Opinion ID: 6534110
Heading Depth: 2
Heading Rank: 2

Heading: Disclosure of Damages/Admission of Damages Evidence

Text: [¶23] Mr. Downs asserts the district court abused its discretion by admitting Homax's damages evidence at trial because Homax did not properly disclose its damages in accordance with Rule 26. At the time the parties were conducting discovery, W.R.C.P. 26 (2016) 1 stated, in relevant part: (a) Required disclosures; methods to discover additional matter. (1) Initial disclosures. Except in categories of proceedings specified in Rule 26 (a) (1) (E), or to the extent otherwise stipulated in writing or directed by order, a party must, without awaiting a discovery request, provide to other parties: ... (B) A copy of, or a description by category and location of, all documents ... that are in the possession, custody, or control of the party and that the disclosing party may use to support its claims or defenses ...; (C) A computation of any category of damages claimed by the disclosing party, making available for inspection and copying as under Rule 34 the documents or other evidentiary material, not privileged or protected from disclosure, on which such computation is based[.] ... ... Unless a different time is set by stipulation in writing or by court order, these disclosures must be made within 30 days after a party's answer is required to be served under Rule 12(a)[.] ... [¶24] Under Rule 26(a)(1)(B) and (C), a party is required to disclose, without waiting for a discovery request , all documents which it may use to support its claims and a computation of any category of damages claimed by the party, together with all documents upon which the computation is based. Dishman v. First Interstate Bank, 2015 WY 154 , ¶ 20, 362 P.3d 360 , 367 (Wyo. 2015) (emphasis added). Homax failed to produce a computation of damages and it failed to produce the documents upon which any computation was based. Despite our clear  precedent that the proper measure of damages for tortious interference with prospective contractual relation is lost profit, during the discovery period Homax produced to Mr. Downs only a single document with two accounting lines showing its 2014 and 2015 revenue from sales to RKI. While total revenue would be the starting point in computing lost profit, expenses must be deducted to prove lost profits. See, Hopper, supra. See also, Design Strategies, Inc. v. Davis, 367 F.Supp.2d 630 , 633-34 (S.D.N.Y. 2005) (applying F.R.C.P. 26 and concluding that disclosure of lost gross revenue did not meet the requirement for disclosing lost profits). Rule 26 required Homax to provide its damages computation and the supporting documentation, including information about its expenses. [¶25] Throughout the district court proceedings, Homax asserted that Mr. Downs was required to request specific information about damages before it had the obligation to provide the computations. That is categorically untrue. Under Rule 26(a)(1)(B) and (C) (2016), Mr. Downs was entitled to Homax's damages computation and the documents supporting it without making a discovery request. Homax's one-page accounting report showing only total revenue was clearly insufficient. [¶26] W.R.C.P. 37(c) (2016) 2 governed Homax's discovery violations: (c) Failure to disclose; false or misleading disclosure; refusal to admit. (1) A party that without substantial justification fails to disclose information as required by Rule 26(a) or 26(e)(1) or to amend a prior response to discovery as required by Rule 26(e)(2), is not, unless such failure is harmless, permitted to use as evidence at trial, at a hearing, or on a motion any witness or information not so disclosed. In addition to or in lieu of this sanction, the court, on motion and after affording an opportunity to be heard, may impose other appropriate sanctions. [¶27] In Dishman , ¶ 28, 362 P.3d at 369-70 , we stated that W.R.C.P. 37(c)(1) automatically excludes undisclosed evidence. Id. (citing Wright & Miller, 8B Fed. Prac. & Proc. Civ. § 2289.1 (3d ed. 2015) (discussing automatic exclusion under the similar F.R.C.P. 37 ) ). Thus, a party who fails to comply with its Rule 26 discovery obligations generally is not permitted to use the undisclosed evidence at trial unless the failure was substantially justified or harmless. Id. Additionally, a court may, in its discretion, choose to impose alternative sanctions. Rule 37(c)(1) ; Dishman, ¶ 28, 362 P.3d at 369-70 . [¶28] The party seeking admission of the evidence has the burden of demonstrating that the failure to disclose it was substantially justified or harmless. In re Paternity of HLG, ¶ 25, 368 P.3d at 908 ; Black Diamond Energy, Inc. v. Encana Oil & Gas (USA), Inc., 2014 WY 64 , ¶ 45, 326 P.3d 904 , 916 (Wyo. 2014). In HLG, ¶¶ 27-28, 368 P.3d at 908-09 , we stated that the following factors are relevant in determining whether a party's violation of its discovery responsibilities was harmless: (1) whether allowing the evidence would incurably surprise or prejudice the opposing party; (2) whether excluding the evidence would incurably prejudice the party seeking to introduce it; (3) whether the party seeking to introduce the testimony failed to comply with the evidentiary rules inadvertently or willfully; (4) the impact of allowing the proposed testimony on the orderliness and efficiency of the trial; and (5) the impact of excluding the proposed testimony on the completeness of the information before the court or jury. (citations omitted). See also, Forbes v. Forbes, 2015 WY 13 , ¶¶ 79-89, 341 P.3d 1041 , 1062-64 (Wyo. 2015). [¶29] Given Homax insisted in the proceedings below that it was not required to provide its damages evidence to Mr. Downs because he had not requested it in discovery, it made no effort to establish that its failure  was substantially justified or harmless. On appeal, Homax still does not expressly recognize that it violated its discovery obligations and, consequently, does not assert that its failure to provide the information was substantially justified. Although it does not make a specific argument on harmlessness, Homax does cite Dishman as supporting the district court's admission of the evidence at trial. In Dishman, ¶¶ 25-26, 362 P.3d at 368-69 , we concluded that the plaintiff had violated Rule 26 by failing to provide documentation of its attorney fees claim in discovery. However, we concluded the failure was harmless because the information was provided over four days before trial and it was apparent the defendant was sufficiently prepared to challenge the attorney fees request at trial. Id., ¶¶ 29-30, 362 P.3d at 370 . [¶30] The situation in the case at bar is somewhat more complicated. As we explained above, Mr. Downs stipulated to admission of Exhibit 4, which included two pages not previously disclosed. Homax's attorney claimed he told Mr. Downs' attorney that he had added a couple in there for foundation on damages. Mr. Downs' attorney denied that conversation and pointed out that the Exhibit 4 provided by Homax in its exhibit list just prior to trial did not contain the additional pages. In any event, the district court held that the entire Exhibit 4 was admissible because Mr. Downs' attorney had stipulated to its admission. As Homax points out, our precedent supports enforcing stipulations. See Jackman Constr., Inc., ¶¶ 32-33, 385 P.3d at 320 . However, a court may grant relief from a stipulation for various reasons, including fraud, misrepresentation or mistake. 73 Am.Jur.2d Stipulations § 13 (2018). We do not need to address the disputed question of whether Mr. Downs' stipulation should have been set aside because Exhibit 4, in its entirety, still did not adequately disclose Homax's damages. [¶31] The two additional pages provided information about Homax's gross profits from sales to RKI in 2014 and 2015. Mr. Homer testified gross profit is determined by subtracting the costs of goods from total sales. However, net profit, not gross profit, is the proper measure of damages. Hopper, 861 P.2d at 548 . Evidence about the other expenses which had to be deducted to arrive at a net profit figure was not provided prior to trial. In fact, Mr. Homer testified about those expenses from documents he brought to trial that had never been disclosed to Mr. Downs. [¶32] Homax violated its obligation under Rule 26 to disclose its computation of lost profits and the documents supporting such computation. Homax does not analyze the factors identified in HLG, supra, as relevant in determining whether a discovery violation was harmless. It is Homax's obligation to show harmlessness, so we will not conduct a comprehensive review of each of the factors. However, we note that Homax's discovery violation clearly was not harmless because Mr. Downs was surprised and prejudiced by the undisclosed damages information. He had no idea until Mr. Homer testified at trial the amount of net profit Homax claimed to have lost as a result of his actions. Mr. Downs also did not have any information prior to trial about the expenses that should be deducted from Homax's total revenues from RKI to arrive at net lost profits. Without that information, Mr. Downs had no way to challenge the reasonableness of the expenses or the accuracy of Homax's claimed damages. Thus, pursuant to Rule 37(c)(1), Homax's damages evidence should not have been admitted at trial, and the district court abused its discretion by allowing Mr. Homer to testify about Homax's lost profits. [¶33] Homax argues that the district court's damages award can be affirmed because other types of damages are available for tortious interference with prospective contractual relation under Restatement (Second) of Torts § 774A (1979, updated 2018) : (1) One who is liable to another for interference with a contract or prospective contractual relation is liable for damages for (a) the pecuniary loss of the benefits of the contract or the prospective relation; (b) consequential losses for which the interference is a legal cause; and (c) emotional distress or actual harm to reputation, if they are reasonably to be expected to result from the interference.  [¶34] This Court has never expressly adopted § 774A as the appropriate measure of damages. In Ahrenholtz, ¶ 24, 79 P.3d at 517 , the appellant urged us to adopt § 774A to allow damages for emotional distress caused by interference with contract or business expectancy. We concluded that the appellant's emotional distress evidence was insufficient as a matter of law and did not expressly determine whether § 774A set out the proper measure of damages in Wyoming. 3 Id., ¶ 25, 79 P.3d at 517-18 . [¶35] We do not need to determine whether to adopt § 774A in this case, either. If Homax was claiming damages other than lost profits, it had the obligation under Rule 26 to disclose the claimed damages and the evidence supporting its claims. Homax's Rule 26 disclosure listed its claimed damages as: $2,470,157.52 in lost profits and sales; attorney fees; and punitive damages. It did not list the other categories of damages set out in § 774A. [¶36] In its complaint, Homax only requested damages for lost business, punitive damages, attorney's fees, and further relief as the Court deems just and proper, including pre and post judgment interest incurred in the prosecution of this action. It made no claim for emotional damages or loss of reputation. It is unnecessary for us to decide whether and to what extent § 774A might apply in Wyoming because Homax did not claim these types of damages in its complaint or in its disclosures. Homax cannot now claim that the damages awarded by the district court related these types of damages.