Khushaim v. Tullow, Inc.

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
HASAN KHUSHAIM,
Plaintiff,
v. C.A. NlSC-l 1-212 PRW
TULLOW INC. d/b/a
APPOSTROPHIC,
APPOSTROPHIC LLC,
OUTREACH GLOBAL, LTD.,
and NATHAN GIBSON,
Defendants.
Submitted: June 27, 2017
Decided: August 16, 2017
Upon Defendant ’s Motionfor Partial Summary Judgment,
DENIED.
MEMORANDUM OPINION AND ORDER
Gordon J. Zuiderweg, Esquire (pro hac vice), LaW Offlces of Barry K. Rothman,
Los Angeles, California, Nicholas G. Kondraschow, Esquire (argued), Rhodunda &
Williams, Wilmington, Delaware, Attorneys for Plaintiff.
Todd A. Holleman, Esquire, Robert E. Murkowski, Esquire, Miller, Canfleld,
Paddock and Stone, PLC, Detroit, Michigan, John A. Sensing, Esquire (argued),
Potter Anderson & Corroon LLP, Attorneys for Defendant, Tullow Inc.
WALLACE, J.
I. INTRODUCTION
Before the Court is Defendant Tullow, Inc.’S d/b/a Appostrophic (“Tullow”)
Motion for Partial Summary Judgment of Count I of Plaintiff Hasan Khushaim’s
(“Khushaim”) Complaint. In January 2013, Khushaim hired TulloW to design and
build certain mobile applications Tullow Was to be paid in four installments totaling
$75,000. The parties memorialized the terms of their agreement in a “Project
Development Contract” dated January 29, 2013. Khushaim complains that Tullovv
breached this contract by failing to deliver the completed mobile applications
Among other things, Khushaim’s breach-of-contract claim alleges future lost profits.
Tullow maintains that Khushaim has failed to submit any admissible evidence in
support of that damages claim and that partial summary judgment is Warranted. For
the reasons set forth beloW, Tullow’s Motion is DENIED.
II. FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff Khushaim brought this action against Defendant Tullow in a
ten-count complaint.l Tullow filed a dismissal motion, Which this Court granted in
part and denied in part.2 Count I, alleging breach of contract, is the only surviving
claim.3 TulloW now asks for partial summary judgment on that remaining claim.
' Khushaim v. Tullow Inc., 2016 WL 3594752, at *1 (Del. Super. Ct. June 27, 2016).
2 See id.
3 See id. at *9.
ln January 2013, Khushaim, a citizen of Saudi Arabia, and Tullow, a DelaWare
corporation, entered into a Project Development Contract (“the Contract”).4 The
Contract provided that Tullow Would “design, develop, and implement” mobile
applications adapting two Arabic card games (“Trix” and “Belote”) for mobile use.5
The Contract had a completion period of 250 days and specified a schedule of four
payments of $18,750.00, for a total anticipated contract value of $75,000.6 The
Contract included a DelaWare choice-of-law provision.7
Khushaim says he made the first three payments, but not the fourth and final
because the Contract’s fourth phase, “Deployment,” never occurred.8 Khushaim
says further that in addition to the first three regular installments, he paid Tullow a
supplement of $20,000 in May 2013 for upgrades to the programs9 Khushaim
4 See Def. Tullow’s Mot. to Dismiss, EX. 1 (“Project Development Contract”).
5 Ia'. at EX. 1 § 1 (“[Tullow] shall serve as a contractor of Buyer, and shall design, develop,
and implement applications ‘Belote & Trix’ according to the functional specifications and related
information, if any, and incorporated herein by this reference . . . . The Software, including all
versions . . . shall be delivered to Buyer Within 250 days of receiving the payment.”).
6 Id. at Ex. 1, at 13 (“Payment Schedule”).
7 Ia', at EX. 1 § 13 (“This Agreement shall be construed and enforced according to [t]he laws
of the State of DelaWare and any dispute under this Agreement must be brought in this venue and
no other.”).
8 Pl.’s Compl. 11 13. The exact date of the four payments is not specified in the Complaint
or the Project Development Contract, but provides for a “Total Completion Period” of “250
Working Days.” See Def. Tullow’s Mot. to Dismiss, Ex. 1, at 13 (“Payment Schedule”).
9 Pl.’s Compl. 11 13.
claims he never received the final versions of the two mobile applications and that
he has been unable to “obtain the return of his copyrighted software designs.”‘()
Khushaim alleges that “as a result of Tullow’s failure to complete
development of the mobile applications for Trix and Belote, Khushaim lost
subscription sales for the two games, which would have totaled $27,000,000.00.”ll
Tullow filed this Motion for Partial Summary Judgment to limit Khushaim’s
damages for the breach-of-contract claim to $75,000.
The Court heard oral argument on this Motion and addressed Khushaim’s lack
of evidence to support his surviving claim of $27 million in lost profits.12 The
speculative nature of the alleged $27 million in future lost profits was discussed
previously during oral argument on an earlier motion to dismiss.'3 Again, at the time
of this Motion, the Court was concerned that Khushaim had still failed to offer any
evidence to support a “reasonable certainty . . . of potential lost profits.”14 Khushaim
had also failed to submit a responsive affidavit pursuant to Superior Court Civil Rule
56(1).'5
‘0 Id. 1116.
" 1a 1117.
'2 Def. Tullow’s Mot. for Partial Summ. J. Hr’g Tr. 11, Jan. 13, 2017.
'3 Hr’g Tr. 11_12.
'4 Hr’g Tr. 12.
15 Hr’g Tr. ii.
Because no scheduling order preceded this Motion, and because Khushaim
appeared to have anticipated being able to produce evidence to support his claim,
the Court granted limited discovery on the particular issue of the $27 million in lost
future profits.16 The Court allowed the parties 120 days to conduct discovery and
30 days from the close of that discovery to submit supplemental briefs.17
The parties recently submitted those supplemental briefs. Khushaim attached
exhibits he suggests support his $27 million future lost profits claim.18 These
exhibits include: (1) Tullow’s Interrogatories and Requests for Production; (2) a
record of payment to another software development company; (3) a market research
report from the digital marketing agency MKT Indeed (the “MKT report”); (4) the
résumé of Khushaim’s proposed expert, Dr. Michael Einhom; (5) Dr. Einhom’s
Expert Report; (6) Khushaim’s Interrogatories and Requests for Production; and (7)
the Proj ect Development Contract.19
16 Hr’g Tr. 19_20.
17 Hr’g Tr. 20.
18 See Pl. Khushaim’s Supplemental Br. in Opp. to Def. Tullow’s Mot. for Partial Summ. J.
to Limit Damages, Exs. A-G [hereinafter “Pl.’s Br.”].
19 Id
Tullow argues that Khushaim “fails to support his claim for lost profits with
any admissible evidence.”20 Tullow specifically disputes the qualifications of
Khushaim’s expert21 and the reliability of the MKT report.22 As such, Tullow
requests that the Court grant partial summary judgment in its favor.23
III. DIsCUSSIoN
The entirety of Tullow’s argument rests on the alleged inadmissibility of
Khushaim’s proposed lost profit valuation evidence. But its request that the Court
determine the admissibility of Khushaim’s evidence comes too soon and is far too
cursory.24 True, the Court should consider only “admissible evidence in deciding a
motion for summary judgment.”25 And for an expert and his report to be admitted
into evidence, the proponent of the proffered expert testimony eventually bears the
20 Def. Tullow’s Supplemental Br. in Supp. of Mot. for Partial Summ. J. to Limit Damages
at 3 [hereinafter “Def.’s Br.”].
21 Ia'. at 3.
22 Id. at 4.
23 Id. at 5.
24 Id. at 3-5.
25 Lundeen v. PricewaterhouseCoopers, LLC, 2006 WL 2559855, at *8 (Del. Super. Ct. Aug.
31, 2006).
burden of establishing the testimony’s relevance, reliability, and admissibility by a
preponderance of the evidence.26
Delaware Rule of Evidence 702 governs the admissibility of such expert
testimony. And Rule 702 provides that “a witness qualified as an expert by
knowledge, skill, experience, training or education may testify thereto in the form of
an opinion or otherwise, if (1) the testimony is based upon sufficient facts or data,
(2) the testimony is the product of reliable principles and methods, and (3) the
witness has applied the principles and methods reliably to the facts of the case.”27
Delaware has adopted Daubert v. Merrell Dow Pharmaceuticals, Inc. ’s
five-factor test to evaluate the admissibility of expert testimony.28 Those five factors
are f
(i) the witness is ‘qualified as an expert by knowledge,
skill, experience, training or education’; (ii) the evidence
is relevant and reliable; (iii) the expert’s opinion is based
upon information ‘reasonably relied upon by experts in the
particular field’; (iv) the expert testimony will ‘assist the
trier of fact to understand the evidence or to determine a
fact in issue’; and (v) the expert testimony will not.create
unfair prejudice or confuse or mislead the jury.29
26 Mz``nner v. Am. Mortg. & Guar. Co., 791 A.2d 826, 843 (Del. Super. Ct. Apr. 17, 2000).
27 D.R.E. 702.
211 See M.G. Bancorporation, Inc. v. Le Beau, 737 A.2d 513, 523 (Del. 1999).
29 Cunningham v. McDonald, 689 A.2d 1190, 1193 (Del. 1997) (citing Nelson v. State, 628
A.2d 69, 74 (Del. 1993); D.R.E. 702; D.R.E. 703).
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Such a Daubert evaluation at the summary judgment stage should never be
conducted loosely.30
When exclusion of expert testimony results in summary judgment, there is the
understandable concern that the Court acts on an incomplete record and - when
deciding the expert’s inadmissibility - has “set the threshold too high.”31
This is not to say that the Court can never make a Daubert determination
during the summary judgment phase. But the Court should be hesitant in all but the
clearest of cases to do so.32 As a general rule,
A trial setting normally will provide the best operating
environment for the triage which Daubert demands. Voz``r
dire is an extremely helpful device in evaluating proffered
expert testimony . . . and this device is not readily available
in the course of summary judgment proceedings.
Moreover, given the complex factual inquiry required by
Daubert, courts will be hard-pressed in all but the most
clearcut cases to gauge the reliability of expert proof on a
truncated record. Because the summary judgment process
does not conform well to the discipline that Daubert
imposes, the Daubert regime should be employed only
with great care and circumspection at the summary
judgment stage . . . . [A]t the junction where Daubert
intersects with summary judgment practice, Daubert is
accessible, but courts must be cautious_except when
30 Corte's-Irz'zarry v. Corporacio'n Insular de Seguros, 111 F.3d 184, 188 (lst Cir. 1997).
31 In re Paoli R.R. Yard PCB Litig., 35 F.3d 717, 750 (3d Cir. 1994) (“[W]hen the district
court’s exclusionary evidentiary rulings with respect to scientific opinion testimony will result in
a summary or directed judgment, we will give them a ‘hard look’ . . . to determine if a district court
has abused its discretion in excluding evidence as unreliable.”).
32 Corte's-Irizarry, 1 11 F.3d at 188.
defects are obvious on the face of a proffer_not to
exclude debatable scientific evidence without affording
the proponent of the evidence adequate opportunity to
defend its admissibility33
Tullow is correct ~ the Court should consider only admissible evidence on a
motion for summary judgment.34 But Tullow does little to address the Daubert-
required examination when attacking the admissibility of the future profit valuation
evidence offered. And the Court cannot, given the proffer made, find this a clear cut
case of unreliable expert testimony.
Instead, a detailed factual inquiry is necessary to evaluate the admissibility of
the proffered economist’s opinion testimony in this matter. That detailed inquiry
has yet to be engaged or even available during these summary judgment
proceedings In turn, the Court can’t say that Khushaim’s future lost profit evidence
wouldn’t support the necessary element of his damages claim. And so, Tullow’s
Motion for Partial Summary Judgment to limit damages must be DENIED.
IT Is so oRDERED. @&Q §
Paul R. Wallace, Judge
33 Id. See United States v. Sepulvea’a, 15 F.3d 1161, 1184 (lst Cir. 1993); see also Margaret
A. Berger, Procea'ural Paraa’igms for Applyz'ng the Daubert Test, 78 Minn. L. Rev. 1345,
1379-80, 1381 (1994).
34 See Kennea'y v, Giannone, 1987 WL 37799 (Del. June 16, 1987) (noting that “party
opposing a motion for summary judgment must come forward with admissible evidence showing
the existence of a genuine issue of fact”).
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