Panel Specialists, Inc. v. Tenawa Haven Processing, LLC

Filing 91

ORDER granting 79 Motion for Leave to Submit Expert Report on Markup Out of Time. Plaintiff Panel Specialists, Inc. is allowed twenty-one (21) days from the date of this order to conduct another deposition of Ed Whitfield related to his expert opinion. Plaintiff Panel Specialists, Inc. is allowed thirty (30) days from the date of this order to designate a rebuttal expert witness on the issue of markups. Signed by Magistrate Judge K. Gary Sebelius on 1/16/2018. (wh)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
PANEL SPECIALISTS, INC.,

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Plaintiff/Counterclaim Defendant,
v.
TENAWA HAVEN PROCESSING, LLC,
Defendant/Counterclaim Plaintiff.

Case No. 16-4140-SAC

ORDER
This matter comes before the court upon defendant/counterclaim plaintiff Tenawa Haven
Processing, LLC’s (“Tenawa”) Motion for Leave to Submit Expert Report on Markup Out of
Time (ECF No. 79). For the following reasons, this motion is granted.
I.
Plaintiff/counterclaim defendant Panel Specialists, Inc. (“PSI”) sued Tenawa for more
than $600,000 in unpaid invoices for work that PSI performed in connection with the
construction of Tenawa's gas processing plant in Haven, Kansas. Tenawa asserted counterclaims
against PSI for damages due to defective and delayed work on the project by PSI. Tenawa also
believes that it can show that PSI excessively marked up the cost of materials and equipment that
PSI purchased for the construction of the plant in the invoices PSI submitted to Tenawa.
In this motion, Tenawa seeks to submit an expert report of Ed Whitfield out of time on
the markup issue. Tenawa contends that the expert report could not have been prepared prior to
the filing of the motion because PSI did not produce the majority of its invoices until October 17,
2017, and Tenawa was not aware of PSI’s general markup strategy until the deposition of a
former PSI employee on November 15, 2017. PSI has suggested Tenawa’s motion should be
denied because markups have been an issue in this case for some time. PSI asserts that Tenawa

could have produced an expert opinion on the reasonableness of the markups at any time prior to
the expert report deadline of June 23, 2017. PSI contends that allowing the submission of
Tenawa’s expert report would interfere with the trial of this case because PSI would be entitled
to submit a rebuttal report and both parties would be entitled to seek exclusion of the experts
through Daubert motions. PSI has also attacked the substance of the opinions in the report and
whether Whitfield is an expert.
II.
In the court’s Scheduling Order of January 12, 2017, the deadline for Tenawa to serve
expert reports was May 8, 2017. After subsequent extensions, the deadline became June 23,
2017. On June 23, 2017, Tenawa did file a designation of expert witness and submitted the
expert report of Tanner Courrier on an issue unrelated to the markup issue. On September 22,
2017, Denise Bergeron, PSI’s finance and office manager, was deposed. During that deposition,
Ms. Bergeron provided testimony regarding markups by PSI on the Tenawa project. PSI’s
counsel acknowledged during that deposition that not all of PSI’s invoices had been produced.
On September 26 and October 17, 2017, PSI produced a significant number of additional
invoices for work on the Tenawa project. On November 15, 2017, Andrew Toups, PSI’s former
purchasing agent who was PSI’s purchasing agent during the entirety of the Tenawa project,
testified about various markups, which he identified as margins. Tenawa filed the instant motion
on November 29, 2017, after conferring with opposing counsel and determining that PSI
objected to the issuance of the Whitfield expert report. On December 14, 2017, PSI deposed Ed
Whitfield as a fact witness.

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III.
Under Federal Rule of Civil Procedure 26(a)(2), the parties must disclose the identity of
their expert witnesses and the experts' written reports “at the times and in the sequence directed
by the court.” Fed.R.Civ.P. 26(a)(2). The purpose of Rule 26(a)(2) is to ensure opposing parties
have a reasonable opportunity to prepare an effective cross examination and, if needed, retain
their own expert.1 A party “who ‘without substantial justification, fails to disclose information
required by Rule 26(a) or 26(e)(1) . . . is not, unless such failure is harmless, permitted to use as
evidence at trial, at a hearing, or on a motion any witness or information not so disclosed.’”2
As the party seeking to file an untimely expert report, Tenawa bears the burden to
establish that the untimely disclosure was substantially justified; if Tenawa fails to meet its
burden, it must establish that its untimely disclosure was harmless to PSI.3 A party's failure to
disclose is “harmless when there is ‘no prejudice to the party entitled to the disclosure.’”4 Before
excluding expert testimony under Rule 26, the court must consider the following factors: (1) the
prejudice or surprise to the party against whom the testimony is offered; (2) the ability to cure
the prejudice; (3) the extent to which introducing such testimony would disrupt the trial; and (4)
the moving party's bad faith or willfulness, if any.5

1

See Miller v. Prairie Ctr. Muffler, Inc., No. 03–2424–DJW, 2004 WL 2821220, at * 1 (D.Kan. Nov. 16,

2004).
2

Burton v. R.J. Reynolds Tobacco Co., 203 F.R.D. 636, 639 (D.Kan.2001) (citing Fed.R.Civ.P. 37(c)(1)).

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See id.

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Id. (citation omitted).

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Id. (citing Woodworker's Supply, Inc. v. Principal Mut. Life Ins. Co., 170 F.3d 985, 993 (10th Cir.1999)).

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IV.
Having carefully reviewed the arguments of the parties, the court is persuaded that
Tenawa’s motion should be granted. The court finds that Tenawa has provided good cause for
its failure to timely produce the expert report of Whitfield. Although markups have long been an
issue in this case, information concerning the nature and extent of those markups was only
provided to Tenawa after the expert witness deadline. The numerous invoices produced in
September and October coupled with the subsequent deposition of Toups in November show that
Tenawa acted reasonably in obtaining this expert report. PSI’s other arguments concerning the
opinions contained in the report and whether Whitfield is a proper expert are premature and not
relevant to the issue raised by Tenawa’s motion. The other arguments raised by PSI concerning
the timing of this motion also do not require denial of Tenawa’s motion. Although the Pretrial
Conference is scheduled for January 17, 2018, no trial date has been designated. Daubert
motions are not due until 42 days prior to trial. In light of these circumstances, the court does
not find that PSI will be prejudiced by the granting of this motion. In addition, in order to lessen
any prejudice from the granting of this motion, the court shall allow PSI to conduct another
deposition of Whitfield concerning his expert opinions. The court shall allow PSI twenty-one
(21) days from the date of this order to conduct that deposition. The court shall also allow PSI to
designate a rebuttal witness within thirty (30) days of the date of this order.
IT IS THEREFORE ORDERED that defendant/counterclaim plaintiff Tenawa Haven
Processing, LLC’s (“Tenawa”) Motion for Leave to Submit Expert Report on Markup Out of
Time (ECF No. 79) is hereby granted.

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IT IS FURTHER ORDERED that plaintiff/counterclaim defendant Panel Specialists,
Inc. shall be allowed twenty-one (21) days from the date of this order to conduct another
deposition of Ed Whitfield related to his expert opinion.
IT IS FURTHER ORDERED that plaintiff/counterclaim defendant Panel Specialists,
Inc. shall be allowed thirty (30) days from the date of this order to designate a rebuttal expert
witness on the issue of markups.
IT IS SO ORDERED.
Dated this 16th day of January, 2018, at Topeka, Kansas.

s/ K. Gary Sebelius
K. Gary Sebelius
U.S. Magistrate Judge

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