Lawyer Sanctioned by 8th Circuit For Forging Document


The case is SPV-LS, LLC v. TransAmerica Life, 912 F.3d 1106 (8th Cir. 2018). The plaintiff estate sued TransAmerica and lost on summary judgment. The outcome of the case was not at issue in the sanctions motion. This case is from a year ago, but it is important and I am including it in this blog.

The discussion of the forgery of an engagement letter is below:

Fed. R. Civ. P. 26(g)(1) requires attorneys and pro se litigants to certify that every disclosure is “complete and correct at the time it was made” and that every discovery request, response, and objection is consistent with the Federal Rules of Civil Procedure, nonfrivolous, not submitted for an improper purpose, and not unreasonable or unduly burdensome. Fed. R. Civ. P. 26(g)(3) imposes “appropriate” sanctions on attorneys or parties who violate Rule 26(g)(1). Such sanctions may include monetary penalties, such as expenses and attorneys’ fees, Johnson Int’l Co. v. Jackson Nat. Life Ins. Co., 19 F.3d 431, 438 (8th Cir. 1994), and are particularly appropriate when an attorney submits a forged discovery document. See Perkins v. Gen. Motors Corp., 965 F.2d 597, 600 n.5 (8th Cir. 1992). Unlike § 1927 sanctions, these sanctions are nondiscretionary. Fed. R. Civ. P. 26(g)(3); Perkins, 965 F.2d at 600 n.5; see also Rojas v. Town of Cicero, 775 F.3d 906, 909 (7th Cir. 2015) (“Rule 26(g)(3) gives the judge discretion over the nature of the sanction but not whether to impose one.”); Chudasama v. Mazda Motor Corp., 123 F.3d 1353, 1372 (11th Cir. 1997) (“The decision whether to impose sanctions under Rule 26(g)(3) is not discretionary.”).

SPV’s key evidence supporting Rule 26(g) sanctions is an allegedly-forged discovery document and the associated metadata produced by Attorney Kroll. SPV presents no evidence that Attorney Donahoe participated in this violation of Rule 26(g)(1). We therefore decline to find that the district court abused its discretion in denying Rule 26(g) sanctions against Attorney Donahoe.

In response to a discovery request, Attorney Kroll provided SPV with a redacted copy of the retainer agreement between himself and the Estate’s personal representative. After filing a motion to compel production in a related proceeding against Attorney Kroll in the United States District Court for the Central District of California, SPV obtained an unredacted draft of the same retainer agreement. This draft showed Attorney Kroll would receive a contingency fee if either the Estate or the Trust prevailed in obtaining the death benefits payable under the Policy, supporting SPV’s theory that the Estate and Trust were controlled by the same parties in interest. When SPV produced the unredacted draft to the district court, the Estate claimed that draft was not a correct copy and produced its own unredacted copy of the retainer agreement. The Estate’s copy omitted the provision awarding Attorney Kroll a contingency fee if the Trust prevailed.

SPV requested Rule 26(g)(3) sanctions based on document metadata, taken directly 1114*1114 from Attorney Kroll’s computer by his e-discovery vendor. The metadata showed that the retainer agreement produced by the Estate, while purportedly signed by the Estate’s personal representative in August 2015, was not created until July 20, 2016—two days before Attorney Kroll produced the document to the court. Therefore, SPV argued, the document was forged. The district court acknowledged that fabricating discovery documents is grounds for sanctions, see SPV-LS, LLC v. Transamerica Life Ins. Co., No. CIV 14-4092, 2017 WL 3668765, at *3 (Aug. 23, 2017), but it denied sanctions against Attorney Kroll. It did so under the mistaken belief that SPV relied on a document examiner’s report to prove forgery, stating that SPV should have produced that report. However, SPV never claimed that it relied on a document examiner’s report; in fact, it indicated that it never consulted a document examiner and relied solely on the document’s metadata. Because the district court based its denial of sanctions on SPV’s failure to introduce a nonexistent report into evidence, it clearly conducted an erroneous assessment of the evidence. See, e.g., MDU Res. Grp. v. W.R. Grace & Co., 14 F.3d 1274, 1280 (8th Cir. 1994) (finding the district court clearly conducted an erroneous assessment of evidence when it misunderstood the purpose for which the evidence was offered). It therefore abused its discretion in denying Rule 26(g) sanctions against Attorney Kroll on this basis.

This is an unfortunate finding. The forgery was discovered because of the metadata that is present in every document.

If you have any questions about discovery obligations or your responsibilities as a lawyer, do not hesitate to contact me at ed@clintonlaw.net.

Ed Clinton, Jr.

8th Circuit Reverses Discovery Sanctions Dismissal


In Akins v. Southern Glazers Wine & Spirits of Arkansas, LLC, 18-1957, the 8th Circuit vacated a case dismissed for a violation of Rule 37. Akins filed a pro se employment case against his former employer. The Defendant noticed his deposition for two days. Akins appeared both days but left the deposition on at 5:00 p.m. on the second day to go to work. Defendant claimed that it had 15 more minutes of questioning. Defendant moved for dismissal pursuant to Rule 37(b)(2)(A) and the district court granted the motion.

The 8th Circuit reversed on the ground that the district court abused its discretion in dismissing the case. The 8th Circuit faulted the district court for failing to determine whether Akins acted in bad faith and whether a lesser sanction would suffice.

Rule 37 authorizes dismissal as a sanction if there is (1) an order compelling discovery, (2) willful violation of that order, and (3) prejudice. Before dismissing a case as a discovery sanction, the court must investigate whether less extreme sanctions would suffice, unless the failure was deliberate or in bad faith. Fed. R. Civ. P. 37. Dismissals are reviewed for an abuse of discretion. Comstock v. UPS Ground Freight, Inc., 775 F.3d 990, 992 (8th Cir. 2014). Factual findings of willful or intentional failure to comply with a court order are reviewed for clear error. Smith v. Gold Dust Casino, 526 F.3d 402, 404 (8th Cir. 2008).
Akins did not violate the “fails to appear” discovery order, nor did he act in bad faith. He appeared for his deposition both days at the ordered time, and was deposed for nearly six hours over the two days. Both the discovery order and notice of deposition were silent about when the deposition would end. Akins had reason to believe the deposition would end at 5:00 because Southern’s counsel erroneously told him depositions must occur between 9 a.m. and 5 p.m., and he requested that his deposition be scheduled between 2 and 5 p.m. each day. Southern did not identify the additional questions counsel would ask if the deposition continued past 5 p.m. so Southern did not demonstrate prejudice. This court concludes that the dismissal of Akins’s complaint was an abuse of discretion because his conduct did not violate the district court’s discovery order, and the court erred when it failed to consider sanctions less severe than dismissal with prejudice.

Comment: this case, while unpublished, is very unusual for two reasons. First, the district court appears to have acted abruptly in dismissing the case and not ordering Akins to sit for a further deposition. Second, I have never seen a dismissal where the Plaintiff did what he was supposed to do – he sat for his deposition on the days he was told to be there.

Ed Clinton, Jr.

http://www.clintonlaw.net

Wrongful Discharge Case Dismissed Due to Rule 37 Violations


In February 2019, the Fourth Circuit affirmed the dismissal of all claims in the case Rangarajan v. John Hopkins University, 917 F.3d 218 (2019) a rare published opinion affirming Rule 37 sanctions.

Rangarajan was a nurse practitioner at Johns Hopkins before she was terminated. She sued for wrongful discharge and discrimination. During discovery she certified that her production was complete and Johns Hopkins moved for summary judgment. That’s when things got out of hand.

After discovery closed in September 2016 as directed in the district court’s scheduling order, Johns Hopkins filed a motion for summary judgment in both consolidated actions, based on the record that discovery had produced. Johns Hopkins contended that summary judgment in its favor was justified by “overwhelming evidence that Ms. Rangarajan did not satisfy the basic requirements of her job[ ] and that there were legitimate, non-discriminatory and non-retaliatory reasons for any adverse employment action that she allegedly suffered.”

In response to Johns Hopkins’ motion for summary judgment, Rangarajan took a number of steps to expand, embellish, alter, and recast her deposition testimony. First, she submitted a 51-page errata sheet to her deposition, proposing hundreds of edits to her testimony and justifying many of the changes by claiming that the court reporter had intentionally altered both the transcript and the audio 223*223 and video recording of her deposition. She stated:

The Court Reporters’ Office has informed me that they edited my video, audio and typed deposition transcripts. It is clear that key testimony is deleted, altered, cloned from various sound bites etc., to accomplish two things. 1. Change the testimony 2. To induce grammar mistakes thus making me sound as if I am speaking broken English.

She also sent an ex parte letter to the district court for the district judge’s “eyes only,” claiming similarly that the court reporter improperly edited her deposition.

Second, in support of her opposition to the summary judgment motion, Rangarajan filed a 54-page Declaration in which she introduced new allegations, attached 19 exhibits that had never before been produced during discovery, and revised testimony that allegedly contradicted her deposition testimony. While the district court did not find the Declaration to be “diametrically opposed” to Rangarajan’s statements in the deposition, it nonetheless concluded that reliance on the Declaration “would render the taking of [Rangarajan’s] deposition essentially useless.” Rangarajan’s opposition to Johns Hopkins’ motion for summary judgment was grounded mainly on her Declaration and not the evidence produced during discovery. As the district court noted, while Rangarajan cited her deposition testimony only 3 times in her opposition, she cited her subsequently filed Declaration “over 750 times.”

In addition, the newly disclosed exhibits revealed major failures by Rangarajan to produce documents requested of her during discovery. For instance, several exhibits — screenshots of Rangarajan’s emails — revealed her computer’s entire display showing retained copies of emails in two inboxes labeled “Jhmi” and “Jhmi 1,” and one of those inboxes contained 8,612 emails, most of which had never been produced during discovery; Rangarajan had only produced 1,658 documents during discovery.

Somehow Rangarajan filed four highly similar cases against Johns Hopkins. The District Court dismissed all of the lawsuits as Rule 37 sanctions and as sanctions for Rangarajan’s attempts to undermine the summary judgment process by changing her deposition testimony.

The Fourth Circuit affirmed the dismissal of the four lawsuits as a Rule 37 sanction. Part of the explanation is included here:

When reviewed it its totality, the record in this case reveals a totally dysfunctional performance by Rangarajan and her counsel, but mostly by her, as she acknowledged in her brief that “[t]hough [I] was, in fact, represented by an attorney, the court was well aware that [I] was in many ways acting without the benefit of counsel.”

To begin, Rangarajan commenced four actions, when only one was proper and would have sufficed, repeatedly reasserting claims that the district court had dismissed. After the district court denied her motion to replead qui tam claims in the first action, she nonetheless repleaded 228*228 them in the third action, and when the district court dismissed the third action, she refiled the same claims in the fourth action.

In the course of discovery, Rangarajan flagrantly failed to produce thousands of documents, several of which were core documents relating to her claims. She later produced some of those documents for the first time during the summary judgment process, because she thought she needed them to make her points. Also, after giving a daylong deposition, she sought to undermine and recant her testimony in a long, 54-page Declaration that, as the district court found, rendered her deposition essentially useless. Finally, she challenged the transcription of her deposition, claiming it was deliberately altered and recreated by the court reporter, a conclusion that the district court found to be conclusively false. In short, she rendered virtually useless the entire discovery process, in which the parties had invested substantial time and money.

During summary judgment, which required additional expenditures of time and money, Rangarajan relied almost exclusively on her Declaration, which had not been made part of the discovery record and which was often inconsistent with her deposition testimony, placing the summary judgment practice on an untenable and virtually useless footing.

In addition to these specifics, it was also apparent throughout the entire proceedings that, while Rangarajan was represented by an attorney, she refused to follow his advice and engaged in inappropriate actions, such as communicating arguments directly to the court ex parte and including substantive matters in her errata sheet. And the district court attributed this dysfunction between attorney and client to Rangarajan personally, a finding that Rangarajan has not disputed. As the court stated:

It [was] [Rangarajan] who continue[d] the attempt to support the unsupportable contention that the court reporting service made hundreds of alterations to her deposition video and transcript. It is clear that it was [Rangarajan] who authored the embellished narrative contained in her Declaration. It was [Rangarajan] who failed to turn over to her counsel documents that were clearly responsive to discovery requests and it [was] [Rangarajan] who misrepresented the amount of emails from her work email account that were stored on her home computer.

This opinion is an outlier because of the repeated violations of the rules by the plaintiff. I am also amazed that this behavior was tolerated by any attorney and, if anyone presented a situation remotely similar to this one, I would encourage the lawyer to withdraw from the case. Indeed, the lawyer is quite lucky he did not face professional sanctions or other consequences due to the failure to control his client.

Ed Clinton, Jr.

Plaintiff Sanctioned for Withholding Tape Recording


In Jarrell v. Shelter Mutual Insurance Co, 18 cv 183 KS-MTP (Southern District Mississippi, August 1, 2019, plaintiffs sued for insurance coverage after their home was damaged in a fire. Discovery began. Depositions were taken. Then it emerged that the plaintiffs had withheld a recording of a conversation between plaintiffs’ counsel and the insurance company’s adjuster. The recording was made surreptitiously.

In response to an interrogatory requesting any recordings, plaintiffs gave a non answer:

 Included was Interrogatory No. 9, which stated as follows:

State whether or not you, your attorney, anyone acting on your behalf or any other person has obtained any statement (whether signed or otherwise adopted by the person making it, or a stenographic, mechanical, electrical, or other recording, or a transcription) from any person concerning any occurrence or allegation or alleged damages which is a subject of this suit and, if the answer is in the affirmative, please identify each and every person giving such statement and the custodian of the statement.

On March 19, 2019, Plaintiffs answered Interrogatory No. 9 as follows:

Objection is made to Interrogatory No. 9 as the same would invade the work product and work efforts of Plaintiff’s attorneys. Plaintiffs personally have not obtained any written statements from anyone, expect those produced in discovery and already provided to Defendants and their attorneys from contractors, engineers and other person acting on behalf of Plaintiffs.

The insurance company moved for sanctions and requested the dismissal of the complaint.

The court held that the recording should have been turned over with the plaintiffs’ initial disclosures under Rule 26. Further, the failure to disclose the recording merited sanctions under Rule 37.

The court declined to dismiss the case and instead ordered the plaintiffs to pay the defendant’s reasonable attorney fees in bringing the motion. The court also ordered that the plaintiffs were precluded from using the deposition testimony of two witnesses who worked for the insurance company.

While the Court does not condone the belated production of the recording, the Court finds that dismissal of this action is not warranted in this case. Shelter argues that the recording undermines the allegations found in Plaintiffs’ complaint. A Rule 37 motion, however, is not the proper method to test the merits of Plaintiffs’ claims. Additionally, the prejudice caused by Plaintiffs’ failure to timely produce the recording can be cured by precluding Plaintiffs from using the deposition testimony of Haines and Cartledge and allowing their depositions to be retaken. See, Mason,229 F.R.D. at 537. The Court also finds that the desired deterrent effect can be achieved by a monetary sanction. See Griffin v. Javeler Marine Services, LLC,2016 WL 1559170, at *5 (W.D. La. Apr. 18, 2016).

The Court finds that Shelter should be awarded the reasonable attorney’s fees incurred in attending the depositions of Haines and Cartledge on May 30, 2019, and preparing the instant Motion. 

Comment: this is an interesting case as it involved recordings between an adjuster and the plaintiffs’ attorney. In my view, plaintiffs are lucky their case survived this underhanded action.

Ed Clinton, Jr.

http://www.clintonlaw.net

Plaintiff’s Motion For Rule 37 Sanctions Based on Defense Expert’s Conduct Denied


In the Estate of Jackson v. Billingslea, No. 18-10400 (ED Michigan July 1, 2019), the plaintiff brought claims under 42 USC § 1983 arising out of the death of Jackson when he was killed in a crash with police vehicles. The complaint relied upon theories of excessive force, failure to supervise, failure to properly train and failure to intervene.

After the Defendants answered expert discovery and identified their expert, plaintiff attempted to serve a subpoena on the expert. The expert witness, identified only as “Eck” in the opinion, allegedly evaded service of the subpoena thus requiring his deposition to be cancelled several times.

Plaintiff sought to impose Rule 37 sanctions on the Defendants as a result of Eck’s failure to cooperate with discovery.

The court denied the motion and gave several reasons. First, “Eck” was not a party to the case so Rule 37 did not apply to him. Second, Plaintiff was not prejudiced. Third, plaintiff did not file a motion to compel – thus warning the defendants that there was a risk of sanctions. Fourth, the court was concerned that if the witness was stricken the Defendants would be left with no defense at all.

The court’s reasoning is quoted here:

First, the Court finds Defendants did not act willfully or in bad faith. There is no “clear record of delay or contumacious conduct.” Id. (citing Carter v. City of Memphis 636, F.2d, 159, 161 (6th Cir. 1980). Unlike Carter and Freeland, to cancel a deposition after filing a motion for a protective order is not “contumacious conduct.” E.g., Freeland, 103 F.3d at 1277-8.

Plaintiffs argue that Defendants delayed discovery when Eck avoided service of the subpoena for his deposition four times and when Defendants waited until only days before the deposition to challenge Plaintiffs’ subpoena. The Court disagrees. Rule 37(b)(2)(A) allows discovery sanctions for violations committed by parties—not by non-parties. See Powell v. State Farm Mutual Automobile Insurance Co.,No. 11-11280, 2012 WL 12930351, at *2 (E.D. Mich. 2012). The record does not indicate that Defendants had control over Eck or that they were responsible for his failure to be served. It would be improper to sanction Defendants if Eck— on his own—evaded service.

Second, the Court finds that Plaintiffs are not prejudiced. Defendants complied with all court rules pursuant to Rule 26(a)(2)(B). And there is no finding that Plaintiffs cannot prepare the case for trial by November 12, 2019. Carter, 636 F.2d at 161.

Third, “because [Plaintiffs] did not previously raise these issues with the Court before filing their motion to strike, [Defendants] never received warnings from the Court `that failure to cooperate could lead to the sanction.'” Brooks v. Skinner, No. 1:14-cv-412, 2015 WL 6964679, at *3 (S.D. Ohio 2015) (citing Freeland, 103 F.3d at 1277).

While the fourth factor regards the potential for dismissal, if the Court strikes Eck as an expert, the “litigation-ending sanction” the Plaintiffs request would be the potential for a default judgment against Defendants. The Court is not prepared to open the door to that.

Can you file a Rule 11 Motion After Judgment Is Entered?


Rule 11 contains a number of procedural requirements. You must serve the motion for sanctions 21 days before you file it to give the other party an opportunity to withdraw the pleading. One question that has received different answers is whether ot not you can file a motion for sanctions after final judgment is entered.

The case, Blue Heron Commercial Group, Inc. v. Lee Webber, 18-cv-467 (MD Florida June 20, 2019) holds that the motion for sanctions must be filed before final judgment is entered. It is noteworthy that the defendants obtained summary judgment against Blue Heron before they filed the sanctions motion.

As to the timeliness of a Rule 11 motion, the Eleventh Circuit has analyzed Rule 9011 of the Federal Rules of Bankruptcy Procedure, which is “substantially identical” to Rule 11, and “agree[d] with the Second, Fourth, and Sixth Circuits that the service and filing of a motion for sanctions must occur prior to final judgment or judicial rejection of the offending motion.” In re Walker, 532 F.3d 1304, 1309 (11th Cir. 2008)(emphasis added)(quotation and citation omitted). The Eleventh Circuit in Walker thus affirmed the bankruptcy court’s denial of a motion for sanctions because the “motion for sanctions was filed after the offending motion had been denied.” Id.

Here, although it is undisputed that Defendants complied with Rule 11’s safe harbor provision, the Court finds that Defendants’ Motion for Sanctions is due to be denied because Defendants filed the motion after the Court granted summary judgment, entered final judgment, and disposed of Blue Heron’s alleged frivolous pleading. Id. Defendants, however, contend that Walker is inapplicable under the instant facts because, unlike this case, the movant in Walker sought sanctions prior to the conclusion of the 21-day safe harbor provision. The Court does not find that distinction to be determinative in this case because, although the court discussed the safe harbor provision in its analysis, the Eleventh Circuit in Walker did not ultimately base its ruling on the movant’s failure to satisfy the safe harbor provision. Walker, 532 F.3d at 1309. Rather, as discussed above, the court affirmed the bankruptcy court’s denial of sanctions because the “motion for sanctions was filed after the offending motion had been denied.” Id.

The Seventh Circuit follows a different rule, allowing a motion for sanctions to be filed after judgment.

The Blue Heron court also declined to award sanctions under its inherent powers on the ground that the arguments raised by Blue Heron were not frivolous.

The issue as to whether you must file a sanctions motion before judgment is entered is an unsettled question of law. The rules in one circuit may differ from the rules in another circuit. Someday the Supreme Court may resolve this conflict.

Ed Clinton, Jr.

http://www.clintonlaw.net

Tax Protestor’s Claim For Refund Nets Rule 11 Sanctions


Shawn K. Weiler sued the IRS for refunds for taxes he paid. Weiler v IRS, 17 cv 2226 (N.D. Ohio Eastern Division). The IRS moved for summary judgment and sanctions. The motion for summary judgment was granted and the Magistrate Judge also awarded Rule 11 sanctions for the filing of a frivolous pleading.

Mr. Weiler claimed that the Constitution does not permit the imposition of an income tax. He contended that (1) the Sixteenth Amendment does not authorize a direct, non-apportioned income tax; (2) the federal income tax is an improper excise tax that cannot be levied in this case; and (3) Weiler is not subject to income tax because he is not a governmental employee.

The IRS responded that these arguments have been rejected numerous times by U.S. Courts and are, in fact, frivolous.

The IRS also requested the imposition of Rule 11 sanctions against Weiler.

Under Rule 11, a party signing a pleading attests to the court that, to the party’s knowledge, information, and belief, formed after reasonable inquiry under the circumstances, the claims and legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law. By its own terms, Rule 11 applies to pro se litigants as well as to attorneys.

Once a pleading is found by the court to have violated Rule 11, the Rule itself states that the court “shall impose on the person who signed it, . . . an appropriate sanction,” which may include paying the reasonable expenses incurred by the opposing party as a result of filing the action. District courts have broad discretion in tailoring an appropriate and reasonable sanction. Courts should seek to “impose a sanction limited to that which is sufficient to deter repetition of future conduct, either by the offending party or by others similarly situated.”

Here, Weiler certainly violated Rule 11 in filing this action. He has asserted a taxprotestor claim of the sort that federal courts have uniformly rejected in clear language for years. And numerous federal courts have imposed Rule 11 sanctions in similar tax protestor cases.

Therefore, because Weiler asserted a manifestly frivolous claim that did nothing more than burden the courts and the government with addressing claims that he knew, or should have known, to be completely without merit, I recommend the imposition of sanctions consisting of $1,000 payable to the Clerk of Court.

(Footnotes Omitted)

Comment: the federal courts deal with a significant amount of tax protestor litigation. Here, the tax protestor presented legal theories that have been rejected by the courts for many, many years and was sanctioned as a result.

Ed Clinton, Jr.