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Entrata Inc. v. Yardi Systems Inc.

United States District Court, D. Utah

March 28, 2019

ENTRATA, INC., a Delaware corporation, Plaintiff,
v.
YARDI SYSTEMS, INC., a California corporation Defendants.

          MEMORANDUM DECISION AND ORDER ORDER GRANTING ENTRATA, INC.'S EMERGENCY MOTION TO STRIKE YARDI'S SUPPLEMENTAL EXPERT REPORTS IN PART

          CLARK WADDOUPS JUDGE.

         Before the court is Plaintiff Entrata, Inc.'s Emergency Motion to Strike Yardi's Supplemental Expert Reports of Gordon Rausser and Richard Hoffman, (ECF No. 456).

         Background

         On February 13, 2019 Entrata filed an Emergency Motion to Strike the Supplemental Expert Reports of Gordon Rausser and Richard Hoffman. (ECF No. 456.) On February 26, 2019, the court entered an order finding that “Yardi ha[d] repeatedly acted in bad faith in delaying the production of the yCRM data.”[1] (ECF No. 492 at 24.) On March 4, 2019 the court held oral argument to determine “how sanctions should apply and to what extent.” (See ECF No. 492 at 26; ECF No. 501.)

         As the court discussed in its previous order, the yCRM database “is a tool that Yardi uses to manage its relationships and interactions with its customers and potential customers.” (ECF No. 492 at 4 (citation and internal quotation marks omitted).) Entrata's position throughout this litigation has been that the yCRM data is highly relevant and necessary to accurately evaluate economic issues related to Entrata's antitrust claims against Yardi.[2] (See e.g., ECF No. 171.) The parties' experts analyzed these economic issues in their extensive expert reports. Discussion of some of these economic issues-and each party's position regarding these issues-provides helpful context for resolving this dispute.

         Since Entrata filed its Complaint in February of 2015, it has alleged that there are two distinct markets in this case, at least one of which involves managers of multifamily properties consisting of more than 1, 000 units. In its Complaint, Entrata alleged:

there are separate and distinct product markets for
(a) core property management accounting software products for use in the multi-family housing industry in the United States by “enterprise”-sized property management companies (such as Yardi's Voyager product), which typically manage at least 1, 000 units (“Core Accounting Products” or the “Accounting Product Market”), and
(b) “plug-in” or portal special purpose software products (such as Property Solutions' Point Solution Products) that integrate or interface with the core property management accounting software products, such as Voyager (“Integration Products” or the “Integration Product Market”).

(Compl. ¶ 63, ECF No. 2 at 29-30 (bold added).)

On April 18, 2016, Entrata filed its First Amended Complaint. (ECF No. 55.) In the First Amended Complaint, Entrata alleged:
there are separate and distinct product markets for
(a) core property management accounting software products (such as Yardi Voyager) used in the multi-family housing industry in the United States by “enterprise”-sized property management companies, which typically manage at least 1, 000 units (“Core Accounting Products” or the “Accounting Product Market”), and
(b) “plug-in” or portal special purpose software products (such as Entrata's Point Solution Products) that integrate or interface with the Core Accounting Products
(“Integration Products” or the “Integration Product Market”) in the United States. (Am. Compl. ¶ 96, ECF No. 55 at 40 (bold added).)

         On July 23, 2018, Entrata's expert, Dr. Kearl, submitted his initial Expert Report.[3] In his Expert Report, Dr. Kearl “conclude[d] that the relevant product markets . . . in which to evaluate the monopolization . . . claims in this case are” [1] “the market for Core Property Management Systems for Enterprise Property Managers of Conventional Multifamily properties”[4] and [2] “the market for Suite Integration Products for Enterprise Property Managers of Conventional Multifamily properties that use the Yardi Voyager Core Property Management System.”[5](Expert Report of James R. Kearl, ¶ 35, ECF No. 461-21 at 21 (bold added).) Regarding both markets, Dr. Kearl stated: “unless I otherwise specify, it should be understood I refer to Enterprise-level Conventional Multifamily property managers.” (Expert Report of James R. Kearl, ¶ 35, ECF No. 461-21 at 21.) According to Dr. Kearl, “Enterprise Property Managers” are the managers “at issue in this case, ”-“managers of multifamily properties consisting of more than 1, 000 units.” (Expert Report of James R. Kearl, ¶ 11, ECF No. 461-21 at 7 (bold added).) Thus, from the beginning of this case, Entrata has taken the position that the relevant market is comprised of managers of multifamily properties consisting of at least 1, 000 units.

         On August 27, 2018, Dr. Gordon Rausser, one of Yardi's experts, submitted his Expert Reply Report to Dr. Kearl's July 23, 2018 report. (Expert Reply Report of Gordon Rausser, ¶ 3 ECF No. 461-16 at 7.) In this Reply Report, Dr. Rausser criticized Dr. Kearl's relevant market definitions. (See Expert Reply Report of Gordon Rausser, ¶ 12 ECF No. 461-16 at 11.) Relevant here, Dr. Rausser argued that “Dr. Kearl's proposed accounting platform market is . . . artificially restricted by proposing that property managers of at least 1, 000 units purchase their software in a separate relevant market from those who manage less than 1, 000 units.”[6] (Expert Reply Report of Gordon Rausser, ¶ 12 ECF No. 461-16 at 11 (emphasis in original).) But nowhere in this Expert Reply Report did Dr. Rausser criticize Dr. Kearl for assuming that software used in managing conventional multifamily residential properties is sold in a market different than software used for other types of residential rental properties.

         As the court noted in its previous order, when Dr. Kearl wrote his July 2018 Expert Report, Yardi had not yet disclosed all of the relevant yCRM data. (See ECF No. 492 at 10.) Yardi had only “produced yCRM data showing the companies” that Yardi “categorized as multi-family . . . .” (ECF NO. 461-5 at 3.) In its May 2018 production, Yardi did not disclose those Portfolios it categorized as “niche”-even if those Portfolios contained multi-family units. (See ECF No. 492 at 13-14.) And, as previously discussed, Yardi had not yet disclosed the data containing a “prior system field” in what it would eventually label “PORTFOLIO2.” (See ECF No. 492 at 16.) At the March 4, 2019 hearing, Entrata's counsel stated that Yardi's production was incomplete for two distinct reasons. First, it was incomplete because it was “missing companies.” Second, it was incomplete because it was “missing fields, ” or ...


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