United States District Court, W.D. Oklahoma
IN RE SANDRIDGE ENERGY, INC. SECURITIES LITIGATION
CHARLES B. GOODWIN UNITED STATES DISTRICT JUDGE.
before the Court is Defendants' Motion to Strike (Doc.
No. 415) portions of the rebuttal report of Plaintiffs'
expert Bjorn L. Steinholt, as well as a brief in support
(Doc. No. 416). Defendants have responded (Doc. Nos. 419,
420, 421), and this matter is now at issue. Also at issue is
Plaintiffs' Motion to Supplement (Doc. No. 422) and
Defendants' response thereto (Doc. No. 425).
March 1, 2019, Plaintiffs timely submitted two expert reports
to Defendants, including a report by Mr. Steinholt in which
he opined: (i) allegedly false or misleading statements about
SandRidge's Mississippian wells caused the price of
SandRidge stock to be artificially inflated throughout the
putative class period; and (ii) the price impact on November
9, 2012, of the disclosure of the alleged corrective
information after the market closed on November 8, 2012, was
9.9%, or $0.60 per share, when the inflation is assumed
constant on each day of the putative class period. Defs.'
Mot. to Strike Ex. 1 (the “March Report”)
¶¶ 12, 24, 63, 67, 72, 80-81 & Ex. D (Doc. No.
416-1); see Fed. R. Civ. P. 26(a)(2)(B); Am. Sched.
Order (Doc. No. 399). Mr. Steinholt's March Report noted
that Plaintiffs' operative pleading presented allegations
about a SandRidge stock-price drop in August 2011 but
expressly declined to analyze that event or any damages
resulting therefrom. See Mar. R. ¶ 73 (“I
may supplement my report related to SandRidge's August
2011 stock price decline after fact discovery is
April 4, 2019, Defendants timely submitted a report from
their expert Steven Grenadier, PhD. See Defs.'
Mot. to Strike Ex. 2 (the “Grenadier Report”)
(Doc. No. 416-2); Second Am. Sched. Order (Doc. No. 410).
This report criticized Mr. Steinholt's March Report in
various respects, and like the March Report, Dr.
Grenadier's Report focused upon the drop in SandRidge
stock price that occurred on November 9, 2012. Dr. Grenadier
noted Mr. Steinholt's reference to “eight
‘fraud-related event days, '” which had
included August 5, 2011, but Dr. Grenadier did not address
the August 2011 stock-price drop or any loss associated with
that drop. Grenadier R. ¶ 27.
April 29, 2019, Plaintiffs submitted a “Rebuttal Expert
Report” by Mr. Steinholt (the “April
Report”). See Defs.' Mot. to Strike Ex. 3
(Doc. No. 416-3); Fed.R.Civ.P. 26(a)(2)(D)(ii). Much of the
April Report directly replied to Dr. Grenadier's critique
of the March Report and defended the findings and methodology
of that Report. See Apr. R. ¶¶ 1-64. In
Paragraphs 65-83 and Exhibit A, however, Mr. Steinholt
“supplement[ed]” the March Report “to
include damages related to the August 5, 2011
disclosure” made by SandRidge prior to the opening of
the market on that date and the drop in stock price that
followed, calculated using a changing rate of inflation for
each day of the putative class period. See Id.
¶¶ 63-83 & Ex. A.
now seek to strike the paragraphs and appendix of Mr.
Steinholt's April Report pertaining to August 2011
damages, asserting that this portion is an unauthorized late
expert disclosure rather than a proper rebuttal
report. The Court agrees.
Federal Rules of Civil Procedure prescribe that an expert
rebuttal report is permitted if the evidence therein
“is intended solely to contradict or rebut evidence on
the same subject matter” identified by another
party's expert. Fed.R.Civ.P. 26(a)(2)(D)(ii).
“Rebuttal is not an opportunity for the correction of
any oversights in the plaintiff's case in chief.”
Oklahoma v. Tyson Foods, Inc., No.
05-CV-329-GKF-PJC, 2009 WL 1065668, at *1 (N.D. Okla. Apr.
17, 2009) (internal quotation marks omitted). Nor may a party
“use a rebuttal expert to introduce new legal
theories.” Stephenson v. Wyeth LLC, No.
04-2312-CM, 2011 WL 4900039, at *1 (D. Kan. Oct. 14, 2011).
Rebuttal experts may not properly “present new
arguments” or “put forth their own
theories”; expert reports that address the same subject
matter as a prior report “but do not directly
contradict or rebut the actual contents of that prior
report” are not proper rebuttal reports. Spring
Creek Expl. & Prod. Co., LLC v. Hess Bakken Inv. II,
LLC, No. 14-cv-00134-PAB-KMT, 2016 WL 1597529, at *3 (D.
Colo. Apr. 21, 2016) (internal quotation marks omitted).
described above, the disputed portion of Mr. Steinholt's
April Report does not contradict or rebut Dr. Grenadier's
conclusions or methodology. It instead “attempt[s] to
bolster [Plaintiffs'] case-in-chief” and thus is
not a proper rebuttal report under Rule 26(a)(2)(D)(ii).
Ashike v. Mullen Crane & Transp., Inc., No.
2:12-CV-0011, 2014 WL 61142, at *3 (D. Utah Jan. 8, 2014);
cf. Tanberg v. Sholtis, 401 F.3d 1151, 1166 (10th
Cir. 2005) (“Rebuttal evidence is evidence which
attempts to ‘disprove or contradict' the evidence
to which it is contrasted.”).
found that the disputed portion of the April Report does not
qualify as a proper rebuttal report, the resulting question
is what relief the Court should order. Defendants correctly
note that the offending portion of the April Report is
subject to being stricken. See Fed. R. Civ. P.
37(c)(1); see, e.g., Barcus v. Phoenix Ins.
Co., No. 17-2492-JWL-KGG, 2018 WL 6933299, at *2 (D.
Kan. Aug. 17, 2018) (striking purported rebuttal report that
“only support[ed] [the plaintiff's] primary
contentions” without “rebut[ting] any new
elements of the defense expert claims”); cf.
D'Andrea Bros. LLC v. United States, No. 08-286C,
2012 WL 644010, at *3-4 (Fed. Cl. Feb. 10, 2012) (striking
new damages calculations in expert rebuttal report).
Plaintiffs have filed a Motion to Supplement, requesting that
rather than having the disputed portion stricken, the Court
consider that aspect of the April Report as a supplemental
report or allow it to be filed as a supplemental report.
See Pls.' Mot. to Suppl. at 1-2. According to
Plaintiffs, key depositions and discovery analysis took place
after Mr. Steinholt issued his March Report, and so Mr.
Steinholt was able to supplement that Report “with the
benefit of a fully developed factual record.”
Id. at 2; accord Pls.' Resp. to
Defs.' Mot. to Strike (Doc. No. 419) at 11-14.
to Federal Rule of Civil Procedure 26(e)(1), a party must
supplement or correct its disclosures “in a timely
manner” “if the party learns that in some
material respect the disclosure . . . is incomplete or
incorrect, and if the additional or corrective information
has not otherwise been made known to the other parties during
the discovery process or in writing.” Fed.R.Civ.P.
26(e)(1)(A); see also Id. R. 26(a)(2)(E). But the
Rule does not permit parties to “create[e] a ‘new
and improved' expert report in order to gain tactical
advantage.” Rodgers v. Beechcraft Corp., No.
15-CV-129-CVE-PJC, 2016 WL 7888048, at *2 (N.D. Okla. Sept.
20, 2016). Paragraphs 65 through 83 of the April Report are
not reasonably construed as a completion or correction of the
March Report; rather, they present “additional opinions
or rationales” that should have been presented as part
of that initial Report or in an additional (timely) report.
Cook v. Rockwell Int'l Corp., 580 F.Supp.2d
1071, 1169 (D. Colo. 2006); see, e.g., Apr. R.
¶ 83 (describing an “$0.81 per share impact”
“used as the inflation . . . until the disclosure . . .
after market close on August 4, 2011” that “is in
addition to the inflation estimated in [the March Report]
relating to the November 9, 2012 corrective
upon these late-offered opinions must be prohibited unless
Plaintiff's failure to timely disclose the opinions
“was substantially justified or is harmless.”
Fed.R.Civ.P. 37(c)(1); see Cook, 580 F.Supp.2d at
1169. Whether that was the case is a determination
“entrusted to the broad discretion of the district
court, ” with such discretion guided by factors
including the prejudice or surprise to the other party and
the extent to which allowing such evidence would disrupt the
court's schedule. Woodworker's Supply, Inc. v.
Principal Mut. Life Ins. Co., 170 F.3d 985, 993 (10th
Cir. 1999) (internal quotation marks omitted). District
courts also consider whether a party has shown good cause and
excusable neglect under Federal Rule of Civil Procedure
6(b)(1)(B) when considering a tardy request to disclose under
Rule 26(a). See, e.g., Kehler v. Bridgestone
Ams. Tire Operations, LLC, No. 15-CV-127-J, 2016 WL
6080230, at *4 (D. Wyo. Aug. 3, 2016).
Court agrees with Defendants that Plaintiffs' inclusion
of this content in their “rebuttal” report was
not substantially justified. Plaintiffs' argument that
Mr. Steinholt was required to supplement his first Report
based upon later-taken depositions and discovery responses is
belied by the April Report itself, as Mr. Steinholt does not
cite to or rely upon such depositions or ...