Opinion ID: 77297
Heading Depth: 2
Heading Rank: 1

Heading: Whether the District Court Abused Its Discretion to Impose Sanctions?

Text: 47 Rule 37(b), Federal Rules of Civil Procedure, provides that a district court may impose sanctions for failure to comply with discovery orders. Ins. Corp. of Ireland v. Compagnie des Bauxites de Guinée, 456 U.S. 694, 695, 102 S.Ct. 2099, 2100, 72 L.Ed.2d 492 (1982); see Fed.R.Civ.P. 37(b). One of the sanctions a district court may impose under Rule 37 is an order treating as a contempt of court the failure to obey any orders. Id. The court may also penalize uncooperative attorneys or parties litigant in discovery proceedings by requiring the payment of `reasonable expenses, including attorney's fees, caused by the failure. . . .' Carlucci, 775 F.2d at 1453 (quoting Fed.R.Civ.P. 37(b)). 48 Courts . . . have embraced an inherent contempt authority that encompasses the ability to impose civil and criminal contempt. Int'l Union, United Mine Workers of Am. v. Bagwell, 512 U.S. 821, 831, 114 S.Ct. 2552, 2559, 129 L.Ed.2d 642 (1994). [A] contempt sanction is considered civil if it `is remedial, and for the benefit of the complainant. But if it is for criminal contempt the sentence is punitive, to vindicate the authority of the court.' Id. at 827-28, 114 S.Ct. at 2557 (quoting Gompers v. Bucks Stove & Range Co., 221 U.S. 418, 441, 31 S.Ct. 492, 498, 55 L.Ed. 797 (1911)). Civil contempt may be imposed in an ordinary civil proceeding upon notice and an opportunity to be heard. Id. A finding of a failure to comply with discovery orders is a finding of civil contempt. Id. at 833, 114 S.Ct. at 2560. 49 The district court found GM in contempt for failure to produce two categories of discovery. The district court found that GM failed to produce allocation data from all Birmingham dealers from January 2001 forward in violation of its orders on August 27, 2004, and February 3, 2005. The district court also found that GM failed to produce satellite information in violation of the same orders. We first address the allocation data and then address the satellite information.
50 The district court held GM in civil contempt and sanctioned GM for its failure to obey the order of the court to produce File A, or monthly allocation, data from Chevrolet dealers in the Birmingham area, excluding Serra and Edwards Chevrolet, from January 1, 2001, until June 1, 2001. GM argues that the district court abused its discretion because (1) the data is not important and GM was justified for not retaining the information, (2) the district court made an important factual error, and (3) the issue is really one of spoliation, not violation of a discovery order. We agree that the district court abused its discretion for two reasons. 51 First, the finding of the district court that the production was deficient by six months is not fully supported by the record. BankAtlantic, 12 F.3d at 1048 (citation omitted). The district court ignored the admission by Serra that limited its misallocation claim to the period beginning April 16, 2001, when the state court litigation between Serra and GM ended. Serra stated that GM's acts and omissions after the state court litigation are the basis for its misallocation claim (emphasis added). Although the district court, in its January 28, 2004, order, permitted discovery on the misallocation of vehicles since 2001, Serra specifically limited its misallocation claim in an admission on June 2, 2004, almost three months before the August 27, 2004, hearing. The admission rendered irrelevant any allocation data from January 1, 2001, through April 16, 2001. See Fed. R.Civ.P. 26(b)(1). The production by GM, therefore, was deficient by six weeks of data, not six months. 52 Second, the district court misquoted the January 28, 2004, order that permitted discovery on certain outlined topics. The sanction order incorrectly stated that the court ordered discovery on GM's allocation of vehicles since 2001, when, in fact, the January 28, 2004, order permitted discovery on GM's misallocation of vehicles since 2001. The distinction between allocation and misallocation is material because the misallocation claim related to an alleged favoritism solely towards Edwards Chevrolet over Serra. 53 GM objected to the request by Serra for allocation data for other Chevrolet dealers. GM contended that the misallocation data in the discovery order required the production of only the allocation data for Serra and Edwards, not for other Chevrolet dealers in Birmingham. The January 28, 2004, discovery order did not foreclose that argument by GM and instructed the parties to seek assistance from the court if disputes arose. 54 After GM objected, Serra filed a motion to compel discovery, and GM lost the argument. On August 27, 2004, the district court ordered GM to produce the allocation data for all Birmingham dealers from January 2001 forward, but under the retention policy of GM, the data from January 2001 until June 2001 regarding other Chevrolet dealers in Birmingham had been destroyed. When ordered to produce the data on August 27, 2004, GM complied and produced all that it had — allocation data from June 2001 forward. GM could not produce what it did not possess. Although the destruction of the documents by GM may have required the district court to engage in a spoliation analysis under Alabama law, see Wal-Mart Stores, Inc. v. Goodman, 789 So.2d 166, 176 (Ala.2000), the district court abused its discretion when it held GM in civil contempt and imposed sanctions for the failure by GM to obey the order of the district court to produce documents GM did not possess. See Pesaplastic C.A., 799 F.2d at 1520 (A party held in contempt may defend his failure to obey a court's order on the grounds that he was unable to comply.). 55 We also note that the parties now agree that the spoliation issue is moot. After this appeal was filed, on September 2, 2005, GM filed in the district court a notice of production, which informed the district court that the allocation data, dated January 1, 2001, until June 1, 2001, thought to have been destroyed, had actually been retained by a third party. GM produced the data to Serra on September 1, 2005.
56 The district court also held GM in civil contempt for the failure by GM to obey the August 27, 2004, order to produce documents relating to all satellite dealerships. GM contends that the district court abused its discretion because (1) GM performed reasonable searches in response to the order by the district court, (2) the order was not sufficiently clear to support a finding of contempt, and (3) the finding was based in part on clearly erroneous factual findings. After a thorough review of the record, we reject the arguments made by GM and conclude that the district court did not abuse its discretion when it held GM in civil contempt for its failure to produce the satellite information as ordered on August 27, 2004, and February 3, 2005. 57 On August 27, 2004, the district court clearly ordered GM to produce all documents [c]reating, evidencing, terminating, implementing, continuing the satellite program. The court was unambiguous: If it has to do with the satellite program, and it's a document, then you need to produce it. When GM suggested that the order required GM to contact[ ] the hundred and fifty or so zone managers across the country, the district court replied, I suggest you contact your hundred and fifty zone managers . . . . And then you produce the documents . . . that relate to the satellite. The district court stressed that GM must produce any GM satellite as to any document that's within the scope of their request. The court gave GM 60 days to produce the documents. 58 GM failed to produce any documents relating to satellite agreements by the deadline prescribed by the court. Instead, on October 29, 2004, 62 days after the order by the district court to produce the information, GM produced a list of 23 dealerships that had active satellite agreements and their locations. On November 11, 2004, GM supplemented its responses with 12 additional names and locations of dealerships with terminated satellite agreements. Even this late production by GM did not comply with the August 27, 2004, order. GM did not provide any documents. . . that relate[d] to the satellite dealerships, as ordered by the district court. Instead, it produced a list of the names and locations of the satellite dealerships. 59 GM argues that the August order and discovery requests required it to produce only a list of satellite dealerships. GM contends that the district court ordered it to produce documents within the scope of the discovery requests, and the only requests that asked for documents referenced a satellite program, which GM contends does not exist. GM argues that it produced the list of satellite dealerships, as requested, but did not provide any documents because GM has never had a satellite program. The problem for GM is that it did not make this argument to the district court during the August 27, 2004, hearing and the district court rejected this argument in the February 3, 2005, hearing. 60 The district court unambiguously instructed GM to produce all documents in its possession that related to satellite dealerships. Moreover, the record is clear that GM understood, at the August 27, 2004, and the February 3, 2005, hearings, what the district court ordered it to produce. Any argument to the contrary is unsupported by the record. 61 After GM produced the documents found in the search from the telephone calls, counsel for Serra repeatedly contacted counsel for GM regarding the failure to produce information regarding satellite dealerships that GM representatives testified existed in their depositions. Although Serra outlined alleged deficiencies in the production, the record does not reflect that GM took any action in response to these alleged deficiencies. When the district court issued an order to show cause why GM should not be sanctioned for the failure to comply with the earlier orders, GM finally undertook a manual search of its 4100 Chevrolet dealer files, which yielded nine undisclosed satellite dealerships and, on May 16, 2005, produced those additional documents. Only after this manual search could GM have known that the list was finally complete — seven and a half months after GM was ordered to produce the documents. 62 Although GM argues that the district court sanctioned GM because it failed to perform a manual search in the first instance, the factual record belies this assertion. GM contemplated that a manual search would be necessary to identify the requested documents during the August 27, 2004, hearing. If GM was unclear about the scope of the discovery request or the August 27, 2004, order, GM was obliged to request clarification from the court; it was not free to ignore the Order [of the district court] and to impose [its] own interpretation of the order. Carlucci, 775 F.2d at 1448 (citations omitted). 63 Although GM should have understood the scope of the discovery order following the August 27, 2004, hearing, any doubts GM had about the scope of discovery should have disappeared by February 3, 2005, when the district court found the production was deficient and threatened sanctions for failing to provide documents in its possession and control relating to specific satellite dealerships. The district court gave GM 14 days to cure the deficiencies, but GM did not perform a manual search until more than three months later, on May 12, 2005. It was not an abuse of discretion for the district court to conclude that the failure of GM to produce documents about satellite dealerships was due to contumacy rather than good faith misinterpretation.