Asserting various state and federal claims arising from alleged trademark infringement, Sacks Holdings, Inc. (the “Plaintiff” or “Sacks”) sued Grin Natural USA Limited, Grin Holdings Limited, Grin Natural US Limited, and Grin Natural Products Limited (collectively, the “Defendants” or “Grin”) for, inter alia, trademark infringement.
In July 2024, Defendants’ counsel contacted Julianne “Juli” Saitz at FTI Consulting, asking her “to take a look at” the instant “trademark infringement dispute,” as well as to “give [defense counsel Saitz’s] thoughts on potential damages.”
At 8:12 p.m. on Wednesday, October 30, 2024, Defendants produced a second expert report from Saitz (the “New Report”) as well as certain documents (the “New Evidence”) that contain “information relied on by Saitz in forming her opinions.”
Plaintiff sought to exclude the New Evidence and strike the New Report. Defendants opposed both Motions.
Accounting Expert Witness
Julianne Saitz has more than 25 years of experience providing forensic accounting and financial and economic analysis to attorneys in litigation and arbitration, as well as private general ledger accounting expertise.
Saitz holds a B.S. from New York University’s Stern School of Business. She is a Certified Public Accountant in New York, is Accredited in Business Valuation and is Certified in Financial Forensics by the American Institute of Certified Public Accountants.
First of all, Defendants failed to establish either harmlessness or substantial justification for their belated production of the New Evidence.
Defendants contended that the New Report qualifies as a “timely and proper” supplementation.
To begin, as Defendants tacitly concede, the Initial Report opines solely on the parties’ sales, whereas the New Report additionally opines on the parties’ profits. Thus, the New Report offers “new opinions” and calculations; it does not merely “offer[] more details on [Saitz’s] prior calculations” or otherwise supplement her prior opinions.
However, Defendants just failed to provide the (basic) information necessary to begin the five-day objection window until August 26, 2024, a delay that extended the objection window beyond the expert report deadline.
“Second,” Defendants maintained, they “created new financial statements after receiving guidance from Saitz on the details of costs and expense information necessary from deduction of sales to determine profits. That effort took until October.” The Court held that this argument does not show good cause for the violation of Rule 26.
The exclusion of the New Evidence independently necessitates exclusion of those portions of the New Report that rely thereon, and the determination that Plaintiff possesses priority rights to the disputed mark lessens the importance of the New Report’s calculation of Plaintiff’s profits to resolution of this action.
This case, filed more than seventeen months ago, goes to trial in less than three months and even Defendants’ proposed alternative sanction would interject further delay into these proceedings.
In sum, the Court held that the Defendants failed to establish good cause for their belated production of the New Report.
Held
The Court granted the Plaintiff’s motion to exclude the New Evidence and strike the New Report.
Key Takeaway:
Rule 26(e) requires a party to “supplement or correct its disclosure or response . . . if the party learns that in some material respect the disclosure or response is incomplete or incorrect.”
Case Details:
Case Caption:
Sacks Holdings, Inc. V. Grin Natural USA Limited Et Al
Docket Number:
1:23cv1058
Court Name:
United States District Court, North Carolina Middle
The CLM Trust is the owner of real property including a home and multiple barns located at 25 Cattle Farm Road in Picayune, Mississippi. At all times relevant, these structures were insured under a homeowner’s policy issued by State Farm Fire and Casualty Company. CLM’s lawsuit arises from alleged damages caused by Tropical Storm Claudette on or about June 19, 2021, and additional damage caused by Hurricane Ida on or about August 29, 2021. State Farm’s estimate of damages to the home totalled $5,505.17, the actual cash value of which falls below the Policy deductible. On March 11, 2024, CLM designated its expert Public Adjuster/Appraiser, Richard Lyon to contest State Farm’s estimate of damages incurred. State Farm filed its motion to strike expert Lyon and supporting memorandum pursuant to Federal Rules of Civil Procedure 26 and 37 and Federal Rules of Evidence 702 and 403.
CLM was required to designate its expert witnesses no later than March 12, 2024. CLM timely filed its expert designation identifying Lyon and incorporating his June 8, 2023, estimate of repair for the home and additional Property structures. In its purported designation, CLM stated “Lyon’s report will be supplemented upon completion.” On June 6, 2024, more than two months after expiration of CLM’s expert designation deadline, CLM filed its motion to supplement expert eeport and amend case management order incorporating Lyon’s written May 30, 2024, expert report. State Farm argued that, not only is Lyon’s original report inadequate, but the supplemental report is an untimely “initial report” and sought to strike Lyon’s opinions for non-compliance with Rule 26.
Insurance Expert Witness
Richard Lyon is a licensed and bonded public insurance adjuster. He the founding member of Gulf Coast Adjusting, and enjoys over 15 years of working in the construction and insurance industries.
Lyon has been continually licensed by the State of Louisiana # 508253 and State of Mississippi # 10180259 and the State of New Jersey #1513282 as a Public Adjuster. He is proficient with insurance industry leading estimating software Xactimate and Xactcontents. Lyon is an admitted expert in the field of Claims Damage Estimating in Federal Court in the Eastern District of Louisiana.
CLM’s initial expert designation included Lyon’s curriculum vitae, compensation rate, previous testimony, photographs, roof reports, and estimates. CLM’s initial designation did not include the basis and reasons for Lyon’s estimates; the facts or data relied upon by Lyon in forming his opinions; or a written, signed report as to Lyon’s expected testimony. The Court held that these documents clearly do not meet requirements of a written report and are deficient pursuant to Rule 26. According to Rule 26, the initial report must be complete and not vague. Moreover, the Court held that Lyon’s estimates, without explanation or opinions, constitute “conclusory unsupported allegations.”
CLM argued that Lyon’s estimates constituted a report because it was to be supplemented at a later date. The Court held that CLM failed to properly designate Lyon as an expert on March 11, 2024. It was not until June 6, 2024, almost three months after CLM’s expert designation deadline, that it provided Lyon’s written May 30, 2024, report.
Substantially Justified or Harmless Factors
CLM argued that even if Lyon’s report was initially inadequate, the inadequacy should be excused as his report would still have to be substantially changed after State Farm provided its Supplemental Disclosures. CLM further argued that because a supplemental report would have been necessary regardless of Lyon’s initial report, any potential error is substantially harmless.
The Court looks to the following factors to determine whether a party’s failure to timely disclose an expert is harmless or substantially justified: “(1) the explanation for the failure to identify the witness; (2) the importance of the testimony; (3) potential prejudice in allowing the testimony; and (4) the availability of a continuance to cure such prejudice.”
The explanation for the failure to identify the witness
The first factor weighed in favor of State Farm. State Farm’s production of critical documents on March 25, 2024, after CLM’s expert designation deadline necessitated the subsequent report. As addressed earlier, Lyon’s “subsequent report” is instead his initial report. CLM failed to state why the initial report was not produced until more than two and a half months after the designation deadline or why Lyon needed this time to review the “critical documents” necessary to author his report. Instead, it appeared to the Court that CLM failed to explain to Lyon his true assignment—to create a report—until well after the designation deadline, uprooting CLM’s argument that Lyon intended to make a report on March 12, 2024.
The Court granted CLM an extension to March 12, 2024, in which to file its expert designation. CLM had ample time to submit Lyon’s initial report in a timely manner. Simply put, CLM was aware that the Rule 26 disclosures were due. It has failed to state why an initial report was not filed prior to the deadline.
Plaintiff asserted that Lyon is absolutely essential to CLM’s claims. While this factor leans in favor of CLM, the Court held that the importance of proposed testimony cannot ‘singularly override the enforcement of local rules and scheduling orders.’ Additionally, the importance of the testimony underscores how critical it is for a Plaintiff to timely designate the expert.
Potential prejudice in allowing the testimony
CLM did not timely designate Lyon. So, Lyon’s untimely report left State Farm without the chance to retain a counter-expert. CLM’s motion for leave to file supplemental expert report on June 6, 2024, was the first time it provided Lyon’s May 30, 2024, supplemental report, more than two months after State Farm’s expert designation deadline had expired. Additionally, this failure left State Farm’s deposition of Lyon at a disadvantage to prepare for trial or anticipate his future testimony. During his May 30, 2024, deposition, Lyon repeatedly could not, or refused to, answer questions regarding his investigation and inspection of the CLM property. Additionally, Lyon testified in his deposition that the June 8, 2023, estimate produced in CLM’s initial expert designation is “no longer relevant.”
The availability of a continuance to cure such prejudice
The ability and opportunity for State Farm to depose Lyon as to his May 30, 2024, report with a continuance still does not solve the prejudice, as “this would obviously result in additional delay and increase the expense of defending this lawsuit.” While CLM offered State Farm “the option to re-depose Lyon at Plaintiff’s expense after submission of the supplemental reports” this offer does not address the likely delay in the case and prejudice to State Farm. Additionally, a continuance would not alleviate the prejudice to State Farm as the discovery and expert deadlines have expired. Absent a rescheduling of deadlines State Farm is unable to retain counter-experts. Granting an extension of those deadlines would require a continuance of the trial, which weighs in favor of the Court striking Lyon’s opinions.
Held
The Court granted State Farm’s motion to strike Plaintiff’s expert Richard Lyon.
Key Takeaways:
Importance of proposed testimony cannot singularly override the enforcement of local rules and scheduling orders.
The ability and opportunity for State Farm to depose Lyon as to his May 30, 2024, report with a continuance still does not solve the prejudice, as “this would obviously result in additional delay and increase the expense of defending this lawsuit.”
The delay of even a few weeks in disclosing expert testimony disrupts the Court’s schedule and the opponent’s preparation and is thus prejudicial.
Case Details:
Case Caption:
Bigelow V. State Farm Fire And Casualty Company
Docket Number:
1:23cv285
Court:
United States District Court for the Southern District of Mississippi, Southern Division
