August 10, 2016 Articles

Rule 26 Damages Disclosures: Pitfalls, Sanctions, and Suggested Practices

By Peter G. Pappas

This article addresses common issues faced by attorneys disclosing damages pursuant to Federal Rules of Civil Procedure 26(a) and (e), as well as the possibility of severe sanctions for violating the rules. In addition, it suggests practices attorneys may use to comply with the rules. 

Requirements of Rule 26(a)(1)(A)(iii)
The damages disclosure provision of Rule 26 provides in pertinent part:

[A] party must, without awaiting a discovery request, provide to the other parties . . . a computation of each category of damages claimed . . . [and] make available for inspection and copying . . . the documents or other evidentiary material, unless privileged or protected from disclosure, on which each computation is based, including materials bearing on the nature and extent of injuries suffered[.]

Fed. R. Civ. P. 26(a)(1)(A)(iii).  

Simply providing information to the opposing party and expecting it to compute the damages does not satisfy Rule 26(a)’s requirements. Rather, “by its very terms Rule 26(a) requires more than providing—without any explanation—undifferentiated financial statements; it requires a ‘computation,’ supported by documents.” Design Strategy, Inc. v. Davis, 469 F.3d 284, 295 (2d Cir. 2006). A party’s obligation to deliver all the documents used to calculate damages is “the functional equivalent of a standing Request for Production under Rule 34[,]” which grants the opposing party general access to these relevant documents. Id. at 296 (quoting Fed. R. Civ. P. 26 advisory committee notes to 1993 amendments).  

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