Experts — Reliance on Business Plan without Inquiry into Qualifications of Preparers or Underlying Assumptions Renders Opinion Unreliable — Expert’s Alternate Opinion Should’ve Been Allowed: Exclusion of Critical Evidence Is Extreme Sanction
ZF Meritor, LLC v. Eaton Corp., 696 F.3d 254 (3d Cir. 2012):
2. Expert Testimony on Damages
In their cross-appeal, Plaintiffs argue that the District Court erred in excluding DeRamus's testimony on the issue of damages. The core of DeRamus's damages analysis was one page (titled "Five Year Product Line Profit and Loss") of ZF Meritor's Revised Strategic Business Plan ("SBP") for fiscal years 2002 through 2005, which was presented to ZF Meritor's [*291] Board of Directors in November 2000.23 The District Court determined that, although DeRamus used methodologies regularly employed by economists, his opinion nevertheless failed the reliability requirements of Daubert and the Federal Rules of Evidence because the underlying [**87] data was not sufficiently reliable. The District Court acknowledged that experts often rely on business plans in forming damages estimates, but concluded that DeRamus's reliance on the SBP in this case was improper because he did not know either the qualifications of the individuals who prepared the SBP estimates or the assumptions upon which the estimates were based. Plaintiffs filed a motion for clarification, which asked the District Court to allow DeRamus to testify based on his existing expert report to damages estimates independent of the SBP, or, in the alternative, to allow him to amend his report to include the alternate damages estimates. The District Court did not resolve the damages issue at that time, and bifurcated the case. After the trial on liability, Plaintiffs supplemented their pre-trial motion for clarification, adding several new arguments based on developments at trial, and renewing their request that DeRamus be allowed to testify based on alternate calculations. The District Court denied Plaintiffs' motion and awarded $0 in damages.
23 The SBP contained a five-year forecast of profit and loss estimates based on estimated unit sales, unit prices, manufacturing [**88] costs, operating expenses, and other considerations.
Our inquiry on appeal is two-fold. Initially, we must determine whether the District Court erred in excluding the expert opinion of DeRamus on the basis that it was not sufficiently reliable. Then, we must consider whether the District Court abused its discretion in denying Plaintiffs' request to allow DeRamus to testify to alternative damages calculations. We will address these issues in turn.
i. DeRamus's original damages calculations
First, we will consider Plaintiffs' contention that the District Court erred in determining that DeRamus's damages opinion was not sufficiently reliable. Federal Rule of Evidence 702, as amended in 2000 to incorporate the standards set forth in Daubert, imposes an obligation upon a district court to ensure that expert testimony is not only relevant, but reliable. Fed. R. Evid. 702; Paoli II, 35 F.3d at 744. As we have made clear, "the reliability analysis [required by Daubert] applies to all aspects of an expert's testimony: the methodology, the facts underlying the expert's opinion, [and] the link between the facts and the conclusion." Heller v. Shaw Indus., Inc., 167 F.3d 146, 155 (3d Cir. 1999); see [**89] also id. ("Not only must each stage of the expert's testimony be reliable, but each stage must be evaluated practically and flexibly without bright-line exclusionary (or inclusionary) rules."). As we explain below, the District Court did not abuse its discretion by finding that DeRamus's damages estimate, which was based heavily on the SPB projections, bore insufficient indicia of reliability to be submitted to a jury.
To determine the damages suffered by Plaintiffs as a result of Eaton's anticompetitive conduct, DeRamus conducted a two-part analysis. He computed Plaintiffs' lost profits for the period between 2000 and 2009, as well as the lost enterprise value of Plaintiffs' HD transmissions business. To calculate Plaintiffs' lost profits, DeRamus first estimated the incremental revenues that Plaintiffs would have earned "but for" Eaton's anticompetitive conduct, and then subtracted from that figure the incremental cost that Plaintiffs would have [*292] had to incur to achieve such incremental sales.
Ordinarily, such an approach would be appropriate because "an expert may construct a reasonable offense-free world as a yardstick for measuring what, hypothetically, would have happened 'but for' [**90] the defendant's unlawful activities." LePage's, 324 F.3d at 165 (citations omitted). However, the District Court's primary criticism of DeRamus's report was that he did not construct an offense-free world based on actual financial data, but instead relied on a one-page set of profit and volume projections without knowing the circumstances under which such projections were created or the assumptions on which they were based. In some circumstances, an expert might be able to rely on the estimates of others in constructing a hypothetical reality, but to do so, the expert must explain why he relied on such estimates and must demonstrate why he believed the estimates were reliable. See Fed. R. Evid. 702; Daubert, 509 U.S. at 592-95; Paoli II, 35 F.3d at 748 n.18 ("Arguably, [third-party estimates] that an expert relies on are not his underlying data, but rather the data that went into the [third-party estimates] in the first place are his underlying data.").
Plaintiffs contend that DeRamus's reliance on the SBP estimates was appropriate because a company's internal financial projections, like those in the SBP, are regularly and reasonably relied upon by economists in formulating opinions [**91] regarding a company's performance in an offense-free world. Plaintiffs are certainly correct that "internal projections for future growth" often serve as legitimate bases for expert opinions. See LePage's, 324 F.3d at 165; Auto west, Inc. v. Peugeot, Inc., 434 F.2d 556, 566 (2d Cir. 1970) (holding that damages testimony was admissible because the financial projections on which the testimony was based "were the product of deliberation by experienced businessmen charting their future course"). Businesses are generally well-informed about the industries in which they operate, and have incentives to develop accurate projections. As such, experts frequently use a plaintiff's business plan to estimate the plaintiff's expected profits in the absence of the defendant's misconduct. See Litigation Services Handbook: The Role of the Financial Expert 24:13 (4th ed. 2007). However, there is no per se rule of inclusion where an expert relies on a business plan; district courts must perform a case-by-case inquiry to determine whether the expert's reliance on the business plan in a given case is reasonable. See Heller, 167 F.3d at 155.
Here, the District Court concluded that the SBP could not serve [**92] as a reliable basis for DeRamus's opinion because he was unaware of the qualifications of the individuals who prepared the document, or the assumptions on which the estimates were based. Plaintiffs argue that these factual findings are contradicted by the record. Admittedly, the record indicates that DeRamus did not, as the District Court suggested, blindly accept the SBP estimates without question. DeRamus was aware that the SBP had been presented to ZF Meritor's Board of Directors, and that it was revised several times to "address and resolve queries management had about the reasonableness of the assumptions, projections, [and] forecasts." He also knew that the Board had relied on the SBP in making business decisions. Moreover, ZF Meritor's former president testified that he "did not submit SBPs to management for review unless [he] believed the projections, forecasts, and assumptions therein to be reliable."
[*293] However, contrary to Plaintiffs' assertions, these excerpts from the record do not contradict the District Court's ultimate findings. The record amply supports the District Court's concern that, although DeRamus was generally aware of the circumstances under which the SBP was [**93] created and the purposes for which it was used, he lacked critical information that would be necessary for Eaton to effectively cross-examine him. An expert's "lack of familiarity with the methods and the reasons underlying [someone else's] projections virtually preclude[s] any assessment of the validity of the projections through cross-examination." TK-7 Corp. v. Estate of Barbouti, 993 F.2d 722, 732 (10th Cir. 1993); compare Auto west, 434 F.2d at 566 (holding that projections of company officials were admissible where such officials "set out at length the bases from which they derived their figures, and consequently, [the opposing party] was able to cross-examine them vigorously"). Here, DeRamus knew that the SBP was presented to the Board by experienced management professionals, but he did not know who initially calculated the SBP figures. He did not know whether the SBP projections were calculated by ZF Meritor management, lower level employees at ZF Meritor, or came from some outside source. Nor did DeRamus know the methodology used to create the SBP or the assumptions on which the SBP's price and volume estimates were based.24
24 As the District Court noted, it is especially important [**94] for an expert to identify and justify the assumptions underlying financial projections when dealing with a new company. Here, although Meritor had been in the HD transmissions industry for over a decade, ZF Meritor was offering a brand new line of transmissions that had never before been sold in the North American market.
Under the deferential abuse of discretion standard, we will not disturb a district court's decision to exclude testimony unless we are left with "a definite and firm conviction that the court below committed a clear error of judgment." In re TMI Litig., 193 F.3d 613, 666 (3d Cir. 1999) (citation omitted). Plaintiffs cannot clear that high hurdle. Accordingly, we conclude that the District Court acted within its discretion in determining that one page of financial projections for a nascent company, the assumptions underlying which were relatively unknown, did not provide "good grounds," Paoli II, 35 F.3d at 742 (quoting Daubert, 509 U.S. at 590), for DeRamus to generate his damages estimate. Compare LePage's, 324 F.3d at 165 (noting that plaintiff's expert considered the defendant's internal projections for growth, but also closely examined the market conditions, including [**95] the past performance of competitors).
Plaintiffs raise two additional challenges to the District Court's exclusion of DeRamus's testimony. First, Plaintiffs contend that because the SBP was admitted into evidence at trial, Rule 703 does not provide a basis for exclusion. However, this argument is based on the flawed assumption that the District Court excluded DeRamus's testimony under Rule 703, rather than Rule 702. Plaintiffs assume that because the District Court stated that "DeRamus manipulated the SBP using methodologies employed by economists," ZF Meritor, 646 F. Supp. 2d at 667, the District Court necessarily concluded that Rule 702, which focuses on methodologies, was satisfied. However, the District Court explicitly stated that "the fundamental query" was "whether the [SBP] estimates pass[ed] the reliability requirements of Rules 104, 702, and 703." Id. Although it is not entirely clear from the District Court's opinion which rule the District Court relied upon in finding DeRamus's [*294] testimony inadmissible, we may affirm evidentiary rulings on any ground supported by the record, Hughes v. Long, 242 F.3d 121, 122 n.1 (3d Cir. 2001), and we conclude that DeRamus's opinion was properly [**96] excluded because it failed the reliability requirements of Rule 702.25
25 We base our affirmance of the District Court's decision entirely on the fact that DeRamus's opinion failed Rule 702, and do not decide whether Rule 703 provides an additional basis for exclusion. We note, however, that Plaintiffs' argument that Rule 703 somehow constrains a district court's ability to conduct an assessment of reliability under Rule 702 is misplaced. After all, a piece of evidence may be relevant for one purpose, and thus admissible at trial, but not be the type of information that can form the basis of a reliable expert opinion. As the District Court stated, "the fact that [a piece of evidence] [i]s part of [the] plaintiffs' 'story' does not mean, ipso facto," that an expert opinion relying on such evidence is admissible. ZF Meritor LLC v. Eaton Corp., 800 F. Supp. 2d 633, 637 (D. Del. 2011).
Plaintiffs' suggestion that the reasonableness of an expert's reliance on facts or data to form his opinion is somehow an inappropriate inquiry under Rule 702 results from an unduly myopic interpretation of Rule 702 and ignores the mandate of Daubert that the district court must act as a gatekeeper. See Daubert, 509 U.S. at 589; [**97] Heller, 167 F.3d at 153 ("While 'the focus, of course, must be solely on principles and methodology, not on the conclusions that they generate,' a district court must examine the expert's conclusions in order to determine whether they could reliably flow from the facts known to the expert and the methodology used.") (emphasis added) (quoting Daubert, 509 U.S. at 595). Where proffered expert testimony's "factual basis, data, principles, methods, or their application are called sufficiently into question, . . . the trial judge must determine whether the testimony has 'a reliable basis in the knowledge and experience of the relevant discipline.'" Kumho Tire Co. v. Carmichael, 526 U.S. 137, 149, 119 S. Ct. 1167, 143 L. Ed. 2d 238 (1999) (quoting Daubert, 509 U.S. at 592). A district court's inquiry under Rule 702 is "a flexible one" and must be guided by the facts of the case. Daubert, 509 U.S. at 591, 594. Here, the District Court's analysis fell squarely within its flexible gatekeeping function under Daubert and Rule 702. See Kumho Tire Co. 526 U.S. at 149; Paoli II, 35 F.3d at 748 n.18; see also Elcock, 233 F.3d at 754 (explaining that an expert's testimony regarding damages must be based on a sufficient factual foundation); [**98] Tyger Constr. Co. v. Pensacola Constr. Co., 29 F.3d 137, 142 (4th Cir. 1994) ("An expert's opinion should be excluded when it is based on assumptions which are speculative and not supported by the record.").
Second, Plaintiffs argue that the District Court did not provide fair notice that it intended to exclude DeRamus's testimony under Federal Rule of Evidence 703. Again, this argument rests on the flawed assumption that the District Court relied solely on Rule 703. However, even assuming the District Court mistakenly believed that its Rule 702 reliability analysis actually fell under Rule 703, Plaintiffs' notice argument would still be meritless. A district court must give the parties "an adequate opportunity to be heard on evidentiary issues." In re Paoli R.R. Yard PCB Litig. (Paoli I), 916 F.2d 829, 854 (3d Cir. 1990). Here, there was extensive briefing regarding DeRamus's damages opinion, much of which focused on Eaton's argument that DeRamus's reliance on the SBP was improper. The District Court held not one, but two in limine hearings, in which DeRamus testified for several [*295] hours. Compare id. at 854-55 (holding that the district court did not give the plaintiffs an adequate opportunity [**99] to be heard where it failed to conduct an in limine hearing and denied oral argument on the evidentiary issues). As such, Plaintiffs were well aware of, and had ample opportunity to be heard on, the question of whether DeRamus's reliance on the SBP rendered his testimony inadmissible.
ii. Alternate damages calculations
The District Court's opinion excluding DeRamus's damages testimony focused exclusively on DeRamus's damages estimates based on the SBP projections regarding ZF Meritor's market share and profit margin. However, his expert report also set forth market-share estimates based on an econometric model. The econometric model did not consider the SBP, but instead used economic variables, such as the number of heavy-duty trucks built and sold in the North American market, an index of consumer confidence in the United States, the average wholesale price of oil in the United States, and interest rates. The model also considered ZF Meritor's market share from the previous month "in order to capture market dynamics."
To reach his ultimate damages estimate, DeRamus averaged several damages calculations, each of which used a different combination of inputs for market share and profit [**100] margin. Following the District Court's order excluding DeRamus's testimony due to his reliance on the SBP, Plaintiffs filed a motion for clarification, asking the District Court to allow DeRamus to calculate damages using the same methodologies from his expert report, but using data independent of the SBP. Specifically, Plaintiffs proposed several revisions to DeRamus's damages estimate. First, Plaintiffs indicated that DeRamus could revise his "Eaton Operating Profit Method," which used as principal inputs the SBP estimates for market share and Eaton's actual operating profits for profit margin. Plaintiffs stated that DeRamus had recalculated lost profits using the same methodology, but replacing the market-share data from the SBP with market-share data from his econometric model. Second, Plaintiffs explained that DeRamus could similarly revise his "Econometric Method" of calculating lost profits, which used the econometric model for market share, and data from the SBP for profit margin. He could use the same methodology and replace the profit margin data from the SBP with profit margin data from Plaintiffs' actual sales data from 1996 through 2000.26
26 Although the District Court [**101] did not address DeRamus's lost enterprise value calculations, Plaintiffs indicated in their motion for clarification that DeRamus could make similar revisions to those calculations.
Noting that all of the data necessary for DeRamus's recalculations were already in the expert report, Plaintiffs requested that DeRamus be able to testify to the alternate calculations using the existing expert report. Allowing DeRamus to testify to alternate damages numbers without amending his expert report would have left Eaton without advance notice of the new calculations, and thus would have been improper. As such, the District Court did not err in ruling that DeRamus could not testify to new calculations based on the existing expert report. However, the District Court's refusal to allow DeRamus to amend his expert report presents a much more difficult question, one that we will explore in depth.
Before beginning our analysis, it is necessary to provide some context regarding the procedural history because the way in [*296] which the damages issue was handled by the District Court is significant to our determination that the District Court abused its discretion. After the District Court granted Eaton's motion [**102] to exclude DeRamus's damages testimony, it granted leave for Plaintiffs to file a motion for clarification to identify damages calculations in DeRamus's expert report that were not based on the SBP. On September 9, 2009, ten days before trial was set to begin, Plaintiffs filed the motion, acknowledging that new calculations would be required, but submitting that all of the necessary data was already in the report. The next day, the District Court held a pretrial conference, in which it considered Plaintiffs' motion, and determined that it had two options: to "basically punt" on the damages issue and bifurcate the case, or to allow Plaintiffs' new damages theory to go forward and allow Eaton to depose DeRamus to examine his new theories. The District Court concluded that the "cleanest" option was to defer the damages issue, bifurcate, and proceed to trial on liability. That way, the District Court stated, the damages issue would only need to be resolved if "the jury c[ame] back with a plaintiffs' verdict, which [was] [up]held on appeal." In opting to defer a decision on damages, the District Court noted that it "did not . . . at the moment, have the time to parse [DeRamus's report] [**103] as carefully" as would be necessary to satisfactorily address the parties' arguments regarding damages.
The jury delivered its verdict on liability on October 8, 2009, and the District Court entered judgment in favor of Plaintiffs on October 14. Two days later, Plaintiffs requested that the District Court set a trial on damages. Eaton opposed Plaintiffs' request, asserting that the judgment on liability was a final appealable decision. Although the District Court apparently agreed with Eaton initially, stating that it "d[id] not intend to address damages until liability has been finally resolved by the Third Circuit," the District Court subsequently issued an amended judgment, which stated that because damages had not been resolved, there was no final appealable order under Federal Rule of Civil Procedure 54(b). On November 3, 2009, Eaton filed its renewed motion for judgment as a matter of law or a new trial. The District Court did not rule on the motion until March 2011.27
27 It is unclear from the record why sixteen months passed between Eaton's motion and the District Court's decision on the motion.
Following the District Court's denial of Eaton's motion, Plaintiffs renewed their request [**104] for a damages trial. On July 25, 2011, the District Court held a status conference, in which it heard arguments on whether the liability issue was appealable as a judgment on fewer than all claims under Rule 54(b). Although the District Court initially indicated that it would proceed under Rule 54(b), and once again defer resolution of the damages issue, after both parties agreed that the judgment on liability was not appealable under Rule 54(b) (and that it was unlikely that this Court would grant an interlocutory appeal), the District Court acknowledged that it would "need to go back to the papers and see how I extract myself from the procedural morass that I put myself in." The District Court then signaled the way in which it would extract itself, stating "so let's assume that I am going to resurrect a motion that is two years old [Plaintiffs' September 3, 2009 motion for clarification], and let's assume that I deny it, and we're left with the situation we have now. At that point, would it make sense to have [*297] a cross-appeal on liability, on the Daubert decision, and get it up to the Third Circuit?"
Several days later, on August 4, 2011, the District Court issued a memorandum opinion [**105] and order denying Plaintiffs' motion for clarification, and awarding $0 in damages. The District Court's entire analysis of Plaintiffs' request to modify DeRamus's report consisted of one paragraph. The District Court concluded that allowing Plaintiffs to amend DeRamus's expert report "would be tantamount to reopening expert discovery" because DeRamus would need to be deposed again and Eaton would have to prepare another rebuttal expert report. The District Court also noted that, when it granted leave for Plaintiffs to move for clarification, leave was granted only for Plaintiffs to show that DeRamus's report already contained an alternate damages calculation, and that Plaintiffs' motion requested permission to submit additional damages calculations. Therefore, the District Court concluded, "[a]t this stage of the litigation," it would not give Plaintiffs an opportunity to modify their damages estimate.
We provide this extensive review of the procedural history to make a basic point: while we appreciate the District Court's attempt to conserve judicial resources and refrain from addressing the damages issue unless absolutely necessary, it is apparent from the record that Plaintiffs' [**106] request for permission to submit alternative damages calculations was given little more than nominal consideration. We are mindful that the District Court has considerable discretion in matters regarding expert discovery and case management, and a party challenging the district court's conduct of discovery procedures bears a "heavy burden." In re Fine Paper, 685 F.2d at 817-18 ("We will not interfere with a trial court's control of its docket 'except upon the clearest showing that the procedures have resulted in actual and substantial prejudice to the complaining litigant.'") (citation omitted); see Schiff, 602 F.3d at 176. Under Federal Rule of Civil Procedure 26(a)(2), a party is required to disclose an expert report containing "a complete statement of all opinions the witness will express and the basis and reasons for them." Fed. R. Civ. P. 26(a)(2)(B)(i) (emphasis added). Any additions or changes to the information in the expert report must be disclosed by the time the party's pretrial disclosures are due. Fed. R. Civ. P. 26(e)(2). Here, Plaintiffs were required to make all mandatory disclosures six months before trial, including all damages calculations. The damages estimates [**107] in DeRamus's report were found to be unreliable, and Plaintiffs sought, after the date by which discovery disclosures were due, to modify the estimates to reflect reliance on different data. Ordinarily, we will not disrupt a district court's decision to deny a party's motion to add information to an expert report under such circumstances. Schiff, 602 F.3d at 176; In re Fine Paper, 685 F.2d at 817. A plaintiff omits evidence necessary to sustain a damages award at its own risk. See Natural Res. Def. Council, Inc. v. Texaco Ref. & Mktg., Inc., 2 F.3d 493, 504 (3d Cir. 1993).
However, exclusion of critical evidence is an "extreme" sanction, and thus, a district court's discretion is not unlimited. Konstantopoulos v. Westvaco Corp., 112 F.3d 710, 719 (3d Cir. 1997); see also E.E.O.C. v. Gen. Dynamics Corp., 999 F.2d 113, 116 (5th Cir. 1993) (explaining that a continuance, as opposed to exclusion, is the "preferred means" of dealing with a party's attempt to offer new evidence after the time for discovery has closed). There are indeed times, even when control of discovery is at issue, that a [*298] district court will "exceed the permissible bounds of its broad discretion." Drippe v. Tobelinski, 604 F.3d 778, 783 (3d Cir. 2010). [**108] In Meyers v. Pennypack Woods Home Ownership Ass'n, 559 F.2d 894, 905 (3d Cir. 1977), overruled on other grounds by Goodman v. Lukens Steel Co., 777 F.2d 113 (3d Cir. 1985), we set forth five factors that should be considered in deciding whether a district court's exclusion of evidence as a discovery sanction constitutes an abuse of discretion. Here, although the District Court's decision was not a discovery sanction nor an exclusion of proffered evidence, but rather an exercise of discretion to control the discovery process and a refusal to allow submission of additional evidence, we find the Pennypack factors instructive, and thus they will guide our inquiry. See Trilogy Commc'ns, Inc. v. Times Fiber Commc'ns, Inc., 109 F.3d 739, 744-45 (Fed. Cir. 1997) (applying factors similar to those set forth in Pennypack to evaluate whether a district court erred in denying the plaintiff's motion to supplement its expert report with additional data); see also Hunt v. Cnty. of Orange, 672 F.3d 606, 616 (9th Cir. 2012) (applying similar factors to determine whether the district court abused its discretion in denying a motion to amend a pretrial order).
In considering whether the District Court [**109] abused its discretion in denying Plaintiffs' request to submit alternate damages calculations, we will consider: (1) "the prejudice or surprise in fact of the party against whom the excluded witnesses would have testified" or the excluded evidence would have been offered; (2) "the ability of that party to cure the prejudice"; (3) the extent to which allowing such witnesses or evidence would "disrupt the orderly and efficient trial of the case or of other cases in the court"; (4) any "bad faith or willfulness in failing to comply with the court's order"; and (5) the importance of the excluded evidence. Pennypack, 559 F.2d at 904-05. The importance of the evidence is often the most significant factor. See Sowell v. Butcher & Singer, Inc., 926 F.2d 289, 302 (3d Cir. 1991); Pennypack, 559 F.2d at 904 (observing "how important [the excluded] testimony might have been and how critical [wa]s its absence").
Applying the Pennypack factors to this case, we conclude that the District Court abused its discretion in denying Plaintiffs' request to allow DeRamus to submit his alternate damages estimates. As to the first and second factors, Eaton would not have suffered substantial prejudice if DeRamus [**110] were allowed to amend his expert report. DeRamus's new calculations will be based on data from the initial report, which Eaton has been aware of for nearly three years, and DeRamus will employ methodologies that the District Court has already recognized as being regularly and reliably applied by economists. As Plaintiffs noted in their motion for clarification, it would be "a straightforward matter of arithmetic" to substitute data from the econometric model and actual sales data for the SBP projections. For this reason, the District Court's concern that granting Plaintiffs' request would be "tantamount to reopening discovery" seems unfounded. Although Eaton will have to respond to new calculations, it will not have to analyze any new data, or challenge any new methodologies. Moreover, Plaintiffs specifically set forth in their motion for clarification the changes that DeRamus would make, and because the changes only involved the substitution of inputs, Eaton would not be unfairly surprised by the new damages estimates.
As to the third Pennypack factor, allowing DeRamus to submit additional damages calculations will not disrupt the orderly and efficient flow of the case. In [*299] fact, our [**111] ruling on the liability issues and remand to the District Court to resolve damages is precisely what the District Court and the parties envisioned all along. Eaton, well aware of the District Court's desire to have this Court determine the liability issues before setting a damages trial, suggested that the best way to accomplish the District Court's objective was to amend the JMOL order to include "zero damages and no injunctive relief." As the District Court stated at the July 25, 2011 status conference, "[t]he way I handle complex litigation generally, when I bifurcate, is that I enter a final judgment pursuant to Rule 54(b). . . and once the Circuit Court determines liability, if there is a reason to have a damages trial, we have a damages trial." Thus, it cannot seriously be a surprise to any of the parties that they will once again be required to address damages in this case. Additionally, Eaton repeatedly states in its brief that Plaintiffs seek to reopen discovery "on the eve of trial." Although that may have been true when Plaintiffs' original motion for clarification was filed, it is no longer true. Trial ended in October 2009 and thus, when the District Court finally ruled [**112] on Plaintiffs' motion, there was no longer any time-crunch problem. Any concern that granting Plaintiffs' motion would prevent Eaton from being able to effectively prepare to address DeRamus's new damages estimates at trial is no longer relevant, nor is there any risk that granting Plaintiffs' motion would excessively delay a trial on liability.
As to the fourth factor, there is no evidence of any bad faith on the part of Plaintiffs. However, under this fourth factor, we may also consider the Plaintiffs' justifications for failing to include alternative damages calculations in the event calculations based on the SBP were found to be insufficient. See Pennypack, 559 F.2d at 905; Gen. Dynamics Corp., 999 F.2d at 115-16. Given that DeRamus's report already included the data necessary to develop alternate damages estimates, he could very easily have provided such estimates. Plaintiffs have provided no persuasive explanation for his failure to do so, other than that he believed his existing estimates were sufficiently reliable. It is not the district court's responsibility to help a party correct an error or a poor exercise of judgment, and thus, Plaintiffs' conscious choice to rely so heavily [**113] on data that was ultimately found to be unreliable weighs against a finding of abuse of discretion. This is especially true in a case such as this, where the party submitting the flawed expert report is a large corporation with significant resources represented by highly competent counsel.
However, perhaps the most important factor in this case is the critical nature of the evidence, and the consequences if permission to amend is denied. Expert testimony is necessary to establish damages in an antitrust case. As such, without additional damages calculations, it is clear that Plaintiffs will be unable to pursue damages, despite the fact that they won at the liability stage. Compare Gen. Dynamics Corp., 999 F.2d at 116-17 (finding an abuse of discretion in the district court's exclusion of expert testimony, in part, because the total exclusion of such testimony "was tantamount to a dismissal of the [plaintiff's] . . . claim"), with Sowell, 926 F.2d at 302 (finding no abuse of discretion in district court's exclusion of proffered expert testimony, in large part, because "the record [was] totally devoid of any indication of . . . how th[e] testimony might have bolstered [the plaintiff's] [**114] case," and thus, there was "no basis whatever for believing that the admission of expert testimony would have influenced the outcome of th[e] case"). The District Court's decision therefore would clearly influence the [*300] outcome of the case. See Sowell, 926 F.2d at 302.
Significantly, in the antitrust context, a damages award not only benefits the plaintiff, it also fosters competition and furthers the interests of the public by imposing a severe penalty (treble damages) for violation of the antitrust laws. See Hawaii v. Standard Oil Co. of Cal., 405 U.S. 251, 262, 92 S. Ct. 885, 31 L. Ed. 2d 184 (1972) ("Every violation of the antitrust laws is a blow to the free-enterprise system envisaged by Congress. . . . In enacting these laws, Congress had many means at its disposal to penalize violators. It could have, for example, required violators to compensate federal, state, and local governments for the estimated damage to their respective economies caused by the violations. But, this remedy was not selected. Instead, Congress chose to permit all persons to sue to recover three times their actual damages . . . . By [so doing], Congress encouraged these persons to serve as 'private attorneys general.'") (citations omitted); [**115] Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 655, 105 S. Ct. 3346, 87 L. Ed. 2d 444 (1985) ("A claim under the antitrust laws is not merely a private matter. The Sherman Act is designed to promote the national interest in a competitive economy . . . .") (quotation omitted). Thus, if Plaintiffs are not able to pursue damages, not only will they be unable to recover for the antitrust injury Eaton caused, the policy of deterring antitrust violations through the treble damages remedy will also be frustrated. See Paoli II, 35 F.3d at 750 ("[T]he likelihood of finding an abuse of discretion is affected by the importance of the district court's decision to the outcome of the case and the effect it will have on important rights.").
In sum, after weighing the Pennypack factors and taking into account the circumstances under which Plaintiffs' motion for clarification was ultimately denied, we conclude that the District Court abused its discretion in not permitting Plaintiffs to submit alternate damages calculations.28
28 We express no opinion as to the reliability or admissibility of DeRamus's alternate damages calculations. That is a matter left to the District Court on remand. However, we note that Plaintiffs' [**116] motion for clarification only sought to include damages calculations based on data already in the expert report, and that fact is crucial to our holding that prejudice to Eaton can be easily cured. Nothing in our opinion should be read as requiring the District Court to allow Plaintiffs to bring in entirely new data for the revised damages estimates.
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