The Inn By The Sea Homeowner's Association, Inc. v. SeaInn, LLC

IN THE SUPREME COURT OF MISSISSIPPI
NO. 2013-CA-02013-SCT
INN BY THE SEA HOMEOWNER’S
ASSOCIATION, INC.
v.
SEAINN, LLC, DRACE CONSTRUCTION CORP.,
CARUBBA ENGINEERING, SOUTHERN CROSS
CONSTRUCTION COMPANY, HARRY BAKER
SMITH ARCHITECTS II, PLLC AND GREG
STEWART
DATE OF JUDGMENT: 10/31/2013
TRIAL JUDGE: HON. JOHN C. GARGIULO
TRIAL COURT ATTORNEYS: DAVID C. GOFF
ADAM STONE
NICHOLAS VAN WISER
THOMAS L. CARPENTER
WILLIAM J. LITTLE, JR.
COURT FROM WHICH APPEALED: HARRISON COUNTY CIRCUIT COURT
ATTORNEYS FOR APPELLANT: ROSS DOUGLAS VAUGHN
JOSEPH L. McREYNOLDS
DAVID C. GOFF
ATTORNEYS FOR APPELLEES: NICHOLAS VAN WISER
KAYTIE MICHELLE PICKETT
ADAM STONE
THOMAS LYNN CARPENTER, JR.
VINCENT AUGUST NOLETTO, JR.
CARTER R. HALE
LEAH NICHOLS LEDFORD
WILLIAM J. LITTLE, JR.
NATURE OF THE CASE: CIVIL - CONTRACT
DISPOSITION: AFFIRMED - 07/30/2015
MOTION FOR REHEARING FILED:
MANDATE ISSUED:
BEFORE WALLER, C.J., CHANDLER AND KING, JJ.
CHANDLER, JUSTICE, FOR THE COURT:
¶1. This action was brought by Inn By the Sea Homeowner’s Association, Inc. (“IBTS”)
against various defendants involved in the development, design, and construction of Inn By
the Sea Condominiums in Pass Christian when the condominiums were rebuilt after they
were destroyed by Hurricane Katrina. Within a year of reconstruction, significant problems
with the building began to manifest, problems allegedly related to defects in the design and
construction of the property. The trial court granted summary judgment to the defendants
after excluding the damages testimony of IBTS’s expert witnesses. We find that the trial
court did not abuse its discretion in excluding the plaintiff’s witnesses, and therefore affirm
the grant of summary judgment.
FACTS AND PROCEEDINGS BELOW
¶2. According to IBTS, the appellant-plaintiffs, Inn By the Sea Condominiums began
showing signs of significant structural defects within a year of the issuance of the Certificate
of Occupancy in 2009. ITBS sued the developer, various contractors, the structural engineer,
the architect, and ten John Does as “unknown persons that provided material services, acted
in a supervisory capacity, or were otherwise involved in the construction of the
Condominiums.”1 The parties entered into an Agreed Scheduling Order on March 3, 2012,
with a trial date set for December 3, 2012. IBTS hired Michael Bailey of Kyle Associates,
LLC, as its expert structural engineer and Alfred Hayes of Hayes Architect as its expert
1
Prior to filing suit, IBTS sent notice of the defects and a request for timely repairs
to the developer and general contractor pursuant to the requirements of Mississippi’s New
Home Warranty Act. See Miss. Code Ann. §§ 83-58-1 to 83-58-17 (Rev. 2011).
2
architect to investigate and identify defects in the design and construction of the property.
IBTS timely designated these experts on June 16, 2012, and produced a copy of the
witnesses’ reports and cost estimates. Bailey estimated costs to correct engineering design
defects to be $1,830,000. Hayes identified twenty-three design and construction defects
which he estimated would cost $1,322,000 to repair. He subsequently updated his report in
August 2012 and revised his repair estimate to $2,689,000 for the twenty-three identified
defects. His report contained a description of each defect and a rounded, ballpark cost
estimate to repair each defect. For example, Item Two states:
2. Condenser Equipment is installed on wood sleepers with pieces of
roofing used as straps. This is not complying with code wind loading.
Equipment should be installed on structural curbs flashed into the roof
or rated equipment racks with pipe legs that can be flashed into roofing
system. Design/Negotiation and Construction Observation Fee
$3,000.00. Construction Cost $100,000. E&O Item 1 and 5.
(Emphasis added.) The description of each defect ended similarly with a cursory rounded
statement of the construction cost.
¶3. In late August 2012, IBTS learned that Michael Bailey had suddenly left his job,
moved out town, and could not be located or further made available as an expert on this case.
At a hearing on September 12, 2012, the trial court orally continued the case without a new
trial date in order for IBTS to find a new engineering expert. IBTS hired Ashton Avegno, a
retired principal of Kyle Associates and a structural engineer with more than forty years of
experience to replace Bailey. Avegno provided his report on November 2, 2012. In addition
to largely agreeing with Bailey’s original report, Avegno also expressed concern that the
foundation pilings “as designed” were overloaded by as much as “2.82 times its safe capacity
3
and the as built piling would be loaded 2.16 times its capacity.” He recommended that a “pile
load test . . . be done at the site using the same size and length pile as the existing.”
¶4. Avegno was unwilling, however, to provided exact itemized cost estimates for the
items of engineering defects he identified. He estimated a total repair budget for all items
between “$1,660,000 and $4,020,000.” He openly stated that the “costs provided here are my
best estimates” but that he was “not a qualified estimator or contractor and therefore cannot
be liable for the accuracy of these numbers. If more accurate numbers are needed then a
licensed contractor or cost estimator should be engaged to provide them.”
¶5. Also on November 2, 2012, IBTS filed a Motion for Trial Setting and Scheduling
Order, proposing a trial date of April 15, 2013, with deadlines for the plaintiff’s experts to
be designated by November 8, 2012, and the defendant’s experts to be designated by
December 7, 2012. IBTS informed the court that IBTS had been unable to depose any of the
defendants’ witnesses, including any of the defendants, and that the new scheduling order
should be issued to allow IBTS to conduct depositions and to seasonably supplement its
expert reports. The defendants objected to the proposed new scheduling order, arguing that
the deadline for expert designations had passed and that Avegno should not be allowed to
offer any new opinions, including his opinion that the foundation piles were overloaded.2
¶6. The court heard IBTS’s motion for a new scheduling order on December 21, 2012.
It granted IBTS’s motion to depose the defendants but limited IBTS’s right to supplement
2
IBTS also filed a Mississippi Rule of Civil Procedure 9(h) motion on December 5,
2012 to substitute two of the “John Does” with Nosidam of Mississippi, Inc., and Greg
Steward d/b/a Madison Homes. The court denied this motion.
4
its expert reports based only information learned in the depositions and excluding new
information learned from the test piles recommended by Avegno. The court reset trial for
August 12, 2013, and established new deadlines for completion of discovery by April 12,
2013, with dispositive or Daubert3 motions to be filed by May 13, 2013.
¶7. IBTS filed a motion for clarification or reconsideration on January 11, 2013, arguing
that the defendants would not be prejudiced by a more extensive expert supplementation
given the new trial date, new discovery deadlines, and the fact that the defendants had been
on notice of potential structural defects in the foundation piles since November 2, 2012. The
court denied IBTS’s motion for reconsideration (among other motions) after a hearing on
March 14, 2013. IBTS had supplemented its motion for reconsideration, pointing out that,
in the February 2012 deposition of defendant Carubba Engineering, Carubba had
acknowledged that it had not used any pile load tests or geotechnical reports to verify load
capacity or soil conditions at the construction site. Rather, despite having written on three
separate occasions to the project architect that a pile load test was needed, he ultimately used
a safe allowable load for his calculations “from my experience as a design engineer in these
types of soils.” IBTS argued that, since the court’s previous order permitted supplementation
of the expert report with evidence obtained from the depositions, opinions on the piles and
the results of the pile tests should appropriately be allowed.4
3
Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 113 S. Ct. 2786, 125 L. Ed 2d
469 (1993)
4
While acknowledging that the court had ruled not to allow the formal
supplementation of expert testimony with opinions on the piles, IBTS circulated a copy of
Avegno’s April 9, 2013, supplemental report, based on the results of the test piles, which
5
¶8. The court held a hearing on July 30, 2013, to hear eighteen separate in limine motions,
including Daubert and dispositive motions. Included were defense motions to exclude the
expert testimony of Hayes and Avegno under Mississippi Rule of Evidence 702. The
defendants asserted that Hayes had failed to offer detailed support or explanation for his
opinion on construction repair costs, and that Avegno was, by his own admission, not
qualified to provide any opinion on costs. IBTS argued that the court should defer ruling on
the reliability of the experts’ costs estimates until trial, when it would have the benefit of
their testimony.
¶9. The court granted the motion to exclude Avegno from testifying as to monetary
damages, finding that he was not qualified by his own admission and that he had declined to
permit supplementation of his report to provide the basis for his cost estimates.
¶10. However, the Court denied the motion to exclude Hayes’s damages testimony, and at
the request of the defense continued trial and ordered Hayes to supplement his report. The
court denied both parties’ motions for summary judgment at that time. The order stated in
relevant part:
Furthermore, this Court holds that the Inn is granted two weeks from the date
of this hearing, which is August 13, 2013, in which to provide Alfred
Hayes’[s] summary of the grounds for each opinion relating to cost. This Court
will then take up any motions pertaining to that supplementation if any such
motions are needed.
This Court further continues this case from its August 12, 2013 setting, to a
time convenient for this Court and the parties.
confirmed that the foundation piles were indeed overloaded. He opined that as many as 110
additional piles would be needed to stabilize the foundation, at a cost ranging between
$500,000 and $800,000.
6
¶11. In response to the trial court’s order for supplementation, Hayes added a ten-paragraph
affidavit with exhibits to his report. He identified the RS Means Construction Cost Data as
the basis for his cost estimates. He asserted that RS Means is “the most used and respected
guide available to the construction industry” and that the RS Means “method of estimating
is widely accepted as one of the most accurate forms of pricing available.”
¶12. Hayes attached an Exhibit B demonstrating a “step by step analysis” of how he used
RS Means to estimate the cost as applies to the roof replacement item, which was the third
of the twenty-three items identified as structural design defects in his report. He further
asserted that each “of the enumerated items in my report [is] contained within [M]eans and
[was] researched for Inn By the Sea.” Hayes used a 2008 version of RS Means to select the
data used to calculate the repair estimate.
¶13. The defendants moved to strike Hayes’s supplementation and renewed their motion
for summary judgment. The court granted the defendants’ motion to exclude Alfred Hayes’s
damages testimony as well as the defendant’s motion for summary judgment and final
judgment on October 31, 2013. The order stated in part:
Plaintiff filed his supplementation at 11:07 PM, on August 13, 2013, the last
day of the two week period. The supplementation included calculations on
only one of the 24 cost items . . .
Thus, the Court finds that the Defendants are in no better position than they
were on August 12, 2013. The substance and details supporting the damage
estimates should have been disclosed, and this Court ordered them disclosed.
This disclosure ordered by this Court extended to all calculations and
methodology used to reach estimates for all 24 cost items, but were only
provided for Cost Item No. 3. This Court finds that as to Number 3, which
calculations were derived from an obsolete manual, the 2008 edition of RS
Means, is unreliable.
7
. . . This Court grants the Defendants’ motion to exclude the testimony of Fred
Hayes as to his damages calculations. This Court notes that as a result, there
are no damages estimates left for the Plaintiff to present as evidence in this
trial. Accordingly, summary judgment is granted as to all defendants in this
cause of action.
¶14. Below is a timeline summary of the major pretrial events in this litigation:
March 2012 Original Agreed Scheduling Order entered with trial date
of Dec 3, 2012.
June 2012 IBTS’s timely initial disclosure of experts and expert
reports.
August 2012 IBTS’s structural expert Bailey disappears; trial
continued without date.
November 2012 Avegno designated as replacement for Bailey,
recommends test piles; IBTS proposes new scheduling
order and trial date.
December 5, 2012 IBTS files motion to substitute two new parties under
M.R.C.P. 9(h)
December 21, 2012 Hearing held in which court grants IBTS’s motion to
depose defendants but limits expert supplementation to
new information gained in depositions; excludes any
future test pile results or testimony. Trial set for August
12, 2013
March 14, 2013 Court hears and denies IBTS’s motion to reconsider
limitation of expert supplementation of pending test pile
results considering Carubba’s deposition testimony
regarding foundation piles.
April 9, 2013 IBTS circulates proposed supplementation of Avegno’s
expert report including the results of the test pile
indicating that piles are overloaded and as many as 110
additional piles would be needed to stabilize the
foundation, at a cost ranging between $500,000 and
$800,000.
8
July 30, 2013 Trial continued without new trial date at request of
defendants to require supplementation of Hayes’s expert
report by August 13, 2013, “to provide Alfred Hayes’s
summary of the grounds for each opinion relating to
cost.” Avegno excluded from testifying as to cost
damages due to his statement in his initial report that he
was not a qualified cost estimator.
August 13, 2013 Hayes supplements report with ten-paragraph affidavit
and Exhibit B with itemized calculations for Item 3 roof
repairs. (Exhibit A describes the 2008 RS Means
Construction Costs Data. The parties agree that RS
Means is generally reliable; the defendants object to the
use of the 2008 version as outdated).
October 31, 2013 Court excludes Hayes’s testimony on damages as
unreliable and grants summary judgment to the
defendants due to lack of proof of damages.
Inn By the Sea timely appealed. Because we find the question of whether IBTS’s experts
were properly excluded dispositive, we do not address the other issues raised by IBTS on
appeal.
DISCUSSION
¶15. This Court reviews grants of summary judgment de novo. Smith ex rel. Smith v.
Gilmore Mem’l Hosp., Inc., 952 So. 2d 177, 181 (Miss. 2007). The evidence will be
reviewed in the light most favorable to the party opposing summary judgment. Bowie v.
Montfort Jones Mem’l Hosp., 861 So. 2d 1037, 1041 (Miss. 2003). Rulings regarding the
admissibility of expert testimony are reviewed for abuse of discretion. Miss. Transp.
Comm’n v. McLemore, 863 So. 2d 31, 40 (Miss. 2003).
WHETHER THE TRIAL COURT ABUSED ITS DISCRETION IN
EXCLUDING THE EXPERT DAMAGES TESTIMONY OF ALFRED
HAYES AND ASHTON AVEGNO.
9
¶16. IBTS argues that the trial court abused its discretion in excluding Hayes’s expert
testimony regarding cost damages. Hayes’s qualifications and the relevance of his testimony
are not in question. Rather, the defendants successfully challenged the reliability of Hayes’s
method and his failure to disclose the basis of the majority of his cost opinions. Mississippi
Rule of Evidence 702 provides that:
If scientific, technical, or other specialized knowledge will assist the trier of
fact to understand the evidence or to determine a fact in issue, a witness
qualified as an expert by knowledge, skill, experience, training, or education,
may testify thereto in the form of an opinion or otherwise, if (1) the testimony
is based upon sufficient facts or data, (2) the testimony is the product of
reliable principles and methods, and (3) the witness has applied the principles
and methods reliably to the facts of the case.
Under Mississippi Rule of Civil Procedure 26(b)(4)(A)(I),
A party may through interrogatories require any other party to identify each
person whom the other party expects to call as an expert witness at trial, to
state the subject matter on which the expert is expected to testify, and to state
the substance of the facts and opinions to which the expert is expected to
testify and a summary of the grounds for each opinion.
¶17. The reliability of expert testimony is analyzed under the nonexhaustive factors
adopted from Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S. Ct. 2786,
125 L. Ed 2d 469 (1993), which include:
(1) whether the expert’s theory can be or has been tested;
(2) whether the theory has been subjected to peer review and publication;
(3) the known or potential rate of error of a technique or theory when applied;
(4) the existence and maintenance of standards and control; and
(5) the degree to which the technique or theory has been generally accepted in
the scientific community.
10
Miss. Transport. Comm’n v. McLemore, 863 So. 2d at 37 (Miss. 2003). The Daubert test
is not meant to be so tightly applied that it replaces traditional methods for challenging
“shaky, but admissible” expert testimony, through “[v]igorous cross examination,
presentations of contrary evidence, and careful instruction on the burden of proof.” Id. at 37.
“The threshold for admissibility is not great, keeping in mind the fact that Mississippi Rule
[of Evidence] 401 favors the admission of evidence when it has probative value.” Utz v.
Running & Rolling Trucking, Inc., 32 So. 3d 450, 457 (Miss. 2010).
¶18. Seasonable supplementation of expert testimony is required under the guidelines of
Mississippi Rule of Civil Procedure 26(f). The function of the supplementation requirement
is to fairly inform the opposing party of the evidence against it with an opportunity to meet
it and to avoid “trial by ambush.” Hyundai Motor Am. v. Applewhite, 53 So. 3d 749, 758
(Miss. 2011). Defendants are entitled to supplementation on “the identity of each person
expected to be called as an expert witness at trial, the subject matter on which the person is
expected to testify, and the substance of the testimony . . . . A duty to supplement responses
may be imposed by order of the court, agreement of the parties, or at any time prior to trial
through new requests for supplementation of prior responses.” M.R.C.P. 26(f)(1) & (3).
¶19. Multiple reliable methods of calculating construction damages are available to experts
depending on the nature of the cause of action and best evidence available of the underlying
facts and data. See Schwartzkopf & McNamara, General Methods of Damage Calculation,
Calc. Constr. Dmgs. § 1.03 (2014). What matters on a case-by-case basis is adherence to the
principles of Mississippi Rule of Evidence 702 and Mississippi Rule of Civil Procedure 26,
11
and, in particular, adherence to the requirement that experts disclose the basis of their
opinions with sufficient specificity to allow defendants to prepare a defense and avoid trial
by ambush. Cost estimates do not have to be presented with mathmatical certainty; rather,
sufficient evidence should be presented so that the trier of fact can determine damages within
a reasonable certainty.
¶20. In Sumrall Church of Lord Jesus Christ v. Johnson, 757 So. 2d 311 (Miss. Ct. App.
2000), our Court of Appeals found the appropriate measure of damages was the actual repair
cost that already had been incurred by the plaintiff in fixing the deficiencies of the electrical
contractor. We affirmed the reliability of repair-cost estimates in Hoover v. United Services
Auto. Association, 125 So. 3d 636 (Miss. 2013), where a qualified expert “used a cost-plus
estimate based on known values to arrive at his calculations. He assessed that it would cost
$40 per square foot to replace the roof, and multiplied this by the total square footage of the
house.” Id. at 645.
¶21. Of particular significance is our unanimous decision in the products liability case
Hyundai Motor America v. Applewhite, 53 So. 3d 749, 758 (Miss. 2011), in which we
affirmed a defendant’s right to not be ambushed at trial with previously undisclosed
calculations forming the basis for the plaintiff’s expert opinions, even when the new
disclosure did not alter the original expert conclusions. In Hyundai, we found reversible
error in the plaintiff’s failure to disclose (via formal supplementation) changes in the velocity
calculations its experts used to form opinions on a car-crash impact. Even though the expert’s
ultimate conclusions remained the same, we found that the defendants had been ambushed
12
in preparation of their defense, which relied on the initial velocity disclosures as the basis for
preparing the defense.
¶22. Generally speaking, the annually published RS Means Construction Cost manual is
a reliable industry source of data and has been used with approval in cases involving expert
testimony on damages. See Traco Steel Erectors, Inc. v. Comtrol, Inc., 222 P.3d 1164 (Utah
2009); Hale v. Big H Constr., Inc., 288 P.3d 1046 (Utah Ct. App. 2012). But merely
disclosing that a five-year-old RS Means manual is the general basis for the conclusory
estimates on twenty-two of twenty-three items of alleged structural damages amounting to
several million dollars does not provide a sufficient disclosure of data for a trier of fact to
determine that the estimates have been calculated with reasonable accuracy or for a defendant
to meet the evidence.5 As it is, the testimony is unreliable because it fails to disclose the basis
of the expert opinion.
¶23. We reiterate that the timing and outcome of Daubert considerations are squarely
within the discretion of the trial court. See Kumho Tire Co. v. Carmichael, 526 U.S. 137,
152, 119 S. Ct. 1167, 143 L. Ed. 2d 238 (1999); Edmonds v. State, 955 So. 2d 787, 792
(Miss. 2007). Pretrial obfuscation of the basis for expert opinions, especially when the court
has ordered further disclosure, is a game of chicken that parties should not play in light of
how our evidentiary standards have evolved to preclude trial by ambush. We note that the
court excluded Hayes’s testimony only after continuing trial to give him the (mandatory)
5
We note that portions of the calculations provided for Item Three do include some
aspects of calculation that could be extrapolated to the other items and create fodder for
cross-examination and opposing expert testimony, such as sales tax and permitting costs.
13
opportunity to supplement his expert report with a specific basis for each of his opinions
relating to cost.
¶24. After carefully examining the transcript of the hearing and the court’s written order
for supplementation, we agree with the trial court and the defendants that production of the
basis for only one itemized opinion out of twenty-three was not in compliance with the
degree of specificity reasonably ordered by the trial court. “The failure seasonably to
supplement or amend a response is a discovery violation that may warrant sanctions,
including the exclusion of evidence.” Hyundai Motor Am. v. Applewhite, 53 So. 3d at 758;
Ekornes-Duncan v. Rankin Med. Cir., 808 So. 2d 955, 958 (Miss. 2002). We find that the
trial court did not abuse its discretion in excluding Hayes’s testimony, particularly in light
of the fact that the trial court continued the trial and granted additional time for
supplementation.
¶25. IBTS argues that the trial court also abused its discretion in finding that Avegno was
unqualified to provide expert testimony relating to damages, and in refusing to permit
supplementation of Avegno’s opinions relating to costs. IBTS argues that Avegno’s
statements in his initial report should be taken in the context of his replacement of Bailey,
that his experience and qualifications outlined in his curriculum vitae (which is part of the
record) counter his initial cautious declamation of his qualifications to provide cost estimates,
and that the trial court abused its discretion in failing to permit Avegno to supplement his
initial report with specific basis for his cost estimates.
14
¶26. An expert is qualified “only if the witness possesses scientific, technical, or
specialized knowledge on [the] particular topic” of his opinion. Bailey Lumber & Supply Co.
v. Robinson, 98 So. 3d 986, 992 (Miss. 2012) (quoting Worthy v. McNair, 37 So. 3d 609,
616 (Miss. 2010)). We agree with IBTS that “a witness need not be a specialist in any
particular profession to testify as an expert. The scope of the witness’s knowledge and
experience, and not any artificial classification, governs the question of admissibility.” R.
McNight & Son v. C. & I Entm’t, 100 So. 3d 1022 (Miss. Ct. App. 2012) (quoting Univ. of
Miss. Med. Ctr. v. Pounders, 970 So. 2d 141, 146 (Miss. 2007). But Avegno explicitly stated
in his expert report that the range of between “$1,660,000 and $4,020,000” was merely his
general estimate and that establishing sufficiently specific estimates would require bringing
in someone more qualified.
¶27. We cannot ignore Avegno’s statements and rely on the general assertion that
Avegno’s background and experience do indeed indicate his qualifications to provide cost
estimates if only given an opportunity to supplement. We find that the trial court did not
abuse its discretion in granting the defendants’ Daubert motion to exclude Avegno as
unqualified to provide expert opinions relating to cost.6
CONCLUSION
6
IBTS has presented a much stronger argument that the trial court abused its
discretion in refusing to permit the seasonable supplementation of Avegno’s expert report
regarding deficiencies of the foundation piles of the condominiums. However, we do not
address this argument, given our affirmation of summary judgment due to lack of admissible
evidence of damages.
15
¶28. We affirm the trial court’s grant of summary judgment on the grounds that the
plaintiff failed to present admissible expert opinions on damages. Hayes’s cost damages
opinions lacked sufficient disclosure of the method and calculations that formed the basis of
his report. Avegno was, by his own admission, not qualified to provide cost estimates relating
to his other opinions on structural defects. Because we affirm summary judgment on these
grounds, we do not find it necessary to address the other issues raised on appeal.
¶29. AFFIRMED.
WALLER, C.J., DICKINSON AND RANDOLPH, P.JJ., LAMAR, KITCHENS,
PIERCE, KING AND COLEMAN, JJ., CONCUR.
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