Sauer Incorporated v. Lexington Insurance Agency, Inc.

Filing 99

ORDER denying 79 Motion to Strike and denying 83 Motion to Compel.. Defendant shall have until July 17, 1015 to conduct discovery regarding Plaintiff's supplemental damages disclosures. Signed by Magistrate Judge Robert B. Jones, Jr. on 6/4/2015. (Grady, B.)

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION
No. 5:13-CV-180-F
SAUER INCORPORATED,

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Plaintiff,

v.

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LEXINGTON INSURANCE AGENCY,
INC., d/b/a LEXINGTON INSURANCE
COMPANY,
Defendant.

ORDER

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This matter is before the court with regard to Defendant's motion to strike Plaintiffs
supplemental Rule 26 disclosures [DE-79] and Defendant's motion to compel [DE-83]. Plaintiffhas
filed responses in opposition to the motions. [DE-85, -88]. Accordingly, the pending motions are
ripe for adjudication. For the reasons that follow, the motions are denied.
I. BACKGROUND

This case, removed to this court on March 13, 2013, involves a breach of contract claim
stemming from Defendant's denial of coverage on Plaintiffs claim under a builder's risk insurance
policy. [DE-1-1] ~~ 4, 8. The insurance contract covered a project named "Special Operations Force
-North Operations Addition Facility," which was located at Fort Bragg in Cumberland County,
North Carolina and included the procurement and installation of an underground storm water
retention system (the "Rain Tank").

!d.~~

4, 10. Plaintiffs breach of contract claim results from

a claim made for property coverage after the Rain Tank collapsed. !d.

~~

11, 12.

On May 3, 2013, the court entered a scheduling order with the following critical deadlines:
discovery to be completed by January 31,2014, dispositive motions to be filed by February 28,2014,

and the trial to be held during the July 14,2014 term of court. [DE-20]. On November4, 2013, the
court allowed the parties' joint motion to amend the scheduling order as follows: discovery to be
completed by May 1, 2014, dispositive motions to be filed by June 2, 2014, and the trial to be held
during the September 29,2014 term of court. [DE-30]. On November 26,2013, Plaintiff filed a
motion for summary judgment [DE-32], to which Defendant responded with a Rule 56(d) motion
[DE-34]. The court allowed Defendant's motion and denied Plaintiffs motion as prematurely filed
to provide Defendant the opportunity to complete discovery. [DE-45].
On May 21, 2014, after conducting a hearing to develop the record, the court allowed in part
Defendant's motion to amend the scheduling order as follows: discovery to be completed by August
22,2014, dispositive motions to be filed by September 22,2014, and the trial to be held during the
January 5, 2015 term of court. [DE-60]. On September 26, 2014, the court again amended the
scheduling order at the parties' request to provide that discovery be completed by December 12,
2014, dispositive motions be filed by January 12, 2015, and the trial to occur during the April, 27,
2015 term of court. [DE-69].
On October 31, 2014, the court quashed Defendant's 30(b)( 6) deposition subpoena directed
to the United States Army Corps of Engineers [DE-76], and an appeal of that order is currently
pending before the presiding district judge [DE-77]. On December 30,2014, Defendant filed the
instant motion to strike Plaintiffs Rule 26 supplemental disclosures. [DE-79]. On January 6, 2015,
the court allowed Defendant's consent motion to extend the dispositive motions deadline to January
26,2015. [DE-82]. On January 12, 2015, Defendant filed the instant motion to compel. [DE-83].
On January 26, 2015, the parties filed cross-motions for summary judgment. [DE-86, -89]. On
February 12, 2015, the court continued the trial of this matter pending further order. [DE-93].
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II. DISCUSSION
A.

Motion to Strike [DE-79]
Defendant contends that Plaintiffs supplemental Rule 26 disclosures related to damages are

untimely and incomplete and thus seeks to have them stricken. Def.'s Mot. [DE-79] at 1-3.
Specifically, Defendant contends that Plaintiff initially disclosed damages of $925,893.81 for
replacement of the Rain Tank, but on December 1, 2014, shortly before the close of discovery,
Plaintiff revised its initial disclosures to include new claims for soft costs of $207,762.00 and
preparation costs of $25,000.00 without sufficient documentation. Id Plaintiff contends that it
promptly supplemented its damages calculation after learning of potential coverage for these types
of damages at the November 18, 2014 deposition of Tom Habinck and provided sufficient
documentation in support. Pl.'s Resp. [DE-85] at 1-5. The court agrees with Plaintiff that the
supplemental disclosures regarding damages satisfy Rule 26.
Rule 26(a)(l) mandates that the parties make certain pre-discovery initial disclosures
including
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). Timely supplementation or correction of initial disclosures is
likewise required by Rule 26( e) when "the party learns that in some material respect the disclosure
or response is incomplete or incorrect, and if the additional or corrective information has not
otherwise been made known to the other parties during the discovery process or in writing[.]" Fed.
R. Civ. P. 26(e)(1 )(A). "Furthermore, when a party receives additional documents that it intends to

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use to prove its damages, or when its previous damages computation becomes otherwise inadequate,
a party must supplement its Rule 26(a)(l )(A)(iii) computation." Silicon Knights, Inc. v. Epic Games,

Inc., No. 5:07-CV-275-D, 2012 WL 1596722, at *1 (E.D.N.C. May7, 2012) (unpublished) (citations
omitted). The scheduling order governing this case further provides that"[ s]upplementation under
Rule 26(e) must be made promptly after receipt ofthe information by the party or counsel." [DE-20]
at 2.
Defendant first argues that Plaintiffs disclosures regarding soft costs and claim preparation
damages are not a supplementation as contemplated by Rule 26(e), but rather an improper attempt
to add two new categories of damages on the eve of the close of discovery. Def.'s Mem. [DE-80]
at 2-3. The court disagrees. Defendant has not disputed that Plaintiff first learned during the
November 18, 2014 deposition of Tom Habinck, the adjuster for the claim at issue, that damages for
soft costs and claim preparation may be included in the covered loss. See Pl.'s Resp. [DE-85] ,-r,-r 1-3,
7-9 (citing !d. Ex. F, Habinck Dep. [DE-85-8] at 60:7-18). Rule 26(e) encompass circumstances
such as those present here where new information regarding the subject of an initial disclosure is
learned through discovery. See Carmody v. Kansas City Bd. of Police Comm 'rs, 713 F.3d 401,
404-05 (8th Cir. 2013) ("Federal Rule of Civil Procedure 26(a)(l)(A)(iii) requires parties to make
initial disclosures, including a computation of damages, which under Rule 26(e)(1 )(A) must be
supplemented when new information comes to light."); KCH Servs., Inc. v. Vanaire, Inc., No.
CIV.A. 05-777-C, 2010 WL 1416672, at *3 (W.D. Ky. Mar. 31, 2010) (unpublished) (denying
motion to exclude based on late expert disclosures and allowing motion to present unjust emichment
damages based on "recently available information" where plaintiffhad a duty pursuant to Rule 26(e)
to supplement once new evidence related to damages was discovered).
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Moreover, the delay in taking Habinck's deposition appears to lie in part with Defendant
where Plaintiff first sought deposition dates for this witness in July of20 14. Pl.'s Resp., Ex. A [DE-

85-3];seealso id, Ex. B [DE-85-4] (Aug. 7, 2014Email from Robey to Mondiregarding scheduling
Habinck's deposition) & Ex. C [DE-85-5] (Oct. 1, 2014 Email from Robey to Mondi regarding
scheduling Habinck's deposition). Thus, the circumstances here are distinct from those where a
party fails to diligently pursue a matter then later attempts to add new theories through Rule 26(e)
supplementation. Cf MRO Commc'ns, Inc. v. Am. Tel. & Tel. Co., 205 F.3d 1351 (9th Cir. 1999)
(unpublished) (finding no error in district court's conclusion that new category of damages was not
admissible under Rule 26(e)(1) where proponent of evidence did not contend the information on
which the new evidence was based was unavailable at the time of the original disclosure); Oceans

Cuisine, Ltd v. Fishery Prods. Int'l, Inc., No. 05-CV-3613 DRH AKT, 2006 WL 1071578, at *5
(E.D.N.Y. Apr. 21, 2006) (unpublished) (upholding ruling that supplemental interrogatory answer
was untimely introduction of new theory on damages where plaintiff"belatedly consulted with AMH
& E, an advertising company, and later attempted to assert theories based upon that consultation,

after the discovery cut-off.").
Finally, Plaintiff offered to cure any potential prejudice by agreeing to provide additional
discovery on damages, including making a30(b )(6) witness available, Pl.'s Resp., Ex. J [DE-85-12]
& Ex. M [DE-85-15]. The court finds that providing an additional period of time in which

Defendant may conduct discovery related to the supplemental damages disclosures is sufficient to
cure any arguable prejudice to Defendant based on the timing ofthe supplementation. See B-Y Water

Dist. v. City of Yankton, No. CIV. 07-4142, 2008 WL 4861692, at *2 (D. S.D. Nov. 10, 2008)
(unpublished) (denying motion to strike supplemental report based on newly-disclosed lost profit

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damages where information was discovered after initial disclosure and depositions and plaintiff
offered to provide expert for another deposition).
Defendant also contends that Plaintiffs supplemental disclosures are not properly supported.
Def.'s Mem. [DE-80] at 3-5. After notifying Defendant that it intended to supplement its damages
disclosures to include soft costs and claim preparation costs, Plaintiff provided a "Soft Costs
Narrative" explaining its calculation as well as a spreadsheet detailing the overhead calculation and
cost estimate analysis. Pl.'s Resp., Ex. I [DE-85-11]. At Defendant's request, Plaintiffthereafter
provided financial statements and other documentation in further support of the soft costs
calculation. /d, Ex. L [DE-85-14]. Rule 26(a)(l) requires that documentation supporting a damages
calculation be made available. Fed. R. Civ. P. 26(a)(l)(A)(iii). It appears Plaintiff has already
provided a substantial amount of information regarding its calculation of soft costs, but none
regarding claim preparation costs. However, where the court will provide an additional period of
time in which Defendant may conduct discovery related to the supplemental damages disclosures
any deficiency is not fatal and may be cured. Accordingly, the motion to strike is denied, and
Defendant shall have until July 17, 2015 to conduct discovery regarding Plaintiffs supplemental
damages disclosures.

B.

Motion to Compel [DE-83]
Defendant seeks an order compelling Plaintiff to identify the number of documents in its

"CLX library," to fully comply with Plaintiffs requests for production of documents, and to produce
a complete copy of its Rule 26 expert's file. Pl.'s Mot. [DE-83]. Specifically, Defendant's motion
pertains to documents Defendant contends it discovered during the depositions of Habinck on
November 18,2014 and of Michael Ulmer on December 10,2014, which had not previously been
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produced. Pl.'s Mem. [DE-84] at 1-2.
Rule 34 of the Federal Rules of Civil Procedure governs document production requests.
Pursuant to Rule 34, a party may request that the opposing party "produce and permit the requesting
party ... to inspect, copy, test, or sample" relevant documents, electronically stored information,
and tangible things that are within the party's "possession, custody, or control." Fed. R. Civ. P.
34(a)(l). The party served with a document production request may object to the request if a
legitimate basis for doing so exists. Fed. R. Civ. P. 34(b)(2)(B) & (C). Rule 37 provides that "[a]
party seeking discovery may move for an order compelling an answer, designation, production, or
inspection." Fed. R. Civ. P. 37(a)(3)(B).
Plaintiff in response to the motion to compel asserts that it produced a privilege log and
provided a supplemental production for the Ulmer file on January 16,2015. Pl.'s Resp. [DE-88] ~~
7-8. Accordingly, it appears the motion with respect to the Ulmer file is moot. With respect to the
document introduced by Plaintiff at the Habinck deposition, the failure to produce one document in
the context of a large electronic production is insufficient to cast doubt on the completeness of the
entire production, particularly where as here the document at issue originated with Defendant's
adjuster and it appears Defendant also failed to produce the document.

Id [DE-88]

~

11.

Furthermore, the document was in fact produced by third-party Willis. Pl.'s Resp., Ex. K [DE-8814]. Accordingly, the motion to compel is denied.

III. CONCLUSION
For the foregoing reasons, Defendant's motion to strike Plaintiffs supplemental Rule 26
disclosures [DE-79] and Defendant's motion to compel [D E-83] are DENIED. Defendant shall have

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until July 17, 2015 to conduct discovery regarding Plaintiffs supplemental damages disclosures.

United States

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