Apex Abrasives v. WGI Heavy Minerals et al

Filing 220

ORDER granting 208 Motion To Exclude Plaintiff's Witness Julie Fagenstrom. Ms. Fagenstrom is excluded from offering expert testimony at trial; however, this Order does not prevent her from offering fact testimony at trial. Signed by Judge Donald W. Molloy on 3/28/2019. (NOS)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
BUTTE DIVISION

FILED
MAR 28 2019
Clerk, U.S C
District Of Moit°'ts

Missoula Divisi~~a

CV 14-37-BU-DWM

APEX ABRASIVES, INC.,
Plaintiff,

ORDER

vs.
WGI HEAVY MINERALS, INC., WGI
HEAVY MINERALS, LLC, and DOE
BUSINESS ENTITIES 1-3, inclusive,
Defendants.

This case arises out of a dispute between the parties regarding the
production and sale of commercial-grade garnet. Plaintiff Apex Abrasives, Inc.
("Apex") alleges that following its construction of a garnet processing facility in
Glen, Montana, it was forced to cease operations and liquidate its inventory
because WGI Heaving Minerals, Inc. and WGI Heavy Minerals, LLC (collectively
"WGI") violated their purchase agreement. WGI objects to Apex's expert
disclosure for Julie Fagenstrom 1 and seeks to exclude her from offering expert
testimony at trial. (Doc. 208.) Argument on the motion was heard on March 28,

1

The expert's name is spelled both "Fagenstrom" and "Fagenstom" in Apex's
disclosure. (See Doc. 215.) "Fagenstrom" is used throughout this Order unless
directly quoting language from the disclosure.
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2019. Ultimately, the inadequacy of Ms. Fagenstrom's expert disclosure excludes
her expert testimony at trial, but she is permitted to testify as a fact witness.
Parties are required to make their expert disclosures at the time and in the
manner ordered by the Court. Goodman v. Staples The Office Superstore, LLC,
644 F .3d 817, 827 (9th Cir. 2011 ). If a party fails to properly disclose this
information, the party cannot use the non-disclosed information at trial "unless the
failure was substantially justified or is harmless." Fed. R. Civ. P. 37(c)(l); Yeti by
Molloy, Ltd. v. Deckers Outdoor Corp., 259 F.3d 1101, 1106 (9th Cir. 2001). The

parties were reminded of this potential sanction in the Scheduling Order, which
states: "An inadequate report or disclosure may result in exclusion of the expert's
opinions at trial even though the expert has been deposed." (Doc. 205 at -,r 9(c).)
Rule 26(a)(2) provides for disclosures by two types of expert: those retained
or specifically employed to give expert testimony in a case, Fed. R. Civ. P.
26(a)(2)(B), and those who are not retained or specially employed, but who
nonetheless may provide expert testimony, Fed. R. Civ. P. 26(a)(2)(C). An expert
who falls into the first category is required to provide an expert report. Fed. R.
Civ. P. 26(a)(2)(B). An expert who falls into the second category, however, need
only provide disclosures stating both "the subject matter on which the witness is
expected to present evidence under Federal Rule of Evidence 702, 703, or 705[]

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and ... a summary of the facts and opinions to which the witness is expected to
testify." Fed. R. Civ. P. 26(a)(2)(C)(i), (ii).
Here, Julie Fagenstrom was disclosed as a non-retained expert under Rule
26(a)(2)(C). While WGI does not dispute that the disclosure adequately states the
subject matter of her anticipated testimony, Fed. R. Civ. P. 26(a)(2)(C)(i), it argues
the disclosure fails to provide a summary of the facts and her opinions, Fed. R.
Civ. P. 26(a)(2)(C)(ii). Ms. Fagenstrom's disclosure states:
Ms. Fagenstrom provided bookkeeping and accounting services for Apex
Abrasives. She is a Nelson family member and it's [sic] not receiving
compensation for participating as a witness in this case.

A. The Subject Matter on Which Ms. Julie Fagenstrom Is Expected
to Present Evidence under Federal Rule of Evidence 702, 703,
or 705
1. Apex Accounting and Ledger Entries

B. Summary of the Facts and Opinions to Which [Ms. Julie
Fagenstrom ]2 Is Expected to Testify
1. Ms Fagenstrom [sic] will rely on her experience and knowledge
as an accountant; and her personal knowledge of Apex' [sic]
financial and production records and related exhibits.
2. Based on the foregoing, Ms. Fagenstom will testify regarding
funds Apex was forced to borrow to sustain operations during the
contract period when WGI did not purchase the minimum
specified tonnages, which borrowed funds are due and owing to
the private lender.
3. Based on the foregoing, Ms. Fagenstom will testify regarding the
expenditure and loss of invested capital to design, construct, and
2

Apex's disclosure states "Mr. Dirk Nelson" but context clarifies that the
disclosure is for Ms. Fagenstrom.
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permit the mill. In connection with this testimony she will opine
regarding the value of the company and the effect Apex's breach
of contract had on that value.
4. Based on the foregoing, Ms. Fagenstom will offer opinion
testimony regarding the profit Apex could have expected to make
on the sale of minimum tonnages specified in the parties'
marketing agreement based upon conservative production costs
of four cents per pound.
5. Based on the foregoing, Ms. Fagenstom will testify regarding
revenue generated from the sale of tungsten as a by-product of
garnet production and offer opinion testimony regarding the
amount of revenue Apex lost because WGI failed to purchase the
specified amounts of garnet in the parties [sic] marketing
agreement.
(Doc. 215 at 2-3.)
Apex's disclosure is not sufficient under Rule 26(a)(2)(C)(ii). The
"disclosure advises the reader that the witness will have opinions in certain areas,
but fails to state what the opinions are, and the factual basis for those opinions."
Cooke v. Town of Colo. City, 2013 WL 551508, at *4 (D. Ariz. Feb. 13, 2013)

(emphasis omitted). "An opposing party should be able (and be entitled) to read an
expert disclosure, determine what, if any, adverse opinions are being proffered and
make an informed decision as to whether it is necessary to take a deposition and
whether a responding expert is needed." Id. at *5; Laslovich v. St. Farm Fire &
Cas. Co., 307 F.R.D. 533, 536 (D. Mont. 2015). While it is clear what topic areas

Ms. Fagenstrom will cover, her opinions and the underlying facts remain unknown.
For example, while she is anticipated to testify to revenue from tungsten sales, the

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disclosure does not state what the expected revenue was or what her calculation of
that revenue is based on.
Because Apex's expert disclosure of Ms. Fagenstrom is not sufficient under
the rules, it must be excluded unless Apex can show that its failure was either
substantially justified or harmless. Fed. R. Civ. P. 37(c)(l). Apex's only response
has been to maintain the sufficiency of its present disclosure. During oral
argument, counsel for Apex stated the proffered calculations walk a fine line
between fact and opinion. While he is correct, once Apex decided to notice Ms.
Fagenstrom as an expert, it was required to meet the disclosure requirements of
Rule 26(a)(2)(C)(ii), which require disclosure of both the opinion at issue and a
summary of the facts upon which it is based. Ms. Fagenstrom's disclosure
includes neither. Counsel also argued that all the underlying data and calculations
have been previously disclosed in the course of this proceeding. This ignores Rule
26(a)(2)(C)'s requirement that the disclosure link evidence to opinions. Finally,
counsel argued that the record contained sufficient information for WGI to decide
whether or not to depose Ms. Fagenstrom. But, "[w]ithout information as to the
opinions [Apex's] non-retained expert witnesses are expected to testify to and the
main facts on which these opinions are based, [WGI]'s ability to meaningfully
depose or cross-examine these witnesses is undermined." Pineda v. City & Cty. of

S.F., 280 F.R.D. 517,523 (N.D. Cal. 2012). As argued by WGI, the inadequate
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disclosure has not given WGI a meaningful choice whether to depose Ms.
Fagenstrom, but rather mandates a deposition. See Pineda, 280 F.R.D. at 523.
Based on the foregoing, exclusion is appropriate.
Accordingly, IT IS ORDERED that Apex's motion (Doc. 208) is
GRANTED. Ms. Fagenstrom is excluded from offering expert testimony at trial;
however, this Order does not prevent her from offering fact testimony at trial. 3
DATED this

3

K

~
day of March, 2019.

Given that Ms. Fagenstrom was only disclosed as a fact witness prior to the first
trial in this case, (see Doc. 66 at 1; Doc. 117 at 31 ), her testimony would have been
similarly circumscribed had she testified in that proceeding.
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