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Grove U.S. LLC v. Sany America Inc.

United States District Court, E.D. Wisconsin

February 28, 2019

GROVE U.S. LLC, Plaintiff,
v.
SANY AMERICA INC. and SANY HEAVY INDUSTRY CO., LTD., Defendants.

          DECISION AND ORDER

          William C. Griesbach, Chief United States District Judge.

         Plaintiff Manitowoc Cranes LLC, now Grove U.S. LLC, initiated this lawsuit against Defendants Sany America Inc. and Sany Heavy Industry Co. Ltd. (collectively, Sany), asserting claims of patent infringement and misappropriation of trade secrets. See Case No. 13-C-677. The court stayed proceedings in the case on July 17, 2013, pending resolution of an investigation by the United States International Trade Commission (ITC). Manitowoc filed a second action against Sany on May 28, 2015, asserting a claim for tortious interference with contract. See Case No. 15-C-647. The court consolidated the cases on November 18, 2015, and continued the stay pending the resolution of the ITC proceedings. On December 7, 2016, the parties notified the court of the conclusion of the ITC proceedings and the resulting appeal. The ITC unanimously found that Sany had violated the Tariff Act by misappropriating Manitowoc's protectable trade secrets and infringing one of Manitowoc's patents, and entered both a limited exclusion order and a cease and desist order. ECF Nos. 66-3, 66-4. The ITC's decision was affirmed by the United States Court of Appeals for the Federal Circuit.

         On December 20, 2016, the court lifted the stay and reopened the consolidated case. Manitowoc subsequently filed an amended complaint asserting only state law misappropriation of trade secrets and tortious interference with contract claims against Sany, over which this court has jurisdiction under 28 U.S.C. § 1332. Manitowoc also sought to recover damages that were not available in the proceedings before the ITC. Manitowoc then filed a motion for partial summary judgment, urging the court to adopt the ITC's findings regarding the misappropriation of Manitowoc's trade secrets and enter summary judgment against Sany's declaratory judgment counterclaims. On December 11, 2017, the court partially granted the motion to the extent that it found Sany liable for trade secret misappropriation under Wisconsin law. But the court allowed Sany to assert certain counterclaims against Manitowoc. ECF No. 81. The case is before the court on the parties' motions to exclude expert opinions. Manitowoc seeks to exclude certain opinions made by Daniel McGavock, and Sany seeks to exclude Brian Napper's opinions in their entirety. For the following reasons, both motions will be partially granted.

         SUMMARY OF DAMAGES OPINIONS

         Manitowoc has named Brian Napper, a Senior Managing Director for FTI Consulting, Inc., as an expert witness who will offer opinions at trial on the damages associated with the misappropriation of trade secrets and tortious interference with contract by Sany. Napper's report identifies six separate categories of damages under two general headings he intends to address. Under the heading “Manitowoc Actual Damages, ” Napper lists (1) Manitowoc's “Incremental Performance Improvement Programs Expenses” (PIPS); (2) its “Incremental Legal Expenses;” and (3) its “Incremental Security Expenses.” ECF No. 118-1 at 9.

         PIPS expenses arise from the fact that in response to Sany's introduction of the SCC8500 crane to the market, Manitowoc contends it was forced to accelerate development of the Manitowoc MLC-650 and the Manitowoc MLC-300 cranes. This reduced the time Manitowoc would normally use to perform the type of prototype testing that would allow it to identify minor problems that would have been corrected before production is under way and the cranes reach the field. As a result of Sany's misappropriation of its trade secrets, Manitowoc contends, it incurred additional performance improvement costs for its MLC-300 and MLC-650 cranes. These, along with Manitowoc's incremental legal expenses related to the ITC proceedings, which it claims were incurred in an effort to mitigate its damages caused by Sany's misappropriation, and its incremental security costs, which it incurred after the misappropriation to prevent any further misappropriation, constitute Manitowoc's actual damages, which amount to $12, 945, 124.

         In addition to its actual damages, Manitowoc contends that it is entitled to recover the amount by which Sany was unjustly enriched by the misappropriation. Under this heading, Napper lists (1) the amount of research and development costs Sany avoided from not adapting its 6500WE and/or 4800WE cranes for the United States market; (2) the amount of research and development costs Sany saved by using Manitowoc's trade secrets in developing the SCC8500 crane; and (3) the amount of incremental profit that Sany anticipated it would have generated at the time closest to the misappropriation, measured as Sany's Economic Value Added (EVA). Napper concluded Sany's unjust enrichment ranged from $73, 976, 693 to $111, 875, 507.

         Sany's damages expert, Daniel McGavock, challenges the assumptions and methodologies underlying each category of damages Napper has identified. He opines that Napper has failed to demonstrate any actual damages to Manitowoc. In particular, he concludes that Manitowoc has not established any lost sales of the MLC-650 or MLC-300 due to Sany's misappropriation of the trade secrets at issue, that there should be no damages awarded for Manitowoc's incremental PIPS expenses or for Manitowoc's security expenses, and that Manitowoc's incremental legal expenses should be reduced by at least $1, 700, 000-the amount of Manitowoc's patent-related fees. McGavock states that, assuming liability based on the ITC's findings and adopting Manitowoc's position that the SCC8500 would not exist in the absence of the misappropriation of trade secrets, Sany's actual profits on the sale of SCC5000E cranes derived from the SCC8500 prototype cranes is $1, 723, 246. Alternatively, he opines that Sany's unjust enrichment based on avoided costs associated with actual use of the trade secrets ranges from $1, 283, 852 to $1, 533, 488.

         LEGAL STANDARD

         “The admissibility of expert testimony is governed by Federal Rule of Evidence 702 and the Supreme Court's opinion in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993).” Lewis v. Citgo Petroleum Corp., 561 F.3d 698, 705 (7th Cir. 2009). Rule 702 permits a witness “who is qualified as an expert by knowledge, skill, experience, training or education” to 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. “Expert testimony is admissible when the testimony is reliable and would assist the trier of fact to understand the evidence or determine a fact at issue in a case.” Lewis, 561 F.3d at 705 (citation omitted). “The proponent of the expert bears the burden of demonstrating that the expert's testimony would satisfy the Daubert standard” by a preponderance of the evidence. Id. A district court has “wide latitude in performing its gate-keeping function and determining both how to measure the reliability of expert testimony and whether the testimony itself is reliable.” Lapsley v. Xtek, Inc., 689 F.3d 802, 804 (7th Cir. 2012) (citation omitted). The rule on expert testimony is liberal, and doubts about the usefulness of an expert's testimony are generally ...


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