INSURANCE: Insurer satisfied Endorsement by recommending settlement of $850,000 verdict by $250,000 from manufacturer and $600,000 from insurer that would satisfy parents of deceased ball player (manufacturer declined settlement, appealed, lost)… insurer satisfied post-judgment interest provision of Endorsement by offering to pay the part of the judgment within policy limits, relieved of post-judgment interest, fees… Molloy.

Brandon Patch, 18, died after being hit in the head by a ball batted off Hillerich & Bradsby’s CB-18 aluminum bat 7/25/03. His parents sued H&B in State Court asserting manufacturing & design defect and failure to warn. H&B’s ACE policy indemnified H&B for $2 million, but it had a $250,000 self-insured retention for indemnity which meant that it had to pay the first $250,000 to satisfy any judgment or settlement. The policy also provided $1 million coverage per occurrence for Allocated Loss Adjustment Expenses (attorney fees, costs, post-judgment interest). H&B had a self-insured retention for this coverage in the amount of $350,000. These coverages were governed by a “Self-Insured Retention with ALAE Limits Endorsement.” A Helena jury returned an $850,000 verdict for Patches. H&B wanted to appeal; ACE wanted to put the case to rest. It recommended that H&B pay $250,000 (the self-insured retention for indemnity) and ACE pay $600,000. H&B did not heed this recommendation. ACE took the position that under the Endorsement it could stop paying post-judgment interest and attorney fees (Allocated Loss Adjustment Expenses) because it had recommended a settlement that was acceptable to Patches. H&B pursued its appeal and lost. Patch (Mont. 2011). ACE then paid $600,000 to H&B, which ACE considered its share of the judgment. It also paid what it believed was its share of the ALAE owed up to the point that it recommended settlement. H&B filed this suit, claiming that ACE wrongly refused to pay further post-judgment interest and fees after it recommended that they pay the verdict. The Court granted summary judgment for ACE 3/7/13 with this opinion to follow.

ACE argues that under Pgf. h of the Endorsement it had no obligation to pay Allocated Loss Adjustment Expenses after 11/17/09 when it recommended that H&B and ACE pay the full verdict. Pgf. h, by its plain language, applies only to “settlements.” The question is whether ACE’s recommendation was a recommendation to make a “settlement.” A settlement is a “binding contractual agreement … through which the parties arrange for final disposition of the case.”Carlson (26 MFR 31). “`Contractual agreement’ refers to any enforceable contract.” Id. The question is whether Patches’ willingness to accept an agreement to pay the verdict, which ACE recommended, was a “contractual agreement.” A contract is an “agreement to do or not do a certain thing.” MCA 28-2-101;Kluver (Mont. 2012). “Sufficient cause or consideration” is an essential element. “Consideration requires that the contracting parties, each as to the other, confer some legal benefit and/or incur some detriment as an inducement to performance.” MPEA (Mont. 1995). ACE’s recommendation to H&B was a recommendation to make a settlement. Had they paid the $850,000, Patches would have received payment of the judgment without the risk of it being vacated on appeal, and H&B and ACE would have been relieved of the obligation to pay post-judgment interest, among other benefits provided by the release (e.g., a disclaimer of liability). Since ACE satisfied the requirements of Pgf. h it had no “obligation to pay any `ALAE’ incurred in excess of the `ALAE Self Insured Retention’ after the time [it] requested [H&B to] tender the remaining limits.” H&B’s reading of the “unreasonably withhold its consent” provision in Pgf. h is not reasonable. The plain language means only that H&B cannot unreasonably withhold its consent to tender the self-insured retention if ACE requests that tender. It does not mean that H&B can force ACE to continue paying ALAE as long as H&B is reasonably withholding consent to a settlement.

ACE also argues that it was excused from paying further post-judgment interest after 11/17/09 under the “post-judgment interest clause” in §I of the Endorsement because it offered to pay that part of the judgment that is within applicable limits of insurance. H&B responds by honing in on the “In such event” phrase in the preceding sentence, and argues that this entire section only applies when ACE assumes defense of the case. ACE’s position is more persuasive. This clause is a catch-all at the end of §I. It is not, for example, labeled as a specific clause that applies only when ACE assumes the defense. ACE satisfied this clause because it “paid, offered to pay, or deposited in court that part of the judgment that is within the applicable limits of insurance.” H&B reasons that because ACE offered to pay only $600,000 it did not offer to pay all of the judgment as to trigger this clause. However, ACE did not have to pay the entire judgment including H&B’s $250,000 self-insured retention, because the “applicable limit of insurance” is the amount that ACE will pay in excess of the self-insured retention. §III.2 of the Endorsement states: “The LIMITS OF INSURANCE as shown in the Declarations shall apply in excess of the `Self Insured Retention’ shown in the Declarations. You agree to assume payment of the `Self Insured Retention’.” The “part of the judgment that is within the applicable limits of insurance” is $600,000 — $850,000 minus the $250,000 self-insured retention. When ACE offered to pay that amount it was relieved from paying further post-judgment interest. Contrary to H&B’s suggestion, the Endorsement does not require ACE to have extended that offer to Patches; it only requires ACE to have made an offer to pay the applicable part of the judgment, which it did.

There is no reason the UTPA claim should not be dismissed with prejudice and all pending motions dismissed as moot. Since ACE did not breach the contractual provisions at issue it cannot be liable under the UTPA. MCA 33-18-242(5). If H&B appeals and prevails, the UTPA claim and motion to strike will, like the phoenix, be resurrected.

Hillerich & Bradsby v. ACE American Ins., 40 MFR 219, 3/26/13.

Jason Ritchie, Kyle Gray, and Scott Mitchell (Holland & Hart), Billings, for H&H; John Williams & Thomas Jones (Cozen O’Connor), Seattle, and Perry Schneider (Milodragovich, Dale, Steinbrenner & Binney), Missoula, for ACE.

BUS SOFTWARE CONTRACT: $28,409,512 verdict reduced by $9,439,756 consequential damages as precluded by contract and $70,000 lost perpetual license fees duplicative of award for lost license fees… no reduction or new trial on account of expert’s possibly weak analysis based on assumption that a rational customer would have purchased Plaintiff’s software absent Defendant’s unauthorized look-up access or had it used best efforts to sell the software… Molloy.

A Missoula jury awarded Education Logistics of Missoula and affiliate Logistics Management of Mercer Island $28,409,512 for failure of Laidlaw Transit to promote Edulog’s computerized bus routing software to Laidlaw’s school district customers in the US and Canada 1/11/03-8/12 pursuant to a 1992 agreement and for providing unlicensed access to districts. The jury found that Laidlaw breached the contract with Edulog by failing to use its “best efforts” to promote the use of the Edulog software and failed to prove by a preponderance of the evidence that any breach was excused by prior material breach or estoppel, and awarded $8,596,956 lost license fees, $8,596,956 lost annual license maintenance fees, $70,000 lost perpetual license fees, and $9,460,000 lost royalties. It found that Laidlaw breached the contract by providing districts unlicensed access to the Edulog software and that the breach was not excused by prior material breach or estoppel, and awarded $842,800 lost license fees and $842,800 lost annual maintenance fees. The Court entered judgment for Plaintiffs for $28,409,512. (MLW 11/24/12). Prior to close of the case, Laidlaw moved for JML as to whether the annual license & maintenance fees constituted consequential damages that should be excluded. The Court advised that it was reserving ruling as to consequential damages until after the verdict. Laidlaw also moved for JML as to Neil Beaton’s expert testimony, arguing that it should be excluded for a variety of reasons. He was allowed to testify following a Rule 104 hearing. While I expressed reservations as to some of his assumptions, I determined that it was a matter of weight as opposed to admissibility.

Some of Laidlaw’s arguments here present a unique situation — some either were or were not raised in its summary judgment briefing but were not raised in its 50(a) motion. Edulog argues that those arguments are waived. However, if a party raises a pure question of law before the case goes to the jury it does not need to raise them in a 50(a) or 50(b) motion to preserve them for appeal, Cochran (9th Cir. 2000), because a pure question of law does not implicate sufficiency of the evidence presented to the jury. Moreover, the 7th Circuit has held that a judge may revisit after trial issues raised at the summary judgment stage “if he has a conviction at once strong and reasonable that the earlier ruling was wrong, and if rescinding it would not cause undue harm to the party that benefitted from it.”Avita (7th Cir. 1995) (citing Arizona (US 1983). Laidlaw is now asking to revisit questions that it raised in its summary judgment motion but which the Court at the time determined it did not need to resolve. It did not raise those arguments in its 50(a) motion, but it did raise them in its 50(b) motion. It is unnecessary to resolve what standard applies to these arguments because they fail on the merits under any standard.

Laidlaw argued before and at trial that annual license & maintenance fees should be excluded because they are consequential damages, recovery of which is barred by the Agreement. Edulog insists that the award is for general damages. General damages are “damages the law would impute as the natural, necessary and logical consequence of the wrong or breach;” consequential damages are “the natural but not necessary result of the wrong or breach.” Byrum (Mont. 2007). Consequential damages must be “contemplated” at the time of contracting. McEwen (Mont. 2012). The Agreement makes no mention of annual license & maintenance fees. For instance, it does not require payment for annual license & maintenance fees. They are not the “natural, necessary and logical consequence of” Laidlaw’s breach of the Agreement. Edulog argues that they are not merely fees for upgrades & maintenance, but are license fees required for a district to continue as a licensed user, which Laidlaw has an ongoing duty to promote. However, nothing in the plain language of §4.7.3 which Edulog cites implies that it will continue to charge districts annual license & maintenance fees after the district has purchased a license. If anything, it prohibits such ongoing charges — the license is granted to the district “without further charge.” The fact that Edulog was able to recover annual license & maintenance fees from the districts does not mean that the Agreement expressly permitted them. Nothing in the agreement suggests that lost annual license & maintenance fees are a “natural, necessary and logical consequence” of Laidlaw’s breach of the Agreement. The conclusion here is that they are consequential damages expressly barred by §13.0: “LAIDLAW SHALL NOT BE LIABLE FOR INCIDENTAL, SPECIAL, OR CONSEQUENTIAL DAMAGES.” But these fees are not likely even consequential damages — there is no evidence that the parties “contemplated” them at the time of contracting — and if anything, terms of the contract suggest that Edulog could not charge such fees. So even if the lost annual license & maintenance fees are the natural but not necessary result of the breach, Edulog could not recover them because there is no evidence that the parties “contemplated” them at the time of contracting.

Laidlaw also claims that $26,723,912 — all but the $842,000 for lost license fees on Edulog’s unauthorized look-up access claim — are consequential damages. It insists that the $26,723,912 was for anticipated lost profits from hypothetical transactions with 3rd parties, while the $842,000 resulted from transactions that actually occurred and were direct damages. It argues that the $70,000 for lost perpetual license fees was an alternative to an award for lost full license fees. Edulog did not object to this proposition that awards for both would be duplicative, and its expert testified to that effect. Thus it is unnecessary to resolve whether the lost perpetual license fees are consequential damages. This leaves the lost license fees and lost royalties associated with the best efforts claim. These damages are not consequential; they are general. Laidlaw relies on several cases and secondary sources standing for the “hornbook” proposition that lost profits are consequential damages. It is unclear which hornbook it is reading because the law is at odds with its argument. While lost profits may be consequential damages, they are not necessarily consequential damages. They may be recovered as direct damages in some circumstances, such as when profits are the object of and inducement to the contract. Green (Mont. 1962); Carlson (Mont. 1910). The same is true in other jurisdictions. The royalties and license fees were the very objects of the Agreement, and they induced Edulog to enter the Agreement.

Laidlaw argues that Beaton’s economic analysis was “speculative, scientifically unsupported, legally unsupportable, mathematically and mechanically unreliable, highly prejudicial, and could not provide evidentiary support for the verdict.” It argues that his analysis was merely of lost profits, which the Court had earlier precluded in its summary judgment. The question of lost profits was addressed in the order only in the context of Alan Hess’s report, which focused on forecasted lost profits but was not tied to specific customers. The gist of Hess’s reasoning was that Edulog’s profits had declined while competitor VersaTrans’s had increased, so Laidlaw’s conduct must have been the cause. His opinion testimony was properly excluded. The Court expressly treated his “lost profits” analysis separately from the look-up-access and best-efforts damages analyzed by Beaton, and never concluded that his analysis concerned only “lost profits” and would have been excluded by the summary judgment order. Significantly, Laidlaw treated the lost profits damages calculated by Hess — which were expressly excluded — separately from the look-up-access and best-efforts damages calculated by Beaton. Beaton testified that his analysis was based on an assumption that 100% of Laidlaw’s customers would have purchased Edulog’s software had it used its best efforts and not granted unauthorized access. Laidlaw argues that this assumption is wholly unsupported by any evidence. While there may be some weaknesses in his opinion — perhaps serious weaknesses — those problems go to weight, not admissibility. Laidlaw’s counsel shrewdly challenged him in voir dire and cross, asking whether customers always made rational decisions and, if not, how he could assume that 100% of Laidlaw’s customers would have acted rationally and purchased Edulog’s software and would all of them have thought Edulog was a superior product. Beaton stuck to his guns, claiming that every customer would have purchased Edulog’s software. Laidlaw’s counsel thoroughly communicated these critiques to the jury. The verdict arguably shows that the cross had a significant impact in that the jury awarded less than half the damages that Beaton estimated. The verdict is well within the jury’s prerogative, given the conflicting proof. Laidlaw also argues that Beaton’s “acceleration assumptions” had no basis in fact. They concern the statute of limitations that apply to Edulog’s claims — Edulog can recover only for breaches that occurred before 1/11/03. Laidlaw’s counsel asked probing questions on cross as to whether Beaton was accelerating installation dates to get around the statute of limitations, and in closing attacked his acceleration assumptions. Beaton’s assumption might be fragile and is, perhaps, weakly supported, but Laidlaw sharply cross-examined him and exposed its view of the weakness to the jury, which was instructed not to consider any breaches that occurred prior to 1/11/03. Beaton admitted that there were math and mechanical errors in his schedule of damages. Laidlaw’s counsel thoroughly highlighted these errors on cross and in closing. They go to weight, not admissibility. Beaton testified over objection about First Student/Laidlaw’s 2012 revenues & profits. Laidlaw contends that this was prejudicial and warrants a new trial. Edulog counters that it was based solely on a stipulated exhibit and Laidlaw opened the door because it claimed it did not have the revenue to perform under the contract. The first rationale is dispositive. Beaton’s testimony was based solely on a stipulated exhibit.

In arguing that the award as to best efforts and unauthorized look-up access is not supported by substantial evidence, Laidlaw essentially re-hashes its closing arguments. As Edulog discusses in response, there is evidence on which a reasonable jury could have based its award. Moreover, while it awarded the same damage amounts across different categories, that correctable error alone does not warrant a new trial. Except as discussed above, the Court will not 2nd-guess the jury’s calculation of damages.

Education Logistics and Logistics Management v. Laidlaw Transit, 40 MFR 242, 4/1/13.

Ronald Bender & Matthew Cuffe (Worden Thane), Missoula, and Samuel Bull & Charles Nomellini (Foster Pepper), Seattle, for Plaintiffs; Debra Parker, Missoula, and James Jordan & Devon Sharp (Munsch Hardt Kopf & Harr), Dallas, for Laidlaw.

DEFAULT JUDGMENT: $75,000, §1983, deprivations by private prisoner transporter… Lynch/Molloy.

Magistrate Lynch. Russell Avery was arrested in Iowa on a warrant from Missoula Co. for rape and assault. He was transported to the Missoula jail by Extradition Transport, arriving 10/6/11. According to Avery, he was shackled continuously during the 8-day transport, not given an opportunity to shower, not given proper hygiene, denied access to a restroom up to 8 hours at a time, he and the 5 other prisoners were told to urinate in water bottles, and the transport did not stop at any jail or related facility to allow an opportunity for shower, sleep, or rest until 10/5, at which time an inmate escaped in ND and Avery and the others were transported to a jail until 8 a.m. the next day where they were allowed to shower and sleep. He contends that he has scars on his wrists & ankles and the pain was “terrible beyond description,” and he also suffered stress, anxiety, and mental anguish. Extradition was served with his summons & complaint by the Marshals Service 4/30/12. It did not appear or answer and the Clerk entered default 7/11. At issue is whether default judgment should be entered.

Default judgment factors include: (1) the possibility of prejudice to the plaintiff, (2) the merits of the substantive claim, (3) sufficiency of the complaint, (4) the sum of money at stake, (5) the possibility of a dispute as to material facts, (6) whether the default was due to excusable neglect, (7) the strong policy underlying the FRCivP favoring decisions on the merits. McCool (9th Cir. 1986). The Court previously found that the 1st, 3rd, and 6th, factors have been met. There is no indication that Extradition’s default is due to excusable neglect or that the material facts are subject to dispute since it has not presented a defense or otherwise communicated with the Court. It does not appear that litigation of the merits will be possible due to its refusal to litigate.

To state a claim under §1983 a plaintiff must allege that a right secured by the federal Constitution or laws was violated by one acting under color of state law.West (US 1988). Although Extradition is a private company, it was performing an “exclusive government function,” something it could not have done without authorization from the state. Lugar (US 1982). Therefore it will be presumed that it was a state actor. Melesko (US 2001) (state prisoners enjoy right of action against private correctional providers under §1983). Various courts have allowed §1983 claims against private prisoner transport services. It will also be presumed that Avery was a pretrial detainee, so that his claims arise under the 14th Amendment. Mink (9th Cir. 2003). The 8th Amendment requires that prison officials take reasonable measures for inmate safety. Farmer (US 1994). An official violates the 8th when the deprivation is objectively sufficiently serious and the official is subjectively deliberately indifferent to safety. “Only those deprivations denying `the minimal civilized measure of life’s necessities’ are sufficiently grave to form the basis of an Eighth Amendment violation.” Wilson (US 1991). A court should consider the circumstances, nature, and duration of deprivation of such necessities as shelter, food, clothing, sanitation, medical care, and personal safety. Johnson (9th Cir. 2000). Given the duration of deprivations claimed by Avery, the Court finds that Extradition was deliberately indifferent to his safety and he was denied “the minimal civilized measure of life’s necessities.” Wilson.His well-pled allegations, taken as true in light of the entry of default, are sufficient to entitle him to damages. “It is a familiar practice and an act of judicial power for a court upon default, by taking evidence when necessary or by computation from facts of record, to fix the amount which the plaintiff is lawfully entitled to recover and to give judgment accordingly.” Pope (US 1944). His requested $750,000 is not supported by the evidence; $75,000 is appropriate. Recommended, $75,000 default judgment.

 

– – – 

Judge Molloy. The Court agreed with Judge Lynch’s conclusion that default judgment should be entered against Extradition and that it violated his 8th Amendment rights, but ordered a hearing on damages, which was held 2/7/13. Avery appeared by video from MSP and described his trip and suffering. Asked why he believed $750,000 is appropriate, he said it is simply a starting point for a reasonable award. In light of the pleadings and his testimony, Lynch’s recommended $75,000 is reasonable & appropriate. Lynch’s Findings & Recommendations are adopted in full. The Clerk is directed to enter default judgment against Extradition in the amount of $75,000.

Avery v. Extradition Transport, Lynch’s F&R, 40 MFR 184, 11/28/12; Molloy’s order, 40 MFR 192, 2/7/13.

Russell Avery, MSP, pro se.

INSURANCE: Owner/operator’s load not excluded from contractor trucking company’s policy as brokered load… death crash covered… Cebull.

Randall Dwyer was driving a semi from Roundup to Casper on Hwy 191 8/3/11 after delivering fracking sand for Cobra Trucking. He crossed the centerline north of Billings and struck a vehicle, killing Frank Rohr and severely injuring his wife Alice and their infant son. Alice is seeking recovery under Cobra’s Great West policy. Dwyer had hauled 16 loads of sand for Cobra 6/18/11-8/3/11. Cobra was under contract with Halliburton and other well service companies. It did not have enough employees, tractors, or trailers to handle all loads available, and contracted with owner/operators including Dwyer, who had his own DOT number and liability insurance. Cobra offered loads as they became available to drivers at the top of a list. Once a driver accepted a load he was obligated to pick it up in Casper. Cobra employees assisted in loading and completed a bill of lading listing Cobra as the carrier. The Great West policy stated that “Liability Coverage shall not apply to transportation broker or freight forwarder operations of the `insured’.” Great West seeks summary judgment that it has no duty to defend or indemnify Cobra for the Dwyer/Rohr accident.

Great West argues that “brokerage operations” can be conducted without a party acting as a “broker.” This is not logical. “Broker operations” is not defined in the policy. 49 CFR 371.2(a) states:

“Brokerage” or “brokerage service” is the arranging of transportation or the physical movement of a motor vehicle or of property. It can be performed on behalf of a motor carrier, consignor, or consignee.

“Broker” means a person who, for compensation, arranges, or offers to arrange, the transportation of property by an authorized motor carrier. Motor carriers, or persons who are employees or bona fide agents of carriers, are not brokers within the meaning of this section when they arrange or offer to arrange the transportation of shipments which they are authorized to transport and which they have accepted and legally bound themselves to transport.

Great West argues that 371.2(c) authorizes a carrier to act as a transportation broker. However, §371.2(a) states that a carrier is not a broker if it is arranging transportation for shipments that the carrier is legally bound to transport. Cobra was legally obligated to transport the sand in Dwyer’s truck 8/3/11, based on its contractual relationship with Halliburton. Dwyer did not have a contract with Halliburton. Even Cobra Pres. Donald Hollandworth confirmed that Dwyer’s load was not a brokered load. The bill of lading listing Cobra as the carrier is further confirmation of its contractual obligation with Halliburton to transport the load. Cobra was not acting as a broker and its dealings with Dwyer were not “brokerage operations” under the policy exclusion.

Further, given that the policy does not define “broker operations,” the Court could certainly find the term to be ambiguous and construe it against Great West.

Summary judgment for Alice.

Great West Casualty v. Cobra Trucking and Sieler-Rohr, 40 MFR 195, 2/4/13.

Brian Smith & Katy Mahe (Garlington, Lohn & Robinson), Missoula, for Great West; James Ragain (Ragain Law Firm), Billings, for Cobra; Torger Oaas (Oaas Law), Lewistown, and Kris Birdwell (Stogsdill Law Office, Lewistown, for Alice.

PRODUCT LIABILITY: Opinion that improper assembly of steering components of crashed Honda ATV caused “difficult and unpredictable” steering stricken for failure to satisfy Rule 702 reliability/relevance, leaving insufficient evidence to establish manufacturing defect claim… JML for Defendant following hung jury… Lynch.

Zane Johnson purchased a Honda ATV in 3/07. A few months later he failed to negotiate a right turn on a Forest Service road and crashed. He sued Honda alleging design & manufacturing defects, negligence, and breach of express warranty. He withdrew his negligence claim and the Court dismissed his design defect claim on summary judgment. Trial on his manufacturing defect and warranty claims began 10/22/12. The Court dismissed his warranty claim before instructing the jury 10/31. The Missoula jury deliberated 5 days on the manufacturing defect claim but was unable to reach a verdict. (MLW 12/15/12). Consistent with discussion in open court, Honda has moved to strike the testimony of Johnson’s expert ME Robb Larson and filed renewed motions for JML and sanctions for spoliation.

Larson testified that improper assembly of the right front axle shaft and CV joint caused the ATV to exhibit a “difficult and unpredictable steering response.” Honda moves to strike his testimony for failure to meet Rule 702 and Daubert (US 1993) requirements. It argues that his general expertise in mechanical engineering did not qualify him to offer expert testimony as to ATV operation, handling, and manufacturing, metallurgy, and forensic investigation, he never tested or objectively validated his theory, and his opinion was irrelevant because the difficult steering response he described was unlike the steering problem Johnson claimed before and at the time of the crash.

Assuming for present purposes that Larson was properly qualified to testify as he did, the first question is whether his testimony was sufficiently reliable. Honda’s most compelling complaint is that he did not test or objectively validate his hypothesis. The post-trial record reflects that he failed to conduct any tests to verify or quantify a “difficult and unpredictable” steering response. He admitted as much on cross and went so far as to concede that he did “no validation testing” as to his theory. Presumably in light of his testimony, Johnson concedes that Larson “did not do any tests of the steering mechanism on the subject ATV or an exemplar ATV” and agrees that he indicated that “his opinion of the steering effects was a subjective one.” The scientific method involves generating hypotheses and testing them to determine whether they are correct. Daubert. By his own admission, Larson failed to follow this basic scientific process before he never tested his theory. He never verified that metal-to-metal contact between the axle shaft and CV joints would have caused any steering problem at all, and made no attempt to objectively quantify the extent of such a problem. Thus his opinion that improper assembly of the right front axle shaft had caused a “difficult and unpredictable” steering response was not supported by sufficient facts or data and was not the product of reliable methodology. Johnson takes the position that his testimony was otherwise supported by sufficient facts & data because he relied on information that he had “been made aware of or personally observed” as contemplated by Rule 703. To Johnson, it is significant that Larson “had possession of the physical components” of the ATV and visually inspected them. He notes that Larson found that “the axle did not look the way that an axle should look,” it “did not fit into its corresponding cv joint, and the cv joint had metal particles in it,” which is “objective information that a reasonable juror could understand and that an expert would rely on in the field.” However, Honda has not challenged Larson’s testimony under Rule 703, but claims that under Rule 702 he “cannot identify any objective data that is logically related to his opinions.” Johnson fails to explain how Larson’s basic observations as to the condition of the various parts substantiated or validated his theory that a difficult and unpredictable steering response would have resulted.

Johnson also claims Larson’s opinion was supported by sufficient facts & data because he had received information about the nature of the crash from Johnson and his family. As Johnson notes, Larson testified that “he knew the vehicle had a steering failure directly prior to the crash” and “the facts reported were that the axle was on the vehicle at the time of the crash.” He maintains that this was relevant data which Larson was entitled to accept at face value and properly considered in forming his opinions, and it was for the jury to determine how much weight to give to his opinion. However, Larson assumed that the axle was on the ATV at the time of the accident and disregarded evidence that might have suggested otherwise. When he first received the ATV there was dirt and mud-encrusted duct tape on the inboard CV joint and the outboard joint was filled with contaminated grease. He nonetheless “proceeded with the assumption that the shaft had been in place up until the time of the accident” and disposed of the duct tape and grease without testing or analyzing them. (Honda contends that because Larson did not preserve those materials it was deprived of the ability to establish that the axle was not in the ATV at the time of the crash. Because the Court finds that his testimony must be stricken under Rule 702, its motion for case-terminating sanctions based on spoliation is moot.) Larson essentially accepted that the axle shaft was in the ATV at the time of the crash and extrapolated to an unfounded conclusion that metal-to-metal contact between the shaft and CV joint had caused a “difficult and unpredictable” steering response. But because he never tested his theory and failed to rule out the possibility that the shaft may have been missing when Johnson crashed, the analytical gap between the available data and his ultimate opinion was simply too great.

Johnson nonetheless argues that Larson’s methodology was sound because he performed other tests “to inform his opinion.” For example, he did an Instron tensile exam, or “pull test,” on the left front axle to measure the static force necessary to overcome the circlip capture force and pull the shaft out of the CV joint, because “the shaft had apparently come out of the right side” in the crash and he “was very curious to find out how much force would have been required to extract that.” In Larson’s words, he “learned the maximum force to overcome the circlip tension,” learned that there was “some diminished force required to continue to pull the shaft all the way out,” and discovered that “the further it gets extracted, the lower that force value is until finally it drops to zero and the shaft pops free.” He did not claim to have learned anything about the ATV’s steering.

In an attempt to determine whether the axle had been inserted completely at the time of manufacture he cut the CV joint in half to determine if the circlip had expanded and left any marks inside the joint. He found “no obvious wear patterns,” and described the results as “inconclusive.” He sent some grease and metallic particles from the joint to a lab. That testing “ruled out the possible presence of foreign metallic materials within the CV joint recess” and had nothing to do with steering. He performed a Rockwell hardness test to find out why the right front axle appeared “shiny, smooth, rounded compared to the machined splined surface on a good axle.” That showed that “the splines were extremely hard and resistant to wear and the rounded portion and the core of the shaft was relatively soft.” To Larson, this simply “explained the rounded shape” of the axle shaft because they “seem to indicate that once the ends of those splines were chipped off or ground off or broken off, then what’s left would round off nicely into the form seen.” He did not claim to have learned anything about the steering mechanism.

Nonetheless, Larson concluded based on his tests that there was a manufacturing defect in the form of improper coupling of the right front axle shaft and CV joint, which caused a difficult and unpredictable steering response. While his tests may have “informed his opinion” as to a manufacturing defect, Johnson fails to explain how they substantiated, validated, or even related to his theory that the alleged defect affected the steering, while Larson made it abundantly clear on cross that he did no validation testing to determine whether metal-on-metal contact between the axle shaft and CV joint would have caused a steering problem, and conceded that his opinion was a “hypothesis that I did not test.” Johnson argues that Larson should not be faulted for failing to test his hypothesis because the steering “condition is inimitable, because there is no documentation of the exact conditions and placement of the axle at the moment of the steering failure.” But the point is not whether the exact condition and placement of the axle at the time of the accident can ever be known, but that Larson developed a hypothesis which he failed to test or otherwise validate. There is also no evidence that his “difficult and unpredictable” steering theory has been subjected to peer review or publication or is generally accepted in the scientific community. Barabin (9th Cir. 2012). His opinion that improper assembly of the axle shaft caused a “difficult and unpredictable” steering response was not based on sufficient facts or data and was the product of a fundamentally flawed methodology, and is not sufficiently reliable to be admitted under Rule 702.

Even if it could be said to be sufficiently reliable, it would still have to be stricken because it did not “fit” the facts developed at trial and so failed to satisfy Rule 702 “relevancy.” Daubert. Larson testified that the response would be felt during “operation of the vehicle in any condition other than when it’s going in a straight line” and “would be especially apparent at large turn angles.” He explained that “there would be feedback through the steering assembly that would cause a feeling by the operator that the vehicle wanted to return to a straight line condition” — that there would be a large degree of difficulty when the steering angle was severe and basically negligible when the vehicle is going in a straight line. However, as Johnson described it, he was “approaching the corner and went to turn,” the steering “was stuck, so I went straight off the corner and I wrecked.” He stated that the handlebars essentially “locked up” as he was making his straight approach to the turn and he “couldn’t move them” and was unable to force them loose, even as he stood in an attempt to do so, and they remained locked as he went straight off the edge of the road. He and his brother-in-law testified that the steering had similarly locked up earlier that day. However, Larson made clear that he “did not identify a condition where it was impossible to turn the handlebars.”

Honda moved for JML under Rule 50(a) at the close of Johnson’s case. The Court denied the motion after the jury was unable to reach a verdict, subject to Honda’s right to renew it in light of the evidence at trial. Honda has filed a renewed motion pursuant to 50(b). The Court instructed that for Johnson to prevail on his manufacturing defect claim he had to prove:

First, that at the time of sale by [Honda] the product was in a defective condition because of a manufacturing defect. A manufacturing defect exists when a product fails to conform to its design. Second, that the manufacturing defect caused injury to Mr. Johnson.

There can be no real dispute that ATV assembly and the effects that improper assembly may have on steering are beyond the common experience of the trier of fact, so it was necessary for Johnson to present expert testimony to establish that a manufacturing defect caused the steering problem that he alleges made it impossible to negotiate the turn. However, Larson’s opinion that improper assembly of the right front assembly and CV joint caused a “difficult and unpredictable” steering response is properly stricken because it does not satisfy Rule 702. Without Larson’s opinion Johnson has no evidence that the alleged manufacturing defect cause any steering problem, and without that he cannot show that it caused his injuries.

Honda’s renewed motion to strike Larson’s testimony is granted to the extent set forth. Its motion for JML is granted. Its renewed motion for a dispositive spoliation sanction is denied as moot.

Johnson v. American Honda Motor Co., 40 MFR 160, 1/31/13.

Martin Judnich & Vincent Pavlish (Judnich Law Offices), Missoula, and Mathew Stevenson, Missoula, for Johnson; Paul Cereghini & William Auther (Bowman & Brooke), Phoenix, and Gerry Fagan (Moulton Bellingham), Billings, for Honda.