The opinion of the court was delivered by: Paul L. Friedman United States District Judge
This matter is before the Court on Minebea's Motion for Leave to Supplement the Expert Report of Mr. Thomas Gardner. The Court has examined Minebea's motion, Papst's opposition, and Minebea's reply, as well as the Supplemental Report itself. For the reasons that follow, Minebea's motion is granted in part and denied in part. This matter is also before the Court on Papst's strike through of the testimony of Mr. Gardner and Papst's objections to the trial exhibits Minebea proposes to introduce through Mr. Gardner. The Court's conclusions regarding admissibility are contained herein.
Mr. Gardner's original report, dated April 4, 2005, provides an analysis of the hard disk drive ("HDD") marketplace in general, as well as conclusions as to what Minebea's market share and production of HDD motors would have been in a "but-for" scenario, if Minebea's rights under the Papst patents had been affirmed in 1993 or 1995. See April 4, 2005 Report of Thomas Gardner ("First Expert Report"). One week into trial, Minebea now seeks to admit in evidence a so-called "supplemental report," which would provide additional information in four specific sections: (1) a "refined focus" on the metrics of the U.S. HDD marketplace; (2) a "compendium" of reasonable royalty rates along with a reasonable royalty rate figure per drive; (3) a rebuttal of Mr. Dubinsky's alleged "mischaracterizations" of Mr. Gardner's "but-for scenario"; and, (4) a revised forecast of Minebea's production capacities based on Mr. Malackowski's supplemental report. Minebea's Motion for Leave to Supplement the Expert Report of Thomas Gardner ("Supp. Mot.") at 1-6. As discussed below, only two limited portions of Mr. Gardner's supplemental report fall within the scope of a permitted supplementation of disclosures as contemplated by the Federal Rules of Civil Procedure.
Rule 26(a)(2)(B) of the Federal Rule of Civil Procedure states that expert witnesses must provide the Court with a written report containing, among other things, "a complete statement of all opinions to be expressed and the bases and reasons therefore; [and] the data or other information considered by the witness in forming the opinions; [and] any exhibits to be used as a summary of or support for the opinions." Fed. R. Civ. P. 26(a)(2)(B). Rule 26(a)(2)(C) requires that such reports be disclosed at least 90 days before the trial date or as directed by the Court. The purpose of Rule 26(a)(2) is to prevent unfair surprise at trial and to permit the opposing party to prepare rebuttal reports, to depose the expert in advance of trial, and to prepare for depositions and cross-examination at trial. See Coles v. Perry, 217 F.R.D. 1, 4 (D.D.C. 2003) (noting that "the very purpose of the rule is nullified" when an expert "supplements" his report by addressing a new matter after discovery has ended). The Rule also prevents experts from "lying in wait" to express new opinions at the last minute, thereby denying the opposing party the opportunity to depose the expert on the new information or closely examine the expert's new testimony. See Keener v. United States, 181 F.R.D. 639, 641 (D. Mont. 1998).
In light of the purposes of Rule 26(a), Rule 37(c)(1) provides for the exclusion at trial of any information not disclosed pursuant to Rule 26(a), unless the failure to disclose is harmless, or if there was substantial justification for such failure. Fed. R. Civ. P. 37(c)(1).*fn1 Neither of the exceptions in Rule 37(c)(1) are present in this case. As explained below, the information contained in Mr. Gardner's supplemental report could have been compiled and filed with this Court well before the start of trial. Minebea has articulated no substantial justification for waiting until one week after the start of trial to provide this report. Discovery in this action began years ago, and the time for disclosure of additional evidence has long since passed. Furthermore, the failure to disclose is not harmless, as Minebea alleges. Mr. Gardner's supplemental report is, in several respects, a substantial "refinement" of the original report, containing new or different material and providing additional information to support specific elements of Minebea's case. Papst has not had the opportunity to depose Mr. Gardner regarding his new report, to have its own witness prepare rebuttal reports, or adequately to prepare for cross-examination with respect to the new report. Rule 26(a)(2) specifically contemplates the exclusion of reports, such as this one, that are filed too late to provide the opposing party with an adequate opportunity to respond or prepare a response for trial.
Rule 26(e)(1) provides a limited exception to the deadlines provided in Rule 26(a)(2)(C), requiring that an expert witness supplement his report if he "learns that in some material respect the information disclosed is incomplete or incorrect and if the additional or corrective information has not been made known to the other parties during the discovery process or in writing." Fed. R. Civ. P. 26(e)(1). Contrary to the suggestion of Minebea in its Motion for Leave to Supplement, Rule 26(e) does not permit parties to file supplemental reports whenever they believe such reports would be "desirable" or "necessary" to their case. Rather, the Rule permits supplemental reports only for the narrow purpose of correcting inaccuracies or adding information that was not available at the time of the initial report. Keener v. United States, 181 F.R.D. at 640; Coles v. Perry, 217 F.R.D. at 3 ("Fed. R. Civ. P. 26(e) does not grant a license to supplement a previously filed expert report because a party wants to, but instead imposes an obligation to supplement the report when a party discovers the information it has disclosed is incomplete or incorrect."). Specifically, supplemental reports are permitted under Rule 26(e)(1) only in the following situations: (1) upon court order; (2) when the party learns that the earlier information is inaccurate or incomplete; or (3) when answers to discovery requests are inaccurate or incomplete. Keener v. United States, 181 F.R.D. at 640. Minebea's liberal interpretation of Rule 26(e) would contradict the purpose of Rule 26(a)(2) and Rule 37(c)(1), which specifically prevent further disclosures of expert testimony as trial approaches.
Minebea first argues that the section of Mr. Gardner's supplemental report regarding the U.S. HDD marketplace should be admissible at trial because Mr. Gardner did "not anticipate the desirability" of such a specific analysis until after the Court's June 24, 2005 Opinion denying the parties' cross-motions for summary judgment on the issue of patent exhaustion. Minebea's Motion at 1-3. Specifically, Minebea claims that a more "refined" analysis by Mr. Gardner was "desirable if not necessary," given this Court's interpretation of the elements of patent exhaustion, adding that Mr. Gardner could not have thought to include such an analysis in his report before the Court issued its opinion. See id. at 2-3. The Court disagrees with Minebea's implied assertion that Minebea could not have anticipated the Court's interpretation of the elements of patent exhaustion and requested their expert witnesses to prepare accordingly. A thorough reading of the case law should have been adequate to inform Minebea of the possibility that the Court would require Minebea to establish that motor sales occurred within the United States. At the very least, Minebea should have been aware that such an interpretation of the case law existed when the parties filed their cross-motions for summary judgment, well before June 24, 2005. Given the fact that Minebea could reasonably have anticipated the need for the type of analysis Mr. Gardner now presents in his supplemental report several weeks or months earlier, the Court is unwilling to permit a significant change in an expert's report during trial.
Second, Minebea asks the Court to permit a "compendium" of reasonable royalty rates along with a reasonable royalty rate figure per drive. See Minebea's Motion at 4-6. Minebea claims that it realized that this analysis would be "helpful" only following the Court's June 21, 2005 Daubert Opinion excluding the testimony of Minebea's damages expert, Mr. Fiorito, who had estimated a royalty rate of $1 per drive. Id. at 4. The Court first expressed its doubts about the proffered testimony of Mr. Fiorito, however, on the day Mr. Fiorito testified at the Daubert hearing on June 2, 2005. Had Minebea then planned for Mr. Fiorito's possible exclusion, then it could easily have requested Mr. Gardner to compile a compendium of reasonable royalty rates well in advance of trial. The section of Mr. Gardner's supplemental report discussing Papst royalty rates will therefore also be excluded, subject to one exception discussed below.
Minebea claims that Mr. Gardner's supplemental report corrects an error in his initial report with respect to Papst's "average lower royalty concept." Minebea's Motion at 5-6. This inaccuracy is of the type contemplated by Rule 26(e), which permits experts to submit supplemental reports to correct an earlier figure which the expert has deemed to be inaccurate or incorrect. Although the correction in this case happens to work in Minebea's favor, Rule 26(e) does not distinguish between supplemental disclosures to correct inaccuracies in favor of the party proffering the expert's supplemental report as compared with the party opposing the expert's report. Such a correction in this case will not prejudice Papst by impairing Papst's ability to prepare for cross-examination of Mr. Gardner. Therefore, paragraph 12 of Mr. Gardner's supplemental report and revised Exhibits XI and XII are the proper subject of a supplemental report to the extent that they are necessary to correct Mr. Gardner's pervious error regarding his projection of Papst's "average lower royalty concept." The Court notes, however, that because trial has already begun, it would have been more appropriate to simply highlight any errors and corrections -- with proper explanations -- in the written direct testimony of the expert rather than submit an entirely new supplemental report.
Third, Minebea urges that portions of Mr. Gardner's supplemental report containing a defense of his "but-for scenario" be admitted to rebut Mr. Dubinsky's "mischaracterizations" of Mr. Gardner's original expert report. Minebea's Motion at 6. Rule 26(a)(2)(C) states that expert disclosures intended to contradict or rebut evidence on the same subject matter identified by another party's expert witness must be made within 30 days of the disclosure by the other party. Fed. R. Civ. P. 26(a)(2)(C). By Minebea's own admissions, such "mischaracterizations" must have happened on or before May 25, 2005, over thirty days before Mr. Gardner's supplemental report was submitted. Therefore, a supplemental report on this issue is untimely submitted. Despite Minebea's tardiness, however, in the interest of efficiency, the Court will permit Minebea to include any rebuttals to Mr. Dubinsky's reports in its written direct testimony rather than forcing Minebea to wait until its rebuttal case to present such testimony. Papst will not be surprised or prejudiced by permitting Mr. Gardner to so testify.
Fourth, Minebea argues that Mr. Gardner's revised production forecast should be admitted through the supplemental report, in order to comport with Mr. Malackowski's third supplemental report. Mr. Gardner's original forecast was based on data provided in Mr. Malackowski's original report, which was subsequently revised. Rule 26(e) permits such a revision in order to correct data that is based on information that is inaccurate or out-of-date. Therefore, paragraph 15 and Exhibit XIV of Mr. Gardner's supplemental report may be relied upon to the extent that they are necessary to accurately reflect the revised forecasts of Minebea's production provided in Mr. Malackowski's third supplemental report.
Although the majority of Mr. Gardner's supplemental report will be stricken, it is important to draw a distinction between information contained in the supplemental report, and information, issues, or opinions raised during Mr. Gardner's deposition, which may or may not have been covered in Mr. Gardner's original report. Nothing in this Opinion prevents Minebea from raising in its direct examination of Mr. Gardner any evidence, issues or opinions raised by counsel during Mr. Gardner's deposition, or raised in reaction to issues presented by Mr. Dubinsky or Mr. Malackowski regardless of whether such evidence, issues or opinions were presented in Mr. Gardner's original report.
B. Objections to Testimony
The Court will now address Papst's specific objections to Mr. Gardner's direct testimony in light of the foregoing discussion. The Court does not appreciate Minebea's attempt to introduce new testimony, outside of the scope of either the original expert report or the deposition testimony of Mr. Gardner, into the proffered written direct testimony of Mr. Gardner. Minebea has wasted opposing counsels' time -- in forcing them to attempt to determine which portions of the direct testimony were and were not contained in or directly related to subjects covered by Mr. Gardner in his First Expert Report -- and the Court's time in resolving these objections. Minebea would have saved its own, opposing counsels' and the Court's time had it simply filed the strike-through of Mr. Gardner's First Expert Report and then supplemented it with brief written or oral direct testimony only to the extent necessary to correct errors in the First Expert Report, to rebut Mr. Dubinsky's conclusions, or to take account of Mr. Malackowski's observations. While the Court did find Minebea's comments to Papst's strike throughs very helpful in resolving these objections, the sheer volume of objections would have been significantly less had Minebea submitted its testimony as described above.
Nevertheless, the Court notes that a number of Papst's objections take a far too narrow view of what is acceptable direct expert testimony. Were Minebea simply to have put Mr. Gardner on the stand for direct testimony, there would have been no line-by-line comparison of the expert report to his direct testimony. He would have been permitted a certain degree of latitude with respect to the areas in which he has been accepted as an expert as permitted to expand upon and explain the opinions and conclusions in his expert report and at deposition. The Court therefore will permit Minebea to include reasonable explanations -- such as would have been elicited during live direct testimony -- of which Papst had fair notice beyond the actual language of the First Expert Report.
The following is a paragraph by paragraph resolution of Papst's objections. Minebea shall submit revised written direct testimony which comports with this Opinion.
* ¶¶ 4-5. The references to the July 5, 2005 supplemental report will be stricken.
* ¶ 6.4. The conclusions stated in ¶ 6.4 are new conclusions rather than a "restatement and further explanation" of ¶¶ 23, 27 and 31 of the First Expert Report. This paragraph shall be stricken. Minebea may substitute the actual conclusions from the First Expert Report.
* ¶ 6.8. The first sentence was contained in the First Expert Report and the objection is overruled. The second sentence states that Papst demanded royalty rates of 1% to 6%. Minebea does not cite to the exact paragraph in the First Expert Report in which these numbers are contained, but merely says "royalty rates are discussed extensively" and "the documents supporting this opinion are all listed in Exhibit II." This is insufficient. If the royalty demand range of 1% to 6% is actually in the First Expert Report, then it may be included in the direct testimony. Entirely new opinions are not permissible even if the documents underlying them were previously identified. The third sentence is not a "summary" of paragraph 41 at page 22 of the First Expert Report and will be stricken. Minebea will not be permitted to introduce royalty-related testimony which was not the subject of either the First Expert Report or deposition testimony. The fourth sentence is contained in paragraph 40 of the First Expert Report and the objection is overruled.
* ¶ 7. The additional conclusion that there are no substantive uses for HDD spindle motors other than building HDDs is not reflected in the deposition testimony of Mr. Gardner, as claimed by Minebea. Rather, the excerpt shows only that Mr. Gardner agreed that the sale of a spindle motor represents the sale of an HDD unit. This paragraph shall be stricken.
* ¶ 9. The concept that the hard disk drive market follows the personal computer market was contained in paragraph 11 of the Gardner Report. This objection is overruled. The statement that there were 13 significant participants in the hard disk drive industry in 1995 was not contained in the original report. Minebea's argument that the 1995 number could be found in the 1996 Disk/Trend report whereas the 1989 number actually used in the First Expert Report was from the 1990 ...