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, :

JUDGE JAMES L. GRAHAM

 v. : 

Magistrate Judge Kemp

Tellermate Holdings Ltd., : 

et al.,

Defendants. 

OPINION AND ORDER

I. Introduction

On July 1, 2014, the Court issued an Opinion and Order

concluding that, as the proper disposition of a motion for

default judgment, certain discovery sanctions be imposed on the

Defendants. Based in part on developments subsequent to the

hearing held on the motion for sanctions (the hearing was held

over the course of three days, ending on February 27, 2014),

Plaintiffs Robert and Christine Brown filed a second motion for

default judgment. The Tellermate Defendants, and Insperity PEO

Services, L.P. (now represented by separate counsel) filed

separate responses, and the Browns replied to each. For the

following reasons, the motion will be denied.

II. Background of the Motion

The second motion for default judgment is based on

discovery-related issues which came to light after the first

motion was filed. They fall into two primary categories:

Defendants’ untimely production of additional insurance

information (a disclosure required under Fed.R.Civ.P. 26(a)(1)),

and their production (or withholding) of documents related to

Frank Mecka, a subject also addressed in the Court’s prior

Opinion and Order. The Browns raise other issues as well. The

Court will summarize the facts about each subject below.

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A. The Insurance Policies

The facts relating to the disclosure of insurance coverage

appear to be undisputed. In their initial disclosures,

Defendants identified one insurance policy - issued by Lexington

Insurance Company - as potentially providing coverage for the

claims made by the Browns. The Browns’ counsel questioned

whether that was the only policy, but, after initially receiving

no response to that inquiry, he was told by Defendants’ counsel 

that no other policies existed. 

Not satisfied with that response, and believing that because

the defendants included not only corporations but individual

officers and directors, there might be separate coverage for

those parties, the Browns’ counsel inquired a second time about

the existence of other policies. Despite that request,

Defendants did not produce any other insurance policies in that

time frame, which was from March through May of 2012.

Nothing further occurred with respect to insurance coverage

until after the sanctions hearing. Then, on May 16, 2014,

Defendants’ counsel disclosed a second policy issued by Chartis. 

Defendants have not provided any additional information,

requested by the Browns, about communications with their

insurers, including whether there has been discussion about the

scope or extent of coverage under the policies.

Tellermate and Insperity have provided separate responses to

this portion of the motion. Insperity points out that it is

covered only by the Lexington policy, and that it had no duty to

disclose the existence of the Chartis policy, which was procured

by Tellermate Holdings, Ltd. For its part, Tellermate (through

new counsel) does not take issue with the sequence of facts

stated by the Browns, nor does it provide any explanation for the

two-plus year delay in identifying the second policy. Further,

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it does not say why its former counsel, Ms. O’Neil, apparently

believed (and consequently represented) that no other policy

existed apart from the Lexington policy, or what efforts either

she or officials of Tellermate made to respond to the Browns’

counsel’s repeated requests that she look into the question of

whether other policies existed. Tellermate’s response to this

issue, fairly summarized, is that this is a “no harm, no foul”

situation because the Browns cannot show that they were

prejudiced by not knowing about the Chartis policy for over two

years, and that Tellermate should not be sanctioned “for

supplementing its discovery responses by identifying the Chartis

policy.” Tellermate’s Memorandum, Doc. 167, at 16.

B. The Frank Mecka Documents

The prior Opinion and Order contains a great deal of

information about the Frank Mecka documents. Those facts are

incorporated here by reference. In this section, the Court will

recite the facts which have surfaced about the Mecka documents

since the prior order was issued.

The short summary of the saga of the Mecka documents is that

they keep turning up, and that Defendants, at least through prior

counsel, made a number of representations about how many of them

there were, all of which turned out to be wrong. First there

were two; then there were four; then seven; then thirty; now, an

indeterminate number much higher than thirty. 

According to the Browns, after the Court issued the series

of orders which held that the Mecka documents were discoverable

and that any claims of privilege had been waived, Tellermate

produced 367 additional Mecka documents. Insperity also produced

approximately 15 Mecka documents. Insperity had never prepared a

privilege log for any of its Mecka documents, and it appears to

concede that it has additional documents relating to Frank Mecka. 

The Browns asserted in their motion that some additional Mecka

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documents were still being withheld by Tellermate as well, or

that some of the Mecka documents were produced with portions

redacted, apparently based on a claim of privilege as to the

information which was redacted. 

Insperity’s position on this issue is simple; it contends

that it never received a formal request to produce this specific

set of documents relating to Mr. Mecka. In its words,

“Plaintiffs never served a request on Insperity asking for

[documents related to Mecka’s age discrimination claim against

Tellermate].” Insperity’s Memorandum, Doc. 158, at 8. 

Consequently, it argues that the Browns are entitled neither to a

default judgment nor even to an order compelling the production

of the Mecka documents in its possession. It also asserts that it

had a good faith belief that it did not have to produce documents

relating to Mr. Mecka’s discrimination claims against Tellermate

even if the requests made to it, or the orders on this subject,

actually covered such documents.

Tellermate makes a different response. It points out that

the 367 additional documents produced are largely made up of

duplicates or pages with no substantive information, and that

only eight of them are of any significance at all. Tellermate

further represents that all of its Mecka documents have now been

produced, so that there is no basis for a default judgment based

on the earlier withholding of some of these documents. It

attached additional Mecka documents to its response, most of

which were previously produced or which contain little additional

information. Finally, it notes that had the subject of any

withheld documents been raised in a Rule 37.1 conference, the

issue would likely have been resolved short of motions practice.

The reply memorandum takes issue with Insperity’s assertion

that it was never asked for its copies of Mecka documents. The

Browns cite to documents requests 23 and 24, which, Insperity

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concedes, were directed to it as well as to Tellermate. Those

requests call for the production of any communications between

Insperity and Frank Mecka and any documents relating to any

agreements made between either Insperity or Tellermate and Frank

Mecka. The Browns continue to claim that, in prior counsel’s

communications on this subject, she never distinguished between

Tellermate’s and Insperity’s obligation to produce Mecka

documents as Insperity now does, and that the Court’s orders on

this subject required Insperity, as well as Tellermate, to

produce all of its Mecka documents.

As to Tellermate, the reply does not appear to take issue

with the fact that Tellermate has now produced all of the Mecka

documents. However, the Browns note that Tellermate continued to

withhold such documents after the Court ordered them to be

produced, and that the excuse that new counsel had difficulty

finding the rest of the Mecka documents among the documents they

obtained from prior counsel does not relieve Tellermate of the

obligation to have produced them to the Browns at an earlier date

- especially since prior counsel had the documents, evidenced by

the fact that new counsel produced them from the records they

obtained from prior counsel. The Browns further contend that,

now that the documents have been produced, it is evident that

many of the claims of privilege, in addition to being untimely,

were substantively baseless. Finally, they refute Tellermate’s

efforts to place all of the blame for this situation on prior

counsel, noting that prior counsel testified unequivocally that

her production of additional and undisclosed Mecka documents

after having told the Court that none existed was based on new

documents which Tellermate disclosed to her. 

C. The Insperity “Termination Reason Definitions” Document

The Browns have also raised an issue about Insperity’s

failure to produce a document which they have obtained from

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another source. They note that when they were let go, internal

Tellermate documents showed that the reason for that decision was

“layoff.” Defendants have claimed in this case that the Browns

were terminated for performance-related reasons. However, in an

Insperity document which contains a glossary of terms, “layoff”

is defined as a termination unrelated to an employee’s

performance. The Browns claim to have been told that this

glossary is normally attached to the termination form filled out

when an employee is terminated, but although Insperity produced

their termination forms, it did not produce the glossary. They

assert this is especially troublesome given the Defendants’

arguments, in their summary judgment motions, that the Browns’

“layoff” was performance-related, and that this withheld document

may be enough to create a material factual issue on that key

point.

Insperity’s position, similar to its argument about the

Mecka documents, is that the Browns never served a production

request which covered this particular document. Insperity also

disputes that the document was attached to the Browns’

termination forms, at least as to the portion of the forms kept

by Insperity. The form is not contained in the Browns’ personnel

files. Insperity also notes that no issue about the form was

ever raised with their counsel, and that the Court never ordered

its production, so a default judgment based on the non-production

of this form would not be appropriate. In reply, the Browns cite

to several of their discovery requests which, they claim, are

broad enough to cover this document, including a request for any

documents relating to their claims in this case, to their job

performance, and to the decision to terminate their employment.

D. Other Documents

Finally, the Browns’ motion addresses the production of

other documents for which a claim of privilege has been made. 

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According to the motion, most of these documents fall into the

category of communications between Insperity and Tellermate

concerning the Browns’ claims. They argue that the claims of

privilege are likely unfounded because the privilege log

describes these documents as “non-attorney communications” and

because a review of the Mecka documents which bore the same

designation revealed that the claim of privilege was spurious.

Tellermate responds briefly to this argument by noting that

there has never been a request for extrajudicial resolution of

any issues concerning these documents, and that the Browns have

not specifically identified the “hundreds of documents” at issue. 

It asks the Court to convene a conference among the parties to

assist in resolving the matter. Insperity does not directly

address this issue in its response. The Browns’ reply is no more

specific than their motion, again identifying only a few of the

privilege log entries which they claim are inappropriate.

III. Discussion

There is no real dispute about the parameters of the law

relating to default judgements awarded as a result of misconduct

during discovery. Such a sanction is specifically permitted by

Fed.R.Civ.P. 37(b)(2) as a remedy for a party’s failure to comply

with a discovery order, and can also be imposed under Rule 37(c)

for a party’s failure to disclose or supplement information

required to be disclosed by Rule 26(a). 

The fact that such a sanction is permissible under the

Rules, however, does not mean that it should be routinely imposed

as part of the Court’s management of the discovery process. As

the Court observed in Vogerl v. Elliott, 2010 WL 4683950, *2

(S.D. Ohio Sept 9, 2010), adopted and affirmed 2010 WL 4683948

(S.D. Ohio Nov. 10, 2010), 

Entry of a default judgment is obviously the most

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severe sanction available, and should only be

considered when 1) the disobedient party acted in

wilful bad faith; 2) the opposing party suffered

prejudice; 3) the court warned the disobedient party

that the failure to cooperate could result in a default

judgment; and 4) less drastic sanctions have been

attempted. See Grange Mutual Cas. Co. v. Mack, 270 Fed.

Appx. 372, 376 (6th Cir. 2008). 

See also JPMorgan Chase Bank, N.A. v. Neovi, Inc., 2007 WL

1989752 (S.D. Ohio July 9, 2007), citing, inter alia, Taylor v.

Medtronics, Inc., 861 F.2d 980, 986 (6th Cir. 1988). And, as

this Court said about dismissal as a discovery sanction (which is

the mirror image of a default judgment),

if a party's failure to provide discovery or to comply

with a court order is “due to an inability fostered

neither by its own conduct nor by circumstances within

its control,” and therefore not due to “willfulness,

bad faith, or any fault” on the part of that party,

dismissal as a discovery sanction is inappropriate.

[citation omitted]. On the other hand, where a party

demonstrates bad faith by failing to meet dates set by

the Court for compliance with discovery, despite being

warned about possible sanctions, the Court does not

abuse its discretion in finding that such “callous

disregard” of discovery orders justifies dismissal.

National Hockey League v. Metropolitan Hockey Club,

Inc., 427 U.S. 639, 96 S.Ct. 2778, 49 L.Ed.2d 747

(1976) (per curiam).

Safety Today, Inc. v. Roy, 2014 WL 1049962, *4 (S.D. Ohio March

17, 2014). These are the principles guiding the Court’s decision

here.

A. Bad Faith

The first factor to be considered is whether the disobedient

party acted in bad faith. That inquiry is complicated by the

fact that the Browns have raised not one, but multiple, claims

about discovery abuses on the part of both Tellermate and

Insperity, and that the issues differ with respect to each. The

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most likely candidate for a finding of bad faith deals with the

failure to disclose insurance coverage, an issue which relates

only to Tellermate. There, Tellermate’s counsel was repeatedly

questioned about the existence of additional insurance, based on

a reasonable belief that some type of officers’ and directors’

liability policy was likely in place, and she repeatedly denied

that such coverage existed. Tellermate has not explained why she

said that, nor has it explained why it took two years for the

Chartis policy to be identified. Whether counsel simply failed

to ask the right questions, or whether Tellermate deliberately

provided incorrect answers to her questions, cannot be determined

from the record, but the facts certainly allow an inference that

either Tellermate or its counsel acted in bad faith. Coupled

with the Court’s prior conclusions about counsel’s and

Tellermate’s conduct with respect to the salesforce.com

documents, this appears to be yet another instance of grossly

deficient participation in the discovery or disclosure process

that defies explanation.

It is not so clear that bad faith exists with respect to the

other issues, however. Certainly, the continued expansion of the

universe of Mecka documents is problematic, and, again, the only

evidence on that subject is prior counsel’s testimony that she

was relying on Tellermate’s representations about those

documents. The efforts to locate and produce all of the Mecka

documents after this Court overruled the claims of privilege were

not optimal, but it now appears they have all been produced, and

the Court accepts the Defendants’ statements that most of the

previously-unproduced documents are not substantive in nature. 

And while the Court believes Insperity has read the requests for

Mecka documents served on it too narrowly, and that prior counsel

did not do a good job of differentiating between documents in

Tellermate’s possession and those controlled by Insperity, there

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is at least arguable good faith behind Insperity’s decision not

to produce some Mecka documents. 

The Court is troubled by Insperity’s failure to produce the

glossary of terms, however. That document is certainly relevant

to the Browns’ claims, particularly when Defendants have

consistently taken the position that the “layoff” was a

performance-related termination. It is difficult to argue that a

document which provides meaning to terms used in other relevant

and discoverable documents is not itself relevant; certainly, it

has a bearing on how the producing party understood those terms,

and the fact that it was not physically attached to the Browns’

termination forms does not make it any less relevant. The fact

that it should have been produced, however, is not tantamount to

Insperity’s disregard of a court order directing its production -

there does not appear to be any order which can be read broadly

enough to cover that particular document - so, as more fully

discussed below, this particular matter does not seem to provide

a basis for imposing an extremely harsh sanction.

Finally, as to other documents withheld on grounds of

privilege, there is simply not enough information in the record

to allow the Court to determine if the documents were withheld in

bad faith. Without a more particularized identification of the

documents, a better explanation of the basis of Tellermate or

Insperity’s claims of privilege, and, perhaps, an in camera

review, the Court cannot make an informed decision about the

reasons why these documents appear on the privilege log. 

B. Prejudice

The next factor in determining whether to grant a default

judgment is prejudice to the moving party. Again, due to the

number of different matters raised in the motion, this factor

does not lend itself to a simple analysis. And, at this stage of

the case, given that the trial date has been vacated and the

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summary judgment proceedings have been put on hold for reasons

mostly unrelated to the issues raised in the default judgment

motion, the fact that most of the issues raised by the Browns -

particularly the insurance policy question, the production of the

Mecka documents, and the Insperity glossary - have been resolved

cuts against a finding of any ongoing prejudice.

No doubt, the failure to produce the glossary could have

been prejudicial had it not been available to the Browns for use

in summary judgment proceedings. Further, the Court is not

prepared to say that a party can never be prejudiced by the

failure to disclose available insurance coverage, since that

disclosure is mandated at the early stages of every case. 

However, any prejudice here, where Defendants have apparently

never made an offer approaching the limits of the policy which

was disclosed, and the Browns made a demand within those limits

which was rejected, is minimal. There has been no clear showing

how the struggle to get the Mecka documents identified and

produced has affected the Browns apart from the time and expense

they have incurred to force Defendants to comply with their

requests and the Court’s orders. In short, there has been some

prejudice, especially in the form of cost, but that can be

remedied through an award of expenses, if appropriate. Any

prejudice from these matters does not begin to approach the level

of prejudice caused by the mishandling of the salesforce.com

issue, which has led to an unknown amount of alteration or

spoliation of evidence and which was accompanied by an

unjustifiable lack of diligence and candor on the part of

counsel, the clients, or both. 

C. Additional Factors

Given that the Court is unable to find a significant amount

of bad faith or prejudice here, a discussion of the two remaining

factors is largely academic. The defendants in this case are

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certainly on notice that they have been less than forthcoming

with discovery, but as to the particular matters raised in the

Browns’ second motion, they have not been specifically warned of

the potential for default. If any sanctions are needed (and it

is not clear what sanctions might be appropriate other than some

cost-shifting), lesser sanctions will suffice. Consequently, the

Court does not believe that granting a default judgment is

warranted.

That is not to say, however, that the matters raised in the

motion for default judgment should not be considered by the Court

at all, especially as it relates to the pending review of the

Opinion and Order of July 1, 2014. Some of them trace additional

developments about matters already addressed in that order, while

others - like the failure to disclose the second insurance policy

- reflect a fact pattern which seems to have parallels in the

conduct described in that order. It will, of course, be up to

the District Judge to determine how much of this additional

evidence he wishes to consider, even as context, but nothing in

this order should be read to exonerate the Defendants from all

blame as to the issues raised in the second motion for default

judgment. The Court has simply determined that, based on the

facts as represented in the motion and as clarified by the

responses, a default judgment is not warranted at this juncture.

IV. Order

For the following reasons, the Second Motion for Default

Judgment (Doc. 141) is denied, except that Insperity is ordered

to produce any additional documents in its possession relating to

Frank Mecka within 14 days of the date of this order.

V. Motion for Reconsideration

Any party may, within fourteen days after this Order is

filed, file and serve on the opposing party a motion for

reconsideration by a District Judge. 28 U.S.C. §636(b)(1)(A),

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Rule 72(a), Fed. R. Civ. P.; Eastern Division Order No. 14-01,

pt. IV(C)(3)(a). The motion must specifically designate the

order or part in question and the basis for any objection. 

Responses to objections are due fourteen days after objections

are filed and replies by the objecting party are due seven days

thereafter. The District Judge, upon consideration of the

motion, shall set aside any part of this Order found to be

clearly erroneous or contrary to law.

This order is in full force and effect even if a motion for

reconsideration has been filed unless it is stayed by either the

Magistrate Judge or District Judge. S.D. Ohio L.R. 72.3.

/s/ Terence P. Kemp 

United States Magistrate Judge

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