USGen New England, Inc.

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF MARYLAND
at GREENBELT
In re: 	*
* 	Case No. 	03-30465
USGen New England, Inc., 	* 	(Chapter 11)
*
Reorganized Debtor. 	*
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*
USGen New England, Inc., 	* 	Docket Nos. 2187, 2191, 2198
*
vs. 	*
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TransCanada Pipelines, Ltd. 	*
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*
*
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* 	* 	* 	* 	* 	* 	* 	* 	* 	* 	* 	*
MEMORANDUM OPINION
Several pre-trial disputes arose in this litigation over the objection by the Debtor,
USGen New England, Inc. (“USGen”), to the Proof of Claim of TransCanada Pipelines
Ltd. (“TransCanada”). USGen filed a motion (Docket No. 2191) to compel TransCanada
to produce materials and information concerning TransCanada’s expert witnesses.
TransCanada filed a motion and a supplemental motion (Docket Nos. 2187 and 2198)
Date signed August 16, 2007
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seeking to strike the expert reports of Gordon Cameron and Roland Priddle, two expert
witnesses proffered by USGen. The parties have fully briefed these issues and the court
heard argument on July 26, 2007.
TransCanada’s Proof of Claim stems from USGen’s rejection of a natural gas
transportation contract. The claim, as amended, is in the approximate amount of $50
million Canadian (“CAD”).1 Two central issues in the claim litigation are whether
TransCanada has mitigated its damages and whether TransCanada has been held
harmless through rate-making procedures before the National Energy Board of Canada
(“NEB”).
In Docket No. 2191 (the “USGen Motion”), USGen seeks a ruling compelling
TransCanada to produce: (1) materials that are protected by the attorney work product
doctrine or the attorney-client privilege that were considered by Charles Kemm Yates,
Esq. (“Yates”), TransCanada’s retained expert, in forming his opinion, or which are
otherwise relevant to the opinion; (2) a statement of the amount of fees that Yates’ law
firm billed to TransCanada in the past seven years; and (3) materials that are protected by
the attorney work product doctrine or the attorney-client privilege that were considered
by four TransCanada employees who have been designated under Fed. R. Civ. P.
26(a)(2)(A) as witnesses who will provide opinion testimony. 2
1 The parties have not yet addressed the requirement of 11 U.S.C. §502(b) that the Court must determine
the amount of the claim in United States currency.
2 Fed. R. Civ. P. 26 is made applicable to this proceeding by Fed. R. Bankr. P. 9014(c) and the court’s
scheduling orders.
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In Docket Nos. 2187 and 2198 (collectively the “TransCanada Motion”),
TransCanada contends that the expert reports of Messrs. Cameron (“Cameron”) and
Priddle (“Priddle”) should be stricken because the reports: (1) are not proper rebuttal
reports, but rather offer opinions that support USGen’s case-in-chief and should have
been previously produced; and (2) include improper legal opinion testimony and are
otherwise improper under Fed. R. Civ. P. 44.1 and Fed. R. Evid. 702.3
For the reasons set forth herein, the court will:
(1) compel TransCanada to produce any materials protected by the attorney work
product doctrine or attorney-client privilege that were considered by Yates in
forming his opinion, as required by Fed. R. Civ. P. 26(a)(2)(B);
(2) compel TransCanada to produce any materials protected by the attorney work
product doctrine or the attorney-client privilege that Yates did not consider in
forming his opinion, but that are relevant to specific statements or opinions
contained in Yates’ expert report (which statements or opinions are identified
herein) because such statements have been put in issue by TransCanada;
(3) not compel TransCanada to produce the requested billing information of
Yates’ law firm because there is no pending discovery request for the
information;
(4) not compel TransCanada to produce materials that are protected by the
attorney work product doctrine or attorney-client privilege with respect to
three of the employee hybrid fact/expert witnesses, Kay Coad, Sean Brett and
Rob Whitmore, with respect to his initial affidavit dated November 2, 2006;
(5) compel TransCanada to produce a log of privileged or withheld materials and
information that were considered by Rob Whitmore in the preparation of his
supplemental affidavit dated January 15, 2007, subject to further proceedings;
(6) require the parties to supplement the record on the source of the facts
considered and the scope of the opinions offered by Zafir Samoylove, the
fourth employee hybrid fact/expert witness;
3 Fed. R. Civ. P. 44.1 is made applicable to this proceeding by Fed. R. Bankr. P. 9017, which also makes all
of the Federal Rules of Evidence applicable to this proceeding.
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(7) deny the TransCanada Motion to strike the expert reports of Cameron and
Priddle to the extent it is based on the claim that the reports are improper
rebuttal reports, but the court will allow TransCanada to serve a surrebutal
report;
(8) deny the TransCanada Motion to strike the expert reports of Cameron and
Priddle to the extent it is based on the claim that expert submissions under
Fed. R. Civ. P. 44.1 cannot include legal opinion testimony on foreign law or
apply foreign law to the facts; and
(9) defer ruling on the remaining objections in the TransCanada Motion to strike
the expert reports of Cameron and Priddle until the parties have fully briefed
their cross-motions for summary judgment, so that TransCanada’s remaining
objections to the reports can be properly addressed in the context of the merits
of the objection to the TransCanada Claim.
I. 	BACKGROUND
A. 	The TransCanada Claim Litigation.
On January 6, 1992, USGen’s predecessor-in-interest, New England Power
Company, and TransCanada entered into a Firm Transportation Contract (the
“Agreement”). The contract price for firm transportation capacity under the Agreement
was set at the regulated tariff rate approved by the NEB. As a firm contract, the pipeline
capacity for the transport of natural gas specified in the Agreement was available for
USGen’s transportation and use whenever needed, provided that all other obligations of
the Agreement were met.
Under the Agreement, TransCanada was required to reserve capacity
on the TransCanada Mainline pipeline to enable the transport of a maximum
daily quantity of natural gas of 53,9044 gigajoules (GJ) per day. 	The receipt
4 The record reflects several different amounts for the maximum daily quantity of natural gas under the
Agreement. These differences are not material to the issues addressed herein.
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point for natural gas was at the head of the TransCanada Mainline at Empress,
Alberta. The delivery point under the Agreement was the interconnection of the
TransCanada Mainline to the Iroquois Gas Transmission System at the U.S.-
Canada 	border 	near 	Waddington, 	New 	York. 	Performance 	under 	the
Agreement was to continue through October 31, 2006.
USGen filed a voluntary chapter 11 petition on July 8, 2003. On August 12,
2003, USGen filed a motion to reject the Agreement (Docket No. 186), which was
deemed rejected as of September 5, 2003. See Order Authorizing Rejection of Certain
Gas Transportation Agreements, September 12, 2003 (Docket No. 275).
On October 20, 2003, TransCanada filed a Proof of Claim, No. 37, in the amount
of $71,133,275.63 CAD. The claim was based on the alleged contractual damages that
resulted from the rejection of the Agreement. TransCanada amended its claim on
October 12, 2005, and on November 2, 2006 (as amended, the “TransCanada Claim”).
The TransCanada Claim is asserted as an unsecured nonpriority claim in the amount of
$50,966,472.00 CAD and a secured claim in the amount of $1,460,094.00 CAD.
USGen filed its objection to the TransCanada Claim on April 12, 2005. Docket
No. 1620. In the objection, USGen contended that the TransCanada Claim should be
disallowed in its entirety because:
. . .TransCanada has mitigated almost all of its damages, as required
by applicable law, and, to the extent TransCanada has not been able
to mitigate, TransCanada has been held harmless, through its annual
cost recovery and rate-making processes, against any impact from
the rejection of the [Agreement].
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Debtor’s Objection to Claim of TransCanada Pipelines, Ltd. [Claim No. 37], Docket No.
1620 at p. 3. TransCanada filed a response to the objection on May 18, 2005. Docket
No. 1716.
Since that time, the parties have engaged in discovery and filed initial cross-
motions for summary judgment, but agreed to defer filing final briefs on the cross-
motions pending completion of expert discovery. The current disputes arose during that
process.
B. 	The Current Disputes.
USGen has retained three experts, Mr. Peter J. Milne (“Milne”) and Cameron and
Priddle; USGen designated Milne as its expert for its case-in-chief and Cameron and
Priddle as rebuttal experts.5
TransCanada retained Yates as its expert. As described by TransCanada, Yates is
an expert in Canadian law and Canadian regulatory processes. It is not disputed that
Yates is also TransCanada’s lead outside Canadian regulatory counsel and has
represented TransCanada in numerous regulatory proceedings before the NEB.
In addition, TransCanada served USGen a notice of expert disclosures that
designated four TransCanada employees as so-called hybrid fact/opinion witnesses. The
four employees are Kay Coad, Sean Brett, Rob Whitmore and Zafir Samoylove
5 In support of its cross-motion for summary judgment, USGen submitted the declaration of Milne. After
TransCanada moved to strike the declaration., USGen served TransCanada with Milne’s expert report and
TransCanada deposed him. The motion to strike the Milne declaration has been deferred while
TransCanada files a supplemental motion to strike Milne’s report, since his report is more comprehensive
than his declaration and it has been supplemented by his deposition testimony.
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(collectively, the “hybrid fact/expert witnesses”). TransCanada described their role as
follows:
Kay Coad - Although she is not a “retained expert” as described in
Fed. R. Civ. P. 26(a)(2)(B), TransCanada designates its employee
Kay Coad as an expert witness as to matters respecting its marketing
and sale of pipeline capacity and the regulatory requirements that
effect the marketing and sale of pipeline capacity to the extent they
are relevant to this case, including without limitation the matters set
forth in Ms. Coad’s affidavit in this case, her depositions in this case,
and the exhibits thereto.
Sean Brett - Although he is not a “retained expert” as described in
Fed. R. Civ. P. 26(a)(2)(B), TransCanada designates its employee
Sean Brett as an expert as to matters respecting the appropriate
discount rate.
Rob Whitmore - Although he is not a “retained expert” as described
in Fed. R. Civ. P. 26(a)(2)(B), TransCanada designates its employee
Rob Whitmore as an expert witness as to matters respecting its toll
design and regulatory requirements, including without limitation the
matters set forth in Mr. Whitmore’s affidavit in this case, and the
exhibits thereto.
Zafir Samoylove - Although he is not a “retained expert” as
described in Fed. R. Civ. P. 26(a)(2)(B), TransCanada designates its
employee Zafir Samoylove as an expert witness as to matters
respecting its proof of claim, damages, and potential mitigation,
including without limitation the matters set forth in TransCanada’s
proof of claim, Mr. Samoylove’s depositions in this case, and the
exhibits thereto.
See TransCanada’s Notice of Expert Disclosures, Docket No. 2191, Exhibit J.
USGen served TransCanada with the expert reports of Cameron and Priddle.
Cameron’s report states that he is a Canadian attorney who has taught the Law of
Remedies at the University of Toronto Law School and currently teaches that subject at
the University of Ottawa Law School. Cameron also states that he has particular
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experience in the Canadian federal regulation of natural gas pipelines, and of
TransCanada in particular, before the NEB. Priddle’s report states that he is a consultant
on matters of energy, principally having to do with regulation. He states that he was
Chairman of the NEB from 1986 through 1997.
USGen contends that Cameron’s and Priddle’s reports rebut Yates’ report and
portions of Cameron’s report also rebut the affidavit of Rob Whitmore. The specific
statements in the reports or affidavits of the foregoing witnesses will be addressed further
as appropriate in the context of the pending motions.
II. DISCUSSION
A. 	The USGen Motion.
1. 	Yates’ law firm’s billing information.
USGen seeks the amount of fees billed by Yates’ law firm, Stikeman Elliott LLP
(“Stikeman Elliott”), to TransCanada since 2000, breaking out those fees for which Yates
received supervisory or billing credit in the firm’s compensation structure. The court will
deny this request.
This issue arose during Yates’ deposition. Yates is a Canadian regulatory lawyer
and a partner in Stikeman Elliott. He and his firm do legal work for TransCanada. Yates
testified at his deposition that TransCanada was his largest client over the past two to
three years. He testified that he could not estimate his total billings or billable hours for
TransCanada for those years or the current year. He estimated that his billings to
TransCanada were more than half but less than three-quarters of his total billings.
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TransCanada did not object to questions to Yates about his personal billings.
However, when Yates was asked for the amount of billings by Stikeman Elliott to
TransCanada, he was initially instructed not to answer. The stated basis for the
instruction was that:
[w]hat TransCanada paid to this law firm other than Mr. Yates is not an
issue and not relevant to this proceeding. . . . If you want to know how
much they paid to Mr. Yates, that’s different. The law firm is not the
expert; it’s Mr. Yates.
Yates deposition transcript at p.139; Docket 2201, Exhibit A. Yates was then asked a
series of questions about the amount of the fees Stikeman Elliott billed to TransCanada
from 2004 through 2007, and was instructed not to answer each question.
If the record ended there, the court would not hesitate to order TransCanada to
produce the requested information. From the questions that Yates answered, it was
apparent that TransCanada is a significant client of Yates and it further appeared that
TransCanada was a significant client of the firm. As a partner in the firm, Yates’
personal economic well-being is potentially affected by matters that can either benefit or
harm clients of his firm, especially significant clients. That is especially true when Yates
himself is serving in a capacity that can effect whether the client is benefited. Thus, the
economic relationship between Yates’ law firm and TransCanada is the proper subject of
exploration for Yates’ potential bias. The scope of the economic relationship is certainly
relevant, as that term is used in Fed. R. Civ. P. 26(b)(1), and the inquiry “appears
reasonably calculated to lead to the discovery of admissible evidence.” Fed. R. Civ. P.
26(b)(1); see e.g., Behler v. Hanlon, 199 F.R.D. 553 (D. Md. 2001) (finding that an
expert’s financial relationships are relevant under Fed. R. Civ. P. 26(b)(1) to show bias).
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Further, as USGen points out, Fed. R. Civ. P. 30(d)(1) provides that a witness
may be instructed not to answer a question at a deposition “only when necessary to
preserve a privilege, to enforce a limitation directed by the court, or to present a motion
under Rule 30(d)(4).” Thus, TransCanada’s instruction to Yates was clearly improper.
The record, however, does not end there. After the series of questions concerning
Stikeman Elliott’s annual billings to TransCanada, the deposition transcript reflects a
“discussion off the record.” Yates deposition transcript at p. 142; Docket 2201, Exhibit
A. When the parties were back on the record, Yates was asked a series of questions
about the scope of the relationship between Stikeman Elliott and TransCanada, including
the same questions concerning the amount of the law firm’s billings to TransCanada that
he had previously been instructed not to answer. Those questions were asked without
objection. With respect to questions concerning the amount of Stikeman Elliott’s billings
to TransCanada, Yates stated that he did not know the amounts. Id. at pp. 142-144. The
deposition continued without further dispute on this point.
USGen asks the court to require TransCanada to produce the billing information
as a sanction for the improper instruction not to answer. But while the initial instruction
was improper, TransCanada allowed the same questions to be asked without asserting the
instruction within a matter of minutes – or, perhaps to be more accurate, within 2-3 pages
of the deposition transcript. Thus, USGen was not prejudiced by the instruction.
Moreover, because Yates answered all questions put to him about the billing
information and scope of relationship between Stikeman Elliott and TransCanada, there is
no pending discovery request to which TransCanada has not responded and as to which
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the court could compel a response.6 Accordingly, the court will not compel TransCanada
to produce the billing information.
2. 	Materials protected by the attorney work product doctrine or
attorney-client privilege that were considered by Yates or are relevant
to his opinion.
The scope of the dispute between TransCanada and USGen with respect to the
protected materials is fairly narrow, although potentially significant.7 The parties do not
dispute that TransCanada identified Yates as a Fed. R. Civ. P. 26(a)(2)(B) expert, and
that Rule 26 and the Rule 26(a)(2)(B) disclosure obligations apply to Yates. 8 Yates
prepared a report, produced materials in response to USGen’s discovery requests, and has
been deposed by USGen. USGen does not dispute that Yates complied with the Rule
26(a)(2)(B) disclosures and responded to discovery requests, other than the issues raised
here.
USGen seeks an order compelling TransCanada to produce documents and Yates
to answer deposition questions relating to his representation of TransCanada in the 2004
regulatory proceeding before the NEB on TransCanada’s Mainline Tolls and Tariff
Application. 	In that proceeding, the NEB allowed TransCanada to recover the $5.8
million deferral account, which purportedly represented the gross amount of the Firm
6 TransCanada’s counsel stated at the hearing that the off-the-record discussion at the deposition resulted in
an understanding that TransCanada would allow Yates to answer questions concerning whether he knew
the billing amounts. If so, TransCanada would decide whether to press its objection; if not the objection
would be moot. As stated above, the discussion was off the record and the court cannot determine whether
any understanding was reached. That point is not controlling. It is clear from the record that after the
discussion, USGen was allowed to ask Yates questions about the billing information without objection.
7 The dispute is “potentially” significant because the court has not been provided with a list of any specific
documents that have been withheld by TransCanada.
8 See TransCanada’s reply to the USGen Motion. Docket No. 2201 at pp. 3-5.
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Transportation (“FT”) tolls payable by USGen in 2003 after the rejection of the
Agreement. USGen contends that because Yates has stated that there is a risk that the
NEB could reconsider its 2004 decision, any materials and information related to that
process should be the subject of discovery, even if privileged or protected. USGen also
seeks materials and information relevant to specific statements in Yates’ report that are
allegedly protected by the attorney work product doctrine or the attorney-client privilege.
a. 	Materials considered by Yates in forming his opinion.
The first category the court will address is information protected by the attorney
work product doctrine or the attorney-client privilege that Yates considered in forming
his expert opinion. For the reasons set forth below, the court will order TransCanada to
produce materials and information considered by Yates in forming his opinion that are
protected by the attorney work product doctrine or the attorney-client privilege.
Fed. R. Civ. P. 26(a)(2) provides disclosure requirements for expert witnesses.9
9 Fed. R. Civ. P. 26(a)(2) provides:
(2) Disclosure of Expert Testimony.
(A) In addition to the disclosures required by paragraph (1), a party shall disclose to other parties the
identity of any person who may be used at trial to present evidence under Rules 702, 703, or 705 of the
Federal Rules of Evidence.
(B) Except as otherwise stipulated or directed by the court, this disclosure shall, with respect to a witness
who is retained or specially employed to provide expert testimony in the case or whose duties as an
employee of the party regularly involve giving expert testimony, be accompanied by a written report
prepared and signed by the witness. The report shall contain a complete statement of all opinions to be
expressed and the basis and reasons therefor; the data or other information considered by the witness in
forming the opinions; any exhibits to be used as a summary of or support for the opinions; the
qualifications of the witness, including a list of all publications authored by the witness within the
preceding ten years; the compensation to be paid for the study and testimony; and a listing of any other
cases in which the witness has testified as an expert at trial or by deposition within the preceding four
years.
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It mandates that the expert’s report must include “the data or other information
considered by the witness in forming the opinions.” Fed. R. Civ. P. 26 (a)(2). “The
commentary to the Rule makes it clear that ‘other information’ considered by the expert
includes work product10 provided by the attorney who retained the expert.” Musselman
v. Phillips, 176 F.R.D. 194, 197 (D. Md. 1997).
Rule 26(a)(2)(B) does not preclude counsel from providing
assistance to experts in preparing the reports, and indeed,
with experts such as automobile mechanics, this assistance
may be needed. . . . The report is to disclose the data and
other information considered by the expert and any exhibits
or charts that summarize or support the expert's opinions.
Given this obligation of disclosure, litigants should no
longer be able to argue that materials furnished to their
experts to be used in forming their opinions-whether or not
ultimately relied upon by the expert-are privileged or
otherwise protected from disclosure when such persons are
testifying or being deposed.
Id. (quoting Commentary to Fed. R. Civ. P. 26(a)(2)(B)) (emphasis in original).
“[W]hen an attorney communicates otherwise protected work product to an expert
witness retained for the purposes of providing opinion testimony at trial-whether factual
in nature or containing the attorney’s opinions or impressions-that information is
discoverable if it is considered by the expert.” Musselman, 176 F.R.D. at 199; See also,
10 Work product is divided into two categories: fact work product and opinion work product that encompass
the mental impressions, conclusions, opinions or theories of an attorney concerning litigation. Generally,
the former enjoys only qualified immunity while the latter is protected by absolute immunity that gives way
only in extraordinary circumstances. See Better Gov't Bureau, Inc. v. McGraw, 106 F.3d 582, 607 (4th Cir.
1997) (“In contrast to fact work product, which is discoverable ‘upon a showing of both a substantial need
and an inability to secure the substantial equivalent of the materials by alternate means without undue
hardship,’ opinion work product ‘enjoys a nearly absolute immunity and can be discovered only in very
rare and extraordinary circumstances’” (quoting In re Grand Jury Proceedings, Thursday Special Grand
Jury, 33 F.3d 342, 348 (4th Cir. 1994))). “Whether the applicable immunity from discovery is qualified-as
for fact work product-or “nearly absolute”-for opinion work product-it may, of course, be waived.”
Musselman, 176 F.R.D. at 197 (citing United States v. Pollard (In re Martin Marietta Corp.), 856 F.2d 619,
623-27 (4th Cir. 1988)).
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Elm Grove Coal Co. v. Director, O.W.C.P, 480 F.3d 278, 303 (4th Cir. 2007) (“... draft
expert reports prepared by counsel and provided to testifying experts, and attorney-expert
communications that explain the lawyers concept of the underlying facts, or his view of
the opinions expected from such experts, are not entitled to protection under the work
product doctrine.”). Work product provided to a retained expert is “…discoverable even
if the expert did not rely upon it in forming his or her opinions, so long as the expert
considered it while developing them.” Musselman, 176 F.R.D. at 202 (citing Karn v.
Ingersoll-rand Co., 168 F.R.D. 633, 634 (N.D. Ind. 1996)).
In accordance with the foregoing, TransCanada must produce any materials or
information protected by the attorney work product doctrine or the attorney-client
privilege that were considered by Yates in forming his opinion and preparing his report,
whether or not he relied upon them.
b. 	Materials that are relevant to Yates’ opinion or report but
which he did not consider in forming his opinion.
The second category raised by the USGen Motion is information or materials
protected by the attorney-client privilege that are relevant to Yates’ opinion but that he
did not consider in forming his opinion. 11 These materials would include legal
memoranda or analyses that Yates provided to TransCanada during the course of his
representation of TransCanada in prior years. Yates may not have “considered” (as that
11 With respect to this second category of materials, the court focuses on materials protected by the
attorney-client privilege. One would expect that if Yates were given attorney work product, he would have
“considered” those materials and their production is governed by Section II.A.2.a, above. To the extent
Yates has in his possession or control attorney work product materials that he did not consider in forming
his opinion, but which are relevant to his opinion, those materials would be included in this second
category.
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term is used in Fed. R. Civ. P. 26(a)(2)(B)), these materials in forming his opinion, but
they may be relevant to his opinion.
The distinction between materials considered by Yates, on the one hand, and
materials that he did not consider but that are relevant to his opinion, on the other hand,
arises from the application of Rule 26(a)(2)(B). As stated above, supra at Section
II.A.2.a., Rule 26(a)(2)(B) requires a party to disclose, with respect to an expert who has
been retained to provide expert testimony in the case, the data and information considered
by the expert and the basis and reasons for the opinion. The disclosures required by Rule
26(a)(2)(B) are affirmative obligations imposed on the party who intends to call the
retained expert. Accordingly, to the extent Yates has in his possession or control
materials relevant to his opinion but which he did not consider in forming his opinion,
Rule 26(a)(2)(B) imposes no affirmative obligation on TransCanada or Yates to identify
those materials.
USGen, however, is entitled to seek those materials through usual discovery
processes. It is well established that, in addition to the disclosures required by Fed. R.
Civ. P. 26(a)(2)(B), a party is entitled to obtain discovery from designated experts by
other methods authorized by the Federal Rules of Civil Procedure. See e.g, Fed. R. Civ.
P. 26(b)(4)(A) (permitting depositions of testifying experts). “The enumeration in Rule
26(a) of items to be disclosed does not prevent a court from requiring by order or local
rule that the parties disclose additional information . . . . Nor are parties precluded from
using traditional discovery methods to obtain further information regarding these matters
. . . .” Fed. R. Civ. P. 26 Advisory Committee’s Note; see also, Behler v. Hanlon, 199
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F.R.D. 553 (D. Md. 2001) (contemplating the use of Fed. R. Civ. P. 34 to permit
discovery from experts of relevant information). The scope of such discovery is
governed by Fed. R. Civ. P. 26(b)(1), which permits discovery of information that
“appears reasonably calculated to lead to the discovery of admissible evidence.”
The parties apparently do not dispute the foregoing, as USGen apparently has
served document requests on Yates and has deposed him. The battle lines have been
drawn, however, over the production of attorney-client privileged materials and the scope
of Yates’ opinion.
“[I]t is well established that a party waives the attorney-client and work product
privileges whenever it puts an attorney’s opinion into issue, by calling the attorney as an
expert witness or otherwise.” Herrick Co., Inc. v. Vetta Sports, Inc.; No. 94 Civ. 905,
1998 U.S. Dist. LEXIS 14544, 1998 WL 637468, at *1 (S.D. N.Y. Sept. 17, 1998) (citing
United States v. Bilzerian, 926 F.2d 1285, 1292 (2d Cir.), cert. denied, 502 U.S. 813, 112
S. Ct. 63 , 116 L. Ed. 2d 39, (1991)). “[C]ourts cannot sanction the use of the privilege to
prevent effective cross-examination on matters reasonably related to those introduced in
direct examination.” Bilzerian, 926 F.2d at 1293.
In Herrick, the defendant law firm designated an expert, Wolfram, in legal ethics.
Wolfram had a close relationship with the defendant for a number of years, and served as
an expert on matters of legal ethics for the defendant and its clients in connection with
numerous matters. The plaintiffs sought to compel the production of documents from
Wolfram related to advice previously rendered to the defendant on the same subject
matter as Wolfram’s opinion but that Wolfram did not consider in forming his opinion.
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The defendant contended that documents related to prior advice that they received from
Wolfram and that were not considered by Wolfram in forming his opinion were not
discoverable because they were protected by the attorney-client privilege. 	The court
disagreed and stated:
By designating Wolfram as an expert trial witness, [the defendant] has
opened the door to such discovery, which covers documents other than
those directly considered by Wolfram in forming his opinions. Prior
inconsistent opinions by Wolfram on the same subject matter would be
highly relevant material.
Herrick, 1998 U.S. Dist. LEXIS 14544 at 7-8.
TransCanada contends that it has not put in issue any advice Yates has provided
to TransCanada in connection with TransCanada’s 2004 NEB toll application or any
other regulatory matter. TransCanada states that although Yates offered the opinion that,
under the NEB regulatory scheme, there is a risk the NEB will reverse its 2004 decision,
Yates provided no opinion on the likelihood that any party would seek a review of the
decision or whether the review would be successful. Therefore, according to
TransCanada, documents that may be relevant to an opinion that quantifies or assesses
the magnitude of those risks are not relevant to Yates’ opinion. USGen contends that
Yates’ opinion goes far beyond the limited description offered by TransCanada and seeks
Yates’ file from the 2004 regulatory proceeding, whether privileged or not.
The court disagrees with USGen that the entire file is relevant to Yates’ opinion.
Yates took care in writing his report to state that a risk exists that a party may seek
reconsideration of the NEB 2004 decision or that the NEB would grant reconsideration.
He offered no opinion on the likelihood that either event would occur. More
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significantly, his opinion on these two points is largely, although not exclusively, based
on the NEB regulatory scheme, as opposed to particular facts concerning TransCanada’s
application. Further, it does not appear that there is substantial dispute between
TransCanada’s expert and USGen’s experts on the general framework of the NEB
regulatory scheme. Thus the wholesale inquiry by USGen into all privileged matters
relating to TransCanada’s 2004 NEB application process is unwarranted.12
Yates’ opinion, however, is not merely the sterile discussion of Canadian
regulatory law and procedure that TransCanada suggests. 	His report contains a number
of statements that provide a factual context to his opinion or apply the facts to the law.
The court has reviewed the report and concludes that the following statements have been
put in issue by Yates’ opinion, such that a waiver of the attorney-client privilege is
warranted.
· 	The statements in ¶ 16 of his report that other parties have alleged that
TransCanada is exposed to no risk because of the existence of the deferral
account, and that this position has been rejected by the NEB, which
explained “[t]he Board [NEB] wishes to emphasize that the existence of
that deferral account does not mean that unrecovered fixed costs will
automatically be allowed to be passed on to the shippers by the Board.”
The NEB has denied recovery of a balance in a deferral account where it
determined that TransCanada had not “made every effort to ensure that the
interests of its tollpayers are protected. . .” in other legal proceedings.
· 	A decision by this court in favor of USGen could be viewed as a “changed
circumstance” or “new fact” that would raise a doubt as to the correctness
of the decisions of the NEB (RH-2-2004 Phase I) to (1) permit recovery of
the USGen 2003 default amount, recorded in the Firm Service Revenue
Deferral Account, in 2004 Mainline tolls, and (2) approve reallocation of
12 To be sure, USGen’s proposed rebuttal experts, Cameron and Priddle, both assess that risk. But merely
because the materials are relevant to USGen’s rebuttal expert opinions does not provide a basis for
compelling the production of information or materials that are protected by the attorney-client privilege
from the expert whose opinion they are purportedly rebutting.
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billing determinants to permit the Mainline to recover the impact of the
US Gen default in 2004 from other Mainline shippers.
· 	The premise for NEB approval of recovery of the effect of the USGen
defaults from Mainline shippers through tolls was that TransCanada would
prudently pursue recovery of the loss and would credit any net recovery to
the Mainline revenue requirement. Destruction of that premise through a
judicial decision could provide an incentive to Mainline shippers to seek
review and variance of the NEB decisions that visited the effect of the
USGen default on them.
· 	The amount in question is not insignificant in a Mainline toll context.
Currently, a variation of approximately $16 million in revenue equates to
approximately 1 cent in the Eastern Zone Toll which is approximately $1
CAD per gigajoule. The $50 million CAD in question would therefore
result in an impact of approximately 3 cents (3 percent) if applicable to
one year, or 1 cent (1 percent) in each of the three years 2004, 2005, 2006.
The amounts are certainly significant enough to warrant consideration by
stakeholders of a review and variance application.
· 	To the extent the cost of USGen’s breach was “shifted” to TransCanada’s
non-breaching shippers, it was done with the expectation that
TransCanada would prudently pursue its claims against USGen and that
any net recovery would be credited to TransCanada’s revenue
requirement.
· 	The Supreme Court of Canada’s decision in British Columbia v. Canadian
Forest Products Ltd. [2004] 2 S.C.R. 74, is entirely inapplicable to the
facts of this case.
Accordingly, TransCanada must produce any privileged or protected materials that
address or relate to the matters contained in the foregoing bulleted statements.
3. 	Discovery of attorney work product or attorney-client
privileged materials from the hybrid fact/expert witnesses.
As stated above, TransCanada designated four employee hybrid fact/expert
witnesses to offer opinion testimony at trial. USGen does not seek an order compelling
TransCanada to submit a report containing the disclosures required by Fed. R. Civ. P.
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26(a)(2)(B) for these witnesses. USGen, however, contends that by designating these
employees under Fed. R. Civ. P. 26(a)(2)(A), TransCanada has waived the protection of
the attorney work product doctrine and the attorney-client privilege for materials that they
have considered. USGen concedes that the only basis for obtaining the protected
materials is that TransCanada designated these witnesses under Fed. R. Civ. P.
26(a)(2)(A). Thus the issue is whether a party must produce information protected by the
attorney work product doctrine or the attorney-client privilege that was provided to an
employee witness designated under Fed. R. Civ. P. 26(a)(2)(A).
Fed. R. Civ. P. 26(a)(2) distinguishes between witnesses who may be used at trial
to present evidence under Fed. R. Evid. 702, 703 or 705, and witnesses who are retained
or specially employed to provide expert testimony in a case. Rule 26(a)(2)(A) requires
disclosure of the identity of the former; Rule 26(a)(2)(B) requires a party to make the
mandatory disclosures contained therein for the latter.
Consistent with Rule 26(a)(2), Local Rule 104.10 of the United States District
Court for the District of Maryland makes it clear that a party need not make the
“disclosures” required by Fed. R. Civ. P. 26(a)(2)(B) for hybrid fact/expert witnesses.13
13 D. Md. Loc. R. 104.10 (amended 8/16/04) provides:
Actions and Witnesses Exempted From Provisions of Fed. R. Civ. P. 26(a)(2)(B)
Unless otherwise ordered by the Court a party must provide the disclosures required by Fed. R. Civ.
P.26(a)(2)(B) only as to experts retained or specially employed by a party to provide expert testimony. The
disclosures need not be provided as to hybrid fact/expert witnesses such as treating physicians. The party
must disclose the existence of any hybrid fact/expert witness pursuant to Fed. R. Civ. P. 26(a)(2)(A), and
an adverse party may obtain the opinions of such witnesses (to the extent appropriate) through
interrogatories, document production requests, and depositions.
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The Local Rule provides, however, that a party may obtain the “opinions” of such
witnesses, to the extent appropriate, through usual discovery means.
The seminal case in this District that discusses the differences between hybrid
fact/expert witnesses and retained experts is Sullivan v. Glock, Inc., 175 F.R.D. 497 (D.
Md. 1997). In that case, the defendant sought to exclude an expert’s testimony at trial
pursuant to Fed. R. Civ. P. 37(c)(1) on the grounds that the plaintiff had failed to produce
all the required disclosures mandated by Fed. R. Civ. P. 26(a)(2)(B). The court denied
the request, finding that the subject experts were hybrid witnesses for whom no Fed. R.
Civ. P. 26(a)(2)(B) disclosures were required. Id. at 499.
In determining whether a party is required to make the Rule 26(a)(2)(B)
disclosures for a hybrid fact/expert witness, Judge Grimm cautioned that “it is a mistake
to focus solely on the status of the expert, instead of the nature of the testimony which
will be offered at trial.” Id. at 500. The court held that:
. . . to the extent that the health care experts identified by the
plaintiff in her Rule 26(a)(2)(A) disclosures are intended to testify
at trial regarding their treatment of the plaintiff, any opinions
regarding the existence of her medical condition, its causation, her
treatment and prognosis, then they are hybrid witnesses and the
plaintiff was not obliged to provide the defendant with the
comprehensive disclosures required under Rule 26(a)(2)(B) . . . .
However, to the extent that the plaintiff intends for these witnesses
to offer opinion testimony based on facts not obtained from their
actual treatment of the plaintiff, they may not do so unless
complete Rule 26(a)(2)(B) disclosures have been made.
Id. at 508.
The message of the Sullivan case is that merely because a party designates a
witness as a hybrid fact/expert witness under Rule 26(a)(2)(A), as opposed to a retained
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expert under Rule 26(a)(2)(B), does not necessarily make him or her so. The court
should analyze the source of the information that forms the basis of the witness’ opinion
and determine whether the information was obtained in the ordinary course of the
witness’ responsibilities or was provided by litigation counsel in order for the witness to
form an opinion for the case. Id. at 501; accord, Stanley Martin Companies, Inc. v.
Universal Forest Products Shoffner LLC, 396 F.Supp.2d 606 (D.Md. 2005).
The court adopts the Sullivan approach for purposes of determining whether
TransCanada must produce information protected by the attorney work product doctrine
or the attorney-client privilege that may have been provided to the hybrid fact/expert
witnesses. To be sure, the court was not required to address in Sullivan whether, if a
party was required to make the disclosures required by Rule 26(a)(2)(B) for a designated
hybrid fact/expert witness who the court determines is serving in the role of a retained
expert, those disclosures must include information protected by the attorney work product
doctrine or attorney-client privilege. But two weeks after issuing the Sullivan decision,
Judge Grimm penned Musselman, which held that the disclosures required by Rule
26(a)(2)(B) for retained experts included privileged and protected materials considered
by the expert. See supra at II.A.2.b. And the Musselman decision has been cited with
approval by the Fourth Circuit Court of Appeals. Elm Grove Coal Co., 480 F.3d at 302.
Accordingly, the court will review the source of the facts relied upon and the
scope of the opinions offered by TransCanada’s hybrid fact/expert witnesses to determine
if they are truly hybrid fact/expert witnesses, or are really retained expert wolves hiding
in hybrid fact/expert sheep’s clothing. If they are hybrid fact/expert witnesses, the court
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will not require the production of materials protected by the attorney work product
doctrine or attorney-client privilege which they considered. This is consistent with Local
Rule 104.10, which does not require a party to produce the “disclosures” required by
Rule 26(a)(2)(B) for a hybrid fact/expert witness (which disclosures, as stated above,
include all matters considered, even if privileged or protected.) Supra at n. 13. Rather,
Local Rule 104.10 only requires that an opposing party may obtain the “opinions” of the
hybrid fact/expert witness.
If, however, the witness is serving in the role of a retained expert, and has been
fed facts or opinions to support his or her opinion testimony, a party should not be able to
shield the privileged materials merely because the witness has been designated under
Rule 26(a)(2)(A). The issue is one of substance, not form.
The Sullivan approach is admittedly more cumbersome than and not as
convenient as a bright-line test. See e.g, United States v. American Elec. Power Service
Corp., No. 2:99-cv-1182, 2:99-cv-1250, 2006 WL 3827509 at *1 (S.D. Oh. Dec. 28,
2006), and cases cited therein. However, it balances two important competing interests.
The protection of materials under the attorney work product doctrine and the attorney-
client privilege allows counsel to develop opinions and strategies and effectively
communicate with clients in a way that is essential to effective representation. Disclosure
should be compelled only in very limited circumstances. On the other hand, a party
should not be able to circumvent the important disclosure obligations of Rule 26(a)(2)(B)
by simply using an employee to serve in the role of a retained expert.
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The court will turn to the proposed testimony of the four hybrid fact/expert
witnesses.
Kay Coad: According to her affidavit, Ms. Coad is an employee of TransCanada
who served as the Sales Representative for Eastern Sales and Marketing from April,
1997, through January, 2006. Her affidavit states: (1) she participated in the marketing of
the capacity that became available because of USGen’s rejection of the Agreement; and
(2) from the time of the rejection of the Agreement in September, 2003, through January,
2006, she had primary day-to-day responsibility for managing and administering the open
seasons for capacity on the TransCanada Mainline. Her affidavit addresses
TransCanada’s efforts to sell the capacity that was made available by USGen’s rejection
of the Agreement, which efforts are relevant to TransCanada’s mitigation efforts and are
clearly factual in nature. According to her affidavit, Ms. Coad will also offer the opinion
that TransCanada marketed the available capacity to all potential purchasers and did so in
accordance with her understanding of applicable Canadian law and regulations.
The Court concludes that, as presented, Ms. Coad is a hybrid fact/expert witness
governed by Rule 26(a)(2)(A). She will testify primarily, if not exclusively, about facts
that arose in the ordinary course of her employment. Her opinion testimony appears
primarily to be her view that when she did her job, she did it well (i.e, she marketed the
capacity to all potential purchasers and complied with Canadian law and regulations).
The court will not compel TransCanada to produce materials protected by the attorney
work product doctrine or the attorney-client privilege that may have been provided to Ms.
Coad.
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Sean Brett: At the time USGen rejected the Agreement, the Agreement had
approximately three years remaining on its term. In determining the damages that flow
from the rejection, a discount rate may be needed to determine the value, as of a
particular date, of the stream of some or all of the payments that USGen would have
made under the Agreement if it had not been rejected. TransCanada contends that the
discount rate should be the interest rate set forth in USGen’s confirmed plan of
reorganization and no testimony is needed on the appropriate discount rate. USGen
disagrees, and contends that the appropriate discount rate is TransCanada’s cost of
capital.
TransCanada has identified Sean Brett to testify on the discount rate, if necessary.
As explained at the hearing on these motions, Brett is an employee with substantial
knowledge of TransCanada’s cost of capital. Thus, to the extent the dispute over the
discount rate focuses on TransCanada’s cost of capital, Brett will testify in that regard.
Further, TransCanada made it clear that Brett’s testimony would not include general
opinion testimony on the appropriate discount rate to use under the circumstances.
The court concludes that, as presented, Brett is a hybrid fact/expert witness
governed by Rule 26(a)(2)(A). He will testify primarily, if not exclusively, about facts
that he learned in the ordinary course of his employment. The court will not compel
TransCanada to produce materials protected by the attorney work product doctrine or the
attorney-client privilege that may have been provided to Brett.
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Rob Whitmore: According to his initial affidavit dated November 2, 2006,
Whitmore is the Manager, Rates East, Market Development, for TransCanada and has
held that position for over six years. His affidavit states that in that capacity, he is
responsible for rate design and tolls on the TransCanada Mainline pipeline, including rate
design and tolls as applied to the pipeline capacity formerly reserved by USGen for the
Agreement. His affidavit describes TransCanada’s services and its “toll design” process
(i.e., the process by which TransCanada’s tolls for its services are derived). He describes
the effect on TransCanada’s toll process of Miscellaneous Discretionary Revenues, which
are the revenues derived from the sale of Discretionary Services such as Short Term Firm
Transportation Service (“STFT”), Interruptible Service (“IT”) and diversions. He states
that the toll design process has resulted in lower FT tolls since USGen’s rejection of the
Agreement as a result of the revenues derived from the sale of Discretionary Services of
the capacity made available from the rejection.
In his supplemental affidavit dated January 15, 2007, he disputes Milne’s opinion
that USGen should receive a direct dollar-for-dollar credit for revenues derived from the
sale of Discretionary Services of capacity made available from the rejection of the
Agreement because, under the toll design process, any such revenues reduce the cost of
service for all shippers and thus reduce all FT tolls. He further states that because lower
tolls were used to calculate TransCanada’s damages resulting from the rejection of the
Agreement, USGen has received, pro rata, the benefit from the sale of Discretionary
Services of capacity made available from the rejection of the Agreement.
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The court concludes that, at least with respect to the opinions and matters in his
initial affidavit dated November 2, 2006, Whitmore is a hybrid fact/expert witness
governed by Rule 26(a)(2)(A). His initial affidavit testimony is primarily about
TransCanada’s toll design process and how revenues derived from the sale of
Discretionary Services are factored into that process. As presented, he will testify about
facts that he learned in the ordinary course of his employment. The court will not compel
TransCanada to produce materials protected by the attorney work product doctrine or the
attorney-client privilege that may have been provided to Whitmore in the preparation of
his initial affidavit.
The resolution is not so clear with respect to Whitmore’s supplemental affidavit
dated January 15, 2007. There he disputes Milne’s opinion, as described above.
TransCanada must produce a log of materials and information provided to Whitmore in
the preparation of his supplemental affidavit, to the extent it has not done so. USGen can
seek an order compelling the production of any materials it deems appropriate under the
rationale of this opinion. Any disputes can be resolved in due course.
Zafir Samoylove: USGen states that Mr. Samoylove is the principal architect of
TransCanada’s mitigation and damages analysis and calculation, and that the analysis
does not reflect information he obtained in the ordinary course of employment. USGen
states that Mr. Samoylove obtained the information from, and performed the analysis on
instructions by, TransCanada’s counsel. TransCanada contends that the substance of Mr.
Samoylove’s testimony will be based on matters that arose in the ordinary course of his
employment.
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The record before the court is not adequate to determine the source of Mr.
Samoylove’s facts or the scope of his opinion. TransCanada did not submit an affidavit
of Mr. Samoylove in support of the motion for summary judgment. Neither party
submitted Mr. Samoylove’s deposition transcript, other than three pages submitted by
USGen.
Accordingly, USGen will be allowed to supplement the record with any
deposition transcripts or other materials that would aid the Court in the analysis described
herein. Similarly, TransCanada shall be allowed to file a responsive brief or other
materials in accordance with a scheduling order that the Court will enter.
B. 	The TransCanada Motion.
In the TransCanada Motion, TransCanada seeks to strike the expert reports of
Cameron and Priddle because the reports: (1) are not proper rebuttal reports; and (2)
constitute inadmissible legal-opinion testimony, improperly apply foreign law to the facts
and improperly assist the court in resolving factual issues.
By way of background, TransCanada filed its motion for summary judgment on
November 2, 2006. USGen filed its opposition and cross-motion for summary judgment
two weeks later. In its cross-motion, USGen argued that TransCanada was never at risk
under the NEB rate-making process because it passes all gains and losses to its shippers
in the form of higher or lower tolls; accordingly, TransCanada suffered no loss as a result
of the rejection of the Agreement. USGen contended that the Supreme Court of Canada’s
decision in Canadian Forest Products applies. USGen argued that in that case the
Canadian Supreme Court categorically rejected the notion that a plaintiff can recover
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damages when it was never at risk for the loss. USGen maintained that the facts and
mechanism by which the plaintiff in Canadian Forest Products was insulated against
losses are similar to those in this case.
In support of its reply, TransCanada filed the affidavit of Yates, who contended
that Canadian Forest Products did not apply because the NEB regulatory scheme differed
from the scheme in Canadian Forest Products. The basis for this opinion was, among
other reasons: (1) TransCanada is not assured recovery of its costs, but only has the
opportunity to recover those costs, through its rate-making process; (2) even when it has
recovered costs, such as the cost of USGen’s rejection of the Agreement, it is subject to a
duty of prudence to pursue recovery of those costs; (3) because of that duty of prudence,
it faces risk that the NEB will reverse its decision to allow the recovery of the rejection
costs through its tolls; and (4) the regulatory scheme in Canadian Forest Products
presented no such risks, and therefore that opinion does not apply to this case.
The parties deferred further briefing on summary judgment until they completed
expert discovery. Subsequently, TransCanada served USGen with the report of Yates,
which supplemented the affidavit he submitted in connection with TransCanada’s
summary judgment reply brief. USGen then served TransCanada with the expert reports
of Cameron and Priddle. Cameron’s report stated that the risk that the NEB would
reverse its decision is “fanciful”, and Priddle’s report stated that there is “no realistic
likelihood” of reversal.
1. 	Rebuttal Reports
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The court disagrees that Cameron’s and Priddle’s reports should be stricken as
improper rebuttal reports. “Rebuttal evidence is defined as “evidence given to explain,
repel, counteract, or disprove facts given in evidence by the opposing party. That which
tends to explain or contradict or disprove evidence offered by the adverse party.” United
States v. Stitt, 250 F.3d 878, 897 (4th Cir. 2001) (quoting Black's Law Dictionary 1267
(6th ed. 1990)). “There must be a nexus between the purported rebuttal evidence and the
evidence that the purported rebuttal evidence seeks to rebut.” Stitt, 250 F.3d at 897
(citing United States v. Curry, 512 F.2d 1299 (4th Cir. 1975)).
Cameron’s and Priddle’s reports are clearly rebuttal reports. Yates offered the
opinion that TransCanada remains at risk for the costs of the rejection of the Agreement
notwithstanding the prior action of the NEB. Cameron and Priddle acknowledge that
risk, hypothetically, but contend it is “fanciful” and “not realistic,” respectively.14 The
reports are intended to counteract Yates’ opinion and are therefore rebuttal in nature.
Moreover, the court will not strike the reports on the basis that the opinions
should have been included in USGen’s case-in-chief reports. TransCanada’s position is
that USGen should have anticipated Yates’ argument. The court concludes that striking
the reports of Cameron and Priddle on this basis is entirely too harsh under the
circumstances. It may be the case that USGen could have more fully addressed the risk
factor in an expert submission with its cross-motion for summary judgment.
Nonetheless, it is likely that USGen still would have submitted a rebuttal report not
altogether different than the reports it has submitted. Further, the court finds that it was
14 Cameron also rebuts various opinions of TransCanada’s witnesses on the mitigation issues.
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not unreasonable for USGen to raise the Canadian Forest Products case in its cross-
motion, but await TransCanada’s reply before it decided on the scope of the expert
opinion it needed in support of its position.
TransCanada has suffered no real prejudice. Discovery has been extended to
allow the completion of the expert reports. The parties have not completed briefing on
summary judgment. To eliminate the potential for any prejudice to TransCanada that
could result from the sequence of the delivery of the expert reports, the court will allow
TransCanada to serve a surrebutal report.
2. 	Legal-opinion testimony.
The dispute between the parties raises, in part, the distinction between expert
reports submitted pursuant to Fed. R. Civ. P. 44.1 and reports submitted under Fed. R.
Evid. 702. The distinction is important, albeit more so in jury trials: Fed. R. Civ. P. 44.1
submissions are made only to the judge to assist the court in formulating the conclusions
of law, while Fed. R. Evid. 702 opinions are submitted to the factfinder as part of the
evidentiary record.
The reports have elements both of foreign law reports under Fed. R. Civ. P. 44.1
and expert opinion reports under Fed. R. Evid. 702. For example, Yates’ opinion that
Canadian Forest Products is inapplicable is clearly a Fed. R. Civ. P. 44.1 submission.
Yates, Priddle and Cameron, however, are all offered as experts in the field of NEB
regulatory matters. There are aspects of their opinions that can be characterized as Fed.
R. Evid. 702 opinions on regulatory matters, without regard to the foreign law nature of
the NEB proceeding. Much of the discussion in the reports about what the NEB did in
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2004 and why the NEB did it is in the nature of Fed. R. Evid. 702 opinion testimony,
relying upon facts or information they presumably obtained in accordance with Fed. R.
Evid. 703. 15 Such matters could be appropriate for submission to the factfinder under
Fed. R. Evid. 702, assuming the other elements for admissibility are met. The court
therefore turns to the standards for Fed. R. Evid. 702 and Fed. R. Civ. P. 44.1.
a. 	Fed. R. Evid. 702 and 704.
Fed. R. Evid. 702 provides:
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.
Fed. R. Evid. 704(a), with one exception, provides that “testimony in the form of an
opinion or inference otherwise admissible is not objectionable because it embraces an
ultimate issue to be decided by the trier of fact.” This rule, however, “does not lower the
bars so as to admit all opinions.” United States v. Barile, 286 F.3d 749, 759 (4th Cir.
2002) (quoting Advisory Committee Notes). “Expert testimony on an ultimate issue is
therefore excludable under Rule 702 if it does not aid the jury.” Id. at 760 (citing Kopf v.
Skyrm, 993 F.2d 374, 377-78 (4th Cir. 1993)). “Expert testimony that merely states a
legal conclusion is less likely to assist the jury in its determination.” Id. See also,
15 The court does not rule in this decision whether the Priddle and Cameron reports comply with Fed. R.
Evid. 702, 703, 704. TransCanada has stated it intends to make a Daubert challenge to Milne, Cameron
and Priddle.
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Weinstein's Federal Evidence § 704.04[2][a] (2d ed. 2001) (“The most common reason
for excluding opinion testimony that gives legal conclusion is lack of helpfulness . . . .
The testimony supplies the jury with no information other than the witness's view of how
the verdict should read.”)
In Adalman v. Baker, Watts & Co., 807 F.2d 359, 366 (4th Cir. 1986), the Court
of Appeals for the Fourth Circuit affirmed a district court’s decision prohibiting an expert
from testifying “to the jury as to what the applicable law may mean, and what the
applicable law does or does not require[.]” In reaching its decision, the Adalman court
stated:
[I]t is the responsibility – and the duty – of the court to
state to the jury the meaning and applicability of the
appropriate law, leaving to the jury the task of determining
the facts which may or may not bring the challenged
conduct within the scope of the court's instruction as to the
law.
Id. Further, in cases concerning domestic law, the Court could not “…conceive [any]
circumstances which would shift this burden from the court to the jury, where the jury
judgment would be influenced, if not made, on the basis of expert witness testimony
which would undoubtedly follow the usual pattern of conflicting expert opinions.” Id.
Critically, the Adalman court expressly distinguished cases where the meaning and
applicability of foreign law was at issue:
There are cases, particularly those involving foreign law,
where the court may receive and consider the opinions of
experts in that foreign law, usually practitioners in that law,
as to the meaning and applicability of that law to a
controversy pending in one of our courts. There, however,
the significant difference is that such expert witness
evidence is presented to the court – not to the jury – to aid
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the court in formulating its charge in the relatively rare
such cases in which a jury is involved.
Id. Without expressly stating, in addressing foreign law submissions, the Fourth Circuit
appeared to be referring to Fed. R. Civ. P. 44.1 submissions.
b. 	Fed. R. Civ. P. 44.1
Fed. R. Civ. P. 44.1 provides:
A party who intends to raise an issue concerning the law of
a foreign country shall give notice by pleadings or other
reasonable written notice. The court, in determining foreign
law, may consider any relevant material or source,
including testimony, whether or not submitted by a party or
admissible under the Federal Rules of Evidence. The
court's determination shall be treated as a ruling on a
question of law.
This rule seeks to provide a “uniform and effective procedure for raising and determining
an issue concerning the law of a foreign country.” See § 44.1App.01 (Original
Committee Note of 1966 to Fed. R. Civ. P. 44.1).
Courts may use expert testimony to determine foreign law.16 Grupo Protexa, S.A.
v. All Am. Marine Slip, 20 F.3d 1224, 1230, n.6 (3d Cir. 1994). Such testimony need not
be live and may be made via declarations or affidavit. Universe Sales Co., Ltd. v. Silver
Castle, Ltd., 182 F.3d 1036, 1038 (9th Cir. 1999). The court may give an expert opinion
whatever probative value it deems warranted under the circumstances. Argonaut P’ship,
16 The scope of what a court can consider under Fed. R. Civ. P 44.1 is very broad. In order to arrive at legal
conclusions under foreign law, courts may consider: (1) the opinions of expert witnesses; (2) extracts from
foreign legal material; and (3) even material that would be inadmissible at trial. Nat'l Group for Communs.
& Computers Ltd. v. Lucent Techs. Int'l Inc., 331 F. Supp. 2d 290, 294 (D. N.J. 2004). In addition, Fed. R.
Civ. P. 44.1 “provides courts with broad authority to conduct their own independent research to determine
foreign law.” Bel-Ray Co., Inc. v. Chemrite Ltd., 181 F.3d 435, 440 (3d Cir. 1999). Expert opinions
regarding foreign law need not be under oath. United States v. First Nat'l Bank of Chicago, 699 F.2d 341,
343-344 (7th Cir. 1983) (relying on unsworn letters from foreign counsel).
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L.P. v. Bankers Trustee Co., Ltd., No. 96 CIV. 1970 (MBM), 96 CIV 2222 (MBM), 1997
WL 45521, at *9 (S.D.N.Y. Feb. 4, 1997) (citing United States v. First Nat'l Bank of
Chicago, 699 F.2d 341, 344 (7th Cir. 1983)). “In fact, federal judges may reject even the
uncontradicted conclusions of an expert witness and reach their own decisions on the
basis of independent examination of foreign legal authorities.” Haywin Textile Prods.,
Inc. v. Int’l Fin. Inv. & Commerce Bank Ltd., 137 F. Supp. 2d 431, 435 (S.D.N.Y. 2001)
(quoting Curtis v. Beatrice Foods Co., 481 F. Supp. 1275, 1285 (S.D.N.Y. 1980), aff'd,
633 F.2d 203 (2d Cir. 1980); see also, Zurich Capital Mks. Inc. v. Coglianese, 383 F.
Supp. 2d 1041, 1053 (N.D. Ill. 2005). “[D]ifferences of opinion among experts on the
content, applicability, or interpretation of foreign law do not create a genuine issue as to
any material fact.” Lucent Techs. Int'l Inc., 331 F. Supp. 2d at 294; Matter of the
Arbitration Between Trans Chem. Ltd. and China Nat'l Mach. Import & Export Corp.,
978 F. Supp. 266, 275 (S.D. Tex. 1997); See also, Banco de Credito Indus., S.A. v.
Tesoreria General de la Seguridad Social de Espana, 990 F.2d 827, 838 (5th Cir. 1993)
(“[E]ven differences of opinion on the content, applicability, or interpretation of the
foreign provision may not be characterized as a "genuine issue as to any material fact”);
United States v. BCCI Holdings (Luxembourg), S.A., 977 F. Supp. 1, 6 (D. D.C. 1997),
aff'd, 159 F.3d 637 (D.C. Cir. 1998).
TransCanada argues that an expert proffered under Fed. R. Civ. P. 44.1 may not
apply the law to the facts. It is correct that there are a number of cases that hold that an
expert proffered under Fed. R. Civ. P. 44.1 may not offer to find the facts or assist the
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factfinder in finding the facts.17 But that is a different issue than a claim that an expert
proffered under Fed. R. Civ. P. 44.1 may not apply the foreign law to the facts.
The Court of Appeals for the Fourth Circuit, tacitly at least, has been tolerant of
allowing Fed. R. Civ. P. 44.1 experts to offer their opinion on the applicability of the
foreign law to the facts. See Adalman, 807 F.2d at 366 (In foreign law cases, the court
may receive and consider expert opinions as to the “meaning and applicability” of the
foreign law.); Basch v. Westinghouse Elec. Corp., 777 F.2d 165, 170 (4th Cir. 1985).
In Basch, a widow filed suit against her husband’s employer seeking damages for
her husband’s death. One of the principle theories of liability was that the husband’s
death was caused by an Iranian physician whom the widow contended was an employee
of the husband’s employer. The parties stipulated that Iranian law governed. Both parties
presented expert opinions on whether the physician was in fact an employee under
Iranian law. Both experts applied Iranian law to the facts as they understood them and
reached legal conclusions regarding the issue of the physician’s employment status. Id.
While the experts in Basch initially agreed that Dr. Salami was not an employee of
Westinghouse under Iranian law, the plaintiffs’ expert subsequently changed his opinion
based on additional facts. Id. at n. 8. In reaching its determination, the Basch court
considered both expert opinions regarding the substance of Iranian law and its
applicability to the facts of that case.
17 See e.g., ID Sec. Sys. Can., Inc. v. Checkpoint Sys., 198 F. Supp. 2d 598, 623 (E.D. Pa. 2002) (“To the
extent that Olah [the expert] seeks to find or assist the court in finding the facts of this case, Olah’s
testimony invades the province of the factfinder and it is not an appropriate function of expert testimony
under Rule 44.1.”); Lithuanian Commerce Corp., Ltd. v. Sara Lee Hosiery, 177 F.R.D. 245, 264 (D. N.J.
1997) vacated in part on other grounds, 179 F.R.D. 450 (D.N.J. 1998), (“[T]his report will subvert the
jury's function in that it is the responsibility of the jury, not Mr. Pukas or the Lithuanian government, to
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A case providing an example of the allowable scope of an expert opinion under
Fed. R. Civ. P. 44.1 in a bench trial is Vlachos v. M/V Proso, 637 F.Supp. 1354 (D. Md.
1986). There, the court was called upon to determine whether a seaman plaintiff had a
claim for recovery under Greek law. In determining Greek law, the court considered the
deposition testimony and an affidavit of a Greek attorney, and the trial testimony of a
second Greek attorney. Id. at 1366. The opinion is replete with examples of testimony
by the Greek attorneys applying Greek law to the facts of the case. Indeed, one of the
experts answered the court’s specific question on the application of the law to the facts:
[I]f the Court comes to the conclusion that the Captain [defendant] . . .
would have had the knowledge that it was dangerous . . . to have a seaman
go up this mast and do this kind of work without being equipped with the
proper safety device, would that be the equivalent of . . . dolus [the basis
of liability under Greek law]?”
Id. at 1369. Further, that expert testified that he had reviewed the depositions and heard
the testimony and stated “there is not room . . . for . . . a Greek Court, under Greek law to
hold that there was dolus on the part of the employer . . . .” Id. See also, Bostingl v.
Maryland Bank, N.A., 662 F. Supp. 882, 885 (D. Md. 1987) affirmed 841 F.2d 1122 (4th
Cir. 1988) (“The Court notes that the defendants’ experts cogently state the reasons [in
their Fed. R. Civ. P. 44.1 submission on Greek law] supporting their conclusion that there
was no causal connection between the alleged negligence of the defendants . . . [and the
plaintiff’s harm].”)
In each of the foregoing cases, the lower courts or the Court of Appeals reached
its own conclusion on the foreign law and applied it to the facts of the case. In doing so,
determine what the facts are in light of the applicable law. For those reasons, Mr. Pukas’ report shall not be
admitted into evidence at trial and he shall be barred from testifying before the jury.”).
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however, the courts considered expert testimony that included the application of the law
to those facts.
TransCanada also objects to the reports as containing improper legal-opinion
testimony. As noted earlier, legal-opinion testimony that may well be improper to submit
to the factfinder under Fed. R. Evid. 702 is entirely appropriate to submit to the court
under Fed. R. Civ. P. 44.1. 	See Adalman, 807 F. 2d at 366 (differentiating between
legal-opinion testimony offered in cases concerning domestic law and legal-opinion
testimony offered in cases concerning foreign law.). The rationale for this differentiation
is that, in the latter case, “such expert witness evidence is presented to the court – not to
the jury – to aid the court in formulating its charge . . . .” Id.
To the extent the reports contain matters that are to be submitted to the factfinder
under Fed. R. Evid. 702, the court is mindful that the Fourth Circuit has consistently held
that conclusory legal-opinion testimony is not admissible because it does not help the
jury and may in fact lead to confusion because the jury may decide to rely on the expert’s
rendition of the law rather than the instruction given by the judge. See Barile, 286 F.3d at
760; Adalman, 807 F.2d at 366 (“Permitting such testimony as to legal conclusions gives
cogent meaning to the apprehensions that jurors will turn to the expert, rather than to the
judge, for guidance on the applicable law.”) To that end, the task of the trial court is “to
distinguish opinion testimony that embraces an ultimate issue of fact from opinion
testimony that states a legal conclusion. This task, however, is not an easy one.” Barile,
286 F.3d at 760; see also, Adalman, 807 F.2d at 366. As the Fourth Circuit has stated:
The proffer of expert opinion in many cases raises problems difficult
of resolution by the trial court, where the line must be drawn between
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proper expert evidence as to facts, the inferences to be drawn from
those facts, and the opinions of the expert, on the one hand, and
testimony as to the meaning and applicability of the appropriate law,
on the other hand. While sometimes difficult to discern that line,
especially in the heat of trial, it nonetheless must be drawn.
Id. at 366.
While the court recognizes the importance of drawing the line in order to shield
the factfinder from confusing and unhelpful testimony, the court need not be quite so
sharp-penciled in drawing the line in this case. This matter will be resolved without a
jury. If resolved on summary judgment, the court will issue its statement of undisputed
material facts and conclusions of law. If resolved after trial, this court will issue findings
of fact and conclusions of law. In either circumstance, the court will be required to
distinguish between factual matters and legal conclusions. But that is the usual function
of this court, and sorting out the difference between opinion testimony that embraces an
ultimate issue of fact, on the one hand, from opinion testimony that states a legal
conclusion under Fed. R. Civ. P 44.1, on the other, does not implicate the same concerns
as if a jury were the factfinder. Further, because the parties will have an extensive
statement of the basis for this court’s decision, each party will have a full record to assess
whether the court has failed to properly make these distinctions. Finally, although the
reports include matters that could be submitted to the factfinder under Fed. R. Evid. 702,
it appears that virtually all of the legal-opinion testimony in the reports focus on foreign
law opinion and will only be pertinent to the court’s conclusions of law.
Accordingly, to the extent the reports are Fed. R. Civ. P. 44.1 reports, the court
will allow the experts to offer legal-opinion testimony and offer their opinions on the
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applicability of the foreign law to the facts. While the court independently will determine
all conclusions of law, and will apply the law to the facts, allowing the experts to offer
their opinions on the applicability of the law to the facts in their Fed. R. Civ. P. 44.1
submissions could be helpful to the court. The court further concludes that this approach
is consistent with the practice of the courts within the Fourth Circuit, as described in the
cases identified above, especially in non-jury matters. The court also notes that
TransCanada opened this door with Yates’ report, and that report includes statements in
which Yates applies the foreign law to the facts of the case.18 Thus, the TransCanada
Motion is denied to the extent they are based on the claim that experts under Fed. R. Civ.
P. 44.1 cannot offer legal-opinion testimony or apply the foreign law to the facts.
The court will defer ruling on the remainder of the TransCanada Motion for
several reasons. First, the record before the court is incomplete on the significance of the
expert opinions to the underlying objection to the TransCanada Claim. The parties have
not completed briefing on the summary judgment issues. USGen has not filed its reply
brief integrating the significance of its experts’ contentions. TransCanada obviously has
not had a chance to respond to the Cameron and Priddle reports in the context of
summary judgment. Thus, the record is not altogether clear on the extent to
which the opinions in the reports of Priddle and Cameron are pertinent to the merits of
the underlying claim objections.19
18 See e.g. Yates’ report at ¶25. (“.... it is my opinion that [the Supreme Court of Canada’s decision in
British Columbia v. Canadian Forest Products Ltd.] is entirely inapplicable to this case.”)
19 At the hearing, TransCanada contended that the court need only determine that the risk exists that the
NEB would reverse itself; USGen contended that the court must also determine that the risk is material.
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To some extent, the parties argued the significance of the expert opinions to
Canadian Forest Products at the July 26 th hearing on the instant motions. The better
approach would be for the parties to complete the briefing on summary judgment. The
court will then be in a better position to determine what issues remain pending and
whether the expert opinions are appropriate matters to consider with respect to those
rulings. On the record before the court, it appears that the court is presently being called
upon to offer a blanket advisory opinion that may have little or no significance to the
merits of the underlying claims.
With respect to whether or not Cameron and Priddle offered improper factual
testimony, the court notes that the parties did not submit the extensive exhibits and
supporting documents to the reports that apparently provide the basis for some or all of
the factual statements made within. Thus, the court does not have before it a complete
record. Moreover, TransCanada has stated it intends to make a Daubert challenge to
Milne’s, Cameron’s and Priddle’s testimony. The court can address the remaining issues
in the context of that challenge.
III. CONCLUSION
The court will enter an order consistent with the foregoing.
cc:
Gordon A. Coffee, Esq.
Peter K. Dykema, Esq.
Winston & Strawn, LLP
1700 K Street, NW
Washington, D.C. 20005
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Marc E. Richards, Esq.
Blank Rome LLP,
The Chrysler Building
405 Lexington Avenue,
New York, N.Y. 10174
David W. Elrod, Esq.
Craig Tadlock, Esq
Elrod, PLLC
500 N. Akard St., Suite 3000
Dallas, Texas 75201
Adam M. Spence, Esq.
Michael J. Lentz, Esq.
The Law Office of Adam M. Spence
P.O. Box 20369
Baltimore, MD 21284-0369
Office of the U.S. Trustee
6305 Ivy Lane, Suite 600
Greenbelt, MD 20770
END OF MEMORANDUM
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