United States District Court, D. Hawaii
AFFIRMING “ORDER GRANTING STATE OF HAWAII'S MOTION
TO STRIKE AND EXCLUDE: (1) PLAINTIFF'S SUPPLEMENTAL
EXPERT DISCLOSURE OF DAVID J. BURGER, CPA, SERVED ON JUNE 27,
2016 [DCK. 259]; AND (2) PLAINTIFF'S SECOND SUPPLEMENTAL
EXPERT DISCLOSURE, FILED ON AUGUST 1, 2017 [DCK. 267]”;
ORDER DENYING MOTION TO AMEND FOURTH AMENDED RULE 16
SCHEDULING ORDER [DKT. 170] FILED 5/5/16
Oki Mollway United States District Judge.
only claims remaining for adjudication, Plaintiff Bridge Aina
Le`a, LLC (“Bridge Aina”), asserts temporary
takings arising out of the reclassification of land in
violation of the Fifth Amendment of the United States
Constitution and Article I, section 20 of the Hawaii
constitution. Before this court are (1) Bridge Aina's
appeal from a magistrate judge's order striking and
excluding two supplemental expert reports of David J. Burger,
and (2) Bridge Aina's Motion to Amend the Fourth Amended
Rule 16 Scheduling Order to extend the deadline for it to
submit those same supplemental reports. The court affirms the
magistrate judge's thorough and well-reasoned order
striking and excluding the two Burger supplemental reports
and denies the motion to amend the scheduling order to allow
factual background of this case has been discussed in the
court's previous orders and is incorporated by reference.
See, e.g., ECF Nos. 131 and 283. In essence, this
case arises out of a decision by Defendant State of Hawaii
Land Use Commission (the “LUC”) to reclassify a
parcel of land from urban use to agricultural use. The LUC
had conditioned the reclassification on the condition that
sixty percent of the homes built would be
“affordable” units. Id. When the LUC
believed that Bridge Aina had failed to abide by the
conditions, the LUC issued an order to show cause as to why
the land should not revert back to an agricultural
classification. Bridge Aina claims that Defendants caused a
temporary taking under the federal and Hawaii constitutions
for the period the property was subsequently reclassified to
Third Amended Rule 16 Scheduling Order set April 1, 2016, as
the discovery deadline. See ECF No. 92, PageID #
Third Amended Rule 16 Scheduling Order required Bridge Aina
to disclose the identity and written report of any expert no
later than November 20, 2015. See Id. Bridge Aina
timely served the expert report of David J. Burger, CPA, on
the November 30, 2015, deadline for expert disclosures.
See Certificate of Service, ECF No. 100; Decl. of
John D. Ferry III ¶ 3, ECF No. 284-2, PageID # 6199
(indicating date of service).
a certified public accountant, opined in his three-page
report as to the rate of return that Bridge Aina would have
earned had it been able to reinvest the proceeds from the
sale of the property for the duration of the temporary
taking, which Bridge Aina claimed ran from April 30, 2009 to
November 25, 2014. See ECF No. 284-3. After
discussing his resume and hourly rate, Burger opined as to
the rate of return applicable, “focus[ing] on the rate
of return on invested capital demonstrated by Bridge Capital,
LLC, the parent company of Bridge Aina Lea, LLC” and
“its majority owned subsidiaries.” Id.,
PageID # 6302. Burger's analysis reads in its entirety:
analysis, the two definitions of return on invested capital
that we used are as follows:
• Net operating profit minus taxes, divided by invested
• Net operating profit minus taxes, divided by total
assets minus excess cash and non-interest bearing current
analysis, the two definitions of invested capital that we
used are as follows:
• Total equity plus total interest bearing debt
• Total assets minus excess cash minus non-interest
bearing current liabilities.
With the two different definitions of return on invested
capital, we have calculated the average return on invested
capital for the years ended December 31, 2009 to 2014 as
ROIC Formula #1
Net operating profit minus taxes, divided by invested capital
Net operating profit minus taxes, divided by invested capital
ROIC Formula #2
Net operating profit minus taxes, divided by total assets
minus excess cash and non-interest bearing current
Given that the second and third formulas above produce nearly
identical results, and are based on audited financial
statements, we feel it is both reasonable and realistic to
use these formulas to derive the return on invested capital.
Accordingly, it is our opinion that the return on invested
capital for Bridge Capital, LLC and its subsidiaries for the
years ended December 31, 2009 to 2014 is 10.12%.
Id., PageID # 6302-03.
March 2, 2016, Defendants moved to exclude Burger's
expert report, as well as the expert report of Steven D.
Chee. See ECF No. 134.
April 19, 2016, the audited financial data was produced by
Bridge Aina to Defendants. See ECF No. 286-3
(“Attached please see Bridge Capital, LLC's audited
financial statements, relied upon by Dave Burger in his
expert report. . . .”). This production of financial
data occurred after the court ordered discovery deadline had
passed on April 1, 2016.
5, 2016, the court issued a Fourth Amended Rule 16 Scheduling
Order, setting trial in this matter for June 15, 2016.
See ECF No. 170, PageID # 3837. The order did not
change the expert disclosure deadline of November 20, 2015,
which had already passed. See id., PageID # 3838;
ECF No. 92. Nor did it change the discovery deadline of April
1, 2016, which had also passed. See id.
11, 2016, the court issued its usual prehearing Inclinations
with respect to the motion to exclude expert reports.
See ECF No. 172. The court stated:
The court is inclined to rule that the Burger Report should
be excluded because (1) Bridge Aina failed to comply with
Rule 26(a)(2)(B) of the Federal Rules of Civil Procedure; and
(2) the opinions expressed in the Burger Report are not
sufficiently reliable under Rule 702 of the Federal Rules of
Evidence and Daubert v. Merrell Dow Pharmaceuticals,
Inc., 509 U.S. 579 (1993).
Under Rule 26(a)(2)(B) of the Federal Rules of Civil
Procedure, an expert report must contain, among other things,
“a complete statement of all opinions the witness will
express and the basis and reasons for them”; “the
facts or data considered by the witness in forming
them”; and “any exhibits that will be used to
summarize or support them.” Fed.R.Civ.P. 26(a)(2)(B).
Id., PageID # 3883. The inclinations noted that
Burger failed to provide any of the documents underlying his
opinions or the calculations forming the basis for his
conclusion that the rate of return should be 10.12%.
Id., PageID # 3884. The inclinations stated that,
under Rule 37(c)(1) of the Federal Rules of Civil Procedure,
a party who fails to provide information required by Rule
26(a) “is not allowed to use that information or expert
witness at trial, ‘unless the failure was substantially
justified or is harmless.'” Id. The court
stated that it was “inclined to rule that Bridge Aina
has not shown that its failure to comply with Rule
26(a)(2)(B) was either harmless or substantially
justified.” Id. The court also stated that it
was inclined to rule that Burger's opinions were not
reliable for purposes of Rule 702 of the Federal Rules of
19, 2016, the court held a hearing on the motion to exclude
expert reports and took the motion under advisement.
See ECF Nos. 207, 209.
this court could rule on the motion to exclude the Burger
report, Bridge Aina sought to disqualify this judge.
See ECF No. 238. The court therefore refrained from
ruling while another judge decided to motion to disqualify.
See ECF No. 258. In light of the motion to
disqualify, the court continued the trial date to July 27,
2016. See ECF No. 251. On June 9, 2016, the trial
date was continued to August 1, 2016. See ECF No.
256. On June 21, 2016, Judge Alan C. Kay denied the motion to
disqualify. See ECF No. 258.
27, 2016, Bridge Aina sent Defendants Burger's purported
“supplemental” expert report. See ECF
No. 284-4 (copy of report); Ferry Decl. ¶ 4, ECF No.
284-2, PageID # 6299 (indicating that report was served on
June 27, 2016). This “supplement” said:
In reviewing our November 20, 2015, report, we see that we
only presented the results of the calculations and not the
detailed calculations themselves. Had we presented the
detailed calculations, we feel that the readers of the report
would have been able to better understand the results.
ECF No. 284-4, PageID # 6304. The “supplement”
went on to explain that the second and third formulas
contained in the original report were different because the
third accounted for income tax implications. The
“supplement” then stated, however, that Bridge
Capital, Bridge Aina's parent company (on which Burger
was basing his rate of return), had no income taxes. See
id., PageID Nos. 6304-05.
5, 2016, the parties notified the court that they had settled
this case pending legislative approval of the settlement
payment. See ECF No. 262. The court therefore
terminated Defendant's motion to exclude Berger's
expert report without ruling on it.
30, 2017, Defendants notified the court that the legislature
had not approved the settlement. See ECF No. 264.
The court therefore set trial in ...