Sixth Circuit Affirms Sanctions Award Against Lawyers

In NPF Franchising, LLC v. Sy Dawgs, LLC 37 F.4th 369 (6th Cir. 2022), the Sixth Circuit affirmed a Rule 37 sanctions award against the lawyers for NPF Franchising. The fees were awarded against NPF and the individual lawyers because the lawyers failed to comply with discovery obligations in the case, a dispute between an franchisor and a franchisee. I have quoted from the relevant portions of the opinion below.

“This case began in February 2018 with NPF’s complaint against SY Dawgs for breach of their franchise agreement and non-competition and non-disclosure agreement. About a week later, NPF amended its complaint. After the district court denied NPF’s motion for a preliminary injunction, NPF amended the complaint for a second time. SY Dawgs then moved for attorneys’ fees, costs, and expenses, pursuant to a contractual fee-shifting provision.[1] SY Dawgs argued that it was entitled to monetary compensation because NPF was the “unsuccessful party” on its claim for injunctive relief. The district court denied the motion without prejudice as premature.

374*374 Around this time, in August 2018, NPF failed to appear at a status conference. At that conference, the district court noted that despite SY Dawgs having issued multiple subpoenas and responded to NPF’s discovery requests, NPF had thus far refused to respond to SY Dawgs’s discovery requests, with the discovery deadline two months away. SY Dawgs again moved for costs and fees, this time over NPF’s non-attendance at the status conference. At the next status conference, on September 4, 2018, new counsel, the Buchalter Law Firm, appeared for NPF and vowed to produce all outstanding discovery. The district court granted motions to appear pro hac vice on behalf of NPF filed by Buchalter Law Firm attorneys Tracy Warren and Kathryn Fox around this time.

Later in September, SY Dawgs again moved to compel discovery and for sanctions. It stated that NPF had provided no interrogatory answers or documents in response to the requests that it served on June 20, 2018. SY Dawgs also noted that NPF refused to designate a representative for corporate representative depositions. The parties then had a status conference in early October, where NPF represented to the district court that it had turned over all the requested discovery. Relying on this representation, the district court denied SY Dawgs’s motion for costs and fees but also expressed willingness to revisit the issue later. The district court also granted SY Dawgs’s motion to compel discovery “inasmuch as [NPF]’s counsel has represented to Court and counsel that all requested information has been disclosed.”

SY Dawgs moved for discovery sanctions yet again on October 25, 2018. It stated that NPF had failed to appear for a properly noticed deposition or produce any documents related to a subpoena. SY Dawgs also accused NPF of misrepresenting to the district court that it had produced all documents, given that it had later produced several hundred more documents. The district court then granted a motion by NPF to extend discovery, held another status conference at which it noted that SY Dawgs’s motion for sanctions was fully briefed, and asked the parties to confer and prepare a list of documents still needed. Soon after, it extended discovery again, this time until March 1, 2019.

The new discovery deadline brought yet another motion from SY Dawgs to compel discovery, filed at the end of December. In addition to alleging that NPF had provided insufficient or incomplete responses to several of SY Dawgs’s requests, SY Dawgs argued that NPF had provided no documents responsive to the 45 other requests. That same day, Buchalter Law Firm attorneys Rick Waltman and J. Patrick Allen were admitted pro hac vice to represent NPF. And NPF made its own motion to compel discovery and sanction SY Dawgs. It alleged that SY Dawgs had failed to supplement its prior discovery responses and that doing so was a “willful and concerted effort to avoid the discovery process.” The district court denied both parties’ motions for discovery sanctions, but it left the sanctions issue open for revisitation after litigation concluded. And, yet again, the court granted SY Dawgs’s motion to compel discovery. It also instructed NPF to respond to the discovery requests within 14 days or, in the alternative, certify to the district court that there is nothing responsive left to produce.

The 14-day deadline passed with no such certification from NPF. In February 2019, SY Dawgs renewed its motion for sanctions. It stated that “NPF and its pro hac vice-admitted counsel” had a “pattern of ignoring discovery obligations” and “flagrantly” ignoring both court orders compelling discovery. Def.’s Renewed Mot. for Sanctions, R. 161, PageID 3606. The district 375*375 court granted the motion, ordering NPF to file an affidavit certifying that it had fully complied with the discovery request and also ordering NPF’s counsel to file a “similar certification of compliance by counsel.” The district court warned that “[f]ailure to comply with this Order will result in sanctions, up to and including dismissal of Plaintiff’s action.” And it warned yet again that “any monetary sanctions for Plaintiff’s repeated discovery intransigence will be addressed at the conclusion of this action.”

Despite that admonition, NPF never complied. So, SY Dawgs moved for the ultimate sanction—to dismiss the case under Federal Rule of Civil Procedure 37. In the meantime, NPF moved for an interlocutory appeal of the sanctions order before our court. But NPF later voluntarily dismissed the appeal, and SY Dawgs renewed its motion to dismiss. NPF also sought a writ of mandamus from our circuit, stating that it would be “irreparably harmed” by “fully respond[ing] to all of Respondents’ discovery requests.” Pet. for Writ of Mandamus, R. 180, PageID 4054.[2] Yet no protective order regarding these documents was sought by NPF from the district court, nor did the franchisor ever produce a privilege log. We denied the petition for mandamus. Finally, NPF moved for default judgment, stating that SY Dawgs was misrepresenting its efforts to cooperate with the court’s orders and communicate.

After this last flurry of motions, NPF moved to voluntarily dismiss the case with prejudice in July 2019. The district court granted its request. But just before the dismissal, SY Dawgs moved again for attorneys’ fees and costs.”

The District Court sanctioned four individual lawyers, their law firm and the client.

Because Rule 37 does not allow sanctions against a law firm, that portion of the sanctions award was reversed. However, the sanctions were upheld against the individual lawyers.

The lawyers argued on appeal that they had not received sufficient notice of the sanctions and had not had an opportunity to respond. The Sixth Circuit rejected both arguments. The lawyers argued that their position was “substantially justified” but the court did not accept that argument either.

Comment: In my opinion, this is a case where emotions got the better of the lawyers for NPF. No matter how you may feel about a case or the position of the other side, you must comply with court orders to answer discovery requests. If you work for a firm that appears to be headed down this path, consult ethics counsel before engaging in this behavior. It is unfortunate that the junior lawyers did not engage counsel to defend themselves. Their defense might have been different than the defense offered by their more senior colleagues.

If you have a question about ethics or discovery obligations and you do not know what to do, please call us. We can often help resolve messy situations if we have time to give advice.

Ed Clinton, Jr.

The Clinton Law Firm, LLC

Chicago, Illinois 60602


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