Certain Underwriters at Lloyds et al v. National RailRoad Passenger Corporation et al
MEMORANDUM AND ORDER denying 583 Motion to Strike. LMI must file a letter by April 3, 2017, describing the supplemental discovery they seek, limited to the newly disclosed costs claimed by Amtrak. Any objections to this Memorandum and Order must be filed with the Honorable Frederic Block by April 14, 2017, or will be deemed waived. See attached for further discussion. Ordered by Chief Mag. Judge Roanne L. Mann on 3/28/2017. (Proujansky, Josh)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
CERTAIN UNDERWRITERS at LLOYD’S,
NATIONAL RAILROAD PASSENGER
CORPORATION, et al.,
ROANNE L. MANN, CHIEF UNITED STATES MAGISTRATE JUDGE:
Currently pending before the Court, in this declaratory judgment insurance coverage
action, is a motion filed by plaintiffs London Market Insurers (“LMI”) seeking to preclude
defendant National Railroad Passenger Corporation (“Amtrak”) from asserting newly disclosed
damages claims, as a sanction for Amtrak’s untimely disclosure. See Motion to Strike
Untimely Cost Claims (Mar. 9, 2017) (“Motion to Strike”), Electronic Case Filing Docket
Entry (“DE”) #583. For the reasons that follow, LMI’s motion to preclude is denied.
In November 2016, LMI obtained invoices, pursuant to a subpoena served on American
Premier Underwriters (“APU”), the successor to Penn Central, the previous owner of
Sunnyside Yards, the site at issue during this phase of the litigation, regarding additional
remediation work completed by Amtrak. See Response in Opposition (Mar. 14, 2017)
(“Amtrak Opp.”) at 1 & n.1, DE #584. LMI provided Amtrak with copies of the documents
produced by APU in January 2017.1 See id. at 1 & n.1, 2.
Also in January 2017, LMI discovered a court filing in another case demonstrating that
Amtrak had recovered from APU more than $722,000 of the costs claimed for environmental
remediation of Sunnyside Yards. See Motion to Strike at 1. LMI determined that Amtrak had
not deducted this amount from its damages calculation, thereby seeking a double recovery of
that amount. See id. On February 17, 2017, LMI requested that Amtrak supplement its
discovery responses regarding this payment. See id.; Letter to Rhonda Orin and Daniel Healy
from Aisha Bembry dated February 17, 2017 (attached as Ex. A to Declaration of Aisha
Bembry dated March 9, 2017 (“Bembry Decl.”)), DE #583-2. On February 27, 2017, Amtrak
updated its interrogatory response to reflect that Amtrak had received from APU $722,988.63,
in addition to the $8.6 million that Amtrak had previously disclosed. See Amtrak Opp. at 1;
Amtrak’s Responses and Objections to Plaintiffs’ Fourth Set of Interrogatories (“Amtrak’s
Responses to 4th Set of Interrogatories”) (attached as Ex. C to Bembry Decl.) at 4, DE #5834. Amtrak also updated its damages calculation to reflect approximately $4.067 million in
invoices for “investigation and remediation costs relating to the Sunnyside Yards Site,”
included in the production from APU, that had not previously been included in Amtrak’s
computation of damages. See Amtrak Opp. at 1; Amtrak’s Responses to 4th Set of
Interrogatories at 6. Amtrak’s expert had stated in his report, dated January 30, 2017, that
Amtrak had identified many invoices that pre-dated the general ledger data, including
approximately $1.5 million in environmental remediation costs, and had reserved the right to
The parties blame each other for the delay in production to Amtrak. See Amtrak Opp. at 1 &
n.2; Reply in Support (Mar. 20, 2017) (“LMI Reply”) at 1-2 & n.3, DE #588.
update his findings after his review of more than 1,700 documents received from LMI pursuant
to the subpoena served on APU. See Amtrak Opp. at 2 n.4; Expert Report of Bruce
Dubinsky dated January 30, 2017 (“Dubinsky Report”) (attached as Ex. 4 to the Declaration of
Daniel Healy dated March 14, 2017) at 12 n.15, 13 n.16, DE #584-5. Amtrak had been
unable to locate these invoices, which were created before 1996, because they pre-date the
general ledger entries upon which Amtrak had been relying and it was not standard practice at
Amtrak to permanently retain paid invoices. See Amtrak Opp. at 1 n.1; Dubinsky Report
LMI contend that they are prejudiced by Amtrak’s late disclosure of additional damages
because fact discovery closed on December 16, 2016, expert reports were exchanged on
January 30, 2017, and a trial date is “fast approaching.” See Motion to Strike at 1. Thus,
LMI contend that they have not had the opportunity to take fact discovery on these new
damages claims, their expert could not analyze these new claims, and no time remains in the
schedule to do so. See id.
Rule 26(a)(1)(A)(iii) of the Federal Rules of Civil Procedure provides that “a party
must, without awaiting a discovery request, provide to the other parties . . . a computation of
each category of damages claimed by the disclosing party -- who must also make available for
inspection and copying as under Rule 34 the documents or other evidentiary material, unless
privileged or protected from disclosure, on which each computation is based, including
materials bearing on the nature and extent of injuries suffered.” Fed. R. Civ. P.
26(a)(1)(A)(iii). The disclosing party must timely supplement or correct its initial disclosures
if it subsequently learns that the information it had provided was either “incomplete or
incorrect.” Fed. R. Civ. P. 26(e)(1)(A). A party’s production of documents supporting its
damages claims does not excuse that party “‘from its separate obligation to disclose a damages
computation.’” See Max Impact, LLC v. Sherwood Grp., Inc., No. 09 Civ. 902 (JGK)(HBP),
2014 WL 902649, at *6 (S.D.N.Y. Mar. 7, 2014) (quoting Agence France Presse v. Morel,
293 F.R.D. 682, 684 (S.D.N.Y. 2013)). If a party fails to provide or supplement information,
that party is prohibited from “us[ing] that information . . . to supply evidence on a motion, at a
hearing, or at a trial, unless the failure was substantially justified or is harmless.” Fed. R.
Civ. P. 37(c)(1).
“Preclusion is, of course, a harsh sanction, to be imposed rarely.” U.S. Bank Nat’l
Ass’n v. PHL Variable Ins. Co., Nos. 12 Civ. 6811 (CM)(JCF), 13 Civ. 1580 (CM)(JCF),
2013 WL 5495542, at *2 (S.D.N.Y. Oct. 3, 2013) (citing Ritchie Risk-Linked Strategies
Trading (Ireland), Ltd. v. Coventry First LLC, 280 F.R.D. 147, 156 (S.D.N.Y. 2012)); see
Lujan v. Cabana Mgmt., Inc., 284 F.R.D. 50, 68 (E.D.N.Y. 2012). Despite the seemingly
mandatory language in the Rule, even where a court finds that a discovery failure is not
harmless or substantially justified, preclusion is subject to the court’s wide discretion. See
Design Strategy, Inc. v. Davis, 469 F.3d 284, 294, 297 (2d Cir. 2006). Courts have
considered four factors in determining whether preclusion is the appropriate sanction for the
failure to timely disclose: 1) the party’s explanation for the failure to comply with its disclosure
obligations; 2) the importance of the precluded evidence; 3) the prejudice to the opposing party
from having to prepare to meet the new evidence; and 4) the possibility of a continuance. See
id. at 296 (citing Patterson v. Balsamico, 440 F.3d 104, 117 (2d Cir. 2006)); Max Impact,
2014 WL 902649, at *5.
Amtrak argues that its failure to timely disclose the newly claimed costs is the fault of
LMI for not having earlier produced the invoices obtained from APU. However, based on the
exhibits submitted by Amtrak detailing communications between the parties’ attorneys, it
appears that Amtrak would have received copies of the documents sooner had it been more
diligent. See Emails exchanged between Aisha Bembry and Daniel Healy (attached as Ex. 2 to
the Declaration of Daniel Healy dated March 14, 2017), DE #584-3; Second Declaration of
Aisha Bembry (Mar. 20, 2017) (“2d Bembry Decl.”) ¶ 6, DE #588-1. Furthermore, these
were invoices that had been paid by Amtrak, some of which Amtrak had previously produced
in discovery as early as 2015. See 2d Bembry Decl. ¶ 3. Thus, Amtrak’s attempt to shift the
blame for its own discovery omission falls short. Amtrak cannot credibly complain that its
failure to update its damages computation is attributable to LMI’s delay in producing
documents that, at least at one time, had been in Amtrak’s possession. This Court finds that
Amtrak is at fault for failing to adequately disclose its new computation of damages within the
discovery period. Moreover, such failure was neither substantially justified nor harmless.
Nevertheless, the sanction sought by LMI is too harsh a remedy. LMI does not claim
that Amtrak’s failure was willful or in bad faith. Although Amtrak does not offer any specific
explanation for its failure to timely disclose the newly claimed costs –- apart from the
suggestion that it was unaware of this information -- the Court is mindful of the fact, based on
its familiarity with the extensive discovery in this case, and by LMI’s own admission, see LMI
Reply at 2 n.4, that Amtrak has produced hundreds of thousands of pages of documents.
Given the volume of documents produced by Amtrak, the age of the documents at issue (more
than 20 years old), and Amtrak’s practice of not retaining paid invoices, it is understandable
that Amtrak neglected to focus on these particular ones sooner.
To be sure, Amtrak’s costs incurred for environmental remediation are an important
part of its case. Moreover, any prejudice that LMI would suffer by the late disclosure may be
remedied short of preclusion. The newly claimed costs do not affect the parties’ arguments on
their to-be-filed motions for summary judgment, and trial is several months away. There is
sufficient time remaining before trial for LMI to take whatever limited supplemental discovery
they need. Indeed, LMI possessed the invoices underlying the newly claimed costs since APU
produced the documents in November of last year; Amtrak produced some of the invoices as
early as 2015. Although that fact does not absolve Amtrak’s failure to timely supplement its
computation of damages, LMI were in possession of the underlying damages information
before the close of discovery. Having considered the Patterson factors, the Court concludes
that preclusion is inappropriate under the circumstances.
The cases cited by LMI in support of preclusion are distinguishable. In those cases, the
parties against whom sanctions were sought either failed entirely to provide an adequate
computation of damages or waited until the eve of trial or in response to a dispositive motion to
make their disclosure. See Design Strategy, 469 F.3d at 295 (plaintiff changed damages
theory in pretrial order); CQ, Inc. v. TXU Mining Co., 565 F.3d 268, 279-80 (5th Cir. 2009)
(plaintiff failed to disclose computation of various categories of damages); Agence France
Presse, 293 F.R.D. at 683-85 (party for the first time changed his damages theory in
connection with the preparation of the pretrial order); Spotnana, Inc. v. Am. Talent Agency,
Inc., No. 09 Civ. 3698 (LAP), 2010 WL 3341837, at *1-*2 (S.D.N.Y. Aug. 17, 2010)
(defendant never disclosed damages calculation for counterclaim); Gould Paper Corp. v.
Madisen Corp., 614 F.Supp.2d 485, 490 (S.D.N.Y. 2009) (defendant never provided damages
computation for counterclaim); 24/7 Records, Inc. v. Sony Music Entm’t, Inc., 566 F.Supp.2d
305, 318 (S.D.N.Y. 2008) (plaintiff asserted new damages theory just weeks before trial);
AVX Corp v. Cabot Corp., 252 F.R.D. 70, 76-81 (D. Mass. 2008) (plaintiff made
supplemental response to interrogatory after deadline for opposition to motion for summary
LMI must file a letter by April 3, 2017, describing the supplemental discovery they
seek, limited to the newly disclosed costs claimed by Amtrak.
For the foregoing reasons, LMI’s motion to preclude is denied.
Any objections to this Memorandum and Order must be filed with the Honorable
Frederic Block by April 14, 2017, or will be deemed waived.
Brooklyn, New York
March 28, 2017
Roanne L. Mann
ROANNE L. MANN
CHIEF UNITED STATES MAGISTRATE JUDGE
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