Schreier v. Drealan Kvilhaug Hoefker & Co. P.A.

Background

Allan M. Schreier sued Drealan Kvilhaug Hoefker & Co. (DKH), an accounting firm, and Hedeen Hughes & Wetering (HHW), a law firm. He alleged professional malpractice in the management of his parents’ trusts and estates, aiding and abetting his brother Carl Schreier’s breaches of duties as co-trustee and co-personal representative, and violations of the Racketeer Influenced and Corrupt Organizations Act (RICO). Among other allegations, Schreier claimed that Carl and Michelle, Carl’s sister-in-law, paid below-market rent for family farmland and that DKH and HHW helped conceal the alleged misconduct.

Schreier later resolved related state litigation with Carl and other family members. Under the settlement, he became the sole beneficiary and trustee of his parents’ trusts and the sole personal representative of their estates. He also acquired the other family members’ claims against DKH and HHW. His proposed supplemental complaint sought additional legal fees and other amounts allegedly resulting from DKH and HHW’s conduct.

Supplemental complaint

A supplemental complaint adds claims based on events that occurred after the original complaint was filed. DKH and HHW did not object to Schreier filing the supplemental complaint, although they denied liability. Based on the parties’ stipulation, the court granted leave to file it.

The court ordered Schreier to file the supplemental complaint, in the form attached to the parties’ stipulation, within three days of the order. DKH and HHW had 21 days after that filing to respond. The court stated that the supplemental complaint adequately identified additional claims involving specifically identified fees and expenses, but did not adequately identify other claims that were not described. The court gave alleged underpayment of rent as an example of a claim not plainly shown to have been assigned to Schreier.

Request for a third expert

The scheduling order allowed each side to call up to two expert witnesses. Schreier sought permission to call a third expert about historical market rental rates for farmland. He had initially intended to use Corey Prins as a fact witness to authenticate a rental-analysis letter, but Prins was unwilling to testify as an expert. Schreier said he might therefore need another expert.

Under Federal Rule of Civil Procedure 16, a scheduling order may be changed only for good cause and with the judge’s consent. The court found that Schreier could have requested a farm-rental expert earlier, but also found that his counsel contacted Prins soon after the scheduling order was issued. The court therefore did not deny the request for lack of diligence.

The court nevertheless found no good cause for adding the expert. It reasoned that Schreier’s rental claim sought money that had remained within the family, rather than money that should have entered the family trusts from outside. Because the intra-family dispute had been settled, the court found that expert testimony about market rental rates would not be relevant to Schreier’s claims against DKH or HHW. The court also concluded that adding a third expert for Schreier, and therefore likely requiring DKH and HHW to use three experts as well, would be disproportionate to the needs of the case.

The court noted concerns about the viability of some claims, including the RICO claims, but this order did not decide whether Schreier would prevail on those claims.

Disposition

The court granted in part Schreier’s combined motion to the extent he sought leave to file a supplemental complaint. It denied in part the motion to the extent he sought to modify the scheduling order to call a third expert witness. Judge Katherine Menendez issued the order.