United States District Court, D. Colorado
Kathleen M Tafoya United States Magistrate Judge
This matter is before the court on Defendants’ Hess Bakken Investment II, LLC (“Hess Bakken”) and Statoil Oil & Gas, L.P. (“Statoil”) “Motion to Strike the “Rebuttal” Expert Report of Rick Chamberlain and Adrian Reed” [Doc. No. 163] (“Mot”) filed November 20, 2015. Plaintiffs Spring Creek Exploration & Production Company, LLC (“Spring Creek”) and Gold Coast Energy LLC (“Gold Coast”) filed “Plaintiffs’ Response in Opposition to Defendants’ Motion to Strike the “Rebuttal” Expert Report of Rick Chamberlain and Adrian Reed” [Doc. No. 181] on November 20, 2015 (“Resp.”) and on December 7, 2015 “Defendants’ Reply in Support of Motion to Strike the “Rebuttal” Expert Report of Rick Chamberlain and Adrian Reed” [Doc. No. 195] (“Reply”) was filed. The matter was set and re-set for hearing several times and was eventually heard on February 19, 2016. [Minutes, Doc. No. 257.] Following the hearing, the court took the matter under advisement and allowed counsel to submit supplemental briefing on particularized issues raised at the hearing. “Defendants’ Supplemental Briefing in Support of Motion to Strike the “Rebuttal” Expert Report of Rick Chamberlain and Adrian Reed” [Doc. No. 252] and “Plaintiffs’ Supplemental Response in Opposition to Defendants’ Motion to Strike the “Rebuttal” Expert Report of Rick Chamberlain and Adrian Reed” [Doc. No. 251] were timely filed.
This case involves Plaintiffs’ allegations that in October 2009, Spring Creek entered into a multi-part transaction and agreement with the predecessor of Defendant Hess Bakken Investment II, LLC (“Hess Bakken”), TRZ Energy (“Spring Creek/TRZ Agreement”), selling its interests in an area known as the Tomahawk Prospect. As part of the Spring Creek/TRZ Agreement, Spring Creek assigned all of its existing mineral leasehold interests to TRZ, which eventually were received by Hess Bakken when it took over TRZ. Through the Spring Creek/TRZ Agreement, Spring Creek retained an overriding royalty interest (“ORRI”) on any mineral production on those existing leases. The Spring Creek/TRZ Agreement also required TRZ, and later Hess Bakken, to assign Spring Creek an ORRI on all leases TRZ or Hess Bakken acquired in the Tomahawk Prospect during the three year term of the agreement. Besides the transfer of interests and the ongoing and potential future ORRIs on well production, Plaintiffs contend that the Spring Creek/TRZ Agreement required TRZ, and then Hess Bakken, to continue pursuing new leases in the Tomahawk Prospect in exchange for Spring Creek’s agreement not to compete with TRZ or Hess Bakken in acquiring new leases within the boundaries of the Tomahawk Prospect. Hess Bakken denies that the Spring Creek/TRZ Agreement required either TRZ or Hess Bakken to acquire any new leases.
Subsequent to the Spring Creek/TRZ Agreement, Hess Bakken and Defendant Statoil Oil & Gas (“Statoil”) entered into a confidential settlement and purchase agreement in which Hess Bakken sold and assigned all of its leases in the Tomahawk Prospect, including those acquired from Spring Creek pursuant to the Spring Creek/TRZ Agreement, to Statoil. Further, as part of the settlement agreement with Statoil, Hess Bakken was required to cease pursuing and acquiring new leases in the Tomahawk Prospect. Spring Creek contends that Hess Bakken and Statoil purposefully left Plaintiffs ignorant as to this agreement and that Spring Creek unknowingly continued to abide by its agreement not to compete in the Tomahawk Prospect to its detriment, expecting future ORRI payments according to the Spring Creek/TRZ Agreement. Plaintiffs further contend that because of that, Statoil became subject to the obligation of Hess Bakken to both compete for leases in the Tomahawk Prospect and assign commensurate ORRIs to Spring Creek on new leases acquired in that area during the remaining term of the agreement since Spring Creek was unaware of the unilateral agreement between Statoil and Hess Bakken to deprive Spring Creek of the benefit of its bargain. Statoil disputes that it is obligated under the Spring Creek/TRZ Agreement to anything except for payment of the ORRIs to Spring Creek on the existing leases Spring Creek transferred to TRZ and that Hess Bakken later transferred to Statoil in settlement of a different matter. The parties do not dispute that Statoil has been paying ORRI on these existing leases to Spring Creek but disagree whether the amounts paid were accurate.
On April 10, 2014, the Court entered a scheduling order [Doc. No. 40] which provided for a three-part expert disclosure schedule. The first date was for Plaintiffs to disclose affirmative experts, the second was for Defendants to disclose both its affirmative experts and also to disclose its rebuttal experts to Plaintiffs’ previously disclosed affirmative experts. Finally, the third date was for Plaintiffs to disclose rebuttal experts to any affirmative experts disclosed by Defendants.
Plaintiffs timely disclosed their affirmative experts, including the report of Berkley Research Group (“BRG”) prepared by experts Rick Chamberlain and Adrian Reed. [Doc. No. 181, Ex. E., (hereinafter “BRG Exp.Rpt.”)] Plaintiffs characterize that report as containing
“essentially two main opinions: (1) the discounted present value of the overriding royalty interest on leases in the Area of Mutual Interest which results in a damage estimate between $24.2 million and $59.3 million; and (2) the discounted present value of potential working interests in the same area which results in a damage estimate of $182 million to $403 million.
(Resp. at 7.)
On July 15, 2015, Defendants timely served their expert reports, including the reports of Bill Abington, Terry Payne, and Austin Mater, which Defendants jointly endorsed. (Mot., Exs. 2-4). Defendants assert that each of these reports were “intended solely to contradict or rebut evidence on the same subject matter identified by Plaintiffs in their initial expert disclosures.” (Mot. at 2.)
Arguing against this characterization and asserting that Defendants’ experts offered both affirmative and rebuttal opinions, on September 25, 2015, Plaintiffs served a “rebuttal” report authored by Rick Chamberlain and Adrian Reed of BRG. (Mot., Ex. 1, hereinafter “BRG September 25th Report”.) It is this report that Defendants seek to strike, characterizing it as an improper sur-rebuttal opinion, maintaining that Defendants did not disclose any affirmative experts and therefore there is nothing for Plaintiffs’ experts to rebut.
Plaintiffs insist that the BRG September 25th Report is not only proper rebuttal to Defendants’ experts’ affirmative opinions, which they claim were mixed with Defendants’ rebuttal opinions, but also, alternatively, that portions of the report are also proper supplemental opinion pursuant to Fed.R.Civ.P. 26(a)(2)(E).
While this motion was under advisement, District Judge Philip A. Brimmer issued his Order [Doc. No. 286] (“Working Interest Order”) holding that “at trial, plaintiffs . . . will not be permitted to present evidence of the value of any working interests that they may have acquired had they not entered into, or treated as rescinded, the contract at issue in this case.” This ruling greatly curtails this court’s need to examine all the arguments submitted by counsel on this motion, including many of the issues argued at the hearing.
Rule 26(a) requires a party to disclose the identity of any expert witness it may use at trial. Fed.R.Civ.P. 26(a)(2)(A). A party must make this disclosure “at the times and in the sequence that the court orders.” Fed.R.Civ.P. 26(a)(2)(D). As is the case here, the court most often sets forth the time and sequence for disclosing experts in a scheduling order with extensions of the dates occurring as modifications to the scheduling order. Fed.R.Civ.P. 16(b)(1).
A. Affirmative Expert Opinion verses Expert Opinion Offered in Rebuttal
1. Contradict or Rebut
Fed. R. Civ. P. 26(a)(2)(C)(ii) permits the admission of rebuttal expert testimony that is “intended solely to contradict or rebut evidence on the same subject matter identified” by an initial expert witness. TC Sys. Inc., v. Town of Colonie, NY, 213 F.Supp.2d 171, 179 (N.D.N.Y.2002); Carroll v. Allstate Fire & Cas. Ins. Co., No. 12-CV-00007-WJM-KLM, 2013 WL 3810864, at *5 (D. Colo. July 22, 2013) (citing Lindner v. Meadow Gold Dairies, Inc., 249 F.R.D. 625, 636 (D. Hawaii 2008) (individuals designated only as rebuttal experts could present limited testimony, could not testify as part of a party’s case-in-chief, and would not be allowed to testify “unless and until” the experts they were designated to rebut testified at trial). See also Marmo v. Tyson Fresh Meats, Inc., 457 F.3d 749, 759 (8th Cir. 2006) (“The function of rebuttal testimony is to explain, repel, counteract or disprove evidence of the adverse party.”)
In terms of rebuttal evidence, it is irrelevant through which expert witness the initial affirmative evidence is elicited; that it actually be elicited in the course of the opposing party’s case-in-chief is the determining factor in the context of the admissibility analysis.” Carroll, at *5. Rebuttal expert reports “necessitate ‘a showing of facts supporting the opposite conclusion’ of those at which the opposing party’s experts arrived in their response reports.” Bone Care Int’l, LLC v. Pentech Pharmaceuticals, Inc., 2010 WL 3894444, *15 (N.D. Ill. Sep. 30, 2010) (quoting ABB Air Preheater, Inc. v. Regenerative Environmental Equip., Inc., 167 F.R.D. 668, 669 (D.N.J. 1996).
By contrast, an affirmative expert serves to establish a party’s case-in-chief. See Lead GHR Enters., Inc. v. American States Ins. Co., No. CIV. 12-5056-JLV, 2014 WL 1246499, at *3 (D.S.D. Mar. 25, 2014) (quoting Marmo, 457 F.3d at 759.)
Rebuttal expert reports are not the proper place for presenting new arguments. 1-800 Contacts, Inc. v. Lens. com, Inc., 755 F.Supp.2d 1151, 1167 (D. Utah 2010)(rev. in part on other grounds, 722 F.3d 1229 (10th Cir. 2013)); LaFlamme, Id . “[R]ebuttal experts cannot put forth their own theories; they must restrict their testimony to attacking the theories offered by the adversary’s experts.” International Bus. Machs. Corp. v. Fasco Indus., Inc., No. C-93-20326 RPA, 1995 WL 115421, at *3 (N.D. Cal. Mar. 15, 1995); Boles v. United States, No. 1:13CV489, 2015 WL 1508857, at *2 (M.D. N.C. Apr. 1, 2015).
However, “[i]f the purpose of expert testimony is to ‘contradict an expected and anticipated portion of the other party’s case-in-chief, then the witness is not a rebuttal witness or anything analogous to one.’” Amos v. Makita U.S.A., 2011 WL 43092 at *2 (D. Nev. Jan. 6, 2011) (quoting In re Apex Oil Co., 958 F.2d 243, 245 (8th Cir. 1992) (emphasis added)); Century Indem. Co. v. Marine Grp., LLC, No. 3:08-CV-1375-AC, 2015 WL 5521986, at *2-3 (D. Or. Sept. 16, 2015); LaFlamme v. Safeway, Inc., 2010 WL 3522378, *3 (D. Nev. Sep. 2, 2010).
2. Same Subject Matter
In addition to requiring that rebuttal evidence contradict affirmative evidence, rebuttal evidence must also be directed to the same subject matter identified by the affirmative expert. See Fed. R. Civ. P. 26(a)(2)(C)(ii). Neither the Advisory Committee Notes to Rule 26, nor case law in the District of Colorado, as cited by the parties, explains precisely what is meant by “same subject matter.” However, “expert reports that simply address the same general subject matter as a previously-submitted report, but do not directly contradict or rebut the actual contents of that prior report, do not qualify as proper rebuttal or reply reports.” Boles, id. (citing Withrow v. Spears, 967 F.Supp.2d 982, 1002 (D. Del. 2013).
In Armstrong v. I-Behavior Inc., No. 11-CV-03340-WJM-BNB, 2013 WL 2419794, at *3 (D. Colo. June 3, 2013), District Judge William B. Martínez ruled that courts should not place an overly restrictive interpretation on this operative phrase, rejecting the plaintiff’s argument that the phrase should be construed narrowly. Id. (relying on TC Sys. Inc., 213 F.Supp.2d at 180). In TC Sys. Inc., the plaintiff’s expert addressed damages caused by a public right-of-way from an accounting perspective but the defendant’s rebuttal expert addressed the damages from the same public right-of-way from an accounting perspective. Id. at 180. The plaintiff claimed that the defendant’s rebuttal expert was improperly designated as rebuttal testimony because the expert sought to introduce new arguments. The court stated that were it to confine the phrase “same subject matter” in an overly restrictive fashion, it would effectively preclude many methodologies from being introduced through rebuttal evidence. Despite the different methodologies applied by the experts, the court found each party addressed the same subject matter-i.e., damages associated with the public right-of-way. Id. Armstrong itself involved two experts opining on the plaintiff’s economic loss as a result of her constructive discharge from employment. The plaintiff’s expert addressed damages from a quantitative perspective, examining loss of earnings, loss of employee benefits, and non-compensation for overtime pay. Id. at 1. The defendant’s expert approached the plaintiff’s damages from a qualitative and a quantitative perspective as seen through the lens of a vocational expert addressing the plaintiff’s ability to find comparable employment after leaving the defendant, including the plaintiff’s efforts to find comparable positions and the reasonable duration of time required to find comparable employment. Judge Martínez rejected a narrow ...