Failure To Provide Computation Of Damages In Initial Disclosures Precludes Any Evidence Of Damages At Trial

In this patent infringement action, Vinotemp International ("Vinotemp") brought suit against Wine Master Cellars, LLP ("Wine Master"). Wine Master filed a counterclaim for patent infringement. Prior to trial, Vinotemp moved to preclude Wine Master from offering evidence of damages at trial.

As explained by the district court, "Vinotemp moves to exclude Wine Master's evidence of damages on two grounds: (1) Wine Master failed to properly disclose its damages categories and computations under Federal Rules of Civil Procedure 26(a)(1)(A)(iii) and (e); and (2) Wine Master's damages are impermissibly speculative."

Federal Rule of Civil Procedure 26(a)(1)(A)(iii) requires that parties disclose "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[.]" Parties also have an obligation to supplement initial disclosures when prior disclosures are "incomplete or incorrect," if the additional information has not already been disclosed during discovery. Fed. R. Civ. P. 26(e).

The district court explained that Rule 37(c)(1) gives teeth to Rule 26(a) and (e)'s "requirements 'by forbidding the use at trial of any information required to be disclosed by Rule 26(a) that is not properly disclosed.' Yeti by Molly, Ltd. v. Deckers Outdoor Corp., 259 F.3d 1101, 1106 (9th Cir. 2001). The Ninth Circuit considers Rule 37 'a self-executing, automatic sanction to provide a strong inducement for disclosure of material,' and therefore a finding of willfulness or bad faith is not required."

In its initial disclosures, Wine Master stated: "As of the date of this Rule 26 disclosure, discovery has not commenced and WMC [i.e., Wine Master Cellars] is unaware of all sales of the Vinotemp Rack sold in violation of the Settlement Agreement between the parties. Consequently, WMC is unable to calculate any potential damages claim it may assert and reserves the right to do so at the appropriate time."

Wine Master never supplemented this initial disclosure, much less to include lost profits as a category of damages.

At trial, Wine Master intended to seek damages in the form of lost sales calculated based on Vinotemp's sales of its own wine racks. The district court concluded that Wine...