Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_05-cv-00151/USCOURTS-casd-3_05-cv-00151-1/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Breach of Contract

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05cv0151

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

DOS AMIGOS DISTRIBUTORS, INC., a

California corporation,

Plaintiff,

v.

CADBURY BEBIDAS, S.A. de C.V., a

Mexican corporation dba CADBURY

SCHWEPPES BEBIDAS MEXICO;

COMANIA EXPORTADORA DE

AGUAS MINERALES, S.A. de C.V., a

Mexican corporation; ALEJANDRO

ANDRADE ESCALANTE, an individual;

and DOES 1 though 10, inclusive,

Defendants; __________________________________

AND RELATED COUNTERCLAIM.

__________________________________

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Civil No. 05cv0151-L(POR)

ORDER OVERRULING

PLAINTIFF’S OBJECTIONS TO

MAGISTRATE JUDGE ORDER

This case arises out of a business dispute between Defendants, Mexican business entities

which sell, among other products, the Penafiel brand of mineral water in the United States, and

Plaintiff Dos Amigos Distributors, Inc. (“Dos Amigos”), their distributor in the United States.

The case was referred to Magistrate Judge Louisa S. Porter for determination of non-dispositive

pretrial matters, including discovery, pursuant to Federal Rule of Civil Procedure 72(a) and Civil

Local Rule 72.1(b). Dos Amigos timely filed Objections to the Magistrate Judge’s Order

Striking Plaintiff’s Supplemental Disclosure of Expert Testimony and Report (“Order”) filed

Case 3:05-cv-00151-MMA-POR Document 81 Filed 08/14/08 Page 1 of 6
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1 Plaintiff is surprised that the Magistrate Judge did not recognize the extended

deadline and remarked that both parties were in violation of the case management orders by

stipulating to extend the various discovery dates. The surprise is misplaced. Party stipulations

are “recognized as binding on the court only when approved by the judge.” Civ. Loc. R. 7.2(a). 

A review of the docket indicates that the parties did not have their stipulations approved by the

court.

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July 17, 2008. Defendants filed a response. For the reasons which follow, Plaintiff’s objections

are OVERRULED.

Plaintiff designated Vickie M. Wolf as its damages expert. The parties exchanged their

expert reports on December 12, 2007. In her initial report, Ms. Wolf opined that Plaintiff lost

$1,270,526 in profits. However, because this analysis did not take into account increased sales

over the relevant time, Plaintiff’s counsel asked her to prepare a supplemental report. (James

Decl. at 3.) In her supplemental report, Ms. Wolf opined that, based on the increased sales

assumption, Plaintiff lost $1,884,271 in profits. The supplemental report, dated January 14,

2008, was served on July 11, 2008. This was four business days before Ms. Wolf’s deposition

and two weeks before the final pretrial conference. Defendants objected to the supplemental

report as untimely. On July 17, 2008, the Magistrate Judge granted their objection and ordered

the supplemental report stricken. Plaintiff objects to the Magistrate Judge’s order.

District court review of magistrate judge orders on non-dispositive motions is limited. 

Discovery motions, such as the motion at issue here, are considered non-dispositive. See 28

U.S.C. § 636(b)(1)(A); Civ. Loc. R. 72.1(b). A district court judge may reconsider a magistrate

judge’s ruling on a non-dispositive motion only “where it has been shown that the magistrate’s

order is clearly erroneous or contrary to law.” 28 U.S.C. § 636(b)(1)(A); Fed. R. Civ. Proc.

72(a). This essentially amounts to an abuse of discretion standard. See Foster v. Skinner, 70

F.3d 1084, 1087 (9th Cir. 1995) (“An abuse of discretion occurs if the district court does not

apply the correct law or rests its decision on a clearly erroneous finding of fact.”).

The time to exchange supplemental expert reports was set in the Magistrate Judge’s

Second Amended Order Regarding Discovery and Other Pretrial Proceedings filed October 17,

2007 (“October 17 Order”). The date was set for December 28, 2007. It is undisputed that the

parties stipulated to extend the time to January 25, 2008.1

 Plaintiff argues that the supplemental

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28 2 The parties did not seek approval of the court for their stipulation.

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report was not untimely served under the October 17 Order because it was not supplemental in

the sense intended by the order. The order stated: 

Any party, through any expert designated, shall in accordance with Federal Rules

of Civil Procedure 26(a)(2)(C) and 26(e), supplement any of its expert reports

regarding evidence intended solely to contradict or rebut evidence on the same

subject matter identified in an expert report submitted by another party.

(October 17 Order at 2.) The parties do not dispute that Ms. Wolf’s supplemental report was not

intended to contradict or rebut Defendants’ expert report. Accordingly, the January 25, 2008

deadline did not apply.

Plaintiff argues that the report was supplemental as required by Rule 26(e)(1) (Objection

at 3), which provides in pertinent part:

A party who has made a disclosure under Rule 26(a) . . . must supplement or

correct its disclosure or response [] in a timely manner if the party learns that in

some material respect the disclosure or response is incomplete or incorrect, and if

the additional or corrective information has not otherwise been made known to the

other parties during the discovery process or in writing . . ..

(Emphasis added.) Assuming Plaintiff’s counsel’s afterthought regarding the increased sales

assumption qualifies as “learn[ing] that in some material respect the [expert report was]

incomplete or incorrect,” the question remains whether Plaintiff complied with Rule 26(e)(1) “in

a timely manner.” 

Plaintiff argues that his disclosure of the supplemental report was timely because it was

served before the deadline for exchanging Rule 26(a)(3) pretrial disclosures. (Objections at 4.) 

The Magistrate Judge’s Third Amended Order Regarding Discovery and Other Pretrial

Proceedings set July 7, 2008 as the deadline, but the parties stipulated to extend the time to July

21, 2008.2

 Plaintiff argues that he timely complied because he served the supplemental report

before that date. 

Plaintiff’s focus on Rule 26(a)(3) is misdirected. According to Plaintiff, the supplemental

report was required by Rule 26(e)(1), which mandates disclosure “in a timely manner.” Plaintiff

waited for six months after the supplemental report was prepared to share it with opposing

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3 Plaintiff apparently concedes his untimeliness because he offers to pay monetary

sanctions. (See Objection at 9, 10.)

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counsel on the eve of the expert’s deposition and pretrial conference. Accordingly, Plaintiff did

not comply in a timely manner.3

 

Plaintiff next argues that exclusion of the supplemental report from evidence was not an

appropriate sanction under Rule 37(c) because there was no bad faith or deception involved and

Defendants suffered no prejudice. The court disagrees. 

The rule expressly provides for exclusionary sanctions:

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. In addition to or instead of this sanction, the court, on

motion and after giving an opportunity to be heard:

(A) may order payment of the reasonable expenses, including attorney's fees,

caused by the failure;

(B) may inform the jury of the party's failure; and

(C) may impose other appropriate sanctions, including any of the orders listed in

Rule 37(b)(2)(A)(i)-(vi).

Fed. R. Civ. Proc. 37(c). “Courts have upheld the use of the sanction even when a litigant’s

entire cause of action or defense has been precluded.” Yeti by Molly, Ltd. v. Deckers Outdoor

Corp., 259 F.3d 1101, 1106 (9th Cir. 2001). 

Moreover, Plaintiff’s absence of bad faith and prejudice arguments do not address the

appropriate legal standard. “Two express exceptions ameliorate the harshness of Rule 37(c)(1): 

The information may be introduced if the parties’ failure to disclose the required information is

substantially justified or harmless.” Id. Accordingly, Plaintiff should have argued his conduct

was substantially justified or harmless.

Plaintiff delayed service of the supplemental report to review subsequently produced

documents. Ultimately none of the subsequently produced documents necessitated any further

supplementation. (See Decl. of Fred C. James at 3.) In preparation for Ms. Wolf’s deposition on

July 11, 2008, Plaintiff’s counsel noticed that the supplemental report had not been produced and

served it the same day. (Id.) Although the foregoing provides an explanation, it is hardly a

/ / / / /

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substantial justification for springing the supplemental report on the opponent on the eve of

expert deposition. 

A similar explanation was deemed insufficient in Yeti by Molly. In that case, the party

was under a mistaken belief that the opposing expert report would be supplemented again and

was waiting for the final version of that report before disclosing their own expert’s report. Yeti

by Molly, 259 F.3d at 1106. The court reasoned that “defendants could have issued a

preliminary report to be supplemented after [the opposing expert’s] report had been modified or

they could have asked for an extension of the discovery deadline.” Id. 

In this case, there appears no reason why Ms. Wolf’s supplemental report could not have

been served when it was prepared. If subsequent document productions necessitated further

supplementation, Plaintiff could have supplemented the report again pursuant to Rule 26(e) or

seek leave to supplement it, if necessary. Far from even attempting to meet and confer on the

issue of the supplemental report, Plaintiff did not mention its contemplation or existence to the

opposing counsel until July 11, 2008. (Decl. of Jeffrey A. Feasby at 2.) Plaintiff’s explanation

falls short of the requisite substantial justification.

In the alternative, Plaintiff argues that Defendants were not prejudiced because the nearly

50% percent increase in Plaintiff’s claimed damages “merely constitutes an additional

mathematical calculation and does not necessitate the designation of a rebuttal witness by

Defendants.” (Objections at 9.) In addition, Plaintiff offers to have Ms. Wolf deposed on the

supplemental report and pay monetary sanctions to compensate Defendants for the greater

expenditure for attorneys’ or experts’ fees. (Id. at 9-10.) 

Rather than arguing that the opposing side was not prejudiced, “the burden is on the party

facing sanctions to prove harmlessness.” Yeti by Molly, 259 F.3d at 1107. Plaintiff’s admission

that monetary sanctions may be appropriate alone counsels against finding that its conduct was

harmless. As anticipated by Plaintiff (see Objections at 9-10), Defendants contend that had the

supplemental report been served when it was prepared, they would have addressed the increased

sales issue in discovery by developing testimony regarding market conditions in the beverage

industry during the relevant time and their impact on profits and growth potential, and they

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would have sought to designate a beverage industry expert to dispute the sales growth

assumptions made by Ms. Wolf. (Decl. of Jeffrey A. Feasby at 2.) Plaintiff’s conduct was not

harmless.

Based on the foregoing, the Magistrate Judge did not abuse discretion when she excluded

Ms. Wolf’s supplemental report. Exclusion is an appropriate remedy for failing to fulfill the

disclosure requirements even though the litigant never violated an explicit court order to produce

the supplemental report and even absent a showing in the record of bad faith or willfulness. Yeti

by Molly, 259 F.3d at 1106. Plaintiff’s objections to the Magistrate Judge’s order are

OVERRULED.

IT IS SO ORDERED.

DATED: August 14, 2008

M. James Lorenz

United States District Court Judge

HON. LOUISA S. PORTER

UNITED STATES MAGISTRATE JUDGE

ALL PARTIES/COUNSEL

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