Court Opinion

ID: 3183125
Source: CourtListenerOpinion
Date Created: 2016-03-07 18:07:07.788504+00
Date Added: 2024-06-11T14:28:52.281953
License: Public Domain

In the

        United States Court of Appeals
                      For the Seventh Circuit
                          ____________________
No. 14-2943
ORVIL DUANE HASSEBROCK and
EVELYN HASSEBROCK,
                                                     Plaintiffs-Appellants,

                                       v.

ROBERT G. BERNHOFT, et al.,
                                                    Defendants-Appellees.
                          ____________________

                Appeal from the United States District Court
                    for the Southern District of Illinois.
         No. 10-CV-0679-NJR-DGW — Nancy J. Rosenstengel, Judge.
                          ____________________

          ARGUED APRIL 6, 2015 — DECIDED MARCH 7, 2016
                    ____________________

   Before POSNER and SYKES, Circuit Judges, and SIMON, Chief
District Judge.*
   SYKES, Circuit Judge. Orvil and Evelyn Hassebrock sued
their former attorneys and accountants for professional mal-
practice, but they waited until after discovery closed to file

*   Of the Northern District of Indiana, sitting by designation.
2                                                         No. 14-2943

their expert-witness disclosure. They belatedly moved for an
extension of time, but the district court denied the motion
and disallowed the expert. Without expert testimony, the
Hassebrocks could not prove their claims against either the
attorneys or the accountants. The court entered summary
judgment for the defendants.
    On appeal the Hassebrocks insist that the judge should
have applied the disclosure deadline specified in
Rule 26(a)(2)(D) of the Federal Rules of Civil Procedure ra-
ther than the discovery deadline set by court order. They al-
so challenge the judge’s summary-judgment ruling.
    We affirm. The disclosure deadline specified in
Rule 26(a)(2)(D) is just a default deadline; the court’s sched-
uling order controls. And it was well within the judge’s dis-
cretion to reject the excuses offered by the Hassebrocks to
explain their tardy disclosure. Finally, because expert testi-
mony is necessary to prove professional malpractice, sum-
mary judgment was proper as to all defendants.
                           I. Background
A. Factual Background
   Orvil Hassebrock and his wife, Evelyn, hired the Bern-
hoft Law Firm in 2005 to help with a host of legal problems.
Most seriously, Orvil was then the subject of a federal crimi-
nal tax investigation. 1 The Hassebrocks also believed they
had a potential civil claim for investment losses in a compa-

1 Orvil Hassebrock was ultimately found guilty, sentenced to 36 months
in prison and 36 months of supervised release, and ordered to pay a fine
along with almost $1 million in restitution. We affirmed his prison sen-
tence and remanded for a clarification on the restitution order. United
States v. Hassebrock, 663 F.3d 906 (7th Cir. 2011).
No. 14-2943                                                     3

ny called Semper Libera and a claim against a previous set of
lawyers over fees withheld from a settlement recovery.
    In 2008 the Hassebrocks became dissatisfied with the
firm’s attorneys and fired them. In 2010 Orvil filed this suit
against the firm in federal court, invoking the court’s diversi-
ty jurisdiction. He initially proceeded pro se. Several years
later he retained counsel, and in 2013 counsel filed an
amended complaint adding Evelyn as a plaintiff and multi-
plying the number of defendants.
    We take the following factual narrative from the amend-
ed complaint, remembering of course that these are only al-
legations. The first group of defendants is the Bernhoft Law
Firm and two of its attorneys, Robert G. Bernhoft and Robert
E. Barnes. 2 The second group of defendants are accountants:
John C. Noggle; Noggle’s firm, John C. Noggle, CPA, Inc.;
and Tim D. Brewer. The accountants came into the picture
when the Bernhoft Firm hired Noggle to assist in preparing
the Hassebrocks’ delinquent tax returns. The Hassebrocks
later complained about the quality of Noggle’s work, so
Bernhoft asked Brewer to help instead. The Hassebrocks
were dissatisfied with his work too.
   The Hassebrocks allege that the defendants failed to file
accurate tax returns on their behalf, resulting in hundreds of
thousands of dollars in penalties, interest, and legal and ac-
counting fees. They also allege that the attorney defendants
dropped the ball on the Semper Libera claim and the claim
about the settlement proceeds.

2An additional attorney was named in the amended complaint but was
never served.
4                                                    No. 14-2943

    The amended complaint states six claims for relief: (1) a
negligence claim against all defendants; (2) a breach-of-
contract claim against all defendants; (3) a legal malpractice
claim against the law firm and the attorneys; (4) a claim for
breach of fiduciary duty against the accounting firm and the
accountants; (5) a claim for negligent misrepresentation
against the accountants; and (6) a claim against the account-
ants for aiding and abetting the torts of the attorneys.
B. Procedural History
   The substance of this appeal focuses largely on discovery
deadlines, so we’ll sketch the relevant procedural history in
some detail. The case was litigated in fits and starts because
Orvil was initially pro se and the case was twice judicially
reassigned.
    When Orvil filed his pro se complaint—on September 2,
2010—the case was initially assigned to Judge William
Stiehl. It pended for nearly two years while the Hassebrocks
secured counsel, which occurred sometime in late 2012.
Newly retained counsel did not amend the complaint until
March 2013. The defendants then moved to dismiss, and on
February 2, 2014, the case was reassigned to Judge Phil
Gilbert. By order dated May 2, 2014, Judge Gilbert granted
the motion in part and denied it in part. Two weeks later (on
May 19) the case was reassigned to Judge Nancy
Rosenstengel.
    As relevant here, the district court’s local rules provide
that “[t]he cut-off date for all discovery, including experts and
third parties, shall not be later than 115 days prior to the first
day of the month of the presumptive trial date.” Uniform
Trial Practice and Procedures, SDIL-LR Forms Appendix
No. 14-2943                                                   5

at ii-iii (Dec. 2009); Timetable and Deadlines Under Federal
Rules and Civil Justice Reform Act, SDIL-LR at v (Dec. 2009)
(emphasis added). On March 16, 2012, while Orvil was still
pro se, the court clerk issued a scheduling order setting
September 2013 as the presumptive trial month. Consistent
with the local rules, this order established a discovery cut-off
date by reference to the presumptive trial month:
       The cut-off date for all discovery, including
       experts and third parties, shall not be later than
       115 days prior to the first day of the month of
       the presumptive trial date. Disclosure of ex-
       perts and discovery with reference to experts
       and other discovery dates will be set according
       to the Joint Report of the Parties following their
       initial meeting or at the schedule and discovery
       conference before the Magistrate Judge.
    On August 20, 2013, the clerk rescheduled the presump-
tive trial month to December 2013. This order also scheduled
a Rule 26(f) pretrial and discovery conference and instructed
the parties to submit a joint report and proposed scheduling
order.
    A motion to reschedule the presumptive trial date fol-
lowed, and the parties thereafter produced a joint report
proposing this schedule for discovery and motions dead-
lines:
       5. Expert witnesses shall be disclosed, along
          with a written report prepared and signed
          by the witness pursuant to Federal Rule of
          Civil Procedure 26(a)(2), as follows:
          Plaintiff’s expert(s): June 15, 2014.
6                                                   No. 14-2943

          Defendant’s expert(s): August 15, 2014. …
       6. Depositions of expert witnesses must be
          taken by:
          Plaintiff’s expert(s): August 15, 2014.
          Defendant’s expert(s): October 15, 2014. …
       7. Discovery shall be completed by Novem-
          ber 1, 2014 (which date shall be no later
          than 115 days before the first day of the
          month of the presumptive trial month). …
       8. All dispositive motions shall be filed by
          December 15, 2014 (which date shall be no
          later than 100 days before the first day of
          the month of the presumptive trial month).
    On September 18 the district court reset the presumptive
trial month to September 2014. That timeframe obviously
didn’t mesh with the schedule proposed by the parties in
their joint report. It’s not entirely clear why the parties’ pro-
posed schedule was rejected, but it’s reasonable to assume
that the court simply wanted to get the case back on track
and move it along more quickly.
   The next discussion of discovery deadlines occurred on
January 17, 2014, during a conference with Magistrate Judge
Donald Wilkerson. At the conclusion of that conference,
Judge Wilkerson entered the following minute order:
       Discovery shall be completed by 5/10/2014.
       Dispositive motions due by 5/25/2014. The par-
       ties are reminded that they may, pursuant to
       Federal Rule of Civil Procedure 29, modify dis-
       covery dates occurring prior to the close of dis-
No. 14-2943                                                7

      covery, by agreement, without the Court’s in-
      volvement, provided that neither the discovery
      cutoff and dispositive motion deadlines nor the
      settlement conference date are affected.
    In March 2014 the defendants moved to stay discovery
until the motions to dismiss were resolved. The Hassebrocks
filed an opposition to the motion on March 6, explaining that
they fully intended to comply with the discovery deadline.
They further explained that
      [t]o comply with the January 17, 2014, Order
      setting deadlines … , Plaintiffs have calendared
      events and expended thousands of dollars
      preparing. The latest of those events will be the
      final selection of an expert witness which will
      likely occur in the days to come after the depo-
      sitions in Chicago next week.
The magistrate judge declined to stay discovery.
   Discovery then proceeded, with some hiccups. The de-
fendant Robert Bernhoft did not make himself available for
deposition until some 13 days after the May 10 deadline for
completion of discovery, following a hearing in which the
magistrate judge ordered him to appear. In addition, on
April 9 the Hassebrocks asked the court to allow them to
disclose the name of their expert witness without the ex-
pert’s report as required by Rule 26(a)(2)(B) of the Federal
Rules of Civil Procedure. They explained:
      Although the Hassebrocks have engaged their
      expert witness, he is awaiting the release and
      then review of IRS transcripts for tax years
      1994–2008 in order to begin calculating ex-
8                                                 No. 14-2943

      pected damages, among other disclosures
      which his written report must provide. Be-
      cause the Hassebrocks believe that information
      will be soon forthcoming, the delay will be
      minimal, and well before the discovery cutoff
      of May 10, 2014, set by this Court.
    The court did not rule on this motion, and the May 10
discovery deadline came and went. The Hassebrocks did not
disclose either their expert’s name or his report before the
cutoff, as they said they would. Instead, on May 13—after
discovery closed—they filed a new motion identifying their
expert but asking the court to allow additional time to dis-
close the expert’s report. This motion stated, in part:
      The Hassebrocks acknowledge that pursuant
      to this Court’s Local Rules, the disclosure of
      the identity of the expert and report are gener-
      ally due no later than 115 days before the first
      day of the month of the presumptive trial date.
      Yet, the Hassebrocks seek an additional en-
      largement of 20 days, or until May 30, 2014, to
      file their expert’s report.
    At a hearing on May 14 and by written order on May 15,
the magistrate judge denied both the April 9 and May 13
motions. The Hassebrocks told the judge that they “were re-
lying upon the 90-day prior to the trial month set forth in
Rule 26.” As relevant here, Rule 26(a)(2)(D) provides that
“[a]bsent a stipulation or a court order, [expert witness] dis-
closures must be made … at least 90 days before the date set
for trial or for the case to be ready for trial.”
No. 14-2943                                                 9

  The magistrate judge rejected the Hassebrocks’ argu-
ment:
      [T]he Court will take some responsibility here
      that we didn’t have in the discovery order a
      deadline for experts, but we did have a discov-
      ery cutoff and a dispositive motion deadline.
      And don’t know how -- I just don’t understand
      how you could figure that you could disclose
      experts after the close of discovery or the dis-
      positive motion deadline. That just -- I mean
      even if the rule said that, it doesn’t make sense,
      does it? That just doesn’t make common sense.
      …
      The Court has set a deadline on a discovery
      cutoff, and for you to make an assumption that
      you could do things after that discovery cutoff
      without leave of court just doesn’t make com-
      mon sense to me.
    The Hassebrocks also argued that their tardiness should
be excused because they had difficulty gathering the funds
to pay an expert witness. The magistrate judge criticized
them for not raising this concern earlier and denied their be-
lated request to extend the discovery deadline based on ex-
cusable neglect.
   The Hassebrocks appealed these rulings to the district
judge. While the appeal was pending, they filed their expert
report on May 28 and amended it on May 30.
   In the meantime, the defendants moved for summary
judgment. As we’ve noted, on May 19 the case was reas-
signed to Judge Rosenstengel. On August 18, 2014, she held
10                                                 No. 14-2943

a hearing to address the appeal of the magistrate judge’s rul-
ings and the motions for summary judgment. After clarify-
ing the facts surrounding the expert-witness disclosure,
Judge Rosenstengel upheld the magistrate judge’s May 15
order, excluded the Hassebrocks’ expert witness, and grant-
ed the motions for summary judgment. She found no error
in the magistrate judge’s rulings regarding expert disclosure.
On the merits she concluded that without an expert witness,
the Hassebrocks would be unable to establish the standard
of care owed to them by either the attorneys or the account-
ants. Without an expert the Hassebrocks had no case, so the
judge entered summary judgment for the defendants.
                        II. Discussion
   The Hassebrocks primarily challenge the exclusion of
their expert witness. In the alternative, they argue that even
without an expert witness, at least some of their claims re-
main viable and should not have been resolved against them
on summary judgment.
    We review discovery-related orders for abuse of discre-
tion. Jones v. City of Elkhart, 737 F.3d 1107, 1115–16 (7th Cir.
2013). When, as in this case, the district judge rules on a dis-
covery matter based on an appeal from a magistrate judge’s
decision, the judge’s discretion is constrained: A district
judge may reverse a magistrate judge’s discovery ruling only
when it is “clearly erroneous or contrary to law.” 28 U.S.C.
§ 636(b)(1)(A); see also Jones, 737 F.3d at 1115–16 (reviewing
for abuse of discretion the district court’s affirmance on
clear-error review of a magistrate judge’s quashing of a sub-
poena).
No. 14-2943                                                    11

   The Hassebrocks’ primary contention is that the expert-
witness disclosure deadline was actually June 3, 2014, not
May 10, 2014. They insist that the district court should have
applied the expert-witness disclosure deadline specified in
Rule 26(a)(2)(D) rather than the discovery deadline set by
court order.
    This argument is easily dismissed. Among other discov-
ery requirements, Rule 26 requires parties to disclose the
identity of any expert witness they intend to present at trial,
together with “a written report—prepared and signed by the
witness—if the witness is one retained or specially employed
to provide expert testimony in the case.” FED. R. CIV.
P. 26(a)(2)(A), (B). The rule also sets a default deadline for
the required disclosures:
       Time to Disclose Expert Testimony: A party
       must make these disclosures at the times and
       in the sequence that the court orders. Absent a
       stipulation or a court order, the disclosures must
       be made:
       (i) at least 90 days before the date set for trial or
           for the case to be ready for trial … .
FED. R. CIV. P. 26(a)(2)(D)(i) (emphasis added).
    The default deadline in the rule does not apply in this
case because there was a court order setting a discovery
deadline. As we’ve explained, on January 17, 2014, the mag-
istrate judge ordered that “[d]iscovery shall be completed by
5/10/2014” and referred to that date as the “close of discov-
ery.” The Hassebrocks make much of the fact that the order
didn’t say that “all discovery shall be completed” by that
date, but that hardly matters. The addition of the word “all”
12                                                   No. 14-2943

would have been superfluous. Indeed, in their April 9 mo-
tion asking for leave to disclose their expert without an ac-
companying report, the Hassebrocks made it clear that they
understood the May 10 deadline as the final date to conclude
all discovery: They promised to disclose their expert’s report
“well before the discovery cutoff of May 10, 2014.”
    The Hassebrocks’ May 13 motion requesting an after-the-
fact extension of time reinforces the point. Rule 6 provides
that when a request for extension of time is made after an
expired deadline, “the court may, for good cause, extend the
time … if the party failed to act because of excusable ne-
glect.” FED. R. CIV. P. 6(b)(1)(B); see, e.g., Satkar Hospitality,
Inc. v. Fox Television Holdings, 767 F.3d 701, 707 (7th Cir.
2014) (discussing the requirements for excusable neglect).
The Hassebrocks advanced an argument for excusable ne-
glect; they explained that they had difficulty raising the
funds needed to pay an expert witness. So there was no mis-
understanding here. The Hassebrocks clearly grasped that
the May 10 deadline applied to all discovery.
   If a party doesn’t make a timely and complete expert-
witness disclosure, the expert’s testimony ordinarily can’t be
presented at trial:
       If a party fails to provide information or identi-
       fy 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).
No. 14-2943                                                  13

    As the district judge saw it, the Hassebrocks’ delay was
neither substantially justified nor harmless. The judge noted
that the Hassebrocks could have raised the issue of their fi-
nancial constraints much earlier, before the discovery dead-
line lapsed, but instead their April 9 motion assured the
court that they would provide the necessary expert disclo-
sures “well before” the May 10 deadline. The judge also not-
ed that reopening discovery would prejudice the defendants
because the case was old and had already moved to the
summary-judgment stage. Reopening discovery would
cause further delay and require the defendants to prepare
new motions on potentially different grounds. This reason-
ing is sound in all respects. We find no abuse of discretion.
    On the merits our review is de novo. Zuppardi v. Wal-
Mart Stores, Inc., 770 F.3d 644, 649 (7th Cir. 2014). All claims
in this case sound in professional negligence (i.e., negligence
and malpractice) or are duplicative or derivative of the
claims for professional negligence.
   To prove a professional negligence case under Illinois
law,
       the established standard of care … is stated as
       the use of the same degree of knowledge, skill
       and ability as an ordinarily careful professional
       would exercise under similar circumstances. …
       The standard recognizes that lay jurors are not
       equipped to determine what constitutes rea-
       sonable care in professional conduct without
       measuring the actor’s conduct against that of
       other professionals.
14                                                    No. 14-2943

Advincula v. United Blood Servs., 678 N.E.2d 1009, 1020–21 (Ill.
1996). Moreover, “in professional negligence cases, … the
plaintiff bears a burden to establish the standard of care
through expert witness testimony.” Id. at 1021.
   A legal malpractice claim thus requires expert legal tes-
timony to establish the attorney’s professional standard of
care, with a narrow exception for “common knowledge” sit-
uations. When the “common knowledge or experience of lay
persons is extensive enough to recognize or infer negligence
from the facts, or … an attorney’s negligence is so grossly
apparent that a lay person would have no difficulty apprais-
ing it,” a plaintiff can proceed to trial without expert testi-
mony. Hatchett v. W2X, Inc., 993 N.E.2d 944, 963 (Ill. App. Ct.
2013) (internal quotation marks omitted); accord Ball v. Kotter,
723 F.3d 813, 821 (7th Cir. 2013).
    The standard of care for accountants is established in the
same manner as it is for attorneys—with expert testimony.
See generally Bd. of Trs. of Cmty. Coll. Dist. No. 508 v. Coopers &
Lybrand, 803 N.E.2d 460, 468 (Ill. 2003) (Illinois law holds ac-
countants “to the same standard as surgeons or any other
professional service providers.”). So the defendants are enti-
tled to summary judgment unless the common-knowledge
exception applies.
   The Hassebrocks say that they should at least have the
opportunity to prove that the attorneys wholly failed to pur-
sue a claim related to their investment losses in Semper
Libera, which they contend is a breach of duty sufficiently
obvious as to fit within the common-knowledge exception.
There are two problems with this argument. First, the
Hassebrocks failed to raise it in their cursory three-page re-
sponse to the summary-judgment motion in the district
No. 14-2943                                                     15

court—or at the motion hearing, for that matter. That consti-
tutes a waiver. See C & N Corp. v. Gregory Kane & Ill. River
Winery, Inc., 756 F.3d 1024, 1026 (7th Cir. 2014) (arguments
not made in response to summary-judgment motion are
waived).
    Even if the argument was not waived, however, the
Hassebrocks failed to support it in this court with anything
more than abstract generalities. Surviving a motion for
summary judgment requires showing a genuine dispute of
fact sufficient to establish the need for a trial. See FED. R. CIV.
P. 56(a), (c); Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986)
(“[T]he nonmoving party [is required] to go beyond the
pleadings” to survive summary judgment.). The
Hassebrocks point to no evidence to support their allega-
tions of negligence on the Semper Libera claim. To the con-
trary, the only facts of record on this point come from the
attorney defendants, who direct us to evidence showing the
Hassebrocks’ allegations to be false. According to Bernhoft’s
affidavit, he told the Hassebrocks that the Semper Libera
claim—valued at a little over $50,000 (at best)—was not
worth pursuing in light of the likely expense of litigation, so
he recommended instead that they deduct the loss on their
tax return (which, incidentally, they did). This evidence is
uncontradicted. The common-knowledge exception does not
apply. The absence of an expert witness is fatal to the negli-
gence and malpractice claims.
    The breach-of-contract claim directly incorporates the
professional duties of care that, as we’ve said, require expert
testimony:
       44. The Hassebrocks entered into a contract
       with attorney Defendants which also created
16                                                  No. 14-2943

      an express[] or implied contractual or mutual
      relationship with accounting Defendants,
      whereby all Defendants agreed to provide
      skilled and specialist ongoing services in the
      areas of accounting, federal tax matters, and
      civil litigation and recovery.
      45. All Defendants owed the Hassebrocks a du-
      ty to render legal and accounting services and
      perform their obligations and commitments
      within the standard of care of reasonable attorneys,
      law firms, CPA or accounting firms, in the local le-
      gal and accounting community.
(Emphasis added.)
    Even if the contract claim had been stated in a way that
was less obviously duplicative of the negligence claims,
summary judgment remains appropriate. The contracts that
were supposedly breached are ones for professional services,
after all. Unlike an ordinary contract dispute, in this context
the question of breach doesn’t turn on whether the defend-
ants complied with specific terms in the contract but rather
on whether they rendered professionally competent services
within the standard of care. A plaintiff “cannot be permitted,
by recharacterizing the claim—whether by calling the [law-
yer’s action] a breach of fiduciary obligation or by contend-
ing that his contract with the law firm contained an implied
promise not to commit such [acts]—to get around the re-
quirement of presenting expert testimony.” Hoagland ex rel.
Midwest Transit, Inc. v. Sandberg, Phoenix & von Gontard, P.C.,
385 F.3d 737, 744 (7th Cir. 2004).
No. 14-2943                                                           17

    Similarly, the claim for breach of fiduciary duty against
the accountants also depends on expert testimony to estab-
lish the duty. Fiduciaries owe duties of “candor, rectitude,
care, loyalty, and good faith.” Miller v. Harris, 985 N.E.2d
671, 679 (Ill. App. Ct. 2013) (quotation marks omitted). The
claim here is more properly regarded as an accounting mal-
practice claim because the alleged breach is based on the
quality of the work performed. See Nettleton v. Stogsdill,
899 N.E.2d 1252, 1270 (Ill. App. Ct. 2008) (affirming dismis-
sal of breach-of-fiduciary-duty claim as duplicative with
malpractice claim). And as we’ve seen, establishing the duty
of care for accountants requires expert testimony.
     The claim for negligent misrepresentation alleges that
mistakes in the Hassebrocks’ income-tax filings are attribut-
able to the negligence of the accountants. The Hassebrocks
concede that summary judgment on this claim is appropriate
if they can’t use their expert.
   The final claim is a derivative one for aiding and abetting
the various breaches of duty by the others. The Hassebrocks
are unable to establish any breach of duty for the reasons
we’ve already explained. The claim for aiding and abetting
necessarily fails. 3

3 The Hassebrocks advance two additional arguments for reversal of the
judgment in favor of Barnes. They say he was not entitled to summary
judgment because he filed his motion two days after the expiration of the
deadline for dispositive motions and the district court never explicitly
granted an extension of time. This argument asks us to remand a case for
trial when we know the plaintiffs cannot win because they have no ex-
pert witness. That would be a waste of time, money, and judicial re-
sources. The Hassebrocks also argue that Barnes was not entitled to
summary judgment because he did not formally raise the expert-witness
18                                                            No. 14-2943

                                                               AFFIRMED.

issue in the district court. It’s true that Barnes did not include this argu-
ment in his summary-judgment brief; he argued instead that the
Hassebrocks have no evidence of his personal liability for any profes-
sional negligence. At the motion hearing, however, Barnes specifically
said he joined and adopted the arguments raised by the other defendants
about the need for an expert witness. That’s enough to preserve the ar-
gument.