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Zykronix Inc. v. Conexant Systems, Inc.

United States District Court, D. Colorado

November 22, 2017

ZYKRONIX, INC., a Colorado corporation, Plaintiff,
v.
CONEXANT SYSTEMS, INC., a Delaware corporation, Defendant.

          ORDER

          KRISTEN L. MIX, MAGISTRATE JUDGE

         This matter is before the Court on Defendant's Motion in Limine to Exclude Testimony and Evidence Related to Untimely Disclosed Damages [#94][1] (the “Motion”). Plaintiff filed a Response [#102] in opposition to the Motion [#94], and Defendant filed a Reply [#105]. The Court has reviewed the filings and the applicable law, and is sufficiently advised in the premises. For the reasons stated below, the Motion [#94] is DENIED.

         I. Summary

         Defendant asks the Court to preclude Plaintiff from presenting various categories of damages at trial due to their late disclosure. Motion [#94] at 1-2. In short, Defendant asserts that Plaintiff's disclosure of new categories and amounts of alleged damages on the day before the discovery cut-off and two business days before dispositive motions were due is prejudicial to Defendant. Id. at 6. Plaintiff argues that the categories of damages were disclosed by May 8, 2017, and that Defendant had the opportunity to conduct discovery into the damages during the depositions of Plaintiff's designated 30(b)(6) witness and Chief Financial Officer. Response [#102] at 1. Plaintiff adds that, to the extent that any prejudice to Defendant exists, any such prejudice can be cured by allowing additional discovery and continuing the trial. Id. at 2.

         II. Analysis

         Fed. R. Civ. P. 26(a)(1)(A)(iii) provides:

[A] party must, without awaiting a discovery request, provide to the other parties . . . a computation of each category of damages claimed by the disclosing party - who must also make available for inspection and copying as under Rule 34 the documents or other evidentiary materials, unless privileged or protected from disclosure, on which each computation is based, including materials bearing on the nature and extent of injuries suffered[.]

         Initial disclosures must be made “at or within 14 days after the parties' Rule 26(f) conference unless a different time is set by stipulation or court order.” Fed.R.Civ.P. 26(a)(1)(C). Litigants' disclosure obligations do not cease after initial compliance with the Rule, however. “A party who has made a disclosure under Rule 26(a) . . . must supplement or correct its disclosure or response . . . in a timely manner if the party learns that in some material respect the disclosure or response is incomplete or incorrect . . . .” Fed.R.Civ.P. 26(e).

         Pursuant to Fed.R.Civ.P. 37(c)(1), if a party fails to comply with its obligation to disclose or supplement initial disclosures pursuant to Rule 26(a) or (e), “the party is not allowed to use that information . . . to supply evidence on a motion, at a hearing, or at trial, unless the failure was substantially justified or is harmless.” “The determination of whether a Rule 26(a) [or (e)] violation is justified or harmless is entrusted to the broad discretion of the district court.” Woodworker's Supply, Inc. v. Principal Mut. Life Ins. Co., 170 F.3d 985, 993 (10th Cir.1999); see also HCG Platinum, LLC v. Preferred Prod. Placement Corp., 873 F.3d 1191, 1200 (10th Cir. 2017). The Tenth Circuit Court of Appeals identified four factors for consideration in determining whether the failure to disclose is substantially justified or harmless: (1) the prejudice or surprise to the impacted party, (2) the ability to cure the prejudice, (3) the potential for trial disruption, and (4) the erring party's bad faith or willfulness. Woodworker's Supply, 170 F.3d at 993. The Court addresses each in turn.

         A. Prejudice to Defendant

         Defendant argues that Plaintiff waited until September 21, 2017, the day before the discovery cut-off, to disclose for the first time nearly $9 million worth of damages under the following categories: “Damage to reputation” ($7, 943, 673); “Cost of redesign of Sole 4/5/7” ($815, 835); and “Cost of noise investigation” ($30, 553). Motion [#94] at 1; Summary of Estimated Damages [#96-7]. Defendant explains that these types of damages may require Defendant to retain additional experts and would require substantial fact discovery, “including third-party discovery of the customers Mr. Streicher identified on the last day of discovery.” Motion [#94] at 6.

         Although Plaintiff asserts that all categories of damages were disclosed by May 8, 2017, Plaintiff does not dispute that the September 21, 2017 Summary added “lost profits” related to lost contracts with three companies that were not previously disclosed (totaling $7, 943, 673). See Response [#102] at 5 (“The only change was an increase in the amount of “lost profits” sought by [Plaintiff]. This was due to the inclusion of three lost contract[s] in the “lost profits” category rather than the single contract estimated in the initial disclosures.”).[2] The names of the three companies apparently were not disclosed by Plaintiff until September 22, 2017. Streicher Depo. [#96-8] at 3. “A key policy goal of requiring parties to keep their disclosures current is ‘to avoid trial by ambush.'” Gallegos v. Swift & Co., No. 04-cv-01295-LTB-CBS, 2007 WL 214416, at *3 (D. Colo. Jan. 25, 2007) (citing Macaulay v. Anas, 321 F.3d 45, 50 (1st Cir. 2003)). On these grounds alone, Plaintiff's timing of providing the computation of damages is akin to trial by ambush. Even if Plaintiff is correct that all categories of damages were disclosed by May 8, 2017, Plaintiff did not comply with the requirements of Fed.R.Civ.P. 26(a)(1)(A)(iii) to provide a computation of each category of damages until it provided the Summary on September 21, 2017. Furthermore, the record does not reflect whether Plaintiff has even “ma[de] available . . . the documents or other evidentiary materials . . . on which each computation is based” as required by the Rule. See Fed. R. Civ. P. 26(a)(1)(A)(iii).

         Moreover, “delay and mounting attorneys fees can equate to prejudice.” Sender v. Mann, 225 F.R.D. 645, 656 (D. Colo. 2004) (citing Jones v. Thompson, 996 F.2d 261, 264 (10th Cir. 1993)). Allowing Plaintiff to add these disclosures would necessitate the reopening of discovery in order to permit Defendant to prepare a defense regarding damages. As such, the Court finds that the first factor weighs in favor of excluding the damages, because Defendant is indeed prejudiced, in terms of time, money, and effort, by the delayed issuance of Plaintiff's disclosures.

         B. Plaintiff's Bad ...


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