Court limits the testimony of Metallurgical Engineering Expert Witness for rendering legal conclusions by stating that certain information was not a trade secret

On March 24, 2021, BPS initiated legal action against Inashco, accusing it of having breached a non-disclosure agreement (NDA) (Claim 1), misappropriation of trade secrets (Claim 2), and unjust enrichment (Claim 3). The first claim alleged that Inashco violated the NDA by using BPS’ confidential information. Similarly, Claim 2 asserted that Inashco had used BPS’ trade secrets without authorization.

BPS was a manufacturer of bulk processing and recycling equipment, with a notable recycling equipment system called the RecoverMax Fines Process. This system allowed for the recovery of minute metal pieces from incinerator bottom ash and auto shredder residue, including valuable metals like copper, silver, and gold and other precious metals that could have been reused in other applications. 

Inashco, the North American branch of a Netherlands company, had processed incinerator bottom ash from power stations to recover low-grade metals to be further processed to separate the metals from the waste components. In July 2016, Inashco had become interested in BPS’ RecoverMax process, and had initiated discussions about a Mutual Non-Disclosure Agreement (NDA) to continue business discussions and the testing process. On August 2, 2016, Inashco’s president, John Joyner, signed the NDA with BPS, wherein the definition of Confidential Information included, “proprietary information
concerning the components, construction, and processes of BPS’ RecoverMax technology used
for crushing the mineral components of a non-ferrous metal concentrate as derived from
municipal solid waste ash by means of [Inashco’s] process.”

After reviewing the internal structure of the RecoverMax machine, Inashco questioned its similarities to technology manufactured by Palla Mill. BPS had clarified the distinctions, emphasizing the RecoverMax system’s focus on recovering metals from friable materials, i.e., glass, rock, and other minerals.

Shortly after installation, Inashco raised concerns about the performance of the RecoverMax system and its hourly tonnage capacity. BPS attempted to address these issues but Inashco put BPS on notice that it
was in breach of the RecoverMax Purchase Agreement. While the communication between BPS and Inashco regarding the purported breach was ongoing, Inashco had reached out to one of BPS’ suppliers to obtain a quote for a dust control system for the facility in Lancaster, Pennsylvania. On January 25, 2019, Inashco presented BPS with a proposed Mutual Release and Termination Agreement, initiating negotiations for the termination of the RecoverMax Agreement. During these negotiations, Inashco imported a Palla Mill system to the United States on August 25, 2019. One month later, on September 25, 2019, BPS and Inashco executed a Mutual Release and Termination Agreement. The Mutual Release and Termination Agreement explicitly stipulated that the previous NDA between Inashco and BPS would persist beyond the termination of the RecoverMax Agreement and would remain in effect until August 3, 2031, unless both parties mutually terminated it in writing before that date.

On December 20, 2020, Inashco imported a second Palla Mill system to the United States. It was implied that Inashco utilized information and technology acquired from BPS via the exchange of information governed by the NDA to achieve comparable outcomes to the RecoverMax system by importing the Palla Mill systems and incorporating additional components from the same vendors used by BPS.

In July 2022, Inashco enlisted the services of Dr. Jerome P. Downey, Ph.D., P.E., as an expert in the “design, development, and operation of material processing equipment.” Downey had been deposed by BPS. During his testimony, Downey revealed that Inashco’s attorneys had aided him in drafting his report. He had approximated that seventy-five percent of the 117-page report had been composed in his own words, emphasizing that any technical aspects had been directly from him.

On August 25, 2023, BPS submitted a Motion to Strike and Exclude Downey’s Expert Report and Testimony. BPS had contended that the Court should invalidate Downey’s expert report and testimony for two primary reasons. Firstly, Downey had opined about ultimate legal conclusions, specifically stating what information is confidential and had constituted a trade secret. Secondly, Downey had not personally drafted the entire content of his expert report.

Inashco had filed an Opposition, disputing BPS’ mischaracterization of the substance of Downey’s report and asserting that the law had permitted counsel to assist an expert in drafting the report.

Metallurgical Engineering Expert Witness

Jerome P. Downey earned his Ph.D. in Metallurgical and Materials Engineering at Colorado School of Mines and his B.S. and M.S. degrees in Metallurgical Engineering at Montana Tech. He is currently the Goldcorp Professor of Extractive Metallurgy at Montana Tech, where he also serves as the campus Director of the Montana University System Materials Science Ph.D. program. He is also the Chief Executive and General Manager at J. P. Downey & Associates, P.L.L.C. Downey has over 25 years of experience managing research and development projects in the chemical, metallurgical, and materials industries. 

Discussions by the Court

BPS contended that Downey’s testimony consisted of “impermissible legal conclusions,” when he opined that (1) BPS failed to meet the legal requirements for trade secrets or confidentiality protection; (2) Inashco did not misappropriate BPS’ trade secrets; and (3) Inashco did not violate the NDA.

In response, Inashco argued that Courts usually permitted experts to testify as to whether the information was generally known or readily ascertainable and whether it was entitled to trade secret protection.

Federal Rule of Evidence 704, as of the relevant time, did not prohibit an expert’s opinion from embracing an ultimate issue, as stated in Fed. R. Evid. 704(a). However, it clarified that the issue embraced by the expert must be a factual one, as was cited in Berry v. City of Detroit, 25 F.3d 1342. The Sixth Circuit, emphasized the subtle but crucial distinction between opining on the ultimate question of liability (deemed impermissible) and stating opinions that offer information for the jury to draw inferences about the ultimate issue (considered permissible). Downey could opine as to the factors underlying whether certain information constitutes a trade secret. However, he would be restricted from directly opining on whether that information is, in fact, a trade secret.

Therefore, the Court granted BPS’ Motion to Strike and Exclude Downey’s Expert Report and Testimony, specifying that it would not take into account the portions of Downey’s report and deposition testimony that presented legal conclusions. 

BPS also asserted that Downey’s report, was not entirely drafted by him and contained substantial portions which matched with Inashco’s interrogatory responses, violating Federal Rule of Civil Procedure 26. Inashco countered, asserting that the law allowed the counsel to aid an expert in drafting the report and that it was acceptable to incorporate discovery responses into an expert report.

Federal Rule of Civil Procedure 26 stipulates that expert witness disclosures must be accompanied by a written report, which must be prepared and signed by the witness. Even though the rule prohibits counsel from preparing the report on behalf of the witness, it allows counsel to assist the witness, with the assistance typically limited to ensuring compliance with Rule 26’s requirements. Counsel may participate in the fine-tuning of an expert report to ensure Rule 26(a)(2)(B) compliance, but they are not permitted to create the expert’s opinion entirely and then have the expert sign it. The key question in determining the appropriateness of counsel’s participation is whether it exceeds the bounds of legitimate assistance to the point of negating the possibility that the expert genuinely prepared their own report.

For the following reasons, the Court concluded that Downey’s expert report should not be entirely stricken.

Firstly, Downey’s deposition testimony didn’t indicate that Inashco’s counsel had entirely fabricated the report or crossed the limits of legitimate assistance. When questioned about the report’s content in his own words, Downey specified that a substantial portion of the report was his own work, particularly any technical aspects. He estimated about “seventy-five” percent was his own work, stating that the portions he did not write primarily consisted of legal standards and italicized trade secret portion of the report. As to the italicized trade secret portion of the report, Downey mentioned that Inashco’s counsel took his opinions almost verbatim and put them in there. However, Downey clarified in the deposition that his signing of the report signified his thorough review to ensure factual accuracy and consistency with his rendered opinions. He admitted his discomfort with certain legal terminologies, indicating that this was where Inashco’s counsel provided assistance.

No evidence suggested that the report did not accurately reflect Downey’s views. Inashco’s counsel’s assistance amounted to, at most, twenty-five percent of the report, signifying that Downey had personally drafted a significant portion of the report as a whole.

Secondly, BPS’ argument to strike Downey’s report on account of significant portions matching with Inashco’s discovery responses failed to persuade the Court. Downey testified that his responses or evaluations of the interrogatories were included in his report. Downey also added that he considered “Inashco’s Third Supplemental Response to BPS’ Interrogatory No. 13” before drafting his expert report. Therefore, it logically follows that portions of Downey’s expert report would align with Inashco’s discovery responses.

BPS asserted that Inashco had formulated its initial and first supplemental responses to BPS’ interrogatories before it retained Downey. These discovery responses were then carried forward into the Third Supplemental Discovery Responses, which BPS claims were directly copied into Downey’s report. According to BPS, this sequence indicated that Downey could not have participated in drafting those discovery responses.

However, the Court observed that since those responses were carried forward, Downey would have reviewed those prior responses while assisting Inashco with the third supplemental responses. Downey’s testimony also affirmed that he had thoroughly reviewed everything in the report to ensure factual accuracy and consistency with his opinions. Consequently, the fact that portions of Inashco’s discovery responses appear in Downey’s report was thus insufficient evidence to indicate that Inashco’s counsel had entirely fabricated the report in violation of Rule 26(a)(2)(B).

Held

The Court has granted in part and denied in part BPS’ Motion to Strike and Exclude the Expert Report and Testimony of Inashco’ expert Jerome P. Downey. The Court has not arrived on an outcome for this case since the remaining issues involved in this case still await resolution.

Key Takeaways:

1) An expert cannot opine on ultimate legal conclusions, such as whether certain information constitutes a trade secret. However, the expert can testify to the underlying factors and analysis that may lead the jury towards that legal conclusion. 

2) Counsel may assist an expert in drafting the report to ensure compliance with Rule 26, but cannot prepare the substantive opinions themselves.

3) Mere overlap between an expert report and discovery responses does not warrant striking the report, as long as the expert reviewed the responses and adopted them as his own opinions. 

4) The Court struck the legal conclusions in Downey’s report, but denied striking the report entirely. The Court found Downey’s testimony showed the report reflected his actual views, even if counsel helped draft portions.