Hoffman v. Martinez et al

Filing 396

MEMORANDUM OPINION AND ORDER denying 277 Defendants Studio Capital, Inc.'s and David Martinez's Motion to Strike "Supplemental" Expert Report of Victor Wiener. The July 11, 2012 motion to strike of Studio Capital and Martinez, joined by L&M on July 11, 2012, is denied. The court reschedules the trial of this case to the two-week docket of October 7, 2013. (Ordered by Chief Judge Sidney A Fitzwater on 1/8/2013) (Chief Judge Sidney A Fitzwater)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
MARGUERITE HOFFMAN,
Plaintiff,
VS.
L&M ARTS, et al.,
Defendants.

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§ Civil Action No. 3:10-CV-0953-D
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MEMORANDUM OPINION
AND ORDER
Defendants Studio Capital, Inc. (“Studio Capital”) and David Martinez (“Martinez”),
joined by defendant L&M Arts (“L&M”),1 move to strike the supplemental expert report of

Victor Wiener (“Wiener”) as untimely. In a December 6, 2012 response to the court’s
inquiry regarding case management, defendants ask the court to reschedule the trial from the
two-week docket of August 19, 2013 to the weeks of September 16-27, 2013 based on the
unavailability of plaintiff Marguerite Hoffman (“Hoffman”). Concluding that Hoffman’s
failure to disclose the supplemental report before the discovery deadline was harmless under
Fed. R. Civ. P. 37(c)(1), the court denies the motion to strike. The court reschedules the trial
to the two-week docket of October 7, 2013.2

1

On July 11, 2012 L&M joined the motion to strike filed by Studio Capital and
Martinez.
2

Due to other scheduling conflicts, the court cannot set the case for trial during the
September period that defendants request.

I
The scheduling order in this case required that the parties designate expert witnesses
by November 30, 2011. Hoffman disclosed on November 30, 2011 the report (“November
Report”) of her expert, Wiener. In the November Report, Wiener gave two opinions. First,
he opined on the value of the 1961 Mark Rothko oil painting, Untitled (“the Rothko
Painting”), if sold at public auction on or about April 24, 2007. Second, he opined that
defendants failed to make every reasonable effort to keep all aspects of the sale of the
Rothko Painting confidential, as required in an April 24, 2007 Letter Agreement. The part
of the November Report devoted to Wiener’s valuation opinion consisted of two doublespaced pages. Although defendants disclosed their own expert reports and rebuttal reports
in compliance with the scheduling order deadlines, Hoffman did not disclose a rebuttal
report.
On June 29, 2012, just days before Wiener’s scheduled July 3, 2012 deposition,
Hoffman served on defendants’ counsel the “Supplemental Expert Report of Victor Wiener:
Self-Contained Appraisal Report of Untitled, 1961 by Mark Rothko” (“Supplemental
Report”). The Supplemental Report is 45 single-spaced pages with over 150 pages of
exhibits. In the Supplemental Report, Wiener does not change his opinion concerning the
fair market value of the Rothko Painting on or about April 24, 2007. Defendants deposed
Wiener on July 3, 2012 and again on July 26, 2012, but allegedly did not question him about
the contents of his Supplemental Report. Defendants now move under Rules 16(b) and 37(c)

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to strike the Supplemental Report as untimely.3 Hoffman opposes the motion.
II
Assuming arguendo that the Supplemental Report is not a proper supplement under
Rule 26(e),4 the court concludes that the report should not be stricken under Rule 37(c)(1)
because Hoffman’s failure to make a timely disclosure is harmless.
A
Under Rule 37(c)(1),
[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.
Rule 37(c)(1).5
In evaluating whether a violation of Rule 26 is harmless, the
court examines four factors: (1) the importance of the evidence;
(2) the prejudice to the opposing party of including the
evidence; (3) the possibility of curing such prejudice by
granting a continuance; and (4) the explanation for the party’s
failure to disclose.

3

Rule 16(b)(4) permits a scheduling order to be modified only for good cause and with
the judge’s consent. Absent a clear request that the scheduling order be modified, the court
will treat defendants’ motion to strike as brought under Rule 37(c).
4

Rule 26(e)(1)(A) requires that a party supplement a Rule 26(a) disclosure “if the
party learns that in some material respect the disclosure . . . 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[.]”
5

Rule 26(a)(2)(D) requires that the parties make expert disclosures “at the times and
in the sequence that the court orders.”
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Librado v. M.S. Carriers, Inc., 2004 WL 1490304, at *11 (N.D. Tex. June 30, 2004)
(Fitzwater, J.).
B
1
The evidence is important. At trial, Hoffman will apparently attempt to establish that
she suffered damages as a result of defendants’ alleged breach of contract by establishing
that she sacrificed the “substantial premium” she could have realized from a public sale of
the Rothko Painting. 3d Am. Compl. ¶ 33. Thus she will have to prove at trial that the
Rothko Painting would have sold for a higher amount had she sold it at public auction rather
than through a private sale. Hoffman will offer the expert testimony of Wiener to establish
the value of the Rothko Painting on or about April 24, 2007. Information concerning the
proper method of appraising a piece of artwork, and the bases on which Wiener relied to
reach his opinion, will be important given that defendants intend to posit that Wiener’s
valuation methodology is flawed because it relies only on post-April 24, 2007 sales.
Defendants maintain that the Supplemental Report is not important because it follows
the same flawed methodology as the original report and is therefore subject to exclusion
under Fed. R. Evid. 702 and Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579
(1993). The court disagrees. First, the court has not yet addressed defendants’ pending
motion to strike Wiener’s November Report, and, at present, his opinions have not been
stricken. Second, to the extent that Wiener’s Supplemental Report shores up deficits found

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in his November Report, the Supplemental Report is important for that reason.
2
Defendants argue that they will be prejudiced if the Supplemental Report is not
stricken. They contend that, at a minimum, they will be required to obtain additional rebuttal
reports to address the new opinions contained in the Supplemental Report and to file a new
Daubert motion directed to the Supplemental Report, all after discovery in this case has
closed. They maintain that, even if the court modifies the scheduling order to allow them
to obtain new rebuttal opinions, this will cause them to incur substantial additional expenses.
The court is not persuaded that defendants will be prejudiced if the court fails to strike
the Supplemental Report. In the sense relevant here, prejudice arises, if at all, from the
timing of the disclosure rather than from the content of the disclosure. If prejudice could be
demonstrated based on the content of the disclosure, a party could always show prejudice
when required to rebut new evidence. The timing of the disclosure results in prejudice when,
for instance, the opposing party must incur unreasonable additional costs that could have
been avoided by an earlier disclosure, or the party is precluded under the scheduling order
from developing and presenting rebuttal evidence. Defendants have not shown that they
must incur unreasonable additional costs that could have been avoided by an earlier
disclosure. And they in fact maintain in their December 6, 2012 response to the court’s
inquiry regarding case management that, given the extension of the discovery deadline to
March 15, 2013, they can now retain an appraisal expert to rebut Wiener’s opinions. See Ds.

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Resp. 2. Although the court disagrees that the discovery deadline has been extended so
broadly,6 it recognizes below under the third factor that such a continuance can be granted.
In fact, the court assumes that Hoffman would agree to such a continuance if necessary to
avoid the striking of the Supplemental Report.
3
The court next considers the possibility of curing any potential prejudice by granting
a continuance. As just noted, the discovery deadline can be continued for this purpose, and
defendants recognize that such a continuance would enable them to retain an appraisal expert
to rebut Wiener’s opinions. If necessary, the court can grant such a continuance as a means
of addressing prejudice resulting from the decision not to strike the Supplemental Report.
And to avoid delay between now and when such an order is filed, the parties can assume that
the court would grant a continuance to enable defendants to retain an appraisal expert, make
any necessary expert disclosures, and present any witness for deposition.

6

In defendants’ December 6, 2012 response, they assert that, “[g]iven the Court’s
Order extending the discovery deadline to March 15, 2013, it would now be possible, if the
Motion to Strike were denied, for Defendants to retain an appraisal expert to rebut the new
opinions offered by Mr. Wiener in his belated ‘supplemental’ report.’” Ds. Resp. 2. The
court’s November 26, 2012 order extending the discovery deadline, however, did not reopen
all discovery; instead, it reopened discovery related to Hoffman’s new fraudulent
inducement claim and/or to the new allegations of her third amended complaint. See
Hoffman v. L&M Arts, 2012 WL 5906722, at *1 (N.D. Tex. Nov. 26, 2012) (Fitzwater, C.J.).
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4
Finally, the court considers Hoffman’s explanation for failing to disclose the
Supplemental Report by the November 30, 2011 scheduling order deadline. Hoffman
maintains that the November Report was prepared without the benefit of significant
discovery that was later developed. She argues that valuable evidence relevant to Wiener’s
opinion was obtained during discovery in the spring of 2012, and that all of the data Wiener
considered in preparing the Supplemental Report were either cited in the November Report
or were uncovered through fact discovery and therefore unavailable at the time Wiener
prepared the November Report. For example, the Supplemental Report takes into account
a May 2012 sale of a Rothko painting and discusses the newly-discovered fact that the
consignor of one of the Rothko “comparables” cited in the November Report was Robert
Mnuchin.
Although the Supplemental Report relies on some new facts discovered during early
2012, there are many aspects of the Supplemental Report—such as the lengthy discussion
of the various available valuation methodologies and the appropriate method for determining
the value of the Rothko Painting—that do not rely on any new facts obtained during
discovery and that apparently could have been included in the November Report.
Accordingly, this factor weighs only slightly in favor of denying the motion to strike.

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5
Considering the four factors holistically,7 the court concludes that the failure to file
the Supplemental Report by the November 30, 2011 deadline was harmless. The disclosure
was made over one year before the date of the revised trial setting; the evidence is important
to Hoffman’s case; defendants either have not shown prejudice from the timing of the
disclosure or the court finds that any prejudice can be cured; and the availability of a
continuance of the discovery deadline sufficiently addresses any prejudice resulting from the
decision not to strike the Supplemental Report.
III
In the court’s November 26, 2012 memorandum opinion and order, it continued the
trial to the two-week docket of August 19, 2013. Because of Hoffman’s unavailability
during this period, the court reschedules trial to the two-week docket of October 7, 2013.

7

The court considers the four-factor test holistically. Hoffman v. L & M Arts, 2012
WL 4321739, at *4 (N.D. Tex. Sept. 21, 2012) (Fitzwater, C.J.) (“‘It does not mechanically
count the number of factors that favor each side.’” (quoting EEOC v. Serv. Temps, Inc., 2009
WL 3294863, at *3 (N.D. Tex. Oct. 13, 2009) (Fitzwater, C.J.), aff’d, 679 F.3d 323 (5th Cir.
2012))) (addressing motion for leave to amend).
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For the foregoing reasons, the July 11, 2012 motion to strike of Studio Capital and
Martinez, joined by L&M on July 11, 2012, is denied. The court reschedules the trial of this
case to the two-week docket of October 7, 2013.
SO ORDERED.
January 8, 2013.

_________________________________
SIDNEY A. FITZWATER
CHIEF JUDGE

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