Free Response to Motion - District Court of Colorado - Colorado

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

Civil Action No. 04-cv-0329-WYD-CBS CACHE LA POUDRE FEEDS, LLC., a Colorado limited liability company, Plaintiff, v. LAND O' LAKES, INC., a Minnesota corporation; LAND O' LAKES FARMLAND FEED, LLC, a Minnesota limited liability company; AMERICAN PRIDE CO-OP, a Colorado cooperative corporation; POUDRE VALLEY COOPERATIVE ASSOCIATION, INC., a Colorado cooperative corporation; FRANK BEZDICEK, individually, and in his official capacity as Director of Marketing, Land O' Lakes, Inc.; ROBERT DEGREGORIO, individually, and in his official capacity as President, Land O' Lakes Farmland Feed, LLC; and As yet unidentified entities and individuals participating in concert with the aforenamed defendants, Defendants.

PLAINTIFF'S RESPONSE TO DEFENDANTS' MOTION IN LIMINE TO EXCLUDE EXPERT TESTIMONY OF A. CARR CONWAY

The Plaintiff, Cache La Poudre Feeds, L.L.C. ("Treiber"), by and through its attorneys, Santangelo Law Offices, P.C. and Thomas R. French, P.C., respectfully submits the following Response to Defendants' Motion in Limine to Exclude Expert Testimony of A. Carr Conway. SUMMARY The gravamen of Mr. Conway's report and expected testimony is that Land O' Lakes' SEC filings concerning Land O' Lakes ("LOL") Profile brand animal feed were so incomplete, inconsistent with other documents, and inaccurate that, "the disclosures and lack of information

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[provided] ... could mislead the public and could appear to operate as a deceit or perhaps even a fraud upon those relying on the reports....", that LOL's attempt to purchase the registration for an abandoned Profile trademark was an attempt to, "operate a deceit or perhaps even a fraud" on those who were led to believe that LOL had unquestioned rights in the Profile trademark, and that LOL should have disclosed, but did not, disclose to the public, "the events underlying LOL's use of the trademark `Profile'". (See, Attached Exhibit 1, pp. 18-20, June 6, 2005 Report and Opinion of Andrew Carr Conway, Jr. ("Report")). These opinions are relevant to prove Treiber's claims in its Third Amended Complaint of intentional trademark infringement, unfair competition, trademark disparagement, and deceptive trade practices. These opinions of Mr. Conway are also relevant to disprove LOL's defamation counterclaims raised against Treiber. LOL's counterclaims allege that Treiber libeled LOL when Treiber stated in a brochure, "Worse yet, LOL went so far as to mislead both the SEC and investors in its 10-K filings". LOL alleges that this statement by Treiber was libelous. The opinions of Mr. Conway directly dispute LOL's claims of libel, and show that the statement made by Treiber was true. The testimony of Mr. Conway also helps prove enhanced and

punitive damages, and Treiber's entitlement to attorneys' fees. BACKGROUND Mr. Conway has been a certified public accountant in Colorado since 1971 (Report, p. 23). He is also a certified fraud examiner who specializes in the investigation, assessment and presentation of fraud (Report p. 23). He has had thirty eight years of experience in investigation of fraud, financial and accounting analysis, financial reporting and tax examinations (Report, p.

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23). He has testified on many occasions in these capacities, both in depositions and in state and federal courtrooms (Report, pp. 25-26). Mr. Conway issued his report almost two years ago on June 6, 2005. He was asked to answer the following three questions in regard to this lawsuit and LOL's use of the Profile trademark:

(Report, p. 2)(emphasis supplied).

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ARGUMENT I. Mr. Conway's testimony is relevant to disprove LOL's counterclaims, prove Treiber's claims, prove enhanced damages, prove punitive damages and prove entitlement to attorneys' fees. This motion in limine is not an effort by LOL under the authority of either Daubert v. Merrell Dow Phar. Co., 113 S. Ct. 2786 (1993), or Komho Tire v. Carmichael, 119 S. Ct. 1167 (1999), to exclude the testimony of Mr. Conway because the subject matter of his testimony is inappropriate for expert testimony, or because he is unqualified to render the stated opinions. LOL does not dispute that the subject matter of his report is generally appropriate for expert testimony. Nor does LOL contend that Mr. Conway is unqualified to testify as an expert on these matters. LOL's contentions are two: The testimony of Mr. Carr is irrelevant, and, alternatively, even if it is relevant, it should be excluded under FRE 403 because its prejudicial effect outweighs any probative value. Mr. Conway's testimony and opinions are relevant to prove Treiber's claims and disprove LOL's counterclaims. LOL argues that the opinions of Mr. Conway are irrelevant because Mr. Conway is an SEC and accounting expert whose testimony about securities violations is irrelevant. LOL never admits, nor even discusses, that the testimony of Mr. Conway is directly relevant to disprove LOL's libel counterclaims. LOL alleged in its counterclaims that Treiber libeled LOL as follows: 193. Plaintiff [Treiber] published the following written statements to the public and LOLFF's investors on February 24, 2004: "The lawsuit seeks an injunction preventing Land O' Lakes from future use of the Profile trademark, and seeks Land O' Lakes' profits of $132 million from the sale of products under the Cache La Poudre Profile trademark. Worse yet, Land O' Lakes went so far as to mislead both the Securities and Exchange Commission and investors in its 10-K filing.

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Paragraph 189, Count III, Counterclaim of LOL in Answer to Plaintiff's Third Amended Complaint (emphasis supplied). Land O' Lakes made the identical allegations in its Count IV Counterclaim against Treiber, i.e., that Treiber libeled LOL by stating "Worse yet, Land O' Lakes went so far as to mislead both the Securities and Exchange Commission and investors in its 10-K filing." See, Paragraph 201, Count IV, Counterclaim of LOL in Answer to Plaintiff's Third Amended Complaint. Mr. Conway was asked to discuss the precise allegation made by LOL in its libel counterclaims against Treiber. He was asked to address whether 10-K filings by LOL were misleading to the general public: "1. Did the disclosures by Land O' Lakes Farmland Feed (LOL Feed", an entity reporting to the SEC, comply with federal securities law from both a disclosure and accounting viewpoint and, if not, might the disclosures mislead the general public and could they appear deceptive or fraudulent in any regard as compared to other instances of which I am aware?" (Report, p. 2)(emphasis supplied). Mr. Conway began his answer to this question on page 18 of his report and concluded the answer on page 20. He opined that an S-4 form filed by LOL in 2002 should have included, but did not, disclosures about known use of the Profile trademark by anyone else, disclosures about potential impediments to LOL's use of the Profile trademark, and a statement as to the prominent risk factor in LOL's use of the Profile trademark. (Report, p. 18). He opined that a 10-K filed in 2002 by LOLFF should have included, but did not, an extensive discussion of the "ongoing dispute about ownership of the trademark" and "disclosures about the uncertainties and risks surrounding the use of `Profile'" (Report, pp. 18-19). He opined that the 10-K filed

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by LOL in 2003 should have included, but did not, a discussion about the trademark dispute (Report, pp. 19-20). He concluded this answer with the following paragraph:

(Report, p. 20)(emphasis supplied). The opinions of Mr. Conway directly disprove LOL's averments that Treiber libeled LOL. Treiber denied in its Reply to these counterclaims that the statements were false when made, and also asserted an affirmative defense that, "Any alleged defamatory statements made by CLP [Treiber] are substantially true or the gist of any alleged defamatory statement is true." Treiber's Reply to Counterclaims and Jury Trial Demand, Dec. 23, 2004, paragraphs 192, 193, 202, 203 and paragraph 7 of Treiber's Affirmative Defenses. Therefore, the opinions of Mr. Conway to this first question are relevant to disprove LOL's assertions in its counterclaims that Treiber made false statements about LOL misleading the SEC and investors. It is difficult to conceive that LOL could directly contend at some point that Mr. Conway's opinions are not relevant to disprove LOL's counterclaims. Even if LOL elects to surmount this hurdle by dismissing its libel counterclaims, the opinions of Mr. Conway are still proper

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evidence. Mr. Conway's opinions are relevant to prove Treiber's intentional willful trademark infringement claim, the unfair competition claim, and the deceptive trade practices claim. They are also relevant to prove the willful misconduct necessary for punitive damages, any willful conduct necessary for enhanced damages, the exceptional circumstances necessary for attorneys' fees, and the bad faith of LOL to defeat its good faith junior user affirmative defense. More specifically, Mr. Conway's opinions are relevant to prove Treiber's claim of intentional trademark infringement. Mr. Conway's opinions are, at least, circumstantial evidence of willful corporate misconduct, and willful trademark infringement can be proved by circumstantial evidence. Jellibeans, Inc. v. Skating Clubs of Ga. Inc., 716 F.2d 833, 843 (11th Cir. 1983). In Western Diversified Services, Inc. v. Hyundai Motor America, Inc., 427 F.3d 1269, 1274 (10th Cir. 2005), the Tenth Circuit found that willful infringement may be proven by defendants' deceptions, misrepresentations to the Court, or by a defendant using its economic muscle to weaken a plaintiff. According to Mr. Conway, LOL should have disclosed to investors, but did not disclosed "any impediments to [LOL's] full and unfettered use of the mark", should have disclosed, "any known use of a similar trademark by other parties," should have disclosed potential

impediments known to LOL of the use of the Profile trademark, should have disclosed "the ongoing dispute about ownership of the trademark" and should have made "disclosures about the uncertainties and risks surrounding" LOL's use of the Profile trademark. (Report, pp. 18-19). These failures are relevant to show that LOL deceived investors about its alleged Profile trademark and the strength of its alleged Profile trademark.

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Mr. Conway further opines that LOL made representations about the strength of its alleged Profile trademark that were inconsistent with LOL's own statements about the Profile trademark in other portions of the 2003 10-K filing, inconsistent with statements about Profile in other LOL documents, and inconsistent with LOL efforts to acquire the Bioglan Profile trademark for $15,000 (Report, pp. 19-20). These opinions are relevant to prove that LOL willfully misrepresented its ownership of and the strength of its alleged Profile trademark to the detriment of Treiber's Profile trademark. The above quoted summary opinion of Mr. Conway that, "the disclosures [by LOL] and lack of information [disclosed by LOL] referenced above could mislead the general public and could appear to operate as a deceit or perhaps even a fraud upon those relying upon such reports," (p. 20, Report) is obviously relevant to prove LOL's corporate misconduct in regard to the Profile trademark. Mr. Conway also opined that LOL's attempt to purchase the Profile trademark from Bioglan showed "the importance of the trademark to LOL", and could be seen as "a deceit or perhaps even a fraud upon those any who were to eventually have been lead to believe that unquestioned rights existed as a result" of LOL's intended purchase of Bioglan's trademark. (Report, p. 21). That is, LOL's conduct could be seen as an attempt to defraud the public about LOL's ownership of the Profile trademark and the strength of any rights in that trademark. This is also relevant to prove LOL's willful misconduct in regard to Treiber's Profile trademark. Treiber's fifth claim for relief is a claim for unfair competition. Mr. Conway's opinions are relevant to prove this claim. One of the ways to prove this claim is to prove trademark disparagement. See, Big O Tire Dealers, Inc. v. Goodyear Tire and Rubber Co, 408 F. Supp.

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1219, 1223 (D. Colo. 1976). Evidence that LOL made statements about its alleged Profile trademark that were inaccurate, incomplete and inconsistent with its own documents, and which were misleading, deceptive or fraudulent is obviously unfair competition. LOL's statements assured LOL's customers that it was appropriate for them to offer and sell Profile-branded products. LOL's statements were of such a nature to cause investors and the public to believe that it was LOL, not Treiber, who held rights to the Profile trademark. Mr. Conway's opinions reveal that LOL willfully misrepresented the strength of its alleged Profile trademark to the detriment of Treibe and Treiber's Profile trademark. (Report, pp. 19-20). This is relevant evidence on the claim of unfair competition. The opinions of Mr. Conway are also relevant to Treiber's deceptive trade practices claim. The Colorado Deceptive Trade Practices Act provides that one engages in a deceptive trade practice when one: "(a) Knowingly passes of goods, services or property as those of another; (b) Knowingly makes a false representation as to the source, sponsorship, approval, or certification of goods, services or property; (c ) Knowingly makes a false representation as to affiliation, connection or association with or certification by another; ...." See, C.R.S., Section 6-1-105.

One example of LOL's deceptive trade practices, whereby it made a "false representation as to the source, sponsorship, [or] approval ... of goods...." in violation of C.R.S., Section 6-1105(1)(b), is that LOL consistently represented to the public that it had a federal registration for the Profile trademark by use of the "®" trademark symbol on its products and its advertising. It

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did not own such a registration.

The following goods sold and given away by LOL show its

deceptive use of the trademark "®" symbol in conjunction with the Profile trademark:

It is Treiber that owns the federal trademark registration for Profile for animal feed. LOL's misrepresentations as to its rights and as to Treiber's trademark were deceptive trade practices. Similarly, LOL made incomplete, inaccurate and inconsistent statements about its Profile brand products and the Profile trademark, and these failures could mislead the public and could operate as a deceit or a fraud on the public, according to Mr. Conway. This deceptive conduct by LOL is a deceptive trade practice, just like its improper use of the trademark "®" symbol. At a minimum, LOL's misconduct as will be testified to by Mr. Conway is evidence of corporate misconduct which shows LOL's intent to deceive, and this is relevant on the deceptive trade practices claim. The opinions of Mr. Conway are relevant to prove enhanced damages, punitive damages, and Treiber's entitlement to attorneys' fees under the Lanham Act. The Lanham Act, 15 U.S.C.

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Section 1117, provides that successful infringement plaintiffs, "shall be entitled to ... [ a defendant's ] profits ... subject to the principles of equity" and that in exceptional circumstances the court may award reasonable attorneys' fees to the prevailing party. Punitive damages

require proof that a defendant has acted in a fraudulent, malicious, or willful and wanton manner. See, e.g., C.R.S., §13-21-102(1)(a). The Lanham Act allows attorneys' fees in exceptional circumstances, see 15 U.S.C. §1117, and the Tenth Circuit has held that an exceptional case is one in which the trademark infringement is "malicious, fraudulent, deliberate or willful." VIP Funds, Inc. v. Vulcan Pet, Inc., 675 F.2d 1106, 1107 (10th Cir. 1982). As such, evidence of

willful misconduct by LOL is relevant to prove entitlement to enhanced damages, punitive damages and attorneys' fees. LOL has also pled the affirmative defense of the remote good faith junior user. LOL's willful misconduct is relevant to prove that it did not act in good faith in adopting and using Treiber's Profile mark. II. The probative value of Mr. Conway's opinions substantially outweighs any danger of unfair prejudice. LOL's other contention is that Mr. Conway's opinions should be excluded because "Even if the Court determines that Mr. Conway's expert testimony carries some tangential relevance to the claims at issue, his opinions should be excluded under Fed.R. Evid. 403 because its prejudicial effect outweighs any probative value." FRE 403 states as follows: "Although relevant, evidence may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, waste of time, or needless presentation of cumulative evidence."

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It is clear that prejudice to the opposing party does not require exclusion of evidence. In fact, evidence must be prejudicial to the other party or it is not material. "Virtually all evidence is prejudicial or it isn't material." Dollar v. Long Manufacturing, 561 F. 2d 613, 618 (5th Cir. 1977), cert. den. 435 U.S. 996 (1978). FRE 403 requires that evidence be "unfairly

prejudicial" before a court can even begin the calculus of determining whether its probative value is substantially outweighed by danger of "unfair prejudice". FRE 403; Dollar, supra. "Unfair prejudice" is not to be equated with testimony that is simply adverse to the opposing party. Dollar, supra. And, the exclusion of relevant testimony under FRE 403 is an

"extraordinary remedy to be used sparingly." K-B Trucking v. Riss Int'l. Corp., 763 F. 2d 1148, 1155 (10th Cir. 1985). FRE 403 requires the court to determine probative value, and then determine if that value is "substantially outweighed" by the other concerns listed in the Rule. Here the value of Mr. Conway's testimony is more than tangentially relevant, as LOL contends. The relevance of his testimony was discussed in detail above (see, pages 4-11, supra). As analyzed above, his testimony is relevant on three of Treiber's claims, two of LOL's counterclaims, one of LOL's affirmative defenses, whether Treiber is entitled to punitive or enhanced damages, and whether Treiber is entitled to attorneys' fees. The probative value of this profoundly relevant evidence must be found to be "substantially outweighed" by the listed concerns. The only prejudicial effects of this evidence alleged by LOL are that Mr. Conway's testimony "would be to persuade the members [of the jury] that Land O' Lakes had violated federal securities laws", that "His expert opinions are intended to create an emotional response and to prompt the jury to view Land O' Lakes as an Enron-style violator of the securities laws",

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and that the jury should not be confused with "nuances of the federal securities laws that are tangential at best to this action." LOL Motion in Limine, p. 10. It is interesting to note that LOL endorsed no expert or other witness to discuss the propriety of its disclosures concerning its alleged Profile trademark. Perhaps that is because LOL realizes that its disclosures were misleading, deceitful or fraudulent. If that is so, LOL's only possible way to combat this testimony is to have it excluded. And, if, as Treiber contends, the disclosures are misleading, deceitful and fraudulent, Conway's testimony is profoundly relevant, and should be admissible. LOL's stated concern that Mr. Conway's testimony will create an emotional response will be dealt with by the court's anticipated instructions. The anticipated first instruction states that the jury is not to be controlled by sympathy or prejudice against any party, but is to base its decisions on the law and the facts as they determine them to be. For example, the last paragraph of the first instruction given by this Court in the similar case of Purebred Co. v. Star Kist Foods, Inc., et.al., No. 00-665/01-481 (D. Colo. 2002) instructs jurors not to decide the case based upon sympathy or prejudice against any party, but to impartially consider all the evidence, follow the law and reach a just verdict, regardless of the consequences:

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Treiber does not intend to argue that Land O' Lakes violated the securities law. The purpose of Mr. Conway's testimony is to prove and disprove the limited and precise issues discussed above in pages 4 through 11 of this Response. Moreover, any prejudice from admission of Mr. Conway's testimony could be eliminated by a limiting instruction similar to the following: "The testimony of Mr. Conway was admitted for limited purposes. It was not admitted to prove that Land O' Lakes, Inc. committed security fraud violations, and you must not consider it for that purpose. You may only consider that evidence for the following limited purposes: To prove whether Land O' Lakes intentionally infringed the Profile trademark of Treiber; To prove whether Land O' Lakes engaged in unfair competition against Treiber; To prove whether Land O' Lakes committed deceptive trade practices against Treiber; To prove whether Treiber libeled Land O' Lakes when Treiber said that Land O' Lakes made misleading statements in documents filed with the Securities and Exchange Commission; To prove whether Land O' Lakes, Inc acted in good faith as to Treiber, such that it is entitled to assert its remote good faith junior use affirmative defense; To prove whether Treiber is entitled to enhanced damages against Land O' Lakes, Inc., and, To prove whether Treiber is entitled to punitive damages against Land O' Lakes, Inc. The testimony of Mr. Conway may be considered for no other purpose."

1. 2. 3. 4.

5.

6. 7.

And, jurors are assumed to follow the instructions of law given by the Court. United States v. Cardall, 885 F. 2d 656, 667 (10th Cir. 1989). Treiber has no objection to a limiting instruction to avoid any alleged prejudice. CONCLUSION Mr. Conway's anticipated testimony is relevant and proper. It is relevant to prove Treiber's claims, disprove LOL's counterclaims, disproves LOL's affirmative defenses, prove Treiber's

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damages, and prove Treiber's entitlement to attorneys' fees.

The probative value of his

testimony is not substantially outweighed by any listed concerns so it is proper under FRE 402 and 403. As such, Treiber respectfully requests that this Court deny LOL's Motion in Limine to Exclude Expert Testimony of A. Carr Conway. RESPECTFULLY SUBMITTED this 3rd day of May, 2007.

By:

s/Thomas R. French Thomas R. French THOMAS R. FRENCH, P.C. Attorney for Plaintiff 125 South Howes Street, Suite 401 Fort Collins, CO 80521 Telephone: (970) 484-0360 Fax: (970) 482-6964 Email: [email protected]

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CERTIFICATE OF SERVICE (CM/ECF) I certify that on the 3rd day of May, 2007 I electronically filed the foregoing with the Clerk of Court using the CM/ECF system which will send notification of such filing to the following email addresses: [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] and that I have mailed Plaintiff's Summaries to the following non-CM/ECF participants by U.S. mail, postage prepaid, as follows: Mr. Ryan Stern Dean & Stern, P.C. 4155 E. Jewell Avenue Suite 703 Denver, CO 80222 Mr. Ted Svitavsky 7785 Highland Meadows Parkway Suite 203 Windsor, CO 80528

By:

s/Thomas R. French Thomas R. French THOMAS R. FRENCH, P.C. Attorney for Plaintiff 125 South Howes Street, Suite 401 Fort Collins, CO 80521 Telephone: (970) 484-0360 Fax: (970) 482-6964 Email: [email protected]

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