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Sleekez, LLC v. Horton

United States District Court, D. Montana, Billings Division

January 8, 2018

SLEEKEZ, LLC, Plaintiff,
v.
HAL HORTON, doing business as Groom Ninja, Defendant.

          FINDINGS AND RECOMMENDATION OF U.S. MAGISTRATE JUDGE

          TIMOTHY J. CAVAN, UNITED STATES MAGISTRATE JUDGE.

         Plaintiff SleekEZ, LLC (“Plaintiff” or “SleekEZ”) brings this action against Defendant Hal Horton, doing business as Groom Ninja (“Defendant”), for misappropriation of trade secrets and other business torts relating to animal grooming products developed and sold by Plaintiff. (Doc. 57.)

         Judge Watters has referred the case to the undersigned under 28 U.S.C. § 636(b)(1)(B). (Docs. 10, 40.) Presently before the Court is Defendant's Motion in Limine to Exclude Testimony of James Winchell (Doc. 59), and Defendant's Motion for Summary Judgment (Doc. 61). The motions are fully briefed and ripe for the Court's review. (Docs. 60, 62, 67, 71, 72, 74.)

         Having considered the parties' submissions, the Court RECOMMENDS that Defendant's Motion in Limine to Exclude Testimony of James Winchell be DENIED, and Defendant's Motion for Summary Judgment be DENIED.

         I. BACKGROUND [1]

         Plaintiff SleekEZ is a business owned by Jennifer Tipton. (Doc. 9 at ¶ 3.) SleekEZ is in the business of developing, marketing, and selling custom-manufactured grooming tools for horses and other animals. (Id. at ¶ 4.) Defendant Hal Horton, doing business as Groom Ninja, sells a competing grooming tool. (Id. at ¶ 9; Doc. 69 at ¶ 3.)

         Mr. Horton and Ms. Tipton have had a long personal and professional relationship. They began dating in 2002, and were in a romantic relationship for approximately seven years. (Doc. 69 at ¶ 17.) After their romantic relationship ended in 2009, they continued a personal friendship. (Id. at 18.)

         In 2009, Ms. Tipton began developing the SleekEZ grooming tool. (Doc. 69 at ¶ 27.) Prior to developing the SleekEZ tool, Ms. Tipton was aware of a grooming tool called the Magic Stick, which appeared to be a hacksaw blade and a piece of wood. (Id. at ¶¶ 30-32.) Ms. Tipton studied the Magic Stick's features, and through a trial and error process, developed the SleekEZ tool, which she describes as a superior product that has a better handle, blade, and construction. (Id. at ¶ 32.) The SleekEZ tool is composed of a wooden handle, with an elongated blade slot along the length of the handle, and a blade. (Id. at ¶¶ 22-23.) A portion of the blade is recessed in the blade slot and secured within the slot with an adhesive. (Id. at ¶ 23.) The blade has teeth that form a wave configuration. (Id. at ¶ 24.) The handle of the SleekEZ tool is convex in shape and can be held using two hands. (Id. at ¶ 25.)

         Ms. Tipton began selling the SleekEZ grooming tool in 2010. (Id. at ¶ 28.) Sometime after 2012, Ms. Tipton hired Mr. Horton to work on sales and marketing for SleekEZ. (Id. at ¶ 11.) Although it is disputed whether he was actually an employee, it is undisputed that Mr. Horton was compensated by SleekEZ for his work. (Id. at ¶¶ 12, 13; Doc. 9 at ¶ 7.) Mr. Horton's relationship with SleekEZ was terminated in 2014. (Id. at ¶ 19.)

         After Mr. Horton left SleekEZ, he began selling a grooming tool called the Groom Ninja. (Doc. 69 at ¶ 1.) Like the SleekEZ, the Groom Ninja tool is comprised of three components. It has a wooden handle, a blade that can be described as a band saw or a hacksaw blade, and adhesive. (Id. at ¶ 5.) The handle of the Groom Ninja has a “C” shaped indentation on one side. (Id. at ¶ 7; 76.) Plaintiff claims Mr. Horton used trade secret information developed by SleekEZ in his production of the Groom Ninja. (Id. at ¶ 20.)

         Plaintiff uses multiple manufacturers and suppliers to produce the SleekEZ grooming tool. (Doc. 69 at ¶ 39.) Plaintiff has an exclusive contract with Diamond Saw, which is the company that supplies SleekEZ's blade component. (Id. at ¶ 40.) Aside from Diamond Saw, Plaintiff has not entered into formal written confidentiality agreements with any independent contractors, suppliers, wholesale customers, marketers, or manufacturers, with regard to the SleekEZ products that are currently on the market. (Id. at ¶ 42-43.) Mr. Horton does not use any of Plaintiff's manufacturers in his production of the Groom Ninja. (Id. at ¶ 48.)

         Plaintiff also did not have a written confidentiality agreement with Mr. Horton. Nevertheless, Plaintiff contends that Mr. Horton held a position of trust at SleekEZ due to his close personal relationship with Ms. Tipton, and that he knew the information he obtained was meant to be kept confidential. (Doc. 69 at ¶ 47.)

         Plaintiff initiated this action on February 16, 2016. (Doc. 1.) On May 12, 2017, an Amended Complaint was filed. (Doc. 57.) Plaintiff asserts claims for (1) misappropriation of trade secrets under Montana's Uniform Trade Secrets Act; (2) misappropriation of trade secrets under the Defend Trade Secrets Act; (3) tortious interference with business relations and prospective business relations; (4) breach of fiduciary duty; (5) conversion and civil theft; (6) preliminary and permanent injunction; (7) accounting; and (8) punitive damages. (Id.)

         On February 21, 2017, Plaintiff disclosed James Winchell as a damages expert, and produced his expert report. (Doc. 60-1 at 36-40; 65-73.)

         Defendant now moves to exclude the testimony of Mr. Winchell, and further moves for summary judgment on all of Plaintiff's claims. (Docs. 59, 61.)

         II. MOTION TO EXCLUDE TESTIMONY OF JAMES WINCHELL

         A. Legal Standard

         Federal Rule of Evidence 702 controls the admissibility of expert opinion testimony. It 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.

         “Although Rule 702 should be applied with a ‘liberal thrust' favoring admission, Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 588 (1993), it requires that ‘[e]xpert testimony be both relevant and reliable[.]'” Messick v. Novartis Pharm. Corp., 747 F.3d 1193, 1196 (9th Cir. 2014). The trial court acts as a gatekeeper by excluding evidence that does not meet standards of relevance and reliability. Id. “The relevancy bar is low, demanding only that the evidence ‘logically advances a material aspect of the proposing party's case.'” Id. (quoting Daubert, 43 F.3d at 1315). Expert opinion testimony “is reliable if the knowledge underlying it has a reliable basis in the knowledge and experience of the relevant discipline.” Primiano v. Cook, 598 F.3d 558, 565 (9th Cir. 2010). The trial court retains broad discretion to decide whether to admit expert testimony, and also retains “the same kind of latitude in deciding how to test an expert's reliability.” United States v. Hankey, 203 F.3d 1160, 1168 (9th Cir. 2000) (emphasis in original) (quoting Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 151 (1999)).

         The Court should screen out “unreliable nonsense opinions, but not exclude opinions merely because they are impeachable.” Alaska Rent-A-Car Inv. v. Avis Budget Grp., Inc., 738 F.3d 960, 969 (9th Cir. 2013) (finding the defendant's challenges to the plaintiff's expert's assumptions and comparisons went to the weight of the testimony and its credibility, not to admissibility). “Shaky but admissible evidence is to be attacked by cross examination, contrary evidence, and attention to the burden of proof, not exclusion.” Primiano, 598 F.3d at 564. See also Hangarter v. Provident Life & Acc. Ins. Co., 373 F.3d 998, 1017 n. 14 (9th Cir. 2004) (noting “the factual basis of an expert opinion goes to the credibility of the testimony, not the admissibility, and it is up to the opposing party to examine the factual basis for the opinion in cross-examination.”) (quoting Children's Broad. Corp. v. Walt Disney Co., 357 F.3d 860, 865 (8th Cir. 2004)).

         B. Discussion

         Plaintiff retained James Winchell to provide an opinion regarding the “economic loss to SleekEZ resulting from alleged use or sharing of SleekEZ's trade secrets, confidential information, intellectual property, data or business opportunities by Hal Horton d/b/a Groom Ninja.” (Doc. 60-1 at 65.) Mr. Winchell opined that Plaintiff's total damages for 2015 through June 30, 2017 are estimated to be $787, 908. (Id. at 66.) Mr. Winchell arrived at his conclusion by taking Defendant's sales revenues and applying Plaintiff's gross profit margin. (Id. at 67-68.)

         Defendant argues Mr. Winchell's opinion should be excluded because the opinion is based on the false assumption that Plaintiff would have captured 100% of Defendant's sales if the Groom Ninja tool was not for sale. Defendant argues this assumption is erroneous because there are numerous other competitors in the horse comb industry. Defendant also contends Mr. Winchell failed to do a market share analysis, and failed to consider Plaintiff's ability to scale her marketing and manufacturing.

         Plaintiff counters that it is entitled to damages for both actual loss and unjust enrichment caused by trade secrete misappropriation. Plaintiff maintains that Mr. Winchell testimony goes to both categories of damages, and that unjust enrichment does not require consideration of other competitors, market share, and scalability. Plaintiff also argues that ...


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