Fowers Fruit Ranch v. Bio Tech Nutrients
Filing
177
MEMORANDUM DECISION AND ORDER granting in part and denying in part 170 Bio Techs Renewed Motion for Sanctions Signed by Judge Tena Campbell on 8/3/2016. (jds)
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH
CENTRAL DIVISION
FOWERS FRUIT RANCH, LC;
S & L FARMS, LC; LYNN J.
FOWERS; and SHERRYL FOWERS,
Plaintiffs,
MEMORANDUM DECISION
AND ORDER
vs.
BIO TECH NUTRIENTS, LLC,
Case No. 2:11-CV-00105-TC
Defendant.
Plaintiffs Fowers Fruit Ranch, LC; S & L Farms, LC; Lynn J. Fowers;
and Sherryl Fowers (collectively “Fowers”) own and operate a fruit orchard.
They filed a lawsuit against Defendant Bio Tech Nutrients, LLC (Bio Tech), a
company that convinced Fowers to stop their traditional fertilizing program
and use its products instead. After trial, the jury awarded Fowers $1,172,651
in damages for the injuries to their orchard.
Bio Tech now files a Renewed1 Motion for Sanctions (ECF No. 170)
asking the court to sanction Fowers’ counsel for ignoring a prior order that
excluded evidence of lost revenues associated with tart cherries. That order
excluded evidence as a sanction for Fowers’ late supplementation to their
initial disclosures. Throughout the trial, Fowers’ counsel repeatedly argued
for a damage award that necessarily would have relied on the tart-cherry
evidence and tried to introduce this evidence even after the court told them to
stop.
For reasons discussed more fully below, the court grants Bio Tech’s
motion in part and denies in part orders Fowers’ counsel to pay Bio Tech for
its attorneys fees associated with filing the renewed motion.
BACKGROUND
In 2008, Fowers adopted a new fertilizer plan that Bio Tech
recommended. Rather than applying traditional fertilizers, Fowers began
applying Bio Tech’s products to some of their fruit plants. The fruit plants
Bio Tech made its first motion for sanctions after Fowers’ closing
arguments
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affected by the Bio Tech products included tart cherries, sweet cherries,
apples, and berries. Fowers eventually filed a lawsuit against Bio Tech.
I.
The exclusion of evidence
In Fowers’ initial disclosures, they designated Dr. Earl J. Seeley as an
expert witness who would supply a calculation of damages and testify about
how the adoption of the Bio Tech fertilizer plan injured the plants. Bio Tech
moved to exclude some of Dr. Seeley’s testimony—specifically, his opinion
about lost revenues due to injuries to tart-cherry trees. After a hearing on Mr.
Seeley’s reliability, the court granted Bio Tech’s motion and struck, in
accordance with Daubert v. Merrill Dow Pharmaceuticals, Inc., 509 U.S. 579
(1993), the parts of his expert report “about crop yields, future crop prices, or
lost revenues for tart cherries.” (Order & Mem. Decision 24, ECF No. 101.)
In effect, this order excluded testimony from Dr. Seeley about lost tart-cherry
revenues.
The court issued its decision to exclude his testimony on May 15, 2015.
Fowers had not disclosed any other evidence that supported their damage
calculations for lost revenues for tart cherries. Fowers did not supplement
their disclosures until October 15, 2015, eighteen days before the original
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November 2 trial date. 2 This supplement included 3500 pages of documents
about crop yields and sales from 2013 through 2015. Fowers would have
used these documents, in part, to prove lost revenues for tart cherries.
At the final pretrial conference, Fowers said that the documents
supported the testimonies of Lynn, Sherryl, and Jerry Fowers (the owners and
managers of the farm) and Richard Hoffman, another designated expert
witness. Fowers had not disclosed, before October 21, that Lynn, Sherryl, or
Jerry Fowers would testify about damage calculations or that they or
Mr. Hoffman would use these documents for their calculation of damages.
Further, Fowers failed to designate Lynn, Sherryl, or Jerry Fowers as
potential expert witnesses under Federal Rule of Evidence 702 and Federal
Rule of Civil Procedure 26(a)(2)(A).
Because Fowers’ supplementation was late, the court, under Federal
Rule of Civil Procedure 37(c)(1), excluded evidence that would support
damages for lost tart-cherry revenue. (Order, ECF No. 138.) This ruling, on
October 30, 2015, significantly affected Fowers’ potential damage award. If
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The court later continued the trial start date to February 1, 2016,
because of an unfortunate injury to one of the Fowers’ close family members.
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Dr. Seeley had overcome the Daubert gatekeeping function, and his testimony
about lost tart-cherry revenue had been admitted, there would have been some
evidence for the jury to find approximately $4 million in damages. Without
evidence about lost tart-cherry revenue, the most the jury could reasonably
award was a little less than $1.3 million.
II.
The January 27 request for clarification
When the court continued the trial date from November 2, 2015, to
February 1, 2016, the court announced that the case was frozen in time and
the court would not receive motions to reconsider prior holdings. On January
27—four days before trial—Steven Paul, a member of Fowers’ counsel,
emailed the court and Bio Tech seeking “clarification from the Court relating
to [Fowers’] ability to put on evidence of damage to the tart cherry orchards.”
(Email from Steven R. Paul to Case Administrator for the Honorable Tena
Campbell (Jan. 27, 2016, 10:18 AM), ECF No. 170-3.) The court held a
hearing that day to address Mr. Paul’s request. At the hearing, Fowers’
counsel essentially asked the court to reconsider prior orders that excluded
evidence about lost tart-cherry revenue. The court affirmed the prior orders.
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III.
Statements made at trial
On February 1, the first day of trial, during Fowers’ opening statement,
Fowers’ counsel told the jury that it would hear evidence that would support
$4 million in damages. This number would necessarily include evidence of
the lost tart-cherry revenues. Fowers’ counsel also elicited testimony from
Lynn Fowers that Bio Tech’s fertilizer program cost Fowers approximately
$4 million. Bio Tech objected to the opening statement and the testimony.
The court sustained the objection and instructed Fowers’ counsel to stop using
the $4 million figure. But they did not stop.
On the last day of trial, Fowers’ counsel began their closing arguments
asking the jury to award $4 million in damages. The court interrupted the
argument, suggested that Mr. Paul had accidentally used some old notes, and
instructed the jury to disregard the $4 million figure. Undeterred, Mr. Paul
again asked for $4 million in the final sentences of his argument.
Once the jury had been excused, the court asked Mr. Paul if he had
used the $4 million figure intentionally. He confirmed that he had. Bio Tech
moved for the court to dismiss the entire lawsuit as a sanction. The court
denied Bio Tech’s motion, but admonished Mr. Paul for his actions. Now Bio
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Tech renews its motion after the entry of judgment on the merits, which
awarded Fowers $732,906.88.
DISCUSSION
I.
Jurisdiction
Fowers, in their opposition memorandum, challenge the court’s
subject-matter jurisdiction over the lawsuit. During trial, the court raised its
own concern about jurisdiction and ultimately concluded that it indeed had
jurisdiction because diversity existed at the commencement of the lawsuit and
citizenship of a trust’s beneficiaries is irrelevant when the trustee is the
litigant. (Mem. Decision & Order, ECF No. 166.)
Fowers cite the recent U.S. Supreme Court decision in Americold
Realty Trust v. Conagra Foods, Inc., 136 S. Ct. 1012 (2016), which was
issued after this court’s Memorandum Decision and Order on jurisdiction.
The Supreme Court’s new decision further supports this court’s initial
conclusion. The Court held that “when a trustee files a lawsuit or is sued in
her own name, her citizenship is all that matters for diversity purposes.” Id. at
1016 (citing Navarro Savings Assn. v. Lee, 446 U.S. 458, 462–66 (1980)).
The Court continued, “For a traditional trust, therefore, there is no need to
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determine its membership, as would be true if the trust, as an entity, were
sued.” Id.
Here, Lynn and Sherryl Fowers sued Bio Tech as trustees of their
traditional trusts. Accordingly, only the trustees’ citizenships matter, and
there is complete diversity between the parties. Lynn and Sherryl Fowers are
citizens of Utah, and they were the only two members of the two Plaintiff
entities. The sole member of Bio Tech is the ASB Trust and its trustee is a
citizen of Nevada. Also, the court retains jurisdiction to sanction conduct,
after the case is resolved on the merits. Tiscareno v. Frasier, No. 2:07-CV00336-CW, 2015 WL 7756064, at *4 (D. Utah Dec. 1, 2015) (citing
Chambers v. NASCO, Inc., 501 U.S. 32, 56 (1991)).
II.
The court’s power to sanction
Courts are inherently vested with the “power to impose silence, respect,
and decorum, in their presence, and submission to their lawful mandates.”
Chambers, 501 U.S. at 43 (quoting Anderson v. Dunn, 19 U.S. (6 Wheat.)
204, 227 (1821)) (internal quotation marks omitted). The power is “to
manage their own affairs so as to achieve the orderly and expeditious
disposition of cases.” Id. (quoting Link v. Wabash R. Co., 370 U.S. 626,
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630–31 (1962)) (internal quotation marks omitted). And this power “must be
exercised with restraint and discretion.” Id. at 44 (citing Roadway Express,
Inc. v. Piper, 447 U.S. 752, 764 (1980)). To act in accordance with that
discretion, a court’s “sanction must be both ‘just’ and ‘related to the particular
“claim” . . . at issue.’” Ehrenhaus v. Reynolds, 965 F.2d 916, 920–21
(10th Cir. 1992) (quoting Ins. Corp. of Ir., LTD v. Compagnie des Bauxites
de Guinee, 456 U.S. 694, 707 (1982)).
Before a court dismisses a lawsuit as a sanction, it “should ordinarily
consider” the five Ehrenhaus factors:
(1) the degree of actual prejudice to the defendant;
(2) the amount of interference with the judicial
process; . . . (3) the culpability of the litigant,
(4) whether the court warned the party in advance
that dismissal of the action would be a likely
sanction for noncompliance; and (5) the efficacy of
lesser sanctions.
Id. at 921 (textual omission in original) (citations omitted) (internal quotation
marks omitted). The court considers these factors in order.
1.
Actual prejudice to the defendant
Bio Tech claims it was unfairly prejudiced by continually being forced
to object to Fowers’ counsel’s attempts to submit excluded evidence and their
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arguments that necessarily relied on that evidence. (Reply Mem. 6–7, ECF
No. 175.) Repeated objections may have prejudiced Bio Tech if the jury
believed that the Fowers were being unfairly silenced. Fowers’ counsel argue
that Bio Tech was not injured because the jury’s final award was the exact
amount that Bio Tech’s expert gave in his testimony, that is $1,172,651.
(Mem. Opp’n 6, ECF No. 172.) Because the jury did not adopt an award
higher than $1.3 million, knowing how much, if any, prejudice Bio Tech
actually suffered is nearly impossible. Although the jury did not find the
Fowers’ counsel’s conduct persuasive enough to award the higher amount,
Bio Tech still was left trying to decide how often to object.
2.
Interference with the judicial process
Fowers’ counsel’s insubordinate arguments and examinations in front
of the jury interfered with the judicial process. The court, on October 30,
2015, had fully considered the question of whether to admit evidence about
lost tart-cherry revenue. Fowers’ counsel’s request for clarification on
January 27 was a veiled attempt to ask the court for reconsideration. At trial,
Fowers’ counsel repeatedly tried to circumvent the court’s order in the
opening and closing arguments and during witness examinations.
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In sidebars, Fowers’ counsel tried to resurrect their arguments that
owners of companies can testify about damages. They try this again in their
opposition memorandum. (See Mem. Opp’n 3 (quoting LifeWise Master
Funding v. Telebank, 374 F.3d 917, 929–30 (10th Cir. 2004)).) Despite the
fact that courts have allowed business owners to testify about lost revenues,
Fowers may not rely on that because they still failed to supplement their
initial disclosures and adequately notify Bio Tech how they planned to prove
damages at trial. Further, if Lynn, Sherryl, or Jerry Fowers intended to give
expert-opinion testimony about damages, Fowers’ counsel should have, but
did not disclose that before the eve of trial. Fed. R. Civ. P. 26(a)(2)(A); see
also LifeWise, 374 F.3d at 930 (“Such . . . matters fail to be rationally based
on [the owner’s] perception, and therefore cannot be admissible as lay
opinion testimony.”); United States v. Peoples, 250 F.3d 630, 641 (8th Cir.
2001) (“What is essentially expert testimony . . . may not be admitted under
the guise of lay opinions. Such a substitution subverts the disclosure and
discovery requirements of Federal Rules of Criminal Procedure 26 and 16 and
the reliability requirements for expert testimony . . . .” (citations omitted)).
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Notwithstanding the clear rule and the court’s ruling, the Fowers’
counsel would not stop arguing the issue. They continue even now. This
continually repeated argument disrupted the judicial process.
3.
Culpability of the litigant
After Mr. Paul asked the jury for $4 million at the very end of his
closing argument, the court asked him if he intentionally used the $4 million
figure. He said that he was acting intentionally. This open insubordination of
the court’s instructions shows that Fowers’ counsel’s prior conduct was
equally culpable.
Bio Tech does not argue that Fowers, the actual parties and litigants,
intentionally encouraged their counsel’s conduct. To dismiss the entire action
and set aside the resolution of the lawsuit on the merits for their counsel’s
conduct would be too heavy of a sanction against the litigants.
4.
In-advance warnings of dismissal
The court never warned Fowers of possibly dismissing the lawsuit as a
sanction. The closest the court came to giving this type of warning was when
Bio Tech moved for dismissal at the end of Fowers’ closing argument. Yet
the court denied that motion.
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5.
Efficacy of lesser sanctions
Sanctions less harsh than complete dismissal would effectively
compensate Bio Tech for Fowers’ counsel’s actions.
ORDER
For these reasons, the court GRANTS in part and DENIES in part Bio
Tech’s Renewed Motion for Sanctions (ECF No. 170). The court sanctions
Fowers’ counsel by requiring them to reimburse Bio Tech for the reasonable
attorneys fees and costs associated with submitting and arguing the current
motion. The court directs Bio Tech to submit, as soon as practicable,
affidavits or declarations, with supporting documentary evidence, that
establish the fees and costs incurred in submitting the current motion and
supporting memoranda.
DATED this 3rd day of August, 2016.
BY THE COURT:
TENA CAMPBELL
U.S. District Court Judge
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