Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-91-01269/USCOURTS-ca10-91-01269-0/pdf.json

Parties Involved:
David Monnich
Appellant
Rose Manufacturing Company
Appellee
United States Forgecraft Corporation
Appellant

Document Text:

FILl2:D 

United State!i Coun uf Appeals 

UNITED STATES COURT OF APPEALS Tenth Circuit 

FOR THE TENTH CIRCUIT JUL 2 7 1992 

ROSE MANUFACTURING COMPANY, 

Plaintiff-Appellee, 

v. 

UNITED STATES FORGECRAFT CORPORATION; 

DAVID MONNICH, 

Defendants-Appellants. 

) 

) 

) 

) 

ROBERT L. HOECKER 

Clerk 

) No. 91-1269 

) (D.C. No. 88-S-1797) 

) ( D. Colo. ) 

) 

) 

) 

ORDER AND JUDGMENT* 

Before ANDERSON and BALDOCK, Circuit Judges, and 

District Judge. 

CONWAY,** 

**Honorable John E. Conway, District Judge, United States District 

Court for the District of New Mexico, sitting by designation. 

After examining the briefs and appellate record, this panel 

has determined unanimously that oral argument would not materially 

assist the determination of this appeal. See Fed. R. App. P. 

34(a); 10th Cir. R. 34.1.9. 

submitted without oral argument. 

* 

The case is therefore ordered 

This order and judgment has no precedential value and shall 

not be cited, or used by any court within the Tenth Circuit, 

except for purposes of establishing the doctrines of the law of 

the case, res judicata, or collateral estoppel. 10th Cir. R. 

36.3. 

Appellate Case: 91-1269 Document: 010110270483 Date Filed: 07/27/1992 Page: 1
Defendants appeal the district court's order dismissing this 

civil action without prejudice, pursuant to Fed. R. Civ. P. 37(b), 

as a sanction for Plaintiff's failure . to comply with discovery 

orders. The issue presented by this appeal is whether the 

district court abused its discretion in dismissing this action 

without prejudice, rather than with prejudice. See Willner v. 

University of Kan., 848 F.2d 1023, 1030 (10th Cir. 1988) 

(appellate court reviews district court's dismissal under Rule 37 

for failure to provide discovery for abuse of discretion), cert. 

denied, 488 U.S. 1031 (1989). Upon review of the record and the 

parties' arguments on appeal, we conclude that the district court 

did abuse its discretion in refusing to dismiss Plaintiff's claims 

with prejudice. 

Plaintiff commenced this diversity action November 1, 1988, 

asserting claims for breach of contract and patent infringement. 

Defendants answered the complaint and served Plaintiff with its 

first set of interrogatories. Responses to those interrogatories 

were due February 16, 1989. Plaintiff timely filed objections to 

eleven of the forty-four interrogatories propounded, but failed to 

file timely responses to the remaining interrogatories. 

Defendants, on February 21, filed a motion for imposition of 

sanctions against Plaintiff for its failure to file timely 

responses to those interrogatories to which Plaintiff asserted no 

objection. On March 3, Defendants filed a motion to compel 

responses to the interrogatories to which Plaintiff did object. 

Following a hearing held April 7, 1989, before a magistrate 

judge, to whom discovery matters in this case had been referred, 

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the magistrate judge denied Plaintiff's objections to the 

interrogatories and ordered Plaintiff to provide Defendants with 

responses to all interrogatories. During the April 7 hearing, the 

magistrate judge admonished Plaintiff that failure to comply with 

a discovery order could result in dismissal of the action. 

On April 12, Plaintiff provided Defendants with verified 

responses to those interrogatories to which Plaintiff had not 

objected. Asserting that Defendants had refused to negotiate a 

time table for provision of the responses to the remaining 

interrogatories, however, Plaintiff failed to provide those 

answers as required by the magistrate judge's April 11 order. In 

light of Plaintiff's failure to provide the remaining answers, 

Defendants, on June 6, 1989, filed a motion for dismissal of the 

action due to Plaintiff's failure to comply with the magistrate 

judge's discovery order. Plaintiff eventually provided verified 

responses to the remaining unanswered interrogatories several days 

prior to a hearing, scheduled for July 20, 1989, on the motion to 

dismiss. Following that hearing, the magistrate judge noted that 

[t)he fact that the [April 11) order did not contain a 

deadline for plaintiff to submit answers in place of its 

objections does not excuse plaintiff's interference with 

the orderly progress of discovery .... Plaintiff 

clearly had a duty to promptly provide full and complete 

answers, but did not do so until defendant once again 

filed a motion. Moreover, the answers filed June 28, 

1989, over two months after the Magistrate's order, were 

neither complete nor sworn and verified. 

Appellants' App., doc. 18 at 3-4. Although the magistrate judge 

declined to dismiss the action as a sanction for Plaintiff's 

failure to comply with the discovery order, the magistrate judge 

did award Defendants their costs and attorneys' fees incurred in 

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preparing the motion to compel, id. at 4-5, and recommended to the 

district court that Plaintiff "be barred from presenting evidence 

or witnesses concerning incomplete responses to interrogatories 

not later supplemented," id. at 5-6. 

In February 1990, Defendants served Plaintiff with a request 

for production of documents, which included a request for "all 

financial statements for [Plaintiff] which cover the years 1987, 

1988 and/or 1989." Id., doc. 19, exh. A. Plaintiff objected to 

this request, and Defendants filed a motion to compel production. 

Following a hearing, the magistrate judge ordered Plaintiff 

to produce all requested documents, but in accordance with a 

confidentiality order requested by Plaintiff. In response to the 

magistrate judge's order compelling production, Plaintiff produced 

a three-page financial report for each of the three years 

requested, accompanied by a letter dated July 19, 1990, asserting 

that these were "all documents that exist which are responsive" to 

Defendants' production requests. Id., doc. 19, ex. E. Defendants 

later submitted the affidavit of one of their experts, who 

asserted that these financial statements did not contain 

sufficient information for the expert to develop an opinion 

concerning the financial issues presented by this case. 

During a deposition of Plaintiff's president, Defendants 

became aware of the existence of other, audited financial 

statements for 1987, 1988, and 1989, which had been prepared 

annually by an outside accountant and which Plaintiff had failed 

to produce. In light of this revelation, Defendants filed a 

motion to dismiss as a sanction under Rule 37 for Plaintiff's 

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failure to comply with discovery orders. Then, during the 

court-ordered deposition of Plaintiff's trial counsel, who was 

also Plaintiff's vice-president in charge of, among other things, 

the accounting department, Defendants further discovered that 

there existed monthly financial reports for this period of time 

which Plaintiff had also failed to produce. As a result of this 

further disclosure, Defendants filed yet another motion to 

dismiss. 

In response, Plaintiff asserted that the magistrate judge's 

order that Plaintiff produce "[a]ll financial statements ... 

which cover the years 1987, 1988, and/or 1989," did not mean that 

Plaintiff was required "to produce every financial statement 

prepared during the years 1987, 1988 and 1989." Id., doc. 26 at 

4. Plaintiff also argued that (1) the request for production 

specified only financial statements "which cover the years" 1987, 

1988, and 1989 and, therefore, did not include the monthly 

statements; (2) Defendants possessed all the information they 

needed from the statements already produced and, therefore, did 

not need the monthly financial statements; and (3) even though 

Defendants had not specifically requested the monthly statements, 

and production of those statements would have been cumulative, 

Plaintiff had now offered to produce those documents. Id. at 3-4. 

The magistrate judge recommended to the district court that 

it grant Defendants' motions to dismiss as a sanction for 

Plaintiff's continuing violations of discovery orders. The 

magistrate judge found to be without merit Plaintiff's claims that 

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it had made a reasonable interpretation of the discovery request 

and that, in any event, Defendants had not been prejudiced: 

Considering the Court's May 2, 1990, bench ruling, 

subsequent July 2, 1990, written order compelling 

production under a confidentiality agreement, and 

defendant's further request, plaintiff's attempt to 

place the burden on defendant to seek a court order 

compelling production of the audited statements is 

incredible. Equally offensive and self-serving is 

plaintiff's assertion that its three-page statements, 

consisting of information selectively taken from the 

audited reports, are a "reasonable interpretation" of 

"all financial statements." Contrary to plaintiff's 

claims, defendant has been prejudiced by plaintiff's 

failure to provide audited statements. Based on the 

limited information provided, defendant's expert . was unable to reach an opinion on a key issue in the 

defense . . . . 

Id., doc. 28 at 3. 

The district court, considering the motions to dismiss, 

agreed with the magistrate judge's recommendation and dismissed 

the civil action on May 30, 1991: 

[Plaintiff] had been warned about and even 

sanctioned for its noncompliance with discovery orders. 

Yet, [Plaintiff] continued to ignore discovery orders 

under the guise that it was interpreting those orders as 

a "reasonable accountant" would interpret them. The 

Court cannot agree that [Plaintiff's] interpretation of 

the numerous discovery requests and court orders was 

reasonable. It is evident that [Plaintiff] acted in bad 

faith, that [Defendant] was prejudiced by [Plaintiff's] 

actions, and that alternative sanctions have proven 

ineffective. Considering the facts surrounding 

[Plaintiff's] lengthy record of discovery violations in 

this case, the Court agrees with [the magistrate 

judge's] recommendation for dismissal of this civil 

action. 

Id., doc. 30 at 3. 

Defendants, who had counterclaims pending against Plaintiff 

at the time the district court dismissed the civil action, filed a 

motion to clarify that the order did not preclude Defendants from 

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Appellate Case: 91-1269 Document: 010110270483 Date Filed: 07/27/1992 Page: 6
reasserting those claims at a later date. In response to that 

motion, the district court sua sponte amended its May 30 order to 

indicate that the court had dismissed Plaintiff's complaint 

without prejudice. Defendants filed a motion to alter or amend 

the district court's judgment, pursuant to Fed. R. Civ. P. 59(e), 

arguing dismissal should be with prejudice. The district court 

denied that motion, and Defendants appealed. 

The district court's initial order dismissed Plaintiff's 

claims with prejudice. See 4A Moore's Federal Practice 1 37.03[2] 

(2d ed. 199l)("Unless the court indicates otherwise in the order, 

a dismissal under Rule 37 ... is an adjudication on the 

merits."). Although dismissal with prejudice is "the most severe 

in the spectrum of sanctions," National Hockey League v. 

Metropolitan Hockey Club, Inc., 427 U.S. 639, 643 (1976), 

justified only by extreme circumstances, see Meade v. Grubbs, 841 

F.2d 1512, 1520 and n.6 (10th Cir. 1988)(addressing dismissal with 

prejudice under local rule), the record in this case, considered 

as a whole, see National Hockey League, 427 U.S. at 641-42, 

clearly warrants dismissal with prejudice. We agree with the 

magistrate judge that "Plaintiff's flagrant and repeated failures 

to provide discovery have made a mockery of the discovery process 

and represent an egregious offense against the court." 

Appellants' App., doc. 28 at 4. 

Although dismissal of Plaintiff's claims without prejudice 

will adversely affect Plaintiff, that adverse effect is outweighed 

by the benefits Plaintiff derived from such a dismissal. See 

Dellums v. Powell, 566 F.2d 231, 235 (D.C. Cir. 1977) ( "it is 

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Appellate Case: 91-1269 Document: 010110270483 Date Filed: 07/27/1992 Page: 7
fundamental that a party that does not provide discovery cannot 

profit from its own failure"). In amending the dismissal to be 

without prejudice, the district court, in effect, gave Plaintiff 

an opportunity to pursue this litigation on a clean slate, without 

the trail of discovery abuses and resulting sanctions found in the 

initial action. 

Further, dismissal with 

discovery sanction serves, not 

prejudice 

only to 

under Rule 37 as a 

punish contumacious 

conduct, "but to deter those who might be tempted to such conduct 

in the absence of such a deterrent." National Hockey League, 427 

U.S. at 643. "[L]enity ... , while certainly a significant 

factor in considering the imposition of sanctions under Rule 37, 

cannot be allowed to wholly supplant other and equally necessary 

considerations embodied in that Rule." Id. at 642. 

Under the circumstances of this case, the district court 

abused its discretion in amending its initial dismissal order to 

make the dismissal without prejudice. Cf. Dellums, 566 F.2d at 

236 (district court abused its discretion in reinstating 

plaintiff's claims, dismissed for failure to provide discovery, 

"if for no other reason than the prophylactic considerations 

identified in National Hockey League"). 

We, therefore, REVERSE the district court's order amending 

the original dismissal order, and REMAND this cause to the 

district court with instructions to enter an order dismissing the 

complaint with prejudice. In addition, in light of the egregious 

and contumacious conduct of Plaintiff's counsel, we direct the 

district court, on remand, to give the strongest consideration to 

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referring its file in this matter to the disciplinary arm of the 

Colorado bar, as well as considering disciplinary action by the 

federal court itself. See People v. Haase, 781 P.2d 80 (Colo. 

1989)(attorney suspended from the practice of law for six months 

in light of misconduct during discovery proceedings). "[T]he 

mandate of the Code of Judicial Conduct for United States 

Judges . direct[s] judicial officers to 'take or initiate 

appropriate disciplinary measures against a lawyer for 

unprofessional conduct of which the judge becomes aware.' Canon 3 

B(3). This includes, if warranted, bringing the matter to the 

attention of appropriate state disciplinary authorities." 

v. Jeane, 910 F.2d 296, 301 (5th Cir. 1990). 

Entered for the Court 

Stephen H. Anderson 

Circuit Judge 

9 

• 

Mylett 

Appellate Case: 91-1269 Document: 010110270483 Date Filed: 07/27/1992 Page: 9