Vyanet Operating Group, Inc. v. Maurice

Opinion

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Magistrate Judge S. Kato Crews

Civil Action No.: 1:21-cv-02085-CMA-SKC

VYANET OPERATING GROUP, INC.,

Plaintiff,

v.

FREDERICK J. MAURICE and CHRISTOPHER A. HEATH,

Defendants.

ORDER DENYING PLAINTIFF’S MOTION TO STRIKE AFFIRMATIVE EXPERT OPINIONS IMPROPERLY DISCLOSED AS REBUTTAL EXPERT DISCLOSURES [DKT. 49]

The disclosure of expert witnesses is governed by Fed. R. Civ. P. 26(a)(2). The Rule requires a party to “disclose to the other parties the identity of any witness it may use at trial to present evidence under Federal Rule of Evidence 702, 703, or 705.” The party who bears the burden of proof on an issue first designates their affirmative expert opinions, while the other party may designate rebuttal expert opinions to contradict or refute those affirmative opinions. Fed. R. Civ. P. 26(a)(2)(D). Plaintiff timely disclosed one retained expert witness under Rule 26(a)(2)(B), and three non-retained expert witnesses, collectively, under Rule 26(a)(2)(C). [Dkt. 49-1.] Plaintiff’s description of the opinions of the non-retained experts is somewhat vague or broad. This is because it lumps the three non-retained experts together without discerning which witness will testify to which opinions. And nearly all of their opinions are couched in terms of what these witnesses “may” testify about. [See generally Dkt. 49-2 pp. 2-11 (emphasis added).] Compare Fed. R. Civ. P. 26(a)(2)(C)(ii) (the disclosure must state “a summary of the facts and opinions to which the witness is expected to testify”) (emphasis added). The Court mentions this only because the broad or vague nature of Plaintiff’s expert witness disclosures perhaps adds to the

disconnect between the parties on the present Motion. Defendants subsequently timely disclosed four rebuttal expert witnesses. Plaintiff moves to strike these rebuttal experts arguing they express affirmative opinions that do not solely contradict or rebut the opinions of Plaintiff’s experts, and these experts offer new theories. Plaintiff’s Motion to Strike [Dkt. 49] these rebuttal expert disclosures is before this Court on referral. After carefully considering the Motion and related briefing, the expert reports, and applicable law, the Court

DENIES the Motion for the following reasons: ANALYSIS Rebuttal experts are those “intended solely to contradict or rebut evidence on the same subject matter identified” by affirmative experts. Fed. R. Civ. P. 26(a)(2)(D)(ii); E.E.O.C. v. JBS USA, LLC, No. 10–cv–02103–PAB–KLM, 2013 WL 3302429, at * 6 (D. Colo. July 1, 2013). Rebuttal experts cannot “put forth their own

theories; they must restrict their testimony to attacking the theories offered by the adversary’s experts.” Spring Creek Expl. & Prod. Co., LLC, v. Hess Bakken Inv. II, LLC, No. 14-cv-00134-PAB-KMT, 2016 WL 1597529, at *3 (D. Colo. April 21, 2016) (cleaned up). Individuals designated only as rebuttal experts may present limited testimony, may not testify as part of a party’s case-in-chief, and cannot testify “unless and until” the testimony they were designated to rebut is given at trial. Lindner v. Meadow Gold Dairies, Inc., 249 F.R.D. 625, 636 (D. Haw. 2008); see also Johnson v. Grays Harbor Cmty. Hosp., No. C06–5502BHS, 2007 WL 4510313, at *2 (W.D. Wash.

Dec. 18, 2007) (rebuttal expert witnesses would “be permitted only to offer rebuttal testimony at trial”). The Motion lays out the specific rebuttal opinions Plaintiff contends are not proper rebuttal. Defendants’ Response takes each of those rebuttal opinions and identifies the affirmative opinions they rebut. The Court juxtaposes those opinions in the following table:1 Plaintiff’s Affirmative Opinion Defendants’ Rebuttal Opinion

Plaintiff’s experts opine Plaintiff was Defendants’ experts opine that Section not required to comply with the 1.6 of the Purchase Agreement required provision in the Agreement setting forth Plaintiff to make a purchase price the 120-day deadline for the purchase adjustment 120 days after the date of price adjustment. closing.

Plaintiff’s experts opine Plaintiff was Defendants’ experts opine Plaintiff was unable to or prevented from making the able to make such an adjustment. purchase price adjustment within 120 days of the closing date.

1 Defendants’ Response [Dkt. 54] provided pinpoint citations to the record (namely the exhibits/expert reports attached to the Motion [Dkt. 49]) for each opinion listed in the Table. The Court reviewed those pinpoint citations. They are omitted from the Table for readability and to save space. Plaintiff’s experts opine that purchase Defendants’ experts opine that Section price adjustment provisions do not 1.6 of the Purchase Agreement was the create a remedy for unexpected or exclusive remedy for issues related to surprising events related to the the purchase price. purchase price.

Plaintiff’s experts opine Plaintiff sent a Defendants’ experts opine that notices timely letter requesting a purchase price seeking extension of the measure date adjustment in October 2020. and a purchase price adjustment were late.

Plaintiff’s experts opine the purpose of Defendants’ experts opine, among other the due diligence was to analyze the data opinions on due diligence, that Plaintiff’s provided on contracts and payment due diligence obligations under the information and not to determine Purchase Agreement and the due whether the Camp Fire would cause diligence conducted by Benchmark cancellations. Plaintiff’s experts also Partners was inadequate. provide the due diligence report and opine that the due diligence agent used “best efforts and professional judgment.”

Plaintiff’s experts opine Plaintiff and its Defendants’ experts opine Plaintiff representatives lacked knowledge about should have been aware of the Camp the Camp Fire. Fire and its location.

Plaintiff’s experts opine Defendants Defendants’ experts opine there was no should have disclosed the Camp Fire need for Defendants to speculate about and its impact or potential impact and the potential effects of the Camp Fire or that MAC’s books and records included to report cancellations due to the Camp accounts that were cancelled due to the Fire to Plaintiff so long as they were Camp Fire as of the closing date. “recorded in the records” of MAC before closing.

Plaintiff’s experts opine that its ability Defendants’ experts opine Plaintiff had to meet the 120-day purchase price 120 days from closing to ascertain adjustment deadline depended on it cancellations due to the Camp Fire and being able to identify and parse out seek an adjustment for them. inactive and/or cancelled accounts, including those related to the Camp Fire. Plaintiff’s experts opine Plaintiff was Defendants’ experts opine that because unaware of the Camp Fire or its “[Plaintiff] was fully aware of the 2018 potential effects on MAC’s business and Camp Fire and proceeded with the that “Defendants are trying to use the transaction anyway” it effectively relied 120-day provision for adjusting the “on the 120-day adjustment period to purchase price . . . to retain address any lost accounts and associated compensation . . . that they were not RMR [recurring monthly revenue].” entitled to retain.”

Plaintiff’s experts opine that the effect of Defendants’ experts opine that the effect the Camp Fire on the transaction was of the Camp Fire on the transaction was significant. immaterial.

Plaintiff’s experts opine Defendants Defendants’ experts opine Defendants failed to disclose certain information to disclosed all information Plaintiff and Plaintiff and its due diligence agent, Benchmark Partners requested, made Benchmark Partners; Plaintiff's experts no misrepresentations, that Defendants’ also opine on, and specifically list, warranties were true and accurate, and liabilities that Defendants failed to that Defendants did not fail to disclose disclose and representations and liabilities. warranties that were false.

Plaintiff’s experts opine Defendants Defendants’ experts opine Plaintiff failed to reduce the purchase price under waived its right to payment under the the First Addendum. First Addendum of the Purchase Agreement because it failed to seek a purchase price adjustment within 120 days.

Plaintiff’s experts opine Plaintiff was Defendants’ experts opine that Plaintiff prevented from “accurately calculating” could have put forth “any plausible the purchase price adjustment within figure” within 120 days to trigger a 120 days. review.

Plaintiff’s experts opine Plaintiff acted Defendants’ experts opine Plaintiff was reasonably. allegedly negligent.

Plaintiff’s experts opine Plaintiff’s letter Defendants’ experts opine the absence of requesting a purchase price adjustment a written agreement extending the 120- in October 2020 was timely and that it day period made Plaintiff’s request for a was prevented from making the purchase price adjustment untimely. calculation by the 120-day deadline. Plaintiff’s experts opine Plaintiff “did Defendants’ experts opine that notices of not learn of accounts cancelled . . . due to cancellation not received by the Measure the Camp Fire until long after the Date could not “be used as an closing” and that “in many cases, adjustment to the Purchase Price.” cancellation was not received for several months after the closing.”

Plaintiff’s experts opine Plaintiff’s Defendants’ experts opine Plaintiff did October 2020 request for a purchase not seek a timely purchase price price adjustment was timely. Plaintiff's adjustment under Section 1.7 [the experts also opine “[t]he Purchase attrition guaranty] of the Purchase Price Holdback is usually for a twelve- Agreement. month period from the Closing Date and is used for any initial Purchase Price Adjustments or attrition guaranties defined in the Purchase and Sale Agreement.”

Plaintiff’s experts opine on the Defendants’ experts opine Plaintiff obligations under the Agreement and decision to go forward with the the due diligence process and its purpose transaction was “conclusive proof” thereunder. Plaintiff was satisfied with its due diligence pursuant to the terms of the Agreement.

Plaintiff’s experts opine that “the 12- Defendants’ experts opine that month reconciliation spreadsheet “[b]ecause [Plaintiff] closed on the reflects the QRMR of MAC as of January transaction knowing that the results of 31, 2019, immediately before the closing critical data testing and analysis was 4 date [and] that the data used to months old, this is conclusive that determine the estimated purchase price [Plaintiff] would rely on the 120 day prior to closing was from November of adjustment period to calculate the Final 2018, which was reasonable for Purchase Price and the one year determining the estimated purchase adjustment period to calculate any claim price.” to be made under the attrition guarantee.” Rule 26(a)(2)(D)(ii) makes clear: a rebuttal expert’s testimony must relate to and rebut evidence or testimony on the same subject matter identified by another party under Rule 26(a)(2)(B) or (C). Such evidence is not tied to any particular witness; it is tied to whether the party with the affirmative burden has presented evidence and/or testimony from a duly disclosed expert on the same subject matter as that which will be rebutted by the disclosed rebuttal expert.

Bleck v. City of Alamosa, Colo., No. 10–cv–03177–REB–KMT, 2012 WL 695138, at *4 (D. Colo. March 5, 2012). The Advisory Committee Notes to Rule 26 do not explain what “same subject matter” means; but “expert reports that simply address the same general subject matter as a previously-submitted report, but do not directly contradict or rebut the actual contents of that prior report, do not qualify as proper rebuttal or reply reports.” Spring Creek Expl. & Prod. Co., 2016 WL 1597529, at *2 (citing Boles v. United States, No. 1:13-cv-489, 2015 WL 1508857, at *2 (M.D.N.C. Apr. 1, 2015). Comparing Defendants’ rebuttal opinions to Plaintiff’s affirmative opinions, as done above, it is clear those opinions directly contradict and rebut Plaintiff’s affirmative opinions.2 In this way Defendants experts were properly and timely disclosed as rebuttal experts. To the extent those rebuttal experts go further and discuss certain facts and evidence in support of their opinions, that too is not

2 In its Reply, Plaintiff did not address Defendants’ point-by-point comparison of the competing opinions, but instead defaulted to its overall argument that the rebuttal opinions are really affirmative opinions. But the side-by-side comparison makes plain the direct contradictions in the opinions on the same subject matter, as contemplated by Rule 26(a)(2)(D)(ii). improper. Rebuttal reports by their very nature require a showing of facts and evidence which support the contrary opinions. Spring Creek Expl. & Prod. Co., 2016 WL 1597529, at *3 (citing Bone Care Int'l, LLC v. Pentech Pharmaceuticals, Inc., 2010 WL 3894444, at *15 (N.D. Ill. Sept. 30, 2010)). They “may introduce new methods of analysis, if presented for the purpose of contradicting or rebutting evidence on the same subject matter.” United States v. CEMEX, Inc., No. 09-cv-00019-MSK-MEH, 2011 WL 13068613, at *1 n.1 (D. Colo. Aug. 11, 2011). “Moreover, courts have also held that a rebuttal report may consider additional data not utilized in the expert report, again, if related to the same subject matter.” Id. Here, Plaintiffs expert witness disclosures describe a litany of opinions its non- retained experts “may” offer at trial. To the extent those opinions actually are offered at trial, Defendants’ rebuttal expert opinions directly contradict and rebut those opinions. The key, however, is that Plaintiff's affirmative opinions actually be elicited in the course of its case-in-chief. Since Defendants only disclosed rebuttal experts— they disclosed no affirmative experts nor sought an extension of the deadline to do so—any affirmative opinions they might endeavor to offer may be properly objected to at trial for the presiding judge’s consideration. For these reasons, the Motion is DENIED. DATED: February 9, 2023 BY THE COVRT: Che Za S. Kato Crews United States Magistrate Judge