Hunt et al v. Hadden et al
Filing
61
SUPPEMENTAL OPINION on Cross Motions for Summary Judgment. Signed by District Judge David M. Lawson. (SPin)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
DAVID HUNT and
CAROL SANTANGELO,
Plaintiffs,
Case Number 14-10713
Honorable David M. Lawson
v.
DONNELLY HADDEN, and
DONNELLY W. HADDEN, P.C.,
Defendants.
_______________________________/
SUPPLEMENTAL OPINION ON CROSS MOTIONS FOR SUMMARY JUDGMENT
This case began as a legal malpractice case, but eventually was pared down by the plaintiffs
to claims of conversion, breach of fiduciary duty, and fraud, based on the plaintiffs’ former attorney
charging legal fees in excess of the parties’ retainer agreement. After discovery closed, the parties
each filed motions for summary judgment. The Court denied the defendants’ motion and granted
the plaintiffs’ motion in part, finding that the defendants were liable for statutory conversion and
fixing the amount converted. The Court held that a jury must decide whether the plaintiffs are
entitled to treble damages under Michigan’s conversion statute. Subsequently, the parties each filed
motions for reconsideration, in part focusing on the amount of damages. It became apparent that
there was a material fact dispute over that amount, and the Court vacated that part of its prior
opinion, leaving the amount of damages for jury determination, along with the treble damage issue.
At a status conference held thereafter, the parties raised additional issues, not addressed in
their summary judgment briefs, pertaining to attorney fees, the requisite proofs for treble damages,
and whether expert testimony could be offered.
The Court ordered the parties to submit
supplemental briefs addressing the following issues: (1) What are the relevant factors for the jury
to consider in determining whether the plaintiffs are entitled to treble damages under Michigan
Compiled Laws § 600.2919a? (2) Who decides whether and how much to award in attorney fees
under section 600.2919a: the jury at trial, or the Court upon motion after trial under Federal Rule
of Civil Procedure 54(d)? (3) Should the Court permit expert testimony on whether the plaintiffs
should be awarded treble damages? The parties have submitted their supplemental briefs.
I. Treble Damages
After the Court filed its opinion and order, the Michigan Supreme Court issued its opinion
in Aroma Wines & Equip., Inc. v. Columbian Distribution Servs., Inc., 497 Mich. 337, --- N.W.2d --(2015). The court determined that, to be liable for statutory conversion, a plaintiff must show “that
the defendant employed the converted property for some purpose personal to the defendant’s
interests, even if that purpose is not the object’s ordinarily intended purpose.” Aroma, 497 Mich.
337, slip op. at 4. The court, however, declined to review whether an award of treble damages is
a matter of discretion for the jury. Id. at 7 n.10. As this Court stated in its previous opinion, the
Michigan intermediate appellate court decisions commit that determination to the jury.
The defendants maintain that treble damages are akin to punitive damages, although they cite
no Michigan authority in support of that argument. Nonetheless, they contend that the requisite
showing therefore must be sufficient to justify a punitive damage award. The plaintiffs point out
that treble damages are not always identified as punitive damages, and sometimes a different
standard of proof is appropriate.
The plaintiffs cite Johnson v. Jensen, 433 N.W.2d 472 (Minn. Ct. App.), rev’d in part on
other grounds, 446 N.W.2d 664 (Minn. 1989), for the proposition that “[t]he standard o[f] proof
required for the imposition of punitive damages is not the same as the standard o[f] proof required
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for the imposition of treble damages.” Id. at 476. That is certainly the case in some states. For
instance, the Minnesota Supreme Court recognized that “there are differences between a statutory
award of multiple damages, which represents a fixed amount and does not necessarily reflect a
judgment concerning the culpability of the [defendant]’s conduct, and an award of punitive damages
at common law, which is assessed by the jury and thus reflects the community’s condemnation of
a defendant’s conduct when it is viewed as wanton, malicious, or outrageous.” Wojciak v. N.
Package Corp., 310 N.W.2d 675, 680 (Minn. 1981).
Similarly, in Cieslewicz v. Mut. Serv. Cas. Ins. Co., 267 N.W.2d 595 (Wisc. 1978), the
Wisconsin Supreme Court identified three differences between common law punitive damages and
statutory multiple damages under Wisconsin law. First, the court noted that punitive damages are
awarded only if the plaintiff establishes a specific state of mind, but found that state of mind is
irrelevant to an award of treble damages under Wisconsin law. Id. at 600. Second, the court said
that common law punitive damages are assessed in the discretion of the jury, but “[m]ultiple
damages, on the other hand, are assessed whenever the statutory requirements are met, and the
plaintiff is entitled to multiple damages on that showing alone.” Ibid. Third, the court noted that
the wealth of the defendant must be considered when calculating punitive damages, but wealth has
nothing to do with the assessment of statutory multiple damages. Id. at 600-01.
The national jurisprudence recognizes a difference between punitive damages denominated
as such, and multiple damages, acknowledging that multiple damages are not always punitive.
“When the award of multiple damages is intended to serve penal purposes, it is a substitute for
punitive damages, and the same or similar proof requirements usually must be satisfied.” Dist.
Cablevision Ltd. P’ship v. Bassin, 828 A.2d 714, 726 (D.C. 2003). “On the other hand, multiple
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damages provisions may be enacted to serve remedial rather than punitive purposes, such as
ensuring full compensation or encouraging private enforcement of the law.” Ibid. Similarly, in a
series of cases, the Supreme Court has “placed different statutory treble-damages provisions on
different points along the spectrum between compensatory and strictly punitive awards.” PacifiCare
Health Sys., Inc. v. Book, 538 U.S. 401, 405 (2003) (collecting cases). As the Supreme Court has
noted, “the tipping point between payback and punishment defies general formulation, being
dependent on the workings of a particular statute and the course of particular litigation.” Cook
Cnty., Ill. v. United States ex rel. Chandler, 538 U.S. 119, 130 (2003). Indeed, at least one court of
appeals has instructed that “treble damages statutes defy easy categorization as compensatory or
punitive in nature.” Alea London Ltd. v. Am. Home Services., Inc., 638 F.3d 768, 777 (11th Cir.
2011). Instead, “[w]hether treble damages under a given statute are considered compensatory or
punitive is an intensely fact-based inquiry that may vary statute-to-statute.” Ibid. (citations
omitted).
Those articulated distinctions between punitive damages and multiple damages are sensible
and well-reasoned. However, they do not appear to have taken root in Michigan jurisprudence. The
nature and amount of damages to which a plaintiff is entitled is a matter of substantive law. See
Blasky v. Wheatley Trucking, Inc., 482 F.2d 497, 498 (6th Cir. 1973). Because this is a diversity
action, the Court must follow Michigan substantive law, as prescribed by the state’s highest court.
Erie R.R. v. Tompkins, 304 U.S. 64 (1938). And because the Michigan Supreme Court has not
addressed whether the requirements to impose punitive and statutory multiple damages are the same,
the Court “must predict how it would resolve the issue from ‘all relevant data.’” Kingsley
Associates, Inc. v. Moll PlastiCrafters, Inc., 65 F.3d 498, 507 (6th Cir.1995) (citing Bailey v. v. &
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O Press Co., Inc., 770 F.2d 601, 604 (6th Cir.1985)). “Relevant data include decisions of the state
appellate courts, and those decisions should not be disregarded unless we are presented with
persuasive data that the Michigan Supreme Court would decide otherwise.” Ibid. (citing FL
Aerospace v. Aetna Casualty and Surety Co., 897 F.2d 214, 218-19 (6th Cir.1990)).
Every Michigan court to consider the issue has found that treble damages under Michigan
Compiled Laws § 600.2919a is punitive in the traditional sense, that is, to punish the defendant for
wrongdoing. See e.g., Peisner v. Detroit Free Press Inc., 421 Mich. 125, 143 n.4, 364 N.W.2d 600,
609 (1984) (describing treble damages as an example of “true ‘punitive’ (i.e., punishment-type)
damages”); Shephard v. Gates, 50 Mich. 495, 498, 15 N.W. 878, 880 (1901) (“[T]reble damages are
in their nature punitory.”); Michigan Land & Iron Co. v. Deer Lake Co., 60 Mich. 143, 146, 27 N.W.
11 (1886) (same).
The plaintiffs have not argued otherwise. As the Michigan Court of Appeals noted in New
Properties, Inc. v. George D. Newpower, Jr., Inc., 282 Mich. App. 120, 137, 762 N.W.2d 178, 189
(2009), treble damages are intended as a “penalty,” not an assessment of actual compensatory
damages. In other words, treble damages under this statute “extend[] beyond restoring” a plaintiff
“to their original condition” before the act of conversion. Ibid. Instead, the purpose of treble
damages is “to penalize” the converter. Ibid.; see also Alken-Ziegler, Inc. v. Hague, 283 Mich. App.
99, 104, 767 N.W.2d 668, 671 (2009) (Mich. Comp. Laws § 600.2919a “is a punitive statute that
provides for recovery of three times the amount” converted. “Punitive damages reflect a worthy
public policy consideration of punishing dishonest defendants and setting an example for similar
wrongdoers.”); Pantall Gallup, No. 314852, 2014 WL 5793945, at *19 (“Treble damages awarded
under [Mich. Comp. Laws § 600.2919a] are punitive in nature.”); Stockbridge Capital, LLC v.
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Watcke, No. 313241, 2014 WL 860353, at *3 (Mich. Ct. App. Mar. 4, 2014) (same); Beginin v.
Thomas Hospitality Grp., Inc., No. 317515, 2014 WL 6859292, at *2 (Mich. Ct. App. Dec. 4, 2014)
(“The purpose of [Mich. Comp. Laws § 600.2919a] . . . is to punish wrongdoing . . . by granting
victims of conversion the possibility of treble damages.”); Sutter v. Ocwen Loan Servicing, LLC, No.
320704, 2015 WL 1814160, at *6 (Mich. Ct. App. Apr. 21, 2015) (“The purpose of the conversion
statute is not merely to restore the plaintiff to his or her original condition, but to penalize the
converting defendant by authorizing treble damages.”) (citing New Properties, 282 Mich. App at
137; 762 NW2d at 189).
Where multiple damages are considered punitive, the award, as noted above, must be made
by the fact finder upon an appropriate showing, instead of automatically “whenever the statutory
requirements are met.” Cieslewicz, 267 N.W.2d at 600. Consistent with that procedure, the
Michigan Court of Appeals — unlike Wisconsin courts, for instance — has uniformly found that
treble damages for statutory conversion are a matter for the jury to decide. See Aroma Wines &
Equip., Inc. v. Columbian Distribution Servs., Inc., 303 Mich. App. 441, 449-50, 844 N.W.2d 727,
732 (2013) (“[W]hether to award treble damages is a question for the trier of fact, and we cannot
simply order treble damages upon a finding of conversion.”); see also Pantall Gallup, LLC v.
Alnouri, No. 314852, 2014 WL 5793945, at *18-19 (Mich. Ct. App. Nov.6, 2014) (“The term ‘may’
is permissive and indicates discretionary activity. Thus, under the language in MCL 600.2912a(1),
treble damages and attorney fees are discretionary. Accordingly, whether to award treble damages
is a question for the trier of fact.”) (citations omitted); Poly Bond, Inc. v. Jen Tech Corp., No.
290429, 2010 WL 2925428, at *4 (Mich. Ct. App. July 27, 2010) (“As the trial court concluded, the
phrase ‘may recover’ in MCL 600.2919a indicates that treble damages are permissive, not
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mandatory. Thus, a trier of fact has discretion to decide whether to award them when a person has
sustained actual damages as a result of another person converting property, for example.”).
Michigan courts have been less clear, however, on the showing a plaintiff must make to
recover treble damages for statutory conversion under section 600.2919a. Nonetheless, there is a
body of law addressing awards of multiple damages under other statutes. As with punitive damages,
Michigan courts have repeatedly found that a plaintiff may only recover statutory multiple damages
upon a showing of wilful misconduct. Shephard, 50 Mich. at 498, 15 N.W. at 880 (“[I]nasmuch as
treble damages are in their nature punitory, it cannot be assumed they were designed to be inflicted
in any case not clearly defined, or in any case not involving something like willful wrong. The
statute applies to nothing but active injuries proceeding directly from unlawful acts. . . . It also
follows that such damages cannot arise from mere neglect, but must come from active
misconduct.”); Overseer of Highways of Rd. Dist. No. 4 of St. Ignace Twp. v. Pelton, 129 Mich. 31,
34, 87 N.W. 1029, 1030 (1901) (same); Governale v. City of Owosso, 59 Mich. App. 756, 759, 229
N.W.2d 918, 920 (1975) (noting that a good faith and honest belief is a good defense to treble
damages under trespass statute); Stevens, 121 Mich. App. at 509, 328 N.W.2d at 675 (Treble
damages under Mich. Comp. Laws § 600.2919 “are not designed to be imposed in the absence of
active misconduct”); Tammy E. Hinshaw and John Kimpflen, 7 Mich. Civ. Jur. Damages § 179
(2015) (“The legislature may provide for the recovery of treble damages. Since treble damages are
by their nature punitive, they are not to be awarded in any case not clearly defined or not involving
something like willful wrong.”).
Consistent with the foregoing, the Michigan Supreme Court has approved jury instructions
directing juries to award treble damages only upon a finding of willful misconduct. For instance,
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in Michigan Land & Iron Co. v. Deer Lake Co., 60 Mich. 143, 27 N.W. 10 (1886), the Michigan
Supreme Court affirmed the following treble damages instruction in a trespass case:
In determining [an award of treble damages] there must be some evidence of
willfulness, wantonness, or evil design. . . . Negligence alone is not sufficient to
create liability [for treble damages] in a case of this kind. If [the defendant’s
foreman] believed he was on the lands of defendant, he would not be liable for the
trespass himself in treble damages, nor would the defendant in the case.
Id. at 145-46, 27 N.W. at 10-11. The court held that treble damages were “punitory” under the
statute and could only be awarded for “active misconduct.” Id. at 146, 27 N.W. at 11.
Even when the defendant’s state of mind is irrelevant for determining liability, willfulness
may become relevant to an assessment of damages. For instance, in Connor v. McRae, 193 Mich.
682, 160 N.W. 479 (1916), the Michigan Supreme Court held that treble damages for trespass could
only be awarded for willful or wanton conduct, even though trespass is a strict liability tort. The
parties did not dispute that the defendant trespassed on the land; the only question for the jury was
the extent of the trespass and the resulting damages. The Michigan Supreme Court found no error
in the following charge to the jury:
The burden of proof in this case is upon the plaintiffs to maintain their cause of
action by a fair preponderance of the evidence. As I have said, there are some
undisputed questions of fact. In view of the undisputed questions of fact, it becomes
your duty to find a verdict in favor of these plaintiffs. The only question upon that
point is as to the amount of damages; that is a disputed question of fact to be
determined by you.
...
In order to so hold defendants . . . [liable] for treble damages there must be evidence
of willfulness, wantonness, or evil design upon the part of such defendants. . . .
Negligence alone is not sufficient to create liability of this kind. Even if the
defendants were negligent, that alone would not be sufficient to make them liable for
treble damages; there must be active misconduct.
Id. at 693-94, 160 N.W. at 482-83.
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The foregoing authority suggests that there is little likelihood that the Michigan Supreme
Court would treat the assessment of treble damages under the statutory conversion statutes
differently than treble damages for trespass. Both are akin to punitive damages under Michigan
law. The plaintiffs therefore must establish their right to treble damages for statutory conversion
with evidence that the defendants acted willfully or wantonly in converting the excess attorney’s
fees.
The defendants argue that the plaintiffs must prove their entitlement to punitive damages by
clear and convincing evidence, but do not cite any Michigan court cases to support their assertion.
The law appears contrary. The Michigan Supreme Court has stated that a plaintiff is entitled to
treble damages if the jury finds that the defendants acted willfully or wantonly by a preponderance
of the evidence. See Connor, 193 Mich. at 693, 160 N.W. at 483; see also White v. Burlington N.
& Santa Fe R. Co., 364 F.3d 789, 805-06 (6th Cir. 2004) (“[P]unitive damages have a long history
in American civil litigation, where the traditional standard of proof has been ‘preponderance of the
evidence.’”) (citing Jury Determination of Punitive Damages, 110 Harv. L. Rev. 1513, 1531-32
(1997)). The Court will instruct the jury accordingly.
II. Attorney’s Fees
The defendants argue that the jury also must decide whether the plaintiffs are entitled to
attorney’s fees under Michigan Compiled Laws § 600.2919a(1) and, if so, the amount of those fees.
The plaintiffs disagree; they believe the Court makes that determination after trial.
In a diversity action, the Court must apply state substantive law and federal procedural law
in determining an award of attorney fees. See First Bank of Marietta v. Hartford Underwriters Ins.
Co., 307 F.3d 501, 528 (6th Cir. 2002) (citing Erie, 304 U.S. at 78); see also Alyeska Pipeline Co.
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v. Wilderness Soc’y, 421 U.S. 240, 260 n.31 (1975) (“In an ordinary diversity case where the state
law does not run counter to a valid federal statute, . . . state law denying the right to attorney’s fees
or giving a right thereto, which reflects a substantial policy of the state, should be followed.”).
Michigan’s statutory conversion statute expressly authorizes recovery of attorney’s fees
when a plaintiff establishes a violation of the statute as a matter of state substantive law. The statute
states:
A person damaged as a result of [statutory conversion] may recover 3 times the
amount of actual damages sustained, plus costs and reasonable attorney fees.
Mich. Comp. Laws § 600.2919a(1). The federal procedural rule governing the award of attorney’s
fees when appropriate is Federal Rule of Civil Procedure 54(d). The rule states:
A claim for attorney’s fees and related nontaxable expenses must be made by motion
unless the substantive law requires those fees to be proved at trial as an element of
damages.
Fed. R. Civ. P. 54(d) (emphasis added). State laws that collide with federal rules of procedure must
yield, and the federal procedural rule governs in federal courts. Shady Grove Orthopedic Associates,
P.A. v. Allstate Ins. Co., 559 U.S. 393, 410 (2010) (plurality) (holding that if a Federal Rule
“regulates procedure,” “it is authorized by [the Rules Enabling Act, 28 U.S.C.] § 2072 and is valid
in all jurisdictions, with respect to all claims, regardless of its incidental effect upon state-created
rights”). Michigan courts have not spoken to the question whether the court or the jury decides an
award of attorney’s fees under the conversion statute. Rule 54(d) provides the necessary guidance
in any event, by directing the inquiry toward whether attorney’s fees are a form of collateral relief,
or must be considered an element of damages. In this case, the plaintiffs argue for the former, while
the defendants insist upon the latter.
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“Attorney’s fees and costs are matters traditionally reserved for court determination.” The
Scotts Co. v. Cent. Garden & Pet Co., 256 F. Supp. 2d 734, 748 (S.D. Ohio 2003); see also Dryvit
Sys., Inc. v. Great Lakes Exteriors, Inc., 96 F. App’x 310, 311 (6th Cir. 2004) (“Typically, attorney’s
fees are collateral to the merits and awarded after judgment by Fed. R. Civ. P. 54(d)(2) motion.”).
The primary exception involves disputes in which attorney fees are authorized by contract. See
Tipton v. Mill Creek Gravel, Inc., 373 F.3d 913, 923 n.10 (8th Cir. 2004) (observing that “[c]ourts
have held attorney fees to be special damages primarily in instances when available under a contract
between the parties”); see also Dryvit, 96 F. App’x at 311 (“[I]n Michigan, attorney’s fees awarded
by a ‘prevailing party’ contract clause are considered damages, not costs, and therefore are not
collateral to the merits.”) (citations omitted).
No Michigan court has found that attorney’s fees are an element of damages for statutory
conversion. However, the defendants argue that whether to award attorney fees should be submitted
to the jury because they are “discretionary” under Michigan law. See Aroma, 303 Mich. at 449, 844
N.W.2d at 732 (noting that under section 600.2912a(1), “treble damages and attorney fees are
discretionary”). That attorney fees are discretionary, however, does not mean that the discretion to
award attorney fees belongs to the jury. Instead, courts traditionally have the discretion to award
attorney fees and costs. Cf. King v. Gen. Motors Corp., 136 Mich. App. 301, 307, 356 N.W.2d 626,
629 (1984) (“As in all cases where attorney fees are recoverable pursuant to statute or court rule,
the decision to grant or deny an award of attorney fees under [the civil rights statutes] is within the
discretion of the trial court.”). There is no indication in the conversion statute that attorney’s fees
are considered an element of damages. A finding otherwise may subject the attorney’s fee award
to trebling. The defendants have offered no reason why the Court should depart from the general
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rule here. An award of attorney’s fees is collateral to the plaintiffs’ damages for statutory
conversion. Because attorney’s fees are not an element of damages, the plaintiffs may seek them
under the procedures outlined in Rule 54(d).
III. Expert Witnesses
The plaintiffs argue that they should be able to call an attorney to testify as an expert witness
about defendant Hadden’s conduct and whether it justifies an award of treble damages. According
to the plaintiffs, their witness would give opinions about the extent of the defendants’ misconduct
based on his or her (1) review of the underlying facts in this case; (2) experience as a licensed
Michigan lawyer; (3) familiarity with the calculation of a contingency under Michigan Court Rule
8.121(c)(1); (4) understanding of the Michigan Rules of Professional Conduct; (5) review of the
Attorney General Commission letter and its underlying investigation; and (6) knowledge of
Michigan law. The defendants argue that it would be error to permit expert testimony from a lawyer
about his or her legal opinion. However, the defendants assert that they will produce their own
medical expert to testify about Hadden’s state of mind at the time he converted the settlement
proceeds.
The admissibility of expert testimony is governed by Rule 702 of the Federal Rules of
Evidence. That rule was modified in December 2000 to reflect the Supreme Court’s emphasis in
Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), and Kumho Tire Co. v.
Carmichael, 526 U.S. 137 (1999), on the trial court’s gatekeeping obligation to conduct a
preliminary assessment of relevance and reliability whenever a witness testifies to an opinion based
on specialized knowledge. Although the rule and the cases interpreting it set forth a number of
criteria, at base expert testimony must be helpful to the jury “to understand the evidence or to
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determine a fact in issue.” Fed. R. Evid. 702(a). Expert “testimony that does little more than tell
the jury what result to reach . . . is properly excludable under the Rules.” Woods v. Lecureux, 110
F.3d 1215, 1220 (6th Cir. 1997).
To prove entitlement to treble damages, the plaintiffs must show that the defendants acted
willfully or wantonly. Generally, opinion testimony on a person’s state of mind does not aid the jury
in determining a fact in issue. As one district court explained recently:
Expert testimony as to intent, motive, or state of mind offers no more than the
drawing of an inference from the facts of the case. The jury is sufficiently capable
of drawing its own inferences regarding intent, motive, or state of mind from the
evidence, and permitting expert testimony on this subject would be merely
substituting the expert’s judgement for the jury’s and would not be helpful to the
jury.
Waite, Schneider, Bayless & Chesley Co., L.P.A. v. Davis, No. 11-851, --- F. Supp. 3d ---, 2015 WL
3505793, at *14-15 (S.D. Ohio June 3, 2015) (quoting Siring v. Oregon State Bd. of Higher Ed., 927
F. Supp. 2d 1069, 1077 (D. Or. 2013)). Because “[t]he intent of the [defendant] is an issue within
the competence of the jury,” expert opinion testimony will not assist the jury in determining whether
Hadden acted willfully when he converted the settlement funds. See CMI-Trading, Inc. v. Quantum
Air, Inc., 98 F.3d 887, 890 (6th Cir. 1996), abrogated on other grounds by Morales v. American
Honda Motor Co., Inc., 151 F.3d 500 (6th Cir. 1998).
Moreover, neither party identified expert witnesses on this subject when they exchanged
disclosures under Federal Rule of Civil Procedure 26(a)(2). That rule requires a party to disclose
the identify of any expert witness it may use at trial, which “must be accompanied by a written
report — prepared and signed by the witness — if the witness is one retained or specifically
employed to provide expert testimony in the case.” Ibid. “The expert witness discovery rules are
designed to aid the court in its fact-finding mission by allowing both sides to prepare their case
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adequately and efficiently and to prevent the tactic of surprise from affecting the outcome of the
case.” Sherrod v. Lingle, 223 F.3d 605, 613 (7th Cir. 2013) (citing Fed. R. Civ. P. 26(a)(2) advisory
committee’s note). As the Fourth Circuit has explained, “‘Rule 26 disclosures are often the
centerpiece of discovery in litigation that uses expert witnesses. A party that fails to provide these
disclosures unfairly inhibits its opponent’s ability to properly prepare, unnecessarily prolongs
litigation, and undermines the district court’s management of the case.’” Wilkins v. Montgomery,
751 F.3d 214, 221 (4th Cir. 2014) (quoting Saudi v. Northrop Grumman Corp., 427 F.3d 271, 27879 (4th Cir. 2005)).
The plaintiffs did not furnish any expert reports to the defendant under Rule 26(a)(2).
Although the plaintiffs identified the names of potential expert witnesses, none of them pertained
to statutory conversion. The defendants’ proposed expert, Dr. Ernest Chiodo, was retained to
evaluate “whether or not there is any causal connection between Dr. Hunt’s habitation of the
condominium and any adverse health conditions suffered by him.” Chiado Report, dkt. #38-4, at
4. The defendants did not retain him to opine about Hadden’s state of mind at the time he converted
the settlement funds.
Under Federal Rule of Civil Procedure 37(c)(1), the Court must exclude a witness “[i]f a
party fails to provide information or identify a witness as required by Rule 26(a) or (e) . . . unless
the failure was substantially justified or is harmless.” Fed. R. Civ. P. 37(c)(1). “Federal Rule of
Civil Procedure 37(c)(1) requires absolute compliance with Rule 26(a); that is, it ‘mandates that a
trial court punish a party for discovery violations in connection with Rule 26 unless the violation
was harmless or is substantially justified.’” Roberts ex rel. Johnson v. Galen of Virginia, Inc., 325
F.3d 776, 782 (6th Cir. 2003) (quoting Vance v. United States, No. 98-5488, 1999 WL 455435, at
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*3 (6th Cir. June 25, 1999)). Exclusion of expert testimony is the “standard sanction” for a violation
of Rule 26. Samos Imex Corp. v. Nextel Communications, Inc., 194 F.3d 301, 305 (1st Cir. 1999).
However, in determining whether to nevertheless permit expert testimony, “[h]armlessness . . . is
the key.” Sommer v. Davis, 317 F.3d 686, 692 (6th Cir. 2003). “The advisory committee’s note to
Rule 37(c) ‘strongly suggests that “harmless” involves an honest mistake on the part of a party
coupled with sufficient knowledge on the part of the other party.’” Ibid. (quoting Vance, No. 985488, 1999 WL 455435, at *5). The burden is on the potentially sanctioned party to prove
harmlessness. Roberts ex rel. Johnson, 325 F.3d at 782.
Permitting new experts — from either party — at this late stage would unfairly prejudice
both sides’ ability to prepare for trial. The plaintiffs have not furnished the defendants with an
expert report, a summary of the proposed testimony, or even the name of the proposed expert (the
plaintiffs have only identified possible experts depending on their availability on the date of trial).
And although the defendants have furnished Dr. Chiodo’s report, it does not address Hadden’s state
of mind at the time of the conversion. Neither party has met its burden of showing that the failure
to comply with Rule 26(a)(2) was harmless.
For these reasons, the Court will not permit the parties to offer expert testimony on the
defendants’ culpability for treble damages.
IV. Conclusion
For the reasons explained above, the Court will submit the question of treble damages to the
jury and instruct that it must find that the defendants acted willfully or wantonly before a treble
damages award may be made. The plaintiffs’ entitlement to attorney’s fees must be addressed to
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the Court by motion as prescribed by Federal Rule of Civil Procedure 54(d). The parties may not
offer expert testimony on the defendants’ culpability for treble damages.
It is so ORDERED.
s/David M. Lawson
DAVID M. LAWSON
United States District Judge
Dated: September 2, 2015
PROOF OF SERVICE
The undersigned certifies that a copy of the foregoing order was served
upon each attorney or party of record herein by electronic means or first
class U.S. mail on September 2, 2015.
s/Susan Pinkowski
SUSAN PINKOWSKI
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