Commonwealth Insurance v. Titan Tire Corp. , 398 F.3d 879 ( 2004 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
Nos. 03-3223, 03-3224 & 03-3225
COMMONWEALTH INSURANCE COMPANY,
Plaintiff,
v.
TITAN TIRE CORPORATION,
Defendant-Appellant,
v.
PIRELLI TIRE, LLC, formerly known as Pirelli
Tire Corporation, formerly known as Pirelli
Armstrong Tire Corporation,
Defendant-Appellee.
____________
Appeals from the United States District Court
for the Central District of Illinois.
Nos. 99 C 3209, 00 C 3182 & 01 C 3087—Jeanne E. Scott, Judge.
____________
ARGUED SEPTEMBER 21, 2004—DECIDED NOVEMBER 2, 2004
____________
Before MANION, ROVNER, and WOOD, Circuit Judges.
MANION, Circuit Judge. Following a $55 million settlement
of a Texas case involving eight deaths allegedly caused by
a defective tire, the two tire companies involved sued each
2 Nos. 03-3223, 03-3224 & 03-3225
other, claiming breach of an indemnity agreement. The
claims were eventually tried in the Central District of Illinois,
1
which had diversity jurisdiction over the matter. Pirelli
Tire, LLC won a jury verdict for the underlying trial ex-
penses and attorneys’ fees against Titan Tire Corporation in
the amount of $259,775.98, which included interest. On
appeal, Titan challenges a key jury instruction ruling by the
district court as well as several other district court rulings
that affected the trial proceedings. We affirm in part and
reverse in part.
1
Before the district court and in this court it was asserted that
“Pirelli was and is a citizen of the State of Delaware, being a lim-
ited liability company incorporated under the laws of the State of
Delaware, formerly having its principal place of business in
Connecticut and currently having its principal place of business
in Georgia.” However, limited liability companies are unincorp-
orated entities, and, for diversity purposes, “limited liability
companies are citizens of every state of which any member is a
citizen.” See Belleville Catering Co. v. Champaign Mkt. Place, L.L.C.,
350 F.3d 691, 692 (7th Cir. 2003). Therefore, to cure this juris-
dictional defect, this court ordered a supplemental statement of
jurisdiction from Pirelli. See 28 U.S.C. § 1653. Fortunately for all
concerned, Pirelli’s supplemental statement reveals that we do
have subject matter jurisdiction. Pirelli’s sole member, Pirelli
North America, Inc., is a corporation incorporated in the State of
Delaware with its principal place of business in Connecticut, and
complete diversity of citizenship exists in the action between
Pirelli and Titan because Titan is a corporation incorporated in
the State of Illinois with its principal place of business in the
Iowa. Counsel and litigants are again cautioned to carefully
scrutinize all jurisdictional requirements lest they encounter
possible dismissal at this late stage of litigation. See Belleville, 350
F.3d at 694.
Nos. 03-3223, 03-3224 & 03-3225 3
I.
On July 16, 1994, Pirelli sold a tire plant in Des Moines,
Iowa, to Titan. At the same time, the two entered into a man-
ufacturing agreement under which Titan would manufacture
light truck tires for Pirelli at the Des Moines plant according
to Pirelli’s specifications. Pursuant to this agreement, Titan
agreed to indemnify Pirelli for any expenses caused by tire
defects resulting from Titan’s actions or inactions. This
contractual relationship lasted until 1998, when a strike
caused the permanent shut-down of the Des Moines plant.
Shortly after Titan began producing tires under the initial
agreement in September 1994, Pirelli discovered a tread de-
fect in the relevant tire design. Consequently, in November
and December 1994, Titan temporarily halted production,
and Pirelli improved its design. On November 22, 1994,
Pirelli provided its design improvements to Titan and by
letter agreed to indemnify Titan and hold Titan harmless with
respect to any claims arising from the tread defects of the
prior design. This so-called letter agreement of November 22
(“the letter agreement”) was modified on December 14, 1994,
with an addendum (“the addendum”) handwritten on the
margin of the letter agreement by Titan’s president, Maurice
Taylor, a non-attorney. The addendum stated that the in-
demnity arrangement in the letter agreement covered tires
“that had been produced since Sept[ember] 1, 1994.” The
addendum is at the epicenter of this appeal.
The addendum became a point of contention as the result
of a 1998 automobile accident in Duval County, Texas, in
which eight people died. The accident triggered a negligence
and product liability action over a light truck tire involved
in the accident. Initially, Titan and Pirelli were named as
defendants in the underlying action, but, in the early stages
of that case, the plaintiffs dismissed their claims against Pirelli.
Nonetheless, as the result of a Titan cross-claim for indem-
4 Nos. 03-3223, 03-3224 & 03-3225
nity, Pirelli remained exposed to liability in the underlying
suit. During the underlying litigation, Titan and Pirelli pos-
ited—to varying degrees—that the tire at issue was not de-
fective. In the end, however, Titan’s insurer, Commonwealth
Insurance Company, paid $55 million to settle the underly-
ing case, and Titan dismissed its cross-claim against Pirelli
in that case.
The indemnity battle, nevertheless, was far from over.
After the settlement, three new lawsuits involving indem-
nity and other claims arising from the underlying litigation
were filed in three different jurisdictions by and against Pirelli,
Titan, and Commonwealth. Each entity was a plaintiff as
well as defendant in at least one of the three suits. Eventu-
ally, the three suits were consolidated in the United States
District Court for the Central District of Illinois. Matters
concerning Commonwealth are not before this court, and
only two causes of action are pertinent to this appeal: Titan’s
direct claim against Pirelli for breach of indemnity agree-
ment, and Pirelli’s counterclaim against Titan for breach of
the same indemnity agreement. Through these claims, each
party sought to recover the attorneys’ fees and other ex-
penses it incurred as the result of the underlying action. Of
the district court’s numerous decisions in this complex case,
only four remain at issue in this appeal.
At the summary judgment stage, the district court con-
cluded that the unambiguous text of the addendum limited
the duration of the letter agreement. Specifically, the district
court, applying Illinois law, ruled that the addendum
confined Pirelli’s obligation to indemnify Titan for tires
produced between September 1, 1994 and December 14,
1994. After that date, when the addendum’s coverage ex-
pired, the default indemnity arrangement formulated in the
original manufacturing agreement controlled. Under the
district court’s interpretation of the addendum, the key fact
Nos. 03-3223, 03-3224 & 03-3225 5
of each party’s indemnity claim against the other was when
the tire at issue was made. For Titan to prevail on its claim,
Titan had to prove that the tire was made before December
14, 1994. On the other hand, Pirelli had to prove that the tire
was made after December 14, 1994. Further, the district court
twice ruled that the date the tire was produced was an issue
for trial. In the second ruling, the district court explicitly
held that the evidence presented by Pirelli did not show
when the tire was made and, as a result, that question of fact
remained for trial.
The case then proceeded to trial. On the first day of trial,
Titan’s witness, who was expected to establish the date of
production, suddenly backed out of testifying. The witness
determined, at the last minute, that he could not testify that
the tire was made before December 14, 1994. Absent this
testimony, Titan conceded that it could not meet its burden
of proving that the tire was made before December 14, 1994.
Titan rested its case without presenting any evidence, and
the district court granted Pirelli’s uncontested motion for
judgment as a matter of law on Titan’s claim against Pirelli.
The district court then began the trial on Pirelli’s counter-
claim. At a mid-trial conference on the jury instructions, Titan
proposed an instruction requiring Pirelli to prove that the
tire in question was manufactured after December 14, 1994.
The district court rejected the proposed instruction and
further refused to include any instruction regarding the date
of production, thereby relieving Pirelli of its burden of prov-
ing when the tire was manufactured. The reason behind this
on-the-record ruling is not clear. The transcript reveals that
the district court, although having made contrary summary
judgment rulings, adopted Pirelli’s contention that Pirelli
did not have the burden of proving when the tire was made.
Further, the transcript indicates that the district court
treated Titan’s concession that it could not prove that the
6 Nos. 03-3223, 03-3224 & 03-3225
tire was made before December 14, 1994, as an admission
that the tire was made after December 14, 1994. The ques-
tion of when the tire was made was thus dropped from the
trial.
As a consequence, to prevail on its counterclaim against
Titan, Pirelli only had to prove that the tire was defective as
the result of some failure on the part of Titan and that the
defect caused the underlying accident. As an additional
defense, Titan argued that the doctrine of judicial estoppel
precluded Pirelli from claiming that the tire was defective
because, in the underlying litigation, Pirelli had taken the
exact opposite position, i.e., that the tire was not defective.
The district court disagreed, concluding that the doctrine of
judicial estoppel was inapplicable because the underlying
case settled and, as a result, Pirelli never won a favorable
judicial ruling with its prior non-defect position.
Additionally, to prove that the tire was defective and that
the defect caused the accident, Pirelli relied upon the dep-
osition testimony of Robert Ochs, the plaintiffs’ expert from
the underlying litigation. However, Titan moved for discovery
sanctions under Federal Rule of Civil Procedure 37(c)(1),
requesting that the district court exclude Ochs’s testimony
from trial because Pirelli failed to properly disclose this opin-
ion evidence under Federal Rule of Civil Procedure
26(a)(2)(A). The district court denied Titan’s motion, finding
that the discovery violation was harmless for two reasons.
First, Titan participated in Ochs’s deposition and thus knew
the substance of his testimony. Second, Pirelli put Titan on
notice of its intent to rely on Ochs’s opinion when it re-
sponded to Titan’s interrogatories in this case.
Ultimately, the jury returned a verdict in favor of Pirelli
and awarded $223,625.00 in damages. This amount repre-
sents the attorneys’ fees and costs incurred by Pirelli as the
result of Titan’s breach of its contractual obligation to indem-
Nos. 03-3223, 03-3224 & 03-3225 7
nify Pirelli for matters related to the underlying accident.
The district court also awarded $36,150.98 in prejudgment
interest for a total judgment amount of $259,775.98. Titan
appeals.
II.
Titan seeks to overturn that judgment by challenging four
key district court decisions: (a) the interpretation of the ad-
dendum, (b) the rejection of the proposed jury instruction
on the elements of Pirelli’s counterclaim, (c) the decision to
not judicially estop Pirelli on the defectiveness issue, and (d)
the determination that Pirelli’s discovery violation was
harmless. We will address each in turn.
A. Interpretation of the Addendum
Titan first maintains that the district court incorrectly ruled
that the addendum was unambiguous and limited Pirelli’s
liability to tires made before December 14, 1994. Under
Illinois contract law, whether a contract is ambiguous is a
question of law subject to de novo review. See WH Smith
Hotel Servs., Inc. v. Wendy’s Int’l, Inc., 25 F.3d 422, 427 (7th
Cir. 1994); Berryman Transfer & Storage Co. v. New Prime, Inc.,
802 N.E.2d 1285, 1287 (Ill. App. Ct. 2004).
8 Nos. 03-3223, 03-3224 & 03-3225
2
The addendum entered into on December 14, 1994, states:
“It is further agreed that [with respect to] all tires . . . that
have been produced since Sept[ember] 1, 1994, provided they
were produced to [Pirelli] specification[s], and [past Pirelli]
practices[,] . . . Titan Tire is held harmless and indemnified
by [Pirelli] as [stated] above [in the letter agreement].”
Titan argues that the absence of an explicit end date in the
addendum renders the addendum ambiguous and that, as
a result, the case should be remanded to permit a jury to
consider its meaning. Titan hopes that a jury would find that
the addendum indemnified Titan beyond December 14,
1994, the date of the addendum. However, Titan ignores the
plain meaning of the terms: “all tires . . . that have been
produced” and “were produced.” Under Illinois law, “a court
must give meaning and effect to every part of the contract.”
Cress v. Recreation Servs., Inc., 795 N.E.2d 817, 852 (Ill. App.
Ct. 2003). Here, there is no reason to treat the terms “have
been produced” and “were produced” as meaningless sur-
plusage. See id. These terms clearly indicate that the addendum
addressed tires made in the past; in other words, tires
2
The addendum in question was handwritten on the bottom of
the one-paragraph letter agreement, dated November 22, 1994,
from Sherwood Willard, vice president and general counsel for
Pirelli, to Russell Ash, advisor to the chairman of Titan. The ad-
dendum was written and signed on December 14, 1994, by
Maurice Taylor, the president of Titan, who was not an attorney.
The actual text of the addendum, which was agreed to by
Willard, is as follows:
It is further agreed that all tires (LT235/85/R16) that have
been produced since Sept. 1, 1994, provided they were pro-
duced to P.A.T.C. [Pirelli Armstrong Tire Corporation] spe-
cifications, and pass [sic] P.A.T.C. Des Moines practices that
Titan Tire is held harmless and indemnified by P.A.T.C., as
above.
Nos. 03-3223, 03-3224 & 03-3225 9
manufactured before December 14, 1994, when the adden-
dum was signed. Thus, the addendum’s use of the past tense
literally confines Pirelli’s responsibilities to a finite period,
the time from September 1, 1994 to December 14, 1994.
Titan’s contention that the relevant period was completely
open-ended is an unreasonable expansion of the adden-
dum’s plain text. See Forest Glen Cmty. Homeowners Ass’n v.
Bishof, 746 N.E.2d 1285, 1289 (Ill. App. Ct. 2001). Therefore,
as the language employed in the addendum is susceptible
to only one reasonable interpretation, the addendum is not
ambiguous: Pirelli’s obligations under the letter agreement
are limited to tires produced before December 14, 1994. See
3
id.
Titan further complains that the district court ignored Titan’s
evidence of extrinsic ambiguity and, thereby, erroneously
precluded the jury from considering the addendum’s mean-
ing. Under the doctrine of extrinsic ambiguity, a party may
present evidence to show the existence of an ambiguity even
though the contract appears clear on its face because, in
certain situations, the real-world context shows that the
contract does not actually mean what it appears to mean.
3
We note that, contrary to Titan’s additional assertion, the dis-
trict court’s mention of the addendum’s “purpose” in its ruling
was not some tacit acknowledgment that the addendum was
ambiguous. (The district court observed that “Titan wanted cov-
erage for [the three-month] period during which it had followed
Pirelli’s defective procedures.” See Order, July 15, 2003, at 24.)
Rather, it was a simple explanation of the plain meaning of the
addendum as well as the context in which the addendum was
created—a context reasonably drawn from the contractual pro-
visions of the initial manufacturing agreement as modified by the
letter agreement and as further modified by the addendum. See
Unelko Corp. v. Prestone Prods. Corp., 116 F.3d 237, 239-40 (7th Cir.
1997). The district court did not err in this regard.
10 Nos. 03-3223, 03-3224 & 03-3225
See AM Int’l, Inc. v. Graphic Mgmt. Assocs., 44 F.3d 572, 574
(7th Cir. 1995). However, “the general rule in Illinois is that
only objective evidence supplied by disinterested third
parties may establish an extrinsic ambiguity in a contract.”
Ocean Atl. Dev. Corp. v. Aurora Christian Schs., Inc., 322 F.3d
983, 1003-04 (7th Cir. 2003); see also Home Ins. Co. v. Chicago
& N.W. Transp. Co., 56 F.3d 763, 768-69 (7th Cir. 1995); AM
Int’l, 44 F.3d at 574-75; but cf. Air Safety, Inc. v. Teachers Realty
4
Corp., 706 N.E.2d 882, 885 & n.1 (Ill. 1999). Subjective evi-
dence, on the other hand, is generally inadmissible. See AM
Int’l, 44 F.3d at 575-76. Subjective evidence is “the testimony
of the parties themselves as to what they believe the contract
means.”Id. at 575. In this case, Titan did not present evidence
from disinterested third parties. Rather, it only offered
subjective evidence: the deposition of its president, Maurice
Taylor—the very person who drafted the addendum. Accord-
ing to Taylor, the addendum was meant to provide Titan
with unlimited indemnity both retroactively and prospec-
tively. Such evidence from a party’s agent/employee/
executive is frequently self-serving and inherently difficult
to verify, which is exactly why such subjective evidence of
ambiguity is inadmissible and should be disregarded, as it
was in this case. See Mathews v. Sears Pension Plan, 144 F.3d
461, 467 (7th Cir. 1998); AM Int’l, 44 F.3d at 575.
4
In Air Safety, the Supreme Court of Illinois noted that, although
several appellate courts in Illinois have applied the doctrine of
extrinsic ambiguity, it has not had an opportunity to formally
adopt the doctrine. See 706 N.E.2d at 885 & n.1. We need not
predict whether the Supreme Court of Illinois will adopt this
principle, however, because we conclude that it is inapplicable in
this case. See generally Allstate Ins. Co. v. Menards, Inc., 285 F.3d
630, 635-37 (7th Cir. 2002).
Nos. 03-3223, 03-3224 & 03-3225 11
B. Jury Instruction/Elements of Pirelli’s Counterclaim
Titan next contends that the district court erred in refusing
to instruct the jury on an essential element of Pirelli’s
counterclaim against Titan, specifically, Pirelli’s burden of
proving that the tire at issue was produced after December
14, 1994. “We review jury instructions with deference,
analyzing them as a whole to determine if they accurately
state the law and do not confuse the jury.” Aliotta v. Nat’l
R.R. Passenger Corp., 315 F.3d 756, 759 (7th Cir. 2003); see also
Pearson v. DaimlerChrysler Corp., 813 N.E.2d 230, 237 (Ill.
App. Ct. 2004). Reversal is warranted when an instruction
misstates the law and this misstatement misled the jury
causing prejudice to one party. See Aliotta, 315 F.3d at 759;
Pearson, 813 N.E.2d at 237.
Under the district court’s interpretation of the addendum,
Pirelli had to prove three elements in order to prevail on its
counterclaim: first, the tire involved in the underlying acci-
dent was produced after December 14, 1994; second, the tire
was defective due to actions or inactions taken by Titan;
and, third, the defect was the proximate cause of the un-
derlying accident. The district court twice ruled that all
three, including the date issue, were issues for trial, and, on
the second occasion, the district court expressly held that
Pirelli’s evidence regarding the date issue failed to show
when the tire was made for summary judgment purposes
and that the date of production remained a question of fact
for trial.
At trial, Titan submitted a proposal to instruct the jury
that, in order for Pirelli to prevail, the jury had to find that
the tire at issue was produced after December 14, 1994. The
district court, however, rejected the proposed instruction
and refused to put the date issue to the jury. This on-the-
record refusal contradicted the district court’s prior summary
judgment rulings, and instead endorsed Pirelli’s contention
12 Nos. 03-3223, 03-3224 & 03-3225
that Pirelli did not have the burden of proving when the tire
was made. The district court’s refusal was not justified by
Titan’s concession in its own case that it was unable to meet
its burden of proving that the tire at issue was made before
December 14, 1994. Although Titan threw in the towel on its
own claim, it did not admit that the tire was made after
December 14, 1994. Titan only conceded that it could not
prove the tire was produced before December 14, 1994.
Pirelli’s counterclaim against Titan was a separate, inde-
pendent cause of action in which Pirelli had its own burdens
of proof to bear, including the burden to prove that the tire
in question was produced after December 14, 1994.
By rejecting Titan’s proposed instruction, the actual in-
struction given required Pirelli to prove only the second and
third elements discussed above. Nowhere in the instructions
did the district court reference the question of when the tire
was produced. Furthermore, because the district court’s jury
instruction ruling came in the middle of the trial, the date
issue was dropped from the case, and the jury did not have
an opportunity to consider evidence about when the tire
was made. By not having to prove that the tire was pro-
duced after December 14, 1994, Pirelli was relieved from
proving an essential element of its counterclaim. Thus, the
instruction given misstated the elements of Pirelli’s claim,
and this misstatement misled the jury into believing that the
date of production did not matter, thereby prejudicing
Titan; therefore, it was an abuse of discretion not to give
Titan’s proposed instruction to the jury. See Aliotta, 315 F.3d
at 759, 770; Pearson, 813 N.E.2d at 237. Consequently, this
case must be remanded for a new trial. On remand, Pirelli
will have the burden of proving that the tire in question was
produced after December 14, 1994, and the jury must be
instructed accordingly.
Nos. 03-3223, 03-3224 & 03-3225 13
C. Judicial Estoppel
Titan further argues that the district court committed an
error of law in its refusal to judicially estop Pirelli from
asserting that the tire at issue was defective when Pirelli had
taken the exact opposite position in the underlying litiga-
tion. “Judicial estoppel prevents a party that has taken one
position in litigating a particular set of facts” and prevailed
under that position “from later reversing its position when
it is to its advantage to do so.” Levinson v. United States, 969
F.2d 260, 264 (7th Cir. 1992). Although judicial estoppel is a
matter of discretion, see In re Cassidy, 892 F.2d 637, 642 (7th
Cir. 1990), errors of law require plenary review, see Maynard
v. Nygren, 332 F.3d 462, 467 (7th Cir. 2003); Chapman v. Maytag
Corp., 297 F.3d 682, 689 (7th Cir. 2002).
Titan twice requested that the district court judially estop
Pirelli from employing a reverse position on the defective-
ness issue. On both occasions, the district court denied
Titan’s request on the sole ground that, due to the settle-
ment of the underlying case, Pirelli never won a favorable
judicial ruling with its prior non-defect position. However,
as Pirelli concedes, the district court’s reasoning has been
rejected by this court. See Kale v. Obuchowski, 985 F.2d 360,
361-62 (7th Cir. 1993). In Kale, this court held that a favor-
able settlement, such as the one in this case which benefitted
5
Pirelli, may be sufficient to show that the party to be
estopped prevailed in the prior case regardless of whether
5
The settlement was a benefit to Pirelli in three important re-
spects. First, through the settlement, Pirelli was released from
all liability by the underlying plaintiffs. Second, the settlement
award was paid by Titan’s insurer; thus, the lawsuit was settled
through insurance coverage for which Pirelli did not pay premi-
ums. Finally, the settlement enabled Pirelli to avoid the possibility
that the underlying matter would be appealed.
14 Nos. 03-3223, 03-3224 & 03-3225
a judicial decision was obtained. See id. Thus, the district
6
court’s ruling was contrary to established case law.
Despite its erroneous rationale, however, the district court
reached the correct result, and we affirm that result. See
Payne v. Churchich, 161 F.3d 1030, 1038 (7th Cir. 1998) (“The
rule is settled that, if the decision below is correct, it must be
affirmed, although the lower court relied upon a wrong
ground or gave a wrong reason.” (internal quotation omit-
7
ted)). As judicial estoppel is an equitable concept, our law
in this area is flexible. While there are boundaries, there is
not a rigid set of rules to be enforced. See Ogden Martin Sys.
of Indianapolis, Inc. v. Whiting Corp., 179 F.3d 523, 526-27 (7th
Cir. 1999); Levinson, 969 F.2d at 264; Cassidy, 892 F.2d at 641-
42. One aspect of the inquiry is whether the party to be
estopped has taken clearly inconsistent positions. See Cassidy,
892 F.2d at 641. Obviously, it is inconsistent to first say that
a tire was not defective and later say that the same tire was
indeed defective. However, what is not clear in this case is
the extent to which Pirelli had actually taken (i.e., adopted
or endorsed) the non-defect position during the underlying
action. In support of its estoppel argument, Titan points to
only two ways in which Pirelli asserted that the tire was not
defective. One, after the plaintiffs had already dismissed
6
Additionally, although Titan did not explicitly raise this issue,
we note that the district court erroneously looked to Illinois law
to adjudicate the judicial estoppel question. Even though this is
a diversity action, federal judicial estoppel law controls. See
Ogden Martin Sys. of Indianapolis, Inc. v. Whiting Corp., 179 F.3d
523, 527 n.1 (7th Cir. 1999).
7
The judicial estoppel matter need not be remanded to the
district court for further consideration because this court has the
authority to render judicial estoppel determinations in the first
instance. See Cassidy, 892 F.2d at 641.
Nos. 03-3223, 03-3224 & 03-3225 15
Pirelli from the underlying action but while Titan’s cross-
claim was still pending, Pirelli obtained two expert reports
concluding that the tire was not defective. Two, in response
to Titan’s request for admissions, Pirelli stated that it had no
direct evidence that the tire was defective. This is not
enough to trigger the harsh consequences of judicial estoppel.
Having been dismissed from the original complaint, the
minimal degree to which Pirelli advanced the non-defect
position as a defendant in a cross-claim is insufficient to
establish that Pirelli firmly attached itself to that position for
judicial estoppel purposes. Moreover, Pirelli’s overriding
position has always been that, to the extent the tire was
defective, Titan was responsible for the defect. Therefore,
under the unique circumstances of this case, we cannot con-
clude that Pirelli should be judicially estopped from asserting
that the tire was defective. Pirelli’s reflexive responses do
not reach a level requiring drastic action. Consequently, on
remand, Pirelli may again argue that the tire was defective.
D. Discovery Violation
Lastly, Titan faults the district court for not sanctioning
Pirelli under Rule 37(c)(1) for Pirelli’s violation of Rule
26(a)(2)(A): failing to properly disclose the expert opinion of
Robert Ochs. Again, Ochs was the plaintiffs’ expert in the
underlying action in which Pirelli was a defendant. Yet, in
this case, Pirelli used his deposition to support its argu-
ments that the tire was defective and the defect caused the
accident. The district court excused Pirelli’s discovery vio-
lation because it determined that it was harmless. See Fed.
R. Civ. P 37(c)(1).
A district court enjoys broad discretion in declining to
impose discovery sanctions and exclude evidence, and its
“exercise of discretion on discovery matters will only be
16 Nos. 03-3223, 03-3224 & 03-3225
reversed upon a showing of a clear abuse of discretion.”
McCarthy v. Option One Mortgage Corp., 362 F.3d 1008, 1012
(7th Cir. 2004). The district court found that Pirelli’s viola-
tion was harmless for two reasons. First, Titan participated
in Ochs’s deposition during the underlying litigation and
thus knew the substance of his testimony. Second, Titan had
adequate notice of Pirelli’s intent to rely on Ochs’s opinion as
the result of Pirelli’s responses to Titan’s interrogatories in
this case. As these two reasons are entirely sound, we
conclude that the district court’s ruling was not an abuse of
discretion.
III.
Accordingly, we AFFIRM IN PART, REVERSE IN PART,
VACATE the district court’s judgment, and REMAND to the
district court for further proceedings consistent with this
opinion. The district court’s one error on the elements of
Pirelli’s indemnity counterclaim invalidates the results of the
trial in this case. On remand, given the unambiguous text of
the parties’ addendum, Pirelli will have the burden of
proving that the tire at issue was produced after December
14, 1994, and the jury must be so instructed. Further, on
remand, Pirelli may again argue that the tire was defective
and may use the Ochs opinion to support that argument.
Nos. 03-3223, 03-3224 & 03-3225 17
A true Copy:
Teste:
_____________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—11-2-04