Opinion
C.A. No. 97C-08-086 WTQ.
Submitted: May 23, 2000.
Decided: June 29, 2000.
Plaintiffs' Motion for Reargument and/or for Relief From Judgment — MOTION DENIED
This is the Court's Letter Opinion and Order on Plaintiffs USH Ventures and USH Telecom, LLC's (collectively "USH") Motion for Reargument and/or for Relief From Judgment. For the reasons stated herein, the Motion is DENIED.
Initially, the Plaintiffs claim they should be allowed to offer expert testimony to prove that USH could obtain an equity investor in the Hydrotel project. On May 9, 2000, this Court held that the failure of Plaintiffs to provide expert testimony to prove that USH could have obtained an equity investor in the Hydrotel project limited available recovery on the breach of contract claims to one dollar. USH Ventures v. Global Telesystems Group, Inc., Del. Super., C.A. No. 97C-08-086, Quillen, J. (May 9, 2000) (Op. at 25) (hereinafter referred to as "May 9, 2000 Op. at ___"). In moving for Reargument, Plaintiffs supply the affidavits of two experts who opine that the Hydrotel project was sufficiently attractive and that Plaintiffs could have obtained an equity investor. Per-Ola Hellgren Aff. David Ford Aff., Dkt. No. 169, Ex. A B. Plaintiffs argue that dismissal of this action for late presentation of an expert witness is the severest possible sanction and that the Court should balance the equities in Plaintiffs' favor because Plaintiffs made a good faith argument that expert testimony was unnecessary.
Normally, in a Motion for Reargument, a Court will only allow reexamination of the facts in the record at the time of the decision or the law as it applies to the facts before it at the original hearing. Miles, Inc. v. Cookson America, Inc., Del. Ch., 677 A.2d 505, 506 (1995); Steadfast Ins. Co. v. Eon Labs Mfg. Inc., Del. Super., C.A. No. 98C-01-058, Del Pesco, J. (Aug. 19, 1999). This comports with Federal case law, which only allow reconsideration of matters properly encompassed on the merits. 12 Moore's Federal Practice § 59.30[2][a] (3d ed. 1997). Plaintiffs cite no error of law or fact based on the original record sufficient to justify reargument on the expert testimony issue.
Technically, the Federal Rules of Civil Procedure do no recognize a Motion for Reargument. 12 Moore's Federal Practice § 59.30[7] (3d ed. 1997). Such a Motion is usually treated as a Motion to alter or amend judgment or as a Motion seeking relief from judgment under Rule 60(b). Id. It appears that under the Delaware Federal Local Rules, reargument is allowed, but reargument may not be used as a vehicle to enlarge the record. Schering Corp. v. Amgen, Inc., D. Del., 25 F. Supp.2d 293, 295 (1998). The Motion in this State case has been characterized as a "Motion for Reargument and/or to Alter or Amend Judgment" (see Footnote 2).
Even if the Court considers the fact that the Plaintiffs have now supplied expert affidavits showing equity financing could have been obtained for the Hydrotel project, the Court, under the factual circumstances present here, should not allow the Plaintiffs a second bite at the apple. Plaintiffs advanced on a theory that expert testimony by the Plaintiffs was not necessary to prove their assertion that an equity investor could be found. Now, after Summary Judgment has been granted against them, Plaintiffs ask this Court to grant them the opportunity to supply expert testimony. This request comes long after the time for identifying expert witnesses has passed and in a case where trial dates have been explored. Furthermore, Plaintiffs have known for some time that Defendants were proceeding on a theory that equity financing could not have been obtained, yet no expert testimony was provided. Plaintiffs' own expert, David Ford, testified in his deposition on February 20, 2000, that:
Q. Now, I understood you to tell us earlier that you are not offering an opinion that it is more likely than not that Telecom could find another investor? That's outside of your realm of expertise?
A. To specifically opine on whether or not they could find an investor I believe would be outside. But integral to the determination of damages, the assumption is that one would be available.
Q. What I think you are telling me is you are assuming for purposes of your calculations that they would have found one, but you are not offering an opinion as to whether that, in fact, would have occurred? That's somebody else's job?
A. Yes. That's accurate.
David Ford Dep. at 163, Dkt. No. 149 at A-12 (emphasis supplied).
In addition to Defendants' own expert testifying that it was key to the determination of damages that an equity investor could be found, Plaintiffs were also put on notice that Defendants would proceed on a theory that expert testimony was needed after the Defendants' brief was filed on March 9, 2000. Yet, when providing a response to Defendants' Motion, Plaintiffs argued on March 17, 2000 that there is no "fixed range of rates uniformly applicable to the entire universe of investors within which the Hydrotel business plan must fall to attract a reasonable investor." Plaintiffs' Ans. Br. at 9. Plaintiffs also argued that an individual investor's motivation includes many variables and the needs of each potential investor will vary. Id. Plaintiffs further stated abstract rates of return alone would not establish whether or not the Hydrotel project was sufficiently attractive. Furthermore, Plaintiffs argued: "assuming . . . that an expert could so opine, there is no rule that such expert testimony would be the sole way of proving the issue." Id. at 10. Oral argument on the Summary Judgment Motion was held, after full briefing, on April 7, 2000. Thus, Plaintiffs knew that Defendants were proceeding on a theory that expert testimony was necessary, but chose to argue that such testimony was inaccurate and unnecessary (even though that information was available) until after the Court ruled against them on May 9, 2000.
Expert testimony is necessary in cases where the understanding and analysis of the issues is beyond the ken of the typical jury. See Mazda Motor Corp. v. Lindahl, Del. Supr., 706 A.2d 526, 533 (1998). It appears that in this case the Plaintiffs decided to wait and see how the Court would rule before providing expert opinion for the Court. In light of the clearly established Delaware case law mandating that expert testimony is required in cases where the issues are beyond the ken of the typical juror, the Court cannot hold that Plaintiffs were in any way unfairly surprised by Defendants' expert testimony argument. Plaintiffs took a calculated risk in not supplying available expert testimony. Defendants are correct when they argue that Plaintiffs should not be able to adopt a "wait and see" attitude to determine whether an expert is required.
Three other comments seem appropriate. First, the Hydrotel project was, in fact, never built. That fact should suggest to Plaintiffs that this case was a tough row to hoe and every avenue to marshall evidence should have been exhausted. Second, one should certainly not assume that, if the Court permitted expert testimony by the Plaintiffs at this stage, the matter would be put to rest. I think it is a safe assumption that the Defendants would challenge the experts at every level, as indeed they did in passing in their Response to Plaintiffs' Motion for Reargument (Dkt. No. 171 at 2). So a decision now would only open a new issue, not bring closure. Third, I note with some embarrassment, Plaintiffs' reliance on their April 10, 2000 letter wherein Plaintiffs said:
Plaintiffs maintain that the testimony of Messrs. Carlberg, Kenley and Whiting, especially coupled with Dr. Jacobs' affidavit, provide sufficient evidence to present to a jury on the issue of the likelihood of obtaining an investor (or investors) to replace defendants. However, in the event that the Court agrees with defendants' position that expert testimony on the issue is necessary, plaintiffs respectfully request that they be given an opportunity to attempt to obtain such expert testimony before the Court dismisses the action for lack of sufficient evidence. In light of the fact that plaintiffs' position as to their evidence was not unreasonable, and the fact that defendants will not suffer any prejudice (especially as the Court has granted their request for a delay to permit Mr. Parkins to prepare for trial), such an opportunity is just under the circumstances. See Smith v. Chrysler Corp., Del. Super., C.A. No. 94C-12-002, Quillen, J. (Oct. 25, 1996).
This letter was a cover letter to filing the "enclosed Declarations of Leslie J. Jacob" (Dkt. No. 165) and was delivered to Chambers and the Prothonotary on April 10, 2000. It was not separately docketed and I confess it was not among the briefing papers reviewed immediately prior to issuing the Opinion of May 9, 2000. I simply did not focus on the April 10 cover letter in relation to the decision and I do not recall if the proposition quoted above was mentioned at the oral argument on April 7, 2000. But I do not believe it was. In any event, I think it should be noted for the record the letter comment of April 10, 2000 was, in fact, made prior to the decision on summary judgment.
Then the question becomes: So what? Cover letters by their nature are not usually docketed and this is not the ordinary way to present an alternative legal position. The April 10, 2000 letter was after oral argument and the submission of the Motion. The "expert" affidavits could have been supplied as part of the briefing. Defendants contend the "wait and see" or "advisory opinion" approach should not be permitted. On balance, the Court does not think the April 10 letter is much different than an application to permit the experts as part of a Motion for Reargument. I do, however, regret not focusing on the April 10 letter prior to the May 9 Opinion and I want the record to be clear on that fact and on my regret.
Thus, the Motion for Reargument on the expert witness issue is DENIED.
Plaintiffs alternatively seek relief under Superior Court Civil Rule 60(b). Rule 60(b) allows the Court to grant relief from judgment or orders arising from mistake, inadvertence, surprise, excusable neglect, newly discovered evidence or fraud. Rule 60(b), however, should not be used as a substitute for a Motion for Reargument or an appeal. Burkhart v. Agostini, Del. Supr., No. 18, 1995 (Oct. 10, 1995) (ORDER). Here, it appears that the Plaintiffs' only chance for Rule 60(b) recovery is under a theory of excusable neglect. In making the determination whether the neglect was excusable, the United States Supreme Court has held that a trial Court must take into account all relevant circumstances, including: (1) the danger of prejudice to the adverse party; (2) the length of any delay caused by the neglect and its effects on the proceedings; (3) the reason for the neglect, including whether it was within the reasonable control of the moving party; and (4) whether the moving party acted in good faith. 12 Moore's Federal Practice § 60.41[1][a] (citing Pioneer Inv. Services Co. v. Brunswick Associates Limited Partnership, 507 U.S. 380 (1993)). There are times when an attorney's negligence or carelessness can cause excusable neglect ( id.), but there was no excusable neglect for failing to present expert testimony in this case. A conscious litigation choice, negligent or non-negligent, is not excusable neglect.
Plaintiffs rely on Superior Court Civil Rule 60(b), but sometimes use the "alter or amend a judgment" language of Rule 59 (d). The Court will treat the alternative application as one under Rule 60(b) for Relief from Judgment.
Litigation decisions that fail are not necessarily caused by neglect. If the Plaintiffs here could have sustained the proposition that their lay witnesses could make the case for the financial feasibility of the project that may have helped carry the persuasion burden on the liability question, that is, if success was so much in the realm of reasonable probability that it could be presented by partisan lay testimony, the persuasiveness of the case could have been enhanced.
Since the Motion for Reargument was filed in a timely fashion, an alternative Rule 60(b) Motion does not seem to be an appropriate route. Even if it could be granted, such a request would cause delay in getting this case to trial. And certainly, Plaintiffs' choice in not obtaining expert testimony was within their reasonable control. Although there is no doubt that the Plaintiffs acted in good faith in not supplying expert testimony, the circumstances here mandate that any Rule 60(b) Motion be DENIED.
Plaintiffs argue that Defendants would have adequate time before the scheduled trial date to prepare to meet Plaintiffs' expert evidence. For one thing, Court decisions are entitled to at least some time. The Court is also certain that a continuance would have to be granted to allow Defendants the opportunity to take expert deposition testimony and respond to the new experts.
In the May 9, 2000 Opinion, this Court held "there was nothing in the written terms of the non-disclosure/non-compete agreement preventing GTS from making an investment in Hydrotel." May 9, 2000 Op. at 28. This Court further held "GTS wanted to move in a direction different than the `specific application' in USHV's plan. The parties were in dispute concerning the proper backbone and routing of the network and how the network should be set up." Id.
For starters, it appears that Plaintiffs allege in their complaint that the non-disclosure/non-compete agreement was breached by GTS' investment in Hydrotel, which gave GTS voting and management control, causing Plaintiffs' damages. See Amended Compl. ¶ 27. This investment, however, was not precluded by the express written terms of the non-disclosure/non-compete agreement. Indeed, a plain-language reading of Schedule B shows that there were no provisions precluding an investment by GTS in Hydrotel. It is not what the agreement said; rather, it was what the agreement did not say. And, it is important to note that, without GTS' investment, the Hungarian authorities would have taken steps to wind up Hydrotel. Varga Dep. at 35-36, Dkt. No. 160, Ex. B. So, without this investment, no one would have been able to profit from the Hydrotel venture. If the project would have been terminated without GTS' investment, there would have been no "specific application" or project for GTS or USHT to pursue. Therefore, investment did not cause a violation of the agreement. To put it simply, the GTS/USH agreement did not bar GTS' investment, and, without that investment, the project would have died. Thus, there was clearly no breach of the agreement by GTS' investment.
As to the second point, the Plaintiffs are correct that loop and star specifications and specifications as to how the network should be set up did not expressly appear in Schedule B. Schedule B, however, must be understood within the context of the parties' working relationship and negotiations. Whether a star or loop configuration was used is factually significant to determine if the parties were pursuing the same project. In fact, it was Dr. Jacob who first stated in his post-argument affidavit that:
There was no significant difference between the Hydrotel project as proposed by plaintiffs and as proposed by defendants (as I understood it). They both use high capacity microwave backbone connections. Both would have been built out as connecting rings for economy and coverage (unlike the star configuration customarily used in traditional microwave networks). The connecting links in both plans were 2 Mbps (megabits per second) microwave radios. Plaintiffs wanted to use frame relay switches in their network (the same technology used in the Internet), whereas defendants planned on using ATM switches. The two types of switches are comparable, except that the frame relay is more efficient, and, as a matter of fact, GTS uses frame relay switches in the commercial network that they have built in Hungary independent of the Hydrotel project. Any differences between the parties' respective projects is merely in some of the details.
Declaration of Leslie Jacob, April 9, 2000.
Dr. Jacob's affidavit is a bit specious considering that on November 11, 1996, just before the project fell apart, Dr. Jacob wrote a memo to members of GTS explaining why he thought the loop design should be utilized instead of a star design. Dkt. No. 167, Ex. B. The Declaration of Geza Szathmari clearly indicates that, by July 1996, GTS had determined it would pursue a spoke and hub design instead and not a loop design for the project. Declaration of Geza Szathmari, ¶ 4, Dkt. No. 167, Ex. D.
Thus, Dr. Jacob originally injected the concept of the star and loop network into the litigation after oral argument to illustrate that the GTS and the USH projects were similar in nature. Dr. Jacob then stated that any differences in the proposed project were merely some of the details. If Dr. Jacob submits an affidavit stating that both sides had agreed to using "connecting rings and coverage" and not star configurations, then whether or not star or loop configuration was used plays a part in whether there were differences in the GTS and the USH plans. Such information is relevant to determine whether a "specific application" was pursued. Such information does go to show that the network envisioned by the Defendants was different from the one described in Schedule B. Furthermore, it appears clear that, by Mr. Jacob's own written statements on December 11, 1996, the parties were not on the same page with the project. All and all, it is evident that GTS' plan for the communications network had strayed far from the communications network envisioned by Dr. Jacob at the time the non-disclosure/non-compete agreement was signed and GTS was not, and did not, pursue the specific application as stated in Schedule B.
The December 11, 1996 letter states:
Despite providing voluminous evidence of the overwhelming economic benefits of the technology and design adopted by USH for Hydrotel, it seems that the forces advocating a much less gainful approach are prevailing. I am hard put to understand why technical experts are so heavily embracing the ATM technology when even in the most communication oriented economy, the United States, it is used only when huge volumes of transmission needs to be accommodated for a single customer. Even ATT does not recommend using it below 1.5Mb (2.4 in Europe). It is also hard for me to understand why marketing people would be willing to discard the most effective marketing tool they would have in selling Hydrotel's services: "the free voice over data" in a pure frame relay private network, not to mention the integration of data, voice, video, fax, Internet and Intranet in a single transmission channel . . . . I find the preliminary plan grossly inadequate.
I believe, however[,] that the performance can be dramatically improved if we return to the original concept, technology and design of the network . . .
(emphasis in original).
Indeed, Dr. Jacob found the GTS plan grossly inadequate. Id.
USH claims that the plans pursued by GTS and USHT were virtually the same and asks this Court to adopt by analogy the "doctrine of equivalence" from patent law. As stated herein and in the May 9, 2000 Opinion, there were significant differences in the plan envisioned by Dr. Jacob and GTS. Nothing presented in the Plaintiffs' Motion convinces this Court that it was factually mistaken in holding GTS did not pursue the "specific application" listed in Schedule B. Request for Reargument on the Schedule B issue is DENIED.
For the foregoing reasons, the Plaintiffs' Motion for Reargument and/or for Relief from Judgment is DENIED. IT IS SO ORDERED.