MGMTL, LLC v. Strategic Technology Institute, Inc.

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF LOUISIANA

MGMTL, LLC CIVIL ACTION

VERSUS NO. 20-2138-WBV-MBN

STRATEGIC TECHNOLOGY SECTION: D (5)

ORDER AND REASONS

Before the Court is Defendant’s Motion in Limine to Preclude Opinion

Testimony of Jorge Menes.1 MGMTL, LLC oppose the Motion,2 and Defendant has

filed a Reply.3

After careful consideration of the parties’ memoranda and the applicable law,

the Motion is GRANTED in part and DENIED in part.

I. FACTUAL AND PROCEDURAL BACKGROUND

This is copyright infringement case concerning a computer software

application. On July 28, 2020, MGMTL, LLC (“MGMTL”) filed a Complaint in this

Court, seeking a permanent injunction against, and damages from, Strategic

Technology Institute, Inc. (“STI”) for copyright infringement, breach of contract, and

1 R. Doc. 91.

2 R. Doc. 99-7, filed into the record under seal. MGMTL moved for leave to file under seal its Opposition

brief and several exhibits thereto “[o]ut of an abundance of caution” and on the basis that, “STI has

taken an expansive approach with respect to the parties’ protective order and has designated all

documents it has produced in discovery in this litigation as ‘confidential’ pursuant to the protective

order (Rec. Doc. 39).” R. Doc. 100. The Court granted that request. R. Doc. 105.

3 R. Doc. 121, filed into the record under seal. The Court granted STI’s request to file the Reply brief

and two exhibits thereto into the record under seal on the basis that the Reply brief discusses

“information contained within the above exhibits and other documents that have been designated as

‘confidential’ under the Court’s general Protective Order.” See, R. Docs. 112 & 121.

misappropriation of trade secrets.4 With the Court’s consent, MGMTL subsequently

filed an Amended and Restated Complaint (the “Amended Complaint”) to clarify and

revise certain allegations.5

MGMTL alleges that in 1998, Jorge Menes, a full-time college student, started

teaching himself software coding and began creating a security management

database at home in his spare time.6 MGMTL alleges that Menes and his business

partner, Whit Himel, created MGMTL and transferred their ownership of the

security database and its intellectual property to MGMTL.7 MGMTL alleges that the

security database was refined over time with the help of Himel, and eventually

evolved into the Security Management and Reporting Tool (“SMART”), a “computer

software application designed to streamline and efficiently manage the complex tasks

and requirements of United States Department of Defense security managers,

government contracting companies, and other industries for which the management

of personnel and their security clearance is a priority.”8 MGMTL alleges that the

SMART software application is an extremely valuable tool and the first of its kind,

capable of evaluating thousands of personnel records while applying Department of

Defense rules, regulations, and applicable security clearance guidelines to each one.9

MGMTL asserts that it obtained a registered copyright for “the SMART Security

Management and Reporting Tool” on September 27, 2013.10 MGMTL asserts that it

4 R. Doc. 1.

5 R. Docs. 19, 21, & 22.

6 R. Doc. 22 at ¶ 6.

7 Id. at ¶ 7.

8 Id. at ¶¶ 2 & 8.

9 Id. at ¶ 9.

10 Id. at ¶ 11.

had previously granted the New Orleans office of the Marine Forces Reserve

(sometimes referred to by the parties as “MARFORRES”),11 a unit of the United

States Marine Corps, limited permission to use its SMART software application on a

trial basis.12 MGMTL does not specify when this occurred.

MGMTL alleges that on May 27, 2015, it entered into a software evaluation

agreement with STI, whereby MGMTL granted STI temporary access to the SMART

software application to evaluate it for the possibility of long-term licensing.13

MGMTL asserts that, due to STI’s experience and presence in the realm of

government contracting, MGMTL was considering the possibility of STI providing

distribution, marketing, and other support services to MGMTL regarding SMART.14

According to MGMTL, STI received a copy of the SMART software application and

was authorized to install and evaluate it for a 30-day period, during which STI agreed

to maintain the confidentiality of the application and to not duplicate the application

or disclose it to anyone outside of STI.15 MGMTL alleges that soon after executing

the software evaluation agreement, the parties entered into a distributor agreement,

through which STI was permitted to advertise, promote, and resell SMART to end-

users. 16 MGMTL asserts that the distributor agreement included an

acknowledgment by STI that SMART is “proprietary to MGMTL and that MGMTL

retains all right, title, and interest in and to the SMART Software including, without

11 R. Doc. 91-1 at p. 4; R. Doc. 99-27; R. Doc. 99-6 at p. 25.

12 R. Doc. 22 at ¶ 12.

13 Id. at ¶ 15.

14 Id. at ¶ 14.

15 Id. at ¶ 16.

16 Id. at ¶¶ 19 & 20.

limitation, all copyrights, trademarks, patents, and other proprietary rights of any

kind.”17 MGMTL further alleges that the agreement did not give STI the right to

reverse engineer, reverse compile, duplicate, rename, repackage or otherwise

disassemble the SMART software application, as may be permitted by applicable

legislation.18 MGMTL asserts that the parties agreed that all of the foregoing

provisions of the distributor agreement would survive termination of the agreement,

such that STI remains bound by the provisions.19

MGMTL further alleges that STI held a meeting in or about April 2016 with

several high-ranking employees of the Marine Forces Reserve at the headquarters in

New Orleans, Louisiana to discuss SMART. MGMTL claims that the Marine Forces

Reserve officials, who previously had MGMTL’s permission to use the SMART

software application for free for a limited, trial-run basis in the New Orleans office,

“were apparently frustrated that STI was working with Menes and that Menes’s

entity (MGMTL) wanted to charge them for the future use of the SMART software

application.”20 MGMTL asserts that, after this unsuccessful meeting, STI refused to

communicate with MGMTL and ignored all communications from MGMTL until

March 2017, when STI responded to an MGMTL email and stated that STI “ha[s]

nothing to do with your products/services.”21

17 Id. at ¶ 22 (internal quotation marks omitted).

18 Id. at ¶ 23.

19 Id. at ¶ 26.

20 Id. at ¶ 30.

21 Id. at ¶ 32 (quoting R. Doc. 22-4 at p. 2) (internal quotation marks omitted).

MGMTL then alleges that in or around November 2017, a colleague who

worked at the Marine Forces Reserve office in New Orleans informed Menes that he

had observed STI install security management software at the New Orleans office,

which he believed was a repackaged or altered version of SMART.22 MGMTL asserts

that Menes also received an anonymous email dated September 6, 2018 from someone

identified as an “STI employee,” stating that STI had repackaged the SMART

software application as an application called Personnel Administrative Security

System, or “PASS,” which STI then sold to the Marine Forces Reserve and installed

on five machines at the Marine Forces Reserve office in New Orleans.23 MGMTL

alleges that PASS is listed on STI’s United States Government General Services

Administration (“GSA”) Schedule, which is a long-term government-wide contract

that provides federal, state, and local government buyers certain contractual pre-

approvals to move forward with licensing or purchasing the PASS application.24

According to MGMTL, the PASS application is actively listed and available for

purchase on GSA’s Advantage! Website at a purchase price of $214,094.00 per

license.25 MGMTL filed this lawsuit after learning of these actions allegedly taken

by STI.

On May 10, 2021, STI filed the instant Motion in Limine, seeking to preclude,

under Fed. R. Evid. 701 and 702, the opinion testimony of Menes at trial on any

22 R. Doc. 22 at ¶ 35.

23 Id. at ¶ 36.

24 Id. at ¶ 38.

25 Id. at ¶ 39.

matters relating to damages.26 Specifically, STI seeks to preclude Menes from

offering opinion testimony regarding the fair market value or reasonable licensing

fee of the SMART software application, as set forth in the Summary of Opinion

Testimony of Jorge Menes, dated January 28, 2021 (the “Summary Opinion”).27 STI

asserts that the Summary Opinion states that Menes estimates the fair market value

or reasonable exclusive licensing fee for all rights to SMART “for a period of five years

as $7,650,00 as a minimum and likely $89,870,000.”28 STI claims that Menes’s

testimony is inadmissible under Rule 702 because he is not qualified to testify as an

expert regarding the fair market value or reasonable licensing fees for software, and

because his opinions are not reliable.29 STI further asserts that Menes’s testimony

should be excluded under Rule 701 because it does not satisfy the requirements for

lay opinion testimony.30

MGMTL opposes the Motion, asserting that Menes is an experience-based

expert in security management and is qualified to address the issue of damages under

the less rigid approach taken by Daubert toward such experts.31 MGMTL asserts

that Menes’s knowledge, skill, experience, training, and education qualify him to offer

opinion testimony on the issue of damages because he played a significant role in the

development of SMART, he established a price point for it, and he can testify that it

was met with acceptance in negotiations for sale of a license to the Marine Forces

26 R. Doc. 91.

27 Id.; See, R. Doc. 91-2.

28 R. Doc. 91-1 at p. 1 (quoting R. Doc. 91-2) (internal quotation marks omitted).

29 R. Doc. 91-1 at pp. 2 & 3-11.

30 R. Doc. 99-27 at pp. 11-12.

31 Id. at pp. 1 & 2-4, 7-8, & 9-10.

Reserve.32 MGMTL argues that Menes’s opinion valuing a one-year license of

SMART at $30,000 is not speculative because MGMTL sold a SMART license to the

Marine Forces Reserve and, therefore, MGMTL has experience in licensing SMART.33

In a footnote, however, MGMTL notes that, “Due to sequestration, the money was

never actually paid; but a sale was made nevertheless.”34 MGMTL then explains that

Menes arrived at his calculation of $7,650,000 by multiplying the one-year, $30,000

license “by a conservative estimate of licenses Menes knew were doable and realistic,”

meaning the 51 units within the Marine Forces Reserve, and multiplying that

number by five years, which is “the period of time during which STI has taken

unrestricted access to [SMART].”35 MGMTL contends that this is “simply a baseline

as to what would have been required to give up unrestricted rights to SMART.”36

MGMTL asserts that Menes’s testimony will be corroborated by the testimony of

other witnesses, and that it should be considered in that context rather than in

isolation.37 Finally, MGMTL asserts that, at a minimum, Menes should be allowed

to offer lay opinion testimony under Rule 701 regarding his personal time and

expense in creating SMART and to explain that MGMTL would not have given STI

unrestricted rights to SMART without being compensated for its labor and time.38

In response, STI maintains that Menes’s testimony regarding the fair market

value or reasonable exclusive licensing fee for SMART should be excluded because he

32 Id. at pp. 13-14.

33 Id. at p. 17.

34 Id. at n.56 (citations omitted).

35 Id. at p. 19.

36 Id.

37 Id. at pp. 21-22.

38 Id. at pp. 23-24.

is not qualified to give expert testimony on that topic, his opinions are unreliable, and

his opinions are based upon insufficient information.39 STI contends that the Court

should preclude Menes’s testimony because Menes testified during his deposition that

he picked $30,000 as the starting point for his calculations because it was the

“threshold of what could be charged on a government charge card.”40 STI urges the

Court to disregard the new Declaration from Menes, submitted with the Opposition

brief, in which he states that the $30,000 figure was based on cost savings to the

government, because it is a sham-affidavit that contradicts his deposition

testimony.41 STI argues that such supplemental expert reports cannot be used to fix

problems in initial reports.42 STI points out that while MGMTL claims that it sold a

SMART license to the Marine Forces Reserve through a “signed bailment agreement,”

the Marine Forces Reserve never executed the bailment agreement.43 MGMTL

maintains that Menes should not be allowed to offer lay opinion testimony regarding

a reasonable royalty or licensing fee, and argues the cases relied upon by MGMTL

are distinguishable.44 Finally, STI asserts that MGMTL seems to have abandoned

any defense of Menes’s calculation of damages above $7,650,000 because it did not

defend Menes’s higher calculation of $89,870,000 in its Opposition brief.45

39 R. Doc. 121.

40 Id. at p. 1 (quoting R. Doc. 91-1 at pp. 6-7) (internal quotation marks omitted).

41 R. Doc. 121 at pp. 2-3.

42 Id. at p. 2 (citing authority).

43 Id at p. 8 (citing R. Docs. 121-3 & 121-4).

44 R. Doc. 121 at pp. 9-10 (citing LaCombe v. A-T-O, Inc., 679 F.2d 431, 433 (5th Cir. 1982); King v.

Ames, 179 F.3d 370 (5th Cir. 1999)).

45 R. Doc. 121 at p. 10. STI notes in a footnote in its Reply brief that, “Menes could never quite get his

math to add up to $89,870.000 during his deposition.” R. Doc. 121 at p.1, fn 1. The Court notes that

this appears to be a typographical error, as STI likely intended to reference Menes’s higher estimate

of $89,870,000.

II. LEGAL STANDARD

Federal Rule of Civil Procedure 26(a)(2)(A) requires parties to “disclose to the

other parties the identity of any witness it may use at trial to present evidence under

Federal Rule of Evidence 702, 703, or 705.”46 Rule 26 distinguishes between

witnesses who are retained or specially employed to give expert testimony and those

who are not retained or specially employed, but who may nonetheless testify as a fact

witness and also provide expert testimony.47 According to Rule 26(a)(2)(B), if a

witness “is one retained or specially employed to provide expert testimony in the case

or one whose duties as the party’s employee regularly involve giving expert

testimony,” the witness must provide an expert report. Rule 26(a)(2)(C), entitled

“Witnesses Who Do Not Provide a Written Report,” provides the following:

Unless otherwise stipulated or ordered by the Court, if the witness is

not required to provide a written report, this disclosure must state:

(i) the subject matter on which the witness is expected to present

evidence under Fed. R. Evid. 702, 703, or 705; and

(ii) a summary of the facts and opinions to which the witness is

expected to testify.48

As previously explained by this Court, “Rule 26(a)(2)(C) was added to

‘mandate summary disclosures of the opinions to be offered by expert witnesses who

46 Fed. R. Civ. P. 26(a)(2)(A).

47 Fed. R. Civ. P. 26, Advisory Committee Notes to 2010 Amendments; Tajonera v. Black Elk Energy

Offshore Operations, LLC, Civ. A. No. 13-0366 c/w 13-0550, 13-5137, 13-2496, 13-5508, 13-6413, 14-

374, 14-1714, 2016 WL 3180776, at *7 (E.D. La. June 7, 2016) (Brown, J.) (citing Rea v. Wis. Coach

Lines, Inc., Civ. A. No. 12-1252, 2014 WL 4981803, at *2 (E.D. La. Oct. 3, 2014) (Duval, J.)).

48 Fed. R. Civ. P. 26(a)(2)(C).

are not required to provide reports under Rule 26(a)(2)(B) and of the facts supporting

those opinions.’”49

As explained by other courts in this Circuit, “The distinction between retained

and non-retained experts should be interpreted in a common sense manner.”50

“While a retained expert is recruited to provide expert testimony without any prior,

personal knowledge of the facts giving rise to litigation, a non-retained expert’s

testimony ‘arises not from his enlistment as an expert, but, rather, from his ground-

level involvement in the events giving rise to the litigation.’”51 Often referred to in

this Circuit as a “hybrid fact/expert witness,” a non-retained expert under Rule

26(a)(2)(C) is typically limited to testifying about his opinions formed as a result of

his knowledge of the case gained through direct observation.52 Stated another way,

a hybrid witness can testify as “an actor with regard to the occurrences from which

the tapestry of the lawsuit was woven.”53 “While non-retained experts may be asked

questions that implicate their expertise, they cannot be asked to opine about broader

49 Tajonera, Civ. A. No. 13-0366, 2016 WL 3180776 at *7 (quoting Fed. R. Evid. 26(a)(2)(C), Advisory

Committee Notes to 2010 Amendments). The Court notes that the Tajonera court’s reference to Fed.

R. Evid. 26(a)(2)(C) appears to be a typographical error and an intended reference to Fed. R. Civ. P.

26(a)(2)(C).

50 Ferrara Land Management Mississippi, LLC v. Landmark American Insur. Co., Civ. A. No.

1:19cv956-HSO-JCG, 2021 WL 4819461, at *2 (S.D. Miss. July 19, 2021) (Ozerden, J.) (quoting

DiSalvatore v. Foretravel, Inc., Civ. A. No. 9:14-CV-00150-KFG, 2016 WL 7742996, at *2 (E.D. Tex.

May 20, 2016) (Giblin, M.J.)) (internal quotation marks omitted); See also, Cooper v. Meritor, Inc., Civ.

A. No. 4:16-CV-52-DMB-JMV, 2018 WL 1513006, at *2 (N.D. Miss. Mar. 27, 2018) (Virden, M.J.); Meier

v. UHS of Delaware, Inc., Civ. A. No. 4:18-CV-00615, 2020 WL 923952, at *8 (E.D. Tex. Feb. 26, 2020)

(Mazzant, J.).

51 Ferrara, Civ. A. No. 1:19cv956-HSO-JCG, 2021 WL 4819461 at *2 (quoting DiSalvatore, Civ. A. No.

9:14-CV-00150-KFG, 2016 WL 7742996 at *2). See, United States ex rel. Rigsby v. State Farm Fire &

Cas. Co., Civ. A. No. 1:06CV433-HSO-RHW, 2019 WL 6792774, at *2 (S.D. Miss. Dec. 12, 2019)

(Walker, M.J.).

52 Ferrara, Civ. A. No. 1:19cv956-HSO-JCG, 2021 WL 4819461 at *2 (citing DiSalvatore, Civ. A. No.

9:14-CV-00150-KFG, 2016 WL 7742996 at *2).

53 Tajonera, Civ. A. No. 13-0366, 2016 WL 3180776 at *9 (quoting LaShip, LLC v. Hayward Baker,

Inc., 296 F.R.D. 475, 480 n.34 (E.D. La. 2013) (Brown, J.)) (internal quotation marks omitted).

issues beyond their own personal involvement unless they also submit written expert

reports.”54 Thus, the scope of a non-retained expert’s testimony is limited to expert

opinions based upon her personal knowledge and observations.55

Regardless of whether a witness is proffered as a retained expert or as a non-

retained expert, the witness must still satisfy the requirements of Daubert v. Merrell

Dow Pharmaceuticals, Inc.56 and Fed. R. Evid. 702.57 “Thus, although Daubert and

its progeny often discuss specially retained experts, Rule 26(a)(2)(C) experts who

provide expert opinions pursuant to Rule 702 may also be challenged under

Daubert.”58 The district court has considerable discretion to admit or exclude expert

testimony under Fed. R. Evid. 702,59 and the burden rests with the party seeking to

present the testimony to show that the requirements of Rule 702 are met.60 Rule 702

provides that an expert witness “qualified . . . by knowledge, skill, experience,

training or education may testify in the form of an opinion” when all of the following

54 Ferrara, Civ. A. No. 1:19cv956-HSO-JCG, 2021 WL 4819461 at *2 (citing DiSalvatore, Civ. A. No.

9:14-CV-00150-KFG, 2016 WL 7742996 at *2); See, Spears v. United States, Civ. A. No. 5:13-CV-47-

DAE, 2014 WL 258766, at *8 (W.D. Tex. Jan. 23, 2014) (Ezra, J.) (citing Fed. R. Civ. P. 26(a)(2)(B) and

26(e)).

55 Ferrara, Civ. A. No. 1:19cv956-HSO-JCG, 2021 WL 4819461 at *2 (quoting StoneCoat of Texas, LLC

v. Procal Stone Design, LLC, Civ. A. No. 4:17CV303, 2019 WL 9899919, at *15 (E.D. Tex. June 28,

2019) (Craven, M.J.)).

56 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993).

57 Ferrara, Civ. A. No. 1:19cv956-HSO-JCG, 2021 WL 4819461 at *3 (citing Collett v. Weherhaeuser

Co., Civ. A. No. 19-11144, 2021 WL 76396, at *3 (E.D. La. Jan. 8, 2021) (Fallon, J.); Tajonera, Civ. A.

No. 13-0366, 2016 WL 3180776, at *7).

58 Tajonera, Civ. A. No. 13-0366, 2016 WL 3180776 at *7 (citing authority).

59 See, Gen. Elec. Co. v. Joiner, 522 U.S. 136, 138-39, 118 S.Ct. 512, 139 L.Ed.2d 508 (1997); Seatrax,

Inc. v. Sonbeck Int’l, Inc., 200 F.3d 358, 371 (5th Cir. 2000); Tajonera, Civ. A. No. 13-0366, 2016 WL

3180776 at *8 (citing authority).

60 Moore v. Ashland Chemical Inc., 151 F.3d 269, 276 (5th Cir. 1998).

requirements are met:

(a) The expert’s scientific, technical, or other specialized knowledge will

help the trier of fact to understand the evidence or to determine a

fact in issue;

(b) The testimony is based on sufficient facts or data;

(c) The testimony is the product of reliable principles and methods; and

(d) The expert has reliably applied the principles and methods to the

facts of the case.61

Rule 702 codifies the Supreme Court’s opinion in Daubert, which charges district

courts to act as “gatekeepers” when determining the admissibility of expert

testimony.62 “To be admissible under Rule 702, the court must find that the evidence

is both relevant and reliable.”63 According to the Fifth Circuit, reliability is

determined by assessing whether the reasoning or methodology underlying the

testimony is scientifically valid, while relevance depends on whether the reasoning

or methodology underlying the testimony can be properly applied to the facts at

issue.64 The purpose of the reliability requirement is to exclude expert testimony

based merely on subjective belief or unsupported speculation.65

III. ANALYSIS

A. Menes is a Non-Retained Expert Under Fed. R. Civ. P. 26(a)(2)(C)

At the outset, the Court notes that while both parties refer to Menes as an

“expert” in their briefs, neither party has addressed, much less mentioned, whether

61 Fed. R. Evid. 702; Tajonera, Civ. A. No. 13-0366, 2016 WL 3180776 at *8.

62 United States v. Fullwood, 342 F.3d 409, 412 (5th Cir. 2003) (citing Daubert v. Merrell Dow

Pharmaceuticals, Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993)).

63 United States v. Ebron, 683 F.3d 105, 139 (5th Cir. 2012) (citing United States v. Valencia, 600 F.3d

389, 423 (5th Cir. 2010)).

64 Ebron, 683 F.3d at 139 (citing Pipitone v. Biomatrix, Inc., 288 F.3d 239, 244 (5th Cir. 2002)).

65 Tajonera, Civ. A. No. 13-0366, 2016 WL 3180776 at *8 (citing Daubert, 509 U.S. at 590, 113 S.Ct. at

2795).

Menes is a retained expert under Fed. R. Civ. P. 26(a)(2)(B) or a non-retained expert

under Fed. R. Civ. P. 26(a)(2)(C). Nonetheless, there is no evidence before the Court

indicating that Menes was specially retained or employed by MGMTL to provide

expert testimony in the case, or that his duties as a “majority member/manager of

MGMTL”66 “regularly involve giving expert testimony.”67 Instead, the evidence

before the Court reveals that Menes is the co-creator of the SMART software

application at issue in this case. As such, it seems that Menes’s opinion testimony

“arises not from his enlistment as an expert but, rather, from his ground-level

involvement in the events giving rise to the litigation.”68 Further, STI does not raise

any objection to Menes’s failure to provide a written report. Thus, Menes appears to

be a non-retained expert under Rule 26(a)(2)(C). Additionally, Menes’s Summary

Opinion appears to be a Rule 26(a)(2)(C) disclosure for a non-retained witness. The

Court reaches this conclusion based upon both the information contained in the

Summary Opinion and the fact that it is dated January 28, 2021, the Court’ imposed

deadline for MGMTL’s “expert disclosures, as defined by the Federal Rules of Civil

Procedure 26(a)(2)(C).”69

As a non-retained expert under Rule 26(a)(2)(C), Menes is exempt from the

Rule 26(a)(2)(B) reporting requirements insofar as his testimony may be related to

his personal involvement in the events that gave rise to this litigation. That personal

66 R. Doc. 99-5 at p. 1.

67 Fed. R. Civ. P. 26(a)(2)(B).

68 Tajonera, Civ. A. No. 13-0366, 2016 WL 3180776 at *9 (quoting LaShip, LLC v. Hayward Baker,

Inc., 296 F.R.D. 475, 480 n.34 (E.D. La. 2013)) (internal quotation marks omitted).

69 R. Doc. 44.

involvement includes his observations and opinions regarding his creation of the

SMART software application, his personal involvement in MGMTL’s discussions with

individuals at the Marine Forces Reserve office in New Orleans, Louisiana regarding

licensing the SMART software application, and his personal involvement in

MGMTL’s negotiations with STI to market and sell the SMART software

application.70 Any opinion testimony offered by Menes on these issues clearly fall

within the purview of Rule 26(a)(2)(C).

Menes’s expert testimony, however, will be allowed only as to facts and

opinions that were not produced specifically in preparation for the trial of this

matter.71 As previously explained by this Court, this approach comports with “the

plain language of Rule 26(a)(2)(B), which clearly contemplates that some employees

who render expert opinions should be exempt from the reporting requirement, but

would limit the exception to ‘experts who are testifying as fact witnesses, although

they may also express some expert opinions.’”72 If, however, Menes is called to offer

expert testimony that extends beyond “his ground-level involvement in the events

giving rise to the litigation,”73 and strays into opinions that he developed in

preparation for this litigation, Menes must comply with the Rule 26(a)(2)(B) reporting

requirements, regardless of his status as a non-retained expert.74

70 Beechgrove Redevelopment, LLC v. Carter & Sons Plumbing, Heating, and Air-Conditioning, Inc.,

Civ. A. No. 07-8446, 2009 WL 981724, at *6 (E.D. La. Apr. 9, 2009) (Barbier, J.).

71 Id.

72 Id. (quoting Day v. Consol. Rail Corp., Civ. A. No. 95 CIV. 968 (PKL), 1996 WL 257654, at *2

(S.D.N.Y. May 15,1996) (Dolinger, M.J.)) (emphasis added by Beechgrove).

73 Tajonera, Civ. A. No. 13-0366, 2016 WL 3180776 at *9 (quoting LaShip, LLC v. Hayward Baker,

Inc., 296 F.R.D. 475, 480 n.34 (E.D. La. 2013)) (internal quotation marks omitted).

74 Beechgrove Redevelopment, LLC, Civ. A. No. 07-8446, 2009 WL 981724 at *6 (quoting Day, Civ. A.

No. 95 CIV. 968 (PKL), 1996 WL 257654 at *2) (quotation marks omitted); See, Lee v. Valdez, Civ. A.

B. The Opinion Testimony At Issue in STI’s Motion.

At the outset, the Court notes that in the instant Motion, STI requests “an

Order to preclude the opinion testimony of Jorge Menes at trial on any matters related

to damages (including regarding fair market value or a reasonable licensing fee) as

disclosed in the Summary of Opinion Testimony of Jorge Menes dated January 28,

2021.” 75 STI’s Supporting Memorandum, however, is devoted exclusively to

excluding Menes’s opinion testimony regarding the fair market value or reasonable

licensing fee of the SMART software application.76 As such, the Court’s review of

STI’s Motion is limited to STI’s request for the Court to exclude Menes’s opinion

testimony regarding the fair market value or reasonable licensing fee for the SMART

software application, as set forth in Menes’s Summary Opinion.77 The Court must

therefore determine whether Menes’s testimony regarding the fair market value or

No. 3:07-CV-1298-D, 2008 WL 4287730 (N.D. Tex. Sept. 18, 2008) (Fitzwater, C.J.) (excluding

defendant sheriff’s expert treating physicians in action for wrongful death of inmate based on failure

to produce Rule 26 expert reports, despite argument that physicians were exempt as employees of

defendant); Prieto v. Malgor, 361 F.3d 1313, 1318-19 (11th Cir. 2004) (finding that an expert report

was required regarding the testimony of an employee proffered as an expert in use of force and police

procedures).

75 R. Doc. 91 at p. 1 (emphasis added).

76 R. Doc. 91-1 at pp. 1-2, 3, 4-5, & 6-11.

77 Although not raised by STI, the Court questions whether the Summary Opinion meets the disclosure

requirements of Fed. R. Civ. P. 26(a)(2)(C). As noted by another Section of this Court, “[W]hile courts

‘must take care against requiring undue detail’ in Rule 26(a)(2)(C) disclosures, Adv. Comm. Notes to

2010 Amendments, the ‘summary’ disclosure should at the very least an [sic] ‘abstract, abridgement,

or compendium’ of the opinion and facts supporting the opinion.” Rea v. Wisconsin Coach Lines, Inc.,

Civ. A. No. 12-1252, 2014 WL 4981803, at *5 (E.D. La. Oct. 3, 2014) (Duval, J.) (quotation omitted)

(emphasis in original). The Summary Opinion does not specify the facts upon which Menes based his

valuation of the SMART license. Instead, the Summary Opinion states that, “With respect to these

opinions, Menes will testify as a fact witness to establish the fair market value or reasonable licensing

fee of SMART based on real world facts and knowledge of the target industry and the current state of

information technology.” R. Doc. 91-2 at p. 3. However, because STI has not raised this as a basis

upon which to exclude Menes’s opinion testimony, the Court need not answer this question in this

Order.

reasonable licensing fee of SMART satisfies the relevancy and reliability

requirements of Daubert and Fed. R. Evid. 702.78

C. MGMTL Has Failed to Show That Menes is Qualified to Offer

Opinion Testimony Regarding the Fair Market Value or

Reasonable Exclusive Licensing Fee For SMART.

On the question of whether Menes is qualified to offer opinion testimony

regarding the fair market value or reasonable licensing fee of SMART, the parties’

arguments are brief. STI argues that Menes has no professional background,

experience, training, or education in valuation or software licensing, and points out

that no qualifications are listed in the Summary Opinion.79 Relying upon Menes’s

deposition testimony, STI further asserts that neither Menes nor MGMTL have ever

sold a software license, that Menes has never served as an expert, that Menes has

never been paid for his time to provide an expert opinion, and that Menes has never

been paid to calculate a reasonable licensing fee for software.80 STI also points out

that Menes admitted that he is not an expert in software, “but simply claims to

understand economics.”81

MGMTL asserts that it seeks to recover its actual damages from STI’s alleged

copyright infringement and trade secret misappropriation, and that “actual damages”

are based on a reasonable licensing fee, or the “fair market value of the copyright.”82

78 Ferrara Land Management Mississippi, LLC v. Landmark American Insur. Co., Civ. A. No.

1:19cv956-HSO-JCG, 2021 WL 4819461, at *2-3 (S.D. Miss. July 19, 2021); Tajonera, Civ. A. No. 13-

0366, 2016 WL 3180776 at *7-9; Beechgrove Redevelopment, LLC, Civ. A. No. 07-8446, 2009 WL

981724 at *5-7.

79 R. Doc. 91-1 at p. 3 (citing R. Doc 91-2).

80 R. Doc. 91-1 at pp. 3-4 (citing R. Doc. 91-3 at pp. 2, 14, & 42).

81 R. Doc. 91-1 at p. 4 (citing R. Doc. 91-3 at p. 16).

82 R. Doc. 99-27 at pp. 10-11 (quoting Ghirmay v. Tsegia, Civ. A. No. 07-1826, 2009 WL 2488185, at *3

(E.D. La. Aug. 10, 2009) (Berrigan, J.)) (internal quotation marks omitted).

MGMTL contends that for intellectual property damages, the Fifth Circuit applies a

“flexible and imaginative approach to the problem of damages,” which is controlled

by the facts particular to the case.83 Relying upon this framework and the Fifth

Circuit’s decision in University Computing Co. v. Lykes-Youngstown Corp., MGMTL

asserts that Menes is qualified to testify regarding the fair market value of an

unrestricted license to SMART because he played a significant role in the

development of SMART, he established the price point for it and can testify that it

was met with acceptance in negotiations for sale of a license to MARFORRES, and he

served as a technical expert at sales presentations of SMART.84 MGMTL further

asserts that, as the co-creator of SMART, Menes has the personal knowledge to speak

about development costs, the field-testing SMART underwent, “and other extrinsic

factors such as the need for SMART and the highly specialized security management

knowledge required to build SMART – specialized knowledge that goes beyond

software valuation and deep into various Department of Defense regulations and

general principles of security management.”85 MGMTL contends that Menes’s

knowledge, skill, and experience as manager of MGMTL, as a security management

specialist, and as the co-creator of SMART make him uniquely qualified to testify

regarding these issues.

The Court agrees with STI that MGMTL has failed to establish that Menes is

qualified to offer an expert opinion regarding the “fair market value or reasonable

83 R. Doc. 99-27 at p. 11 (quoting University Computing Co. v. Lykes-Youngstown Corp., 504 F.2d 518,

538 (5th Cir. 1974)) (internal quotation marks omitted).

84 R. Doc. 99-27 at p. 14 (citing Univ. Computing Co., 504 F.2d at 543).

85 R. Doc. 99-27 at p. 14.

exclusive licensing fee for all rights to SMART (including the ability to sell a copy or

derivative of SMART through a Government Services Agency contract) for a period

of five years as $7,650,000 as a minimum and likely $89,870,000.”86 While there is

evidence before the Court indicating that Menes has experience in the field of security

management,87 which STI does not appear to dispute,88 that experience does not

automatically qualify him to provide expert testimony regarding the fair market

value or reasonable exclusive licensing fee for software in a copyright infringement

case. Likewise, the fact that Menes is the co-creator of SMART and has personal

knowledge about the development costs and field-testing of the software reveals

nothing about Menes’s knowledge or experience in calculating a reasonable licensing

fee for a software application. There is no evidence before the Court indicating that

Menes has any professional or significant experience-based background, experience,

training, or education in valuing software licensing or that Menes or MGMTL have

ever sold a software license.89 As STI points out, Menes testified during his

deposition that he has never sold a software license to anything he has created, and

also confirmed that MGMTL has never sold a software license to anyone.90

The Court recognizes that MGMTL strenuously argues in its Opposition brief

that Menes is qualified to opine on the fair market value or reasonable exclusive

licensing fee for SMART because “MGMTL did sell a SMART license” to the Marine

86 R. Doc. 91-2; R. Doc. 99-5.

87 R. Doc. 91-2 at p. 2; R. Doc. 99-5 at p. 1, R. Doc. 99-2.

88 See, generally, R. Docs. 91-1 & 121.

89 See, R. Doc. 99-27 at pp. 2-4; R. Doc. 99-2.

90 R. Doc. 91-3 at pp. 2 & 14.

Forces Reserve office in New Orleans, Louisiana in 2014 for $30,000.91 Nonetheless,

MGMTL also acknowledges, somewhat reluctantly, that the sale fell through because

“a government sequestration that fiscal year prevented the release of funds to pay for

the SMART license.”92 As explained by Menes during his deposition:

Q Has Managemental or MGMTL, for short, sold any software licenses?

A Yes, we - - we had sold a license to MARFORRES.

. . . .

Q For What Product?

A For SMART.

Q Did they pay you for it?

A. They did not pay me for it.

. . . .

Q And why do you believe they agreed to pay you $30,000 to license

SMART for one year?

A Well, over the course of a year, we provided sole source justification,

provided a purchase request, provided documentation on what the

client, MARFORRES, would receive, and we even signed a bailment

agreement provided to us by the regional contracting office at

MARFORRES.

All of those steps, with the exception of receiving a check, in my

opinion constitute a sale.

Q I see. Did MARFORRES ever - - did MARFORRES ever sign a

contract with MGMTL where MARFORRES agreed to pay MGMTL

$30,000 to license SMART for one year?

A That was in the bailment agreement. We never received a returned

signed copy by the government, and in 2014, a thing called

91 R. Doc. 99-27 at p. 7 & n.56; See, Id. at pp. 5, 15, 16, 21, & 25.

92 Id. at p. 5, n.16 & pp. 15, 16 & n.56, 21.

“sequestration” held up all discretionary funding for things like

software, purchasing of vehicles, things like that.93

But simply believing that an unaccepted offer constitutes a sale does not make it so.

It is clear to the Court, from both the Opposition brief and Menes’s deposition

testimony, that a sale of the one-year license of the SMART software was never

effectuated between MGMTL and the Marine Forces Reserve for $30,000. Further,

Menes’s testimony makes clear that MGMTL never received a signed contract, or

bailment agreement, from the Marine Forces Reserve demonstrating its acceptance

of that purchase price of $30,000. MGMTL points to no other sale of a software license

by either Menes or MGMTL.94 Thus, while Menes may offer testimony regarding

MGMTL’s discussions with the Marine Forces Reserve to sell a one-year license of

the SMART software application for $30,000, as such testimony was likely “formed

as a result of [his] knowledge of the case gained through direct observation,”95 any

opinions regarding the fair market value or reasonable exclusive licensing fee for

SMART would “stray into opinions that [he] may have developed in preparation for

the litigation of this matter.”96 Any such testimony would be subject to the expert

report requirement of Fed. R. Civ. P. 26(a)(2)(B).97 MGMTL has not directed the

Court to any expert report prepared by Menes.

93 R. Doc. 99-6 at pp. 2-4.

94 See, generally, R. Doc. 99-27.

95 Ferrara Land Management Mississippi, LLC v. Landmark American Insur. Co., Civ. A. No.

1:19cv956-HSO-JCG, 2021 WL 4819461, at *2 (S.D. Miss. July 19, 2021).

96 Beechgrove Redev., LLC v. Carter & Sons Plumbing, Heating and Air-Conditioning, Inc., Civ. A. No.

07-8446, 2009 WL 981724, at *6 (E.D. La. Apr. 9, 2009).

97 Id.

To the extent MGMTL claims that Menes is qualified to render an expert

opinion regarding the fair market value of the SMART license based upon the fact

that he priced it at $30,000 for the attempted sale to the Marine Forces Reserve,

Menes’s deposition testimony makes clear that he did not perform any calculation in

setting that price. As STI points out, Menes testified that he valued the license at

$30,000 for one year because “$30,000 seems to be the threshold that could be charged

on a government charge card by, of course, an authorized approved agent with - - you

know, with those charge cards.”98 MGMTL does not address this testimony in its

Opposition brief. The Court notes that MGMTL omitted Menes’s testimony regarding

the charge card limit from the deposition transcript that was submitted with its

Opposition brief.99

Rather than address this issue directly, MGMTL opted instead to submit a new

Declaration from Menes, dated May 17, 2021, in which he asserts that:

The price of licensing SMART for one year was originally based on the

labor cost savings it provided to the licensee. SMART allowed the

security management office at MARFORRES to reduce the security

administration duties from four personnel down to one. The $30,000

licensing fee is roughly the equivalent of the annual salary of a lance

corporeal in the Marine Corps. Licensing of SMART at $30,000 a year

would thus allow a security management office to reduce its security

administration labor costs by half.100

MGMTL relies upon this new Declaration to assert that Menes’s determination that

a one-year license of the SMART software application is not speculative, but “turns

98 R. Doc. 91-3 at p. 27.

99 See, R. Doc. 99-6 at pp. 26-27.

100 R. Doc. 99-1 at ¶ 16.

on real world economic considerations.”101 The Court agrees with STI that this new

Declaration is merely an attempt by MGMTL to circumvent Menes’s deposition

testimony, as there is no indication from the deposition transcripts submitted by the

parties that Menes ever testified that the $30,000 valuation was based upon “labor

cost savings.”102 Thus, the Court is not persuaded by the new Declaration that Menes

is qualified to render an expert opinion on the fair market value or reasonable

exclusive licensing fee for the SMART software application in this case.

To the extent MGMTL relies on University Computing Co. to argue that Menes

has the professional background and experience to offer an opinion regarding the fair

market value of a SMART license,103 the Court disagrees and finds that case factually

distinguishable. There, the Fifth Circuit found no error in the lower court allowing

Stan Josephson, the plaintiff’s Vice President of Technical Services, to testify as an

expert on the question of damages for the defendant’s misappropriation of the

plaintiff’s computer system.104 In doing so, the Fifth Circuit pointed out that

Josephson had testified that he was responsible for developing software systems,

pricing them for marketing, and assisting as technical expert at sales presentations,

and that in pricing a software system, he took into account such factors as

development costs, the long-term potential for the system, and the plaintiff’s sales

objectives, as well as the current market for such systems.105

101 R. Doc. 99-27 at p.18.

102 See, R. Docs. 91-3, 99-6, & 121-1.

103 R. Doc. 99-27 at p. 11-14 (citing Univ. Computing Co. v. Lykes-Youngstown Corp., 504 F.2d 518,

536-38, 543 (5th Cir. 1974)).

104 504 F.2d at 543.

105 Id.

Unlike the witness in University Computing Co., MGMTL has failed to direct

the Court to any evidence suggesting that Menes has similar prior experience in

marketing or pricing software licenses for SMART, or any software for that matter,

beyond the one unsuccessful sale of a license to one office of the Marine Forces

Reserve. More importantly, however, STI has produced evidence in the form of

Menes’s deposition testimony showing that: (1) Menes attributes most of the

development of SMART to its co-creator, Whit Himel; (2) Menes admitted he is not a

software expert; and (3) Menes has only ever priced the SMART software application,

which was based upon the government’s charge card limit.106 STI has also presented

evidence showing that no one has ever purchased a one-year license of SMART for

$30,000, despite MGMTL’s attempts, and that Menes’s only sales presentation

experience, to two prospective customers other than STI, was unsuccessful.107 Thus,

Menes’s deposition testimony flatly contradicts MGMTL’s assertion that Menes is

qualified to render an expert opinion on the fair market value or reasonable exclusive

licensing fee for SMART based upon his prior experience and training. As cautioned

by another Section of this Court, this seems to be a situation in which MGMTL is

attempting “to avoid Rule 26(a)(2)(B)’s reporting requirements by having a regular

employee testify on an issue instead of an expert.”108

Based upon the foregoing analysis, the Court finds that MGMTL has failed to

carry its burden of proving that Menes is qualified to offer opinion testimony

106 R. Doc. 121 at p. 7 (citing R. Doc. 121-1 at pp. 4-5; R. Doc. 91-3 at pp. 16 & 27).

107 R. Doc. 121 at p. 7 (citing R. Doc. 91-3 at p. 14; R. Doc. 121-2 at pp. 3-4).

108 Beechgrove Redevelopment, LLC v. Carter & Sons Plumbing, Heating and Air-Conditioning, Inc.,

Civ. A. No. 07-8446, 2009 WL 981724, at *5 (E.D. La. April 9, 2009).

regarding the fair market value or reasonable exclusive licensing fee for all rights to

SMART.

D. MGMTL Has Failed to Show That Menes’s Opinions Regarding the

Fair Market Value or Reasonable Exclusive Licensing Fee For

SMART Are Reliable Under Rule 702.

The Court further finds that, even if Menes is qualified to provide opinion

testimony regarding the fair market value or reasonable exclusive licensing fee for

the SMART software application, such opinions must be excluded as unreliable under

Fed. R. Evid. 702. To satisfy the reliability prong of the Daubert/Rule 702 analysis,

a “party seeking to introduce expert testimony must show (1) the testimony is based

upon sufficient facts or data, (2) the testimony is the product of reliable principles

and methods, and (3) the witness has applied the principles and methods reliably to

the facts of the case.”109 To prove reliability, the proponent of the expert testimony

must present some objective, independent validation of the expert’s methodology.110

As explained by the Supreme Court, the objective of this Court’s gatekeeper role is to

ensure that an expert “employs in the courtroom the same level of intellectual rigor

that characterizes the practice of an expert in the relevant field.”111

109 Recif Resources, LLC v. Juniper Capital Advisors, L.P., Civ. A. No. H-19-2953, 2020 WL 5623982,

at *2 (S.D. Tex. Sept. 18, 2020) (Atlas, J.) (quoting Huss v. Gayden, 571 F.3d 442, 452 (5th Cir. 2009))

(internal quotation marks omitted).

110 Recif Resources, LLC, Civ. A. No. H-19-2953, 2020 WL 5623982 at *2 (citing Brown v. Illinois Cent.

R. Co., 705 F.3d 531, 536 (5th Cir. 2013)).

111 Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 152, 119 S.Ct. 1167, 1176, 143 L.Ed.2d 238

(1999); Hodges v. Mack Trucks Inc., 474 F.3d 188, 194 (5th Cir. 2006).

1. Menes’s Opinions Are Based Upon Sufficient Facts or Data.

As STI points out,112 the Fifth Circuit has recognized that, “The Daubert

reliability analysis applies to, among other things, ‘the facts underlying the expert’s

opinion.’”113 “In particular, an opinion based on ‘insufficient, erroneous information,’

fails the reliability standard.”114 The Fifth Circuit has further cautioned that,

“Although the Daubert reliability analysis is flexible and the proponent of the expert

evidence need not satisfy every one of its factors, ‘the existence of sufficient facts . . .

is in all instances mandatory.’”115 Thus, “expert testimony that relies on ‘completely

unsubstantiated factual assertions’ is inadmissible.”116 Nevertheless, the Fifth

Circuit has made clear that, “[a]s a general rule, questions relating to the bases and

sources of an expert’s opinion affect the weight to be assigned that opinion rather

than its admissibility and should be left for the jury’s consideration.”117 “It is the role

of the adversarial system, not the court, to highlight weak evidence.”118

STI asserts that Menes’s opinion testimony regarding the fair market value or

reasonable exclusive licensing fee for SMART is not based on sufficient facts or data

because it is based upon assumptions regarding the price of a one-year license for the

112 R. Doc. 91-1 at p. 4.

113 Moore v. Int’l Paint, LLC, 547 Fed.Appx. 513, 515 (5th Cir. 2013) (quoting Knight v. Kirby Inland

Marine Inc., 482 F.3d 347, 355 (5th Cir. 2007)); Jacked Up, LLC v. Sara Lee Corporation, 291 F. Supp.

3d 795, 802 (N.D. Tex. 2018) (Horan, M.J.) (quoting Moore, 547 Fed.Appx. at 515).

114 Moore, 547 Fed.Appx. at 515 (quoting Paz v. Brush Engineered Materials, Inc., 555 F.3d 383, 389

(5th Cir. 2009)).

115 Moore, 547 Fed.Appx. at 515 (quoting Hathaway v. Bazany, 507 F.3d 312, 318 (5th Cir. 2007))

(internal citation omitted).

116 Moore, 547 Fed.Appx. at 515 (quoting Hathaway, 507 F.3d at 319, n.4).

117 Primrose Operating Co. v. National American Ins. Co., 382 F.3d 546, 562 (5th Cir. 2004) (quoting

United States v. 14.38 Acres of Land, More of Less Sit. In Leflore County, Miss, 80 F.3d 1074, 1077 (5th

Cir. 1996)) (internal quotation marks omitted) (emphasis added by Primrose).

118 Primrose, 382 F.3d at 562.

SMART software application, the number of licenses that would have been sold to the

military, the duration of the licenses and, for the higher damages estimate, a royalty

fee, a fee for technical services provided by MGMTL, and payment for the hours spent

by Menes and Himel to develop SMART.119 STI argues that the assumptions are

speculative and not based in fact because MGMTL never sold a license to SMART.120

Although difficult to decipher, MGMTL seems to argue that Menes’s testimony

regarding the fair market value of a SMART license is not speculative because the

$30,000 price for a one-year license of SMART is based upon the price at which

MGMTL sold a license to the Marine Forces Reserve, and because STI valued its own

copycat PASS software at $214,094 per year.121 MGMTL contends that Menes then

multiplied $30,000 by five years, “the period of time during which STI has taken

unrestricted access to [SMART],”122 and multiplied that number “by a conservative

estimate of licensees Menes knew were doable and realistic” based upon his own

experience in the field.123 According to MGMTL, “Within MARFORRES (which is

only one component of the entire Marine Corps), there are 51 units across the United

States and so represent 51 potential licensees. A five-year license to each of these

generates revenue of $7.65 million.”124 MGMTL further asserts that, “MARFORRES

was used as a baseline for predicting sales because it constitutes ‘low hanging fruit’

closely connected to Menes’s experience and accessible through its position and

119 R. Doc. 91-1 at pp. 4-5.

120 Id. at p. 5.

121 R. Doc. 99-27 at pp. 17 & 19.

122 Id. at p. 19.

123 Id. at pp. 18 & 19.

124 Id. at p. 19.

proven record within the MARFORRES security management office and his personal

contacts.”125 As STI points out in its Reply brief, MGMTL does not attempt to explain

the basis for Menes’s higher damages estimate of $89.8 million.126

During his deposition, Menes testified that his lower estimate of $7.65 million

was reached by multiplying $30,000, his price for a one-year license of the SMART

software application, by 51 licenses over the course of five years, which is the length

of time that STI had unrestricted use of SMART.127 Menes valued a one-year license

of the SMART software application at $30,000 because “That was the calculation that

we presented to MARFORRES, so that was the calculation that we would have

presented to STI.”128 Menes explained that the 51 licenses “included MARFORRES

and the 50 battalions at MARFORRES that Steve McMurtry at the time of his

licensing of SMART believed that the SMART application would be capable of being

plugged into every one of the battalions at MARFORRES.”129 When asked whether

he took any steps to check the reliability of the 51-license assumption, Menes testified

that, “The one person in the Marine Corps that could have authorized and would have

authorized such a procurement was Steve McMurtry at the time. There was no other

individual.”130 As for the higher estimate of $89.8 million, Menes testified that he

reached that number by multiplying a one-year, $30,000 license by five years, and

multiplying that number by 500 licenses.131 Menes explained that, “We also believed

125 R. Doc. 121 at p. 10; See, generally, R. Doc. 99-27.

126 R. Doc. 121 at p.

127 R. Doc. 91-3 at p. 6.

128 Id. at p. 4.

129 Id. at p. 17.

130 Id. at p. 19.

131 Id. at pp. 4-5 & 6-7.

that contacts with the Marine Corps, specifically Steve McMurtry and MARFORRES

and the Navy, that that would have potentially included a conservative number of

500 licenses,”132 and that, “from conversations with STI, we believed that 500 licenses

was the minimum amount that we could get between the Navy and the Marine

Corps.”133

The Court finds that, although the facts relied upon by Menes in calculating

the fair market value or reasonable exclusive licensing fee for SMART are thin, they

are sufficient for purposes of Daubert. The Court remains cognizant that,

notwithstanding Daubert, “the rejection of expert testimony is the exception and not

the rule.”134 Thus, to the extent that STI is attacking the factual basis of Menes’s

opinions, such arguments address the weight to be assigned to those opinions, rather

than their admissibility at trial.135 The Court is fully satisfied that, during trial,

counsel for STI is perfectly able to, and will, take the opportunity to vigorously cross-

examine Menes regarding the bases for his opinions.

2. Menes’s Opinions Are Not The Product of Reliable Methodologies.

Although Menes’s opinions regarding the fair market value or reasonable

exclusive licensing fee for SMART are based upon sufficient facts, the Court finds

that his opinions must be excluded under Rule 702 because they are not based upon

132 Id. at p. 4.

133 Id. at p. 7.

134 Johnson v. Samsung Electronics America, Inc., 277 F.R.D. 161, 165 (E.D. La. 2011) (Duval, J.)

(quoting Fed. R. Evid. 702 Advisory Committee Notes to 2000 Amendments) (internal quotation marks

omitted).

135 See, Tyler v. Union Oil Co. of Cal., 304 F.3d 379, 393 (5th Cir. 2002) (“Unocal instead attempts to

show that the underlying data – provided by Unocal – was itself unreliable. This is an issue that

Unocal could – and did – raise in cross-examination.”).

reliable principles or methods. The Supreme Court in Daubert set forth the following non-

exclusive list of factors to consider in determining the reliability of expert testimony: (1)

whether the theory has been tested; (2) whether the theory has been subject to peer review

and publication; (3) the known or potential rate of error; (4) whether standards and controls

exist and have been maintained with respect to the technique; and (5) the general acceptance

of the methodology in the scientific community.136 Whether some or all of these factors apply

in a particular case depends on the facts, the expert’s particular expertise, and the subject of

his testimony.137 The Fifth Circuit has held that a trial court may consider additional factors

in assessing the scientific reliability of expert testimony, including: (1) whether the expert’s

opinion is based on incomplete or inaccurate data; (2) whether the expert has unjustifiably

extrapolated from an accepted premise to an unfounded conclusion; and (3) whether the

expert has adequately accounted for alternative explanations.138 “The overarching goal ‘is to

make certain that an expert, whether basing testimony on professional studies or personal

experience, employs in the courtroom the same level of intellectual rigor that characterizes

the practice of an expert in the relevant field.’”139

As previously mentioned, Menes testified that his opinions are based upon a

calculation in which he multiplied the price of a one-year license of the SMART

software application ($30,000), by the number of licenses he believes MGMTL could

136 In re: Vioxx Products Liability Litigation, 401 F. Supp. 2d 565, 573 (E.D. La. 2005) (Fallon, J.) (citing

Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 593-95, 113 S.Ct. 2768, 125 L.Ed.2d 469

(1993)).

137 In re: Vioxx, 401 F. Supp. 2d at 573 (citing Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 13,

119 S.Ct. 1167, 143 L.Ed.2d 238 (1999)).

138 Nola Ventures, LLC v. Upshaw Insurance Agency, Inc., Civ. A. No. 12-1026, 2014 WL 12721798, at

*6 (E.D. La. Oct. 31, 2014) (Brown, J.) (citing Black v. Food Lion Inc., 171 F.3d 308, 313 (5th Cir. 1999);

Moore v. Ashland Chemical Inc., 151 F.3d 269, 278-79 (5th Cir. 1998); In re Vioxx, 401 F. Supp 2d at

573).

139 Nola Ventures, LLC, Civ. A. No. 12-1026, 2014 WL 12721798 at *6 (quoting Kumho Tire, 526 U.S.

at 152, 119 S.Ct. at 1176).

have sold to the military (at least 51 and up to 500), and multiplied that number by

the length of time that STI had unrestricted access to SMART (five years). According

to MGMTL, Menes valued a one-year license at $30,000 because that was the price

at which it sold a one-year license to the Marine Forces Reserve.140 Menes admitted,

however, that he did not know how much STI was willing to pay to license SMART,141

that MARFORRES never actually licensed the SMART software for $30,000,142 and

that MGMTL has never sold technical services or a software license to anyone.143

More importantly, however, Menes further testified that the price of a one-year

license for the SMART software application was set at $30,000 because that “seems

to be the threshold that could be charged on a government charge card by, of course,

an authorized approved agent with - - you know, with those charge cards.”144 Thus,

the evidence before the Court suggests that Menes valued a one-year license at

$30,000 based upon the credit card limit of its potential customer, rather than actual

information regarding its fair market value.

With respect to the number of licenses that MGMTL could have sold in the five

years that STI had the SMART software application, Menes testified that he believed

500 licenses was a “conservative number” based upon MGMTL’s contacts with Steve

McMurtry, MARFORRES, and the Navy.145 Menes explained, “[F]rom conversations

with STI, we believed that 500 licenses was the minimum amount that we could get

140 R. Doc. 99-27 at pp. 17 & 19.

141 R. Doc. 91-3 at p. 11.

142 Id. at p. 3.

143 Id. at p. 14.

144 R. Doc. 91-3 at p. 27.

145 Id. at p. 4.

between the Navy and the Marine Corps. Multiply 500 by 30,000 times 5 is $75

million.”146 Menes explained that to calculate MGMTL’s royalty fee, he “tacked an

additional 15 percent off on those 500 licenses, comes out to 11 million point 65.”147

Menes likewise testified that he added another $3 million to that calculation to

account for “technical assistance” provided by Menes and Himel,148 and added an

additional $600,000 for development costs.149

As for the lower end of 51 licenses, Menes testified that “Steve McMurtry at

the time of his licensing of SMART believed that the SMART application would be

capable of being plugged into every one of the battalions at MARFORRES,” of which

there are 51.150 When asked directly if he did anything to check the reliability of his

assumption that MGMTL could sell 51 licenses to MARFORRES, Menes repeatedly

answered “no.”151 Menes further answered that Steve McMurtry was the one person

in the Marine Corps who could have authorized such a procurement of the SMART

license and that McMurtry “said he wanted it at 51 units, I mean that’s the guy that

told me. I mean that’s what was told to me, that that was the plan.”152 Menes

testified that he believed it was “100 percent probable” that MGMTL was going to be

able to sell 51 licenses to MARFORRES based upon his discussions with Steve

McMurtry because “the man asked me and told me he was going to license it 50 more

times, so I have no reason to believe it would have been less, no, or more, for that

146 R. Doc. 91-3 at p. 7.

147 Id. at pp. 5, 7, & 11.

148 Id. at pp. 8 & 12.

149 Id. at p. 8; R. Doc. 99-6 at pp. 14, 37-41.

150 R. Doc. 91-3 at p. 17.

151 Id. at pp. 18 & 21.

152 Id. at p. 19.

matter.”153 According to Menes, “There was an assumption. It was based off of what

McMurtry had told me he wanted to happen.”154

Although Menes testified that these valuations are based upon his

“understanding and fact of the marketplace” and that he “understand[s]

economics,”155 Menes stated that he did not consult any technical documents and that

he is not an expert in software or in calculating the fair market value or reasonable

licensing fees for software.156 Menes testified that the co-creator of SMART, Whit

Himel, has “been in the business for a long time creating database utilities for oil

companies. So what I would tell you, a lot of my valuations on what SMART was

worth came from his 40-plus years of experience. So, yeah, I would say Whit’s an

expert. I consulted an expert.” 157 Menes also testified that the “scientific

information” he used to calculate damages was “the market, the market being

MARFORRES.”158 When asked if he conducted a survey in connection with his

opinion as to the fair market value or reasonable exclusive licensing fee for all rights

to SMART, Menes stated:

Again, I don’t need to take a survey for something that I have created.

I understand the labor. I understand the economy of scale. I understand

the demand. I understand the placement of our product. I had enough

153 Id. at p. 41.

154 R. Doc. 99-6 at p. 26.

155 R. Doc. 91-3 at pp. 5 & 16; R. Doc. 99-6 at p. 51.

156 R. Doc. 91-3 at pp. 15 & 16; R. Doc. 99-6 at p. 17.

157 R. Doc. 99-6 at p. 16.

158 R. Doc. 91-3 at pp. 17-18.

experience with the help of Whit Himel and his 40 years to position,

price, and license SMART. I didn’t need a survey.159

Menes subsequently clarified that, “No, I did not need to conduct a survey. I did not

need a survey to answer those questions. I was able to answer them myself.”160 When

asked if he talked to “anyone else in any other government or military agency and

ask them what they would pay to license SMART,” Menes said “no.”161

The Court finds that Menes’s calculations of the fair market value or

reasonable exclusive licensing fee for SMART as “$7,650,000 to $89,870,000” were

based solely upon unreliable methodologies, including assumptions made from

conversations he had with Steve McMurtry and Whit Himel, a credit card limit, and

an unconsummated sale of a one-year license to MARFORRES. Menes very plainly

stated that he performed no market analysis to verify the reasonableness or accuracy

of his calculations. In fact, it is clear to the Court that Menes performed no

independent research, beyond his discussions with Steve McMurtry or Whit Himel,

regarding the numbers he used to calculate the fair market value or reasonable

exclusive licensing fee for SMART. Thus, there is no “concrete” evidence before the

Court to support Menes’s opinion regarding the fair market value or reasonable

exclusive licensing fee for the SMART software application, such as market surveys

or quotes solicited from other companies regarding the cost to create and license

analogous works.162 Other courts, including this Court, have excluded expert

159 Id. at p. 32.

160 Id.

161 Id. at p. 33.

162 See, Recif Resources, LLC v. Juniper Capital Advisors, L.P., Civ. A. No. H-19-2953, 2020 WL

5623982, at *1, 5 (S.D. Tex. Sept. 18, 2020) (“Bersin’s methodology of soliciting multiple quotes to

opinions where the expert failed to conduct any independent research to determine

the reliability of his assumptions.163

The Court reaches the same conclusion in this case as to Menes’s opinion

testimony. It is evident that Menes merely accepted as true the information provided

to him by McMurtry regarding his interest in licensing the SMART software

application at the 51 battalions of the Marine Forces Reserve and performed no

independent analysis of those numbers. Thus, Menes’s theory cannot be tested. The

Court finds that MGMTL has failed to establish that Menes reached his opinions

regarding the fair market value or reasonable exclusive licensing fee for SMART

using “the same level of intellectual rigor that characterizes the practice of an expert

in the relevant field.”164 Instead, this appears to be an attempt by MGMTL to present

its own estimation of damages in the guise of an expert opinion.165 MGMTL has also

failed to show that Menes was impartial in formulating his opinions, which is

especially troubling since he is the co-creator of the SMART software application and

a major member/manager of MGMTL. The Court therefore concludes that STI’s

Motion must be granted to the extent that STI seeks to exclude any opinion testimony

from Menes regarding his calculations of the fair market value or reasonable

determine the reasonable royalty/license fee for the copyrighted works based on the market value of

obtaining analogous works is a rational, reliable methodology.”).

163 JRL Enterprises, Inc. v. Procorp Associates, Inc., Civ. A. No. 01-2893, 2003 WL 21284020, at *7-8

(E.D. La. June 3, 2003) (Fallon, J.) (citing authority).

164 Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 152, 119 S.Ct. 1167, 1176, 143 L.Ed.2d 238

(1999).

165 JRL Enterprises, Inc., Civ. A. No. 01-2893, 2003 WL 21284020 at *8.

exclusive licensing fee for all rights to SMART, as MGMTL has failed to show that

Menes’s calculations are reliable under Rule 702.166

E. MGMTL Has Failed to Show That Menes’s Opinions Regarding the

Fair Market Value or Reasonable Exclusive Licensing Fee For

SMART Are Admissible Under Rule 701.

To the extent that MGMTL asserts that Menes should be allowed to offer

opinion testimony regarding the value of SMART under Federal Rule of Evidence

701,167 the Court finds that such opinions fall outside the scope of lay opinion

testimony. Rule 701 provides that if a witness is not testifying as an expert, his

testimony is limited to opinions that are: “(a) rationally based on the witness’s

perception; (b) helpful to clearly understanding the witness’s testimony or to

determining a fact in issue; and (c) not based on scientific, technical, or other

specialized knowledge within the scope of Rule 702.”168 It is well settled in this

Circuit that, “a person may testify as a lay witness only if his opinions or inferences

do not require any specialized knowledge and could be reached by any ordinary

person.”169

MGMTL has made no showing that the fair market value or reasonable

exclusive licensing fee for SMART could be determined by an ordinary person.

Instead, MGMTL cites two Fifth Circuit cases, LaCombe v. A-T-O, Inc. and King v.

166 Because the Court finds that Menes’s expert opinions are not reliable under Rule 702, the Court

need not address whether they are relevant. See, JRL Enterp., Inc., Civ. A. No. 01-2893, 2003 WL

21284020 at *6 (“After the proponent of the expert testimony has carried her burden of showing

reliability, the party must also prove the expert opinions’ relevance.”).

167 R. Doc. 99-27 at pp. 22-25.

168 Fed. R. Evid. 701.

169 Doddy v. Oxy USA, Inc., 101 F.3d 448, 460 (5th Cir. 1996) (citing Brady v. Chemical Constr. Corp.,

740 F.2d 195, 200 (2d Cir. 1984)).

Ames, for the proposition that the owner of property is qualified by his ownership

alone to testify as to its value.170 The Court finds those cases clearly distinguishable

from the facts of this case, as LaCombe concerned testimony of a homeowner

regarding the value of his home and furnishings and the Fifth Circuit relied upon

case law addressing the admissibility of testimony concerning the value of movable

and immovable property.171 While the Fifth Circuit in King allowed a daughter to

testify regarding the value of damages resulting from the misappropriation of the

name and likeness of her father, a famous musician, it did so, at least in part, because

“the image was her father’s and she had engaged in some limited transactions

involving the marketing of her father’s name and likeness” and her testimony was

not “based on naked conjecture and speculation.”172 Unlike King, MGMTL has not

directed the Court to any evidence showing that Menes has engaged in successful

negotiations or marketing of a SMART license. As such, the Court finds that opinion

testimony from Menes regarding the fair market value or reasonable exclusive

licensing fee for SMART would “be based on naked conjecture or solely speculative

factors,”173 as Menes’s calculations were based solely upon assumptions made from

conversations he had with Steve McMurtry and Whit Himel, a credit card limit, and

an unconsummated sale of a one-year license to MARFORRES.

170 R. Doc. 99-27 at pp. 22-23 (citing LaCombe, 679 F.2d 431, 433 (5th Cir. 1982); Ames, 179 F.3d 370,

376 (5th Cir. 1999)).

171 LaCombe, 679 F.2d at 434-35 (citing authority).

172 King, 179 F.3d at 376-77 (“King explained that she had informally conducted business on behalf of

the heirs of Freddie King and the Freddie King estate for over ten years. King testified that she was

familiar with the commercial value of her father’s name and likeness because of her prior involvement

in negotiations to market that name and likeness on T-shirts. Nothing in the record appears to rebut

this testimony.”) (footnotes omitted).

173 Id. at 376 (citation omitted).

Based on the foregoing analysis, the Court agrees with STI that the fair market

value or reasonable exclusive licensing fee for SMART is not within the realm of

knowledge of the average lay person.174 As such, Menes cannot offer opinion

testimony regarding the fair market value or reasonable exclusive licensing fee of

SMART under the guise of Rule 701 lay opinion testimony. This finding, as detailed

above, is limited to restricting Menes’s opinion testimony regarding the fair market

value or reasonable exclusive licensing fee of SMART. STI has not sought, nor will

the Court provide, any broader findings as to Menes’s testimony.

IV. CONCLUSION

For the foregoing reasons, IT IS HEREBY ORDERED that Defendant’s

Motion in Limine to Preclude Opinion Testimony of Jorge Menes175 is GRANTED in

part and DENIED in part. The Motion is GRANTED to the extent that STI seeks

to exclude the opinion testimony of Jorge Menes regarding his calculation of the fair

market value or reasonable exclusive licensing fee for SMART as between $7,650,000

and $89,870,000, as set forth in the Summary Opinion dated January 28, 2021.176

The Motion is DENIED to the extent that STI seeks to exclude “the opinion testimony

of Jorge Menes at trial on any matters relating to damages,” as Menes may offer

opinion testimony under Fed. R. Civ. P. 26(a)(2)(C) regarding matters related to his

174 R. Doc. 91-1 at p. 11.

175 R. Doc. 91.

176 R. Doc. 91-2.

personal involvement in the events that gave rise to this litigation as long as those

opinions were not produced specifically in preparation for the trial of this matter.

New Orleans, Louisiana, February 16, 2022.

Vetha

WENDY B/] VITTER

United States District Judge