempt to memorialize or renegotiate its contract with Softketeers in 2011 and 2018. Id. at 6:8-7:6. This seems unlikely to the Court; Regal is just as likely to succeed in arguing that these contract negotiations were attempts to memorialize extant conditions as Softketeers is likely to succeed in arguing that these negotiations are evidence of a shift in the contract.