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Nationwide Life Insurance Company v. Commonwealth Land Title Insurance Company

January 20, 2011


The opinion of the court was delivered by: Buckwalter, S.J.


Currently pending before the Court is Plaintiff Nationwide Life Insurance Company's Motion in Limine to Exclude the expert report and testimony of Defendant Commonwealth Land Title Insurance Company's expert J. Bushnell Nielsen. For the following reasons, the Motion is granted in part and denied in part.


This long-pending case arose out of a title insurance policy issued by Defendant Commonwealth Land Title Insurance Company ("Commonwealth") to Plaintiff Nationwide Life Insurance Company ("Nationwide"). According to the Complaint,*fn1 a company by the name of PMI Associates ("PMI") originally purchased real property from Liberty Mills Limited Partnership ("Liberty Mills") in 1988. (Compl. ¶ 8.) At that time, PMI and Liberty Mills entered into a Declaration of Restrictions (the "Declaration"), which gave Liberty Mills, in part, the right to refuse approval of future purchasers of the Property and an option to repurchase the Property in certain circumstances. (Id. ¶¶ 9-11.)

In 2001, PMI took out a $3.5 million loan from Plaintiff Nationwide using the above property as interest. (Id. ¶¶ 12-13.) Nationwide, in turn, purchased a title insurance policy ("Policy") from Defendant Commonwealth, which contained what is known as an America Land Title Association ("ALTA") 9 Endorsement, covering Nationwide, among other things, against loss or damage sustained by reason of:

Any instrument referred to in Schedule B as containing covenants, conditions or restrictions on the land which, in addition, . . . (iv) provides for an option to purchase, a right of first refusal or the prior approval of a future purchaser or occupant. (Id. ¶¶ 14-15.) PMI eventually defaulted on the balance of its loan in 2003 and, in lieu of foreclosure proceedings, it conveyed the property to Nationwide by fee simple deed. (Id. ¶ 18.) In an effort to recoup its losses, Nationwide attempted to sell the property to Ironwood Real Estate, LLC ("Ironwood"), but was thwarted when Liberty Mills's successor-in-interest, Franklin Mills Associates Limited Partnership ("Franklin Mills"), invoked its rights under the Declaration and refused to approve Ironwood as a buyer. (Id. ¶¶ 20-21.)

Thereafter, Nationwide submitted a claim for coverage to Commonwealth, alleging that Franklin Mills's rights of refusal were covered restrictions that made the property unusable and unsalable. (Id. ¶¶ 22-24.) Commonwealth denied the claim on the ground that the Policy expressly excepted coverage for loss resulting from the rights invoked by Franklin Mills. (Id. ¶ 25.) In light of its disagreement with such a policy interpretation, Nationwide initiated a lawsuit against Commonwealth in this Court. Commonwealth moved to dismiss and, on October 19, 2005, the Court dismissed the case finding that, by listing the Declaration under the heading "exceptions from coverage" in Schedule B of the Policy, the Policy "expressly excepted" any loss or damage arising from the Declaration. Nationwide Life Ins. Co. v. Commw. Land Title Ins. Co., No. CIV.A.05-281, 2005 WL 276492, at *7 (E.D. Pa. Oct. 19, 2005). Nationwide subsequently sought reconsideration, arguing that the Court's plain-language interpretation of the Policy was inconsistent with industry custom and practice. The Court, however, rejected that claim and further held that Plaintiff Nationwide bore the burden of proper diligence before issuing the mortgage to PMI. Nationwide Life Ins. Co. v. Commw. Land Title Ins. Co., No. CIV.A. 05-281, 2006 WL 1192998, at *3 (E.D. Pa. May 3, 2006).

Nationwide appealed to the United States Court of Appeals for the Third Circuit. Via decision issued January 28, 2009, the Third Circuit reversed the District Court's dismissal of the case. Nationwide Life Ins. Co. v. Commonw. Land Title Ins. Co., 579 F.3d 304, 317 (3d Cir. 2009). Specifically, the Appeals Court reinterpreted the insurance Policy considering not only the text of the contract, but also its purpose and industry custom and practice. Doing so, it found that, "[t]o except expressly from ALTA 9 Endorsement coverage a right of refusal or other restrictions noted in paragraph 1(b)(2) of the Endorsement, an insurer must list those restrictions specifically in Schedule B. It is not enough for the insurer merely to list in some part of Schedule B the document in which the restrictions are embedded." Id. It went on to hold that, "Commonwealth bore the burden of detecting the restrictions stated in the Declaration, and had to list those restrictions explicitly as exceptions to avoid covering loss from them." Id. at 319.

Under Third Circuit mandate, the parties returned to this Court and Plaintiff filed a First Amended Complaint on November 12, 2009. The parties have now proceeded through discovery and filed dispositive motions. The Motion presently at issue reflects Plaintiff's efforts to exclude Defendant's expert from either testifying or being considered by the Court during summary judgment proceedings.


The Supreme Court has explained that district court judges perform a "gatekeeping role" with respect to expert testimony by assessing whether such testimony is admissible under Federal Rule of Evidence 702. Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 590-91, 597 (1993); seealsoKumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 146-47 (1999) (extending Daubert to testimony about "technical or other specialized knowledge") (internal quotations and citations omitted). Rule 702 provides as follows:

If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise, if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case.

FED. R. EVID. 702. When the expert testimony at issue is not scientific, "the court must determine whether the expert is qualified to provide such an opinion, whether the testimony assists the fact-finder, whether the testimony is reliable and whether the testimony 'fits' the facts of the case." D & D Assoc., Inc. v. Bd. of Educ. of N. Plainfield, 411 F. Supp. 2d 483, 487-88 (D.N.J. 2006), aff'd, 2006 WL 755984 (D.N.J. Mar. 20, 2006).

The first requirement of qualification is interpreted liberally to encompass "a broad range of knowledge, skills, and training." In re Paoli R.R. Yard PCB Litig., 35 F.3d 717, 741 (3d Cir. 1994). At minimum, the expert "must possess skill or knowledge greater than the average layman." Elcock v. Kmart Corp., 233 F.3d 734, 741 (3d Cir. 2000) (quotations omitted). The second factor of reliability "means that the expert's opinion must be based on the 'methods and procedures of science' rather than on 'subjective belief or unsupported speculation'; the expert must have 'good grounds' for his or her belief." In re Paoli, 35 F.3d at 742 (quoting Daubert, 509 U.S. at 589-90). Finally, the requirement of "fit" concerns relevancy. "'Expert testimony which does not relate to any issue in the case is not relevant and, ergo, non-helpful.'" In re Unisys Savings Plan Litig., 173 F.3d 145, 162 (3d Cir. 1999) (quoting Daubert, 509 U.S. at 591).


Plaintiff's Motion seeks to preclude the expert testimony of J. Bushnell Nielsen on multiple grounds. First, according to Plaintiff, Mr. Nielsen's report contradicts the Third Circuit's mandate in this case. Second, Plaintiff asserts that the language of the Policy is so clear and unambiguous that expert testimony is irrelevant and unnecessary to assist with its meaning. Third, Plaintiff claims that the report is unreliable because it is based solely on Mr. Nielsen's own subjective belief and not on any reliable methodology. Fourth, according to Plaintiff, Mr. Nielsen's expert report was untimely filed and should therefore be stricken. Fifth, Plaintiff avers that Commonwealth should be judicially estopped from presenting any arguments or evidence that are incompatible with the arguments Commonwealth originally relied upon to convince the Court to dismiss this action. Finally, Plaintiff argues that Mr. Nielsen offers only impermissible conclusions of law, which are not admissible under the Federal Rules of Evidence.*fn2

A. Whether Nielsen's Testimony is Precluded by the Third Circuit's Ruling

As a primary matter, Plaintiff contends that the conclusion contained in Mr. Nielsen's report is directly contradictory to the Third Circuit's ruling on appeal in this case and, therefore, is barred by the law of the case doctrine. The law of the case doctrine provides that "when a court decides upon a rule of law, that rule should continue to govern the same issues in subsequent stages in the litigation." In the Matter of Resyn Corp., 945 F.2d 1279, 1281 (3d Cir. 1991) (quotations omitted). In other words, "once an issue has been decided, parties may not relitigate that issue in the same case." Waldorf v. Shuta, 142 F.3d 601, 616 n.4 (3d Cir. 1998). With this well-established proposition, however, comes the equally well-settled corollary that a trial court "may consider, as a matter of first impression, those issues not expressly or implicitly disposed of by the appellate decision." Bankers Trust Co. v. Bethlehem Steel Corp., 761 F.2d 943, 950 (3d Cir. 1985). Thus, the trial court is "free to make any order or direction in further progress of the case, not inconsistent with the decision of the appellate court, as to any question not settled by the decision." Id.; see also In re Resyn Corp., 945 F.2d 1279, 1282 (3d Cir. 1991) (noting that issues raised but not reached on a prior appeal are not within the law of the case doctrine.). Moreover, "[t]he doctrine does not apply to dicta." United Artists Theatre Circuit, Inc. v. Twp. of Warrington, Pa., 316 F.3d 392, 397 n.4 (3d Cir. 2003).

A detailed review of the present case's procedural background reveals the law of the case doctrine to be inapplicable to Mr. Nielsen's expert report. As noted above, the entire dispute in this matter centers upon interpretation of the ALTA 9 Endorsement to the Policy issued to Plaintiff. That Endorsement states:

The Company [Commonwealth] insures the owner of the indebtedness secured by the insured mortgage against loss or damage sustained by reason of:

1. The existence at Date of Policy of any of the following:

(a) Covenants, conditions or restrictions under which the lien of the mortgage referred to in Schedule A can be divested, subordinated or extinguished, or ...

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