accountant

Damages Expert Excluded for Failure to Do Independent Verification

Written on Thursday, June 17th, 2021 by Kimberly DelMonico
Filed under: Business Development for Experts, ExpertWitness, Working with Experts

A plaintiff damages expert has been excluded in a false advertising case under the Lanham Act for failure to do any independent verification of the plaintiff’s cost estimates.

The Dispute

Natera and CareDx are manufacturers of kidney transplant tests. Natera created an advertising campaign aimed at showing that its kidney transplant rejection test is superior to CareDx’s AlloSure organ transplant diagnostics.

CareDx sued Natera, claiming false advertising. CareDx argued, “Natera has begun a false advertising campaign designed to deceive doctors, healthcare professionals, insurance companies, and patients — as well as investors — into believing that Natera’s ‘me too’ test is superior to AlloSure when that has simply not been shown…Natera’s dissemination of false and misleading claims about AlloSure is an attempt to poison the marketplace and must be stopped.”

CareDx specifically accused Natera of one count of false advertising in violation of the Lanham Act, one count of trademark disparagement under the Lanham Act, one count of common law unfair competition, and one count of unfair or deceptive trade practices under Delaware law.

Lanham Act Damages

According to CareDx, under the Lanham Act, 15 U.S.C. § 1117(a)(2), “a successful false advertising plaintiff can recover the costs of any completed advertising that actually and reasonably responds to the defendant’s offending ads.”

CareDx presented James Malackowski as a damages expert at trial to establish the actual costs of corrective advertising spent in 2019 and the first half of 2020 and the projected costs of continued corrective advertising for the second half of 2020 and 2021. Malackowski did not perform independent analysis of the marketing spend. Instead, Malackowski relied solely on the CareDx Chief Executive Officer’s deposition testimony containing an estimate about what the company had spent on corrective advertising.

Natera moved to exclude CareDx’s proposed expert under Rule 702 and Rule 403 of the Federal Rules of Evidence. Federal Rule of Evidence 702 requires that an expert be qualified, reliable, and fit. Federal Rule of Evidence 403 allows a court to exclude relevant evidence “if its probative value is substantially outweighed by a danger of one or more of the following: unfair prejudice, confusing the issues, misleading the jury, undue delay, wasting time, or needlessly presenting cumulative evidence.”

The United States District Court for the District of Delaware agreed with Natera. The court determined that Malackowski’s corrective advertising opinions failed to meet all three requirements of Rule 702:

(1) The challenged opinions did not contain specialized knowledge outside a juror’s common understanding; therefore, they failed both the qualification and fit requirements.

(2) The challenged opinions were also unreliable. The expert’s efforts were limited to reading the CareDx CEO’s deposition, interviewing the CEO, and reviewing one SEC filing. The court noted that Malackowski failed to review ledgers, invoices, or interview any marketing or other personnel who could provide more specific data.

The court also noted that even if the challenged testimony were admissible under Rule 702, it should be excluded under Rule 403 as unfairly prejudicial, misleading to the jury, and needlessly presenting cumulative evidence.

The court excluded Malackowski’s testimony.

About Kimberly DelMonico

Kimberly DelMonico is a licensed attorney in New York and Nevada. She received her law degree from William S. Boyd School of Law at University of Nevada, Las Vegas and her undergraduate degree from New York University, where she studied psychology and broadcast journalism.

About Kimberly DelMonico

Kimberly DelMonico is a licensed attorney in New York and Nevada. She received her law degree from William S. Boyd School of Law at University of Nevada, Las Vegas and her undergraduate degree from New York University, where she studied psychology and broadcast journalism.