PHILIP G. REINHARD, District Judge.
For the reasons stated below, the court denies without prejudice the motion [71] to strike the Oakley Affidavit and refers the matter to the magistrate judge for a determination, after granting the parties an opportunity to be heard, of the appropriate sanctions (which may include exclusion of Oakley's expert testimony) for the failure to disclose Oakley as an expert witness under Rule 37(c) for this Rule 26(a) violation. The magistrate judge should also rule on the other alleged discovery violations raised in defendant's motion to strike. The motion [42] for partial summary judgment is stricken without prejudice to re-filing after determination of the Rule 37(c) sanctions. Prior to the magistrate judge undertaking the foregoing, the parties are directed to contact Magistrate Judge Johnston on or before October 12, 2018 to arrange a settlement conference.
Plaintiff, PCM Leasing, Inc. ("PCM"), an Illinois corporation with its principal place of business in Illinois, brings this action against BelGioioso Cheese, Inc. ("BelGioioso"), a Delaware corporation with its principal place of business in Wisconsin. The amount in controversy exceeds $75,000. Jurisdiction is proper under 28 U.S.C. § 1332(a)(1). Count I alleges breach of contract for untimely termination and failure to return documentation and software. Count II alleges breach of contract for disclosing source code to a third party in violation of a contract provision requiring the source code to be kept confidential. Defendant filed a motion for partial summary judgment [42] seeking summary judgment as to the Count II claim. When it responded to defendant's motion, plaintiff offered the affidavit of Myron Oakley ("Oakley Affidavit") [51] to support plaintiff's LR56.1(b)(3)(A) responses to defendant's LR.56.1(a)(3) statement of facts and plaintiff's LR56.1(b)(3)(B) statement of additional facts requiring denial of summary judgment. Defendant moves [71] to strike the Oakley Affidavit.
Myron Oakley is the owner and president of plaintiff. Plaintiff's primary product is a proprietary software producer payroll system called Total Milk Management ("TMM") used by companies and cooperatives that purchase raw milk to make cheese and other dairy products. The parties entered into a "Software Service, Maintenance and Support Agreement" ("Agreement") effective as of September 23, 2003 for plaintiff to provide the TMM software and support services to defendant. Paragraph 17 of the Agreement provides:
Plaintiff contends defendant breached this provision by hacking plaintiff's password protection and sharing the data file containing plaintiff's source code with a third party, Data Specialists, Inc. ("DSI"), plaintiff's competitor, when defendant terminated the Agreement and entered a new contract with DSI. Defendant denies it breached this provision of the Agreement. Defendant maintains it merely copied and pasted its own confidential information from the user interface component of the TMM database into a spreadsheet so it could be uploaded into the system DSI would be providing.
The TMM software was a Microsoft Access application that consisted of three primary software components, including the main application, a custom application and a database that housed defendant's producer and vendor information. The main application and custom application are encrypted and password-protected files which contain source code; business logic; and business flow, functions and formulas. The database contained defendant's confidential and proprietary information about its producers (milk suppliers) and each producer's vendors. This information included the identity of each producer, the producer's tax identification numbers, bank account numbers, loan numbers, etc., along with similar information for each producer's vendors.
On or about February 22, 2012, defendant entered a contract with DSI for DSI to provide defendant a license to use DSI's producer payroll software package, Dairy & Food Tracker Software Suite. While defendant was working through the conversion to the DSI software, defendant continued to pay plaintiff the monthly support services fees for the TMM software program. During this time, defendant had full access to the TMM database, including access to copy its own confidential and proprietary producer and vendor data. That much is undisputed.
Defendant states that beginning in March 2012, its employee keyed producer and vendor data into Excel spreadsheets that DSI created and e-mailed to defendant on March 8, 2012. DSI created the Excel spreadsheet to allow defendant to compile the necessary information for the conversion to the DSI program in a manner that would allow DSI to import easily the producer and vendor data into the DSI software package. The spreadsheet included separate columns for each piece of data that would need to be imported. In order to populate the Excel spreadsheets with the necessary producer and vendor information, defendant's employee, Danielle Kozelek, copied each piece of data from the individual fields (a/k/a cells) contained in the user interface component of the TMM database (e.g., producer name, and payee; producer identification number; producer address; producer tax identification number; producer phone numbers) and pasted this data into the new spreadsheet. As defendant completed filling the necessary data into the Excel spreadsheets, it would e-mail the spreadsheets to DSI who would then import the data from the populated spreadsheet into the DSI software package. Defendant was able to copy its own producer and vendor data by using the interface component of the TMM database. Defendant never broke through plaintiff's encryption or otherwise accessed source code within the TMM software.
Plaintiff disputes the facts set forth in the previous paragraph. It argues, based on the Oakley Affidavit, that defendant could not have copied and pasted the information but must have accessed plaintiff's source code and transferred it to DSI. The Oakley affidavit contains the following statements:
"22. Based upon the above findings contained in paragraph 21 of this affidavit, either the defendant or its agents, wrongfully hacked or otherwise defeated the password protection to plaintiff's source code, opened the file, and made its contents available to DSI."
Defendant moves to strike the Oakley Affidavit arguing that it contains information that was not identified or disclosed as required by Fed. R. Civ. P. 26(a) nor provided in any supplement as required by Fed. R. Civ. P. 26(e), nor in the course of discovery and that it contains expert testimony and opinion though Mr. Oakley was never disclosed as an expert witness. Plaintiff responds that its Rule 26(a)(1) disclosures identified Oakley as someone who "has knowledge regarding all aspects of the contract and the provisions regarding the software procedures to be followed upon the termination of the contract." It also argues the Oakley Affidavit does not render any expert opinions "but merely states what he has observed regarding defendant's disclosures and how this evidence relates to his personal perceptions and observations." Plaintiff contends, therefore, that Oakley "is acting as a Rule 701 Lay Witness, not as a Rule 702 Expert Witness."
Fed. R. Evid. 701 provides: "If a witness is not testifying as an expert, testimony in the form of an opinion is limited to one that is: (a) rationally based on the witness's perception; (b) helpful to clearly understanding the witness's testimony or determining a fact in issue; and (c) not based on scientific, technical, or other specialized knowledge within the scope of Rule 702."
Fed. R. Evid. 702 provides: "A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if: (a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue; (b) the testimony is based on sufficient facts or data; (c) the testimony is the product of reliable principles and methods; and (d) the expert has reliably applied the principles and methods to the facts of the case."
Fed. R. Evid. 703 provides: "An expert may base an opinion on facts or data in the case that the expert has been made aware of or personally observed."
Rule 701 makes clear that "lay opinion testimony is limited to those observations of a lay witness that are not based on scientific, technical, or other specialized knowledge within the scope of Rule 702."
"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. As such, lay testimony is not admissible when the witness's reasoning process is not that of an average person in everyday life but, rather, relies on the witness's considerable specialized training, experience, and knowledge. Stated another way, lay testimony cannot make connections for the jury based on the witness's expertise. That means lay testimony is not admissible to provide specialized explanations or interpretations that an untrained layman could not make if perceiving the same acts or events."
The Oakley Affidavit clearly "relies on the witness's considerable specialized training, experience, and knowledge" and makes connections based on the witness's expertise. Looking at the spreadsheet information, an untrained layperson could not conclude that the information contained therein could only have gotten there by breaching the password protection and taking something that belonged to plaintiff rather than defendant. To a layperson, defendant's description of what it did (opened up the part of the program which was a database that contained information about its own customers that defendant, itself, owned and then copied this information that belonged to it and transferred it to DSI) would seem pretty straightforward. A layperson is likely familiar with "copying and pasting". The Oakley Affidavit's analysis and explanation as to why the spreadsheet shows it was not the result of "copying and pasting" but rather of taking plaintiff's confidential source code and transferring it to DSI is based on Oakley's specialized knowledge. The Oakley Affidavit does not result "from a process of reasoning familiar in everyday life" but "results from a process of reasoning which can be mastered only by specialists in the field."
Fed. R. Civ. P. 26(a)(2)(A) requires a party to disclose "the identity of any witness it may use at trial to present evidence under Federal Rule of Evidence 702, 703, or 705." Rule 26(a)(2)(C)(i-ii) provides that the disclosure "must state: 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." By order [33] dated April 18, 2017, the deadline for Rule 26(a)(2)(C) disclosures was set for August 18, 2017. Plaintiff did not make any Rule 26(a)(2)(C) disclosures by that deadline.
Plaintiff states that in its Rule 26(a)(1) disclosures it disclosed Oakley as someone who "has knowledge regarding all aspects of the contract and the provisions regarding software procedures to be followed upon termination of the contract." Plaintiff supplies the affidavit of its attorney in which the attorney states that following the completion on October 31, 2017 of the deposition of one of plaintiff's employees that plaintiff's counsel informed defense counsel "that he believed that her deponent Jeffrey Cichocki had lied during his deposition in that Row 13 of the Defendant's spreadsheet contained approximately 75 cryptic column headings that were authored by the plaintiff and could only be obtained by defeating the password protection to the Bg.mdb data base." Plaintiff argues citing Rule 26(e)(1)(A) that this was enough to meet plaintiff's obligation to supplement its 26(a) disclosures as that obligation is satisfied when the information has otherwise been made known to the other party during discovery.
If a person is to be an expert witness, the person must be separately disclosed as such even if the person has been disclosed as a fact witness.
Rule 26(e)(1) provides: "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: (A) in a timely manner if the party learns that in some material respect the disclosure or response is incomplete or incorrect, and if the additional or corrective information has not otherwise been made known to the other parties during the discovery process or in writing; or (B) as ordered by the court."
Plaintiff maintains its counsel's oral statement to defense counsel on October 31, 2017 concerning the Row 13 cryptic column headings satisfied its duty to supplement because this statement showed the information had otherwise been made known to defendant. However, Rule 26(e)(1)(A) presupposes a disclosure has been made ("A party who has made a disclosure. . ."). No 26(a)(2)(A) & (C) disclosures having ever been made, the October 31, 2017 statement cannot be considered to have supplemented them. The statement does not cure the failure to supply the required 26(a)(2)(A) & (C) disclosures by the August 18, 2017 deadline.
Fed. R. Civ. P. 37(c)(1) provides: "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. In addition to or instead of this sanction, the court, on motion and after giving an opportunity to be heard: (A) may order payment of the reasonable expenses, including attorney's fees, caused by the failure; (B) may inform the jury of the party's failure; and (C) may impose other appropriate sanctions, including any of the orders listed in Rule 37(b)(2)(A)(i)-(vi)."
Defendant argues excluding the Oakley Affidavit is mandatory under Rule 37(c)(1) citing
Accordingly, the court denies without prejudice the motion [71] to strike the Oakley Affidavit and refers the matter to the magistrate judge for a determination, after granting the parties an opportunity to be heard, of the appropriate sanctions (which may include exclusion of Oakley's expert testimony) for the failure to disclose Oakley as an expert witness under Rule 37(c) for this Rule 26(a) violation. The magistrate judge should also rule on the other alleged discovery violations raised in defendant's motion to strike. The motion [42] for partial summary judgment is stricken without prejudice to re-filing after determination of the Rule 37(c) sanctions. Prior to the magistrate judge undertaking the foregoing, the parties are directed to contact Magistrate Judge Johnston on or before October 12, 2018 to arrange a settlement conference.
