Court Opinion

ID: 3001808
Source: CourtListenerOpinion
Date Created: 2015-09-24 20:21:02.36908+00
Date Added: 2024-06-11T15:03:34.379088
License: Public Domain

In the
 United States Court of Appeals
              For the Seventh Circuit
                       ____________

No. 07-1996
COMPANIA ADMINISTRADORA
DE RECUPERACION DE ACTIVOS
ADMINISTRADORA DE FONDOS
DE INVERSION SOCIEDAD ANONIMA,
                                              Plaintiff-Appellee,
                              v.

TITAN INTERNATIONAL,
INCORPORATED,
                                          Defendant-Appellant.
                       ____________
          Appeal from the United States District Court
              for the Central District of Illinois.
            No. 05 C 3071—Jeanne E. Scott, Judge.
                       ____________
     ARGUED JANUARY 17, 2008—DECIDED JULY 10, 2008
                       ____________

 Before RIPPLE, ROVNER and TINDER, Circuit Judges.
  RIPPLE, Circuit Judge. Compania Administradora de
Recuperacion de Activos Administradora de Fondos de
Inversion Sociedad Anonima (“Compania”) sued Titan
International, Inc. (“Titan”) for breach of a guaranty
contract. As an affirmative defense, Titan asserted that
Compania had impaired the collateral that secured the
guaranteed debt. After discovery, Compania moved
2                                                    No. 07-1996

for summary judgment. The district court granted sum-
mary judgment in favor of Compania; it concluded that
Titan had failed to present any credible evidence of the
value of the collateral.1 Titan timely appealed. For the
reasons set forth in this opinion, we affirm the judgment
of the district court.

                                I
                       BACKGROUND
   Titan is an international tire manufacturer based in
Illinois. In June 1998, Titan purchased a controlling inter-
est in Fabrica Uruguaya de Neumaticos S.A. (“FUNSA”),
a tire manufacturer based in Uruguay. At that time,
FUNSA had an existing line of credit in the amount of
$5 million from Banco de la Republica Oriental del Uru-
guay (“the bank”). The line of credit was secured by
FUNSA property and equipment.
  In April 1999, Titan requested additional credit from the
bank to fund FUNSA’s operations. The bank agreed to
increase FUNSA’s line of credit by $1 million if Titan
would guarantee the increase. On April 19, 1999, Titan
executed a document entitled “Garantia Solidaria” (“the
guaranty”). Titan agreed to serve as a surety for any
debt owed to the bank by FUNSA, up to $1 million. The
bank, accordingly, increased FUNSA’s line of credit, and

1
   The district court had jurisdiction in this case under 28 U.S.C.
§ 1332. The plaintiff is a Uruguayan corporation with its
principal place of business in Uruguay. The defendant is an
Illinois corporation with its principal place of business in
Illinois. The amount of controversy exceeds $75,000. We
have jurisdiction pursuant to 28 U.S.C. § 1291.
No. 07-1996                                                   3

this new debt was secured by a pledge of FUNSA’s plant
and equipment (“the collateral”), as well as by Titan’s
guarantee.
   On March 4, 2002, FUNSA declared bankruptcy under
Uruguayan law. As of the date of the bankruptcy filing,
FUNSA owed more than $4 million to the bank. On Decem-
ber 31, 2003, the bank transferred its FUNSA indebted-
ness, including all of its rights in the collateral and all of
its rights against Titan under the guaranty, to Compania.2
  Buyers were sought for the collateral both before and
after it was transferred from the bank to Compania, but an
agreement was never reached on a sale. In March 2004,
Compania obtained a third-party appraisal of the collateral.
The appraiser valued the collateral at between $1.5 million
and $2.3 million. On May 6, 2004, Compania sold its
interests in the collateral, along with a number of other
outstanding notes, to a third party for $2 million.
Compania, however, failed to notify Titan in advance of
the sale. The third party subsequently foreclosed on the
collateral, which was sold at public auction pursuant to
Uruguayan bankruptcy law for $1 million.
  With approximately $2 million of FUNSA’s debt left
unpaid, Compania then pursued other avenues of collec-
tion. It demanded that Titan pay it $1 million, the amount

2
  The full name of this company at the time of the events in
question was Compania Administradora de Recuperacion de
Activos Administradora de Fondos de Inversion Sociedad
Anonima (“Compania”). Compania since has changed its
name to Republica Administradora de Fondos de Inversion
Sociedad Anonima (“RAFISA”). Both the district court opinion
and the appellant’s brief refer to the entity as “Compania,” and
we follow this convention.
4                                             No. 07-1996

of FUNSA’s debt that Titan had guaranteed. Titan, how-
ever, refused to pay under the guaranty. It contended,
among other things, that Compania’s failure to provide
notice prior to the sale had impaired Titan’s rights in
the collateral that secured the debt. Consequently,
Compania initiated this action to enforce the guaranty
agreement.
  During discovery, the district court issued a sched-
uling order that required the parties to disclose all of
their expert witnesses by February 3, 2006. Titan did not
disclose any expert witnesses prior to that date.
  On February 21, however, nearly three weeks after the
expert witness disclosure deadline and days before fact
discovery was set to conclude, Titan served Compania
with two expert declarations. In one of these declara-
tions, Ricardo Olivera offered an opinion on the inter-
pretation of Uruguayan law. In the other declaration,
Mark Haron offered an opinion on the value of the
FUNSA collateral based on his experience buying and
selling tires and equipment on the worldwide tire market.
Titan did not disclose any other experts at this time.
  Compania moved to strike both experts’ declarations as
being untimely disclosed. On April 21, 2006, the district
court granted Compania’s motion to strike Titan’s prof-
fered expert declarations on the ground that the delay in
disclosure was neither justified nor harmless.
  On June 2, 2006, Compania moved for summary judg-
ment. It contended that Titan had presented no credible
evidence that the value of the collateral was, in fact,
greater than the price for which it had been sold; accord-
ingly, urged Compania, Titan could not show that its
interests in the collateral had been impaired.
No. 07-1996                                                   5

  On June 27, 2006, Titan filed its opposition to Compania’s
motion for summary judgment. As evidence of the value
of the collateral, it attached an affidavit from Maurice
Taylor.3 Mr. Taylor was the President and CEO of Titan
from 1990 to 2005, and he was employed as Titan’s CEO
and chairman at the time that his affidavit was filed.
Although the majority of Taylor’s testimony described
the extent of his involvement in the decision to guarantee
FUNSA’s debt, paragraphs 8 and 9 of his affidavit also
asserted his belief that the value of the FUNSA collateral
exceeded $10 million. Specifically, the affidavit noted:
    In connection with my duties at Titan International,
    Inc., I have extensive experience purchasing and
    selling used Tire and Wheel manufacturing equip-
    ment on the world market, and, accordingly, I have
    specific and up-to-date knowledge of the value of used

3
  Titan also included a second affidavit from Ricardo Olivera.
Olivera’s second affidavit was substantially the same as his
original proffered expert testimony, which already had been
stricken once by the district court because it was not timely
disclosed. Compania again moved to strike Olivera’s affidavit,
and the district court granted the motion. Titan does not
challenge this order on appeal.
  Titan also attached to its opposition motion the working paper
of Dannys Correa, an auditor with PricewaterhouseCoopers
Ltda., Uruguay. The working paper included a February 2000
appraisal of the collateral performed by another auditor,
Mario Duran Lasala. Lasala had estimated the final replacement
cost of the collateral as approximately $14.9 million and the
“final selling price” as $9 million. The district court, how-
ever, concluded that this paper was both unreliable and
inadmissable hearsay and refused to consider it. Titan also
does not challenge this conclusion on appeal.
6                                              No. 07-1996

    equipment of the sort on the FUNSA premises at the
    time of the bankruptcy of FUNSA. Based on this
    knowledge and a review of the list of equipment at
    FUNSA, and based further upon my investigation of
    equipment at FUNSA at the time of the bankruptcy,
    including my knowledge of equipment sent to
    FUNSA by Titan during the period of Titan’s owner-
    ship interest in FUNSA, the value of the equipment
    at FUNSA at the time of its bankruptcy exceeded
    US$ 10 million.
R.58, Ex. A at ¶ 8. Compania moved to strike paragraphs
8 and 9 of this affidavit as undisclosed expert testimony,
and the district court granted its motion.
  On October 19, 2006, the district court granted
Compania’s motion for summary judgment. It held that
Titan had presented no competent evidence that either
the bank or Compania had impaired the value of the
collateral or otherwise increased the risk to Titan under
the guaranty. Titan timely appealed.

                            II
                     DISCUSSION
                            A.
  Titan first challenges the district court’s decision not
to consider the testimony of Maurice Taylor regarding
the estimated value of the collateral. The court determined
that Taylor’s opinion, although styled as lay opinion
testimony, was actually expert testimony. The district
court excluded this testimony because Titan never dis-
closed Taylor as an expert according to the procedures
No. 07-1996                                                  7

required by Federal Rule of Civil Procedure 26(a)(2).4
  We generally review for an abuse of discretion the
district court’s decision to exclude expert testimony.
Mannoia v. Farrow, 476 F.3d 453, 456 (7th Cir. 2007). When
this decision is based on an interpretation of the Fed-
eral Rules of Evidence, however, we review de novo the
court’s interpretation of the law. The district court’s
classification of a witness as lay or expert is a legal inter-
pretation that we review de novo. See United States v.
Davis, 471 F.3d 783, 788 (7th Cir. 2006) (“Legal conclu-
sions made by the trial court in reaching the decision to
admit expert testimony are reviewed de novo.”); United
States v. Gray, 410 F.3d 338, 347 (7th Cir. 2005) (“[O]ur
review of whether [the witness] was properly qualified
as an expert is de novo and our review of the decision to
admit the testimony is for an abuse of discretion.”).
  Here, the district court classified Maurice Taylor’s
affidavit as expert testimony under Federal Rule of Evi-
dence 702, and therefore it was inadmissible because Titan
had not disclosed Taylor as an expert witness. Titan
contends that Taylor’s testimony should have been charac-
terized as lay opinion testimony under Rule 701, not as
expert testimony under Rule 702, and, therefore, it was
not required to disclose Taylor as an expert witness
prior to the scheduled date. Rule 701 provides:
    If 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

4
  Notably, Titan also never disclosed Taylor as a potential lay
witness on the question of valuation, despite an interrogatory
requesting such disclosures.
8                                               No. 07-1996

    (a) rationally based on the perception of the witness,
    (b) helpful to a clear understanding of the witness’
    testimony or the determination of a fact in issue, and
    (c) not based on scientific, technical, or other special-
    ized knowledge within the scope of Rule 702.
Fed. R. Evid. 701 (2000).
  Titan contends that Taylor’s testimony was based on
his “extensive experience purchasing and selling used
Tire and Wheel manufacturing equipment on the world
market,” R.58, Ex. A at ¶ 8, but not on any specialized or
scientific techniques or processes of reasoning that can
be mastered only by specialists in the field. In Titan’s
view, therefore, Taylor’s opinion was based on his own
perceptions of, and experience in, buying and selling
the equipment in question. According to Titan, Taylor’s
testimony was “quintessential Rule 701 testimony” re-
garding “the value of his property.” United States v.
Conn, 297 F.3d 548, 554 n.2 (7th Cir. 2002) (quoting
Asplundh Mfg. Div. v. Benton Harbor Eng’g, 57 F.3d 1190,
1198 (3d Cir. 1995)).
  In support of its position, Titan relies on a number of
cases from other circuits that permit business owners or
officers to testify without being qualified as experts. See
Asplundh, 57 F.3d at 1198 (noting that a maintenance
supervisor was competent to testify as to the cause of an
accident when he had personally inspected the damaged
parts); Lightning Lube v. Witco, 4 F.3d 1153, 1174 (3d
Cir. 1993) (holding that the owner of a small business
may testify as a lay witness regarding the projected
future profits of his business); State v. Brown, 836 S.W.2d
530, 549-50 (Tenn. 1992) (holding that a nurse may testify
as a lay witness about the nature of injuries she per-
sonally observed).
No. 07-1996                                                  9

  The advisory committee notes to Rule 701 explain,
however, that a business owner or officer is allowed to
testify without being qualified as an expert only because
that testimony is tied to his or her personal knowledge:
    [M]ost courts have permitted the owner or officer of a
    business to testify to the value or projected profits of
    the business, without the necessity of qualifying the
    witness as an accountant, appraiser, or similar
    expert. See, e.g., Lightning Lube, Inc. v. Witco Corp. 4
F.3d 1153 (3d Cir. 1993) (no abuse of discretion in
    permitting the plaintiff’s owner to give lay opinion
    testimony as to damages, as it was based on his knowl-
    edge and participation in the day-to-day affairs of the
    business). Such opinion testimony is admitted not
    because of experience, training or specialized knowl-
    edge within the realm of an expert, but because of the
    particularized knowledge that the witness has by
    virtue of his or her position in the business. The
    amendment does not purport to change this analysis.
Fed. R. Evid. 701 (advisory committee notes).
   This case does not present such a circumstance. Taylor
purported to value the collateral by applying his gen-
eralized knowledge of the worldwide tire market, gained
through his experience in the worldwide tire business, to
a proffered list of specific items owned by a third party.
Taylor’s only connection to the items in question is the
fact that he is an officer of a company that, at one time, held
a controlling interest in a company that, at one time, owned
the collateral. Titan, however, had no ownership interest in
FUNSA at the time that Taylor made his purported valua-
tion. Furthermore, Titan identifies no evidence that Taylor
participated in FUNSA’s initial purchase of the particular
items in question, and his affidavit belies any contention
10                                               No. 07-1996

that he based his valuation opinion on personal knowledge
of the collateral. Indeed, in his deposition, Taylor specifi-
cally disclaimed any personal knowledge of the particular
items that were included in the sale.
   Taylor’s position therefore was not akin to the owner
of a small business testifying to the value of that busi-
ness. His attempt at valuation was not based on any
knowledge obtained through his special relationship
with the items in question; instead, he simply looked at
a list of items provided by Compania, and he estimated
their value based on his extensive experience purchasing
and selling the type of goods at issue. This is the kind
of testimony traditionally provided by an expert: “[I]t
could have been offered by any individual with special-
ized knowledge of the [tire] market.” Conn, 297 F.3d at
555. In fact, Taylor’s testimony on this issue was essen-
tially the same as that of Titan’s originally retained valua-
tion expert, Haron, whose statements already had been
excluded by the district court because they were
untimely disclosed.
  Rule 701 recently was amended “to emphasize that
lay opinion testimony is limited to those observations of a
lay witness that are ‘not based on scientific, technical, or
other specialized knowledge within the scope of Rule
702.’ ” Conn, 297 F.3d at 553 (quoting Fed. R. Evid. 701). The
amendment was designed to avoid this very situation—to
prevent parties from “proffering an expert in lay wit-
ness clothing.” Fed. R. Evid. 701 (advisory committee
notes). We have noted:
     Before the 2000 amendment to Rule 701, some courts
     had become more lenient in the admission of lay
     opinion on subjects appropriate for expert testimony.
     The amendment was designed to make clear that
No. 07-1996                                                11

    courts must scrutinize witness testimony to ensure
    that all testimony based on scientific, technical or
    other specialized knowledge is subjected to the re-
    liability standard of Rule 702.
Conn, 297 F.3d at 553 (internal citations omitted).
  Testimony based solely on a person’s special training
or experience is properly classified as expert testimony,
and therefore it is not admissible under Rule 701. Id. at 554-
55. Taylor’s valuation attempt was based on his
special experience in the tire industry, not on his per-
sonal knowledge of the goods in question; therefore, it
falls within the purview of Rule 702. Accordingly, we
conclude that the district court properly classified para-
graphs 8 and 9 of Taylor’s affidavit as expert testimony.
  Because Titan failed to disclose Taylor as an expert
witness prior to the disclosure deadline, the district court
did not abuse its discretion when it excluded his
testimony. See Salgado v. Gen. Motors Corp., 150 F.3d 735,
743 (7th Cir. 1998) (holding that “the district court acted
well within its discretion when it imposed the sanction of
excluding the testimony of the expert witness” because
the party had failed to comply with the court’s sched-
uling order); Hill v. Porter Mem. Hosp., 90 F.3d 220, 224
(7th Cir. 1996) (noting that “[w]hen one party fails to
comply with a court’s pre-hearing order without justifiable
excuse, thus frustrating the purposes of the pre-hearing
order, the court is certainly within its authority to pro-
hibit that party from introducing witnesses or evidence
as a sanction”).
                             B.
 Finally, Titan submits that an affidavit from former
FUNSA employee Cesar Villar should have been con-
12                                                  No. 07-1996

sidered by the district court as evidence of the value of
the collateral. Villar’s affidavit recounted statements,
allegedly made to him by unidentified representatives of
unidentified foreign companies, regarding a possible
purchase of the collateral. He speculated that unidentified
foreign companies would have paid more than $2 million
for the collateral under certain conditions, although he
did not specify a particular dollar figure.5 The district
court did not specifically mention Villar’s affidavit when
it discussed the issue of valuation in its opinion. Accord-
ingly, Titan contends that the district court improperly
“ignored” Villar’s affidavit when it determined that no
credible evidence supported Titan’s assertion that the
collateral was valued at significantly more than $2 million.
  Titan’s contention is without merit. Titan never pointed
to Villar’s affidavit as evidence of valuation in its brief
in opposition to Compania’s summary judgment motion.

5
    Specifically, Villar’s affidavit stated:
        Approximately two years ago, after the termination of my
      employment relationship with FUNSA, I represented a
      foreign company which was interested in the acquisition
      of FUNSA. . . . The foreign company which I represented in
      the said negotiations, would have paid (and its offer
      involved) an amount higher than USD 2,000,000 in case
      the abovementioned strict terms by [the bank] had not been
      required.
        . . . I was contacted by another foreign company
      which was interested in the acquisition of part of the
      equipment and collaterals of FUNSA. The abovementioned
      company could not make its offer since the decision of [the
      bank] was to sell the collateral as a whole and not in parts
      ....
R.58, Ex. C.
No. 07-1996                                                    13

Instead, it referenced the affidavit only for the assertion
that “difficult political issues” were involved in the
FUNSA bankruptcy. R.57 at 4, 7-8. The district court
cannot be expected to search through the entire record
for evidence that may support a party’s contentions; a
party must point to specific evidence that creates a genu-
ine issue of material fact for trial. See Fed. R. Civ. P. 56(e)(2)
(requiring an adverse party to “set out specific facts”).
   Furthermore, Federal Rule of Civil Procedure 56(e)(1)
states that affidavits opposing summary judgment “must
be made on personal knowledge, set out facts that
would be admissible in evidence, and show that the
affiant is competent to testify on the matters stated.”
Villar’s proffered statements—that two unidentified
foreign companies would have purchased the collateral
for more than $2 million had certain conditions been
met—are entirely without foundation. He claimed no
personal knowledge of the value of the collateral, and
his assertions are based entirely on speculation and
hearsay. The district court correctly gave no credence in
its opinion to such conclusory and unsupported assertions.
See Abioye v. Sundstrand Corp., 164 F.3d 364, 368 (7th Cir.
1998).
   The district court did not err when it concluded that
Titan had failed to present evidence of valuation suf-
ficient to create a genuine issue of material fact for trial.

                          Conclusion
    For the foregoing reasons, we affirm the judgment of
the district court.
                                                      AFFIRMED

                     USCA-02-C-0072—7-10-08