Court Opinion

ID: 4110254
Source: CourtListenerOpinion
Date Created: 2016-12-22 17:01:45.186736+00
Date Added: 2024-06-11T14:34:02.084015
License: Public Domain

UNITED STATES DISTRICT COURT
                   FOR THE DISTRICT OF COLUMBIA
___________________________________
                                    )
3E MOBILE, LLC,                     )
                                    )
Plaintiff / Counterclaim Defendant )
                                    )
v.                                  ) Case No. 14-cv-1975 (EGS)
                                    )
GLOBAL CELLULAR, INC.,              )
                                    )
Defendant / Counterclaimant         )
                                    )
___________________________________)

                       MEMORANDUM OPINION

     This matter comes before the Court on Global Cellular

Inc.’s (“Global”) motion to sanction 3E Mobile, LLC (“3E”) for

its failure to comply with its discovery obligations. Due to

3E’s failure to produce documents or respond to certain

interrogatories until months after the close of discovery,

Global asks this Court to treat as established certain facts,

preclude 3E from introducing contrary evidence or argument, and

order 3E to pay Global’s attorneys’ fees. Global Mem. Supp. Mot.

for Sanctions (“Global’s Mem. Supp.”), ECF No. 41 at 1. Upon

consideration of the motion, the response and reply thereto, the

applicable law, and the entire record, Global’s motion will be

GRANTED in part and DENIED in part.

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     I.   BACKGROUND

          A. Procedural History

     3E is a manufacturer of cell phone protective cases and

Global is a provider of cell phone accessories. In 2013, Global

and 3E settled an intellectual property lawsuit that resulted in

a Manufacturing Agreement (“Agreement”) under which Global

promised to make monthly advance payments to 3E in return for

3E’s agreement to manufacture products for Global or source

products from Global’s manufacturers. Global’s Mem. Supp., ECF

No. 41 at 4. Although Global made the required advance payments

during the first six months of the Agreement, 3E failed to

produce any of the products Global ordered. See Mem. Op., ECF

No. 21 at 3. When Global brought 3E’s inaction to the attention

of management, 3E executives advised Global to stop making

payments. Id. Nonetheless, when Global halted the payments, 3E

brought suit claiming that Global breached the Agreement.

Compl., ECF No. 1. Global filed a counterclaim for the payments

it had already made to 3E, citing 3E’s failure to manufacture

the products as required by the Agreement. See Answer and

Countercl., ECF No. 5. On August 11, 2015, this Court denied

3E’s motion to dismiss Global’s counterclaim due to 3E’s

untenable interpretation of the Agreement which would have

allowed 3E to collect Global’s advance payments without

incurring any obligation to produce the products Global ordered.

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Mem. Op., ECF No. 21 at 9. The parties then proceeded to

discovery.

            B. The Parties’ Discovery Efforts

      On September 11, 2015, Global served its first set of

document requests and interrogatories. Global’s Mem. Supp., ECF

No. 41 at 6. After the parties agreed to stay discovery pending

an ultimately unsuccessful mediation, the Court set a fact

discovery deadline of August 24, 2016. See Stipulated Revised

Scheduling Order, ECF No. 33. On April 29, 2016, Global served a

second set of interrogatories and document requests on 3E.

Global’s Mem. Supp., ECF No. 41 at 7. Because 3E changed counsel

before its discovery responses were due, Global agreed to extend

the deadline for 3E to respond to Global’s first and second

rounds of discovery requests to June 2, 2016 and June 3, 2016

respectively. Id. 3E did not respond to either set of discovery

requests by June 3, 2016. Id. at 8. After an extended back and

forth between counsel and repeated time extensions granted by

Global (which 3E consistently ignored), 3E produced written

discovery responses on July 19, 2016 in response to Global’s

first set of discovery requests. 1 Id. at 9. 3E’s corresponding

document production consisted of approximately 115 pages. Id.

Global’s numerous letters inquiring as to 3E’s failure to

1 3E does not dispute that it failed to meet the repeated extensions granted
to it by Global.

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respond to Global’s second set of discovery requests went

unanswered. Id at 10.

     On August 1, 2016, Global filed a motion to compel 3E to

produce all responsive, non-privileged documents and respond to

Global’s second set of interrogatories. Mot. to Compel, ECF No.

38. 3E never filed an opposition and the Court granted the

motion. Minute Entry of December 22, 2016. On August 24, 2016,

fact discovery closed pursuant to the Court’s scheduling order.

At that time, 3E still had not responded to Global’s second set

of discovery requests. Global’s Mem. Supp., ECF No. 41 at 11. On

September 30, 2016, more than a month after the close of

discovery and after all depositions had been conducted, 3E

responded to Global’s second set of discovery requests and

produced 1,151 pages——i.e., over nine times as many pages as 3E

had produced before depositions took place. Id. Global

identified a number of deficiencies in 3E’s untimely production,

including that 3E omitted all email attachments, neglected to

produce specific documents acknowledged in depositions, and

withheld “confidential” but non-privileged documents that should

have been produced pursuant to the protective order governing

this case. Id. at 12-14. In an effort to remedy these

deficiencies, 3E made a supplemental production of 597

additional pages on November 11, 2016. See Letter of Nov. 11,

                                4
2016, ECF No. 45-1; Global’s Mot. for Oral Hearing, ECF No. 46

at 1.

     As a result of 3E’s actions, Global asks the Court to: (1)

order 3E to pay Global’s attorneys’ fees related to its motion

to compel and motion for sanctions; (2) treat certain facts as

established; and (3) preclude 3E from introducing contrary

evidence or argument. Global’s Mem. Supp., ECF No. 41 at 1-2.

     II.   LEGAL STANDARDS

           A. The Court’s Power to Sanction Discovery Misconduct

     “[D]istrict court judges enjoy wide discretion in managing

the discovery process.” Shatsky v. Syrian Arab Republic, 312

F.R.D. 219, 223 (D.D.C. 2015)(quotation marks omitted). The

Federal Rules of Civil Procedure provide federal courts with the

authority to police the parties’ conduct during discovery. In

particular, Rule 37(b) authorizes federal courts to impose

sanctions when a party fails to obey a discovery order.

Fed.R.Civ.P. 37(b). Authorized sanctions under Rule 37 include,

but are not limited to, designating facts as established for the

purpose of the action, entering a default judgment, and ordering

the payment of attorney’s fees and expenses. Id. In situations

where a party has committed discovery abuses but Rule 37 does

not apply, a court may issue appropriate sanctions under its

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inherent power. Shepherd v. Am. Broadcasting Cos., Inc., 62 F.3d

1469, 1474 (D.C. Cir. 1995). 2

      The Court of Appeals for the District of Columbia Circuit

divides sanctions into two categories: penal sanctions and

issue-related sanctions. Id. at 1478. “When selecting the

appropriate sanction, the Court must properly calibrate the

scales to ensure that the gravity of an inherent power sanction

corresponds to the misconduct.” Davis v. D.C. Child & Family

Servs. Agency, 304 F.R.D. 51, 60 (D.D.C. 2014). The choice of an

appropriate sanction is “necessarily a highly fact-based

determination based on the course of the discovery process

leading up to the sanction[.]” Bonds v. D.C., 93 F.3d 801, 804

(D.C. Cir. 1996). A court’s use of its power to sanction

misconduct “should reflect our judicial system’s strong

presumption in favor of adjudication on the merits.” Shepherd,

62 F.3d at 1475.

            B. Penal Sanctions

      Penal sanctions include dismissals, default judgments,

contempt orders, awards of attorneys’ fees, and imposition of

fines. For those sanctions that “are fundamentally penal –

dismissals and default judgments, as well as contempt orders,

2 This power also authorizes courts to enter a default judgment, impose fines,

award attorneys’ fees and expenses, issue contempt citations, disqualify or
suspend counsel, permit adverse evidentiary determinations, and preclude the
admission of evidence. Johnson v. BAE Sys., Inc., 307 F.R.D. 220, 224 (D.D.C.
2013).

                                      6
awards of attorneys’ fees, and the imposition of fines – the

district court must find clear and convincing evidence[ ] of the

predicate misconduct.” Id. at 1478. With regard to the Court’s

ability to use its inherent power to award attorneys’ fees and

impose fines, the Court must find clear and convincing evidence

of bad faith. Parsi v. Daioleslam, 778 F.3d 116, 131 (D.C. Cir.

2015). Bad faith “may be found where a party, confronted with a

clear statutory or judicially-imposed duty towards another, is

so recalcitrant in performing that duty that the injured party

is forced to undertake otherwise unnecessary litigation to

vindicate plain legal rights.” Am. Hosp. Ass’n v. Sullivan, 938

F.2d 216, 220 (D.C. Cir. 1991) (quotation marks omitted).

          C. Issue-Related Sanctions

     Issue-related sanctions include adverse evidentiary

determinations——such as adverse findings of fact, considering an

issue established for the purpose of the action and adverse

inferences——and precluding the admission of evidence. Shepherd,

62 F.3d at 1475. A court can impose issue-related sanctions

after finding by a preponderance of the evidence that the

alleged misconduct occurred. Id. at 1478(reasoning that issue-

related sanctions are “fundamentally remedial rather than

punitive” and can be imposed “whenever a preponderance of the

evidence establishes that a party’s misconduct has tainted the

evidentiary resolution of the issue”).

                                7
     With regard to the misconduct giving rise to the sanction,

courts have routinely found that an adverse inference

instruction is appropriate when a preponderance of the evidence

establishes that the conduct was negligent. See, e.g.,

Residential Funding Corp. v. DeGeorge Fin. Corp., 306 F.3d 99,

108 (2d Cir. 2002)(reasoning that the “culpable state of mind”

factor for adverse evidentiary determination is satisfied by

showing that evidence was destroyed either knowingly or

negligently “because each party should bear the risk of its own

negligence”)(citations omitted); Chen v. District of Columbia,

839 F. Supp. 2d 7, 12 (D.D.C. 2011) (“To justify the issuance of

an adverse inference instruction, the spoliation of evidence

need not be purposeful . . . negligent spoliation may

suffice.”)(citations omitted). Although penal and issue-related

sanctions are distinct categories, an issue-related sanction can

operate as a penal sanction. For example, precluding the only

source of evidence available in support of a dispositive issue

operates as a dismissal, even though it is nominally an

evidentiary sanction. See Shepherd, 62 F.3d at 1479.

Accordingly, a court should assess the practical effect of the

sanction when determining which sanction is appropriate.

Johnson, 307 F.R.D. at 225.

                                8
     III. ANALYSIS

     Global asks this Court to impose both penal and issue-

related sanctions. According to Global, 3E’s “pattern of delay

and intransigence” warrant the award of attorneys’ fees, the

establishment of certain facts, and the preclusion of 3E from

introducing contrary evidence or argument. Global’s Mem. Supp.,

ECF No. 41 at 1-3. Specifically, Global requests that the Court

establish:

     i.   In February 2014, 3E adopted a new procedure for
          Global to place orders with 3E under the Manufacturing
          Agreement. Under that new process, Global was to send
          orders to its own suppliers, but copy 3E on those
          communications. By copying 3E, Global in fact placed
          an order with 3E, and 3E then had an obligation to
          fill the order itself;
    ii.   Global placed hundreds of product orders with 3E under
          this process; and
   iii.      3E failed to fill those orders repeatedly and thus
             repeatedly failed to live up to its obligations under
             the Manufacturing Agreement.

     Id. at 16. Global contends that such sanctions are

appropriate because 3E had ample time to collect and produce the

documents Global requested, the documents produced after the

close of discovery relate to key issues in the case, and Global

has been prejudiced by 3E’s conduct. Id. at 2, 17, 20. According

to Global, the facts it requests the Court to establish are

“facts that those [late] documents would have shown if produced

on time[.]” Global’s Reply Mot., ECF No. 44 at 7. 3E does not

dispute that its productions were untimely and thus in violation

                                   9
of the Court’s May 25, 2016 scheduling order. 3E’s Opp’n, ECF

No. 43 at 8 (“3E is not claiming to have performed perfectly

throughout discovery”). Instead, 3E argues that its misconduct

does not rise to the level where sanctions are proper. Id. For

the reasons stated below, the Court finds that sanctions are

appropriate here, but in the form of attorneys’ fees rather than

issue-related sanctions.

          A. Issue-Related Sanctions Are Not Appropriate.

     A court may impose issue-related sanctions “after finding

by a preponderance of the evidence that the alleged misconduct

occurred.” Johnson, 307 F.R.D. at 225. Here, this standard is

clearly met since 3E does not dispute that its productions were

untimely. 3E’s Opp’n, ECF No. 43 at 8. Nonetheless, this Court

is reminded that it “should keep in mind the practical effect of

its sanction when determining whether that sanction is

appropriate.” See Johnson, 307 F.R.D. at 225. Specifically,

“[w]hen considering possible penalties, the Court must remain

cautious that any alternative sanctions ordered in lieu of

dismissal [do] not effectively amount to a default judgment.”

Davis, 304 F.R.D. at 62 (citing Hildebrandt v. Vilsack, 287

F.R.D. 88, 97 (D.D.C. 2012))(quotation marks omitted).

     Here, the Court finds that the issue-related sanctions

Global seeks would be the functional equivalent of a dismissal.

The crux of the underlying dispute in this case is whether

                               10
either party breached the Manufacturing Agreement. Were the

Court to grant as established that “3E adopted a...procedure for

Global to place orders...under the Manufacturing Agreement” and

“3E failed to fill...orders repeatedly and thus repeatedly

failed to live up to its obligations under the Manufacturing

Agreement[,]” the case would, for all intents and purposes,

amount to summary judgment in Global’s favor. Put differently,

the Court, by adopting Global’s proposed facts, would

essentially establish that 3E breached the Agreement. “[A]

discovery sanction that results in a one-sided trial...is a

severe one” and before imposing such a sanction, the Court

“should consider a less drastic [option].” Bonds, 93 F.3d at

809; see also Outley v. City of New York, 837 F.2d 587, 591 (2d

Cir. 1988) (“Before the extreme sanction of preclusion may be

used by the district court, a judge ... must consider less

drastic responses.”). The Court does not find that precluding 3E

from introducing contrary evidence or argument is appropriate

when, as detailed below, alternative and less severe sanctions

are available, and when that evidence may be critical to

adjudicating the merits of 3E’s claims. 3

3 Global relies on a three-prong test employed by the Southern District of New
York to argue that 3E’s misconduct warrants issue-related sanctions. ECF 41
at 16-18 (citing Short v. Manhattan Apartments, Inc., 286 F.R.D. 248, 252
(S.D.N.Y. 2012)). Not only does Global fail to demonstrate that the same test
applies in this Circuit, but even if this Court were to adopt that test, it
would reach the same conclusion since Global has not shown that 3E had “a
culpable state of mind.” See Short, 286 F.R.D. at 252. According to the Short

                                      11
      Further, 3E correctly points out that the cases on which

Global principally relies to justify issue-related sanctions are

factually distinguishable and generally concern more flagrant

misconduct. See, e.g., Johnson, 307 FRD at 222-224 (imposing

sanctions where party falsified medical records and counsel

failed to certify discovery requests and conduct a reasonable

inquiry to assess accuracy); Shepherd, 62 F.3d at 1479-80

(discussing appropriateness of sanctions where party altered a

document and harassed potential witnesses); Parsi, 778 F.3d at

133 (affirming sanctions where party denied the existence of

documents and disobeyed court orders to produce certain

material). Here, Global does not contend that 3E intentionally

destroyed, falsified or tampered with evidence. See generally

Global’s Mem. Supp., ECF No. 41. Rather, 3E has simply failed to

produce responsive documents in a timely manner. Global has not

cited any cases in this Circuit granting issue-related sanctions

for a late document production in the absence of additional and

more flagrant misconduct. 4 Id.; see also Reply Mot., ECF No. 44

court, the party seeking the issue-related sanction must show: “(1) that the
party having control over the evidence had an obligation to timely produce
it; (2) that the party that failed to timely produce the evidence had a
culpable state of mind; and (3) that the missing evidence is relevant to the
party's claim or defense such that a reasonable trier of fact could find that
it would support that claim or defense.” Id. (quotation marks omitted).
4 The Court also notes that other courts have neglected to impose issue-

related sanctions in cases involving document productions that were
significantly more untimely than 3E’s late production. See e.g., Williams v.
Saint-Gobain Corp., No. 00 Civ. 502, 2002 WL 1477618, at *2 (W.D.N.Y. June
28, 2002) (holding that there was no basis for adverse inference instruction
for failure to produce e-mails until five days before trial).

                                      12
at 5. For all of these reasons, Global’s requests for issue-

related sanctions are hereby DENIED.

          B. Monetary Sanctions are Warranted.

     While issue-related sanctions may not be proper here, the

Court will not reward 3E for blatantly flouting the Court’s

scheduling order and producing over ninety percent of its

documents months after discovery had closed and depositions

concluded. The Court concludes that monetary sanctions in the

amount of Global’s attorneys' fees incurred during the

preparation of its motion to compel and motion for sanctions are

the just penalty for 3E’s discovery violations. Imposing penal

sanctions, such as attorneys’ fees, requires a court to find by

clear and convincing evidence that the alleged misconduct

occurred, see Johnson, 307 FRD at 224-225, a standard met by

3E’s admission that its productions were untimely. See 3E’s

Opp’n, ECF No. 43 at 8. 3E’s discovery conduct has resulted in

the late production of at least 1,748 pages of additional

documents——over fourteen times more pages than 3E produced in

advance of depositions——and has significantly disrupted the

progress of this litigation. The Court recognizes that 3E

produced for the first time as recently as November 11, 2016,

the email attachments to the documents it had previously

produced. Letter of Nov. 11, 2016, ECF No. 45-1. While 3E had

the benefit of Global’s timely productions when preparing for

                               13
depositions, 3E’s sparse pre-deposition production confined

Global to a mere cross-section of potentially responsive

documents. Global has not only incurred unnecessary costs by

having to file a motion to compel and motion for sanctions as a

result of 3E’s failure to fulfill its discovery obligations, but

Global will also incur additional expenses if it decides to re-

depose witnesses using 3E’s newly-produced documents. See Am.

Hosp., 938 F.2d at 219-20 (reasoning that monetary sanctions are

warranted where a party “is so recalcitrant in performing [its]

duty that the injured party is forced to undertake otherwise

unnecessary litigation to vindicate plain legal rights”). As in

Davis, 3E has “missed or ignored discovery deadlines, not

provided appropriate documentation or answers to discovery

requests, and generally failed to comply with the Federal Rules

of Civil Procedure.” 304 F.R.D. at 60 (concluding that monetary,

and not issue-related sanctions, were appropriate). The Court

finds that monetary sanctions will most appropriately serve the

punitive and remedial purposes of discovery sanctions and

preserve the case for adjudication on the merits. Accordingly,

3E is ordered to pay Global the attorneys' fees it incurred

during the preparation of its motion to compel and motion for

sanctions, the exact amount to be determined by a fee petition

that Global shall present to the Court within ten days of this

Order.

                               14
     3E is advised that its failure to comply with discovery

moving forward can and will result in more drastic sanctions

than paying attorneys' fees. The Court will reopen discovery in

this matter for the narrow purpose of permitting Global to re-

depose witnesses based on information gleaned from the documents

3E produced after the discovery deadline.

     IV.   CONCLUSION

     For the foregoing reasons, Global’s Motion for Sanctions is

GRANTED in part and DENIED in part. The Court does not impose

any issue-related sanctions but ORDERS monetary sanctions in the

form of the attorneys’ fees Global incurred in connection with

its motion to compel and motion for sanctions. The value of this

sanction shall be determined by a fee petition that Global shall

file within 10 days of this Order. The Court also ORDERS that

discovery will be reopened until February 28, 2017 for the

limited purpose of allowing Global to re-depose witnesses based

on information gleaned from the documents 3E produced after the

discovery deadline. An appropriate Order accompanies this

Memorandum Opinion, filed this same day.

     SO ORDERED.

Signed:    Emmet G. Sullivan
           United States District Judge
           December 22, 2016

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