Commercial Litigation and Arbitration

Supplemental Expert Reports — Need to Rely on Information Previously Unknown — Substantial Justification and Harmless Error: Four-Factor Test (Second Circuit)

Faulkner v. Arista Records LLC, 2014 U.S. Dist. LEXIS 129711 (S.D.N.Y. Sept. 15, 2014):

Under Rule 26(a)(2)(B) of the Federal Rules of Civil Procedure expert [*28]  testimony must be accompanied by a written report which shall contain, inter alia, "a complete statement of all opinions the witness will express and the basis and reasons for them," "the data or other information considered by the witness in forming them," and "any exhibits that will be used to summarize or support them." Parties are required to make these disclosures "at the times and in the sequence that the court orders." Fed.R.Civ.P. 26(a)(2)(C). Rule 26(e) provides that "[a] party who has made a disclosure under Rule 26(a) . . . must supplement or correct its disclosure . . . if the party learns that in some material respect the disclosure . . . is incomplete or incorrect." Rule 37(c)(1) states that if a party fails to abide by these requirements, "the party is not allowed to use that information . . . to supply evidence on a motion, at a hearing, or at a trial, unless the failure was substantially justified or is harmless." The Second Circuit has interpreted the language in Rule 37(c)(1) to allow for preclusion of the supplemental expert declarations where there is "no substantial justification and the failure to disclose is not harmless." Design Strategy, Inc. v. Davis, 469 F.3d 284, 294 (2d Cir. 2006).

Nevertheless, "experts are not free to continually bolster, strengthen, or improve their reports by endlessly [*29]  researching the issues they already opined upon, or to continually supplement their opinions." Cedar Petrochemicals, Inc. v. Dongbu Hannong Chem. Co., Ltd., 769 F. Supp. 2d 269, 278 (S.D.N.Y. 2011) (internal citations and quotations omitted). Under Rule 26, an expert's report that does not rely on "any information that was previously unknown or unavailable to him," should not be considered a supplemental report. Id. Because preclusion of an expert may be a harsh sanction, the courts must consider four factors in assessing whether preclusion is appropriate: (1) the explanation for the delay in providing the evidence; (2) the importance of the new evidence; (3) the potential prejudice to the opposing party; and (4) whether a continuance is more appropriate. See id.; Point Prods. A.G. v. Sony Music Entm't, Inc., 93 CIV. 4001 (NRB), 2004 WL 345551, *9 (S.D.N.Y. Feb. 23, 2004).

Finally, under Rule 26, supplemental expert evidence offered after the close of discovery should not be admitted where it "expound[s] a wholly new and complex approach designed to fill a significant and logical gap in the first report," because doing so "would eviscerate the purpose of the expert disclosure rules." Id. Nevertheless, "to the extent that an expert affidavit is within the scope of the initial expert report, it is properly submitted in conjunction with dispositive motions [*30]  even outside the time frame for expert discovery." Cedar Petrochemicals, 769 F. Supp. 2d at 279.

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