Hoskins Oil Company, LLC v. Equilon Enterprises LLC et al (JRG1)

Filing 240

MEMORANDUM AND ORDER denying 160 Defendants' Motion to Exclude Plaintiff's Expert for Violation of the Court's Amended Scheduling Order. Signed by Magistrate Judge Debra C Poplin on February 19, 2019. (AYB)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TENNESSEE
AT KNOXVILLE
HOSKINS OIL COMPANY, LLC,

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Plaintiff,
v.
EQUILON ENTERPRISES, LLC d/b/a
SHELL OIL PRODUCTS US, et al.,
Defendants.

No. 3:16-CV-417-JRG-DCP

MEMORANDUM AND ORDER
This case is before the undersigned pursuant to 28 U.S.C. § 636, the Rules of this Court,
and Standing Order 13-02.
The parties appeared before the Court on January 17, 2019, for a motion hearing on
Defendants’ Motion to Exclude Plaintiff’s Expert for Violation of the Court’s Amended
Scheduling Order (“Motion to Exclude”) [Doc. 160].1 Attorneys Broderick Young and Paul
Wehneier appeared on behalf of Plaintiff. Attorneys David Harris, Tali Katz, and Dean Howell
appeared on behalf of Defendants.

Accordingly, for the reasons further explained below,

Defendants’ Motion to Exclude [Doc. 160] is DENIED.
I.

POSITIONS OF THE PARTIES
In their Motion [Doc. 160], Defendants request that the Court exclude Plaintiff’s expert

witness because Plaintiff violated the Court’s Amended Scheduling Order.

Specifically,

Defendants state that on January 25, 2018, Plaintiff served Defendants with its expert disclosure,
identifying Michael Harvey (“Harvey”) as its expert witness who will testify to Plaintiff’s

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The Court also addressed the parties’ Motions in Limine at the hearing. The Court will
rule on the Motions in Limine in a separate order.

damages. Defendants state that in his original expert report, Harvey did not apply a discount rate
to reduce his calculation of damages, and therefore, did not comply with the standards of the
American Institute of Certified Public Accountants (“AICPA”). On March 13, 2018, Defendants
deposed Harvey and questioned whether Harvey intended to apply a discount rate. Harvey
responded, “No.” Defendants state they disclosed their expert, James Lloyd (“Lloyd”), on March
23, 2018, and that Lloyd opined that Harvey committed a number of mistakes, including the failure
to apply a discount rate to his calculation of alleged lost profits. Defendants state that on December
11, 2018, Plaintiff served them with a Supplemental Expert Disclosure, wherein Harvey applies a
discount rate to his lost profit calculation. Defendants maintain that the deadline to disclose expert
testimony expired on March 13, 2018, and that Plaintiff’s Supplemental Expert Disclosure is
untimely. Defendants argue that the Supplemental Expert Disclosure is not based on any new
evidence and that it was submitted only two months before trial. Defendants assert that Plaintiff
has been on notice of the defect in Harvey’s report for nine months, and it provides no explanation
as to why its expert failed to include the discount rate in his original report. Defendants state that
if the Court were to allow the Supplemental Expert Report, the parties would need to reopen expert
discovery, including redeposing Harvey.
Plaintiff responds [Doc. 162] in opposition to the Motion. Plaintiff states that the only
substantive change to Harvey’s expert report is the inclusion of a 22% discount rate on Plaintiff’s
damages, which had the effect of reducing the amount of damages. Plaintiff states that it provided
the Supplemental Expert Disclosure on December 11, 2018, which is sixty-three (63) days from
trial, and therefore, a proper disclosure under Federal Rule of Civil Procedure 26(a)(2)(E). Further,
Plaintiff contends that Defendants have not been harmed by its Supplemental Expert Disclosure.
Plaintiff explains that Defendants’ experts have applied a discount rate to Plaintiff’s damages. In

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addition, Plaintiff argues that Harvey’s decision to apply a discount rate after further reflection
resulted in Plaintiff having to reduce its requested amount of lost profits. Plaintiff states that
Defendants may ask Harvey about his decision to supplement at the trial.
Defendants filed a Reply [Doc. 192], maintaining that Plaintiff’s opposition fails to explain
why it waited nine months to make significant changes to its expert disclosures. Defendants argue
that Plaintiff’s unexplained delay in supplementing its expert disclosure violates the Court’s
Amended Scheduling Order and the Federal Rules of Civil Procedure. Defendants submit that
Plaintiff did not supplement the expert disclosure in a timely manner and that Plaintiff’s delay
harms Defendants and threatens to delay the trial. Defendants assert that allowing Harvey to
completely change his methodology and conclusions without allowing Defendants the opportunity
to re-depose him regarding the basis for the change and to issue a new rebuttal expert report would
severely prejudice them.
II.

ANALYSIS
The Court has considered the parties’ filings and the oral arguments presented at the

hearing on January 17, 2019. Accordingly, for the reasons explained below, the Court finds
Defendants’ Motion to Exclude [Doc. 160] not well taken, and the same is DENIED.
As summarized above, Defendants seek to exclude Harvey because Plaintiff submitted his
Supplemental Expert Report on December 11, 2018, wherein Harvey applies a discount rate to
Plaintiff’s lost profits. Defendants argue that the Supplemental Expert Report is untimely and that
Harvey’s application of a discount rate harms Defendants and threatens to delay the trial.2 At the
hearing, Defendants argued that they intended to impeach Harvey because he originally did not

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The Court observes that the trial in this case was originally set to begin on February 12,
2019. [Doc. 114]. Due to scheduling conflicts with other jury trials, however, this case was
continued to April 22, 2019. [Doc. 234].
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apply a discount rate in accordance with the standards of the AICPA. Defendants asserted that
they cannot sufficiently impeach Harvey now that he uses a discount rate. Defendants stated that
the Court should prohibit Harvey from testifying, or in the alternative, strike his Supplemental
Expert Report.
Plaintiff argued at the hearing that Defendants have not cited any basis to exclude Harvey
as an expert witness. Plaintiff stated that Defendants may cross examine Harvey as to why he
decided to apply a discount rate.
As an initial matter, Defendants request that Harvey be precluded from testifying in this
case. Pursuant to the Scheduling Order [Doc. 114], Plaintiff’s expert disclosures were due on
March 13, 2018. Plaintiff disclosed Harvey on January 25, 2018, and therefore, such disclosure is
timely. Thus, the Court finds no basis to exclude Harvey from testifying in this case. Instead, the
questions before the Court are whether Harvey’s Supplemental Expert Report is a proper
supplementation and whether it is timely.
Defendants argue that Plaintiff’s Supplemental Expert Report is not a proper
supplementation, and therefore, should have been provided by the original expert disclosure
deadline. Federal Rule of Civil Procedure 26(e)(2) provides three circumstances for allowing an
expert to supplement: (1) to correct an error or inaccuracy; (2) to respond to an opposing expert
pointing out gaps in the supplementing expert’s chain of reasoning; or (3) to reflect an expert’s
changed opinion. Eiben v. Gorilla Ladder Co., No. 11-CV-10298, 2013 WL 1721677, at *6 (E.D.
Mich. Apr. 22, 2013) (other citations omitted). Here, Harvey originally opined that applying a
discount rate with respect to the lost profit analysis was not necessary. On December 11, 2018, he
corrected his original opinion by asserting that a discount rate of 22% on lost profits is proper.
The Court finds Harvey’s recent disclosure a proper supplement, wherein he simply changes his

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opinion regarding whether a discount rate should be applied to Plaintiff’s alleged lost profits
calculation.
Rule 26(e)(2) governs the timing of supplementing expert disclosures.3 Specifically, Rule
26(e)(2) provides as follows:
(2) Expert Witness. For an expert whose report must be disclosed
under Rule 26(a)(2)(B), the party's duty to supplement extends both
to information included in the report and to information given during
the expert's deposition. Any additions or changes to this information
must be disclosed by the time the party's pretrial disclosures
under Rule 26(a)(3) are due.
Rule 26(a)(3) requires that the parties exchange pretrial disclosures thirty (30) days prior
to trial. Fed. R. Civ. P. 26(a)(3) (“Unless the court orders otherwise, these disclosures must be
made at least 30 days before trial.”). Because the Supplemental Expert Report was provided to
Defendants on December 11, 2018, the Court finds it to be timely.
As a final matter, even if the Court determined that Harvey’s Supplemental Expert
Disclosure was not a proper supplementation, and therefore, untimely, the Court finds that any
failure to properly disclose harmless in this case. See Fed. R. Civ. P. 37(c)(1) (explaining that if a
party fails to timely disclose a witness, the party is not allowed to use that witness unless the failure
is substantially justified or harmless). The Sixth Circuit has set forth a five-factor test to determine
whether a party’s late disclosure is substantially justified or harmless:
(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.

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The Court observes that Defendants cite to Rule 26(e)(1), which provides that a party
who has made a disclosure under Rule 26(a) must supplement or correct its disclosure or response
“in a timely manner.” Rule 26(e)(2), however, speaks directly to expert witness disclosures. Thus,
the Court will rely on Rule 26(e)(2).
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Howe v. City of Akron, 801 F.3d 718, 748 (6th Cir. 2015) (quoting Russell v. Absolute Collection
Servs., Inc., 763 F.3d 385, 396-97 (4th Cir. 2014)). The Court has weighed these factors, and the
Court finds that they weigh in favor of permitting Plaintiff’s Supplemental Expert Disclosure.
While Harvey’s opinion that a discount rate should be applied to the calculation of
Plaintiff’s lost profits is a surprise to Defendants, the Court finds Defendants have the ability to
cure the surprise. Defendants argue that Harvey’s Supplemental Expert Disclosure will delay the
trial because Defendants need to redepose Harvey and submit an expert rebuttal report. The trial
has already been continued in this matter, which allows Defendants sufficient time to discuss
Harvey’s changes with their expert witness. Further, the Court finds that Defendants may properly
cross examine Harvey on the stand as to why he believes a discount rate is now appropriate.
At the hearing, when the Court inquired as to any prejudice in permitting the Supplemental
Expert Disclosure, Defendants asserted that they intended to impeach Harvey because he failed to
apply a discount rate, and now, they can no longer do so. Without making a finding as to whether
this actually constitutes prejudice, the Court notes that Defendants are not prohibited from asking
Harvey on the stand why he failed to apply a discount rate in his original report, why he testified
under oath that it was not necessary to apply a discount rate, and why he later amended his opinion
to include a discount rate. The Court observes that Harvey’s application of a discount rate is
important as both sides agree that using a discount rate is the proper method to calculate Plaintiff’s
alleged lost profits. Although Harvey did not explain why he provided his Supplemental Expert
Report until December 11, 2018, the Court finds that the other factors weigh in Plaintiff’s favor.
Accordingly, the Court finds Defendants’ argument not well taken.

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III.

CONCLUSION
Accordingly, for the reasons explained above, the Court DENIES Defendants’ Motion to

Exclude Plaintiff’s Expert for Violation of the Court’s Amended Scheduling Order. [Doc. 160].
IT IS SO ORDERED.
ENTER:

________________________
Debra C. Poplin
United States Magistrate Judge

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