A recent case out of the Eastern District of New York highlights the (1) criticality of exactness and timeliness of expert disclosure under the Federal Rules; and (2) that practitioners should not rely on the supplementation process available at Rule 26 to set forth opinions that “could have been asserted” at an earlier date.

Mirkin v. XOOM Energy, LLC, 2024 WL 4143376 (EDNY Sept. 2024) involves two expert reports of a class action plaintiff Mirkin. Plaintiff’s first expert report was “adopted” by the District Court to support class certification, and to deny defendant’s motion for summary judgment.

Thereafter, and at the close of expert discovery, plaintiff sought, and the District Court granted, leave to issue an amended report.

The amended report seemingly corrected a methodological flaw in the expert’s analysis.

Defendant, on a motion in limine, raised issue with the methodology set forth in plaintiff’s original expert report and argued that the damages as stated in the original report do not comport with plaintiff’s theory of liability. The District Court noted that defendant did not previously raise this issue during class certification. [1]

Presumably endeavoring to establish good cause for the amended report, Plaintiff argued that the amended report was necessitated by the Court’s later-in-time decisions interpreting the relevant contract between the parties and supplemental discovery from Defendant.

The District Court (1) granted Defendant’s motion to exclude the original report as evidence of damages based on the flaw; and (2) in the same decision, in relation to the amended report (that corrects the flaw), granted Defendant’s motion to preclude the amended report as untimely because, in correcting the methodology, it was “not supplementing” the original report but was offering a “new theory out of time” that was prejudicial to Defendant.

This decision serves as a practice reminder about Federal Rules 26 and 37. Below are the salient points:

• While Rule 26 permits supplementation of an expert disclosure, it does not permit a party to offer a new theory or methodology. [2] EDNY and SDNY have held that permissible supplementation includes changing a mathematical error but not the theory of the opinion. [3]
• If an opinion is out of time (meaning it is not a proper supplement under Rule 26) it is subject to preclusion under Rule 37(c)(1) absent an exception. An exception may be found if “the failure was substantially justified or is harmless.” [4] Generally speaking, if a party can show good cause for the late disclosure, such as new discovery, and either no prejudice or a method to ameliorate the prejudice, late disclosure is typically allowed.[5]
• Generally, whether a sanction is warranted, and whether that sanction is upheld, is a fact specific inquiry. The district courts have wide discretion to impose sanctions and to preclude under Rule 37, and will only be reversed if the party can establish an abuse of discretion. [6]

Here, plaintiff argued that the amended report was justified by (i) post-discovery court orders that clarified interpretation of the underlying service contract in dispute; and (ii) supplemental discovery from defendant. The District Court did not buy those arguments and held that the post-discovery decisions and later in time discovery did not occasion the amendment because the amendment mimicked plaintiff’s earlier arguments, meaning the methodology of the amended report was not “novel” and “could have been asserted at an earlier date.”

When looking at the facts in favor of plaintiff, the result here seems particularly harsh – the flaws in the report were not pointed out previously by defendant (meaning it is not as though plaintiff was notice and then ignored the flaws), plaintiff was granted leave to amend, the amended report corrects the flaws of the original report, and the amended report was still precluded.

However, when looking at the facts in favor of defendant, it seems the methodology set forth in the amended report could been asserted in plaintiff’s original disclosure from the beginning of the case because, according to the District Court, the precise methodology was plaintiff’s theory of liability “all along.”

That said, however, if that was the theory of liability “all along,” and set forth in earlier statements and arguments from plaintiff, how can defendant claim prejudice because the original expert report did not mimic plaintiff’s underlying methodology of liability?

This case serves as a reminder to the Bar that (i) the Rules require exactness and precision with respect to expert disclosures (even if the other side is on notice of the underlying theories); (ii) parties should routinely review whether supplementation or amendments of their disclosures are appropriate and not wait until the end of discovery; and (iii) whether a sanction will be granted is a fact specific inquiry and is given wide discretion on appeal.

[1] See Mirkin v. XOOM Energy, LLC, 2024 WL 4143376. *13 (EDNY Sept. 2024).

[2] See Exist, Inc. v. Tokio Marine Am. Ins. Co., 2023 WL 7117369, at *3 (S.D.N.Y. Oct. 5, 2023) (holding that plaintiff was required to show why the methods used in the amended report could not have been included in the original report).

[3] See Rules 26(a)(2)B and 26(e)(1)(A); see also Lidle v. Cirrus Design Corp., 2009 WL 4907201, at *5 (S.D.N.Y. Dec. 18, 2009).

[4] Rule 37(c)(1).

[5] See Patterson v. Balsamico, 440 F.3d 104, 117 (2d Cir. 2006) (considered the following factors in review of lower court’s decision to grant sanction: “(1) the party’s explanation for the failure to comply with the [disclosure requirement]; (2) the importance of the testimony of the precluded witness[es]; (3) the prejudice suffered by the opposing party as a result of having to prepare to meet the new testimony; and (4) the possibility of a continuance”).

[6] See Design Strategy, Inc. v. Davis, 469 F.3d 284, 297 (2d Cir. 2006) (affirming district court’s preclusion of report on damages even though preclusion would prevent party from establishing damages when other factors favored underlying movant; holding that standard as to whether exception applies includes the following four factors and affirming district court’s sanction precluding damages expert report) citing Patterson, 440 F.3d 104.