Opinion
Civ. No. 85-2441 (HAA).
February 18, 2005
OPINION AND ORDER
This matter comes before the Court on two separate motions. The first, filed by Plaintiff John Crowley, is an objection to an Order by Special Master John Boyle determining that Defendant PricewaterhouseCoopers LLP's ("PwC") disclosure regarding a defense witness, Paul Malvasio, was sufficient and denying Plaintiff the right to take an expert deposition of that witness. The other is a motion brought by PwC seeking the right to take the depositions of certain claimant witnesses recently permitted to testify as a result of this Court's in limine opinion. For the reasons outlined below, Plaintiff's objection is sustained and PwC is ordered to produce Paul Malvasio for an expert deposition. Additionally, PwC's motion to take the depositions of certain claimant witnesses is granted and Plaintiff is ordered to help arrange those depositions as well as produce the additional documents, if any, requested by PwC.
Background
This case arises from the 1984 insolvency and liquidation of Ambassador Insurance Company ("AIC"). This Court has written several opinions detailing the facts of this case, most recently the Daubert opinion, Crowley v. Chait, 322 F. Supp. 2d 530 (D.N.J. 2004), the summary judgment opinion, Crowley v. Chait, No. 85-2441, slip op. (D.N.J. Aug. 25, 2004), and the in limine opinion, Crowley v. Chait, No. 85-2441, slip op. (D.N.J. Dec. 29, 2004). To that effect, the Court will review only those facts necessary to resolve the pending motions seeking to take additional depositions prior to trial, which is scheduled for May 3, 2005.Plaintiff's objection arises out of an exchange of information regarding expert witnesses that occurred during 2002. As a result of discovery exchange between the parties, Plaintiff sought specific clarification regarding certain expert testimony that would be presented at trial by PwC from certain previously designated fact witnesses. Plaintiff sought help and clarification regarding these witnesses from then-Magistrate Judge Chesler, who issued an order on November 20, 2002. The Order stated:
Each party shall disclose, at a time to be set by agreement of the parties or by subsequent order of the Court, the name of each witness other than retained experts from whom such party expects to elicit expert opinion testimony at trial and shall set forth the substance of the expert opinions to be elicited and a summary of the basis therefor, to the extent such matters were not covered in a deposition of the witness.
(Judge Chesler's November 2002 Order attached to the Declaration of Richard Whitney ("Whitney Decl.") as Ex. E.)
On April 23, 2004, PwC served its disclosures pursuant to the November 20, 2002 Order and identified eleven specific witnesses, nine of whom were Coopers Lybrand ("CL") personnel who had participated in the AIC audits. The substance of testimony from the nine CL witnesses was repeated virtually verbatim with little insight into the real context of the expert opinions to be elicited. In a letter dated June 4, 2004, Plaintiff's counsel raised this issue with the Special Master, Judge Boyle, requesting "more specific and detailed disclosures regarding this proposed `expert opinion' testimony, in sufficient time to allow for the taking of depositions if that is necessary.'" (June 4, 2004 Letter from Plaintiff to Judge Boyle attached to Whitney Decl. as Ex. G.)
CL was the predecessor to PwC. CL specifically conducted the two company audits in question in this case, 1981 and 1982.
On June 28, 2004, Judge Boyle concluded that the disclosure failed to comply with Judge Chesler's Order because it did not sufficiently provide the "substance of" and "reasons" for each of the opinions. (Judge Boyle's June 2004 Order attached to Whitney Decl. as Ex. H.) Judge Boyle ordered that PwC resubmit its disclosures for all eleven named witnesses to cure the defective first disclosure. Judge Boyle's Order stated that the parties were required to "disclose, in substance but not in detail, the actual [expert] opinion to be offered and the basis for that opinion." ( Id.) In addition, Judge Boyle scrutinized Judge Chesler's Order and found that it did not apply "to testimony that simply takes issue with another witness's understanding of or assumption regarding facts or is incidental expert opinion." ( Id.) Finally, Judge Boyle's Order stated that:
If, after considering objections to the sufficiency of the amended and supplemental disclosures, the undersigned finds that there was good faith compliance with this Order and [Judge Chesler's Order] no further discovery with respect to these issues shall be available. ( Id.)
In response, on August 16, 2004, PwC submitted a Supplemental Disclosure in which it argued that disclosure, in light of both Judge Chesler's and Judge Boyle's Orders, was not required in the first place for ten of the original eleven witnesses and therefore PwC was not going to supplement for any of the witnesses. However, "out of an abundance of caution," PwC provided certain additional testimony for Mr. Malvasio, one of the original nine CL witnesses disclosed. In essence, PwC now claims that all of its previous disclosures actually fit into the exception for disclosure regarding factual discrepancies and incidental expert opinion. PwC did include in its new disclosure that Mr. Malvasio could offer at least four areas of expert opinion, each area specifically countering the opinions being offered by Loren Kramer, Plaintiff's retained expert on auditing issues. The testimony anticipated from Mr. Malvasio "ranges from a seriatim discussion and refutation of Mr. Kramer's identification of 23 internal accounting control weaknesses at AIC, to a conclusion of what would have happened if CL had competently performed their duties as an auditor, and whether the company could have been saved in that instance." (Plf.'s Objection to PwC's Supplemental Disclosure attached to Whitney Decl. as Ex. J.)
The Court notes that Mr. Malvasio was the audit partner at CL in charge of both of the critical AIC audits at issue in this case. As such, Mr. Malvasio is a very important witness in the upcoming trial.
On August 23, 2004, Plaintiff objected to PwC's Supplemental Disclosure, noting that the anticipated testimony of Mr. Malvasio was not "incidental expert opinion" but was rather "classic expert testimony of which the Plaintiff is entitled to have notice and discovery." ( Id.) Plaintiff also noted that it was apparent that "Mr. Malvasio has studied Mr. Kramer's reports, has done research regarding the opinions Mr. Kramer has expressed and has formulated a response that will, PwC assumes, satisfy the requirements of the Federal Rules of Evidence for expert opinion." ( Id.) Finally, Plaintiff noted that to allow Mr. Malvasio or any of the other numerous auditor witnesses to "parade" to the stand and take aim at Mr. Kramer without the benefit of an expert opinion or expert deposition would amount to "trial by ambush." ( Id.) In sum, Plaintiff sought permission to take the deposition of Mr. Malvasio as PwC had failed to comply with the disclosure orders.
On November 9, 2004, Judge Boyle overruled Plaintiff's objection to PwC's final disclosures, determining that there had been good faith compliance with his June 28, 2004 Order and Judge Chesler's November 20, 2002 Order. Judge Boyle also denied Plaintiff's request to take an expert deposition of Mr. Malvasio, causing Plaintiff to file the instant objection to Judge Boyle's decision in this case.
In addition to Plaintiff's request that this Court review his right to take an expert deposition of Mr. Malvasio, PwC is seeking to take the depositions of three claimant witnesses designated by Plaintiff as potential rebuttal witnesses at trial. On or about March 8, 2004, Plaintiff voluntarily disclosed the identity of the Claimant Witnesses in conjunction with the preparation of the Final Pretrial Order. At that time, Plaintiff also volunteered to produce the Claimant Witnesses for deposition. Instead of taking the depositions, PwC filed a motion in limine seeking to prohibit testimony from the Claimant Witnesses because they were not properly disclosed in an amended answer to an earlier interrogatory. Ultimately, this Court denied PwC's motion to exclude this testimony and will allow Plaintiff to call the Claimant Witnesses only as rebuttal witnesses if PwC challenges the interest component of Plaintiff's damages claim.
The claimant witnesses are three individuals who have direct claims against AIC. They are not the policy holders, but rather individual injured parties who had the right to claim insurance proceeds from AIC. The Court notes that two of these witnesses are individual parties, while the third is an attorney who represents two other claimants. For ease of nomenclature, the Court will refer to them collectively as the "Claimant Witnesses."
From the motion filed, it is apparent that PwC does intend to challenge the interest component of Plaintiff's damages claim, and thus PwC seeks to take the depositions of the Claimant Witnesses. In addition to the depositions, PwC seeks discovery as follows:
Access to and copying of Plaintiff's files of the claimants involved and the related [AIC] policies covering the claims, and other documents of [AIC] in liquidation concerning the handling and payment of the claims; and
Discovery of any other communications between the claimants involved and Plaintiff (or person acting on their behalf).
(PwC's Br. in Supp. of Discovery Mot. at 3.) Thus, the Court must ultimately determine whether or not Plaintiff and PwC are entitled to the additional discovery they seek.
The Court notes that PwC also sought, in the context of this Motion, to establish a timetable for Plaintiff to seek leave of Court to update its damages calculation and to submit an updated damages report. The issue regarding Plaintiff's requirement to file a motion for leave to amend the Final PreTrial Order has been resolved outside the confines of this Opinion and Order. Accordingly, that part of the motion is now moot and the Court will not address it further.
Discussion
I. Plaintiff's Request to Depose Mr. Malvasio
As a preliminary issue, this Court must first address the standard of review for Plaintiff's objection to Judge Boyle's November 9, 2004 Order. Review by a district court of a Special Master's Order is covered by Federal Rule of Civil Procedure 53(g). Rule 53(g) includes certain standards by which a court should review a master's order, report or recommendation. As to any issues of fact or legal conclusions, the court must review the master's order de novo. See Fed.R.Civ.P. 53(g)(3) (4). As to matters of procedure, "the court may set aside a master's ruling . . . only for an abuse of discretion." Fed.R.Civ.P. 53(g)(5) (emphasis supplied). However, the Advisory Committee Notes contemplate that due to "[t]he subordinate role of the master . . . the trial court's review for abuse of discretion may be more searching than the review that an appellate court makes of a trial court." Fed.R.Civ.P. 53(g) advisory committee notes. In addition, if a master makes a recommendation or ruling "on any matter that does not fall within Rule 53(g)(3), (4) or (5), the court may act on the recommendation under Rule 53(g)(1)," thereby providing the parties the opportunity to be heard and acting as necessary on the master's recommendation or order. Id.; see also Fed.R.Civ.P. 53(g)(1).
As may be expected, PwC takes the position that Judge Boyle's Order may only be set aside for abuse of discretion. PwC argues that because Plaintiff seeks an additional deposition of Mr. Malvasio, Judge Boyle's Order must be deemed procedural pursuant to Rule 53(g)(5) and therefore reviewed only for abuse of discretion. PwC concludes that Plaintiff has "failed to meet his heavy burden of showing that Judge Boyle abused his discretion" and requests that this Court overrule Plaintiff's objection. (PwC's Opp'n to Pl.'s Discovery Mot. at 22.)
This Court, however, is not persuaded by PwC's argument. First, the Court notes that section (g) of Rule 53 was added pursuant to amendments in 2003. There is very little case law regarding the appropriate standards for reviewing a special master's order. More importantly, while it may be true that depositions and discovery are matters of procedure within the confines of a litigation, many special masters are appointed solely to deal with complicated discovery issues in complex civil litigations. To take the position that any decision made by a special master appointed to deal with discovery requires review only for abuse of discretion would make the additional standards contemplated under Rule 53(g) superfluous.
In addition, this Court finds that a district court must look to the type of conclusion or decision made by a special master, as opposed to the circumstances surrounding the decision, to determine whether an abuse of discretion or de novo standard is appropriate. See Evolution, Inc. v. Suntrust Bank, Civ. No. 01-2409, 2004 WL 2278559 (D. Kan. Sept. 29, 2004) (finding that report made by special master regarding complicated discovery issue was reviewed de novo based on the type of conclusion drawn in the special master's report); Medtronic Sofamar Danek, Inc. v. Michelson, Civ. No. 01-2373 03-2055, 2004 WL 2905399 (W.D. Tenn. May 3, 2004) (finding a special master's order regarding discoverable electronic documents to go beyond the scope of his appointment and thus reviewable de novo).
Turning to Judge Boyle's November 9 Order, this Court concludes that Judge Boyle was not, as argued by PwC, merely addressing a procedural issue. Judge Boyle made a conclusion regarding the sufficiency of PwC's disclosure to Plaintiff. This Court finds that such a determination turns on a mixed question of fact and law thereby warranting a de novo review pursuant to Fed.R.Civ.P. 53(g)(3) (4). A proper de novo review allows this Court to consider the basis of Judge Boyle's decision without any particular deference. Thus, this Court must determine if PwC's disclosures regarding the intended expert testimony of Mr. Malvasio were sufficient to allow Plaintiff to determine the substance and bases for such testimony. And, if such disclosures were insufficient, this Court must then decide whether or not Plaintiff should be entitled to take an additional, limited deposition of Mr. Malvasio.
A review of the disclosures made by PwC demonstrates that Mr. Malvasio will likely be asked to render "expert opinion" regarding at least four specific points of Mr. Kramer's audit report. The Court finds it particularly interesting that Mr. Malvasio will take direct issue with some particular attachments to Mr. Kramer's report. Mr. Malvasio will give testimony that those attachments, designed by Mr. Kramer to be recommended forms of an auditor's report for the audits of AIC, would not have been appropriate for AIC at the time of the questionable audits. In addition, Mr. Malvasio will testify that those "recommended reports are not found in any professional auditing literature at the time of the audits" and that "Mr. Kramer gives no examples of similar reports being given on financial statements of other companies at the time." (PwC's Supplemental Disclosures attached to Whitney Decl. as Ex. I.) Further, Mr. Malvasio will take direct issue with Mr. Kramer's final conclusion in his audit report. PwC disclosed that Mr. Malvasio will testify, given the facts of this case that "it is not reasonable to assume, as [Mr. Kramer's report] asserts, that [CL] should have issued . . . a report stating, among other things, that [AIC] `may be near insolvency.'" ( Id.) It is the Court's opinion that this proposed testimony by Mr. Malvasio is the quintessence of expert testimony.
Expert depositions are a fundamental component of trial preparation. See Oddi v. Ford Motor Co., 234 F.3d 136, 153 (3d Cir. 2000); In re Paoli R.R. Yard PCB Litig., 35 F.3d 717, 739 (3d Cir. 1994); see also Afros S.p.A. v. Krauss-Maffei Corp., 671 F. Supp. 1402, 1441 (D. Del. 1987) (acknowledging that an expert should not be permitted to testify to areas not covered in his deposition). Rule 26 allows that "[a] party may depose any person who has been identified as an expert whose opinions may be presented at trial." Fed.R.Civ.P. 26(b)(4)(A). That right exists regardless of whether the expert is retained and required to submit a report or a fact witness providing expert testimony. See, e.g., Lamere v. New York State Office for the Aging, 223 F.R.D. 85, 88 (N.D.N.Y. 2004) ("[W]hether or not a doctor has been retained, as long as [she has] been identified as a witness who will provide expert opinion testimony, pursuant to Rule 702, [she] may be deposed."). The "rules of expert disclosure are designed to allow an opponent to examine an expert opinion for flaws and to develop counter-testimony through that party's own experts." Southern States Rack Fixture, Inc. v. Sherwin-Williams Co., 318 F.3d 592, 598 (4th Cir. 2003); see also Stecyk v. Bell Helicopter Textron, Inc., 295 F.3d 408, 413 (3d Cir. 2002) (finding that trial court did not abuse discretion in admitting surprise expert testimony where trial court stopped trial to allow opposing party to depose expert before continuing his trial testimony).
As previously mentioned, PwC's supplemental disclosure evinces that the proposed testimony of Mr. Malvasio will contain more than mere "incidental expert testimony" and will take direct aim at the methods, manner and conclusions in Plaintiff's expert report. However, it is not entirely clear from the disclosure alone the exact "substance of" and "reasons for" the expert testimony PwC seeks to elicit from Mr. Malvasio. The Court concludes that the disclosures made by PwC fail to rise to the level of disclosure contemplated by Judge Chesler's original November 2002 Order and Judge Boyle's subsequent June 2004 Order. Instead of allowing the parties to engage in the continued unproductive exchange of written disclosures, this Court will sustain Plaintiff's objection to Judge Boyle's November 2004 Order and allow Plaintiff to take Mr. Malvasio's deposition. This Court reads Judge Boyle's June 2004 Order to allow additional discovery where the written disclosures have failed to provide adequate notice of the upcoming testimony. The Court notes, however, that the deposition should not cover any questions or subject matters relating to Mr. Malvasio's fact witness testimony that could have been addressed at his earlier deposition.
II. PwC's Request to Depose Claimant Witnesses
PwC argues that it should be entitled to take the depositions of the Claimant Witnesses because it would suffer significant hardship if it were not permitted to take this additional discovery. PwC claims that without the opportunity for discovery, "[it] will not have the `mutual knowledge of all relevant facts gathered by both parties essential to proper litigation.'" (PwC's Br. In Supp. of Discovery Mot. at 6) (citing Hickman v. Taylor, 329 U.S. 495, 507 (1947)). In response, Plaintiff does not argue that this Court should deny PwC's relief. Instead, Plaintiff contends that PwC's relief should be contingent on Plaintiff's right to depose Mr. Malvasio. Plaintiff cites PwC's all-too-often quoted line: "Sauce for the goose is sauce for the gander." (Pl.'s Br. In Opp'n of PwC's Discovery Mot. at 5).
While this Court does not necessarily believe in the "tit for tat" system of allowing Final Pretrial Orders to be amended or to engage in additional discovery, the circumstances of these two motions allow for a Solomon-like approach. That is, in light of this Court's ruling to allow for the limited expert deposition of Mr. Malvasio to go forth, there is no reason why PwC should not be allowed to take the depositions of the Claimant Witnesses. After all, a district court has complete discretionary authority over decisions regarding discovery and depositions prior to trial. See, e.g., Buffington v. Wood, 351 F.2d 292, 298 (3d Cir. 1965); see also Hall v. Clifton Precision, 150 F.R.D. 525, 527 (E.D. Pa. 1993) ("Taken together, Rules 26(f), 30, and 37(a), along with Rule 16, which gives the court control over pre-trial case management, vest the court with broad authority and discretion to control discovery, including the conduct of depositions."). The Court reminds all parties, however, that this matter is scheduled for trial on May 3, 2005 and that there will be no future adjournments. Accordingly, absent a showing of very good cause, the Court will not likely allow for any additional discovery beyond that which is ordered today.
Conclusion
For the aforementioned reasons, it is on this 18th day of February, 2005 hereby ORDERED that:
1. PwC produce Paul Malvasio for an expert deposition at a day and time mutually convenient for all parties; and
2. Plaintiff help arrange for the depositions of the Claimant Witnesses on a days and times mutually convenient for all parties; and
3. Plaintiff allow PwC access to all Claimant Witness files and any documents relating to the handling and payment of their claims or communications between Plaintiff and the Claimant Witnesses.