Musket Corporation v. Suncor Energy (U.S.A.) Marketing, Inc.
MEMORANDUM OPINION AND ORDER GRANTING IN PART #75 Sealed motion, GRANTING IN PART #76 Sealed motion, GRANTING IN PART #77 Sealed motion.(Signed by Judge Gray H Miller) Parties notified.(rkonieczny, 4)
United States District Court
Southern District of Texas
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
SUNCOR ENERGY (U.S.A.) MARKETING, INC.,
December 20, 2016
David J. Bradley, Clerk
CIVIL ACTION H-15-100
MEMORANDUM OPINION AND ORDER
Pending before the court are (1) a motion to exclude Edwin Arthur Smith filed by defendant
Suncor Energy (U.S.A.) Marketing, Inc. (“Suncor”) (Dkt. 75); (2) a motion to strike David J. Hackett
filed by plaintiff Musket Corporation (“Musket”) (Dkt. 76); and (3) a motion to exclude Jon P. FjeldHansen filed by Suncor (Dkt. 77). After considering the motions, related filings, and applicable law,
the court is of the opinion that the motion to exclude Smith should be GRANTED IN PART, the
motion to strike Hackett’s testimony should be GRANTED IN PART, and the motion to exclude
Fjeld-Hansen should be GRANTED IN PART.
This is a breach of contract case. Musket is a commodity supply, trading, and logistics
company, and Suncor is a crude oil supply, marketing, and trading company. Dkt. 25. Musket and
Suncor entered into a Master Agreement for U.S. Crude Oil Purchase, Sale, or Exchange
Transactions and a Physical Confirmation Transaction (collectively, the “Agreement”). Id. Musket
claims Suncor did not deliver the crude oil as required under the Agreement, and Suncor claims
Musket’s claims are barred due to the occurrence of an “Interruption” as defined by the Agreement.
Id.; Dkt. 37. There are currently competing motions for summary judgment and partial summary
judgment pending before the court. In addition, there are three remaining motions to exclude expert
testimony: Musket has moved to exclude the testimony of Hackett, and Suncor has moved to exclude
the testimony of Smith and Fjeld-Hansen. This order addresses only these three motions to exclude.
II. LEGAL STANDARD
The Supreme Court of the United States acknowledged in Daubert v. Merrell Dow
Pharmaceuticals that Federal Rule of Evidence 702 is the proper standard for determining the
admissibility of expert testimony. Daubert v. Merrell Dow Pharms., 509 U.S. 579, 597–98, 113 S.
Ct. 2786 (1993). Rule 702 provides:
A witness who is qualified as an expert by knowledge, experience,
training, or education may testify in the form of an opinion or
(a) the expert’s scientific, technical, or other specialized knowledge
will help the trier of fact to understand the evidence or to determine
a fact in issue;
(b) the testimony is based on sufficient facts or data;
(c) the testimony is the product of reliable principles and methods;
(d) the expert has reliably applied the principles and methods to the
facts of the case.
Fed. R. Evid. 702. Under Daubert, a trial court acts as a “gatekeeper,” making a “preliminary
assessment of whether the reasoning or methodology properly can be applied to the facts in issue.”
Daubert, 509 U.S. at 592–93; see also Kumho Tire v. Carmichael, 526 U.S. 137, 147, 119 S. Ct.
1167 (1999); Pipitone v. Biomatrix, Inc., 288 F.3d 239, 243–44 (5th Cir. 2002). Daubert and its
principles apply to both scientific and non-scientific expert testimony. Kumho Tire, 526 U.S. at 147.
Experts need not be highly qualified to testify, and differences in expertise go to the weight of the
testimony, rather than admissibility.
Huss v. Gayden, 571 F.3d 442, 452 (5th Cir. 2009).
Nonetheless, courts need not admit testimony that is based purely on the ipse dixit of the expert.
Gen. Elec. Co. v. Joinder, 522 U.S. 136, 146, 118 S. Ct. 512 (1997); Moore v. Ashland Chem. Inc.,
151 F.3d 269, 276 (5th Cir. 1998).
In addition to being qualified, an expert’s methodology for developing the basis of his or her
opinion must be reliable. Daubert, 509 U.S. at 592–93; Moore, 151 F.3d at 276. “The expert’s
assurances that he [or she] has utilized generally accepted scientific methodology is insufficient.”
Moore, 151 F.3d at 276. Even if the expert is qualified and the basis of his or her opinion is reliable,
the underlying methodology must have also been correctly applied to the case’s particular facts in
order for the expert’s testimony to be relevant. Daubert, 509 U.S. at 593; Knight v. Kirby Inland
Marine Inc., 482 F.3d 347, 352 (5th Cir. 2007). The party proffering expert testimony has the
burden of establishing by a preponderance of the evidence that the challenged expert testimony is
admissible. See Fed. R. Evid. 104(a); Moore, 151 F.3d at 276. The proponent does not have to
demonstrate that the testimony is correct, only that the expert is qualified and that the testimony is
relevant and reliable. Moore, 151 F.3d at 276.
Musket’s counsel retained Smith to provide a report and testimony on the value chain and
logistics of the North American crude oil market from wellhead to refinery, the actions and
capabilities of the parties during the term of the Agreement, and the parties’ damages or alleged
damages. Dkt. 75, Ex. B (Smith’s Rep.). Smith has over forty years of commodity market
experience. Id. He trained as an agricultural economist and worked in the energy futures market
from 1979 through 1991. Id. He notes that crude oil futures opened for trading in late 1983 and that
he was one of the first to trade this market. Id. In the 1990s, he developed a grain merchandising
business in Central Texas. Id. From 2001 through 2004, he was on the faculty at Texas A&M
University, where he developed the curriculum in Energy Risk Management for the Reliant Energy
Trading Center. Id. Smith joined the Finance Department at the Bauer School of Business at the
University of Houston in 2006 and currently teaches Energy Trading and Energy Market Analysis
classes. Id. He also works as a consultant. Id. In 2009, Smith became the Chief Economist and
Director of New Products at CIMA Energy Inc. Id. In this role, he positioned CIMA in the crudeby-rail business, developed a crude terminal, and managed terminal operations. Id.
Suncor moves to exclude Smith’s expert testimony, arguing that Smith has no specialized
knowledge in the interpretation of the Agreement and that his testimony about the Agreement will
not help the trier of fact. Dkt. 75 at 1. Suncor asserts that Smith inappropriately draws legal
conclusions about the Agreement, testifies about damages barred by the Agreement, and opines as
to the ultimate legal question in the case. Id. Suncor also contends that the opinions Smith offered
during his deposition that were not in his expert report are untimely. Id.
Musket contends that Smith’s education, training, and experience qualify him to testify about
the crude-by-rail industry, the Agreement, and related issues. Dkt. 87 at 6. Musket asserts that
Smith does not offer any legal opinions and that his testimony is instead about industry standards and
practices relating to the Agreement, which it argues are appropriate topics for an expert. Id. at 11.
Musket additionally contends that Smith’s testimony is helpful to the jury and that all of the opinions
offered at Smith’s deposition are timely because Smith merely expanded on the opinions in his report
during his deposition. Id. at 20–22.
In reply, Suncor reiterates its original arguments and asserts that Musket misconstrues
Smith’s deposition testimony. Dkt. 91. Suncor argues that Smith is an economist, not a lawyer, and
that Smith’s only experience with contracts is sitting in on meetings while his coworkers negotiated
two dissimilar take-or-pay agreements. Id. at 2. Suncor also argues that Smith’s opinions are not
merely an expansion of the topics in Smith’s report. Id.
First, Suncor asserts that Smith is unqualified to testify about the meaning, interpretation, or
parties’ obligations under the Agreement. Dkt. 75 at 2. Under Federal Rule of Evidence 702, an
expert must be qualified by his or her “knowledge, skill, experience, training, or education.” Fed.
R. Evid. 702. The district courts “should refuse to allow an expert to testify if it finds that the expert
is not qualified to testify in a particular field or on a given subject.” Wilson v. Woods, 163 F.3d 935,
937 (5th Cir. 1999). Suncor argues that Smith is unqualified to testify about the meaning,
interpretation, and parties’ obligations under the Agreement because (1) he has no specialized
experience interpreting contracts; (2) he has no experience as an expert testifying on the meaning,
interpretation, or parties’ obligations under a contract; and (3) he admits that he does not understand
the meaning of the damages prohibited in the Agreement. Dkt. 75 at 4. Suncor particularly takes
issue with Smith’s testimony about damages because Smith admitted during his deposition that he
was not sure what some types of damages are. Id. at 5–6 (citing Dkt. 75, Ex. C at 326, 331).
Musket argues that it is “well-settled that expert testimony concerning industry practices and
standards, as it relates to contract interpretation, is permissible.” Dkt. 87 at 6. Musket touts Smith’s
experience in the crude-by-rail industry and his experience with, specifically, commodity supply
agreements. Id. at 7–8. During his deposition, Smith testified that he has “‘reviewed a lot of
different contracts,’” including “take-or-pay contracts for storage.” Id. at 8 (quoting Dkt. 87, Ex. B
at 46). Musket asserts that Smith has experience in contract-interpretation issues based on his
specialized, relevant trade experience and training in the discrete area of the industry before the court
in this case. Id. at 9. As far as damages, Musket notes that Smith is not offering legal opinions, he
is testifying about industry practices. Id. at 10. Thus, his lack of knowledge about terms relating to
damages is inconsequential. Id. Musket asserts that Smith does not offer any opinions about
ultimate legal issues in the case and instead provides the factfinder with useful information on
customs and practice of the industry. Id. at 11–12. Finally, Musket argues that any lack of
specialization would go to the weight of the testimony, not its admissibility. Id. at 11.
The court notes first that while it is the court’s province to determine the legal meaning of
a contract, the court may rely on an expert experienced in a specific field to obtain explanations of
“the technical meaning of terms used in the industry.” Kona Tech. Corp. v. S. Pac. Transp. Co., 225
F.3d 595, 611 (5th Cir. 2000). The court has reviewed the contested testimony and finds that Smith
draws many legal conclusions. The motion to exclude Smith’s testimony based on his qualifications
is GRANTED IN PART. The court will not consider any of Smith’s testimony to the extent he
draws legal conclusions about the meaning of the Agreement, but it will rely on Smith’s testimony
to the extent he provides insight into the technical meaning of terms as used in the industry.1
Suncor argues that the court should strike Smith’s testimony as untimely because (1) Smith’s
testimony during his deposition that Suncor had a “rogue trader” was not discussed in his report; and
(2) Smith provided undisclosed rebuttal testimony for the first time at his deposition. Dkt. 75 at
11–12. Under Federal Rule of Civil Procedure 26(a)(2), expert reports must contain “a complete
statement of all opinions the witness will express and the basis and reasons for them.” Fed. R. Civ.
P. 26(a)(2)(B). However, the rule also allows parties to “supplement these disclosures when required
under Rule 26(e).” Fed. R. Civ. P. 26(a)(2)(E). Rule 26(e) requires parties to supplement
disclosures “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
If after the summary judgment stage there are still issues with Smith’s testimony at trial,
the court will rule on specific objections at that time.
been made known to the other parties during the discovery process or in writing.” Fed. R. Civ. P.
26(e)(1)(A). With regard to expert reports, specifically, Rule 26(e) states that 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.” Fed. R. Civ. P. 26(e)(2). The pretrial
disclosures under Rule 26(a)(3) are due, unless otherwise ordered by the court, thirty days before
trial.2 Fed. R. Civ. P. 26(a)(3)(B). The Advisory Committee Notes to the 1993 amendment to Rule
26 indicate that paragraph (a)(2), which is the paragraph requiring a report, “impose[s] an additional
duty to disclose information regarding expert testimony sufficiently in advance of trial that opposing
parties have a reasonable opportunity to prepare for effective cross examination and perhaps arrange
for expert testimony from other witnesses.” Fed. R. Civ. P. 26, notes (1993 amend.).
Suncor moves to strike Smith’s testimony either because he did not include certain
information in his expert report under Rule 26 or because it is rebuttal testimony that was not
disclosed within thirty days of Suncor’s expert disclosure. Dkt. 75 at 10–11. The court will not
address the rebuttal testimony argument because Suncor did not specify which testimony it contends
is rebuttal. See id. at 12 (discussing generally how Smith “provided rebuttal testimony at his
deposition for the first time” even though the deposition was two months after Suncor’s expert
report, but failing to identify the offending testimony). The court has no way to determine what
portion of testimony Suncor alleges is rebuttal testimony.3
Generally, the court sets the pretrial disclosures deadline in a scheduling order. However,
in this case the court has cancelled all deadlines pending rulings on all of the evidentiary motions
and motions for summary judgment or partial summary judgment currently on file. See Dkt. (Aug.
17, 2016). The trial date will be reset after the court rules on the pending motions.
Suncor makes the same rebuttal testimony argument with regard to Fjeld-Hansen. See § C,
As far as the alleged new testimony about a rogue trader, Musket asserts that Smith’s
opinions regarding the “rogue trader” at his deposition are in his report. Dkt. 87 at 22. Smith
explained during his deposition that he believed a certain individual was a rogue trader because this
individual did not follow all of Suncor’s risk policies. Id. at 23 (citing Smith’s deposition).
Musket argues that this is basically what Smith’s report said. Id. Musket points out that the
alleged rogue trader was Suncor’s trader-in-charge and supervised the communications among the
parties. Id. Musket contends this is encompassed in Smith’s report because the report notes that
Suncor entered into contracts it could not profitably fulfill. Id. (citing Dkt. 87, Ex. A at 14, 17–18).
Musket asserts that the testimony about the trader being a “rogue trader” is merely an expansion on
the testimony about how Suncor traded in general. Id. at 24. Additionally, Musket notes that Suncor
had ample opportunity to depose Smith about this opinion, so there is no danger of unfair surprise
in permitting Smith to expand upon his report. Id. In reply, Suncor argues that Musket’s argument
that the rogue trader testimony is merely an expansion of Smith’s report is “unpersuasive.” Dkt. 91.
The court agrees with Suncor that Musket’s argument that the testimony is merely an
expansion of the report is unpersuasive. While at first glance Smith’s testimony that he believes
Suncor’s trader in charge had gone rogue may just be an expansion of the expert testimony that
Suncor was entering into contracts it could not fulfill, when one examines Smith’s testimony about
what a “rogue trader” is, this supposition fades. Smith defined “rogue trader” during his deposition
as “somebody that doesn’t follow the policy guidelines, doesn’t follow the risk policy of the
corporation.” See Dkt. 87, Ex. B at 383. Yet Smith did not discuss Suncor’s risk policy guidelines
in his report, and he could not identify during his deposition how much money the alleged rogue
trader had made or lost during his tenure with Suncor. See id. at 384. The court finds that, given
Smith’s own definition of “rogue trader,” his testimony about a Suncor employee being a rogue
trader is outside of his expert report. This testimony will not be permitted at trial, and the court will
not consider Smith’s opinion regarding the rogue trader when it addresses the parties’ motions for
summary judgment or partial summary judgment. Accordingly, Suncor’s motion to strike Smith’s
testimony is GRANTED with respect to the rogue trader issue, but DENIED with respect to the
alleged rebuttal testimony.
Hackett is the president of Stillwater Associates LLC (“Stillwater”), a transportation energy
consulting company. Dkt. 76, Ex. A-1 (Dkt. 76-1). He received a Bachelor of Science degree in
Oceanography from the U.S. Naval Academy in 1971, and he earned an Masters of Business
Administration degree from the University of California, Irvine, in 1997. Id. He worked for Mobil
Oil Corporation (“Mobil”) for twenty years and then founded Stillwater in 1998. Id. Stillwater
consults “on topics like gasoline price controls, corn ethanol distribution, biodiesel production, next
generation renewable fuels implementation, price gouging, fuels infrastructure constraints, refinery
mergers and acquisitions, interstate commerce, Low Carbon Fuel Standard, Cap & Trade, Crude-byRail, and refining technology.” Id. Hackett states that he reviewed documents relating to the
Windsor Terminal and has determined, based on the documents and his experience in the industry,
that the tank capacity and infrastructure at the Windsor Terminal was not sufficient; that the
Agreement was a sales agreement and not the type of agreement that could have included a take-orpay provision; and that Musket had alternatives to mitigate its damages and failed to do so. Id.
Musket argues that (1) Hackett is not qualified to render opinions on the parties’ obligations
under the Agreement, Musket’s Windsor Terminal operations, or any other crude by rail matters; (2)
Hackett’s opinions are unreliable and not helpful to the trier of fact; and (3) any opinions relating
to counterclaims offered by Hackett should be stricken because Suncor did not timely designate
Hackett as an expert for its counterclaim. Dkt. 76.
Suncor contends that Hackett is qualified to offer his opinions as he has extensive experience,
knowledge, and training with a similar product and experience administering contracts like the
Agreement. Dkt. 83. Suncor asserts that Hackett’s opinions are reliable because they are based on
sufficient facts and data and are derived from reliable principles and methods that are reliably applied
to the facts. Id. With regard to opinions about counterclaims, Suncor argues that Hackett may offer
these opinions because the parties agreed that the expert-designation dates applied by party, not by
claimant, and Hackett was timely designated as an expert for Suncor as the defendant. Id.
Moreover, Suncor contends that the opinions are timely under Rule 26 as rebuttal evidence even if
they are otherwise untimely. Id.
Musket replies that Hackett is indeed not qualified as he has no educational background on
the most relevant issues and relies in part on his degree in Oceanography—even though he admitted
that the relationship between crude-by-rail and oceanography is tenuous. Dkt. 94. Additionally,
Musket contends that Hackett’s alleged experience with similar contracts is negotiating two shortterm crude deals and work on administering contracts for a different company many years ago;
Musket argues that this experiences many is insufficient. Id. Musket points out that Hackett
admitted during his deposition that he had never seen a contract like the Agreement. Id. (citing Dkt.
76, Ex. A-2 at 73).
Musket argues that even if Hackett were qualified, his opinions are unreliable because he
made assumptions that were either wrong or simply parroted from other colleagues.
Additionally, Musket points out that Hackett did not draft his second and third opinions. Id. (citing
Ex. A-2 at 183). With regard to the counterclaim, Musket states that “Suncor missed its expert
designation deadline and is now grasping for an excuse.” Id. Musket asserts that there was no
understanding between the parties that the expert-designation deadlines were party-specific. Id.
Musket argues that the testimony cannot qualify as rebuttal testimony because Hackett makes no
reference to Musket’s report on that topic. Id.
Qualifications. Under Federal Rule of Evidence 702, an expert must be qualified
“by knowledge, skill, experience, training, or education.” Fed. R. Evid. 702. However, experts do
not have to be highly qualified, and differences in expertise bear on the weight of the testimony, not
its admissibility. Huss, 571 F.3d at 452.
Musket admits that Hackett has experience in a variety of energy-related fields, but it
contends that Hackett has no experience or “remarkably limited” experience with crude by rail.
Dkt. 76. Musket specifically objects that this renders Hackett unqualified to testify about Musket’s
crude oil facility, the Agreement, or the parties’ corresponding obligations under the Agreement.
Id. Musket argues that Hackett’s educational background is inapplicable to the crude-by-rail issues
in this case, noting that Hackett testified that “‘[i]t’s kind of a stretch between oceanography and
crude by rail.’” Id. (quoting Dkt. 76, Ex. A-2 at 86).
Suncor contends that Musket’s argument goes to the weight to be assigned Hackett’s
testimony, not its admissibility. Dkt. 83. Suncor argues that an expert’s skill or knowledge does not
have to derive from the exact same experience so long as it is based on a similar pursuit. Id. Suncor
notes that Hackett has over forty years of experience in the oil and gas industry working as a
scheduler, analyst, supply coordinator and manager, and trading and distribution manager, and that
Hackett has experience analyzing tank capacity. Id. (citing Dkt. 83, Ex. 4A at 23, 25, 26–30, 33, 36,
40, 43, 44–45, 54–55). Suncor also points out that Hackett has taken courses in economics and asset
optimization and has knowledge about these topics from his jobs. Id. (citing Dkt. 83, Ex. 4A at 81,
85). Suncor argues that Hackett’s lack of specialization in the crude-by-rail industry does not render
his opinion inadmissible. Id. Suncor also asserts that Hackett has ample experience negotiating and
administering contracts and that it “makes no difference whether this experience was with contracts
involving crude oil, gasoline, or ethanol.” Id. Suncor points out that Hackett has negotiated several
dozen contracts and has experience administering a contract that is “just like the [Agreement],
including administering the take-or-pay provisions.” Id. (citing Dkt. 83, Ex. 4A at 66–67, 71–72,
Hackett testified that he has never operated any crude-by-rail terminals, but that he did
negotiate “[p]robably several dozen” contracts when working for Mobil, including a few that related
to crude oil purchases, though most of them related to gasoline. Dkt. 83, Ex. 4A at 66. Hackett
admitted that he never negotiated a contract with a two-year term while at Mobil, but he did
administer contracts like that. Id. at 71–72. He also stated that he does not recall seeing a contract
“with the combination that’s in this contract,” and he has never negotiated a “take-or-pay” provision.
Id. at 73, 364. Hackett admitted that he has no accomplishments or publications in his curriculum
vitae relating to directly to crude by rail or rail terminal operations. Id. at 76–77. He stated that it
is “a stretch” between his undergraduate degree in oceanography and the crude oil issues he is
testifying about in this case, but he noted that the study of the components that went with his
degree—math, engineering, and leadership—connect the two. Id. at 87–88. Hackett agreed,
however, that he has no technical training in “how a railcar, a tank car, in connection with moving
of crude by rail, work.” Id. at 89. That being said, Hackett did testify that in his various roles he
has coordinated the movement of fuel oil between refineries; analyzed the economics of moving
crude oil; coordinated communications about market conditions and refinery operating plans; dealt
with ensuring his company’s information technology would support rail terminals delivering
gasoline, diesel, and heating oil; supervised the coordination of the movement and supply of crude
oil and ethanol; supervised all supply-chain processes; and analyzed tank capacity and inventory
management. Dkt. 83 at 7 (citing Dkt. 83, Ex. 4-A at 23–25, 26–30, 33, 36, 40, 43–44, 54–55).
After considering Hackett’s report and testimony, the court agrees with Suncor that Musket’s
concerns about Hackett’s qualifications go to the weight of his testimony, not its admissibility.
Hackett’s forty years of experience in the oil and gas industry working as a scheduler, analyst, supply
coordinator and manager, and trading and distribution manager qualifies him to render the opinions
he offers, to the extent they are non-legal opinions. The fact that his experience is not directed at
crude oil specifically may be considered by the trier of fact when deciding how much weight to give
As to legal conclusions about the Agreement, “‘[i]n the absence of specialized trade usage,
expert testimony regarding proper contract interpretation is inadmissible, as is expert testimony
regarding the legal significance of the contract language.’” Fisher v. Halliburton, No. 05-1731, 061791, 06-1168, 2009 WL 5216949, at *4 (S.D. Tex. Dec. 21, 2009) (Miller, J.). Here, there is no
indication that Hackett’s opinions about the Agreement relate to specialized trade usage. Thus, any
opinions about the legal significance of the terms in the Agreement are inadmissible. The motion
to strike Hackett’s testimony based on qualifications is thus GRANTED IN PART in that the court
will not consider any legal conclusions reached by Hackett.
Unreliable and Unhelpful
Musket contends that the reliability of Hackett’s methods is “woefully deficient.” Dkt. 76.
Rule 702 requires that all scientific, technical, or other specialized knowledge assist the trier of fact
and be the product of reliable principles and methodologies, among other things. Fed. R. Evid. 702.
The underlying methodology must have also been correctly applied to the case’s particular facts.
Daubert, 509 U.S. at 593.
According to Musket, there is no basis for the assumptions Hackett was given and there is
no basis for the assumptions he made. Dkt. 76. Musket contends that Hackett relied on his team’s
experience without any further supporting information or evidence and made assumptions that he
now acknowledges were incorrect. Id. Thus, Musket argues that Hackett’s opinions are not based
on sufficient facts and data. Id.
(a) Hackett’s First Opinion. Musket asserts that Hackett’s first opinion—that the Windsor
Terminal did not have enough tankage or infrastructure to reliably receive 20,000 barrels per day of
crude oil—is merely a subjective belief because Hackett “did not even know whether a pipeline
could deliver crude to Musket’s Windsor terminal,” and whether there is a pipeline that could deliver
crude oil “would drastically alter the bases of all of Hackett’s opinions relating to Windsor
operations.” Id. Musket notes that neither Hackett nor his team ever visited the Windsor Terminal
and that Hackett did not even know, when asked at his deposition, the bases of his opinion that
“‘Windsor would require operable tank capacity of at least 130% of unit train capacity to routinely
load 20kbd of crude oil.’” Id. (quoting Dkt. 76, Ex. A01 at 3–6). Instead, Hackett stated that he
relied on his colleague, Ralph Grimer. Id. Musket additionally points out that Hackett was not
aware that Musket was using rolling storage in connection with the Windsor Terminal when he wrote
his report. Id. (citing Dkt. 76, Ex. A-2 at 203). Hackett also admitted in his deposition that “‘the
size of the trains at Windsor were different than the size that [he and his colleagues] assumed for the
analysis.’” Id. (quoting Dkt. 76, Ex. A-2 at 163).
Suncor argues that Hackett’s first opinion is based on his experience and the documents
produced in this case. Dkt. 83. Suncor asserts that Hackett “did in fact evaluate the Windsor
Terminal.” Id. at 10 (citing Dkt. 83, Ex. 4A (Dkt. 83-4) at 105:20–22 (“Oh, I reviewed articles about
the Windsor terminal that I found online.”)). Additionally, Suncor notes that Hackett relied on
communications from Musket’s employees showing the Windsor Terminal’s capacity constraints.
Id. at 10–11.
The court finds that Hackett’s first opinion is based on unreliable methodology. Hackett
admits that he did not visit the terminal and that he used incorrect information for his analysis.
Moreover, he could not even testify as to the bases for his opinion. The court is not persuaded by
Suncor’s assertion that Hackett “did in fact evaluate the Windsor Terminal,” as this evaluation was,
according to the citation provided by Suncor, done by reviewing unknown articles found on
unknown websites, which certainly does not meet the Daubert standard for reliably investigating the
capacity to take crude oil.4 Suncor has not met its burden of showing this opinion meets the Daubert
standard. As far as the opinions based on Suncor communications, Hackett’s testimony is not
needed or helpful as Suncor may present these communications through non-expert witnesses.
Musket’s motion to exclude Hackett’s testimony as to his first opinion is GRANTED.
(b) Hackett’s Second and Third Opinions. Next, Musket contends that Hackett’s second
opinion, which is about Suncor’s interruption claim, and his third opinion, which is about the
Agreement, are based on unreliable foundations because the opinions are really those of Hackett’s
colleague, Michael Bloch, and not of Hackett. Dkt. 76 at 19–20. Hackett believes Bloch came to
his conclusions simply by reading the Agreement; Hackett did not know if Bloch relied on any
documents when formulating this opinion. Id. at 20 (citing Dkt. 76, Ex. A-2 at 190). Hackett relied
While it is possible to reliably investigate on the Internet, as is evidenced by the use of
Westlaw Next or LexisNexis to investigate the law, the court cannot determine that Hackett based
his opinion on reliable information when the only information it has is that he reviewed some articles
he found online.
on testimony from Suncor and on reading the Agreement as the bases for his opinion regarding the
interruption. Dkt. 76 at 20 (citing Dkt. 76, Ex. A-2 at 190–91, 322). He also relied on a report on
the Internet from a government agency. Id. at 21 (citing Dkt. 76, Ex. A-2 at 324–26); see Dkt. 76,
Ex. A-2 at 327 (identifying where he found the report). When asked, Hackett could not identify the
pipeline that experienced the alleged issue or its location and relied solely on Suncor’s testimony.
Moreover, Hackett admitted that he had “no other basis to support [his] testimony” about the length
of the interruption “other than the delivery data that Suncor provided . . . reflecting what it delivered
to the Musket terminal.” Id. (citing Dkt. 76, Ex. A-2 at 342). He based his opinion that there was
an interruption on the volumes Suncor delivered. Id. He also stated during his deposition that he
was “‘assuming that [Suncor’s] inability to secure crude was a result of a rupture in a pipeline’” in
July of 2014. Id. (citing Dkt. 76, Ex. A-2 at 347) (emphasis added). He also admitted that Suncor’s
failure to deliver enough crude oil could have been something “totally unrelated to any rupture in
the pipeline.” Id. (citing Dkt. 76, Ex. A-2 at 347).
Suncor contends that Hackett may testify about the parties’ obligations under the Agreement
because he testified that he has “administered plenty” of contracts involving crude oil including one
like the Agreement at issue. Dkt. 83 at 11 (citing Dkt. 83, Ex. 4-A at 71–72). Suncor asserts that
Hackett may opine on the Agreement to explain the parties’ obligations based on the similar
contracts he has administered. Id. With regard to Hackett’s opinion regarding the interruption,
Suncor argues that Hackett’s conclusions are reliable because they are based on communications
involving Suncor employees, Musket employees, producers, suppliers, as well as public information
about a pipeline explosion. Id. at 12 (citing Dkt. 83, Ex. 4-C (Hackett Rep.) at 8).
Hackett’s second opinion is that a “pipeline rupture resulted in a [force majeure] event or
Interruption under the Contract. Suncor notified Musket about the pipeline rupture—along with
other production and regulatory issues—and the impact on Suncor’s ability to obtain crude oil
producers in the area. These [force majeure] events or Interruptions continued through October
2014.” Dkt. 83, Ex. 4-C at 8. While the court is not concerned about Hackett basing his opinions
about the pipeline rupture on Suncor’s communications,5 it is concerned that Hackett admits he does
not know if the rupture caused the interruptions to continue through October 2014 and that he based
this on an assumption. That aspect of his opinion is not reliable. The motion to strike Hackett’s
second opinion as unreliable is therefore GRANTED IN PART, and the court will not consider
Hackett’s opinion with regard to how long the rupture caused an interruption.
Hackett’s third opinion includes an opinion that if Musket were harmed by Suncor, it had a
duty to mitigate under the Agreement and that “[u]nder the agreement, Musket, the Buyer, should
go into the market to buy alternative supplies when Suncor could not deliver.” Dkt. 83, Ex. 4-C at
9. He then discusses the ways in which Suncor could have mitigated damages. Id. Hackett also
discusses the exclusivity provision and the exclusions and limitations and how these provisions
should be interpreted and applied. Id. Hackett opines that Musket could have obtained supplies with
other shippers to use its available capacity and could have pursued at least eight of Suncor’s
competitors to buy from. Dkt. 83, Ex. 4-C at 10.
The court does not believe that Hackett’s third opinion is unreliable simply because he bases
his conclusions on his experience administering similar contracts and also relies on a colleague. Any
issues with these methods go to the weight of the testimony, not its admissibility. The motion to
exclude Hackett’s third opinion as unreliable is thus DENIED. However, the court here reiterates
that Hackett may not offer the aforementioned testimony that relates to the actual interpretation of
the contract; this is the court’s province.
Hackett also confirmed this with government records. See Dkt. 83, Ex. 4-A at 327.
Opinions Regarding Suncor’s Counterclaim
Musket next argues that the court should strike Hackett’s opinions regarding Suncor’s
counterclaims because Suncor failed to properly designate Hackett as an expert on its counterclaim.
Dkt. 76 at 22. Suncor’s counterclaim is a breach of contract claim. Dkt. 12. Suncor alleges that
Musket breached the Agreement by failing to comply with the terms and failing to purchase or
receive the agreed-upon crude oil volumes. Dkt. 76 at 22. Musket requests that the court strike,
specifically, the following paragraph found on page 8 of Hackett’s report because Suncor did not
designate or did not timely designate Hackett to testify about the counterclaim:
“In addition, according to Additional Provisions, Windsor Terminal
(ii) in the PTC, ‘If Buyer is unable to provide railcars over three
consecutive months which interferes with Seller’s ability to ratably
deliver Product to the Windsor Terminal, Buyer to pay Seller
$1.50/barrel. [sic.] for each barrel that Seller delivers to an alternate
terminal.’ The above clause operates to not only reduce any ToP
volume (assuming the ToP conditions were met), but provides for
damages payable to Suncor.”
Id. (quoting Dkt. 76, Ex. A-1 at 8). Musket argues that the court ordered that all written reports filed
by counter-plaintiff were due by April 5, 2016. Id. at 23 (citing Dkt. 56). Musket states that Suncor
designated Hackett on May 3, 2016, which is the date defendants and counter-defendants were
required to designate experts. Id. Musket argues that under Rule 26(a), Suncor should not be
permitted to use evidence from the untimely designated expert at trial and under Rule 37 the court
may exclude the witness as a sanction for the Rule 26 violation. Id. at 24. Moreover, Musket
contends that the court should not permit the untimely designation because Suncor’s failure to
comply with the order to file reports by April 6 (1) prevented Musket from preparing a counterdefendant designation responding to Hackett’s opinion on counterclaim damages; and (2) prevented
Musket from preparing for Hackett’s deposition with regard to the counterclaim. Musket argues that
a continuance would be prejudicial because docket call was (at the time Musket wrote its motion)
scheduled for September 2016. Id. at 25.
Suncor responds that the “parties operated with the understanding that the expert-designation
deadlines were party specific and not based on claimant versus counter-claimant.” Dkt. 83 at 17.
Suncor additionally argues that even if the court were to find the designation untimely, Hackett’s
opinions are still timely as rebuttal evidence to Suncor’s expert Edwin Arthur Smith as they were
disclosed within thirty days of Smith’s report. Id. at 18 (relying on Fed. R. Civ. P. 26(a)(2)(D)(ii)
and Global Integrated Bldg. Sys. v. Target Logistics, LLC, No. H-06-2637, 2008 WL 5552332 (S.D.
Tex. May 19, 2008)). Moreover, according to Suncor, Musket has not been prejudiced by the
allegedly late disclosure. Id. at 19. Suncor points out that Musket received the report two months
before the close of discovery and before all but one of the fact witnesses’ depositions were taken.
Id. Additionally, Musket questioned Hackett on issues relating to the counterclaim during Hackett’s
deposition. Id. (citing Dkt. 83, Ex. 4-A at 241–44, 351, 367–73).
Musket replies that Suncor is the only party that operated with the understanding that the
deadlines were party specific and not based on claimant versus counter-claimant. Dkt. 94 at 5. As
far as the argument that it is rebuttal testimony, Musket points out that the report does not even
mention Musket’s expert’s report and asserts that Suncor has not met its burden of showing that the
testimony is rebuttal testimony. Id.
First, the court is not convinced that there was an actual “understanding” between the parties
that the expert deadlines were party specific and did not relate to the types of claims. The court’s
scheduling order clearly states, in bold capital letters, that the April 5 deadline is for “EXPERT
WITNESSES FOR PLAINTIFF/COUNTER-PLAINTIFF.” Dkt. 56 (emphasis added). While
emails between Musket and Suncor about extending expert deadlines state “Plaintiff’s expert
witnesses deadline” and “Defendant’s expert witness deadline,” the failure to include “counterplaintiff” and “counter-defendant” may have been perceived as an informal reference and the court’s
actual order—entered after this email communication—states the deadline is for both plaintiff and
counter-plaintiff. Compare Dkt. 83, Ex. 40-D (December 2015 email string), with Dkt. 56 (March
8, 2016 scheduling order). Second, the court is also not convinced that the testimony is offered as
rebuttal testimony. Hackett’s failure to discuss Smith’s report is telling in this regard.
The court, therefore, must determine whether the report should be permitted even though it
was untimely. Since the expert report was not timely filed under the court’s scheduling order, the
court may modify the deadline only if Suncor shows good cause for failing to timely file the report.
See Fed. R. Civ. P. 16(b)(4) (“A schedule may be modified only for good cause and with the judge’s
consent.”). “To show good cause, the party seeking to modify the scheduling order has the burden
of showing ‘that the deadlines cannot reasonably be met despite the diligence of the party needing
the extension.’” Squyres v. Heico Cos., L.L.C., 782 F.3d 224, 237 (5th Cir. 2015) (quoting Filgueira
v. U.S. Bank Nat’l Ass’n, 734 F.3d 420, 422 (5th Cir. 2013)). To determine if there is good cause,
the court must consider:
“(1) the explanation for the failure to timely [comply with the
(2) the importance of the [modification];
(3) potential prejudice in allowing the [modification]; and
(4) the availability of a continuance to cure such prejudice.”
Id. (quoting Meux Surface Protection, Inc. v. Fogleman, 607 F.3d 161, 167 (5th Cir. 2010)).
Musket asserts that all these factors weigh in its favor because (1) Suncor did not designate
Hackett until after the deadline and had no justifiable reason for failing to do so; (2) Suncor
obviously does not find the testimony very important as it only included one sentence about the
counterclaim in the expert report and did not timely designate; (3) the failure to comply is harmful
and prejudicial to Musket because it undermined Musket’s ability to designate a counter-defendant
designation; and (4) a continuance is prejudicial to Musket. Dkt. 76 at 24–25.
Suncor, on the other hand, argues that all of the factors weigh in its favor. Dkt. 83 at 19.
First, Suncor asserts that it reasonably believed that the parties had an understanding that all of its
designations should be made on May 3, 2016, and its failure to do so was not malicious or callous.
Id. Second, Suncor contends that Musket is not prejudiced by the failure to disclose earlier because
Musket had Hackett’s report two months before the close of discovery and before all but one of the
depositions of fact witnesses was taken and had almost two months to prepare for Hackett’s
deposition. And, in fact, Musket questioned Hackett about his opinions with regard to the
counterclaims. Id. at 20. Third, Suncor contends that the testimony is important because Musket’s
expert attacked Suncor’s counterclaims in his expert report and Suncor should have the opportunity
to rebut the claims. Id. Finally, Suncor asserts that a continuance is not necessary because Musket
was able to depose Hackett about these opinions. Id. at 21.
The court agrees that the factors weigh in Suncor’s favor. Even though the expert disclosure
was not timely, Musket had ample opportunity to explore Hackett’s opinions about the counterclaim
during discovery. Musket’s motion to strike the testimony relating to counterclaims as untimely is
Fjeld-Hansen is a non-retained expert who is the managing director and a vice president of
Musket. Dkt. 86, Ex. A. He is designated to testify about Musket’s operations, the crude oil value
chain, typical industry practices in the logistics of the crude-oil market, the investment in midstream
crude-oil infrastructure, the interpretation of the parties’ obligations and the reasonableness in the
industry of their performance of these obligations, and rebuttal testimony as to any claim by Suncor
relating tho the Agreement, market conditions, industry practices, and alleged damages. Id.
Suncor asserts that Musket did not provide an expert report for Fjeld-Hansen in violation of
the court’s scheduling order and that Fjeld-Hansen’s opinion offering rebuttal evidence to Suncor’s
expert at Fjeld-Hansen’s deposition, which was after the rebuttal expert deadline, was untimely.
Dkt. 77. Additionally, Suncor contends that Fjeld-Hansen has no specialized knowledge in the
interpretation of the Agreement and that his testimony will not be helpful to the trier of fact. Id.
Suncor also objects that Fjeld-Hansen’s purported opinions of the meaning and legal effect of the
Agreement’s provisions. Id. Suncor contends that Musket is offering Fjeld-Hansen as an expert
“simply so that he can opine of legal issues and draw legal conclusions about the Agreement, while
testifying on matters about which he lacks any personal knowledge.” Id.
Musket notes that Fjeld-Hansen is a non-retained expert who is qualified to testify and that
his testimony will be helpful to the trier of fact. Dkt. 86. Musket contends that Federal Rule of Civil
Procedure 26(a)(2)(C) specifically exempts non-retained experts from filing an expert report. Id.
Musket asserts that Fjeld-Hansen did not offer any new rebuttal opinions during his deposition, and
Musket contends that Fjeld-Hansen is qualified to testify as to non-legal conclusions regarding the
Agreement because of his experience on matters relating to such agreements. Id. Musket also
argues that none of Fjeld-Hansen’s opinions are impermissible legal conclusions. Id.
First, the motion to exclude Fjeld-Hansen’s testimony because he did not file an expert report
is DENIED for the same reasons the court denied this argument with regard to the motion to exclude
Doug Lumry’s testimony. See Dkt. 109.
As far as rebuttal testimony, Suncor contends that Fjeld-Hansen provided rebuttal testimony
at his deposition on June 15, 2016, and that it is untimely because under Federal Rule of Civil
Procedure 26(a)(2)(d)(ii) rebuttal evidence must be disclosed within thirty days after the other party
disclosed the evidence to be rebutted. Dkt. 77. Suncor contends that Fjeld-Hansen’s testimony was
in rebuttal to its expert’s report and that the deposition occurred two weeks after the thirty-day
deadline to submit rebuttal testimony. Id. Suncor asserts that this caused it harm because its expert
was unable to address the rebuttal testimony before the end of discovery. Id.
Musket notes that Suncor did not even identify which testimony was “rebuttal testimony.”
Dkt. 86. Moreover, Musket contends that all of Fjeld-Hansen’s testimony relating to Suncor’s expert
“was covered in Mr. Fjeld-Hansen’s disclosures.” Id. Finally, Musket asserts that even if the
testimony were actually rebuttal testimony, Suncor had sufficient time to depose Fjeld-Hansen about
these opinions and cannot claim unfair surprise. Id.
In its response, Suncor asserts that Musket’s counsel “is unfamiliar with what rebuttal
testimony is” and suggests that Musket review pages 290 through 323 of Fjeld-Hansen’s deposition
as Fjeld-Hansen “clearly identifies it.” Dkt. 92. This is not helpful. It is the court, not Musket, that
needs to know why Suncor believes the testimony is rebuttal testimony, as the court needs to
determine if it should grant Suncor’s motion to strike the testimony for this reason. The court should
not be tasked with parsing through thirty-three pages of deposition testimony in an attempt to figure
it out. Suncor’s motion to strike the testimony because it is rebuttal testimony is DENIED.
Suncor next contends that Fjeld-Hansen is not qualified to testify under Federal Rule of
Evidence 702. Dkt. 77. It asserts that Fjeld-Hansen is not qualified to testify about the meaning,
interpretation, or parties’ obligations under the Agreement. Id. It contends, moreover, that FjeldHansen’s testimony is unhelpful to the jury and contains impermissible legal conclusions. Id.
Musket asserts that Fjeld-Hansen is qualified to supply his opinions related to the Agreement due
to his work history and training in the crude-by-rail industry. Dkt. 86. Musket notes that Fjeld23
Hansen has over twenty-five years of experience in the oil business and has worked with take-or-pay
agreements in the past with language that is conceptually similar to the Agreement.
Additionally, Fjeld-Hansen was involved in contract negotiation and thus had a hand in the language
of the Agreement. Id.
The court finds that Fjeld-Hansen is qualified to testify about certain non-legal aspects of the
Agreement and how it impacted the parties’ actions. However, the court will not rely on any legal
conclusions reached by Fjeld-Hansen when determining whether to grant summary judgment.
Suncor’s motion to strike because Fjeld-Hansen is unqualified and cannot render legal opinions is
therefore GRANTED IN PART.
Suncor’s motion to exclude Edwin Arthur Smith (Dkt. 75), Musket’s motion to strike the
testimony of David J. Hackett (Dkt. 76), and Suncor’s motion to exclude Jon P. Fjeld-Hansen
(Dkt. 77) are all GRANTED IN PART as outlined above.
Signed at Houston, Texas on December 20, 2016.
Gray H. Miller
United States District Judge
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