4.5 Sanctions for Discovery Abuse

• Library: Attorney Fees and Sanctions - Virginia and Federal Courts (Virginia CLE) (2016 Ed.)

4.5 SANCTIONS FOR DISCOVERY ABUSE

4.501 Basis for Discovery Sanctions.

A. Nondisclosure of Witness or Evidence Under Rule 26. Pursuant to Rule 37(c)(1), a party who fails to comply with disclosure requirements of Rule 26(a) or the supplementation requirement of Rule 26(e) is not allowed to use that information or witness to supply evidence to the court for any purpose (namely, on motion, at a hearing, or at a trial) unless the failure was "substantially justified or is harmless." In addition to or instead of the exclusion sanction, the court "(A) may order payment of the reasonable expenses, including attorney's fees, caused by the failure; (B) may inform the jury of the party's failure; and (C) may impose other appropriate sanctions, including any of the orders listed in Rule 37(b)(2)(A)(i)-(vi)." ²¹⁷

The Advisory Committee notes to Rule 37(c) emphasize that the automatic sanction of exclusion "provides a strong inducement for disclosure of material that the disclosing party would expect to use as evidence." ²¹⁸

The process of deciding whether to impose sanctions under Rule 37(c)(1) "involves three major steps: (1) determining that a violation of a discovery order or one of the Federal Rules of Civil Procedure occurred; (2) determining whether that violation was harmless and substantially justified, by reference to Southern States Rack & Fixture, Inc. v. Sherwin-Williams Co., 318 F.3d 592, 597 (4th Cir. 2003); and (3) fitting a sanction to the violation, if one is found." ²¹⁹

In Southern States, the Fourth Circuit explained that to determine whether a nondisclosure of evidence is substantially justified or harmless

a district court should be guided by the following factors: (1) the surprise to the party against whom the evidence would be offered; (2) the ability of that party to cure the surprise; (3) the extent to which allowing the evidence would disrupt the trial; (4) the importance of the evidence; and (5) the nondisclosing party's explanation for its failure to disclose the evidence. ²²⁰

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"Southern States explains that district courts have 'broad discretion' to decide harmlessness and 'should'—not 'shall'—'be guided by' the five factors." ²²¹ Therefore, the district court does not need to expressly mention the five-factor Southern States test when evaluating discovery violations. ²²²

Bad faith is explicitly not one of the Southern States factors but, according to the Fourth Circuit, in some circumstances might be relevant to the fifth factor—a party's explanation for its failure to disclose. ²²³ The court reasoned, "excluding evidence only when the nondisclosing party acted in bad faith would undermine the basic purpose of Rule 37(c)(1): preventing surprise and prejudice to the opposing party." ²²⁴ "Instead, 'explanation' looks to the objective circumstances surrounding the nondisclosure. . . . In that sense, 'explanation' looks more at the feasibility of full and timely disclosure than it does at parties' intent." ²²⁵ Accordingly, counsel's failure to understand the full extent of the material relied upon by an expert "is not the sort of circumstance that substantially justifies a nondisclosure." ²²⁶

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"A legal position is 'substantially justified' if there is a 'genuine dispute' as to proper resolution or if 'a reasonable person could think it correct, that is, if it has a reasonable basis in law and fact.'" ²²⁷

Under the first two Southern States factors, surprise and cure, "failure to disclose in the right form, at the right time, impedes discovery at the time of nondisclosure, such that later putting the opposing party on notice does not render the nondisclosure unsurprising or curable." ²²⁸ Therefore, "notice in deposition testimony does not render a failure to disclose in the expert report unsurprising or curable, even when that deposition testimony completely covers the material that should have been disclosed." ²²⁹ Where the court's pretrial order sets the schedule for the required Rule 26(a)(2) witness disclosures, a party failing to disclose the expert's written report by the agreed-upon deadline will have "necessarily violated the Pre-Trial Order and Rule 26(a)(2)," warranting exclusion of the untimely witness as an appropriate sanction. ²³⁰

"The United States Court of Appeals for the Fourth Circuit and the district courts in this circuit are clear that an expert report should be a comprehensive document that, by itself, provides all the expert's opinions that will be offered at trial, along with the bases for those opinions." ²³¹

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Therefore, an expert's response to deposition questions and the evidence relied on therein may create a fact question or credibility issue for the jury but otherwise "is irrelevant to the analysis under Rule 26, which merely requires disclosure." ²³²

Factor four, "the importance of the evidence," by itself, cannot save improperly disclosed evidence from being found unjustified or nonharmless. "Even if a party's entire case hangs on one expert, such that excluding the expert leads inevitably to summary judgment against that party, then that expert's testimony may be excluded if that expert's testimony was improperly disclosed." ²³³

If the court determines that a violation occurred, and that the violation was not harmless or substantially justified, it must then determine what sanction to impose. ²³⁴ District courts enjoy broad discretion to select an appropriate remedy in light of the totality of the circumstances, and the Fourth Circuit employs a four-part test to guide the exercise of that discretion. ²³⁵

B. Failure to Answer Under Rule 30, 31, 33. Costs and attorney fees may be recovered under Rule 37(a)(5)(A) for refusal to disclose or answer discovery where a party files a motion to compel and either the motion is granted or the disclosure or discovery is provided after the motion was filed. There is no recovery when no order is sought or obtained. ²³⁶ Where

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a motion to compel is denied, Rule 37(a)(5)(B) permits an award of expenses to the party or deponent who opposed the motion. If the motion is granted in part and denied in part, the court may apportion the reasonable expenses of the motion under Rule 37(a)(5)(C).

Under Rule 37(a)(5)(A) and (B), the court must require the nonprevailing party to pay the prevailing party's "reasonable expenses," including attorney fees, incurred in making or opposing the motion unless the nonprevailing party's motion or objection was "substantially justified" or "other circumstances make an award of expenses unjust." ²³⁷ A motion is substantially justified if "a reasonable person could think it correct, that is, if it has a reasonable basis in law and fact." ²³⁸ Where "[m]ere negligence does not rise to the level of bad faith [it] will not support the imposition of sanctions under § 1927." ²³⁹ In a trademark litigation that "involved an excessive amount of discovery motions," many of which were denied or deemed moot by the court, the court found an award of expenses under Rule 37 inappropriate because it was "unclear to the court which party's conduct created the need for the multiple discovery motions" and, during the course of discovery, the court had granted some relief to both sides. ²⁴⁰

C. Failure to Comply with a Court Order. Discovery sanctions under Rule 37(b) may arise from a failure to comply with a court order, including a scheduling order. ²⁴¹

Under Rule 37(b):

If a party . . . fails to obey an order to provide or permit discovery, including an order under Rule 26(f), 35, or 37(a),

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the court where the action is pending may issue further just orders. They may include the following: (i) directing that the matters embraced in the order or other designated facts be taken as established for purposes of the action, as the prevailing party claims; (ii) prohibiting the disobedient party from supporting or opposing designated claims or defenses, or from introducing designated matters in evidence; (iii) striking pleadings in whole or in part; (iv) staying further proceedings until the order is obeyed; (v) dismissing the action or proceeding in whole or in part; (vi) rendering a default judgment against the disobedient party; or (vii) treating as contempt of court the failure to obey any order except an order to submit to a physical or mental examination. ²⁴²

This rule also authorizes an award of expenses: "Instead of or in addition to the orders above, the court must order the disobedient party, the attorney advising that party, or both to pay the reasonable expenses, including attorney's fees, caused by the failure, unless the failure was substantially justified or other circumstances make an award of expenses unjust." ²⁴³

In contrast to Rule 37(c)(1)—which generally requires exclusion of evidence that a party seeks to offer but has failed to disclose . . . —Rule 37(b) provides district courts with greater discretion in selecting one or more appropriate sanctions. . . . Thus, while the exclusion analysis under Rule 37(c)(1) is limited by the specific language of that provision, Rule 37(b) allows district courts to consider a broader range of factors, including bad faith, in determining which sanction(s) to impose. ²⁴⁴

"'Stalling and ignoring the direct orders of the court with impunity' is 'misconduct' that 'must obviously be deterred.'" ²⁴⁵

Nonparticipation in pretrial process as well as overuse of "Attorneys' Eyes Only" designation is precisely the type of behavior that the court needed to deter. ²⁴⁶

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Under Rule 37(b)(2)(A)(vi) and Rule 16(f)(1), the trial court properly imposed a sanction of default where the defendant refused to participate in the pretrial process of creating pretrial order and ignored her attorney's request for guidance so that case could not efficiently move forward. ²⁴⁷

D. Failure to Attend Own Deposition, Serve Answers to Interrogatories, or Respond to Request for Inspection. Rule 37(d) permits the same...