New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.

Commercial Litigation and Arbitration

New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.
Commercial Litigation and Arbitration
« Back to Complex Lit Blog

Rule 37 Sanctions — Purposes — Factors — Prejudice as Prerequisite to Obtaining Sanctions More Severe Than Fees — Categories of Prejudice

Download PDF

Paice, LLC v. Hyundai Motor Co., 2014 U.S. Dist. LEXIS 95043 (D. Md. June 27, 2014):

B. Sanctions

The Court now turns to consider whether discovery sanctions are appropriate for Defendants' discovery conduct to-date.5  Courts have broad discretion to impose punitive measures on any party who fails to obey a discovery order. Fed R. Civ. P. 37(b)(2)(A); Mut. Fed. Sav. & Loan Ass'n v. Richards & Assocs., 872 F.2d 88, 92 (4th Cir. 1989); 8B Charles Alan Wright, et al., Federal Practice & Procedure § 2289 (3d ed. 2010). It is generally recognized that Rule 37 sanctions are intended to: (1) penalize culpable parties; (2) deter others from engaging in similar conduct; (3) compensate the court and other parties for expense caused, and (4) compel discovery. Gregory P. Joseph, Sanctions: The Federal Law of Litigation Abuse, § 49 (2013)(citing Carlucci v. Piper Aircraft Corp., 775 F.2d 1440, 1453 (11th Cir. 1985)). As such, Rule 37 sanctions are both punitive and/or remedial, and may be used to discourage bad behavior or make the aggrieved party whole.

5 A centerpiece of Plaintiffs' motion for sanctions was three of the nine disputed documents, which were the subject of Defendants' motion to strike (ECF No. 190). These were technical documents — remarkable as few technical documents had been produced. Moreover, on their face, some of the documents suggested that they had been in defense counsel's possession for considerable time before their production. Since the Court has granted Defendants' motion to strike, the Court does not consider Defendants' treatment of these documents in discovery as evidence of misconduct. Thus, any mention of the documents  [*39] subject in Defendants' motion to strike was not considered by the Court in the context of Plaintiffs' motion for sanctions.

Courts in the Fourth Circuit must consider four factors in determining what sanctions to impose: (1) whether the non-complying party acted in bad faith; (2) the amount of prejudice that noncompliance caused the adversary; (3) the need for deterrence of the particular sort of non-compliance; and (4) whether less drastic sanctions would have been effective. Southern States Rack & Fixture, Inc. v. Sherwin-Williams Co., 318 F.3d 592, 597 (4th Cir. 2003);  [*40] Mutual Fed. Sav., 872 F.2d at 92. The presence or absence of any one of these factors is generally not decisive: "[t]he harshest of sanctions" may be imposed "when ... culpability is minimally present, if there is a considerable showing of prejudice, or, alternatively, the prejudice is minimal but the culpability is great." Victor Stanley, Inc. v. Creative Pipe, Inc., 269 F.R.D. 497, 533 (D. Md. 2010). Ultimately, a court must "make whatever disposition is just in the light of the facts of the particular case." Bethesda Softworks LLC v. Interplay Entm't Corp., No. 09-2357, 2011 WL 1559308, at *2 (D. Md. Apr. 25, 2011)(citations omitted).

Rule 37 provides a nonexclusive range of sanctions. The most severe is dismissal or default judgment. Mutual Fed. Sav., 872 F.2d at 92 (quoting Wilson v. Volkswagen of America, Inc., 561 F.2d 494, 503-04 (4th Cir. 1977)); Hathcock v. Navistar Int'l Transp. Corp., 53 F.3d 36, 40 (4th Cir. 1995). Slightly lower in the spectrum are preclusion orders, recognized as "strong sanctions, although not as drastic as dismissals or defaults."6 Gregory P. Joseph, Sanctions: The Federal Law of Litigation Abuse, § 49 (2013). Adverse inference or rebuttable presumption [*41] instructions are also considered stricter than an award of fees, but more lenient than dismissals or defaults. Courts have accordingly set a high bar for parties seeking penalties beyond fees. Courts in this district generally decline requests for preclusion absent some strong showing of prejudice.7 See Bethesda, 2011 WL 1559308, at *6 (D. Md. Apr. 25, 2011)(preclusion "typically requires some strong evidence of prejudice")(citing Passlogix, Inc. v. F2A Tech., LLC, 708 F. Supp.2d 378, 421 (S.D.N.Y. 2010)) ; Hastings v. OneWest Bank, No. 10-3375, 2013 WL 1502008, at *4 (D. Md. Apr. 11, 2013)(same).

6 There are two types of preclusion order. Gregory P. Joseph, Sanctions: The Federal Law of Litigation Abuse, § 49 (2013). The first precludes a party from asserting a claim or defense. Id. The second bars the introduction of evidence. Id. Plaintiffs here seek both (ECF No. 181, 49-50).

7 Two types of prejudice result from discovery abuses. The first is procedural prejudice resulting from delay. Evasiveness, delay and obfuscation may hinder the opposing party's ability to develop their case. Bethesda Softworks LLC v. Interplay Entm't Corp., No. 09-2357, 2011 WL 1559308, at *5 (D. Md. Apr. 25, 2011)("Indefinite delay, disruption of deadlines, and the continuation of discovery can amount to prejudice."). The second is substantive. If a party refuses to produce requested evidence despite a court order, their opponent is obviously hindered in their ability to present evidence at trial.

Share this article:

Facebook
Twitter
LinkedIn
Email

Recent Posts

Rule 41(b): Five Factors to Be Weighed in Deciding Whether Dismissal Is Appropriate (Second Circuit) — Is A Finding of Bad Faith or Fault Required if Dismissal Is Without Prejudice? — Undecided If Truly Without Prejudice But It Is Required If the Without Prejudice Dismissal Will Act as a Dismissal on the Merits (Here, Because of the Statute of Limitations) — Failure To Consider A Lesser Sanction Than Dismissal Is Generally An Abuse Of Discretion

Spoliation Sanctions/Mootness: Stipulation Resolving “All Pending Discovery Disputes,” Which Are Enumerated, Does Not Moot Subsequent Sanctions Motion for ESI Spoliation — Postjudgment Sanctions Order Is Appealable When District Court Has Finally Disposed of Both Liability and Amount

Rule 37 Default Judgment Sanction: (1) Default Judgment Appropriate Only As a Last Resort, When Less Drastic Sanctions Would Not Ensure Compliance with the Court’s Orders — (2) Default Judgment Sanction Requires Willful or Bad Faith Failure to Obey Discovery Order — (3) Fugitive Defendant’s Failure to Appear at Court-Ordered, Remote Deposition Despite Court Warning That Sanctions Could Follow Disobedience Warrants Default Judgment — (4) District Court Afforded Wide Discretion in Interpreting Its Own Orders — (5) Filing a Notice of Appeal from a Non-Appealable Order (Here, a Discovery Order) Does Not Deprive the District Court of Jurisdiction over the Case

RICO and Injunctions: (1) State Court Actions Designed to Perpetuate and Monetize a RICO Violation Are Enjoinable under RICO, Even Though They Are Not Themselves Alleged to Be Predicate Acts [Note: Noerr Pennington Applies in RICO Actions] — (2) Although Civil RICO’s Text and Legislative History Fail to Reveal Any Intent to Override the Provisions of the Federal Arbitration Act, Arbitrations Are Enjoinable Under the “Effective Vindication” Doctrine Where They Operate As a Prospective Waiver of a Party’s Right to Pursue Statutory RICO Remedies — (3) Arbitration Findings May Be Given Collateral Estoppel Effect in a Civil RICO Action — (4) Injunction of Non-Corrupt State Court Litigations That Furthers a RICO Violation Are Enjoinable Under the Anti-Injunction Act’s “Expressly Authorized” Exception — (5) “The Irreparable Harm Requirement Is The Single Most Important Prerequisite For The Issuance Of A Preliminary Injunction” (Good Quote) — (6) When Injunction Is Based on “Serious Questions on the Merits” Rather Than “Likelihood of Success,” Court May Rely on Unverified Pleadings and Attached Exhibits to Assess the Merits, Unless the Opponent Has Raised Substantial Questions (Here, the Opponent Failed to Request an Evidentiary Hearing) — (7) Whether Amended Pleading Moots An Appeal Turns on Whether It Materially Changes the Substantive Basis for the Appeal — (8) Meaning of “In That” (“Used To Introduce A Statement That Explains Or Gives More Specific Information” About A Prior Statement)

RICO: Fraudulent Concealment Must Prevent Discovery of the Injury to Toll Statute of Limitations

Rule 37 Default Judgment Sanction: (1) Abuse of Discretion Review = Legal Conclusions De Novo. Factual Findings for Clear Error — (2) Client May Be Sanctioned for Misconduct of Its Counsel, Though Here Client Was Directly Involved in Bad Faith Misbehavior — (3) Is There A Difference, Under Rule 11 As Opposed to Rule 37, Concerning Whether A Client Can Be Sanctioned for Its Counsel’s Misconduct? — (4) While Sanctions of Last Resort (Dismissal/Default) Are Apt Only If Lesser Sanctions Wouldn’t Ensure Compliance, Rule 37 Doesn’t Require the Vain Gesture of First Imposing Lessert Sanctions When It Is Clear They Would be Ineffective — (5) Court’s Reconsideration of Non-Final Orders Is Governed by Rule 54(b), And Court’s Discretion under That Rule Is Governed by the Law-of-the-Case-Doctrine

RICO: (1) Special Pleading Requirements? — (2) Although Enterprise Must Be More Than a Summation of the Predicate Acts, The Predicate Acts Can Demonstrate the Existence of the Enterprise — (3) Requirement That Association-in-Fact Exist For Purposes Other Than Just to Commit Predicate Acts Merely Requires Continuity — (4) To State an Association-in-Fact Enterprise Consisting of One Natural Person and Collection of Legal Fictions Requires Factual Detail As to How They Acted Together — (5) “A § 1962(c) Enterprise Must Be More Than An Association of Individuals Or Entities Conducting the Normal Affairs of a Defendant Corporation” (Good Quote)

RICO: (1) Fee Award May Exceed Amount Recovered — Strict Proportionality Not Required — (2) Nonmonetary Benefits and Injunctive Relief Recovered Also Relevant Factors — (3) Loss on Some Claims Need Not Result in Lowered Fees, Especially When Both Arise Out of The Same Nucleus of Operative Facts

RICO: Indirect Purchasers (Car Buyers/Renters) Lack Standing to Sue Manufacturers for RICO Violations Even Though Intermediaries (Auto Dealer Direct Purchasers) Lack Any Damages

RICO: Statutory Requirement that RICO Be Liberally Construed Does Not Establish a More Liberal Pleading Standard for RICO Claims — “To Be Sure, Adequately Pleading a RICO Claim Can Be Challenging” (Good Quote) — Court May Dismiss Action Pursuant to Rule 41(b) Absent A Motion

Archives
New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.
New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.

New York Office

© 2024 Joseph Hage Aaronson LLC  
Disclaimer | Attorney Advertising Notice | Legal Notice