Expert Opinion Excluded as "Mere Wishful Thinking"

An intellectual property expert witness who has argued for using more “creative methods” in valuations has had his own expert opinion excluded as “mere wishful thinking” by a California trial court. The California Court of Appeals agreed, calling it “hypothetical conjecture.”

In Olive v. Gen. Nutrition Ctrs., Inc., an advertising model won $1.1 million after a trial court determined that General Nutrition Centers Inc. (GNC) used the image of model Jason Olive in its ad campaign after the licensing agreement had expired.

Both Olive and GNC were disappointed in the award, and each appealed both the judgment and the order denying prevailing party attorney fees. Olive contended, among other issues, the trial court erred in excluding his expert witnesses. GNC contended it should have been deemed the prevailing party.

Originally, GNC had contracted photographer Peter Arnell for a photo shoot in September 2010 for it new “Live Well” campaign. Arnell cast some 16 models, including Olive, and secured the release agreements which lasted for one year, with a right to a one-year renewal.

In September 2010, GNC secured a second release to use Olive‘s image on it's company trucks and vehicles, which was valid until December 31, 2021.

In May 2011, GNC decided to pursue a new photo shoot with new models, and it terminated its relationship with Arnell. GNC declined to renew the release agreement with Olive, and in January 2012 Olive‘s agent emailed GNC to confirm it was no longer entitled to use Olive's image.

The GNC marketing employee in charge of handling the releases did not respond to Olive‘s agent, but did inform GNC's marketing VP that some releases were expiring. While GNC was initially unaware the releases had expired, after discovering it, GNC negotiated extensions with every model except Olive, although it continued trying for some time. In December 2012, GNC removed Olive's image from all of its marketing materials.

It was not clear to the trial court exactly when the release expired, but both GNC and Olive agreed that it expired sometime in late 2011 or early 2012.

Olive sued, alleging misappropriation of likeness and seeking restitution for unjust enrichment. He engaged Weston Anson, Leonard Lyons and Jeff Anderson as his intellectual property expert witnesses to opine on damages and apportion GNC's profits.

Weston Anson opined that one to three percent of GNC's revenue was attributable to the unauthorized use of Olive's likeness. (GNC's revenue in 2012 was approximately $2.4 billion.) Anson based his opinion on:

• an analysis of various celebrity royalty agreements,
• a statement by GNC's CEO, Joe Fortunato, that in-store merchandising impacts the company's sales by zero to one percent, and
• GNC's increase in revenue during the subject period of time.

The trial court found this methodology flawed. The appellate court agreed, finding:

• Anson compared the royalty agreements of internationally famous celebrities — Joe Namath, George Foreman, Kathy Ireland, Paris Hilton, Barry Bonds, Michael Jordan, etc. — with Olive who had no such degree of celebrity. The fatal flaw, the appellate court found, was Anson‘s attempt to compare those celebrities, who acted as company spokespersons and provided their celebrity endorsements, with the limited use of Olive's image and its licensing.
• Anson also failed by taking Fortunato‘s statement of sales impact out-of-context to support his conclusion that at least one percent of GNC's revenues came from its unauthorized use of Olive's image. Olive was only one of number of models used in only one of of GNC's in-store marketing campaigns, but Anson did not apportion any revenues to other models or campaigns.
• Anson assumed GNC's annual growth rate was the result of its unauthorized use of Olive's image without any evidence, the appellate court found. Anson, it said, did not consider "GNC's pricing promotions, general sales in the vitamin and supplement industry, employee sales promotions, GNC's other marketing efforts, and the impact of professional athletic “ambassadors” used by GNC.

Finding Anson‘s opinion “hypothetical conjecture”, the appellate court upheld the trial court's exclusion of Anson's opinion. Since Lyons' opinion was based on Anson's calculations, it too was excluded. Jeff Anderson was never called to testify.

The jury awarded Olive $213,000 in actual damages and $910,000 in emotional distress damages. The trial court, noting that both parties were visibly disappointed at the jury verdict, and that “the jury accepted neither side's recommendation but instead awarded a middling sum amounting to a tie,” found that there was no prevailing party.

“Creative methods” may sound enticing to a client when such expert opinions generate a more favorable result for the client, but they have to have some factual support and some reasonable methodology.

Olive v. Gen. Nutrition Ctrs., Inc., 2018 BL 479914, Cal. Ct. App., 2d Dist., No. B279490, 12/27/18