Sununu v. Philippine Airlines

• Court: District Court, District of Columbia
• Decided: October 4, 2010
• Docket: Civil Action No. 1998-1192
• Status: Published

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

JOHN H. SUNUNU and VICTOR H. FRANK, Jr.,

Plaintiffs,

v. Civil Action No. 98-1192 (HHK/JMF)

PHILIPPINE AIRLINES, INC.,

Defendant.

MEMORANDUM OPINION

This case was referred to me for resolution of Defendant’s Motion to Strike

Expert [#47] (“Defs. Mot.”). For the reasons stated below, the motion will be denied

without prejudice.

BACKGROUND

Plaintiffs are John H. Sununu, former Governor of New Hampshire and former

Chief of Staff to President Bush, and Victor H. Frank, Jr., former United States

Ambassador to the Asian Development Bank. Defs. Mot. at 3. Defendant is Philippine

Airlines, Inc. (“PAL”). Id. at 1. In 1997, defendant hired plaintiffs to assist in the

renegotiation of an aircraft lease with World Airways. Id. at 2. Although the

renegotiation was ultimately successful, plaintiffs claim that defendant breached the

terms of their contract by failing to pay them a “success fee.” Id. at 1. Plaintiffs therefore sued defendant for 1) breach of contract, 2) unjust enrichment, and 3) fraud. Id. at 2. On

July 31, 2009, the Court dismissed plaintiff’s breach of contract claim on the grounds

that plaintiffs failed to satisfy the terms of the agreement required in order to merit

payment of a success fee. Memorandum Opinion and Order [#19] at 4-7. Thus, the only

remaining claims are those for unjust enrichment and fraud. Id. at 8-11.

DISCUSSION

I. The Parties’ Positions

In support of their claim of unjust enrichment, plaintiffs claim that PAL “caused

Sununu and Frank to use their prestige, reputations and personal contacts to successfully

persuade World Airways to lower the lease rates” and that as a result, “PAL has been

unjustly enriched by receiving the benefits of the lower rates . . . without having to pay

either the fair and reasonable rate (10%) normally paid to third parties for achieving such

savings, or the 4% fee set out in the Agreement.” Complaint [#1] (“Compl.”) ¶¶ 22, 24.

Similar claims are made with respect to plaintiffs’ claim of fraud. Compl. ¶ 27.

In Plaintiffs’ Rule 26(a)(2) Expert Disclosures, plaintiffs indicated that they may

designate Sununu as a hybrid fact/expert witness. Defs. Mot., Exhibit A at 2-3. Plaintiffs

defined the scope of Sununu’s potential testimony to include “industry standard fee

arrangements for business consulting services, the reasonable value of the business

services furnished to [PAL], the standard fees charged for services by former White

House Chiefs of Staff to advance interests of U.S. businesses, and the value of the

political and business capital expended on behalf of [PAL].” Id. at 2. Plaintiffs later

added that Sununu’s opinions are based on his “respective knowledge and personal

2 experience in business consulting, both domestically and abroad, including representation

and negotiations of large-scale business deals” as well as “his knowledge and personal

experience as a former Chief of Staff to the President of the United States and

communications with former White House Chiefs of Staff.” Id. at 4. Finally, plaintiffs

noted that Sununu “was not retained or specially employed to provide expert testimony in

this case” and therefore was “not required to prepare a written report under Federal Rule

of Civil Procedure 26(a)(2)(B).” Id.

In the motion currently before the Court, defendant seeks to strike Sununu as an

expert witness. In support of its motion, defendant makes the following three arguments.

First, defendant claims that “Sununu cannot hold himself out as an expert witness and

then refuse to disclose the basis for the opinions he intends to introduce into evidence.”

Defs. Mot. at 8. Second, defendant argues that plaintiffs either have to file a Rule

26(a)(2)(B) expert report for Sununu or, at a minimum, allow defendant to explore the

basis of Sununu’s opinions, whether it be through deposition testimony or responses to

interrogatories. Id. at 11. Finally, defendant claims that because defendant offered to

enter into a protective order, plaintiffs cannot refuse to provide the requested information

on the grounds that it is confidential. Id. at 12-13.

II. Analysis

As noted above, plaintiffs’ breach of contract claim was previously dismissed by

the Court and the only remaining claims are those for unjust enrichment and fraud. The

gravamen of both of these claims is that PAL was unjustly enriched because it did not

have to pay the rates normally charged or the 4% contractual rate for the services it

3 received. In order to support these claims, plaintiffs must, as they concede, provide

evidence relating to 1) industry standard fee arrangements for business consulting

services, 2) the reasonable value of the services provided to defendant, 3) standard fees

charged by former White House Chiefs of Staff, and 4) the value of the capital (political

and business) expended on behalf of defendant. Defs. Mot., Exhibit A at 2. As plaintiffs

have chosen to do this through Sununu’s testimony, it is clear that at least one of the

purposes of Sununu’s testimony is to offer his opinion. See Defs. Mot. at Exhibit A.

Because defendant does not quarrel with the fact that Sununu was not “retained or

specifically employed to provide expert testimony,” or that his duties as a consultant do

not “regularly involve giving expert testimony,” the issue is under what circumstances

Sununu may, as either a hybrid/fact witness or simply a fact witness, provide opinion

testimony.

With respect to expert witnesses, Rule 26 of the Federal Rules of Civil Procedure

states that “a party must disclose to the other parties the identity of any witness it may

use at trial to present evidence.” Fed. R. Civ. P. 26(a)(2)(A). Rule 26 further requires

that the “disclosure must be accompanied by a written report–prepared and signed by the

witness–if the witness is one retained or specially employed to provide expert testimony

in the case or one whose duties as the party’s employee regularly involve giving expert

testimony.” Fed. R. Civ. P. 26(a)(2)(B). Significantly, “‘[b]y distinguishing between the

identification of an expert whose opinions may be presented at trial, and the requirement

of an expert report, Rule 26(b)(4)(A) reiterates that Rule 26(a)(2)(A) applies to all

testifying experts,’ and thus even non-retained experts are subject to deposition as fact

4 witnesses, if not the reporting requirements of Rule 26(a)(2)(B).” Beechgrove

Redevelopment, LLC v. Carter & Sons Plumbing, Heating and Air-Conditioning, Inc.,

No. 07-CIV-8446, 2009 WL 981724, at *4 (E.D. La. 2009) (quoting Hamburger v. State

Farm Mut. Auto. Ins. Co., 361 F.3d 875, 883 n.4 (5th Cir. 2004)). In addition, speaking

to subsection (b)(4)(A), the Advisory Committee noted that “the subdivision does not

address itself to the expert whose information was not acquired in preparation for trial

but rather because he was an actor or viewer with respect to the transactions or

occurrences that are part of the subject matter of the lawsuit” and that “[s]uch an expert

should be treated as an ordinary witness.” Advisory Committee’s note to the 1970

Amendment.

As an “ordinary witness,” therefore, Sununu is subject to the same discovery as

all other witnesses, including interrogatories and depositions. To allow Sununu to give

opinion testimony without permitting defendant to explore the basis for those opinions

would be to ignore the application of Rule 26 as to not just expert witnesses but as to all

witnesses. This is especially true given the broad scope of permissible discovery under

Rule 26, which states that “[p]arties may obtain discovery regarding any nonprivileged

matter that is relevant to any party’s claim or defense” and that the “[r]elevant evidence

need not be admissible at the trial if the discovery appears reasonably calculated to lead

to the discovery of admissible evidence.” Fed. R. Civ. P. 26(b)(1).

In order to prove that defendant was unjustly enriched and/or committed fraud,

plaintiffs have to establish that 10% is the “fair and reasonable rate . . . normally paid to

third parties” for achieving the type of savings they secured for PAL. In order to defend

5 against plaintiffs’ claims, defendant has to establish that 10% is not a fair and reasonable

rate, and that it is not the rate normally charged third parties. The next issue, therefore, is

whether plaintiffs, through Sununu, have provided defendant with sufficiently detailed

information to do so.

Plaintiffs cite to numerous sections of Sununu’s depositions in support of their

contention that sufficient information was provided defendant. See, e.g., Plains. Opp. at

19. In each of the sections, however, the information provided does not even come close

to giving defendant a true understanding of the way in which fee arrangements are

derived. For example, in his May 19, 2010 deposition, Sununu identified some of the

variables he considered in determining an appropriate fee:

Q Okay. And I also believe that you testified that that retainer generally varies from 20 to $40,000 a month? A That’s the usual. Q What about in 1997, was that the amount you charged? A Yes. Q And what were the factors that you considered in determining whether to charge, you know, 20,000 or 40,000 or somewhere in between? A How intense an effort it required, in terms of time, whether there was a lot of international travel, whether we had to do a lot of research work. The level of work involved, the tenure of the contract. If - - if a client would come in and make a multiyear commitment, they would generally get a little lower rate than a client who only wants to do a one-year commitment.

Plains. Opp., Exhibit 1 at 365-66.

Later in the deposition, however, Sununu refused to provide any of the details

relating to his firm’s other contracts:

6 Q . . . What I’m asking is are you expressing an expert opinion that you - - your - - the value of your services was a 7 percent success fee on success fees that you have been paid in the past - - A Yes. Q - - by other clients? A Yes. This is consistent with work we have done for other clients. Q Okay. What other client? A I’m not going to tell you. Q What kind of work have you done for the other clients? A We have - - we have done a significant solution [sic] of a conflict that had a value in the - - almost $100 million and received a success fee of 10 percent on that. Q What kind of services did you provide in that case? A We resolved a 12-year dispute and had our client paid the amount [sic] - - very significant amount. Q What was the nature of the dispute? A I’m not going to tell you.

Id. at 376-77.

By refusing to provide defendant with information about, for example, the

amount of effort other contracts required, the amount of time needed, the amount of

international travel involved, whether a lot of research was required, and the tenure of the

contract, all factors identified by Sununu previously in his deposition, he is refusing to

provide defendant with clearly relevant information. See Fed. R. Evid. 401 (“evidence

having any tendency to make the existence of any fact that is of consequence to the

determination of the action more probable or less probable than it would be without the

evidence”). Without knowing any of the specifics of plaintiffs’ other contracts,

defendant cannot possibly assess and then potentially dispute plaintiffs’ claims.

7 Additionally, the answer Sununu gave – “I am not going to tell you” – was

improper. Confronted with an objectionable question, a witness must either answer the

question or claim a privilege, with the latter being the only permissible basis for refusing

to answer a question, unless he intends to file a motion under Federal Rule of Civil

Procedure 30(d)(3). Fed. R. Civ. P. 30(c)(2). In other words, Sununu could have moved

for a protective order prior to his deposition if he had a justifiable fear that defendant’s

questions would invade a privilege recognized in law (Fed. R. Civ. P. 26(c)(1)(D)), or he

could have claimed a specific and legitimate privilege and explained at the deposition the

legal basis for his claim. Answering, “I am not going to tell you,” is a response that the

Federal Rules do not countenance.

There is a simple solution. Sununu’s deposition will be re-opened and he may be

asked the questions he refused to answer in his first deposition. Any objection based on

relevance may be made, but Sununu must answer the question, subject to that objection.

See Fed. R. Civ. 30(c)(2). He may not object, however, on the grounds of privilege; the

time for his moving for a protective order has come and gone. Instead, by the attached

order, I will order the transcript sealed and direct all participants in the deposition and all

persons in attendance at the deposition not to disclose, disseminate, or transmit anything

Sununu says.

The order I will issue is without prejudice to defendant’s motion being renewed if

Sununu still refuses to answer the questions posed.

An Order accompanies this Memorandum Opinion.

8 Digitally signed by John M. Facciola Date: 2010.10.04 11:58:02 -04'00' JOHN M. FACCIOLA UNITED STATES MAGISTRATE JUDGE