Construction Law Insights

Advanced Training Grp. Worldwide, Inc. v. ProActive Techs. Inc., 2020 U.S. Dist. LEXIS 141855 (E.D. Va. Aug. 7, 2020)

ProActive Technologies, Inc. (“ProActive”) filed two motions in limine: (1) preclude ATG from introducing any evidence relating to any claimed damages; (2) preclude expert testimony from ATG’s rebuttal expert John M. Falk (“Falk”). Advanced Training Group Worldwide, Inc. (“ATG”) filed three motions in limine: (1) preclude any reliance by ProActive on the Business Judgment Rule or the Advice-of-Counsel defense; (2) preclude expert testimony from ProActive’s expert James A. Hughes, Jr. (“Hughes”) to the extent that it offers impermissible legal opinions; (3) preclude certain testimony from Adam Newbold (“Newbold”).

On December 9, 2019, the Court affirmed the Magistrate Judge’s Order striking ATG’s government contracting and joint venture expert because that issue was inadequately briefed. On January 29, 2020, the Court affirmed the Magistrate Judge’s Order striking ATG’s damages expert because ATG’s damages expert designation did not meet the standard required by Rule 26, Fed. R. Civ. P. and the application of the five-factor test set forth in Southern States Rack & Fixture, Inc. v. Sherwin Williams Co. pointed to the conclusion that exclusion of ATG’s damages expert was the appropriate remedy under Rule 37(c), Fed. R. Civ. P.

The matter was set to proceed to trial solely on ATG’s breach of contract claim, which alleges that ProActive breached the Raptor Training Services, LLC (“RTS”) joint venture (“JV”) when ProActive unilaterally terminated ATG from the JV on November 8, 2016.

Because ATG did not disclose to ProActive the amount of its damages or how ATG calculated its claimed damages as required by Rule 26(a), Fed. R. Civ. P., the Court granted ProActive’s motion in limine to preclude ATG from introducing evidence related to any claimed damages at trial. Pursuant to Rule 26(a), a plaintiff must disclose to the defendant a computation of each category of damages claimed and, if a plaintiff fails to provide that damages computation, Rule 37(c) provides that exclusion of such evidence is the appropriate remedy unless the failure to disclose is harmless or substantially justified. Here, the sole damages calculation that ATG gave ProActive was an improper calculation of lost profits because it calculated ATG’s alleged lost revenues without subtracting ATG’s expenses.

The Fourth Circuit has set forth a five-factor test to guide a district court’s determination of whether a party’s failure to disclose information is substantially justified or harmless. ATG offered no explanation for its failure to provide a proper damages calculation at any point in the litigation. Finally, lost profits damages evidence was extremely important to ATG’s case-in-chief. Thus, ATG’s failure to disclose a proper damages calculation was neither harmless nor substantially justified.

The Court granted in part and denied in part each parties’ motion in limine to exclude the other party’s expert testimony. Rule 702 Fed. R. Evid governs expert testimony. Expert testimony must be reliable and relevant to be admissible. In parts of ATG’s rebuttal report, Falk opines on the interpretation of the contract at issue, the MOU, and whether ProActive’s conduct constituted a breach of contract. The Court excluded this testimony because it was a conclusion of law. Falk also speculated as to ProActive’s justifications for terminating ATG from the JV. The Court excluded this testimony because it was speculative without any basis in scientific or other expertise. The Court also excluded Falk’s testimony about the JV being highly unusual and rare because it was irrelevant to whether ProActive breached the MOU by terminating ATG from the JV. The Court also excluded Hughes’ testimony about whether the JV’s conduct constituted a breach of its contract with the government because experts cannot testify as to conclusions of law.

Because Virginia’s Business Judgment Rule does not apply to breach of contract claims, the Court granted ATG’s motion in limine to preclude any reliance by ProActive on Virginia’s Business Judgment Rule.

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