No. 01 C2963 Page 4

Belger, LaSalle produced 100 pages of employee census spreadsheets listing various details

about Anisted’s ESOP participants, including their age, years of employment, and share

account balances. To give plaintiffs time to review these census sheets, Belger’s deposition was

| rescheduled;

he :
ee ae DISCUSSION

Plaintiffs argue that defendants’ failures to produce the PERLS reports, the quarterly
ESOP repurchase spreadsheets and the employee census sheets, in response to their production
requests, are discovery abuses sanctionable under both the court’s inherent powers and
Federal Rule of Civil Procedure 37. Courts have an inherent power to sanction a range of
litigation abuses — including discovery abuses ~ to ensure the “orderly and expeditious
disposition of cases.” Chambers v. NASCO, Inc., 501 U.S. 32, 43, 46 (1991). Furthermore,
Rule 37 explicitly grants the court the power to sanction discovery abuses. It states: “A party
that without substantial justification fails to disclose information required by Rule 26(a) or
26(e)(1) shall not, unless such failure is harmless, be permitted to use as evidence at a trial, at
a hearing, or on a motion any witness or information not so disclosed. In addition to or in lieu
of this sanction, the court, on motion and after affording an opportunity to be heard, may
impose other appropriate sanctions. ...” Amsted and LaSalle argue that the circumstances
do not warrant sanctions. In separate responses each defendant addresses its alleged lapses
and the effect on its expert witnesses’ reports.

Amsted first argues that plaintiffs’ motion should be denied because it does not comport
with Local Rule 37.2, which requires a statement from the movant that a consultation between
the parties was unable to resolve the discovery dispute or at least that attempts to schedule a

consultation were made but were unsuccessful due to no fault of the movant. Though


aw
No, 01 C 2963 Page 9
annual data, which plaintiffs received during fact-discovery, as well as quarterly data,
Nonetheless, plaintiffs are correct that their experts were not able to consider and challenge the
information in the PERLS reports, quarterly ESOP data spreadsheets and employee census
reports, when forming their opinions and preparing their reports. To remedy this, both of
plaintiffs’ experts will be allowed to supplement their opinions in light of these belatedly-
produced documents.
CONCLUSION
Plaintiffs’ motion for sanctions is denied. Plaintiffs’ experts will however be allowed to

supplement their opinions in light of the belatedly-produced documents.

Senior Judge, U. S. District Court
ww | > 2004.



No. 01 C 2963 Pageé

his expert report. Plaintiffs protest the late production of spreadsheets containing quarterly
ESOP data from 1984 to 2000’, the failure to produce the spreadsheet at Tab 3 of Levine’s
report, and Levine’s reliance on this historical quarterly ESOP information in his standard
deviation analysis. Amsted minimizes the significance of the tardy production of spreadsheets,
arguing that much of the data contained in the spreadsheets had been produced in other
documents and that Levine’s reliance on this information (especially in relation to his standard
deviation analysis of Amsted’s repurchase obligation) was overstated by plaintifts, However,
as plaintiffs point out, defendant’s production of some of the information through other
documents does not satisfy its obligation under the rules of discovery. Furthermore, Levine
does state that he relied on quarterly ESOP data from the 1980s and ‘90s in forming his
opinions.

The parties dispute the significance of the spreadsheet at Tab 3 of Levine’s report.
Plaintiffs argue that this was another document prepared by Amsted, relied upon by its expert,
yet not produced by defendant, Amsted maintains that this spreadsheet was Levine’s creation
~ a re-working of ESOP data supplied by Hower that was provided (belatedly) to plaintiffs.
Levine’s deposition testimony supports each party’s allegations. He states both that he
constructed the spreadsheet from data provided by Hower (Levine’s dep., p.27), and that
Hower gave him the document (Levine’s dep., p.156). Regardless, the document containing

quarterly reports on ESOP distributions and share turnover from March 1987 to June 1999,

‘Plaintiffs also argue that defendants’ use of these documents and others predating 1998 violates the
court’s memorandum order and opinion on their motion to compel. Armstrong y. Amsted, 2002 WL 31844956
(N.D.1iL. 2002). This is a misreading of the court’s decision, which granted plaintiffs’ request for the
production of certain documents predating 1999. Over defendants’ objections, we ordered them to
supplement their responses to certain requests for production with documents from 1998, but declined to
make them provide earlier documents, We did not generally bar discovery of all documents containing
information before 1998, as plaintiffs appear to assert.


=

No. 01 C 2963 . Page S

plaintiffs’ motion does not contain such a statement and apparently no consultation was
attempted, we accept plaintiffs’ contention that a meeting between the parties would have been
fruitless, given plaintiffs’ desired sanction.

In response to plaintiffs’ allegations that defendants failed to produce the PERLS
reports, Amsted argues both that plaintiffs never sought to compel these documents and that
its failure to produce these documents was inadvertent and rectified when they were given to
plaintiffs immediately after Amsted discovered the lapse. Plaintiffs maintain that the PERLS
reports from 1998 and 1999 should have been turned over in response to three of their requests
for production and to the document requests submitted with Hower’s deposition notice.
Defendants objected to all of these requests to the extent they sought documents generated
before January 1, 1999, leading to plaintiffs’ motion to compel. We ordered defendants to
supplement their responses to include materials from 1998. Amsted argues that plaintiffs only
sought to compel the additional documents for certain requests from its First Requests for
Production. Thus, it maintains that of the four allegedly relevant requests it needed only to
provide documents from 1998 in response to request 51 from the First Requests for
Production. This request did not implicate the PERLS reports, Amsted argues, because it
sought documents relating to the Varlen merger, and the PERLS reports did not relate.

Though Amsted’s technical reading of plaintiffs’ requests and the motion to compel
may be correct, it recognizes that this did not relieve its obligation to produce the PERLS
reports from either 1999 (which clearly would have been implicated by plaintiffs’ cited
requests) or 1998, Thus, Amsted maintains that the failure was an inadvertent mistake by
Hower, who allegedly believed that all the PERLS reports requested were produced earlier.

Amsted also contests plaintiffs’ arguments regarding Lawrence Levine’s use of data in


No. 01 C 2963 Page 8

would have sought to overcome LaSalle’s objection to the temporal scope of plaintiffs’
production request.
Plaintiffs argue that even if LaSalle did not have the documents earlier, and was not

required to produce them, Belger’s opinion should still be barred. They maintain that since

1999 one of the defendants has had control over the census sheets and as defendants have acted
in concert in defending this matter, LaSalle is also responsible for Amsted’s discovery abuse.
Yet, plaintiffs have not shown how Amsted erred in not producing these census spreadsheets
earlier. Of the relevant production requests made to Amsted, the documents appear to fit
under the broadest request, no. 55 of the Second Requests for Production, seeking documents
relating to any claim or defense. Yet, defendants argue that these spreadsheets did not become
relevant to a claim or defense until after plaintiffs’ experts released their reports and the
documents were requested by Belger for his consideration. Plaintiffs have not provided us with
any reason to disagree.

Defendants failed to turn over PERLS reports and quarterly ESOP data during fact-
discovery that should have been produced. Yet, we do not find evidence of bad faith or
obstruction on the part of either Amsted or LaSalle. Nor was either party in violation of a court
order. Furthermore, plaintiffs have not demonstrated any harm from the late production that
cannot be cured by a much less drastic remedy than sanctions. Harm to plaintiffs was
minimized by a variety of factors. Plaintiffs’ expert, Kace Clawson, was given time te consider
the PERLS reports before his deposition. Plaintiffs were able to question Hower about the
PERLS reports, Levine about the quarterly ESOP data, and Belger about the employee census
reports. The opinions of defendants’ experts concerning Amsted’s repurchase obligations did

not rely solely on the documents at issue. Even Levine’s standard deviation analysis relied on


uh © Minute OMe Form (06/97)

| United States District Court, Northern District of Mlinois

ee
CASE NUMBER 01 C2963 DATE 7/1/2004
CASE JUAN ARMSTRONG, et al vs. AMSTEAD INDUSTRIES, INC., et al
TITLE
} orton. t the folowing box (0 indie the party filing the motion, ¢.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
| MEMORANDUM OPINION AND ORDER
DOCKET ENTRY: —
(60) Qa Filed motion of [ use listing in “Motion” box above.}
(2) o Brief in support of motion due
@) og Answer brief to motion due____. Reply to answer brief due__.
(4) 0 Ruling/Hearingon___setfor___at
(5) ag Status hearing(held/continued to] [set for/re-set for]on_____setfor__at
(6) 0 Pretrial conference[held/continued to} [set for/re-set for]on_____setfor__-_ i at__
7) aq Trial[set for/re-set for] on__at
(8) Oo [Bench/Jury trial] [Hearing) held/continuedto___—sat
(9) ag This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]

OFRCP4(m) (CiLocal Rule 41.1 CFRCP41(a)(J) CO FRCP41(a){2).

do ff {Other docket entry) Enter Memorandum Opinion And Order, Plaintiffs’ motion for sanctions is
denied. Plaintiffs’ experts will however be allowed to supplement their opinions in light of the belatedly-
produced documents.

(al) @ [For further detail see order attached to the original minute order.]

No notices required, advised in open court.
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No. 01 C 2963 Page7

was not merely a duplication in content and form of the spreadsheets given to plaintiffs.

LaSalle also contests plaintiffs’ motion for sanctions. Only one of plaintiff’s relevant
requests for production was directed at LaSalle. The request was for all documents provided
to LaSalle by Amsted after January 1, 1997, for LaSalle’s use in serving as the trustee of the
Amsted ESOP. LaSalle made a general objection to the production of documents provided
after 2000 and represented that it otherwise complied with the request. Plaintiffs dispute
defendant's compliance, however, because after the close of fact-discovery LaSalle produced
100 pages of employee census spreadsheets which its expert witness, Joseph Belger, used to
form his opinion regarding Amsted’s forecasts of its ESOP repurchase obligations. Plaintiffs
contend that LaSalle’s failure to produce these documents earlier justifies the exclusion of
Belger’s expert opinion on the repurchase obligation.

LaSalle argues that it did not produce the employee census spreadsheets (nor the PERLS
reports, nor the quarterly ESOP spreadsheets) in response to plaintiffs’ request because
Amsted had not given LaSalle these documents by the close of fact-discovery, much Jess for its
use as trustee. LaSalle received the employee census spreadsheets through its outside counsel
in November 2003, after Belger requested the information in order to determine whether there
was a pattern among the employees who sought ESOP redemptions in 2000. LaSalle further
argues that even if these documents had been provided at that time for its use as trustee, they
would not have had to produce them because it had objected to the production of any
documents provided by Amsted after 2000, and plaintiffs had not moved to compel. Plaintiffs
appear to misunderstand this argument and wonder how they could have been required to
compel something they did not know existed. Of course, their motion to compel would not have

been for these specific documents, but rather, as with their motion to compel against Amsted,


e

No. 01 C 2963 Page3

request,

Finally, plaintiffs requested that Matthew Hower, Amsted’s treasurer, bring certain
documents to his deposition, including “{fleasibility studies, analyses, opinions, reports and/or
projections prepared in connection with the ESOP stock repurchase obligation resulting from
the, prepared at the direction of, reviewed by, circulated to or addressed to any Amsted officer,
director and/or employee” and all documents in his control that he may use to support his
claims and defenses,

In response to Amsted’s objection to the production of documents generated before
1999, plaintiffs brought a motion to compel. On December 18, 2002, the court ordered
defendants to supplement their previous responses to plaintiffs’ production requests with
documents from January 1, 1998 to January 1, 1999, Armstrong v. Amsted, 2002 WL
31844956 (N.D.IIL 2002).

After the close of fact-discovery, and after plaintiffs had made their expert disclosures,
defendants provided plaintiffs with three different types of documents that were previously
undisclosed. On October 1, 2003, Amsted produced twelve PERLS reports from 1998 and two
from 1999, LaSalle’s expert, Robert Gross, refers to these reports in his opinion, finding that
Amsted used PERLS software to analyze its repurchase obligation throughout 1998 and 1999,
On December 31, 2003, three days before Amsted’s expert Lawrence Levine’s deposition,
Amsted produced spreadsheets documenting the company’s quarterly ESOP repurchase
history from 1984 to 2000. Levine received these spreadsheets while formulating his opinion
after he requested more information from Amsted. Another spreadsheet allegedly generated
by Amsted containing ESOP repurchase data from 1987 to 1999, appeared in Levine’s report

under Tab 3. Finally, on January 5, 2004, the day before the deposition of its expert, Joseph


»

No, 01 C2963 Page 2

submitted to Amsted on May 3, 2002, plaintiffs asked for: “Documents provided by either
AMSTED Industries, Inc. or the AMSTED ESOP, to any third-party for use in the

preparation of any stock repurchase obligation feasibility study, analysis, opinion, report

",, and/or projection in connection with, or preparation for, the Varlen merger.” Amsted

: objected to the production of documents generated before 1999, but otherwise complied with
the request. ‘In request no. 55 of their Second Requests for Production made to Amsted on
June 13, 2002, plaintiffs requested: “To the extent not previously produced, a copy of all
documents, data compilations and tangible things that are in your possession, custody or
control that you may use to support any claims or defenses.” Amsted responded that the
“[iJnvestigation continues.” On October 21, 2002, plaintiffs served Amsted with their Third
Requests for Production, in which request no. 59 read: “To the extent not previously
produced, any data, output, report or other analysis generated by, or created with PERLS
software, that it is/was related to or made in conjunction with any stock repurchase obligation
stemming from any corporate acquisition or merger from January 1, 1997 to the present.”
Amsted once again objected to the temporal scope of the request and referred plaintiffs to
previously disclosed documents,

Plaintiffs also made requests for production on LaSalle Bank. On October 9, 2002,
plaintiffs requested “All documents regardless of form, including all documents stored on
magnetic or digital media, provided by Amsted Industries, Inc., and/or the Amsted Industries,
Inc. Employee Stock Ownership Plan (ESOP) to LaSalle Bank, N.A. as Trustee of the Amsted
Industries, Inc. Employee Stock Ownership Plan (ESOP) for its use in serving as trustee of the
Amsted Industries, Inc. Employee Stock Ownership Plan (ESOP) from January 1, 1997 to the

present.” LaSalle stated that it would produce all non-privileged documents responsive to the


IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION
JUAN ARMSTRONG, et al, )
Plaintiffs Dockery
vs. ) No. 01.2963 L 02 2004
" AMSTEAD INDUSTRIES, INC,, et al, }
Defendants. )
MEMO: M OPINION AN E

Plaintiff class brought this action against Amsted Industries, Inc, (Amsted), LaSalle
Bank (LaSalle) and various other defendants for violations of the Employee Retirement Income
Security Act of 1974, 29 U.S.C. § 1001 et seq., (ERISA). Plaintiffs now seek sanctions against
Amsted and LaSalle for discovery abuses, and request that the court strike the opinions of three
of defendants” expert witnesses concerning Amsted’s stock repurchase obligation. Plaintiffs
claim that despite numerous production requests, defendants did not disclose various relevant
documents until after the close of fact discovery and plaintiffs’ submission of their expert
disclosures. Nonetheless, defendants provided these documents to their own experts. Plaintiffs
seek to bar defendants’ use of certain parts of opinions of Robert Gross, Lawrence Levine, and
Joseph Belger. Plaintiffs’ motion for sanctions is denied.

BACKGROUND

After more than sixteen months, fact-discovery in this case closed on August 22, 2003.
Plaintiffs made their expert disclosures on September 5, 2003, and defendants made their
disclosures on December 10, 2003. During discovery, plaintiffs made several production

requests to Amsted and LaSalle. In request no. 51 of their First Requests for Production

7\\0