Court Opinion

ID: 9380234
Source: CourtListenerOpinion
Date Created: 2023-03-17 18:00:34.231834+00
Date Added: 2024-06-11T17:17:23.629811
License: Public Domain

Case: 21-20542        Document: 00516680243            Page: 1      Date Filed: 03/17/2023

             United States Court of Appeals
                  for the Fifth Circuit                                United States Court of Appeals
                                                                                Fifth Circuit

                                                                              FILED
                                                                         March 17, 2023
                                       No. 21-20542                       Lyle W. Cayce
                                                                               Clerk

   Majestic Oil, Inc.,

                                                                   Plaintiff—Appellant,

                                            versus

   Certain Underwriters at Lloyd’s, London Subscribing
   to Policy Number W1B527170201,

                                                                  Defendant—Appellee.

                     Appeal from the United States District Court
                         for the Southern District of Texas
                               USDC No. 4:19-cv-3149

   Before Clement, Duncan, and Wilson, Circuit Judges.
   Per Curiam:*
         This is a first-party insurance case. Majestic Oil, Inc. asserts that its
   insurer, Certain Underwriters at Lloyd’s, London, improperly denied
   coverage for damage to the roof of Majestic’s property in Pasadena, Texas,
   in the wake of Hurricane Harvey. Majestic contends that the district court
   erred by excluding an expert report, excluding an expert affidavit, and then

         *
             This opinion is not designated for publication. See 5th Cir. R. 47.5.
Case: 21-20542      Document: 00516680243          Page: 2   Date Filed: 03/17/2023

                                    No. 21-20542

   granting summary judgment in favor of Lloyd’s. Because the district court
   did not properly conduct the required analyses in excluding the expert
   evidence, we vacate the district court’s evidentiary rulings and remand for
   reconsideration under the applicable standard. In the light of that holding,
   we also vacate the district court’s order granting summary judgment.
                                         I.
          Majestic purchased a building in Pasadena, Texas (“the Property”) in
   2014. Incident to the purchase, Majestic hired a contractor, Kim Hamel, to
   identify and repair any issues with the Property. Hamel identified multiple
   leaks in the roof as well as other damage caused by normal wear and tear.
   During her deposition in this action, she admitted that the wear and tear
   damage “probably should have [been] fixed,” but Majestic did not
   completely replace the roof. Instead, Hamel only had the leaks repaired.
   Hamel, along with multiple Majestic employees, attested that the roof leaked
   before the repairs—but not after.
          Lloyd’s insured the Property in April 2016. Before issuing the policy,
   the underwriter Lloyd’s sent to inspect the Property agreed that there were
   no roof leaks. The policy did not cover pre-existing damage, ongoing
   damage, or wear and tear. Relevant here, it provided coverage for damage
   caused by “[r]ain or wind driven rain which enters the insured building or
   structure through an opening created by the force of a [n]amed [s]torm . . . .”
          Enter Hurricane Harvey, such a named storm, which pummeled the
   Texas Gulf Coast in August 2017. It is undisputed that the Property’s roof
   leaked after Harvey, but the parties dispute what caused those leaks. In
   November 2017, Majestic reported the loss to Lloyd’s.             An adjuster
   employed by Lloyd’s determined that the roof was in poor condition before
   Harvey and the damage to the Property’s interior predated the hurricane.

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   The structural engineering expert that Lloyd’s retained agreed. Lloyd’s
   denied the claim in August 2018.
          In February 2019, Majestic hired an engineer, Gregory Becker, to
   determine what caused the damage. The manager of the Property told
   Becker that the leaks began after Harvey. In April 2019, Becker authored an
   initial expert report (his “First Report”). In it, he “note[d] that the storm
   events of Hurricane Harvey best correlate with the manager’s accounting of
   damages[;] however[,] the earlier [storm] event [o]n January 2, 2017[,]
   cannot be ruled out as initially contributing to the roof vulnerability.” Becker
   ultimately concluded in his First Report that “it is more likely than not that
   the observed damage is a result of the claimed storm event [i.e., Harvey].”
          In August 2019, Majestic sued Lloyd’s over the denial of coverage.
          During Becker’s deposition in April 2021, Lloyd’s exposed
   shortcomings in the First Report.          Becker conceded that he did not
   differentiate damage caused by covered perils from that caused by uncovered
   perils in his First Report. Further, he confirmed that he did not wholly rule
   out the January 2017 storm as initially contributing to the roof vulnerability
   in his First Report. But Becker also identified weather report data (“the
   Weather Report”) he located in researching an unrelated case that he had
   not considered in preparing his First Report. Becker testified that he relied
   on the Weather Report to exclude the January 2017 storm as causing damage
   to the Property. He explained that he was able to rule out the January 2017
   storm because the data in the Weather Report indicated that the Property
   experienced higher windspeeds during Harvey than Becker had previously
   realized. In other words, Becker refined his theory to conclude that only
   Harvey could have caused the observed damage to the Property. Counsel for
   Lloyd’s questioned Becker about the Weather Report during his deposition.

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         Majestic provided a second expert report authored by Becker (the
   “Second Report”) in April 2021—shortly after Becker’s deposition, but six
   months after the deadline for expert reports. In the Second Report, Becker
   reiterated the conclusion, consistent with his deposition testimony, that the
   January 2017 storm could not have caused the observed damage to the
   Property. Lloyd’s moved to strike the Second Report, arguing that it was
   untimely because it contained a new opinion. Majestic countered that the
   Weather Report was merely supplemental, and therefore timely. The district
   court agreed with Lloyd’s and struck the Second Report.
         In August 2021, Lloyd’s filed a motion for summary judgment.
   Majestic opposed the motion with, inter alia, an affidavit from Becker. That
   affidavit repeated the same conclusions as Becker’s now-struck Second
   Report, and the district court likewise struck the affidavit, as a “sham
   affidavit.” With both Becker’s Second Report and affidavit excluded, the
   outcome of the insurer’s motion for summary judgment hinged in large part
   on Becker’s conclusion, in his First Report, that the January 2017 storm
   could not be ruled out as having caused damage to the Property. Applying its
   reading of Texas’s concurrent causation doctrine, the district court faulted
   Becker for failing to exclude the January 2017 storm as a potential cause of
   the damage and found that Majestic otherwise failed to show that the damage
   was attributable to Harvey. Majestic Oil, Inc. v. Underwriters at Lloyd’s,
   London, No. 4:19-cv-3149, 2021 WL 4502841, at *2 (S.D. Tex. Sept. 30,
   2021). Further, the court found that Majestic had not submitted evidence
   that could allow a jury to segregate damage caused by Harvey from damage
   caused by non-covered perils. Id. The court accordingly entered summary
   judgment for Lloyd’s.
         Majestic now appeals, contending that the district court erred by
   excluding the Second Report and Becker’s affidavit and, in turn, granting
   summary judgment in favor of Lloyd’s.

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                                             II.
          We review the district court’s evidentiary rulings for abuse of
   discretion. Smith v. Chrysler Grp., L.L.C., 909 F.3d 744, 748 (5th Cir. 2018);
   Seigler v. Wal-Mart Stores Tex., L.L.C., 30 F.4th 472, 476 (5th Cir. 2022).
   We review the district court’s order granting summary judgment de novo.
   GWTP Invs., L.P. v. SES Americom, Inc., 497 F.3d 478, 481 (5th Cir. 2007).
   As we agree with Majestic that the district court erred in its evidentiary
   rulings, we vacate the court’s orders striking Becker’s Second Report and
   affidavit, vacate its summary judgment order based on those rulings, and
   remand for further proceedings.
                                             A.
          Under Federal Rule of Civil Procedure 26(e)(2),1 a party must
   supplement its expert’s report if the party or expert learns that it is incorrect
   or incomplete. In re Complaint of C.F. Bean L.L.C., 841 F.3d 365, 371 (5th
   Cir. 2016). “However, supplemental disclosures are not intended to provide
   an extension of the deadline by which a party must deliver the lion’s share of
   its expert information.” Id. (quotation marks omitted). Thus, when a party
   files an additional expert report after the expert disclosure deadline, the
   question is whether the report is “supplemental.” Id. If it is, then it falls
   within Rule 26(e) and is admissible. If not, i.e., the report asserts new analysis
   or conclusions, it runs afoul of Rule 26(e), and Federal Rule of Civil
   Procedure 37(c)(1) governs its admissibility.

          1
              Rule 26(e)(2) provides:
          For an expert whose report must be disclosed under Rule 26(a)(2)(B), the
          party’s duty to supplement extends both to information included in the
          report and to information given during the expert’s deposition. Any
          additions or changes to this information must be disclosed by the time the
          party’s pretrial disclosures under Rule 26(a)(3) are due.

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           The district court determined that Becker’s Second Report was not
   merely supplemental because it “changed Becker’s ultimate conclusions
   about whether certain storms before Hurricane Harvey could have caused
   the damage to the [P]roperty.” While Becker posited in his First Report that
   “the earlier [storm] event [o]n January 2, 2017[,] cannot be ruled out as
   initially contributing to the roof vulnerability,” his Second Report “ruled
   out” the January storm. The Second Report thus altered a significant, if
   intermediate, conclusion of the First Report. On the record before us, then,
   we discern no abuse of discretion in the court’s determination that Becker’s
   Second Report was new rather than supplemental.
           The problem arises in the district court’s follow-on decision to
   exclude Becker’s Second Report. In a nutshell, the court failed properly to
   apply the Federal Rules of Civil Procedure. Rule 37(c)(1) provides:
           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 . . . .
   Fed. R. Civ. P. 37(c)(1); see also Fed. R. Civ. P. 16(b), (f) (authorizing
   district courts to control pretrial discovery through scheduling orders and
   providing for sanctions for failure to obey scheduling or other pretrial
   orders).2 Courts consider four factors to determine whether exclusion is
   appropriate: “(1) the explanation for the failure to identify the [information];
   (2) the importance of the [information]; (3) potential prejudice in allowing

           2
              It is unclear under which rule the district court acted in this case because, while
   the district court did not enter a scheduling order, the parties agreed to a series of deadlines,
   including for expert disclosures. No matter; the same factors apply regardless. See
   Complaint of Bean, 841 F.3d at 372–74 (analyzing factors through lens of Rule 37);
   Geiserman v. MacDonald, 893 F.2d 787, 790–91 (5th Cir. 1990) (applying them in context
   of Rule 16 scheduling order deadlines).

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   the [information]; and (4) the availability of a continuance to cure such
   prejudice.” Certain Underwriters at Lloyd’s, London v. Axon Pressure Prod.
   Inc., 951 F.3d 248, 270 (5th Cir. 2020) (quotation omitted). A district court
   must explain its reasoning when excluding expert evidence. Id.
          “We are tasked with determining whether the district court ‘based its
   decision on an erroneous view of the law or on a clearly erroneous assessment
   of the evidence.’” Id. (alterations adopted) (quoting CenterPoint Energy
   Hous. Elec. LLC v. Harris Cnty. Toll Rd. Auth., 436 F.3d 541, 550 (5th Cir.
   2006)); see Complaint of Bean, 841 F.3d at 372–74 (analyzing four factors to
   determine whether district court abused its discretion by excluding testimony
   as a sanction). It follows that “where a district court fails to explain its
   decision . . . we do not know whether the decision was within the bounds of
   its discretion or was based on an erroneous legal theory.” Axon Pressure, 951
   F.3d at 270 (quotation omitted).
          Here, the district court provided three reasons for its exclusion of the
   Second Report. First, it found that the Second Report changed Becker’s
   ultimate conclusion about the cause of the roof damage. Second, it found
   that the Weather Report on which Becker based the Second Report was
   available to Becker when he wrote the First Report. Third, the district court
   found that Becker’s “delay to seemingly surprise [Lloyd’s] at his deposition
   by altering his ultimate conclusions [was] not harmless.”
          The district court relied primarily on the fact that Becker could have
   obtained the data found in the Weather Report before his First Report was
   filed. That is a valid consideration under the first factor of our four-factor
   test, and it may well be determinative after full analysis. But the district court
   failed meaningfully to weigh the remaining factors. The court’s order lacks
   any analysis of either the importance to the case of the new data in Becker’s
   Second Report or the potential prejudice to Lloyd’s of allowing the late

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   disclosures, beyond the court’s bald statement that the “delay to seemingly
   surprise [Lloyd’s] . . . [was] not harmless.” And the district court did not
   address the possibility of a continuance to cure any prejudice. Because the
   district court failed adequately to explain its reasoning, “the order must be
   vacated and remanded to allow the district court to explain its decision after
   considering the proper factors.” Axon Pressure, 951 F.3d at 270.
                                          B.
          The district court similarly erred in striking Becker’s summary
   judgment affidavit as a “sham affidavit” because it contradicted his First
   Report. Under the sham affidavit doctrine, a party cannot manufacture an
   issue of material fact on summary judgment using an affidavit that contradicts
   a prior deposition. E.g., Seigler, 30 F.4th at 477. But Becker’s affidavit was
   consistent with his deposition testimony.         Indeed, the affidavit was
   cumulative: In his deposition, the Second Report, and his affidavit, Becker
   ruled out a non-covered cause of loss (the January 2017 storm first mentioned
   in his First Report) as a possible cause of the roof damage to the Property.
   Therefore, the sham affidavit doctrine does not apply in this instance. See id.
   (“An affidavit that supplements rather than contradicts prior deposition
   testimony falls outside the doctrine’s ambit.” (internal quotation marks
   omitted)).
          Instead, as a practical matter, the fate of Becker’s affidavit rises and
   falls with that of the Second Report, as the two repeat the same conclusions.
   See Axon Pressure, 951 F.3d at 270–71 (applying the same four-factor test to
   both additional expert reports and expert affidavits produced in opposition to
   summary judgment). Thus, while it was error for the district court to strike
   Becker’s affidavit as a sham affidavit, on remand, the district court may
   properly weigh the admissibility of Becker’s affidavit using the same factors
   that apply to the Second Report. Id.

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                                         C.
          Because we vacate the district court’s evidentiary rulings striking
   Majestic’s belated expert disclosures and remand for further consideration
   of that evidence’s admissibility, we must also vacate the district court’s
   summary judgment order. And we note that more than the summary
   judgment record may change on remand. Pending Majestic’s appeal, this
   court spoke to Texas’s concurrent causation doctrine, which formed the legal
   basis for the district court’s summary judgment ruling.          See Advanced
   Indicator & Mfg., Inc. v. Acadia Ins. Co., 50 F.4th 469, 476–77 (5th Cir. 2022).
   In Advanced Indicator, we held that “when covered and non-covered perils
   combine to create a loss, the insured is entitled to recover that portion of the
   damage caused solely by the covered peril.” Id. at 477 (quotation marks and
   citation omitted). The insured may carry its burden of proving its loss “by
   putting forth evidence demonstrating that the loss came solely from a
   covered cause or by putting forth evidence by which a jury may reasonably
   segregate covered and non-covered losses.” Id.
          Whether Advanced Indicator breathes life into Majestic’s sole
   causation theory it advances on appeal is a question, like the admissibility of
   Becker’s Second Report and affidavit, for the district court to consider anew,
   once the summary judgment record is properly settled.
                                        III.
          Because the district court failed adequately to explain its pertinent
   evidentiary rulings, we vacate its orders striking Majestic’s expert’s Second
   Report and summary judgment affidavit. In turn, we vacate the court’s
   summary judgment based on those rulings, and we remand for further
   proceedings consistent with this opinion.
                                               VACATED and REMANDED.

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