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IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF OHIO

EASTERN DIVISION

Robert A. Brown, et al.,

Case No. 2:11-cv-1122

Plaintiffs, 

v. Judge Graham

Tellermate Holdings Ltd., et al., Magistrate Judge Kemp

Defendants.

OPINION & ORDER

The course of this litigation is an appalling example of discovery run amok. This 

straightforward age discrimination case has spawned nearly three years of collateral litigation 

over discovery, which has consumed enormous amounts of the resources of the parties and this 

Court without materially advancing the goal of fair and efficient preparation for trial. It is the 

Court’s intention to resolve these collateral disputes expeditiously and put this case on course for 

trial before the end of the year.

I. Background

This matter is before the Court on a number of discovery-related objections and motions. 

The Plaintiffs in this case are Robert and Christine Brown, former salespersons for Defendant 

Tellermate. The Defendants are Tellermate Holdings Ltd.; Tellermate, Inc.; Paul Rendell; David 

Lunn; Gareth Davies; Edgar Biss; John Pilkington; Debra Elliott (collectively, Defendant 

Tellermate); and Insperity PEO Services, L.P. (Defendant Insperity). Defendant Tellermate 

offers cash management products and services. Defendant Insperity is a human resources 

outsourcing company.

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In August 2011, Defendant Tellermate terminated the Plaintiffs’ employment. Several 

months after their termination, the Plaintiffs commenced this action for age discrimination. As

the Magistrate Judge diplomatically put it, “[d]iscovery did not go smoothly.” July 1, 2014 Op. 

& Order at 2, doc. 96. The parties repeatedly clashed over discovery matters, necessitating the 

Magistrate Judge’s frequent intervention. Now before the Court are the Defendants’ objections to 

the Magistrate Judge’s award of discovery sanctions against the Defendants and the Plaintiffs’ 

objections to the Magistrate Judge’s denial of their Second Motion for Default Judgment.

II. Standard of Review

“The nature of the matter considered by the magistrate judge, dispositive or 

nondispositive, determines the standard of review by the district court.” Griffin v. Bank of Am., 

N.A., No. 2:14-CV-02335-JTF, 2015 WL 3892058, at *1 (W.D. Tenn. June 24, 2015) (citing 

Fed. R. Civ. P. 72(b)(3)). When reviewing a magistrate judge’s nondispositive ruling, the district 

court applies a “clearly erroneous or contrary to law” standard of review. Fed. R. Civ. P. 72(a); 

28 U.S.C. § 636(b)(1)(A). In contrast, the district court reviews de novo a magistrate judge’s 

ruling on a dispositive matter. Fed. R. Civ. P. 72(b)(3); 28 U.S.C. § 636(b)(1).

An award of attorneys’ fees for discovery misconduct is not dispositive of a claim or 

defense and is therefore reviewed under Rule 72(a)’s “clearly erroneous or contrary to law” 

standard. Estates of Ungar & Ungar ex rel. Strachman v. Palestinian Auth., 325 F. Supp. 2d 15, 

25 (D.R.I. 2004) aff’d sub nom. Ungar v. Palestine Liberation Org., 402 F.3d 274 (1st Cir. 

2005); see also Baker v. Peterson, 67 F. App’x 308, 311 (6th Cir. 2003) (per curiam) (citing 

Ocelot Oil Corp. v. Sparrow Indus., 847 F.2d 1458 (10th Cir. 1988), for the proposition that “the 

magistrate’s imposition of attorney fees as a discovery sanction is reviewed under the ‘clearly 

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erroneous or contrary to law’ standard”); Zang v. Zang, No. 1:11-CV-884, 2014 WL 5426212, at 

*4 (S.D. Ohio Oct. 22, 2014) (finding that “[w]ith few exceptions, orders concerning pre-trial 

discovery matters including the imposition of monetary sanctions for violations under Rule 37 

are considered to be non-dispositive” and awarding attorneys’ fees and costs as a sanction for 

discovery misconduct). The Court reviews the Magistrate Judge’s award of attorneys’ fees under 

the clearly erroneous or contrary to law standard of review.

The evidentiary sanction imposed by the Magistrate Judge precludes the Defendants from 

“from using any evidence which would tend to show that the Browns were terminated for 

performance-related reasons.” Id. at 45. In the Court’s view, whether this sanction is “dispositive 

of a . . . defense,” Fed. R. Civ. P. 72(a), for the Defendants, and thus subject to de novo review, is 

a close call. While this sanction precludes the Defendants from asserting a potential nondiscriminatory reason for the Plaintiffs’ termination, it does not preclude the Defendants from 

asserting other non-discriminatory reasons for the Plaintiffs’ termination. Thus, it does not 

preclude the defense that the Plaintiffs were terminated for non-discriminatory reasons. 

Therefore, the Court reviews the evidentiary sanction under the clearly erroneous or contrary to 

law standard.

III. Discussion

The Defendants have objected to the Magistrate Judge’s July 1, 2014 Opinion and Order 

imposing sanctions. The Plaintiffs have objected to the Magistrate Judge’s March 30, 2015 

Opinion and Order denying their Second Motion for Default Judgment. The Court will address 

each set of objections separately.

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A. The Plaintiffs’ First Motion for Default Judgment

In the fall of 2013, the Plaintiffs filed a Motion for Default Judgment (doc. 60) and a 

Motion for Sanctions (doc. 65) based on their belief that the Defendants had engaged in a pattern 

of obfuscation and misconduct related to discovery. After the parties briefed the motions, the 

Magistrate Judge held a three-day evidentiary hearing. At the conclusion of that hearing, the 

Magistrate Judge offered the parties the opportunity to submit additional briefing, but the parties

declined to do so.

1. The Magistrate Judge’s July 1, 2014 Opinion and Order

The Magistrate Judge issued his Opinion and Order ruling on the Plaintiffs’ motions on 

July 1, 2014. He identified three areas in which the Defendants and their counsel, of the law firm 

Calfee, Halter & Griswold LLP (Calfee), failed to live up to their discovery obligations: (1) the 

preservation and production of salesforce.com records; (2) the production of records concerning 

a previous age discrimination claim against the Defendants (the Frank Mecka documents); and 

(3) the production of 50,000 pages of employee performance-related documents and the 

designation of those documents as “Attorneys’ Eyes Only.” A summary of each of these issues is 

necessary to understand the objections now before the Court.

Salesforce.com Records: Salesforce.com provides services and products related to 

“customer relationship management.” Defendant Tellermate contracted with Salesforce.com to 

provide customer relationship management application for the use of Defendant Tellermate’s 

sales employees. Each salesperson had their own account in which they could record a variety of 

sales activities, including: customer contacts, potential sales leads, and information concerning

actual sales.

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During discovery, the Plaintiffs requested that the Defendant Tellermate produce 

salesforce.com reports for the Plaintiffs and their co-workers. The Plaintiffs sought these records 

to help establish their contention that their sales performance was comparable to that of younger 

employees who were not terminated.

Defendant Tellermate nonetheless asserted that it could not produce the salesforce.com 

reports requested by the Plaintiffs because: (1) they did not maintain hard copies of 

salesforce.com reports; (2) they could not access historical salesforce.com data and could only 

access salesforce.com in real time; (3) they were contractually prohibited from turning over 

salesforce.com data to third parties; and (4) salesforce.com, rather than the Defendant 

Tellermate, had possession and control over the salesforce.com data that the Plaintiffs requested. 

These justifications were either false or irrelevant as demonstrated by the testimony of the 

Defendant Tellermate’s employees. See July 1, 2014 Op. & Order at 7–11, 12–13. Moreover, the 

plain language of the contract between the Defendant Telelrmate and Salesforce belied many of 

Defendant Tellermate’s arguments. See id. at 17.

The lengthy battle over the production of the salesforce.com records was compounded by 

the preservation, or lack thereof, of those same records. Following the Plaintiffs’ termination, 

Defendant Tellermate’s salesforce.com administrators had the ability to access the 

salesforce.com records, including those of the Plaintiffs, and change or delete information in 

those accounts. Id. at 11. Despite their receipt of the Plaintiffs’ preservation letter at the 

beginning of this litigation, Defendant Tellermate did not take any steps to preserve the contents 

of the salesforce.com database. Id. at 15–16. Defendant Tellermate’s failure to preserve the 

records may have occurred because of their mistaken belief that the salesforce.com kept backup 

records of information entered into salesforce.com applications. Id. at 15. However, as 

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Defendant Tellermate later determined, salesforce.com did not backup data in salesforce.com 

applications beyond three to six months. Id. at 16.

The Plaintiffs’ forensic review of Defendant Tellermate’s salesforce.com records 

revealed the problem with this lax approach to Defendant Tellermate’s discovery obligations. 

The forensic expert explained that it was not possible to determine whether, in the interim 

between the Plaintiffs’ termination and the forensic review of the salesforce.com records, anyone 

changed or deleted the information therein. Id. at 16. Consequently, any data contained in the 

salesforce.com application that is older than three to six months is inherently unreliable. Id. 

Frank Mecka Documents: The Magistrate Judge then turned to the Defendants’ failure to 

produce documents concerning Frank Mecka. Mecka was a former salesperson for the 

Defendants. After his termination, he alleged that he was discharged because of his age. Mecka 

settled his claim of age discrimination with the Defendants. The Plaintiffs requested that the 

Defendants produce a variety of documents relating to Mecka, including the agreement settling

his claim. Although the Defendants initially objected to the Plaintiffs’ request for production of 

documents relating to that agreement, the Defendants agreed to produce the relevant, nonprivileged documents. Id. at 19. On February 15, 2013, the Defendants produced “a few 

documents,” stating that those were all of the non-privileged documents related to Mecka. Id. At 

that point, the Defendants had not created a privilege log with respect to any of the alleged 

privileged Mecka documents. Id.

In April 2013, the Magistrate Judge found that the Defendants had waived their claim of 

privilege with respect to the Mecka documents by failing to create a privilege log and ordered the 

Defendants to produce the relevant documents. Id. This Court overruled the Defendants’ 

objections to the Magistrate Judge’s ruling. See July 29, 2013 Order, doc. 46. Prior to the 

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Magistrate Judge’s ruling, the Defendants had represented that only two documents were being 

withheld as a matter of privilege. July 1, 2014 Op. & Order at 19–20. Subsequent events revealed 

this representation to be false. Following this Court’s Order denying the Defendants’ objections, 

the Defendants’ produced more than two Mecka documents but also produced a new privilege 

log, listing more than 30 Mecka documents as subject to the attorney-client privilege. Id. at 20. 

The Defendants had not previously made any claim of attorney-client privilege. Id. at 20.

Document Dump and Attorneys’ Eyes Only Designation: Finally, the Magistrate Judge 

turned to the Defendants’ handling of discovery with respect to documents concerning the 

performance of the Plaintiffs’ co-workers. Initially, the Defendants represented that the number 

of such documents was “unlimited.” Id. at 21. However, in response to the Plaintiffs’ motion to 

compel, contrary to their earlier statement, the Defendants represented that only about 20 such 

documents existed. Id. With limited evidence before him, the Magistrate Judge directed the 

Defendants to produce any additional performance evaluation documents. Id. at 21–22.

Following the issuance of the Magistrate Judge’s order, the Defendants notified the 

Plaintiffs that their request for performance evaluation-related documents encompassed 35,000 

to 40,000 records. Id. at 23. After the parties failed to agree on search terms to potentially limit 

the number of records that needed to be produced, the Defendants produced 50,000 pages of 

documents. Id. at 22–23. Most of these documents were irrelevant and nonresponsive to the 

Plaintiffs’ discovery request, which the Defendants justified, in part, as a result of the limited 

time in which they had to produce the documents in question. Id. at 24.

Further, the Defendants marked almost all of these documents as “Confidential -

Attorneys’ Eyes Only” (AEO). Id. The Magistrate Judge’s prior protective order had set out the 

narrow terms under which such a designation could be applied. Id. at 24–25. According to the 

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Defendants, they viewed Plaintiff Robert Brown as a business competitor, which justified their 

use of the AEO designation. Id. at 25. The parties’ negotiations over these designations failed. Id.

at 25–26. While acknowledging that their production of these documents was overinclusive, the 

Defendants nonetheless failed to conduct a more precise review of the documents in question to 

determine whether they were responsive or whether the AEO designation was appropriate. Id. at 

26–27.

The Magistrate Judge’s Sanctions: In his Opinion and Order of July 1, 2014, the 

Magistrate Judge denied the Plaintiffs’ Motion for Default Judgment and found instead that 

lesser sanctions were appropriate. Considering each of the discovery issues before him, the 

Magistrate Judge assigned fault to both the Defendants and their counsel. Id. at 31–41. With 

respect to the salesforce.com issue, the Magistrate Judge found that the Defendants failed to 

provide full, truthful, and appropriate discovery responses, id. at 31–32, and that the Defendants’ 

counsel failed to conduct a reasonable investigation of the Defendants’ ability to produce the 

salesforce.com records, id. at 32–34. As a result of these failings:

The Browns did not get this discovery timely; they were forced, unnecessarily, to 

spend time and money trying to resolve the matter informally, with the Court, 

and, eventually, by way of motions practice; and by the time they got it, due to 

Tellermate’s failure to preserve the evidence properly, they had no way of 

knowing how much of it was still reliable and accurate.

Id. at 32. Turning to the remaining discovery issues, the Magistrate Judge found the Defendants’ 

and their counsel’s handling of the Frank Mecka documents and the performance evaluationrelated documents were part of a larger pattern of misconduct. Id. at 37–41.

In support of his decision to impose sanctions, the Magistrate Judge cited Federal Rules 

of Civil Procedure 26(g)(3), 37(a)(3)(c)(B)(iv), 37(b)(2); 28 U.S.C. § 1927; the Court’s inherent 

authority; and the common law related to the spoliation of evidence. Id. at 41. The Magistrate 

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Judge concluded that an award of attorneys’ fees and expenses to the Plaintiffs’ for all motions 

practice related to the salesforce.com records, Frank Mecka documents, and performance 

evaluation-related documents was appropriate. Id. at 42, 45–46. The Magistrate Judge ordered 

the Defendants and their counsel to jointly pay those fees and expenses. Id. at 46.

The Magistrate Judge further found that the severity of the Defendants’ misconduct 

during the discovery process justified a further sanction, holding that the Defendants would be 

“preclude[d] . . . from using any evidence which would tend to show that the Browns were 

terminated for performance-related reasons.” Id. at 45. The Magistrate Judge explained his 

reasoning as follows:

The Browns need evidence to make out their claim that performance issues were a 

pretext for age discrimination. Because Tellermate professes not to have done 

formal performance evaluations of its representatives, the most comprehensive 

evidence of their performance (and the Browns’ own performance) appears to be 

the salesforce.com information. But that information cannot be trusted, and even a 

forensic computer expert has no way to detect what changes, deletions, or 

additions were made to the database on an historical basis. Consequently, even a 

sanction like forcing Tellermate to pay for the entire cost of a comprehensive 

examination of the database and an extraction of all relevant performance-related 

information would do nothing to guarantee that the information was reliable. And 

precluding Tellermate from contesting the accuracy of the information would not 

help, either, because any introduced inaccuracies in the database—with their 

timing and content unknown and unknowable—might actually favor Tellermate.

. . .

This sanction is commensurate with the harm caused by Tellermate’s discovery 

failures, and is also warranted to deter other similarly-situated litigants from 

failing to make basic, reasonable inquiries into the truth of representations they 

make to the Court, and from failing to take precautions to prevent the spoliation 

of evidence. It serves the main purposes of Rule 37 sanctions, which are to 

prevent parties from benefitting from their own misconduct, preserving the 

integrity of the judicial process, and deterring both the present litigants, and other 

litigants, from engaging in similar behavior. It is also an appropriate response to 

the spoliation of evidence.

Id. at 44–45 (internal citations omitted). 

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After filing their objections to the Magistrate Judge’s Opinion and Order, the Defendants 

terminated Calfee’s representation and retained new counsel. Whereas the Defendants previously 

had joint representation, Defendant Tellermate and Defendant Insperity retained separate law 

firms to represent their individual interests. See Notices of Appearance, docs. 97, 98, 107, 108, 

112, 115–121). Due to its joint liability with Defendant Telelrmate for the Plaintiffs’ attorneys’ 

fees and expenses, Calfee continued its involvement in this case as an interested party.

2. The Court’s Analysis

Defendant Tellermate makes numerous objections to the Magistrate Judge’s Opinion and 

Order. As an initial matter, Defendant Tellermate argues that Rule 37(b)(2) sanctions cannot be 

imposed in this case because it did not violate a Court order. Def. Tellermate’s Objections at 25–

27, doc. 99. Rule 37(b)(2) provides that a court may sanction a party for “fail[ing] to obey an 

order to provide or permit discovery, including an order under Rule 26(f), 35, or 37(a).” In his 

July 1, 2014 Opinion and Order, the Magistrate Judge cited Rule 37(b)(2) as one of many bases 

for his sanctions order. 

The Magistrate Judge’s reliance on Rule 37(b)(2) was appropriate. Defendant Tellermate 

and its counsel violated the Magistrate Judge’s April 3, 2013 Opinion and Order (doc. 37) 

granting the Plaintiffs’ motion to compel. In his Opinion and Order, the Magistrate Judge 

instructed Defendant Tellermate to “[p]roduce additional documents responsive to the request for 

documents either constituting or pertaining to evaluation of other sales representatives.” April 3, 

2013 Op. & Order at 11, doc. 37 (emphasis added). In response to this Order, Defendant 

Tellermate produced over 50,000 documents, many of which counsel for Defendant Tellermate 

conceded were not responsive to the Plaintiffs’ request for production. See July 1, 2014 Op. & 

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Order at 24. By providing nonresponsive documents, Defendant Tellermate violated the 

Magistrate Judge’s April 3, 2013 Opinion and Order. Defendant Tellermate’s violation of that 

Order was exacerbated by its failure to cure its nonresponsive production prior to the Magistrate 

Judge’s July 1, 2014 Opinion and Order.

Further, the Magistrate Judge’s April 3, 2013 Opinion and Order directed Defendant 

Tellermate to produce additional documents relating to Mr. Mecka, which had previously been 

withheld on grounds of privilege. April 3, 2013 Op. & Order at 11. This Court denied Defendant 

Tellermate’s objections to the Magistrate Judge’s finding that Defendant Tellermate waived its 

claim of privilege for these documents. See July 29, 2013 Order, doc. 46. Despite this ruling, 

“Tellermate did not produce these additional documents.” July 1, 2014 Op. & Order at 21. This 

too violated the Magistrate Judge’s April 3, 2013 Opinion and Order. 

Finally, “attorney’s fees and costs, as well as other appropriate sanctions, may be 

awarded under Rule 37(b)(2) for a violation of a protective order.” Trenado v. Cooper Tire & 

Rubber Co., 274 F.R.D. 598, 600–01 (S.D. Tex. 2011) (collecting cases). See also Field Turf 

USA, Inc. v. Sports Const. Grp., LLC, No. 1:06 CV 2624, 2007 WL 4412855, at *4 (N.D. Ohio 

Dec. 12, 2007) (citing Rule 37(b)(2) and finding that “[t]he Court has the power to dismiss a 

claim or enter judgment against a party for failure to comply with discovery orders, including 

protective orders”); but see Lipscher v. LRP Publ’ns, Inc., 266 F.3d 1305, 1321–23 (11th Cir.

2001) (holding that Rule 37(b)(2) does not permit a district court to impose sanctions for a 

violation of a protective order); Coleman v. Am. Red Cross, 23 F.3d 1091, 1098 (6th Cir. 1994)

(Ryan, J., dissenting) (“In my judgment, the majority’s apparent conclusion that neither Rule 

41(b) nor Rule 37(b) authorize the dismissal sanction the district court imposed misses the point, 

because neither Rule 41(b) nor Rule 37(b) are the proper bases for resolving this case. This is a 

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case about the sanctions that are available to a district court for the violation of its protective 

order. Rules 41(b) and 37(b) have nothing to do with protective orders.”). Here, Defendant 

Tellermate and its former counsel’s massive production of 50,000 documents in response to the 

Plaintiffs’ request for personnel evaluations, most of which had nothing to do with personnel 

evaluations, violated the Magistrate Judge’s April 18, 2013 Protective Order (doc. 39). 

Defendant Tellermate and its counsel designated 99% of those 50,000 documents with the 

“Confidential – Attorneys Eyes Only,” the most protective designation available under the 

Magistrate Judge’s Protective Order. July 1, 2014 Op. & Order at 24. But as the Magistrate 

Judge noted, Defendant Tellermate lacked a basis for assigning this designation to many of these 

documents, such as a picture of baby. Id. at 25–26. Defendant Tellermate’s inappropriate use of 

the “Confidential – Attorneys Eyes Only” designation violated the Magistrate Judge’s Protective 

Order and provides an additional basis for the imposition of Rule 37(b)(2) sanctions.

Because Defendant Tellermate and its counsel “fail[ed] to obey an order to provide or 

permit discovery,” Rule 37(b)(2) sanctions are available in this case.

Pursuant to Federal Rule of Civil Procedure 37, the Court has discretion to impose 

sanctions against a party for failure to comply with discovery orders. Fed. R. Civ. P. 37(b)(2). 

Courts consider a four factor test to determine whether the imposition of extreme sanctions under 

Rule 37 is appropriate:

The first factor is whether the party’s failure to cooperate in discovery is due to 

willfulness, bad faith, or fault; the second factor is whether the adversary was 

prejudiced by the party’s failure to cooperate in discovery; the third factor is 

whether the party was warned that failure to cooperate could lead to the sanction; 

and the fourth factor in regard to a dismissal is whether less drastic sanctions were 

first imposed or considered.

Freeland v. Amigo, 103 F.3d 1271, 1277 (6th Cir. 1997). 

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In addition to its authority under the Federal Rules of Civil Procedure, “[a] district court 

has the inherent power to sanction a party when that party exhibits bad faith, including the 

party’s refusal to comply with the court’s orders.” Youn v. Track, Inc., 324 F.3d 409, 420 (6th 

Cir. 2003) (collecting cases). “Although a court ordinarily should rely on the Rules rather than 

the inherent power,” the Sixth Circuit recognizes that “the inherent power of a court can be 

invoked even if procedural rules exist which sanction the same conduct.” Metz v. Unizan Bank, 

655 F.3d 485, 491 (6th Cir. 2011).

Willfulness, Bad Faith, or Fault: Defendant Tellermate asserts that its failure to cooperate 

in discovery was not due to bad faith, willfulness, or fault. Instead, Defendant Tellermate argues, 

any misrepresentations made to the Court were a result of miscommunication between the 

Defendants and their former counsel. Def. Tellermate’s Objections at 32–34. 

In Barron v. Univ. of Michigan, the Sixth Circuit elaborated on what is required to 

support a finding of willfulness, bad faith, or fault:

whether the party’s failure is due to willfulness, bad faith, or fault . . . requires a 

clear record of delay or contumacious conduct. Contumacious conduct is behavior 

that is perverse in resisting authority and stubbornly disobedient. The [party’s]

conduct must display either an intent to thwart judicial proceedings or a reckless 

disregard for the effect of his conduct on those proceedings.

— F. App’x —, 2015 WL 3450075, at *3 (6th Cir. May 29, 2015) (internal citations and

quotation marks omitted). Under this definition, the Court has little trouble concluding that 

Defendant Tellermate’s and its former counsel’s actions during the discovery process were due 

to a combination of gross negligence and bad faith. The actions of Defendant Tellermate and its 

former counsel significantly delayed the prosecution of this case and demonstrated a reckless 

disregard for their obligations to the Court.

The Magistrate Judge’s finding that Defendant Tellermate and its former counsel made 

numerous false and misleading representations to the Plaintiffs and the Court regarding their 

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ability to produce the salesforce.com records is well supported by the record. See July 1, 2014 

Op. & Order at 7–8, 8–9 (identifying false and misleading statements made by Defendant 

Tellermate and its former counsel to the Plaintiffs regarding their ability to produce the 

salesforce.com records); id. at 8 (identifying false statements made by Defendant Tellermate and 

its former counsel to the Court regarding their ability to produce the salesforce.com records). 

Throughout the discovery process, Defendant Tellermate and its former counsel incorrectly 

asserted that the salesforce.com records belonged to Salesforce, and not Defendant Tellermate, 

and therefore Defendant Tellermate could not produce those records. Moreover, former counsel 

for Defendant Tellermate argued that Defendant Tellermate’s contract with Salesforce prohibited 

Defendant Tellermate from producing the salesforce.com records despite the plain language of 

the contract to the contrary.

Likewise, with respect to the Frank Mecka documents, Defendant Tellermate and its 

former counsel: failed to produce discoverable documents in a timely manner; misled the 

Plaintiffs and the Court about the number of discoverable documents; and claimed that many of 

the documents in question were privileged without creating any privilege log as required by the 

Rules. Moreover, with respect to the performance evaluation documents sought by the Plaintiffs, 

Defendant Tellermate and its former counsel produced more than 50,000 documents, the vast 

majority of which were irrelevant to the discovery requested by the Plaintiffs. Despite the 

overbroad production, counsel for Defendant Tellermate designated almost all of them as 

“Confidential – Attorneys’ Eyes Only.” Former counsel for Defendant Tellermate took little, if 

any action, to cure these production deficiencies. 

In responding to discovery requests, the Court expects parties to provide accurate 

information to their counsel and opposing parties. However, “trial counsel must exercise some 

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degree of oversight to ensure that their client’s employees are acting competently, diligently and 

ethically in order to fulfill their responsibility to the Court.” Bratka v. Anheuser–Busch Co., 164 

F.R.D. 448, 461 (S.D. Ohio 1995). The Magistrate Judge’s finding that Defendant Tellermate 

and its former counsel did not fulfill their respective obligations is well supported by the record. 

The record supports the finding that Defendant Tellermate’s and its former counsel’s 

failure to cooperate with discovery was a result of gross negligence1 and bad faith and not simple 

negligence resulting from miscommunication. The record further supports the finding that 

Defendant Tellermate’s failures, and those of its former counsel, were part of an ongoing pattern 

of discovery misconduct and that their actions were in bad faith. 

Prejudice: Defendant Tellermate maintains that the Plaintiffs have suffered no prejudice 

as a result of its misconduct because the Plaintiffs “received the discovery that they sought.” Def. 

Tellermate’s Objections at 34. The Court disagrees. Defendant Tellermate’s argument is 

inconsistent with the Sixth Circuit’s definition of prejudice. As the Sixth Circuit has explained, 

in the context of Rule 37, a litigant is prejudiced by an opposing party’s “dilatory conduct if the

[litigant] is ‘required to waste time, money, and effort in pursuit of cooperation which [the 

opposing party] was legally obligated to provide.’ ” Carpenter v. City of Flint, 723 F.3d 700, 707 

(6th Cir. 2013) (quoting Harmon v. CSX Transp., Inc., 110 F.3d 364, 368 (6th Cir. 1997)). That 

the Plaintiffs ultimately received the salesforce.com records, Mecka documents, and personnel 

evaluations ignores the fact that the Plaintiffs were required to expend “time, money, and effort” 

to compel the production of these documents that Defendant Tellermate was legally obligated to 

provide in the first place. This, in and of itself, satisfies the prejudice standard.

 1 In the context of Rule 37, gross negligence is sufficient to establish fault on the part of a sanctioned party. 

Bratka, 164 F.R.D. at 460.

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Further, Defendant Tellermate’s argument ignores the more fundamental prejudice 

suffered by the Plaintiffs’ in this case. As thoroughly explained by the Plaintiffs’ forensic expert 

at the evidentiary hearing before the Magistrate Judge, Defendant Tellermate’s failure to 

preserve the salesforce.com records has made it impossible to know whether the salesforce.com 

records have been altered since the Plaintiffs’ termination. In short, the salesforce.com records 

are now unreliable and therefore of little evidentiary value to the Plaintiffs. 

Notice: Defendant Tellermate also argues that the imposed sanctions came without 

warning and are therefore improper. Def. Tellermate’s Objections at 34. According to Defendant 

Tellermate: 

[i]n granting the Browns’ Motion to Compel, this Court did not warn Defendants 

that they would be faced with defense preclusion sanctions. Nor did this Court 

conclude at that time that Defendants’ opposition to the Browns Motion was 

“substantially unjustified” so as to justify an attorney’s fee sanctions under Rule 

37 or warn Defendants that they may be liable in the future for such fees (or any 

other sanctions) based on their opposition.

Id. 

The Court notes some tension in Sixth Circuit case law as to whether notice is an absolute 

requirement prior to the imposition of extreme sanctions. In Peltz v. Moretti, the Sixth Circuit 

reversed the district court’s Rule 37(b) sanctions because, in part, the district court failed to 

provide the defendants with notice that failure to cooperate in discovery could lead to those 

sanctions. 292 F. App’x 475, 480 (6th Cir. 2008). The Peltz court observed that “[t]he district 

court in this case never explicitly warned the parties about the possibility and severity of 

sanctions” and emphasized that “[c]lear notice is required” prior to the imposition of such 

sanctions. Id.

Other Sixth Circuit decisions suggest a different view of the notice requirement. “There is 

no magic-words prerequisite to dismissal under Rule 37(b),” Universal Health Grp. v. Allstate 

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Ins. Co., 703 F.3d 953, 956 (6th Cir. 2013), and no one factor is dispositive under the Rule 37(b) 

analysis, United States v. Reyes, 307 F.3d 451, 458 (6th Cir. 2002). Where a court finds that a 

party acted in bad faith, notice is not required. See Harmon v. CSX Transp., Inc., 110 F.3d 364, 

367 (6th Cir. 1997) (“Where a plaintiff has not been given notice that dismissal is contemplated, 

a district court should impose a penalty short of dismissal unless the derelict party has engaged 

in bad faith or contumacious conduct.” (internal quotations and citation omitted) (emphasis 

added)).

Here, it is unclear whether Defendant Tellermate was put on notice by the Court that its 

failure to comply with discovery orders could lead to the imposition of extreme sanctions. But 

even assuming that it was not, the Court agrees with the Magistrate Judge’s finding that 

Defendant Tellermate and its former counsel acted in bad faith, limiting the import of the notice 

requirement in the context of Rule 37(b) sanctions, see id. Moreover, even absent the finding of 

bad faith, no one factor under the Rule 37(b) sanctions analysis is dispositive, Reyes, 307 F.3d at 

458, and “prior warning is not indispensable” to the imposition of such sanctions, Fharmacy 

Records v. Nassar, 379 F. App’x 522, 524 (6th Cir. 2010) (citations omitted).

Here, the Magistrate Judge issued an order granting the Plaintiffs’ motion to compel. “If 

there has been an order compelling discovery, . . . it is not ordinarily necessary (although it may 

be desirable) that the court have warned the sanctioned party in advance of the risk of serious 

sanctions.” 8B Charles A. Wright and Arthur R. Miller, Fed. Prac. & Proc. § 2289 (3d ed. 2015). 

The Plaintiffs then filed a motion for default judgment and a motion for sanctions, putting 

Defendant Tellermate on notice that the most severe sanction available under Rule 37(b), default 

judgment, could be imposed. The Magistrate Judge held a three-day evidentiary hearing at which 

Defendant Tellermate and its former counsel had ample opportunity to present evidence 

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explaining their conduct. At the end of the hearing, the Magistrate Judge made clear that he 

would be imposing sanctions on Defendant Tellermate and that the only remaining question was 

how serious those sanctions would be. He offered Defendant Tellermate the opportunity to 

submit additional briefing, but it declined to do so. While the Plaintiffs’ motions may not have 

provided prior notice that a failure to cooperate in discovery could lead to severe sanctions, “a 

motion to dismiss or for default is sufficient to put the offending party on notice that such a 

sanction is being considered.” Field Turf USA, Inc., 2007 WL 4412855, at *4 (citing Reyes, 307 

F.3d at 458).

Consideration of Lesser Sanctions: Defendant Tellermate argues that less drastic 

sanctions are available. In its view, the Court should choose to extend the discovery deadline, 

rather than the preclusion sanction imposed by the Magistrate Judge. Def. Tellermate’s 

Objections at 35–37.

The fourth factor obligates courts to consider the availability of lesser sanctions, which 

the Magistrate did here, see July 1, 2014 Op. & Order at 42–46 (“The Court is mindful that, in 

choosing the correct sanction, it must consider whether punishment short of entering a default as 

to liability, or some issue connected with liability, would be sufficient to address the magnitude 

of the misconduct involved” and explaining its reasoning for imposing serious sanctions). 

Evidentiary Sanction: “In selecting a sanction under Rule 37, a court may properly 

consider both punishment and deterrence.” Bratka, 164 F.R.D. at 459 (citing Nat’l Hockey 

League v. Metro. Hockey Club, 427 U.S. 639, 643 (1976); Patton v. Aerojet Ordnance Co., 765 

F.2d 604, 607 (6th Cir. 1985)). Defendant Tellermate’s persistent misconduct and gross 

negligence in the discovery process in this case warrant sanctions. See Bratka, 164 F.R.D. at 463. 

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Further, significant sanctions are necessary to deter future parties and their counsel from 

engaging in similar behavior before this Court.

In Bratka, this Court imposed a default judgment where a defendant was guilty of “gross 

negligence and lack of good faith in complying with plaintiff’s discovery requests and the 

Court’s discovery order.” Id. It did so, in part, because the defendant withheld discoverable 

documents that were relevant to the issues of fault and proximate cause. The Court reasoned:

[i]f litigants are to have any faith in the discovery process, they must know that 

parties cannot fail to produce highly relevant documents within their possession 

with impunity. Parties cannot be permitted to jeopardize the integrity of the 

discovery process by engaging in halfhearted and ineffective efforts to identify 

and produce relevant documents.

Id.

Like the Magistrate Judge, the Court believes that Defendant Tellermate’s conduct with 

respect to the salesforce.com records has prejudiced the Plaintiffs’ ability to present their case. 

Although the parties debate the relative importance of the salesforce.com records, there is no 

question that they are relevant to the Plaintiffs’ age discrimination claim. Indeed, they were 

highly relevant at the time Defendant Tellermate resisted their discovery because Defendant

Tellermate was then claiming that one of the reasons it terminated the Plaintiffs was that they 

failed to effectively use their salesforce.com accounts, a claim that Defendant Tellermate has 

since apparently abandoned. But because Defendant Tellermate did not preserve the 

salesforce.com records, those records are inherently unreliable.

The Court finds that the Magistrate Judge’s decision to impose sanctions, including an 

award of attorneys’ fees and expenses and a limitation on defense evidence, is supported by the 

record and is not clearly erroneous or contrary to law. The Court finds, however, that the 

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evidence does not support the Magistrate Judge’s findings regarding the severity of the prejudice 

suffered by the Plaintiffs and concludes that the evidentiary sanction is overbroad. 

A determination of the severity of prejudice to the Plaintiffs necessarily involves an 

examination of the issues for trial and the totality of the evidence available to the parties. The 

Defendants assert that the Plaintiffs’ employment was terminated because their sales 

performance had declined to an unacceptable level. The Plaintiffs assert to the contrary that their 

sales performance exceeded that of their peers but that the Defendants manipulated their sales 

quotas and account profiles by eliminating their most lucrative accounts, assigned them to the 

sale of unprofitable products, and otherwise failed to support their sales efforts thereby setting 

them up to fail.

The Plaintiffs maintain that the salesforce.com records are the best evidence to support 

their position that without those records their ability to prosecute their claims has been severely 

damaged. A discussion of the salesforce.com application is necessary to understand the strength 

of the Plaintiffs’ argument. Salesforce.com is a sales and marketing tool, not a sales management 

or business records keeping tool. Defendant Tellermate’s employees were encouraged to use it to 

record information that would help them be more effective in selling Defendant Tellermate’s

products. This could include information like sales leads, customer contact information, the 

identity of the customers employees who make purchase decisions, how those customers tend to 

make their purchase decisions, and how best to approach customers. They might also record 

personal information about their customer contacts, such as: family information, hobbies, 

favorite sports teams, etc. The salesforce.com account would also be used as a sales calendar to 

record dates and times of appointments and to schedule reminders for follow-up contacts. The 

amount, frequency, and kind of information recorded would be entirely up to the salesperson 

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using the application. Salesforce.com is a digital repository for the kind of information that a 

salesperson of the last century would have recorded on Rolodex cards, calendars, and notebooks. 

It has many of the features of today’s social medica applications. It can be used to send email, 

photographs, and documents.

Although the Plaintiffs emphasize the importance of the salesforce.com records to their 

ability to prove their claim of age discrimination, it appears that the Plaintiffs have significant 

personal knowledge of the sales activities of their co-workers. Defendant Tellermate’s sales

department is a relatively small group of individuals. The Plaintiffs, because of their long tenure, 

and Mr. Brown’s position as a regional sales director, were personally acquainted with most if 

not all of them and had at least general knowledge of their responsibilities and effectiveness. 

Indeed the Plaintiffs’ opposition to the Defendants’ motion for summary judgment, including 

their individual affidavits, shows that they have firsthand knowledge of various aspects of the

activities of the entire Tellermate sales staff and that they are aware of how all of the major 

customer accounts are handled. They have sufficient first-hand knowledge to make their own 

calculations and projections about their sales efforts and those of other Tellermate sales 

employees.

Furthermore, it has not been suggested that the Plaintiffs have not been provided with 

unhindered access to much of Defendant Tellermate’s official sales, business, and personnel

records kept in the regular course of business. These records would presumably include sales 

results for all of Defendant Tellermate’s sales staff and all of Defendant Tellermate’s customers,

including sales staff travel and entertainment expenses as well as the amount of sales generated 

by each employee. The Plaintiffs’ counsel listed the kinds of business records maintained by 

Defendant Tellermate in a letter to defense counsel on October 18, 2012 as follows:

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• Monthly Pilot Reports for the period of January 1, 2009 to present;

• Monthly Company Forecasts for the period of January 1, 2009 to present;

• Monthly Commission Reports for the period of January 1, 2009 to present;

• Sales and Commission Targets for the period of January 1, 2009 to present;

• Sales reports showing monthly revenue generation for the period of January 1, 

2009 to present;

• Geographic Territory and Account Lists for North America for the period of 

January 1, 2010 to present;

• Territory Report Out Reports and Kickoff Reports for the years 2005 to present;

• Documents sufficient to show the customers, including locations per customer, 

assigned to the above individuals, for each month for the years 2009 to present;

• SalesForce.com Reports for each month for the period of January 1, 2009 to 

present; and

• Weekly expense reports for the period of January 1, 2010 to present.

October 18, 2012 Letter from Pls.’ Counsel at 5, doc. 24-6. Defendant Tellermate’s business 

records would seem to be a more useful source of evidence than the contents of salesforce.com 

accounts.

The Plaintiffs have had access to their salesforce.com accounts since July 1, 2014. 

Nevertheless, over a year later, at the July 17, 2015 hearing, their counsel conceded that they 

have never looked at those records. The unstructured and constantly changing information which 

was recorded in the salesforce.com accounts undoubtedly includes some additional relevant 

information, but its sheer volume and somewhat haphazard nature likely produce a rather 

unwieldy and bewildering mass of random information. This may explain why the Plaintiffs 

themselves have not yet begun to examine the contents of their own salesforce.com accounts to 

determine what information they contain.

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After considering the nature of this evidence the Court has been able to discern only a 

few instances in which it might have significant value. If the Defendants were to claim, as 

Defendant Tellermate did previously, that the Plaintiffs failed to effectively use the

salesforce.com sales tool then, of course, the salesforce.com data could be used to rebut that 

contention. If an issue were to arise regarding a specific transaction or event that would normally 

be recorded in a salesforce.com account then the data could be mined to glean whatever 

information it might contain about that event.

But the Court is not persuaded that the salesforce.com data could be effectively used as 

evidence to compare the sales performance or effectiveness of the Plaintiffs with that of other 

Tellermate sales employees. Clearly, the Court would not permit the parties to dump this massive 

amount of unstructured data in the jury’s lap for them to evaluate. While theoretically it might be 

possible for an expert (or a large team of them) to examine this massive amount of daily 

information recorded by 20 or 30 different sales employees over a period of months or years and 

reach some opinions about their comparative level of activity and effectiveness, the questionable 

admissibility and limited persuasive value of such evidence would hardly justify the effort and 

expense, particularly when the Plaintiffs can offer their own testimony and the Defendants’ sales 

and personnel records.

The Plaintiffs’ salesforce.com accounts were not assigned to other users after they were 

terminated, so, unlike the accounts of their former peers, the Plaintiffs’ accounts were essentially 

frozen in time and not subject to the kind of daily or hourly changes which might occur in an 

active account. While Defendant Tellermate failed to take any steps to protect the integrity of the 

Plaintiffs’ accounts, there is no evidence that any material changes or deletions were made. Thus 

there is at least the possibility that their accounts presently contain weeks months or years of data 

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relating to their own sales efforts. However as of oral argument on July 17, 2015, the Plaintiffs

had not bothered to examine the content of their salesforce.com accounts to determine whether 

there had been any alterations or deletions or whether they contain any information that would be 

favorable to their case.

The Plaintiffs argue that it is unreasonable to expect them to be able to determine whether 

any alterations or deletions have occurred in their salesforce.com accounts. See Pls.’ Supp. Br., 

doc. 235–1. Their arguments are not persuasive. If the Plaintiffs engaged in some significant 

sales-related activity that they believe was recorded in their salesforce.com accounts they can 

certainly look for it and determine if it is present or not. If they are concerned about something 

they cannot recall which might have been recorded then it would be reasonable to presume that

the matter was of trifling significance.

In light of the foregoing, the Court concludes that a somewhat narrower evidentiary 

sanction would be sufficient to mitigate the prejudice suffered by the Plaintiffs and serve the goal 

of deterrence. The Court will sanction Defendant Tellermate as follows:

1. Defendant Tellermate shall not be permitted to introduce salesforce.com records 

as evidence at trial or refer to those records at trial;

2. Defendant Tellermate is precluded from asserting that the Plaintiffs’ use or nonuse of the salesforce.com application was in any way deficient or that it justified 

their termination; 

3. If evidence at trial raises any contested issue about the sales conduct of the 

Plaintiffs or any other Tellermate salesperson, and the Plaintiffs show that missing 

salesforce.com data would corroborate their position, then the Court will give the 

jury an adverse inference instruction appropriate for the circumstances; and

4. The Plaintiffs will be permitted to testify as to what the salesforce.com records 

would have shown had they been properly preserved. Defendant Tellermate may 

rebut this testimony only through independent evidence, and not the 

salesforce.com records.

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This sanction will permit the Plaintiffs to effectively present their case with respect to the issue 

of pretext and ameliorate the prejudice resulting from Defendant Tellermate’s and its former 

counsel’s actions. It will also prevent Defendant Tellermate from benefiting from its own 

misconduct while allowing Defendant Tellermate to present a legitimate defense unrelated to the 

salesforce.com records—that the Plaintiffs were terminated because they failed to meet their 

sales quotas. Finally, these sanctions will discourage future litigants from their violating duties 

under the Federal Rules of Civil Procedure.

The Court has used the language of the clearly erroneous/contrary to law standard of 

review in the above analysis. The application of that standard to a significant evidentiary 

sanction is perhaps a close call. Thus, the Court has also considered whether de novo review 

would change the result in this case and has concluded that it would not. This Court, upon de 

novo review, would reach the same conclusions regarding the propriety of an evidentiary 

sanction in addition to the award of attorneys’ fees and expenses, and this Court would exercise 

its discretion to impose the evidentiary sanction outlined above.

Attorneys’ Fees: The Magistrate Judge’s award of attorneys’ fees against Defendant 

Tellermate and its former counsel is well-supported by the record.

2

 

Rule 26(g) requires a response to a discovery request to be signed by an attorney of 

record, certifying “that to the best of the person’s knowledge, information, and belief formed 

after a reasonable inquiry” that the response is “consistent with [the Federal Rules of Civil 

 2 Interested party Calfee sought leave to submit new evidence in support of its argument that the Court 

should not impose attorneys’ fees against it. See Calfee’s Motion to Present New Evidence, doc. 148. The Court 

denied Calfee’s motion and provided all of the parties the opportunity to submit supplemental briefs on the issue of 

attorneys’ fees based on the record before the Magistrate Judge at the time of his July 1, 2014 Opinion and Order. 

See July 8, 2015 Order, doc. 214. At the July 17, 2015 oral hearing, the Court also permitted the parties to present 

argument concerning the attorneys’ fees issue based on the record before the Magistrate Judge. Calfee did not 

submit briefing on the attorneys’ fees issue and, at the oral hearing, declined to present argument concerning the 

same unless it was permitted to introduce new evidence to the Court. In contrast, Defendants Tellermate and 

Insperity submitted briefs presenting argument on the issue of attorneys’ fees and also addressed the attorneys’ fees 

issue at the oral hearing.

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Procedure]” and “not interposed for any improper purpose, such as to harass, cause unnecessary 

delay, or needlessly increase the cost of litigation.” Fed. R. Civ. P. 26(g)(1)(B). 

If a certification violates this rule without substantial justification, the court . . . 

must impose an appropriate sanction on the signer, the party on whose behalf the 

signer was acting, or both. The sanction may include an order to pay the 

reasonable expenses, including attorney’s fees, caused by the violation.

Fed. R. Civ. P. 26(g)(3). Here, the Magistrate Judge concluded that counsel for Defendant 

Tellermate responded to the Plaintiffs’ discovery requests without performing a reasonable 

inquiry into whether Defendant Tellermate could produce the salesforce.com records. See July 1, 

2014 Op. & Order at 32–34. On the record before the Magistrate Judge, the Court agrees with his 

analysis, and finds that his award of attorneys’ fees under Rule 26(g)(3) was appropriate.

Rule 37(a) governs motions for an order compelling disclosure or discovery. Fed. R. Civ. 

P. 37(a). Pursuant to that rule, if a party’s motion to compel is granted, “the court must, after 

giving an opportunity to be heard, require the party . . . whose conduct necessitated the motion, 

the party or attorney advising that conduct, or both to pay the movant’s reasonable expenses 

incurred in making the motion, including attorney’s fees.” Fed. R. Civ. P. 37(a)(5)(A). Here, the 

Magistrate Judge concluded that Defendant Tellermate’s opposition to the Plaintiffs’ motion to 

compel the attorneys’-eyes-only documents was not substantially justified because Defendant 

Tellermate failed to present “evidence that a single one of these documents was properly so 

designated,” and failed “to recognize . . . that it had the burden to articulate and to prove, by 

competent evidence, its claim of harm which would result if any of the documents were viewed 

by the Browns.” July 1, 2014 Op. & Order at 42–43. On the record before the Magistrate Judge, 

the Court agrees with his analysis, and finds that his award of attorneys’ fees under Rule 37(a)(5) 

was appropriate.

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Rule 37(b)(2) provides sanctions for a party’s or attorney’s failure to obey a discovery 

order. “Both parties and counsel may be held personally liable for expenses, ‘including 

attorney’s fees,’ caused by the failure to comply with discovery orders.” Roadway Exp., Inc. v. 

Piper, 447 U.S. 752, 763–64 (1980). Indeed, “Rule 37 sanctions must be applied diligently both 

to penalize those whose conduct may be deemed to warrant such a sanction, and to deter those 

who might be tempted to such conduct in the absence of such a deterrent.” Id. (internal quotation 

marks, citation, and alteration omitted). If a party fails to obey an order to provide or permit 

discovery, “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.” Fed. R. 

Civ. P. 37(b)(2)(C). As discussed above, Defendant Tellermate failed to obey the Magistrate 

Judge’s order to provide or permit discovery. Consequently, the award of attorneys’ fees under 

Rule 37(b)(2)(C) was appropriate.

Under 28 U.S.C. § 1927, an attorney “who so multiples the proceedings in any case 

unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, 

expenses, and attorneys’ fees reasonably incurred because of such conduct.” The Sixth Circuit 

has interpreted the statute:

to provide for sanctions when an attorney knew or should have known that a 

claim pursued was frivolous, or that his litigation tactics will needlessly obstruct 

the litigation of non-frivolous claims. Sanctions under § 1927 are also appropriate 

where there has been some conduct on the part of the subject attorney that trial 

judges could agree falls short of the obligations owed by a member of the bar to 

the court and which, as a result, causes additional expense to the opposing party. 

Section 1927 sanctions may be imposed without a finding that the lawyer 

subjectively knew that his conduct was inappropriate. However, the conduct must 

exceed simple inadvertence or negligence that frustrates the trial judge.

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Dubuc v. Green Oak Twp., 482 F. App’x 128, 134 (6th Cir. 2012) (internal quotation marks, 

citations, and alterations omitted). The Magistrate Judge concluded that Defendant Tellermate’s 

former counsel conducted themselves in bad faith, and the Court has reached the same 

conclusion. In the Court’s view, the conduct of Defendant Tellermate’s former counsel “[fell] 

short of the obligations owed by a member of the bar to the court and which, as a result, cause[d] 

additional expense to the opposing party.” Id. Given this finding, an award of attorneys’ fees 

under 28 U.S.C. § 1927 is appropriate.

In passing, Defendant Tellermate appears to argue that its actions in opposing the 

Plaintiffs’ discovery requests were substantially justified, and, as a result, they cannot be liable 

for attorneys’ fees in this case. See Def. Tellermate’s Objections at 34 (“Nor did this Court 

conclude at that time that Defendants’ opposition to the Browns’ Motion was “substantially 

unjustified” so as to justify an attorney’s fee sanction under Rule 37”). As discussed above, the 

Rules provide an exception to the imposition of sanctions where the sanctioned party’s actions 

were “substantially justified.” However, Defendant Tellermate does not develop this argument in 

its brief, and a review of the record in this case does not support a finding that its actions were 

substantially justified. Moreover, the Court’s finding of bad faith “negates any substantial 

justification for [Defendant Tellermate’s] conduct.” New London Tobacco Mkt., Inc. v. 

Kentucky Fuel Corp., No. 6:12-CV-91-GFVT-HAI, 2014 WL 5107466, at *17 (E.D. Ky. Mar. 

25, 2014) report and recommendation adopted, No. CIV. 12-91-GFVT, 2014 WL 5107464 (E.D. 

Ky. Sept. 30, 2014).

In combination, Defendant Tellermate and its former counsel: made repeated 

misrepresentations to the Court; presented legally irrelevant arguments to the Court, one of 

which—that Defendant Tellermate’s contract with salesforce.com prevented it from disclosing 

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data entered into salesforce.com—was patently false; violated multiple discovery-related orders; 

and generally conducted themselves in a manner contrary to both the letter and the spirit of the 

Federal Rules of Civil Procedure. This behavior led to unnecessary delay in the prosecution of 

this case and required a significant expenditure of time and resources by the Court and the 

Plaintiffs. Defendant Tellermate and its former counsel are therefore jointly liable for the 

attorneys’ fees identified by the Magistrate Judge in his July 1, 2014 Opinion and Order.

Defendant Insperity: In its Objections, Defendant Insperity argues that it should not be 

subject to any sanctions because it committed no misconduct during discovery in this case. 

Defendant Insperity notes that the Magistrate Judge treated it and Defendant Tellermate as a joint 

entity in his July 1, 2014 Opinion and Order, but emphasizes that it is, in fact, a separate entity 

from Defendant Tellermate. According to Defendant Insperity, it: (1) did not have possession or 

control of Defendant Tellermate’s salesforce.com records; (2) believed that its former counsel 

had all of the responsive Frank Mecka documents; and (3) had no role in the document dump or 

the AEO designation concerning Defendant Tellermate’s personnel evaluations. 

In response, the Plaintiffs maintain that the Magistrate Judge properly imposed sanctions 

against Defendant Insperity. According to the Plaintiffs, Defendant Insperity and Defendant 

Tellermate both violated multiple court orders and jointly obstructed the Plaintiff’s discovery 

efforts. The Plaintiffs contend that Defendant Insperity’s handling of the Frank Mecka 

documents is representative of its actions in this case. They argue that most of the Frank Mecka 

documents that were the subject of the Magistrate Judge’s Opinion and Order were possessed by 

Defendant Insperity, which in their view, undermines Defendant Insperity’s claim that it 

committed no misconduct in the discovery phase of this case. Moreover, the Plaintiffs 

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emphasize, Defendant Insperity now attempts to present new evidence and new arguments that 

were not presented to the Magistrate Judge prior to his issuance of the sanctions order.

In his July 1, 2014 Opinion and Order, the Magistrate Judge referred to Defendant 

Tellermate and Defendant Insperity as “Tellermate.” See July 1, 2014 Op. & Order at 2 

(discussing all of the Defendants as “Tellermate” “for ease of reference”). The Magistrate Judge 

cannot be faulted for his decision to do so; at the time, Defendant Tellermate and Defendant 

Insperity were jointly represented and no party to this litigation made any effort to distinguish 

between the two as separate entities. It is now apparent that Defendant Tellermate and Defendant 

Insperity are separate entities. As a result, Defendant Insperity cannot be held liable for the 

discovery misconduct related to the salesforce.com records and the document dump. Those 

documents were not in the possession of Defendant Insperity, and Defendant Insperity had no 

obligation to produce them. The evidence in the record does not support the imposition of any 

sanctions against Defendant Insperity.

Generally, “ ‘one party to litigation will not be subjected to sanctions [for failure to 

cooperate in discovery] because of the failure of another to comply with discovery, absent a 

showing that the other party controlled the actions of the non-complying party.’ ” Patton v. 

Aerojet Ordnance Co., 765 F.2d 604, 606 (6th Cir. 1985) (quoting DeLetelier v. Republic of 

Chile, 748 F.2d 790, 795 n. 2 (2d Cir. 1984)). Although the record establishes a business 

relationship between Defendant Insperity and Defendant Tellermate, it does not support the 

conclusion that Defendant Insperity controlled the actions of Defendant Tellermate. The 

evidence in the record does not support the imposition of any sanctions against Defendant 

Insperity, and insofar as the Magistrate Judge’s Opinion and Order does so, it is contrary to law.

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B. The Plaintiffs’ Second Motion for Default Judgment and the Magistrate Judge’s March 

30, 2015 Opinion and Order.

While the parties continued to brief their objections to the Magistrate Judge’s July 1, 

2014 Opinion and Order, the Plaintiffs filed a Second Motion for Default Judgment (doc. 145) 

on October 23, 2014. In their motion, the Plaintiffs accused the Defendants of further discoveryrelated misconduct, including: continuing to withhold Frank Mecka documents; continuing to 

misrepresent the number of Frank Mecka documents they were withholding; baselessly claiming 

the attorney-client privilege for otherwise discoverable documents; and concealing the existence 

of an insurance policy that would otherwise have satisfied judgment in this case. Pls.’ Second 

Mot. for Default J. at 2–3, doc. 145.

1. The Magistrate Judge’s March 30, 2015 Opinion and Order

At the outset of his Opinion and Order, the Magistrate Judge identified two primary 

issues before him: (1) the Defendants’ untimely production of insurance-related information as 

required by Federal Rule of Civil Procedure 26(a) and (2) the Defendants’ continued withholding 

of Frank Mecka documents. See March 30, 2015 Op. & Order at 1. The Magistrate Judge 

reviewed the record and observed that “the facts relating to the disclosure of insurance coverage 

appear to be undisputed.” Id. at 2. Initially, in 2012, the Defendants represented that they were 

potentially covered by one insurance policy and denied the existence of any other additional 

policies. Id. Two years later, the Defendants disclosed a second insurance policy, which 

potentially provided coverage for Defendant Tellermate. Id. at 2–3. Defendant Tellermate 

acknowledged that it supplemented its discovery response with the additional policy but argued 

that the Plaintiffs suffered no prejudice as a result of its late disclosure. Id. at 3.

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The Magistrate Judge then turned to the Frank Mecka documents, which he discussed at 

length in his July 1, 2014 Opinion and Order. The parties offered competing narratives to explain 

the ongoing discovery problems related to the Frank Mecka documents. The Plaintiffs asserted 

that the Defendants’ continued misrepresentations and withholding of these documents was 

consistent with the Defendants’ prior history of misconduct and prevented the Plaintiffs from 

developing their case. In response, Defendant Insperity asserted that it had never received a 

formal request for any Frank Mecka documents in its possession and therefore was under no 

obligation to provide those documents to the Plaintiffs. Id. at 4. Defendant Tellermate took a 

different approach, emphasizing that most of the documents the Plaintiffs were concerned with 

were merely duplicates of documents already disclosed to them previously. Id. at 5.

Addressing the Plaintiffs’ request for default judgment, the Magistrate Judge 

acknowledged that it was “the most severe sanction” available to him and should only be 

imposed where: (1) a party acted in willful bad faith; (2) the opposing party suffered prejudice; 

(3) the court warned the disobedient party that the failure to cooperate could result in default 

judgment; and (4) less drastic sanctions were attempted. Id. at 7–8. On the record before him, the 

Magistrate Judge concluded that, while Defendant Tellermate may have acted in bad faith by 

failing to disclose the existence of the second insurance policy, the Plaintiffs had suffered little, 

if any harm, as a result of that untimely disclosure. Id. at 8–11. Moreover, the Magistrate Judge 

found, any prejudice the Plaintiffs may have suffered by the untimely disclosure of other 

documents was limited because summary judgment proceedings before the Court had been put 

on hold. Id. at 10–11. Finally, the Magistrate Judge held, the Defendants had not been put on 

notice of the potential for default and lesser sanctions were available to him that would have 

been sufficient to cure any prejudice suffered by the Plaintiffs. Id. at 11–12. The Magistrate 

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Judge therefore denied the Plaintiffs’ Second Motion for Default Judgment but directed 

Defendant Insperity to promptly produce any additional Frank Mecka documents. Id. at 12. 

2. The Court’s Analysis

The Plaintiffs subsequently filed an Objection (doc. 192) to the Magistrate Judge’s ruling 

denying their Second Motion for Default Judgment. 

The Court has conducted a de novo review of the Magistrate Judge’s March 30, 2015 

Opinion and Order denying the Plaintiffs’ Second Motion for Default Judgment and adopts the 

Magistrate Judge’s findings as its own. In the Court’s view, the Magistrate Judge conducted a 

thorough Rule 37(b)(2) analysis and correctly concluded that the Defendants’ misconduct did not 

rise to the level sufficient to justify the imposition of default judgment. 

Two of the Magistrate Judge’s findings are of particular importance to the Court’s 

conclusion. First, the Magistrate Judge found that Defendant Tellermate’s and its former 

counsel’s failure to disclose insurance coverage permitted the inference that they acted in bad 

faith and was consistent with their “grossly deficient participation in the discovery or disclosure 

process.” March 30, 2015 Opinion and Order at 8–9, doc. 189. However, the Magistrate Judge 

concluded that, while the other instances of misconduct identified by the Plaintiffs were 

troubling, they did not support a finding of bad faith against the Defendants. Id. at 9–10. The 

narrow finding of bad faith is in contrast to the pervasive bad faith conduct at issue in the 

Plaintiffs’ First Motion for Default Judgment.

Second, the Magistrate Judge found that the Plaintiffs suffered limited prejudice from the 

Defendants’ misconduct at issue in the Second Motion for Default Judgment. March 30, 2015 

Opinion and Order at 10–11. In the Court’s view, the lone action that supported a finding of bad 

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faith—Defendant Tellermate’s and its former counsel’s failure to disclose the existence of a 

second insurance policy—did not actually prejudice the Plaintiffs. As the Magistrate Judge 

explained, the Plaintiffs’ settlement demand did not exceed the limits of the first insurance 

policy, id. at 11, and, as a result, any settlement discussions would not have been impacted by 

knowledge of the second insurance policy’s existence. As the Court previously noted, no one 

factor under the Rule 37(b) sanctions analysis is dispositive, Reyes, 307 F.3d at 458, but the 

limited prejudice suffered by the Plaintiffs weighs heavily against a finding that default judgment 

is appropriate here.

The Court offers several additional reasons why it will not grant default judgment in 

favor of the Plaintiffs. The Plaintiffs have presented a detailed factual account of the Defendants’ 

discovery-related misconduct following the July 1, 2014 Opinion and Order in their objections to 

the Magistrate Judge’s March 30, 2015 Opinion and Order. See Pls.’ Objections, doc. 192; Pls.’ 

Replies in Supp. of Objections, docs. 202, 203. But, in the Court’s view, they have not 

articulated a legal basis for an award of default judgment in this case. For example, the Plaintiffs 

repeatedly cite Grange Mut. Cas. Co. v. Mack, 270 F. App’x 372, 378 (6th Cir. 2008), for the 

proposition that default judgment is appropriate when a party obstructs an opposing party “from 

accessing evidence needed to bring the case.” However, the Plaintiffs do not adequately explain 

how the Defendants’ obstruction prevented them from accessing evidence needed to bring their 

case. 

Nor do the Plaintiffs attempt to engage with the requirement that a court provide notice 

and consider lesser sanctions before imposing default judgment as a sanction under Rule 

37(b)(2). The misconduct described in the Plaintiffs’ Second Motion for Default Judgment pales 

in comparison to the misconduct at the heart of the Magistrate Judge’s July 1, 2014 Opinion and 

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Order. If default judgment was not an appropriate sanction in response to Defendant Tellermate’s 

and its former counsel’s actions concerning the salesforce.com records, it is not an appropriate 

sanction for the lesser misconduct at issue in the Second Motion for Default Judgment.3

C. Calfee’s Motion for Leave to Present New Evidence and the Magistrate Judge’s March 

30, 2015 Order

On November 4, 2014, Calfee filed a motion requesting an order finding that (1) the 

attorney-client privilege between itself and the Defendants had been waived and (2) allowing it 

to present additional evidence at an evidentiary hearing on objections to the Magistrate Judge’s 

July 1, 2014 Opinion and Order. See Calfee Motion, doc. 148. Calfee explained that, following 

the termination of their representation of the Defendants, Defendant Tellermate threatened to sue 

it for legal malpractice and asserted “advice of counsel” as a defense to the sanctions imposed by 

the Magistrate Judge. Id. at 3. As a result, Calfee argued, the attorney-client privilege no longer 

attached to its communications with the Defendants. Id. Because it could not present this 

evidence at the time of the proceedings before the Magistrate Judge, Calfee asserted that it was 

entitled to an evidentiary hearing at which it would present new evidence for the Court’s 

consideration. Id.

The Magistrate Judge issued an Order (doc. 190) addressing Calfee’s Motion. He 

observed that Calfee’s request for an order declaring the attorney-client privilege waived 

“appear[ed] to be largely moot” based on Defendant Tellermate’s filing of a motion (doc. 186) to 

which they attached numerous attorney-client communications. Order on Calfee’s Mot. at 2. The 

Magistrate Judge reasoned that “[h]aving chosen to waive the privilege for those 

 3 To the extent that the Plaintiffs argue that the Court should require the production of the Brown 

documents, see Pls.’ Objection at 17, the Court understands that the Magistrate Judge is addressing this issue with 

the parties.

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communications, Tellermate cannot now be heard to claim that other communications regarding 

the same subject-matter are still protected by the privilege.” Id. at 2–3 (citing Procter & Gamble 

Co. v. Team Technologies, Inc., 2013 WL 3778740, *1 (S.D. Ohio July 18, 2013)). Recognizing 

that there still may be disputes as to the scope of the waiver, the Magistrate Judge denied 

Calfee’s motion with respect to the waiver of the attorney-client privilege. Id. at 3. As to Calfee’s 

request that it be permitted to submit new evidence to the Court, the Magistrate Judge deferred to 

the Court for a ruling on this portion of Calfee’s motion. Id.

On July 8, 2015, the Court issued an Order (doc. 214) denying Calfee’s Motion to Present 

New Evidence (doc. 148) and Defendant Tellermate’s Motion for Leave to File Second 

Supplemental Brief in Support of Objections (doc. 186). In their motions, Defendant Tellermate 

and Calfee sought leave to present the Court with new evidence regarding their actions during 

the discovery phase of this case. While the Court recognized that it had the authority to consider 

new evidence, the Court declined to exercise its discretion to do so:

The Court declines to exercise its discretion to consider new evidence in 

connection with the parties’ objections in this case. Even if Calfee were permitted 

to introduce new evidence in an attempt to shift blame on to Defendant 

Tellermate for the misrepresentations and delays that occurred during the 

discovery process, there remains sufficient evidence to justify the imposition of 

joint liability in this case. For example, during the discovery dispute, Calfee 

attorneys argued to the Magistrate Judge that Defendant Tellermate was 

contractually prohibited from producing information from its salesforce.com 

accounts. This was a legal argument made by Calfee attorneys despite the plain 

language of the contract which indicated the exact opposite. Calfee and its 

attorneys are responsible for this argument, not Defendant Tellermate. Similarly, 

Calfee attorneys made the decision to produce 50,000 documents to the Plaintiffs, 

assigning “Attorneys’ Eyes Only” designations to those documents, and failed to 

subsequently cure the overbroad production and privilege designation. The broad 

and unresponsive nature of the production may have resulted from Defendant 

Tellermate’s failure to timely assist Calfee attorneys or perhaps even 

misrepresentations made by Defendant Tellermate to Calfee Attorneys. But 

Calfee attorneys nonetheless made the decision to produce those documents, 

assign the AEO designation to them, and then failed to take action to supplement 

or correct the discovery responses at issue. 

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Defendant Tellermate’s desire to introduce new evidence is constrained by 

the general rule that clients are liable for the acts or omissions of their attorneys. 

Pioneer Inv. Servs. v. Brunswick Assocs. Ltd. P’ship, 507 U.S. 380, 396–97 

(1993); Link v. Wabash R. Co., 370 U.S. 626, 633–34 (1962); see also Gilley v. 

Eli Lilly & Co., No. 3:10-CV-251, 2014 WL 619583, at *2 (E.D. Tenn. Feb. 18, 

2014) (“With respect to plaintiff’s contention that her discovery abuses were 

attributable to her prior counsel, the Court finds this argument unavailing. Parties 

are bound by counsel’s conduct.”). New evidence would therefore do little to alter 

the finding of joint liability with respect to the attorneys’ fees sanction.

July 8, 2015 Order at 3–6, doc. 214. To develop the record for appellate review, the Court 

directed the parties to submit proffers of what new evidence they would have presented to the 

Court if the Court had granted their motions. See Calfee Proffer, docs. 222, 224–26; Def. 

Tellermate Proffer, doc. 223.

The Court will adhere to its July 8, 2015 Order. In so doing, the Court notes that much of 

the evidence proffered by Calfee would be merely duplicative of the evidence already in the 

record which includes extensive testimony from Calfee attorneys. The proffered evidence would 

not change the result in this case.

IV. Conclusion

For the foregoing reasons, the Court adopts the Magistrate Judge’s July 1, 2014 Opinion 

and Order (doc. 96) as modified by this Opinion and Order; adopts the Magistrate Judge’s March 

30, 2015 Opinion and Order (doc. 189); and grants Defendant Tellermate’s Motion for Extension 

of Time (doc. 132). 

IT IS SO ORDERED.

s/ James L. Graham 

JAMES L. GRAHAM

United States District Judge

DATE: August 11, 2015

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