Category: Discovery Sanctions

Effort to Sanction United States Under Rule 30(b)(6) Fails

Rule 30(b)(6) allows a party to serve a deposition notice on an organization and the organization must tender a witness who can answer questions. The party serving the notice sets forth the issues it will cover in the deposition and the responding party is required to identify and produce a witness who has knowledge of said matters.

In this case, the United States tendered a Rule 30(b)(6) witness, but the plaintiff claimed that the witness was a “Know Nothing Witness” who did not provide useful information. The court rejected that argument and denied the sanctions motion and explained:

Plaintiff alleges that Mr. Whitaker was not prepared for his RCFC 30(b)(6) deposition. When asked to explain how he had prepared for the RCFC 30(b)(6) deposition, Mr. Whitaker stated that he had seen the list of plaintiff’s RCFC 30(b)(6) deposition topics only the day before his deposition, and that, in order to familiarize himself with the topics, he looked at each one of the admissions and the spreadsheets produced by defendant in discovery. Mr. Whitaker also testified that he had not thoroughly reviewed the contract between Securiforce and DLA Energy before his deposition.

Plaintiff points to different statements made by Mr. Whitaker during his RCFC 30(b)(6) deposition to demonstrate that the “government’s designated witness, Mr. Whitaker, had no firsthand knowledge concerning the specified topics and had undertaken no investigation as to what was `reasonably known to the organization.'” Specifically, Mr. Whitaker testified that he had no personal knowledge as to whether fuel was delivered to any of Securiforce’s sites between September 7, 2011 and October 24, 2011, and that his knowledge regarding specific fuel deliveries was based on the information contained in the spreadsheets that were produced to plaintiff in July 2013. When asked about the process for ordering and delivering fuel in Iraq, however, Mr. Whitaker articulated a developed understanding of this process and its nuances, including how the process could be different based on the source of the fuel. Furthermore, Mr. Whitaker was able to testify to the information contained in defendant’s response to interrogatory 16, including the data systems used to compile the spreadsheets.

The transcript of Mr. Whitaker’s deposition demonstrates that he offered a thorough knowledge of the spreadsheets prepared by DLA and previously turned over to plaintiff. The spreadsheets purportedly captured the fuel deliveries to the Securiforce Department of State sites in Iraq during the relevant time period according to defendant’s information when the spreadsheets were prepared. Mr. Whitaker stated that he was familiar with the various databases listed on the spreadsheets, including “DLA Energy’s fuels enterprise server, DLA Energy’s defense fuel, automated management system, and DLA Energy’s automated voucher examination and dispersing system” and was able to explain the systems to plaintiff’s counsel when asked. The dialogue contained in the deposition transcript indicates that Mr. Whitaker could speak intelligently about the information contained in the spreadsheets. Mr. Whitaker answered many questions posed by plaintiff’s counsel about specific, detailed information contained in the spreadsheets based on his ability to decipher the spreadsheets. Specifically, Mr. Whitaker could read the codes used in the spreadsheets to identify countries of origin, invoice numbers, billing codes, delivery sites, delivery dates, funding codes, stock numbers, fuel quantities, and fuel grades. Mr. Whitaker’s knowledgeable deposition testimony about the spreadsheets and fuel deliveries in Iraq indicates that he was prepared to discuss a broad range of the topics plaintiff included in the RCFC 30(b)(6) deposition notice based on the information contained in DLA Energy’s records.

…

It is clear from Mr. Whitaker’s deposition testimony that, although he could not provide specific details for all of plaintiff’s counsel’s questions, he testified about information reasonably known by the government, based on DLA Energy’s records, and was responsive to a significant portion of plaintiff’s identified RCFC 30(b)(6) topics. Because Mr. Whitaker testified knowledgably about the DLA-prepared spreadsheets, and the information contained therein, his deposition testimony as a RCFC 30(b)(6) witness was not such that he was, as alleged by plaintiff, a “No-show” witness. Moreover, it would be hard to argue that only one witness could have testified to DLA Energy headquarters’ records and whether onsite deliveries in the conflict theater of Iraq actually occurred, as well as to possible fuel deliveries by the Army. The government offered to provide additional RCFC 30(b)(6) witnesses, and identified possible further witnesses, but plaintiff declined to depose any additional witnesses who could speak to the onsite fuel deliveries in Iraq. Instead, plaintiff chose to file its motion for sanctions and seek monetary compensation.

The case is interesting because it shows what work must be done by the party producing the Rule 30(b)(6) witness to make sure the witness knows what he is talking about. Source: SECURIFORCE INTERNATIONAL AMERICA, LLC v. US, Court of Federal Claims 2016 – Google Scholar

Court Grants Default Judgment Against Litigant Who Refuses to Appear for Deposition

STERLING CROSS DEFENSE SYSTEMS, INC. v. DOLARIAN CAPITAL, INC., Dist. Court, ED California 2015 – Google Scholar.

The defendant in this case must have a really good reason not to appear for his deposition.

Neither the witness nor his lawyer appeared at the date and time when the deposition was noticed. The district court awarded sanctions and ordered the client and his lawyer to appear at a show cause hearing to explain why they should not be held in contempt. From there things went downhill:

“The Court determined, with reference to the website of the State Bar of California, that Defendant’s counsel had been ordered inactive by the State Bar as of February 27, 2015 and is no longer eligible to practice in the State of California.[1]Smith never advised the Court of this development, nor did he withdraw as attorney of record for Plaintiff. Plaintiff’s counsel, Jeff Reich, informed the Court, both at the hearing and via declaration, that Smith had been non-responsive to his communication attempts for some time. (Declaration of Jeff Reich ¶ 11, ECF No. 32.)

The Court granted Plaintiff’s request for monetary sanctions in the amount of $1,625.00 and issued an order to show cause why further sanctions, including the striking of all responsive pleadings and entry of default, should not be imposed based on Smith’s failures to appear, both at the deposition and at the hearing on the motion to compel. The order, which was directed at both Dolarian and Smith, required each to file separate responses to the order to show cause no later than June 25, 2015. It also provided Dolarian the opportunity to request a continuance if he required time to retain new counsel. (ECF No. 36.) Finally, the order required personal appearances by both Dolarian and Smith. The order to show cause hearing was set for July 10, 2015.

The U.S. Marshals Service was directed to personally serve both Dolarian and Smith with the order and succeeded in doing so on June 8, 2015; the two were served in adjacent suites in the building housing Smith’s law offices. (ECF No. 37.) Neither Smith nor Dolarian filed any response to the order to show cause. Neither Smith nor Dolarian appeared at the order to show cause hearing.”

The Ninth Circuit uses a five-factor test to determine whether a case should be dismissed pursuant to Rule 37.

” In re Exxon Valdez, 102 F.3d 429, 432 (9th Cir.1996). In determining whether to dismiss an action or enter default pursuant to Rule 37(b)(2)(C), a district court must consider five factors:

(1) the public’s interest in expeditious resolution of litigation; (2) the court’s need to manage its docket; (3) the risk of prejudice to the [opposing party]; (4) the public policy favoring disposition of cases on their merits; and (5) the availability of less drastic sanctions.’ Payne,121 F.3d at 507, quoting Malone v. U.S. Postal Serv., 833 F.2d 128, 130 (9th Cir.1987). Where a court order is violated, the first and second factors will favor sanctions and the fourth will cut against them.Id.

Computer Task Group, Inc. v. Brotby, 364 F.3d 1112, 1115 (9th Cir.2004).”

Because neither the defendant nor his lawyer appeared for the show cause hearing the court entered a default judgment against the defendant. This is an ugly outcome for the defendant. One must wonder why he would use a lawyer who was not licensed to practice law and why he failed to appear at the show cause hearing and explain his predicament to the judge. The defendant/deponent could have appeared before the judge and claimed that he did not know that his lawyer was no longer allowed to practice law. The judge would then have been required to give time to obtain new counsel and complete the deposition.

In sum, this is an ugly outcome that could have been prevented with even a minimum of courtesy to the court and opposing counsel.

Edward X. Clinton, Jr.

Trial Court Denies Motion in Limine To Exclude A Witness Who Was Not Listed On Witness List

NORFOLK SOUTHERN RAILWAY COMPANY v. PITTSBURGH & WEST VIRGINIA RAILROAD, Dist. Court, WD Pennsylvania 2015 – Google Scholar.

This opinion raises an issue that can arise in litigation – a party fails to disclose the identity of a witness and the opposing party moves to bar the witness from testifying. Here the court rejected that argument because the defendant was aware of the identity of the witness (even though he was not on the witness list) and failed to take the appropriate deposition.

The court explains: “Bearing those standards in mind, the Court will deny Defendant’s motion in limine to exclude Chastek from testifying at trial. Where, as here, a party fails to list a potential witness in its initial disclosures, courts have not imposed the harsh sanction of excluding his or her testimony at trial so long as the opposing party knows of that witness well in advance of trial. …

At the first step, Defendants are hard-pressed to claim surprise. As Plaintiffs discuss at length in their brief, Defendants knew of Chastek’s identify and position at Wheeling & Lake Erie during the discovery period and could have easily noticed his deposition. But they apparently chose not to do so. Defendants also questioned Wheeling & Lake Erie’s then-Rule 30(b)(6) designee, Michael Mokodean, its Chairman and CEO, Larry Parsons, and its Director of Real Estate, Taxes and Industrial Development, Clarence Jaeger, about Chastek during their respective depositions and introduced an article quoting Chastek (and identifying his position) as an exhibit in no less than two of those deposition. In addition, Chastek was identified on numerous documents (i.e., various e-mail chains) produced to Defendants by Plaintiffs and third-party Chesapeake throughout the discovery phase of this litigation.”

Thus, the court refused to bar the witness because the defendants could have solved the problem themselves by taking the deposition of the witness.

This case is important because it shows how good lawyering by the plaintiff defeated a motion based on a technicality. While its true that the witness was not listed on the witness list, defendants should have been aware that the witness existed given the volume of discovery materials that were produced concerning the witness. This is a demonstration of good lawyering by plaintiff’s counsel.

Edward X. Clinton, Jr.

Copyright Infringement Case Implodes Due To Rule 37(c) Violations

BWP MEDIA USA INC. v. RICH KIDS CLOTHING COMPANY, LLC, Dist. Court, WD Washington 2015 – Google Scholar.

This is a fairly routine case in which BWP sued Rich Kids alleging that Rich Kids infringed its copyrights on three photographs. To support its claim of copyright infringement, BWP produced three screen shots of Rich Kids’ website allegedly showing that BWP’s photographs were copied without permission.

Rich Kids responded to the motion for summary judgment by arguing that the screen-grab exhibit should be stricken because it was not produced during discovery. Rich Kids also filed its own summary judgment motion in which it argued that BWP failed to produce admissible evidence upon which a reasonable jury could find copyright infringement.

The district court granted Rich Kids’ motion for summary judgment based on its finding that BWP violated Rule 37. That finding was, in turn, based on a finding that BWP had failed to comply with the Rule 26(a)(1)(A) automatic disclosure requirements. The Court explained:

“Federal Rule of Civil Procedure 26(a)(1)(A) requires a party to make certain initial disclosures to other parties “without awaiting a discovery request[.]” Those disclosures include “a copy — or a description by category and location — of all documents, electronically stored information, and tangible things that the disclosing party has in its possession, custody, or control and may use to support its claims[.]” Fed. R. Civ. P. 26(a)(1)(A)(ii). Parties are further required, under Rule 26(e), to supplement or correct initial disclosures on an ongoing basis.

In this case, BWP indicated in its initial disclosures its “possession of materials relevant to Defendant’s commission of copyright infringement on its website, including digital files of screen shots of the website depicting Defendant’s commission of copyright infringement.” (Dkt. 28-1 at 3.) No materials were included in the disclosures. RKCC submits evidence showing it sought production of the materials identified in plaintiff’s initial disclosures, and that BWP failed to comply with that request. Specifically, in an email dated October 30, 2014, the deadline for filing discovery-related motions and some two weeks prior to the close of discovery, counsel for RKCC reminded counsel for BWP that he had “never received any documents at all from BWP[,]” other than the exhibit attached to the complaint, described above. (Dkt. 24-1 at 2.) Defendant’s counsel indicated he was considering filing a motion to compel, which would be withdrawn when documents were produced. (Id.) In an email later that same day, RKCC’s counsel reiterated:

As to the documents, I’m referring to any documents envisioned by the initial disclosure rules “all documents, electronically stored information, and tangible things that the disclosing party has in its possession, custody, or control and may use [sic] to support its claims or defenses, unless the use would be solely for impeachment[.]”

(Dkt. 24-1 at 3.) He added: “Of course, if BWP doesn’t plan to rely on any documents other than the pleadings to support its claims, that’s fine. I guess I would just ask for confirmation.” (Id.) Counsel for RKCC attests that counsel forBWP provided the requested confirmation by telephone that BWP would not rely on any documents other than those included in the pleadings. (Dkt. 24, ¶4.)

…..

In sum, the Court concludes that, pursuant to Rule 37(c), BWP is foreclosed from relying on the evidence attached to its motion for summary judgment and is restricted to relying on the evidence attached to its complaint and/or otherwise properly produced during the course of discovery. Within that framework, the Court proceeds to the pending motions for summary judgment.”

The court held that BWP violated Rule 26 by failing to disclose the screen-grab exhibit and held that, pursuant to Rule 37(c), BWP had no admissible evidence to support its claims of copyright infringement.

Separately, the Court denied Rich Kids’ motion for Rule 11 sanctions because Rich Kids did not comply with the safe harbor (providing the other party 21 days in which to withdraw the claims) and did not file the sanctions motion as a separate motion.

In sum, an excellent opinion on these issues.

Edward X. Clinton, Jr.

Rule 37 Sanctions Awarded Where Defendant Alters An Engineer’s Report

http://scholar.google.com/scholar_case?case=3229138459727806220&hl=en&lr=lang_en&as_sdt=400006&as_vis=1&oi=scholaralrt

Raimey v. Wright National Flood Insurance (E.D. NY 2014).

The plaintiffs sued the defendant flood insurance carrier for breach of contract. They alleged that their home was damages by flooding during Hurricane Sandy and that the defendant wrongfully denied plaintiffs’ claim.

The defendant was sanctioned because it concealed a report by its engineer who found that the home was damaged beyond repair by Hurricane Sandy. The defendant did not produce the report in discovery. Instead, the defendant altered the report so that it reached the opposite conclusion.  The Magistrate Judge sanctioned the defendant and its counsel and the district court upheld the sanctions.

The district judge held (a) that prior court orders required the defendant to disclose the original unedited engineering report (b) that the failure to produce the report was improper; (c) that the failure to produce the report prejudiced the plaintiffs and made the litigation more costly; and (d) defendant’s counsel attempted to curtail the magistrate’s inquiry concerning the report during a hearing on the issue.

In sum, this is a textbook case of Rule 37 sanctions.

3rd Circuit affirms discovery sanction against foreclosure law firm

McLaughlin v. Phelan Hallinan & Schmieg, LLP, 756 F. 3d 240 – Court of Appeals, 3rd Circuit 2014 – Google Scholar.

This case arose out of a clerical error by a bank, which erroneously concluded that the plaintiff had defaulted on his mortgage. Plaintiff was not in default. However, the bank then sent the file to the defendant law firm which sent Plaintiff a demand letter.

Plaintiff then filed a putative class action against the law firm for alleged violations of the Fair Debt Collection Practices Act. The district court dismissed the FDCPA claims against the law firm, but it awarded plaintiff Rule 37 sanctions because the law firm violated an order requiring it to produce its legal bills. The defendant law firm did not comply with the order, but attached the bills to its own summary judgment motion. The district court awarded plaintiff Rule 37 sanctions. The third circuit affirmed. “The District Court, however, did find that PHS’s failure to produce the invoices during discovery was sanctionable under Fed.R.Civ.P. 37(b)(2)(A) and sua sponte ordered PHS to pay all expenses, including attorney’s fees, that McLaughlin had incurred in connection with his motion for reconsideration, reasoning that PHS’s action prevented full and timely investigation of the facts and led to additional briefing on the summary judgment motion.”

On appeal, the law firm argued that the sua sponte imposition of sanctions deprived it of an opportunity to be heard on the sanctions issue. The Third Circuit disagreed.  It explained:

“It is true that PHS did not receive notice that sanctions were being considered before the District Court initially imposed them and hence did not immediately have an opportunity to argue that its failure was substantially justified. PHS, however, eventually provided arguments why it believed its conduct was not sanctionable. More specifically, in connection with the briefing on the magnitude of sanctions, PHS explicitly laid out its arguments why its conduct was substantially justified and neither in bad faith nor willful and asked the newly assigned District Court Judge to “reevaluat[e] … the imposition ofsanctions.” ECF No. 111. The District Court considered these arguments, reaffirmed the relevance of the discovery sought and the impact of the tardy production, and, for those reasons “and for all of the reasons previously stated in” her predecessor’s decision, ordered sanctions in the form of attorney’s fees. Thus, PHS had notice of the conduct that the District Court found to be sanctionable, had an opportunity to be heard, and received review and a ruling from a different judge concerning their conduct. Accordingly, we conclude PHS received due process and we will affirm the sanctions order.”

The sanctions award was approximately $15,000.

Edward X. Clinton, Jr.

Electronic Evidence – Article on New Proposed Rule 37(e)

Civil Procedure & Federal Courts Blog.

This is one discussion of the new proposed Rule 37(e) which deals with sanctions for the loss of electronic evidence.

I will post other comments on the rule in the coming weeks.

Ed Clinton, jr.

Jones Day Sanctions Order – Lawyer Sanctioned For Tedious Objections At Deposition – But Eighth Circuit Reverses Sanction

Jones Day Sanctions Order.

This is a lengthy opinion by a federal district court judge, Mark W. Bennett, in which he sanctions a Jones Day lawyer for excessive and tedious objections at a deposition. In writing the opinion, Bennett is clearly out to reform the entire discovery process. He writes: “Discovery-a process intended to facilitate the free flow of information between parties – is now too often mired in obstructionism. Today’s ‘litigators’ are quick to dispute discovery requests, slow to produce documents, and all-too-eager to object at every stage of the process.” He also criticizes judges for ignoring this misconduct and encouraging obstructionist tactics. He argues that the judiciary should step up to the plate and sanction obstructionist lawyers. “Obstructionist litigators, like Ivan Pavlov’s dogs, salivate when they see discovery requests and are conditioned to unleash their treasure chest of obstructive weaponry. Unlike Pavlov’s dogs, their rewards are not food but successfully blocking or impeding the flow of discoverable information. Unless judges impose serious adverse consequences, like court-imposed sanctions, litigators’ conditional reflexes will persist. The point of court-imposed sanctions is to stop reinforcing winning through obstruction.”

As an aside, I agree with Judge Bennett. There are too many objections and delays in the discovery process. That conduct slows down the court system and wastes resources. Judges who urge lawyers to meet and work it out need to remember that some lawyers won’t produce, no matter what happens. In Chicago, the most difficult firms to work with are often the so-called litigation boutiques.

In any event, Judge Bennett sanctioned a Jones Day lawyer for obstructionist conduct during depositions. First, the lawyer used speaking objections when questions were asked to disrupt the flow of questions and answers. Second, the lawyer excessively used what are known as “form” objections. Third, Judge Bennett concluded that the lawyer was using the objections to coach the witness on what to say.

Specifically, Judge Bennett found that the form objections were a waste of time and were not necessary. Furthermore, the form objections did not explain what the problem was so that the questioner could cure the problem. As the court explained, “counsel’s ‘form’ objections, however, amplified two other issues: witness coaching and excessive interruptions.” Page 17.  The court found that certain objections were used to coach the witness not to answer questions. Judge Bennett objected to the use of “vague and ambiguous” as an objection because it was used to coach the witness to refuse to answer on the ground that the question called for speculation.

Judge Bennett objected to objections such as “You can answer if you know.” He is correct to find this conduct sanctionable. Those type of objections are designed to coach witnesses to give certain types of answers.

The sanction ordered is that the lawyer make a video discussing proper deposition conduct. I think the sanction is very odd, given the behavior, but Judge Bennett is on to something – lawyers should not be coaching witnesses during a deposition.

Update: the Eighth Circuit reversed the ruling on the ground that the sanction was inappropriate and out of line.

The court was concerned about (a) the lack of any complaint from the other side’s attorneys (b) the lengthy delay before sanctions were imposed; and (c) the failure to notify Ghezzi that sanctions were being considered.  The Court explained its ruling in this abstract:

“Then, sixteen months after defense counsel participated in the Bottock and Barrett-Reis depositions, one year after fact discovery had closed, and nine months after Abbott had moved for summary judgment based on excerpts of key depositions, the trial judge assumed control of the case for the first time and criticized defense counsel’s deposition conduct. Seven months later she was sanctioned under Rule 30(d)(2)—some two years after she had defended the Bottock and Barrett-Reis depositions without complaint from opposing counsel or inquiry by the magistrate judge. Cf. Manual for Complex Litigation § 11.42; Federal Judicial Center, Civil Litigation Management Manual, Ch. 3 (2d ed. 2010).

With few exceptions, sanctions should be imposed “within a time frame that has a nexus to the behavior sought to be deterred.” Thomas v. Capital Sec. Servs., Inc., 836 F.2d 866, 881 (5th Cir. 1988); cf. Cooter & Gell, 496 U.S. at 395-96. Rule 30(d)(2) sanctions assessed near the time of violation deter both ongoing and subsequent abuses. See Craig, 384 F. App’x at 533. Prompt action “helps enhance the credibility of the rule,” and by deterring further discovery abuse, “achieve its therapeutic purpose.” Cf. Matter of Yagman, 796 F.2d at 1183-84. This is especially true when sanctions are imposed sua sponte after the fact, for delay allows potential violations to pass unchecked and undeterred. E.g., Thomas, 836 F.3d at 881. The primary purpose of Rule 30(d)(2) was not well served by the post hoc procedures here. See Matter of Yagman, 796 F.2d at 1184 (concluding that “the benefit provided by the policy of deterrence is lost if the [district court] postpones imposition of [discovery sanctions] until the end of the case”); see alsoCraig, 384 F. App’x at 533….”

The court discussed the failure to notify counsel in this passage:

“

Here, there was no real notice of the nature of the sanction the court had in mind. While the trial judge did provide defense counsel advance notice of his reasons for considering sanctions under Rule 30(d)(2), nothing was mentioned about their unusual nature requiring counsel to produce and distribute an instructional video addressing the impropriety of unspecified form objections, witness coaching, and excessive interruptions. Nor were any “probable consequences” discussed at the subsequent sanctions hearing. See Fisher, 526 F.2d at 1343. The nature of the sanction became apparent only in the court’s final published opinion in the matter. See In re Tutu Wells, 120 F.3d at 380; see also In re Prudential, 278 F.3d at 192-93.

Once information about an unusual sanction appears in public, the damage to the subject’s career, reputation, and future professional opportunities can be difficult if not impossible to repair. See Adams v. Ford Motor Co., 653 F.3d 299, 308-09 (3d Cir. 2011). Defense counsel’s reputation was one of her “most important professional assets,” see id. at 305, and the district court’s unusual sanction might leave an indelible and deleterious “black mark” on her career, see In re Tutu Wells, 120 F.3d at 381 n.10.”

The Eighth Circuit opinion can be found at this link. https://scholar.google.com/scholar_case?case=13463882856548559569&q=June+k.+ghezzi&hl=en&as_sdt=400006&as_ylo=2015

Comment: the sanction imposed by the District Court was harsh and unusual punishment. It is noteworthy that the Eighth Circuit did not vindicate the conduct of the attorney who made the tedious objections at the deposition. In my experience tedious objections of this sort are used to coach witnesses on how to answer questions and should be prohibited.

Edward X. Clinton, Jr.

The End of Prenda – Sanctions and Contempt Order Affirmed by Seventh Circuit

Duffy v. Smith :: Seventh Circuit :: US Courts of Appeals Cases :: US Federal Case Law :: US Case Law :: US Law :: Justia.

This ruling, affirming the sanctions and contempt orders against the Prenda Lawyers, was no surprise as the oral argument went poorly for them. See my post of April 8, 2014. The ruling may prove to be a troublesome one for lawyers who are named in sanctions motions after they withdraw form litigation. I have only discussed the issues that are important to the appeal and to lawyers. I have ignored many of the arguments and defenses raised by the Prenda Lawyers.

Prenda Law, according to the Seventh Circuit, consisted of Paul Duffy, John Steele and Paul Hansmeier. All three were Illinois lawyers. Prenda would file a lawsuit against unknown individuals and would then subpoena their internet provider for information identifying particular individuals. Then, Prenda would contact those people and would claim that they had wrongfully downloaded pornographic movies and would extract settlements from them.

In this particular case, Lightspeed Media Corporation, which operates pornography sit, sued Anthony Smith and other defendants. The case began in the State Court, where Lightspeed claimed that one John Doe defendant (identified through his IP address). Lightspeed then identified 6,000 other IP addresses and then served subpoenas on two internet service providers (ISPs) seeking the identity of the owner of each of the 6000 IP addresses. In the state court the ISPs refused to turn over the information. The trial court denied the motion to quash the subpoenas. The ISPs appealed and the Illinois Supreme Court held that the trial court erred by refusing to quash the subpoenas.

On August 3, 2012, Lightspeed amended the complaint and claimed that the ISPs were co-conspirators of those defendants who had wrongfully downloaded the pornographic movie. In the amended complaint the defendant John Doe’s name was revealed to be Anthony Smith.

On August 9, 2012, the ISPs removed the case to the District Court for the Southern District of Illinois. Lightspeed filed emergency motions to require the ISPs to produce personally identifiable information for each of the 6,000 alleged co-conspirators. The district judge denied the motion. The ISP defendants then submitted a motion to dismiss the case and a motion to stay discovery (stop discovery) while the motion to dismiss was pending. See Opinion at 4.

In November 2012, Hansmeier moved to withdraw. In March 2013, Steele moved to withdraw.

In May 2013, a California district court entered a rule to show cause against Duffy, Hansmeier, and Steele. That court also made a finding that Duffy, Hansmeier and Steele controlled Prenda Law. See Seventh Circuit Opinion at 5.

After the show-cause order was entered in California, Prenda moved to voluntarily dismiss the Lightspeed case. After the voluntary dismissal was granted, Smith (within 14 days) moved for sanctions pursuant to 28 U.S.C. Section 1927. Duffy responded but Hansmeier and Steele did not file responses. In October 2013, the district court granted the motion for sanctions. The lawyers moved for reconsideration. The court granted the request for a rehearing.

Then the ISPs became involved. They sought attorney frees from Steele, Hansmeier and Duffy.  After rehearing, the district court upheld its original order of sanctions to Smith and granted the ISP’s motion for sanctions. The district court assessed fees against the lawyers jointly and severally. The district court found that the lawsuit was frivolous and that the litigation “‘smacked of a bully pretense.'” The district court also ruled that the lawyers “were engaged in ‘abusive litigation…simply filing a lawsuit to do discovery to find out if you can sue somebody. That’s just utter nonsense.'” Opinion at 17-18.  The three lawyers then appealed.

Were Steele and Hansmeier given notice and an opportunity to be heard?

Steele and Hansmeier argued that they did not receive notice of the motion for sanctions. The Seventh Circuit disagreed because, first even if they did not have notice of the original motion, “the defect was cured when the district court granted rehearing on the sanctions issue.”  Second, Steele and Hansmeier did have notice of the original motion. The court explained that “[g]iven the close connections among the lawyers, it was reasonable for the court to conclude that service on Duffy would suffice to give notice to Steele and Hansmeier as well.”  This holding is supported by the common address used by the three lawyers and the impression they gave to the outside world that they were a team acting together. The Seventh Circuit also held that Steele received actual notice via email.

Did the Defendants Delay Too Long Before Seeking Section 1927 Sanctions?

Smith’s motion for sanctions was filed 10 days after the case was voluntarily dismissed, which was not too late for the court to lose jurisdiction. However, the ISPs did not seek sanctions until October 2013 (after Smith’s Motion for Sanctions was granted).

Was Joint and Several Liability Appropriate?

The lawyers argued that Section 1927 liability is direct and that it was wrong to hold the lawyers vicariously liable for each others’ actions. Opinion at 24. Here, the Seventh Circuit rejected the argument because the district court held a hearing and held them liable after determining that each one was individually liable.

The Seventh Circuit also affirmed a contempt holding for the failure to pay the sanctions promptly.

Conclusion

This case means the end of the Prenda enterprise and the careers of the lawyers who were involved in this appeal. The case may be more important to future lawyers defending themselves against sanctions motions. Lightspeed means that a lawyer can be sanctioned long after the lawyer withdraws from the litigation. Lightspeed also means that, in the future, there will be requests to sanction both the principal lawyer involved and anyone who helped that lawyer with the case.  The ugly spectre of joint and several liability will be raised again and again in future sanctions proceedings. Most importantly, Lightspeed will probably be read to mean that you can get notice of a sanctions motion by email. (This is also very scary for lawyers).

Thus, the Lightspeed case is a great victory for those who were fighting Prenda Law. They deserve congratulations. However, the case has introduced or reintroduced some scary doctrines into the law of sanctions including (a) sanctions after you withdraw; (b) service by email; and (c) joint and several liability.

Edward X. Clinton, Jr.

www.clintonlaw.net

 

Florida District Court Dismisses Case On Its Own Motion Because of Discovery Noncompliance

Martello v. PRODUCT QUEST MANUFACTURING, LLC, Dist. Court, MD Florida 2014 – Google Scholar.

The court explains its decision:

“Plaintiff’s failure to comply with this deadline is the culmination of several months of abusive discovery practices, vexatious tactics, and brazen disregard of Court orders. The Court has considered lesser sanctions, such as striking Plaintiff’s expert report or treating certain facts as admitted, but the level of misconduct present here threatens not only Defendants’ ability to litigate this case, but the integrity of the Court and its Orders. Accordingly, for the reasons stated herein, the Court will dismiss this action as a sanction for Plaintiff’s serious and continuing refusal to obey Court orders….

The facts outlined in Part I of this Order demonstrate a pattern of dilatory and duplicitous litigation tactics as well as blatant disobedience of Court orders. Plaintiff’s ongoing failure to comply with the Court’s orders is intentional and done in bad faith. She has ignored the imposition of one round of sanctions, and multiple threats of further sanctions, stemming from her refusal to produce her tax returns. All the while, Plaintiff knew that this case was advancing inexorably toward a July trial date. The Court gave Plaintiff as many chances to rectify the discovery violations as possible, but her intentional and ongoing refusal to do so leaves the Court with no choice but to impose the ultimate sanction and dismiss this case. No other sanction would adequately address Plaintiff’s bad faith or protect the integrity of the Court and its Orders.”

It is noteworthy that the court dismissed the lawsuit on its own motion. The defendants did not request dismissal. The case was dismissed when the defendants notified the court that the plaintiff had failed to produce tax returns.

Edward X. Clinton, Jr.