US Magnesium v. PVS Chloralkali

Filing 118

MEMORANDUM DECISION - unsealed version of order 108 granting in part and denying in part 94 Motion in Limine. (previously terminated). Original version has been unsealed as well. Signed by Judge Jill N. Parrish on 2/7/22. (alf)

FILED
Case 2:16-cv-01021-JNP-DBP Document 118 Filed 02/24/22 PageID.2986 Page 1 of 10
2022 FEB 24 AM 11:00
CLERK
U.S. DISTRICT COURT

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH
US MAGNESIUM, LLC,
MEMORANDUM DECISION AND
ORDER GRANTING MOTION IN
LIMINE TO EXCLUDE PVS TRIAL
EXHIBITS 280 AND 281 AND DENYING
AS MOOT MOTION IN LIMINE TO
EXCLUDE PVS TRIAL EXHIBIT 282

Plaintiff,
v.
PVS CHLORALKALI, INC.,
Defendant.

Case No. 2:16-cv-1021-JNP-DBP
District Judge Jill N. Parrish
Before the court is Plaintiff US Magnesium, LLC’s (“US Mag”) motion in limine to
exclude Defendant PVS Chloralkali, Inc.’s (“PVS”) trial Exhibits 280, 281, and 282. Oral
argument on the motion was held on February 3, 2022. For the reasons presented herein, US Mag’s
motion is GRANTED with respect to Exhibits 280 and 281 and DENIED AS MOOT with respect
to Exhibit 282.
BACKGROUND
US Mag filed suit against PVS on September 30, 2016. US Mag and PVS subsequently
stipulated to a scheduling order to govern discovery in this dispute. The scheduling order provided
that the final date for the parties to supplement their disclosures and discovery under Federal Rule
of Civil Procedure 26(e) would be January 26, 2018; that fact discovery would close on July 6,
2018; and that expert discovery would close on October 8, 2018. ECF No. 37.
During the course of fact discovery, US Mag requested that PVS produce “[a]ll documents
constituting, referring, or relating to any contracts between PVS and any third party pursuant to
which PVS purchased, sold, and/or transferred HCl from June 1, 2015 to the present.” ECF No.
1

Case 2:16-cv-01021-JNP-DBP Document 118 Filed 02/24/22 PageID.2987 Page 2 of 10

30-2 at 19. PVS objected to the request and did not produce its contracts with third parties. US
Mag subsequently moved to compel PVS to produce the contracts and related documents. PVS
opposed the motion, and the magistrate judge to whom the motion was referred denied it. ECF No.
34. As a result, PVS did not disclose any of its third-party contracts to US Mag during the fact
discovery period. However, PVS did disclose selected third-party contracts to US Mag on January
20, 2022, after US Mag filed the instant motion.
During the course of expert discovery, PVS disclosed Jeffrey Stein, who was previously
the president of PVS, as its sole expert witness. The disclosure provided, in pertinent part, that:
The subject matter on which Mr. Stein is expected to present evidence under Rules
702, 703, and 705 of the Federal Rules of Evidence includes the market conditions
for the sale and resale of hydrochloric acid between the years 2015 and 2017. It is
anticipated that Mr. Stein will testify that, at various times between 2015 and 2017,
the market prices for HCl in the United States made it cost prohibitive for PVS to
purchase HCl from US Magnesium, LLC (“USMAG”) at the prices at which
USMAG offered to sell HCl to PVS. Mr. Stein’s testimony is supported by the data
listed in Attachment 1, the source for which is Global Chlor-Alkali Report—
Monthly Market Summary (published by IHS Markit).
ECF No. 45. PVS did not disclose any expert witness who would opine on US Mag’s lost profits.
In advance of trial, PVS disclosed its proposed trial Exhibits 280, 281, and 282 to US Mag.
Exhibits 280 and 281 are spreadsheets titled “Analysis of US Magnesium’s Lost Profits (Assume
1 Employee Runs Plant)” and “Analysis of US Magnesium’s Lost Profits (Assume 4 Employees
Run Plant),” respectively. ECF No. 96-1, 2. The spreadsheets present various calculations, such as
“Railcar Cost Analysis” and “Calculation of Profits Lost by Not Selling Additional 60 Railcars.”
Id. Exhibits 280 and 281 do not identify who conducted the calculations or any source establishing
the calculations as a valid means of calculating lost profits.
Exhibit 282 presents two tables titled “HCl Purchases by PVS Chloralkali, Inc. (June 1,
2015 thru December 31, 2017)” and “HCl Sales by PVS Chloralkali, Inc. (June 1, 2015 thru

2

Case 2:16-cv-01021-JNP-DBP Document 118 Filed 02/24/22 PageID.2988 Page 3 of 10

December 31, 2017).” ECF No. 96-3. The former table includes columns for “Supplier,”
“Location,” “Long-Term Contract (C) or Spot Purchase(s) (S),” “Type of HCl,” and “Comments,”
and the latter table includes the same columns except that “Supplier” is replaced with “Ship To.”
Id. The tables present information regarding the content of PVS’s contracts with third-parties.
US Mag moves to exclude Exhibits 280, 281, and 282 from trial.
LEGAL STANDARD
Under Federal Rule of Civil Procedure 26(a), “a party must, without awaiting a discovery
request, provide to the other parties . . . a copy—or a description by category and location—of all
documents, electronically stored information, and tangible things that the disclosing party has in
its possession, custody, or control and may use to support its claims or defenses, unless the use
would be solely for impeachment,” as well as “the identity of any witness it may use at trial to
present evidence under Federal Rule of Evidence 702, 703, or 705.” See FED. R. CIV. P.
26(a)(1)(A)(ii), (2)(A). Moreover, “[a] party who has made a disclosure under Rule 26(a)—or who
has responded to an interrogatory, request for production, or request for admission—must
supplement or correct its disclosure or response . . . in a timely manner if the party learns that in
some material respect the disclosure or response is incomplete or incorrect.” FED. R. CIV. P.
26(e)(1)(A).
“If 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.” FED. R. CIV. P.
37(c)(1). “The [c]ourt considers the following factors to determine whether the failure to timely
disclose or supplement was substantially justified or is harmless under Rule 37(c)(1): ‘(1) the
prejudice or surprise to the party against whom the testimony or evidence is offered; (2) the ability

3

Case 2:16-cv-01021-JNP-DBP Document 118 Filed 02/24/22 PageID.2989 Page 4 of 10

of the party to cure the prejudice; (3) the extent to which introducing such testimony or evidence
would disrupt the trial; and (4) the moving party’s bad faith or willfulness.’” Clark v. Wilkin, No.
2:06-cv-693-TS, 2008 U.S. Dist. LEXIS 45962, at *5 (D. Utah June 10, 2008) (quoting
Woodworker’s Supply, Inc. v. Principal Mut. Life Ins., 170 F.3d 985, 993 (10th Cir. 1999))
(alterations omitted). “The burden to establish harmlessness is on the party who failed to make the
required disclosure.” Sowsonicut v. Roosevelt City, No. 2:03-cv-676-DB, 2005 U.S. Dist. LEXIS
55919, at *16–17 (D. Utah Mar. 29, 2005) (citation omitted).
ANALYSIS
US Mag moves to preclude PVS from offering Exhibits 280, 281, and 282 into evidence at
trial. US Mag argues that Exhibits 280 and 281 should be excluded because they contain expert
opinions from an undisclosed expert. US Mag further argues that Exhibit 282 should be excluded
because it contains “cherry-picked” information from contracts that PVS failed to disclose during
discovery. The court considers each argument in turn.
I.

Exhibits 280 and 281
Exhibits 280 and 281 are spreadsheets titled “Analysis of US Magnesium’s Lost Profits

(Assume 1 Employee Runs Plant)” and “Analysis of US Magnesium’s Lost Profits (Assume 4
Employees Run Plant),” respectively. US Mag contends that “these documents show someone’s
opinion about US Mag’s ‘lost profits’ under various hypothetical scenarios” and that “[t]he
‘someone’ who rendered these opinions has never been identified as an expert in this case pursuant
to the disclosure requirements of [R]ule 26.” ECF No. 96 at 10. Because “no expert was disclosed
[who] could testify regarding the exhibits,” US Mag asserts that the “exhibits should be excluded.”
Id.

4

Case 2:16-cv-01021-JNP-DBP Document 118 Filed 02/24/22 PageID.2990 Page 5 of 10

PVS responds that the “analysis in Exhibits 280 and 281 is based on information produced
during discovery in this case” and that, although the exhibits include calculations, “[t]hey merely
represent basic mathematical analysis any lay person could conduct of the facts already produced
and presented by the parties.” ECF No. 100 at 3–4. PVS argues that, “[t]herefore, these exhibits
do not require expert designation for admission.” Id. at 4. PVS further argues that, even if the court
determines that the exhibits require expert testimony, they still should not “be excluded pretrial,
because PVS should have the opportunity to lay any missing foundation for these exhibits through
Jeff Stein, PVS’s disclosed/non-retained expert.” Id. At oral argument, PVS similarly contended
that the foundation for the exhibits could be laid through David Nicholson, PVS’s CEO of
Manufacturing, who PVS disclosed as a fact witness in this case. The court disagrees and excludes
Exhibits 280 and 281.
“Federal Rule of Evidence 701 sets the boundaries for lay-witness testimony: it must be
‘(a) rationally based on the witness’s perception; (b) helpful to clearly understanding the witness’s
testimony or to determining a fact in issue; and (c) not based on scientific, technical, or other
specialized knowledge.’” United States v. Brown, 654 F. App’x 896, 902 (10th Cir. 2016)
(unpublished) (quoting FED. R. EVID. 701). Within the Tenth Circuit, courts
consider four factors in determining whether the testimony at issue is lay witness
testimony or is, in fact, expert testimony offered as lay testimony. First, [courts]
consider whether the testimony meets the requirements of Rule 701 set forth above.
Second, [courts] consider whether the testimony was based on professional
experience. Lay witness testimony can rely on “a limited amount of expertise,” so
long as the “opinions or inferences . . . could be reached by any ordinary person.”
A witness who possesses “scientific, technical or other specialized knowledge” can
testify as a lay witness so long as the testimony is not based on such knowledge. . . .
Third, [courts] consider whether the expert relied on “a technical report by an
outside expert.” Finally, [courts] consider how the Federal Rules of Evidence
generally classify the testimony at issue.
Id. at 903 (internal citations omitted).

5

Case 2:16-cv-01021-JNP-DBP Document 118 Filed 02/24/22 PageID.2991 Page 6 of 10

Here, expert testimony is required to introduce Exhibits 180 and 181. Although much of
the data presented in Exhibits 180 and 181 may have come from US Mag’s discovery disclosures,
and although the mathematical operations underlying the calculations may be relatively simple
(e.g., multiplication, subtraction, and addition), the formula presented in the exhibits, the
determination of which data to input into the formula, and the assumptions included in the
calculations are all based on “specialized knowledge.” See FED. R. EVID. 701. Indeed, it would be
beyond the common knowledge of “any ordinary person” to conduct the railcar cost analysis and
calculation of profits lost by not selling an additional 60 railcars, along with most—if not all—of
the other calculations presented in the exhibits. See Brown, 654 F. App’x at 903 (citation omitted).
Because the calculations presented in the exhibits are based on specialized knowledge, the exhibits
may only be introduced through expert testimony. See FED. R. EVID. 701; see also United States v.
Yeley-Davis, 632 F.3d 673, 684 (10th Cir. 2011) (“[T]he distinction between lay and expert
testimony is that lay testimony results from a process of reasoning familiar in everyday life, while
expert testimony results from a process of reasoning which can be mastered only by specialists in
the field.” (citation omitted)); Curtis v. Okla. City Pub. Sch. Bd. of Educ., 147 F.3d 1200, 1218–19
(10th Cir. 1998) (“Expert testimony is appropriate when it relates to issues that are beyond the ken
of people of ordinary intelligence.” (citation omitted)).
Thus, the court considers whether PVS may introduce the exhibits through the testimony
of its expert, Jeff Stein.1 During expert discovery, PVS disclosed Stein as a non-retained expert.
PVS’s disclosure, in pertinent part, provided the following:

Because PVS did not disclose Nicholson as an expert witness—and did not produce a written
report by Nicholson or a disclosure summarizing “the facts and opinions to which [Nicholson] is
expected to testify,” see FED. R. CIV. P. 26(a)(2)(A)–(C)—PVS may not introduce expert testimony
through Nicholson at trial. See FED. R. CIV. P. 37(c)(1).
1

6

Case 2:16-cv-01021-JNP-DBP Document 118 Filed 02/24/22 PageID.2992 Page 7 of 10

The subject matter on which Mr. Stein is expected to present evidence under Rules
702, 703, and 705 of the Federal Rules of Evidence includes the market conditions
for the sale and resale of hydrochloric acid between the years 2015 and 2017. It is
anticipated that Mr. Stein will testify that, at various times between 2015 and 2017,
the market prices for HCl in the United States made it cost prohibitive for PVS to
purchase HCl from US Magnesium, LLC (“USMAG”) at the prices at which
USMAG offered to sell HCl to PVS. Mr. Stein’s testimony is supported by the data
listed in Attachment 1, the source for which is Global Chlor-Alkali Report—
Monthly Market Summary (published by IHS Markit).
ECF No. 45.
Under Federal Rule of Civil Procedure 26(a)(2)(C), a nonretained expert must disclose “the
subject matter on which the witness is expected to present evidence under Federal Rule of
Evidence 702, 703, or 705; and . . . a summary of the facts and opinions to which the witness is
expected to testify.” Here, PVS did not disclose that Stein would opine on US Mag’s lost profits,
or on the appropriate way to calculate a company’s lost profits. If PVS intended for Stein to provide
expert testimony on such issues, it was required to disclose that information under Federal Rule of
Civil Procedure 26(a)(2)(C). Because PVS failed to make such a disclosure, Stein may not provide
such testimony at trial, unless PVS’s failure “was substantially justified or is harmless.” See FED.
R. CIV. P. 37(c)(1). Although it is PVS’s burden to establish that its failure was substantially

Moreover, PVS’s Rule 26(a)(1)(A)(i) disclosure for Nicholson provided that Nicholson
would potentially provide testimony regarding:
The parties’ respective negotiation of, and performance under, the Contracts;
communications between the parties; USMAG’s acceptance and use of the
Subleased Railcars; USMAG’s claimed affirmative defenses to liability for
payment for the Subleased Railcars; the parties’ separate handling of, and
accounting for, transactions under the Commercial Agreement, the Sales
Agreement, the ARL Railcar Sublease, the GATX Railcar Sublease and the UTLX
Railcar Sublease; contractual agreements; contractual defenses; waiver; and other
relevant information that may be discovered during the course of discovery.
ECF No. 105 at 4. PVS did not disclose that Nicholson would potentially provide testimony
regarding US Mag’s lost profits. Accordingly, PVS may not introduce Exhibits 180 and 181
through Nicholson.
7

Case 2:16-cv-01021-JNP-DBP Document 118 Filed 02/24/22 PageID.2993 Page 8 of 10

justified or harmless, it has not provided any argument or evidence that would support such a
conclusion. See Sowsonicut, 2005 U.S. Dist. LEXIS 55919, at *16-17. And, in fact, the court
concludes that PVS’s failure was neither substantially justified nor harmless. Specifically, although
there does not appear to be any evidence that PVS’s failure to disclose Stein’s testimony on US
Mag’s lost profits was the result of bad faith or willfulness, US Mag would be significantly
prejudiced by Stein’s testimony because US Mag has had no opportunity to depose Stein regarding
the damages analyses reflected in Exhibits 280 and 281 or to retain an expert to rebut Stein’s
testimony.2 Such prejudice could only be cured by providing US Mag with the opportunity to retain
such an expert and to potentially depose Stein regarding such opinions, but that would substantially
delay and disrupt trial, which is scheduled to begin in approximately one week. Therefore, PVS’s
failure is neither substantially justified nor harmless.
The court further notes that Federal Rule of Evidence 702 “imposes a gatekeeping function
on district courts to ensure expert testimony is admitted only if it is relevant and reliable.” Etherton
v. Owners Ins. Co., 829 F.3d 1209, 1217 (10th Cir. 2016). Under Rule 702, expert testimony is
admissible only if “the testimony is the product of reliable principles and methods [and] . . . the
expert has reliably applied the principles and methods to the facts of the case.” FED. R. EVID. 702.
“The proponent of expert testimony bears the burden of showing that the testimony is admissible.”
Conroy v. Vilsack, 707 F.3d 1163, 1168 (10th Cir. 2013). Thus, an additional ground for excluding
Stein’s testimony regarding the exhibits is that PVS has provided no evidence that the damages
calculations presented in the exhibits are reliable. See id.; FED. R. EVID. 702. Therefore, expert
testimony regarding such damages calculations is inadmissible.

2

Expert discovery concluded on October 8, 2018. ECF No. 37 at 3.
8

Case 2:16-cv-01021-JNP-DBP Document 118 Filed 02/24/22 PageID.2994 Page 9 of 10

Because PVS has no expert witness through whom Exhibits 180 and 181 can be introduced,
the court grants US Mag’s motion and excludes those exhibits from trial. See United States v.
Quintana, 466 F. App’x 533, 536 (6th Cir. 2012) (unpublished) (“To be admissible, a summary
exhibit ‘must be accurate and nonprejudicial’ and ‘properly introduced through the testimony of a
witness who supervised its preparation.” (emphasis added and citation omitted)).
II.

Exhibit 282
Exhibit 282 consists of two tables that provide information regarding PVS’s purchases and

sales of HCl between June 1, 2015 and December 31, 2017. US Mag argues, in part, that Exhibit
282 should be excluded because it “appears to present a cherry-picked summary of certain
contractual obligations that PVS purports to have had to various producers and customers,” and
PVS did not disclose the underlying contracts—“and in fact vigorously opposed US Mag’s Motion
to Compel addressing those very documents”—during discovery, in violation of Federal Rule of
Civil Procedure 26(a). ECF No. 96 at 8.
Following oral argument, PVS withdrew Exhibit 282. The court therefore denies as moot
US Mag’s motion to exclude Exhibit 282.
III.

Additional Issue Raised at Oral Argument
Before oral argument, the parties submitted trial briefs that included the parties’ anticipated

trial witnesses and the topics to which each witness is anticipated to testify. At oral argument, US
Mag objected that some of the anticipated testimony that PVS disclosed in its trial brief for
witnesses Stein and Nicholson falls outside of PVS’s Rule 26 disclosures for those witnesses and,
therefore, should be excluded. The court defers ruling on these objections until trial. To the extent
that Stein’s and Nicholson’s testimony at trial falls within the broad categories of testimony that
PVS disclosed to US Mag pursuant to Federal Rule of Civil Procedure 26(a)(1)(A)(i), the court

9

Case 2:16-cv-01021-JNP-DBP Document 118 Filed 02/24/22 PageID.2995 Page 10 of 10

will allow the testimony. However, if, at trial, US Mag believes that Stein or Nicholson is providing
testimony that is not encompassed by those broad categories, US Mag may raise an objection and
the court will consider the objection at that time.
CONCLUSION AND ORDER
For the foregoing reasons, US Mag’s motion to exclude Exhibits 280 and 281 is
GRANTED and its motion to exclude Exhibit 282 is DENIED AS MOOT.
DATED February 7, 2022.
BY THE COURT

______________________________
Jill N. Parrish
United States District Court Judge

10