December 17, 2013
ZEST IP HOLDINGS, LLC, et al., Plaintiffs,
IMPLANT DIRECT MFG., LLC, et al., Defendants.
ORDER GRANTING MOTION TO STRIKE THE JOINT EXPERT REPORT OF SCOTT D. HAMPTON AND BRUCE G. SILVERMAN PURSUANT TO RULE 37(c)
WILLIAM V. GALLO, Magistrate Judge.
Plaintiffs Zest IP Holdings ("Plaintiffs") have made a Motion To Strike The Joint Expert Report Of Scott D. Hampton And Bruce G. Silverman Pursuant To Rule 37(c) ("Motion"). Defendants Implant Direct Mfg. ("Defendants") have filed an Opposition to the Motion. Plaintiffs have filed a Reply to Defendants' Opposition. The Court, having reviewed the moving, opposition, reply papers, the record in this case, and GOOD CAUSE APPEARING, HEREBY GRANTS Plaintiff's Motion.
On February 9, 2011, the Court issued a Case Management Conference Order Regulating Discovery And Other Pretrial Proceedings ("Feb. 9, 2011 Order"). The Feb. 9, 2011 Order states, inter alia:
On or before December 15, 2011, all parties shall exchange with all other parties a list of all expert witnesses expected to be called at trial... On or before December 29, 2011, any party may supplement its designation so long as that party has not previously retained an expert to testify on that subject. (Feb. 9, 2011 Order, at 7).
On December 15, 2011, Plaintiffs designated Susan McDonald. Ph.D. ("McDonald") to testify as an expert witness regarding their claims of trademark infringement in this case.
On December 29, 2011, Defendants designated Hal Poret ("Poret") to testify as an expert witness regarding Plaintiffs' claims of trademark infringement in this case.
On December 19, 2012, the Court issued a Sixth Amended Case Management Conference Order Regulating Discovery And Other Pretrial Proceedings ("Sixth Amd. CMC Order"), which states inter alia:
Each expert witness designated by a party shall prepare a written report to be provided to all other parties no later than January 22, 2013, containing the information required by Fed.R.Civ.P. 26(a)(2)(A) and (B).... Any party that fails to make these disclosures shall not, absent substantial justification be permitted to use evidence or testimony not disclosed at any hearing or at the time of trial. In addition, the Court may impose sanctions as permitted by Fed.R.Civ.P. 37(c).
Any party... shall in accordance with Fed.R.Civ.P. 26(a)(2)(C) and Fed.R.Civ.P. 26(e), supplement any of its expert reports regarding evidence intended solely to contradict or rebut evidence on the same subject matter identified in an expert report submitted by another party. Any such supplemental reports are due on February 11, 2013. (Sixth Amended Case Management Conference Order Regulating Discovery And Other Pretrial Proceedings, at 2)(emphasis in original).
On February 7 and 13, 2013, Defendants requested that Plaintiffs agree to extend the dates by which their supplemental expert reports regarding Plaintiffs' trade-mark infringement claims were due. Plaintiffs agreed to the requested extensions of the dates. Defendants did not seek the Court's approval of the extensions of dates about which Plaintiffs agreed
On February 21, 2013, Defendants requested for a third time that Plaintiffs agree to extend the date by which their supplemental expert reports regarding Plaintiffs' trademark infringement claims were due. At this time, and for the first time, Defendants informed Plaintiffs that Defendants were designating two new expert witnesses, Scott D. Hampton ("Hampton") and Bruce G. Silverman ("Silverman"). Defendants again did not seek the Court's approval for the requested extension of dates, nor did they seek the Court's approval to designate two new expert witnesses.
Also, at this time, Defendants acknowledged to Plaintiffs that Defendants decided to retain two new rebuttal experts regarding Plaintiffs' trademark infringement claims in place of Poret, after they read Plaintiffs' expert McDonald's expert report on Plaintiffs' trademark infringement claims. Defendants explained that they would not use Poret as an expert witness because: (1) McDonald's report did not rely on trademark surveys to support Plaintiffs' trademark infringement claims; and, (2) Poret could not opine on Plaintiffs' trademark infringement claims if the evidence upon which Plaintiffs rely to prove their trademark infringement claims is not trademark surveys.
Plaintiffs refused to grant Defendants' third request for extension of the date for when Defendants' supplemental expert report regarding Plaintiffs' trademark infringement claims were due. Defendants did not seek the Court's assistance or intervention to resolve the dispute.
On February 25, 2013, Defendants submitted to Plaintiffs the rebuttal expert report of Hampton and Silverman.
APPLICABLE STATUTORY LAW
Fed. R. Civ. P. 16 provides that the Court must issue a scheduling order. The scheduling order must limit the time to amend pleadings, complete discovery and file motions. Fed.R.Civ.P. 16(b)(1), (3)(A). The scheduling order may modify the timing of disclosures under Rule 26(a) and 26(e)(1). Fed.R.Civ.P. 16(b)(3)(B)(i). A scheduling order may be modified only for good cause and with the judge's consent. Fed.R.Civ.P. 16(b)(4).
Fed. R. Civ. P. 26 provides that a party must disclose to other parties expert witnesses it may use at trial. Fed.R.Civ.P. 26(a)(2)(A). A party must make its expert witness disclosures "at the times and in the sequence that the Court orders." Fed.R.Civ.P. 26(a)(2)(D) (emphasis added). Absent a court order, expert witness disclosures must be made at least 90 days before the date set for trial, or in the case of rebuttal expert witnesses, within 30 days after the other party's disclosure. Fed.R.Civ.P. 26(a)(2)(D)(i), (ii) (emphasis added).
Fed. R. Civ. P. 26(e) states in pertinent part: "For an expert whose report must be disclosed under Rule 26(a)(2)(B), the party's duty to supplement extends both to information included in the report and to information given during the expert's deposition."
Fed. R. Civ. P. 37(c)(1) states:
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 supply evidence in a motion, at a hearing, or at trial, unless the failure was substantially justified or is harmless...
District courts are given particularly wide latitude in their discretion to issue sanctions under Rule 37(c)(1). Yeti By Molly, Ltd. v. Deckers Outdoor Corp. , 259 F.3d 1101, 1106 (9th Cir. 2001). Rule 37(c)(1) is recognized as broadening the court's sanctioning power. The rule is a "self-executing, " "automatic" sanction to "provide... a strong inducement for disclosure of material..." Yeti By Molly, supra, at 1106, citing Fed.R.Civ.P. 37 Advisory Committee Notes (1993). Exclusion of an expert witness report is an appropriate remedy for failing to fulfill the required disclosure requirements of Rule 26(a). Yeti By Molly, supra, at 1106.
"Two express exceptions ameliorate the harshness of Rule 37(c)(1): The information may be introduced if the parties' failure to disclose the required information is substantially justified or harmless." Yeti By Molly, supra, at 1106. (emphasis added). The burden is on the party facing sanctions to prove harmlessness. Yeti By Molly, supra, at 1106-1107, Goodman v. Staples , 644 F.3d 817 (9th Cir. 2011). There is no requirement that a court find that the failure to disclose (or delay in disclosing) was willful or in bad faith. Yeti By Molly, supra, at 1107.
Numerous courts in the Ninth Circuit have followed the above-noted precepts. See Strong v. Valdez Fine Foods, 2011 WL 455285 at *4 (S.D. Cal. 2011), rev'd on other grounds 724 F.3d 1042 (2013)(exclusion of expert's declaration and rebuttal report as evidence to support motion for summary judgment appropriate due to late designation of expert), Corby v. American Express Co., 2011 WL 4625719 at *1, n.1 (C.D. Cal. 2011)(same), Wilson v. Tony M. Sanchez & Co, Inc., 2009 WL 173249 at *3-4 (E.D. Cal. 2009)(same), Mendez v. Unum Life Ins. Co. Of America, 2005 WL 1865426 at *3 (N.D. Cal. 2005)(granting in part and denying in part motion to exclude expert testimony due to late disclosure of expert's report).
A. Defendants Were Not Substantially Justified In Designating New Expert Witnesses and Providing Expert Reports By Those Expert Witnesses
Plaintiffs argue that Defendants were not substantially justified in designating new expert witnesses regarding Plaintiffs' trademark infringement claims. Plaintiffs assert that Defendants should have anticipated that they would need a rebuttal trademark infringement expert that could analyze the trademark infringement claims in the absence of trademark surveys. Plaintiffs contend that Defendants knew as early as April 2012, and specifically in May 2012, that Plaintiffs had not conducted any trademark surveys, that no such surveys were in progress and that Plaintiffs were willing to produce a witness for deposition to confirm these facts. Despite Defendants' knowledge that Plaintiffs had not, and would not, conduct trademark surveys, Defendants did not attempt to inform the Court that it had designated an expert (Poret) who could not respond to Plaintiffs' expert's report. Nor did Defendants attempt to seek leave of court to amend the Feb. 9, 2011 Order or the Sixth Amd. CMC Order so that new dates for Hampton's and Silverman's designation and report deadlines could be established.
Defendants argue that they were substantially justified in designating new expert witnesses and providing their reports to Plaintiffs. Defendants assert that after they read Plaintiffs' expert's (McDonald's) report, they realized that Poret was not the appropriate person to rebut McDonald's report because Poret was a survey expert and McDonald's report did not rely on survey evidence. Defendants claim that at the time they designated Poret, they could not have known that McDonald would not rely on survey evidence. So, Defendants promptly retained Hampton and Silverman and identified them to Plaintiffs on February 21, 2013 and provided their report to Plaintiffs on February 25, 2013. Further, Defendants argue that they were following the requirements of Fed.R.Civ.P. 26(a)(2)(D)(i), which allows them to disclose their expert witnesses 90 days before the date set for trial or in the case of rebuttal experts, within 30 days after the other party's disclosure.
Defendants arguments are not well taken. First, since trademark infringement may be proven in many ways, with or without trademark survey evidence, Defendants' selection and retention of Poret, a trademark survey expert, was improvident. This is especially true since as early as May 2012, Defendants knew that Plaintiffs were not relying on trademark survey evidence to prove their trademark infringement claims because Plaintiffs told them so. While Poret was designated as an expert on December 29, 2011, Defendants did nothing after they learned that Plaintiffs would not rely on trademark survey evidence, to seek leave of court to designate a new trademark infringement expert that would not rely on trademark survey evidence. Instead, Defendants waited until February 21, 2013 to inform Plaintiffs (but not the Court) that Poret was not a suitable expert and that they were designating two new experts. Thereafter, they provided the new experts' report to Plaintiffs. Defendants' actions in this regard clearly violated the Feb. 9, 2011 Order and the Sixth Amd. CMC Order.
Second, Defendants' reliance on the requirements of Fed.R.Civ.P. 26(a)(2)(D) is misplaced. Fed.R.Civ.P. 16(b)(3)(B)(i) clearly states that a scheduling order issued by a court may modify the timing of disclosures under Rules 26(a) and 26(e)(1). Fed.R.Civ.P. 26(a)(2)(D) clearly states that a party must make its expert witness disclosures at the times and in the sequence that the Court orders. Fed R. Civ. P. 26(a)(2)(D) (i), (ii) clearly states that absent a court order, the parties are required to follow Rule 26(a)(2)(D)(i). Here, the Feb. 9, 2011 Order and the Sixth Amd. CMC Order are court orders which trumped the parties from the alternative disclosure requirements of Fed.R.Civ.P. 26(a)(2)(D)(i). Further, the Feb. 9, 2011 Order clearly states the date by which supplemental expert reports were due. Additionally, the Sixth Amd. CMC Order clearly states that any party shall supplement any of its expert reports regarding evidence solely to contradict or rebut evidence on the same subject matter identified in an expert report submitted by another party. Moreover, the Sixth Amd. CMC Order clearly states that each expert witness shall prepare a written report to be provided to all parties no later than January 22, 2013. The Sixth Amd. CMC Order clearly warns that a party's failure to provide the expert's report shall not, absent substantial justification, be permitted to use evidence or testimony not disclosed, at any hearing or at the time of trial. Finally, the Sixth Amd. CMC Order clearly notifies the parties, that in addition to the exclusion of evidence noted in the preceding sentence, the Court may impose the sanctions permitted by Fed.R.Civ.P. 37(c).
The Court concludes that Defendants' lack of diligence in failing to timely inform Plaintiffs and the Court that their designated trademark infringement expert was not suitable to rebut Plaintiffs' expert's report, their lack of diligence in seeking a remedy therefor, and their misplaced reliance on Fed.R.Civ.P. 26(a)(2)(D)(i), do not constitute substantial justification under Fed.R.Civ.P. 37(c)(1). Since Defendants chose to designate a trademark infringement expert that could only analyze Plaintiffs' trademark infringement claims using trademark surveys, and chose to not seek relief from the Court when their designated expert was determined to be unsuitable, it did so at its own peril. Yeti By Molly , 259 F.3d at 1106-1107, Quevedo v. Trans-Pacific Shipping, Inc. , 143 F.3d 1255, 1258 (9th Cir. 1998). Mendez v. Unum, 2005 WL 1865426 at *3.
B. Defendants' Failure To Timely Identify Their New Experts Was Not Harmless
Plaintiffs argue that Defendants' untimely designation of their trademark infringement experts is not harmless because it prejudices them. They assert that allowing Defendants to untimely designate new trademark infringement experts rewards Defendants' recalcitrant and improvident conduct. Specifically, Plaintiffs contend that the fact that after Plaintiffs provided McDonald's expert report to Defendants, Defendants sought extensions of time from them to provide their rebuttal expert report, while concealing from Plaintiffs, and the Court, that they intended to designate new experts and provide a report from the new experts. Therefore, Plaintiffs assert that Defendants' conduct was calculated to seek an improper tactical advantage over them.
Defendants argue that their late disclosure of the new expert witnesses is harmless. They contend that the depositions of expert witnesses have not commenced, all future deadlines in the case have been stayed, and no trial date has been set. Therefore, they assert that their late disclosures did not harm Plaintiffs.
In Wong v. Regents of the University of California , 410 F.3d 1052, 1060 (9th Cir. 2005), the court stated:
In these days of heavy caseloads, trial courts... routinely set schedules and establish deadlines to foster the efficient treatment and resolution of cases. Those efforts will be successful only if the deadlines are taken seriously by the parties, and the best way to encourage that is to enforce the deadlines. Parties must understand that they will pay a price for failure to comply strictly with scheduling and other orders, and that failure to do so may properly support severe sanctions and exclusion of evidence.
In Wong, the Ninth Circuit upheld a district court's ruling that the testimony of expert witnesses designated after the expert witness disclosure deadline had passed, was properly excluded from use in a motion for summary judgment. The court affirmed the district court's ruling that the late expert designation was not harmless, even though the trial date in the case was several months away. In doing so, the court stated:
If (Plaintiff) had been permitted to disregard the deadline for identifying expert witnesses, the rest of the schedule laid out by the court months in advance, and understood by the parties, would have to have been altered as well. Disruption to the schedule of the court and other parties is not harmless. Courts set such schedules to permit the court and the parties to deal with cases in a thorough and orderly manner, and they must be allowed to enforce them, unless there are good reasons not to.
Wong, supra, at 1062 (emphasis added).
See also 02 Micro Intern Ltd. v. Monolithic Power Systems, Inc. , 467 F.3d 1355, 1368-1369 (9th Cir. 2006)(exclusion of expert's report due to lack of diligence and lack of harmlessness in timely disclosure of expert's report), Paramount Pictures Corp. v. International Media Films, Inc., 2013 WL 3215189 at *9 (C.D. Cal. 2013)(exclusion of expert's report due to lack of diligence and lack of harmlessness in timely disclosure of expert's testimony in motion for summary judgment), Nehara v. California, 2013 WL 1281618 at *6-7 (E.D. Cal. 2013)(exclusion of expert's report due to lack of diligence and lack of harmlessness in timely disclosure of expert's report and willful disregard of court's scheduling order), Tamburri v. Sun Trust Mortgage, Inc., 2013 WL 3152921 at *2 (N.D. Cal. 2013)(exclusion of expert's report due to late disclosure of expert's report and non-compliance with previous order of the court).
Here, had Defendants timely sought relief to designate new trademark infringement experts in, or shortly after, May 2012, it is possible that the Court's established schedule would not have been disrupted. However, Defendants fail to show that their late designation of trademark infringement experts and provision of those experts' reports to Plaintiffs were harmless. Defendants did not seek relief to designate new experts, and after reading Plaintiffs' expert's report, unilaterally, and without court approval, designated new trademark infringement experts approximately one year and two months after their expert designation was due. The late designation of experts and the provision of those experts' reports to Plaintiffs was done approximately ten months after Defendants learned that Plaintiffs' trademark infringement expert would not rely on trademark survey evidence and that their own expert could only opine on trademark surveys. Such non-compliance with the deadlines set by the Court and Defendants' recalcitrance supports the finding that Defendants' late designation of new experts and late provision of the new experts' report was not harmless.
In 1993, Rule 37(c)(1), in its present form, was added to Rule 37. Rule 37(c)(1) is written using the disjunctive "or, " not the conjunctive "and, " in outlining two circumstances where failure to disclose may be excused. Therefore, it would seem that one or the other bases may let the offending party off the hook. The language of the Advisory Committee Notes, when the amendment was added, bear this interpretation out:
"Limiting the automatic sanction to violations without substantial justification' coupled with the exception for violations that are harmless, ' is needed to avoid unduly harsh penalties in a variety of situations..." Fed.R.Civ.P. 37 Advisory Committee Notes (1993)(emphasis added).
In other words, a party that is unable to demonstrate substantial justification for its delay or failure to disclose or supplement may avoid sanctions if the opposing party is not harmed or prejudiced by the delay or failure. None of the examples justifying excusal contained in the 1993 Advisory Committee Notes are present here. Tellingly, the Advisory Committee Notes indicate that exclusion of a witness or evidence is appropriate when a pro se litigant is informed by the court of the requirement for disclosure and does not make the disclosure despite being so informed.
In this case, counsel for Defendants are highly experienced attorneys, not naive and inexperienced pro se litigants. Moreover, Defendants were well aware of the requirements to disclose experts and experts' reports, and the timing of those disclosures.
Defendants' failure to demonstrate substantial justification for the delay in disclosing Hampton and Silverman, by itself would have been sufficient to grant Plaintiffs' Motion. However, as noted above, Defendants also failed to show that Plaintiffs were not harmed by the substantial delay. Accordingly, given that both exceptions to Rule 37(c)(1) and the Yeti By Molly analysis have not been met, ample reason exists to grant Plaintiff's Motion.
As a result of the foregoing, the Court finds that the application of Fed.R.Civ.P. 37(c)(1) to Defendants' conduct is particularly apt. Since Defendants failed to timely disclose Hampton and Silverman as expert witnesses in rebuttal to Plaintiffs' trademark infringement expert and failed to seek permission from the Court to designate new trademark infringement experts, Defendants are disallowed from supplying evidence in the form of Hampton's and Silverman's report and/or testimony at any hearing or at trial.
Plaintiffs' Motion To Strike The Joint Expert Report of Scott D. Hampton and Bruce G. Silverman Pursuant to Rule 37(c) is GRANTED.