Dexon Comp., Inc. v. Cisco Sys., Inc.
Dexon Comp., Inc. v. Cisco Sys., Inc.
2023 WL 9648516 (E.D. Tex. 2023)
June 1, 2023
Baxter, J. Boone, United States Magistrate Judge
Summary
Defendant Cisco Systems, Inc. filed a motion to compel damages disclosures from Plaintiff Dexon Computer, Inc. in an antitrust lawsuit. The court denied the motion, finding that Dexon's initial and supplemental disclosures were sufficient for the current stage of the case and that Dexon has a continued obligation to supplement its responses under Rule 26.
Additional Decisions
DEXON COMPUTER, INC.
v.
CISCO SYSTEMS, INC. and CDW CORPORATION
v.
CISCO SYSTEMS, INC. and CDW CORPORATION
Case No. 5:22-cv-53-RWS-JBB
United States District Court, E.D. Texas, Texarkana Division
Filed June 01, 2023
Counsel
David Reichenberg, Matthew F. Bruno, Pro Hac Vice, Matthew Killan Hayden, Pro Hac Vice, Tina Lapsia, Manatt, Phelps & Phillips, LLP, New York, NY, Christian J. Hurt, Ty William Wilson, William Ellsworth Davis, III, Rudolph Fink, IV, The Davis Firm, PC, Longview, TX, for Dexon Computer, Inc.Aaron M. Panner, Alex Atticus Parkinson, Andrew Goldsmith, Caroline Schechinger, Chiseul Kylie Kim, Hilary Weaver, Pro Hac Vice, Leslie V. Pope, Pro Hac Vice, Ryan M. Folio, Daniel V. Dorris, Pro Hac Vice, Donald Chanslor Gallenstein, Geoffrey Block, Pro Hac Vice, Jonathan Liebman, Kellogg, Hansen, Todd, Figel & Frederick, P.L.L.C., Washington, DC, Deron R. Dacus, The Dacus Firm, PC, Tyler, TX, Gregg Costa, Gibson Dunn & Crutcher, Houston, TX, Jennifer Haltom Doan, Mariah Leigh Hornok, Haltom & Doan, Texarkana, TX, Louis Feuchtbaum, Lyndsey C. Heaton, Pro Hac Vice, Richard J. Nelson, Sideman & Bancroft LLP, San Francisco, CA, for Cisco Systems, Inc.
James Arthur Reeder, Jr., John Bruce McDonald, Pro Hac Vice, Jones Day, Houston, TX, Cole Alan Riddell, Jennifer Haltom Doan, Mariah Leigh Hornok, Haltom & Doan, Texarkana, TX, Danielle Leneck, Pro Hac Vice, Jones Day, Los Angeles, CA, Thomas York, Jones Day, Dallas, TX, for CDW Corporation.
Baxter, J. Boone, United States Magistrate Judge
ORDER
*1 The above-referenced cause of action was referred to the undersigned United States Magistrate Judge for pretrial purposes in accordance with 28 U.S.C. § 636. The following pending motion is before the Court:
Defendant Cisco Systems, Inc.'s Motion to Compel Damages Disclosures (Dkt. No. 141).
After considering the relevant briefing and hearing arguments of counsel on May 24, 2023, Cisco's motion is DENIED.
BACKGROUND
On April 27, 2022, Plaintiff Dexon Computer, Inc. (“Plaintiff” or “Dexon”) filed the above antitrust case against Defendant Cisco Systems, Inc. (“Cisco”) and Defendant CDW Corporation (“CDW”) (collectively, “Defendants”). Dkt. No. 1. Cisco requests the Court order Dexon to supplement its initial and supplemental damages disclosures (dated September 22 and October 24, 2022, respectively) to provide a “detailed computation” of the lost profits it seeks in this case. Dkt. No. 141.
LEGAL STANDARDS
Federal Rule of Civil Procedure 26(a)(1)(A) requires a party to include in its initial disclosures, “a computation of each category of damages claimed by the disclosing party -- who must also make available for inspection and copying as under Rule 34 the documents or other evidentiary material, unless privileged or protected from disclosure, on which each computation is based, including materials bearing on the nature and extent of injuries suffered.” FED. R. CIV. P. 26(a)(1)(A)(iii)). Furthermore, a party has a duty to supplement disclosures, “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 or in writing.... ” Realtime Data L.L.C. v. EchoStar Corp., No. 6:17-CV-00084-JDL, 2018 WL 6257472, at *1 (E.D. Tex. Nov. 15, 2018) (quoting FED. R. CIV. P. 26(e)(1)(A)).
To the extent a plaintiff fails to produce a computation of damages, the court may exclude evidence of damages under Rule 37(c)(1). See CQ, Inc. v. TXU Min. Co., L.P., 565 F.3d 268, 279-80 (5th Cir. 2009) (noting that plaintiff's initial disclosures “failed to properly disclose the ‘computations’ for the various ‘categories’ of damages it now complain[ed] of” and affirming the district court's decision to exclude new evidence of damages under Rule 37(c)). “Failure to provide damage computation documents may result in exclusion of damage calculation evidence or expert testimony regarding damage calculations at trial.” Lima LS PLC v. PHL Variable Ins. Co., No. 3:12CV1122-WWE, 2014 WL 2002485, at *1 (D. Conn. May 15, 2014) (quoting 6 Moore's Federal Practice, § 26.22[4][c][i]). Courts also recognize that eventual disclosure of information about damages through subsequent discovery may render a potential violation of the initial disclosure requirements harmless and not prejudice the defendant—therefore, not requiring the exclusion of evidence under Rule 37(c)(1). Realtime Data, 2018 WL 6257472, at *3 (citing cases).
DISCUSSION
*2 On September 22, 2022, in the early stages of this litigation, Dexon served Defendants with its initial disclosures pursuant to Rule 26(a)(1) and the Court's Discovery Order (Dkt. No. 65). With respect to computation of damages, Dexon disclosed the following:
The partial production of financial data by CDW to date is relevant to the damages claimed by Dexon in this action, and a detailed computation of damages will be provided upon designation of experts in accordance with the Court's Docket Control Order. In general, Dexon will be claiming damages in [the] form of lost profits due to the anticompetitive conspiracy of Cisco and CDW, as well as the monopolistic actions of Cisco.
Declaration of David H. Reichenberg (“Reichenberg Decl.”), Ex. 1 (Dkt. No. 155-2). On September 29, 2022, Cisco propounded an interrogatory requesting that Dexon identify all lost sales it claims, as well as the associated revenue and profit. Like Dexon's initial disclosures, its interrogatory response states that damages will be the subject of expert discovery.
On January 23, 2023, four months after Dexon's initial disclosures were served, Cisco requested a “computation” of Dexon's lost profits and the identification of supporting evidence. Dexon served its supplemental disclosure on March 17, 2023. Based on information available at that time, Dexon disclosed as follows:
[A]fter Cisco terminated Lubbock Emergency Communication District's (“Lubbock”) SmartNet service package because it purchased the five-year SmartNet package from Dexon, Dexon lost the opportunity and profits from being able to renew that contract with Lubbock. In addition, since Cisco threatened Lubbock that it would not service its equipment, Lubbock has ceased making purchases from Dexon in the Relevant Markets. Dexon does not presently have information sufficient to form a belief as to how much business Lubbock would have awarded it, in the absence of Cisco's misconduct, and Dexon's total damages will be appropriately estimated by its economic expert. Between 2019 and 2021, after Cisco's first instance of known anticompetitive conduct toward Targa Resources (“Targa”), Targa was forced to limit its purchases with Dexon, reducing total sales by one-half to two-thirds in those years, as compared to 2018. Thus, Dexon believes that it lost at least hundreds of thousands of dollars as a result of Cisco's misconduct toward Targa, and Dexon's total damages will be appropriately estimated by its economic expert.
Dexon estimates that it would have earned more than $1.3 million in revenue and $312,000 in profit had the Fort Bend Independent School District not cancelled its agreement with Dexon for IP phones as a result of Cisco's interference, and Dexon's total damages will be appropriately estimated by its economic expert. Dexon does not presently have information sufficient to form a belief as to how much business Asbury Automotive Group/Park Place Dealerships would have awarded it, in the absence of Cisco's misconduct, and Dexon's total damages will be appropriately estimated by its economic expert. Dexon believes that it lost at least $1.2 million in sales to West Penn Allegheny Health System because of the misconduct alleged in the Complaint.
Reichenberg Decl., Ex. 2 (Dkt. No. 155-3).
*3 Seeking more detail, Cisco moves the Court to order Dexon to its supplement its initial and supplemental damages disclosures to include the amount of knowable lost profits, Dexon's method for computing those claimed damages, and supporting evidentiary materials (if any). Dexon contends this is “its current damages theories and underlying facts based on what is presently available,” and that it “recognizes its continued obligation to supplement under Rule 26.” Dkt. No. 155 at 5. Dexon asserts its ability to further compute and quantify the extent of market-wide damages will account for Defendants' document and financial data productions, which require expert analysis. Dkt. No. 155 at 4.
At the hearing, Cisco admitted that Dexon's response has not yet impeded any non-party discovery to date, but that its main concern was that it would suffer prejudice if Dexon's future expert report on damages included information that Cisco would not have known to explore during discovery. See Dkt. No. 224 (Transcript) at 65:1-67:16. As explained, the Court will address any issue on that front, if it develops, at the appropriate time in the case.
In the meantime, Dexon's initial and supplemental damages disclosures are sufficient for the stage of the case, subject to Dexon's continued obligation under Rule 26 to supplement its responses. See Roane Cnty., Tennessee v. Jacobs Eng'g Grp., Inc., No. 3:19-CV-206-TAV-HBG, 2020 WL 5262250, at *2-3 (E.D. Tenn. Sept. 3, 2020) (finding sufficient an identification of “specific categories of claimed damages and generally explained the methodology to be used to calculate actual amounts”). Dexon has disclosed its current damages theory and provided a summary of the estimated profits lost from five customers. This level of basic information is sufficient “to assist the parties in focusing and prioritizing their organization of discovery.” Hesco Parts, L.L.C. v. Ford Motor Co., No. 3:02-CV-736-S, 2007 WL 2407255, at *2 (W.D. Ky. Aug. 20, 2007). By providing the general categories of claimed damages, in addition to the disclosure that such computation will rely upon the consultation of experts, Dexon has provided sufficient information to allow Defendants to “independently analyze” their damages claim at this time. Roane Cnty., Tennessee, 2020 WL 5262250, at *2. Based on the foregoing, it is
ORDERED that Defendant Cisco Systems, Inc.'s Motion to Compel Damages Disclosures (Dkt. No. 141) is DENIED.
SIGNED this the 1st day of June, 2023.