Rule 37 Sanctions: How Mandatory Is the Mandate That the Court Must Order a Party Who Violates a Discovery Order to Pay the Fees and Expenses Incurred by the Other Side? — Sixth Circuit Splits on Issue
Chang Lim, proceeding pro se, appeals the district court's grant of summary judgment in favor of the defendants in his action raising claims under Title VII of the Civil Rights Act of 1964, 42 U.S.C. §§ 2000-2000e-17 ("Title VII"), and various state laws. The defendants cross-appeal the court's denial of reasonable expenses as a sanction under Federal Rule of Civil Procedure 37(b)(2)(C) and (d)(3). This case has been referred to a panel of the court that, upon examination, unanimously agrees that oral argument is not needed. Fed. R. App. P. 34(a).
I. Lim's Employment at Terumo Heart, Inc.
In March 2010, Lim, who identifies his race as Asian and his national origin as South Korean, began working as the Regulatory Affairs Manager at Terumo Heart, Inc. ("THI"), a medical device company with a facility in Michigan. In this role, Lim reported to defendant Keith Proctor, Director of Regulatory [*2] Affairs at THI.
In July 2010, Lim began to complain about Proctor's performance and about quality control and regulatory compliance to defendant William Pinon, President and CEO of THI. Pinon referred Lim's complaints to Gael Tisack, Compliance Officer for THI, for an investigation. Tisack concluded that Lim's claims were "irresponsible, unsupported, disrespectful[,] and created dissention." Tisack met with Lim to share her findings and instructed that he "stop making false and inflammatory allegations."
On September 20, 2010, Eva Gao, one of Lim's subordinates, emailed Lim and Proctor, asking whether she should participate in software testing that week. Proctor responded first and instructed her to participate. Lim followed up with a response copying Pinon and instructing Gao not to participate. Lim's email stated that the software testing violated internal quality procedures and Food and Drug Administration (FDA) regulations and suggested that participation in such testing could result in "jail" and "handcuffs." Pinon responded with an instruction that Gao participate in the software testing and advised Lim that his insinuation of wrongdoing was inappropriate.
On September 23, 2010, [*3] after continuing her investigation, Tisack met with Lim and gave him a copy of her written report, in which she concluded that Lim's accusations against Proctor were false and that his behavior was insubordinate. On October 1, 2010, Lim responded to Tisack's report with an email, in which he accused Tisack of "fail[ing] to bring correction, corrective action[,] and/or preventive action." Later that day, Lim was fired.
II. District Court Proceedings
Lim commenced this action in the district court against thirteen entities and individuals, including, inter alia, THI, Proctor, Pinon, and Tisack. Lim alleges that the defendants retaliated against him and terminated his employment because of his race, color, national origin, and opposition to THI's violations of its own policies and procedures and FDA regulations. THI filed counterclaims, alleging that Lim misrepresented his employment qualifications and work history during the application process and that he was unjustly enriched as a result.
With only a few weeks remaining until the deadline for dispositive motions, the defendants moved for an order compelling Lim, who had been uncooperative and nonresponsive during his deposition, to appear for [*4] the continuation of his deposition and for a psychological examination. In a May 30, 2013 order, the magistrate judge granted the defendants' motion and ordered that Lim travel to Michigan for the deposition and psychological examination within two weeks. On the day before the deposition and examination were set to take place, Lim told the defendants that he would not appear because he had been unable to sleep and had a headache. In June 2013, the defendants filed a motion for entry of an order of contempt and for sanctions, asking the court to dismiss the case and to order Lim to pay the expenses incurred in planning the deposition and psychological examination.
The defendants moved for summary judgment, and Lim filed a motion to dismiss the counterclaims and for summary judgment. The magistrate judge issued a report recommending that: (1) the defendants' summary judgment motion be granted as to Lim's claims and denied as to their counterclaims; (2) the court decline to exercise supplemental jurisdiction over the defendants' counterclaims and dismiss them without prejudice; (3) Lim's summary judgment motion be denied; and (4) the defendants' motion for contempt and sanctions be denied [*5] as moot. Both sides filed objections, but Lim's objections failed to comply with the local rules. The defendants filed a motion to strike Lim's objections, which the court granted. The court ordered Lim to pay the defendants' costs incurred in reviewing his voluminous objections and in having to brief and file another motion to strike and to refile objections that conformed to the local rules. Lim refiled his objections, but failed to pay the defendants' bill of costs. On January 17, 2014, the defendants filed a motion for contempt and sanctions.
On April 9, 2014, the district court entered an order addressing all pending motions. The court adopted the magistrate judge's recommendations that the defendants' motion for summary judgment be granted with respect to all of Lim's claims and that the defendants' counterclaims be dismissed without prejudice. The district court rejected the magistrate judge's recommendation that the June 2013 motion for sanctions be denied as moot and granted the motion in part. Pursuant to Federal Rules of Civil Procedure 37(b) and 37(d), the court ordered Lim to pay $1,750, the amount paid by the defendants as a deposit to the doctor who was to perform the psychological examination. The court also [*6] granted, in part, the defendants' January 2014 motion for contempt and sanctions and ordered Lim to pay the amount set forth in the defendants' bill of costs and an additional $200 as a sanction for the fees and costs incurred by the defendants in having to file the contempt motion.
Lim timely appealed the court's ruling, and the defendants have cross-appealed. In his opening brief, Lim generally states that the "main issues" he wishes to raise are: (1) whether the district court erred in granting summary judgment to the defendants; and (2) whether the district court erred by denying his "motions, objections, requests, and applications." He later identifies five more specific issues: (3) whether the district court erroneously characterized the discovery proceedings; (4) whether the district court's de novo review of the magistrate judge's report and recommendation was sufficient; (5) whether the district court properly weighed the evidence; (6) whether the district court properly applied Federal Rule of Civil Procedure 56(c); and (7) whether the district court misconstrued important facts or took facts out of context. Lim has also filed a "Motion for Sanction or, Alternatively, Motion for Relief from Judgment."
In their [*7] cross-appeal, the defendants challenge the district court's denial of reasonable expenses under Federal Rule of Civil Procedure 37(b)(2)(C) and (d)(3) as a sanction for Lim's failure to comply with the magistrate judge's May 30, 2013 discovery order. They do not challenge the dismissal of their cross-claims.
Lim states in his brief that "the district court improperly sanctioned the Appellant by relying on the evidence misrepresented by the Appellees." Lim's general assertion is inadequate to preserve for appeal any challenge [*15] he may have with respect to the district court's sanctions rulings. See Vance v. Wade, 546 F.3d 774, 781 (6th Cir. 2008); Wu v. Tyson Foods, Inc., 189 F. App'x 375, 381 (6th Cir. 2006); Dillery, 398 F.3d at 569.
IV. Defendants' Cross-Appeal
The sole issue raised by the defendants in their cross-appeal is whether the district court abused its discretion by not awarding them reasonable expenses under Federal Rules of Civil Procedure 37(b)(2)(C) and 37(d)(3) for Lim's failure to comply with the magistrate judge's order compelling his continued deposition and psychological examination. See Sommer v. Davis, 317 F.3d 686, 692 (6th Cir. 2003). In the Rule 37 context, "[a]n abuse of discretion occurs when (1) the district court's decision is based on an erroneous conclusion of law, (2) the district court's findings are clearly erroneous, or (3) the district court's decision is clearly unreasonable, arbitrary or fanciful." McCarthy v. Ameritech Publ'g, Inc., 763 F.3d 488, 491 (6th Cir. 2014).
Federal Rule of Civil Procedure 37(b)(2) provides that, if a party fails to obey a discovery order, "the court where the action is pending may issue further just orders." Fed. R. Civ. P. 37(b)(2)(A). The rule further provides that, "[i]nstead of or in addition to the orders [set forth in subsection (b)(2)(A)], the court must order the disobedient party . . . 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." Fed. R. Civ. P. 37(b)(2)(C) (emphasis added). Rule 37(d), which authorizes the district court to impose sanctions [*16] where a party fails to attend his own deposition, states that such sanctions may include any of the orders set forth in Rule 37(b)(2)(A)(i)-(vi) and includes language identical to that in Rule 37(b)(2)(C) about when to award reasonable expenses. Fed. R. Civ. P. 37(d)(3).
The defendants devote much of their brief to arguing that an award of reasonable expenses is mandatory under the plain language of Rules 37(b)(2)(C) and 37(d)(2) and that the district court abused its discretion by not making such an award where Lim failed to show that his failure to comply with the court's discovery order was substantially justified or that other circumstances made an award of expenses unjust. But it appears that the district court followed the plain language of the rule and, "instead of" imposing one or more of the sanctions listed in Rule 37(b)(2)(A), ordered Lim to pay the expenses incurred by the defendants. Fed. R. Civ. P. 37(b)(2)(C) and (d)(3). In its order, the court explained that the amount of the sanction--$1,750--was "an amount known to the Court to have been incurred by Defendants, in paying the doctor's fee, as a direct result of Plaintiff's failure to comply with the Court's Order." In other words, the court found that the doctor's fee was the extent of the reasonable expenses that were a direct result of Lim's failure to [*17] appear for his deposition. Facts presented to the district court included the defendants' decision to prepay for Lim's flight and hotel, despite his long history of noncompliance with discovery orders. In light of the district court's direct knowledge of the litigation and experience with the parties, we do not find the court's factfinding to be "clearly erroneous" or the decision to limit the scope of reasonable expenses to be "clearly unreasonable, arbitrary or fanciful." McCarthy, 763 F.3d at 491; see also Rachel-Smith v. FTData, Inc., 247 F. Supp. 2d 734, 739-40 (D. Md. 2003).
Accordingly, we affirm the district court's grant of summary judgment to the defendants on all of Lim's claims and order that Lim pay the defendants $1,750 as a sanction for failing to comply with the magistrate judge's order to appear for a psychological examination and his continued deposition.
CONCUR BY: McKEAGUE (In Part)
DISSENT BY: McKEAGUE (In Part)
McKEAGUE, Circuit Judge, concurring in part and dissenting in part.
The law is clear: A person like Lim, who unjustifiably fails to obey a discovery order, "must . . . pay the reasonable expenses"--all of them, "including attorney's fees"--"caused by [his] failure." Fed. R. Civ. P. 37(b)(2)(C), (d)(3). Under the majority's judgment, Lim will pay only some of the expenses caused by his disobedience, and none of [*18] the mandatory attorney's fees--all without a word of explanation as to why that was so. Because we do not know whether the district court followed the law, I would not affirm on this issue. I would instead vacate and remand for a factual determination by the district court--and some explanation--vis-à-vis the reasonable expenses owed to the defendants.
The district judge, majority, and I agree that this lawsuit is another meritless one in a long line of Lim's meritless suits. I therefore concur in the majority's conclusion that the district court properly dismissed Lim's federal-and state-law claims. All also agree that Lim unjustifiably failed to comply with a discovery order by not attending his deposition and psychological exam. So I also concur in the majority's conclusion to that effect. Finally, all agree that because of this unjustified disobedience and because Lim did not show "other circumstances [that] make an award of expenses unjust," mandatory sanctions were required under Federal Rule of Civil Procedure 37(b)(2)(C) and (d)(3). And yes, I concur in the majority's holding here, too: that the district court "must order" those sanctions. Majority Op. at 9 (quoting Fed. R. Civ. P. 37(b)(2)(C)).
The sanctions that all agree were required here had to include, [*19] at a minimum, "the reasonable expenses, including attorney's fees, caused by the failure" to follow the discovery order. Fed. R. Civ. P. 37(b)(2)(C), (d)(3). The district court awarded the defendants $1,750 in expenses--the amount that the defendants paid to the doctor who would have examined Lim had Lim followed the discovery order. But the district court said nothing--not one word--about the other expenses that the defendants incurred because of Lim's failure. See R. 146 at 18. These expenses included more than $1,100 for a plane ticket, $190 for a hotel room, and $330 for a court reporter and videographer--in addition to the $1,750 paid to the doctor. And they included attorney's fees. If these other expenses were "reasonable," the district court "must [have] order[ed]" them. Fed. R. Civ. P. 37(b)(2)(C), (d)(3) (emphasis added).
Saying nothing on the issue caused two problems and was an abuse of discretion. First, we simply do not know if these other expenses were reasonable, for the district court's opinion contains no discussion whatsoever on them. Even though the district court has discretion in determining the reasonableness of expenses incurred, it must provide us with "a clear understanding of the analytical process by which ultimate findings were reached" [*20] and "assure us that [it] took care in ascertaining the facts." Gonzales v. Galvin, 151 F.3d 526, 532 (6th Cir. 1998); see Gen. Envtl. Sci. Corp. v. Horsfall, 25 F.3d 1048, at *11-*12 (6th Cir. 1994) (unpublished) (citing, among others, Batson v. Neal Spelce Assocs., Inc., 765 F.2d 511, 517 (5th Cir. 1985)). It must show us, in other words, its "direct knowledge of the litigation." Majority Op. at 10. That's not a high bar. But saying nothing does not overcome it.
Second, the reasonable expenses under Rule 37(b) and (d) must "includ[e] attorney's fees," yet the district court did not even purport to analyze what (if any) attorney's fees were reasonable. Fed. R. Civ. P. 37(b)(2)(C), (d)(3). That is either an "erroneous conclusion of law" (reading the required attorney's fees as permissive) or an "arbitrary" determination (no explanation as to why the attorney's fees were not reasonable). McCarthy v. Ameritech Publ'g, Inc., 763 F.3d 488, 491 (6th Cir. 2014). Either way, it was an abuse of discretion. Id.
For these reasons, I dissent as to the reasonable-expenses issue under Rule 37.
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