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Sauer Incorporated v. Lexington Insurance Agency, Inc.

United States District Court, E.D. North Carolina, Western Division

June 4, 2015

SAUER INCORPORATED, Plaintiff,
v.
LEXINGTON INSURANCE AGENCY, INC., d/b/a LEXINGTON INSURANCE COMPANY, Defendant.

ORDER

ROBERT B. JONES, Jr., Magistrate Judge.

This matter is before the court with regard to Defendant's motion to strike Plaintiffs supplemental Rule 26 disclosures [DE-79] and Defendant's motion to compel [DE-83]. Plaintiff has filed responses in opposition to the motions. [DE-85, 88]. Accordingly, the pending motions are ripe for adjudication. For the reasons that follow, the motions are denied.

I. BACKGROUND

This case, removed to this court on March 13, 2013, involves a breach of contract claim stemming from Defendant's denial of coverage on Plaintiffs claim under a builder's risk insurance policy. [DE-1-1] ¶¶ 4, 8. The insurance contract covered a project named "Special Operations Force North Operations Addition Facility, " which was located at Fort Bragg in Cumberland County, North Carolina and included the procurement and installation of an underground storm water retention system (the "Rain Tank"). Id. ¶¶ 4, 10. Plaintiffs breach of contract claim results from a claim made for property coverage after the Rain Tank collapsed. Id. ¶¶ 11, 12.

On May 3, 2013, the court entered a scheduling order with the following critical deadlines: discovery to be completed by January 31, 2014, dispositive motions to be filed by February 28, 2014, and the trial to be held during the July 14, 2014 term of court. [DE-20]. On November 4, 2013, the court allowed the parties' joint motion to amend the scheduling order as follows: discovery to be completed by May 1, 2014, dispositive motions to be filed by June 2, 2014, and the trial to be held during the September 29, 2014 term of court. [DE-30]. On November 26, 2013, Plaintiff filed a motion for summary judgment [DE-32], to which Defendant responded with a Rule 56(d) motion [DE-34]. The court allowed Defendant's motion and denied Plaintiffs motion as prematurely filed to provide Defendant the opportunity to complete discovery. [DE-45].

On May 21, 2014, after conducting a hearing to develop the record, the court allowed in part Defendant's motion to amend the scheduling order as follows: discovery to be completed by August 22, 2014, dispositive motions to be filed by September 22, 2014, and the trial to be held during the January 5, 2015 term of court. [DE-60]. On September 26, 2014, the court again amended the scheduling order at the parties' request to provide that discovery be completed by December 12, 2014, dispositive motions be filed by January 12, 2015, and the trial to occur during the April, 27, 2015 term of court. [DE-69].

On October 31, 2014, the court quashed Defendant's 30(b)(6) deposition subpoena directed to the United States Army Corps of Engineers [DE-76], and an appeal of that order is currently pending before the presiding district judge [DE-77]. On December 30, 2014, Defendant filed the instant motion to strike Plaintiffs Rule 26 supplemental disclosures. [DE-79]. On January 6, 2015, the court allowed Defendant's consent motion to extend the dispositive motions deadline to January 26, 2015. [DE-82]. On January 12, 2015, Defendant filed the instant motion to compel. [DE-83]. On January 26, 2015, the parties filed cross-motions for summary judgment. [DE-86, 89]. On February 12, 2015, the court continued the trial of this matter pending further order. [DE-93].

II. DISCUSSION

A. Motion to Strike [DE-79]

Defendant contends that Plaintiffs supplemental Rule 26 disclosures related to damages are untimely and incomplete and thus seeks to have them stricken. Def.'s Mot. [DE-79] at 1-3. Specifically, Defendant contends that Plaintiff initially disclosed damages of $925, 893.81 for replacement of the Rain Tank, but on December 1, 2014, shortly before the close of discovery, Plaintiff revised its initial disclosures to include new claims for soft costs of $207, 762.00 and preparation costs of $25, 000.00 without sufficient documentation. Id. Plaintiff contends that it promptly supplemented its damages calculation after learning of potential coverage for these types of damages at the November 18, 2014 deposition of Tom Habinck and provided sufficient documentation in support. Pl.'s Resp. [DE-85] at 1-5. The court agrees with Plaintiff that the supplemental disclosures regarding damages satisfy Rule 26.

Rule 26(a)(1) mandates that the parties make certain pre-discovery initial disclosures including

a computation of each category of damages claimed by the disclosing party-who must also make available for inspection and copying as under Rule 34 the documents or other evidentiary material, unless privileged or protected from disclosure, on which each computation is based, including materials bearing on the nature and extent of injuries suffered[.]

Fed. R. Civ. P. 26(a)(1)(A)(iii). Timely supplementation or correction of initial disclosures is likewise required by Rule 26(e) when "the party learns that in some material respect the disclosure or response is incomplete or incorrect, and if the additional or corrective information has not otherwise been made known to the other parties during the discovery process or in writing[.]" Fed.R.Civ.P. 26(e)(1)(A). "Furthermore, when a party receives additional documents that it intends to use to prove its damages, or when its previous damages computation becomes otherwise inadequate, a party must supplement its Rule 26(a)(1)(A)(iii) computation." Silicon Knights, Inc. v. Epic Games, Inc., No. 5:07-CV-275-D, 2012 WL 1596722, at *1 (E.D. N.C. May 7, 2012) (unpublished) (citations omitted). The scheduling order governing this case further provides that"[s]upplementation under Rule 26(e) must be made promptly after receipt of the information by the party or counsel." [DE-20] at 2.

Defendant first argues that Plaintiffs disclosures regarding soft costs and claim preparation damages are not a supplementation as contemplated by Rule 26(e), but rather an improper attempt to add two new categories of damages on the eve of the close of discovery. Def.'s Mem. [DE-80] at 2-3. The court disagrees. Defendant has not disputed that Plaintiff first learned during the November 18, 2014 deposition of Tom Habinck, the adjuster for the claim at issue, that damages for soft costs and claim preparation may be included in the covered loss. See Pl.'s Resp. [DE-85] ¶¶ 1-3, 7-9 (citing Id. Ex. F, Habinck Dep. [DE-85-8] at 60:7-18). Rule 26(e) encompass circumstances such as those present here where new information regarding the subject of an initial disclosure is learned through discovery. See Carmody v. Kansas City Bd. of Police Comm'rs, 713 F.3d 401, 404-05 (8th Cir. 2013) ("Federal Rule of Civil Procedure 26(a)(1)(A)(iii) requires parties to make initial disclosures, including a computation of damages, which under Rule 26(e)(1)(A) must be supplemented when new information comes to light."); KCH Servs., Inc. v. Vanaire, Inc., No. CIV.A. 05-777-C, 2010 WL 1416672, at *3 (W.D. Ky. ...


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