Christensen et al v. Quinn et al

Filing 271

ORDER granting in part and denying in part 215 Motion to Strike. Signed by U.S. District Judge Karen E. Schreier on 5/17/2013. (KC)

UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
SOUTHERN DIVISION
DANIEL REED CHRISTENSEN,
Plaintiff,
vs.
ROSIE QUINN;
SECOND CHANCE RESCUE CENTER;
JAMES ADAMSON, individually and
in his official capacity as a Turner
County Commissioner;
LUVERNE LANGEROCK, individually
and in his official capacity as a
Turner County Commissioner;
JOHN OVERBY, individually and in
his official capacity as a Turner
County Commissioner;
STEVE SCHMEICHEL, individually
and in his official capacity as a
Turner County Commissioner;
LYLE VAN HOVE, individually and in
his official capacity as a Turner
County Commissioner;
TIFFANI LANDEEN-HOEKE,
individually and in her official
capacity as Turner County State's
Attorney;
BYRON NOGELMEIER, individually
and in his official capacity as Turner
County Sheriff;
JAY OSTREM, individually and in his
official capacity as a Turner County
Deputy;
JIM SEVERSON, individually and in
his official capacity as a Special Agent
for the Division of Criminal
Investigation;
LARA CUNNINGHAM, individually
and in her official capacity as a
Revenue Agent for the South Dakota
Department of Revenue and
Regulations;
THE HUMANE SOCIETY OF THE
UNITED STATES a/k/a HSUS;

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CIV. 10-4128-KES

ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’
MOTION
TO STRIKE SUPPLEMENTAL EXPERT
REPORT

WAYNE PACELLE;
SCOTTLUND HAISLEY;
DR. ADAM BAUKNECHT;
EMERGENCY ANIMAL RESCUE
SANCTUARY a/k/a EARS;
DR. DAWN DALE; and
TURNER COUNTY, SOUTH DAKOTA;
Defendants.

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Defendants move to strike an expert report that was prepared as a
supplemental report by Lela Lawless, a damages expert designated by plaintiff
Daniel Christensen.1 Christensen resists the motion. For the following reasons,
defendants’ motion is granted in part and denied in part.
BACKGROUND
Christensen operated a dog breeding business at his residence. On
September 2, 2009, Christensen’s property was searched, and all of his breeding
dogs and puppies were seized pursuant to a warrant. Because of the search and
seizure, Christensen was no longer able to maintain his dog breeding business.
Christensen brought this action against defendants on September 2, 2010,
seeking damages that included lost profits from his dog breeding business.
During discovery, Christensen hired Lela Lawless, a forensic accountant
from Eide Bailly, LLP, to calculate the amount of lost profits Christensen suffered
as a result of defendants’ actions. Lawless submitted her expert report on

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The motion to strike was first filed by defendants Lara Cunningham, Jim
Severson, and United Animal Nations (referred to as Emergency Animal Rescue
Sanctuary a/k/a EARS in the caption). Defendants Rosie Quinn, Second
Chance Rescue Center, Tiffani Landeen-Hoeke, Wayne Pacelle, The Humane
Society of the United States, Dawn Dale, Adam Bauknecht, James Adamson,
Luverne Langerock, John Overby, Steve Schmeichel, Lyle Van Hove, Byron
Nogelmeier, Jay Ostrem, Turner County, and Scotlund Haisley join in the
motion.

February 29, 2012, one day before Christensen’s expert disclosure deadline of
March 1, 2012.
Following disclosure of Lawless’s report, defendants deposed several
witnesses, including Christensen himself. Defendants disclosed Ginger Knutsen’s
expert report pertaining to the issue of lost profits on November 30, 2012, which
was defendants’ disclosure deadline. Then, defendants filed a Daubert motion on
December 13, 2012, seeking to exclude the testimony of Lawless.
Before responding to defendants’ Daubert motion, Christensen disclosed an
additional expert report from Lawless (Lawless’s Supplemental Report) on
February 14, 2013.2 Christensen then responded to defendants’ Daubert motion.
Defendants argue that the Lawless Supplemental Report should be
excluded from trial because it was disclosed well after the court’s expert
disclosure deadline, and it goes well beyond the scope of a supplemental report.
DISCUSSION
Defendants move to strike Lawless’s Supplemental Report in its entirety,
arguing that the report is improper supplemental testimony under Rule 26(e) of
the Federal Rules of Civil Procedure. Under Rule 26(a)(2), each party must
disclose the identities of expert witnesses, along with a written report prepared by
each witness, by the date ordered by the court. If the evidence is offered solely to
rebut expert testimony offered by another party, disclosure may be made up to

2

Lawless drafted a rebuttal report to Knutsen’s report on Janurary 15,
2013.
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thirty days after the other party’s disclosure. Fed. R. Civ. P. 26(a)(2)(C)(ii).
Further, each party is obligated to supplement information included in an
expert’s report “if the party learns that in some material respect the disclosure or
response is incomplete or incorrect.” Fed. R. Civ. P. 26(e). Supplemental
disclosures must be made at least thirty days before trial unless a court order
directs otherwise. Fed. R. Civ. P. 26(a)(3)(B), 26(e).
Here, the court ordered Christensen to disclose his expert reports by
March 1, 2012, and defendants to disclose their expert reports by November 30,
2012. Christensen’s deadline to produce Lawless’s rebuttal report to defendants’
expert Knutson was February 8, 2013. Supplemental reports are due twenty days
before trial; the trial has not been scheduled at the time of this order.
Christensen disclosed Lawless’s Supplemental Report on February 14,
2013. Therefore, unless Lawless’s Supplemental Report qualifies as a
supplemental report under Rule 26(e), it is untimely.
As a starting point, “the district court maintains broad control over Rule
26(e) issues regarding the disclosure of the substance of an expert’s testimony.”
Farmland Indus., Inc. v. Morrison-Quirk Grain Corp., 54 F.3d 478, 482 (8th Cir.
1995). The purpose of a supplemental report is to “inform the opposing party of
any changes or alterations,” Tenbarge v. Ames Taping Tool Sys., Inc., 190 F.3d
862, 865 (8th Cir. 1999), not “to provide an extension of the deadline by which a
party must deliver the lion’s share of its expert information.” Sierra Club, Lone
Star Chapter v. Cedar Point Oil Co., 73 F.3d 546, 571 (5th Cir. 1996). Rule 26(e)

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“permits supplemental reports only for the narrow purpose of correcting
inaccuracies or adding information that was not available at the time of the initial
report.” Minebea Co. v. Papst, 231 F.R.D. 3, 6 (D.D.C. 2005).
If an expert opinion is untimely, Rule 37(c)(1) sanctions are triggered,
including the exclusion at trial of testimony on undisclosed opinions. Fed. R. Civ.
P. 37(c)(1). Exclusion of the evidence is not appropriate if the failure to disclose
“was substantially justified or is harmless.” Id. The court weighs four factors in
determining whether exclusion is the proper sanction for untimely expert
testimony: (1) the importance of the excluded expert testimony; (2) the party’s
explanation for failure to disclose; (3) the potential prejudice created by permitting
use of the expert testimony at trial or on a pending motion; and (4) the ability to
cure any prejudice by granting a continuance. Transclean Corp. v. Bridgewood
Servs., Inc., 77 F. Supp. 2d 1045, 1064 (D. Minn. 1999); see also Citizens Bank of
Batesville, Ark. v. Ford Motor Co., 16 F.3d 965, 966 (8th Cir. 1994) (using similar
factors to determine whether to exclude witnesses not made known in compliance
with a pretrial order).
Lawless’s Supplemental Report included nine sections and additional
tables and exhibits. The nine sections are as follows: (A) Labor Costs; (B) Building
Renovation Costs; (C) Saved Costs or Cost Not Incurred; (D) Industry Trends,
Economic Trends, and Puppy Pricing; (E) Puppy Demand and Markets; (F) Puppy
Capacity; (G) Revenue and Profitability; (H) Mitigating Earnings Update; and (I)
Estimated Value of Seized Breeding Stock and Puppies.

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A.

Labor Costs
In Lawless’s Supplemental Report, Lawless revised her previous projections

of damages to include labor costs at $8.84 per hour for 40 hours a week. The
initial report did not include any labor costs. This revision added $18,387 in fixed
costs to her damages analysis beginning in 2010. This change was made after
Lawless reviewed the transcripts of the depositions of Christensen that occurred
after Lawless filed her initial expert report.3
Defendants argue that this information regarding labor costs is untimely
because it is not supplemental information. Defendants contend the information
was available to Lawless prior to making her initial report because she only
needed to ask Christensen to provide this information. The court disagrees.
Although the labor costs associated with doing business are common
considerations when assessing a business’s expenses, Christensen did not have
any labor costs for the years that he operated his business because any help he
needed came free of charge from family members. It was not until Christensen
was deposed—after Lawless submitted her initial report—that he first articulated
the need to hire additional help to run his puppy business. Therefore, the
information required to generate labor costs associated with Christensen’s
business was unavailable at the time Lawless made her initial report and at the
time of Christensen’s March 1, 2012, deadline to disclose expert reports. Because

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Christensen’s depositions took place on May 22, May 23, and June 13 of
2012.
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the addition of labor costs was made after Lawless received new information that
was unavailable at the time of her initial report, it is a supplement to her initial
report.
B.

Building Renovation Costs
Lawless revised her damages analysis by subtracting $60,000 from total

damages due to renovation expenses for a building that would have allowed for an
increase in puppy production. Lawless noted these building renovations in her
initial report but did not include any costs associated with such renovations in
her damages projection.
The court finds that the subtraction of $60,000 from total damages due to
costs associated with anticipated renovations is untimely because this
information was available at the time of Lawless’s initial report. The issue, then, is
whether this information should be excluded. The court will address the four
factors previously identified.
First, the court finds that the $60,000 alteration to Lawless’s damages
projection is important. Christensen can testify on this specific issue, which
would make Lawless’s testimony on the issue unnecessary and thus
unimportant. But not allowing Lawless, Christensen’s damages expert, to include
the information in her report may confuse and mislead the jury. Lawless is
attempting to provide a “full” picture of Christensen’s alleged damages resulting
from the lost profits of his business. Not allowing Lawless to include the $60,000
reduction would make her testimony incomplete. If the evidence comes in only

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through Christensen, the jury would be forced to make unnecessary deductions
regarding possible lost profits. Therefore, Lawless’s $60,000 alteration to her
damages projection is important and weighs in favor of admission.
Second, Christensen states that the additional figure is proper “in order to
address Knutsen’s criticism that Christensen would not physically been able to
raise and sell 582 puppies on a long-term basis.” Docket 243 at 10. Because the
figure is in response to defendants’ expert, this type of information is not properly
included in a supplemental report. Thus, the second factor weighs in favor of
exclusion.
Third, there is minimal prejudice to defendants created by permitting
Lawless to include the $60,000 alteration in her testimony because the inclusion
decreases the amount of lost profits that Lawless projects. Defendants argue that
allowing the supplementation will prejudice them due to the effect it will have on
their pending Daubert motion and the discovery schedule. Defendants have not,
however, persuaded the court how this alleged prejudice to their Daubert motion
will occur. Certainly, the court would have been able to consider this information
had it been provided in an affidavit that was attached to Christensen’s response
to defendants’ motion. Moreover, Lawless included the fact that Christensen
intended to renovate the building in her initial report; she simply failed to include
the amount of the renovation. Lastly, Christensen has offered to produce Lawless
in Sioux Falls for an additional deposition at no cost to defendants. Thus, the
third factor weighs in favor of admission.

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Fourth, granting a continuance, or an extension of the discovery deadline,
cures the prejudice that defendants note pertaining to the discovery schedule. It
is not as if this case is on the eve of trial; indeed, the trial has not even been
scheduled. So, the fourth factor weighs in favor of admission.
Therefore, the court finds that allowing Lawless to include the $60,000
alteration in her testimony, although untimely, is harmless and thus will be
allowed.
C.

Saved Costs or Cost Not Incurred
Lawless made changes to her saved costs projections after reviewing the

files used to prepare Christensen’s tax returns, bank statements, and check
copies. These changes significantly alter Christensen’s saved costs projections.
The documents that Lawless reviewed in making her supplementation were
all available at the time she produced her initial report. Lawless did not rely on
these documents when making her initial report because Christensen did not
provide them to her. In other words, the documents were available—they just
were not provided to the expert.
Moreover, these alterations resulted in significant changes to Lawless’s
projections, essentially creating an entirely new report. Christensen cannot use
the guise of a Rule 26(e) supplemental report to garner the admissibility of a new
expert opinion disclosed after the court’s disclosure deadline. Carter v. Finely
Hosp., No. 01 C 50468, 2003 WL 22232844, at *2 (N.D. Ill. Sept. 22, 2003). Thus,
this supplementation is untimely.

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After weighing the four factors, the court finds that exclusion of this
evidence is warranted. Admitting this evidence would create significant prejudice
to defendants because this supplementation materially increases Lawless’s
projections. Defendants would also be required to not only re-depose Lawless, but
they would need to have their damages expert, Knutsen, review Lawless’s new
projections and in all likelihood produce an additional rebuttal report. And of
course Christensen and his expert would want to review the rebuttal reports and
perhaps re-depose Knutsen.
In summary, allowing these changes in saved costs essentially would be the
equivalent to allowing an entirely new report. Christensen had plenty of time
during discovery to provide Lawless with the documents that Lawless relied on in
changing her report; he chose not to provide them. Furthermore, Christensen has
not identified the importance of modifying the saved costs nor provided an
explanation for failing to disclose this change within the court’s deadline.
Therefore, Lawless’s testimony pertaining to this section of Lawless’s
Supplemental Report will be excluded from trial.
D.

Industry Trends, Economic Trends, and Puppy Pricing
Lawless included an entirely new section in her supplemental report that

discusses trends in the pet industry and the economy and how these trends affect
puppy pricing. Lawless did not, however, make any actual changes to her
damages projections. In making this alteration, Lawless relied on her review of

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reports that she found online while conducting research after she produced her
initial report.
First, the majority of reports that Lawless relied on in adding this new
section were available at the time she made her initial report. Second, this new
addition does not merely supplement her initial report, but instead adds an
entirely new section. Therefore, the court finds this testimony untimely.
Although untimely, the additional testimony on industry trends, economic
trends, and puppy pricing is harmless. As defendants point out in their brief,
“Lawless did not change any elements of her projections based on this new
section.” Docket 216 at 14. The section does not increase the amount of lost
profits that Lawless projects. Further, just as in section B above, any prejudice
created can be cured by deposing Lawless a second time. Thus, the court will not
exclude this testimony.
E.

Puppy Demand and Markets
Lawless’s Supplemental Report included information about the identity of

Christensen’s customer base and reduced Christensen’s projected revenue by
$273,959 because of the puppies that Christensen gave away free of charge. The
information about the customer base came from documents produced by
Christensen’s veterinarian. The reduction in revenue stemmed from Christensen’s
statement during his deposition that he gave puppies away for free.
Because the information about the customer base came from documents
that existed at the time Lawless produced her initial report, the court finds that

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the information about Christensen’s customer base is untimely. Indeed,
Christensen admits that “Lawless could have easily made this same exhibit with
the information she already had at the time she formulated her initial report.”
Docket 243 at 15.
Although untimely, the court concludes that the information about the
identity of Christensen’s customer base is harmless. The information does not
change Lawless’s damages projection. Just as was the case in section B above,
the information does not prejudice defendants’ pending Daubert motion because
the court would be able to consider it regardless of whether it was included as a
supplement. Because no trial date has been set and the discovery deadline will be
extended, defendants have plenty of time to review the information. Therefore,
exclusion of the information about the customer base is not warranted.
Turning to Lawless’s reduction in Christensen’s projected revenue because
of the puppies Christensen gave away for free, the court finds this information a
proper supplement because the information was not available to Lawless at the
time she made her report, and it was an attempt to correct a mistake in the initial
report. Similar to the increased labor costs, Lawless was not aware of this
information until Christensen was deposed, which occurred after Lawless
produced her initial report. Moreover, Lawless stated that she misinterpreted the
records she reviewed at the time of the initial report, and this error came to her

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attention once she reviewed Christensen’s deposition testimony. Thus, such
information is a proper supplementation.4
Therefore, the court will not exclude the evidence found in section E of
Lawless’s Supplemental Report.
F.

Puppy Capacity
Lawless also included in her supplement further details in support of her

assumptions of Christensen’s potential puppy capacity. Much of the information
is simply a restatement of Lawless’s assertions in her initial report. The only new
information is the testimony of Gary Sanborn, owner of a different dog breeding
business.
Regardless of whether the information is timely, the court finds that it is
harmless. The only argument that defendants make is that the information is
prejudicial to their pending Daubert motion because it bolsters Lawless’s initial
report. As discussed before, for purposes of evaluating defendants’ Daubert
motion, the court can consider the information regardless of how it is received.
Furthermore, because the majority of the information is simply restating what
was noted in the initial report, it will not prejudice defendants. Therefore, such
information will not be excluded.

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Even if the information was untimely, it is harmless to defendants for
many of the same reasons discussed in the previous sections, including the
fact that it reduces Lawless’s total damages projection.
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G.

Revenue and Profitability
Lawless’s Supplemental Report includes a section detailing the revenue and

profitability of Christensen’s business for year 2009. Included in the section are
tables calculating the minimum 2009 revenue, the total “but for” 2009 revenue,
and the 2009 estimated net income. Nothing of the like appears in Lawless’s
initial report.
Christensen asserts that this section of Lawless’s Supplemental Report
“doesn’t introduce any new data. Nor does Lawless attempt to introduce any new
accounting principles.” Docket 243 at 20. Christensen argues that the
supplement is timely because Christensen relies on the deposition testimony of
Rosie Quinn, which occurred after Lawless produced her initial report. The new
figures are not based on the substance of Rosie Quinn’s new testimony, but
instead are created from data that was available to Lawless at the time she made
her initial report. Thus, this information is untimely.
The court also finds that the information is not harmless. First, the
information is not very important because it shows the possible revenue and
profit that Christensen could have achieved in 2009. Christensen’s total potential
lost puppy sales revenue and lost profits for 2009 are already included in
Lawless’s initial report. Therefore, Lawless’s additional information regarding
revenue and profitability is of limited importance.
Second, Christensen’s explanation for failing to disclose this information in
the first report is unavailing. Christensen first argues that the section was added

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to clarify the numbers in Lawless’s original report and to demonstrate how easy it
would have been for Christensen to be profitable in 2009. These explanations are
not acceptable justifications for supplementation. Then, in a footnote,
Christensen notes that Lawless added this section in response to Quinn’s
deposition testimony. As noted above, Quinn’s testimony had no effect on her
calculations for her new figures. Thus, this factor weighs in favor of exclusion.
Third, these new figures prejudice defendants in the same manner as the
saved costs figures Lawless produced in section C. The figures are entirely new
and would require extensive analysis from defendants’ expert. Therefore, this
factor weighs in favor of exclusion.
Because Christensen has not identified a good reason why Lawless did not
include this new information regarding revenue and profitability in her initial
report and such information prejudices defendants, the information will be
excluded at trial.
H.

Mitigating Earnings Update
Lawless also included information pertaining to Christensen’s mitigation of

the damages allegedly caused by defendants. In this section, Lawless reduces her
lost profits calculation because Christensen could have mitigated damages by
gaining alternative employment.
Because Lawless’s mitigating earnings supplement did not correct an error
or rely on unavailable information, it is untimely. Nonetheless, the court will not
exclude it because it is harmless to defendants. First, the supplement reduces

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Lawless’s lost profits projection. Second, defendants will not be required to spend
significant time assessing this new information because it is straightforward.
Third, this information is an important element in calculating net lost profits.
Thus, the information will not be excluded at trial.
I.

Estimated Value of Seized Breeding Stock and Puppies
Lawless’s Supplemental Report includes a section that calculates the value

of the seized breeding stock and puppies as of September 2, 2009. Lawless’s
initial report did not include similar information. Neither Lawless nor Christensen
explain how this section either corrects an error in the initial report or relies on
previously unavailable information, thus making it untimely.
Furthermore, the court finds that exclusion is warranted here. These new
figures are an attempt to allow Lawless to testify about out-of-pocket damages
Christensen suffered. Lawless’s testimony on this subject is not important
because there is no reason why Christensen himself cannot provide this evidence.
Moreover, Lawless was designated as an expert to calculate lost profit damages,
not out-of-pocket damages. If Christensen intended to have Lawless testify on
out-of-pocket damages, he should have disclosed her testimony on the issue
before the court’s deadline. Thus, Lawless is precluded from testifying about this
information at trial.
CONCLUSION
Much of Lawless’s Supplemental Report is either proper supplementation
or harmless, thus not requiring exclusion at trial. But Lawless’s new information

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regarding saved costs (section C), revenue and profitability (section G), and the
estimated value of seized breeding stock and puppies (section I) is not proper
supplementation nor is it harmless. Therefore, any testimony from Lawless about
the information contained in these sections, and any tables or exhibits that
accompany them, will be excluded from the trial. Accordingly, it is
ORDERED that defendants’ motion to strike plaintiff’s supplemental expert
report (Docket 215) is granted in part and denied in part.
IT IS FURTHER ORDERED that Christensen will produce Lawless in Sioux
Falls, South Dakota, at no cost to defendants if defendants choose to re-depose
Lawless.
Dated May 17, 2013.
BY THE COURT:

/s/ Karen E. Schreier
KAREN E. SCHREIER
UNITED STATES DISTRICT JUDGE

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