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Cement-Lock v. Gas Technology Institute

March 30, 2009


The opinion of the court was delivered by: Judge Rebecca Pallmeyer


On January 3, 2005, Plaintiffs Cement-Lock, LLC ("CL") and Richard Mell filed a derivative lawsuit on behalf of Cement-Lock Group LLC ("CLG"). CLG was the owner of certain intellectual property and rights to the "Cement-Lock" technology (the "Technology"), a method for converting contaminated waste into a decontaminated, beneficial cement additive. The Technology did not prove as profitable as its inventors hoped, however, and litigation among the developers and investors ensued. In addition to the nominal Defendant, CLG, Plaintiffs have named several entities and individuals as Defendants: Gas Technology Institute and Institute of Gas Technology ("IGT") (together "GTI"); Endesco Services, Inc. ("ESI"); Endesco Clean Harbors, LLC ("ECH"); Stanley S. Borys, James E. Dunne, and Francis S. Lau. Three individuals who are not named as Defendants in this case played a significant role in the Technology's troubled history: Peter Barone, Anthony Lee, and Amirali Rehmat were involved in a kickback scheme for which all three men were ultimately indicted, and Lee and Rehmat have pleaded guilty (Barone has died). See United States v. Barone, No. 07 CR 0574 (N.D. Ill.) Although that scheme--sometimes referred to as the "BLR Fraud"--is not the focus of this lawsuit, the parties here have attempted to lay blame on one another for the harm resulting from the BLR Fraud.

Plaintiffs' allegations here describe another fraudulent scheme, one by which the named corporate and individual Defendants deprived CLG of millions of dollars and devalued CLG's intellectual property in the Technology. In their eleven-count complaint, Plaintiffs alleged that the Defendants breached fiduciary duties (Count I); violated the Racketeer Influenced and Corrupt Organizations Act ("RICO") (Counts II and III); committed fraudulent concealment (Count IV); committed fraudulent misrepresentation (Count V); committed negligent misrepresentation (Count VI); were unjustly enriched (Count VII); must provide an accounting (Count VIII); infringed certain trademarks (Count IX); committed unfair competition (Count X); and engaged in deceptive trade practices (Count XI). (Docket Entry No. 1.) The court dismissed the RICO counts in Plaintiffs' original complaint without prejudice on September 30, 2005. Cement-Lock v. Gas Tech. Inst., No. 05 C 0018, 2005 WL 2420374, *23 (N.D. Ill. Sept. 30, 2005) ("Cement-Lock I"). Their amended complaint, filed on November 30, 2005 (Docket Entry No. 56), presented RICO claims that survived Defendants' Rule 12(b)(6) motions. Cement-Lock LLC v. Gas Tech. Inst., No. 05 C 00018, 2006 WL 3147700, *11 (N.D. Ill. Nov. 1, 2006) ("Cement-Lock II"). Defendants then moved for summary judgment on Counts I through VI and VIII; the individual Defendants also moved for summary judgment on Count VII. The court granted Dunne, Lau, and Borys summary judgment on the unjust enrichment claims (Count VII), granted Lau summary judgment on several other claims against him, and otherwise denied the motions for summary judgment. Cement-Lock LLC v. Gas Tech. Inst., 523 F. Supp. 2d 827 (N.D. Ill. 2007), as amended by Cement-Lock LLC v. Gas Tech. Inst., No. 05 C 00018, 2007 WL 4246888 (N.D. Ill. Nov. 30, 2007) ("Cement-Lock III"). The court will presume familiarity with the factual and legal discussions in Cement Lock I, Cement Lock II, and Cement Lock III in this opinion.

Trial of Plaintiff's surviving claims commenced on January 14, 2008. (Docket Entry No. 399.) Before jury deliberations, the court dismissed Counts VI (negligent misrepresentation), VIII (accounting), and X (unfair competition). The remaining claims were submitted to the jury, which found for Plaintiffs on Counts I through V and VII and for Defendants on Counts IX (trademark infringement) and XI (deceptive trade practices). (Docket Entries No. 494 & 496.) The jury awarded damages of $10,000 on Count I, and $3,000,000 in damages on Counts II through V and VII. (Id.) The total award is unclear: the parties dispute whether the $3,000,000 awarded on counts II through V and VII was intended to remedy a single injury, or to be added together to total $15,000,000. (Docket Entries No. 499, 515, 516, 530, & 534.) At the close of Plaintiff's case-in-chief, Defendants moved for judgment as a matter of law; at the close of their own case-in-chief, Defendants renewed this motion. Following the jury verdict, Defendants moved for judgment in their favor on Counts I through V and VII.

Plaintiffs' damages theory is that Defendants' actions stripped the Technology of all value. To measure the devaluation, Plaintiffs asked an expert to compare the value of the Technology in approximately 1997 with its current value to CLG. As explained below, the court now concludes that Plaintiffs' current-day valuation of the Technology was in fact based on a calculation of projected lost income and was therefore barred by the new business rule. As a result, Plaintiffs offered no basis for calculating the devaluation of the Technology, and therefore no basis for calculating their damages. Proof of measurable harm is an essential element of each of the six claims on which Plaintiffs prevailed at trial, and, thus, the jury's verdict cannot stand. Although there had been substantial motion practice aimed at Plaintiffs' damages theory, however, no specific contemporaneous objection was raised to Plaintiffs' current-day valuation of the Technology. Plaintiffs therefore did not have the opportunity to cure the deficiency in their evidence at trial, and the court is unwilling to enter judgment for Defendants as a matter of law. Instead, the court will strike the jury's verdict on all counts. Defendants are entitled to judgment as a matter of law on counts for which Plaintiffs failed to prove other essential elements: Counts II and III (the RICO claims) as well as Count VII (unjust enrichment) against all Defendants. In addition, IGT, GTI, and ECH are entitled to judgment on Count I, and Dunne is entitled to judgment in his favor on Count V (fraudulent misrepresentation). The parties are entitled to a new trial on all remaining claims. Lastly, the court denies as moot those pending post-trial motions that are aimed at determining what damages award best reflects the jury's verdict.


I. Standard of Review

Once the jury returns a verdict, the non-prevailing party may renew its Rule 50(a) motion for judgment as a matter of law and ask the court to enter judgment in its favor notwithstanding the verdict. FED. R. CIV. P. 50(b). If "the court finds that a reasonable jury would not have a legally sufficient evidentiary basis to find for the [prevailing] party," it may allow judgment on the verdict, order a new trial, or direct the entry of judgment as a matter of law for the non-prevailing party. FED. R. CIV. P. 50(a) & (b). When deciding a Rule 50(b) motion, the court views the facts in the light most favorable to the non-moving party, here Plaintiffs, and disregards all evidence favorable to the moving parties, here Defendants, unless the jury was required to believe that evidence. Morales v. Jones, 494 F.3d 590, 599-600 (7th Cir. 2007); Hossack v. Floor Covering Assocs. of Joliet, Inc., 492 F.3d 853, 859 (7th Cir. 2007). The court examines the record as a whole, including the evidence presented and reasonable inferences drawn from that evidence, to determine whether there is sufficient evidence to support the jury's verdict. Id. The court may neither re-weigh the evidence nor make credibility determinations. Id.

If the trial court concludes that the moving party would be entitled to judgment as a matter of law, the court nevertheless has discretion to order a new trial rather than entering judgment for the non-prevailing party. FED. R. CIV. P. 50(b)(2); Network Publ'ns, Inc. v. Ellis Graphics Corp., 959 F.2d 212, 213 (11th Cir. 1992) ("once a trial court concludes that a verdict should be set aside for insufficiency of evidence it then has the option of granting a new trial or granting judgment to the movant (the loser at trial)"); 9B Wright & Miller, Federal Practice & Procedure § 2538 (3d ed. 2008). "Rule 50(b) contains no language which absolutely requires a trial court to enter judgment notwithstanding the verdict even though that court is persuaded that it erred in failing to direct a verdict for the losing party." Cone v. West Virginia Pulp & Paper Co., 330 U.S. 212, 215 (1947). Instead, the fact that the rule offers trial judges alternative paths "means what it seems to mean, namely, that there are circumstances which might lead the trial court to believe that a new trial rather than a final termination of the trial stage of the controversy would better serve the ends of justice." Id. The court's exercise of discretion to grant a new trial can, in fact, be an opportunity to correct errors in conduct of the trial "without the delay, expense or other hardships of an appeal." Id. at 216 (citations omitted). If the court "concludes that a verdict should be set aside for insufficiency of evidence it then has the option of granting a new trial or granting judgment to the movant (the loser at trial)."

II. Plaintiffs' Alleged Injury

One issue Defendants raise in their post-trial briefs is relevant to each of Plaintiffs' claims: whether Plaintiffs proved any injury at trial. Proving actual injury is a standing requirement for Plaintiffs' RICO and RICO conspiracy claims. 18 U.S.C. § 1964(c); Evans v. City of Chicago, 434 F.3d 916, 924 (7th Cir. 2006); Vazquez v. Cent. States Joint Bd., 547 F. Supp. 2d 833, 856 (N.D. Ill. 2008). Plaintiffs argue that this is a generous test, citing the Supreme Court's recent decision in Bridge v. Phoenix Bond & Indem. Co., ___U.S.___, 128 S.Ct. 2131 (2008) (Pl.'s.' Opp'n [555] at 92-92), but the focus in that case was on causation, not standing. Plaintiffs in Bridge, who bid at tax sale auctions, claimed they were harmed whenother bidders concocted a scheme to submit multiple bids in violation of the county's auction rules. The Seventh Circuit concluded these allegations were sufficient to confer standing on plaintiffs who claimed they had lost the "valuable chance" to acquire tax liens on favorable terms; if plaintiffs' allegations were true, there was no question the multiple bid scheme decreased their chances of winning the tax auction. Phoenix Bond & Indem. Co. v. Bridge, 477 F.3d 928, 929-30 (7th Cir. 2007). Affirming that result, the Supreme Court brushed aside defendants' arguments that plaintiffs could not prevail because they themselves did not rely on defendants' alleged misrepresentations to county authorities. 128 S.Ct. at 2145. The Bridge case stands for the proposition that a direct victim may recover under RICO whether or not it was the direct recipient of false statements. Bridge does not depart from the principle that "injuries proffered by plaintiffs in order to confer RICO standing must be 'concrete and actual,' as opposed to speculative and amorphous." Evans, 434 F.3d at 932 (citations omitted).

Plaintiffs do not contest that having suffered actual injury is an essential element of their remaining claims. In fact, the court instructed the jury that, in order to find for CLG on Plaintiffs' substantive claims, they must find actual injury, or damages, to CLG. (Docket Entry No. 496 at 31 (breach of fiduciary duty); 64 (fraudulent concealment); and 70 (fraudulent misrepresentation).) Plaintiffs' unjust enrichment claim also requires a showing that Defendants were enriched at CLG's expense. Ass'n Ben. Servs. v. Caremark Rx, Inc., 493 F.3d 841, 852 & 855 (7th Cir. 2007) ("where the plaintiff's claim of unjust enrichment is predicated on the same allegations of fraudulent conduct that support an independent claim of fraud, resolution of the fraud claim against the plaintiff is dispositive of the unjust enrichment claim as well"). Because it was a required element of each of their claims, Plaintiffs bear the burden of proving that they introduced "substantial affirmative evidence" of their injury at trial.

Prior to trial, Plaintiff identified four categories of injuries they had purportedly suffered as a result of Defendants' wrongdoing:

(1) misappropriation of millions of dollars in grant money, which prevented the development of the Technology and results in the future loss of profits from the licensing of the Technology; (2) harm to Cement-Lock Group's business reputation; (3) lost business opportunities to market the Technology to other individuals, corporations, or governmental entities, including Taiwan, Hong Kong, and China; and (4) devaluation of Cement-Lock Group's intellectual property by wasted years in the lifespan of certain patents and confusion and infringement on the Technology's service mark and trademark.

Cement-Lock I, 2005 WL 2420374, at *13; Cement-Lock III, 523 F. Supp. 2d at 85-59. The court here considers whether Plaintiffs proved injuries in any of these categories that were actual and concrete, rather than merely speculative and amorphous.

A. Devaluation of the Technology

In this set of briefs, Plaintiffs rely exclusively on the fourth category of alleged injury: devaluation of the Technology. (Pl.'s. Opp'n [as corrected, 555] at 42-44.) At trial, Plaintiffs' damages expert Ronald G. Vollmar testified that CLG suffered at least $26.4 million in losses as a result of Defendants' actions. (Trial Tr. 4190:2-5.) To reach this conclusion, Vollmar compared the value of the Technology in the mid-1990s with its current value to CLG. Defendants take issue with his method of valuing the intellectual property both in the mid-1990s and today, and as explained here, their objections have considerable traction.

1. Vollmar's Mid-1990s Valuation

Three methods for valuing intellectual property are accepted by experts: the income approach, the cost approach, and the market approach. Vollmar's expert report used all three. In a pre-trial ruling, the court excluded Vollmar's proffered income-approach valuation pursuant to Federal Rule of Evidence 702. (Docket Entry No. 392 at 11-12; 2/26/08 Trial Tr. 4243:2-21.) Under that approach, Vollmar calculated the royalties CLG might receive from licensing the Technology, and then discounted that sum to allow for the fact that the Technology was still in early stages of development at the relevant time. The court found that Vollmar failed to explain why he chose a discount rate of 15%, rather than the 40% discount rate treatises suggest for businesses, such as CLG, that have a proven prototype but have not yet achieved commercial scales of production. (Docket Entry No. 392 at 12.) In addition, the court concluded that, to the extent that Vollmar relied on lost royalties as a measure of damages, his testimony was inadmissible pursuant to the new business rule. (Id. at 13.) Based on the court's pre-trial rulings, Vollmar was limited at trial to employing the cost- and market-approaches of valuing intellectual property, unless he could satisfy the court that his income-approach valuation was admissible. (Id. at 16.)

At trial, the cost approach was the centerpiece of Vollmar's damages theory. That approach considers the reproduction cost (the cost to produce an exact replica of the intangible asset) as well as the replacement cost (the cost to recreate the equivalent level of utility that the owner of the intangible asset possesses) of the intellectual property. (Docket Entry No. 392 at 3.) Vollmar thus calculated the money spent to create the Technology, which is presumably the same as the cost of replacing the Technology. Vollmar noted that in a 1997 proposal to GRI, GTI proposed to spend $26.4 million over thirty-nine months to build a demonstration plant for the Technology. (Trial Tr. 4258:16-4259:14.) GRI's agreement to the proposal, Vollmar asserted, illustrates that the Technology was worth at least $26.4 million, because "nobody is going to commit to spending $26 million when the technology isn't worth a lot more than $26 million." (Id.) Vollmar also asserted that the decision by GTI and GRI to invest over $26 million in the Cement-Lock Technology was a marketplace decision. (Id. 4285:12-22.) At the time of the proposal, then, Vollmar concluded that the value of the Technology was at least $26.4 million.*fn1

To corroborate his cost-approach valuation, Vollmar employed the market approach. That approach values an intangible asset by ascertaining and comparing what others have paid for comparable assets in a free and competitive market place. (Docket Entry No. 392 at 14 (citation omitted).) In his market-approach valuation, Vollmar considered GRI's agreement to purchase $4.5 million of debentures from ECH, in exchange for the option to convert those debentures into a 20% ownership stake in the company. (Trial Tr. 4259:17-4260:15.) The debenture was essentially a loan, but it enabled GRI to opt for repayment or for an ownership stake in ECH. At the time, ECH's only asset was a license to use the Technology. (Id.) Extrapolating from GRI's 20% investment, Vollmar concluded that the Technology had a value in the marketplace of $22.5 million. (Id.) This made Vollmar "very secure" that his cost-approach valuation of the Technology at $26.4 million was accurate. (Id.)

2. Pump's Response to Vollmar's Mid-1990s Valuation

To counter Vollmar's analysis, Defendants introduced the testimony of rebuttal expert Bernard Pump. Pump concluded that Vollmar's calculation was based on "a very superficial and incomplete valuation." (Trial Tr. 4488:14-4489:1.) First, Pump criticized Vollmar's use of the cost approach; that approach, Pump observed, is more appropriate for valuing tangible assets, where projecting replacement or replication costs is a more straightforward inquiry. (Id. 4499:16-4500:3.) According to Pump, it is particularly extraordinary that Vollmar used the approach to value an untested intangible asset. The cost approach is rarely used to value new technology, and is an ineffective way of doing so because it cannot account for the risks associated with new technology. (Id. 4500:7-21.) In other words, Pump questions whether any cost-approach valuation of the Technology could be reliable.

Pump found additional fault with Vollmar's use of the cost approach as applied in this case. Pump explained that the proposal to GRI (as well as Brookhaven National Labs, the United States EPA, and the New Jersey Department of Transportation) is not an appropriate transaction with which to conduct a cost-approach valuation:

The fundamental-one of the fundamental assumptions of the cost approach is that investors are not going to pay more than the asset is worth. So they are going to take a look at what the future profits are from an asset and say, well, I am not going to spend more than that to build it.

But there is no necessary requirement for the Department of Transportation or the EPA or GRI, for that matter. Their primary mission is not to earn profits. Their primary mission is to fund research. They don't have shareholders who expect dividends.

(Id. 4507:11-23.) In other words, these entities were driven by interests independent of cost, and their willingness to invest in the Technology is not a reliable indicator of its value. (Id. 4507:24-4508:2.) This testimony undermines Vollmar's assumption that "nobody is going to commit to spending $26 million when the technology isn't worth a lot more than $26 million." (Trial Tr. 4258:16-4259:14.)

Pump identified several additional flaws in Vollmar's analysis, as well. For example, Vollmar's Report did not account for the historical financial performance of either the Technology or CLG, the future financial projected performance of the Technology or CLG, the industry in which the Technology would be used, the economic conditions at the time of valuation, market alternatives to the Technology, potential competitors of the Technology, risk factors, or investment considerations. (Id. 4494:13-4495:9.) Nor did Vollmar prepare any exhibits suggesting that his calculations or analysis incorporates these factors, each of which, in Pump's view, should be part of a valuation report. (Id. 4489:20-4491:25; 4495:10-16.) In light of the need to take these factors into account, a valuation report for a simple business or a simple intangible asset would be at least twenty to thirty pages long, with five to ten exhibits, Pump stated. (Id. 4492:1-12.) Valuation of a new technology (such as the Cement-Lock Technology) is typically even more complex because of the lack of performance history. (Id.) Vollmar's valuation report was just two pages long, and the valuation analysis consisted of two paragraphs, comprising less than one full page. (Id. 4293:14-4494:3.) The report contained no exhibits that would illuminate the calculations. (Id. 4495: 10-13.) As a result, Pump testified, Vollmar's analysis deviated sharply from what treatises require for valuation of an intangible asset: (1) detail and explanation consistent with the complexity of the asset; (2) supporting documentation to illuminate the logic and calculations; and (3) a discussion of the market in which the technology operates. (Id. 4496:4-4497:3.) The business appraisal community also follows these guidelines. (Id. 4497:4-8.) Pump testified that Vollmar adhered to none of them. (Id. 4497:9-12.)

In addition to the problems with Vollmar's cost-approach valuation, Pump also identified failings in Vollmar's market-approach valuation. According to Pump, the debenture transaction Vollmar considered was not an appropriate starting point for two reasons. First, as explained above, GRI's motivation was not profit: GRI is a not-for-profit research organization with a mission of funding research to improve the natural gas industry for the public good. (Trial Tr. 4509:2-21.) Nor was the transaction a purchase of either ECH or the Technology in the strict sense; rather, it was an unsecured loan. (Id. 4509:22-4510:14.) The debenture transaction is therefore not a reliable indicator of the value of ECH. (Id.)

In other words, the experts offered sharply different viewpoints on the proper method for evaluating the Technology's value in the mid-1990s. The court finds Pump's critiques compelling and troubling, yet the jury's verdict makes clear that they sided with Vollmar in this dispute. It is not for the court to decide whether Vollmar was credible, or whether his testimony was correct. Smith v. Ford Motor Co., 215 F.3d 713, 719 (7th Cir. 2000). Indeed, the court expressly instructed the jury that it was entitled to give expert witness testimony "whatever weight you think it deserves, considering the reasons given for the opinion, the witnesses's qualifications, and all of the other evidence in the case." (Docket Entry No. 496 at 16.) For the reasons explained in the court's pre-trial decision, the court anticipated that Vollmar's analysis would be sufficiently reliable to be admitted at trial. Defendants opted not to set forth their own damages calculation, and the jury apparently found Defendants' attempts to discredit Vollmar's analysis insufficient. In light of this, the court declines to impose its own evaluation of the damages theory. See also Gorlikowski v. Tolbert, 52 F.3d 1439, 1447 (7th Cir. 1995) ("When a defendant goes for broke, staking its all on convincing the jury to award zero damages-fearing otherwise a compromise verdict--it risks being hit with a verdict much larger than if it had offered the jury an alternative estimate of damages to the plaintiff's. It should not expect the appellate court to relieve it from the consequences of its gamble.").

3. Vollmar's Current-Day Valuation

The next step in Vollmar's calculation of the harm to the Technology's value was an assessment of the Technology's current value to CLG, a value he would then subtract from the $26.4 million he claims it was worth in the mid-1990's. It is in this step of his analysis that Vollmar's opinion runs afoul of Seventh Circuit standards for calculating damages.

According to Vollmar, the Technology now has "little or no value to CLG" because the patent life is nearly expired. (Trial Tr. 4250:4-19.) While the Technology may retain value for others, the value to CLG therefore has all but expired. (Trial Tr. 4251:5-16.) In explaining this distinction, however, Vollmar exposes a fundamental flaw in his analysis. As he testifies: "It's only the value to CLG, because, remember, CLG's only method of making money from this technology was to receive royalties. So if it no longer can receive royalties, the value to it, CLG, is de minimis." (Id.) In other words, Vollmar's calculation of the current value of the Technology relies exclusively on his analysis of CLG's ability to earn royalties from the Technology. Vollmar explained why he used value to CLG, as opposed to a market-based measure, to calculate the Technology's current value:

And here maybe it's worthwhile explaining when we are talking about value to CLG, that's different than the value of the technology itself.

CLG was a small company. It could never have gotten the funds to actually commercialize the technology itself. So when it was formed it was really designed to license the technology and collect royalties or rentals basically from other people using that technology. So when I talk about value of the technology to CLG, that really means what impact did it have on the ability of CLG to collect royalties down the road.*fn2 (Trial Tr. 4177:7-4178:17.)

The court clearly and repeatedly barred Plaintiffs from using lost profits as a measure of damages before trial commenced, in its ruling excluding Vollmar's income-approach valuation at trial. (Docket Entry No. 392 at 13.) At trial, the court reaffirmed this ruling, again barring Vollmar from testifying regarding his income-approach valuation of the Technology. (Trial Tr. 4243:2-21.) Plaintiffs claim that they did not elicit such evidence from Vollmar at trial. (Pl.'s.' Opp'n [555] at 66 & 66 n.32.) Vollmar's current-day valuation of the Technology makes clear, however, that while lost profits may not be the basis for Plaintiffs' theory of damages, they are a part of Vollmar's method for calculating the current value of the Technology. Thus, after the court reaffirmed its ruling regarding the income-approach valuation, Vollmar also offered testimony that the current value of the Technology to CLG is zero, based on the fact that CLG will not have the option of licensing the Technology. (Trial Tr. 4258:16-59:14.) Despite this, the court failed to recognize that Vollmar's current-day valuation of the Technology did incorporate an inadmissible lost profits analysis, and, during Vollmar's testimony, Defendants themselves did not raise an objection specifically aimed at Vollmar's current-day valuation of the Technology.

4. Legal Remedy

Although neither party identifies the appropriate standard of review under these circumstances, the court applies Federal Rule of Evidence 103. Rule 103 provides that a court commits error if it admits evidence that affects a substantial right of a party if the party makes a timely objection or motion to strike and the grounds for exclusion is clear. FED. R. EVID. 103(a). The Rule 103(a) requirement that a timely objection be made allows "the trial judge to avoid or correct the error efficiently." 21 Wright & Graham, Federal Practice & Procedure: Evidence § 5037, at 708-09 (2d ed. 2005). Defendants here did raise a new-business-rule objection to Vollmar's testimony, but it was limited to his income-approach valuation, and the court did not understand Defendants as suggesting that the objection extended to his other methods of valuing the Technology. (See Mot. to Strike [258] at 11.) Plaintiffs clearly believed that Vollmar's testimony was devoid of any lost profits analysis. (Pl.'s.' Opp'n [555] at 66 & 66 n.32.)

Rule 103(a) will not bar the court from redressing plain error that affects substantial rights of the parties, even where no objection was raised at trial. FED. R. EVID. 103(d). See Estate of Moreland v. Dieter, 395 F.3d 747 (7th Cir. 2005) (plain error review of an evidentiary issue in a civil case is available only where exceptional circumstances exist, substantial rights are affected, and a miscarriage of justice will otherwise occur). The court concludes that plain error review of the admission of Vollmar's current-day valuation of the Technology is proper here.It was error to admit Vollmar's testimony that the current value of the Technology to CLG is zero, because Vollmar based this conclusion on CLG's ability to recover royalties with the Technology.

The parties agree that "as a general rule, expected profits of a new commercial business are considered too uncertain, specific and remote to permit recovery" under Illinois law. TAS Distrib. Co. v. Cummins Engine Co., 491 F.3d 625, 633 (7th Cir. 2007). That rule recognizes that calculating the profits a new business might earn often requires speculation, and thus runs afoul of the principle that damages must be proven to a reasonable degree of certainty. Id. at 634-35. Usually, of course, the new business rule prohibits a plaintiff from introducing evidence of exorbitant profits it hoped to collect based on a new invention or venture. Here, on the other hand, Plaintiffs' measure of damages is not lost profits but, rather, lost value of the Technology. The logic of the new business rule was nevertheless triggered once Vollmar admitted that his current-day valuation of the Technology is an approximation of the profits CLG might earn from that Technology. Thus, while Vollmar does not actually calculate CLG's damages to be its lost profits, he does rely improperly on lost profits when valuing the Technology to CLG today. See id. ("Illinois courts consistently have rejected the use of speculative, inaccurate or false projections of income in the valuation of a business") (internal quotation marks and citation omitted). To the extent Vollmar's explanation of his current-day valuation of the Technology suggests that his mid-1990s cost-approach valuation of the Technology, too, is no more than a proxy for lost profits (and the court is not at all certain that it does), the new business rule would also bar his valuation of the Technology in 1997.*fn3 In any case, the court concludes that Vollmar's current-day valuation of the Technology should have been excluded at trial.

Second, this error was plain, in light of the court's prior recognition that the new business rule bars Plaintiffs from recovering speculative damages, including lost profits from the untested Technology. (Docket Entry No. 392 at 13 (quoting TAS, 491 F.3d at 633).) Finally, this plain error did affect Defendants' substantial rights. In effect, Vollmar's testimony enabled Plaintiffs to present a damages theory that was so speculative as to be irrefutable. Even more significantly, because a showing of non-speculative injury is an element of each of Plaintiffs' substantive claims, consideration of Vollmar's current-day valuation of the Technology may render the jury's liability findings infirm.

The court is nevertheless unwilling to enter judgment for Defendants as a matter of law. As noted, Defendants did not specifically object to Vollmar's current-day valuation of the Technology, and therefore did not put Plaintiffs on notice that the new business rule exclusion extended to that testimony. Had Plaintiffs recognized that Vollmar's cost-approach valuation--the crux of his opinion--was also in jeopardy, Plaintiffs might have been able to correct or supplement his testimony, perhaps by correcting Vollmar's calculation, or by presenting alternative evidence of the Technology's value.*fn4 It is impossible to know for certain how exclusion of this testimony might have affected the trial's outcome. Accordingly, the court concludes that a new trial is necessary to cure this error. See Waters v. Young, 100 F.3d 1437, 1442 (9th Cir. 1996) (reversing grant of JML for defendant and ordering new trial where trial court failed to apprise pro se plaintiff of failure in proof and holding that this responsibility is "mandatory in all cases"); Network Publ'ns., 959 F.2d at 215 (reversing grant of Rule 50 judgment for defendant and ordering new trial where plaintiff's failure to provide evidence of the amount of damages was "possibly remediable").

B. Other Damages Theories

As noted, Plaintiffs' post-trial briefs rely exclusively on the loss in value of CLG's intellectual property. The court nevertheless pauses to note that alternative damage theories are flawed, as well. With respect to the first category of damages, lost profits resulting from misappropriation of grant money, the court made clear during summary judgment proceedings that Plaintiffs had no evidence that they were ever the intended recipients of the grant money allegedly misappropriated. Cement-Lock III, 523 F. Supp. 2d at 863. Thus, they cannot claim direct entitlement to the grants themselves. Insofar as the first category of damages seeks lost royalties because Plaintiffs were intended beneficiaries of that grant money, pre-trial briefing also precludes Plaintiffs from recovering such sums: lost profits evidence is inadmissible because the methodology used to calculate them is not reliable and, in any case, the evidence is unduly speculative and barred by the new business rule. (Docket Entry No. 392 at 11-13.)

Turning to the second and third categories of damages, Defendants contend that Plaintiffs introduced no evidence of harm to business reputation at trial. (JML Brief [482] at 6; Supp. to JML Brief [527] at 2 n.1.) Defendants also argue that any evidence of lost business opportunities in Taiwan was too speculative to constitute a cognizable injury. (JML Brief [482] at 5-6; Supp. to JML Brief [527] at 2 n.1.) Plaintiffs offer no response to either argument in their Opposition, which constitutes waiver. See Blakely v. Brach & Brock Confections, Inc., 181 F. Supp. 2d 943, 951 (N.D. Ill. 2002). Thus, Plaintiffs implicitly acknowledge that they did not introduce substantial affirmative evidence to prove these two categories of injury. Furthermore, the court is inclined to agree with Defendants that any evidence Plaintiffs did introduce of business opportunities that might have existed in Taiwan was too speculative to support a claim for damages under governing law. Accordingly, Plaintiffs may not revive these damages theories at trial.

C. Causation

Defendants also urge that Plaintiffs failed to establish a causal relationship between Defendants' alleged wrongdoing and Plaintiffs' claimed injury. See, e.g., Evans, 434 F.3d at 924 (that RICO injury was caused "by reason of" violation of RICO is a RICO standing requirement). In support of this argument, Defendants rely on Movitz v. First Nat'l Bank, 148 F.3d 760 (7th Cir. 1998). Plaintiff in Movitz was a real estate investor who purchased a building in reliance on the defendant bank's valuation of a building's structural soundness. The real estate market took a plunge and plaintiff's purchase turned out to be a disaster. Id. at 762. Plaintiff lost nearly all of his investment and sued the bank, recovering a substantial jury award. Reversing the judgment, the Seventh Circuit acknowledged that "but for" the bank's advice, plaintiff would not have made the investment. Still, the plaintiff had not offered evidence of an accurate valuation of the property on the date of his purchase, and therefore did not identify which of his losses were the result of the banks' actions. Id. at 765. Because the investor failed to link his losses with the bank's wrongdoing, the jury's damages award was overturned.

Movitz is instructive, but distinguishable here. Although the court has taken issue with Plaintiffs' damages calculation for other reasons, the court acknowledges that Plaintiffs have introduced evidence that all their losses were attributable to the Defendants' actions. As described above, Plaintiffs' evidence begins with the value of the Technology in 1997, before Defendants' wrongful conduct occurred. Vollmar testified that it was Defendants' actions that caused the value of the Technology to be reduced by at least $26.4 million. (Trial Tr. 4316:6-9.) More specifically, Vollmar testified that Defendants' fraud caused $5.3 million in development funds to be diverted from their intended purpose of commercializing the Technology. (Id. 4297:2-17.) Vollmar identified Defendants' misdeeds as including not only the purchase of inadequate equipment, but also imposition of restrictions on development of the Technology by issuing restrictive licenses to ECH. (Id. 4118:1-4, 9-16, 4320:13-21:1.) Thus, this case is unlike Movitz, in which the plaintiff ignored causation altogether. As the court previously held, Vollmar was under no obligation to exclude every other possible explanation for the devaluation; his failure to account for the factors to which Defendants point goes to the weight, rather than the admissibility of his testimony. (Docket Entry No. 392 at 7-8 (citing Bazemore v. Friday, 478 U.S. 385, 400 (1986); Lauzon v. Senco Prods., Inc., 270 F.3d 681, 693 (8th Cir. 2001); United States ex rel. Tyson v. Amerigroup IIlinois, Inc., 488 F. Supp. 2d 719, 733 (N.D. Ill. 2007).)

D. Jury's Award

The parties offer extensive analysis of the jury's verdict and argument concerning its relationship to the evidence introduced at trial. In light of the court's conclusion that the error in Vollmar's current-day valuation of the Technology renders his opinion inadmissible, the court need not reach these arguments.

III. Breach of Fiduciary Duty Claims (Count I)

Having concluded that the Plaintiffs failed to prove their damages at trial, the court now turns to the other substantive elements of their claims. To the extent Plaintiffs were able to prove the other elements of their claims, a new trial will be necessary for the reasons explained above. The court determined that Delaware law applies to Plaintiff's breach of fiduciary duty claims, and instructed the jury that a breach of fiduciary duty is proven where: (1) a defendant owed CLG fiduciary duties; (2) that defendant breached a fiduciary duty to CLG; and (3) the defendant's breach of fiduciary duty was the proximate cause of injury to ...

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