Shilling v. PolyOne Corporation

Filing 131

ORDER RE 117 , 118 , 121 MOTIONS IN LIMINE. Signed by Judge Beth Labson Freeman on 2/17/2017. (blflc4, COURT STAFF) (Filed on 2/17/2017)

Download PDF
1 2 3 UNITED STATES DISTRICT COURT 4 NORTHERN DISTRICT OF CALIFORNIA 5 SAN JOSE DIVISION 6 7 JOHN D. SHILLING, Case No. 14-cv-03562-BLF Plaintiff, 8 v. ORDER RE MOTIONS IN LIMINE 9 10 POLYONE CORPORATION, [Re: ECF 117, 118, 121] Defendant. United States District Court Northern District of California 11 12 13 This case arises out of PolyOne Corporation (“PolyOne”)’s purchase of Glasforms, Inc. 14 (“Glasforms”) pursuant to a Share Purchase Agreement (“SPA”) and concerns the parties’ 15 respective obligations under that agreement. Plaintiff John D. Shilling, Trustee of the Peter Pfaff 16 Revocable Trust (“Shilling”) brings this lawsuit against PolyOne, asserting claims of declaratory 17 relief, breach of implied covenant of good faith and fair dealing, and express contractual 18 indemnity. Notice of Removal and Compl., ECF 1. PolyOne counter-claims that Shilling is liable 19 for breach of contract, express contractual indemnity, and also seeks declaratory relief. Second 20 Am. Cross-Compl., ECF 73. This Order addresses the parties’ motions in limine. For the reasons 21 explained below and on the record at the February 16, 2017 pretrial conference, the motions are 22 decided as follows: 23 Shilling’s Motion in Limine No. 1: GRANTED IN PART AND DENIED IN PART. 24 Shilling’s Motion in Limine No. 2: DENIED. 25 Shilling’s Motion in Limine No. 3: DENIED. 26 PolyOne’s Motion in Limine No. 1: DENIED IN PART AND DEFERRED IN PART. 27 PolyOne’s Motion in Limine No. 2: DEFERRED. 28 1 I. SHILLING’S MOTIONS IN LIMINE A. 2 Shilling’s Motion in Limine No. 1 to exclude untimely expert supplemental reports. GRANTED IN PART AND DENIED IN PART. Shilling moves to exclude supplemental reports and trial testimony of PolyOne’s expert 3 4 witnesses, Dr. Barbara Luna and Andre Jardini, because they were not disclosed by the February 5 2, 2017 deadline, when parties’ Rule 26(a)(3) pretrial disclosures were due. MIL No. 1 at 2, ECF 6 121. According to Shilling, supplementation at this time would be unduly prejudicial to Shilling. 7 Id. at 3. Shilling claims that discovery might have to be reopened and Shilling’s experts need to 8 draft responsive reports in response to the supplemental disclosures. Shilling argues that such 9 endeavors incur great time and expense to both parties. Id. at 3. PolyOne responds that it plans to provide Shilling no later than 30 days before trial, an 10 United States District Court Northern District of California 11 updated expert report by Dr. Luna to reflect the 2016 revenue information. Opp’n No. 1 at 2, ECF 12 122. It also supplemented Dr. Jardini’s report on February 3, 2017 to incorporate attorney’s fees 13 and cost incurred from July 1, 2016 through January 31, 2017 so as to bring PolyOne’s attorney’s 14 fee claim current. Id. PolyOne argues that these reports were not supplemented by the February 15 2, 2017 deadline because of PolyOne’s counsel’s “calendaring misunderstanding.” Id. PolyOne 16 attributes this misunderstanding to Rule 26(a)(3)(B), stating that, “[u]nless the court orders 17 otherwise, these [pretrial] disclosures must be made at least 30 days before trial.” Id. PolyOne 18 further argues that Shilling will suffer no prejudice as Shilling will have thirty days before trial to 19 review the updated report and that additional depositions and discovery would not be necessary. 20 Id. 21 At the pretrial conference, Shilling represented to the Court that he will not be objecting to 22 Dr. Jardini’s supplemental report that was disclosed one day after the Rule 26(a)(3) pretrial 23 disclosure deadline. As such, the Court DENIES in part this motion in limine as to Mr. Jardini’s 24 supplemental report. As to Dr. Luna’s supplemental report, the Court finds that allowing PolyOne 25 to use this supplemental report at trial would be unduly prejudicial to Shilling. Although PolyOne 26 argues that the report only incorporates new company sales data from 2016 without any other new 27 analysis or opinions, allowing this newly added information would still be prejudicial to Shilling, 28 who has not had access to this new information that was under PolyOne’s control. Given that 2 1 discovery is closed, Shilling would not have an opportunity to properly rebut this evidence at trial 2 or even verify the accuracy of the underlying documentation. Accordingly, the Court GRANTS 3 this motion in limine in part as to Dr. Luna’s supplemental report. 4 5 B. Shilling’s Motion in Limine No. 2 to bifurcate claim for indemnification of the TRC lawsuit. DENIED. Shilling seeks to bifurcate PolyOne’s claim for indemnification of the matter of Total Rod 6 Concepts, Inc. v. Glasforms, Inc., et al. (Montgomery County, Texas, Case No. 14-05005365) 7 (the “TRC Lawsuit”). MIL No. 2 at 2, ECF 121-1. First, Shilling argues that PolyOne’s claim for 8 indemnification of the TRC Lawsuit is separate and distinct from its claims for indemnification 9 pertaining to certain of Glasforms’ customers. Id. at 2. Second, Shilling claims that both parties 10 did not conduct meaningful discovery pertaining to the TRC Lawsuit indemnification claim 11 United States District Court Northern District of California because PolyOne’s counsel represented that the evidentiary matters were handled within the 12 confines of the TRC Lawsuit litigation. Id. at 3. Third, Shilling argues that trial on this 13 indemnification claim could undermine the trial of the TRC Lawsuit in Texas, which is scheduled 14 to commence on May 1, 2017. Id. Finally, Shilling asserts that bifurcation of this TRC Lawsuit 15 claim would be more expeditious and promote efficiency. Id. at 2, 4 (citing Fed. R. Civ. Proc. 16 41(b); Shaughnessy v. Ass’n of Apartment Owners of Moana Pac., No. 09-00051, 2011 WL 17 97254, at *4 (D. Haw. Jan. 12, 2011)). 18 Shilling does not oppose this motion to bifurcate the indemnification claim for the TRC 19 Lawsuit. Opp’n No. 2 at 1, ECF 123. Shilling adds that the bifurcated claims would include 20 PolyOne’s claims under SPA Sections 5.14 and 9.2(a)(v), including the duty to defend Glasforms 21 and PolyOne in the TRC Lawsuit and indemnification against any judgment or settlement in the 22 TRC Lawsuit. Id. 23 Fed. R. Civ. Proc. 42(b) provides that a court may “order a separate trial of one or more 24 separate issues” for “convenience, to avoid prejudice, or to expedite and economize.” Whether to 25 grant bifurcation is left to the sound discretion of the district court. Hangarter v. Provident Life & 26 Acc. Ins. Co., 373 F.3d 998, 1021 (9th Cir. 2004). Bifurcation “is the exception rather than the 27 rule of normal trial procedure.” GEM Acquisitionco, LLC v. Sorenson Grp. Holdings, LLC, No. 28 3 1 09-01484-SI, 2010 WL 1729400, at *3 (N.D. Cal. Apr. 27, 2010) (citations omitted). While the Court is mindful about the potential impact this trial may have on the TRC 2 3 Lawsuit, bifurcation would not be in the interest of judicial efficiency. The Court is not opposed 4 to continuing the trial if the parties agree that continuation is the best course of action and timely 5 make a request for continuance. However, separate trials would not be conducive to expedition 6 and economy, given that the indemnification claims relating to the TRC Lawsuit also arise from 7 the parties’ obligations pursuant to the Share Purchase Agreement, like the other claims to be tried 8 at trial. Shilling’s argument on the lack of meaningful discovery is inapposite to the issue of 9 bifurcation because discovery is closed and will not be reopened simply because the trial is bifurcated. Accordingly, the reasons proffered by Shilling do not justify bifurcation and the Court 11 United States District Court Northern District of California 10 DENIES this motion in in limine. 12 13 C. Shilling’s Motion in Limine No. 3 to bifurcate parties’ claims for attorney’s fees. DENIED. Shilling moves to bifurcate the claims for attorney’s fees because the claims are separate 14 and distinct from the breach of contract and breach of implied covenant of good faith and fair 15 dealing claims. MIL No. 3 at 2-3, ECF 121-2 (citing Budinich v. Becton Dickinson & Co., 486 16 U.S. 196, 200 (1988)). Shilling argues that since both parties are only seeking fees and costs if 17 they prevail, the fees claims are collateral to the substantive claims and no prejudice would result 18 from bifurcation. Id. at 3-4. Shilling proposes that after trial, the prevailing party will seek fees 19 by filing a motion and supporting memorandum and declarations. Id. at 4. 20 PolyOne opposes this motion, arguing that the attorney’s fees claims should not be 21 resolved on post-trial motions as they pertain to a component of indemnifiable “Losses” under the 22 section 9.2(a) of the SPA. Opp’n No. 3 at 1-2, ECF 124. Unlike the situation in Budinich, 23 PolyOne contends that the attorney’s fees claim here is an item for proof at trial, as a breach of 24 contract claim, and not a “collateral” issue. Id. at 2. PolyOne further argues that allowing Shilling 25 to withhold information regarding a claim for damages until post-trial motions would be 26 prejudicial to PolyOne. Id. at 3. 27 The fact that the fees will only be sought by the prevailing party does not persuade the 28 4 1 Court that the amount of attorney’s fees should be resolved on post-trial motions. The attorney’s 2 fees are damages, which constitute an essential element of the breach of contract claims. This 3 fundamental element of a cause of action must be proven at trial. This is different from Budinich, 4 where the request for attorney’s fees under 18 U.S.C. section 1988 in a civil rights case raised 5 legal issues collateral to and “separate from” the decision on the merits. 486 U.S. at 200. 6 Accordingly, the Court DENIES this motion in limine. 7 8 II. POLYONE’S MOTIONS IN LIMINE A. 9 PolyOne’s Motion in Limine No. 1 to exclude certain opinion testimony of Eric Nath and James Turner as improper rebuttal. DENIED IN PART AND DEFERRED IN PART. 10 PolyOne moves to exclude certain opinion testimony of Eric W. Nath and James A. Turner United States District Court Northern District of California 11 because they do not solely contradict or rebut Dr. Luna’s report. MIL No. 1 at 1, ECF 117. 12 According to PolyOne, Shilling disclosed no experts by the initial expert disclosure deadline but 13 provided rebuttal disclosures, setting forth new analysis of damages. Id. at 2. PolyOne claims 14 that the rebuttal disclosures of Nath and Turner pertain to Shilling’s case-in-chief and should have 15 been provided as initial disclosures. Id. 2-3 (citing Fed. R. Civ. Proc. 26(a)(2)(C); Matthew 16 Enter. v. Chrysler Grp. LLC, No. 13-04236-BLF, 2016 U.S. Dist. LEXIS 108694, at *4 (N.D. Cal. 17 Aug. 3, 2016)). In particular, PolyOne claims that Section VI in Nath’s report provides an 18 alternative theory for analyzing the “Equity and Enterprise value of the business,” and Section VII 19 relates to “impairment” of “goodwill,” neither of which depends on any opinion or conclusions of 20 Dr. Luna. MIL No. 1 at 4. PolyOne also asserts that Turner’s opinions derived from Nath’s work. 21 Id. PolyOne further argues that the belated disclosures were tactical and were not harmless as 22 Shilling had no justification and PolyOne was deprived of the opportunity to rebut. Id. at 6. 23 In opposition, Shilling argues that the contested reports and testimony are not part of his 24 case-in-chief as the declaratory relief cause of action “does not go to the dollar amount of 25 PolyOne’s tendered claims.” Opp’n No. 1 at 3. Even if the portions of the rebuttal report and 26 testimony could be part of Shilling’s case-in-chief, they are not barred as long as they are offered 27 only to refute PolyOne’s expert witness testimony. Id. (citing Hellmann-Blumberg v. Univ. of 28 Pac., No. 12-00286, 2013 WL 3422699, at *5 (E.D. Cal. July 8, 2013)). Regardless, Shilling 5 contends that the rebuttal is proper because it provides an alternative approach to calculate 2 damages, the market approach, to show that PolyOne’s expert omitted facts and methods in the 3 report. Id. at 4. Shilling further argues that it would be improper to limit a rebuttal expert’s 4 methodology to that advanced by the initial expert. Id. at 5 (citing Deseret Mgmt. Corp. v. United 5 States, 97 Fed. Cl. 272, 274 (2011)). Similarly, with respect to Section VII of Nath’s report on 6 “impairment of goodwill,” Shilling argues that expert evidence on “impairment of goodwill” 7 rebuts PolyOne’s assertion that there was diminution in value, as the SEC filings did not disclose 8 any “impairment of goodwill.” Id. at 5-6. Shilling further contends that PolyOne waived the issue 9 of prejudice, if any, for failing to bring this motion earlier, having received the rebuttal reports in 10 August 2016. Id. at 6. Lastly, Shilling urges the Court to exercise its broad discretion to admit all 11 United States District Court Northern District of California 1 expert evidence on damages because the “gatekeeper obligation is less pressing in connection with 12 a bench trial.” Id. (citing Wolkowitz v. Lerner, No. 07-777, 2008 WL 1885770, at *2 (C.D. Cal. 13 Apr. 21, 2008)). 14 “[A]n expert may introduce new methods of analysis in a rebuttal report if they are offered 15 to contradict or rebut another party’s expert.” Deseret Mgmt., 97 Fed. Cl. at 274. Furthermore, 16 just because the expert evidence may be offered in a party’s “case-in-chief does not necessarily 17 bar its admission by a rebuttal expert.” Hellmann-Blumberg , 2013 WL 3422699, at *5. Here, the 18 contested sections of the Nath and Turner reports discuss the “market approach” as an alternative 19 methodology to rebut the “income approach,” the methodology used by PolyOne’s expert, Dr. 20 Luna. As such, this is not improper rebuttal. PolyOne avers that the contested sections of the 21 reports not only present the alternative methodology but also compute the damages amount based 22 on this alternative methodology, making this an improper rebuttal report. However, the 23 computation can lend credence to the alternative methodology and Shilling represents that the 24 computed amount itself is not offered for the purpose of proving a damage amount. Given that 25 this is a bench trial and that the evidence has a proper rebuttal purpose, the Court shall exercise its 26 discretion and allow the admission of this evidence at trial. Wolkowitz, 2008 WL 1885770, at *2. 27 PolyOne also objects to section VII of Nath’s report pertaining to “impairment of 28 goodwill” and any related portion of Turner’s report, on the grounds that the opinions are 6 1 speculative. As to this objection, the Court cannot evaluate whether the opinions are speculative 2 based on the parties’ submissions at this time. Whether the opinions will be admitted will depend 3 on whether a foundation can be established at trial. Accordingly, PolyOne may renew its 4 objection at trial and the Court will DEFER IN PART as to the opinions relating to “impairment of 5 goodwill” on the ground of speculation. 6 7 B. PolyOne’s Motion in Limine No. 2 to exclude evidence of “Transition Effects.” DEFERRED. PolyOne moves to exclude evidence of “transition effects resulting from change in 8 ownership” because they are without sufficient probative value and irrelevant. MIL No. 2 at 4-5, 9 ECF 118. Specifically, PolyOne argues that there is no evidence to show that “the business of the 10 six customers that are the subject of the case was lost due to PolyOne’s purchase of the company 11 United States District Court Northern District of California or changes in operation of Glasforms after the purchase.” Id. at 2-3. As such, PolyOne concludes 12 that Shilling’s argument suggesting that “transition effects” affected the sales decline of the six 13 customers lacks foundational support. Id. at 3. 14 In response, Shilling contends that irrelevant evidence does not present much of a risk in a 15 bench trial. Opp. No. 2 at 2-3, 5, ECF 127-1 (citing Fed. R. Evid. §§ 401, 403). Shilling first 16 asserts that the evidence relating to “transition” is important as it shows how the “great difficulties 17 in the transition year” could have caused sales to decline. Id. at 3-4. As such, Shilling argues that 18 PolyOne fails to show how the evidence of “transition effects” is irrelevant or prejudicial. Id. at 5. 19 Regardless, Shilling claims that whether probative value substantially outweighs the prejudice 20 should not be a great concern since the Court is the sole trier of fact. Id. at 5-6 (citing Wolkowitz, 21 2008 WL 1885770, at *2; Cmty. Ass’n for Restoration of the Env’t, Inc. v. Cow Palace, LLC, 80 F. 22 Supp. 3d 1180, 1216 (E.D. Wash. 2015)). 23 Based on the parties’ submissions, it is not clear to the Court at this time whether the 24 witnesses testifying on Shilling’s theory on “transition effects” will be able to establish a sufficient 25 foundation for their testimony and whether the related evidence will be relevant. Even if 26 attenuated, the evidence on “transition effect” can be potentially relevant to the measure of 27 damages in this case and may be sufficient to clear Fed. R. Evid. 401’s relatively low bar. It is 28 7 1 also unclear whether the probative value of this evidence will be substantially outweighed by 2 unfair prejudice, waste of time, or other factors of Fed. R. Evid. 403. As Shilling aptly noted, 3 Rule 403 has a limited role, if any, in a bench trial. Cmty. Ass’n for Restoration of the Env’'t, 80 4 F. Supp. 3d at 1216 (citing E.E.O.C. v. Farmer Bros. Co., 31 F.3d 891, 898 (9th Cir. 1994)). As 5 such, the Court DEFERS this motion in limine until trial. 6 7 8 IT IS SO ORDERED. 9 10 United States District Court Northern District of California 11 12 Dated: February 17, 2017 ______________________________________ BETH LABSON FREEMAN United States District Judge 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 8

Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.

Why Is My Information Online?