Ehrenberg v. HALA Enterprises, LLC

1 2 FILED & ENTERED 3 4 NOV 30 2022 5 CLERK U.S. BANKRUPTCY COURT 6 C Be Yn f t ir s a h l e D r li s t r i c Dt E o Pf UC Ta Yli f Cor Ln Eia RK 7 8 UNITED STATES BANKRUPTCY COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 SAN FERNANDO VALLEY DIVISION 11 12 In re: CHAPTER 7 13 Victory Entertainment Inc Case No.: 1:18-bk-11342-VK Adv No: 1:20-ap-01056-GM 14 TENTATIVE RULING, ADOPTED AS THE 15 MEMORANDUM OF OPINION, ON Debtor(s). 16 DEFENDANT’S MOTION IN LIMINE TO EXCLUDE THE EXPERT TESTIMONY OF J. 17 MICHAEL ISSA [dkt. 128] 18 D ate: November 29, 2022 19 Howard M Ehrenberg Time: 10:00 AM Courtroom: 303 20 Plaintiff(s), v. 21 22 HALA Enterprises, LLC 23 24 Defendant(s). 25 26 The Trustee did not provide an expert report in violation of Rule 26(a)(2)(B) and 27 this court’s May order [dkt. 114] regarding expert discovery. Rule 37(c)(1) specifies that 28 the sanction is exclusion of the expert’s testimony and is "self-executing" and 1 "automatic." In the scheduling order, experts were to be designated by 5/23/22 and 2 reports were to be exchanged by 7/15/22. The Trustee designated Mr. Issa in his May 3 2022 designation report, but did not produce Mr. Issa’s report at all. Hala’s counsel sent 4 emails to Mr. Beck on 7/18/22 and on 7/25/22 requesting the report and a confirmation 5 that Mr. Issa would be a witness. No immediate response was received, but on 8/8/22 6 Mr. Beck acknowledged that he had not sent the report, but stated that Mr. Issa would 7 be called as an expert nonetheless. 8 The Trustee should not be allowed to call Mr. Issa as an expert witness nor as a 9 rebuttal expert witness. This would be circumventing Rules 26 and 37. 10 11 Opposition 12 If the failure to comply with Rule 26(a) is substantially justified or is harmless, the 13 expert’s testimony should not be excluded. A motion for sanctions under FRCP 37(c)(1) 14 is discretionary and should be based on whether there is substantial justification or 15 harmlessness due to the violation of the rule. 16 The Court must balance fairness to the parties with the need to manage dockets, 17 taking into account the totality of the circumstances, such as: the history of the 18 litigation, the need for the challenged evidence, any justifications, prior notice of 19 the expert and the possibility of designation, whether the testimony will be 20 meaningfully different from or cover the same areas as that of the original expert, 21 and the ability of the opposing counsel to depose or cross-examine the new expert. Macaulay, 321 F.3d at 51; see Ferrara & DiMercurio v. St. Paul Mercury 22 Ins. Co., 240 F.3d 1, 10–11 (1st Cir.2001). 23 Morel v. Daimler-Chrysler Corp., 259 F.R.D. 17, 20 (D.P.R. 2009). 24 There are a series of factual circumstances that courts have used to determine 25 whether to exclude the evidence. Here the expert had been designated in a timely 26 fashion back on May 23, 2022. The Defendants had all of the information that would be 27 28 1 in Mr. Issa’s report, but failed to depose him in the apparent hope that the Court would 2 exclude his testimony. 3 The Second Amended Complaint has extraordinary detail in the allegations, 4 specifically in paragraphs 17 through 32. These were from Mr. Issa, as were the 5 conclusions in paragraphs 52-53, 57, and 75. The Defendants have had this 6 information since January 2021 and conducted a series of discovery through a set of 7 requests for admissions and interrogatories as well as a demand for production of 8 documents. 9 10 Reply 11 No report was ever served and thus exclusion of the expert is automatic and no 12 discretion is needed. Even if the court could consider substantial justification and 13 harmlessness, the Trustee has not shown either. No reason is given for failure to 14 produce a report. The Defendants requested the report several times and yet none was 15 produced. This was deliberate and tactical. 16 The complaint and the discovery responses do not substitute for the expert’s 17 report. In this case, the Trustee designated Mr. Issa to testify as to the Debtor’s 18 solvency/insolvency. The complaint merely makes a conclusionary allegation in 19 paragraph 53 that the Debtor was insolvent in the year before filing bankruptcy. This 20 was on information and belief and does not show Mr. Issa’s opinion, methodology, or 21 data. It is a statement of ultimate fact. The extensive data in the complaint refers to the fair market value and the market 22 trends during the Debtor’s lease. In the expert designation, it is Mr. Eidson who was 23 designated for that, not Mr. Issa. 24 Offering Mr. Issa for deposition now is not only late, but it is without a report. The 25 Defendants have no road map to follow for discovery or the imminent trial. 26 /// 27 /// 28 1 || Proposed Ruling 2 As to the information underlying his expert opinion that Mr. Issa will testify to, it is 3 || insufficient on the theory that these are the contentions and facts laid out in the Second 4 ||Amended Complaint. And as to the revelations in the responses to requests for 5 || admissions, interrogatories, and requests to produce, | cannot find any reference to Mr. 6 as the basis of these responses. Further, as of November 22, there still is not a 7 || written report from Mr. Issa that has been produced. And no excuse has been given for 8 || this. 9 The Plaintiff seeks to place the burden on the Defendants to have deposed Mr. 10 but the initial burden is that the report needed to be produced. Otherwise the 41 || Defendants are just taking a shot in the dark as to the basis of his opinions (whatever 42 may be) and as to whether he is the one whose initial allegations are the basis of 43 || the complaint. 14 It would be unfair to the Defendants and to the Court to allow Mr. Issa to give his 45 || expert opinion orally on the stand. And time has certainly run out. We set the trial date 46 ||months ago so that it would be convenient to all parties and so that the Court would 17 access to a courtroom for five consecutive days. The Defendants have complied 1g || with the stipulations. The Plaintiff has not. 19 The issue of Mr. Issa’s statement of qualifications is not dispositive. The lack of 20 report that was timely or even slightly late is. m4 Grant the motion. Mr. Issa will be welcome in the courtroom as a consultant to 22 Plaintiff's counsel, but may not testify either on direct examination or in rebuttal. 93, || HHT a eee 95 Date: November 30, 2022 Geraldine Mund United States Bankruptcy Judge 26 27 28