Liliya Turubchuk v. Southern Illinois Asphalt Comp
958 F.3d 541
| 7th Cir. | 2020Background:
- A van crashed in an Illinois construction zone; occupants sued the contractors who repaved the highway. The case settled for $1 million after plaintiffs' counsel made a time‑limited demand and defendants' counsel provided Rule 26 initial disclosures listing only a $1 million joint‑venture policy. Plaintiffs signed releases containing a non‑reliance clause.
- Years later plaintiffs discovered the two contractors each had separate, higher‑limit liability policies and sued for negligent misrepresentation, alleging defendants (through counsel) misrepresented available insurance in the Rule 26 disclosure to induce the $1 million settlement.
- The district court (on summary judgment and in limine rulings) held all but two negligent‑misrepresentation elements as matters of law: (1) the Rule 26 disclosure was a false statement of material fact and negligent, and (2) plaintiffs justifiably relied on it; the only jury question was whether defendants intended to induce settlement. The court also found no joint venture under Illinois law and excluded much defense evidence, including its retained expert (Judge Patrick Murphy).
- At trial plaintiffs called their former counsel Allahyari (also offered as an expert) to testify; Allahyari testified about his phone call with defense counsel Green and opined Green intended to induce settlement. The defense could not fully impeach Allahyari and its expert Murphy was excluded. A jury awarded plaintiffs over $8 million.
- On appeal the Seventh Circuit reversed and remanded, finding multiple legal and evidentiary errors: plaintiffs’ claim improperly relied on a federal rule to create a state‑law duty; the district court usurped the jury by deciding fact questions as law (negligence, justifiable reliance, and joint venture); the admission of Allahyari’s testimony about Green’s intent and exclusion of impeachment evidence was improper; and exclusion of the defense expert was an abuse of discretion.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a negligent‑misrepresentation claim can be premised on a duty created by Federal Rule 26 disclosures | Rule 26 created the duty to disclose insurance and thus supports a negligent‑misrepresentation claim | Federal rules cannot create state‑law duties; Rule 26 violations are policed by the rules/statutes, not by importing federal rules into state tort law | Held: No. Federal Rule 26 does not furnish the state‑law duty element for negligent misrepresentation; the district court erred to the extent it relied on Rule 26 as the duty source |
| Whether the district court properly resolved elements (negligence and justifiable reliance) as matters of law before trial | Plaintiffs: the legal standards were met and could be decided as a matter of law | Defendant: factual disputes existed (what Green knew, timing of demand, reasonableness of inquiry), so breach and justifiable reliance were jury questions | Held: District court erred; negligence and justifiable reliance were factual and should not have been decided as matters of law, so excluding evidence on those issues was improper |
| Whether the court properly resolved existence of a joint venture as a matter of law (impacting coverage/causation) | Plaintiffs: no joint venture under Illinois law; thus individual policy exclusions inapplicable | Defendant: pleadings, contract, and behavior supported existence of a joint venture; factual dispute existed | Held: The joint venture issue was factual and the court erred in deciding it as a matter of law |
| Admissibility of plaintiffs' counsel Allahyari's testimony about defendant counsel Green's intent, and exclusion of defense expert Murphy | Plaintiffs: Allahyari's testimony (and his valuation opinions) were admissible; defendant's expert was unreliable | Defendant: Allahyari lacked personal knowledge of Green's intent and should be impeached; Murphy employed reliable methodology and should have testified | Held: Allowing Allahyari to opine on Green's intent and preventing impeachment was improper; excluding Murphy in full (despite a sufficiently detailed methodology) was an abuse of discretion. Because Allahyari's conjecture was the sole evidence of inducement and Murphy's exclusion was prejudicial, the verdict could not stand |
Key Cases Cited
- Living Designs, Inc. v. E.I. Dupont de Nemours and Co., 431 F.3d 353 (9th Cir. 2005) (Federal Rules do not create duties for adversaries that support negligence claims premised on discovery violations)
- Roppo v. Travelers Comm. Ins. Co., 869 F.3d 568 (7th Cir. 2017) (attorney’s duty of care runs to client, not generally to adversaries; do not conflate discovery duties with tort duty element)
- First Midwest Bank, N.A. v. Stewart Title Guar. Co., 843 N.E.2d 327 (Ill. 2006) (elements of negligent misrepresentation under Illinois law)
- Fulk v. Illinois Cent. R. Co., 22 F.3d 120 (7th Cir. 1994) (duty is a question of law but breach and standard of care are typically factual questions for the jury)
- Tricontinental Indus., Ltd. v. PricewaterhouseCoopers, LLP, 475 F.3d 824 (7th Cir. 2007) (speculation about another party’s motive is insufficient to prove intent)
- Mid‑State Fertilizer Co. v. Exchange Nat'l Bank, 877 F.2d 1333 (7th Cir. 1989) (expert that offers only a bottom‑line ipse dixit is inadmissible)
- Wendler & Ezra, P.C. v. Am. Int'l Group, Inc., 521 F.3d 790 (7th Cir. 2008) (expert testimony must disclose sufficient methodology and data to be admissible)
- Karum Holdings LLC v. Lowe's Co., Inc., 895 F.3d 944 (7th Cir. 2018) (exclusion of expert testimony may be an arbitrary abuse of discretion if methodology adequately disclosed)