MARVIN J. GARBIS, District Judge.
THIS MATTER is before the Court on Defendant International Marine Underwriters' ("IMU") Renewed Motion to Strike Plaintiff Clifford Meredith's Expert Designation of Charles Smith ("Renewed Motion to Strike") and Renewed Motion for Summary Judgment. (ECF Nos. 54-55). This case involves IMU's denial of coverage, under an insurance policy, for damage sustained to Mr. Meredith's boat as a result of its sinking. The issues before the Court are (1) whether the Court should grant IMU's Renewed Motion to Strike where Mr. Meredith failed to disclose a written report as mandated by Federal Rule of Civil Procedure 26(a)(2)(B) and (C); and (2) whether the Court should grant IMU's Renewed Motion for Summary Judgment where Mr. Meredith cannot establish a genuine issue of material fact as to causation or damages. The issues have been fully briefed and no hearing is necessary.
The Court concludes that Mr. Meredith's repeated failure to provide adequate Rule 26(a)(2)(B) and (C) disclosures, pursuant to this Court's Order, warrants that his expert designation of Charles Smith as to damages be stricken. Secondly, the Court denies IMU's Renewed Motion for Summary Judgment because (1) a genuine issue of material fact exists as to causation and (2) under Maryland law, damages is not an essential element of a cause of action for breach of contract.
In April 2009, Mr. Meredith purchased an insurance policy ("the Policy") from IMU, through the Avon Dixon Agency, LLC ("Avon Dixon"), to insure Mr. Meredith's vessel, "the Eleanor." (Compl. ¶ 2, ECF No. 2). The Policy contained a "Perils Clause," which insured the Eleanor for physical damage, but a separate "Exclusion Clause" excluded from coverage any damage resulting from Mr. Meredith's failure to maintain the Eleanor in a seaworthy condition. (
In October 2009, the Eleanor was found partially submerged while docked at a private residence ("the Accident"). (Def.'s Mem. Law Supp. Summ. J. 2). Shortly thereafter, Mr. Meredith submitted a claim under the Policy for damage the Eleanor sustained in the Accident. (Compl. ¶ 6). IMU assigned a surveyor, J. Stephen Russell, to inspect the Eleanor and determine the cause of the Accident. (Def.'s Mem. Law Supp. Summ. J. 3). Mr. Russell concluded that the Eleanor was taking on water through a number of "leakage points" that were caused by normal wear and tear, particularly a two-inch gap between two hull planks. (
On February 26, 2010, Mr. Meredith filed the instant Complaint in the Circuit Court for Anne Arundel County. (Notice of Removal ¶ 1, ECF No. 1). Mr. Meredith's primary contention is that the Accident was not caused by normal wear and tear or a failure to maintain the Eleanor in a seaworthy condition, and that the damage is, therefore, covered under the Policy's Perils Clause. (Compl. ¶¶ 22-23). On that basis, Mr. Meredith asserts a claim for breach of contract.
IMU removed the suit to this Court, invoking federal diversity jurisdiction. (Notice of Removal ¶¶ 2-4). During discovery, Mr. Meredith disclosed the identity of Charles Smith, an expert witness and the owner of Yacht Maintenance Co., who would offer opinion testimony regarding the cause of the Accident and damages. (Pl.'s Disclosure of Expert Witnesses 1, ECF No. 31-1). The text of that disclosure is reproduced below:
(
On July 26, 2010, IMU wrote to Mr. Meredith requesting all disclosures required by Federal Rule of Civil Procedure 26(a)(2), including expert reports. (Def.'s Mem. Law Supp. Mot. to Strike Pl.'s Expert Designations 2 ["Def.'s Strike Mem."], ECF No. 29-1). Mr. Meredith responded that "no reports had been generated," but noted that the witnesses were available for deposition. (Pl.'s Opp'n to Def.'s Mot. to Strike Pl.'s Expert Designations 2, ECF No. 31; Pl.'s Supplemental Disclosures 1, ECF No. 31-4).
Thereafter, IMU filed a Motion to Strike Plaintiff's Expert Designation's for failure to disclose expert reports as mandated by Rule 26(a)(2)(B). (ECF No. 29). Finding for IMU, the Court issued a detailed Order requiring Mr. Meredith to provide the following:
(Ct. Order 1-2, ECF No. 36). Additionally, the Court instructed Mr. Meredith that, if upon further reflection he determined that Mr. Smith was a retained expert witness, as defined in the Court's Order, he was required to produce a complete expert report as set forth in Rule 26(a)(2)(B). (
Following the above Order, Mr. Meredith supplemented his expert designation on May 13, 2011. (Pl.'s Updated Disclosure of Expert Witnesses Pursuant to Ct. Order ["Pl.'s Updated Disclosure"], ECF No. 44). In his updated disclosures, Mr. Meredith recapitulated much of his prior disclosure:
(Pl.'s Updated Disclosure 3). Mr. Meredith's Updated Disclosure further indicated that
through direct contact by counsel." (
prior to the commencement of litigation. (
(
IMU subsequently deposed Mr. Smith on August 1, 2011, with the understanding that based on the above disclosures, Mr. Smith was a hybrid witness. (Def.'s Renewed Strike Mot. ¶ 8). At his deposition, IMU alleges it became clear that Mr. Smith was a retained expert, such that the full disclosures set forth under Rule 26(a)(2)(B) were required to be produced. (
IMU now moves that the Court sanction Mr. Meredith for his failure to produce expert reports by excluding the testimony of Mr. Smith, pursuant to Federal Rule of Civil Procedure 37(b)(2).
Federal Rule of Civil Procedure 26(a)(2)(A) requires litigants to disclose "the identity of any witness [they] may use at trial to present evidence under Federal Rule of Evidence 702, 703, or 705." Fed.R.Civ.P. 26. Rule 26(a)(2)(B) further requires litigants to produce written reports for any witness who is "retained or specially employed to provide expert testimony in the case" or "whose duties as the party's employee regularly involve giving expert testimony."
Fed.R.Civ.P. 26(a)(2)(B).
Rule 26(a)(2)(C), while less onerous, requires that the disclosure of witnesses who do not need to provide a written report must nevertheless 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." Fed.R.Civ.P. 26(a)(2)(C).
Rule 37(b)(2) gives teeth to a court imposed order to provide or permit discovery under Rule 26(a)(2) by permitting a trial court to impose sanctions when a party fails to obey an order to provide or permit discovery.
Fed.R.Civ.P. 37(b)(2)(A)(i)-(vii).
In determining what sanction to impose under Rule 37(b)(2), this Court is guided by consideration of four factors: "(1) whether the non-complying party acted in bad faith, (2) the amount of prejudice that noncompliance caused the adversary, (3) the need for deterrence of the particular sort of non-compliance, and (4) whether less drastic sanctions would have been effective."
The Court grants IMU's Renewed Motion to Strike because Mr. Meredith violated this Court's Order by repeatedly failing to provide adequate Rule 26(a)(2)(B) disclosures.
Central to the Court's holding is its threshold determination that Mr. Smith is a retained expert witness. The Court finds that Mr. Meredith has not carried his burden of demonstrating that Mr. Smith formed his opinions, as to damages, in the normal course of his duties or activities in connection with the Eleanor.
Under Rule 26(a)(2)(B), a witness is required to provide an expert report if the witness is "retained or specially employed to provide expert testimony in the case" or has "duties as the party's employee [that] regularly involve giving expert testimony." A witness must submit a report regarding any opinions formed specifically in anticipation of litigation, or otherwise outside the normal course of a duty.
Here, Mr. Smith's opinion as to damages is based on a report that was prepared in anticipation of litigation. Specifically, during IMU's deposition of Mr. Smith on August 1, 2011, it became clear that Mr. Smith was relying on a previously undisclosed damages survey and report performed by Quaker Neck Marine Surveying (the "Quaker Survey & Report"). The Quaker Survey was performed on May 10, 2011, and the Report was prepared on May 12, 2011, after the close of discovery. (
Mr. Meredith's argument that Mr. Smith's opinion as to damages is based on the normal course of his duty in repairing and maintaining the vessel is without merit and belied by the preamble to the Quaker Report. The introductory text of the Report states in relevant part that the Survey was performed "at the request of Cliff Meredith" and that "a list of repairs and or replacements was compiled for the use of Mr. Meredith and the Yacht Maintenance Co." (Def.'s Renewed Strike Mot. Ex. 2 at 4, ECF No. 55).
Moreover, Mr. Smith's testimony during his deposition buttresses IMU's claim that the basis of Mr. Smith's opinion, as to damages, is the Quaker Report:
(Smith Dep. 52:1-14, Aug. 1, 2011).
(Smith Dep. 63:12-64:13, Aug. 1, 2011) (emphasis added). Mr. Smith also confirmed that appraising the value of vessels, and more specifically, the Eleanor, was not within the normal course of his duties:
(Smith Dep. 55:5-18, Aug. 1, 2011) (emphasis added). The foregoing makes clear that Mr. Smith's opinion as to damages is not based on facts learned or observations made in the normal course of his duty, but instead on a damages survey that he did not perform and on a detailed report that he did not draft.
Accordingly, the Court finds that, as a matter of law, Mr. Smith is a retained expert witness and that Mr. Meredith, therefore, had a duty to disclose an expert report as set forth in Rule 26(a)(2)(B).
Having determined that Mr. Meredith was obliged to provide an expert report for Mr. Smith's opinions, the Court further finds that Mr. Meredith's omission violated an express Court Order.
In its Order dated April 18, 2011, the Court instructed that if "within 30 days of this order, . . . Plaintiff, upon reflection, determines that any witness is a retained expert, as defined in the preceding memorandum, he shall produce for that witness a complete expert report as required by Fed.R.Civ.P. 26(a)(2)(B)." (Ct. Order 2). Furthermore, the Order required Mr. Meredith to provide a "description of how and when [Mr. Smith] came to form the proffered opinion(s)." (
Mr. Meredith never provided an expert report for Mr. Smith. As discussed above, Mr. Meredith had a duty to disclose an expert report for Mr. Smith because Mr. Smith's expert opinion on damages is based on the Quaker Survey and Report; both of which were performed in anticipation of litigation and do not constitute facts learned or observations made in the normal course of his duty. The omission of the expert report and failure to disclose the Quaker Survey and Report plainly violated this Court's express Order.
Mr. Meredith argues that the Renewed Motion to Strike should be denied because (1) he provided IMU with the repair estimate, (2) IMU had the opportunity to depose Mr. Smith, and (3) Mr. Smith's expert opinion on damages is based on his firsthand knowledge of the condition of the Eleanor, the nature and cost of the initial repairs his company performed after the Eleanor sank, and the fact that he observed and viewed the Eleanor almost daily while moored at his place of business in Cambridge, Maryland. (Pl.'s Opp'n to Def.'s Renewed Mot. to Strike Pl.'s Expert Designation of Charles Smith 4 ["Pl.'s Opp'n to Def.'s Renewed Strike Mot."], ECF No. 56).
The Court finds these arguments unavailing and unpersuasive, however, because the record is clear that in drafting the repair estimate, Mr. Smith relied, not on his firsthand knowledge, experience, and observations, but, rather, on the Quaker Survey and Report. (
Additionally, making Mr. Smith available for deposition did not obviate the need to comply with this Court's Order. As this Court previously noted, a party is not justified in its failure to disclose "simply because opposing counsel had an opportunity to depose the witness. This would shift to the opposing party the burden that Rule 26 indisputably places on the party calling the witness." (Ct. Mem. 8-9, ECF No. 35) (citing
Even assuming, arguendo, that Mr. Meredith reasonably believed Mr. Smith to be a hybrid witness, subject only to the Rule 26(a)(2)(C) requirements, his disclosures were nevertheless inadequate and violated this Court's Order. Specifically, the Court instructed that:
(Ct. Mem. 12-13). In an attempt to further clarify Mr. Meredith's burden, the Court, by way of example, explained that "Plaintiff's description of Captains Harmon's and Philip's opinion that the accident was the result of "third causes" would not be sufficient, absent a detailed statement of exactly what those causes are or might be." (
Accordingly, the Court finds that Mr. Meredith's omission violated an express Court Order.
In view of the preceding analysis, the Court concludes that sanctions under Rule 37(b)(2)(A) are available. As set forth above
Fed.R.Civ.P. 37(b)(2)(A). In determining what sanction to impose under Rule 37(b)(2), the Court applies the Fourth Circuit's four-factor test, namely, "(1) whether the non-complying party acted in bad faith, (2) the amount of prejudice that noncompliance caused the adversary, (3) the need for deterrence of the particular sort of non-compliance, and (4) whether less drastic sanctions would have been effective."
As to the first factor, bad faith, the Court finds that Mr. Meredith did act in bad faith. This finding is substantially supported by the evidence recited herein, which demonstrates a pattern of indifference for the rules of discovery and the authority of this Court. "In such cases, not only does the noncomplying party jeopardize his or her adversary's case by such indifference, but to ignore such bold challenges to the district court's power would encourage other litigants to flirt with similar misconduct."
In
As to the second element, prejudice, Mr. Meredith's dilatory conduct in disclosing the Quaker Report prejudiced IMU by unnecessarily delaying discovery and the adjudication of this matter. Specifically, due to Mr. Meredith's failure to timely disclose the Quaker Report, IMU was forced to seek leave to designate its expert witness and draft an expert report. (
As to the third factor, deterrence, this Court concurs with the Fourth Circuit that such "noncompliance . . . stalling and ignoring the direct orders of the court with impunity . . . must obviously be deterred."
Finally, as to the fourth element, the Court finds that alternative sanctions would be ineffective in deterring future disrespect for the judicial system. Central to the Court's reasoning is the fact that Mr. Meredith was given specific instructions on how to comply with his failed disclosures and failed to follow them. Striking Mr. Meredith's expert designation of Mr. Smith, on the issue of damages is, on its face, a far less severe sanction than dismissal with prejudice or default judgment.
Accordingly, IMU's Renewed Motion to Strike Mr. Meredith's Expert Designation of Charles Smith will be granted. The Court next addresses IMU's Renewed Motion for Summary Judgment.
Summary judgment is only appropriate "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c);
Once a motion for summary judgment is properly made and supported, the opposing party has the burden of showing that a genuine dispute exists.
A "genuine" issue concerning a "material" fact arises when the evidence is sufficient to allow a reasonable jury to return a verdict in the nonmoving party's favor.
The Court denies IMU's Renewed Motion for Summary Judgment because there is a genuine issue of material fact as to causation. As set forth above, summary judgment is only appropriate "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c);
Having reviewed the record, the Court is persuaded that two equally plausible theories of causation emerge, which create a genuine issue of material fact as to causation. Under the first theory, the Eleanor sunk as a result of a failure to maintain the vessel in a seaworthy condition, as evidenced by alleged rot and loose planks in the hull. Conversely, the second theory suggests that it is just as likely that the Eleanor grounded during a low tide and that high wave action caused her bottom framing to flex, which in turn caused gaps between the planks that allowed water to flow into the boat as the tide rose. The Court finds that looking at the facts in the light most favorable to the non-moving party, Mr. Meredith, a reasonable jury could conclude that the Accident did not fall under the Policy's Exclusion Clause and was, therefore, covered as physical damage under the Perils Clause.
As such, the Court denies IMU's Renewed Motion for Summary Judgment under its causation argument.
As an alternative theory, IMU seeks summary judgment on the basis that there is no material dispute of fact as to damages. Despite having stricken Mr. Meredith's sole retained damages expert, the Court denies IMU's Renewed Motion for Summary Judgment, under its damages argument, because under Maryland law, damages is not an essential element of a claim for breach of contract.
In Maryland, "[t]o prevail in an action for breach of contract a plaintiff must prove that the defendant owed the plaintiff a contractual obligation and that the defendant breached that obligation."
In this case, the Court finds that expert testimony, based upon the allegations and record, is necessary to determine actual damages.
Accordingly, the Court rejects IMU's argument as to damages and denies IMU's Renewed Motion for Summary Judgment on this ground.
For the foregoing reasons, the Court will, by separate Order, GRANT Defendant's Renewed Motion to Strike Plaintiff's Expert Designation of Charles Smith (ECF No. 55) and DENY Defendant's Renewed Motion for Summary Judgment (ECF No. 54).
