Southern States Rack v. Sherwin Williams Co ( 2003 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
SOUTHERN STATES RACK AND 
FIXTURE, INCORPORATED,
Plaintiff-Appellant,
v.
SHERWIN-WILLIAMS COMPANY,
Defendant-Appellee,  No. 01-2283
and
KELLER RIGGING & CONSTRUCTION
SC, INCORPORATED,
Defendant.

Appeal from the United States District Court
for the District of South Carolina, at Aiken.
Joseph F. Anderson, Jr., Chief District Judge.
(CA-99-2726-1)
Argued: December 5, 2002
Decided: January 30, 2003
Before WILKINS and MOTZ, Circuit Judges, and
HAMILTON, Senior Circuit Judge.
Affirmed by published opinion. Judge Wilkins wrote the opinion, in
which Judge Motz and Senior Judge Hamilton joined.
COUNSEL
ARGUED: Gregory A. Keyser, GETTY, KEYSER & MAYO,
L.L.P., Lexington, Kentucky, for Appellant. Jack Norris Sibley,
2 SOUTHERN STATES RACK & FIXTURE v. SHERWIN-WILLIAMS
HAWKINS & PARNELL, L.L.P., Atlanta, Georgia, for Appellee.
ON BRIEF: Robert S. Thompson, HAWKINS & PARNELL, L.L.P.,
Atlanta, Georgia, for Appellee.
OPINION
WILKINS, Circuit Judge:
Southern States Rack and Fixture, Incorporated (Southern States)
appeals a judgment of the district court entered in favor of Sherwin-
Williams Company (Sherwin-Williams) following a jury trial. South-
ern States argues that the district court abused its discretion by
excluding testimony from one of Southern States’ expert witnesses
concerning a new opinion that the expert formed during trial. Finding
no error, we affirm.
I.
Southern States brought this action against Sherwin-Williams,
claiming that paint Southern States purchased from Sherwin-Williams
was defective because it rubbed off of metal racks that Southern
States manufactured. In May 2000, Sherwin-Williams responded to a
discovery request by Southern States that sought the formula of the
paint at issue. Sherwin-Williams indicated that it would produce the
formula only if Southern States would sign a confidentiality agree-
ment.
After lengthy negotiations, Southern States and Sherwin-Williams
signed a confidentiality agreement in July 2001, and Sherwin-
Williams promptly disclosed a document purporting to contain the
paint formula. Several days later at a pretrial conference, Southern
States asserted that the document Sherwin-Williams had produced did
not contain the actual formula of the paint. Though Sherwin-Williams
maintained that the formula it had provided was correct, it promised
to confirm this fact. On August 3, 2001, Sherwin-Williams sent a let-
ter to Southern States providing the specific chemical composition of
each ingredient identified in the earlier document.
SOUTHERN STATES RACK & FIXTURE v. SHERWIN-WILLIAMS 3
Southern States forwarded this information to its expert chemist,
Geoffrey Byrnes, who had previously issued a report and been
deposed. Based on the new information, Byrnes issued a supplemen-
tal report on August 6, 2001.
Trial began on Monday, August 13, 2001. Two days later, Byrnes
was called to testify. When Southern States offered him as an expert,
Sherwin-Williams conducted voir dire regarding Byrnes’ opinions.
During this voir dire, Byrnes and Southern States’ counsel disclosed
—for the first time—that two days earlier, Byrnes had formed a new,
third opinion, and had communicated that opinion to Southern States’
counsel.1 Specifically, Byrnes stated that he now believed that certain
components of the paint were incompatible, causing it to rub off.
Other than a passing reference to "the nature of the paint" during his
deposition, J.A. 972, Byrnes had not previously expressed any opin-
ion that the failure of the paint was caused by incompatible ingredi-
ents. Though Byrnes’ earlier opinions were based on the composition
and physical properties of the paint, those opinions apparently
focused on the behavior of the paint when applied in a particular man-
ner, not the compatibility of its ingredients.
Byrnes also stated that his new opinion was based in part on tests
he conducted in response to deposition testimony by one of Sherwin-
Williams’ experts, Dr. Bernard Appleman. Though Appleman had
been deposed in March 2001, Byrnes claimed that he had not received
a copy of the deposition and exhibits until approximately two weeks
before his trial testimony. Still, Byrnes acknowledged that he "didn’t
1
Southern States claims that the information Byrnes communicated to
counsel on the Monday evening of trial week was, at that point, merely
a "hypothesis." Br. for Plaintiff-Appellant at 6. According to Southern
States, Byrnes tested that hypothesis the following day, and he confirmed
his new "opinion" to counsel Tuesday night. Id. However, Southern
States also made this argument to the district court in its motion for a
new trial, and the district court apparently did not credit it, finding that
Byrnes’ new opinion was "formulated on the Monday the trial began."
J.A. 1591. Indeed, after Byrnes disclosed his new opinion during voir
dire, Southern States’ counsel repeatedly stated to the court that Byrnes
had communicated the new opinion to counsel on Monday. Given these
admissions, we will not disturb the finding of the district court that
Byrnes formulated his new opinion that Monday.
4 SOUTHERN STATES RACK & FIXTURE v. SHERWIN-WILLIAMS
get around to reading" these materials thoroughly until the weekend
before trial. Id. at 724. In addition, counsel for Southern States
asserted that counsel’s failure to disclose Byrnes’ new opinion when
he learned of it two days earlier was due to "the heat of a trial." Id.
at 739-40.
On Sherwin-Williams’ motion, the district court excluded Byrnes’
third opinion due to Southern States’ failure to timely disclose it. The
court allowed Byrnes to testify regarding opinions he had expressed
during his deposition and in his August 6 supplemental report. After
the close of evidence, the jury returned a verdict for Sherwin-
Williams.
Southern States then moved for a new trial, arguing that the district
court erred in excluding Byrnes’ third opinion, and alternatively, that
this opinion constituted newly discovered evidence. The district court
held that Byrnes’ third opinion was properly excluded under Fed. R.
Civ. P. 37(c)(1), which provides for the exclusion of evidence that is
not disclosed in accordance with Fed. R. Civ. P. 26, including supple-
mental disclosures relating to experts. Applying a five-factor test dis-
cussed in Rambus, Inc. v. Infineon Technologies AG, 145 F. Supp. 2d
721 (E.D. Va. 2001), the district court concluded that "Byrnes’ third
expert opinion, formulated on the day trial began and not disclosed
to defense counsel until defense counsel conducted voir dire of . . .
Byrnes on the third day of trial, should have been excluded." J.A.
1592. Thus, the district court denied Southern States’ motion for a
new trial.
II.
We review the imposition of discovery sanctions for abuse of dis-
cretion. See Nelson-Salabes, Inc. v. Morningside Dev., LLC, 284 F.3d
505, 513 n.10 (4th Cir. 2002); see also Yeti by Molly Ltd. v. Deckers
Outdoor Corp., 259 F.3d 1101, 1106 (9th Cir. 2001) ("[W]e give par-
ticularly wide latitude to the district court’s discretion to issue sanc-
tions under Rule 37(c)(1)."). As explained below, we conclude that
the district court did not abuse its discretion in excluding Byrnes’
third opinion due to Southern States’ failure to timely disclose it.
However, because of a dispute regarding the proper standards for
SOUTHERN STATES RACK & FIXTURE v. SHERWIN-WILLIAMS 5
excluding evidence under Rule 37(c)(1), we will first address this
issue.
A.
1.
In relevant part, Rule 37(c)(1) provides that "[a] party that without
substantial justification fails to disclose information required by Rule
26(a) or 26(e)(1), or to amend a prior response to discovery as
required by Rule 26(e)(2), is not, unless such failure is harmless, per-
mitted to use as evidence at a trial . . . any witness or information not
so disclosed."2 Of importance here, Rule 26(e)(1) requires a party to
supplement its experts’ reports and deposition testimony when the
2
In its entirety, Rule 37(c)(1) reads:
A party that without substantial justification fails to disclose
information required by Rule 26(a) or 26(e)(1), or to amend a
prior response to discovery as required by Rule 26(e)(2), is not,
unless such failure is harmless, permitted to use as evidence at
a trial, at a hearing, or on a motion any witness or information
not so disclosed. In addition to or in lieu of this sanction, the
court, on motion and after affording an opportunity to be heard,
may impose other appropriate sanctions. In addition to requiring
payment of reasonable expenses, including attorney’s fees,
caused by the failure, these sanctions may include any of the
actions authorized under Rule 37(b)(2)(A), (B), and (C) [relating
to failure to comply with discovery orders] and may include
informing the jury of the failure to make the disclosure.
The Rule 37(c) advisory committee notes emphasize that the "auto-
matic sanction" of exclusion "provides a strong inducement for disclo-
sure of material that the disclosing party would expect to use as
evidence." Fed. R. Civ. P. 37(c) advisory committee note (1993). The
alternative sanctions referenced in the rule are primarily intended to
apply when a party fails to disclose evidence helpful to an opposing
party. See 7 James Wm. Moore et al., Moore’s Federal Practice
§§ 37.60[2][b], 37.61 (3d ed. 2002). This is because "[p]reclusion of evi-
dence is not an effective incentive to compel disclosure of information
that, being supportive of the position of the opposing party, might advan-
tageously be concealed by the disclosing party." Fed. R. Civ. P. 37(c)
advisory committee note (1993).
6 SOUTHERN STATES RACK & FIXTURE v. SHERWIN-WILLIAMS
party learns of new information. If the party fails to do so, the court
may exclude any new opinion offered by the expert. See Tenbarge v.
Ames Taping Tool Sys., Inc., 190 F.3d 862, 865 (8th Cir. 1999).
The language of Rule 37(c)(1) provides two exceptions to the gen-
eral rule excluding evidence that a party seeks to offer but has failed
to properly disclose: (1) when the failure to disclose is "substantial[ly]
justifi[ed]," and (2) when the nondisclosure is "harmless." Here, in
concluding that Byrnes’ undisclosed third opinion should be
excluded, the district court applied the following five-factor test for
determining whether nondisclosure of evidence is substantially justi-
fied or harmless: "‘(1) the surprise to the party against whom the wit-
ness was to have testified; (2) the ability of the party to cure that
surprise; (3) the extent to which allowing the testimony would disrupt
the trial; (4) the explanation for the party’s failure to name the witness
before trial; and (5) the importance of the testimony.’" Rambus, 145
F. Supp. 2d at 726 (quoting Burlington Ins. Co. v. Shipp, 215 F.3d
1317, 2000 WL 620307, at *4 (4th Cir. May 15, 2000) (per curiam)
(unpublished table decision)).3
Southern States argues that the district court erred by excluding
Byrnes’ third opinion in the absence of any finding that Southern
States acted in bad faith.4 We find Southern States’ argument unavail-
ing. Rule 37(c)(1) does not require a finding of bad faith or callous
disregard of the discovery rules. While Rule 37(c)(1) requires the
nondisclosure to be "without substantial justification" and harmful,
3
Rambus noted the discrepancy between Burlington Insurance and
another unpublished decision of this court addressing the standards for
excluding evidence under Rule 37(c)(1). See Tritchler v. Consolidation
Coal Co., 91 F.3d 134, 1996 WL 379706, at *2 (4th Cir. June 28, 1996)
(per curiam) (unpublished table decision) (stating that "[g]enerally, pre-
clusion is considered a drastic remedy, and it is not imposed unless the
party’s conduct is in bad faith or callous disregard of the discovery
rules"). However, Rambus concluded that "[n]otwithstanding Tritchler,
the approach of Burlington Insurance, a more recent decision, more
closely tracks the plain language of the rule; is consonant with its pur-
pose; and is harmonious with the approaches to Rule 37(c)(1) taken in
other circuits." Rambus, 145 F. Supp. 2d at 727.
4
The district court stopped short of making a finding of bad faith.
SOUTHERN STATES RACK & FIXTURE v. SHERWIN-WILLIAMS 7
neither of these requirements suggests that the nondisclosing party
must act in bad faith or otherwise culpably.
In addition, excluding evidence only when the nondisclosing party
acted in bad faith would undermine the basic purpose of Rule
37(c)(1): preventing surprise and prejudice to the opposing party, see
Thibeault v. Square D Co., 960 F.2d 239, 246 (1st Cir. 1992) (noting
that "the focus of a preclusion inquiry is mainly upon surprise and
prejudice, including the opponent’s ability to palliate the ill effects
stemming from the late disclosure"). And, requiring proof that the
nondisclosing party acted in bad faith would improperly shift the bur-
den of proof away from that party on the exclusion issue. See Wilson
v. Bradlees of New England, Inc., 250 F.3d 10, 21 (1st Cir. 2001)
("[I]t is the obligation of the party facing sanctions for belated disclo-
sure to show that its failure to comply with [Rule 37(c)(1)] was either
justified or harmless . . . ."); accord Finley v. Marathon Oil Co., 75
F.3d 1225, 1230 (7th Cir. 1996).
Further, we believe that the five factors articulated in Rambus are
helpful in determining whether a party’s nondisclosure of evidence
was substantially justified or harmless. Four of these factors—
surprise to the opposing party, ability to cure that surprise, disruption
of the trial, and importance of the evidence—relate mainly to the
harmlessness exception, while the remaining factor—explanation for
the nondisclosure—relates primarily to the substantial justification
exception. We therefore hold that in exercising its broad discretion to
determine whether a nondisclosure of evidence is substantially justi-
fied or harmless for purposes of a Rule 37(c)(1) exclusion analysis,
a district court should be guided by the following factors: (1) the sur-
prise to the party against whom the evidence would be offered; (2) the
ability of that party to cure the surprise; (3) the extent to which allow-
ing the evidence would disrupt the trial; (4) the importance of the evi-
dence; and (5) the nondisclosing party’s explanation for its failure to
disclose the evidence.
2.
We recognize that two published opinions of this court have stated
that in "determining what sanctions to impose under Rule 37," a dis-
trict court must consider four factors: "(1) whether the non-complying
8 SOUTHERN STATES RACK & FIXTURE v. SHERWIN-WILLIAMS
party acted in bad faith, (2) the amount of prejudice that noncompli-
ance caused the adversary, (3) the need for deterrence of the particular
sort of non-compliance, and (4) whether less drastic sanctions would
have been effective." Anderson v. Found. for Advancement, Educ. &
Employment of Am. Indians, 155 F.3d 500, 504 (4th Cir. 1998);
accord Belk v. Charlotte-Mecklenburg Bd. of Educ., 269 F.3d 305,
348 (4th Cir. 2001) (en banc), cert. denied, 122 S. Ct. 1537 (2002),
and cert. denied, 122 S. Ct. 1538 (2002). While the broad language
of these decisions suggests that a court must consider these four fac-
tors as part of any sanctions analysis under Rule 37, neither of these
cases addressed exclusion of undisclosed evidence under Rule
37(c)(1).
In Anderson, we affirmed a default judgment sanction against a
party that repeatedly failed to comply with discovery orders requiring
it to produce requested documents—violations governed by Fed. R.
Civ. P. 37(b). See Anderson, 155 F.3d at 503-05. In Belk, we affirmed
a sanction ordering a party that failed to timely supplement its
answers to interrogatories seeking a list of trial witnesses, as required
by court order, to pay fees and expenses for deposing its witnesses.
See Belk, 269 F.3d at 347-48. Though quoting the four-factor test
from Anderson, Belk did not specify which part of Rule 37 was at
issue, and the opinion could be construed to implicate both Rule
37(c)(1) and Rule 37(b). See id. at 348. Because the analysis in Belk
focused mainly on the party’s violation of a district court order, see
id. (referring to "the district court’s command to supplement interrog-
atories" and "non-compliance with the district court’s orders"), we
conclude that the sanction was imposed pursuant to Rule 37(b).
In contrast to Rule 37(c)(1)—which generally requires exclusion of
evidence that a party seeks to offer but has failed to disclose, see
supra note 2—Rule 37(b) provides district courts with greater discre-
tion in selecting one or more appropriate sanctions. See Fed. R. Civ.
P. 37(b)(2) (stating that when parties fail to obey discovery orders,
courts "may make such orders in regard to the failure as are just," and
listing several possible sanctions). Thus, while the exclusion analysis
under Rule 37(c)(1) is limited by the specific language of that provi-
sion, Rule 37(b) allows district courts to consider a broader range of
factors, including bad faith, in determining which sanction(s) to
impose.
SOUTHERN STATES RACK & FIXTURE v. SHERWIN-WILLIAMS 9
For this reason, the four-factor test recited in Anderson and Belk,
which includes bad faith, does not control the determination of
whether to exclude evidence under Rule 37(c)(1). Indeed, the most
recent published decision of this court applying Rule 37(c)(1) did not
consider whether the nondisclosing party acted in bad faith, but
instead focused solely on whether the failure to disclose was substan-
tially justified or harmless. See Nelson-Salabes, Inc., 284 F.3d at 513
n.10 (affirming exclusion of damages testimony when party failed to
properly supplement discovery).
We also acknowledge that other circuits interpreting Rule 37(c)(1)
apply various tests that either do or do not include bad faith as a con-
sideration. Compare Nicholas v. Pa. State Univ., 227 F.3d 133, 148
(3d Cir. 2000) (applying four-factor test including bad faith or willful-
ness), and Woodworker’s Supply, Inc. v. Principal Mut. Life Ins. Co.,
170 F.3d 985, 993 (10th Cir. 1999) (same), with Yeti by Molly Ltd.,
259 F.3d at 1106 ("[E]ven absent a showing in the record of bad faith
or willfulness, exclusion is an appropriate remedy for failing to fulfill
the required disclosure requirements of Rule 26(a)."), and United
States v. $9,041,598.68, 163 F.3d 238, 252 (5th Cir. 1998) (applying
four-factor test not including bad faith or willfulness). Even in circuits
where bad faith is an explicit factor in the exclusion analysis, it is not
a prerequisite for exclusion. See Nicholas, 227 F.3d at 148; Wood-
worker’s Supply, 170 F.3d at 993. For the reasons stated above, we
decline to consider bad faith as a separate factor in our exclusion anal-
ysis, although under some circumstances, it might be relevant to the
fifth factor of our test—the nondisclosing party’s explanation for its
failure to disclose evidence.
B.
Because the district court here properly relied on the five factors
discussed above in deciding the exclusion issue, we now turn to the
application of these factors. The district court found that Sherwin-
Williams was surprised by Byrnes’ third opinion, because both at his
deposition and in his August 6, 2001 supplemental report, Byrnes
indicated that he had completed his opinions. In addition, the court
explained that Sherwin-Williams was unable to cure this surprise.
Noting that "the ability to simply cross-examine an expert concerning
a new opinion at trial is not the ability to cure," the court emphasized
10 SOUTHERN STATES RACK & FIXTURE v. SHERWIN-WILLIAMS
that "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. Such was not possible here." J.A.
1593. The district court also found that granting a continuance to
accommodate Byrnes’ third opinion would have significantly dis-
rupted the trial, because "witnesses from distant places had testified
and if the case were continued and tried again, much of the parties’
trial preparation would be rendered obsolete." Id.Regarding Southern States’ explanation for Byrnes’ undisclosed
opinion—alleged delays by Sherwin-Williams in producing the paint
formula—the court explained that Southern States "cannot escape that
it failed to file a motion to compel twenty days after it knew Sherwin-
Williams would not produce the formula." Id. More important to the
district court, however, Southern States could not "explain why it did
not supplement its discovery responses when it knew of . . . Byrnes’
new, third opinion formed on the Monday the trial began." Id. Finally,
the court recognized that Byrnes’ new opinion concerning an alleged
defect in the paint formula was important evidence. However, the
court explained that "this factor must be viewed from the perspective
of both parties": "The fact that the expert’s testimony regarding the
paint formula might have been helpful to [Southern States’] case in
the eyes of the jury also points out why it should have been disclosed
in a timely manner to [Sherwin-Williams]." Id. at 1593-94.
We believe that the district court correctly determined that a bal-
ancing of the five factors discussed above weighed in favor of exclud-
ing Byrnes’ third opinion. Thus, the district court did not abuse its
discretion in excluding this opinion based on Rule 37(c)(1).5
5
We also reject Southern States’ claim that the district court should
have ordered a new trial because Byrnes’ third opinion constituted newly
discovered evidence. Because Southern States learned of this evidence
during trial, it cannot be considered "newly discovered" for purposes of
a post-trial motion. See Boryan v. United States, 884 F.2d 767, 771 (4th
Cir. 1989). Thus, the district court did not abuse its discretion in denying
Southern States’ motion for a new trial. See Knussman v. Maryland, 272
F.3d 625, 639 (4th Cir. 2001).
SOUTHERN STATES RACK & FIXTURE v. SHERWIN-WILLIAMS 11
III.
For the reasons set forth above, we affirm the judgment of the dis-
trict court.
AFFIRMED