Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_05-cv-01878/USCOURTS-cand-5_05-cv-01878-15/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:2201 Declaratory Judgement (Insurance)

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United States District Court

For the Northern District of California

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NOT FOR CITATION

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

FEDERAL INSURANCE COMPANY,

Plaintiff,

 v.

ST. PAUL FIRE AND MARINE INSURANCE

COMPANY,

Defendant. /

ST. PAUL FIRE AND MARINE INSURANCE

COMPANY,

Counterclaimant,

 v.

FEDERAL INSURANCE COMPANY and

NATIONAL UNION FIRE INSURANCE

COMPANY OF PITTSBURGH,

Counterclaim defendants. /

No. C05-01878 JW (HRL)

ORDER GRANTING ST. PAUL’S

MOTION FOR PROTECTIVE ORDER

AND TO BAR TESTIMONY

[Re: Docket No. 110]

This matter having been referred to the undersigned for disposition, on March 18, 2008,

this court heard the expedited motion for protective order and to bar testimony filed by

defendant St. Paul Fire and Marine Insurance Company (“St. Paul”). Plaintiff Federal

Insurance Company (“Federal Insurance”) opposed the motion. Upon consideration of the

moving and responding papers, as well as the arguments of counsel, this court grants the

motion.

*E-FILED 3/19/2008*

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United States District Court

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28 1 Cirrus is not a party to the instant lawsuit.

2

I. BACKGROUND

This is an insurance coverage action in which plaintiff Federal Insurance and defendant

St. Paul seek declaratory relief with respect to expenses they paid in an Underlying Litigation

pursuant to their coverage obligations to their insured, Cirrus Logic (“Cirrus”).1

 The

Underlying Litigation concerned allegations by Fujitsu Limited (“Fujitsu”) that its hard drives

were damaged by integrated circuit chips that it purchased from Cirrus. In the instant lawsuit,

the parties (all of whom are insurance companies who issued policies to Cirrus) dispute the

amount of money they were obliged to contribute to the settlement of the Underlying Litigation. 

St. Paul is Cirrus’ primary carrier. Federal Insurance’s policy is excess to St. Paul’s policy. 

The National Union policy is excess to both the St. Paul and Federal policies.

Pursuant to the court’s scheduling order, on September 20, 2007, St. Paul disclosed the

experts it intended to call at trial – among them, Craig D. Hillman, Ph.D, who served as an

expert for Fujitsu in the Underlying Litigation. St. Paul says that Dr. Hillman was retained to

opine about the evidence in the Underlying Litigation, namely (a) whether Cirrus’ chips caused

any physical damage to property other than Cirrus’ chips and (b) whether the physical damage

to those chips was gradual or sudden. These are issues which St. Paul says pertain to whether

an “impaired property” exclusion applied. St. Paul’s expert disclosure included Dr. Hillman’s

expert report and related exhibits. (Shrake Decl., Ex. 2).

Federal Insurance did not disclose any principal experts. Instead, on October 4, 2007, it

disclosed Richard A. Blanchard, Ph.D, as a rebuttal expert. Dr. Blanchard also served as an

expert for Fujitsu in the Underlying Litigation. His rebuttal report indicates that he was

“retained to review and comment on the report of Craig D. Hillman, Ph.D.” (Shrake Decl., Ex.

4).

Federal Insurance subsequently served a notice for Dr. Hillman’s deposition. St. Paul

also served a notice for the deposition of Dr. Blanchard. In the meantime, before either

deposition was taken, Judge Ware granted Federal Insurance’s motion for partial summary

judgment and denied St. Paul’s motion for partial summary judgment. In that order, Judge

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Ware considered (a) how the “impaired property” exclusion of St. Paul’s policy operates; (b)

whether a duty to defend was triggered in light of the exclusion, and (c) whether the duty to

defend was extinguished when St. Paul learned additional facts about the Fujitsu hard drives. 

Briefly stated, he concluded that St. Paul’s duty to defend arose on June 18, 2004 (when Fujitsu

filed a second amended complaint) and was not extinguished until the Underlying Litigation

concluded. (See Docket No. 88). Federal Insurance sought leave to file a motion for

reconsideration as to certain matters, but that motion was denied. (See Docket No. 101).

A dispute has now arisen as to the depositions of Drs. Hillman and Blanchard. St. Paul

says that it has re-designated Dr. Hillman as a non-testifying expert because the court’s recent

summary judgment order and its order denying reconsideration largely dispose of the issues on

which Dr. Hillman was designated to testify. It seeks a protective order preventing him from

being deposed. Additionally, it requests an order barring Federal Insurance from presenting any

testimony from Dr. Blanchard. It argues that, since Dr. Hillman will not be testifying, there will

be no need for rebuttal testimony from Dr. Blanchard. Federal Insurance disagrees, maintaining

that St. Paul cannot preclude Dr. Hillman’s deposition (or discovery of his documents) simply

by re-designating him now as a non-testifying expert. It also argues that, even if Dr. Hillman

does not testify, there is still a need for Dr. Blanchard’s testimony.

II. DISCUSSION

Rule 26(b)(4) of the Federal Rules of Civil Procedure addresses discovery from expert

witnesses. Under Fed.R.Civ.P. 26(b)(4)(A), “[a] party may depose any person who has been

identified as an expert whose opinions may be presented at trial. If Rule 26(a)(2)(B) requires a

report from the expert, the deposition may be conducted only after the report is provided.” 

FED.R.CIV.P. 26(b)(4)(A). By contrast, Fed. R. Civ. P. 26(b)(4)(B) pertains to experts who

have been retained or specially employed by a party in anticipation of litigation or to prepare for

trial and who are not expected to testify at trial. A party ordinarily may not take discovery of

those experts except as provided in Fed. R. Civ. P. 35(b) (which concerns reports of physical

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28 2 This case does not concern any physical or mental examination.

4

and mental examinations)2

 or upon a showing of “exceptional circumstances under which it is

impracticable for the party to obtain facts or opinions on the same subject by other means.” 

FED.R.CIV.P. 26(b)(4)(B).

Principally, this court must decide whether Dr. Hillman, having initially been designated

by St. Paul as a testifying expert witness (and having provided a report), but later re-designated

as a non-testifying expert, may be deposed by Federal Insurance. The parties have not cited,

and this court has not found, binding precedent on point. The issue is one which has been

addressed by a number of courts, resulting in a split of authority.

Federal Insurance urges the court to follow House v. Combined Ins. Co., 168 F.R.D. 236

(N.D. Iowa 1996). In House, plaintiff sued her former employer and supervisor for sexual

harassment and sought damages for alleged emotional distress. After defendants’ expert, a

psychiatrist, conducted a mental examination of plaintiff, plaintiff moved to compel his

deposition, as well as a copy of his examination report. Defendants then advised that they no

longer intended to call the psychiatrist to testify at trial and resisted plaintiff’s efforts to take

discovery of him.

The House court found that plaintiff was no longer “entitled” to depose the defense

expert under Fed.R.Civ.P. 26(b)(4)(A). See id. at 246. Nonetheless, it also concluded that the

“exceptional circumstances” test under Fed. R. Civ. P. 26(b)(4)(B) did not apply because, in its

view, that rule applies only to experts who have never been designated to testify at trial. Id. at

245. The court therefore applied a discretionary “balancing test,” whereby it balanced

probative value against prejudice. Id. at 246. Focusing on the nature of the testimony sought

(i.e., concerning plaintiff’s mental examination), the court found that plaintiff had an overriding

interest in presenting all evidence pertinent to her emotional distress claim. It therefore

permitted her to depose the defense expert and to call him at trial (in which event, plaintiff

would be obliged to pay his expert witness fee). Id. at 247-49.

St. Paul counters that the “exceptional circumstances” standard is the proper test to be

applied and that this court should instead follow FMC Corp. v. Vendo Co., 196 F. Supp.2d 1023

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(E.D. Cal. 2002). In FMC Corp., plaintiff sought contribution for the clean up of certain

environmental contamination. Plaintiff eventually settled with defendants. As part of that

settlement, plaintiff agreed to withdraw its expert designations and further agreed that it would

not make its expert work product available to a third-party defendant. The third-party

defendant subpoenaed plaintiff’s experts to testify at trial. Defendants moved to quash the

subpoena, citing the settlement agreement with plaintiff. Id. at 1041.

The FMC Corp. court distinguished House on the ground that “[u]nlike House, the

experts here have not performed a personal medical examination pursuant to Rule 35, nor

scientific tests that are unavailable or unduplicatable.” Id. at 1046. After reviewing cases

addressing the issue, the court rejected House’s “balancing test” and held that the “exceptional

circumstances” standard applies, including in those situations where an expert’s report or

opinions are disclosed before the expert is re-designated as a non-testifying expert. Id. at 1046. 

Finding that the third-party defendant made no showing that the information and opinions of

plaintiff’s experts were otherwise unobtainable or incapable of being reproduced, and in light of

the “strong policy against permitting a non-diligent party from free-riding off the opponent’s

industry and diligence,” the court concluded that the third-party defendant should not be

allowed to depose plaintiff’s experts to or to call them at trial. Id. at 1046-47. The court further

noted that, even under House’s “balancing standard,” the third-party defendant’s lack of

diligence in designating its own experts and the prejudice to plaintiff outweighed the probative

value of the testimony being sought. Id. at 1047-48. Moreover, it noted that because a new

scheduling order was being entered, the third-party defendant would have ample time in which

designate its own experts. Id.

This court agrees that Federal Insurance is no longer entitled to depose Dr. Hillman

under Fed. R. Civ. P. 26(b)(4)(A). Moreover, it appears that the majority of courts that have

confronted this issue have concluded that the “exceptional circumstances” standard applies. See

Estate of Manship v. United States, 240 F.R.D. 229, 235-37 (M.D. La. 2006) (reviewing cases). 

Accordingly, this court concludes that the “exceptional circumstances” test should be used here.

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Even so, Federal Insurance emphasizes that Dr. Hillman’s expert report was produced

before St. Paul re-designated him as a non-testifying expert. Indeed, several decisions suggest

that discovery of a withdrawn expert should be permitted where that expert provided testimony

or produced a report before re-designation. See e.g., Estate of Manship, 240 F.R.D. at 237

(concluding that exceptional circumstances did not exist to justify a deposition where the

experts would not testify at trial and did not produce expert reports); Ross v. Burlington

Northern Railroad Co., 136 F.R.D. 638 (N.D. Ill. 1991) (concluding that the protections of

Fed.R.Civ.P. 26(b)(4)(B) for non-testifying experts were not waived where nothing more than

the identity of the expert and the subject matter of his testimony was revealed); see also CP

Kelco U.S., Inc. v. Pharmacia Corp., 213 F.R.D. 176 (D. Del. 2003) (holding that where the

attorney-client privilege was waived when defendant produced certain documents to its expert

witness, defendant was required to produce those documents to the opposing party,

notwithstanding that after the expert’s deposition, defendant decided to re-designate the expert

as a non-testifying consultant).

In the instant case, however, it is not apparent that there is any need for Dr. Hillman’s

testimony. St. Paul says that the court’s recent order on summary judgment and the order

denying leave to seek reconsideration largely disposes of the issues about which Dr. Hillman

was designated to testify – i.e., whether there was damage to property other than Cirrus’ chips

and whether any damage was sudden – in support of St. Paul’s contention that an “impaired

property” exclusion applied. Further, St. Paul says that the only issue left unresolved by the

court’s summary judgment ruling – i.e., how the “Other Insurance” provisions of the St. Paul

policy apply to Cirrus’ claim – is a subject about which Dr. Hillman was never designated to

testify.

Federal Insurance does not directly dispute these contentions. Instead, it argues that

there remains a real possibility that expert evidence will be presented on the technical issues

concerning whether there was any physical damage outside the Cirrus chips and whether any

damage was sudden. Here, it expresses concern that St. Paul may assert coverage arguments

based on these technical issues, even if it will not present Dr. Hillman’s testimony to support

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them. Federal Insurance maintains that it should therefore be permitted to depose Dr. Hillman

about his knowledge as a percipient witness on a number of “collateral factual issues,”

including the tests he performed in the Underlying Litigation, as well as his knowledge of the

“state of evolving contemporaneous knowledge among the scientific community.” (Opp. at pp.

11-12). While Federal Insurance has no current plans to call Dr. Hillman to testify at trial, it

does not exclude the possibility that it will seek to do so. Here, it asserts that the court has not

said whether its summary judgment ruling as to St. Paul’s duty to defend is a conclusion of law

or is simply a finding that triable fact issues remain. As such, Federal Insurance maintains that

the door remains open for the presentation of expert evidence.

This court is unpersuaded that “exceptional circumstances” exist to justify Federal

Insurance’s request to obtain deposition or document discovery of Dr. Hillman. St. Paul says

that it did not rely on Dr. Hillman on summary judgment and further represents that it has no

intention of calling him at trial. Moreover, St. Paul points out that Dr. Hillman did not perform

any tests in connection with the instant action and that information about his work in the

Underlying Litigation and all of the work which formed the basis for his report in the instant

action is accessible to Federal Insurance in the records from the Underlying Litigation –

including six days of deposition testimony by Dr. Hillman. (See Shrake Reply Decl., Exs. 3-8).

Moreover, there is nothing in the record before this court to suggest that the redesignation was prompted by anything other than the current posture of these proceedings. 

Federal Insurance theorizes that Dr. Hillman must have changed his mind about the opinions

rendered in his expert report and further hypothesizes that the re-designation is little more than

an eleventh hour attempt to conceal what must be unfavorable opinions for St. Paul. However,

Federal Insurance’s supposition is unpersuasively speculative; and, Dr. Hillman attests that

none of his opinions in this matter have changed. True, St. Paul re-designated Dr. Hillman on

the eve of his scheduled deposition. However, the re-designation came a little more than a

week after the court issued its order denying leave to seek reconsideration of its summary

judgment rulings.

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Federal Insurance maintains that, notwithstanding St. Paul’s re-designation of Dr.

Hillman, Dr. Blanchard will continue to have a role in this litigation. Here, it says that Dr.

Blanchard was retained not only to rebut Dr. Hillman’s opinion, but also to rebut any technical

arguments which might be raised. However, that contention is not borne out by the record. The

record presented shows that Dr. Blanchard was retained solely for the purpose of rebutting

opinions offered by Dr. Hillman. (Shrake Decl., Ex. 4). Since Dr. Hillman will not be

testifying, there appears to be nothing for Dr. Blanchard to rebut.

Even under the more permissive “balancing test,” Federal Insurance has not managed to

convince that discovery of Dr. Hillman should be allowed (or that testimony by Dr. Blanchard

will be necessary). Indeed, it appears to this court that, having missed the boat on the

opportunity to designate an expert to testify about technical issues, Federal Insurance now seeks

to either piggyback on St. Paul’s prior designation of Dr. Hillman or to somehow transform Dr.

Blanchard into something other than a rebuttal expert. The deadline for expert designation has

long passed, and the period for expert discovery will close in about ten days. Federal Insurance

had ample opportunity to designate principal experts to testify at trial and apparently decided

not to designate any expert testimony except in rebuttal to Dr. Hillman. Indeed, at oral

argument, Federal Insurance acknowledged that it is “at a procedural loss” because, at the time

expert designations were due, it did not anticipate that technical issues would be relevant.

Federal Insurance maintains that, even if Dr. Hillman does not testify, it will be severely

prejudiced if it is not now permitted to present any expert testimony to rebut coverage

arguments St. Paul might assert based on technical issues. However, to the extent there is any

such prejudice, it was not precipitated by St. Paul’s re-designation of Dr. Hillman, but rather, by

Federal Insurance’s decision not to designate any principal experts in the first place. Nor is

Federal Insurance saved by its offer to now re-designate Dr. Blanchard as a principal testifying

expert. See O2 Micro Int’l Ltd. v. Monolithic Power Sys. Inc., 467 F.3d 1355, 1368-69 (Fed.

Cir. 2006) (finding no abuse of discretion in denial of leave to supplement an expert report to

include a theory which was not timely disclosed under Fed.R.Civ.P. 26(a)); see also

Fed.R.Civ.P. 37(c)(1) (“If a party fails to provide information or identify a witness as required

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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.”).

Federal Insurance protests that St. Paul has, in effect, waived any objection to the

continued use of Dr. Blanchard because it did not object to the submission of his declaration on

summary judgment. As such, Federal Insurance argues that Dr. Blanchard must be permitted to

testify because his opinion has become part of the record. These arguments fail to convince. 

St. Paul’s re-designation of Dr. Hillman came well after briefing on summary judgment was

submitted. And, the court’s order denying reconsideration expressly states that the court did not

consider Dr. Blanchard’s testimony in ruling on summary judgment. (See Docket No. 101 at

3:25-26).

Accordingly, this court concludes that St. Paul’s motion should be granted.

III. ORDER

Based on the foregoing, IT IS ORDERED THAT St. Paul’s motion for protective order

as to Dr. Hillman and to bar testimony by Dr. Blanchard is GRANTED.

Dated:

 

HOWARD R. LLOYD

UNITED STATES MAGISTRATE JUDGE

March 19, 2008

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5:05-cv-1878 Notice has been electronically mailed to: 

Thomas R. Beer tbeer@barwol.com, jlee@barwol.com, mbatres@barwol.com,

tdo@barwol.com, ynesbitt@barwol.com 

Melissa A Dubbs mdubbs@ccplaw.com 

William Lee wlee@barwol.com, syoung@barwol.com 

Stephen Lynn Newton efile@newtonremmel.com, snewton@newtonremmel.com 

Marc J. Shrake mshrake@ssd.com, clopez@ssd.com, ekimble@ssd.com 

Counsel are responsible for distributing copies of this document to co-counsel who have

not registered for e-filing under the court’s CM/ECF program.

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