A prisoner who sued the Illinois Department of Corrections has obtained an award of Rule 37 sanctions. The district court held that the Department of Corrections failed to produce relevant documents and then violated a court order to produce those same documents. The court found that there was no bad faith by the Department of Corrections. Instead, it was a simple case of negligence. The court entered an order granting the motion, requiring production of the documents and requiring the Department to present the Warden for a second deposition. Additionally, appointed counsel had leave to submit a fee petition.
Category: Rule 37 Sanctions
This is a Rule 37 sanctions case for the failure by a Homeowners’ Association, Daisy Trust, to produce documents in response to JP Morgan’s discovery requests. The case is a simple one: the Homeowners’ Association moved to foreclose a single family residence. JP Morgan, which made a loan on the property, served discovery requests. The discovery requests were directed to issues of jurisdiction, and sought to determine the citizenship of the Trust.
The court granted the motion to compel and imposed sanctions by requiring the Daisy Trust to pay the bank’s legal fees. The court reasoned that the discovery requests were proper and that there was not a legitimate basis for refusing to respond. The court’s explanation is provided in pertinent part:
“Daisy Trust must pay Chase’s reasonable attorney’s fees and expenses. Daisy Trust refused to provide adequate information contrary to Judge Jones’ order. In response to an interrogatory, Daisy Trust merely responded that it was a “trust” and that its trustee is Resources Group, LLC. (ECF No. 93 at 5). However, without information on the type of trust, the identity of the trustee is not enough to determine citizenship. Second, despite Chase’s attempt to meet to discuss the inadequate responses, Daisy Trust was unwilling to provide the necessary information even after they were directed to the court order requiring them to respond to jurisdictional discovery. This is impermissible. The discovery rules are designed to be self-executing to avoid unnecessary court involvement and the needless accrual of costs and expenses. See Goodman v. Staples, 644 F.3d 817, 827 (9th Cir. 2011) (stating that Rule 37 “gives teeth” to the rules’ discovery requirements). Here, Daisy Trust disregarded discovery requests served pursuant to the Court’s order to obtain information concerning Daisy Trust’s citizenship to proceed with this matter.”
Edward X. Clinton, Jr.
In this case, the Magistrate and the District Judge found that the defendants’ refusal to participate in discovery amounted to intransigence and entered a default judgment against them. The plaintiff were a union of bricklayers who sued a contruction firm. The opinion does not reveal what the case was about, but the plaintiffs needed the defendants’ records to determine whether or not they had claims. The court panned the conduct of the defendants and explained:
Over the course of a discovery period that was protracted unnecessarily because of Defendant’s intransigence, Defendant refused to make available the books and records needed to complete the audit required to assess Plaintiffs’ claims. As a result of Defendant’s obstruction, the March 2015 Opinion ordered Defendant to submit to an audit under the threat of being found in contempt and having sanctions imposed for failure to cooperate. (March 2015 Opinion.) After Defendant continued to defy clear and unambiguous court orders, the March 2016 Opinion granted Plaintiffs’ motion to hold Defendant in civil contempt of court and to impose sanctions for failing to comply with the directives of the March 2015 Opinion. (March 2016 Opinion.) Specifically, the Court ordered sanctions in the amount of $250.00 per day to be imposed on Defendant for each day after May 2, 2016, that Defendant failed to produce the requested records to Plaintiffs’ auditors. (March 2016 Opinion.)
After Defendant still failed to produce the records after May 2, 2016, the Court granted Plaintiffs leave to file a motion for default judgement, which was done on August 24, 2016. (Mot. for Default J. (“Plaintiffs’ Motion” or “Pls. Mot.”), Dkt. Entry No. 36.) The next day, on August 25, 2016, the Court referred the motion to the magistrate judge for the preparation of a report and recommendation. While the motion was pending, the Court ordered Defendant to show cause why the sanctions ordered in the March 2016 Opinion should not be imposed. At the conclusion of the order to show cause hearing held on October 19, 2016, before this Court and Magistrate Judge Tiscione, the Court imposed sanctions of $250.00 per day from May 2, 2016 to October 19, 2016.
On January 12, 2017, the magistrate judge issued the thorough and well reasoned R&R, recommending that this Court find default judgment appropriate under both Federal Rules of Civil Procedure 37 and 55. (R&R.) With respect to Rule 37, the magistrate judge weighed the pertinent factors and found that sanctions were appropriate, inter alia, because of “the willfulness of Defendant’s failure to comply with the Court’s discovery orders,” and the extent of its noncompliance. (R&R at 10-16.) The magistrate judge further held that, even if this were not a situation where Rule 37 sanctions were appropriate, Defendant had not met the “good cause” standard to defend against default judgment under Rule 55. (Id. at 16-20.) Ultimately, the magistrate judge recommended that the Court enter judgment awarding Plaintiffs $288,979.42, consisting of: (i) $130,386.48 in unpaid contributions; (ii) $79,121.47 in accrued interest as of the date of the R&R, plus $35.72 per day until the date judgment is entered; (iii) $79,121.47 in accrued interest as of the date of the R&R, plus $35.72 per day until the date judgment is entered, in lieu of liquidated damages; and (iv) $350 in costs and disbursements. (Id. at 27-28.) The magistrage judge further recommended that Plaintiffs not be awarded attorney’s fees. (Id. at 28
The District court entered judgment against the defendants and awarded damages to the plaintiffs.
This case is unusual because the court dismissed a lawsuit with prejudice and revoked the pro hac vice admission of plaintiff’s counsel. Dismissal is the most extreme sanction, of course, but the Court provides a detailed discussion of the reasons for the dismissal.
The case appears to be a trade secrets/unfair competition case. The court summarized the lack of cooperation among the parties:
From the beginning, this case has been marked by a level of dysfunction and inability to work together that is unprecedented in the Court’s experience. See, e.g., Dkt. Nos. 96 & 98 (parties filed separate case management statements in contravention of Local Rule 16-9); Dkt. No. 101 (inability to conduct Rule 26(f) Meet and Confer); Dkt. No. 157 at 47-57 (Plaintiff’s counsel blocked emails from Defendants, choosing to accept only faxes, letters, and phone calls from opposing counsel, because receiving emails from Defendants was too “intrusive”); Dkt. No. 288 (Defendants requested a discovery referee because Plaintiff allegedly “refuses to discuss any items beyond Loop’s own agenda” during meet-and-confer meetings). Magistrate Judge Donna M. Ryu attempted to “impose a workable structure on the parties’ discovery dispute resolution process,” Dkt. No. 271 at 2, and the docket highlights the Court’s many, many attempts to advance this litigation in a productive way. Over the course of the last two years, the Court has tried numerous approaches, such as ordering court-supervised discovery management conferences, Dkt. No. 136 at 2; ordering the parties to audio record meet and confer sessions, Dkt. No. 156 at 2; instituting standing meetings each week to encourage substantive and meaningful meet-and-confer sessions, Dkt. No. 271 at 2; and eventually requiring the parties to provide dial-in information and agendas for the weekly meet-and-confer teleconferences, so that the Court could monitor the parties’ conduct by joining the calls, Dkt. No. 415 at 2.
As described more fully below, Plaintiff’s insubordination, through its counsel Valeria C. Healy, was and continues to be particularly egregious, posing a significant obstacle to the progress of this case. The Court has given Plaintiff many chances to litigate in a professional and productive manner, and has been consistently confronted with counsel’s utter disregard for the Court’s authority and her persistent refusal to comply with the Court’s orders and the Federal Rules. The following section details the key discovery orders serving as the basis of this order.
The court listed many issues, including the refusal to produce documents and the refusal to answer interrogatories. However, the deposition misconduct is unusual and worth quoting at some length.
Witness coaching happens all the time in depositions. It is rare for a court to find that the lawyer exceeded the bounds of permissible conduct.
As early as December 2015, Judge Ryu gave specific warnings with respect to the issue of privilege during depositions: “there can be no instructions to not answer except for privilege. . . . And it has to be clearly privilege. Because if it’s not, again there will be sanctions.” Dkt. No. 335 at 46.
On January 25, 2016, Almawave first deposed Plaintiff’s co-founder and CEO Gianmauro Calafiore. Dkt. No. 884 at 1 (“Order 884”). After reviewing the deposition transcript, Judge Ryu issued an order regarding Healy’s conduct during the deposition. Dkt. No. 436 (“Order 436”).
[The deposition transcript] is replete with examples of inappropriate behavior by Plaintiff’s counsel, Valeria Calafiore Healy. Ms. Healy made speaking objections, instructed the deponent not to answer questions for reasons other than the invocation of privilege, and repeatedly objected without stating a basis for the objection. The deponent, Gianmauro Calafiore, was often argumentative and uncooperative in providing testimony, thereby delaying the deposition process. Ms. Healy and Mr. Calafiore’s obstructionist conduct repeatedly stymied Alma[w]ave USA’s attempts to obtain discovery through this key deposition.Id. at 1. Judge Ryu sanctioned the Plaintiff, ordering five additional hours of deposition and requiring Plaintiff to bear the cost. Id. The order again provided specific instructions:
In the future, Ms. Healy, and indeed, all attorneys defending depositions in this litigation (1) shall state the basis for an objection, and no more (e.g., “relevance,” “compound,” “asked and answered”); (2) shall not engage in speaking objections or otherwise attempt to coach deponents; and (3) shall not direct a deponent to refuse to answer a question unless the question seeks privileged information.Id. at 2. Judge Ryu further warned that “[g]iven Ms. Healy’s repeated inappropriate conduct in her defense of the Calafiore deposition, any further breach” would result in sanctions. Id.
On August 25, 2016, Judge Ryu issued an order regarding Healy’s continued conduct during the deposition of Calafiore, as well as Loop AI’s other executives Bart Peintner and Patrick Ehlen. Dkt. No. 884. Leading up to this order, Judge Ryu had already twice directed Plaintiff to produce Peintner and Ehlen for depositions as they “appeared to be percipient witnesses.” See Dkt. No. 465 (March 10, 2016); Dkt. No. 526 (March 25, 2016). Judge Ryu’s March 25 order included specific dates, ordering that Ehlen and Peintner appear on March 29 and March 30, and that Calafiore and any of Plaintiff’s 30(b)(6) witnesses appear either on March 31 or April 1. Dkt. No. 526. This Court denied Plaintiff’s motion for relief from Judge Ryu’s nondispositive order regarding the deposition dates. Dkt. No. 533. Plaintiff nonetheless failed to follow Judge Ryu’s orders. See Dkt. No. 555 (Almawave’s letter brief indicating that “Loop and its witnesses refused to appear for deposition as ordered”). On April 4, 2016, Judge Ryu again ordered Plaintiff to make witnesses Calafiore, Ehlen, and Plaintiff’s corporate representative available. Dkt. No. 564.
Order 884 is based on Judge Ryu’s review of the deposition transcripts of these witnesses. Judge Ryu found that “[i]n direct contravention of the court’s February 29, 2016 order, Healy instructed witnesses to refuse to answer questions on grounds other than privilege.” Order 884 at 4 (noting, for example, that Healy “instructed Plaintiff’s 30(b)(6) designee (Calafiore) not to answer certain questions, unilaterally deciding that the questions were outside the scope of the noticed Rule 30(b)(6) topics”); id. at 5 (“[W]hen Almawave asked Ehlen, `Can you tell us how your particular algorithms work?’, Healy instructed him not to answer on the basis of relevance, again unilaterally taking the topic off the table.”). Judge Ryu cited Healy’s “numerous improper speaking objections, in direct contravention of this court’s order that counsel confine objections to a statement of their basis, (e.g., `compound,’ or `asked and answered’), and not engage in speaking objections or otherwise attempt to coach the witness.” Id. at 5. Order 884 found “Healy’s coaching was so effective that the witnesses occasionally repeated her objections, sometimes verbatim, to the examining attorney,” and that “[o]n other occasions, Healy actually attempted to answer the question for the witness.” Id. at 6-7.Order 884 held that Healy improperly asserted attorney-client privilege to prevent witnesses from answering, noting that Healy “inexplicably refused to allow the witnesses to respond to questions about their own discussions with other Loop employees or third parties,” and “refused to allow Plaintiff’s witnesses to answer questions about their document collection and production in this litigation” on the basis of attorney-client privilege. Id. at 7-8. Judge Ryu concluded that Healy’s conduct, “including instructions not to answer questions and speaking objections and coaching, was both improper and in direct violation of the court’s February 29, 2016 order regarding the conduct of depositions” and “[a]ccordingly, it is sanctionable.” Id. at 9. Judge Ryu deferred to this Court as to what sanction should be imposed. Id.
In sum, this case will draw coverage in the media and in legal publications which discuss discovery shenanigans.
Biomet made hip implants that allegedly became defective and were removed from patients and replaced with other implants. Biomet sought dismissal of some claims because the plaintiff failed to preserve the devices. The court denied the motion because there was no preservation order in place when the implants were allegedly lost. The court explained:
At a minimum, for a plaintiff to have violated a discovery order that would subject her to Rule 37 sanctions, he or she must have been bound by the discovery order when it was possible for her to comply. None of these plaintiffs were.
Biomet cites no cases that support the proposition that a plaintiff is subject to the orders of an MDL court before that plaintiff has joined the MDL. Biomet cites Bennett v. Bayer Healthcare Pharmaceuticals, Inc., 577 F. App’x 616 (7th Cir. 2014) for this proposition, but Bennett offers no such support. The plaintiff in that case was bound by an MDL court’s discovery order that predated her transfer to the MDL court, but the court order only bound her once her case was transferred to the MDL court and she was still able to comply. In contrast:
None of these plaintiffs’ cases had been transferred to this court by the time of the revision surgery. Ms. Baker, Mr. Marous and Mr. Bauman hadn’t filed any case at all by the time of the revision surgery. With respect to all plaintiffs except Ms. Glasser, compliance with any obligation to preserve the explant appears to have been impossible by the time he or she joined the MDL. For Ms. Glasser, compliance appears to have been impossible for the device removed during her final revision surgery.
This opinion is worth reading and considering. The Plaintiff waited until there were only 60 days left in the discovery period to update its interrogatory answers. In those revised answers the Plaintiff sought additional damages that it had not previously sought. Plaintiff, according to the court, had the information in its possession but did not move quickly to supplement the interrogatory answers.
The result is that the court granted Defendant’s motion to bar the additional damage claims. The holding:
In short, the Court finds Plaintiff’s failure to timely supplement its answer to Interrogatory No. 9 was not substantially justified or harmless. Accordingly, the Court finds that sanctions under Rule 37 are appropriate. Plaintiff will not be allowed to seek the additional categories of damages disclosed for the first time in its December 6, 2016, supplemental answer to Interrogatory No. 9.
Given that plaintiff did update the disclosure more than 60 days before the close of discovery, this ruling is an outlier. Plaintiff may wish to appeal on this issue.
This is a typical Rule 37 sanctions case in which the party fails to respond to discovery and then makes a number of excuses that do not prove compliance. After detailing the discovery deficiencies, the court explains:
In response, Defendants do not contend that they have complied fully with the Court’s discovery orders. Instead, they argue the merits of the case, and claim that (1) they have repeatedly reached out to Plaintiffs’ counsel to discuss the responses, (2) they are confused by Plaintiffs’ assertion that they have continued to object to Plaintiffs’ requests, (3) Plaintiffs “have ample discovery” because they conducted a three-hour deposition of one of the Defendants, Leon Saja, and (4) they are continuing to gather documents in order to prepare supplemental discovery responses. Resp. 2-5, ECF No. 64.
None of those points remedy the fact that Defendants have had multiple opportunities to fully comply with the Court’s orders and have failed to do so. Instead of objecting to the Discovery Master’s report when it was issued back in December 2015, Defendants have engaged in delay tactics and willful noncompliance.
Civil Rule 37(b)(2) authorizes the Court to sanction behavior when a disobedient party fails to show that noncompliance was substantially justified, or that an award of reasonable expenses and fees would be unjust. Defendants have not provided adequate reasons for the repeated noncompliance. In its earlier order, the Court warned them that “any further failure to cooperate with the progression of the case or to comply with an order of the Court will be treated as conduct tantamount to bad faith, and will result in harsher sanctions under Civil Rule 37.” The Court will issue those harsher sanctions now: (1) Defendants shall pay the Plaintiffs’ reasonable expenses, including attorney fees, incurred with the present motion, see ECF Nos. 63, 67; (2) Defendants shall pay the Plaintiffs’ reasonable expenses, including attorney fees, incurred with the Plaintiffs’ motions to compel filed on March 13, 2015, see ECF Nos. 25, 26, 30, 40, 44; (3) Defendants shall pay Plaintiffs’ share of the Discovery Master’s fees and expenses associated with his appointment and resolution of the earlier discovery issues through the report issued on December 10, 2015; and (4) Defendants shall pay the entirety of the Discovery Master’s fees and expenses associated with his upcoming assessment of the discovery issues.
If the Defendants continue to defy the Court’s orders, the Court will impose harsher sanctions, including directing that certain designated facts be taken as established for purposes of the action as to Plaintiffs’ claims, prohibiting Defendants from supporting or opposing designated claims or defenses, or from introducing designated matters in evidence, and treating the noncompliance as contempt of the Court. See Fed. R. Civ. P. 37(b)(2).