Court Finds that Rule 26 Disclosure and Computation of Damages Insufficient Where Party Failed to Explain How It Calculated Damage Number

by Jeffer Mangels Butler & Mitchell LLP
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Orbit Irrigation Products ("Orbit") filed a patent infringement action against Sunhills International ("Sunhills"). After the completion of certain discovery, Sunhills filed a motion to compel. Sunhills contended that Orbit had failed to provide a computation of damages as required by Federal Rule of Civil Procedure 26 and failed to produce its documents related to its damages. As a result, Sunhills asked the district Court to bar Orbit from introducing any evidence related to damages beyond that already produced.

In its disclosure and in discovery, Orbit claimed that it suffered $19 million in damages. The court explained that "[o]n its face Rule 26 requires Orbit to provide Sunhills both with a computation of each category of damages it claims and with the non-privileged documents on which it bases those calculations. Orbit asserted a fixed number for damages suffered from price compression ($19 million) as compared to the lack of any concrete number offered for reputational damages. Sunhills has a right to know from the outset how Orbit reached that number. Such disclosure does not prevent a party from changing theories as the case proceeds."

The court then concluded that Orbit had not basis to withhold how it calculated that number and that "Orbit's failure to provide Sunhills with a calculation of its damages violates Rule 26(a)(1)(A)(iii)'s requirements." Orbit also represented that it had provided all of the documents to support this calculation and the court stated that it had to rely upon that representation.

The court then addressed whether the violation harmed Sunhills and what the remedy should be for the violation. "The Court finds Orbit's violation harmful but will allow Orbit to cure its Rule 26(a) disclosure deficiencies now with additional disclosure, and the Court ORDERS Orbit to do so within fourteen (14) days of this Order."

The court also barred Orbit from using any documents in its possession that it should have provided during the Rule 26 disclosure. "The Court bars Orbit from using any documents produced that Orbit had in its possession, custody, or control prior to October 7, 2013, the filing of its opposition, to prove its damages pursuant to Rules 26 and 37 unless it did not know of their relevance until other parties made subsequent disclosures. Orbit claims it does not have any further documents to rely upon for damages but believes Sunhills may possess some such documents. If Orbit is correct, that Sunhills has yet to produce documents which may help in its damage calculations, it may use those documents or others made relevant by the subsequent disclosure."

Orbit Irrigation Products v. Sunhills International, Case No. 1:10-CV-113-TS-EJF (D. Utah Feb. 11, 2014)

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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