Corporate Parent May Not Claim Inexorable-Flow of Profits From Subsidiary Based Solely on Ownership and Control

The district judge overruled defendants' objection to the magistrate judge's order denying defendants' motion to compel the production of documents regarding plaintiff's financial relationship with its subsidiary. "The Court finds it prudent at this stage to make clear its expectations going forward, based on the Court’s recent experience with the inexorable-flow theory of lost-profits damages in patent cases. . . . [Plaintiff] cannot rely merely on its ownership and control of [its subsidiary] (or on [its subsidiary's] tax status) to prove that [the subsidiary's] profits flow inexorably to [plaintiff]. Additionally, any expert opinion that [the subsidiary's] profits flow inexorably to [plaintiff] must be based on more than [its] ownership and control of [the subsidiary]. . . . The Court also expects [plaintiff's] damages expert’s opinions -- including any opinion that [the subsidiary's's] profits flow inexorably to [plaintiff] -- to be based on sufficient facts or data, according to the standard articulated above and without reliance on any unproduced documents."

Polaris Industries Inc. v. Arctic Cat, Inc. et al, 0-15-cv-04129 (MND July 3, 2018, Order) (Tunheim, USDJ)