Opinion ID: 880774
Heading Depth: 1
Heading Rank: 6

Heading: 4(a The Exclusion of Rebuttal Testimony From Expert John McCafferty.

Text: John T. McCafferty is a Dallas, Texas, attorney with an extensive background in municipal bond financing both as a Treasury Department employee for several years and as a practicing lawyer in Dallas and in Washington, D.C. He testified in the trial before the District Court, without objection, to his opinion, based upon his professional experience with accountants, that Don Blackwell should absolutely not have recognized the potential IRB problem under § 103. Further on in his testimony, the District Court sustained an objection to his proffered testimony that because of the passage of the 1986 Tax Reform Act by the Congress, it was likely that the holder of the proposed IRB bonds for the Clinic would call them in 1992. (The offer from Security Mortgage Company to the Clinic had specified that the IRB bonds would be callable, at the option of the holders, in 1992.) The Clinic's expert, Arthur Shenkin, and others, had testified that such bonds would not have been called. The District Court sustained an objection to Mr. McCafferty's testimony as an expert on this point on the grounds that this part of his expert testimony had not been revealed to the clinic in pre-trial discovery. The question of McCafferty's proposed testimony as to whether the IRB bonds would be called up in 1992 arose in an unorthodox way. On cross-examination of Shenkin by counsel for Peat Marwick, he was asked whether he had considered the implications of § 265 of the Tax Reform Act of 1986 and other implications of that Act. Shenkin testified that he did not consider them because they were not relevant. Peat Marwick contended that the testimony of McCafferty would show that such considerations were relevant. In effect Peat Marwick sought to rebut its own cross-examination on a matter of expertise through an expert that had not been designated. The court posed the issue in this fashion: THE COURT: It is just a question of whether it is rebuttal or not rebuttal. So it gets down to a technical question as to whether you can raise the matter by cross examination, then, depending on the answer from the witness which you believe is an incorrect answer, that you can then, under this circumstance we are dealing with, bring forth rebuttal testimony or attempt to establish that it would have made a difference. That's really where we are here? The court then went on to sustain the objection. On appeal Peat Marwick contends that the proffered testimony by McCafferty was only rebuttal to specific testimony that Shenkin gave during the trial and that it tended to counteract new matters offered by the adverse party. McGee v. Burlington Northern Inc. (1977), 174 Mont. 466, 480, 571 P.2d 784, 792. Before the trial, on April 24, 1987, the District Court had entered an order requiring disclosure of expert witness testimony by January 15, 1988, and establishing a discovery cutoff date of May 1, 1988. The Peat Marwick defendants designated Mr. McCafferty as an expert witness on time, supplemented his designation on June 17, 1988, but did not in that designation mention the proposed 1986 Tax Reform Act testimony. The ruling of the District Court on this part of McCafferty's testimony is proper. Under Rule 26(b)(4), M.R.Civ.P., a party may be required to state the subject matter on which a proffered expert is expected to testify, the substance of the facts and opinions to which the expert is expected to testify, and a summary of the grounds for each opinion. Peat Marwick had not identified the Tax Reform Act of 1986 as a subject for Mr. McCafferty's testimony. Moreover his proffered testimony could not be considered rebuttal because rebuttal testimony is confined to that evidence which tends to counteract new matter offered by the adverse party. Massman v. City of Helena (1989), 237 Mont. 234, 773 P.2d 1206; Mountain West Farm Bureau Mutual Insurance Company v. Girton (1985), 215 Mont. 408, 697 P.2d 1362. Here the new matter was brought out by Peat Marwick. We uphold the District Court's ruling. Peat Marwick also claims here when the District Court refused further testimony by Mr. McCafferty that a pamphlet written by Shenkin in 1973, Transfers to Partnerships, contained an outline of a transaction similar to the reorganization of the Billings Clinic, but Shenkin did not warn the reader that such a transaction would constitute a capital expenditure under § 103. The Clinic objected to the proposed testimony of Mr. McCafferty again because the Peat Marwick defendants had not designated the testimony prior to trial and because the evidence did not rebut new matters raised by the Clinic but rather constituted undisclosed expert evidence presented in their own case-in-chief. The trial court sustained the objection. The pamphlet itself was not offered as an exhibit by Peat Marwick. On his cross-examination, Shenkin had admitted that it did not warn readers of the potential implications of § 103 in IRB financing. Shenkin also stated that he was not sure if there was a capital expenditure limitation for IRBs in effect in 1973 when he wrote his pamphlet. It is clear from Shenkin's testimony on direct examination and on cross-examination that the pamphlet he had authored was directed to the tax implications of transfers to partnerships, a subject which had no relation, for the purpose of his pamphlet, to the parallel subject of IRB financing under § 103. The District Court was clearly correct in refusing McCafferty's testimony on this subject also.