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Lauer v. NIC Industries, Inc.

United States District Court, W.D. Wisconsin

May 17, 2018

STEVEN M. LAUER d/b/a LAUER CUSTOM WEAPONRY, Plaintiff & Counter-Defendant
NIC INDUSTRIES, INC., Defendant & Counterclaimant.



         Steven Lauer d/b/a Lauer Custom Weaponry and NIC Industries, Inc. are competitors in the firearm finishing market.[1] Lauer is suing NIC in this lawsuit for false advertising under the Lanham Act and Wisconsin law. Following a stipulation by the parties, Lauer's remaining Lanham Act claims arise out of alleged statements that NIC made about the Cerakote Elite Series coating, and NIC's remaining Lanham Act counterclaim concerns alleged statements by Lauer concerning the post-UV exposure of the Cerakote Black product. (See dkt. #42 at 1-2.) This opinion will address and grant in part NIC's motion to strike the expert report of Brian R. Smith. (Dkt. #26.)[2]


         Lauer and NIC are competitors in the firearm finishing market. Before filing suit, Lauer sent a cease and desist letter to NIC in May 2017, demanding NIC “immediately cease and desist making false claims” that overstate the performance characteristics of its products. (Cease & Desist Letter (dkt. #28-2) 1.) In particular, the letter identified two representations about the Cerakote Elite Series coating that Lauer claimed “[i]ndependent testing” had shown to be inaccurate: that it “withstands (i) 8, 000 Taber abrasion wear cycles (ASTM D4060); and (ii) 3, 000 hours of corrosion resistance (ASTM B117).” (Id.) According to Lauer's letter, independent testing showed that the coating instead “withstands: (i) 4, 000 taber abrasion wear cycles . . .; and (ii) 185 hours of corrosion resistance.” (Id.) When NIC continued to claim its products achieved greater performance, this suit resulted.

         The court's preliminary pretrial conference order in this case required plaintiff to disclose its experts on or before February 9, 2018, and for the disclosures to comply with Rule 26(a)(2).[4] (Prelim. Pretrial Conference Order (dkt. #9) 2.) The order also provided that supplementation under Rule 26(e) must be: “limited to matters raised in an expert's first report”; “in writing”; and “served no later than five calendar days before the expert's deposition, or before the general discovery cutoff if no one deposes the expert.” (Id.)

         Lauer later produced a timely expert report by Brian R. Smith, the vice president of technology and business development for Assured Testing Services. (Smith Rpt. (dkt. #28-1) 1.) Assured Testing Services is an independent laboratory that “specializ[es] in the testing of coatings and their physical properties, corrosion resistance, weathering, and chemical resistance performance.” (Id.) Smith was retained to and did opine in writing about the accuracy of four of NIC's claims concerning the Cerakote H and Cerakote Elite Series coatings.


         Rule 26(a)(2)(B) details what must be included in an expert's written report: “a complete statement of all opinions . . . and the basis and reasons for them”; “the facts or data considered”; summary or supporting exhibits; the expert's qualifications, including publications from the past decade and prior expert experience in the past four years; and a compensation disclosure. Fed.R.Civ.P. 26(a)(2)(B). “Rule 26 is designed to avoid surprise and give the opposing party a full opportunity to evaluate the expert's methodology and conclusions and to respond appropriately.” Gicla v. U.S., 572 F.3d 407, 411 (7th Cir. 2009). If violated, exclusion under Rule 37 “is automatic and mandatory unless the sanctioned party can show that its violation of Rule 26(a) was either justified or harmless.” Salgado by Salgado v. General Motors Corp., 150 F.3d 735, 742 (7th Cir. 1998) (citing Finley v. Marathon Oil Co., 75 F.3d 1225, 1230 (7th Cir. 1996)). That said, Salgado recognizes that “less severe” sanctions are available, such as restricting an expert to testifying to the incomplete opinions contained in his report. Id. at 741 n.6.

         Defendant argues that the Smith Report should be struck under Rule 37 on three grounds: (1) it did not attach the exhibits on which Smith purports to rely; (2) the Smith Report does not support, but rather undermines plaintiff's claims; and (3) the Smith Report is a preliminary, not a final, report. Defendant's first argument requires little discussion. (See Pl.'s Opp'n (dkt. #37) at 3.) While this failure is a literal violation of Rule 26(a)(2)(B), defendant “readily” determined that the report was based on previous testing, the reports of which plaintiff had already produced in discovery. (See Mot. Strike Br. (dkt. #27) 3.) Defendant having been prejudiced in no discernable way by this technical violation, striking the report would obviously be too harsh a sanction.

         Next, defendant argues that the Smith Report “undermines” plaintiff's claims. More specifically, defendant argues the Smith Report is inadequately or improperly supported, “predicated upon assumptions and unknowns, ” and relies on unreliable prior testing. (Id. at 9.) Most of these concerns were obviated by the parties' stipulation to dismiss certain claims with prejudice.[5] (See Stipulation (dkt. #42) 1.) As to the remaining claims, Smith opines that:

• “To [his] knowledge based on the reports reviewed no samples were tested to 8, 000 cycles therefore it is not possible to address the claim given the data available from previous testing.”
• The earlier testing results are “not directly comparable to results obtained by Assured or those posted on NIC Industries' website.”
• “Based on the Assured Testing Services' TR 14006A test results . . . where all samples exhibited some rust at approximately 500 hrs, Product ‘1' or ‘2' samples are not compliant to the 3, 000 hr claim of withstanding ASTM B117 Salt Spray without red rust.”
• “Regarding the results in the Touchstone Testing Laboratory LLC (TTL) report 20284, . . . the (apparent) Cerakote Elite samples are not compliant with the 3, 000 hr claim of withstanding ...

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