Retained vs. Unretained Experts — Identifying Characteristics of Each and Limitations on the Scope of Testimony of the Latter

Compass Bank v. Eager Road Assocs., LLC, 2013 U.S. Dist. LEXIS 154118 (E.D. Mo. Oct. 28, 2013):

In the First Amended Complaint, the Banks seek damages for the breach of a Settlement Agreement between the parties arising out of   an underlying lawsuit brought in this district. (ECF No. 107). The dispute underlying the prior lawsuit arose out of a complex financial transaction involving the development of commercial and retail property known as The Meridian at Brentwood (the Meridian Project). As relevant to the pending motion, the Banks allege Defendant City of Brentwood issued tax increment revenue bonds (the Bonds) to finance certain public improvements associated with the Meridian Project and to reimburse Defendant Eager Road Associates (ERA) for certain costs incurred by ERA in constructing such improvements. (Id. ¶ 18). In September 2011, the parties agreed, through their respective attorneys, to enter into the Settlement Agreement. Additionally, in September 2011, each party executed the Acknowledgment and Acceptance of Settlement Agreement and Mutual Release of Claims (the Mutual Release), by which they confirmed and accepted the terms and conditions of the Settlement Agreement. (Id. ¶¶ 20-21).

The Banks further allege that at issue are two provisions of the Settlement Agreement and Mutual Release, whereby Defendants were required to (1) tender to Plaintiffs $4.15 million to purchase a portion of the Bonds (the Developer Settlement Payment), and (2) provide a $1.35 million letter of credit (Developer Letter of Credit), payable in three years. (ECF No. 107, Ex. A ¶ B(1)(a) and (b)). The Banks allege that the Settlement Agreement provided for Bond Refinancing, which involved either remarketing of Series 2007B Bonds or refunding both Series 2007A and Series 2007B Bonds (ECF No. 107 ¶ 23), and that, under the terms of the Settlement Agreement, delivery of the Developer Settlement Agreement and Developer Letter of Credit were conditions precedent to the Bond Refinancing. (Id. ¶ 25). According to the Banks, they have performed their obligations under the Settlement Agreement, but ERA has failed to meet its obligations as designated by the Settlement Agreement, including making the Developer Settlement Payment, delivering the Developer Letter of Credit, and completing the Bond Refinancing. (Id. ¶¶ 26-27).

For purposes of the instant lawsuit, ERA has disclosed Eugene Norber as a non-retained expert witness. ERA's expert witness disclosure states that the subject matter of Mr. Norber's   testimony will be "payments made from trust accounts maintained" by Defendant UMB Bank. N.A., relating to the Series 2007B Bonds, "including, but not limited to, interest payments to bondholders from said accounts and payments for legal fees made from said accounts." (ECF No. 209.1 at 1). ERA's disclosure also states the following:

   Summary of facts and Opinions: Mr. Norber will testify regarding the interest payments made from the trust accounts for the 2007B Series bonds since September 9, 2011 and the applicable interest rate for each interest payment made since that date. Mr. Norber will opine as to the portion of the interest payments made to bondholders for the 2007B Series bonds since September 9, 2011 up to the time of the testimony that is attributable to the continued charging of a default rate of interest for the 2007B Series bonds after September 9, 2011.

 

Mr. Norber will further testify as to the payments for legal fees made from the aforementioned trust accounts to attorneys or law firms representing Compass Bank and Vectra Bank in the period after September 9, 2011.

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Additionally, ERA disclosed and provided the Banks with Mr. Norber's 2011 report. The  report describes, among other things, the work performed in developing a study of the Meridian Project revenue projections and the work performed in developing "the 2011 estimates of tax revenues which could be generated" at the Meridian Project Site in the future. The report also provides Mr. Norber's opinion regarding: "the reasonableness of the information used to make th[e] projections" and of the projections themselves; the nature and severity "of the most recent recession"; and whether the City "had, or could have obtained the information" to make a determination in 2007 regarding the actual and projected revenue for the Meridian Project. (ECF No. 209.2 at 5).

In addition to his being president of Economic Development Resources, which firm was retained by ERA to provide the report, Mr. Norber stated that his qualifications include his being "retained in 2000 by a predecessor of the Developer to review various documents prepared by and for" the City regarding the Meridian Project Site and "projects proposed by the predecessor, and to create studies estimating the projects' sales and property taxes."  (Id. at 5-6).

Also, in his 2011 report, Mr. Norber provided an "Overview of the  Redevelopment Site," a history of the development of the site, including how the development was funded, and a description of his role in the 2007 Study for the Site. In particular, Mr. Norber described his role in the initial studies for the project, in researching data pertaining to "sales per square foot," in calculating the estimated taxable sales created by tenants, and in preliminarily calculating assessed values and estimated real estate taxes payable from the site. (Id. at 2-18). Attached to Mr. Norber's report was the 2007 Study, which included an estimate of the future years' growth of the site's taxable sales. (Id. at 19-39).

DISCUSSION

The Banks seek to exclude Mr. Norber's testimony on the grounds that (1) ERA incorrectly designated him as a non-retained expert rather than as a retained expert; (2) even if Mr. Norber was properly designated a non-retained expert, ERA's expert disclosure does not properly comply with the requirements for non-retained experts under Rule 26(a)(2)(C); and (3) given the subject of Mr. Norber's testimony, ERA failed to disclose any unique knowledge or expertise Mr. Norber has regarding trust accounts or payments made from trust accounts. (ECF  No. 208 at 1-2).

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A retained or specialty expert is "an expert who without prior knowledge of the facts giving rise to litigation is recruited to provide expert opinion testimony." Downey v. Bob's Disc. Furniture Holdings, 633 F.3d 1, 6 (1st Cir. 2011). A non-retained expert is one whose testimony arises from his or her involvement in events giving rise to the litigation. See id.; cf. Fielden v. CSX Transp., Inc., 482 F.3d 866, 869 (6th Cir. 2007). Fed. R. Civ. P. 26(a) requires disclosure of the identity of persons likely to have discoverable information relevant to disputed facts, a copy of all documents relevant to disputed facts in the party's possession or control, and the identity of any person who may be used to present expert testimony. Rule 26(a)(2)(B) requires production of an expert report from any retained expert. See Crump v. Versa Prods., Inc., 400 F.3d 1104, 1110 (8th Cir. 2005) (Rule 26(a)(2)(B) requires disclosure of retained witness must be accompanied by written report prepared and signed by witness). Rule 26(a)(2)(B) disclosures, however, are not required for non-retained experts. See Brandt Distrib. Co., Inc. v. Fed. Ins. Co., 247 F.3d 822, 825-26 (8th Cir. 2001)  (failure to disclose opinion of fire captain who conducted investigation and prepared report in his official capacity that fire was fraud and set for fraudulent purposes was not required and did not violate Rule 26(a)(2)(B)); see also Fielden, 482 F.3d at 869 (Rule 26(a)(2)(B) does not require expert report from treating physician where proposed testimony addressed causation of plaintiff's injuries; permitting treating doctor to testify on causation in such context is consistent with the Rules plain language). Fed. R. Civ. P. 37(c)(1) forbids a party from using undisclosed opinion of a retained expert at trial. See Crump, 400 F.3d at 1110; Brandt, 247 at 825.

The Court finds that Mr. Norber was properly designated a non-retained expert. He was contacted and consulted to address an ongoing issue for which he has specialized expertise, and he was actively involved in financial matters related to the funding and development of Meridian Project. See e.g., Downey, 633 F.3d at 6 (exterminator testifying as to causation from his own firsthand observations akin to treating physician for purposes of Rule 26); Guarantee Trust Life Ins. Co. v. Am. Med. & Life Ins. Co., 2013 U.S. Dist. LEXIS 126553, 2013 WL 4714146, at *2-3 (N.D. Ill. 2013)  (treating physician is only retained expert where he "gives opinions beyond scope of his own observation"; "Non-retained experts must only testify about opinions that were formed during the course of their participation in the relevant events of the case"; finding Defendant's chief financial officer who was subsequently retained as consultant was non-retained witness who could testify based on his personal knowledge of facts and data at issue in litigation). The case which the Banks cite in support of their argument that Mr. Norber's being paid precludes his being a non-retained expert, United States v. Sierra Pacific Industries, 2011 U.S. Dist. LEXIS 60372, 2011 WL 2119078, *5 ( E.D. Cal. May 26, 2011), holds only that  an expert's being paid is a factor to be considered when determining the status of an expert; it is not determinative. Finally, Mr. Norber's previously holding himself out as a witness for hire is not determinative of whether he is a non-retained expert for purposes of the pending matter.

Because Mr. Norber was properly designated a non-retained expert by ERA, the Court finds that ERA's expert witness disclosure regarding Mr. Norber was sufficient as it provided a "summary of the facts and opinions"   about which he is expected to testify, including payments made from trust accounts maintained by UMB relating to the Series 2007B Bonds. See Fed. R. Civ. P. 26(a)(2)(C)(I)-(ii)) (for witness who is not required to provide written report, disclosure must state "subject matter on which the witness is expected to present evidence and summary of facts and opinions to which witness is expected to testify).

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