Fordec Realty Corp. v. Travelers Excess and Surplus Lines Company

Background

Fordec sued Travelers over the scope of insurance coverage for damage to property at 3000 Jerome Avenue, Bronx, New York. Fordec alleged that the property sustained damage from a covered event on February 19, 2017. Travelers denied the claim, citing, among other things, a policy exclusion. The opinion states that the parties disputed whether Fordec knew about a defective condition at the property before the loss.

The ruling addressed expert-witness disclosures, not whether the insurance policy covered Fordec’s loss. Federal Rule of Civil Procedure 26 requires certain experts to provide written reports describing their opinions, the reasons for those opinions, the information considered, their qualifications, prior testimony, and compensation. Rule 37 generally bars a party from using an undisclosed witness or information unless the failure was substantially justified or harmless.

Expert Disclosures and Magistrate Judge’s Order

Fordec identified four proposed expert witnesses: John Walsh and Cynthia Laracuente on behalf of IPAC, Aranit Ametaj of Freedom GS, Inc., and Ronald Ogur of Ogur P.C. Fordec initially treated Walsh and Ametaj as witnesses required to provide written reports, and Laracuente and Ogur as witnesses subject to less detailed disclosure requirements.

Fordec’s initial disclosures described the subjects of the witnesses’ expected testimony and included Walsh’s handwritten repair-cost notes. The disclosures did not include a report for Ametaj, despite stating that he would testify in accordance with an attached report. Fordec later served supplemental disclosures after Travelers identified alleged deficiencies. Travelers argued that the original and supplemental disclosures did not comply with Rule 26 and that the supplemental disclosures were late.

Magistrate Judge Fox granted Travelers’ motion to strike Fordec’s expert disclosures and preclude the four witnesses from testifying. He denied Fordec’s motion seeking confirmation that its disclosures complied with the federal rules, or alternatively seeking more time and permission to amend them. Judge Fox concluded that all four witnesses had been retained to provide expert testimony and therefore had to provide written reports. He found that the disclosures did not provide the required bases and reasons for the opinions or the facts and data considered in forming them. He also found that the supplemental disclosures were untimely and that Fordec’s failures were neither substantially justified nor harmless.

District Court Review

Fordec filed a motion for reconsideration and reargument, describing it as an appeal of Judge Fox’s order. Travelers disputed how the motion should be treated. Because Fordec filed it within 14 days and the motion substantively objected to Judge Fox’s nondispositive pretrial order, the district court treated it as a timely objection under Federal Rule of Civil Procedure 72(a).

Under that rule, a district judge may modify or set aside a magistrate judge’s order on a nondispositive pretrial matter only if the order is clearly erroneous or contrary to law. The court explained that discovery rulings receive substantial deference and that the party challenging such a ruling bears a heavy burden.

Fordec argued that its witnesses did not need reports covering work performed outside the litigation. The district court rejected that argument because Fordec did not dispute that the witnesses had at some point been retained to provide expert testimony. The court therefore agreed that Rule 26 required written reports. It also agreed that the reports failed to provide the bases and reasons for the opinions or the facts and data considered, and that the supplemental disclosures were late.

Fordec also argued that its disclosure failures were substantially justified and harmless. The district court upheld Judge Fox’s conclusion that Fordec’s attorney’s explanation did not sufficiently justify the failures. The court also upheld the finding of prejudice because Travelers would have had to guess about the missing information and could not meaningfully prepare to examine the experts.

Finally, Fordec argued that excluding the testimony was too severe a sanction. The district court recognized that exclusion is a harsh sanction but concluded that Judge Fox had considered the relevant circumstances, including the inadequate explanation for the failures, the prejudice to Travelers, and whether a continuance would cause additional delay and prejudice. The district court held that the sanction was within Judge Fox’s discretion.

Disposition

The court overruled Fordec’s objections and affirmed Judge Fox’s order. The order striking Fordec’s expert disclosures and precluding its expert witnesses’ testimony remained in effect, as did the denial of Fordec’s request for confirmation of compliance or, alternatively, a continuance and permission to amend.