United States District Court, E.D. Kentucky, Central Division, Lexington
MEMORANDUM OPINION AND ORDER
E. Wier United States Magistrate Judge
EQT Production Company (EQT) filed a formal motion on a
portion of the subject matter at issue on the April 10, 2017,
discovery dispute telephonic conference. See DE
##49 (Motion for Reconsideration); 43 (Minute Entry Order).
Defendant Magnum Hunter Production, Inc. (MHP), responded in
opposition. DE #53 (Response). EQT replied. DE ##54, 55
(Reply). The matter is ripe for consideration. For the
following reasons, the Court DENIES DE #49 and reconfirms the
substance of the provisional ruling.
discovery, a party must disclose “a computation of each
category of damages claimed” as well as make available
“the documents or other evidentiary material . . . on
which each computation is based, including materials bearing
on the nature and extent of injuries suffered[.]”
Fed.R.Civ.P. 26(a)(1)(A)(iii). Further, a “party who
has made a disclosure under Rule 26(a) . . . must supplement
or correct its disclosure . . . in a timely manner if the
party learns that in some material respect the disclosure . .
. 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[.]”
Id. 26(e)(1)(A). “If a party fails to provide
information . . . as required by Rule 26(a) or (e), the party
is not allowed to use that information . . . to supply
evidence on a motion, at a hearing, or at a trial, unless the
failure was substantially justified or is harmless.”
Id. 37(c)(1). The Court may order additional or
substitute sanctions. Id. 37(c)(1)(A)-(C). The Rule
37(d) exclusion basis, where applicable, likewise includes
the potential for additional or substitute sanctions.
Id. 37(d)(3) (cross-referencing Rule
test for Rule 37(c) exclusion “is very simple: the
sanction is mandatory unless there is a reasonable
explanation of why Rule 26 was not complied with or the
mistake was harmless.” Bessemer & Lake Erie
R.R. Co. v. Seaway Marine Transp., 596 F.3d 357, 370
(6th Cir. 2010); see also Acuity Brands Lighting, Inc.
v. Bickley, No. 5:13-CV-366-DLB-REW, 2015 WL 10551946
(E.D. Ky. Nov. 30, 2015), adopted by 2016 WL 1171541
(E.D. Ky. Mar. 24, 2016). “Rule 37(c)(1) authorizes the
trial court to exclude evidence that was withheld in
violation of Rule 26(a) or (e). The party requesting
exclusion under Rule 37(c)(1) need not show prejudice, rather
the non-moving party must show that the exclusion was
‘harmless' or ‘substantially
justified.'” Saint Gobain Autover USA, Inc. v.
Xinyi Glass N. Am., Inc., 666 F.Supp.2d 820, 826 (N.D.
Ohio 2009). “The exclusion of non-disclosed evidence is
automatic and mandatory under Rule 37(c)(1) unless
non-disclosure was justified or harmless.”
Dickenson v. Cardiac & Thoracic Surgery of E.
Tenn., 388 F.3d 976, 983 (6th Cir. 2004). Indeed, as the
Circuit recently emphasized, “exclusion of late or
undisclosed evidence is the usual remedy for noncompliance
with Rule 26(a) or (e), ” although the Court of course
retains alternative options. Howe v. City of Akron,
801 F.3d 718, 747 (6th Cir. 2015).
then, does it mean for a mistake to be substantially
justified or harmless? The Sixth Circuit explored that
question in Howe, “adopt[ing]” the
Fourth Circuit's five-factor test to “assess
whether a party's omitted or late disclosure is
‘substantially justified' or
‘harmless[.]'” 801 F.3d at 747-48. The
factors are: “(1) the surprise to the party against
whom the evidence would be offered; (2) the ability of that
party to cure the surprise; (3) the extent to which allowing
the evidence would disrupt the trial; (4) the importance of
the evidence; and (5) the nondisclosing party's
explanation for its failure to disclose the evidence.”
Id. at 748 (quoting Russell v. Absolute
Collection Servs., Inc., 763 F.3d 385, 396-97 (4th Cir.
2014), and S. States Rack & Fixture, Inc. v.
Sherwin-Williams Co., 318 F.3d 592, 597 (4th Cir.
2003)); see also, e.g., Baker Hughes
Inc. v. S&S Chemical, LLC, 836 F.3d 554,
568-69 (6th Cir. 2016); Smith v. State Farm Mut. Auto.
Ins. Co., No. 5:15-375-KKC, 2017 WL 107971, at *2 (E.D.
Ky. Jan. 11, 2017) (applying the factors); Bentley v.
Highlands Hosp. Corp., No. 15-97-ART-EBA, 2016 WL
5867496, at *10 (E.D. Ky. Oct. 6, 2016) (characterizing the
five factors as “flesh[ing] out”
Bessemer's “simple test”). As Judge
Thapar put it: “The factors simply lend themselves to
the task at the heart of Rule 37(c)(1): separating
‘honest, ' harmless mistakes from the type of
‘underhanded gamesmanship' that warrants the harsh
remedy of exclusion.” Id.
said, though, Rule 37(c)(1) still “requires absolute
compliance with Rule 26(a), that is, it mandates that a trial
court punish a party for discovery violations in connection
with Rule 26 unless the violation was harmless or is
substantially justified.” Marais v. Chase Home
Fin., LLC, 24 F.Supp.3d 712, 730 (S.D. Ohio 2014). As
EQT emphasizes and the Court recognizes, Rule 37(c)(1)
provides for “less draconian options” than
exclusion in appropriate circumstances. Id. The
Rules and the unfolding discovery process, though, give many
opportunities to timely correct a prior inadequacy or
seasonably supply equivalent information. The later the
disclosure, the smaller the margin of error and greater the
peril. The Sixth Circuit deferentially reviews district
courts' decisions on these matters under an abuse of
discretion standard. Howe, 801 F.3d at 747.
Court previously excluded, “as a preclusive sanction
under Rule 37(c) and (d), from further proceedings in this
case any evidence on which EQT relied to make a damages
calculation that EQT did not produce to [MHP].” DE #43.
The Court “h[e]ld EQT to what EQT . . . produced,
” including through exclusion of any “unproduced
backup documentation.” Id. In sum, the Court
“fr[o]ze EQT's damage proof at what it in fact
ha[d] provided to [MHP].” Id.
does not dispute that there is a category of information
(summarized as “backup” or other information from
the Enertia database to support its damages calculation) that
it did not timely produce (and did not so dispute in the
informal discovery dispute resolution setting). See,
e.g., DE ##49, at 8 (stating that “EQT provided
MHP with a report from Enertia” only on April 25, 2017,
well after the 3/23/17 Bergonzi deposition and 3/1/17
discovery cutoff); 54, at 6 (“The crux of [MHP]'s
argument is that EQT did not provide Enertia data that
supports its damages calculations to MHP until after Mr.
Bergonzi's deposition. EQT has since provided that data
to MHP.” (emphasis added)); 54-1 (West Affidavit), at
¶ 24; 49-1, at 6 (Bergonzi Depo. p. 113) (“[Y]ou
used some Enertia records in-house to come up with those
numbers?” “Yes.” “And those documents
have never been provided to us. The backup for that has never
been provided to us in this case, but you're going to go
back and look for that?” “I'm sure we have
backup for that.”); id. at 7 (Depo. p. 119)
(“[W]e can substantiate how we calculated those
EQT's Complaint and Rule 26 initial disclosure provided
some damage figures, the disclosure did not in any way detail
the computation. EQT most certainly did not make available to
MHP the underlying Enertia ESI or any spreadsheets generated
as back-up for the figures-Rule 26 plainly requires this as
to “the documents or other evidentiary material . . .
on which each computation is based, including materials
bearing on the nature and extent of injuries suffered.”
Fed.R.Civ.P. 26(a)(1)(A)(iii). Notably, the initial
disclosure, at DE #53-1, nowhere lists Enertia data or
spreadsheets from Enertia as documents or ESI in EQT's
possession that it may use “to support its claims,
” again counter to the Rule 26(a) dictates. Later, by
detailed and overlapping document requests, MHP sought,
through many formulations, all evidence related to or
supporting the damage claims. None of those triggered
production of Enertia records. Heading into the Rule 30(b)(6)
depositions, EQT knew it was to designate and prepare a
witness to discuss damages. Despite all of that history and
the many instances of required disclosure or response, EQT
produced its designee and mouthpiece Bergonzi for deposition,
having not produced to MHP the Enertia records,
substantiating spreadsheets, or the work papers underlying
the damage amounts. As Plaintiff, EQT had used the materials
to formulate its Complaint (and its pre-complaint POC in
bankruptcy). Still, EQT simply ignored that cache of records,
as a matter of discovery, until Bergonzi testified, a point
well after the formal discovery close. When first before the
Court, EQT insisted that the discovery requests had not
encompassed Enertia materials and that EQT had timely
produced all the Rules required. See Audio File No.
KYED-LEX5-16-cv-150-JMH-REW20170410105000, at 15:30.
seeks refuge in Rule 37's “unless” clause: it
endeavors to establish that the discovery failure was
“substantially justified” or “harmless,
” so as to militate against the remedy of exclusion.
See, e.g., DE #49, at 6. Whether the failure was
substantially justified or harmless is a question on which
EQT has the burden. Roberts ex rel. Johnson v. Galen of
Va., Inc., 325 F.3d 776, 782 (6th Cir. 2003); Blair
v. GEICO Gen. Ins. Co., 917 F.Supp.2d 647, 656 (E.D. Ky.
2013). Because the Howe factors govern the analysis,
the Court examines each.
surprise to MHP. The Court, in these circumstances,
sees plain surprise to MHP. MHP directly asserted its
surprise. DE #53, at 10. In MHP's view, “Bergonzi
could not explain how he came up with even the place-holding
numbers except by vague references to Enertia reports he ran
in February 2016 and yet had not produced by the time he was
deposed more than a year later, in March 2017.”
Id. The Court recognizes MHP's surprise concerns
as valid in this scenario.
Court has reviewed every tendered page of the Bergonzi
deposition (indeed, of every exhibit tendered) and agrees
with MHP on the issue. Apparently, little (if anything)
Enertia-related had been exchanged in discovery prior to the
Bergonzi deposition, despite the database's apparent
empirical centrality (per Bergonzi, EQT's speaker) to
EQT's damages calculation. Bergonzi had to explain the
basics of Enertia, see DE #49-1, at 3-4, and
“[w]hen” Bergonzi “mentioned Enertia . . .,
a bell went off in [EQT counsel's] head that maybe we can
. . . go back and look there” for responsive
information. Id. at 3 (Depo. p. 88). Ms. Chesnut
agreed that the topic of damages was “hard to talk
about without something in front of us to understand ...