National Credit Union Administration Board v. Cumis Insurance Society Inc.

Filing 154

Memorandum Opinion & Order. Defendant's 136 Motion in limine concerning Elizabeth Martin is denied. Signed by Magistrate Judge Greg White on 10/30/2015. (S,S)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
NATIONAL CREDIT UNION,
ADMINISTRATION BOARD,
as Liquidating Agent of
St. Paul Croatian Federal Credit Union,
Plaintiff,
v.

CUMIS INSURANCE SOCIETY, INC.,
Defendant.

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CASE NO. 1:11 CV 1739

MAGISTRATE JUDGE GREG WHITE

MEMORANDUM OPINION & ORDER

This matter is before the Court upon Defendant Cumis Insurance Society, Inc.’s
(“Cumis”) Motion in Limine Concerning Elizabeth Martin (Doc. No. 136.)1 For the following
reasons, Cumis’ Motion is DENIED.
I.

Procedural History
On August 18, 2011, Plaintiff National Credit Union Administration Board, as

Liquidating Agent of St. Paul Croatian Federal Credit Union (hereinafter “Plaintiff” or
“Liquidating Agent”) filed a Complaint against Cumis. (Doc. No. 1.) Therein, Plaintiff alleges
that, on April 30, 2010, the National Credit Union Administration Board placed the St. Paul
Croatian Federal Credit Union (hereinafter “St. Paul”) into involuntary liquidation due to

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This case is before the Court upon consent of the parties entered November 28, 2011.
(Doc. No. 13.)

insolvency and appointed itself the Liquidating Agent pursuant to 12 U.S.C. ¶ 1787(a)(1)(A). Id.
at ¶ 6. As Liquidating Agent, Plaintiff asserts it “assumed all right, title and interest of St. Paul
by operation of law.” Id. at ¶ 7. The Complaint contains one count, seeking a declaratory
judgment that CUMIS owes coverage under a fidelity bond it issued to St. Paul for losses arising
from employee or director dishonesty. Id. at ¶¶ 8-19, 32-34. Cumis filed its Answer on October
24, 2011. (Doc. No. 3.)
A case management conference was conducted on November 29, 2011, at which time the
Court set a discovery deadline of September 1, 2012 and a dispositive motions deadline of
October 1, 2012. (Doc. No. 14.) These deadlines were extended seven times, in large part due
to the parties’ numerous discovery disputes. Ultimately, the discovery deadline was extended to
July 28, 2014 and the dispositive motions deadline was extended to October 29, 2014. See NonDocument Order dated April 15, 2014; Doc. No. 71.
In April 2012, as part of its First Set of Interrogatories, Cumis requested that Plaintiff
identify “each person you intend to call as a witness at trial, the substance of the expected
testimony and your relationship, if any, to each witness.” (Doc. No. 138-1 at 4.) Plaintiff did
not identify Elizabeth Martin at that time.
Two years later, in March 2014, Cumis noticed the deposition of Plaintiff’s Corporate
Designee Pursuant to Fed. R. Civ. P. 30(b)(6). (Doc. No. 88-9 at 2.) Among other things, the
Notice of Deposition requested Plaintiff produce a witness to testify regarding “the loans on
which the complaint is based” and “the damages plaintiff seeks.”2 Id. On March 20, 2014,

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The Notice also requested Plaintiff’s 30(b)(6) witness be able to testify about
paragraphs 10, 11, 12, 15, and 18 of the Complaint. (Doc. No. 88-9.) These paragraphs allege
that: (1) “The liquidation of St. Paul was due to insolvency resulting, in whole or in large part,
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Plaintiff produced Jennifer Murphy as its Rule 30(b)(6) witness. (Doc. No. 84-1.) As discussed
in more detail below, the parties sharply disagree as to whether Ms. Murphy provided responsive
testimony regarding the topics listed in the Notice of Deposition.
Several months later, in October 2014, the parties filed cross-motions for summary
judgment. (Doc. Nos. 88, 90.) In its motion, Cumis argued (among other things) that it was
entitled to summary judgment in its favor because Plaintiff had failed to demonstrate that the loss
for which it is seeking coverage under the bond resulted directly from the dishonest conduct of
St. Paul Chief Operating Officer Anthony Raguz.3 (Doc. No. 88.) Cumis noted that the bond
provides that: “[w]e will pay you for your loss resulting directly from dishonest acts committed

from employee dishonesty leading to losses in excess of $72 million and triggering coverage
under Cumis’ bond. See Criminal Indictment of Anthony Raguz in a criminal case entitled
United States of America v. Nikolovski, Case No. 1:11-cr-00008-CAB-3, pending in the United
States District Court for the Northern District, Eastern Division, Judge Christopher Boyko
presiding.” (Doc. No. 1 at ¶ 10); (2) “In the spring of 2010, the NCUA discovered what appeared
to be a fraudulent lending scheme perpetrated by Anthony Raguz, which was later confirmed by
a forensic report prepared by Lillie & Company, Inc., dated October 2, 2010.” (Id. at ¶ 11); (3)
“On April 12, 2010, St. Paul placed Cumis on notice of the scheme and its intent to
pursue a claim under the bond.” (Id. at ¶ 12); (4) “On October 8, 2010, the NCUA filed a Proof
of Loss with Cumis, in the amount of $72,546,823.72.” (Id. at ¶ 15); and, (5) “The Liquidating
Agent timely asserted the claims under the Cumis bond.” (Id. at ¶ 18.)
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As detailed at length in the Court’s Memorandum Opinion & Order denying the parties’
cross motions for summary judgment (Doc. No. 102), Anthony Raguz became the Chief
Operating Officer of St. Paul in 1996. At some point in 2000, Mr. Raguz began making
fraudulent loans; i.e., accepting bribes in exchange for loans. (Doc. No. 102 at 4.) It is
undisputed that Mr. Raguz’s fraudulent conduct continued from 2000 up until the collapse of St.
Paul in April 2010. Id. at 6. In March 2011, Mr. Raguz was indicted on one count of bank
fraud in violation of 18 U.S.C. § 1344; four counts of money laundering in violation of 18 U.S.C.
§ 1957; and, one count of receipt of commissions or gifts for procuring loans in violation of 18
U.S.C. § 215(a)(2), in connection with his role in the failure of St. Paul Croatian Federal Credit
Union. See United States v. Raguz, Case No. 1:11CR0008 (N.D. Ohio) (Doc. No. 17.) He pled
guilty to all charges on September 27, 2011. Id. at Doc. No. 96, 100. On November 27, 2012,
Raguz was sentenced to 168 months incarceration and ordered to pay $71,501,823.72 in
restitution. Id. at Doc. No. 176.
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by an ‘employee’ or ‘director, acting alone or in collusion with others.” (Doc. No. 90-2 at 20)
(emphasis added). Cumis maintained that Ms. Murphy was unable in deposition to tie any losses
directly to Mr. Raguz’s dishonest conduct, emphasizing her testimony that neither she nor
anyone in her department had prepared a list of loans on which Plaintiff’s bond claim is based.
On April 7, 2015, the Court issued a Memorandum Opinion & Order, denying the
parties’ summary judgment motions. (Doc. No. 102.) Therein, the Court rejected Cumis’
causation argument, noting that “[w]hile Plaintiff will of course be required to demonstrate the
amount of its loss at trial, the Court is unable to say, given the wealth of evidence regarding Mr.
Raguz’s dishonest conduct, that Cumis is entitled to judgment in its favor on the basis that
Plaintiff has failed in its burden to demonstrate a covered loss under the bond.” Id. at 56-57
(emphasis in original).
On April 24, 2015 (nearly nine months after the close of discovery), Plaintiff
supplemented its Answers to Cumis’ First Set of Interrogatories to identify Elizabeth Martin as a
trial witness. (Doc. No. 138-1 at 4.) In its supplement, Plaintiff identified Ms. Martin as a
“liquidation analyst” and stated that she “is expected to verify the documentary evidence and the
amount of damages.” Id. Thereafter, Plaintiff’s counsel emailed defense counsel on several
occasions, offering to make Ms. Martin available for deposition. (Doc. No. 138-2.) It appears
Cumis did not take Plaintiff up on its offer, or otherwise attempt to schedule Ms. Martin’s
deposition.
On July 14, 2015, the Court issued an Order scheduling the matter for bench trial on
August 5, 2015. (Doc. No. 118.) As has been detailed in other Orders recently issued by this
Court (Doc. Nos. 124, 135, 141), Cumis subsequently sought to conduct (and did, in fact,

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conduct) additional discovery regarding various issues not relevant to the instant motion. As a
result, the Court rescheduled trial for December 1, 2015. (Doc. No. 129.)
On October 20, 2015, Cumis filed the instant Motion in Limine to exclude the testimony
of Elizabeth Martin. (Doc. No. 136.) Plaintiff filed a Brief in Opposition on October 26, 2015.
(Doc. No. 138.)
II.

Discussion
In its Motion, Cumis argues Elizabeth Martin should be barred from testifying at trial for

two reasons. First, Cumis maintains Plaintiff failed to timely identify her as a trial witness “as
she was disclosed nearly nine months after discovery closed and nearly three years after this
litigation commenced.” (Doc. No. 136 at 1.) Second, Cumis argues that Plaintiff “cannot
substitute Ms. Martin’s testimony for the non-responsive testimony of Jennifer Murphy, its
previously provided corporate designee pursuant to Rule 30(b)(6).” Id. The Court will address
each of these arguments in turn.
A.

Alleged Failure to Timely Identify Ms. Martin as a Trial Witness

Cumis asserts Plaintiff failed to timely supplement its discovery responses to identify Ms.
Martin as a trial witness. It maintains “plaintiff cannot show that its failure to identify Ms.
Martin as a witness was substantially justified or harmless and a sanction pursuant to Rule
37(c)(1), therefore is appropriate.” (Doc. No. 136-1 at 3.) Cumis claims it had “no knowledge
that Ms. Martin was a potential witness, and allowing her to testify would strongly prejudice
Cumis at trial.” Id.
Plaintiff argues it did not fail to timely disclose Ms. Martin as a trial witness. It
maintains Ms. Martin “did not become a federal employee until the Fall of 2013" and argues

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that, “[d]uring her employment, Ms. Martin’s role and responsibilities evolved.” (Doc. No. 138
at 3.) Plaintiff’s counsel states he “disclosed Ms. Martin as a witness in this case within 24
hours of learning her new roles and responsibilities” and, therefore, the disclosure was timely.
Id. Plaintiff further argues that, even assuming it failed to timely disclose Ms. Martin as a
witness, any such failure was “both harmless and not prejudicial.” Id. at 4. In this regard,
Plaintiff notes Ms. Martin was disclosed to Cumis as a witness more than seven months before
trial. Plaintiff emphasizes that it repeatedly offered Cumis the opportunity to depose Ms. Martin
but Cumis declined to do so, deciding instead to file a motion in limine “in order to create an
issue in dispute.” Id.
Fed. R. Civ. P. 26(e) provides that:
(e) Supplementing Disclosures and Responses.
(1) In General. A party who has made a disclosure under Rule 26(a)--or who has
responded to an interrogatory, request for production, or request for admission--must
supplement or correct its disclosure or response:
(A) in a timely manner if 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; or
(B) as ordered by the court.
Fed. R. Civ. Pr. 26(e). As a means of enforcement, Rule 37(c) provides that “[i]f a party fails to
provide information or identify a witness as required by Rule 26(a) or (e), the party is not
allowed to use that information or witness to supply evidence on a motion, at a hearing, or at a
trial, unless the failure was substantially justified or is harmless.”
As the Sixth Circuit recently explained, “[a] non-compliant party may avoid sanction
[under Rule 37(c)] if ‘there is a reasonable explanation of why Rule 26 was not complied with or
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the mistake was harmless.’” Howe v. City of Akron, 801 F.3d 718 (6th Cir. Sept. 17, 2015)
(quoting Bessemer & Lake Erie R.R. Co. v. Seaway Marine Transp., 596 F.3d 357, 370 (6th Cir.
2010)). In order to assess whether a party’s omitted or late disclosure is “substantially justified”
or “harmless,” a court should consider the following five factors: “‘(1) the surprise to the party
against whom the evidence would be offered; (2) the ability of that party to cure the surprise; (3)
the extent to which allowing the evidence would disrupt the trial; (4) the importance of the
evidence; and (5) the nondisclosing party’s explanation for its failure to disclose the evidence.’”
Id. (quoting Russell v. Absolute Collection Servs., Inc., 763 F.3d 385, 396–97 (4th Cir. 2014) and
S. States Rack & Fixture, Inc. v. Sherwin–Williams Co., 318 F.3d 592, 597 (4th Cir. 2003)).
Even assuming Ms. Martin was not timely disclosed, the Court finds any such error to be
harmless. As noted above, Ms. Martin was identified as a trial witness in April 2015, more than
seven months before the December 1, 2015 bench trial in this matter. Plaintiff repeatedly offered
to make Ms. Martin available for deposition prior to trial but, for whatever reason, Cumis chose
not to depose her. Although Plaintiff’s disclosure of Ms. Martin was undoubtedly a surprise, it
was not an eve of trial surprise nor was it one that Cumis was unable to cure. Indeed, Cumis
offers no reason why it could not have “cured the surprise” by deposing Ms. Martin at some
point during the last six months.4 The fact that it chose not to do so does not compel the
conclusion that Ms. Martin should be barred from testifying, particularly since Plaintiff has

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As Plaintiff correctly notes, during this same time period, Cumis served multiple Touhy
requests on the non-party National Credit Union Association, in its capacity as Regulatory
Agency (hereinafter “Agency”); the FBI; and, the IRS. Moreover, Cumis took the deposition of
former Agency supervisory examiner Dale Turner. Cumis does not explain why it was willing to
pursue these lines of inquiry after the close of discovery but not willing to take the deposition of
Ms. Martin, as offered by Plaintiff.
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offered a plausible explanation for her disclosure after the close of discovery. Moreover, the
Court does not anticipate that allowing Ms. Martin to testify will disrupt the trial and, indeed,
Cumis makes no argument to that effect.
Accordingly, and having considered the factors set forth in Howe, the Court finds that,
even if Plaintiff failed to timely supplement its discovery responses to identify Ms. Martin as a
witness, any such failure is harmless. Therefore, the Court denies Cumis’ argument that Ms.
Martin’s testimony should be barred under Rule 37(c)(1).
B.

Alleged Failure of Jennifer Murphy to Provide Responsive Testimony during
the Rule 30(b)(6) Deposition

Cumis argues that the testimony of Plaintiff’s 30(b)(6) witness, Jennifer Murphy, was
non-responsive to the topics listed in the Notice of 30(b)(6) Deposition. By way of example,
Cumis quotes excerpts from Ms. Murphy’s testimony wherein she stated that she (1) never
prepared or saw a list of the loans on which the claim to Cumis is based; (2) could not name a
particular loan at issue in the case; and, (3) did not know how much of the loss was caused by
Mr. Raguz as opposed to fraud by the borrowers. (Doc. No. 136-1 at 5-6.) Cumis asserts
Plaintiff is now bound by Ms. Murphy’s allegedly non-responsive testimony and cannot call a
more responsive witness (i.e., Ms. Martin) to testify about these issues at trial.
In response, Plaintiff states that it “is not substituting Ms. Martin for Ms. Murphy” and
its “Rule 30(b)(6) witness remains Ms. Murphy.” (Doc. No. 138 at 6.) Plaintiff “agrees that it
may be bound by” Ms. Murphy’s testimony but argues her testimony “does not unequivocally
bind [Plaintiff] to the exclusion of other evidence that may explain or explore that testimony.”
Id. at 6-7. Rather, Plaintiff maintains it is permitted to call Ms. Martin to testify in addition to
Ms. Murphy and “Cumis is free to attempt to impeach or contradict Ms. Murphy’s trial
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testimony with her prior deposition.” Id. at 8. Finally, Plaintiff argues Ms. Murphy was, in fact,
responsive during her 30(b)(6) deposition and did not evade any of Cumis’ questions. Plaintiff
explains it is not surprising that Ms. Murphy was “unable to recall a specific loan number of the
hundreds occurring over a decade of time,” and argues she was denied the opportunity to
“refresh her memory” with the 28 volume forensic accounting report prepared by Lillie & Co.
Id. at 9, 13.
Under Rule 30(b)(6), a party may depose a public or private corporation, partnership,
association, governmental agency or other entity by issuing a notice or subpoena that
“describe[s] with reasonable particularity the matters for examination.” Fed. R. Civ. P. 30(b)
(6). The recipient of the notice “must then designate one or more officers, directors, or
managing agents, or designate other persons who consent to testify on its behalf; and it may set
out the matters on which each person designated will testify.” Id. The designee must be
knowledgeable about the subjects described in the notice, and the recipient of the notice must
prepare that witness to testify not just to his or her own knowledge, but the organization's
knowledge. Prosonic Corp. v. Stafford, 2008 WL 2323528 at * 1 (S.D. Ohio June 2, 2008). In
addition, the party seeking the Rule 30(b)(6) deposition “must designate the areas of inquiry with
reasonable particularity, and the [recipient of the notice] must designate and adequately prepare
the witness to address those matters.” Id. (quoting Starlight Intern. Inc. v. Herlihy, 186 F.R.D.
626, 638 (D. Kan. 1999).
Although the testimony of a Rule 30(b)(6) designee may be binding on the party
proffering it, courts have stated that such testimony “is not tantamount to a judicial admission
and does not unequivocally bind the corporation to the exclusion of other evidence that may

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explain or explore that testimony.” Little Hocking Water Ass'n, Inc. v. E.I. Du Pont de Nemours
& Co., 2013 WL 1791083 at *11 (S .D. Ohio April 26, 2013 ) (internal quotations omitted). See
also Zino v. Whirlpool Corp., 2014 WL 4699652 at * 1 (N.D. Ohio Sept. 19, 2014); Dow
Corning Corp. v. Weather Shield Mfg., Inc., 2011 WL 4506167 at * 6 (E.D. Mich. Sept. 29,
2011); Whitesell Corp. v. Whirlpool Corp., 2009 WL 3672751 at * 1 (W.D. Mich. Oct. 30,
2009). Rather, courts within this district have found that “to the extent evidence . . . offered at
trial merely clarifies and updates the testimony and exhibits offered during the 30(b)(6)
deposition, no rule of evidence or civil procedure requires its exclusion on that basis alone.”
Whitesell, 2009 WL 3672751 at *1. See also Dow Corning Corp., 2011 WL 4506167 at *5.
Cumis maintains, however, that “when a party first provides a non-responsive 30(b)(6)
deponent and later tries to call a more-responsive witness at trial . . . courts have excluded the
witness.” Ruth v. A.O. Smith Corp., 2006 WL 530388 at * 10 (N.D. Ohio Feb. 27, 2006). Thus,
Cumis argues that, because Ms. Murphy was “total[ly] [unable] to testify as to the issues for
which she was designated,” Plaintiff is now precluded from calling Ms. Martin to testify at trial
regarding the same issues. (Doc. No. 136-1 at 3, fn 3.)
The Court disagrees with Cumis’ characterization of Ms. Murphy’s 30(b)(6) testimony.
While it is true Ms. Murphy was not able to rattle off a list of specific loans during her deposition,
she did testify that the amount of the loss was in excess of $72 million and that this figure was
based on the findings contained in the Proof of Loss and the 28-volume Lillie & Co. forensic
accounting report dated October 2010. (Doc. No. 84-1 at Tr. 51, 75, 88.) Ms. Murphy also
testified that, in preparing to testify about the loans that form the basis of Plaintiff’s claim, she
“looked at the attachments to the Lillie report.” (Doc. No. 84-1 at Tr. 75.) As Plaintiff notes,

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counsel for Cumis did not bring the Lillie Report attachments to Ms. Murphy’s deposition and,
thus, she was unable at that time to testify in any greater detail regarding the content of those
attachments and how they related to the topics listed in the Notice of 30(b)(6) deposition. (Doc.
No. 84-1 at Tr. 70.)
Under these circumstances, the Court is not inclined to bar Ms. Martin from testifying at
trial on the basis that Ms. Murphy’s testimony was non-responsive. Of course, to the extent
Plaintiff’s damages evidence at trial contradicts the testimony offered during the Rule 30(b)(6)
deposition, Cumis can use that deposition testimony for impeachment purposes. However, to the
extent evidence offered at trial merely clarifies and updates the testimony offered during the Rule
30(b)(6) deposition, “no rule of evidence or civil procedure requires its exclusion on that basis
alone.” Dow Corning, 2011 WL 4506167 at * 5.
Accordingly, the Court rejects Cumis’ argument that Ms. Martin should be barred from
testifying at trial on the grounds that Ms. Murphy’s 30(b)6) testimony was non-responsive.
III.

Conclusion
Accordingly, and for all the reasons set forth above, Cumis’ Motion in Limine

Concerning Elizabeth Martin (Doc. No. 136) is DENIED.
IT IS SO ORDERED.

/s/ Greg White
U.S. Magistrate Judge
Date: October 30, 2015

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