Summary
The Seventh Circuit affirmed the district court's exclusion of Karum's damages evidence under Rule 37(c)(1) for failure to properly disclose a non-retained expert under Rule 26(a)(2)(C). The court held that disclosing a fact witness under Rule 26(a)(1)(A) and providing a damages model does not satisfy the requirement to formally designate an expert and provide a summary of facts and opinions; the violation was not harmless or substantially justified. The exclusion was a proportionate case-dispositive sanction where the district court carefully considered alternatives. The court also upheld the permissive nature of Lowe's setoff counterclaim because it arose after the answer was served, and affirmed the dismissal of claims based on agreements to which Lowe's was not a party.
Topics
Practice areas
Questions Presented
- Whether the district court abused its discretion in excluding the expert testimony of Peter Johnson on the damages model under Rule 37(c)(1) for failure to comply with Rule 26(a)(2) expert disclosure requirements.
- Whether the district court erred in striking the Services Component and supplemental damages model.
- Whether the district court erred in dismissing Karum Latin America and claims related to the Services Agreement.
- Whether the district court erred in finding Lowe's counterclaim permissive rather than compulsory.
Holdings
- The district court did not abuse its discretion in excluding the expert testimony because Karum failed to formally disclose Johnson as an expert under Rule 26(a)(2), and the violation was not substantially justified or harmless.
Key quotations
“Formal disclosure of experts is not pointless. Knowing the identity of the opponent’s expert witnesses allows a party to properly prepare for trial.” (at 13)
“The district court's discovery rulings, including a decision to exclude expert testimony, are reviewed for an abuse of discretion.” (at 11)
“The exclusion of non-disclosed evidence is automatic and mandatory under Rule 37(c)(1) unless non-disclosure was justified or harmless.” (at 12)
Factual background
Lowe's expanded into Mexico and contracted with Karum to provide private-label credit card services. The program failed to meet expectations, and Karum sued for breach of contract. Karum disclosed a damages model but did not designate an expert to testify about it. The district court excluded Karum's proposed lay witness testimony on the damages model, finding it required expert testimony, and Karum had not properly disclosed an expert. As a result, Karum could not prove damages, and the court entered judgment for Lowe's.
Procedural history
Karum filed a lawsuit alleging breach of contract. The district court struck parts of the damages model, dismissed certain claims, and later excluded Karum's proposed expert testimony on damages. After Karum conceded it could not prove damages, the court entered judgment for Lowe's. Karum appealed.