Portion of Expert's Lost Development Deals Damages Ruled Too Speculative

A magistrate for the U.S. District Court for the Southern District of Texas has excluded a significant portion of an expert's damages testimony in a suit by book author Michael Baisden alleging that the defendants exceeded the scope of a license to produce stageplays of Baisden's novels The Maintenance Man and Men Cry in the Dark. Baisden v. I'm Ready Productions Inc., 4:08-CV-00451. Baisden's suit included claims of copyright infringement and failure to pay royalties from DVD releases of the stage productions.

U.S. Magistrate Judge Nancy K. Johnson first decided that Baisden's damages expert Scott A. Barnes, a certified public accountant, qualified as an expert under Rule 702 of the Federal Rules of Evidence, by noting: “Although Barnes lacks any specific training and has limited experience in the valuation of feature films, he possesses a significant amount of experience generally in the valuation of businesses and other commercial ventures and specifically in damage assessment related to intellectual property infringement.”

Magistrate Johnson then found that the existence of an option contract that a production outfit had entered into with Baisden's company for motion picture rights to two Maintenance Man novels provided a sufficient factual basis for Barnes to opine on monetary damages from lost film developments due to the defendants' infringement. Barnes further determined the impact of the defendants' infringement on Baisden's film development opportunities from two of his other novels, for a total from all five novels of $13,408,659. In addition, Barnes concluded that the defendants' net profits from Maintenance Man and Men Cry in the Dark DVD sales and merchandise from 2005 forward totaled $1.1 million.

But Magistrate Johnson emphasized: “The issue of greatest concern to the court with regard to the reliability of Barnes' report is that a bulk of the opinions are based largely on speculation.” This was particularly so for the federal magistrate as to Men Cry in the Dark and the two other non-Maintenance Man novels, all for which Baisden had no film option deals. Magistrate Johnson noted that for Barnes to opine that Baisden “suffered actual damages in the millions of dollars from lost profits related to three additional unmade movies. ' Barnes necessarily followed a long string of assumptions, including that the option would have been exercised on The Maintenance Man, that The Maintenance Man movie(s) would have been successful, that Baisden himself would have been offered and would have accepted movie deals on each of his other three books. On top of those assumptions, Barnes speculates what the terms of those contracts would be, how vast the distributions of the movies would be, what the budgets would be, how successful the movies would be, how much each movie would realize in profits, and what percentage of the profits would reach Plaintiff individually, among other things.”

Magistrate Johnson added: “Barnes based his opinions regarding distribution, budget, and profit on data for what he determined to be movies of similar ilk; however, that slight anchoring of his opinions to reality will not hold them steady against a sea of speculation.”

A magistrate for the U.S. District Court for the Southern District of Texas has excluded a significant portion of an expert's damages testimony in a suit by book author Michael Baisden alleging that the defendants exceeded the scope of a license to produce stageplays of Baisden's novels The Maintenance Man and Men Cry in the Dark. Baisden v. I'm Ready Productions Inc., 4:08-CV-00451. Baisden's suit included claims of copyright infringement and failure to pay royalties from DVD releases of the stage productions.

U.S. Magistrate Judge Nancy K. Johnson first decided that Baisden's damages expert Scott A. Barnes, a certified public accountant, qualified as an expert under Rule 702 of the Federal Rules of Evidence, by noting: “Although Barnes lacks any specific training and has limited experience in the valuation of feature films, he possesses a significant amount of experience generally in the valuation of businesses and other commercial ventures and specifically in damage assessment related to intellectual property infringement.”

Magistrate Johnson then found that the existence of an option contract that a production outfit had entered into with Baisden's company for motion picture rights to two Maintenance Man novels provided a sufficient factual basis for Barnes to opine on monetary damages from lost film developments due to the defendants' infringement. Barnes further determined the impact of the defendants' infringement on Baisden's film development opportunities from two of his other novels, for a total from all five novels of $13,408,659. In addition, Barnes concluded that the defendants' net profits from Maintenance Man and Men Cry in the Dark DVD sales and merchandise from 2005 forward totaled $1.1 million.

But Magistrate Johnson emphasized: “The issue of greatest concern to the court with regard to the reliability of Barnes' report is that a bulk of the opinions are based largely on speculation.” This was particularly so for the federal magistrate as to Men Cry in the Dark and the two other non-Maintenance Man novels, all for which Baisden had no film option deals. Magistrate Johnson noted that for Barnes to opine that Baisden “suffered actual damages in the millions of dollars from lost profits related to three additional unmade movies. ' Barnes necessarily followed a long string of assumptions, including that the option would have been exercised on The Maintenance Man, that The Maintenance Man movie(s) would have been successful, that Baisden himself would have been offered and would have accepted movie deals on each of his other three books. On top of those assumptions, Barnes speculates what the terms of those contracts would be, how vast the distributions of the movies would be, what the budgets would be, how successful the movies would be, how much each movie would realize in profits, and what percentage of the profits would reach Plaintiff individually, among other things.”

Magistrate Johnson added: “Barnes based his opinions regarding distribution, budget, and profit on data for what he determined to be movies of similar ilk; however, that slight anchoring of his opinions to reality will not hold them steady against a sea of speculation.”