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Danganan v. American Family Mutual Insurance Co.

United States District Court, D. Nevada

August 2, 2018

ROBERT DANGANAN, et al., Plaintiffs,
v.
AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Defendant.

          ORDER (MOT STRIKE - ECF NO. 20)

          PEGGY A. LEEN UNITED STATES MAGISTRATE JUDGE

         The court set a hearing on defendant's Motion to Strike Plaintiffs' Rebuttal Expert Report of Charles M. Miller (ECF No. 20) on July 19, 2018 at 2:00 p.m. Kesha Hodge appeared on behalf of the plaintiffs, and Scott Flinders appeared on behalf of defendant. The court has considered motion, defendant's Erratta (ECF No. 21), plaintiff's Response and Opposition (ECF No. 22), defendant's Reply (ECF No. 24), and the arguments of counsel at the hearing. At the hearing the court granted the motion in part and denied it in part.

         BACKGROUND

         This is a breach of contract and bad faith claim arising out of claim made under a homeowner's insurance policy issued to the plaintiffs for a home located at 9610 Drayton Avenue in Las Vegas, Nevada. American Family Mutual Insurance Company (“American Family”) issued a homeowner's policy for the home and its contents. The case was initially filed in state court and Removed (ECF No. 1) November 3, 2017. Plaintiffs notified American Family, their homeowner's insurance company, on September 21, 2016, that their house had been flooded while the plaintiffs were away. American Family eventually denied coverage for the claim asserting the water damage was caused by continuous seepage, or slow escape of water involving wear and tear and deterioration, which was not covered by the policy. Plaintiffs claim that the source of the water damage was a fracture in the supply line of the downstairs bathroom. Defendant denied coverage asserting it was a continuous seepage and slow escape of water which was not covered by the policy. Plaintiffs seek damages for necessary repairs to the structure and expenses incurred from the loss in excess of $180, 000.00. The plaintiffs assert claims for breach of contract; the implied duty of good faith and fair dealing; and tortious bad faith claims handling.

         The court's initial Discovery Plan and Scheduling Order (ECF No. 10) established a May 11, 2018 discovery cutoff and other deadlines consistent with the requirements of LR 26-1. The court approved the parties' Stipulation (ECF No. 18) in an Order (ECF No. 19) which extended the discovery cutoff from May 11, 2018, to July 11, 2018. The parties did not request, and the court did not order any extension of the expert or rebuttal expert deadlines.

         In the current motion, defendant seeks to strike the report of plaintiffs' expert, Charles M. Miller. On March 12, 2018, plaintiffs disclosed a damages expert, M. Chris Gusick, but did not disclose a bad faith expert. After defendant disclosed its bad faith expert, plaintiffs served what is styled “An Expert Rebuttal Report of Charles M. Miller.” Defendant argues that Mr. Miller's opinions go beyond rebuttal of defendant's bad faith expert, Steve Plitt, and instead offers independent bad faith theories. Defendant argues that Mr. Miller only directly discusses Plitt's report in 5 paragraphs of his 80 paragraph, 46-page report. Plaintiffs have the burden of proof on their bad faith claims, but did not disclose a bad faith expert by the initial expert deadline. Defendant's expert, Plitt, offers opinions regarding whether American Family acted reasonably and properly in processing plaintiffs' claims and whether denial was reasonable. American Family's expert did not offer legal opinions as to whether there is coverage, but opinions that decisions concerning coverage was reasonable. By contrast, Mr. Miller's rebuttal report offers independent theories on both the interpretation of the policy, and reasonableness of American Family's investigation that do not directly rebut Mr. Plitt's opinions. A rebuttal report cannot be used to establish plaintiffs' case-in-chief, and a rebuttal expert may only testify after an opposing expert has testified. The rebuttal opinion is not an opportunity to cure oversights in a party's casein-chief. Accordingly, the court should strike Mr. Miller's report in its entirety and preclude plaintiffs from using it in motion practice, at hearing, or at trial.

         Plaintiffs oppose the motion arguing that expert testimony is not required to establish bad faith or to show improper claims handling. Plaintiffs argue that the motion to strike is based on the premise that expert testimony is required for plaintiffs to establish a bad faith claim. Plaintiffs rely on Tracy v. American Family, 2010 WL 3724896 (D. Nev. 2010) in which the court held that, unless a breach of contract involves unusually complex or esoteric matters beyond the ken of ordinary jurors, expert testimony is not required to establish bad faith. Plaintiffs argue that this case does not involve complex or esoteric issues, and therefore, no expert is required. However, plaintiffs argue they can “bolster” their claim through expert testimony.

         Plaintiffs represent that the need for rebuttal expert testimony only arose when American Family disclosed Steve Plitt as its bad faith expert. Plaintiffs dispute that Mr. Miller's rebuttal report only rebuts 5 of 80 paragraphs of Mr. Plitt's report. However, if the court determines that an expert on bad faith is required for plaintiffs' case-in-chief to establish their bad faith claim, then exclusion would be case dispositive. In this instance, the court must apply the Ninth Circuit five factor test. Less drastic sanctions are available. The defendant has time to depose Mr. Miller before the existing discovery cutoff, and the prejudice or surprise to American Family will be minimal.

         American Family replies that it is not seeking a ruling from the court regarding whether expert testimony is needed to establish a bad faith claim. This is an issue for the court to consider on summary judgment. Rather, American Family wants an order striking some or all of Mr. Miller's report because it is not a true rebuttal report and can only be properly used to rebut Mr. Plitt's opinions. In this case, plaintiffs concede Miller's report is only rebuttal, so the only issue is whether it is a true rebuttal report, or whether all or portions of the report should be stricken, and plaintiff should be precluded from relying on it at hearing, motion practice, or trial.

         DISCUSSION

         Rule 37(c) authorizes sanctions for a party's failure to make disclosures or cooperate in discovery:

If a party fails to provide information or identify a witness as required by Rule 26(a) or (e), the party is not allowed to use that information or witness to supply evidence on a motion, at a hearing, or at a trial, unless the failure was substantially justified or is harmless.

Fed. R. Civ. P. 37(c)(1). Rule 37 gives “teeth” to Rule 26's mandatory disclosure requirements by forbidding the use at trial of any information that is not properly disclosed. Ollier v. Sweetwater Union High Sch. Dist., 768 F.3d 843, 861 (9th Cir. 2014). Rule 37(c)(1) is a “self-executing, automatic” sanction designed to provide a strong inducement for disclosure. Goodman v. Staples, The Office Superstore, 644 F.3d 817, 827 (9th Cir. 2011). Rule 37(a)(4) explicitly provides that an evasive or incomplete disclosure, answer, or response to a discovery obligation “is to be treated as a failure to disclose, answer, or respond.”

         A “district court has wide discretion in controlling discovery.” Ollier, 768 F.3d at 862 (citing Jeff D. v. Otter, 643 F.3d 278, 289 (9th Cir. 2011). The Ninth Circuit “gives particularly wide latitude to the district court's discretion to issue sanctions under Rule 37(c)(1), ” which is “a recognized broadening of the sanctioning power.” Ollier, 768 F.3d at 859 (citing Yeti by Molly, Ltd. v. Deckers Outdoor Corp., 259 F.3d 1101, 1106 (9th Cir. 2001)). The burden is on the party facing discovery sanctions under Rule 37(c)(1) to prove harmlessness. Torres v. City of Los Angeles, 548 F.3d 1197, 12123 (9th Cir. 2008) (citing Yeti by Molly, 259 F.3d at 1107). Exclusion of an expert's testimony for failure to comply with the requirements of Rule 26(a) is a sanction available to the district court even in the absence of showing a bad faith or willfulness. Yeti by Molly, 259 F.3d at 1106. ...


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