Empire Lumber Company et al

Filing 110

MEMORANDUM DECISION AND ORDER RE: Defendant's Daubert Motion to Exclude Testimony of Andy Shemchuk granting in part and denying in part 83 Motion to Exclude. Signed by Judge Ronald E Bush. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (cjm)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO

EMPIRE LUMBER CO., a Washington
corporation, d/b/a KAMIAH MILLS,
Plaintiff,
vs.
INDIANA LUMBERMENS MUTUAL
INSURANCE COMPANY, an Indiana
corporation and a division of the ILM Group,
THE ILM GROUP, and JOHN DOES I to V,
Defendants.

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Case No. 3:10-CV-00533-REB
MEMORANDUM DECISION AND
ORDER RE: DEFENDANT’S DAUBERT
MOTION TO EXCLUDE TESTIMONY
OF ANDY SHEMCHUK
(Docket No. 83)

Currently pending before the Court is Defendant’s Daubert Motion to Exclude Testimony
of Andy Shemchuk (Docket No. 83). Having carefully considered the record, participated in oral
argument, and otherwise being fully advised, the Court enters the following Memorandum Decision
and Order:
I. BACKGROUND
On November 4, 2008, a catastrophic fire destroyed buildings, equipment, and machinery
at Plaintiff Empire Lumber Company’s (“Empire Lumber”) sawmill in Weippe, Idaho.
Defendant Indiana Lumbermens Mutual Insurance Company (“ILM”) had issued a policy to
Empire Lumber to cover such losses. This is a bad faith lawsuit, which primarily concerns the
valuation of certain property destroyed in the fire and the handling of Empire Lumber’s claim for
such losses under the policy. However, Empire Lumber also contends that ILM’s alleged
mishandling of its loss claim was so egregious that a claim for punitive damages is justified.

MEMORANDUM DECISION AND ORDER - 1

Relevant here, in support of its effort to add a claim for punitive damages, Empire
Lumber attached (1) the September 2, 2011 Affidavit of Andy Shemchuk (Docket No. 21, Att.
7), and (2) the July 19, 2012 Supplemental Declaration by Andy Shemchuk (Docket No. 78, Att.
2) (collectively the “Shemchuk materials”). Part and parcel with its objection to Empire
Lumber’s argument in favor of punitive damages, ILM objects to the Shemchuk materials,
arguing that the testimony contained therein: “(1) seeks to define for the Court and the jury what
the law is; (2) offers legal conclusions as to compliance with, or violations of, particular statutes;
(3) offers legal conclusions as to the meaning and application of the insurance contract; (4)
offers inadmissible conclusions characterizing the behavior and actions of certain witnesses and
of ILM; (5) purports to evaluate the credibility of other witnesses, and to weigh the evidence
offered by those witnesses; and (6) otherwise is merely cumulative with that of other fact
witnesses.” See Mem. in Supp. of Daubert Mot. to Exclude, pp. 2-3 (Docket No. 83, Att. 1).
II. DISCUSSION
A.

ILM’s Motion as an Objection to Empire Lumber’s Motion to Amend
Preliminarily, the undersigned primarily views ILM’s dispute with the Shemchuk

materials as largely another piece of ILM’s objection to Empire Lumber’s attempt to add a
punitive damages claim – ILM’s motion targeted Mr. Shemchuk’s affidavit offered in support of
Empire Lumber’s motion to amend, not Mr. Shemchuk’s expert report(s) specifically; ILM’s
motion followed Empire Lumber’s motion to file supplemental declarations (including Mr.
Shemchuk’s supplemental declaration), again, in support of Empire Lumber’s motion to amend,
not any FRCP 26(a)(2)(B) report authored by Mr. Shemchuk; and ILM’s motion was filed two
weeks before the hearing on Empire Lumber’s motion to amend. Considered in that context, the
Court’s handling of the Shemchuk materials follows its previous consideration of the affidavits
of Messrs. O’Neill and Klau – that is, ILM’s objections are generally well-taken (see infra), but
do not affect the Court’s position on Empire Lumber’s underlying motion to amend; to be sure,

MEMORANDUM DECISION AND ORDER - 2

Empire Lumber has already been permitted to amend their pleadings to assert a punitive
damages claim against ILM. See 9/27/12 Order, pp. 2-9 (Docket No. 102). To this extent, then,
ILM’s Motion to Exclude is denied as moot.
B.

ILM’s Motion as a Separate Challenge Under Daubert Analysis
Notwithstanding the fact that ILM’s motion exists most neatly in terms of Empire

Lumber’s already-decided motion to amend, it nonetheless raises issues with the Shemchuk
materials for the case moving forward. These issues implicate FRE 702 and its application to the
Shemchuk materials.
Whether and to what extent Mr. Shemchuk may testify at trial is addressed under the
well-known standard first enunciated in Daubert and expanded upon in its progeny. Such
standards are now largely set forth in FRE 702, which contains several requirements for the
permitted use of expert opinion. First, the evidence offered by the expert must assist the trier-offact to understand the evidence or to determine a fact in issue. See Primiano v. Cook, 598 F.3d
558, 563 (9th Cir. 2010)); Fed. R. Evid. 702. “The requirement that the opinion testimony assist
the trier-of-fact goes primarily to relevance.” Id. at 564 (internal quotations and citations
omitted).
Additionally, the witness must be sufficiently qualified to render the opinion. Id. at 563.
If specialized knowledge will assist the trier-of-fact to understand the evidence or determine a
fact in issue, a witness qualified by knowledge, skill, experience, training or education may offer
expert testimony where: (1) the opinion is based upon sufficient facts or data, (2) the opinion is
the product of reliable principles and methods; and (3) the witness has applied those principles
and methods reliably to the facts of the case. See Fed. R. Evid. 702; Daubert v. Merrell Dow
Pharmaceuticals, Inc., 509 U.S. 579, 592-93 (1993); Kumho Tire Co. v. Carmichael, 526 U.S.
137, 147 (1999).

MEMORANDUM DECISION AND ORDER - 3

The court’s inquiry into such foundation is a flexible one. See Primiano, 598 F.3d at
564. Ultimately, a trial court must “assure that the expert testimony both rests on a reliable
foundation and is relevant to the task at hand.” Id. (internal quotation and citation omitted). In
determining whether expert testimony is reliable and relevant, the Court examines “whether the
reasoning or methodology underlying the testimony is scientifically valid and . . . whether that
reasoning or methodology properly can be applied to the facts in issue.” Boyd v. City and
County of San Francisco, 576 F.3d 938, 945 (9th Cir. 2009) (internal citation omitted). Finally, a
review of the case law after Daubert reveals that exclusion of expert testimony is the exception
rather than the rule. See Fed. R. Evid. 702, Adv. Comm. Notes (2000).
Here, ILM does not seem to dispute Mr. Shemchuk’s expertise but, rather, challenges the
reliability of his opinions – namely, that they go too far by speaking to conclusions of law
(including the extent of ILM’s alleged bad faith), contract interpretation, credibility, and weight
of evidence. Assuming Mr. Shemchuk’s expert reports mirror the content of his at-issue
affidavit and declaration, the Court agrees, but only to an extent.
“It is well-established . . . that expert testimony concerning an ultimate issue is not per se
improper.” Hangarter v. Provident Life and Accident Insur. Co., 373 F.3d 998, 1016 (9th Cir.
2004) (citing Maukhtar v. Cal. State Univ., Hayward, 299 F.3d 1053, 1066, n.10 (9th Cir. 2002)).
“Testimony in the form of an opinion or inference otherwise admissible is not objectionable
because it embraces an ultimate issue to be decided by the trier of fact.” Fed. R. Evid. 704(a).
“That said, an expert witness cannot give an opinion as to her legal conclusion, i.e., an opinion
on the ultimate issue of law. Similarly, instructing the jury as to the applicable law is the distinct
and exclusive province of the court.” Nationwide Transp. Fin. v. Cass Info. Sys., 523 F.3d 1051,
1058 (9th Cir. 2008) (citing Hangarter, 373 F.3d at 1016) (internal citations and quotation marks
omitted); Fed. R. Evid. 702 (requiring that expert opinion evidence “assist the trier of fact to
understand the evidence or to determine a fact in issue.”)).

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Contrary to Empire Lumber’s matter-of-fact position that “Mr. Shemchuk’s testimony in
no way reflects conclusions of law” (see Empire Lumber’s Resp. to Daubert Mot., p. 5 (Docket
No. 87), there is no question that, at times, the Shemchuk materials improperly speak to ultimate
issues of law. See, e.g., Shemchuk Aff. at ¶¶ 6, 8, 19, 27, 33, 44, & 48 (Docket No. 21, Att. 7)
(“I have concluded that . . . [ILM] is clearly in violation of the Fair Claims Practices as set forth
by the Idaho Department of Insurance”; “This lack of pertinent written correspondence . . . is in
violation of the Fair Claims Statute . . . .”; “The aforementioned discussion and Exhibits
demonstrate how ILM is in violation of two of the Fair Claims Statutes . . . .”; “Once again, this
is not only deplorable business practice, but is in violation of the Idaho Fair Claims Statute . . .
.”; “This series of correspondence illustrates violations of fair claims practices on several
levels”; “This is also a violation of the Idaho Fair Claims Statute . . . .”; “As illustrated above,
ILM is in violation of fully six (6) of the 14 Unfair Claim Settlement Practices as listed under
Title 41, Chapter 13 of the Idaho Legislature Statutes.”). Simply put, these sorts of opinions
attempt to preemptively answer ultimate issues of law and do not constitute admissible expert
testimony.1
However, as part of its own case and to counter ILM’s anticipated position that its
conduct was appropriate, Empire Lumber is permitted to offer expert testimony speaking to
ILM’s duty under the circumstances and whether, in fact, ILM complied with that duty of care.
This inquiry no doubt embraces legal questions concerning the meaning and interpretation of the
applicable insurance contract/policy, but is nonetheless relevant as foundation to Mr.

1

Additionally, as discussed during the hearing, the overwhelming majority of what is
contained within the Shemchuck materials represents argument upon the evidence in the record.
The undersigned has already rejected similar attempts. See 9/27/12 Order, p. 10 (Docket No.
102) (“Thus, to the extent Mr. O’Neill and Mr. Klaue attempt to lay the foundation for the facts
upon which they later testify they were unaware of, such “foundation” is improper and, in this
particular instance, represents nothing more than another opportunity for Empire Lumber to
make argument. The Court strikes such instances in these respects . . . .”). As with Messrs.
O’Neill and Klaue, the Shemchuk materials are problematic for these same reasons.
MEMORANDUM DECISION AND ORDER - 5

Shemchuk’s opinion as to whether ILM’s coverage decisions were done in bad faith. To do so,
Mr. Shemchuk must set forth ILM’s duty (in part, by commenting upon the underlying
contract/policy), and his opinion that ILM did or did not comply with that duty, before Mr.
Shemchuk can offer any opinion as to whether or not ILM’s conduct was reasonable and/or
breached any applicable industry standards. This is a fine line, to be sure – one that becomes
even more difficult to identify when considering the Shemchuk materials’ overzealous
commentary concerning the credibility of certain actors and the weight of the evidence (see
supra).
Despite its shortcomings, Mr. Shemchuk’s testimony will not be stricken in its entirety,
consistent with the Court’s above-referenced reasoning. To the extent more direction is
necessary in order for ILM to properly prepare for trial (and the parties are unable to stipulate to
the scope of Mr. Shemchuk’s opinions), ILM is free to move in limine to further define the
boundaries of Mr. Shemchuk’s testimony, being sure to challenge his actual report instead of
affidavits offered in support of an ancillary motion. Until then, ILM’s Motion to Exclude is
granted in limited part, insofar as Mr. Shemchuk is not permitted to offer opinions on ultimate
issues of law; ILM’s Motion to Exclude is denied, however, in that the entirety of Mr.
Shemchuk’s opinion will not be excluded.
III. ORDER
Based upon the foregoing, IT IS HEREBY ORDERED THAT ILM’s Daubert Motion to
Exclude Testimony of Andy Shemchuk (Docket No. 83) is GRANTED, in part, and DENIED, in
part, without prejudice to renew in limine, if necessary.
DATED: November 16, 2012

Honorable Ronald E. Bush
U. S. Magistrate Judge
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