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Apex Abrasives Inc. v. WGI Heavy Minerals Inc.

United States District Court, D. Montana, Butte Division

March 28, 2019

APEX ABRASIVES, INC., Plaintiff,
v.
WGI HEAVY MINERALS, INC., WGI HEAVY MINERALS, LLC, and DOE BUSINESS ENTITIES 1-3, inclusive, Defendants.

          ORDER

          Donald W. Molloy, United States District Judge.

         This case arises out of a dispute between the parties regarding the production and sale of commercial-grade garnet. Plaintiff Apex Abrasives, Inc. ("Apex") alleges that following its construction of a garnet processing facility in Glen, Montana, it was forced to cease operations and liquidate its inventory because WGI Heaving Minerals, Inc. and WGI Heavy Minerals, LLC (collectively "WGI") violated their purchase agreement. WGI objects to Apex's expert disclosure for Julie Fagenstrom[1] and seeks to exclude her from offering expert testimony at trial. (Doc. 208.) Argument on the motion was heard on March 28, 2019. Ultimately, the inadequacy of Ms. Fagenstrom's expert disclosure excludes her expert testimony at trial, but she is permitted to testify as a fact witness.

         Parties are required to make their expert disclosures at the time and in the manner ordered by the Court. Goodman v. Staples The Office Superstore, LLC, 644 F.3d 817, 827 (9th Cir. 2011). If a party fails to properly disclose this information, the party cannot use the non-disclosed information at trial "unless the failure was substantially justified or is harmless." Fed.R.Civ.P. 37(c)(1); Yeti by Molloy, Ltd. v. Deckers Outdoor Corp., 259 F.3d 1101, 1106 (9th Cir. 2001). The parties were reminded of this potential sanction in the Scheduling Order, which states: "An inadequate report or disclosure may result in exclusion of the expert's opinions at trial even though the expert has been deposed." (Doc. 205 at ¶ 9(c).)

         Rule 26(a)(2) provides for disclosures by two types of expert: those retained or specifically employed to give expert testimony in a case, Fed.R.Civ.P. 26(a)(2)(B), and those who are not retained or specially employed, but who nonetheless may provide expert testimony, Fed.R.Civ.P. 26(a)(2)(C). An expert who falls into the first category is required to provide an expert report. Fed.R.Civ.P. 26(a)(2)(B). An expert who falls into the second category, however, need only provide disclosures stating both "the subject matter on which the witness is expected to present evidence under Federal Rule of Evidence 702, 703, or 705 [] and ... a summary of the facts and opinions to which the witness is expected to testify." Fed.R.Civ.P. 26(a)(2)(C)(i), (ii).

         Here, Julie Fagenstrom was disclosed as a non-retained expert under Rule 26(a)(2)(C). While WGI does not dispute that the disclosure adequately states the subject matter of her anticipated testimony, Fed.R.Civ.P. 26(a)(2)(C)(i), it argues the disclosure fails to provide a summary of the facts and her opinions, Fed.R.Civ.P. 26(a)(2)(C)(ii). Ms. Fagenstrom's disclosure states:

         Ms. Fagenstrom provided bookkeeping and accounting services for Apex Abrasives. She is a Nelson family member and it's [sic] not receiving compensation for participating as a witness in this case.

         A. The Subject Matter on Which Ms. Julie Fagenstrom Is Expected to Present Evidence under Federal Rule of Evidence 702, 703, or 705

1. Apex Accounting and Ledger Entries

         B. Summary of the Facts and Opinions to Which [Ms. Julie Fagenstrom] [2] Is Expected to Testify

1. Ms Fagenstrom [sic] will rely on her experience and knowledge as an accountant; and her personal knowledge of Apex' [sic] financial and production records and related exhibits.
2. Based on the foregoing, Ms. Fagenstom will testify regarding funds Apex was forced to borrow to sustain operations during the contract period when WGI did not purchase the minimum specified tonnages, which borrowed funds are due and owing to the private lender.
3. Based on the foregoing, Ms. Fagenstom will testify regarding the expenditure and loss of invested capital to design, construct, and permit the mill. In connection with this testimony she will opine regarding the value of the company and the effect Apex's breach of contract had on that value.
4. Based on the foregoing, Ms. Fagenstom will offer opinion testimony regarding the profit Apex could have expected to make on the sale of minimum tonnages specified in the parties' marketing agreement based upon conservative production costs of four cents per pound.
5. Based on the foregoing, Ms. Fagenstom will testify regarding revenue generated from the sale of tungsten as a by-product of garnet production and offer opinion testimony regarding the amount of revenue Apex lost because WGI failed to purchase the ...

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