Bonzani v. Shinseki et al

Filing 80

ORDER signed by Magistrate Judge Edmund F. Brennan on 1/8/2014 ORDERING 70 Motion to modify the scheduling order is GRANTED; Defendants' 70 Motion for Rule 37(c)(1) sanctions is GRANTED in part and DENIED in part; the 11/18/2011 scheduling order is MODIFIED to permit defendants to conduct discovery relating to the issue of plaintiff's damages; Defendants' discovery on this issue shall be completed by 6/30/2014; any motion to compel under this revision must be noticed on the u ndersigned's calendar in accordance with Local Rules and must be heard not later than 6/4/2014; this revision does not reopen discovery for the plaintiff; Plaintiff shall REIMBURSE defendants for the costs and reasonable expense incurred in brin ing this motion; within 14 days of the date of this order, defendants shall file a declaration identifying the reasonable expenses incurred; any response shall be filed within 7 days thereafter; all dates theretofore set are VACATED; the court sets a supplemental Pretrial Conference on 8/6/2014 at 10:00 a.m. in Courtroom 8 (EFB) before Magistrate Judge Edmund F. Brennan; the parties may file a joint supplement pretrial statement not later than 7/23/2014. Failure to comply with this order and/or continued failures to comply with the Local Rules and/or Federal Rules of Civil Procedure may result in imposition of sanctions, including monetary sanction, evidentiary sanctions, and/or dismissal of this action.(Waggoner, D)

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UNITED STATES DISTRICT COURT

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FOR THE EASTERN DISTRICT OF CALIFORNIA

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MATTHEW BONZANI,

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No. 2:11-cv-0007-EFB

Plaintiff,
v.

ORDER

ERIC K. SHINSEKI, Secretary of Veterans
Affairs; SCOTT HUNDAHL, M.D.,
Defendants.

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This matter was before the court on December 18, 2013, for hearing on defendants’

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motion to modify the scheduling order and for imposition of sanctions pursuant to Federal Rule of

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Civil Procedure (“Rule”) 37(c)(1). ECF No. 70. Attorney Joanne DeLong appeared on behalf of

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plaintiff; attorney Lynn Ernce appeared on behalf of defendants.

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Defendants previously raised the issue of Rule 37 sanctions in the context of a motion for

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summary judgment which included an argument that pursuant to Rule 37(c)(1) plaintiff should

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not be able to recover damages, because of his repeated violations of Rule 26(a), except for lost

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wages for a two week period when plaintiff was unemployed after leaving the Sacramento VA

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Medical Center. ECF No. 42-1 at 53-57. The order denying summary judgment also denied,

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without prejudice, the request to preclude damages beyond the two weeks of lost wages. ECF

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No. 63 at 24-25 n.13. The order explained that pursuant to the court’s scheduling order, all
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discovery disputes were to be resolved by August 31, 2012. Id.; see ECF No. 32 at 3.

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Defendants had not sought modification of the scheduling order to allow hearing on the motion

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for sanctions pursuant to Rule 37(c)(1) and therefore the motion was denied without prejudice.

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Defendants were informed that they could renew the motion together with a motion seeking

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modification of the court’s scheduling order pursuant to Rule 16(b)(4). Defendants have renewed

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the request and have addressed the Rule 16 standards for extending the discovery cutoff deadline

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for hearing discovery-related motions.

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For the reasons stated on the record, the court finds good cause for modifying the
scheduling order, and considers defendants’ Rule 37(c)(1) motion for sanctions on the merits.

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However, for the reasons stated at the hearing the court declines to impose evidentiary sanctions

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but instead imposes monetary sanctions. The court further modifies the schedule to permit

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defendants to conduct all discovery they would have conducted had plaintiff complied with the

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discovery rules.

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I.

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RELEVANT FACTS
The crux of defendants’ Rule 37 motion is their contention that plaintiff failed to provide a

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calculation of damages or identify and make available any supporting documents. The facts

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pertinent to the motion are essentially undisputed. On December 15, 2011, plaintiff provided

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defendants his initial disclosures pursuant to Rule 26(a). Defs.’ Exs. ISO Mot. for Sanctions,

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ECF No. 70-2 at 11-14 (Ex. B). The initial disclosures identified two categories of damages, lost

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wages and lost benefits, including Federal Employee Retirement System benefits (“FERS”). Id.

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at 14. Under each category of damages, plaintiff stated that computation of damages could not be

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quantified without further discovery. Id. On December 20, 2011, defendants emailed plaintiff to

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inform him that his disclosures were deficient because he had failed to include a computation of

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damages. Id. at 16-17 (Ex. C). On December 23, 2011, plaintiff responded to the December 20

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email, stating that [a]lthough I could come up with a rough estimate of lost wages, I thought it

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would be wiser to get the actual pay data and calculate a specific number.” Pl.’s Opp’n to Defs.’

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Mot. for Sanctions, ECF No. 73-1 (Ex. A).

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In plaintiff’s January 3, 2012 supplemental disclosures, he stated that his net biweekly pay

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was $6,048.63, but that “[h]is gross pay is the true measurement of [lost wages], and that amount

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will be quantified when Plaintiff’s discovery requests have been answered.” ECF No. 70-2 at 22

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(Ex. D). He again stated that he would be seeking damages for lost benefits, including FERS, but

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that computation of lost benefits could not be quantified without further discovery. Id. Plaintiff’s

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February 28, 2012 second supplemental disclosures did provide a calculation for lost wages, but

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again stated he could not calculate lost benefits without further discovery. Id. at 27 (Ex. E).

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On August 15, 2012, defendants deposed plaintiff. During the deposition, defendants’
counsel asked plaintiff if he had “some kind of estimate as to what you think the retirement

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benefits are that are owed to you in this lawsuit.” Id. at 35 (Ex. F). Plaintiff’s answer was no. Id.

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Plaintiff’s counsel, however, stated that plaintiff would be offering an expert that will provide a

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computation for retirement benefits. Id. Plaintiff’s August 31, 2012 third supplemental

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disclosures also stated plaintiff’s intention to offer an expert witness who would calculate the

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damages for plaintiff’s lost retirement benefits. Id. at 42 (Ex. G).

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Although all discovery in this action was to be completed by August 31, 2012, ECF No.

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32 at 3, plaintiff waited until September 14, 2012, to provide defendants with his expert report,

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which revealed that plaintiff was seeking $675,238 in total damages, ECF No. 70-2 at 64 (Ex. J).

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On October 2, 2012, defendants emailed plaintiff to inform him that his expert had relied on

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documents that had not previously been produced or disclosed, including plaintiff’s employment

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agreement and shareholder report from his current employer, and W-2 forms showing his income

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after he left the VA. Id. at 80-81 (Ex. K). Defendants informed plaintiff that not only should

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these documents have been provided in his initial disclosures, but they were also directly

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responsive to a number of defendants’ discovery requests. Id.

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Although time for conducting discovery had closed, in his fourth supplemental

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disclosures, plaintiff provided defendants with the documents his expert relied upon in calculating

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lost benefits. Id. at 87 (Ex. L).

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Defendants now request that plaintiff be precluded from introducing evidence at trial

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relating to damages for lost benefits based on plaintiff’s failure to timely provide defendants with

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a calculation for each category of damages as required by Rule 26(a).

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II.

RULE 37(c)(1) MOTION

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Rule 26 requires a party to make certain initial disclosures “without awaiting a discovery

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requests.” Fed. R. Civ. P. 26(a)(1)(A). The rule expressly requires that plaintiff provide to other

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parties “a computation of each category of damages claimed by the disclosing party.” Fed. R.

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Civ. P. 26(a)(1)(A)(iii). The plaintiff is also required to “make available for inspection and

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copying . . . the documents or other evidentiary material . . . on which each computation is

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based.” Id. Rule 26(e) creates an obligation for parties to supplement the information disclosed

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under Rule 26(a) in a timely manner, including its computation of damages. Fed. R. Civ. P.

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26(e). “Rule 26 does not elaborate on the level of specificity required in the initial damages

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disclosure. However, cases have held that the computation of damages required by Rule

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26(a)(1)(C) contemplates some analysis; for instance, in a claim for lost wages, there should be

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some information related to hours worked and pay rate.” Maharaj v. California Bank & Trust,

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288 F.R.D. 458, 463 (E.D. Cal. 2013) (internal quotation marks and citations omitted) (quoting

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City & Cnty. of San Francisco v. Tutor-Saliba Corp., 218 F.R.D. 219, 220 (N.D. Cal. 2003)).

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Rule 37(c)(1) provides that where a party fails to provide the information “required by

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Rule 26(a) or (e), the party is not allowed to use that information or witness to supply evidence on

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a motion, at a hearing, or at a trial, unless the failure was substantially justified or is harmless.”

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Fed. R. Civ. P. 37(c)(1). The burden of showing that the failure to disclose was substantially

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justified or harmless lies with the party facing sanctions. R & R Sails, Inc. v. Insurance Co. of

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Pennsylvania, 673 F.3d 1240, 1246 (9th Cir. 2012). “Rule 37(c)(1) gives teeth to these

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requirements by forbidding the use at trial of any information required to be disclosure by Rule

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26(a) that is not properly disclosed.” Hoffman v. Constr. Protective Servs. Inc., 541 F. 3d 1175,

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1179 (9th Cir. 2008).

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Rule 37(c)(1) sanctions have been described “as a self-executing, automatic sanction to
provide a strong inducement for disclosure of material.” Yeti by Molly, Ltd. v. Deckers Outdoor
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Corp., 259 F.3d 1101, 1106 (9th Cir. 2001). Nevertheless, district courts have great discretion in

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deciding whether to issue sanctions under Rule 37(c)(1). Id. (“[A]lthough we review every

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discovery sanction for an abuse of discretion, we give particularly wide latitude to the district

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court’s discretion to issue sanctions under Rule 37(c)(1)”). In exercising that discretion here the

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court is also guided by the requirement that where imposing a Rule 37(c)(1) sanction amounts to

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dismissal of a claim, the court is required to consider whether noncompliance involved

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willfulness, fault, or bad faith, and also the availability of lesser sanctions. R & R Sails, 673 F.3d

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at 1247-48; see also Design Strategy, Inc. v. Davis, 469 F.3d 284, 296 (2d Cir. 2006) (requiring a

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district court to consider the possibility of a continuance in determining whether to impose

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sanctions under Rule 37(c)(1)).
As stated at the December 18, 2013 hearing, the evidence before the court establishes that

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plaintiff violated Rule 26(a) and (e). Plaintiff was first put on notice that his initial disclosures

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did not contain a computation of damages as required by Rule 26(a)(1)(A)(iii) on December 20,

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2011. ECF No. 70-2 at 16-17 (Ex. C). Because plaintiff failed to supplement his initial

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disclosures with a computation of damages, on August 15, 2012, during plaintiff’s deposition,

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defendants’ counsel specifically asked plaintiff if he had any information regarding the damages

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he sought for lost benefits. Id. at 35 (Ex. F). Defendants were only notified that a calculation to

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be completed by an expert would be forthcoming. Id. However, it was not until September 14,

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2012, after the close of discovery, that plaintiff provided an expert report disclosing that he was

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seeking more than $675,000 in damages. Id. at 64 (Ex. J). In calculating this figure, the expert

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relied on documents that were not provided to defendants notwithstanding plaintiff’s obligation to

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“make available for inspection and copying” the documents used in calculating damages and the

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Rule 26(e)’s requirement that plaintiff supplement his initial disclosures in a timely manner. Id.

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at 64 (Ex. J), 80-81 (Ex. K).

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Plaintiff waited nearly nine months from the time he was first notified by defendants that

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his initial disclosures were deficient. By the time plaintiff provided defendants with a calculation

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for damages, the discovery cut-off date had passed and defendants were precluded from

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conducting additional discovery on this issue. Plaintiff’s failure to timely provided any
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information concerning the calculation of his lost-benefits damages until after discovery had

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closed is a violation of Rule 26(a) and (e).

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Further, the court cannot find that the violation was substantially justified. Plaintiff was

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given adequate notice that his initial disclosures were deficient. Notwithstanding his assurances

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that the computation would be forthcoming, plaintiff was not diligent in providing defendants

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with the requested information. At the hearing, plaintiff argued that he was not able to produce a

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calculation of damages at an earlier time because more discovery was needed to compute

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plaintiff’s lost-benefits damages. Even if this were true, there is no explanation for why plaintiff

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did not disclose and make available to defendants the documents that his expert intended to use in

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calculating damages. Plaintiff disregarded his obligation to supplement his initial disclosures, see

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Fed. R. Civ. P. 26(e), and only supplied the documents relied upon by his expert after defendants

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notified him that these documents were never provided, see ECF No. 70-2 at Exs. J, K, L. The

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court cannot find any justification for these failures to comply with the disclosure rules.

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Furthermore, the violation was not harmless. Defendants’ counsel’s declaration states that

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had she “known that plaintiff was seeking to recover a lifetime of actual retirement benefits and

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not just make-up contributions into the FERS system, among other things, [she] would have

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conducted additional discovery into plaintiff’s finances and would have subpoenaed records from

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plaintiff’s current employer regarding his salary and benefits, including any retirement benefits,

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and [she] would have asked plaintiff questions about his non-VA retirement benefits in written

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discovery and at his deposition. [She] would have subpoenaed plaintiff’s medical records and

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hired medical and life expectancy experts to challenge plaintiff’s expert’s life expectancy

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assumptions, and a vocational rehabilitation expert to analyze plaintiff’s earning and benefits

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potential in the private sector as compared to the public sector.” ECF No. 77-1 at 3-4. With

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defendants having no information concerning damages for lost benefits before the close of

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discovery, defendants’ discovery efforts were greatly hindered.

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Having concluded that plaintiff violated Rule 26(a) and (e) and that the violation was not

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substantially justified or harmless, the remaining question is what sanction is appropriate.

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Defendants argue that exclusion of the evidence is automatic and that consideration of less

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draconian alternative remedies is not required, or even permissible. At the hearing, defense

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counsel essentially argued that the court may not consider the availability of other sanctions in

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light of Hoffman v. Constr. Protective Servs., Inc., 541 F.3d 1175 (9th Cir. 2008). In Hoffman,

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the Ninth Circuit “reject[ed] the notion that the district court was required to make a finding of

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willfulness or bad faith to exclude damages evidence.” Id. at 1180. However, the sanction in that

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case did not effectively amount to a dismissal of a claim. Id.; see also R & R Sails, Inc., 673 F.3d

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at 1247 n.1 (“And although in Hoffman we rejected the notion that the district court was required

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to make a finding of willfulness or bad faith to exclude damages evidence . . . in that case . . . the

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preclusion sanction did not amount to the dismissal of a cause of action.”). Furthermore, the

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Hoffman court did not hold that exclusion sanctions are mandatory when a court finds that the

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violation was not substantially justified or harmless. Rather, Hoffman stated that district courts

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have wide discretion to issue sanctions under Rule 37(c)(1). 541 F.3d at 1178 (“[W]e give

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particularly wide latitude to the district court’s discretion to issue sanctions under Rule 37(c)(1)”).

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Further, the Ninth Circuit has admonished that “evidence preclusion is, or at least can be, a harsh

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sanction,” (R & R Sails, Inc., 673 at 1247 (quotation marks omitted)) and therefore, when the

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exclusion of evidence amounts to a dismissal of a claim, a court must consider whether the parties

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noncompliance involved willfulness or bad faith, and also the availability of lesser sanctions.” Id.

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Defendants argued at the hearing that R & R Sails, Inc. does not apply here because they

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do not seek to bar all evidence of lost benefits. While exclusion of all evidence concerning

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plaintiff’s lost benefits above $20,000 does not completely foreclose any relief on his claims, it

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diminishes a claim of approximately $675,000 to $20,000. Limiting damages to this amount

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would preclude consideration on the merits of plaintiff’s claim to $655,000 of alleged lost

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benefits. That would effectively eviscerate plaintiff’s claim. Accordingly, the court in exercising

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its discretion under Rule 37(c)(1) declines to impose a sanction of the severity sought here. The

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court is cognizant that plaintiff has failed to comply with the deadlines established in this case in

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this case. Just as “[d]eadlines must not be enforced mindlessly . . . ,” Wong v. Regents of Univ.

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of Cal., 410 F.3d 1052, 1060 (9th Cir. 2005), the severity of the sanction here must take account
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of whether the harm caused to the defendants’ ability to respond to and defend against plaintiff’s

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claim can be remedied by a less draconian sanction. Here, the instant dispute can more equitably

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be resolved by permitting defendants to conduct the very discovery they otherwise would have

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performed to provide them an opportunity to gather rebuttal evidence relating to plaintiff’s claim

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for lost benefits. This will, of course, result in the trial date being vacated and a revised schedule

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being set. Further, for reasons stated on the record at the December 18, 2013 hearing, the court

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also orders plaintiff to pay defendants the reasonable expenses incurred in bringing the instant

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motion for sanctions. These sanctions avoid the harsh consequence of excluding plaintiff’s

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evidence, while providing defendants with a fair opportunity to mount a defense and show why,

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in their view, plaintiff’s claim for lost benefits lacks merit.

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III.

CONCLUSION

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Accordingly, it is hereby ORDERED that:

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1. Defendants’ motion to modify the scheduling order, ECF No. 70, is granted.

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2. Defendants’ motion for Rule 37(c)(1) sanctions, ECF No. 70, is granted in part and

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denied in part.
3. The November 18, 2011 scheduling order is modified to permitted defendants to

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conduct discovery relating to the issue of plaintiff’s damages. Defendants’ discovery on this

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issue shall be completed by June 30, 2014. Any motion to compel under this revision must be

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noticed on the undersigned’s calendar in accordance with the Local Rules and must be heard not

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later than June 4, 2014. This revision does not reopen discovery for the plaintiff.

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4. Plaintiff shall reimburse defendants for the costs and reasonable expense incurred in
bringing this motion.
5. Within 14 days of the date of this order, defendants shall file a declaration identifying
the reasonable expenses incurred in making its motion.

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6. Any response to the declaration shall be filed within seven days thereafter.

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7. All dates heretofore set are vacated. The court sets a supplement Pretrial Conference

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on August 6, 2014 at 10:00 a.m. in Courtroom No. 8. The parties may file a joint supplement

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pretrial statement not later than July 23, 2014.
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8. Failure to comply with this order and/or continued failures to comply with the Local

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Rules and/or the Federal Rules of Civil Procedure may result in the imposition of sanctions,

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including monetary sanction, evidentiary sanctions, and/or dismissal of this action. See E.D. Cal.

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L.R. 110; Fed. R. Civ. P. 37(b)(2).

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Dated: January 8, 2014.

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