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General Steel Domestic Sales, LLC v. Chumley

United States District Court, D. Colorado

June 2, 2015

GENERAL STEEL DOMESTIC SALES, LLC, d/b/a GENERAL STEEL CORPORATION, a Colorado limited liability company, Plaintiff,
v.
ETHAN DANIEL CHUMLEY, individually, ATLANTIC BUILDING SYSTEMS, LLC, a Delaware corporation, doing business as ARMSTRONG STEEL CORPORATION, PRQ INTERNET KOMMANDITBOLAG LIMITED PARTNERSHIP doing business as PRQ INET KB, and GOTTFRID SWARTHOLM, individually, Defendants.

ORDER

Kathleen M. Tafoya United States Magistrate Judge

This matter is before the court on “Defendants’ Ethan Chumley and Armstrong Steel Corporation’s (sic) Motion to Strike Plaintiff General Steel’s Untimely Supplemental Expert Disclosure of Gregory B. Taylor, or for Alternative Relief” (“Mot.”) [Doc. No. 511] filed April 7, 2015. “Plaintiff General Steel’s Response to Defendants’ Motion to Strike General Steel’s Supplemental Expert Disclosure of Gregory B. Taylor, or for Alternative Relief (CM-ECF # 511)” (“Resp.”) [Doc. No. 526] was filed on May 1, 2015 and Defendants’ Reply was filed on May 18, 2015. [Doc. No. 529.]

General Steel timely disclosed its accounting/financial expert, Gregory B. Taylor, on May 14, 2014. (Mot., Ex. A.) In his initial report Mr. Taylor set forth his opinion regarding General Steel’s claimed remedy of disgorgement of profits. Mr. Taylor relied upon, among other things, Armstrong’s disclosed profits for 2012, estimated profits for 2013 and 2014, and Mr. Chumley’s disclosed compensation for 2012 and estimated compensation for 2013 and 2014. (Mot., Ex. A, Sch. 4.) The report also included a category of damages for a search engine optimization employee to work for General Steel to remediate Defendants’ alleged false advertising. (Mot., Ex. A, ¶ 14.) Mr. Taylor requested review of certain other financial documents from Atlantic Building Systems, Mr. Chumley and Armstrong Steel, also set forth on Schedule 4. (Id.) On May 27, 2014, Armstrong Steel satisfied some of Mr. Taylor’s requests including provision of its profit & loss and balance statements for January 2013 through March 2014 and general ledger statements for October 2013 through May 2014. (Mot. at 3.) On November 7, 2014, Armstrong Steel produced updated profit and loss statements and balance sheets “before Armstrong’s Rule 30(b)(6) deposition on Armstrong’s financials.” (Id.)

It is not clear from this statement whether the November documents were produced in this case as supplemental or voluntarily produced financial information or in Armstrong Steel/General Steel case 14-cv-01932-REB-CBS, or both cases. Later in the motion Armstrong Steel avers that Mr. Taylor’s supplemental report calculating Armstrong’s profits for 2012-2014 and estimated profits for 2015 and calculating Mr.Chumley’s compensation for these same time periods relies on “general ledgers, P&L statements, and balance sheets produced in other litigation involving General Steel and Armstrong in this Court, Case No. 14-cv-1932.” (Mot. at 3-4.) Since the information would be the same regardless of the case, the court infers the information was produced pursuant to discovery obligations in both cases. Material affecting damages is obviously relevant pursuant to Fed.R.Civ.P. 26, and parties have a duty to supplement not only documentary discovery responses, but also testimonial evidence such as that given by a Rule 30(b)(6) witness on Defendants’ financials.

Mr. Taylor’s May 2014 expert report explicitly expressed the expert’s intent to update his calculations as future information became available. The report states

Based on the limited information produced by Armstrong Steel in its 2013 general ledgers, we are unable to determine at this time the approximate profits for 2013 and 2014 that would need to be disgorged . . . . We expect to update such calculations when information is provided by the defendants.

(Mot., Ex. A at 7, ¶ 13; see id. at 8, “We will update these computations if we receive additional information concerning this matter.”) On February 24, 2015, such an updated supplemental report was produced by Mr. Taylor. (Mot., Ex. B.)

Armstrong Steel now seeks to strike the supplemental report claiming it was untimely and that the untimely production was neither substantially justified nor harmless. As an alternative to striking the expert, Armstrong Steel seeks leave to depose Mr. Taylor and/or to disclose a new rebuttal expert to the supplemental information and/or to file a Rule 702 motion, all to ameliorate the prejudice it claims.

Federal Rule of Civil Procedure 26(e)(2) provides

For an expert whose report must be disclosed under Rule 26(a)(2)(B), the party’s duty to supplement extends both to information included in the report and to information given during the expert’s deposition. Any additions or changes to this information must be disclosed by the time the party’s pre-trial disclosures under Rule 26(a)(3) are due.

Fed. R. Civ. P. 26(a)(3)(B) provides, “Unless the court orders otherwise, these disclosures must be made at least 30 days before trial.” Further, pursuant to D.C.COLOLCivR 26.1(b), “Disclosures under Fed.R.Civ.P. 26(a)(3) shall be made in the proposed final pretrial order . . . .” Chief Judge Krieger has not yet set a final pretrial conference in this case and therefore no final pretrial order is yet due. Likewise, Chief Judge Krieger has not set this matter for trial. Therefore, the supplemental report is timely under the Rules.

Rule 26(e)(1) permits -- indeed requires -- that an expert supplement his report and disclosures in certain circumstances. Those circumstances are when the party or expert learns the information previously disclosed is incomplete or incorrect in some material respect. See Fed. R. Civ. P. 26(e); Jacobsen v. Deseret Book Co., 287 F.3d 936, 953–54 (10th Cir. 2002). This provision is “not intended to provide an extension of the expert designation and report production deadlines” and may not be used for this purpose. Metro Ford Truck Sales, Inc. v. Ford Motor Co., 145 F.3d 320, 324 (5th Cir.1998). Permissible supplementation under the Rules instead “means correcting inaccuracies, or filling the interstices of an incomplete report based on information that was not available at the time of the initial disclosure.” Cook v. Rockwell Intern. Corp., 580 F.Supp.2d 1071, 1169 (D. Colo. 2006)(citing Keener v. United States, 181 F.R.D. 639, 640 (D. Mont. 1998)); Beller v. United States, 221 F.R.D. 689, 694–95 (D.N.M. 2003). A party may also be ordered by the court to supplement or correct an expert’s disclosure to include information thereafter acquired. See Fed. R. Civ. P. 26(e); Cook, id.

“A plain reading of Fed.R.Civ.P. 26(e)(1) suggests that a supplemental expert report should be based upon additional or corrective information that was not available at the time of the expert’s original report.” SEC v. Nacchio, No. 05–cv–00480–MSK–CBS, 2008 WL 4587240, at *3 (D. Colo. Oct.15, 2008) (citing Minebea Co. v. Papst, 231 F.R.D. 3, 6 (D.D.C. 2005) (stating that Rule 26(e)(1) “permits supplemental reports only for the narrow purpose of correcting inaccuracies or adding information that was not available at the time of the initial report”)). See also Scholl v. Pateder, Case No. 09-cv-02959-PAB-KLM, 2012 WL 2360542, *3 (D. Colo. June 20, 2012)

Mr. Taylor is Plaintiff’s accounting or economic expert not only in this action but also in Civil Action No. 14-cv-01932-REB-CBS, and was Plaintiff’s expert in Civil Action 10-cv-01398-PAB-KLM, now concluded. In all three of these cases, Mr. Taylor offers expert opinion testimony concerning the proper amount of disgorgement damages General Steel should be awarded if it prevails on Langham Act claims in this, or in the other, active federal case. Plaintiff asserts that Mr. Taylor’s methodology was and is the same in all three cases (Resp. at 2), and the court’s side-by-side comparison of the May 14, 2014 initial report with the February 24, 2015 supplement confirms that Mr. Taylor continues to use the same general theory for calculation of damages and has only updated the raw data provided by Defendant for recent time periods in the supplemental report. The updated ...


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