Dominion Resources SVC, Inc. v. Alstom Power, Inc.

          RULING RE: MOTION TO EXCLUDE EXPERT TESTIMONY OF TOMMY MICHAELS (DOC. NO. 117) AND MOTION TO EXCLUDE EXPERT TESTIMONY OF JEFFREY STEMPEL (DOC. NO. 119)

          Janet C. Hall United States District Judge

         I. INTRODUCTION

         This case involves a breach of contract dispute between the plaintiffs (collectively “Dominion Resources”) and the defendant, Alstom Power, Inc. (“Alstom”). On September 1, 2017, Dominion Resources filed a Motion to Exclude the Testimony of Alstom's Proposed Expert, Tommy Michaels. See Dominion Resources' Motion to Exclude Expert Testimony of Tommy Michaels (“Dominion Resources' Mot. to Exclude”) (Doc. No. 117). On that same date, Alstom filed a Motion to Exclude the Testimony of Dominion Resources' Proposed Expert, Jeffrey Stempel. See Alstom's Motion to Exclude Expert Testimony of Jeffrey STempel (“Alstom's Mot. to Exclude”) (Doc. No. 119).

         For the reasons stated below, Alstom's Motion to Exclude the Expert Testimony of Jeffrey Stempel is DENIED. Dominion Resources' Motion to Exclude the Expert Testimony of Tommy Michaels is GRANTED IN PART AND DENIED IN PART.

         II. BACKGROUND

         Dominion Resources and Alstom entered into a contract (the “Alliance Agreement”) on February 1, 2005. See Dominion Resources' Local Rule 56(a)(1)

         Statement of Facts (“Dominion Resources' L.R.56(a)(1)”) (Doc. No. 133) at ¶ 1; Alstom's Local Rule 56(a)(1) Statement of Facts (“Alstom's L.R.56(a)(1)”) (Doc. No. 135) at ¶ 1. The Alliance Agreement governed services provided by Alstom at Dominion Resources' power generation facilities, pursuant to purchase orders issued by Dominion Resources and accepted by Alstom. See id. Among other things, the Alliance Agreement provided that Dominion Resources and Alstom would each “indemnify, save harmless and . . . defend” the other for certain claims specified in the Alliance Agreement. See Alstom's L.R.56(a)(1) at ¶ 5; Dominion Resources' Local Rule 56(a)(2) Statement of Facts (“Dominion Resources' L.R.56(a)(2)”) (Doc. No. 138) at ¶ 5; Dominion Resources' L.R.56(a)(1), Ex. 1 (“Alliance Agreement”), Terms and Conditions, at 15017-18. The Alliance Agreement also required Alstom to obtain certain insurance policies, including “commercial general liability insurance” with coverage and limits specified in the Alliance Agreement. See Alstom's L.R.56(a)(1) at ¶ 6; Dominion Resources' L.R.56(a)(2) at ¶ 6; Alliance Agreement, Terms and Conditions, at 14. It also required the parties to each, “to the extent permitted by its insurers, require each of their respective insurers to waive all rights of recovery against each other.” Alliance Agreement, Terms and Conditions, at 15020.

         Alstom obtained an insurance policy (the “Zurich Policy”) from Zurich American Insurance Company for the period of April 1, 2007, to April 1, 2008. See Dominion Resources' L.R.56(a)(1) at ¶ 2; Alstom's Local Rule 56(a)(2) Statement of Facts (“Alstom's L.R.56(a)(2)”) (Doc. No. 140) at ¶ 2. The Zurich Policy had an aggregate limit of liability of $5 million, and Dominion Resources was named as an additional insured. See id. Alstom also obtained a commercial umbrella insurance policy (the “Allianz Policy”) from Allianz Global Risks U.S. Insurance Company for the same time period with a policy limit of $18 million. See Alstom's LR.56(a)(1) at ¶ 25; Dominion Resources' L.R.56(a)(2) at ¶ 25. Both the Zurich Policy and the Allianz Policy were “eroding” policies, such that the costs of defense reduce the amount of insurance available under the liability limit.^[1] See Alstom's L.R.56(a)(1) at ¶ 13; Dominion Resources' L.R.56(a)(2) at ¶ 13.

         Pursuant to a purchase order under the Alliance Agreement, Alstom performed an inspection of a boiler at a Dominion Resources power generation facility in Massachusetts in April 2007. See Dominion Resources' L.R.56(a)(1) at ¶ 6; Alstom's L.R.56(a)91) at ¶ 33. On November 6, 2007, an accident occurred involving the boiler inspected by Alstom, and five individuals were injured as a result, three fatally so. See Dominion Resources' L.R.56(a)(1) at ¶ 7; Alstom's L.R.56(a)(1) at ¶ 36. In May 2009, the decedents' estates and the injured workers filed a lawsuit against Dominion Resources, Alstom, and other defendants in Massachusetts Superior Court. See Dominion Resources' L.R.56(a)(1) at ¶ 8; Alstom's L.R.56(a)(1) at ¶¶ 37-39.

         Ultimately, the parties in the Massachusetts state court litigation reached a settlement agreement in 2015. See Dominion Resources' L.R.56(a)(1) at ¶ 13; Alstom's L.R.56(a)(1) at ¶¶ 48. Under the settlement, Dominion Resources paid in excess of $5 million to the plaintiffs of the Massachusetts litigation. See Alstom's L.R.56(a)(1) at ¶ 64; Dominion Resources' L.R.56(a)(2) at ¶ 64. Dominion Resources also claims that they paid in excess of $9.9 million to defend themselves in the Massachusetts litigation. See Alstom's L.R.56(a)(1) at ¶ 65; Dominion Resources' L.R.56(a)(2) at ¶ 65.

         Dominion Resources received $5 million from the Zurich Policy and the Allianz Policy obtained by Alstom. See Alstom's L.R.56(a)(1) at ¶ 71; Dominion Resources' L.R.56(a)(2) at ¶ 71. Dominion Resources had also independently obtained an excess insurance policy (the “AEGIS Policy”) from AEGIS. See Dominion Resources' L.R.56(a)(1) at ¶ 14; Alstom's L.R.56(a)(2) at ¶ 14. Dominion Resources received from the AEGIS Policy all of the remaining amount that Dominion Resources paid to defend and settle the Massachusetts litigation that was not paid by the Zurich or Allianz Policies. See Alstom's L.R.56(a)(1) at ¶ 72; Dominion Resources' L.R.56(a)(2) at ¶ 72.

         On December 1, 2016, Dominion Resources filed the Amended Complaint, alleging two counts of breach of contract against Alstom. See Amended Complaint (“Am. Compl.”) (Doc. No. 45). Count One alleges that Alstom breached the Alliance Agreement by failing to pay the costs of Dominion Resources' defense in the Massachusetts litigation. See id. at ¶¶ 43-47. Count Two alleges that Alstom breached the Alliance Agreement by obtaining eroding insurance policies. See id. at ¶¶ 48-52. Dominion Resources argues that “commercial general liability insurance, ” as specified in the Alliance Agreement, required a non-eroding policy such that coverage for a defense would not reduce the amount of insurance available under the policy limit. See id. at ¶ 31. Dominion Resources argues, therefore, that it should have received from Alstom's insurance policies both the $9.9 million for the cost of the defense and the $5 million for the cost of the settlement. See id. at ¶ 42. Instead, because the policy was eroding, Dominion Resources received only a total of $5 million toward the defense. See id. at ¶ 41. Alstom argues to the contrary that “commercial general liability insurance” does not require a non-eroding policy and that, therefore, it complied with the Alliance Agreement. See Alstom's Motion for Summary Judgment on Dominion Resources' Breach of Contract Claims (“Alstom's MFSJ”) (Doc. No. 131) at 6-18.

         On December 15, 2016, Alstom filed its Answer, Defenses, and Counterclaims. See Answer, Defenses, and Counterclaims (“Answer”) (Doc. No. 48). In it, Alstom advances three counterclaims. Counterclaims One and Two assert claims for contractual indemnity and indemnity at law, respectively. See id. at ¶¶ 100-105. Counterclaim Three alleges that Dominion Resources breached the Alliance Agreement by failing to require AEGIS to waive all rights of recovery against Alstom and by pursuing claims paid by AEGIS in this litigation. See id. at ¶¶ 106-09.

         On October 27, 2017, Alstom and Dominion Resources both cross-moved for summary judgment. See Motion for Summary Judgment by Dominion Resources (“Dominion Resources' MFSJ”) (Doc. No. 129); Motion for Summary Judgment Dismissing Plaintiffs' Breach of Contract Claims (“Alstom's MFSJ”) (Doc. No. 131); Motion for Summary Judgment Dismissing Plaintiffs' Claims as Barred by Statute of Limitations (Doc. No. 132); Motion for Judgment on the Pleadings and Alternative Motion for Summary Judgment (Doc. No. 134). Each seeks to preclude the testimony of the other's expert witness. The court lays out each expert's opinion in more detail below.

         III. LEGAL STANDARD

         Federal Rule of Evidence 702 provides:

A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if: (a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue; (b) the testimony is based on sufficient facts or data; (c) the testimony is the product of reliable principles and methods; and (d) the expert has reliably applied the principles and methods to the facts of the case.

Fed. R. Evid. 702. “The party proferring the proposed expert evidence bears the burden of establishing its admissibility by a preponderance of the evidence.” Karavitis v. Makita U.S.A., Inc., 722 Fed.Appx. 53, 55 (2d Cir. 2018).

         Daubert v. Merrell Dow Pharmaceuticals, Inc. established a two-part inquiry: “whether the expert is proposing to testify to (1) scientific knowledge that (2) will assist the trier of fact to understand and determine a fact in issue.” Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 592 (1993). Thus, the court must first determine whether the expert's testimony meets a “standard of evidentiary reliability.” Id. at 590. The Supreme Court has articulated four factors courts may look to when assessing the reliability of an expert: (1) “whether a theory or technique . . . can be (and has been) tested”; (2) “whether a theory or technique has been subjected to peer review and publication”; (3) “the known or potential rate of error of a technique”; and (4) the “general acceptance” of a theory by the “relevant scientific community.” Id. at 593-94.

         However, these factors “do not constitute a definitive checklist or test.” Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 150 (1999) (emphasis in original). Rather, the court's “gatekeeping inquiry must be tied to the facts of a particular case, ” and “the factors identified in Daubert may or may not be pertinent in assessing reliability, depending on the nature of the issue, the expert's particular expertise, and the subject of the testimony.” Id. (internal quotation marks and citation omitted). The Second Circuit has held that this is particularly true where the testimony does “not depend on engineering or scientific expertise, ” but concerns “the customs and practices of the insurance industry.” SR Int'l Bus. Ins. Co. v. World Trade Ctr. Properties, LLC, 467 F.3d 107, 133 (2d Cir. 2006); see also Iacobelli Construction, Inc. v. Cty. of Monroe, 32 F.3d 19, 25 (2d Cir.1994).

         Second, the court must determine whether the expert's testimony meets a relevance standard. See Daubert, 509 U.S. at 591. In order to assist the trier of fact, the expert testimony must be “sufficiently tied to the facts of the case that it will aid the jury in resolving a factual dispute.” Id. (quoting United States v. Downing, 753 F.2d 1224, 1242 (3d Cir. 1985)).

         IV. DISCUSSION

         A. Alstom's Motion to Exclude Expert Testimony of Jeffrey Stempel

         Dominion Resources offers the expert opinion of Jeffrey Stempel, Professor of Law at the William S. Boyd School of Law, University of Nevada Los Angeles. See Expert Report of Jeffrey W. Stempel (“Stempel Report”) (Doc. No. ...