Wellshire Fin. Servs., LLC v. TMX Fin.

Wellshire Fin. Servs., LLC v. TMX Fin.

Opinion

MEMORANDUM AND ORDER

Pending and referred to the undersigned is Defendants' Motion to Exclude Expert Opinion of Kenneth [*3]  L. Bernhardt (Document No. 23), Defendants' Amended Motion to Exclude Expert Testimony of Saul Solomon (Document No. 29)¹ and Plaintiffs' Motion to Exclude Testimony from Defendants' Purported Damages Expert (Document No. 80). Defendants' motions seek to exclude expert opinions and testimony of Plaintiffs' experts on the basis that their opinions are not reliable. Plaintiffs' motion seeks to exclude the opinions and testimony of Defendants' damages expert on the basis that the opinions offered thus far are incomplete. Having considered the motions, the responses and additional briefing, the written expert reports, the unique characteristics of the survey population utilized by Plaintiffs' expert(s), the parties' oral argument, and the applicable law, the Magistrate Judge concludes that all the expert motions (Document Nos. 23, 29 and 80) should, and will be, DENIED.

I. Background

This is essentially an unfair competition case between competitors in the title loan business. The case was initially filed in state court, but was removed after some years when Plaintiff amended its pleadings to add a federal RICO cause of action. Since removal, the parties have focused on completing discovery, [*4]  a process that was started and significantly completed prior to removal, but which is being coordinated in some respects by a special master pursuant to a protocol that was developed in state court prior to removal.

Plaintiffs allege in the Fifth Amended Complaint they filed on July 24, 2018 (Document No. 112) that Defendants "have conspired to surreptitiously target and collect the license plate numbers of the customers in [Plaintiffs'] parking lots, and have used that information to perform inadmissible searches for the customers' personal information in DMV records" and that "Defendants have also conspired to impermissibly search the DMV records directly by lienholder to identify Plaintiffs' customers, obtain their personal information, and use that information for impermissible purposes." Fifth Amended Complaint (Document No. 112) at 7. Plaintiffs further allege that "[t]hrough these acts, Defendants have sought to collect and compile the information contained in Plaintiffs' confidential customer lists for Defendants' use in the direct contact and solicitation of Plaintiffs' customers" and that "Defendants' illegal and unlawful actions have interfered with and hindered Plaintiffs' [*5]  ability to conduct their business and affairs with such customers, causing them to lose thousands of customers to Defendants as a direct result of the fraudulent scheme." Id. at 8, 10. Based on those allegations, Plaintiffs assert claims of misappropriation of trade secrets, tortious interference with existing contracts, tortious interference with prospective contracts and business relations, and civil violations of the federal Racketeer Influenced and Corrupt Organizations Act (RICO). Defendants have counterclaimed, alleging that Plaintiffs have "through improper means, entered non-public areas within TitleMax stores posing as customers or other third parties and, using recording devices, unlawfully and improperly taken TitleMax's proprietary confidential financial and store-profitability information and the formula, pattern, and device used by TitleMax to compile this information. . . . By taking photographs of TitleMax's goal boards and surrounding customized reports hung next to the goal boards, Lone Star circumvented the need to do their own marketing and business analysis," Fifth Amended Counterclaim (Document No. 113) at 3-4, and asserting claims against Plaintiffs for conversion, theft [*6]  of property, misappropriation of trade secrets, unfair competition by misappropriation, and civil RICO violations.

In Defendants' two Motions to Exclude, Defendants maintain that the opinions of Kenneth L. Bernhardt and Saul Solomon, which opinions support Plaintiffs' alleged damages, are not reliable because they are based on a methodologically unsound survey that was conducted of persons who had loans with Plaintiffs and subsequently had loans with Defendants. According to Defendants, the survey itself, as well as the survey methodology, is unreliable insofar as: (1) the survey was based on a "universe" of overlapping customers, and not a "universe" of those who were alleged to have been improperly solicited; (2) the questions asked of the survey respondents do not, and cannot, establish causation; (3) the survey respondents have not been shown to be representative of the population at issue in this case; (4) the survey does not account for survey bias and is based on an disproportionate oversampling of those in the Austin, Texas area; (5) no consideration was given to "non-response" bias; and (6) the survey results include individuals who are not even members of the "universe" of [*7]  overlapping customers. Based on these alleged deficiencies in Bernhardt's survey, Defendants seek to exclude his opinions, and the damages opinions of Solomon that were based on those unreliable survey results.

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