Title: Coleman, et al. v. Pricewaterhouse
Citation: N/A
Docket Number: 386, 2005, 473, 2005
State: Delaware
Issuer: Delaware Supreme Court
Date: June 19, 2006

IN THE SUPREME COURT OF THE STATE OF DELAWARE 
 
RICHARD COLEMAN, CARL 
§  
SLEDZ, MARIETTA DENNIS, 
§   Nos. 386, 2005 and 473, 2005 
STEVEN COLEMAN and 
 
§  
SHANE LYNAGH, 
 
 
§   Court Below – Superior Court 
 
 
 
 
 
 
§   of the State of Delaware, 
 
Plaintiffs Below,  
 
§   in and for New Castle County 
 
Appellants,  
 
 
§   C.A. No. 03C-02-137 
 
 
 
 
 
 
§  
 
v. 
 
 
 
 
§  
 
 
 
 
 
 
§  
PRICEWATERHOUSE   
 
§  
COOPERS, LLC,  
 
 
§  
 
 
 
 
 
 
§  
 
Defendant Below,  
 
§  
 
Appellee. 
 
 
 
§  
 
 
 
 
 
  Submitted:  April 25, 2006 
 
 
 
 
     Decided:  June 19, 2006 
 
Before STEELE, Chief Justice, HOLLAND, BERGER, JACOBS and 
RIDGELY, Justices (constituting the Court en Banc).   
 
 
Upon appeal from the Superior Court.  AFFIRMED. 
 
 
Kevin William Gibson, Esquire, Gibson & Perkins, P.C., Wilmington, 
Delaware, for appellants, Richard Coleman, Carl Sledz, Marietta Dennis, 
Steven Coleman and Shane Lynagh. 
 
 
Gregory V. Varallo, Esquire, Richards, Layton & Finger, Wilmington, 
Delaware, for appellee, PricewaterhouseCoopers, LLC. 
 
 
 
 
 
 
HOLLAND, Justice: 
 
2
 
This is an appeal from the Superior Court’s grant of summary 
judgment to the defendant-appellee, PricewaterhouseCoopers LLP (“PwC”).  
The plaintiffs-appellants, Richard Coleman, Carl Sledz, Marietta Dennis, 
Steven Coleman and Shane Lynagh (the “appellants”), filed a complaint 
alleging that PwC made negligent misrepresentations in its audit report on 
the annual financial statements of Lason, Inc., for the year ended December 
31, 1997.  The complaint also alleged that the appellants relied upon those 
financial statements to their pecuniary detriment.   
 
In this appeal, the appellants do not contend that the granting of 
summary judgment, on the record before the Superior Court, was erroneous.  
Instead, they argue that the record on which the Superior Court based its 
decision was the product of three erroneous discovery rulings.  In those three 
rulings, the Superior Court:  first, granted PwC’s motion to strike a proposed 
supplemental report by the appellants’ expert witness on auditing and 
accounting; second, denied the appellants’ motion to extend the date by 
which all discovery was to be concluded; and third, ruled as untimely filed 
an affidavit of the appellant Coleman, purporting to set forth additional 
expert testimony on behalf of himself and his co-appellants.  The appellants 
also contend that the Superior Court should have set aside, sua sponte, its 
decision granting summary judgment to PwC.  Finally, the appellants submit 
 
3
that the Superior Court should have decided the merits of their motion to 
reargue the granting of summary judgment, which the Superior Court ruled 
was untimely.   
 
We have concluded that none of the appellants’ allegations of 
reversible error are meritorious.  Accordingly, the judgment of the Superior 
Court must be affirmed. 
Facts 
 
On November 24, 1998, the appellants sold their company, Digital 
Imaging & Technologies, Inc. (“DIT”) to Lason, Inc.  The purchase 
agreement provided for a cash payment of $6.5 million at the closing, 
$2,025,000 in Lason stock, and deferred “earnout payments.”  Pursuant to 
the earnout provision, if DIT, as a Lason subsidiary that would continue to 
be managed by the appellants, achieved certain earnings targets, the 
appellants would receive additional payments according to a prescribed 
formula.   
Lason’s stock price began a sharp decline in the fall of 1999.  By the 
middle of 2000, Lason’s stock was trading at or near zero on the NASDAQ 
Stock Market, at which time it was delisted.  Lason filed for protection under 
the bankruptcy laws on December 5, 2001.  The appellants claim not to have 
received the full amount of their earnout payments. 
 
4
 
The appellants filed this action against PwC in the Superior Court on 
February 21, 2003, seeking damages under the Restatement (Second) of 
Torts, 
Section 
552. 
 
They 
allege 
that 
PwC 
made 
negligent 
misrepresentations in its audit report on Lason’s annual financial statements 
for the year ended December 31, 1997.  In that audit report, PwC stated that 
its audit of Lason’s financial statements was conducted in accordance with 
Generally Accepted Auditing Standards (“GAAS”) and that, in PwC’s 
opinion, Lason’s financial statements, in all material respects, were fairly 
stated in accordance with Generally Accepted Accounting Principles 
(“GAAP”).  The appellants contend that they suffered pecuniary loss by 
relying on this audit report to conclude that Lason’s financial statements 
supported a decision to accept Lason stock and future earnout payments as 
part of the consideration for their DIT shares.   
Discovery Schedule Established 
 
In anticipation of trial, the Superior Court held a scheduling 
conference on September 29, 2004.  During that conference, the parties 
agreed that the twenty-five depositions taken in a prior action arising from 
PwC’s audits of Lason’s annual financial statements – Carello v. 
PricewaterhouseCoopers LLP, No. 01C-10-219 (RRC) – would be treated 
as though they had taken place in the present “Coleman” litigation.  Bennett 
 
5
H. Goldstein, the plaintiffs’ expert witness on auditing and accounting in this 
case, had also been the Carello plaintiffs’ expert witness.  Accordingly, 
Goldstein already had received access to PwC’s Lason workpapers and to 
the Carello deposition transcripts.  Goldstein also had testified and 
submitted an expert report in the Carello proceedings, in which he had 
opined regarding Lason’s financial statements.   
Based upon the parties agreement concerning use of the Carello 
discovery materials, the trial judge proposed the following pretrial discovery 
schedule at the conference on September 29, 2004:  the appellants’ expert’s 
report would be due on November 12, 2004; the close of discovery would be 
set for January 28, 2005; and the trial would commence on May 9, 2005.  
Counsel for all parties agreed to the proposed schedule without expressing 
any concerns.   
On November 12, 2004, Goldstein submitted his expert report (the 
“November Report”) on behalf of the appellants.  This report – and the 
reports that he previously submitted in Carello – contained no reference to 
any material misstatements in Lason’s 1997 financial statements.  The 
appellants’ counsel did not serve any written interrogatories or requests for 
production in this matter until November 23 and 24, 2004.  The appellants 
served their first deposition notice in this matter in mid-January 2005. 
 
6
Supplemental Expert Report Filed 
 
On January 13, 2005, two days before the due date for the report of 
PwC’s accounting expert, and more than two months after the appellants’ 
expert had submitted the November Report, the appellants’ counsel sent to 
counsel for PwC via electronic mail a supplemental “report” (the 
“Supplemental Report”), consisting of a letter from Goldstein to the 
appellants’ counsel.  Goldstein maintained that the supplementation was 
necessary because he had not reviewed, until after the submission of his 
November Report, the deposition testimony of James G. Reynolds, given on 
behalf of Lason on March 11 and 12, 2004, concerning the investigation that 
had been conducted by a Special Committee of Lason’s Board.  In his 
Supplemental Report, Goldstein asserted for the first time that the Lason 
Board’s Special Committee had concluded that Lason’s 1997 financial 
statements had overstated income by approximately $5.58 million.  
Goldstein based this assertion on Reynolds’ March 2004 deposition 
testimony in the Carello matter.   
Expert’s Supplemental Report Excluded 
 
On January 18, 2005, PwC filed a motion seeking, inter alia, to strike 
appellants’ proposed Supplemental Report.  According to PwC, the record 
reflected that Goldstein had testified during his Carello deposition on April 
 
7
1, 2004 (approximately seven months before submitting the November 
Report), that he had read Reynolds’ March 2004 deposition.  PwC also 
asserted that on October 8, 2004, more than a month prior to the appellants’ 
submission of the November Report, PwC sent to the appellants’ counsel via 
overnight mail additional copies of all of the Carello deposition transcripts 
and deposition exhibits, including those of Reynolds. 
 
After briefing and oral argument on January 28, 2005, the Superior 
Court granted PwC’s motion to strike the Supplemental Report.  In a bench 
ruling, the trial judge stated several reasons for his conclusion that “no good 
cause had been shown to allow the submission of a supplemental expert’s 
report.”  Those reasons included:  (i) the undisputed fact that the appellants’ 
expert, Goldstein, had received the Reynolds transcript “in advance well in 
front of the [November 12] deadline;” (ii) Goldstein’s testimony under oath 
in April 2004 “that he had already read the [Reynolds] deposition;” (iii) the 
disruptive impact that the Supplemental Report would have had on the 
discovery schedule and on the production of PwC’s auditing and accounting 
expert’s report; (iv) appellants’ counsel’s knowledge, at the time he agreed 
to the deadline for expert reports, that the Carello depositions would be 
relevant for appellants’ expert to review; and (v) the fact that the 
Supplemental Report “was just dropped like a mini bomb into the legal 
 
8
landscape of this case without any prior telephone call to [defendant’s] 
counsel to see if that would be a problem, without any motion to extend or 
revise the trial scheduling order to allow for later discovery . . . .”   
Discretion Exercised Properly 
The standard of review with respect to pretrial discovery rulings is 
abuse of discretion.1  “When an act of judicial discretion is under review the 
reviewing court may not substitute its own notions of what is right for those 
of the trial judge, if his [or her] judgment was based upon conscience and 
reason, as opposed to capriciousness or arbitrariness.”2  This Court has 
explained the application of that standard as follows:   
Judicial discretion is the exercise of judgment directed by 
conscience and reason, and when a court has not exceeded the 
bounds of reason in view of the circumstances and has not so 
ignored recognized rules of law or practice so as to produce 
injustice, its legal discretion has not been abused.3 
 
 
In this case, the record reflects that the trial judge did not abuse his 
discretion in denying the appellants’ attempt to supplement the original 
report of their expert, Bennett H. Goldstein.  In granting PwC’s motion to 
strike, the trial judge expressed specific and cogent reasons for excluding the 
Supplemental Report.  The appellants do not contend the factual bases for 
                                          
 
1 See ABB Flakt, Inc. v. Nat’s Union Fire Ins. Co., 731 A.2d 811, 815 (Del. 1999). 
2 Chavin v. Cope, 243 A.2d 694, 695 (Del.1968).   
3Firestone Tire and Rubber Co. v. Adams, 541 A.2d 567, 570 (Del. 1988) (citing Chavin 
v. Cope, 243 A.2d at 695). 
 
9
the trial judge’s exercise of his discretion were incorrect.  Rather, the 
appellants argue that the trial judge did not appropriately “balance” the 
various factors he considered in exercising his discretion.   
In support of that assertion, the appellants’ cite this Court’s holding in 
Concord Towers, Inc. v. Long,4 to the effect that “the [trial court] must 
balance its duty to admit all relevant and material evidence with its duty to 
enforce standards of fairness and the [rules of the court].”5  The record 
reflects that the trial judge’s ruling was completely in accordance with our 
holding in Concord Towers.  The trial judge carefully considered and 
balanced the various factors relevant to his decision.6  Accordingly, we hold 
that the appellants have failed to demonstrate that the trial judge abused his 
discretion in granting PwC’s motion to strike the Supplemental Report.   
                                          
 
4 Concord Towers, Inc. v. Long, 348 A.2d 325 (Del. 1975). 
5 Id. at 326 (citing Hoey v. Hawkins, 332 A.2d 403 (Del. 1975)). 
6 Delaware courts have consistently engaged in a balancing of factors including 
considering the original scheduling order, whether there is good cause to allow the 
supplement, the prejudice to the opposing party, and possible trial delay.  Candlewood 
Timber Group, LLC v. Pan American Energy, LLC, 2006 WL 258305 (Del. Super. Ct. 
2006) (denying supplemental report because no showing of good cause); Chase 
Manhattan Mortgage Corp. v. Advanta Corp., 2004 WL 422681 (D.Del. 2004) 
(permitting supplemental report because it was not prejudicial, it was only a few weeks 
past the deadline, the trial was seven months away and the opposing party had plenty of 
time to depose the witness); Union Carbide Chems. v. Shell Oil Co., 270 F.Supp.2d 519 
(D.Del. 2003) (denying the admission of supplemental reports when the case was on 
remand, the expert discovery period was closed, and it would cause substantial prejudice 
because admitting the evidence would require considerable additional discovery).  
 
10
Discovery Schedule Properly Enforced 
 
 
On December 14, 2005, the appellants filed a motion to extend the 
discovery cutoff, along with an accompanying form of order requesting that 
discovery be extended to April 9, 2005, less than a month before the 
scheduled commencement of trial.  On January 28, 2005, the trial judge 
denied that motion, for the following reasons:  (i) that the “case [had not] 
been properly discovered when the discovery period started up anew right 
after September 28th,” based on the fact that appellants waited nearly two 
months to serve any interrogatories or document requests on PwC; (ii) that 
the appellants’ auditing and accounting expert had been the appellants’ 
expert in the prior Carello case, and as such already had reviewed the 
relevant PwC work papers and written a report opining as the 1997 financial 
statements and PwC’s audit report thereon; (iii) that 25 depositions already 
taken in Carello were fully usable in the instant case by agreement of the 
parties, substantially decreasing the amount of time needed to conduct 
additional discovery; (iv) that the appellants’ counsel had agreed to the 
schedule set in this case on September 29, 2005; (v) that the appellants had 
failed to set forth any facts constituting good cause for undoing the 
discovery schedule; (vi) that it was the trial court’s practice not to routinely 
permit discovery extensions in the absence of good cause; and (vii) that the 
 
11
requested extension would “undoubtedly jeopardize the trial date, because 
there wouldn’t be time to [properly] file and then have the Court consider 
dispositive motions.”   
 
It is well settled that “the trial court has discretion to resolve 
scheduling issues and to control its own docket.”7  The trial court’s 
resolution of pretrial scheduling issues will only be disturbed on appeal if 
there has been an abuse of discretion.  In this case, the appellants have not 
demonstrated that the trial court abused its discretion in finding that no good 
cause had been shown to extend the discovery schedule.8  As noted by the 
appellants, “‘[G]ood cause’ is likely to be found when the moving party has 
been generally diligent, the need for more time was neither foreseeable nor 
its fault, and refusing to grant the continuance would create a substantial risk 
of unfairness to that party.”9  The record reflects that the trial judge properly 
exercised his discretion in concluding that the discovery schedule should not 
be extended, as reflected in the numerous factors stated in his bench ruling 
on January 28, 2005.   
                                          
 
7 Valentine v. Mark, 873 A.2d 1099 (Del. 1005) (Table). 
8 Super. Ct. Civ. R. 16(b); Horne v. Kent Gen. Hosp., 1990 WL 127840, at *3 (Del. 
Super. Ct.) (“A scheduling order can be modified for good cause.”). 
9 3 James Wm. Moore, et al., Moore’s Federal Practice § 16.14[1][b] (3d ed. 2004). 
 
12
Coleman Affidavit Excluded 
 
On April 18, 2005, PwC filed a motion for summary judgment, based, 
inter alia, on the ground that the appellants’ auditing and accounting expert 
had failed to identify admissible evidence of any material misstatement in 
Lason’s 1997 financial statements on which they allegedly relied.  The 
appellants opposed PwC’s motion and submitted an affidavit from the 
appellant, Richard Coleman.  In that affidavit, Coleman purported, for the 
first time, to offer expert testimony, alleging that, “[us]ing [his] skills as a 
trained auditor and accountant, [he] duplicated Mr. Reynolds’ analysis and   
. . . agree[d] with his conclusion.”  The Superior Court ruled that this 
affidavit was untimely as purported expert testimony, and inadmissible as 
lay opinion testimony. 
 
The trial judge’s rulings regarding the admissibility of evidence are 
reviewed for abuse of discretion.10  The appellants allege abuse of discretion 
in the trial judge’s determination that he would not consider an affidavit of 
Richard Coleman.  The trial judge stated that he would not accept the 
Coleman affidavit “[b]ecause the testimony that Mr. Coleman would provide 
at trial pertaining to alleged material misstatements in the 1997 financial 
statements is either expert testimony proffered under Delaware Uniform 
                                          
 
10 Wien v. State, 882 A.2d 183, 189 (Del. 2005); Bell Sports, Inc. v. Yarusso, 759 A.2d 
582, 590 (Del. 2000).   
 
13
Rules of Evidence (“D.R.E.”) 703 or lay testimony proffered under D.R.E. 
701 and Mr. Coleman is not qualified under either rule to testify as such.”  
The record reflects that determination was both legally correct and within 
the trial court’s discretion. 
 
Coleman asserted in his affidavit that, “hav[ing] come to read the 
deposition of James Reynolds . . . . [that Mr. Reynolds] stated on page 58 of 
his deposition testimony that, Lason had misstated its 1997 income by 
$5,583,000.”  Coleman further asserted that “[u]sing my skills as a trained 
auditor and accountant, I duplicated Mr. Reynolds’ analysis and I agree with 
his conclusion.”  The trial judge concluded, “based on Mr. Coleman’s own 
words,” that Coleman was proffering expert testimony.   
The trial judge then ruled that the appellants had failed to designate 
Coleman as an expert during pretrial discovery, “thereby depriving PwC of 
an opportunity to cross examine Mr. Coleman on his expert opinion.”  The 
appellants do not dispute that they did not designate Coleman as an expert 
witness during pretrial discovery, or that rules of civil procedure required 
them to do so.11   
                                          
 
11 See Duphily v. Delaware Elec. Co-op., Inc., 662 A.2d 821, 836 (Del. 1995) (holding 
that ‘[t]he rendering of . . . expert testimony require[s] that [the expert witness] be 
designated as such in pre-trial discovery and appropriately qualified at trial”).   
 
14
The trial judge also ruled that the appellants failed to satisfy D.R.E. 
702’s requirements that  
a witness qualified as an expert by knowledge, skill, experience, 
training or education may testify thereto in the form of an 
opinion or otherwise, if (1) the testimony is based upon 
sufficient facts or data, (2) the testimony is the product of 
reliable principles and methods, and (3) the witness has applied 
the principles and methods reliably to the facts of the case.  
 
The trial judge concluded that, despite Coleman’s claim that he “duplicated” 
Reynolds’ analysis, Reynolds himself testified that he relied on memos 
written by Lason’s controller that he was not able to identify further, and to 
which Coleman “presumably . . . did not have access.”  Reynolds also 
testified that he relied on the books and records of Lason.  Coleman testified, 
however, that he did not have access to Lason’s books or records and was 
unaware of their contents. 
 
Alternatively, the trial judge ruled that Coleman’s affidavit did not 
constitute a proper lay opinion.  The trial judge noted that D.R.E. 602 states 
that “[a] witness may not testify to a matter unless evidence is introduced 
sufficient to support a finding that he has personal knowledge of the matter.”  
The trial judge further noted that, under D.R.E. 701, “[I]f the witness is not 
testifying as an expert, the witness’ testimony in the form of opinions or 
inferences is limited to those opinions or inferences which are (a) rationally 
based on the perception of the witness.”  The trial judge concluded that the 
 
15
appellants did not satisfy the requirements of Rules 602 and 701 with respect 
to Coleman’s testimony since it was admittedly “not based on either 
‘personal knowledge of the matter’ or ‘based on the perception of the 
witness.’”  That conclusion was based on Coleman’s own admissions that 
his opinion was based on “read[ing] the deposition of James Reynolds,” and 
that he had no familiarity with Lason’s books and records.   
Based on the record before him, the trial judge’s rulings regarding the 
proffered affidavit of Coleman cannot be said to have “exceeded the bounds 
of reason in view of the circumstances [or] so ignored recognized rules of 
law or practice so as to produce injustice.”12  Accordingly, we hold that the 
trial judge properly exercised his discretion in applying the requirements of 
D.R.E. 602, 701 and 702 to the facts of this case.   
Appellants’ Obtain SEC Documents 
 
The appellants’ counsel in the Coleman case also represents the 
plaintiffs in Lundeen, et al. v. PricewaterhouseCoopers LLP, No. 04C-03-
200 (RRC).  That is another action filed in the Superior Court in which those 
plaintiffs allege that they sold their company to Lason in 1998, in purported 
reliance on PwC’s audit report on Lason’s 1997 financial statements, which 
they, too, allege contained negligent misrepresentations.  On May 9, 2005, 
                                          
 
12 Firestone Tire and Rubber Co. v. Adams, 541 A.2d 567, 570 (Del. 1988). 
 
16
subsequent to the Superior Court’s oral grant of summary judgment to 
appellants in the Coleman matter, appellants’ counsel served in the 
companion Lundeen matter a subpoena on the U.S. Securities and Exchange 
Commission (“SEC”) for all documents produced to the SEC by the Special 
Committee or its counsel that related to the Special Investigation.  No 
similar subpoena had been served in the instant Coleman matter.   
Four days later, on May 13, 2005, the SEC agreed to make those 
documents available for review by appellants’ counsel.  Among the 
documents received by appellants’ counsel from the SEC were (i) an e-mail, 
dated August 4, 1998, from Cheryl Dunn, the PwC audit engagement partner 
for the audits of Lason’s 1997 and 1998 financial statements, to William 
Rauwerdink, Lason’s Chief Financial Office (“CFO”) (the “Dunn e-mail”); 
and (ii) a letter from PwC to the SEC, dated March 11, 2002 (the “March 11, 
2002 Letter”), that was part of the Lason Form 8-K publicly filed with the 
SEC on March 14, 2002.   
In this appeal, the appellee admits that these documents had not been 
produced by PwC to appellants’ counsel in the Coleman matter, and argue 
those documents were irrelevant to the Superior Court’s granting of 
summary judgment.  The appellee submits that March letter was not 
produced by PwC because PwC, in response to appellants’ document 
 
17
requests in Coleman and the related Carello and Lundeen matters, 
consistently objected to the production of documents, like the March 11, 
2002 Letter, that were publicly available to the appellants.  The appellee also 
asserts that the March 11, 2002 Letter does not provide any evidence of 
material misstatements in Lason’s 1997 financial statements.   
Reargument Motion Denied 
 
On August 8, 2005, the appellants filed a “Motion for Reargument” of 
the Superior Court’s order granting summary judgment in favor of PwC.  
The sole basis for this motion was the appellants’ contention that the order 
granting summary judgment should be reversed in light of appellants’ 
alleged subsequent discovery of the Dunn e-mail and the March 11, 2002 
Letter.  On September 6, 2005, the Superior Court denied the appellants’ 
Motion for Reargument.   
The trial judge held that it was without jurisdiction to act upon the 
merits of the appellants’ motion for reargument.  The trial judge determined 
that the appellants did not file their “Motion for Reargument” within the 
five-day jurisdictional time limit of Superior Court Civil Rule 59(e).  The 
five-day rule for filing and serving motions for reargument is jurisdictional.  
The trial judge did not have discretion to extend the deadline.13  Therefore, 
                                          
 
13 Super. Ct. Civ. R. 6(b); Brown v. Weiler, 719 A.2d 489 (Del. 1998) (Table). 
 
18
the trial judge properly concluded that he was without jurisdiction to decide 
the merits of the appellants’ motion for reargument. 
No New Trial Sua Sponte 
Finally, the appellants contend that the trial judge erred by not sua 
sponte setting aside his grant of summary judgment, as provided for in 
Superior Court Rule 59(c), when the trial judge was apprised that PwC had 
wrongfully withheld discovery documents that proved the 1997 Lason 
financial statement was materially misstated.  Rule 59(c) states, in relevant 
part:  “Not later than 10 days after entry of judgment the Court of its own 
initiative may order a new trial for any reason for which it might have 
granted a new trial motion of a party.”  Assuming arguendo that a Superior 
Court judge has the authority to “set aside” or “reopen” a grant of summary 
judgment sua sponte pursuant to Rule 59(c), the record reflects that the trial 
judge did not abuse his discretion in not doing so.  A Rule 60 motion for 
relief from judgment was and remains available for the appellants to 
consider filing.14 
Conclusion 
 
The judgment of the Superior Court is affirmed. 
 
                                          
 
14 Super. Ct. Civ. R. 60.