Fresno Rock Taco, LLC v. National Surety Corporation
Filing
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ORDER on parties' discovery disputes, signed by Magistrate Judge Barbara A. McAuliffe on 5/30/2012. (Discovery re: expert deposition due by 8/10/2012; Supplemental Expert Report by B. Luna and D. Peterson to respond to the opinions of P. Hamilton and G. Gray Deadline: 6/30/2012; Supplemental Report by G. Gray Deadline: 7/14/2012) (Figueroa, O)
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UNITED STATES DISTRICT COURT
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EASTERN DISTRICT OF CALIFORNIA
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ZONE SPORTS CENTER, LLC and
FRESNO ROCK TACO, LLC,
CASE NO. 1:11-cv-00845-LJO-BAM
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Plaintiffs,
ORDER ON PARTIES’ DISCOVERY
DISPUTES
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vs.
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NATIONAL SURETY
CORPORATION,
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Defendant.
_______________________________ /
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I.
INTRODUCTION
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On May 25, 2012, the Court held a telephonic status conference to discuss several discovery
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disputes. Richard Hamlish appeared telephonically on behalf of Plaintiffs Zone Sports Center, LLC
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and Fresno Rock Taco, LLC (“Plaintiffs”). Counsel Sean Cooney appeared telephonically on behalf
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of Defendant National Surety Corporation (“Defendant”). The parties stipulated to permit the Court
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to rule informally on the following issues: (1) the timing of the deposition of Plaintiffs’ expert,
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David Petersen, and related requests for production of documents and objections thereto; (2) attorney
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work-product objections involved in Plaintiffs’ deposition of John Auvenin; (3) Defendant’s
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compliance with Rule 26(a) in disclosing their experts /expert reports; and (4) Plaintiffs’ production
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of documents related to Plaintiffs’ expert reports, and Defendant’s discovery requests. Having
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reviewed the parties’ letter briefs and evaluated the arguments presented at the May 25, 2012
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hearing, the Court issues the following order.
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II.
A.
DISCUSSION
Deposition of David Peterson
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On May 17, 2012, the Court instructed the parties to designate a mutually agreeable date to
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depose Plaintiffs’ expert, David Petersen. (Doc. 45.) The parties agreed to schedule the deposition
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for May 31, 2012. Plaintiffs, however, objected to requests for production of documents served
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concurrently with the Petersen deposition notice. Plaintiffs also objected to language in the
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deposition notice that stated “the deposition will commence as indicated above and will continue day
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to day, not necessarily in consecutive order until completed.”
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During the May 25, 2012 telephonic conference, Plaintiffs agreed to provide the requested
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documents at the deposition of Mr. Petersen, despite their objections. Additionally, Defendant
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acknowledged that the language in the deposition notice relating to the timing of the deposition
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mistakenly cited the California Rules of Civil Procedure standard, and agreed that the Petersen
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deposition would comply with Fed. R. Civ. Pro. 30(d)(1). In light of the continuance of the expert
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discovery cut-off, discussed infra, the Petersen deposition may be rescheduled.
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B.
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Attorney work-product objections involved in Plaintiff’s deposition of John Auvenin
During the deposition of John Auvenin, Mr. Auvenin testified he had been informed by an
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investigator for the California Department of Insurance of the name of a female person who was
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apprehended with one of the television sets that is the subject of Plaintiffs’ insurance claim. There
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was confusion between the parties as to whether the information requested was the report prepared
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by Auvenin, or merely the name of the apprehended individual. Defendant argued the report
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prepared by Mr. Auvenin was protected by as attorney work-product.
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During the May 25, 2012 hearing, Plaintiffs represented they were interested only in the
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name and identifying information of the apprehended individual, not the investigative report.
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Defendant represented they would produce the name and contact information for this individual.
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C.
Defendant’s compliance with Rule 26(a)(2) in disclosing their experts /expert reports
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Plaintiffs present numerous challenges to Defendant’s Rule 26 expert disclosures and reports.
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1.
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Rule 26 governs discovery and the duty to disclose. Subsection (a)(2) governs disclosure of
Legal Standard
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expert testimony. It states that each party must disclose to the opposition the identity of any expert
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witness. Fed. R. Civ. P. 26(a)(2)(A). That disclosure must be accompanied by a written report
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containing: (1) a complete statement of all opinions the witness will express and the basis and
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reasons for them; (2) the facts or data considered by the witness in forming them; (3) any exhibits
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that will be used to summarize or support them; (4) the witness's qualifications, including a list of all
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publications authored in the previous 10 years; (5) a list of all other cases in which, during the
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previous 4 years, the witness testified as an expert at trial or by deposition; and (6) a statement of the
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compensation to be paid for the study and testimony in the case. Fed. R. Civ. P. 26(a)(2)(B). He
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written report must be signed. A party must provide its expert witness disclosures “at the times and
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in the sequence that the court orders.” Fed. R. Civ. P. 26(a)(2)(D). Rule 37(c)(1) gives teeth to these
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requirements by automatically excluding any evidence not properly disclosed under Rule 26(a),
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irrespective of the party's bad faith or willfulness. Yeti by Molly Ltd. v. Deckers Outdoor Corp., 259
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F.3d 1101, 1106 (9th Cir.2001).
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Here, the Court finds that the expert designations and reports of Defendant’s experts Paul
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Hamilton and Gary Gray were disclosed untimely and deficient under Rule 26(a)(2)(B). Notably,
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Defendant concedes that “its expert disclosures were not done in accordance with the rules.” The
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deadline to disclose the reports was April 9, 2012. Mr. Hamilton was disclosed on April 9, 2012,
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however, Mr. Hamilton’s report was not signed, failed to include a list of exhibits, facts or data
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relied upon, failed to disclose the subject matter on which he would testify, and failed to present a
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summary of facts and opinions Mr. Hamilton expected to provide. Additionally, Defendant
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submitted the expert designation of Gary Gray on May 9, 2012. Moreover, Mr. Gray’s report was
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not tendered until May 15, 2009. As for the requirements of Rule 26(a)(2)(B), the Court finds that
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both expert designations and reports are deficient.
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The Court will amend the scheduling order as follows: (1) The discovery cut-off to complete
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expert depositions is extended to August 10, 2012; (2) Barbara Luna and Mr. Petersen may file a
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supplemental expert report to respond to the opinions of Mr. Hamilton and Mr. Gray no later than
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June 30, 2012; and (3) Mr. Gray shall be permitted to file a supplemental report, limited to a rebuttal
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of the opinions contained in the supplemental reports of Mr. Hamilton and Ms. Luna, no later than
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July 14, 2012.
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Having found violations of Rule 26(a)(2)(B) and Rule 26(a)(2)(D), the Court turns to the
Sanctions
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question of an appropriate remedy. Sanctions for violation of Rule 26(a) are set forth in Rule 37(c),
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which provides that when a party fails to make the disclosures required by Rule 26(a), the party is
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not allowed to use the witness to supply evidence on a motion, at a hearing, or at trial, unless it
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establishes that the failure was substantially justified or is harmless. Fed. R. Civ. P. 37(c)(1); see
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also Goodman v. Staples The Office Superstore, LLC, 644 F.3d 817, 826 (9th Cir. 2011). The
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Advisory Committee Notes describe Rule 37(c)(1) as a “self-executing,” “automatic” sanction to
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“provide[ ] a strong inducement for disclosure of material ...” Yeti, 259 F.3d at 1106 (citing Fed. R.
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Civ. P. 37, Advisory Committee's Note (1993)).
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The text of Rule 37 also indicates that consideration must be given to the harm, if any, caused
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by the alleged failure. Fed. R. Civ. P. 37(c)(1); see also Fed. R. Civ. P. 37 Advisory Committee's
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Note (1993) (“Limiting the automatic sanction to violations ‘without substantial justification’
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coupled with the exception for violations that are ‘harmless,’ is needed to avoid unduly harsh
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penalties in a variety of situations.”). The party facing the sanctions has the burden to prove that the
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failure to comply was either substantially justified or harmless. See Yeti, 259 F.3d at 1107 (“Implicit
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in Rule 37(c) (1) is that the burden is on the party facing sanctions to prove harmlessness.”). In
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determining whether a parties’ failure to comply with the Rules was harmless, Courts may consider:
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“(1) prejudice or surprise to the party against whom the evidence is offered; (2) the ability of that
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party to cure that prejudice; (3) the likelihood of disruption of the trial; and (4) bad faith or
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willfulness involved in not timely disclosing the evidence.” Lanard Toys, Ltd. v. Novelty, Inc., 375
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Fed. Appx. 705, 713 (9th Cir.2010)
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Plaintiffs request the expert testimony and reports of Paul Hamilton and Gary Gray be
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excluded. Defendant argues that the failure was harmless, and that Defendant’s proposed
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amendments to the scheduling order would cure any remaining prejudice to Plaintiffs. Defendant
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also argues that the expert testimony is necessary to its defense, and that preclusion is an
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unnecessarily drastic sanction.
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The Court finds that the failure to disclose timely was not substantially justified. Defendant
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has not made any meaningful arguments to substantially justify its failure to properly disclose its
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experts under Rule 26.
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Moreover, defendant’s failure to comply with the Rules was not harmless. Not only have
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Defendant’s delays effectively precluded Plaintiff from designating rebuttal expert testimony, but
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also Defendant’s experts have had the opportunity to examine and rebut the opinions set forth by
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Plaintiffs’ experts in their initial reports. This is a significant litigation advantage. While Defendant
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has proposed reopening discovery until June 25, 2012, permitting Plaintiffs’ experts to supplement
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their reports, this extension would give the parties only a week to file their dispositive motions.
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This, too, would significantly prejudice Plaintiffs.
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Exclusion of Defendant’s experts, however, would prejudice Defendant’s ability to present
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its defense such that preclusionary sanctions are not warranted. As the merits of Plaintiffs’ claims
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largely hinge on whether Defendant’s denial of Plaintiffs’ insurance claims substantially caused the
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failure of Plaintiffs’ businesses, expert testimony will be crucial to the parties’ claims and defenses.
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Excluding expert testimony would essentially foreclose the possibility that this case would be
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decided on the merits.
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Nonetheless, sanctions against Defendant are appropriate. Under Fed. R. Civ. P. 37(c)(1)(C),
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the Court has broad discretion to craft an “appropriate sanction.” See also, Yeti by Molly, 259 F.3d at
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1106. Given the required extension of expert discovery to address the harm caused, the Court finds a
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sanction of precluding summary judgment is appropriate. The Court precludes Defendant from
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filing any further dispositive motions in this action. This sanction permits the Court to extend the
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expert discovery deadline, without prejudicing Plaintiffs or the Court for Defendant’s failure to
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comply with the Rules pertaining to expert discovery.
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In accordance with Fed. R. Civ. P. 37(b)(2)(A), the Court provided Defendant an
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“opportunity to be heard” on the above-referenced sanction. Defendant argued that it should still be
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permitted to move for summary judgment if the moving papers did not rely on expert testimony.
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The Court rejected Defendant’s request to modify the sanction, because this modification would
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continue to expose Plaintiff to the scheduling harms the sanction is intended to remedy.
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D.
Plaintiffs’ Production of Documents Related to Plaintiffs’ Expert Reports, and
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Defendant’s Discovery Requests
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Defendant argues that Plaintiffs failed to provide all the documents relied upon by Plaintiffs’
Document Production For Plaintiff’s Expert, Barbara Luna
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expert, Barbara Luna, at the time of her disclosure on April 9, 2012. Defendant states that some of
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the documents relied upon by Ms. Luna were not received until May 21, 2012. This, Defendant
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argues, severely inhibited Defendant’s ability to prepare its expert report. Accordingly, Defendant
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argues, Ms. Luna’s testimony should be precluded.
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Plaintiffs respond that the documents referenced by Ms. Luna were either produced in their
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initial disclosures, concurrently with the expert report, or subsequently thereto after Plaintiffs’
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counsel reviewed the report and provided documents not already produced. Plaintiffs also argue that
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the majority of these documents were in Defendant’s possession, as Defendant received these
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documents from their previous request to the Department of Insurance.
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Plaintiffs have met their obligation under 26(a)(2)(B). Between Plaintiffs’ initial disclosures,
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exhibits attached to Ms. Luna’s expert report, as well as the documents Defendant obtained from the
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Department of Insurance, the evidence indicates Defendant was in possession of all the documents
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referenced by Ms. Luna. Even if some documents were not in Defendant’s possession at this time,
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Defendant acknowledges it received all these documents by May 21, 2012. As the parties are being
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afforded the opportunity to supplement their expert reports, no prejudice resulted from this delay.
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Moreover, the only harm Defendant claims is that this delay “severely inhibited National Surety’s
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ability to prepare its expert report.” This is not a legitimate harm, as Defendant would not have had
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the opportunity to review Ms. Luna’s expert report prior to preparing their own had Defendant timely
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designated its experts.
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2.
Defendant’s Document Requests Relating to Documents Produced by the
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Department of Insurance, but Not Produced By Category Pursuant to
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Defendant’s Discovery Requests
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Defendant argues Plaintiffs have not complied with various discovery requests because
Plaintiffs have not produced documents responsive to those requests by category. Plaintiffs respond
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that the documents have been produced to Defendant based on Plaintiffs’ request to the Department
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of Insurance, who had previously seized Plaintiffs’ documents, to release those documents to
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Defendant.
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Rule 34(b)(2)(E)(I) provides that parties “must produce” documents as they are kept in the
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usual course of business or “must label” the documents to correspond to the categories in the
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request. Here, Plaintiffs produced the responsive documents as they are kept in the usual course of
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business. Plaintiffs were not in physical possession, custody or control of the requested documents.
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Rather, Plaintiffs were deemed to be constructively in control of the documents because Plaintiffs
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had the ability to request them from the Department of Insurance. Those documents, however, were
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produced in the usual course of business as they were produced to Defendant in the manner they
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were maintained with the Department of Insurance. This is sufficient to comply under Rule 34(b)(2).
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3.
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Defendant’s Request For An Order Compelling Plaintiff to Request Intuit to
Unlock Plaintiff’s Quickbook Files
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In Defendant’s review of records produced by the Department of Insurance, Defendant
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identified various Quickbook data files with the file names matching the names of Plaintiffs. These
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files are locked, and Plaintiff is apparently incapable of unlocking them. Accordingly, Defendant
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seeks an order compelling Plaintiffs to submit a request to Intuit1 to unlock these files, and be
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produced to Defendant.
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Defendant has not cited any authority to persuade the Court such an order would be
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appropriate. Defendant has failed to show this information could not be obtained absent a Court
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order, or with a properly noticed third-party subpoena.
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III.
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CONCLUSION
Based on the foregoing, the Court orders as follows:
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The David Petersen deposition shall be conducted in a manner that complies with Fed. R.
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Civ. Pro. 30 (d)(1). At the time of the Petersen deposition, Plaintiffs shall produce
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documents responsive to Defendant’s corresponding discovery requests;
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Intuit is the maker of Quickbooks and, according to Defendant’s representations, capable of unlocking the desired
Quickbook files pursuant to a request from its customer.
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Defendant shall produce the name and contact information of the individual referenced at the
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deposition of John Auvenin who was reportedly apprehended with one of the television sets
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that is the subject of Plaintiffs’ insurance claim within seven days of the date of this Order;
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3.
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Defendant is precluded from filing any further dispositive motions in this action, as a
discovery sanction;
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4.
Defendant’s request to exclude the expert testimony of Barbara Luna is DENIED;
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5.
Defendant’s request to compel Plaintiffs to produce and categorize documents already
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produced by the Department of Insurance is DENIED;
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Defendant’s request to compel Plaintiff submit a request to Intuit to unlock Plaintiffs’
Quickbook files is DENIED;
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The scheduling order is amended as follows:
a.
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2012;
b.
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The discovery cut-off to complete any expert deposition is extended to August 10,
Barbara Luna and David Petersen may file a supplemental expert report to respond to
the opinions of Paul Hamilton and Gary Gray no later than June 30, 2012; and
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Gary Gray shall be permitted to file a supplemental report, limited to a rebuttal of the
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opinions contained in the supplemental reports of Barbara Luna and David Petersen,
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no later than July 14, 2012.
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IT IS SO ORDERED.
Dated:
10c20k
May 30, 2012
/s/ Barbara A. McAuliffe
UNITED STATES MAGISTRATE JUDGE
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