UNITED PRECISION PRODUCTS CO., INC., Plaintiff/Counter-Defendant, v. AVCO CORPORATION,1 Defendant/Counter-Plaintiff Case No. 06-14883 United States District Court, E.D. Michigan, Southern Division Signed July 26, 2010 Counsel Jill A. Bankey, Siegel, Greenfield, Southfield, MI, John J. Gazzoli, Jr., Rosenblum, Goldenhersh, Silverstein & Zafft, P.C., St. Louis, MO, for Plaintiff/Counter-Defendant. Scott R. Torpey, William D. Adams, Jaffe, Raitt, Southfield, MI, for Defendant/Counter-Plaintiff. Hood, Denise Page, United States District Judge ORDER REGARDING MOTIONS IN LIMINE FILED BY PARTIES I. BACKGROUND *1 This matter is before the Court on three Motions in Limine filed by the parties. United Precision Products, Co., Inc. filed a Motion in Limine to exclude the testimony of Avco Corporation's ex pert witness, Bruce Knapp, regarding United Precision's damages. Avco filed two Motions in Limine. Avco seeks to exclude the testimony about “right sizing” by Avco and to exclude Robert Gezelter's opinion concerning Avco's document retention policy. Responses and replies have been filed and a hearing held on the matter. II. MOTIONS IN LIMINE A. General Standard Governing Rules of Evidence In federal diversity actions, state law governs substantive issues and federal law governs procedural issues. Legg v. Chopra, 286 F.3d 286, 289 (6th Cir. 2002). Rules of evidence are deemed rules of procedure. Id. The Federal Rules of Evidence, rather than state evidentiary laws, are held to apply in federal diversity proceedings. Id.; Barnes v. Owens-Corning Fiberglass Corp., 201 F.3d 815, 829 (6th Cir. 2000); Grossheim v. Freightliner Corp., 974 F.2d 745, 754 (6th Cir. 1992); Laney v. Celotex Corp., 901 F.2d 1319, 1320 (6th Cir. 1990). The federal rules themselves provide that they “apply generally to civil actions and proceedings.” Fed.R.Evid. 1101(b); Legg v. Chopra, 286 F.3d 286, 289 (6th Cir. 2002). B. United Precision's Motion in Limine to Exclude the Testimony of Bruce Knapp Regarding United Precision's Damages United Precision moves the Court to exclude the testimony of Avco's retained expert witness, Bruce Knapp, regarding United Precision's damages for failure to comply with the disclosure requirements of the Court's Scheduling Order and Federal Rules of Civil Procedure Rule 26(a)(2). On November 26, 2008, Avco disclosed Knapp as a retained expert witness with respect to “damages in relation to plaintiff's claims and Avco's Corporation's countersuit against plaintiff.” On August 11, 2009, Knapp submitted his expert witness report regarding his opinions on Avco's damages on Avco's Counterclaim. Knapp's report did not address his opinions regarding United Precision's damage claim on its Complaint. On November 24, 2009, United Precision deposed Knapp regarding Knapp's expert report and opinions as to damages related to Avco's Counterclaim. Avco's counsel instructed Knapp not to answer any questions regarding his opinions on United Precision's damage claim. Knapp did not answer questions about United Precision's damage claims on its Counterclaim. United Precision claims that Knapp should not testify at trial as to United Precision's damages claim related to United Precision's Complaint. United Precision asserts that Knapp never submitted a report related to the damages suffered by United Precision alleged in its Complaint. United Precision claims that Avco was on notice since Knapp's deposition in November 2009 that United Precision would seek to exclude any testimony by Knapp as to United Precision's damages on its Complaint since Knapp did not file an expert report on United Precision's damages and Knapp did not respond to any questions about United Precision's damages on its Complaint during Knapp's deposition, as instructed by Avco's counsel. *2 Avco responds that the instant motion is not actually a motion in limine but a motion to strike Knapp's expert opinion testimony for Avco's alleged discovery violations of Knapp's failure to submit an expert report on United Precision's damages and for Knapp's refusal to respond to any questions at his deposition about United Precision's damages on its Complaint. Avco claims it has not violated any discovery rules or any orders of the Court concerning discovery. Avco argues that the Court's scheduling order does not require a responsive expert report on United Precision's damages on its Complaint because United Precision never disclosed an affirmative expert on United Precision's damages, as required by the scheduling order. Avco claims United Precision knew since November 2008 that Avco retained Knapp to offer testimony on the subject of United Precision's affirmative relief damages. Avco argues that because United Precision never identified an affirmative expert on United Precision's damages on its Complaint, there was no requirement that Knapp prepare an expert report as to United Precision's damages or respond to any such related questions at his deposition since Knapp did not have an expert report to respond to. Fed.R.Civ.P. Rule 37(b) provides that if a party fails to obey an order regarding discovery, the court may make such orders as are just, including barring a party from presenting any evidence or witnesses at trial. Fed.R.Civ.P. 37(b)(2)(B). Rule 37(b) provides for sanctions as are just, including prohibiting a party from introducing matters in evidence, striking pleadings, or dismissal of an action, where that party has failed to comply with an order of a court regarding discovery and the failure to comply is attributable to a “willfulness, bad faith, or any fault” of the party. Fed.R.Civ.P. 37(b)(2)(A), (B), and (C); Intercept Security Corp. v. Code-Alarm, Inc., 169 F.R.D. 318, 321 (E.D. Mich. 1996), citing Societe Internationale Pour Participations Industrielles et Commerciales, S.A. v. Rogers, 357 U.S. 197, 212 (1958); Bass v. Jostens, Inc., 71 F.3d 237 (6th Cir. 1995). The sanctions set forth in Rule 37(b) are for violations of a court order requiring a party to respond to discovery requests. Rule 37(a) allows for a party to make a motion to compel the opposing party to respond to discovery requests. Fed. R. Civ. P. 37(a). If the motion to compel is granted, the court may impose sanctions, including attorney fees and costs. Fed. R. Civ. P. 37(a)(4). If a party fails to comply with a Court's order, then Rule 37(b)(2) comes into play and provides for the more severe sanctions such as striking out pleadings, prohibiting a party from introducing matters into evidence or entering a default judgment or dismissal against the party failing to obey any orders. Fed.R.Civ.P. 37(b)(2)(C). Dismissal or a judgment against a party is the sanction of last resort but a district court does not abuse its discretion in dismissing a case even though other sanctions might be workable, if dismissal is supported on the facts. Beil v. Lakewood Eng'r and Mfg. Co., 15 F.3d 546, 552 (6th Cir. 1994); Bell & Beckwith v. United States, 766 F.2d 910, 912 (6th Cir. 1985). The instant motion is essentially a motion for sanctions on a failure to abide by a discovery order under Rule 37(b)(2) and expert report requirements under Rule 26. United Precision did not seek a motion to compel prior to the instant motion in limine for Avco's failure to provide an expert report by Avco's expert on United Precision's damages. United Precision notes in its motion that Avco disclosed in November 2008 that Knapp was retained as an expert on both Avco's Counterclaim damages and United Precision's damages on its Complaint. Both parties agree that the Court's scheduling order set forth different dates for “affirmative” expert discovery and “responsive” expert discovery. Given that the parties, themselves, sought to handle expert discovery in this manner, the Court agreed to the schedule. In light of the language used in the scheduling order–“affirmative” expert and “responsive” expert—the Court finds that a party designated an “affirmative” expert regarding any of its claims or damages, a “responsive” expert was not required since there would be nothing to “respond” to by a “responsive” expert. Knapp, therefore, was not required to file a report on United Precision's damages since United Precision did not designate an “affirmative” expert on its damages. United Precision's Motion in Limine seeking to exclude Knapp's testimony on this basis is denied. *3 At the hearing on this motion, United Precision indicated that it did not disclose an expert as to its damages on its Complaint. United Precision indicated that its employees would be testifying on the damages issue and that its employees had already testified at their depositions as to the damages claim of United Precision. Avco indicated at the hearing that it had sufficient information from United Precision's employees and discovery on the damages issue to allow Knapp to testify as to United Precision's damages on its Complaint. Avco further indicated that Knapp would be able to submit an expert report on the issue and be available to be deposed prior to Knapp's testimony at trial. The Court will allow Knapp to testify at trial as to United Precision's damages on its Complaint after Knapp issues a report on United Precision's damages and is deposed, if United Precision wishes Knapp to be so deposed prior to Knapp's live testimony at trial. The parties are to meet and confer prior to the status conference on this matter regarding the schedule of Knapp's submission of a report and deposition. C. Avco's Motion in Limine to Exclude Testimony About “Right-Sizing” by Avco Avco seeks to exclude any testimony by United Precision's President Gary Winkler (or any other witness) that Avco's motive for allegedly breaching the terms of the parties' agreements and purchase orders for studs and valve seats was to “right-size” United Precision. Avco claims Winkler could not offer any real insight into what the term “right-size” means, yet repeated the term during his deposition. Avco claims that under Michigan law, a party's purported motive for terminating a contract is irrelevant, citing Kewin v. Massachusetts Mut. Life Ins. Co., 409 Mich. 401, 420 (1981). Even if Avco's motive to “right-size” is probative on the breach of contract issue, the testimony should still be excluded under Rule 403 of the Rules of Evidence, which states, “[a]lthough relevant, evidence may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury ...” Fed. R. Evid. 403. Avco claims that given today's economic climate, the testimony concerning “right-sizing” only serves to needlessly inflame the trier of fact so that the prejudicial nature of any testimony outweighs any probative value. Avco also claims the term “right-sizing” would be confusing to the jury since United Precision alleges that the phrase was employed by Avco and that United Precision cannot establish a definition of “right-size” as used by Avco. United Precision claims that it intends to introduce the “right-sizing” testimony by Winkler for the purpose of showing that Avco in the first place terminated the agreements for this reason, and not to show Avco's “motive.” Winkler testified that Avco's Jim Cahill specifically informed United Precision that Avco was terminating the studs purchase order in order to “right-size” United Precision. Although Avco's Ronald Clayton denied knowledge of this statement in his deposition, he testified that Avco's Doug Margraf may have made by the statement. United Precision argues that the testimony is relevant as to whether Avco breached the contract. In Kewin, in discussing whether exemplary damages should be applied in a commercial contract action, the Michigan Supreme Court stated, In the commercial contract situation, unlike the tort and marriage contract actions, the injury which arises upon a breach is a financial one, susceptible of accurate pecuniary estimation. The wrong suffered by the plaintiff is the same, whether the breaching party acts with a completely innocent motive or in bad faith. *4 Kewin, 409 Mich. at 420. In a breach of contract claim, a plaintiff must establish the following: 1) that the parties entered into a valid enforceable contract that included the terms and conditions claimed by plaintiff; 2) that the defendant breached the contract; and, 3) that the defendant's breach caused a loss to the plaintiff. Platsis v. E.F. Hutton & Co., 642 F.Supp. 1277 (W.D. Mich. 1986); Pittsburgh Tube Co. v. Tri-Bend, Inc., 185 Mich. App. 581 (1990). A bad faith failure to pay under a contractual obligation is insufficient to establish an independent tort action. Isagholain v. Transamerica Ins. Corp., 208 Mich. App. 9, 17 (1994). Based on Kewin, the Court finds that the issue of bad faith in a commercial contract action is irrelevant. United Precision's argument that the “right-sizing” comment made by Avco's employee is to be introduced on the issue of breach and liability as to Avco's “reason” in terminating the contract, as opposed to Avco's “motive” in breaching the contract. Courts have used the terms “reason” and “motive” interchangeably. In Michigan, courts have defined “reason” as “an explanation or justification of act, idea, etc.,” or “a cause or motive.” People v. Braxton, 2003 WL 21540384 *6 (July 8, 2003) (unpublished); see also, Hager v. Warren Consol. Schools, 2002 WL 44411 *9 n. 28 (Jan. 8, 2002)(unpublished)(“cause” means “the reason or motive for some action”) and People v. Hoffman, 225 Mich. App. 103, 105 (1997)(“Motive” is “cause or reason that moves the will and induces action.”). United Precision's argument is without merit. Avco's motion to exclude any reference by United Precision that Avco's reasons or motives in breaching the contract was based on “right-sizing” is granted. D. Motion in Limine by Avco to Exclude Robert Gezelter's Opinion Concerning Avco's Retention Policy Avco seeks to exclude the testimony of United Precision's computer forensic expert, Robert Gezelter—that Avco should have retained electronic data containing the email exchange—under Avco's corporate document retention policy and under a “litigation hold” requirement which would have prevented “normal purging of documents relating to the dispute.” Avco seeks exclusion of this opinion, from both Gezelter's expert report and his testimony. United Precision argues that Gezelter is qualified to render an expert opinion as to Avco's corporate document retention policy and his opinion is not an improper legal conclusion. United Precision claims Gezelter's opinion on Avco's document retention policy will assist the trier of fact based upon a “plain English” explanation of the policy. United Precision asserts that it properly disclosed Gezelter's opinion to Avco under Rule 26(a)(2) and properly relied on information obtained from Avco's own counsel regarding Avco's retention policy. United Precision also argues that Avco's motion is in fact a motion under Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993) which was required to be filed no later than January 6, 2010. United Precision retained Gezelter as an expert to analyze the metadata and e-mails to determine whether the February 22, 2002 e-mail was sent by Avco's Charles Bacher to United Precision's Winkler and whether the e-mail was altered in any fashion by Winkler. United Precision requested the Avco produce the hard copies and the electronic versions of the e-mails at issue. Avco's counsel notified United Precision's counsel that Avco did not retain the e-mails, either hard copies or electronic version, including metadata. Gezelter analyzed the metadata on the electronic copies of the e-mails retained by United Precision. Gezelter found a February 26, 2002 e-mail sent by Winker to Bacher purportedly responding to Bacher's e-mail sent on February 22, 2002 at 4:15 p.m. United Precision claims that the February 26, 2002 e-mail establishes that the February 22, 2002 e-mail sent by Bacher acknowledged that a spreadsheet provided additional clarification. United Precision asserts that the February 22, 2002 e-mail, in the version contained in Winkler's February 26, 2002 response e-mail, supports United Precision's claim that Avco accepted a dedicated inventory term under their contracts. *5 Avco's Bacher denies sending the February 22, 2002 e-mail in the version contained in Winkler's February 26, 2002 response e-mail which contained the spreadsheet language. Avco claims that the February 22, 2002 e-mail Bacher sent did not contain this language. Avco's version of the February 22, 2002 e-mail which was produced to United Precision did not contain this language. Bacher testified at his deposition that he did not add anything to the e-mail which was sent at the exact time as the February 22, 2002 e-mail shown in Winkler's February 26, 2002 response. Avco asserts that Winkler himself admitted it was possible the additional language could have been typed after Bacher sent it. Avco admits that after a thorough search of its records, Avco was unable to locate a hard copy of the February 22, 2002 e-mail with the language United Precision claims was in Winkler's February 26, 2002 e-mail. The Sixth Circuit has stated that “[t]he admissibility of expert testimony is a matter of federal, rather than state, procedure.” Brooks v. Am. Broad. Cos., 999 F.2d 167, 173 (6th Cir. 1993). Fed.R.Evid. 702 governs the admissibility of expert testimony. In Daubert, the United States Supreme Court set forth factors to be considered in determining whether to admit expert testimony involving scientific issues. The four factors are: 1) whether a theory or technique can be (and has been) tested; 2) whether the theory or technique has been subjected to peer review and publication; 3) the known or potential rate of error in using a particular and scientific technique and the existence and maintenance of standards controlling the technique's operation; and 4) whether the theory or technique has been generally accepted in the particular scientific field. Id. at 593-94. The factors are neither definitive, nor exhaustive, and may or may not be pertinent to the assessment in any particular case, such as issues involving non-scientific matters. Kuhmo Tire Co. v. Carmichael, 526 U.S. 137, 141 (1999). The factors will often be appropriate in determining reliability. Id. at 152. The trial court has broad latitude to determine whether these factors are reasonable measures of reliability in a particular case. Id. at 153. The trial court must determine whether an expert meets the requirements under Fed.R.Evid. 702: 1) that the witness establish his expertise by reference to knowledge, skill, experience, training or education; 2) the proffered testimony is reliable in that it is based on scientific, technical or other specialized knowledge (Daubert); and 3) the expert's testimony assists the trier of facts in understanding and disposing of the issues relevant to the case. Fed.R.Evid. 702. Although both parties argue that the proposed testimony by Gezelter regarding whether Avco violated Avco's retention document policy or that Avco violated a certain “litigation hold” law or doctrine is an expert testimony issue, the issue as to whether Avco properly retained or improperly destroyed the February 22, 2002 e-mail is a spoliation of evidence issue. “Spoliation is the destruction or significant alteration of evidence, or the failure to preserve property for another's use as evidence in pending or reasonably foreseeable litigation.” Forest Labs., Inc. v. Caraco Pharm. Labs., Ltd., 2009 WL 998402, at *1 (E.D. Mich. Apr. 14, 2009)(quoting West v. Goodyear Tire & Rubber Co., 167 F.3d 776, 779 (2d Cir. 1999)) Spoliation is “the intentional destruction of evidence that is presumed to be unfavorable to the party responsible for its destruction.” Beck v. Haik, 377 F.3d 624, 641 (6th Cir. 2004)(overruled on other grounds). The Sixth Circuit, in an en banc decision, joined its sister circuits in ruling that spoliation of evidence issue is governed by federal law and is evidentiary in nature. Adkins v. Wolever, 554 F.3d 650, 652 (6th Cir. 2009)(en banc). The district court has broad discretion in crafting a proper sanction for spoliation, including dismissing a case, granting summary judgment, or instructing a jury that it may infer a fact based on lost or destroyed evidence. Id. at 652-53. A proper sanction will serve the purpose of leveling the evidentiary playing field and sanctioning the improper conduct. Id. at 652 (quotation omitted). Any adverse inference from spoliation, while not entirely dependent on bad faith, is based on the spoliator's mental state. Joostberns v. United Parcel Serv., Inc., 166 Fed. Appx. 783, 797 (6th Cir. 2006)(citation omitted). The standards of conduct regarding the duty to preserve evidence have evolved in recent years. The Sixth Circuit has required a showing of bad faith to justify an adverse inference from spoliation of evidence. Tucker v. General Motors Corp., 1991 WL 193458, at *2 (6th Cir. Sept. 30, 1991)(unpublished)(A court may not allow an inference that a party destroyed evidence that is in its control, unless the party did so in bad faith.) “When a party is found to have deliberately destroyed evidence that is important to the opposing party's ability to present a claim or defend itself from a claim, the court has the discretion to impose sanctions on the spoliating party.” Chrysler Realty Co., LLC v. Design Forum Architects, Inc., 2009 WL 1872444 (6th Cir. Jun. 30, 2009)(unpublished). *6 The duty to preserve evidence arises when a party reasonably anticipates litigation at which time the party must suspend its routine document retention/destruction policy and put in place a “litigation hold” to ensure the preservation of relevant documents. Pension Comm. of the Univ. of Montreal Pension Plan v. Banc of Am. Sec., LLC, 685 F.Supp.2d 456, 466 (S.D. N.Y. 2010). The July 2004 decision in Zubulake v. UBS Warburg LLC, 229 F.R.D. 422 (S.D. N.Y. 2004) has been noted as an important date when discovery duty is established. Pension Comm., 685 F.Supp.2d at 471. In this case, United Precision has not sought sanctions of any alleged spoliation of any evidence by Avco, although it appears that any testimony to be presented by United Precision regarding Avco's document retention policy or the “litigation hold” duty would attempt to show that Avco failed to retain a copy of the February 22, 2002 e-mail version found in Winkler's February 26, 2002 response e-mail. However, United Precision has not shown, at this juncture, any bad faith by Avco in allegedly failing to retain a copy of the February 22, 2002 e-mail found in Winkler's February 26, 2002 response e-mail. Bacher, the alleged sender of the e-mail has denied sending such an e-mail. Winkler testified that it could be possible that the February 22, 2002 e-mail version found in his February 26, 2002 response e-mail could have been altered. As to Avco's document retention policy, United Precision claims that Avco's counsel represented that Avco did not retain the alleged missing e-mails. Avco's counsel's e-mail to United Precision's counsel actually does not speak to United Precision's “document retention policy.” Avco's counsel merely indicates that “no responsive electronic data can be located concerning the February 22 email” and “[t]he data is not there in any format that they have been able to locate, despite having searched.” (Resp. Br., Ex. 3) The issue of whether the February 22 e-mail is covered by the Avco's document retention policy may be the subject of a Rule 30(b)(6) witness testimony on direct or cross examination. Although Gezelter may have experience related to document retention policies, an expert is not required to assist the trier of fact in determining whether the February 22 e-mail is covered under Avco's document retention policy. Regarding a “litigation hold” claim by United Precision and any such related testimony by Gezelter, the Court will not allow such testimony because United Precision has not shown that in 2002, when the e-mail was purportedly sent by Bacher to Winkler, a duty existed to place a “litigation hold” on certain documents. The seminal decision issued by the New York federal district court, Zubulake, was not issued until 2004. In addition, there appears to be a question of fact as to whether or not the February 22, 2002 e-mail version found in Winkler's February 26, 2002 e-mail was in fact sent by Bacher or whether the e-mail was altered after Bacher sent the e-mail to Winkler. For the reasons set forth above, the Court will not allow Gezelter to express an opinion as to the February 22, 2002 e-mail and that such e-mail is covered under Avco's document retention policy or whether such e-mail should have been retained under a “litigation hold” duty. Testimony will be allowed by Gezelter, as an expert, as to how he discovered the February 22, 2002 e-mail in Winkler's computer. The Court will not issue any sanction at this time against any party on any claim of spoliation of evidence. III. CONCLUSION *7 For the reasons set forth above, IT IS ORDERED that United Precision's Motion in Limine to Exclude the Testimony of Bruce Knapp Regarding United Precision's Damages (Doc. No. 209, 6/23/2010) is DENIED. IT IS FURTHER ORDERED that Avco's Motion in Limine to Exclude Testimony About “Right-Sizing” (Doc. No. 210, 6/23/2010) is GRANTED. IT IS FURTHER ORDERED that Avco's Motion in LImine to Exclude Robert Gezelter's Opinion Concerning Avco's Document Retention policy (Doc. No. 215, 6/23/2010) is DENIED. Footnotes [1] On August 9, 2007, the parties entered into a Stipulated Order dismissing Plaintiff's claims against Defendant Textron, Inc.