United States District Court, N.D. Illinois, Western Division
August 11, 2004.
AIRCRAFT GEAR CORPORATION, an Illinois Corporation, Plaintiff,
CLAYTON S. MARSH, and ROPES & GRAY LLP, a limited liability partnership, Defendants.
The opinion of the court was delivered by: P. MICHAEL MAHONEY, Magistrate Judge
Memorandum Opinion and Order
Aircraft Gear Corporation ("AGC" or "Plaintiff"), an Illinois
corporation with its principal place of business in Rockford,
Illinois, sued Clayton S. Marsh ("Marsh"), a Massachusetts
citizen and Ropes & Gray LLP ("Ropes & Gray") (collectively
"Defendants"), a legal partnership with its primary place of
business in Boston, Massachusetts and with none of its partners
residents of Illinois, alleging attorney negligence (Count I), or
in the alternative, breach of attorney/client contract (Count
II). Currently, before this court is Defendants' Motion to Strike
Plaintiff's Rebuttal/Supplemental Report of Warren Lupel ("Motion
to Strike"). Plaintiff has filed a response and Defendants have
filed their reply. For the following reasons, Defendants' Motion
to Strike is denied.
In 1986, AGC opened an additional aerospace manufacturing
facility in Chandler, Arizona in anticipation of increased
defense industry business from the United States government.
However, the government reduced its defense spending after AGC
opened its Chandler facility, so AGC sought contracts from private aerospace companies. By the late 1980s,
Boeing Corporation ("Boeing") was the primary customer of AGC's
Chandler facility. AGC manufactured aircraft transmissions for
Boeing. In 1991, AGC entered into a fifteen year fix price
contract with Boeing for the manufacturing of transmissions for
Boeing 777 aircrafts. At the time, AGC was the sole manufacturer
of transmissions for the 777 aircrafts.
AGC began to lose money on the 777 contract. In 1994, Boeing
granted AGC's request for a price increase on the 777 contract.
AGC apparently still continued to lose money. In 1996, AGC
negotiated a second price increase to the 777 contract. After
some other financial mishaps, AGC apparently attempted, on March
12, 1998, a third prince increase on the 777 contract. This was
With the denial of its third request, AGC executives met with
Boeing representatives to detail how AGC stood to lose over $10
million over the remainder of the 777 contract. AGC again
requested another price increase on the 777 contract or an early
exit from the contract. Apparently, after this request, Boeing
decided to replace AGC.
In early 1999, Boeing allegedly informed AGC they would be
transferring AGC's entire statement of work for Boeing to Moog.
Boeing informed AGC that Moog would not start producing 777 parts
until July 2000 and that Boeing needed to have some overlap
between the two producers. Thus, Boeing required AGC to produce
parts through December 31, 2000.
AGC was allegedly not satisfied. Specifically, AGC did not want
to produce 777 parts through December 31, 2000 without a price
increase. Around February 19, 1999, AGC contacted Marsh, who may
or may not have advised AGC to stop shipments. On March 12, 1999,
apparently AGC's Board of Directors met at the Chandler facility
and discussed threatening Boeing with a stoppage of shipments. After this meeting, allegedly one of AGC's
board of directors informed the shipping manager at the Chandler
facility to not ship any parts to Boeing. Apparently, three days
after this meeting, an AGC executive contacted Boeing and
threatened to stop shipment unless Boeing agreed to negotiate a
termination agreement with a price increase.
On March 18, 1999, AGC received a new termination agreement
from Boeing which offered AGC a price increase. Defendants allege
Boeing only offered the price increase because AGC's threat to
stop shipments would jeopardize the entire 777 production line.
On March 19, 1999, AGC faxed a counter offer to Boeing's offer.
On June 20, 2000, Boeing notified AGC by letter that Boeing
considered the above referenced March 1999 price increase
unacceptable and that Boeing would immediately begin recouping
the price increase paid to date. Upon receipt of this letter, AGC
apparently decided to close down the Chandler facility.
While some other communications continued to occur between AGC
and Boeing, AGC ultimately negotiated an agreement with Moog for
the purchase of AGC's remaining inventory and equipment. The
Chandler facility was sold in 2002.
Litigation between AGC and Boeing ensued in a federal district
court in the State of Washington. Specifically, AGC sued Boeing
alleging that it was entitled to recover the disputed price
increases and the losses on the remainder of the Boeing contracts
through December 2000. Boeing, in turn, filed a counterclaim
alleging, inter alia, duress. In August 2001, the trial court
ruled upon cross-motions for summary judgment, granting partial
summary judgment in Boeing's favor. Specifically, the district
court apparently found that AGC's March 15, 1999 threat to stop
shipments was an anticipatory breach of the 777 contract. A trial
ensued which resulted in a hung jury on the issue of duress, although the jury apparently did find in favor
of AGC on Boeing's claim that the termination agreement was a
cover contract. In June 2002, the case was tried again. On June
18, 2002, a jury found that the 1999 price increase was the
product of duress and rendered a verdict in Boeing's favor for
$1.83 million. On July 5, 2002, AGC filed the present suit in
Winnebago County against Defendants alleging attorney negligence,
or in the alternative, breach of attorney/client contract.
This case was removed to this court on August 30, 2002. On
December 18, 2002, a case management order was entered
establishing a fact discovery cutoff date of March 31, 2003 and a
dispositive motions due date of April 30, 2003. The fact
discovery cutoff date was subsequently extended to June 30, 2003,
August 29, 2003 and finally September 30, 2003. On November 17,
2003, this court entered an Order requiring Plaintiff to make its
Rule 26(a)(2) disclosures by January 30, 2004 and requiring
Defendants to make their Rule 26(a)(2) disclosures by March 15,
2004. On February 4, 2004, in response to a motion by Plaintiff,
this court issued an Order granted AGC's request for an extension
of time to March 1, 2004 to submit Rule 26(a)(2) disclosures and
expert depositions by March 31, 2004. On March 1, 2004, Plaintiff
disclosed the expert report of attorney Warren Lupel. Plaintiff
subsequently requested, and was granted, an extension of the
deposition date of Warren Lupel to April 9, 2004. Defendants
deposed Mr. Lupel on April 9, 2004. Defendants served their
expert reports on Plaintiff on May 3, 2004. Plaintiff took the
deposition of Defendants' legal malpractice expert Frederic
Tausen, on May 19, 2004. Arguing that this court did not set a
deadline for the production of rebuttal reports, on May 28, 2004,
Plaintiff submitted Rebuttal Expert Report of Warren Lupel under
Fed.R. Civ. P. 26(a)(c) or in the alternative, Supplement To
Rule 26(a)(2)(B) Disclosure Pursuant to Fed.R. Civ. P. 26(e)(1). A. Mr. Lupel's Opinions
Mr. Lupel originally put forth two opinions with regard to this
First, Marsh was negligent in the advice provided to
AGC during March of 1990. If properly advised, AGC
could have negotiated an enforceable termination
agreement that would have required Boeing to pay all
amounts due under the agreement. Second, Marsh and
Ropes and Gray failed to act within acceptable
standards of care during the period of June July
2000 in advising AGC regarding its options concerning
Boeing's rejection of the Termination Agreement. It
is my opinion that had AGC been given the correct
advice, AGC would have continued to produce under the
777 contract in place prior to the Termination
Agreement and would not have filed suit against
Boeing, thereby acquiring $2.2 million from Boeing
and not incurring approximately $1 million in
(Report and Finding of Warren Lupel at 12). After setting out his
two opinions, Mr. Lupel then proceeded to discuss both in detail.
B. Mr. Tausend's Opinions
Subsequent to Mr. Lupel filing his Report and Findings,
Defendants' expert, Fredric C. Tausend filed his Report and
Opinions. Mr. Tausend presented three opinions with regard to the
1. The legal advice [Defendants] provided AGC from
March 1, 1999 to March 15, 1999 satisfied the
applicable standard of care.
2. The legal advice [Defendants] provided AGC from
March 15, 1999 to March 19, 1999, satisfied the
applicable standard of care.
3. The legal advice [Defendants] provided AGC from
June 27, 2000 to July 20, 2000, satisfied the
applicable standard of care.
(Report and Opinions of Frederic C. Tausend at 2). In coming to
these opinions, and citing a Washington Supreme Court case and an
Illinois Appellate Court case, Mr. Tausend wrote that a lawyer giving advice on a contractual dispute meets the standard
of care if "he exercises that degree of skill, diligence and
knowledge commonly possessed and exercised by reasonable, careful
and prudent attorneys in similar circumstances." (Id. at 4).
Additionally, Mr. Tausend wrote "[t]he relevant law for purposes
of defining the circumstances in this case is Washington law
regarding anticipatory breach and duress." (Id.).
C. Mr. Lupel's Rebuttal/Supplemental Opinions
Subsequent to his deposition and after viewing Mr. Tausend
Report and Opinions, Mr. Lupel filed a rebuttal/supplement
report. Citing numerous cases (mainly from Washington state
courts) as resources reviewed in preparation of his
rebuttal/supplemental report, Mr. Lupel presented the following
1. [T]he use by Mr. Tausend of the phrase Washington
law in this instance is not peculiar to Washington
but rather a circumstance of general contract law.
2. I disagree with Mr. Tausend, in that Marsh, and by
extension, Ropes & Gray's failure to change the March
18, 1999 termination agreement constituted "sound
3. [Defendants] failure to advise AGC in June July
2000 period that the case against Boeing was weak and
that the most probable outcome would be a verdict in
Boeing's favor . . . was negligent. The case was not
properly analyzed by Ropes & Gray until November
2001. If properly advised AGC would have performed
the contract through December 31, 2000, and not been
left with millions of dollars in unusable inventory.
Accordingly, AGC would have avoided the subsequent
adverse judgment, and consequent attorneys' fees.
(Rebuttal/Supplemental Expert Report of Warren Lupel at 5-6).
D. Defendants' Motion to Strike
Defendants first argue that Mr. Lupel's rebuttal/supplemental
report is not in fact a rebuttal. Specifically, Defendants argue that Mr. Lupel's second report
does not meet the standard set out in Rule 26(a)(2)(C) of the
Federal Rules of Civil Procedure because the report does not
"solely" contradict or rebut evidence on the same subject matter
as disclosed by Defendants. (Defs.' Mot. to Strike at 5). Rather,
according to Defendants, for Mr. Lupel's second report to comply
with Rule 26, Mr. Lupel would need to offer opinions that
contradict Mr. Tausend's expressed opinions. Defendants argue Mr.
Lupel's report does not.
Specifically, Defendants argue Mr. Lupel's second report does
not contradict the Washington cases cited by Mr. Tausend or the
relevancy of Washington law; but rather, Mr. Lupel's opines that
the law of anticipatory breach in Washington is comparable to the
law of Illinois. Although Mr. Lupel cites many Washington and
Illinois cases for this proposition, Defendants argue the report
does contradict or rebut Mr. Tausend's opinions that 1) the case
cited by Mr. Tausend explicate Washington law on these two
subjects; and 2) that Washington law is the relevant law for
purposes of the 777 contract. (Id. at 6).
Additionally, Defendants argue that Mr. Lupel's second report
contains on opinion that clearly does not rebut anything
contained in Mr. Tausend's report. Namely, Defendants argue Mr.
Lupel's opinion that Defendants did not properly analyze the case
until November 2001 and if properly advised AGC would have
performed the contract through December 31, 2000 does not rebut
anything contained in Mr. Tausend's report because Mr. Tausend
offered no opinions on an e-mail by a Mr. Kaufman, which
Defendants argue is the basis for Mr. Lupel's new opinion.
Defendants also argue that Mr. Lupel's second report is not a
supplemental report. Specifically, Defendants argue Mr. Lupel's
second report does not comply with Rule 26(e)(1) of the Federal
Rules of Civil Procedure because the report does not consist of
newly discovered information or a correction to a past error by Mr. Lupel. (Id. at
8). Rather, according to Defendants, Plaintiff is impermissibly
attempting to correct a material omission from the initial
disclosures. Lastly, Defendants argue that Plaintiff's attempted
supplementation is not harmless to Defendants because Mr. Lupel's
second report occurred after the time for deposing Plaintiff's
expert had passed and after Defendants' expert had been disclosed
and deposed. (Id.).
E. Plaintiff's Response
Plaintiff's argue that Mr. Lupel's second report is a rebuttal
report as defined by the Federal Rules of Civil Procedure because
Mr. Lupel's second report was intended to rebut the implications
of Mr. Tausend that: 1) Washington law is unique and that only a
lawyer from Washington can opine on the issue of duress and
anticipatory repudiation as they apply to the instant case and,
2) that Mr. Lupel failed to consider Washington law or was
unfamiliar with the relevant case law. (Pl.'s Resp. at 4).
Additionally, Plaintiff's argue Defendants incorrectly
characterize Mr. Lupel's report as containing a new theory of
liability, that being, the opinion that Defendants failed to
properly analyze the strengths and weaknesses of Plaintiff's
lawsuit against Boeing. (Id.). Plaintiff's argue that this is not
a new opinion; but rather, it is a "necessary implication of
Plaintiff's complaint and refinement" of Mr. Lupel's prior
opinion in response to Mr. Tausend's deposition testimony and
Additionally, Plaintiff argues that if Mr. Lupel's second
report is not a rebuttal, then it is a supplemental report
pursuant to Rule 26(e)(1). Specifically, Plaintiff argues Mr.
Lupel's second report is a supplement report because Plaintiff
discovered from Defendants' expert disclosure and deposition that
Defendants were taking the position that Washington law was
somehow unique on the issues of anticipatory repudiation and
duress and thus Mr. Lupel's familiarity with those issues under Washington law were at issue. (Pl.'s Resp. at 14).
Finally, Plaintiff argues that barring Mr. Lupel's second
report is too harsh a remedy and is not proportionate with any
alleged infraction. The current state of this instant case is
that no trial date has been set. Additionally, this case was
recently transferred from Judge Reinhard in Rockford, Illinois to
Judge Coar in Chicago, Illinois. Thus, in its current state, the
case is not far enough along for Defendants to assert prejudice.
This court will first address whether Mr. Lupel's second report
is a rebuttal report. Federal Rules of Civil Procedure 26(a)(2)
(A) In addition to the disclosure required by
paragraph (1), a party shall disclose to other
parties the identity of any person who may be used at
trial to present evidence under Rules 702, 703, or
705 of the Federal Rules of Evidence.
(B) Except as otherwise stipulated or directed by the
court, this disclosure shall, with respect to a
witness who is retained or specially employed to
provide expert testimony in the case or whose duties
as an employee of the party regularly involve giving
expert testimony, be accompanied by a written report
prepared and signed by the witness. The report shall
contain a complete statement of all opinions to be
expressed and the basis and reasons therefor; the
data or other information considered by the witness
in forming the opinions; any exhibits to be used as a
summary of or support of the opinions; the
qualification of the witness, including a list of all
publications authored by the witness within the
preceding ten years; the compensation to be paid for
the study and testimony; and listing of any other
cases in which the witness has testified as an expert
at trial or by deposition within the preceding four
(C) These disclosures shall be made at the times and
in the sequence directed by the court. In the absence
of other directions from the court or stipulation by
the parties, the disclosures shall be made at least
90 days before the trial date or the date the case is
to be ready for trial or, if evidence is intended
solely to contradict or rebut evidence on the same subject matter identified by another
party under paragraph (2)(B), within 30 days after
the disclosure made by the other party. The parties
shall supplement these disclosures when required
under subdivision (e)(1).
Fed.R. Civ. P. 26(a)(2)(A), (B) and (C) (emphasis added).
Rule 26(a)(2)(C) provides that rebuttal disclosures are those
that relate to evidence that is "intended solely to contradict or
rebut evidence on the same subject matter identified by another
party" in its expert disclosures. As an initial matter, it should
be noted that although this court did not set a date for
rebuttal, Mr. Lupel's second report was timely and served on
Defendants within 30 days of Defendants' expert disclosures as
required by Rule 26(a)(2)(C) of the Federal Rules of Civil
Procedure. Mr. Lupel's second report advances three new opinions:
1) Washington law in this instance is not peculiar to Washington
but rather a circumstances of general contract law; 2)
Defendants' failure to change the March 18, 1999 termination
agreement did not constitute "sound professional judgment"; and
3) Defendants' failure to advise Plaintiff in June July 2000
that the case against Boeing was weak and that the most probable
outcome would be a verdict in Boeing's favor was negligent.
Turning to Mr. Lupel's first opinion in his second report, this
court finds that Mr. Lupel's opinion that Washington law is not
peculiar to Washington but rather circumstances of general
contract law is a rebuttal opinion. Mr. Tausend's report clearly
states, in his opinion, the relevant law in this case is
Washington law. In attempt to rebut this opinion, Mr. Lupel's
second report contains his opinion as to why Washington law is
not necessarily unique and why general contract law applies,
which according to Mr. Lupel, is similar in both Illinois and
Washington. This is a rebuttal, as it is opinion on the same
subject matter identified by another party (Mr. Tausend) and is allowable under the Federal Rules of Civil Procedure.
The same can be said about Mr. Lupel's second opinion in his
second report. Mr. Lupel's opinion that Defendants' failure to
change the March 18, 1999 termination agreement did not
constitute "sound professional judgment" also satisfies the
Federal Rules of Civil Procedure. This is a rebuttal, as it is
opinion on the same subject matter identified by Mr. Tausend.
Therefore, Defendants' Motion to Strike is denied as to the two
opinions discussed above.
While the above two opinions satisfy the Federal Rules of Civil
Procedure as rebuttal opinions, Mr. Lupel's third opinion that
Defendants did not properly analyze AGC's position until November
2001 and if properly advised AGC would have performed the
contract through December 31, 2000, and not been left with
millions of dollars in unusable inventory does not. However,
this opinion is merely a restatement made by Mr. Lupel in his
initial opinion. Specifically, Mr. Lupel initially wrote:
"Second, Marsh and Ropes and Gray failed to act within acceptable
standards of care during the period of June July 2000 in
advising AGC regarding its options concerning Boeing's rejection
of the Termination Agreement. It is my opinion that had AGC been
given the correct advice, AGC would have continued to produce
under the 777 contract in place prior to the Termination
Agreement and would not have filed suit against Boeing, thereby
acquiring $2.2 million from Boeing and not incurring
approximately $1 million in attorney's fees." While the language
regarding November 2001 was not included, this statement does not
necessitate the need for this court to strike the whole opinion. Conclusion
For the above stated reasons, Defendants' Motion to Strike is
denied. The parties are given ten days from service of this
Order, as calculated under Rule 6, to appeal to Judge David H.
Coar pursuant to Rule 72 of the Federal Rules of Civil Procedure.