Category: Rule 37 Sanctions

Non-compliant Plaintiff Narrowly Escapes Dismissal But Is Sanctioned


The case is Macklin v. Charles Schwab No. DKC 16-3923 (D. Maryland) (January 8, 2019). The plaintiff in the case did not comply with discovery, but did make efforts to remedy the noncompliance when Schwab moved for Rule 37 sanctions. The Court elected not to dismiss the case, but to bar plaintiff from using any late-produced evidence.  The explanation:

Plaintiff acted in bad faith by repeatedly failing to comply with the court’s Orders to provide complete discovery responses. The court’s May 22, 2018 Memorandum Opinion provided Plaintiff with a detailed list of the discovery requests that remained outstanding at that time, and directed Plaintiff to “provide full and complete responses to all the interrogatories and the request for production . . . in a signed writing under oath.” (ECF No. 24, at 6). In response, Plaintiff failed to comply with the court’s orders and provided only a meager amount of additional information that hardly qualified as a full and complete response to the outstanding discovery requests. However, it is unlikely that Defendant is substantially prejudiced by Plaintiff’s lack of compliance. While insufficient, Plaintiff’s responses provide Defendant with enough information to begin building a defense. As for the need to deter future noncompliance, it is evident that Plaintiff requires such deterrence based on her continued defiance of the court’s Orders. Lastly, as explained in further detail below, dismissal is not the only sanction that would effectively deter Plaintiff’s potential future noncompliance.

Based on the four factors, sanctions are warranted but dismissal is not the appropriate sanction at this time. The sanction of dismissal is to be used sparingly, and is usually called upon in cases where a party is unresponsive or largely absent. See Mut. Fed. Sav. & Loan Ass’n v. Richards & Assocs., Inc., 872 F.2d 88, 92 (4th Cir. 1989) (“[O]nly the most flagrant case, where the party’s noncompliance represents bad faith and callous disregard for the authority of the district court and the Rules, will result in the extreme sanction of dismissal or judgment by default.”); Roman v. ESB, Inc., 550 F.2d 1343, 1349 (4th Cir. 1976) (finding dismissal sanction appropriate where plaintiffs “had failed to respond to interrogatories; failed to respond to an order entered by the district court requiring a response to the interrogatories; and additionally failed to respond upon specific request after the court had denied, without prejudice, a first motion to dismiss”); Malry v. Montgomery Cty. Pub. Sch., No. 11-CV-00361-AW, 2013 WL 812020, at *2 (D.Md. Mar. 3, 2013) (dismissing pro se plaintiff’s employment discrimination complaint pursuant to Rule 37(d) where he failed to respond to interrogatories, produce requested documents, or attend a properly noticed deposition). Given Plaintiff’s pro se status, her correspondence and attachments are construed as an attempt to satisfy the court’s August 21, 2018 Order.[3] Although Plaintiff’s discovery responses remain incomplete, Plaintiff supplemented her prior discovery responses by providing Defendant with further information via e-mail on September 10, 2018. (ECF No. 32-1, at 2). Finally, Plaintiff also provided Defendant with her availability in an attempt to schedule a deposition (id.), but Defendant failed to clarify a preferred deposition date and time in its reply email (ECF No. 32-2, at 2). Because dismissal is reserved for more egregious cases of noncompliance, it is not a suitable sanction at this time in light of Plaintiff’s attempts to comply. Additionally, as directed in the foregoing Order, the parties are instructed to schedule and complete Plaintiff’s deposition.

Although Plaintiff’s attempts to comply shield her case from dismissal, they do not shelter her from the alternative sanctions permitted under Rule 37(b)(2)(A). Specifically applicable here is Rule 37(b)(2)(A)(ii), which provides the court discretion to “prohibit[] the disobedient party from supporting or opposing designated claims or defenses, or from introducing designated matters in evidence.” In the event that Plaintiff’s case proceeds to an adjudication on the merits, according to Rule 37(b)(2)(A)(ii), Plaintiff will be barred from introducing evidence that was not already provided to Defendant through initial disclosures or discovery. This sanction more appropriately addresses any potential prejudice to Defendant by limiting Plaintiff’s ability to bolster her claims with additional dilatory evidence in the same way Defendant has been limited by her scant discovery responses.

The court also rejected arguments that the case should be dismissed under Rule 41(b) which allows the court to dismiss an action for noncompliance with court orders or the failure to prosecute the claim.

The Clinton Law Firm, LLC

Plaintiff’s Flooding Lawsuit Goes Down the Drain Because Of Discovery Violations


The case is captioned Justice v. Cabot Oil and Gas, 17-cv-2986 S.D. West Virginia. One of the plaintiffs, James Grimes alleged that Cabot Oil caused flooding on his property by failing to “reasonably divert water from its natural course.” According to Grimes, this caused damage to his property.

After Grimes failed to participate in discovery, Cabot Oil moved to dismiss as a sanction under Rule 37. The court granted the motion. The explanation:

Cabot summarizes in the motion the relevant and undisputed facts that led to the pending motion’s filing. (ECF No. 60 at 1-2.) In short, since Grimes filed his Complaint on April 13, 2017, he has failed to respond to Cabot’s written discovery requests, failed to submit to a deposition, failed to respond to Cabot’s motion to compel, failed to comply with Magistrate Judge Tinsley’s discovery order, and has otherwise failed to participate in this litigation at all. (See id.) It is apparent that Rule 37 sanctions are appropriate in this situation.

First, Grimes has acted in bad faith by blatantly disregarding this litigation since he filed the Complaint well over fifteen months ago. Grimes never responded to initial discovery requests, and his counsel similarly refused to respond to multiple correspondence from Cabot’s counsel inquiring as to the whereabouts of his responses. (See id.) While the failure to participate in initial discovery could be rectified through later involvement, bad faith became even more apparent here through Grimes’ noncompliance with a very specific discovery order entered by Magistrate Judge Tinsley. Cabot suggests that Grimes “moved away . . . since at least January 25, 2018,” (id. at 4), but the discovery order was entered on December 18, 2017, (ECF No. 17). That order was electronically transmitted to Grimes’ counsel upon entry, so Grimes clearly had notice of the court order with which he still has not complied. Simply put, Grimes’ actions—or lack thereof—since the litigation’s commencement serve as a distinct example of bad faith.

Second, the Court agrees with Cabot that it has suffered prejudice because of Grimes’ misconduct. As Cabot notes, Grimes has “deprived Cabot of any knowledge regarding [his] claims,” (ECF No. 60 at 4), and with summary judgment motions due on August 2, 2018, Cabot has been unable to develop any evidence to rebut those claims. Grimes supposedly no longer owns the property that he claims was flooded. (Id.) Thus, Cabot’s experts have been unable to examine the alleged damage suffered. (Id. (“Likewise, counsel for Mr. Grimes did not take Cabot’s experts to the location where the mobile home was previously located and, accordingly, Cabot’s experts do not even know the location of the alleged flooding.”).) The ability to inspect the property and develop expert opinions related to the cause of the supposed damage is essential to Cabot’s defense. In short, the inability to defend itself due to Grimes’ noncompliance with Magistrate Judge Tinsley’s order indicates that Cabot has already suffered great prejudice.

Third, “stalling and ignoring the direct orders of the court with impunity . . . must obviously be deterred.” Mut. Fed. Savs. & Loan Ass’n, 872 F.2d at 93. This applies not only to future litigants who will appear before this Court but also to those who are involved in the instant action. Cabot filed a motion to compel against all Plaintiffs in this matter after almost two months passed from the date when Cabot served its initial discovery requests. (See ECF Nos. 12, 13, 14.) It took Magistrate Judge Tinsley’s order for the other Plaintiffs in this case to respond to those requests. (See ECF No. 20.) While the Court is unaware of additional misconduct by those Plaintiffs, they should be aware of the consequences that may arise from noncompliance with this Court’s orders.

Lastly, no less drastic sanctions than dismissal will be effective in this situation. Cabot has been left with no information regarding Grimes’ claims, and the dispositive motions deadline is looming. Grimes has shown no interest in participating in this action or even communicating with his attorney even though his counsel has not moved to withdraw representation. There is no indication before the Court that Grimes has any intention of obeying Magistrate Judge Tinsley’s order in the future or further pursuing his claims against Cabot. Accordingly, Grimes forfeited his right to prosecute this case, and dismissal of his claims appears to be the only appropriate sanction under Rule 37.

Comment: the plaintiff must participate in the litigation. If the plaintiff does not comply with discovery, plaintiff essentially forfeits the lawsuit.

Ed Clinton, Jr.

 

Lawyers Sue Client For Legal Fees And Seek Rule 37 Sanctions


Center for Individual Rights v. Chevaldina (S.D. Florida)

The Plaintiff is a law firm that represented Chevaldina in a copyright case. Plaintiff sued Chevaldina for legal fees after the copyright case was settled by another law firm. Plaintiff claimed that Chevaldina did not prosecute its claim for a legal fee award from the court. The law firm was suing for the failure of the plaintiff to pursue a claim for legal fees.

The law firm sought discovery from Chevaldina, but she did not produce documents. The law firm then filed a motion for a default judgment under Rule 37, which allows the court to enter a default judgment against a party that fails to participate in discovery.

Because Chevaldina was pro se, the court declined to award sanctions. It reasoned that Chevaldina did not fully understand her obligations to produce documents and denied the default judgment.

In conclusion, the court gave a pro se litigant a break in this case.

District Court Awards Sanctions To Prisoner


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.

Source: Cozad v. Illinois Department of Corrections, Dist. Court, CD Illinois 2017 – Google Scholar

Homeowners’ Association Required to Pay Bank’s Legal Fees


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.”

Source: DAISY TRUST v. JP Morgan Chase Bank, NA, Dist. Court, D. Nevada 2017 – Google Scholar

Edward X. Clinton, Jr.

http://www.clintonlaw.net

Discovery Abuses Merit A Default Judgment, Says New York District Court


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.

Source: BRICKLAYERS INSURANCE AND WELFARE FUND v. PPL CONSTRUCTION SERVICES CORP., Dist. Court, ED New York 2017 – Google Scholar

California District Court Dismisses Lawsuit As A Sanction For Repeated Discovery Violations


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.[1] 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.

Source: LOOP AI LABS INC. v. Gatti, Dist. Court, ND California 2017 – Google Scholar