Court filing
Exhibit 1 to Hayden Schottlaender - Redacted- Publicly Filed… — Brooks v. Thomson Reuters Corporation (Dkt. 187.1)
Filed March 28, 2023 in Brooks v. Thomson Reuters Corporation; one of 127 filings from this case.
Record facts
| Court | U.S. District Court for the Northern District of California |
|---|---|
| Filed | 2023-03-28 |
U.S. District Court for the Northern District of California · No. 3:21-cv-01418-EMC · Doc. 187-1 · 2023-03-28 · Docket on CourtListener
Full text
EXHIBIT 1
REDACTED - PUBLICLY FILED VERSION OF DOC. 157-7
PURSUANT TO COURT ORDER,
DATED MARCH 21, 2023 (DOC. 179)
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UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
SAN FRANCISCO DIVISION
______________________________
CAT BROOKS and RASHEED )
SHABAZZ, individually and on )
behalf of all others )
similarly situation, )
)
Plaintiffs, ) Civil No.
) 3:21-cv-01418-EMC
v. )
)
THOMSON REUTERS )
CORPORATION, )
) Hon. Edward M. Chen
Defendant. )
______________________________)
DEPOSITION OF TERRY LLOYD
August 22, 2022 9:18 a.m.
Location: DEPOSITION BY VIDEOCONFERENCE
Reported by:
HEIDI HUNTER, RPR, CSR
______________________________________________________
DIGITAL EVIDENCE GROUP
1730 M Street, NW, Suite 812
Washington, D.C. 20036
(202) 232-0646
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1
A P P E A R A N C E S
2
FOR THE PLAINTIFF:
3
Amy Zeman
4
Andre M. Mura
5
Ezekiel S. Wald
6
GIBBS LAW GROUP
7
Attorneys at Law
8
505 14th Street, Suite 1110
9
Oakland, CA 94612
10
Email: amz@classlawgroup.com
11
12
FOR THE DEFENDANT:
13
Hayden M. Schottlaender
14
Susan D. Fahringer
15
Kayla Lindgren
16
PERKINS COIE, LLP
17
Attorneys at Law
500 N Akard Street, Suite 3300
18
Dallas, TX 75201
Email: hschottlaender@perkinscoie.com
19
20
21
22
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We go into some detail defining incremental
2
cost, incremental profit, variable costs, things like
3
that. And, again, I realize these aren't maybe things
4
people are comfortable with or know from every day
5
experience, and I apologize if I wasn't sufficiently
6
clear, no pun intended, on the explanation of the
7
calculations.
8
But our approach, our work was to identify a
9
reliable framework and then follow that framework
10
through with a calculation based on the best available
11
data to date as the date of the report.
12
Q (By Mr. Schottlaender) Could you describe
13
again the measure of -- you used the phrase "measure
14
of unjust enrichment," and I'm wondering what that
15
mean to you. What is the measure of unjust
16
enrichment?
17
A I may have conflated two terms. But what
18
we're calculating is the measure of damages, and that
19
is unjust enrichment which we have calculated as the
20
incremental or marginal profit on the use of data for
21
California natural persons by CLEAR.
22
Q Are the terms "incremental" and "marginal
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profit," are those synonymous?
2
A Generally. And I'll refer to my report, at
3
the bottom of page 7, I state: "The measure of
4
profitability called 'net profit' by the
5
Restatement" -- the source I quoted earlier in the
6
report -- "and authorities is what an accountant or
7
financial analyst would more likely call 'gross
8
margin,' 'gross profit,' or 'incremental profit.'
9
"In other words, speaking generically rather
10
than about CLEAR specifically, the concept refers to
11
the difference between the sales price of additional
12
units and the costs required to produce the additional
13
units, that is the 'marginal' or 'incremental profit'
14
from selling an additional unit."
15
For purposes of this report I have used them
16
interchangeably. As I noted in the report, there
17
might be variations depending on the user or the
18
definition or the circumstances. Marginal,
19
incremental, and variable in my mind for this purpose
20
are synonymous, and I've used them that way here.
21
Q But the terms "gross profit" and "net
22
profit" would not be synonymous to an accountant;
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right?
2
A No, they -- no, sir, they would not -- well,
3
depending on the accountant you spoke with, those are
4
not synonymous under GAAP, or general accepted
5
accounting principles.
6
There would be a rare case where a gross
7
profit might be a net profit where somebody had no
8
operational costs. There's also a whole other world
9
in accounting for cannabis where the taxable profits
10
are the gross profits and not the net profits.
11
So there will be some exceptions, but
12
generally speaking, gross profit and net profit are
13
different things.
14
Q And for the nonaccountant, can you explain
15
the difference between gross profit and net profit.
16
A Let's start with a generic and go to
17
specifics. Generally speaking, gross profit is the
18
amount of profit that remains after you sell a thing.
19
I use in the report and in other places the
20
example of a gallon of milk. If I go into the grocery
21
store and buy a gallon of milk for $3 and it costs the
22
grocery store 2.50 to get that gallon milk into the
There would be a rare case where a gross
7
profit might be a net profit where somebody had no
8
operational costs.
So there will be some exceptions, but
12
generally speaking, gross profit and net profit are
13
different things.
6
11
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back of the refrigerated unit, their gross profit on
2
that is 50 cents.
3
The net profit on that would have to reflect
4
other operating costs like electricity to keep it
5
chilled, the cost of insurance for the store, other
6
overhead or fixed costs or operational costs.
7
Generally speaking, the difference between gross and
8
net are operating costs, many of which are fixed.
9
That's consistent with GAAP, generally consistent with
10
tax.
11
Again, depending on the analyst or
12
accountant you asked, or the cost accountant, that
13
becomes a different question.
14
I mentioned cannabis because under a quirk
15
of the tax code, the only costs cannabis
16
plant-touching entities can deduct are their direct or
17
costs of goods sold. So there's a whole mini industry
18
in packing as much as possible into that cost of goods
19
sold number which otherwise would be considered
20
operating costs.
21
Q And in this case, did you calculate gross
22
profits for CLEAR or net profits for CLEAR?
Q
And in this case, did you calculate gross
22
profits for CLEAR or net profits for CLEAR?
21
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A We calculated the gross profits as I
2
describe. Now, the term, again, is -- the bottom of
3
page 7, the Restatement refers to those as net
4
profits, but the Restatement -- the Restatement's
5
definition of net profits is consistent with gross
6
profits or gross margin or incremental profits.
7
So the Restatement uses a different
8
definition than what most of the rest of us would
9
describe as being the definition of net profits. The
10
restatement does not rely on GAAP or any other source.
11
Q Yeah. You refer to the restatement here,
12
and then you say "and other authorities." Do you know
13
what other authorities you're relying on here?
14
A Yeah. There's a variety of texts or
15
treatises or sources, including some that I have
16
published, that describe gross margins or incremental
17
profits as a measure of enrichment, lost profits,
18
unjust enrichment, things like that.
19
Q Are those other authorities that you relied
20
on for that proposition listed in your Appendix A?
21
A Yes, sir, they are.
22
Q Where would that be?
A
We calculated the gross profits as I
2
describe. Now, the term, again, is -- the bottom of
3
page 7, the Restatement refers to those as net
4
profits, but the Restatement -- the Restatement's
5
definition of net profits is consistent with gross
6
profits or gross margin or incremental profits.
7
So the Restatement uses a different
8
definition than what most of the rest of us would
9
describe as being the definition of net profits. The
10
restatement does not rely on GAAP or any other source.
Q
Yeah. You refer to the restatement here,
12
and then you say "and other authorities." Do you know
13
what other authorities you're relying on here?
A
Yeah. There's a variety of texts or
15
treatises or sources, including some that I have
16
published, that describe gross margins or incremental
17
profits as a measure of enrichment, lost profits,
18
unjust enrichment, things like that.
1
11
14
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A I'll start with page 13, about halfway
2
down -- 60 percent of the way down is the Barrett and
3
Herwitz text, which discuss the concept of -- this is
4
page 13 of Appendix A. The Barrett text. As I
5
recall, the Master Lease v. Idanta Partners case makes
6
reference to that.
7
Q Wait. Sorry. Let's slow down a little bit.
8
This Barrett text, what does the Barrett
9
text say for which you rely upon for this opinion?
10
A Well, the Barrett text talks about
11
accounting, including cost accounting, and a
12
definition of gross profits or gross margin, things
13
like that, among other places -- among other topics.
14
Q Does it say that the proper measure for
15
unjust enrichment is gross profit not net profit?
16
A I don't believe it says that. I understood
17
your question to be other authoritative sources that
18
address that question.
19
Q Well, let's be more specific with our
20
language, then, rather than saying "that question."
21
I'm referring to a sentence in your report
22
that says: "The measure of profitability called 'net
19
Q
Well, let's be more specific with our
20
language, then, rather than saying "that question."
21
I'm referring to a sentence in your report
22
that says: "The measure of profitability called 'net
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profit' by the Restatement and other authorities is
2
what the" -- "what an accountant or financial analyst
3
would most likely call gross margin, gross profit, et
4
cetera."
5
And so my question is, what authorities are
6
you relying on that say that for these purposes, which
7
is the calculation of unjust enrichment, that net
8
profit is the same -- that when they say "net profit,"
9
they actually mean "gross profit"?
10
MS. ZEMAN: Objection to form.
11
A Let me see if I can help you there.
12
To answer your question, I'll take you back
13
to page 3, Footnote 4 of my report, where I identify
14
the Restatement and the Master Lease case and others
15
as the source -- or what I understand to be the
16
definition of net profits here.
17
What the Restatement calls net profits is
18
what other sources or authors or cases would refer to
19
as gross profit or gross margin. The sources I was
20
citing in the appendix when you interrupted were those
21
that define or explain gross profit or gross margin
22
consistent with what the Restatement calls net
1
profit' by the Restatement and other authorities is
2
what the" -- "what an accountant or financial analyst
3
would most likely call gross margin, gross profit, et
4
cetera."
5
And so my question is, what authorities are
6
you relying on that say that for these purposes, which
7
is the calculation of unjust enrichment, that net
8
profit is the same -- that when they say "net profit,"
9
they actually mean "gross profit"?
10
MS. ZEMAN: Objection to form.
11
A
Let me see if I can help you there.
12
To answer your question, I'll take you back
13
to page 3, Footnote 4 of my report, where I identify
14
the Restatement and the Master Lease case and others
15
as the source -- or what I understand to be the
16
definition of net profits here.
What the Restatement calls net profits is
18
what other sources or authors or cases would refer to
19
as gross profit or gross margin.
17
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use that term?
2
A No, sir. That is net profits as defined by
3
the Restatement and those other cases. As I go into
4
some detail in the report explaining what the
5
Restatement defines as net profit, I interpret or
6
understand to be gross margin or gross profit, so the
7
net profit I'm referring to here is what an accountant
8
or an analyst would call gross profit or gross margin.
9
Q So any time you have used the term "net
10
profit" in this report, that is actually what an
11
accountant would consider gross margin; correct?
12
A No, sir --
13
MS. ZEMAN: Objection.
14
A -- that is not correct.
15
Q (By Mr. Schottlaender) You just said that
16
when you said the term profits on page 19 for your
17
conclusion, that is what an accountant would refer to
18
as gross profits; right?
19
A That is not what I said.
20
Q Okay. Then try again because I'm not
21
getting it.
22
A If you can ask the question --
4
what the
5
Restatement defines as net profit, I interpret or
6
understand to be gross margin or gross profit,
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mean was the correct one, but yeah, I had some heart
2
palpitations there.
3
There is no weighing of one of these figures
4
over the other, it's just the simple average between
5
them; correct?
6
A That is how the math works. We gave equal
7
weighting to both numbers.
8
Q Are there any other numbers that you believe
9
should have been incorporated into this calculation
10
for California-allocated revenues?
11
A I didn't start out by phrasing it as "should
12
have." I started out by attempting to measure the
13
economic component of the CLEAR product using economic
14
indices or proxies and the legal side of the CLEAR
15
product, and so we surveyed a wide variety of data or
16
attempted to find a wide variety of data we thought
17
could speak to the legal usage or the legal component
18
of this data.
19
Again, as it relates to California natural
20
persons, we couldn't find anything that we thought to
21
be more reliable than arrest records. To my
22
knowledge, you can't arrest a corporation or a
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nonnatural person. The GDP number we felt very
2
confident in. But we started out, cast the net wide
3
and said, "What will tell us about the economic
4
features of this data or the economic features of the
5
data on California natural persons and what index or
6
measure will tell us about the legal aspects of
7
California natural persons?"
8
Q Is CLEAR used more for law enforcement
9
investigations or for economic activity?
10
A I don't know, but those two could overlap.
11
Those two could be the same thing on some occasions.
12
Q Was that a relevant consideration for your
13
methodology?
14
A We contemplated it. But again, given the
15
overlap, we didn't attempt to parse it that finally.
16
Q So for instance, because a California law
17
enforcement agency might investigate financial fraud,
18
then that overlap is a reason for you to not determine
19
which CLEAR usage is more prominent?
20
A I think what you said is fair. Again, there
21
might not be a difference between those two usages in
22
some cases. But as we read how CLEAR was
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represented -- and again, it could just be an arrest
2
record or an arrest issue, but where data on
3
somebody's criminal history speaks to fraud or some
4
other economic activity, those two become one.
5
Q Do you believe that an arrest rate is a
6
proxy for CLEAR usage by law enforcement?
7
A I believe it's a proxy within this existing
8
framework. As of now, to give us an idea of the legal
9
aspect of the data used on Californians, again, I've
10
cited to a couple of cases, or a couple of quotes in
11
my report about the use of CLEAR data in
12
investigations, fraud, know your customer, anti-money
13
laundering, things like that.
14
Q I got lost in that answer. What is your
15
correlation between arrest rates and CLEAR use by law
16
enforcement?
17
A I don't know that we ever said there was.
18
We're attempting to estimate the apportionment, or the
19
share of California data that goes into the total U.S.
20
dataset aggregated by Thomson Reuters in the CLEAR
21
product.
22
Q The way that you started that answer was "I
5
Q
Do you believe that an arrest rate is a
6
proxy for CLEAR usage by law enforcement?
7
A
I believe it's a proxy within this existing
8
framework. As of now, to give us an idea of the legal
9
aspect of the data used on Californians, again, I've
10
cited to a couple of cases, or a couple of quotes in
11
my report about the use of CLEAR data in
12
investigations, fraud, know your customer, anti-money
13
laundering, things like that.
14
Q
I got lost in that answer. What is your
15
correlation between arrest rates and CLEAR use by law
16
enforcement?
17
A
I don't know that we ever said there was.
18
We're attempting to estimate the apportionment, or the
19
share of California data that goes into the total U.S.
20
dataset aggregated by Thomson Reuters in the CLEAR
21
product.
22
Q
The way that you started that answer was "I
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don't know that there was." And so what I'm
2
interpreting from that is you don't know that there is
3
a correlation between arrest rates and CLEAR use by
4
law enforcement?
5
MS. ZEMAN: Objection to form.
6
A I don't know that there is or not. It's not
7
a question we attempted to answer. We use the arrest
8
rates as a proxy for the legal component of the CLEAR
9
product.
10
Q (By Mr. Schottlaender) Is it possible that
11
CLEAR -- CLEAR's use as a product itself affects
12
arrest rates?
13
A That's an interesting question. I don't
14
know. It could. But that's not something I looked
15
into or was asked to.
16
Q Okay. So to summarize the last 5 minutes,
17
you did not look into the correlation between arrest
18
rates and CLEAR use by law enforcement, and you did
19
not consider or look into whether the use of CLEAR by
20
law enforcement itself impacts arrest rates; correct?
21
A I don't know that that data exists. I did
22
not look at or look for it. I don't know that it even
1
don't know that there was." And so what I'm
2
interpreting from that is you don't know that there is
3
a correlation between arrest rates and CLEAR use by
4
law enforcement?
5
MS. ZEMAN: Objection to form.
6
A
I don't know that there is or not. It's not
7
a question we attempted to answer. We use the arrest
8
rates as a proxy for the legal component of the CLEAR
9
product.
10
Q
(By Mr. Schottlaender) Is it possible that
11
CLEAR -- CLEAR's use as a product itself affects
12
arrest rates?
13
A
That's an interesting question. I don't
14
know. It could. But that's not something I looked
15
into or was asked to.
16
Q
Okay. So to summarize the last 5 minutes,
17
you did not look into the correlation between arrest
18
rates and CLEAR use by law enforcement, and you did
19
not consider or look into whether the use of CLEAR by
20
law enforcement itself impacts arrest rates; correct?
21
A
I don't know that that data exists. I did
22
not look at or look for it.
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exists.
2
Q So the answer is correct?
3
A I'll stand by the answer I gave you.
4
Q I don't want the answer you gave me. I want
5
you to answer my question. My question is: Is it a
6
correct summary to say that you did not look into --
7
do not opine on the correlation between CLEAR usage
8
and arrest rates or nor did you look into whether
9
CLEAR's usage by law enforcement itself might impact
10
those arrest rates; is that correct?
11
MS. ZEMAN: Objection. Form.
12
A No.
13
Q (By Mr. Schottlaender) What is not correct?
14
A The correct response is what I gave you
15
previously.
16
Q That's not good enough. I want you to tell
17
me again what is not correct about my answer -- or my
18
question.
19
MS. ZEMAN: Objection. Form.
20
A Your question, at least at the tail end, was
21
whether or not I looked into the existence of a
22
correlation between arrests and inquiries on arrest
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rate records to which I said I do not even know if
2
such a correlation exists, so whether or not it exists
3
is fundamental or foundational to my attempting to
4
evaluate that.
5
Q (By Mr. Schottlaender) My question is: Did
6
you evaluate that? And you're saying I don't know if
7
it exists. So obviously you don't know if it exists
8
because you never went to go look for it. That's what
9
I'm asking.
10
So you never went to go look at whether
11
there's an impact on arrest rates from the usage of
12
clear to begin with; right?
13
MS. ZEMAN: Objection.
14
A I did not look at that. I do not know if
15
such data or correlation exists.
16
Q (By Mr. Schottlaender) You might know if you
17
had gone to look for it.
18
MS. ZEMAN: Objection to form.
19
Q (By Mr. Schottlaender) Wouldn't both
20
economic and -- sorry. Wouldn't both economic
21
activity and arrest rate be correlated to the number
22
of Californians in a state -- in the state at any
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anything about pinning?
2
A The premise to your question is erroneous.
3
My lawyers never looked at this stuff.
4
Q I'm sorry. The plaintiff's lawyer referred
5
to this concept in that deposition as pinning. Does
6
pinning ring a bell?
7
A Yes, sir, it does.
8
Q Okay. So let's say that Thomson Reuters
9
engages in pinning data to subjects so that the data
10
can be queried later on.
11
Do you understand that premise?
12
A I believe I do, yes, sir.
13
Q Are any of Thomson Reuters' revenues
14
attributable to actions like that, pinning the data or
15
making it "queriable"?
16
A An interesting question. I don't know that
17
I'm more qualified than anyone else to speak to that.
18
Q You're a damages expert in this case; right?
19
A I've been designated as such.
20
Q And your damages opinion has to do with the
21
disgorgement of profits for the CLEAR product; right?
22
A The disgorgement -- the potential
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disgorgement of net profits as defined.
2
Q Which relies on a calculation of allocated
3
revenues; right?
4
A And marginal costs.
5
Q Okay. So you do not have an opinion about
6
whether or not search activities undertaken by Thomson
7
Reuters such as pinning at all affect revenues?
8
MS. ZEMAN: Objection.
9
A It's not a question I was asked to address.
10
My treatment of costs and value are contained in my
11
report. I focused my analysis on incremental or
12
marginal costs related to the access and use of data
13
on California natural persons during the damage
14
period.
15
Q (By Mr. Schottlaender) And I'm not talking
16
about costs. I'm strictly revenue side right now.
17
And I'm wondering: Does your methodology account for
18
allocating any portion of Thomson Reuters' CLEAR
19
revenues to Thomson Reuters' activity such as pinning,
20
sorting, making queriable, brand, any other components
21
like that?
22
A Yes.
Okay. So you do not have an opinion about
6
whether or not search activities undertaken by Thomson
7
Reuters such as pinning at all affect revenues?
It's not a question I was asked to address.
And I'm not talking
16
about costs. I'm strictly revenue side right now.
17
And I'm wondering: Does your methodology account for
18
allocating any portion of Thomson Reuters' CLEAR
19
revenues to Thomson Reuters' activity such as pinning,
20
sorting, making queriable, brand, any other components
21
like that?
A
Yes.
15
22
5
Q
A
9
Q
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Q How so?
2
A We captured the total revenue attributable
3
to CLEAR as reported to us by Thomson Reuters. Their
4
generation of that revenue relies on all the factors
5
you identified plus possibly others, but our use of
6
revenue reflects all of those activities, all of that
7
data.
8
Q Okay. But we just went through this line of
9
questioning where you agreed that if you performed
10
your methodology for every state and territory, you
11
would be capturing 99 percent of total worldwide CLEAR
12
revenues.
13
And so I'm asking: How does your
14
methodology account for an allocation to Thomson
15
Reuters' secret sauce of its product?
16
MS. ZEMAN: Objection to form.
17
A Two problems with that question. First of
18
all, you misstated my prior testimony. I said based
19
on a limited hypothetical that you identified,
20
conceptually all of the allocation, if I disaggregate
21
all of the revenue and add it back up, it should equal
22
the total. Some of the parts should equal the whole,
Q
How so?
Their
4
generation of that revenue relies on all the factors
5
you identified plus possibly others,
How does your
14
methodology account for an allocation to Thomson
15
Reuters' secret sauce of its product?
1
3
13
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based on your limited hypothetical.
2
Secondly, I was never asked to address the
3
drivers of revenue or the attributes of revenue across
4
data or other activities or things like that. I
5
focused on the gross revenue generated by the CLEAR
6
product as attributed to California natural persons
7
and subtracted out the marginal costs to come to my
8
conclusion. I was not asked nor did I independently
9
undertake to disaggregate the components or the
10
attributes or drivers of revenue.
11
Q (By Mr. Schottlaender) Do you have an
12
opinion on whether the data made available through
13
CLEAR constitutes the entire value of CLEAR as a
14
product?
15
A That's not an opinion I was asked to
16
undertake or a question I was asked to answer.
17
Q So the value of CLEAR as a product and what
18
constitutes the value of CLEAR as a product is not
19
accounted for in your methodology. Is that fair to
20
say?
21
MS. ZEMAN: Objection.
22
A No, that's not fair to say.
2
Secondly, I was never asked to address the
3
drivers of revenue or the attributes of revenue across
4
data or other activities or things like that. I
5
focused on the gross revenue generated by the CLEAR
6
product as attributed to California natural persons
7
and subtracted out the marginal costs to come to my
8
conclusion. I was not asked nor did I independently
9
undertake to disaggregate the components or the
10
attributes or drivers of revenue.
11
Q
(By Mr. Schottlaender) Do you have an
12
opinion on whether the data made available through
13
CLEAR constitutes the entire value of CLEAR as a
14
product?
15
A
That's not an opinion I was asked to
16
undertake or a question I was asked to answer.
17
Q
So the value of CLEAR as a product and what
18
constitutes the value of CLEAR as a product is not
19
accounted for in your methodology. Is that fair to
20
say?
21
MS. ZEMAN: Objection.
22
A
No, that's not fair to say.
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Q (By Mr. Schottlaender) Because revenues
2
account for that valuation, is that what you were
3
going to say?
4
MS. ZEMAN: Objection.
5
A Are you asking me to predict what I would
6
have said?
7
Q (By Mr. Schottlaender) My question is, your
8
method- -- is it your testimony that your methodology
9
accounts for valuation of CLEAR as a product
10
exclusively through the means -- the mechanism that
11
you identified for calculating revenue?
12
A I'm sorry. Can I have that one again?
13
Q CLEAR as a product has data as a component
14
of its value, the accessibility of data as a component
15
of its value. Do you agree with that premise?
16
A I agree with that premise.
17
Q And CLEAR as a product has nondata
18
attributes that contribute to its value as well. Do
19
you agree with that premise?
20
MS. ZEMAN: Objection.
21
A I agree that it's possible.
22
Q (By Mr. Schottlaender) And just for the sake
CLEAR as a product has data as a component
14
of its value, the accessibility of data as a component
15
of its value. Do you agree with that premise?
I agree with that premise.
And CLEAR as a product has nondata
18
attributes that contribute to its value as well. Do
19
you agree with that premise?
I agree that it's possible.
And just for the sake
13
Q
16
A
17
Q
21
A
22
Q
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of keeping this conversation flowing, some of those
2
nondata attributes, by way of example, would be brand,
3
the pinning, the queriability of the data, those sorts
4
of things.
5
Are you with me so far? I'm not asking you
6
to agree that those are -- that those do have value.
7
I'm asking you to -- if you understand what I say
8
nondata components of the value of CLEAR, that that is
9
what I'm talking about.
10
So do you understand what I mean when I say
11
nondata components for the value of CLEAR?
12
A Yes, sir, I believe I do.
13
MS. ZEMAN: We've been going for like an
14
hour and 15, could we take just a 5-minute break to
15
freshen up?
16
MR. SCHOTTLAENDER: In a little bit, yeah.
17
Shortly.
18
MS. ZEMAN: I don't hear a question pending
19
so I think now should be fine.
20
MR. SCHOTTLAENDER: I'm in the middle of my
21
line --
22
MS. ZEMAN: Am I mistaken, is there a
of keeping this conversation flowing, some of those
2
nondata attributes, by way of example, would be brand,
3
the pinning, the queriability of the data, those sorts
4
of things.
Are you with me so far? I'm not asking you
6
to agree that those are -- that those do have value.
7
I'm asking you to -- if you understand what I say
8
nondata components of the value of CLEAR, that that is
9
what I'm talking about.
So do you understand what I mean when I say
11
nondata components for the value of CLEAR?
12
A
Yes, sir, I believe I do.
1
5
10
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attributable to a state is not correlated to GDP --
2
percentage of GDP that that jurisdiction represents in
3
the country?
4
A I'm sorry. You lost me with that question.
5
Q Let's -- let's simplify your model as a
6
hypothetical. Let's say you only took GDP --
7
percentage of GDP, and so we're at like 14.6 percent.
8
And GDP can be broken up, of course, for each state
9
plus D.C. And the final -- you know, of course, the
10
GDP final percentage, you're at 100 percent GDP,
11
that's the nation's GDP, that's where you derive your
12
14.6 percent from.
13
Are you with me so far?
14
A Yes, sir.
15
Q Okay. And again, assuming that what you had
16
done here was allocated revenues just based on that
17
GDP percentage, then if you did that for every other
18
U.S. state and territory, then the result would be --
19
if you added all of those up, because you have a
20
100 percent of GDP, you would have allocated
21
100 percent of CLEAR revenues; right?
22
A If that's the methodology I used. If I had
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100 percent of the U.S. revenues broken out by state
2
and I multiply those percentages by CLEAR domestic
3
revenues, then I added up that resulting calculation,
4
that would total CLEAR's total revenue. The total
5
revenue by state would equal the total domestic
6
revenue. That's basic math.
7
Q And where we left off before the break is
8
that CLEAR has some nondata value components in its
9
valuation, yes? Do you remember that conversation?
10
A I remember that conversation.
11
Q Under that methodology we just described,
12
the simplified one where we're just using the GDP
13
percentage, if CLEAR's revenues were apportioned to
14
each jurisdiction in that way so that now 100 percent
15
of CLEAR gross revenue has been distributed, or
16
allocated out, in that methodology, Thomson Reuters
17
would have retained zero revenues that it might have
18
derived from the nondata valuation -- nondata value
19
components; right?
20
A No.
21
Q And the answer was no?
22
A The answer is no. You're comparing an apple
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to an orange grove.
2
Q How so?
3
A In the first case, in your simplified
4
hypothetical, by allocating total revenues by state
5
GDP, we still get 100 percent of domestic GDP broken
6
out by state.
7
Your question related to the revenue driver
8
or attribute, what your client calls its secret sauce,
9
back against that data. Those are two different
10
things.
11
One is to allocate revenue across the state
12
by GDP, the other is an attempt to disaggregate
13
revenue by its various components, the things you
14
identified, data, brand, visualizations, things like
15
that. Those are two different things.
16
Q Right. And your formula accounts for the
17
former but not the latter. It analyzes revenues in
18
the aggregate, it does not parse out what components
19
of the product have value or do not have value?
20
A And I apologize if I wasn't clear the prior
21
times you asked me this question, but the answer to
22
your question is no, I did not disaggregate revenue by
3
A
In the first case, in your simplified
4
hypothetical, by allocating total revenues by state
5
GDP, we still get 100 percent of domestic GDP broken
6
out by state.
7
Your question related to the revenue driver
8
or attribute, what your client calls its secret sauce,
9
back against that data. Those are two different
10
things.
11
One is to allocate revenue across the state
12
by GDP, the other is an attempt to disaggregate
13
revenue by its various components, the things you
14
identified, data, brand, visualizations, things like
15
that. Those are two different things.
16
Q
Right. And your formula accounts for the
17
former but not the latter. It analyzes revenues in
18
the aggregate, it does not parse out what components
19
of the product have value or do not have value?
20
A
And I apologize if I wasn't clear the prior
21
times you asked me this question, but the answer to
22
your question is no, I did not disaggregate revenue by
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its various drivers or which databases may or may not
2
have added more value or have more access or how
3
important marketing was or how important the
4
visualization feature was.
5
I did not attempt to break out revenue or
6
revenue drivers by those components. I was not asked
7
to do that, and it's not relevant to my calculation.
8
Q Let's move on to costs. You analyzed
9
marginal costs in this case; is that right?
10
A Yes, sir, that is correct.
11
Q What are marginal costs generally speaking?
12
A Well, I could drag you through Section 3
13
starting on page 14. Or in the interest of time, I
14
can try and summarize that.
15
As I mention there, marginal costs or
16
incremental costs or variable costs or direct costs
17
for my purposes here are the same thing, and that is
18
the incremental or additional cost required to sell an
19
additional unit.
20
There is a very good summarized definition
21
of that. Page 14 starts the calculation, but the
22
description of the concept actually starts back
1
its various drivers or which databases may or may not
2
have added more value or have more access or how
3
important marketing was or how important the
4
visualization feature was.
I did not attempt to break out revenue or
6
revenue drivers by those components. I was not asked
7
to do that, and it's not relevant to my calculation.
5
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A I believe the flat fee is more prevalent.
2
Q The subscription usage?
3
A That's my understanding.
4
Q Okay. So what is a marginal transaction in
5
the subscription arrangement?
6
A I don't know that I ever looked at that
7
question.
8
Q Well, you're calculating marginal revenue.
9
And so one component of that is defining your marginal
10
unit so that you can attribute the revenue in the
11
first place. Where -- what is the unit? Is it a
12
search?
13
A The premise to your question is incorrect.
14
I didn't calculate marginal revenues. I calculated
15
total revenues derived by CLEAR using data on
16
California persons, and then calculated the marginal
17
or incremental cost related to producing that revenue.
18
Q Right. Because you used an allocation
19
method for revenue and you used an incremental cost
20
basis on the cost side. So I guess I'll stick with
21
cost.
22
For determining incremental cost, what was
8
Q
Well, you're calculating marginal revenue.
9
And so one component of that is defining your marginal
10
unit so that you can attribute the revenue in the
11
first place. Where -- what is the unit? Is it a
12
search?
13
A
The premise to your question is incorrect.
14
I didn't calculate marginal revenues. I calculated
15
total revenues derived by CLEAR using data on
16
California persons, and then calculated the marginal
17
or incremental cost related to producing that revenue.
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2
REPORTER'S CERTIFICATE
3
STATE OF UTAH )
4
COUNTY OF SALT LAKE )
5
6
I, Heidi Hunter, RPR, CCR, for the state
7
of Utah.
8
That the foregoing proceedings were taken
before me at the time and place set forth in the
9
caption hereof; that the witness was placed under
oath to tell the truth, the whole truth, and nothing
10
but the truth.
That I thereafter transcribed my said
11
shorthand notes into typing and that the typewritten
transcript of said deposition is a complete, true
12
and accurate transcription of my said shorthand
notes taken at said time.
13
I further certify that I am not a relative
employee, attorney, or counsel of any of the parties
14
nor am I a relative or employee of any of the
parties' attorney or counsel connected with the
15
action, nor am I financially interested in the
action.
16
17
18
19
20
________________________________
21
Heidi Hunter, RPR, CCR
22
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