Opinion ID: 77297
Heading Depth: 3
Heading Rank: 4

Heading: Third Motion for Sanctions and Order to Show Cause

Text: 35 On April 1, 2005, Serra filed a third motion for sanctions that alleged GM failed to produce either complete satellite dealership information or allocation data for all Birmingham-area Chevrolet dealerships. On May 9, 2005, the court issued an order to show cause that directed GM to explain why it should not be sanctioned for failure to comply with the orders entered August 30, 2004, and February 7, 2005, regarding satellite information and allocation data. The order set a hearing for May 16, 2005, and instructed GM to present testimony from any witness with personal knowledge regarding the satellite program. 36 In response to the order to show cause, on May 12 and 13, 2005, GM conducted a manual review of the documents in the 4100 contract files of Chevrolet dealers. GM hired 14 paralegals to search the documents contained in each file manually to ascertain whether the dealer had a satellite dealership that had been missed in the two earlier searches. The search yielded nine additional satellite dealerships, and GM produced those documents to Serra. 37 On May 16, 2005, the district court held a hearing on the order to show cause. After some discussion between the court and counsel for both parties, William Middlekauff, General Director of the Dealer Contractual Group of GM, testified. Among other things, Middlekauff testified regarding the satellite information and the searches performed by GM to obtain and produce the information to Serra. 38 On May 20, 2005, the district court entered an order that found GM in contempt, fined GM $700,000, and struck the affirmative defenses regarding the preclusive effect of the state judgment. The court addressed two issues in the sanction order. After briefly reciting the history of the discovery disputes and court action, the court first addressed the satellite information. The court recounted that this information was ordered to be produced by October 27, 2004, and that, on February 3, 2005, the court verbally held GM in contempt for not producing these documents and ordered GM to purge itself of the contempt by February 17, 2005. The court focused on the testimony of Middlekauff and found the following: (1) Middlekauff did not dispute that GM had not searched for this information until early November 2004; (2) on February 11, 2005, Middlekauff sent an e-mail to regional managers requesting satellite information, and he learned that three satellite dealership had not been disclosed; (3) before this e-mail, the search had been limited to a computer search; (4) GM did not perform a manual search of its files until May 12 and 13, 2005, and this search identified nine additional satellite dealerships; and (5) the dealership file produced to Serra on the Vaden, Georgia, location lacked documents that should be in every satellite file. 39 Second, the court addressed the allocation data. The court found that the failure of GM to retain File B, or weekly allocation, data before November 7, 2001, the date on which GM first began retaining such data, was not discovery abuse. As to the File A, or monthly allocation, data, the court stated that the discovery order dated January 28, 2004, which listed as an area of discovery GM's allocation of vehicles since 2001, required GM to produce vehicle allocation data from all Birmingham dealers, and not only Edwards Chevrolet, as argued by GM. GM retained and produced all File A data for Serra and Edwards Chevrolet, but because of its policy on document retention, GM retained and produced the File A data for the other Birmingham dealers from June 2001 forward. The court found that any destruction of File A data for the period earlier than 36 months prior to [the January 28, 2004] Order was a violation of such Order. The court concluded that GM has made a practice throughout this action of unreasonably narrow interpretations of discovery requests and court Orders. 40 The district court found that GM has engaged in a pattern of disregarding discovery obligations, not responding to discovery requests until ordered to do so, and even then totally disregarding this court's deadlines for complying with its Orders. The court highlighted the fact that GM knew that it had not performed a manual search of its [dealer] files, but chose to rely on its computer search until six (6) days before the end of the period allowed GM to purge itself of contempt, before sending an e-mail to regional managers. The court also stated that [e]ven after the responses to the e-mail established that the computer search was incomplete, GM delayed approximately one (1) month before it undertook the manual search. Finally, the court reasoned that Middlekauff's testimony that the Vaden, Georgia dealership file lacked documents that `would be' in `every' satellite dealership file, calls into question the completeness of GM's production even at this late date. 41 The court concluded that GM did not purge itself of contempt until May 16, 2005, the date on which the latest satellite information was produced. The court calculated that, under the original contempt order, GM was subject to sanctions of $4,900,000 for the 98 days of contempt. Without explanation, the court then limited the monetary sanctions to $700,000, the equivalent of fourteen days of contempt. Additionally, the court stated that in lieu of monetary sanctions, it is more appropriate to impose non-monetary sanctions. Again, without explanation, the court struck the affirmative defenses of res judicata, collateral estoppel, and other related doctrines of issue preclusion. The order also stated that GM will not be permitted to challenge any aspect of Serra's expert's report . . . to the extent that such challenge is based . . . on such expert's lack of information regarding satellite dealerships. 42 GM filed an interlocutory appeal that challenged the sanctions imposed by the district court. GM moved to stay the proceedings while it appealed to this Court, but the district court denied the motion and stated that [t]he Sanctions Order is, unfortunately, mundane in a world where discovery abuse has become common, and refusal to comply with discovery requests, or even discovery Orders, often appears to be a tactical decision made after a cost/benefit analysis by the litigants. The district court concluded that [t]he sanctions imposed were neither harsh nor an abuse of discretion under the circumstances. In other words, this is a garden variety discovery abuse case, and granting the Motion to Stay would place an imprimatur of importance that the issues, and facts, do not warrant. 43 On June 28, 2005, GM deposited $700,000 with the clerk of the district court, and the litigation continued.