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| UNITED STATES DISTRICT COURT |
FOR THE NORTHERN DISTRICT OF ILLINOIS
PLAINTIFF'S REPLY IN SUPPORT OF MOTION TO EXCLUDE
TESTIMONY OR, ALTERNATIVELY, TO ISSUE A REQUEST FOR
INTERNATIONAL JUDICIAL ASSISTANCE
NAR avoids the United States' argument under Rule 37 and responds instead to a straw argument that was not made. The focus of the United States' motion was NAR's untimely disclosure of a Point2 representative as a trial witness. Motion at 6-11. NAR's obligation to disclose trial witnesses arises from four sources: (i) Rule 26(a)(3)(A); (ii) Magistrate Judge Denlow's October 24, 2006 Order (D.E. 79), which modified the default timing under the Rule by requiring that NAR disclose witnesses on the subject of procompetitive justifications by March 15, 2007; (iii) the parties' stipulation that updated witness lists be exchanged by September 7, 2007; and (iv) NAR's duty under Rule 26(e)(1)(A) to supplement its March 15 witness list in a timely manner. Remarkably, NAR's opposition ignores its Rule 26 obligation to disclose witnesses and instead diverts the focus to whether NAR complied with its separate duty under Rule 26(a)(1)(A) to disclose persons with discoverable information. NAR Br. 1, 6-8.
By focusing on a disclosure obligation not in issue, then claiming that the United States was "aware of" Point2 and had previously scheduled the deposition of its employee, NAR misses the point. The United States had no way of knowing that NAR might call a Point2 witness at trial until NAR belatedly disclosed that fact on November 19, 2007. Rather, the United States had every reason to rely on NAR's March and September 2007 witness lists, which did not include a witness from Point2.
Responding to the relief requested under Rule 611, NAR does not argue seriously that it should be allowed to present trial testimony from a volunteer witness who refuses to produce documents that bear on the truth of his testimony. Instead, NAR argues that the United States has failed to show that the withheld documents are relevant. But NAR's own opposition argues that Mr. Tufts' testimony is "critical"(1) because technology has "made threats of broker withdrawal from MLSs even more credible and serious than ever." NAR Br. 2-3. Any proper evaluation of whether Point2 could become a "credible and serious" alternative to MLSs would necessarily include an analysis of the company's business plans and strategies.
Accordingly, for the reasons set forth in Plaintiff's motion and this reply, the Court should exclude Mr. Tufts' testimony or, at a minimum, preclude NAR from calling him unless Point2 promptly produces the documents at issue.
I. NAR'S OPPOSITION CONFIRMS THAT THE KEY FACTS ARE UNDISPUTED
The chronology of events set forth in the United States' motion is largely uncontested by NAR.(2) Specifically, NAR does not dispute that:
II. MR. TUFTS' TESTIMONY SHOULD BE EXCLUDED UNDER RULE 37
NAR's opposition ignores the substance of the United States' argument under Rule 37 and focuses exclusively on minimizing the least important of its lapses the absence of Point2 in NAR's initial disclosures under Rule 26(a)(1)(A). NAR Br. 1, 6-8. NAR argues that Point2's omission from its early disclosures, and its failure to identify Point2 in any supplement to these disclosures, can be excused because the United States became "aware of" Point2 beginning in May 2007 and later scheduled the deposition of a Point2 witness. Id. at 7. This argument sidesteps the issue presented by the United States' motion.
But for NAR's failure to join the issue, it should go without saying that the factual predicate for this motion is NAR's late disclosure of a Point2 witness. Motion 1, 6, 10-11. Plaintiff's motion listed the omission of Point2 from NAR's initial disclosures as only the first of many facts establishing that the United States had no reason to believe that NAR might call a Point2 witness at trial until November 19. Id. at 10-11. Accordingly, NAR failed to comply with its obligation to disclose a Point2 witness under Rules 26(a)(3)(A) and 26(e)(1)(A). Because there are at least hundreds of persons having discoverable information in this case, Magistrate Judge Denlow's October 24, 2006 Order modified the default timing under Rule 26(a)(3)(A) and required earlier disclosure of witnesses. D.E. 79. The parties necessarily structured their discovery efforts around the March 2007 Court-ordered lists, as well as the updated lists that the parties agreed to exchange in September 2007. The United States relied on these witness lists (and lack of any timely supplementation) in concluding that NAR did not intend to call a Point2 witness at trial.
By focusing on only one of its disclosure obligations, NAR fails to supply any justification for its failure to comply with Rule 26(a)(3)(A) by disclosing a Point2 witness on its March 15, 2007 witness list. Nor does NAR offer a justification for not supplementing this list to add such a disclosure "in a timely manner" as required by Rule 26(e)(1)(A) either on the agreed upon date of September 7 or well before the end of the discovery period. Indeed, NAR's argument suggests it had no witness disclosure obligation, which would render its November 19 disclosure of a Point2 witness gratuitous.
NAR argues that any late disclosure on its part was harmless because the United States somehow knew or should have assumed that NAR would call a Point2 witness. NAR Br. 7-8. But NAR's repeated failure to disclose a Point2 witness compels the opposite conclusion. Indeed, purporting to explain its belated disclosure, NAR claims that "[i]n the course of preparing for Mr. King's [November 19] deposition, counsel for NAR concluded that Mr. King did, in fact, have relevant knowledge." NAR Br. 4. This statement, which implies that NAR first learned that it should list a Point2 witness just before the discovery cutoff, contradicts NAR's argument that the United States somehow knew of Point2's "significance" six months earlier. Id. at 3. If, as NAR argues, the United States should have known this based on information provided by NAR then NAR also must have known of Point2's significance six months earlier.
NAR also does not explain its refusal to remedy its late disclosure. During the February 14th conference call setting a briefing schedule for the present motion, the Court asked counsel for NAR to explain what steps NAR had taken to obtain a voluntary production of documents by Point2. Despite the Court's inquiry, NAR's opposition is silent on this point.(5) NAR also does not address its refusal to stipulate that it would not make any arguments relating to Point2's future or potential plans for its NLS technology. NAR's refusals, and its failure to explain them, further make a finding of harmlessness here inappropriate.
Under Rule 37(c), NAR's unjustified failure to disclose information required by Rule 26(a) or 26(e) results in the "automatic and mandatory" exclusion of such information, unless such failure is harmless. Musser v. Gentiva Health Services, 356 F.3d 751, 755 & 758 (7th Cir. 2004). Although NAR's brief embraces this standard (NAR Br. 7), it asserts without elaboration that exclusion of Mr. Tufts' testimony would lead to reversal. NAR cites three cases in support of this argument, but provides no description or discussion of these cases. Id. at 8. None of these cases bears any factual resemblance to these cases, and only one involved a reversal. See Sherrod v. Lingle, 223 F.3d 605, 612-13 (7th Cir. 2000) (reversing exclusion where trial court failed to consider the issue of harmlessness, noting that "in most cases, a district court would be fully within its discretion in strictly applying the rules and excluding reports that were incomplete or submitted a day late").
In fact, Seventh Circuit precedent contradicts NAR's "reversible error" argument. In Musser v. Gentiva Health Servcs., 356 F.3d 751, 755 & 758-59 (7th Cir. 2004), the Court affirmed, under an abuse of discretion standard, the trial court's exclusion of experts disclosed only after their depositions as fact witnesses. The Court upheld the trial court's finding that defendant suffered harm because there were only three months remaining before trial. Id. The facts here present a stronger case for exclusion. Not only is this case similarly (four months) close to trial; in addition, the untimely disclosed witness's Canadian employer has refused to produce relevant documents, NAR seeks to obtain an advantage from Point2's refusal (i.e. friendly testimony that cannot be fully challenged), and the only means of compelling Point2's document production from Canada is a time-consuming, lengthy and uncertain process that presents substantial risk that the United States will not obtain the documents in time for a deposition of Mr. Tufts on the eve of trial, if at all.
Attempting to avoid the consequences of its untimely disclosure, NAR's opposition asserts that Mr. Tufts is a "critical" witness whose exclusion would "seriously prejudice" NAR's defense. NAR Br. 1, 3. As a preliminary matter, this claim is irrelevant under Rule 37(c), which provides that the failure "without substantial justification" to make a required disclosure results in exclusion "unless such failure is harmless." As NAR's own opposition makes clear, prejudice to NAR is not a relevant factor in the Rule 37 analysis. See NAR Br. 7 (quoting list of relevant factors under Rule 37 as set forth in David v. Caterpillar, 324 F.3d 851, 857 (7th Cir. 2003)).(6)
Moreover, NAR's claim that a Point2 witness is "critical" to its case is contrary to its own actions. NAR does not explain why it did not disclose such a "critical" witness on its earlier witness lists or why it did not seek any discovery from Point2. Even on its most recent witness list, served this month, NAR identified Point2's representative as a "may call" rather than a "will call." Ex. 2 (NAR's February 14, 2008 witness list). NAR's claim also cannot be reconciled with the testimony of NAR's own economic expert, Dr. Flyer, who was unable to conclude that Point2 had any relevance to his opinions. Motion Ex. 4 (D.E. 195-2, p. 25) ("I don't know that it's pertinent to any of the opinions drawn in the report or any of the analysis I undertake.").
If a Point2 witness is indeed "critical," there are only two explanations for the preceding facts. Either NAR deliberately chose not to disclose a Point2 witness in order to retain the element of surprise in the deposition the United States had scheduled but subsequently cancelled, or NAR erred by failing to disclose a "critical" witness. In either case, the consequences of NAR's omission should be borne by NAR, not the United States.
NAR also fails to provide any specifics to support its bare conclusions regarding Point2's "importance." NAR Br. 2-3. Instead, NAR repeats its "procompetitive justification" that an association of competitors may restrict new forms of competition solely because some of its members threaten to withdraw from MLSs in the absence of such restrictions. Id. NAR provides no legal support for this novel proposition, which would immunize from antitrust liability any joint venture whose members coupled their anticompetitive conduct with implausible threats of withdrawal. Further, NAR does not dispute that no broker has ever withdrawn from an MLS because it could not opt out of VOWs.(7) In fact, there is no evidence that any broker has withdrawn from an MLS except to join another MLS (or to leave the business). Ex. 3 (Murray Dep. 224). For a broker to withdraw from an MLS without joining another would be "economic suicide," according to NAR's industry expert, Mr. Murray. Id. at 142-143, 190-191.
NAR also does not explain how Point2's testimony would not be cumulative. Contrary to NAR's first claim regarding the relevance of the testimony, it cannot plausibly need a Canadian witness from Saskatoon to testify about the "information that is readily available to [U.S.] consumers on the internet" (NAR Br. 2), a major subject in the reports of both of NAR's experts. As to NAR's second claim of relevance (id. at 2-3), Mr. Murray claimed in his report and deposition that there are many companies that possess the technology to enable brokers to share listings data with one another.(8) Excluding Point2 will not impair NAR from presenting testimony on these issues and, therefore, it will not be prejudiced.
III. THIS COURT SHOULD BAR NAR FROM OFFERING MR. TUFTS' TESTIMONY IF POINT2 REFUSES TO PRODUCE DOCUMENTS BEARING ON THE TRUTH OF THAT TESTIMONY
The fundamental question presented by the United States' motion under Fed. R. Evid. 611 is whether the documents that Point2 is withholding are relevant to its employee's expected testimony. If they are, there can be no appropriate basis for allowing Mr. Tufts to provide voluntary testimony while allowing Point2 to withhold evidence needed to test his testimony. This would effectively permit Mr. Tufts to volunteer testimony for NAR while avoiding hard questions on cross examination. Such a result is not "effective for the ascertainment of the truth." Fed. R. Evid. 611(a)(1); see also United States v. Toner, 173 F.2d 140, 144 (3d Cir. 1949) ("Where the witness, after his examination in chief on the stand, has refused to submit to cross-examination . . . his direct testimony should be struck out.") (quotation omitted).(9)
Rather than seriously arguing that Mr. Tufts should be permitted to avoid effective cross examination by Point2's withholding of documents, NAR asserts instead that the United States "does not make any serious effort" to establish "how the documents it seeks are relevant." NAR Br. 11. In fact, the United States explained the relevance of the documents at length in its motion.(10) Indeed, NAR confirms in its opposition that Mr. Tufts will present "critical" testimony on the allegedly "reasonable likelihood that some brokers might withdraw" from MLSs, because Point2's technology has "made threats of broker withdrawal from MLSs even more credible and serious than ever." NAR Br. 2-3. Evaluating whether Point2 has or could become a "credible and serious" alternative to MLSs requires review of the company's business plans and strategies. Likewise, a list of the American brokers who currently subscribe to Point2 is another measure of whether NAR's claims regarding Point2's potential role are realistic. In addition, NAR cannot now claim that these documents are irrelevant after refusing to stipulate that it would not make any arguments relating to Point2's future or potential plans for its NLS technology.
NAR charges the United States with adopting conflicting positions for arguing first that Point2's testimony is irrelevant, then claiming that it needs documents to test that testimony. NAR Br. 10. But there is no tension between the positions. The United States sought the deposition of Mr. King initially to test an assertion in the report of NAR's industry expert, but ultimately decided that the issue was irrelevant. For this reason, and because Mr. King was not then on NAR's witness list, the United States decided that there was no need to take any discovery from Point2 and cancelled Mr. King's deposition on November 15. NAR's subsequent decision to name Mr. King as a trial witness on November 19 fundamentally changed Point2's and Mr. King's significance: The United States' view of Point2's irrelevance no longer determined the scope of discovery. As stated in its motion, the United States needs the documents it requested to test the expected Point2 testimony that NAR may offer because "the parties' disagreement over Point2's relevance cannot be resolved until later." Motion 5.
The remainder of NAR's response to Plaintiff's motion under Rule 611 raises several inaccurate and immaterial charges. First, NAR's portrayal of Point2 as a neutral third party (NAR Br. 9) is contrary to that company's "White Paper" regarding this litigation.(11) That document publicly sides with NAR in the lawsuit and markets Point2's services as a "solution" to the lawsuit, particularly to those brokers who would be disappointed by a NAR loss. NAR Br. at Ex. 2. In fact, in an email produced by NAR, its top legal officer characterized Point2's arguments in a similar document as an "advertorial" that was "attempting to get readers [NAR members] to sign up for Point2." Ex. 4, p. ENAR-124944.
Second, NAR speculates that the government's document requests are too broad and burdensome, but Point2 has objected only on the basis of confidentiality. There are also no facts to suggest that any of these requests would impose an undue burden on Point2. Indeed, NAR has served similar requests for business plans and strategies (a common document request in antitrust cases) upon employers of the United States' witnesses, and it has received such documents from these witnesses in response to its subpoenas.(12) NAR cannot claim that the United States is not entitled to the same discovery NAR has demanded and received from third parties.
NAR argues that the United States should have narrowed its request for business plans and strategies to documents "relevant to the narrow issue of 'whether Point2 currently functions, could function, or plans to function as an MLS alternative for brokers.'" NAR Br. 11. Such language is unworkable as a document request because it enables evasion by requiring subjective judgments about relevance rather than providing objective criteria for determining responsiveness. Further, the United States explained to Point2's general counsel that it had already made its request as narrow as possible, but nevertheless would consider any limitation the company might suggest. Motion at Ex. 8 (D.E. 195-2, p. 50). Point2 did not respond with any. Id. at 49. Moreover, in addition to its blanket refusal to produce documents relating to its business plans and strategies or membership,(13) Point2 has produced a total of eight documents, none containing non-public information.
Third, NAR asserts conclusorily that Point2 produced "all documents" responsive to 11 of the 13 requests. NAR Br. 5. The claim is not only irrelevant, but untrue. Point2 produced eight documents and one database in response to the eleven requests, with four of the documents related to one request (#5).(14) Point2 has not searched for responsive documents from the files of even the proposed witness, Mr. Tufts. Motion at Ex. 8 (D.E. 195-2, p. 49).
By using its power under Rule 611 to condition NAR's calling Point2 as a voluntary trial witness on Point2's production of responsive documents in time for a meaningful deposition well before trial, the Court would ensure both parties' ability to elicit truthful and complete testimony from Point2 at trial, an outcome that is by no means assured by issuing a letter seeking international assistance.
IV. NAR'S ARGUMENTS REGARDING THE REQUEST FOR INTERNATIONAL ASSISTANCE ARE MISCONCEIVED
While confirming that it does not object to the issuance of a letter of request, NAR raises two issues about which it claims to be "unclear." NAR Br. 12. First, NAR suggests that the United States has unnecessarily sought the Court's assistance because Canada is "obligated" to assist the United States in obtaining documents from Point2.
NAR is mistaken. The Agreement(15) on which NAR relies does not obligate the Canadian Competition Bureau to secure documents on behalf of the United States. A full reading of Article III, Section 3(a), quoted only partially by NAR, shows the non-compulsory nature of the Agreement (prefatory language omitted by NAR is italicized):
3. Each Party's competition authorities will, to the extent compatible with that Party's laws, enforcement policies and other important interests,
Agreement, Art. III, § 3(a). The omitted language reveals, contrary to NAR's selective reading, that the agreement does not obligate Canada to take any action.(16) Moreover, the quoted section involves seeking "voluntary compliance with requests for information" and simply does not address the compulsory process that Point2's refusal has put at issue here.
A letter rogatory is necessary whenever a party--including the United States--needs to compel production of documents in Canada, as the Department of State's Guidance on Judicial Assistance in Canada (attached by NAR to its response) makes clear:
C. Compulsion of Testimony/Production of Documents
NAR Br. Ex. 3, at 4. Thus, contrary to the conjecture in NAR's response, the United States cannot seek compulsory process without this Court's assistance.
Finally, NAR claims it is "unclear" on why the United States did not submit a proposed letter rogatory with its motion. NAR Br. 12. The United States has not yet done so because the Court's Civil Case Management Procedures instruct parties not to email proposed orders until after the underlying motion or request has been heard. Plaintiff remains ready to email the proposed letter if directed to do so. Plaintiff's compliance with the Court's Procedures has not prejudiced NAR.
For the foregoing reasons, the Court should exclude Mr. Tufts from testifying. Alternatively, the Court should (i) order that Mr. Tufts' testimony will be barred unless Point2 promptly and substantially complies with Plaintiff's document requests; or (ii) issue a Request for International Judicial Assistance to Saskatchewan, Canada.
1. As set forth below, NAR’s characterizations regarding the importance of Mr. Tufts are overstated. Infra 7-8.
2. NAR’s opposition does allege (mistakenly) that “DOJ’s chronology omits significant facts that make clear that DOJ was well aware of Mr. King” since September 2007. NAR Br. 4. In fact, each of the “significant facts” that NAR mentions was included in Plaintiff’s chronology. Motion 6-7.
3. Magistrate Judge Denlow’s October 24, 2006 Order mandated that NAR “identify fact witnesses on pro-competitive justification on or by 3/15/07.” D.E. 79. NAR’s brief confirms its view that testimony from Point2 is relevant to its alleged procompetitive justification. NAR Br. 2-3. By agreement, the parties updated their initial witness lists on September 7, 2007.
4. Point2 is also mentioned in the August 1 report of NAR’s economic expert Dr. Flyer. Before then, Point2 was interviewed by an assistant to Dr. Flyer, and NAR’s counsel began communicating with Point2 personnel at least as early as October 1, 2007. Motion at Ex. 4.
5. Instead, NAR criticizes the United States for “refus[ing] even to disclose to NAR what document discovery it would be seeking.” NAR Br. 5 n.3. But the criticism has no significance. In fact, as the email cited by NAR makes plain, the United States assured NAR that “[w]e will disclose to you exactly what documents we are seeking as soon as we prepare our requests, which will be shortly.” Motion at Ex. 1 (D.E. 195-2, p. 4). The United States did so days later, forwarding to NAR a copy of Plaintiff’s document requests to Point2 (the same day they were served on Point2), more than one month before it requested NAR’s assistance in obtaining the documents from Point2. Ex. 1.
6. These factors are intended to guide the Court’s “broad discretion” and, as applied here, include (1) prejudice to the United States, (2) the United States’ ability to cure the prejudice, (3) likelihood of disruption to the trial and (4) bad faith or willfulness on NAR’s part. Id. For the reasons set forth here and in Plaintiff’s motion, the first three factors support exclusion under Rule 37. As to the fourth factor, the United States does not rely on any claim of bad faith, and NAR has not stated whether its late disclosure was willful or inadvertent. NAR’s refusals to assist the United States in curing the prejudice resulting from the late disclosure, however, could only have been willful. As set forth in Plaintiff’s motion, a showing of bad faith or willfulness is not required under Rule 37. Motion 11 n.5.
7. Contrary to the claim attributed to the United States in NAR’s opposition, the United States has not argued that “brokers could not and would never withdraw from an MLS.” NAR Br. 2.
8. Indeed, one of these companies, Terabitz in California, was deposed in discovery.
9. Contrary to NAR's argument (NAR Br. 8), the absence of a Rule 611 opinion involving the same factual situation does not mean that the Rule does not apply. It is not surprising that no opinion involves the unique circumstances presented here, where a foreign non-party beyond the Court's subpoena power volunteers to provide a witness at trial for one party, but refuses to produce relevant documents to the other party. NAR points out that the two cases cited in Plaintiff's motion dealt with the exclusion of party witnesses and not a non-party like Mr. Tufts. But in granting control to the Court over the presentation of witnesses and evidence, Rule 611 makes no distinction between party and non-party witnesses. Rule 611, by its terms, applies to Mr. Tufts.
10. Motion 5-6 (“documents from Point2 relating to its business plans and strategies and the members of its national listing service” are relevant because they “relate directly to the subjects of Mr. Tufts’ expected voluntary testimony about whether Point2 currently functions, could function, or plans to function as an MLS alternative for brokers”); 13 (“The evidence sought will bear directly on the validity of NAR’s anticipated claim that Point2’s alleged ‘MLS-like systems’ could be a timely, likely, and sufficient alternative to MLSs for American real estate brokers. For example, Mr. King reportedly left Point2 based on his ‘fundamental disagreement with the company’s future plans,’ which highlights the importance of obtaining Point2’s strategic and business plans (request no. 1) to gain perspective on and test Mr. Tufts’ testimony.”).
11. Contrary to NAR’s suggestion that the United States knew about the White Paper since June 2007, the United States was unaware of the paper until it began preparing for Mr. King’s deposition in October 2007.
12. Ex. 5, NAR Subpoenas to: Prudential Real Estate, at 32 (“All strategic plans, business plans, and forecasts prepared by, reviewed by, or disseminated to, eRealty or Prudential’s Senior Management.”); HBM II, at 35 (same); ZipRealty, Inc., at 17 (same).
13. The United States requested a list of U.S. brokers who are members of Point2’s listing service. Point2 responded that the identities of agents using its service was publicly available. The United States informed Point2 that it had tried to derive the information it needed from the publicly available information, but was unable to do so reliably. Motion at Ex. 8 (D.E. 195-2, p. 50). Point2 did not respond to the United States’ request to produce the information in a readily accessible form. Id. at 49.
14. For all but two of the thirteen requests Point2 either refused to produce documents (Nos. 1 & 2), produced electronic documents created by counsel the day before production (Nos. 4 & 5), produced documents unrelated to the request (Nos. 6 & 7), produced an inadequate array of documents when evidence on Point2’s website implies that additional items are available (No. 4), produced documents that are missing portions containing the responsive information (No. 5), claimed not to possess documents when the United States has information to the contrary (Nos. 8 & 13), claimed not to possess a different type of document without addressing the request made (No. 11), or claimed not to possess documents that Point2 likely would have because of the nature of its business (Nos. 10 & 13).
15. Agreement Regarding the Application of Their Competition and Deceptive Marketing Practices Laws, U.S.-Can. Aug. 1995 [hereinafter “The Agreement”] (available at http://www.usdoj.gov/atr/public/international/docs/uscan721.htm).
16. See also Article XI (“Nothing in this Agreement shall require a Party to take any action, or to refrain from acting, in a manner that is inconsistent with its existing laws, or require any change in the laws of the Parties or of their respective provinces or states.”).
CERTIFICATE OF SERVICE
I, Timothy Finley, hereby certify that on this 28th day of February, 2008, I caused a copy of the foregoing to be served on the person listed below by ECF.