Certain Underwriters at Lloyd's v. SSDD, LLC

Citations: 301 F.R.D. 391; 2014 U.S. Dist. LEXIS 93706; 2014 WL 3384703Docket: No. 4:13-CV-193 CAS

Court: District Court, E.D. Missouri; July 10, 2014; Federal District Court

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A declaratory judgment case involves a commercial property insurance policy from Certain Underwriters at Lloyd’s, London, issued to SSDD, LLC for a St. Louis property. SSDD filed a Motion for Sanctions and/or Motion in Limine under Rule 37 to exclude testimony from Mr. Andrew Fowles and Mr. Anthony Milo. Underwriters opposed the motion, which is fully briefed. The Court granted SSDD’s motion, barring the two witnesses from testifying at trial. 

According to Rule 26(a)(1)(A), parties must disclose individuals with discoverable information relevant to claims or defenses, and must timely correct any incomplete or incorrect disclosures as mandated by Rule 26(e). Failure to comply results in the exclusion of such evidence or testimony unless the noncompliance was justified or harmless, as outlined in Rule 37(c)(1). The purpose of discovery is to prevent unfair surprises, and the Eighth Circuit allows district courts discretion in determining remedies for noncompliance, considering factors like the reason for noncompliance, prejudice to the opposing party, trial efficiency, and the significance of the information. Rulings under Rule 26(e) are reviewed for gross abuse of discretion, with reversals occurring only in cases of fundamental unfairness.

The discovery deadline for this case was January 21, 2014, with trial set for July 21, 2014. On June 3, 2014, Underwriters provided Supplemental Responses identifying Mr. Fowles and Mr. Milo as witnesses, which SSDD claims was an unjustified late disclosure. SSDD argues that this late identification prejudices them by denying the opportunity to depose the witnesses, subpoena documents, and utilize their testimony in motions. SSDD highlights that Underwriters had previously obtained Mr. Fowles’ Declaration in January 2014, indicating he had relevant information and should have been disclosed earlier, alleging Underwriters concealed his role to impede SSDD's discovery efforts.

SSDD also points out that Mr. Milo, an employee of Madsen, Kneppers & Associates, Inc. (MKA), was not disclosed in prior responses despite Underwriters' knowledge of his involvement since at least 2012. Underwriters counter that they had no duty to supplement disclosures for either witness, arguing that SSDD was aware of Mr. Fowles well before the late disclosure, having received his Declaration in response to SSDD's defense strategy. Underwriters assert that SSDD's failure to express interest in deposing Mr. Fowles negates any claim of prejudice. For Mr. Milo, Underwriters contend he is merely a replacement for a previously disclosed witness, Mr. Gunvaldsen, who is no longer with MKA, and therefore, no duty to disclose him existed.

Underwriters argue that SSDD suffers no prejudice from the substitution of Mr. Milo for Mr. Gunvaldsen, as SSDD did not seek to depose any witnesses regarding the insurance claims. They claim any failure to supplement disclosures was justified and harmless, particularly regarding Mr. Fowles, whose testimony is deemed crucial for SSDD’s "imputation defense." The Underwriters contend that they only recognized the necessity of Mr. Fowles’ testimony after SSDD raised this defense and assert that SSDD is responsible for introducing Mr. Fowles into the dispute. They further state that SSDD did not request Mr. Gunvaldsen’s deposition, reinforcing their argument that SSDD is not prejudiced by the change.

The legal framework dictates that trial courts have the authority to exclude evidence not disclosed according to discovery rules, with Federal Rules 26(a) and 37(e) allowing for exclusions unless the failure to disclose is substantially justified or harmless. The Eighth Circuit has established that delays in disclosure that could have been avoided are not substantially justified. In this case, Mr. Fowles and Mr. Milo were disclosed as witnesses four and a half months after the close of discovery. The Court will evaluate whether the failure to disclose each witness was substantially justified or harmless.

Specifically concerning Mr. Fowles, the Court rejects Underwriters' claim that they were not required to disclose him since he was "otherwise made known" to SSDD. Evidence shows that Underwriters were aware of Mr. Fowles by late January 2014 and failed to disclose him despite having the opportunity to do so. The mere mention of Mr. Fowles in other disclosures does not absolve Underwriters from their obligation to formally disclose witnesses and their relevant information.

In Troknya v. Cleveland Chiropractic Clinic, the Eighth Circuit affirmed the district court’s exclusion of witnesses not disclosed in compliance with Rule 26, emphasizing the potential for unfair prejudice against plaintiffs. The case further discusses Underwriters’ failure to timely disclose Mr. Fowles as a witness. Despite being aware of Mr. Fowles' discoverable information by January 29, 2014, Underwriters delayed disclosure for sixty days, filing his Declaration without giving SSDD the chance to respond. SSDD's motion to strike this Declaration was deemed moot, but Underwriters were expected to supplement their disclosures nonetheless. The court found that Underwriters’ late disclosure was not substantially justified and assessed whether it was harmless. Underwriters failed to adequately argue the significance of Mr. Fowles’ testimony or how it impacted the case, and their lack of explanation for the late disclosure contributed to a finding of undue prejudice against SSDD, as there was insufficient time for adequate preparation before trial.

Granting a continuance for SSDD to take Mr. Fowles' deposition would disrupt the Court's trial schedule, particularly since this is the only case set for trial on July 21, 2014, and several out-of-town witnesses are scheduled to testify, including six from SSDD and at least one from Underwriters. The Court finds Underwriters' failure to disclose Mr. Fowles' testimony is not harmless, leading to the decision to grant SSDD's motion to exclude his testimony.

Regarding Mr. Milo, Underwriters contend they had no duty to disclose him as he is a "replacement witness" for Mr. Gunvaldsen, who was previously disclosed. They argue SSDD cannot claim prejudice since they did not depose Mr. Gunvaldsen and assert that Mr. Milo effectively serves the same role. However, the Court concludes that Underwriters had an obligation to disclose Mr. Milo in their initial disclosures, as he is a source of discoverable information relevant to their claims and defenses. The late disclosure in June 2014 is deemed unjustified. 

Underwriters have not provided evidence showing that they could not have disclosed Mr. Milo sooner, especially since Mr. Gunvaldsen left MKA in early 2014. There is no indication that Mr. Gunvaldsen lacks relevant knowledge or is unavailable for testimony. The assertion that Mr. Milo can simply replace Mr. Gunvaldsen lacks support; their roles in preparing the hail damage report are not sufficiently defined to establish interchangeability. Furthermore, SSDD's lack of deposition of Mr. Gunvaldsen does not eliminate the possibility of prejudice stemming from the late disclosure of Mr. Milo.

SSDD has been prevented from examining MKA’s hail damage report, similar to the issues faced with Mr. Fowles, due to the proximity of the trial. Consequently, the Court has decided to grant SSDD’s motion to exclude Mr. Milo’s testimony. The Court also ruled that SSDD’s motion to exclude the testimonies of late-disclosed witnesses, Mr. Fowles and Mr. Milo, is granted based on Underwriters’ non-compliance with Rules 26(a) and (e). The Court found that Underwriters’ failure to disclose was neither substantially justified nor harmless, and it caused significant prejudice to SSDD. Therefore, SSDD’s Motion for Sanctions and/or Motion in Limine to exclude the testimonies at trial is granted. SSDD attempted to strike Mr. Fowles’ Declaration because he had not been previously disclosed, but this motion was denied as moot after the Court ruled on the parties' summary judgment motions. Underwriters acknowledged that they were aware by late January 2014 that Mr. Fowles had relevant information, but he was not initially intended to be a witness until the last day of discovery, following SSDD’s new defense raised during Mr. Rogers’ deposition on January 21, 2014. Mr. Fowles’ Declaration was dated January 29, 2014.