Zoss v. Protsch et al

UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
SOUTHERN DIVISION
FREDERICK M.ZOSS,
•
Plaintiff 4:20-cv-4211
vs. MEMORANDUM
OPINION AND ORDER
GREG PROTSCH and
MUMFORD & PROTSCH,LLC, 1
Defendants
Pending before the Court is Defendants' Motion to Exclude the report of
Roger DeRouchey,Plaintiffs expert. (Doc. 45). Plaintiff has responded,(Doc.
51), and Defendants have replied. (Doc. 57).
Background
The factual background ofthis case has been summarized by the Court in
three previous Orders(Doc. 13,62, 63). The claim is for damages resulting from
legal malpractice and breach offiduciary duty. (Doc. 1). Plaintiff alleges
Defendant Protsch committed malpractice in his representation of Plaintiff in
connection with the sale of cattle. Defendants assert that Plaintiff caused his own
losses by entering into an ill-advised sale before contacting Protsch for legal advice
and assistance. Plaintiff has endeavored to describe his losses, and his expert.
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Michael Dove, has attributed them to Defendants, primarily in the context of
failing to mitigate Plaintiffs damages.(Doc. 46-1). Defendants have responded
with an expert, Sander Morehead, who concludes the cause ofPlaintiffs damages
is twofold: the buyer of the cattle defaulted and sold the cattle, and Plaintiff
engaged in an ill-advised transaction with the buyer.(Doc. 46-2). Plaintiff
challenges this conclusion, but an important aspect of Defendants' expert report is
his calculation that at most. Plaintiff would have recouped $38,021.43, the amount
for which the cattle were ultimately sold.(Id., PgID 466). Plaintiff has challenged
this conclusion through Dove's rebuttal.(Doc. 36-3, PgID 323). Plaintiff claims
Defendants are responsible for almost $300,000 that Plaintiff asserts could have
been recouped if Defendants had moved to resolve the issues with the sale shortly
after it occurred. The DeRouchey report(Doc. 46-3) adds supporting detail to
Plaintiffs assertions.
The facts concerning the DeRouchey report that pertain to the current
motion are as follows.(Doc. 46-3). After Defendants' submitted Morehead's
expert report,(Doc. 46-2), Plaintiff sent Defendants the DeRouchey report, an
additional report which Plaintiff characterizes as either an expert report or rebuttal
to the Morehead assertions. (Doc. 51,PgID 541-42). The report appears to be
based on Plaintiffs calculation of his losses, as supported by Dove's expert report,
and provides detail for the claim of Defendants' failure to assist Plaintiff in
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mitigating damages. (Docs. 36-1, PgID 295; 36-3,PgID 323). Defendants assert
this report is not rebuttal and is a late-submitted expert report which should be
excluded for failure to comply with the Court's deadline for submission of expert
reports.(Doc. 45, 46). Defendants also challenge the admissibility ofthe report
pursuant to PRE 702 and 703 and move to exclude it on that basis.(Id.).
Por the following reasons, the Court denies Defendants' motion to exclude
the DeRouchey report on the basis it was submitted after the deadline. The Court
offers Defendants the opportunity to submit one or more expert reports as
surrebuttal.
Legal Standard
A. Timeliness of Disclosure
Defendants challenge admission ofthe report as untimely and not qualifying
as a rebuttal report. The Eighth Circuit has provided guidance on how to handle
late disclosures of witnesses to be called at trial. In the leading case of Citizens
Bank ofBatesville, Arkansas v. Ford Motor Co., the district court allowed five
occurrence witnesses to testify, although they had not been mentioned at the
pretrial conference or listed in the pretrial witness list. 16 P.3d 965,966(8th Cir.
1994). The Eighth Circuit set forth the test for district courts to employ in
determining whether to exclude the testimony of witnesses not identified in
compliance with a pretrial order as follows: "(1)the reason the party fails to name
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the witness;(2)the importance ofthe testimony;(3)the amount oftime the
opposing party needs to properly prepare for the testimony; and(4)whether a
continuance would in some way be useful." Id. at 967(quoting Boone
V. Moore, 980 F.2d 539, 541-42(8th Cir.1992)). The court used the abuse of
discretion standard to analyze the district court's ruling allowing the testimony and
affirmed the court's decision to permit the witnesses to testify "as a search for the
truth." Id. at 967. Furthermore, the testimony was relevant and the court was
willing to grant a continuance to accommodate the opponent. Id. Given these
considerations, the Eighth Circuit affirmed.
It is noteworthy that the four factors listed above in Citizens Bank have been
augmented by subsequent cases. In Marti v. City ofMaplewood, Mo., the court
identified the Citizens Bank factors and added the following for consideration: "(1)
the prejudice or surprise in fact ofthe party against whom the excluded witness
would have testified;(2)the ability of that party to cure the prejudice;(3)the
extent to which waiver ofthe rule against calling unlisted witnesses would disrupt
the orderly and efficient trial ofthe case or of other cases in the court;(4)bad faith
or willfulness ofthe party failing to comply with the court's order." 57 F.3d 680,
683(8th Cir. 1995)(quoting Morfeld v. Kehm,803 F. 2d 1452, 1455 (8th Cir.
1986)).
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In the context of expert witnesses, F.R.C.P. 26(a)(2) addresses the disclosure
of expert testimony and directs that the required disclosures be made "at the times
and in the sequence that the court orders." Fed. R. Civ. P. 26(a)(2)(C). In the
event a party fails to abide by the court's order, the court has discretion to permit
the testimony or to exclude it pursuant to F.R.C.P. 37, which authorizes sanctions
for failing to make disclosures or to cooperate in discovery. Fed. R. Civ. P.
37(c)(1).
In Farmland Industries, Inc. v. Morrison-Quirk Grain Corp., the court
addressed the district court's denial of a motion to exclude certain testimony of an
expert witness on retrial, stating it would not reverse "absent a 'gross abuse of
discretion resulting in fundamental unfairness in the trial ofthe case.'" 54 F.3d
478, 482(8th Cir. 1995). The court found no abuse of discretion in permitting the
expert to testify when the opponent was given an additional opportunity to depose
him and was not confused or surprised by the testimony. Id.
The Eighth Circuit has made clear that expert testimony should not be
excluded ifthe failure to disclose was justified or harmless. In Trost v. Trek
Bicycle Corp., the court determined that a late disclosure approximately six weeks
before trial was not harmless, and therefore, excluding the expert's report was not
an abuse of discretion. 162 F.3d 1004, 1008 (8th Cir. 1998). Likewise, in Wcgener
V. Johnson,the court addressed the problem of expert testimony submitted two-
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and-a-half weeks prior to trial which would have supplemented testimony of
plaintiffs expert. 527 F.3d 687(8th Cir. 2008). The trial court excluded it both in
the case-in-chief and in rebuttal, which the Eighth Circuit affirmed. The court
cautioned that "the exclusion of evidence is a harsh penalty and should be used
sparingly." Id. at 692(quoting ELCA Enters, v. Sisco Equip. Rental & Sales, 53
F.3d 186, 190(8th Cir. 1995)). Even so, the district court did not abuse discretion
when it determined that failure to disclose the expert testimony was neither
justified nor harmless, trial would have been delayed yet again due to counsel's
"surprise" at the untimely disclosure and source ofthe opinion, and "a substantial
amount of other evidence was presented to the jury" on the point in question. Id. at
692.
District courts have applied these standards in numerous cases. For
example, in O'Daniel v. Stroud, NA,involving a dispute over the sale offarm
insurance, the plaintiffs expert report did not include all ofthe information
required to be disclosed pursuant to F.R.C.P. 26(a)(2)(B). 2007 WL 9773486, *1
(D.S.D. 2007). The defendants argued exclusion was required given that the report
was inadmissible and untimely, meaning discovery would have to be reopened to
permit them to depose the expert. Id. The court concluded the expert testimony was
important to the plaintiff, meaning exclusion would "significantly affect his ability
to prove his case"; plaintiff had disclosed some information about the expert before
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the discovery deadline; and the defendants would not be prejudiced by the late
disclosure, which would not necessitate a continuance. Id. at *2(citing Citizens
Bank, 16 F.3d at 966). In Janvrin v. Continental Resources, Inc., the court
addressed the problem of untimely disclosure of evidence concerning the
computation of damages. 2016 WL 4574665, *1-2(D.S.D. 2016). The court
determined the late disclosure was harmless, given that the case had not been
plagued with delays and the trial date was not set. Therefore, the court declined to
exclude the evidence or impose sanctions. Id. at *3. Similarly, this Court
addressed the problem of a late disclosed expert witness in Voss v. State Farm Fire
and Cas. Co., and determined the late disclosure was harmless given that the
failure to disclose was inadvertent and that opposing counsel had been aware ofthe
expert opinion since the filing ofthe plaintiffs proof of loss with the insurance
company. 2009 WL 1321910,*2(D.S.D. 2009).
B. Satisfaction of F.R.E. 702-703 and Daubert standard
The standards for admissibility of expert testimony addressing scientific
evidence were established in Daubert v. Merrell Dow Pharm, Inc., 509 U.S. 579
(1993). Kumho Tire Co., Ltd. v. Carmichael expanded the Daubert standard to
apply to technical and other specialized types of evidence that are the subject of
expert testimony. 526 U.S. 137, 149(1999). Subsequently the standards were
embodied in F.R.E. 702 which provides as follows:
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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 offact 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.
F.R.E. 703 addresses the bases of an expert's opinion, and among other
provisions, states that the expert's opinion may be based on facts or data that "the
expert has been made aware of or personally observed." Fed. R. Evid. 703.
The Eighth Circuit has applied the Daubert principles in many cases. Thus,
the court has held that when considering expert testimony, a district court must
ensure that it is "both reliable and relevant." Smith v. Bubak,643 F.3d 1137, 1140
(8th Cir. 2011)(citing Marmo v. Tyson Fresh Meats Inc., 457 F.3d 748, 757(8th
Cir. 2006)). Establishing relevance means "the proponent must show that the
expert's reasoning or methodology was applied properly to the facts at issue."
Barrett v. Rhodia, Inc., 606 F.3d 975,980(8th Cir. 2010)(citing Marmo, 457 F.3d
at 757). The court has relied on the holding in Kumho Tire that reliability is
established by the party offering the testimony and requires a showing "that the
expert is qualified to render the opinion" and that the testimony has "a reliable
basis in the knowledge and experience ofthe [relevant] discipline." Kumho Tire,
526 U.S. at 149(quoting Daubert, 509 U.S. at 592). See generally v.
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Toyota Motor Corporation, 867 F.3d 903, 915 (8th Cir. 2017); Barrett, 606 F.3d at
981.
The proponent ofthe expert testimony must prove its admissibility by a
preponderance. Lauzon v. Senco Products, Inc., 270 F.3d 681,686(8th Cir. 2001).
The opinion must be excluded if it "is so fundamentally unsupported that it can
offer no assistance to the jury." Nettles v. Hilton Worldwide, Inc., 2021 WL
1759227, *3(D.S.D. 2021){oyiotmg Bonner v. ISP Techs., Inc, 259 F.3d 924,929
(8th Cir. 2001)). Speculative testimony is inadmissible. Concord Boat Corp. v.
Brunswick Corp.,207 F.3d 1039, 1057(8th Cir. 2000). The Eighth Circuit has
cautioned that "the factual basis of an expert opinion goes to the credibility ofthe
testimony, not the admissibility," and furthermore, it is the responsibility ofthe
opposing party "to examine the factual basis in cross-examination." Bonner, 259
F.3d at 929.
Analysis
A. Challenge to Timeliness of Disclosure
Plaintiff did not file the DeRouchey report as an initial expert disclosure and
instead, characterizes it as a late-filed or rebuttal report to the testimony of
Defendants' expert Morehead. (Doc. 51). The Court recognizes that it is a close
question whether the DeRouchey report is properly characterized as rebuttal.
Wegener, 527 F.3d at 691-92. The court concludes the report can be characterized
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as such. Plaintiffs expert Dove discussed Defendants' failure to mitigate
damages,(Doc. 36-1,PgID 290), and offered an alternative for how that could
have been done.(Id., PgID 295). Defendants' expert Morehead concluded Dove's
alternative was not feasible and pegged the maximum amount ofPlaintiff s
damages at $38,021.44. (Doc. 36-2,PgID 306). Dove responded with several
suggestions.(Doc. 36-3,PgID 317, 322, 323). Among them was that the cattle
could have been pastured for resale later, measured "by their value a few months
down the road" after they were returned to Plaintiff. (Id., PgID 323). Therefore, in
his view, damages of$38,021.44 were inadequate. The DeRouchey report
dovetails with Dove's rebuttal to Morehead in supplying figures to counter
Morehead's figure and can be classified as rebuttal. As such, it will not be
excluded.
In the alternative, if the report is simply a late-disclosed expert report, the
factors from Citizens Bank and Marti governing exclusion of untimely disclosures
must be analyzed. The Court finds DeRouchey's testimony is important to
Plaintiffs case, which otherwise would lack a foundation for an assessment of
possible damages for failure ofDefendants to mitigate them. The Court further
finds the expert reports from Dove and Morehead alerted Defendants to the issue
of mitigation of damages, including the possible return ofthe cattle to Plaintiff s
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custody. The Court finds the Defendants are not prejudiced by the late disclosure,
given that trial is not imminent.
B. Challenge under F.R.E. 702-703 and Daubert
Defendants challenge the admissibility of DeRouchey's report pursuant to
F.R.E. 702-703. To the extent this report assesses whether Plaintiff could have
sold the cattle for a greater price than he obtained from Kinutson in December
2017, it consists of speculation and is irrelevant, and therefore is disallowed.(Doc.
46-3, PgID 480). Concord,207 F.3d at 1057. To the extent DeRouchey's
conclusions rest on Plaintiffs expert Dove's theories that the sale to Knutson
somehow could have been rescinded or unwound,that Dove opinion lacks
foundation, is speculative, and is inadmissible. By the time Mr. Zoss came to see
Defendants, the cattle had been transferred to Knutson in North Dakota. Likewise,
the Dove opinion that a security interest could have been obtained with the consent
of Town and Country Credit Union also lacks foundation, is speculative, and is
also thus inadmissible. Id. See also Nettles, 2001 WL 1759227, at *3. Town and
Country Credit Union sold the remaining cattle when they could, pursuant to their
secured position, this being directly contrary to the supposition that Town and
Country would have waived their security interest in the cattle. DeRouchey's
conclusion can be supported by Dove's other opinion that if properly done, a
super-priority purchase money security interest could have been obtained on the
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Zoss cattle. Defense expert Sander Morehead opines that under these facts it was
not possible to obtain a super-priority purchase money interest by the time Zoss
first visited with Defendants. For now,this portion of Dove's opinions can support
DeRouchey's damage opinions. The Court notes that unless there is a fact
question, it appears that the Court will ultimately decide whether or not a super-
priority purchase money interest could have been obtained on the cattle by the time
Mr. Zoss first visited with Defendants.
The amount of damages is a proper question for trial, and depends as a
threshold matter on whether Defendants are determined to have committed
malpractice. DeRouchey is qualified to give opinions on the damages sought. The
DeRouchey damage opinions will be admitted at trial as long as there is an expert
opinion establishing that there could have been a security interest created in the
cattle at the time Mr.Zoss first sought the legal assistance of Defendants.
Accordingly,IT IS ORDERED
1. That the Defendants' motion to exclude the DeRouchey report (Doc.45) as
untimely is denied;
2. That the Court defers final ruling on Defendants' motion to exclude the
DeRouchey report until there is a determination as to whether or not a security
interest could have been obtained in the Zoss cattle when Mr. Zoss first sought the
legal advice of Defendants.
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Dated this 1st day of March, 2023.
BY THE COURT:
ATTEST:
MATTHEW W. THELEN,CLERK
jLILUJL iM	CU
L
^dJL^
awrence L. Piersol
United States District Judge
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