Exist, Inc. v. Tokio Marine America Insurance Company

Background

Exist, Inc., described in the opinion as an apparel wholesaler, alleged that a flood damaged merchandise at its warehouse in 2019. Exist sued its insurer, Tokio Marine America Insurance Company, alleging that Tokio Marine did not adequately inventory and catalog the damaged articles and therefore did not properly compensate Exist under the insurance policy. Exist also alleged conversion based on reports that some damaged garments that should have been destroyed were later found for sale at a nearby flea market.

Fact discovery closed on April 14, 2023, after several extensions. Expert discovery, which had also been extended several times, closed on July 19, 2023. On June 19, Exist served an expert report by Ron Santicola. Tokio Marine moved to strike that report under Federal Rule of Evidence 702 and the standard established in Daubert v. Merrell Dow Pharmaceuticals, Inc., rather than serving a rebuttal report.

On September 6, 2023, the court granted Tokio Marine’s motion to strike the Santicola Report. The court principally found that Exist had not shown that Santicola had specialized knowledge about the inventory-management issues involved in the case and that his report did not identify the sources, standards, or methods supporting his opinions. Exist then asked for permission to reopen expert discovery so Santicola could provide an amended report.

The Parties’ Positions

Exist sought to serve an amended report from Santicola. It said the report would include more information about his experience with inventorying and insurance claims and would add citations and sources to address Rule 702’s qualification, reliability, and methodology requirements. Exist did not attach the proposed amended report or explain specifically how it would cure the original report’s deficiencies.

Tokio Marine argued that Exist should not receive a second opportunity to repair an expert report that had been excluded for failing to comply with Rule 702. The opinion notes that neither party’s cited cases directly addressed the precise request before the court.

Analysis

The court treated Exist’s request as an effort to obtain a new expert report, not as a routine supplement under Federal Rule of Civil Procedure 26(e). Rule 26(e) permits supplementation when information in an expert report is incomplete or incorrect based on information previously unknown or unavailable. Exist acknowledged that its proposed changes would add information already known to Santicola, so the court concluded that Rule 26(e) did not provide the basis for the request.

The governing question was whether Exist had shown “good cause” under Rule 16(b)(4) to reopen the discovery schedule. Good cause depends substantially on the moving party’s diligence and requires an explanation why the information could not reasonably have been provided before the deadline. The court found that Exist did not explain why Santicola’s experience, sources, and supporting methods could not have been included in his original report.

The court also relied on the established requirement that parties presenting expert evidence meet the exacting reliability standards imposed by Rule 702 and Daubert. It rejected the idea that a party should ordinarily receive a second chance after its first expert submission fails those standards. Although district courts have broad authority to manage discovery and may reopen expert discovery in some circumstances, the court found no persuasive reason to exercise that discretion here.

The court identified additional practical concerns. Exist did not submit the proposed amended report or provide concrete information showing that Santicola could cure the defects. Reopening discovery could lead to another challenge to the report, additional expense, and delay. If Tokio Marine were then permitted to serve its own expert report out of time, the proceedings could become still more prolonged. The court also stated that it was not clear whether expert testimony was necessary for the jury to evaluate the inventory, cataloging, and destruction of the damaged products, and it did not find that denying the motion would unfairly prejudice Exist.

Disposition

The court DENIED Exist’s motion to reopen expert discovery, docket number 51. The order addressed discovery and the proposed amended expert report; it did not resolve the merits of Exist’s insurance or conversion claims.

The opinion identifies Barbara Moses as the United States Magistrate Judge who issued this order.