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Speedfit LLC v. Woodway USA, Inc.

United States District Court, E.D. New York

January 9, 2020

SPEEDFIT LLC and AUREL A. ASTILEAN, Plaintiffs,
v.
WOODWAY USA, INC., Defendant.

          MEMORANDUM & ORDER

          KIYO A. MATSUMOTO UNITED STATES DISTRICT JUDGE

         Plaintiffs Speedfit LLC (“Speedfit”) and Aurel A. Astilean (“Astilean”) (collectively, “plaintiffs”) commenced th instant action against Woodway USA, Inc. (“Woodway” or “defendant”), alleging that Woodway wrongfully infringed upon United States Patent No. 8, 308, 619 (the “‘619 Patent”) and United States Patent No. 8, 343, 016 (the “‘016 Patent” and together with the ‘619 Patent, the “Patents-in-suit”), both of which are owned by Speedfit and relate to a curved, non-motorized treadmill involving a closed-loop treadmill belt designed to maintain a concave running surface and taut lower portion. (ECF No. 150, Supplemental Complaint (“Supp. Compl.”) ¶¶ 18-21.)

         Before the court are defendant's motions in limine, served October 4, 2019, to preclude fifteen categories of evidence from the parties' impending trial. (ECF No. 290, Def.'s Memorandum of Law in Support of its Motions in Limine, (“Mot.”).) Plaintiffs served their opposition on October 18, 2019, contesting the majority of defendant's motions in limine, (ECF No. 293, Memorandum of Law in Opposition to Defendant's Motion in Limine (“Opp.”)), and defendant served its reply on November 1, 2019. (ECF No. 297, Defendant's Reply Memorandum of Law (“Reply”).

         In an earlier order, the court issued a Memorandum and Order granting in part, and denying in part, the parties' cross-motions for summary judgment. (ECF No. 314, Memorandum & Order Granting in Part and Denying in Part Defendant's Motion for Summary Judgment and Denying Plaintiffs' Motion for Summary Judgment in its Entirety (“Sum. J. Order”).) In pertinent part, the Summary Judgment Order granted defendant's motion for summary judgment as to the Supplemental Complaint's claims for patent infringement, breach of contract, and constructive trust, and dismissed those causes of action accordingly. (Id.) The court, however, determined that genuine disputes of material fact existed with respect to plaintiffs' unjust enrichment claim, and denied both parties' motions for summary judgment on unjust enrichment. (Id. 65-72.) Thus, the court will deem moot any motions in limine that seek to preclude evidence that is relevant solely with respect to dismissed claims, i.e. patent infringement, breach of contract, and constructive trust. Consequently, the court will consider each motion in limine in turn, and clarify whether the motion is granted, denied, or considered moot.

         BACKGROUND

         Plaintiff Speedfit, founded by plaintiff Astilean and co-inventor Dan Bostan, who is not joined in this action, is a New York-based company that develops fitness programs and equipment. (Supp. Compl. ¶¶ 8-9.) Defendant Woodway is a Wisconsin-based corporation that designs, manufactures, and sells fitness and exercise products, including non-motorized treadmills with a curved running surface. (Id. ¶ 10.)

         Familiarity with the factual and procedural history of this matter is assumed, as set forth comprehensively in this court's prior orders concerning this litigation. See Speedfit LLC, et. al. v. Woodway USA, Inc., 53 F.Supp.3d 561 (E.D.N.Y. 2014) (denying Woodway's motion to dismiss and motion to transfer); Speedfit LLC, et. al. v. Woodway USA, Inc., No. 13-CV-1276, 2015 WL 6143697 (E.D.N.Y. Oct. 19, 2015) (granting leave to file a Third Amended Complaint); Speedfit LLC, et. al. v. Woodway USA, Inc., 226 F.Supp.3d 149 (E.D.N.Y. 2016) (granting in part and denying in part Woodway's motion to dismiss Third Amended Complaint); Speedfit LLC, et. al. v. Woodway USA, Inc., No. 13-CV-1276, 2017 WL 5633113 (E.D.N.Y. Nov. 20, 2017) (construing claim term “means for slackening”); Speedfit LLC, et. al. v. Woodway USA, Inc., No. 13-CV-1276, ECF No. 314 (E.D.N.Y. Jan. 9, 2020) (granting and denying in part defendant's motion for summary judgment and denying plaintiffs' cross-motion for summary judgment in its entirety).

         As noted above, the Summary Judgment Order dismissed plaintiffs' claims, with the exception of plaintiffs' claim for unjust enrichment arising under New York State law. The court determined that the Patents-in-suit were rendered invalid by prior art, vitiating plaintiffs' claim for patent infringement. (Sum. J. Order 27-41.) Consequently, the court granted defendant's motion for summary judgment with respect to plaintiffs' patent infringement claim, which, naturally, also mandated a denial of plaintiffs' motion seeking summary judgment as to patent infringement. (Id. 51.)

         The court also granted defendant's motion for summary judgment on two of plaintiffs' state law claims. Plaintiffs' breach of contract claim was deemed waived and abandoned based on plaintiffs' admission that the purportedly written confidentiality agreements did not exist, and the court further found that any asserted oral agreement necessarily failed for indefiniteness. (Id. 59-65.) Defendant's motion was granted on plaintiffs' claim for constructive trust under New York state law, based on the lack of evidence of the requisite relationship between plaintiffs and defendant that could have sustained the constructive trust claim and remedy. (Id. 72-77.)

         The court denied both parties' motions for summary judgment with respect to the Supplemental Complaint's unjust enrichment claim. The court first rejected defendant's contention that the Statute of Frauds' one year rule, see N.Y. Gen. Oblig. Law § 5-701(a)(1), mandated dismissal of plaintiffs' unjust enrichment claim. (Id. 65-69.) The court found that plaintiffs' unjust enrichment claim did not circumvent the Statute of Frauds because plaintiffs never had an oral or written contract with defendant in the first place, and therefore, the Statute of Frauds was inapplicable ab initio. (Id.) The court denied plaintiffs' motion for summary judgment as to unjust enrichment liability because the record raised genuine issues of triable fact and a jury could reasonably find that Woodway was able to develop and market the accused curved, non-motorized treadmills without plaintiffs' contribution. (Id. 69-72.) Plaintiffs' motion for unjust enrichment damages was consequently denied without prejudice as premature. (Id. 72.)

         The court has construed plaintiffs' theory of unjust enrichment as follows: Astilean and Speedfit disclosed a wooden prototype of a curved, non-motorized treadmill (“Wooden Prototype”) to Woodway's CEO Doug Bayerlein in 2008; Bayerlein and his team at Woodway then relied on Astilean's input and know-how to develop the Speedboard 2; the Speedboard 2 ultimately became the Curve, part of the Woodway Legacy Treadmill product line; the Curve and other Woodway Legacy Treadmills, which were developed, at least in part, using Astilean's contribution of time, technical knowledge, and effort, were sold in the market and resulted in profits for Woodway; Astilean and Speedfit, however, did not receive any portion of these profits.

         Ultimately, what remains of the case boils down to whether Woodway was enriched at plaintiffs' expense, a question of fact that turns principally on how much weight a jury assigns to Astilean and Speedfit's contribution, if any, to the Speedboard 2/Curve model that was introduced at the IHRSA trade show in 2009; whether that contribution, if any, benefitted plaintiffs; and whether, and to what extent, it would be unjust for defendant to retain any benefit conferred by plaintiffs' contribution. A jury may determine that Astilean made a substantial contribution to defendant's development of the Woodway Legacy Treadmills, and that equity entitles plaintiffs to some share of those profits. On the other hand, a jury could reasonably infer that Astilean's contribution to the Speedboard 2/Curve was negligible or non-existent, and that Woodway's engineers overcame the critical design hurdle, thus giving the treadmill its value as a marketable product. Under the latter view, equity would not require divesting Woodway of any portion of its profits for the Legacy Treadmills.

         With this framework for the parties' anticipated trial in place, the court proceeds to consider defendant's motions in limine.

         DISCUSSION

         I. Legal Standard

         A. Standard on a Motion in Limine

         “The purpose of an in limine motion is to aid the trial process by enabling the Court to rule in advance of trial on the relevance of certain forecasted evidence, as to issues that are definitely set for trial, without lengthy argument at, or interruption of, the trial.” EEOC v. United Health Programs of Am., Inc., No. 14-CV-3673 (KAM)(JO), 2017 WL 10088567, at *1 (E.D.N.Y. Sept. 4, 2017) (quoting Palmieri v. Defaria, 88 F.3d 136, 141 (2d Cir. 1996)). “Evidence should be excluded on a motion in limine only when the evidence is clearly inadmissible on all potential grounds.” United States v. Paredes, 176 F.Supp.2d 179, 181 (S.D.N.Y. 2001). Further, a district court's ruling on a motion in limine is preliminary and “subject to change when the case unfolds.” Luce v. United States, 469 U.S. 38, 41 (1984).

         B. Relevant Evidence

         Federal Rule of Evidence 402 provides that all relevant evidence is admissible except as otherwise provided by the Constitution, by Act of Congress, or by applicable rule. Fed.R.Evid. 402. Federal Rule of Evidence 401 defines relevant evidence as that which “has any tendency to make a fact more or less probable than it would be without the evidence, ” so long as “the fact is of consequence in determining the action.” Fed.R.Evid. 401. The Second Circuit has characterized the relevance threshold as “very low.” See United States v. White, 692 F.3d 235, 246 (2d Cir. 2012)(quoting United States v. Al-Moayad, 545 F.3d 139, 176 (2d Cir. 2008)). To be relevant, evidence need not prove a fact in issue by itself, but need only have “‘any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence.'” McKoy v. North Carolina, 494 U.S. 433, 440 (1990)(quoting New Jersey v. T.L.O., 469 U.S. 325, 345 (1985)).

         C. Federal Rule of Evidence 403

         Under Federal Rule of Evidence 403, the court “may 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.” Fed.R.Evid. 403. “District courts have broad discretion to balance probative value against possible prejudice.” United States v. Bermudez, 529 F.3d 158, 161 (2d Cir. 2008). “Evidence cannot be excluded under Fed.R.Evid. 403 on the basis that, due to its relevance, such evidence has a negative impact on a party's litigation position.” MBIA Ins. Corp. v. Patriarch Partners VIII, LLC, No. 09-cv-3255, 2012 WL 2568972, at *11 (S.D.N.Y. July 3, 2012)(citing George v. Celotex Corp., 914 F.2d 26, 31 (2d Cir. 1990)).

         II. Defendant's Motions in Limine

         A. Motion in Limine 1

         Defendant moves to preclude evidence of Speedfit's sales and profit margins to support their unjust enrichment claim. (Mot. 1.) Plaintiffs ask the court to permit them to present evidence of Speedfit's margins, presumably in aid of their unjust enrichment claim. (Opp. 7.)

         As an initial matter, Defendant notes the paucity of Speedfit's sales information in the record. (Mot. 1.) During discovery, defendant sought records concerning Speedfit's alleged sales, cost, or profit information relating to the Speedboard. (See, e.g., ECF No. 291-4, Declaration of Kadie M. Jelenchick (“Jelenchick Decl.”), Ex. D (Woodway's First Requests for Production).) Defendant claims that plaintiffs produced no responsive records before the close of fact discovery. (Mot. 1.) Further, Astilean testified in his March 2015 deposition that Speedfit was not selling the Speedboard or any curved, non-motorized treadmills, (ECF No. 291-1, Jelenchick Decl., Ex. A (Astilean Tr.), 84:10-85:8), and plaintiffs indicated in discovery responses throughout 2015 that they had yet to manufacture for sale any curved, non-motorized treadmills. (See ECF No. 291-2, 291-3, Jelenchick Decl., Exs. B (Pls.' Answers to Def.'s First Set of Int.), C (Pls.' Supp. Answers to Def.'s First Set of Int.).)

         Plaintiffs do not dispute their failure to produce evidence of Speedfit's sales during fact discovery, but refer the court to the Supplemental Report of their damages expert, David Wanetick, dated July 13, 2018. (ECF No. 203-1, Wanetick Supp.) The Wanetick Supplement explains that in Wanetick's prior report, which did not present a theory of unjust enrichment damages based on Speedfit's lost profits and margins, (see generally ECF No. 218-1, Wanetick Rept.), he had not received sales or cost summaries from Speedfit. (Wanetick Supp. 1.) Wanetick stated that he had “now received and reviewed production and sales figures of Speedfit which are derived from the purchase and sales of Speedfit during the pendency of the lawsuit . . . .” (Id.) This information, Wanetick explained, “provide[d] a much more vivid picture of the damages Speedfit incurred as a result of Woodway's breach of contract, unjust enrichment, conversion and constructive trust” claims. (Id.) Schedule 2 of the Wanetick Supplement purported to be a chart of “Speedfit's Sales of the Speedfit Curve (2015 - April 30, 2018).” (Id. 5-8.)

         In a Decision and Order, dated March 28, 2019, Magistrate Judge Tomlinson precluded plaintiffs' use of and reliance on the Wanetick Supplement insofar as it concerned “new theories of damages concerning the Plaintiffs' state law claims.” (ECF No. 239, Wanetick Supp. Order, 17.)[1] In Judge Tomlinson's thorough review of the case's procedural history, she noted that expert and fact discovery had closed in April 2015, that plaintiffs had acknowledged the end date for discovery, and that plaintiffs had limited their request for additional discovery to seeking Woodway's additional sales information since the time that fact and expert discovery had closed. (Id. 9-14.) Judge Tomlinson's examination of the docket led her to conclude that even though updates to the expert reports on damages issues were permissible “solely for the purpose of reflecting sales of products sold since the original expert reports were served, ” it was also “made plain to Plaintiffs by the Court . . . that this was not an opportunity to amend or add any new theory of damages with respect to the state law claims.” (Id. 14-15.) To the extent plaintiffs ask the court to ignore, modify, or alter Judge Tomlinson's order, that request is untimely and, in any event, is denied on the merits.

         In addition, plaintiffs' revised initial disclosures, served October 3, 2019, [2] have identified Mark Verstegen as having “Speedfit financial information relating to Speedfit's sales.” (ECF No. 291-5, Jelenchick Decl., Ex. E, 10.) This disclosure, however, was made over four years after the close of fact discovery in April 2015. Pursuant to Rule 26(e), a party is obligated to timely supplement or correct its initial Rule 26 disclosures, and its responses to interrogatories and document demands, “if the additional or corrective information has not otherwise been made known to the other parties during the discovery process or in writing.” Fed.R.Civ.P. 26(e)(1)(A).

         The tardy disclosure of Verstegen warrants preclusion of his testimony at trial under Rule 37 of the Federal Rules of Civil Procedure. Rule 37(c) states that “[i]f a party fails to provide information or identify a witness as required by Rule 26(a) or (e), the party is not allowed to use that information or witness to supply evidence on a motion, at a hearing or at trial, unless the failure was substantially justified or is harmless.” Fed.R.Civ.P. 37(c)(1). “Substantial justification may be demonstrated where there is justification to a degree that could satisfy a reasonable person that parties could differ as to whether the party was required to comply with the disclosure request or if there exists a genuine dispute concerning compliance.” Lujan v. Cabana Mgmt., Inc., 284 F.R.D. 50, 68 (E.D.N.Y. 2012) (quoting Ritchie Risk-Linked Strategies Trading (Ireland), Ltd. v. Coventry First LLC, 280 F.R.D. 147, 159 (S.D.N.Y. Feb. 15, 2012)).

         An omission or delay in disclosure is harmless where there is “an absence of prejudice” to the offended party. Id. “In determining whether to exercise its discretion to preclude evidence under Rule 37, courts examine (1) the party's explanation for the failure to comply with the discovery rules; (2) the importance of the precluded evidence; (3) the prejudice suffered by the opposing party as a result of having to prepare to address the new evidence; and (4) the possibility of a continuance.” Id.; see also Patterson v. Balsamico, 440 F.3d 104, 117 (2d Cir. 2006) (citing Softel, Inc. v. Dragon Med. & Scientific Comm'ns, Inc., 118 F.3d 955, 961 (2d Cir.1997)); Gotlin v. Lederman, No. 04-CV-3736 (ILG)(RLM), 2009 WL 2843380, at *3 (E.D.N.Y. Sept. 1, 2009). Here, plaintiff has provided absolutely no explanation for its delinquent disclosure of Verstegen as a potential witness, and allowing Verstegen to testify at trial, without an opportunity for defendant to depose him, would be highly prejudicial.

         More fundamentally, information concerning Speedfit's sales and profit margin, whether based on the testimony of Wanetick, Verstegen, or Astilean himself, is irrelevant to plaintiffs' claim for unjust enrichment. “To prevail on a claim for unjust enrichment in New York, a plaintiff must establish (1) that the defendant benefitted; (2) at the plaintiff's expense; and (3) that equity and good conscience require restitution.” Kaye v. Grossman, 202 F.3d 611, 616 (2d Cir. 2000) (internal quotation marks and citation omitted). “Because the doctrine of unjust enrichment is grounded in restitution, the measure of damages for an unjust enrichment claim is based on the amount of benefit retained by the defendant, rather than by a plaintiff's loss.” Swan Media Grp., Inc. v. Staub, 841 F.Supp.2d 804, 809-10 (S.D.N.Y. 2012); see also 3 D. Dobbs, Law of Remedies § 12.1(1), at 9 (“Restitutionary recoveries are based on the defendant's gain, not on the plaintiff's loss.”); Giordano v. Thomson, 564 F.3d 163, 170 (2d Cir. 2009) (“Recovery on such a claim [of unjust enrichment] is limited to the reasonable value of the services rendered by the plaintiff.”) (citations and internal quotation marks omitted).

         Plaintiffs state that “[f]or the real profit margin and calculation of unjust enrichment to Woodway, Plaintiffs will use EBITDA and Alex[ Astilean]'s testimony of what his cost of goods is based upon his own sale of the Speedfit Speedboard.” (Opp. 10.) Plaintiffs intend to then “ask the jury to apply [Speedfit's] margin or profit to Woodway's gross sales and ask for a money judgment in this amount.” (Id.) But plaintiffs do not articulate in the least how Speedfit's profits are relevant to Woodway's profits, or to damages for unjust enrichment generally. Nor do plaintiffs provide any authority for their proposed methodology of calculating unjust enrichment damages, or name any expert witness competent to advocate such method. Plaintiffs have also not provided any framework to compare Speedfit's Speedboard with Woodway's Legacy Treadmills, or otherwise demonstrate what application Speedfit's alleged profits could possibly have to Woodway's profits, given the different operating capacities and circumstances of both companies. (See Reply 3.) The court also notes the significant risk, assuming a finding of liability, that the jury could conflate Speedfit's sales and profits with gains accrued by Woodway, and erroneously use the resulting figures as a measure for unjust enrichment damages. Under these circumstances, the danger of unfair prejudice to defendant substantially outweighs whatever probative value evidence of Speedfit's sales and margins might have. Preclusion under FRE 403 is therefore warranted.

         Defendant's first motion in ...


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