Commercial Litigation and Arbitration

Rule 37(c)(2) Sanctions for Failure to Admit Per Rule 36 (Here, Lack of Legally Cognizable Injury) — Test: Reasonable Belief Responder Might Prevail on Matter Denied

Magnetar Techs. Corp. v. Intamin, Ltd., 2015 U.S. App. LEXIS 16310 (9th Cir. Sept. 14, 2015):

III. Rule 37 Sanctions

On cross-appeal, Intamin contends that the district court erred in denying its request for attorney's fees and costs under Rule 37. Intamin claims that Magnetar should be sanctioned because it could not prove antitrust injury and damages. Although Intamin served requests for admission on Magnetar, including requests to admit that it had not been "injured in its business or property" by antitrust violations, Magnetar did not admit these facts.

Fed. R. Civ. P. 37(c)(2) states that "[i]f a party fails to admit what is requested under Rule 36 and if the requesting party later proves a document to be genuine or the matter true, the requesting party may move that the party who failed to admit pay the reasonable expenses, including attorney's fees, incurred in making that proof." Here, the issue is not whether Magnetar prevailed in the litigation but whether it acted reasonably in believing that it might prevail. See Wash. State Dept. of Transp. v. Nat. Gas Co., 59 F.3d 793, 805-06 (9th Cir. 1995).

The district court did not sanction Magnetar because it concluded that Magnetar had reasonable grounds to bring the antitrust action. We agree with the district court. Although we hold that Magnetar [*25]  did not offer enough evidence to establish a causal antitrust injury, we recognize that potentially valid arguments could have been made on both sides of this issue. Accordingly, we conclude that Magnetar proceeded in good faith in not admitting facts related to the antitrust injury.

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