Magistrate Judge Henry Pitman denied in part and granted in part third-party defendant BamBams’s motion to preclude defendant Sherwood from offering certain financial documents to support Sherwood’s lost profits claim. BamBams asserted that preclusion was appropriate because Sherwood did not provide adequate damages computations under Federal Rule of Civil Procedure 26(a)(1)(A)(iii) and failed to produce documents before a court-ordered deadline.

The court applied a 4-factor test to determine whether preclusion was an appropriate sanction:

(1) the party’s explanation for the failure to comply with the [disclosure obligation]; (2) the importance of the testimony of the precluded [evidence]; (3) the prejudice suffered by the opposing party as a result of having to prepare to meet the new testimony; and (4) the possibility of a continuance.

Although the court concluded that Sherwood did not adequately disclose how it calculated lost profits, it found Sherwood’s noncompliance harmless because (1) Sherwood believed that it had satisfied this requirement by producing sales figures and financial data, (2) the claim for lost profits was the most important component of Sherwood’s case, (3) BamBams suffered minimal prejudice since it had the opportunity to review the sales figures and financial data and depose Sherwood’s president about the data, and (4) there was no need for a continuance because a trial date had not yet been set. Similarly, the court did not preclude Sherwood from offering Quickbooks summaries and reports to support its lost profits claim. The court noted that the unreliability of the documents was not a proper ground for preclusion, as BamBams asserted. BamBams should have challenged the reliability of the documents in a motionin limine or before a fact-finder.

Finally, the court granted Bambams’ motion to preclude financial documents produced after a court-ordered deadline because (1) Sherwood failed to provide a credible explanation for the delay, (2) the documents were not particularly important to Sherwood, (3) BamBams suffered prejudice when Sherwood led BamBams to believe that the documents did not exist, and (4) a continuance would not cure the prejudice that BamBams suffered. The court noted that Sherwood’s sudden production of over 105 pages of deposit slips was “precisely the type of ‘sandbagging’ that Rule 26 and 37 are intended to prevent.”

Case: Max Impact, LLC v. Sherwood Group, Inc., No. 09 Civ. 902 (JGK) (HBP), 2014 BL 63686 (S.D.N.Y. Mar. 7, 2014)