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Hamilton Memorial Hospital District v. Toelle

United States District Court, Seventh Circuit

October 17, 2013

HAMILTON MEMORIAL HOSPITAL DISTRICT, an Illinois governmental municipality, Plaintiff/Counterdefendant,
APRIL TOELLE, Defendant/Counterclaimant, and DEACONESS HOSPITAL, INC., Defendant.



This matter comes before the Court on plaintiff/counterdefendant Hamilton Memorial Hospital’s (“HMH”) appeal (Doc. 84) of two orders by Magistrate Judge Philip M. Frazier (Docs. 63 & 78). Defendant/counterclaimant April Toelle and defendant Deaconess Hospital, Inc. (“Deaconess”) have filed a joint response to the appeal (Doc. 86), and HMH has replied to that response (Doc. 89). The Court also considers the defendants’ motion to strike HMH’s reply brief in support of its appeal or, in the alternative, for leave to file a sur-reply brief (Doc. 91) and motion to bar HMH’s second amended initial disclosures (Doc. 100).

In this case, HMH alleges it had a three-year contract to employ Toelle as a doctor in its hospital in McLeansboro, Illinois. In the middle of the contract term, while living in Illinois, Toelle negotiated another employment contract with Deaconess, a hospital in Evansville, Indiana, that began before her term at HMH ended. HMH believes Deaconess knew at the time that Toelle was committed by contract to work at Hamilton Memorial. While still residing in Illinois, Toelle gave notice to HMH that she was leaving and, before the end of the contract term, stopped working for HMH, moved to Indiana and began working for Deaconess. HMH brings this suit for breach of contract against Toelle and for tortious interference with contract against Deaconess. Toelle has filed a counterclaim against HMH under the Illinois Wage Payment and Collection Act, 820 ILCS 115 et seq., for failing to pay her according to the contract terms. The pending appeal involves the amount HMH claims in damages for lost revenue due to Toelle’s departure.

I. Standard of Review

A district court reviewing a magistrate judge’s decision on nondispositive issues should modify or set aside that decision if it is clearly erroneous or contrary to law. See Fed.R.Civ.P. 72(a); 28 U.S.C. § 636(b)(1)(A). The Court may also sua sponte reconsider any matter determined by a magistrate judge. L.R. 73.1(a); Schur v. L.A. Weight Loss Ctrs., Inc., 577 F.3d 752, 760 (7th Cir. 2009).

II. Appealed Orders

A. June 17, 2013, Order (Doc. 63)

Magistrate Judge Frazier’s first appealed order (Doc. 63), entered June 17, 2013, ruled on the defendants’ motion to bar HMH’s damage computations (Doc. 59). In that motion, the defendants asked the Court to bar HMH from presenting evidence in support of $528, 107 in damages for lost revenue because that amount was not included in its initial disclosures, which listed damages for “[g]oodwill and lost revenue” in the estimated amount of $20, 000, and was disclosed almost two weeks after the deadline for designating expert witnesses, too late for the defendants to retain a rebuttal expert. Earlier, HMH had responded to discovery requests seeking damage information by referring to its initial disclosures. It did not provide an explanation or supporting documentation for the calculation of damages for “goodwill and lost revenue” until the unexpected hike in its lost revenue damage calculation. The defendants argued that the failure to disclose information in HMH’s initial disclosures was without substantial justification and was not harmless, and that under Federal Rule of Civil Procedure 37(c)(1) HMH should therefore not be allowed to use that evidence.

In response (Doc. 60), HMH contended that in response to the defendants’ dissatisfaction with its initial “goodwill and lost revenue” estimate, HMH undertook a more detailed review of its losses and found the original estimate far too low. It transmitted its revised lost revenue calculation to the defendants soon after the revision was completed and updated its initial disclosures (after the defendants filed their motion to bar damage computations). It argued the defendants suffered no harm because it could still depose HMH’s CEO and CFO about the damage calculation. HMH asserted they were competent to testify as lay witnesses in that arena based on their experience at HMH. HMH had no objection to the defendants’ late designation of an expert witness in response to its revised calculation.

The defendants’ reply (Doc. 61) faulted HMH for not conducting the review earlier in the litigation, especially if they were “straightforward and common sense calculations, ” as HMH claimed. The defendants also argued that redeposing the CFO would not cure the harm of the late disclosure because the CFO admitted he had no familiarity with how lost revenue was calculated. They also questioned the competence of HMH’s CFO and CEO to testify about those damages as lay witnesses.

Magistrate Judge Frazier found that HMH’s amended initial disclosures were not timely and that the late disclosure was not substantially justified or harmless. He noted HMH had reasonable access to the facts and figures that served as the basis for the new, increased estimate of lost revenue throughout the proceeding, but waited until the end of discovery, when the defendants no longer had an adequate amount of time to evaluate and respond to the new calculation. Pursuant to Rule 37(c)(1), Magistrate Judge Frazier barred HMH from using the recalculated lost revenue amount at hearing or trial.

B. July 25, 2013, Order (Doc. 78)

Magistrate Judge Frazier’s second appealed order (Doc. 63), entered July 25, 2013, ruled on the defendants’ motion to reconsider his June 17, 2013, order (Doc. 66). In that motion, HMH argued that its late calculation was in direct response to a request eleven days earlier during a telephone discovery conference for further information about HMH’s damage calculation. It also noted that the defendants failed to question HMH’s CEO about the revised calculation at his deposition more than seven weeks after it was disclosed.

In response (Doc. 67), the defendants maintain Magistrate Judge Frazier’s original ruling was not clearly erroneous or contrary to law. Additionally, they argue that HMH’s motion for reconsideration, filed twenty-three days after Magistrate Judge Frazier’s order, was untimely under Federal Rule of Civil Procedure 72 and SDIL Local Rule 73.1, which allow fourteen days for an appeal of a magistrate judge’s order. The defendants further point out that they did not question HMH’s CEO about the revised ...

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