Brainstorm Interactive, Inc. v. School Specialty, Inc.

Filing 83

ORDER granting in part and denying in part 59 Motion to Strike Brainstorm's Expert Witness Disclosures. Signed by District Judge William M. Conley on 11/10/2014. (voc)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN
BRAINSTORM INTERACTIVE, INC.,

v.

Plaintiff,

OPINION AND ORDER
14-cv-50-wmc

SCHOOL SPECIALTY, INC.,
Defendant.

Before the court is a motion by defendant School Specialty, Inc. to strike four out
of five experts named by plaintiff Brainstorm Interactive, Inc., for failing to provide
written reports as required by Federal Rule of Civil Procedure 26(a)(2)(B). 1 (Dkt. #59.)
In response, Brainstorm argues that these four experts were exempt from any obligation
to produce a written report because they have not and will not be paid and, therefore, are
not “retained” experts within the scope of Rule 26(a)(2). (Pl.’s Opp’n (dkt. #73).) For
the reasons that follow, the court will grant in part and deny in part School Specialty’s
motion.

BACKGROUND
Plaintiff served its Rule 26(a)(2) expert disclosures on Friday, September 19,
2014. The four-page disclosure identifies five, individual experts: David Zasada, Mike
Kroening, Brad Lindaas, Dan Saldkus, and Robert Williams. (Declaration of Jennifer L.
Gregor (“Gregor Decl.”), Ex. A (dkt. #60-1) p.2.) The report provides a “summary of
1

As explained below, the fifth expert is David Zasada, Brainstorm’s principal, and the
parties agree that Zasada need not provide a written report as required under Rule
26(a)(2)(B).

facts and opinions,” all relating to damages to which all five experts will provide
testimony. (Id. at pp.2-5.) Attached to the report are two “quotes” from Williams and a
proposal for the production of an interactive quiz game from Saldkus. (Id. at pp.6-14.)
Among other things, Rule 26(a)(2)(B) requires a party to provide a timely,
detailed written report “if the witness is one retained or specially employed to provide
expert testimony in the case or one whose duties as the party’s employee regularly
involve giving expert testimony.” In particular, the report “must contain”:
(i) a complete statement of all opinions the witness will
express and the basis and reasons for them;
(ii) the facts or data considered by the witness in forming
them;
(iii) any exhibits that will be used to summarize or support
them;
(iv) the witness's qualifications, including a list of all
publications authored in the previous 10 years;
(v) a list of all other cases in which, during the previous 4
years, the witness testified as an expert at trial or by
deposition; and
(vi) a statement of the compensation to be paid for the study
and testimony in the case.
Fed. R. Civ. P. 26(a)(2)(B). In contrast, “if the witness is not required to provide a
written report,” the party need only disclose:
(i) the subject matter on which the witness is expected to
present evidence under Federal Rule of Evidence 702, 703, or
705; and
(ii) a summary of the facts and opinions to which the witness
is expected to testify.

2

Fed. R. Civ. P. 26(a)(2)(C). The requirements of both Rule 26(a)(2)(B) and (C) are
mandatory. See Davis v. Delap, No. 10-cv-674, slip op. at 2 (W.D. Wis. Oct. 3, 2011)
(dkt. #58) (“A party does not get to pick and choose between the requirements of Rule
26(a)(2)(B) and Rule 26(a)(2)(C) based on what is convenient to him. If plaintiff has
engaged the services of an expert, then plaintiff must not only disclosure the name of his
expert, he also must provide the defendants with a written report prepared by the expert
witness and signed by the expert witness.”).
While plaintiff’s September 19, 2014, submission satisfies the disclosure
requirements for those experts who need not file a report under Rule 26(a)(2)(C), it
plainly fails on several grounds to meet the more rigorous report requirements laid out in
Rule 26(a)(2)(B).

Plaintiff contends that all four, non-employee expert witnesses in

dispute were exempt from Rule 26(a)(2)(B) because those witnesses have not and will
not be paid, and therefore are not “retained.” In support of that position, plaintiff points
to dictionaries that define “retain” as “to keep in one’s pay or service.” (Pl.’s Opp’n (dkt.
#73) p.2 n.1.) Plaintiff argues that Kroening, Lindaas, Saldkus and Williams do not
meet this definition since all are volunteering their services to plaintiff. 2

2

While the experts agreed to testify without compensation (at least from plaintiff),
Saldkus and Williams both acknowledged at their depositions that they are hopeful that
they will be awarded projects if Brainstorm is successful in the litigation. (Def.’s Reply
(dkt. #79) 3.) Despite this further concession, the court will analyze plaintiff’s
disclosure obligations as if no compensation will occur.
3

OPINION
I. Disclosure Requirement
Plaintiff’s reading of the requirements of Rule 26(a)(2)(B) is curious on a number
of levels. Even under dictionary definitions, one may be retained for “pay or service.”
(Pl.’s

Opp’n

(dkt.

#73)

2

(citing

Merriam-Webster,

“retain,”

available

at

http://www.merriam-webster.com/dictionary/retain) (emphasis added).) Here, there is no
dispute that each of the witnesses have agreed to provide ongoing service. (Declaration
of David Zasada (dkt. #74) ¶ 4 (stating that each expert has agreed “to provide
testimony for Brainstorm voluntarily”).)
More fundamentally, however, plaintiff’s reading runs counter to all cases
considering whether the report requirement turns on whether an expert is paid for his or
her services, including cases considering it after the 2010 amendment. 3 Consistent with
these cases, “retained or specially employed” includes experts who were recruited to
testify without the promise of monetary compensation.

See, e.g., Innogenetics, N.V. v.

Abbott Labs., 578 F. Supp. 2d 1079, 1089 (W.D. Wis. 2007), reversed on other grounds, 512
F.3d 1363 (Fed. Cir. 2008) (rejecting argument that expert need not provide written
report because he was not compensated for his work); Beane v. Utility Trailer Mgs. Co.,
No. 2:10 CV 781, 2013 WL 1344763, at *4 (W.D. La. Feb. 25, 2013) (concluding
plaintiff misread Rule 26(a)(2)(C) in asserting that she need not provide reports because

3

Plaintiff attempts to discredit some of the cases cited by defendant as pre-dating the
2010 Amendment. (Pl.’s Opp’n (dkt. #73) 2.) Critically, the 2010 Amendment did not
add the written report requirement; rather, that amendment clarified the necessary
disclosure for those experts not required to submit a written report.
4

the experts were not “actually hired or retained”); see generally 6 James Wm. Moore,
Moore’s Federal Practice § 26.23[2][a][i] (“[C]ourts have ruled that a party is not exempt
from the disclosure and report requirement for a witness who will give expert testimony
simply because the witness is not monetarily compensation.

It is the nature of the

testimony rather than the compensation that determines whether a witness is exempt
from the disclosure and report requirements.”).
The reason for the written report requirement was perhaps best explained by Judge
Crabb in Innogenetics when presented with the same argument as plaintiff asserts here,
[t]he purpose of Rule 26 is to make discovery easier, faster
and more efficient, as well as to avoid surprises at trial. It
does not advance this purpose to withhold the kind of report
that opposing counsel needs in order to conduct an informed
deposition or cross examination of a witness, even if the
witness is willing to testify without charge for reasons of his
own.
578 F. Supp. 2d at 1089.
Stated another way, the report requirement does not turn on whether the expert
agrees to offer his or her services without compensation, at least monetary compensation;
rather, the application of Rule 26(a)(2)(B) depends on the expert’s relationship to the
issues in the lawsuit and whether his or her relationship developed prior to the
commencement of the lawsuit. For example, Rule 26 does not require reports for experts,
often treating physicians, who have an “incidental relationship with the facts.”

See

CMFG Life Ins. Co. v. RBS Securities, Inc., No. 12-cv-037-wmc, 2013 WL 4483068, at *20

5

(W.D. Wis. Aug. 19, 2013); 4 Downey v. Bob’s Discount Furniture Holdings, Inc., 633 F.3d 1,
7 (1st Cir. 2011) (“Interpreting the words ‘retained or specially employed’ in a commonsense manner, consistent with their plain meaning, we conclude that as long as an expert
was not retained or specially employed in connection with the litigation, and his opinion
about causation is premised on personal knowledge and observations made in the course
of treatment, no report is required under the terms of Rule 26(a)(2)(B).”).
Even the case cited by plaintiff in support of its definition of “retained” links the
Rule 26(a)(2)(B) report requirement to the proposed expert witness’s development of
testimony independent of the litigation. (Pl.’s Opp’n (dkt. #73) 4 (citing B.H. ex rel.
Holder v. Gold Fields Mining Corp., No. 04-CV-0564-CVE-PJC, 2007 WL 128224, *1
(N.D. Okla. Jan. 11, 2007).) In B.H. ex rel. Holder, the court concluded that the expert
need not provide a Rule 26(a)(2)(B) report because he was not “called to give any
opinion outside of the scope of scientific research he has already conducted
independently of this litigation.” Id. at *1. While the court acknowledged that “evidence
that a party was not paid to testify suggests he was not retained, this fact alone is not
dispositive of the issue.” Id. at *3. Instead, the “key factor” is “how plaintiffs’ counsel

4

In CMFG, this court also noted the burden on experts of complying with Rule
26(a)(2)(B) report, but noted that the burden is “considerably lessened when the expert
has agreed to be retained and to be paid for his or her time.” CMFG, 2013 WL
4483068, at *21. The court made this statement with the understanding that most
retained experts are paid for their services. Here, it is not clear what arrangement
plaintiff made in securing these experts. To the extent, plaintiff’s counsel assured these
four experts that their duties would be limited to testifying at trial, that advice was shortsighted at best.
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initially formed a relationship with the witness, such as whether the witness was asked to
reach an opinion in connection with specific litigation.” Id.
Even under this generous definition, here, except for a few topics of proposed
testimony by Williams and Saldkus which appear to involve knowledge separate from
this litigation, these four experts are “retained” within the meaning of Rule 26(a)(2)(B).
As such, plaintiff was required to provide a report in full compliance with Rule
26(a)(2)(B) for all of Kroening’s and Lindaas’ testimony and most aspects of that of
Saldkus’s and Williams’.

II.

Appropriate Sanction under Rule 37
Accordingly, the court must consider whether the appropriate sanction is striking

those disclosures as defendant requests. A party who fails to comply with Rule 26(a)(2)
is generally not allowed to introduce the expert witness’s testimony as “evidence on a
motion, at a hearing, or at a trial.” See Fed. R. Civ. P. 37(c)(1). The exclusion of the
witness’s testimony is “automatic and mandatory” unless the offending party can
establish that the violation of Rule 26 was either “justified or harmless.” Keach v. U.S.
Trust Co., 419 F.3d 626, 639 (7th Cir. 2005) (quoting David v. Caterpillar, Inc., 324 F.3d
851, 857 (7th Cir. 2003)). In addition to excluding the report, the court may also: (1)
“order payment of the reasonable expenses, including attorney’s fees, caused by the
failure;” (2) “inform the jury of the party’s failure;” and (3) “impose other sanctions”
described in Rule 37. Fed. R. Civ. P. 37(c)(1).

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Plaintiff argues that its position was justified in light of the limited case law on the
issue and the fact that courts have not grappled specifically with the meaning of
“retained” outside of the context of treating physicians. While the case law on whether a
Rule 26(a)(2)(B) report is required may be somewhat limited, all of the cases cited by the
parties are consistent in defining the critical factor as the expert’s relationship with the
litigation, not whether the expert receives compensation. Moreover, none of the cases
cited by this court above considered whether a lack of monetary compensation shielded a
treating physician from providing a report. See Innogenetics, N.V., 578 F. Supp. 2d at
1089 (striking expert testimony of patent applicant); Beane, 2013 WL 1344763 at *1
n.5, *4 (striking testimony of nine witnesses, none of whom were treating physicians).
Within a few days of receiving plaintiff’s expert disclosures, defendant alerted
plaintiff of its obligations to provide expert reports. (Gregor Aff., Exs. B, D (dkt. ##602, 60-4).) Still, plaintiff utterly refused to comply or to seek guidance from this court.
(Gregor Aff., Exs. C, G (dkt. ##60-3, 60-6.)

Such an aggressive position has

consequences. In the face of this record and the case law uniformly rejecting plaintiff’s
position, the court cannot conclude that plaintiff’s position was justified.
A district court may exercise its considerable discretion in determining whether an
untimely disclosure of expert testimony was harmless, but should consider the following
four factors: (1) the prejudice or surprise to the party against whom the evidence is
offered; (2) the ability of the party to cure the prejudice; (3) the likelihood of disruption
to the trial; and (4) the bad faith or willfulness involved in not disclosing the evidence at
an earlier date. David, 324 F.3d at 857. While defendant was prejudiced by plaintiff’s
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failure to provide reports as required under Rule 26(a)(2)(B), that prejudice (at least in
terms of preparing for trial) was largely ameliorated by defendant’s decision to depose all
four of the experts in dispute, all of which have now been concluded. Moreover, while
plaintiff’s position was too clever by half, the court does not find bad faith on the part of
plaintiff or its counsel.
The court will not strike plaintiff’s expert disclosure in light of these findings, but
it will require plaintiff to compensate defendant for its reasonable attorney’s fees and
costs of deposing the four experts, including those fees defendant agreed to pay the
experts for their time in being deposed. All of those costs may have been avoided had
defendant been able to rely on the witnesses’ expert opinions and their foundation as set
forth in written reports. 5 For those four experts, the testimony at trial will also be limited
to those topics described in the 4-page September 19, 2014, disclosure and for which the
expert provided testimony during his deposition.
If plaintiff finds these sanctions too steep with respect to one or more of its
experts, plaintiff may withdraw its expert disclosure for Kroening and/or Lindaas or file
an amended disclosure for Saldkus and/or Williams limited to the topic or topics for
which these two experts acquired knowledge independent of this lawsuit, and deduct the
cost of that expert’s deposition from the amount to be paid to defendant. Regardless of
which option plaintiff takes, the court also awards defendant its reasonable attorney’s
fees and costs in bringing this motion to strike.
5

Of course, it is possible that defendant may have felt obliged to take one or more of these
depositions even with the expert reports, but any uncertainty results from plaintiff’s
failure. Accordingly, plaintiff will bear the cost.
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ORDER
IT IS ORDERED that:
1) defendant School Specialty, Inc.’s motion to strike plaintiff’s expert witness
disclosures (dkt. #59) is GRANTED IN PART AND DENIED IN PART as
described above;
2) by November 17, 2014, plaintiff shall file a letter with the court indicating
which of the two options described above it takes; and
3) by December 1, 2014, defendant shall submit its request for fees and costs
associated with the four depositions (if applicable) and in bringing this motion
to strike; plaintiff may have until December 15, 2014, to file any response to
that request.
Entered this 10th day of November, 2014.
BY THE COURT:

/s/
__________________________________
WILLIAM M. CONLEY
District Judge

10