United States District Court, N.D. Illinois, Eastern Division
KARUM HOLDINGS LLC, KARUM GROUP LLC, and KARUM CARD SERVICES S.A. DE C.V., SOFOM, E.N.R., Plaintiffs,
LOWE'S COMPANIES, INC., and LOWE'S COMPANIES MEXICO, S. DE R.L. DE C.V., Defendants.
MEMORANDUM OPINION AND ORDER
Z. Lee United States District Judge
Companies, Inc. (“Lowe's Inc.”) is a
corporation that operates home improvement stores in North
America. Around 2007, Lowe's Inc. decided to create a
program to provide private label credit cards to customers of
Lowe's Mexico. To that end, Lowe's Companies Mexico,
S. de R.L. de C.V. (“Lowe's Mexico”) entered
into two agreements with Karum Holdings LLC (“Karum
Holdings”), Karum Group LLC (“Karum
Group”), and Karum Card Services S.A. de C.V., SOFOM,
E.N.R. (“KCS”) to implement the private label
credit card program. In 2015, Karum Holdings, Karum Group,
and KCS (“Karum”) commenced this lawsuit against
Lowe's Inc. and Lowe's Mexico
(“Lowe's”) for purportedly breaching the
parties' agreements. The parties are scheduled to proceed
to trial on December 11, 2017.
April 2015, Karum submitted to Lowe's a summary damages
model and estimate of damages. In anticipation of trial,
Lowe's has filed a motion in limine to preclude
Karum from offering testimony of its damages model and to
exclude the underlying model altogether. For the reasons
stated herein, Lowe's motion is granted insofar as it
seeks to exclude Karum's witnesses from testifying to the
damages model at trial.
March 2015, Karum provided initial disclosures of individuals
likely to have discoverable information to support its claims
or defenses, as required by Federal Rule of Civil Procedure
26(a). See generally Pls.' Rule 26(a)
Disclosures, ECF No. 201. As part of its initial disclosures,
Karum notified Lowe's that Karum Chairman and Chief
Executive Officer, Peter Johnson, (“Johnson”) and
Chief Financial Officer, Russell Ouchida
(“Ouchida”), among others, were persons with
knowledge of discoverable information relevant to the
dispute. Id. at 2-4. Karum did not designate any
potential witnesses in the disclosure as experts. See
id. at 2- 5.
April 2015, Karum provided Lowe's with a summary damages
model and estimate of damages, as required by Rule
26(a)(1)(A)(iii). See generally Defs.' Mot.
in Limine No. 1 to Exclude Evidence of Pls.'
Damages Model (“Defs.' Mot.”), Ex. D,
Lowe's Computation of Damages April 22, 2015
(“Damages Model”), ECF No. 175-4. At that time or
sometime shortly thereafter, Karum advised Lowe's that it
“did not intend to use a retained expert to present
damages, but rather would rely on opinion testimony”
from Johnson. See Karum's Mem. Opp'n
Defs.' Mot. Strike Pls.' Supplemental April 22, 2017
Damages Model (“Pls.' Resp. Defs.' Mot. Strike
Revised Damages”) at 1, ECF No. 126. Karum's
statement in this regard is worth quoting.
Johnson can opine as a lay witness under Federal Rule of
Evidence 701 on the subject of Karum's estimated damages
by virtue of his perception of Karum's business gained
through his management of that business. But he might also
qualify as an expert under Federal Rule of Evidence 702,
through the knowledge and experience he has gathered from
decades in the credit business. In fact, Johnson has served
on the audit committees of multiple public companies, and as
such, is recognized by the SEC to have financial expertise.
Either way, Lowe's knows Johnson and will not be
surprised by his testimony.
September 2017, Lowe's filed a motion in limine
to preclude Johnson and Ouchida from testifying as to
Karum's damages model. Defs.' Mot. at 5-8, ECF No.
159. Lowe's argues that any testimony by Johnson and
Ouchida regarding the model would not be rationally based on
their own perceptions and would require specialized knowledge
in contravention of Federal Rule of Evidence 701.
Id. In response, Karum argues that it does not
intend (and has never intended) to offer lay-opinion
testimony under Rule 701, but rather that Johnson will
provide expert testimony regarding the damages model under
Rule 702. Karum's Opp'n Lowe's Mot.
in Limine (“Pls.' Resp.”) at 1, ECF
No. 184. Karum further asserts that Johnson was disclosed as
an expert “from day one” of this litigation and
that, in the footnote quoted above, Karum
“reminded” Lowe's that it intended to call
Johnson as an expert witness under Rule 702. Id. at
Rule 26(a)(2), a party “shall disclose to other parties
the identity of any person who may be used at trial to
present evidence” under Federal Rule of Evidence 702.
Where, as here, the Court does not order a different
disclosure deadline, the disclosures must be made “at
least 90 days before the date set for trial or for the case
to be ready for trial . . . .” Fed.R.Civ.P.
26(a)(2)(D)(i). Expert witnesses who are not retained as
experts or whose duties do not regularly involve giving
expert testimony need not provide a written expert report,
but a party offering any expert witness must always: (1)
state the subject matter on which the expert witness is
expected to present evidence under Federal Rule of Evidence
702 and (2) provide a summary of the facts and opinions to
which the witness is expected to testify. Fed.R.Civ.P.
26(a)(2)(B), (C). “[A]ll disclosures under Rule 26(a)
must be in writing, signed, and served.” Fed.R.Civ.P.
disclosure of an expert witness requires formally designating
the witness as an “expert.” See Musser v.
Gentiva Health Servs., 356 F.3d 751, 757-58 (7th Cir.
2004). Moreover, the “duty to disclose a witness as
an expert is not excused when a witness who
will testify as a fact witness and as an expert
witness is disclosed as a fact witness.” Tribble v.
Evangelides, 670 F.3d 753, 759-60 (7th Cir. 2012)
(citing Musser, 356 F.3d at 757) (emphasis in
original). “This is a strict but well-founded
requirement: ‘Knowing the identity of the
opponent's expert witnesses allows a party to properly
prepare for trial.'” Id. at 759 (citing
Musser, 356 F.3d at 757).
exclusion of non-disclosed evidence, including an expert
witness, “is automatic and mandatory under Rule
37(c)(1) unless non-disclosure was justified or
harmless.” Musser, 356 F.3d at 758; see
David v. Caterpillar, Inc., 324 F.3d 851, 857 (7th Cir.
2003); NutraSweet Co. v. X-L Eng'g Co., 227 F.3d
776, 785-86 (7th Cir. 2000). “The determination of
whether a Rule 26(a) violation is justified or harmless is
entrusted to the broad discretion of the district
court.” Caterpillar, 324 F.3d at 857 (quoting
Mid-Am. Tablewares, Inc. v. Mogi Trading Co., Ltd.,
100 F.3d 1353, 1363 (7th Cir. 1996)).
to disclose a witness as an expert is usually not harmless
because, for example, “[w]ithout proper disclosures, a
party may miss its opportunity to disqualify the expert,
retain rebuttal experts, or hold depositions for an expert
not required to provide a report.” Tribble,
670 F.3d. at 759-60 (citing Musser, 356 F.3d at
758). Moreover, “a misunderstanding of the law does not
equate to a ...