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AIRCRAFT GEAR CORPORATION v. MARSH

August 11, 2004.

AIRCRAFT GEAR CORPORATION, an Illinois Corporation, Plaintiff,
v.
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.

Background*fn1

  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 denied.

  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 case:
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 ...

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