Erhart v. Bofi Holding Inc.

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA

10 CHARLES MATTHEW ERHART, Case No. 15-cv-02287-BAS-NLS 11 consolidated with Plaintiff, 15-cv-02353-BAS-NLS 12 ORDER GRANTING IN PART 13 v. MOTION IN LIMINE NO. 5 TO

14 BOFI HOLDING, INC., EXCLUDE EVIDENCE OF ANY DAMAGES THAT REQUIRE 15 Defendant. COMPUTATION (ECF No. 221)

16 And Consolidated Case 17 18 19 Presently before the Court is BofI Holding, Inc. (“BofI” or “Bank”)’s Motion 20 in Limine No. 5 to Exclude Evidence of Any Damages that Require Computation. 21 (Mot., ECF No. 221.) Charles Matthew Erhart opposes. (Opp’n, ECF No. 223.) The 22 Court heard argument on the motion. (ECF No. 230; see also Hr’g Tr., ECF No. 23 234.) For the following reasons, the Court GRANTS IN PART BofI’s Motion in 24 Limine No. 5. 25 I. BACKGROUND 26 The Court and the parties are familiar with the story behind these consolidated 27 cases. After extensive discovery and motion practice, the cases now await trial. 1 government. He brings claims for, among other things, whistleblower retaliation in 2 violation of the Sarbanes-Oxley Act, whistleblower retaliation in violation of the 3 Dodd-Frank Act, and defamation under California state law. Erhart’s Complaint 4 seeks relief in the form of “compensatory damages, including lost wages, medical 5 benefits and other employment benefits,” “double back pay with interest,” “general, 6 mental and emotional distress damages,” and “punitive damages.” (Second Am. 7 Compl. 38–39, ECF No. 124.) 8 BofI’s Motion in Limine No. 5 relies on a fact that seems incredulous: Erhart 9 has not once throughout these cases ever provided an estimate of his damages. 10 (Mot. 3:1–15.) The Bank therefore seeks to preclude Erhart from presenting 11 evidence of any damages that require computation at trial. (Id. 4:21–5:2.) 12 To support its request, the Bank points to Erhart’s Rule 26 Initial Disclosures. 13 (Initial Disclosures, Katz Decl. ¶ 3, Ex. 1, ECF No. 221-3.) In disclosing the 14 “computation of each category of damages claimed,” see Fed. R. Civ. P. 26(a)(1)(iii), 15 Erhart stated: 16 Plaintiff seeks all actual, consequential and incidental financial losses, 17 including lost future wages, lost employment benefits, bonuses, overtime, vacation benefits, medical bills, mental and emotional distress, attorneys’ 18 fees and costs, and other special and general damages according to proof. 19 Discovery is ongoing. 20 (Id. 12:21–26.) 21 BofI later propounded written discovery to Erhart. The Bank’s Interrogatories, 22 Set Two, consisted of four questions regarding damages: 23 INTERROGATORY NO. 14: State the BASIS for any and all 24 compensatory damages YOU seek in YOUR COMPLAINT.

25 INTERROGATORY NO. 15: State the BASIS for any and all general 26 damages YOU seek in YOUR COMPLAINT.

27 INTERROGATORY NO. 16: State the BASIS for any and all emotional 1 INTERROGATORY NO. 17: State the BASIS for any and all punitive 2 damages YOU seek in YOUR COMPLAINT. 3 (BofI’s Interrogatories, Set Two 2:2–13, Katz. Decl. ¶ 4, Ex. 2, ECF No. 221-4.) 4 “BASIS” meant providing “the alleged connection between BofI’s conduct and 5 YOUR alleged damages, and a calculation of each damage.” (Id. 1:24–26.) After 6 raising objections, Erhart responded to the question about compensatory damages 7 with: 8 Plaintiff seeks all damages allowable by law on his claims, including without limitation past and future lost wages and benefits, penalties, 9 liquidated damages, attorneys fees and costs, and emotional distress 10 damages. All damages were proximately caused by Defendants’ acts as alleged in the First Amended Complaint. Calculations of such damages 11 shall be done in accordance with acceptable practices for determining 12 such damages. See Erhart000001-000504. 13 (Resp. to Interrogatories 7:20–26, Katz. Decl. ¶ 5, Ex. 3, ECF No. 221-5.) He 14 provided a comparable response to the other interrogatories—he stated his damages 15 will be determined “in accordance with acceptable practices” for doing so and 16 provided a blanket citation to “Erhart000001-000504.” (Id. 8:16–24; 9:16–24; 11:6– 17 10.) 18 Further, the Bank met and conferred with Erhart unsuccessfully on the 19 damages issue, including before filing its motion in limine. (Katz Decl. ¶ 7; see also 20 Hr’g Tr. 47:6–9 (noting the Bank met and conferred with Erhart “two-plus years ago 21 and several occasions since”).) 22 Erhart briefly responds to the Bank’s motion. (Opp’n 11:16–12:14.) He does 23 not submit any evidence or discovery materials with his response. Instead, he argues 24 “the jury, not Mr. Erhart, will compute the damages to which he is entitled.” (Id. 25 13:2–3.) Hence, Erhart argues he “was ‘substantially justified’ in not providing any 26 computation” of his damages to the Bank. (Id. 13:4–5.) 27 Given this lackluster response, the Court at oral argument said it was inclined 1 never disclosed his damages. (Hr’g Tr. 43:12–50:19.) Counsel first responded, “I 2 guess we are unaccustomed to feeling like we have to put on an expert for simple 3 computation damages.” (Id. 43:25–44:26.) Yet, the Court highlighted the issue is 4 not one of needing expert testimony, but rather that Erhart never provided any 5 statement of his claimed damages in discovery. (Id. 43:25–44:7.) Erhart’s counsel 6 next responded that Erhart did enough because “[w]e showed them all the records of 7 what his earnings were post-termination.” (Id. 44:8–11; but see Initial Disclosures 8 12:21–26 (seeking “all actual, consequential and incidental financial losses, 9 including lost future wages, lost employment benefits, bonuses, overtime, vacation 10 benefits, medical bills, mental and emotional distress, attorneys’ fees and costs, and 11 other special and general damages according to proof”).) 12 When pressed further about Erhart’s failure to provide any of his claimed 13 damages in response to the Bank’s written discovery, counsel responded that the 14 Bank “seem[ed] to have no trouble hiring an expert to make those exact computations 15 with the evidence that we turned over to them.” (Hr’g Tr. 44:12–24.) Ultimately, 16 having not received a straightforward response to its questions, the Court inquired 17 about specific categories of damages and again asked why Erhart did not “provide 18 any estimate of his damages whatsoever,” to which counsel responded: 19 I have to say I’m sorry. I am sorry. My associate was there handling this. They – we had income – I thought that all the meet-and-confers we did 20 were so inconclusive, and then they got dropped, and no one picked up 21 on them for these couple years.

22 So my bad if I didn’t sufficiently get involved and see that, oops, we 23 should have done something we didn’t do. 24 (Id. 49:24–50:5.) The Court took the motion under submission. 25 II. ANALYSIS 26 A. Compliance with Rule 26 27 Federal Rule of Civil Procedure 26 requires that a party’s initial disclosures 1 party.” Fed. R. Civ. P. 26(a)(1)(A)(iii). The purpose of Rule 26’s initial disclosures 2 is to enable defendants to understand their potential exposure and make informed 3 decisions as to settlement and discovery. City & Cty. of San Francisco v. Tutor- 4 Saliba Corp., 218 F.R.D. 219, 221 (N.D. Cal. 2003); see also Hewlett Packard Co. 5 v. Factory Mut. Ins. Co., No. Civ. 04-2791 TPG DF, 2006 WL 1788946, at *14 6 (S.D.N.Y. June 28, 2006) (“[E]arly disclosure of a party’s damages computation 7 provide[s] [the] opposing party with an early understanding of the basis and amount 8 of any damages claim it is facing, so that it may conduct meaningful discovery as to 9 the underpinning of such a claim.”). 10 “A computation of damages may not need to be detailed early in the case 11 before all relevant documents or evidence has been obtained by the plaintiff. As 12 discovery proceeds, however, the plaintiff is required to supplement its initial 13 damages computation to reflect the information obtained through discovery.” LT 14 Game Int’l Ltd. v. Shuffle Master, Inc., No. 2:12-cv-01216-GMN, 2013 WL 321659, 15 at *6 (D. Nev. Jan. 28, 2013); see also Fed. R. Civ. P. 26(e). Moreover, 16 “[c]omputation of each category of damages,” as used in Rule 26, “contemplates 17 some analysis beyond merely setting forth a lump sum amount for a claimed element 18 of damages.” Silver State Broad., LLC v. Beasley FM Acquisition, No. 2:11-CV- 19 01789-APG-CWH, 2016 WL 320110, at *2 (D. Nev. Jan. 25, 2016) (citing Tutor- 20 Saliba Corp., 218 F.R.D. at 221), aff’d, 705 F. App’x 640 (9th Cir. 2017); see also 21 Grouse River Outfitters, Ltd. v. Oracle Corp., 848 F. App’x 238, 244 (9th Cir. 2021) 22 (“Rule 26(a)(1)(A)(iii) contemplates damages computation analysis and 23 explanation.”). 24 Accordingly, a plaintiff “cannot shift to the defendant the burden of attempting 25 to determine the amount of the plaintiff’s alleged damages.” Jackson v. United 26 Artists Theatre Circuit, Inc., 278 F.R.D. 586, 593–94 (D. Nev. 2011). “The 27 Defendants are not required to compute damages, Rule 26 requires plaintiffs to do 1 Here, Erhart failed to comply with Rule 26’s disclosure requirement. He did 2 not even provide a lump sum for each category of damages, let alone a computation 3 and analysis. And Erhart’s argument that he provided the relevant documents for 4 BofI to figure out his damages is not well taken. Rule 26(1)(A)(iii) plainly requires 5 Erhart to provide “a computation of each category of damages” in addition to 6 “mak[ing] available for inspection and copying . . . the documents . . . on which each 7 computation is based.” Fed. R. Civ. P. 26(1)(A)(iii); see also, e.g., Design Strategy, 8 Inc. v. Davis, 469 F.3d 284, 295 (2d Cir. 2006) (reasoning that Rule 26 “by its very 9 terms” requires more than providing documents without any explanation); Agence 10 France Presse v. Morel, 293 F.R.D. 682, 685 (S.D. N.Y. 2013) (“Put simply, 11 damages computations and the documents supporting those computations are two 12 different things, and Rule 26 obliges parties to disclose and update the former as well 13 as the latter.”). For example, to assess his claim for future damages and “front pay” 14 (see Hr’g Tr. 48:4), BofI would need to know items like how long Erhart expected to 15 work at BofI, what his expected salary with a new employer would be, and other 16 matters. Cf. Passantino v. Johnson & Johnson Consumer Prod., Inc., 212 F.3d 493, 17 511–13 (9th Cir. 2000) (reviewing damages award for front pay in Title VII and 18 Washington anti-discrimination law case that was based on expected retirement age, 19 salary at a different employer, potential promotion path, expected cash and stock 20 bonuses, and a position the plaintiff believed she was qualified to hold). The Bank 21 is likewise entitled to a calculation for Erhart’s claim for medical expenses. Erhart 22 “cannot shift” to BofI “the burden of attempting to determine the amount of [his] 23 alleged damages.” See Jackson, 278 F.R.D. at 593–94. 24 Hence, the Court concludes Erhart violated Rule 26 for any categories of 25 damages that can be computed. From his Initial Disclosures, these categories include 26 lost future earnings and wages, “lost employment benefits, bonuses, overtime, 27 vacation benefits, [and] medical bills.” (Initial Disclosures 12:21–26.) The same is 1 Whether Erhart violated Rule 26 for his more nebulous categories of damages 2 is a closer call. Erhart is seeking emotional distress damages, punitive damages, and 3 reputational damages. (Initial Disclosures 12:21–26; see also Second Am. Compl. ¶ 4 149 (alleging defamatory publications injured Erhart’s “personal, business, and 5 professional reputation”).) Some courts have reasoned a computation is not required 6 for these types of damages because they are “difficult to quantity” and are “typically 7 considered a fact issue for the jury.” See E.E.O.C. v. Wal-Mart Stores, Inc., 276 8 F.R.D. 637, 639 (E.D. Wash. 2011) (collecting cases); see also, e.g., Williams v. 9 Trader Publ’g, Co., 218 F.3d 481, 486 n.3 (5th Cir. 2000) (“Since compensatory 10 damages for emotional distress are necessarily vague and are generally considered a 11 fact issue for the jury, they may not be amenable to the kind of calculation disclosure 12 contemplated by Rule 26(a)(1)(C).”). Given the facts here, the Court finds those 13 opinions are persuasive. It would be difficult to quantify Erhart’s expected emotional 14 distress, punitive, and reputational damages. 15 Overall, the Court concludes Erhart violated his disclosure obligations for 16 those categories of damages that can be calculated, but did not violate his disclosure 17 obligations for his more nebulous categories of damages. 18 B. Exclusion under Rule 37 19 The Court turns to the consequence of Erhart not disclosing any of his damages 20 that can be estimated. Rule 26(e)(1)(A) requires disclosing parties to supplement 21 their prior disclosures “in a timely manner” when the prior response is “incomplete 22 or incorrect.” Fed. R. Civ. P. 26(e)(1)(A). Rule 37(c)(1) provides for exclusion of 23 any evidence or information that a party fails to disclose in a timely manner, unless 24 the violation was harmless or substantially justified. Id. 37(c)(1); see also Hoffman 25 v. Constr. Protective Servs., Inc., 541 F.3d 1175, 1179 (9th Cir. 2008); Yeti by Molly, 26 Ltd. v. Deckers Outdoor Corp., 259 F.3d 1101, 1106 (9th Cir. 2001). 27 Rule 37(c)(1) is an “automatic” sanction that prohibits the use of improperly 1 exclusion only if they prove that the discovery violations were substantially justified 2 or harmless. Id. (citing Fed. R. Civ. P. 37(c)(1)). The Ninth Circuit further explained: 3 The automatic nature of the rule’s application does not mean that a district court must exclude evidence that runs afoul of Rule 26(a) or (e)— 4 Rule 37(c)(1) authorizes appropriate sanctions “[i]n addition to or instead 5 of [exclusion].” Fed. R. Civ. P. 37(c)(1). Rather, the rule is automatic in the sense that a district court may properly impose an exclusion sanction 6 where a noncompliant party has failed to show that the discovery 7 violation was either substantially justified or harmless. 8 Merch. v. Corizon Health, Inc., 993 F.3d 733, 740 (9th Cir. 2021) (alterations in 9 original). 10 Accordingly, where a failure to provide a computation of damages was not 11 substantially justified or harmless, courts have granted motions in limine to preclude 12 evidence of those damages under Rule 37(c)(1)’s automatic sanction. See, e.g., 13 Hoffman, 541 F.3d at 1179–80 (holding district court did not abuse its discretion in 14 excluding evidence of damages under the Fair Labor Standards Act and California 15 Labor Code provisions where damage calculations were not disclosed); Grouse River 16 Outfitters, 848 F. App’x at 244 (concluding district court did not abuse its discretion 17 in excluding evidence of damages where plaintiff did not adequately disclose 18 damages computation and explanation). 19 Erhart does not meet his burden to avoid Rule 37(c)(1)’s sanction. His 20 counsel’s justifications, including that BofI could figure out his damages with an 21 expert and that a junior attorney is to blame, are unacceptable. See Atari Interactive, 22 Inc. v. Redbubble, Inc., No. 18-CV-03451-JST, 2021 WL 2766893, at *4 (N.D. Cal. 23 June 29, 2021) (“Atari has offered no justification for its failure to disclose damages 24 calculations or evidence other than its incorrect assertion that no disclosure was 25 required.”); cf. Liew v. Breen, 640 F.2d 1046, 1050 (9th Cir. 1981) (reasoning a “good 26 faith dispute concerning a discovery question might, in the proper case, constitute 27 ‘substantial justification’”). 1 Nor does Erhart prove the violation was harmless. He attaches no evidence to 2 his response to the Bank’s motion. The Court will not assume the Bank had all the 3 information it needed to surmise Erhart’s various damages. And even if BofI did, 4 the violation still deprived the Bank of the “damages computation analysis and 5 explanation” that it was entitled to at the outset of discovery, not on the doorstep of 6 trial. See Grouse River Outfitters, 848 F. App’x at 244. Hence, BofI has not had the 7 opportunity to fully assess and investigate Erhart’s claimed damages. See Tutor- 8 Saliba Corp., 218 F.R.D. at 221; see also Hewlett Packard Co., 2006 WL 1788946, 9 at *14 (explaining early disclosure of a party’s damages computation allows the 10 opposing party to “conduct meaningful discovery as to the underpinning of such a 11 claim”). So, on this record, which is blank, the Court cannot conclude Erhart meets 12 his burden. 13 The question, then, is whether the Court should order Erhart to disclose his 14 calculable damages at the eleventh hour, instead of excluding the evidence, and 15 consider imposing other sanctions. See Merch., 993 F.3d at 740 (explaining Rule 16 37(c)(1) authorizes appropriate sanctions “[i]n addition to or instead of [exclusion]”). 17 The Court finds the default sanction—exclusion—is the appropriate consequence 18 here. By the time the Bank brought this motion in limine, discovery had long been 19 closed. Further, BofI argues prejudice exists because it may need to reopen Erhart’s 20 deposition, subpoena his current employer or historical employers, or have an expert 21 do a supplemental report to respond to the belated disclosures. (Hr’g Tr. 46:24– 22 47:17.) The Court agrees. “Where late disclosure of damages would likely require 23 the Court ‘to create a new briefing schedule and perhaps re-open discovery, rather 24 than simply set a trial date,’ a failure to disclose is not harmless.” Fed. Trade 25 Comm’n v. Cardiff, No. ED CV 18-2104-DMG (PLAx), 2021 WL 3616071, at *5 26 (C.D. Cal. June 29, 2021) (quoting Hoffman, 541 F.3d at 1180); see also, e.g., Yeti 27 by Molly, 259 F.3d at 1107 (finding harm to party that would have had to depose and 1 ||LLC vy. Sara Lee Corp., No. 3:11-CV-3296-L, 2019 WL 1098992, at *9 (N.D. Tex. 2 Mar. 8, 2019) (reasoning “it would be fundamentally unfair to subject [defendant] to 3 |/a continuance under these circumstances, especially given [plaintiff's] failure to offer 4 ||any explanation for its failure to disclose [its] damages calculations years earlier in 5 ||compliance with Rule 26”). 6 In sum, Erhart violated Rule 26 by failing to provide any estimate of his 7 ||calculable damages throughout these cases. He does not meet his burden to show 8 || this violation was substantially justified or harmless. Therefore, the Court grants the 9 ||Bank’s request to exclude evidence of those damages under Rule 37(c)(1).! 10 CONCLUSION 11 For the foregoing reasons, the Court GRANTS IN PART Bofl’s Motion in 12 ||Limine No. 5 to Exclude Evidence of Any Damages that Require Computation. 13 (ECF No. 220.) The Court excludes evidence of those categories of damages that are 14 ||computable: Erhart’s claims for future wages and earnings, lost employment benefits, 15 ||bonuses, overtime, vacation benefits, medical expenses, and back pay. The Court 16 ||declines to exclude evidence of those categories of damages that are difficult to 17 || quantity: Erhart’s claims for emotional distress damages, reputational damages, and 18 punitive damages. 19 IT IS SO ORDERED. 20 /) oF 21 DATED: January 13, 2022 Cupid (Highta. 6 How. Cynthia Bashant 2 United States District Judge 23 24 || —__————— ' As the Ninth Circuit noted, there is “some support” for the argument that the Court 25 |!“should consider factors traditionally considered in evaluating dismissal sanctions under Rule 37(b)(2)(A)(v)” when excluding “case-dispositive evidence.” Merch., 993 F.3d at 740; see also R & R Sails, Inc. v. Ins. Co. of Pa., 673 F.3d 1240, 1242 (9th Cir. 2012) (reasoning sanction amounted 27 to dismissal of a claim where the exclusion of evidence of damages led to summary judgment on the claim). Although Erhart did not raise this argument, the potentially relevant authority is 28 || distinguishable. Excluding some but not all of Erhart’s categories of damages does not deal “a fatal blow” to his claims. See Merch., 993 F.3d at 740.