Summary
The Fourth Circuit affirmed the Eastern District of Virginia’s exclusion of Deque Systems’ damages evidence under Federal Rule of Civil Procedure 37(c)(1) for failure to timely disclose damages calculations and supporting evidence under Rule 26(a). The court also affirmed summary judgment for BrowserStack on Deque’s copyright, false advertising, contract, and unjust enrichment claims because Deque lacked admissible evidence of monetary damages and had not established entitlement to injunctive or declaratory relief. The court reviewed the discovery-sanction ruling for abuse of discretion and applied the Southern States factors.
Topics
Practice areas
Questions Presented
- Whether the district court abused its discretion by excluding Deque's damages evidence under Federal Rule of Civil Procedure 37(c)(1) after Deque failed to comply with Rule 26(a)'s disclosure requirements.
- Whether the exclusion of damages evidence carried the force of dismissal and therefore required application of the Rule 37(b)(2) sanctions factors recognized in Wilson v. Volkswagen of America, Inc.
- Whether summary judgment was proper on Deque's copyright infringement, false advertising, breach of contract, and unjust enrichment claims when Deque lacked admissible evidence of monetary damages and failed to present competent evidence supporting injunctive or declaratory relief.
- Whether Deque preserved its argument that Rule 37(b)(2) and Wilson supplied the governing sanctions framework.
Holdings
- The district court properly excluded Deque's evidence of lost profits, disgorgement of revenue, and avoided development costs because Deque failed to comply with Rule 26(a)'s disclosure requirements and did not establish that its nondisclosure was substantially justified or harmless.
- The district court was not required to apply the Wilson factors because Deque waived that argument and, in any event, the exclusion of damages evidence under Rule 37(c)(1) did not itself carry the force of dismissal.
- Summary judgment for Browserstack was proper on all of Deque's claims because Deque lacked admissible evidence supporting its monetary-damages theories and failed to present competent evidence of ongoing or threatened future infringement or false advertising sufficient to support injunctive relief.
Key quotations
“It’s not a means to skirt a party’s initial disclosure obligations for issues on which it bears an affirmative burden of proof.” (at 14)
“In other words, Deque’s failure to prove its case in all respects and the district court’s sanctions decision ultimately led to dismissal.” (at 21)
“We therefore agree with the district court that Deque failed to offer any competent evidence at summary judgment to raise a genuine dispute of material fact as to any actual or threatened future infringement.” (at 25)
Factual background
Deque and Browserstack compete in the accessibility-testing software market. Deque alleged that Browserstack reverse engineered Deque's DevTools software and copied portions of its Rules Help Pages to develop and market an Accessibility Toolkit, and also alleged false advertising. Deque repeatedly failed to provide timely damages computations, supporting documents, and an affirmative damages expert report; it first disclosed damages exceeding $30 million in a rebuttal report served three days before discovery closed. Browserstack later removed the allegedly infringing content and comparative advertisement, and Deque offered no competent summary-judgment evidence of ongoing or threatened future infringement or false advertising.
Procedural history
Deque sued Browserstack for copyright infringement, false advertising, breach of contract, and unjust enrichment. After Deque repeatedly failed to disclose damages computations and supporting evidence within the Rule 26 deadlines, the district court excluded the damages evidence under Rule 37(c)(1). The court then granted Browserstack summary judgment on all claims because Deque lacked admissible damages evidence and had not presented competent evidence supporting injunctive relief. The district court denied Deque's Rule 59(e) motion for reconsideration, and Deque timely appealed.