TOWN & COUNTRY LINEN CORP. and TOWN & COUNTRY HOLDINGS v. INGENIOUS DESIGNS LLC

Background

The plaintiffs moved under Rules 26 and 37 of the Federal Rules of Civil Procedure to preclude, meaning bar, the defendants from offering at trial opinions contained in a supplemental expert report served after the expert-report deadline and shortly before the close of expert discovery. The underlying case involves claims for patent infringement and trade secret or idea misappropriation.

The plaintiffs’ expert calculated the defendants’ profits from the allegedly infringing goods. The defendants’ damages expert, Christopher Gerardi, submitted reports identifying costs that the defendants argued should be deducted from revenues in calculating profits. During preparation for his August 28, 2020 deposition, Gerardi identified additional costs that he had not included in his earlier reports. The parties did not dispute that the information needed to calculate those costs had been available when the original reports were prepared.

Gerardi disclosed the revised calculations during his deposition and supplied an amended supplemental report on September 3, 2020. The amendment added $4.3 million in costs and reduced the alleged profits for three claims: the Aramid Fiber Luggage trade secret or idea-misappropriation claim, the CloseDrier patent-infringement claim, and the CloseDrier trade-secret-misappropriation claim.

The parties’ positions

The plaintiffs argued that Rule 26(e) did not permit the amendment because it was based on information available when Gerardi prepared his original reports. They characterized the amendment as a new opinion about the amount and categories of deductible costs and argued that they lacked enough time to examine Gerardi further or have their own damages expert prepare a revised report.

The defendants argued that the omission would have been corrected earlier if Gerardi’s deposition had occurred as originally scheduled. They also offered to make Gerardi available for another deposition on the four new paragraphs in the amended report and to relieve the defendants of preparing a new report responding to any resulting opinions. The defendants argued that the plaintiffs’ expert could respond at trial without a new report.

Court’s analysis

The court explained that Rule 26(e) requires timely supplementation when a party learns that a disclosure is incomplete or incorrect, unless the additional information was already made known during discovery or in writing. For an expert, the duty covers information in the written report and information given during the deposition.

Reading that rule together with Rule 26(a)(2)(B), which requires an expert report to contain a complete statement of the opinions the expert will express and the basis for them, the court concluded that an expert report generally should reflect the expert’s full knowledge and complete opinions when issued. The duty to supplement arises when the expert later learns information that was previously unknown or unavailable and that makes the earlier report incomplete or inaccurate. Because Gerardi already had the relevant information, the court agreed that the late amendment was not a proper supplementation under that standard.

The court nevertheless stated that precluding the testimony would be a drastic and disfavored remedy and found that the prejudice to the plaintiffs was slight. It determined that the prejudice could be addressed through a short continuance, a limited further deposition, allowing the plaintiffs’ expert to respond at trial without a new report, and requiring the defendants to pay the reasonable expenses of the continued deposition.

Order

The court ordered that:

The court adjourned the conference scheduled for September 25, 2020, to October 19, 2020, and directed the Clerk of Court to close Docket No. 190. The opinion does not expressly state that the motion was “denied,” but the court did not grant the requested preclusion remedy and instead ordered the measures above.