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Rockwood Select Asset Fund XI, LLC v. Devine, Millimet & Branch, PA

United States District Court, D. New Hampshire

May 6, 2016

Rockwood Select Asset Fund XI, 6-1, LLC
Devine, Millimet & Branch, PA, and Karen S. McGinley, Esq. No. 2016 DNH 191P



Before the court are the parties’ several motions in limine seeking to exclude a variety of evidence and areas of inquiry from the upcoming trial of this action, and for miscellaneous other relief in connection with the trial.

This case arises out of a law firm’s allegedly tortious representations concerning its client to a lender. Plaintiff Rockwood Select Asset Fund XI, (6)-1, LLC, sued defendants Devine, Millimet & Branch, PA, and Karen S. McGinley, Esq., on a theory of negligent (or even fraudulent) misrepresentation. Rockwood alleges that defendants, in the process of assisting their client, Martha McAdam, to secure a loan from Rockwood, represented that (1) McAdam was not subject to pending or threatened litigation, when, in fact, they knew that she was; and (2) one of the major tenants of the collateral property was independent of McAdam when, in fact, it was not.

The court, having laid out the background of this action in numerous prior orders, does not repeat itself here. See, e.g., Rockwood Select Asset Fund XI, (6)-1, LLC v. Devine, Millimet & Branch, PA, 2015 DNH 135; Rockwood Select Asset Fund XI, (6)-1, LLC v. Devine, Millimet & Branch, PA, 2016 DNH 24. It addresses each of the parties’ motions in turn.

The court reminds the parties that the rulings herein are made without prejudice to revisiting particular issues in response to circumstances that might arise during trial. Furthermore, these rulings are limited to grounds argued in the parties’ filings. The court reserves the right to assess other factors at trial, such as authenticity, hearsay, and best evidence, see Fed.R.Evid. 800 et seq., 900 et seq., and 1000 et seq., and where appropriate, arguments and grounds not raised by counsel.

I. Motions to exclude expert testimony

A. Defendants’ motion to exclude expert testimony[1]

The defendants seek to exclude the supplemental report of plaintiff’s rebuttal expert, Jonathan E. Hochman. Rockwood submitted this alleged rebuttal report on December 4, 2015, well after the September 1, 2015 rebuttal expert disclosure deadline set by the court’s (largely agreed to) scheduling order. See Amended Discovery Plan (document no. 20) at 3; Order of September 2, 2015.

A party that intends to offer the testimony of an expert witness at trial must disclose the identity of that witness and the witness’s written report, as contemplated by Federal Rule of Civil Procedure 26(a)(2)(B), “at the times and in the sequence that the court orders.” Fed.R.Civ.P. 26(a)(2)(D). When a party fails to comply with that obligation, “the baseline rule is that the required sanction in the ordinary case is mandatory preclusion” of the late-disclosed information. Harriman v. Hancock Cty., 627 F.3d 22, 29 (1st Cir. 2010) (internal quotations omitted); see Fed.R.Civ.P. 37(c)(1) (a party that fails to disclose under Rule 26(a) “is not allowed to use that information or witness to supply evidence . . . at a trial”). While, “in its discretion, the district court may choose a less severe sanction, ” Esposito v. Home Depot U.S.A., Inc., 590 F.3d 72, 78 (1st Cir. 2009), the court concludes, based on the “array of factors” endorsed by the Court of Appeals, id., that preclusion is warranted here. These factors include “the sanctioned party’s justification of the late disclosure; the opponent-party’s ability to overcome its adverse effects (i.e., harmlessness); the history of the litigation; the late disclosure’s impact on the district court’s docket; and the sanctioned party’s need for the precluded evidence.” Harriman, 627 F.3d at 29.

Hochman opined, in his initial report, [2] that certain server logs for an Ohio state court website could indicate whether anyone accessed an opinion issued by that court in 2011 and, further, whether anyone did so after searching for Martha McAdam’s name. He noted that counsel for the plaintiff were in the process of obtaining those server logs. Per the scheduling order in this case, plaintiff’s rebuttal expert report was due on September 1, 2015. On December 4, 2015 -- 3 months after that deadline -- plaintiff’s counsel produced the server logs and disclosed Hochman’s supplemental report, in which he opined about the implications of their contents.

This is not the sort of supplementation contemplated by Rule 26(a)(2)(E). “A party may not use a supplemental report to disclose information that should have been disclosed in the initial expert report, thereby circumventing the requirement for a timely and complete expert report.” Marine Polymer Techs., Inc. v. HemCon, Inc., No. 06-CV-100-JD, 2010 WL 1427549, at *4 (D.N.H. Apr. 2, 2010) (quoting 6 Moore's Federal Practice § 26.131[2]). Counsel’s busy litigation schedule alone does not justify their failure to obtain these logs -- which were public records and which date from 2011 -- well before this litigation commenced, in a timely fashion. See Plaintiff’s Opp. To Mot. to Exclude Supp. Report of Jonathan Hochman (document no. 69) at 2-3 & n.2. This lack of justification -- coming in a case where plaintiff’s counsel have missed several deadlines -- weighs heavily in favor of preclusion of the supplemental report.

The history of the litigation also weighs in favor of preclusion. This is not the first time that plaintiffs have disregarded the court’s scheduling order. See, e.g., Rockwood, 2016 DNH 24 (denying motion to amend the complaint to include civil RICO violation brought ten and a half months after amendment deadline); see also infra Part II.A. As with its late damages disclosures, Rockwood cannot justify this late disclosure by invoking the parties’ agreement to conduct certain depositions after the close of fact discovery. See Fed. R. Civ. P. 16(b)(4); Fed.R.Civ.P. 29(b) (“a stipulation extending the time for any form of discovery must have court approval if it would interfere with the time set for completing discovery”); see also Banks v. City of Philadelphia, 309 F.R.D. 287, 291 (E.D. Pa. 2015) (dismissing claim where plaintiff failed to comply with scheduling order despite parties’ informal discovery agreement).

None of the other factors suggests that the court should impose any other remedy. While neither the potential prejudice to the defendants (that is, defendants’ missed opportunity to conduct discovery into Hochman’s belated opinion and it bases) nor the late disclosure’s impact on the court’s docket (in particular, the expenditure of judicial resources to resolve the resulting motions practice where plaintiff issued the report knowing the deadline had passed) weighs heavily in favor of preclusion, those factors likewise do not weigh against it. Finally, unlike in Esposito, 590 F.3d at 79, this preclusion will not obviously or automatically result in dismissal of the case. Nor will it significantly prejudice plaintiff’s ability to put on its case. Plaintiff may still present Hochman as an expert, who may testify as to the opinions disclosed in his initial report.

Accordingly, the court grants defendants’ motion to exclude Hochman’s supplemental report and testimony related thereto.

B. Plaintiff’s motion to exclude expert testimony[3]

Rockwood seeks to preclude the defendants’ expert, John R. Levine, from testifying that a 2008 Ohio state court opinion concerning Martha McAdam would have appeared on the first page of Google’s search results if the plaintiff had searched Google for “Martha McAdam” prior to closing on the loan in July 2011.

Defendants contend that Levine’s testimony lacks reliability because it is based on methods inadequate to support his conclusion.

Federal Rule of Evidence 702 is “[t]he touchstone for the admission of expert testimony in federal court litigation . . . .” Crowe v. Marchand, 506 F.3d 13, 17 (1st Cir. 2007). Under that rule, an expert witness may offer opinion testimony 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. 702. As the structure of this rule suggests, before the factfinder in a case can consider expert testimony over the adverse party's objection, the trial judge, serving as “gatekeeper, ” must determine whether the testimony satisfies the relevant foundational requirements. See Daubert v. Merrell Dow Pharm. Inc., 509 U.S. 579, 597 (1993).

Here, the only foundational requirement that Rockwood questions is whether Levine’s opinion -- that the 2008 Ohio court opinion would have appeared on the first page of the results of a Google search performed in mid-2011 -- is “the product of reliable principles and methods.” Specifically, Rockwood points out that -- as Levine acknowledged in his deposition -- Google ranks search results using a proprietary algorithm that has evolved over time. Though Google has not disclosed the specific variables that the algorithm accounts for, or precisely how it accounts for them, or how that has changed over time, Levine acknowledged that it is possible to know at least some of those variables, such as a user’s geographic location and search history, as well as how many times a particular result has been accessed. By his own admission, Levine did not account or control for at least these known variables in performing his analysis.

As Levine explained during his deposition, though impossible to control for all variables, Google has disclosed, to a certain degree, how its “PageRank” algorithm functions. Through that algorithm, the most relevant results for a search are weighted to display earliest in a list of search results. In his 2015 search for “Martha McAdam, ” Levine found that the 2008 Ohio court opinion appeared on the first page of the results -- indeed, as the first result. All but a handful of the remainder of the results, he observed, were the familiar (to popular search engine users) “generic links” to “sites that will generally provide a search result for anything that looks like a person’s name.” Levine Report (document no. 67-4) ¶ 22. Noting that the 2008 Ohio court opinion’s metadata has not changed since Google first indexed it, Levine concluded that it would have appeared above such “generic links” in 2011 and, therefore, on the first page of a hypothetical search for “Martha McAdam” at that time.[4]

“While the party seeking to introduce the testimony bears the burden of proving its admissibility, the burden is not especially onerous, because ‘Rule 702 has been interpreted liberally in favor of the admission of expert testimony.’” West v. Bell Helicopter Textron, Inc., 967 F.Supp.2d 479, 484 (D.N.H. 2013) (quoting Levin v. Dalva Bros. Inc., 459 F.3d 68, 78 (1st Cir. 2006)). The method by which Levine arrived at his opinion, see supra Part I.B., is not so inherently unreliable that exclusion is required. That Levine might have, but did not, take into account other known factors that may affect the ranking of a search result goes more to the weight of his testimony than to its admissibility. See Crowe, 506 F.3d at 18 (“Objections of this type, which question the factual underpinnings of an expert’s investigation, often go to the weight of the proffered testimony, not to its admissibility.”); cf. Currier v. United Techs. Corp., 213 F.R.D. 87, 88 (D. Me. 2003) (failure to consider additional relevant factors goes to weight).

“Vigorous cross-examination, presentation of contrary evidence, and careful instruction on the burden of proof are the traditional and appropriate means of attacking shaky but admissible evidence.” Daubert, 509 U.S. at 596. Rockwood will have the opportunity to cross-examine Levine and present contrary evidence here. Accordingly, Rockwood’s motion to exclude Levine’s opinion is denied.

II. Motions in limine

A. Defendants’ motion in limine no. 1: Damages evidence[5]

The defendants seek to preclude Rockwood from presenting evidence or argument concerning its entitlement to damages above the $950, 000 in unpaid principal that plaintiff claimed in its complaint. As far as the court can discern, defendants ask the court to exclude evidence of (1) Rockwood’s attorneys’ fees, costs and expenses incurred in its efforts to recover under the loan after McAdam defaulted; (2) damages arising from Rockwood’s loss of use of the funds; and (3) a default judgment against McAdam.[6] As explained below, this motion is granted in part. To the extent Rockwood seeks to introduce evidence of its damages beyond its actual pecuniary loss, its consequential damages, and prejudgment interest, and especially to the extent that Rockwood seeks to introduce evidence of damages for claims that it has not pled, defendants’ motion is granted and that evidence will be excluded.

1. Background

In its complaint, Rockwood sought as damages for claims of fraudulent and negligent misrepresentation: (1) $950, 000, representing the unpaid principal on the loan at issue; (2) Rockwood’s attorneys’ fees and expenses accrued “in an effort to work out the Loan or realize on the collateral”; and (3) “Loss of the use of the funds by Plaintiff.” Compl. (document no. 1) at 8-9. It echoed this demand in its initial disclosures pursuant to Rule 26(a)(1)(A)(iii), adding that it had not yet calculated the value of its loss of the use of the funds, which would “likely be the subject of expert testimony.” Document no. 93-2 at 4.

On February 23, 2016, some 12 weeks after the close of fact discovery, Rockwood supplemented its initial disclosures to include a breakdown of the fees and expenses. Document no. 93-3. On March 10, 2016, 14 weeks after the close of discovery and a mere six weeks before the then-scheduled April 22, 2016 final pretrial conference, Rockwood emailed the defendants a copy of a default judgment for $2.8 million dollars that it had obtained against McAdam about two years earlier, in May 2014. This default judgment, Rockwood’s counsel’s paralegal explained in the email, “better than anything we’ve provided to date, represents Rockwood’s damages.” Document no. 93-1.

In its final pretrial statement, Rockwood finally calculated the value of its alleged loss of the use of the funds at just under $3 million. Document no. 98 at 10-11. It also set out the calculations underlying its claim ...

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