Seven Stars on the Hudson Corp v. MDG Powerline Holdings, LLC

TAGGED OPINION

Poe Oy,

Vx *

OS aR’ if * □

iD 8 Ss eA □□□

a Ways

A swillikg &

o \ Ai og /

— <3 a8

ORDERED in the Southern District of Florida on January 28, 2022.

Scott M. Grossman, Judge

United States Bankruptcy Court

UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF FLORIDA

FORT LAUDERDALE DIVISION

In re: Chapter 11

Seven Stars on the Hudson Corp., Case No. 19-17544-SMG

Debtor.

Seven Stars on the Hudson Corp.,

Plaintiff,

Adv. No. 19-1230-SMG

MDG Powerline Holdings, LLC and

XBK Management, LLC,

Defendants.

ee

MEMORANDUM OPINION

When a plaintiff's case will rely upon an expert witness to prove damages, but

the plaintiff fails to timely disclose any expert witness or expert report, the

consequences can be devastating. Such is the case here. The plaintiff failed to timely

make its expert disclosures required by Federal Rule of Civil Procedure 26(a)(2).

Without these disclosures, the plaintiff may not present any expert testimony. And

with no expert testimony – and no other competent evidence of damages in the record

– the defendants moved for summary judgment, arguing there is no genuine issue of

material fact and they are entitled to judgment as a matter of law. For this and other

reasons discussed in detail below, the Court agrees and will grant the defendants’

motions for summary judgment.

I. BACKGROUND.

Plaintiff Seven Stars on the Hudson Corp. (“Seven Stars”) operates a

trampoline park and “family fun center” inside a larger indoor entertainment complex

called Xtreme Action Park. Xtreme Action Park – which is operated by XBK

Management, LLC d/b/a Xtreme Action Park (“Xtreme”) – also has a go-cart track,

bowling alley, roller rink, escape rooms, and arcade games, among other attractions.

MDG Powerline Holdings, LLC (“MDG”) – which is allegedly owned and controlled

by the same principals who own and control Xtreme – owns the facility and leases the

space to Seven Stars, Xtreme, and a few other tenants (some of which may also be

affiliated with MDG and Xtreme).1 Although MDG is its landlord, Seven Stars alleges

that its co-tenant Xtreme effectively serves as the property manager.2

1 Mary Bertoni Dep., 11:2-15:23; 27:5-10 (ECF No. 203, Daly Decl. Ex. 1). Seven Stars occupies only

about ten percent of the space in Xtreme Action Park. See ECF No. 138, ¶¶ 11, 21. Xtreme and other

affiliates of Xtreme and MDG occupy most of the rest of the space. Bertoni Dep., 11:2-15:23; 27:5-10.

2 Xtreme was not a party to the lease, but the lease acknowledges that Xtreme is a third-party

beneficiary thereof. See Nov. 23, 2015 Commercial Lease (the “Lease”), § 20.28 (ECF No. 138, Ex. 1).

Nothing in the record, however, evidences any separate contract between Seven Stars and Xtreme

delineating the parties’ respective rights against and obligations to each other.

Jens Berding (“Mr. Berding”) and Eddy Manzo-Berding (“Ms. Manzo-Berding”)

are the principals and owners of Seven Stars. They claim to have initially capitalized

Seven Stars with $1,963,110, consisting of a $553,532 equity investment from their

retirement savings, and $1,409,578 in financing from Wells Fargo Bank, N.A. (“Wells

Fargo”).3 Seven Stars began operating its trampoline park in November 2016,4 as a

franchisee of Rockin’ Jump, LLC (“Rockin’ Jump”). About a year later, the

relationship between Seven Stars and its co-tenant Xtreme began to deteriorate.5

Seven Stars alleges that Xtreme and MDG essentially colluded to squeeze out Seven

Stars, by taking actions designed to deprive it of revenue and customers, while

interfering with Seven Stars’ rights under its Lease. And there is certainly some

evidence to support these claims, including an email from a representative of Xtreme

who stated that Mr. Berding “doesn’t want to work with us. He won’t listen to reason

so it appears we will just need to beat him into default.”6

Specifically, Seven Stars alleges that Xtreme, acting as MDG’s agent, removed

signs for Seven Stars’ business, shut off power to and then dismantled Seven Stars’

registration desk, blocked views of Seven Stars’ logo, and limited access to its

premises. Seven Stars also alleges that Xtreme refused to engage in cross-marketing

3 Decl. of Eddy Manzo-Berding, ¶ 5 (ECF No. 203).

4 ECF No. 138, ¶ 47.

5 Id., ¶ 52.

6 ECF No. 203, Daly Decl. Ex. 3.

with Seven Stars,7 delayed delivery of food orders to Seven Stars’ customers,8 held

“lock-out” events that served to block access to Seven Stars’ trampoline park,9

intentionally confused Seven Stars’ customers about liability waivers, misled its

customers in advertisements,10 and impermissibly installed video cameras in Seven

Stars’ premises.11 Seven Stars also alleges that MDG painted over Seven Stars’

signature green color in its entrance hallway and blocked access to its loading dock.12

As a result, Seven Stars alleges that it saw an approximately 40% decrease in revenue

compared to its performance in 2017.13

A. Seven Stars I and Seven Stars II.

On June 5, 2019, Seven Stars filed a chapter 11 bankruptcy case (“Seven

Stars I”)14 to address these disputes with MDG and Xtreme, as well as disputes it had

with its now-former franchisor, Rockin’ Jump, and its secured creditor, Wells Fargo.

Seven Stars then commenced this adversary proceeding against MDG and Xtreme on

July 19, 2019.15 In the Seven Stars I main bankruptcy case, Seven Stars quickly

sought16 – and then obtained – authority to use Wells Fargo’s cash collateral.17 As for

7 The Lease required Seven Stars to reimburse Xtreme for half of any costs Xtreme advanced for joint

marketing with Seven Stars. Lease § 14.05(c)(i). But nothing in the Lease actually required Xtreme to

engage in any joint marketing with Seven Stars.

8 The Lease prohibited Seven Stars from selling food, so its customers would have to order food from

Xtreme. ECF No. 138, ¶84. But the Lease did provide for Seven Stars to receive a 15% discount on any

food or beverages purchased from Xtreme. Lease § 20.15(a).

9 ECF No. 138, ¶¶ 88-93.

10 Id., ¶¶ 94-100.

11 Id., ¶ 105.

12 Id., ¶¶ 101-104

13 Id., ¶ 107.

14 Case No. 19-17544-SMG.

15 ECF No. 1.

16 Seven Stars I, ECF No. 5.

17 Seven Stars I, ECF No. 65.

Rockin’ Jump, it sought relief from the automatic stay to terminate Seven Stars’

franchise agreement.18 Meanwhile, Seven Stars filed a motion to assume its Lease

with MDG.19 But based on Seven Stars’ ongoing dispute with Rockin’ Jump, MDG

and Seven Stars agreed to defer resolution of the assumption motion until after the

franchise issues were resolved.20

Ultimately Seven Stars and Rockin’ Jump entered into a settlement agreement

on March 18, 2020,21 which resulted in termination of the franchise agreement.22 This

was just as the COVID-19 pandemic was hitting the United States. Only a few days

later, all nonessential retail and commercial businesses in Broward County, Florida

– including Xtreme Action Park and Seven Stars’ trampoline park – were shut down

by government order,23 and remained closed well into June 2020.24 Against this

backdrop, Seven Stars and MDG continued to litigate whether Seven Stars could

assume its Lease with MDG.25

MDG argued that Seven Stars could not assume the Lease because termination

of the Rockin’ Jump franchise agreement violated the Lease’s use clause, and because

Seven Stars owed post-petition rent that it had not paid for April and May 2020, when

it was prohibited by law from operating. After extensive briefing and argument, on

June 1, 2020, the Court granted Seven Stars’ motion to assume the Lease, ruling that

18 Seven Stars I, ECF No. 39.

19 Seven Stars I, ECF No. 80.

20 Seven Stars I, ECF Nos. 89, 105, 127, 140.

21 Seven Stars I, ECF No. 152.

22 Seven Stars I, ECF No. 161. Seven Stars now operates under the name “Spacebound Trampoline

Park.”

23 See In re Seven Stars on the Hudson, 618 B.R. 333, 337-38 (Bankr. S.D. Fla. 2020).

24 Id. at 338.

25 Seven Stars I, ECF No. 164.

termination of the Rockin’ Jump franchise did not prohibit assumption, and that,

under the terms of the Lease and in light of the COVID-19 pandemic, failure to timely

pay April and May rent likewise did not prohibit assumption.26 The Court did,

however, require Seven Stars to pay $130,000 in unpaid rent to MDG by the effective

date of any chapter 11 plan it confirmed.27 Apparently unable to make that payment,

Seven Stars then elected to proceed with its case under the newly enacted

subchapter V of chapter 11 of the Bankruptcy Code, which became effective a few

months earlier.28 But because it first elected to proceed under subchapter V after

expiration of subchapter V’s strict 90-day deadline to file a plan,29 this Court

dismissed the case under 11 U.S.C. § 1112(b)(4)(J).30

After the Court dismissed Seven Stars I, it set a status conference to determine

whether the Court should retain jurisdiction over this adversary proceeding. 31 The

day before the status conference, however, Seven Stars filed another chapter 11

petition under subchapter V (“Seven Stars II”).32 After the status conference, the

Court entered an order33 giving the defendants a deadline to file motions to dismiss

the adversary proceeding based upon the dismissal of Seven Stars I. But, perhaps due

26 Seven Stars I, ECF No. 172.

27 Id.

28 Small Business Reorganization Act of 2019, Pub. L. No. 116-54, Aug. 23, 2019, 133 Stat. 1079, 1087

(“This Act and the amendments made by this Act shall take effect 180 days after the date of enactment

of this Act.”).

29 11 U.S.C. § 1189(b).

30 Seven Stars, 618 B.R. 333.

31 See In re Morris, 950 F.2d 1531, 1534 (11th Cir. 1992) (“dismissal of an underlying bankruptcy case

does not automatically strip a federal court of jurisdiction over an adversary proceeding which was

related to the bankruptcy case at the time of its commencement. The decision whether to retain

jurisdiction over the adversary proceeding should be left to the sound discretion of the bankruptcy

court or the district court, depending upon where the adversary proceeding is pending.”).

32 Case No. 20-19106-SMG.

33 ECF No. 78.

to the filing of Seven Stars II, neither of the defendants elected to file a motion to

dismiss, so this adversary proceeding remained pending before this Court.

In Seven Stars II, Seven Stars and MDG again litigated over assumption of the

Lease, as well as confirmation of Seven Stars’ chapter 11 plan. After a contested

confirmation hearing, the Court overruled MDG’s objection to confirmation,34 granted

Seven Stars’ motion to assume its Lease with MDG,35 and confirmed Seven Stars’

third amended plan.36 Upon confirmation of the plan, Seven Stars secured the right

to remain in the leased premises at Xtreme Action Park and continued operating its

trampoline park under its Lease with MDG.

B. This Adversary Proceeding.

After an August 25, 2020, hearing in this adversary proceeding, the Court

entered an Agreed Scheduling Order37 setting certain pretrial deadlines,38 including

the following:

• November 6, 2020 – deadline to file motions to amend the complaint;

• January 15, 2021 – deadline to complete fact discovery;

• February 5, 2021 – deadline to exchange expert witness summaries

and reports;

• February 26, 2021 – deadline to exchange rebuttal expert witness

summaries and reports;

• March 15, 2021– deadline to complete expert discovery; and

• April 15, 2021– deadline to file dispositive motions.

34 Seven Stars II, ECF No. 217.

35 Seven Stars II, ECF No. 92.

36 Seven Stars II, ECF No. 194.

37 ECF No. 86.

38 See Fed. R. Bankr. P. 7016(a); Fed. R. Civ. P. 16(b).

Seven Stars then timely moved for leave to file a second amended complaint.39 Over

MDG’s objection,40 the Court granted that motion41 and permitted Seven Stars to file

a second amended complaint.42 MDG and Xtreme then filed answers and affirmative

defenses.43

In the second amended complaint, Seven Stars asserts claims for: (1) breach of

the covenant of quiet enjoyment under its Lease against MDG; (2) breach of the

implied duty of good faith and fair dealing against MDG; (3) violation of Florida’s

Deceptive and Unfair Trade Practices Act44 (“FDUTPA”) against MDG; (4) violation

of FDUTPA against Xtreme; (5) tortious interference with advantageous business

relationships against Xtreme; and (6) tortious interference with contract against

MDG and Xtreme. In short, Seven Stars alleges that MDG and Xtreme, through

various actions and inactions, have caused damage to Seven Stars’ business, resulting

in its bankruptcy filing and the loss of its franchise agreement. Its alleged damages

consist of lost revenue and profits, lost business opportunities, and lost goodwill.45

39 ECF No. 88. The Court had previously granted in part and denied in part the defendants’ motions

to dismiss the original complaint, but with leave to replead all but one count (ECF No. 25). The Court

then later denied the defendants’ motions to dismiss the first amended complaint (ECF No. 53).

40 ECF No. 92.

41 ECF No. 129.

42 ECF No. 138.

43 ECF Nos. 139, 140.

44 Fla. Stat. §§ 501.201, et seq.

45 See Second Am. Compl. (ECF No. 138) ¶ 116 (lost revenue and loss of goodwill of its customers);

¶ 128 (lost revenue and attorney’s fees and costs); ¶ 132 (lost ticket sales, increased advertising costs,

and out-of-pocket costs incurred in renting back-up battery systems); ¶ 135 (lost revenue and damage

to its “competitive advantages”); ¶ 144 (lost profits, income, and business opportunities); ¶ 158 (lost

business opportunity, the loss of the “time value of money,” lost goodwill, and “other consequential

damages”).

After an unsuccessful attempt at mediation,46 the parties submitted – and on

March 17, 2021, the Court entered – a Second Agreed Scheduling Order,47 which

included the following relevant deadlines:

• March 16, 2021 – deadline to complete fact discovery;

• April 6, 2021 – deadline to exchange expert witness summaries and

reports;

• April 27, 2021 – deadline to exchange rebuttal expert witness

summaries and reports;

• May 14, 2021 – deadline to complete expert discovery;

• June 14, 2021 – deadline to file dispositive motions.

C. Discovery.

The Court later extended the fact discovery deadline to May 14, 2021,48 as

discussed in more detail below. Thus, the parties ended up conducting discovery over

a period of about a year,49 which included exchanging initial disclosures, serving

interrogatories and requests for production of documents, and taking depositions.

1. Initial Disclosures.

Federal Rule of Civil Procedure 26(a)(1)(A)(iii), applicable to this adversary

proceeding by Federal Rule of Bankruptcy Procedure 7026, requires a party “without

awaiting a discovery request” to “provide to the other parties . . . a computation of

46 ECF No. 136.

47 ECF No. 142. See Fed. R. Bankr. P. 7016(a); Fed. R. Civ. P. 16(b)(1), (4).

48 ECF No. 157.

49 See, e.g., ECF No. 64 (Xtreme’s motion to extend time to respond to Seven Stars’ request for

production of documents served on June 3, 2020); ECF No. 157 (extending fact discovery deadline to

May 14, 2021).

each category of damages claimed.”50 In its first set of Rule 26(a)(1) initial disclosures

served on July 4, 2020,51 Seven Stars disclosed the following as to damages:

See First Amended Complaint.

Additionally, the Plaintiff has incurred attorney’s fees and costs

in prosecuting this action. The Plaintiff reserves any and all rights to

recovery of fees, costs or other remedies which may be available.

The Plaintiff reserves the right to amend and supplement this

disclosure pending completion of the discovery process.52

On March 5, 2021, Seven Stars then served amended initial disclosures.53 But

other than changing the reference from “See First Amended Complaint” to “See

Second Amended Complaint,” these amended initial disclosures were nearly identical

to the original initial disclosures as to damages. Seven Stars then served another set

of amended initial disclosures on March 15, 2021.54 These further amended initial

disclosures contained the same damages disclosures as in the set served ten days

earlier. Then on April 9, 2021 – three days after the April 6, 2021, deadline for the

parties to exchange expert witness summaries and reports – Seven Stars served yet

another set of initial disclosures.55 But again, its damages disclosures did not change

from the previous two disclosures in which it failed to disclose any damages

computations.

50 Fed. R. Civ. P. 26(a)(1)(A)(iii).

51 ECF No. 162, Ex. A, at 2-6.

52 Id. at 5-6.

53 Id. at 7-11.

54 Id. at 12-17.

55 Id. at 18-22.

2. Interrogatories.

But it was not just in its (thrice-amended) initial disclosures that Seven Stars

failed to disclose damages computations. It also failed to provide damages

calculations in answers to written interrogatories from both MDG and Xtreme.

Xtreme attached to its motion for summary judgment copies of damages

interrogatories and interrogatories regarding expert witnesses, both served on Seven

Stars on November 25, 2020.56 Xtreme asserted that Seven Stars did not respond to

either set of interrogatories.57 Although Seven Stars denied those allegations,58

notably it did not provide copies of any answers with its response to the motion for

summary judgment. So, all the Court has before it are copies of interrogatories which

Xtreme asserts Seven Stars did not answer, and no answers from Seven Stars. The

only reasonably conclusion to draw is that Seven Stars did not respond.

Xtreme also attached to its motion for summary judgment another set of

similar (if not identical) interrogatories served on Seven Stars on March 17, 2021.59

The only answers to either of these sets of re-served interrogatories in the record are

answers and objections by Seven Stars to Xtreme’s damages interrogatories dated

56 ECF No. 162, Exs. B, C.

57 ECF No. 162, ¶ 25.

58 ECF No. 204, ¶ 22.

59 ECF No. 162, Exs. D, E.

May 23, 2021.60 This of course was after the May 14, 2021, close of fact discovery.61

Although Federal Rule of Civil Procedure 29(b) generally allows parties to stipulate

to extensions of time to respond to interrogatories without court approval, court

approval is required if the new deadline “would interfere with the time set for

completing discovery.”62 But the parties never sought – and the Court never granted

– approval to answer interrogatories after the close of fact discovery.

These tardy interrogatory answers stated only in conclusory fashion that

Seven Stars is seeking against Xtreme $1.2 million in “estimated” past lost profits

from June 2018 through December 2019 as FDUTPA damages, plus $2.5 million for

its tortious interference claim.63 Seven Stars also referred in its tardy interrogatory

answer to a “breakdown provided on January 29, 2021,”64 but neither party has

pointed the Court to any such “breakdown” anywhere in the record. When asked in

the next interrogatory to “identify with specificity by itemizing factually and

quantifying numerically the alleged damages requested by you in the complaint in

this cause,” Seven Stars responded only with a narrative about the alleged causes of

60 ECF No. 162, Ex. F. As untimely answers, however, any objections that Seven Stars purported to

raise were waived. See Fed. R. Civ. P. 33(b)(4) (“Any ground not stated in a timely objection is waived

unless the court, for good cause, excuses the failure.”); see also Bank of Mongolia v. M & P Glob. Fin.

Servs., Inc., 258 F.R.D. 514, 518 (S.D. Fla. 2009) (objections to discovery requests waived in light of

untimely responses); Brown v. Shendell & Assocs., P.A., 2013 WL 12089970, at *1 (S.D. Fla. 2013) (“as

a general rule, when a party fails to timely object [or answer] to interrogatories, production requests,

or other discovery efforts, the objections are deemed waived.”) (quoting In re United States, 864 F.2d

1153, 1156 (5th Cir. 1989); citing Jaffe v. Grant, 793 F.2d 1182, 1190 n.6 (11th Cir. 1986)).

61 ECF No. 157.

62 Fed. R. Bankr. P. 29; Fed. R. Civ. P. 29(b).

63 ECF No. 162, Ex. F, at 6.

64 Id.

the damage.65 It did not, however, provide any breakdown, calculation, itemization,

or other support for its alleged damages of $1.2 million and $2.5 million, respectively.

Then, when asked in the following interrogatory “to identify with specificity

each document that demonstrates or verifies the damage amount and calculations

provided in response to” the previous interrogatory, Seven Stars again pointed only

to the exhibits to its second amended complaint, the second amendment to its Lease,

various emails, depositions of three witnesses (David Goldfarb, Mary Bertoni, and

Michael Dezer),66 and Seven Stars’ “profit and loss statements beginning in 2017

showing the decrease in revenue following the actions of the Landlord [MDG] and

Xtreme and those that controlled these entities.”67 Other than its profit and loss

statements, Seven Stars pointed to no documents even arguably supporting – let

alone demonstrating or verifying – its total damages sought.

With respect to MDG’s interrogatories, it asked Seven Stars to “state each and

every item of damage you claim or allege you sustained as a result of the actions or

omissions set forth in your complaint in this cause” and to “[d]escribe with

particularity all elements of damages, the amount that you are seeking for each

element of damages, and the manner of calculating your damages.”68 MDG also asked

Seven Stars to “identify with particularity the mathematical formula and/or method

65 Id. at 7.

66 Although the ownership structure is not entirely clear from the record, it appears that Mr. Goldfarb

and Mr. Dezer indirectly own and control both MDG and Xtreme, with Mr. Goldfarb managing Xtreme

(an operations company) and Mr. Dezer managing MDG (a real estate holding company). (ECF

No. 203, Daly Decl. Ex. 2, 7:20-8:24). Ms. Bertoni works for an entity called Dezer Development (ECF

No. 203, Daly Decl. Ex. 1, 8:1-9:2), and appeared as the designated representative for MDG (ECF

No. 203 at 10).

67 ECF No. 162, Ex. F, at 7-8.

68 ECF No. 161, Ex. B, at 6.

used in computing the subject damages, as well as identify with specificity the nature

and factual basis of the damages.”69 In its March 25, 2021, answers, Seven Stars

objected to these interrogatories “as premature as it has not yet obtained an expert

who will opine on the full spectrum of damages suffered by Plaintiff including the

manner of calculating the damages.”70 Subject to that objection, Seven Stars again

proceeded to respond largely with narratives about the alleged causes of damages,

without providing any amount of “lost revenue” or identifying any method of

calculating or measuring how this conduct translated into “lost revenue.”71 And when

asked to identify any documents that support its damages claims, Seven Stars

pointed to the exhibits to its complaint, the second amendment to its Lease, various

emails, and its profit and loss statement for the years 2017 to 2019.72 As with its

answers to Xtreme’s interrogatories, Seven Stars’ answers to MDG’s interrogatories

point to no other documents demonstrating or verifying its damages calculations.

Seven Stars then served further amended interrogatory answers on MDG on

May 27, 2021,73 and June 9, 202174 – both after the close of fact discovery. But again,

the parties never sought – nor did the Court ever grant – leave to answer these

interrogatories after the close of fact discovery. These untimely answers now asserted

– nearly two years into the litigation, after the close of discovery, and five days before

the summary judgment deadline – that Seven Stars was seeking $1.2 million in lost

69 Id. at 7.

70 Id. at 6-7.

71 Id.

72 Id. at 7.

73 ECF No. 161, Ex. E.

74 ECF No. 161, Ex. F.

profits for its FDUTPA claims, $2.5 million for its tortious interference claims, and

$800,000 for its breach of contract claims. But again, Seven Stars failed to include

any supporting detail with respect to these claimed damages. No calculations, no

mathematical formulas, no methods of computation, nor even any underlying factual

basis for the damages (other than pointing generally to its profit and loss statements).

3. Depositions.

MDG served a notice of taking the deposition of a corporate representative of

Seven Stars under Federal Rule of Civil Procedure 30(b)(6), describing the matters

for examination to include, among other topics, “the amount, category and

computation of the damages alleged or sought by Seven Stars,” and “the specific

amount of damages that Seven Stars contends is attributable to each specific harm

or injury alleged in the Adversary Complaint.”75 Seven Stars designated Ms. Manzo-

Berding as its representative under Rule 30(b)(6) for all topics listed in the deposition

notice. And Ms. Manzo-Berding confirmed that she was prepared to testify on all

topics identified in the deposition notice.76

But when questioned about damages, Ms. Manzo-Berding repeatedly testified

that she could not identify any types of damages that Seven Stars was seeking other

than lost profits or “lost ticket sales.” She never disclosed that Seven Stars was

seeking to recover any damages for the diminution in value of its business. For

example, counsel asked whether Seven Stars was “seeking any other damages other

75 ECF No. 206, Ex. F, ¶¶ 25-26.

76 Eddy-Manzo Berding Dep. Vol. I, 16:2-18 (ECF No. 161, Ex. C).

than lost profits?”77 In response, Ms. Manzo-Berding said: “I don’t know if I can

answer that question to be honest with you.”78 When counsel specifically asked if

Seven Stars was seeking “out of pocket” costs or any other types of damages,

Ms. Manzo-Berding again stated that she did not know of any other types of damages:

“I don’t know what else or other type of damages are out there, you know. I don’t

know the classification of damages . . . I don’t know all the other types of damages

that are out there.”79 At least seven times, counsel asked Ms. Manzo-Berding to

identify any out-of-pocket costs that Seven Stars was seeking as damages, and each

time Ms. Manzo-Berding said she could not identify any such damages other than

“lost revenues” or “lost ticket sales.” 80 Rather, Ms. Manzo-Berding repeatedly

testified – on behalf of Seven Stars as its Rule 30(b)(6) representative – that Seven

Stars would be relying on an expert witness to prove damages.81

The defendants also deposed Mr. Berding, who at the time of his deposition

had recently resigned as president of Seven Stars.82 Like Ms. Manzo-Berding,

Mr. Berding offered no substantive testimony on damages.83

77 Id. at 146:16-17.

78 Id. at 146:18-19.

79 Id. at 147:8-24; see also id. at 149:4-6 (“I cannot answer the question if I am pursuing other damages

when I am not clear what other damages are out there.”).

80 See id. at 144:3-14; 145:8-16; 158:15-159:7; 171:9-20; 195:18-196:2; 206:8-207:10; 231:8-19.

81 Id. at 143:4-19; 148:6-149:6; 150:4-24; 158:20-159:13; 159:19-160:5; 196:9-14; 232:12-17.

82 Jens Berding Dep., 9:9-10:13 (ECF No. 161, Ex. D).

83 Id., 231:13-232:2 (lost profits); 272:8-18, 273:6-15 (lock-out events); 298:24-299:25 (no records of

customer confusion, just “anecdotal evidence in terms of the customers telling us that this is what

happened to them.”).

4. Motion to Extend Discovery Deadlines.

On April 28, 2021 – over three weeks after the deadline to exchange expert

witness summaries and reports had passed – Seven Stars filed a third motion to

extend certain scheduling order deadlines.84 In its motion, Seven Stars acknowledged

that “[e]xpert discovery in this case was anticipated from the beginning on

the issue of damages”85 and candidly admitted that “[w]ithout the ability to conduct

expert discovery, Plaintiff will have difficulty proving the economic damages that it

believes has occurred as a result of Defendants’ wrongful conduct.”86 But Seven Stars

filed this motion three weeks after the deadline to make Rule 26(a)(2) expert

disclosures had already passed, and sought only extensions of the fact discovery

deadline (to May 14, 2021) and the expert discovery deadline (to July 14, 2021).

Notably, Seven Stars did not seek in its motion – even belatedly under the “excusable

neglect” standard of Federal Rule of Bankruptcy Procedure 9006(b)(1) – to extend the

already-lapsed expert disclosure deadline. MDG objected to Seven Stars’ request to

extend the expert discovery deadline, noting that “[f]or the third time in less than

four months, Plaintiff has moved to extend the deadlines for both fact and expert

discovery contained in the Court’s [Second Agreed] Scheduling Order,” and arguing

that “none of the recent exigent circumstances discussed in Plaintiff’s Motion has any

bearing on the expert discovery deadlines, which Plaintiff has already blithely

ignored by failing to serve an expert report by the April 6, 2021, deadline.”87

84 ECF No. 148.

85 Id., ¶ 7 (emphasis added).

86 Id., ¶ 11.

87 ECF No. 150.

After a hearing on May 12, 2021,88 the Court granted the requested extension

of the fact discovery deadline (to which the defendants did not object), but denied the

requested extension of the expert discovery deadline.89 The Court noted that expert

reports were due April 6, 2021 – a deadline that had already passed and for which

Seven Stars had not sought an extension. While Seven Stars argued that it was

“waiting for the approval of a litigation funding agreement that would give it the

monetary resources to hire experts,”90 the Court agreed with the defendants that this

was not a valid excuse for the delay in making expert disclosures, and without any

expert disclosures there was no expert discovery to be had and therefore no need to

extend that deadline.91

II. MOTIONS FOR SUMMARY JUDGMENT.

MDG and Xtreme each then timely filed motions for summary judgment,92

arguing that after more than two years of litigation “the record is devoid of any

evidence upon which Plaintiff can satisfy its burden to prove the essential element of

damages.”93 Not in Seven Stars’ Rule 26(a)(1) initial disclosures. Not in Seven Stars’

answers to the defendants’ interrogatories. Not in Seven Stars’ Rule 30(b)(6)

deposition testimony. And, perhaps most significantly, not in any timely submitted

expert report. Because damages are an essential element of each of Seven Stars’

88 ECF No. 152. Although it did not file a written objection, Xtreme objected to the requested extension

at the hearing.

89 ECF No. 157.

90 ECF No. 148, ¶ 7.

91 ECF No. 231, 15:20-17:20.

92 ECF Nos. 161, 162.

93 ECF No. 161 at 20.

claims – and Seven Stars has failed to produce any competent evidence of damages –

the defendants argue they are entitled to summary judgment.94

The defendants also argue that Seven Stars seeks an improper measure of

damages – lost revenues – when only lost profits are recoverable under applicable

law. And they argue that the record contains insufficient evidence to establish

damages with any reasonable degree of certainty, as required by Florida law. MDG

further contends that the record contains no evidence that it was the direct cause of

any damage to Seven Stars, and that the record contains no competent evidence of

any other claims for damages. With respect to the FDUTPA claims, both defendants

argue that past lost profits are “consequential damages” that are not recoverable

under FDUTPA, which limits recovery to “actual damages.” And finally, both

defendants argue that the claim for tortious interference with the Rockin’ Jump

franchise fails on the record as well.

In its responses to the summary judgment motions,95 Seven Stars for the first

time raised certain damages theories that it did not plead in its second amended

complaint or identify during discovery, including reliance, diminution of value, and

94 The Court then issued a briefing order, setting deadlines for responses, replies, and joint stipulations

of fact. (ECF No. 164). Seven Stars filed not one – but four – motions (ECF Nos. 178, 181, 184, 192) to

extend its response deadlines. It then filed responses (ECF Nos. 187, 188), followed up by amended

responses (ECF Nos. 189, 190). Then it filed a motion to correct citation errors in its amended

responses (ECF No. 196), which the Court granted after a hearing on August 11, 2021. (ECF No. 201).

Finally, on August 17, 2021, Seven Stars filed its corrected responses to the motions for summary

judgment (ECF Nos. 203, 204). Both defendants timely filed reply briefs (ECF Nos. 207, 208), and the

parties filed their respective joint stipulations of fact (ECF Nos. 210, 211). A few weeks later, Seven

Stars filed a notice of supplemental authority (ECF Nos. 218, 219), alerting the Court to a newly-issued

decision bearing on the FDUTPA claims – Tymar Distrib. LLC v. Mitchell Grp. USA, LLC, ---

F.Supp.3d ---, 2021 WL 4077966 (S.D. Fla. Sep. 8, 2021).

95 ECF Nos. 203, 204.

punitive damages theories.96 Seven Stars also attached to its responses a Declaration

of Eddy Manzo-Berding (the “Manzo-Berding Declaration”),97 in which Ms. Manzo-

Berding asserted for the first time that Seven Stars was seeking damages for

“diminution of value” of its business and “reliance” damages with respect to its

contract-based claims. The Manzo-Berding Declaration also purported to calculate –

for the first time – the damages Seven Stars seeks as being between $1,567,387 and

$1,888,110.

Ms. Manzo-Berding appears to base these figures on the following analysis:

Seven Stars was initially capitalized with $1,963,110, consisting of a $553,532 equity

investment by the Berdings, plus $1,409,578 in financing from Wells Fargo. She then

asserts that the “current economic value” of Seven Stars as of some point in 2019 was

$395,723, and concludes that the defendants are therefore liable for $1,567,387 in

damages for loss of economic value.98 She derives the “current economic value” using

“adjusted EBIDA [sic]”99 from Seven Stars’ 2019 “financials,”100 to which she applied

a “multiplier of 2.75.”101 Alternatively, she asserts that “the argument can be made”

96 Seven Stars did purport to reserve the right to assert punitive damages against Xtreme in Count V

of its second amended complaint (tortious interference with the Lease). But in response to both

defendants’ motions for summary judgment, Seven Stars raised for the first time a punitive damages

argument only as to MDG, which it did not plead in its complaint.

97 ECF Nos. 203, 204.

98 The difference between $1,963,110 and $395,723.

99 It is unclear whether this was a typographical error or whether Ms. Manzo-Berding did in fact intend

to refer to Seven Stars’ earnings before interest, depreciation, and amortization (EBIDA), rather than

its earnings before interest, taxes, depreciation, and amortization (EBITDA).

100 Seven Stars’ profit and loss statements for 2017 through 2019 do not actually compute or list a line

item for EBITDA or EBIDA anywhere on them. Nor is there any explanation in the Manzo-Berding

Declaration as what adjustments were made to EBIDA (or EBITDA) to arrive at “adjusted EBIDA.”

101 There is likewise no explanation as to why this “multiplier” was used or how it was derived. Further,

nothing in the Manzo-Berding Declaration suggests that Ms. Manzo-Berding is even qualified to

provide this type of financial analysis.

that the only real value of the business is the equipment, “which has been estimated

by various appraisers during and just before the bankruptcy filing of less than

$75,000.” Using this alleged valuation, she deduces that damages are $1,888,110.102

III. MOTION TO STRIKE SHAM DECLARATION.

MDG filed a motion to strike the Manzo-Berding Declaration as a “sham

declaration” and sought sanctions,103 to which Xtreme filed a joinder.104 MDG argued

that for the entire course of the litigation, through the completion of discovery, Seven

Stars consistently maintained that it was seeking “lost profits” damages arising from

“lost ticket sales,” and that Seven Stars never disclosed in its Rule 26(a)(1) initial

disclosures, in its responses to written discovery requests, or at its Rule 30(b)(6)

deposition, that it was seeking any damages other than “lost profits damages.” Thus,

under the “sham declaration” doctrine, MDG and Xtreme asked the Court to strike

the Manzo-Berding Declaration for being inconsistent with Seven Stars’ earlier

testimony, initial disclosures, and written discovery responses, and to sanction Seven

Stars accordingly.105

102 The difference between $1,963,110 and $75,000.

103 ECF Nos. 205, 206.

104 ECF No. 209. The Court then issued a briefing order on that motion, to which Seven Stars timely

filed a response. (ECF Nos. 216, 217). MDG then timely filed a reply (ECF No. 220), to which Xtreme

again filed a joinder) (ECF No. 221).

105 Then, on September 28, 2021 – after over two years of litigation and with discovery having closed

and motions for summary judgment being fully briefed and taken under advisement – Seven Stars

filed a motion for leave to file a third amended complaint. (ECF Nos. 222, 225). In its proposed third

amended complaint, Seven Stars sought to add new allegations about a dispute with the defendants

that arose in the summer of 2021– two years after Seven Stars I and this adversary proceeding were

filed, a year after Seven Stars II was filed, after the Court confirmed the chapter 11 plan in Seven

Stars II, and after discovery closed in this adversary proceeding. MDG objected (ECF No. 226) and,

although Xtreme did not file a written objection, it also objected at the hearing on that motion. The

defendants argued that the proposed third amended complaint was really a disguised attempt to avoid

summary judgment by belatedly alleging new damages theories under the guise of asserting new

IV. LEGAL STANDARDS.

A. Jurisdiction.

A bankruptcy court’s subject matter jurisdiction is set forth in 28 U.S.C. § 1334

and is limited to cases under the Bankruptcy Code106 and all civil proceedings arising

under the Bankruptcy Code, or arising in or related to cases under the Bankruptcy

Code.107 The claims asserted here are all state law claims under Florida law sounding

in contract, tort, and under Florida statutes. As such, this civil proceeding does not

arise under the Bankruptcy Code or arise in a case under the Bankruptcy Code. But

it is “related to” a case under the Bankruptcy Code – in this case both Seven Stars I

and Seven Stars II.

A civil proceeding is “related to” a bankruptcy case if “the outcome of the

proceeding could conceivably have an effect on the estate being administered in

bankruptcy.”108 If the outcome of the action “could alter the debtor’s rights, liabilities,

options, or freedom of action (either positively or negatively) and . . . in any way

impacts upon the handling and administration of the bankrupt estate,”109 then it is

“related to” the debtor’s bankruptcy case. All of the claims here arose before Seven

Stars I was filed, and therefore were property of Seven Stars’ bankruptcy estates.110

And the outcome of this action could alter Seven Stars’ rights, liabilities, options, or

claims. After a hearing, the Court denied Seven Stars’ request for leave to file a third amended

complaint. (ECF No. 228; ECF No. 232 at 39:23-49:23).

106 28 U.S.C. § 1334(a).

107 28 U.S.C. § 1334(b).

108 Miller v. Kemira, Inc. (In re Lemco Gypsum, Inc.), 910 F.2d 784, 788 (11th Cir. 1990) (quoting Pacor,

Inc. v. Higgins, 743 F.2d 984, 994 (3rd Cir. 1984)).

109 Lemco Gypsum, 910 F.2d at 788 (citations omitted).

110 See 11 U.S.C. § 541.

freedom of action, and may impact creditors’ recoveries in Seven Stars II. Accordingly,

there is “related to” jurisdiction over these claims under 28 U.S.C. § 1334(b).

But section 1334(b) actually vests jurisdiction in the District Courts over such

claims. Under 28 U.S.C. § 157(a) and the District Court’s standing Order of

Reference,111 however, this adversary proceeding has been referred to this Court.

Although bankruptcy courts can enter final orders and judgments in cases under the

Bankruptcy Code,112 as well as in (most) core proceedings113 arising under the

Bankruptcy Code or arising in a case under the Bankruptcy Code,114 it may not do so

with respect to non-core claims, absent consent of the parties.115 Core proceedings are

defined in 28 U.S.C. § 157(b)(2) to include sixteen types of proceedings as to which

the Judicial Code authorizes bankruptcy courts to enter final orders and judgments.

“Core proceedings are narrow in scope, and include only those cases that implicate

the property of the bankruptcy estate and either invoke substantive rights created by

federal bankruptcy law or that exist exclusively in the bankruptcy context.”116

Seven Stars has alleged here that all of its claims are core.117 But that

allegation is not dispositive, and the Court has an independent obligation to

111 Administrative Order 2012-25 (S.D. Fla. Mar. 27, 2012).

112 28 U.S.C. § 157(b)(1).

113 See Stern v. Marshall, 564 U.S. 462 (2011).

114 28 U.S.C. § 157(b)(1).

115 28 U.S.C. § 157(c); Wellness Int’l Network, Ltd. v. Sharif, 575 U.S. 665, 671 (2015).

116 Wortley v. Bakst, 844 F.3d 1313, 1318 (11th Cir. 2017) (citing Cont’l Natl. Bank v. Sanchez (In re

Toledo), 170 F.3d 1340, 1347–48 (11th Cir. 1999)).

117 ECF No. 138, ¶ 2 (alleging this adversary proceeding is a core proceeding under 28 U.S.C.

§ 157(b)(2)(A) (matters concerning the administration of the estate); (B) (allowance or disallowance of

claims against the estate); and (M) (orders approving the use or lease of property, including the use of

cash collateral)).

determine whether a proceeding is core or non-core.118 That being said, Seven Stars’

allegation that the claims are core does serve one important purpose: “an admission

that a proceeding is core accords irrevocable consent to a bankruptcy court to

determine the proceeding, even if it is non-core.”119 Although the claims here are all

clearly non-core, Seven Stars’ allegation that the claims are core nevertheless serves

as its express consent to the entry of final orders or judgments by this Court.120 While

MDG has (correctly) denied that these claims are core, it has affirmatively consented

to entry of final orders or judgments both by expressly stating so121 and by moving

for summary judgment.122 Xtreme likewise has consented to entry of final orders or

judgments by admitting (incorrectly) that these claims are core,123 and by moving for

summary judgment as well. Accordingly, based upon the consent of all parties, this

Court may enter final orders and judgments on all claims in this adversary

proceeding.124

B. Summary Judgment.

Federal Rule of Civil Procedure 56(a), made applicable to this adversary

proceeding by Federal Rule of Bankruptcy Procedure 7056, requires the Court to

118 28 U.S.C. § 157(b)(3).

119 Lindsey v. Duckworth Dev. II, LLC (In re Lindsey), 854 Fed. App’x 301, 308 (11th Cir. 2021) (citing

Hiser v. Neumann Med. Ctr., Inc. (In re St. Mary’s Hospital), 117 B.R. 125, 131 (Bankr. E.D. Pa. 1990)).

See also In re Custom Contractors, LLC, 462 B.R. 901, 908-09 (Bankr. S.D. Fla. 2011) (allegation in

complaint that action was a core proceeding serves as “explicit consent” for bankruptcy court to “treat

this matter as a core proceeding in which it may enter a final order”).

120 Lindsey, 854 Fed. App’x at 308.

121 ECF No. 171 at 2 n.1.

122 JWL Entm’t Grp., Inc. v. Solby+Westbrae Partners, (In re Fisher Island Invs., Inc.), 778 F.3d 1172,

1192 (11th Cir. 2015); Kapila v. SunTrust Mortg., Inc. (In re Pearlman), 515 B.R. 887, 892 n.21 (Bankr.

M.D. Fla. 2014).

123 ECF No. 139 at ¶ 2.

124 28 U.S.C. § 157(c); Wellness, 575 U.S. at 671.

grant summary judgment “if the movant shows that there is no genuine dispute as to

any material fact and the movant is entitled to judgment as a matter of law.”125 “An

issue of fact is ‘material’ if it is a legal element of the claim under the applicable

substantive law which might affect the outcome of the case.”126 In considering a

motion for summary judgment, the Court must construe all facts and draw all

reasonable inferences in the light most favorable to the non-moving party.127 The

Court will not, however, weigh the evidence or find facts at the summary judgment

stage. Rather, the Court determines only whether there is sufficient evidence upon

which a reasonable juror could find for the non-moving party.128 If “the record taken

as a whole could not lead a rational trier of fact to find for the nonmoving party, there

is no ‘genuine issue for trial.’”129

The moving party has the burden to establish the absence of any genuine issue

of material fact.130 To support its position, the party must cite “to particular parts of

materials in the record, including depositions, documents, electronically stored

information, affidavits or declarations, stipulations (including those made for

purposes of the motion only), admissions, interrogatory answers, or other

materials.”131 Once the moving party meets its burden, the burden shifts to the non-

movant, who must present specific facts showing that there exists a genuine dispute

125 Fed. R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Anderson v. Liberty

Lobby, Inc., 477 U.S. 242, 247-48 (1986).

126 Allen v. Tyson Foods, Inc., 121 F.3d 642, 646 (11th Cir. 1997).

127 Id.

128 Morrison v. Amway Corp., 323 F.3d 920, 924 (11th Cir. 2003).

129 Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (quoting First Nat’l

Bank of Ariz. v. Cities Serv. Co., 391 U.S. 253, 288 (1968)).

130 Celotex, 477 U.S. at 323; see Fed. R. Civ. P. 56(c)(1).

131 Fed. R. Civ. P. 56(c)(1)(A).

of material fact.132 Although an affidavit from a party opposing summary judgment

can serve as a vehicle to show the existence of a genuine dispute of material fact,

“[w]hen a party has given clear answers to unambiguous questions which negate the

existence of any genuine issue of material fact, that party cannot thereafter create

such an issue with an affidavit that merely contradicts, without explanation,

previously given clear testimony.”133

V. ANALYSIS.

The second amended complaint contains two counts for breach of contract, two

counts for tortious interference, and two FDUTPA counts. To prevail on a breach of

contract claim under Florida law, the plaintiff must prove by a preponderance of the

evidence (1) the existence of a contract, (2) a breach thereof, and (3) damages flowing

from the breach.134 FDUTPA – which prohibits “[u]nfair methods of competition,

unconscionable acts or practices, and unfair or deceptive acts or practices in the

conduct of any trade or commerce,”135 – requires a plaintiff to prove the following

three elements: (1) a deceptive act or unfair practice, (2) causation, and (3) actual

damages.136 And the elements of tortious interference with a contract or business

132 Walker v. Darby, 911 F.2d 1573, 1576 (11th Cir. 1990) (citing British Airways Bd. v. Boeing Co.,

585 F.2d 946, 950–52 (9th Cir. 1978)).

133 Van T. Junkins & Assocs., Inc. v. U.S. Indus., Inc., 736 F.2d 656, 657 (11th Cir. 1984).

134 Knowles v. C. I. T. Corp., 346 So. 2d 1042, 1043 (Fla. 1st DCA 1977); J.J. Gumberg Co. v. Janis

Servs., Inc., 847 So. 2d 1048, 1049 (Fla. 4th DCA 2003); Rollins, Inc. v. Butland, 951 So. 2d 860, 876

(Fla. 2d DCA 2006); Alhassid v. Bank of Am., N.A., 2015 WL 11216721, at *4 (S.D. Fla. 2015). This

analysis also applies to a claim for breach of the implied duty of good faith and fair dealing. Resnick v.

AvMed, Inc., 693 F.3d 1317, 1325–26 (11th Cir. 2012) (citing Baron v. Osman, 39 So.3d 449, 451 (Fla.

5th DCA 2010) (per curiam) (contract implied in fact); Hospital Corp. of Am. v. Fla. Med. Ctr., Inc.,

710 So.2d 573, 575 (Fla. 4th DCA 1998) (per curiam) (implied covenant of good faith and fair dealing)).

135 Fla. Stat. § 501.204(1).

136 Dolphin LLC v. WCI Cmtys., Inc., 715 F.3d 1243, 1250 (11th Cir. 2013) (citing Rollins, Inc., 951 So.

2d at 869). The parties disagree as to whether past lost profits are “actual damages” that are

relationship claim are: (1) the existence of a business relationship (not necessarily

evidenced by an enforceable contract), under which the plaintiff has legal rights;

(2) the defendant’s knowledge of the relationship; (3) an intentional and unjustified

interference with the relationship by the defendant; and (4) damage to the plaintiff

as a result of the interference.137

A. No Competent Evidence of Damages.

Each of these counts requires, as an essential element, proof of damages. In its

contractual and FDUTPA claims (Counts I-IV) Seven Stars seeks damages primarily

based on “lost revenue” or “lost ticket sales” (which is the same thing as lost revenue).

But Florida law requires proof of lost profits (income minus expenses), not just lost

revenue.138 And, although Seven Stars purports in the Manzo-Berding Declaration to

now assert a claim for diminution in value of its business, that is not an appropriate

measure of damages under Florida law unless a business has been completely

recoverable under FDUTPA, see, e.g., Tymar Distrib., --- F.Supp.3d ---, 2021 WL 4077966, or whether

they are instead “consequential damages” that are not recoverable, see, e.g., Midway Labs USA, LLC

v. South Serv. Trading, S.A., 2020 WL 2494608 (S.D. Fla. 2020). But because – as discussed below –

there is no competent evidence of any damages that the Court can consider, the Court need not

determine this legal issue.

137 Salit v. Ruden, McClosky, Smith, Schuster & Russell, P.A., 742 So. 2d 381, 385–86 (Fla. 4th DCA

1999) (citing Tamiami Trail Tours, Inc. v. Cotton, 463 So. 2d 1126, 1127 (Fla. 1985); Procacci v. Zacco,

402 So. 2d 425, 426 (Fla. 4th DCA 1981); Linafelt v. Bev, Inc., 662 So. 2d 986, 989 (Fla. 1st DCA 1995));

Int’l Sales & Serv., Inc. v. Austral Insulated Prod., Inc., 262 F.3d 1152, 1154 (11th Cir. 2001) (citing

Ethan Allen, Inc. v. Georgetown Manor, Inc., 647 So.2d 812, 814 (Fla. 1994)).

138 Del Monte Fresh Produce Co. v. Net Results, Inc., 77 So. 3d 667, 673 n.11 (Fla. 3d DCA 2011).

destroyed.139 Because Seven Stars remains in business, the only appropriate measure

of damages is lost profits, not diminished business value.140

But only in its tortious interference claim against Xtreme does Seven Stars

actually plead a claim for lost profits. The rest of the damages asserted by Seven Stars

include claims for loss of goodwill of its customers;141 attorneys’ fees and costs;142

increased advertising costs, other out-of-pocket costs, and damage to competitive

advantages;143 loss of business opportunities;144 and loss of the time value of money

and other consequential damages.145

Under Florida law, a plaintiff has the burden to present “evidence justifying a

specific and definite amount of economic damages.”146 While this evidence need not

establish the amount of damages “with absolute exactness,”147 the evidence

nevertheless must have a reasonable factual basis and may not be founded on

139 Montage Grp., Ltd. v. Athle-Tech Comput. Sys., Inc., 889 So.2d 180, 193 (Fla. 2d DCA 2004) (citing

Polyglycoat Corp. v. Hirsch Distribs., Inc., 442 So.2d 958, 960 (Fla. 4th DCA 1983)). In such a case –

where there is a “total breach of contract” – the injured party may then choose between the mutually

exclusive remedies of (a) “reliance damages,” whereby the contract is treated as void and the injured

party recovers damages putting it in the same position as it was immediately before entering into the

contract, or (b) “expectation damages,” whereby the injured party affirms the contract and seeks

damages that would put it in the position it would have been in had the counterparty properly

performed. Tampa Pipeline Transp. Co. v. Chase Manhattan Serv. Corp., 928 F. Supp. 1568, 1584

(M.D. Fla. 1995), aff’d sub nom. Tampa Pipeline v. Chase Manhattan, 87 F.3d 1329 (11th Cir. 1996)

(citing Rector v. Larson’s Marine, Inc., 479 So.2d 783, 785 (Fla. 2d DCA 1985)). But here, because the

business was not completely destroyed (Seven Stars confirmed a chapter 11 plan and reorganized in

Seven Stars II), and there was not a total breach of contract (Seven Stars assumed the Lease in Seven

Stars II), the only appropriate measure of damages is lost profits.

140 Id. (citing Aetna Life & Cas. Co. v. Little, 384 So.2d 213, 216 (Fla. 4th DCA 1980)).

141 Counts I and VI.

142 Count II.

143 Count III.

144 Count V.

145 Count VI.

146 United Auto. Ins. Co. v. Colon, 990 So. 2d 1246, 1248 (Fla. 4th DCA 2008) (citing United Steel &

Strip Corp. v. Monex Corp., 310 So.2d 339, 342 (Fla. 3d DCA 1975)).

147 Del Monte Fresh Produce, 77 So. 3d at 675 (citing Nat’l Papaya Co. v. Domain Indus., Inc., 592 F.2d

813, 818 (5th Cir. 1979)).

“speculation or guesswork.”148 There must be some “reasonable certainty” in the proof

and the assumptions underlying them.149 If the finder of fact is not presented with

evidence that will enable it to determine damages “with a reasonable degree of

certainty, rather than by means of speculation and conjecture,” then the plaintiff

cannot recover those damages.150 Thus, for any claim as to which a plaintiff fails to

present evidence justifying any amount on a claim for economic damages, the

defendant will be entitled to judgment in its favor on that claim.151

In support of their respective motions, the defendants relied upon Seven Stars’

responses to written discovery, Seven Stars’ Rule 26(a)(1) initial disclosures, the

transcripts of the depositions of both Mr. Berding and of Seven Stars’ Rule 30(b)(6)

designated representative (Ms. Manzo-Berding), a profit and loss statement for Seven

Stars spanning from January 2017 through December 2019, and a May 6, 2019, letter

from Seven Stars’ former franchisor (Rockin’ Jump) providing written notice to Seven

Stars of its default under the franchise agreement.

Under the summary judgment standard, the burden then shifted to Seven

Stars to present specific facts showing that there exists a genuine dispute of material

fact.152 But the only evidence of damages Seven Stars presented in response to the

148 United Auto. Ins., 990 So. 2d at 1248 (citing Smith v. Austin Devel. Co., 538 So.2d 128, 129 (Fla. 2d

DCA 1989)); Del Monte Fresh Produce, 77 So. 3d at 675.

149 Del Monte Fresh Produce, 77 So. 3d at 675 (citing Nat’l Papaya Co., 592 F.2d at 822; R.A. Jones &

Sons, Inc. v. Holman, 470 So.2d 60 (Fla. 3d DCA 1985)); Air Caledonie Int’l v. AAR Parts Trading, Inc.,

315 F.Supp.2d 1319, 1343 (S.D. Fla. 2004); Pier 1 Cruise Experts v. Revelex Corp., 929 F.3d 1334, 1342

(11th Cir. 2019).

150 Cibran Enterprises, Inc. v. BP Prod. N. Am., Inc., 365 F. Supp. 2d 1241, 1254 n.2 (S.D. Fla. 2005)

(citing Himes v. Brown & Co. Sec. Corp., 518 So.2d 937, 938 (Fla. 3d DCA 1987)).

151 United Auto. Ins., 990 So. 2d at 1248 (citing United Steel, 310 So. 2d at 342).

152 Walker, 911 F.2d at 1576.

motions for summary judgment was the Manzo-Berding Declaration, which

contradicted Seven Stars’ earlier deposition testimony, interrogatory answers, and

initial disclosures.153 As discussed below, however, the Court cannot consider this

new declaration, and there is no other competent evidence of damages in the record

to sustain Seven Stars’ burden to show a genuine dispute of material fact.

1. No Damages Calculations in Initial Disclosures.

Federal Rule of Civil Procedure 37(c)(1), made applicable here by Federal Rule

of Bankruptcy Procedure 7037, is clear that “[i]f a party fails to provide information

or identify a witness as required by Rule 26(a) or (e), the party is not allowed to use

that information or witness to supply evidence on a motion, at a hearing, or at a trial,

unless the failure was substantially justified or is harmless.”154 Rule 26(a)(1)(A)(iii)

mandates initial disclosures – without awaiting a discovery request – of “a

computation of each category of damages claimed by the disclosing party—who must

also make available for inspection and copying as under Rule 34 the documents or

other evidentiary material, unless privileged or protected from disclosure, on which

each computation is based, including materials bearing on the nature and extent of

injuries suffered.”155 Rule 26(e)(1)(A) requires a party who made a disclosure under

153 The other evidence Seven Stars submitted in opposition to the motions for summary judgment did

not appear to pertain to damages, and instead consisted of photographs, email communications,

transcripts of Ms. Bertoni’s and Mr. Goldfarb’s depositions, another copy of the second amended

complaint (filed in violation of Local Rule 9004-1(D), which prohibits including as an attachment any

document already filed in a case or proceeding), another copy of the Lease (also filed in violation of

Local Rule 9004-1(D)), and a $104.00 invoice from November 7, 2016, from Xtreme to Seven Stars for

reimbursement for digital postcards.

154 Fed. R. Civ. P. 37(c)(1); see also Clayman v. Starwood Hotels & Resorts Worldwide, 343 F. Supp. 2d

1037, 1047 (D. Kan. 2004) (plaintiff was not permitted to present damages calculations regarding

future medical expenses because plaintiff failed to provide defendant with computations before trial).

155 Fed. R. Civ. P. 26(a)(1)(A)(iii).

Rule 26(a) to supplement or correct its disclosure in a timely manner if the disclosure

was incomplete or incorrect in some material respect.

Seven Stars’ failure alone to disclose any damages calculations in its initial

disclosures is a sufficient basis – based on the text of Rule 37(c)(1) – to grant summary

judgment in favor of the defendants156 notwithstanding the Manzo-Berding

Declaration. Because Seven Stars failed to disclose its damages computations (as well

as any references to reliance damages or diminution in business value damages) –

even after supplementing its initial disclosures three times – it may not use these

new damages calculations in the Manzo-Berding Declaration to oppose the motions

for summary judgment.157

2. No Damages Timely Disclosed in Interrogatory Answers.

Seven Stars also failed to provide sufficient answers when asked in

interrogatories about (1) the elements of damages and the amount that Seven Stars

is seeking for each element of damages, and the manner of calculating its damages;

156 Mee Indus. v. Dow Chem. Co., 608 F.3d 1202, 1221-22 (11th Cir. 2010) (affirming exclusion of

evidence of damages that plaintiff failed to identify and calculate in its Rule 26 initial disclosures);

City of Rome v. Hotels.com, L.P., 549 Fed. App’x 896, 904-05 (11th Cir. 2013) (same); Gym Door

Repairs, Inc. v. Young Equip. Sales, Inc., 331 F. Supp. 3d 221, 237–39 (S.D.N.Y. 2018) (court excluded

plaintiff’s damages evidence on motion for summary judgment because plaintiff failed to provide “any

background or methodology for how they came up with [damage] estimates, nor did they cite to any

documents as a basis for their computation”); Karum Holdings LLC v. Lowe’s Companies, Inc., 895

F.3d 944, 951 (7th Cir. 2018) (“‘[t]he exclusion of non-disclosed evidence is automatic and mandatory

under Rule 37(c)(1) unless non-disclosure was justified or harmless’” (quoting Musser v. Gentiva Health

Servs., 356 F.3d 751, 758 (7th Cir. 2004))).

157 See, e.g., Mee Indus., 608 F.3d at 1221-22; City of Rome, 549 Fed. App’x at 904-05; Dorvil v.

Nationstar Mortg., LLC, 2020 WL 9065875, at *1 (S.D. Fla. 2020) (plaintiff “must be limited to

damages disclosed in his disclosures and subsequent discovery responses”); Pandora Jewelers 1995,

Inc. v. Pandora Jewelry, LLC, 2011 WL 2295269, at *11 (S.D. Fla. 2011) (excluding evidence or

argument on “new theory of damages” not previously disclosed); In re Mirabilis Ventures, Inc., 2011

WL 3236027, at *9 (M.D. Fla. 2011) (same); MY. P.I.I. LLC v. H&R Marine Eng’g, Inc., 2021 WL

2414135, at *12 (S.D. Fla. 2021) (precluding plaintiff from asserting new damages theories in response

to defendants’ motions for summary judgment).

(2) the mathematical formula and/or method used in computing its claimed damages;

(3) the nature and factual basis of the damages; (4) the existence of documents

that support its damages claims; and (5) the retention, use, and qualifications of

expert witnesses Seven Stars would use to prove damages. It also failed to identify

reliance damages or lost business value damages in any of its interrogatory answers,

even though the defendants’ interrogatories specifically requested that Seven Stars

identify all types of damages being sought, the method of calculation of all damages,

and the evidence to support these damages claims.

Indeed, when asked to identify any documents that support its damages

claims, Seven Stars identified only one relevant document: Seven Stars’ profit and

loss statement for the years 2017 to 2019.158 But without more – like testimony from

an expert witness that will not be forthcoming – this profit and loss statement does

not show any evidence of damages. Nowhere in its interrogatory answers did Seven

Stars identify any expert witnesses that it would use to support its damages claims.159

And only in its amended interrogatory answers – served weeks after the close of

discovery – did Seven Stars ever quantify its damages. These untimely amended

answers asserted for the first time that Seven Stars suffered $1.2 million in lost profit

damages, $800,000 in unidentified damages related to contract claims, and $2.5

million in unidentified damages for its tortious interference claims. But even if the

Court were to consider these untimely amended answers, the amounts set forth

158 ECF No. 161, Ex. B at 7; ECF No. 162, Ex. F, at 7-8.

159 ECF No. 161, Exs. B, E, and F.

therein are all conclusory and without any supporting explanation or analysis.160

Accordingly, these tardy interrogatory answers also fail to meet Seven Stars’ burden

to present specific facts showing that there exists a genuine dispute of material fact.

3. No Evidence of Damages in Deposition Testimony.

Likewise, neither of the Berdings provided any information as to damages in

their depositions. When asked specifically about lost revenue and lost ticket sales,

Ms. Manzo-Berding (testifying as both Seven Stars’ designated representative under

Rule 30(b)(6) and in her individual capacity) stated that she could not testify as to

any specific amounts. When asked to specifically identify the damages arising from

the alleged misconduct, Ms. Manzo-Berding could not testify as to any damages that

were caused by the conduct,161 instead stating that they would bring in an expert to

testify as to the amount of damages.162 She also failed to identify any reliance

damages or damages for diminution in business value. Mr. Berding likewise declined

to offer any substantive testimony on damages.163

Ms. Manzo-Berding’s inability to testify as to damages on behalf of Seven

Stars, as its Rule 30(b)(6) designated representative, has serious consequences. A

Rule 30(b)(6) designated representative is the spokesperson for the corporation,

whose testimony binds the corporation,164 quite similar in effect to written answers

160 There is also no explanation as to how this $800,000 in undefined contract damages relates to the

$1,888,110 in damages later claimed in the Manzo-Berding Declaration.

161 See notes 77-80, supra.

162 See note 81, supra.

163 See note 83, supra.

164 QBE Ins. v. Jorda Enters., Inc., 277 F.R.D. 676, 688 (S.D. Fla. 2012) (“A corporation has an

affirmative duty to provide a witness who is able to provide binding answers on behalf of the

corporation.”).

to requests for admissions under Federal Rule of Civil Procedure 36. When a Rule

30(b)(6) representative “legitimately lacks the ability to answer relevant questions on

listed topics . . . , then the ‘we-don’t-know’ response can be binding on the corporation

and prohibit it from offering evidence at trial on those points.”165 In other words “the

lack of knowledge answer is itself an answer” that will be binding on the company.166

With the corporation having answered “I don’t know” through its designated

representative, it will not later be allowed to change its answer by introducing

contrary evidence at trial.167 Thus, the defendants were entitled to rely on Ms. Manzo-

Berding’s Rule 30(b)(6) deposition testimony that Seven Stars had no evidence of

damages and would be relying solely on expert testimony to prove damages.

4. No Expert Witnesses Designated.

Having boxed itself into a corner of relying solely on expert testimony to prove

damages, Seven Stars then failed to timely identify any expert witnesses. Federal

Rule of Civil Procedure 26(a)(2) requires each party to “disclose to the other parties

the identity of any [expert] witness it may use at trial.”168 These disclosures must

include a written report for witnesses “retained or specially employed to provide

165 Id. at 690.

166 Id. (citing Fraser Yachts Fla., Inc. v. Milne, 2007 WL 1113251, at *3 (S.D. Fla. 2007); Chick–fil–A

v. ExxonMobil Corp., 2009 WL 3763032, at *13 (S.D. Fla. 2009); Ierardi v, Lorillard, Inc., 1991 WL

66799 at *2 (E.D. Pa. 1991)).

167 QBE Ins., 277 F.R.D. at 690 (citing Ierardi, 1991 WL 158911, at *3; See also Strategic Decisions,

LLC v. Martin Luther King, Jr. Ctr. For Nonviolent Soc. Change, Inc., 2015 WL 2091714, at *7 (N.D.

Ga. 2015) (“When the 30(b)(6) representative claims ignorance of a subject during the deposition,

courts have precluded the corporation from later introducing evidence on that subject.”) (quoting

Function Media, LLC. v. Google, Inc., 2010 WL 276093, at *1 (E.D. Tex. 2010)); Rainey v. Am. Forest

& Paper Ass’n, Inc., 26 F.Supp.2d 82, 94 (D.D.C. 1998) (“Unless it can prove that the information was

not known or was inaccessible, a corporation cannot later proffer new or different allegations that

could have been made at the time of the 30(b)(6) deposition.”).

168 Cruz v. U.S., 2013 WL 246763, at *2 (S.D. Fla. 2013) (quoting Fed. R. Civ. P. 26(a)(2)).

expert testimony,”169 and must be made “at the times and in the sequence that the

court orders.”170 But, “[i]f a party fails to provide information or identify a witness as

required by Rule 26(a) . . . , the party is not allowed to use that information or witness

to supply evidence on a motion, at a hearing, or at a trial, unless the failure was

substantially justified or is harmless.”171 Courts have construed “substantial

justification” to mean “justification to a degree that could satisfy a reasonable person

that parties could differ as to whether the party was required to comply.”172 Likewise,

courts have determined that a failure to disclose is harmless where “there is no

prejudice to the opposing party.”173 It is the burden of the party who failed to comply

with Rule 26(a) to establish that its nondisclosure was substantially justified or

harmless.174 If the party fails to meet that burden, then “the sanction of exclusion is

automatic and mandatory.”175

Seven Stars has not made any attempt to satisfy this burden of showing its

failure was substantially justified or harmless. Rather, Seven Stars simply failed to

identify any expert witnesses or provide any expert reports by the April 6, 2021

deadline set forth in the Court’s scheduling order. After it let this deadline come and

169 Id. (quoting Fed. R. Civ. P. 26(a)(2)(B)).

170 Id. (quoting Fed. R. Civ. P. 26(a)(2)(D)).

171 Id. (quoting Fed. R. Civ. P. 37(c)(1)).

172 Id. (quoting McGarity v. FM Carriers, Inc., 2012 WL 1028593, at *9 (S.D. Ga. 2012) (quoting Hewitt

v. Liberty Mut. Grp., Inc., 268 F.R.D. 681, 682 (M.D. Fla. 2010))).

173 Id. (quoting In re Terazosin Hydrochloride Antitrust Litig., 2005 U.S. Dist. LEXIS 45881, at *29

(S.D. Fla. 2005)).

174 Id.

175 Salgado by Salgado v. Gen. Motors Corp., 150 F.3d 735, 742 (7th Cir. 1998); see also Valdes v.

Miami-Dade Cty., 2015 WL 6829055, at *4 (S.D. Fla. 2015); Dyett v. N. Broward Hosp. Dist., 2004 WL

5320630, at *2 (S.D. Fla. 2004); Am. Stock Exchange, LLC v. Mopex, Inc., 215 F.R.D. 87, 93 (S.D.N.Y.

2002).

pass without taking any action, the Court then denied Seven Stars’ later motion to

extend the expert discovery deadline because it had made no timely expert

disclosures.

It bears noting that Seven Stars never took any action to pre-emptively extend

the April 6, 2021, expert disclosure deadline,176 even though it knew “from the

beginning”177 that it would need expert testimony and knew that it needed litigation

funding to pay for an expert.178 Indeed, Seven Stars first filed a motion related to

litigation funding in Seven Stars II on January 28, 2021.179 The Court granted that

motion on February 26, 2021, which at the time only concerned entering into a term

sheet for litigation funding.180 Seven Stars then filed a motion to approve the full

litigation funding agreement on April 6, 2021181 – the same day expert disclosures

were due in this adversary proceeding. That motion was then amended on April 9,

2021,182 and after a hearing on April 14, 2021, the Court entered an order approving

the litigation funding on April 19, 2021.183

While Seven Stars now argues that its failure to timely designate an expert

and exchange expert reports should be justified because it had not yet secured

176 Had Seven Stars sought an extension of this deadline before it expired, it would have only had to

satisfy a “good cause” standard to obtain an extension. See Fed. R. Bankr. P. 7016(a); 9006(b)(1); Fed.

R. Civ. P. 16(b)(4). Had it sought an extension after expiration of the deadline, it would have been

subject to the higher “excusable neglect” standard. See Fed. R. Bankr. P. 9006(b)(1). But Seven Stars

has asserted neither good cause nor excusable neglect; it simply ignored this scheduling order deadline

altogether.

177 ECF No. 148, ¶ 7.

178 Id.

179 Seven Stars II, ECF No. 122.

180 Seven Stars II, ECF No. 136.

181 Seven Stars II, ECF No. 186.

182 Seven Stars II, ECF No. 190.

183 Seven Stars II, ECF No. 193.

litigation funding (which it was in the process of doing at the time the disclosures

were due), this argument actually establishes that its failure to timely make these

disclosures was not substantially justified. Seven Stars knew about the deadline and

knew what it had to do to secure the funding and the timing of those efforts. All Seven

Stars had to do was file a timely motion seeking to extend the expert disclosure

deadline.184 It never did so. Instead, about three weeks later, it just filed a motion to

extend the fact discovery and expert discovery deadlines. But because the expert

disclosure deadline had already come and passed without any disclosures, the

defendants opposed extension of the expert discovery deadline as pointless. What was

there to extend if the plaintiff never timely designated any experts? The Court agreed

and denied the motion to extend the expert discovery deadline.

Seven Stars’ failure to timely disclose any experts – or to timely provide any

computation of damages – was neither substantially justified nor harmless.185

Litigation has rules by which all parties must abide. Even if MDG breached its

contract with Seven Stars, and even if Xtreme and MDG violated Seven Stars’ rights

under FDUTPA or tortiously interfered with Seven Stars’ contractual rights, the

defendants still have rights to require the plaintiff to play by the same rules in

litigation. This means that parties must timely disclose the experts they intend to

use, they must timely identify their damages computations, they must timely and

184 See Fed. R. Bankr. P. 9006(b) and 7016(a); Fed. R. Civ. P. 16(b)(4).

185 See, e.g., Rigby v. Philip Morris USA, Inc., 717 Fed. App’x 834, 835-36 (11th Cir. 2017) (failure to

disclose witnesses until after summary judgment motion was filed was not harmless); Bowe v. Pub.

Storage, 106 F.Supp.3d 1252, 1260 (S.D. Fla. 2015) (“Prejudice generally occurs when late disclosure

deprives the opposing party of a meaningful opportunity to perform discovery and depositions related

to the documents or witnesses in question.”).

completely respond to written discovery requests, and their Rule 30(b)(6) witnesses

must be prepared to testify (which testimony will bind the party). If one party fails to

play by these rules, that is fundamentally unfair to the other parties. This is

particularly so where Seven Stars could have timely moved to extend the expert

disclosure deadline while it was seeking approval for its litigation funding. But with

the deadline to make expert disclosures having passed without Seven Stars having

disclosed any experts or submitted any expert reports, there is no expert testimony

as to damages in the record to support any quantum of damages here.

B. The Manzo-Berding Declaration Cannot Be Considered.

The record is clear that Seven Stars failed to disclose its new damages theories

in its Rule 26(a)(1) initial disclosures, its written discovery responses, and its Rule

30(b)(6) deposition testimony. Notwithstanding this failure to comply with the

discovery rules, Seven Stars now asks the Court to consider the Manzo-Berding

Declaration as sufficient evidence to establish a genuine dispute of material fact

warranting denial of the defendants’ summary judgment motions. The defendants,

however, ask the Court to invoke the “sham declaration” doctrine to strike the Manzo-

Berding Declaration and to sanction Seven Stars under Federal Rule of Civil

Procedure 37(c)(1) for filing it. They argue that Seven Stars cannot now be permitted

to offer evidence regarding its newly-disclosed reliance and diminution of value

damages theories in an attempt to avoid summary judgment.186

186 Mee Indus., 608 F.3d at 1221-22; City of Rome, 549 Fed. App’x at 904-05.

Under the “sham declaration” or “sham affidavit” doctrine, courts “may

disregard an affidavit submitted solely for the purpose of opposing a motion for

summary judgment when the affidavit is directly contradicted by deposition

testimony.”187 The “sham affidavit” rule is to be applied “sparingly,”188 and the party

seeking to invoke it bears a heavy burden.189 When considering a declaration

submitted in opposition to a motion for summary judgment, the declaration must

contain statements that clearly contradict responses to earlier unambiguous

questions, in order for this rule to apply. The contradictions must be explicit and

consist of “clear answers to unambiguous questions which negate the existence of any

genuine issue of material fact.”190 Where the differences between deposition

testimony and a declaration are simply “discrepancies which create an issue of

credibility that go to the weight of the evidence,” a declaration should not be regarded

as a sham.191 As the Eleventh Circuit has explained:

We apply this rule sparingly because of the harsh effect this rule may

have on a party’s case. In addition, we feel that to allow every failure of

memory or variation in a witness’s testimony to be disregarded as a

sham would require far too much from lay witnesses and would deprive

the trier of fact of the traditional opportunity to determine which point

in time and with which words the affiant was stating the truth.192

187 McCormick v. City of Fort Lauderdale, 333 F.3d 1234, 1240 n.7 (11th Cir. 2003); see also Moore v.

Tractor Supply Co., 352 F.Supp.2d 1268, 1275-76 (S.D. Fla. 2004); Van T. Junkins, 736 F.2d at 657.

188 See Latimer v. Roaring Toyz, Inc., 601 F.3d 1224, 1237 (11th Cir.2010); (quoting Allen v. Bd. of Pub.

Educ. for Bibb County, 495 F.3d 1306, 1316 (11th Cir.2007)); Rollins v. TechSouth, Inc., 833 F.2d 1525,

1530 (11th Cir. 1987).

189 In re Stand TV Seal, Products Liability Litigation, 636 F.Supp.2d 1333, 1335 (N.D. Ga. 2009).

190 Van T. Junkins, 736 F.2d at 657; see also Rollins, 833 F.2d at 1530.

191 Tippens v. Celotex Corp., 805 F.2d 949, 953 (11th Cir. 1986).

192 Rollins, 833 F.2d at 1530 (quoting Tippens, 805 F.2d at 954-54) (cleaned up).

But Ms. Manzo-Berding’s failure to testify as to these new damages theories at her

Rule 30(b)(6) deposition was not a mere failure of memory by a witness. Seven Stars

was quite clear all along that it would be relying on expert testimony for damages,

which position Ms. Manzo-Berding doubled down on during her Rule 30(b)(6)

deposition.

Nevertheless, Seven Stars argues that “the Declaration is not ‘inconsistent’ to

such a degree as to warrant the striking of the Declaration.”193 It argues that at the

time of the commencement of the deposition (April 19, 2021), it had just secured and

obtained approval for litigation funding.194 But because, as Seven Stars couched it,

the “[d]efendants succeeded in barring such testimony because the Expert Report had

not been furnished by April 6, 2021,” the litigation funder would not release any funds

to hire an expert to assist Seven Stars on its damages issues.195 Thus, Seven Stars

argues, the Berdings “had to essentially become their own expert and lay before the

Court the financial data supporting Plaintiff’s claims as well as the impact of the

Defendants’ wrongful actions had [sic] on Plaintiff’s business.”196

This excuse is unpersuasive. Essentially Seven Stars argues that it should

have been excused from compliance with the Court’s scheduling order because it did

not have the financial resources to hire an expert, and therefore it could just ignore

the expert disclosure deadline until after it had its litigation financing lined up, even

193 ECF No. 216 at 2.

194 The Court entered an order in Seven Stars II approving the litigation funding agreement on April

19, 2021, after a hearing on April 14, 2021 (which was eight days after expiration of the April 6, 2021

expert disclosure deadline and five days before Ms. Manzo-Berding testified). Seven Stars II, ECF No.

193.

195 ECF No. 216 at 3.

196 Id.

if that occurred (as it did here) after the expert disclosure deadline had passed. But

“[a] scheduling order is not a frivolous piece of paper, idly entered, which can be

cavalierly disregarded by counsel without peril.”197 Nor does lack of funding “permit

a party to decide ex parte that it is justified in not prosecuting the suit and is free to

ignore the rules of the court.”198 Indeed, under Federal Rule of Civil Procedure

16(b)(4), made applicable to this adversary proceeding by Federal Rule of Bankruptcy

Procedure 7016, the Court’s scheduling order could have been modified “only for good

cause and with the judge’s consent.”199 “This good cause standard precludes

modification unless the schedule cannot be met despite the diligence of the party

seeking the extension.”200 But if a party was not diligent, that ends the good cause

inquiry.201

Seven Stars argues, however, that it should suffer no adverse consequences for

its failure to properly and timely respond to discovery, and that instead the

defendants should be faulted for not moving to compel (timely or better) answers. But

the defendants each asked multiple different ways about damages, in written

discovery and during depositions. It was also incumbent upon Seven Stars, as

discussed above, to disclose this information voluntarily under Rule 26(a)(1) and to

supplement or correct its disclosures, in a timely manner, as required by Rule

197 Dabney v. Bank of Am. (In re Dabney), 604 B.R. 233, 239 (Bankr. D.S.C. 2019).

198 Bank of New York v. Meridien Biao Bank Tanzania Ltd., 1998 WL 417510, at *3 (S.D.N.Y. 1998)

(Sotomayor, J.) (quoting Rinieri v. News Syndicate Co., 385 F.2d 818, 823 (2d Cir.1967) (cleaned up));

see also Bank of New York v. Meridien Biao Bank Tanzania Ltd. (In re Treco), 2001 WL 1566701, at

*9 (Bankr. S.D.N.Y. 2001) (“The desire to limit litigation expenses and conserve resources does not

justify a delay in pleading.”).

199 Fed. R. Civ. P. 16(b)(4).

200 Sosa v. Airprint Sys., Inc., 133 F.3d 1417, 1418 (11th Cir. 1998) (cleaned up).

201 Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 609 (9th Cir. 1992).

26(e)(1)(A). After nearly two years of litigation and asking multiple ways for this

information, the defendants were entitled to rely upon Seven Stars’ lack of timely

responses and cannot be faulted for not having moved to compel better answers. If

this were the rule, then no party would ever need to respond to a discovery request

unless and until the other party moved to compel. That is not what the Federal Rules

of Civil Procedure contemplate or require. Accordingly, because the Manzo-Berding

Declaration is clearly inconsistent with Seven Stars’ initial disclosures, interrogatory

answers, and Ms. Manzo-Berding’s own deposition testimony, it falls within the

“sham declaration” rule and must be disregarded.202

While disregarding this declaration might seem like a harsh or draconian

result, it is not. In fact, it is only fair to the defendants. They had been defending

against these claims (which otherwise very well may have merit) for over two years

and had been engaged in discovery for about a year. They were entitled to discovery

about the damages Seven Stars sought from them. Seven Stars was supposed to

disclose this information to them in its Rule 26(a)(1) initial disclosures. It did not. So

the defendants asked Seven Stars in written discovery for computations of damages.

Seven Stars ignored three sets of Xtreme’s interrogatories and then only belatedly

answered another set. Seven Stars likewise failed to adequately and timely answer

MDG’s interrogatories. What it did say in its answers, though, was that it would be

retaining an expert witness to provide this testimony. The defendants then asked

202 See Knight v. Allstar Bldg. Materials, Inc., 2009 WL 3837870, at *15-17 (M.D. Fla. 2009) (striking

as a sham affidavit plaintiff’s submission in opposition to summary judgment months after testifying

at deposition that he “could not recall” the information).

Seven Stars’ Rule 30(b)(6) corporate representative about damages. She could not

testify to any specific damages, and instead pointed to an un-named and un-

designated expert. But then, by April 6, 2021, Seven Stars failed to disclose any

experts or provide any expert reports. Certainly, by that point, the defendants were

entitled to rely on the lack of any evidence of damages. Accordingly, the Court will

disregard the Manzo-Berding Declaration. But because this is a harsh enough result,

the Court declines to award any further sanctions.203

VI. CONCLUSION.

Seven Stars failed at every instance to properly and timely disclose its damages

calculations. It also failed to disclose any expert witness who would opine on damages.

Then, after blaming the defendants for its own failure to timely make expert

disclosures, Seven Stars essentially admitted to throwing a “Hail Mary pass” in the

form of the Manzo-Berding Declaration, in an attempt to defeat the defendants’

summary judgment motions. Seven Stars claimed that, notwithstanding two years of

litigation in which it consistently asserted lost revenue damages and repeatedly said

it would rely on an expert to prove damages, it now had to become its “own expert”204

on new damages theories that it never previously asserted. But if a plaintiff could

avoid summary judgment by simply filing a declaration asserting new damages

theories and opinions for the first time after the close of discovery, then “discovery

would be meaningless, the value of depositions would be negligible, and the summary

203 See Fed. R. Civ. P. 37(c)(1) (providing that attorneys’ fees and expenses may be awarded “[i]n

addition to or instead of” the default sanction of prohibiting the undisclosed information to be used “to

supply evidence on a motion, at a hearing, or at a trial”).

204 ECF No. 216 at 3.

judgment procedural device would be largely useless.”205 Without any competent

evidence of damages – an essential element of each of Seven Stars claims – the

defendants are therefore entitled to summary judgment in their favor on all counts

of the second amended complaint.206

# # #

Copies furnished to all counsel of record by CM/ECF.

205 Nicholson v. Johanns, 2007 WL 3407045, at *4 (S.D. Ala. 2007), aff’d sub nom. Nicholson v. U.S.

Dep’t of Agric., 275 F. App’x 878 (11th Cir. 2008).

206 Because the lack of damages evidence is dispositive, the Court need not address the defendants’

other arguments for summary judgment.