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Grayiel v. AIO Holdings, LLC

United States District Court, W.D. Kentucky, Louisville

November 30, 2017

GEORGE A. GRAYIEL PLAINTIFF
v.
AIO HOLDINGS, LLC,. DEFENDANTS

          MEMORANDUM OPINION AND ORDER

          THOMAS B. RUSSELL, SENIOR JUDGE UNITED STATES DISTRICT COURT

         This matter is before the Court on Defendants AIO Holdings, LLC (“AIO”), Samir Anastas, and Gregory Anastas's (collectively, “Defendants”) Motion to Strike Portions of Plaintiff George A. Grayiel's Witness List. [R. 106.] Grayiel responded, [R. 109], and Defendants replied, [R. 112]. Fully briefed, this matter is ripe for adjudication. For the reasons stated herein, Defendants' Motion to Strike, [R. 106], is DENIED.

         BACKGROUND

         The factual allegations, as set out in the First Amended Complaint, [R. 86], assert a tangled web of fraud perpetuated by Defendants. [See R. 86 at 3-20 (First Amended Complaint).] Defendants disagree with this characterization. According to Grayiel, from January 2000 through December 2001 Martin Twist convinced him to invest nearly $900, 000 in a natural gas endeavor. [Id. at 3-4.] Grayiel claims that Twist lied to him when Twist promised that investing in his natural gas well ventures was safe and would yield a high return. [Id. at 4.] Allegedly, Twist used business entities, such as AIO Holdings, LLC and Blue Light of Kentucky LLC, along with the continuing help of the other named defendants, Samir Anastas, Gregory Anastas, and Sarinprapa Teema, to divert investments, including Grayiel's investment, to Twist and the defendants for their personal use. [Id.]

         Relevant to the matter at hand is the testimony of two witnesses, Jerry M. Layne, Sr. and Todd Pilcher. According to Grayiel, Layne is the owner of a portion of the land that produced the gas for Twist's ventures and he was party to discussions concerning the ownership of that property with Teema and Samir Anastas. [See R. 86 at 16-17, ¶ 93; R. 92 at 4 (Grayiel's Witness List).] Grayiel states that Pilcher was an employee of Twist and committed fraudulent actions involving AIO Holdings, LLC. [See R. 86 at 20, FN 14; R. 92 at 4.] In the witness list filed by Grayiel on August 29, 2017, Grayiel failed to list the contact information for Layne or Pilcher. [R. 92 at 4.] Defendants argue that these omissions violate the Court's scheduling orders, and now move to prohibit Layne and Pilcher from testifying and prohibit Grayiel from amending his witness list. [R. 106-1 at 1 (Memorandum in Support of Motion to Strike).]

         DISCUSSION

         Pursuant to Federal Rule of Civil Procedure (“FRCP”) 37(c)(1), Defendants urge the Court to preclude Pilcher and Layne from testifying due to Grayiel's failure to list their contact information on his witness list. [R. 106-1 at 1.] Defendants also argue that Grayiel should be prohibited from adding to or amending his witness list. [Id.][1]

         Rule 26 sets forth a general framework to regulate pretrial discovery. Of particular importance in this dispute is Rule 26(a)(3)(A)(i), which mandates that a party must provide to the other parties “the name and, if not previously provided, the address and telephone number of each witness--separately identifying those the party expects to present and those it may call if the need arises . . ..” Fed.R.Civ.P. 26(a)(3)(A)(i). Rule 37 dovetails with this requirement: If a litigant “fails to provide information or identify a witness as required by Rule 26(a) or (e), the [litigant] is not allowed to use that information or witness to supply evidence on a motion . . . or at a trial, unless the failure was substantially justified or is harmless.” Fed.R.Civ.P. 37(c)(1). Exclusion “of late or undisclosed evidence is the usual remedy for noncompliance with Rule 26(a) or (e).” Howe v. City of Akron, 801 F.3d 718, 747 (6th Cir. 2015). But that is not always the case, as the Rule gives the Court “the option to order alternative sanctions ‘instead of' exclusion of the late or undisclosed evidence ‘on motion and after giving an opportunity to be heard.'” Id. (quoting Fed.R.Civ.P. 37(c)(1)); see also 8B Charles Alan Wright et al., Federal Practice and Procedure § 2289.1 (3d ed.), Westlaw (database updated Apr. 2017).

         Nonetheless, Grayiel may avoid sanction if “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) (quoting Vance ex rel. Hammons v. United States, 182 F.3d 920, 1999 WL 455435, at *6 (6th Cir. 1999) (unpublished table decision)). To assess whether a litigant's belated disclosure is “substantially justified” or “harmless, ” courts in this Circuit look to five factors:

(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.

Howe, 801 F.3d at 748 (quoting Russell v. Absolute Collection Servs., Inc., 763 F.3d 385, 396-97 (4th Cir. 2014)); see also Abrams v. Nucor Steel Marion, Inc., 694 F. App'x 974, 2017 WL 2297486, at *6 (6th Cir. 2017). These 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.” Bentley v. Highlands Hosp. Corp., No. CV 15-97-ART-EBA, 2016 WL 5867496, at *10 (E.D. Ky. Oct. 6, 2016) (quoting Howe, 801 F.3d at 747, 749).

         A. Motion to Strike Witnesses: Howe Five Factor Test

         Overall, the Howe Test weighs in favor of Grayiel. First, Defendants do not seem to be surprised about the possibility of Layne or Pilcher testifying. In fact, Grayiel states that Defendants have been on notice about the two witnesses for months. [R. 109 at 7 (Grayiel Response).] In response, Defendants argue that their cognizance of a witness “does not absolve Plaintiff from compliance with the Court's order.” [R. 112 at 5 (Defendants Reply).] Furthermore, Defendants claim that it is still not clear what information or evidence these two witnesses will bring against them. [Id. at 6.] Unlike most other cases where a party attempts to add a new witness at the eleventh hour, Defendants were made aware of these two witnesses in Grayiel's witness list from August of 2017, [R. 92]. See Boegh v. United States, No. 5:08-CV-150-R, 2010 WL 4286150 (W.D. Ky. Oct. 22, 2010) (allowing the late addition of a witness as a harmless error); Consumer Fin. Prot. Bureau v. Borders & Borders, PLC, No. 3:13-CV-1047-CRS, 2016 WL 9460472 (W.D. Ky. June 29, 2016) (striking the disclosure of 561 named consumers, seven of which provided statements, when the disclosure was tardy and the movant previously maintained that consumer harm was irrelevant to its theory of the case). Therefore, the issue of surprise weighs in favor of Grayiel.

         Second, even if Defendants are surprised, there is enough time to cure this issue. As suggested by Grayiel, the Court could modify the closing of the discovery period for the purpose of allowing the parties to depose Pilcher and Layne. See, e.g., Boegh, 2010 WL 4286150, at *1 (allowing the nonmovant to depose a witness that was not disclosed during the discovery period); United States v. Nugent, No. 5:16-CV-380-JMH, 2017 WL 4249775, at *5 (E.D. Ky. Sept. 25, 2017) (allowing ...


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