A PDX Pro Co., Inc. v. DISH Network, LLC et al
Filing
274
ORDER granting in part and denying in part 249 Defendant's Motion for Allocation of Sanction Fees. By Magistrate Judge Craig B. Shaffer on 11/30/2015. (cbslc1)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Civil Action No. 12-cv-01699-RBJ-CBS
A PDX PRO CO., INC., an Oregon corporation,
Plaintiff,
v.
DISH NETWORK SERVICE, LLC, a Colorado limited liability company,
Defendant.
______________________________________________________________________________
ORDER REGARDING DEFENDANT’S REQUEST FOR SANCTIONS
______________________________________________________________________________
Magistrate Judge Shaffer
Unlike the toils of Sisyphus, who was condemned to perpetually roll a large boulder up a
steep hill, lawsuits and discovery disputes should come to an end. No one can reasonably
dispute that the instant case has run its course, at least at the trial level.
This matter comes before the court on Defendant Dish Network Service, LLC’s
(hereinafter “Dish”) Motion for Allocation of Sanction Fees (doc. #249). With these
submissions, Dish seeks an order holding Plaintiff A PDX Pro, Co., Inc. (hereinafter “PDX”) and
two of its attorneys, Richard Oertli and William Groh, jointly and severally liable for financial
sanctions attributable to discovery violations in this case. More specifically, the pending motion
seeks an order allocating $127,455.75 in fees that Defendant incurred based upon sanctionable
conduct that Dish attributes to Mr. Oertli and Mr. Groh. Messrs. Oertli and Groh filed separate
response briefs (docs. #253 and #251, respectively), which were followed by Dish’s Reply in
Support of Its Motion for Allocation of Sanction Fees (doc. #254). On July 31, 2015, Dish filed
a Supplement to Motion for Allocation of Sanction Fees (doc. #261), which prompted additional
1
submissions from Mr. Oertli (doc. #265) and Mr. Groh (doc. #266). This court held a two-hour
hearing on the pending motion on September 8, 2015.
PROCEDURAL BACKGROUND
The following pertinent facts have been gleaned from the court’s file and exhibits
proffered by Dish and Mr. Oertli and Mr. Groh in support of their respective positions relative to
the pending motion.
PDX commenced this litigation on June 29, 2012 with the filing of a Complaint (doc. #1)
that asserted claims for breach of contract, quantum meruit, negligent representation, breach of
the duty of good faith and fair dealing, civil conspiracy, breach of retail agreements, and
declaratory relief. Plaintiff contended that after executing an Installment Service Agreement to
install satellite television equipment on behalf of Dish, PDX was provided “with Business Rules
that deprived [Plaintiff] of the previously promised independence and subjected PDX to control
by Dish.” See Complaint, at ¶9. The Complaint alleged, in part, that
The Business Rules gave DISH unfettered and unreasonable discretion to deny
contractors payment for the reasonable value of their services and to impose
unnecessarily complicated documentation requirements in order to provide DISH
with an excuse for non-payment based on contractors’ errors in completing
paperwork. The Business Rules obligate contractors to comply with extremely
tight timelines to resolve payment issues, even though they purport to allow DISH
to go back indefinitely with no time constraints on its efforts to recover from
alleged overpayments to its contractors.
Id. at ¶¶10 and 11.
Plaintiff initially estimated its damaged at $965,225.32, plus an unknown amount for
receivers that PDX purchased from and then returned to Dish. As to the latter category of
damages, PDX claimed that it could not quantify its losses more precisely without “complete
equipment payment and RA records [from Dish], as well as all retail exchanges and receiver
2
purchase orders by PDX in order to determine how many receivers are involved and exactly
what amount, if any, [Dish] owes PDX for them.” See Scheduling Order (doc. #33), at 9-10.
Dish argued, to the contrary, that “the Business Rules at issue here govern, inter alia,
payment disputes for labor and equipment” and establish “specific deadlines in which a payment
must be disputed and explicit instructions setting forth the manner and method by which to do
so.” According to Defendant, “[d]espite these unambiguous directions, including warnings that
jobs submitted outside [the established] deadlines would be rejected by [Dish], PDX consistently
failed to adhere to the Business Rules,” which meant that “many of Plaintiff’s claims for relief
are . . . barred by the Business Rules.” Id. at 5.
Dish served its first set of written discovery on December 14, 2012, including
Interrogatory No. 4 which asked PDX to identify all transactions in dispute in this case and to
provide detailed information regarding those transactions, including a list of the documents
supporting PDX’s request for payment on each disputed transaction, and the dates of PDX’s
compliance with various aspects of the applicable Business Rules between the parties. Plaintiff
responded, without objection, to Interrogatory No. 4 on February 11, 2013 by invoking Fed. R.
Civ. P. 33(d) 1 and identifying four pages of computer hard-drive pathways contained in a
hard-drive that PDX did not contemporaneously produce. That interrogatory response was
1
To rely on Rule 33(d) in lieu of providing a narrative interrogatory response, “the producing party must do four
things: (1) specify for each interrogatory the actual documents where the information will be found; (2) affirm that
the information sought in the interrogatory is in fact available in the specified records; (3) demonstrate that directly
answering the interrogatory would impose a burden on it; and (4) show that the burden of compiling the information
is substantially the same for both parties.” Hege v. Aegon USA, LLC, No. 8:10-cv-01578-GRA, 2011 WL 1119871,
at *3 (D.S.C. Mar. 25, 2011) (noting that “a Rule 33(d) response is inappropriate where the interrogatory calls for
‘the exercise of particular knowledge and judgment on the part of the responding party’”). Cf. Charles Alan
Wright, Arthur R. Miller & Richard L. Marcus, Federal Practice and Procedure §2178, p. 90 (2010) (by invoking
Rule 33(d), the responding party is affirming “that the information sought by the interrogatory in fact is available in
the specified records”). See also Cleveland Construction, Inc. v. Gilbane Building Co., No. CIV A. 05-471-KSF,
2006 WL 2167238, at *5 (E.D. Ky. Jul 31, 2006) (in a case where plaintiff invoked Rule 33(d) in response to an
interrogatory that sought to discover the factual basis for plaintiff’s damages claim, the court observed that only
3
signed by PDX’s counsel, Richard Oertli, 2 and verified as “true and complete to the best of his
knowledge” by Michael Paxton, PDX’s Chief Operating Officer.
After a series of communications between counsel, Dish challenged the adequacy of
PDX’s response to Interrogatory No. 4 during a telephone discovery conference with the district
judge on June 6, 2013. Dish complained that PDX had produced spreadsheets that reflected all
the transactions between the parties, and not specifically the unpaid transactions that formed the
bases for Plaintiff’s alleged damages. See Transcript of Proceedings on June 6, 2013 (doc. #66),
at 8. In response, Plaintiff’s counsel advised Judge Jackson that his client did not have
“complete data to prove” its damages and needed additional information from Dish.
As I understand it, Your Honor, its mostly work orders that were sent in
electronically. And my client doesn’t have a complete record of what he sent in
electronically, so he can’t reconstitute a lot of his claims.
Id. at 10. Judge Jackson directed Dish to “produce all the work orders” and then had the
following colloquy with Mr. Oertli:
The Court: And if [Dish does that], then Mr. Oertli, you think you can provide an
answer to interrogatory 4 that’s complete.
Mr. Oertli: Well, I certainly hope the client can, Your Honor.
The Court: Pardon me?
Mr. Oertli: I suspect the client can, Your Honor. Yes.
The Court: Well, if the client can’t produce the information, it’s going to be hard
for the client to prove its case, isn’t it?
Mr. Oertli: It’s going to be difficult on that damages theory, yes.
plaintiff “knows what facts and information it has relied upon to support the allegations made in its complaint” and
it was unlikely that defendant “would view certain facts and occurrences the same way that [plaintiff] does”).
2
Mr. Oertli entered his appearance in this action on January 31, 2013. Plaintiff’s original counsel withdrew on July
17, 2012. PDX’s second counsel of record withdrew from the case on February 1, 2013 after Mr. Oertli filed his
entry of appearance.
4
Id. at 12-13. At the conclusion of the June 6, 2013 discovery conference, Judge Jackson
directed PDX to provide a complete response to Interrogatory No. 4 by July 15, 2013. 3 Id. at
13. See also Minute Order (doc. #63) of June 6, 2013.
On July 3, 2013, Mr. Oertli requested that Dish provide work order data in native Excel
format, rather than the PDF format contemplated under the parties’ January 9, 2013 Scheduling
Order (doc. #33). Dish honored that request on July 12, 2013 by providing Mr. Oertli with a
thumb-drive containing the requested information. Apparently Mr. Paxton did not receive that
data from his counsel until July 16, 2013. Because of that delayed transmittal, Plaintiff’s
Supplementation of its Computation of Damages; and Related Supplemented Responses to
Interrogatory No. 4 did not incorporate the very information that Mr. Oertli earlier told Judge
Jackson was essential to allow his client to prepare a “complete” response to Interrogatory No. 4.
See Exhibit O submitted with Defendant’s Exhibits for Hearing on Allocation of Sanction Fees
(acknowledging in paragraph 6 of page 2 that “PDX will not know until July 16, 2013, at the
earliest, whether it can use the information on the third thumb drive and whether it will need to
supplement again its responses regarding its damages and Interrogatory No. 4").
Not surprisingly, Dish believed that Plaintiff’s July 15th supplement still failed to provide
the detailed information required by Interrogatory No. 4 and did not identify any supporting
documentation. Moreover, Dish insisted that PDX actually had been paid for many of the
21,632 transactions referenced in the most recent supplement.
3
Although Judge Jackson found Plaintiff’s response to Interrogatory No. 4 was deficient, he did not award fees and
costs to Dish based upon those discovery shortcomings. Indeed, Dish could not have recovered attorney fees and
costs under Rule 37(a)(5) since the June 6, 2013 discovery conference was not convened in response to a formal
motion to compel. See Fed. R. Civ. P. 37(a)(5) (providing that fees and costs may be awarded to a prevailing party
“if the motion [to compel] is granted – or if the disclosure or requested discovery is provided after the motion [to
compel] was filed”).
5
On September 25, 2013, PDX provided a Second Supplementation of its Computation of
Damages; and Related Second Supplemented Responses to Interrogatory No. 4 that referred to
18,079 challenged transactions (down from the prior claim of 21,632 transactions). See Exhibit
Q (doc. #88-17) attached to Defendant’s Motion to Compel. The Second Supplementation
stated that Plaintiff could not provide a complete computation of its damages either because Dish
had not provided necessary documentation or PDX lacked essential information in its own files.
Plaintiff also asserted that it would “determine with more precision the amount of profits and
revenues Dish caused it to lose by its bad faith conduct and punitive actions,” once Judge
Jackson determined “that PDX can recover loss of profits and revenues, in spite of the
unconscionable provision in the Installment Agreement purporting to limit the damages PDX
may recover.”
These representations were squarely at odds with Plaintiff’s initial response to
Interrogatory No. 4. By invoking Rule 33(d), PDX implicitly represented that all of the
information requested in that interrogatory could be gleaned through the computer hard-drive
pathways previously identified. But see Smith v. Sentinel Insurance Co., Ltd., No.
10-CV-269-GKF-PJC, 2011 WL 2883433, at *2 (N.D. Okl. Jul. 15, 2011) (finding that
defendant’s initial invocation of Rule 33(d) was improper and that its interrogatory response was
“sloppy, evasive, and deceitful,” particularly in light of defense counsel’s concession (three
months later) that the documents in question did not contain the requested information). Cf. In
re Lithium Ion Batteries Antitrust Litigation, No. 13-md-0420-YGR (DMR), 2015 WL 4999762,
at *2 (N.D. Cal. Aug. 21, 2015) (finding that defendants’ reliance on Rule 33(d) was improper
given that the referenced documents were plainly incomplete and did not fully contain the
information requested in the interrogatory at issue).
6
On October 3, 2013, Dish filed a Motion to Compel Plaintiff’s Response to Interrogatory
No. 4, for Order Requiring Compliance with Prior Order, and for Sanctions (doc. #87). Dish
conceded that PDX had produced on September 25, 2013 a new Excel file that identified 8,942
allegedly “unpaid transactions” and 9,137 disputed receivers. Defendant insisted, however, that
this spreadsheet still did not cure all the deficiencies in Plaintiff’s earlier responses to
Interrogatory No. 4.
For example, the over 9,000 receivers on which Plaintiff requests payment are
identified only by part number, with no information regarding (a) work order
numbers; (b) account numbers; (c) reconciliation type; or (d) return authorization
numbers, among other missing information. PDX simply states, “We could not
determine on what accounts this receiver was activated on.” This is troubling
since PDX would have physically installed any of the receivers it could be paid
for, and since it should have records containing all of the information sought by
[Dish].
See Defendant’s Motion to Compel, at 5. Dish argued that “many of the ‘unpaid transactions’
remain similarly deficient,” that PDX continued to list “transactions on which PDX has been
paid,” and had failed “to identify any documents supporting the payment amounts requested for
any of the over 9,000 receivers and for more than 2,000 of the allegedly ‘unpaid transactions.’”
Id. at 6. 4 In closing its Motion to Compel, Dish argued that PDX should be prohibited “from
presenting any evidence regarding any of the transactions for which its response (sic) are
deficient either at trial or in response to dispositive motions filed by [Dish]” and that Defendant
“be awarded its reasonable attorney fees pursuant to Rule 37(a)(5)(A).”
In its Response to Defendant Dish’s Motion to Compel (doc. #94), PDX maintained that
its most recent supplemental response to Interrogatory No. 4 “identified the ‘transactions in
4
Dish’s counsel had raised many of these same concerns in an email to Mr. Oertli on October 2, 2013. In his
response dated the same day, Mr. Oertli indicated that it would be helpful if defense counsel could indicate in
writing “how the most recent supplementation of Interrogatory 4 is deficient,” as “[t]he client prepared that
7
dispute’” and, indeed, reduced Plaintiff’s “claims for damages by $611,934” based on the
additional information provided by Dish. PDX also questioned “why a Motion to Compel
should be filed for the production of information PDX has repeatedly stated it cannot provide
without more data from Dish.” Mr. Oertli assured Dish and the court that he had “been
instructed by PDX to be an ‘open book’ and produce everything relevant.” Id. at 3.
At the conclusion of a hearing on October 17, 2013, I directed PDX to provide “a full and
comprehensive [Fed. R. Civ. P. Rule] 26(a)(1) disclosure” that included “a computation of your
damages by category.” See Transcript of Proceedings on October 17, 2013 (doc. #107), at 58.
This court also required PDX to “identify each and every document [it] relies upon and intends
to use at trial to support [its damages] computation,” 5 and to “identify with particularity in [its
Rule] 26(a)(1) disclosures those categories of damages for which [PDX] is lacking
documentation,” 6 with the added warning that these disclosures would be subject to Fed. R. Civ.
P. 26(g)’s certification requirement. Id. at 58-59. Counsel was advised not to “let your client
send something . . . for which you are not willing to live with the consequences, because under
document without input from me.” See Exhibit T (doc. #88-22) and Exhibit U (doc. #88-23) attached to
Defendant’s Motion to Compel.
5
Rule 26(a)(1)(A)(ii) requires, unless otherwise stipulated or ordered by the court, a party to provide at the outset of
the action “a copy – or a description by category and location – of all documents, electronically stored information,
and tangible things that the disclosing party has in its possession, custody, or control and may use to support its
claims or defenses, unless the use would be solely for impeachment.” A party also has a mandatory duty to provide
“a computation of every category of damages claimed by the disclosing party – who must also make available for
inspection and copying as under Rule 34 the documents or other evidentiary material, unless privileged or protected
from disclosure, on which each computation is based, including materials bearing on the nature and extent of
injuries suffered.” See Fed. R. Civ. Pro. 26(a)(1)(A)(iii). Rule 26(e) further imposes a self-executing obligation to
supplement or correct initial disclosures “in a timely manner if the party learns that in some material respect the
disclosure . . . is incomplete or incorrect.” Failure to comply with these disclosure requirements precludes a party
from using the undisclosed information “on a motion, at a hearing, or at a trial, unless the failure was substantially
justified or harmless.” See Fed. R. Civ. P. 37(c)(1). In lieu of or in addition to that sanction, the court may grant
alternative forms of relief, including “payment of the reasonable expenses, including attorney’s fees, caused by the
failure.” Id.
6
During that same hearing, this court specifically advised Mr. Paxton that “if you don’t provide the detailed
information, [Dish’s] inevitable next step is going to be to file a motion in limine” asking to “exclude from the jury’s
consideration any information or any requests for damages regarding these transactions.” See Transcript of
Proceedings on October 17, 2013 (doc. # 107), at 76.
8
[Rule] 26(g) if I find that a lawyer has failed to comply with their certification requirement,” the
court would be required to award fees and costs. Id. After Mr. Oertli expressed some
uncertainty as to his obligations under Rule 26(g), the court explained that the Rule
does not require the signing attorney to certify the truthfulness of the client’s
factual responses, rather the signature certifies that the lawyer has a made a
reasonable effort to assure that the client has provided all the information and
documents available to him that are responsive.
Id. at 60. In closing, the court granted in part and denied in part Dish’s motion to compel, and
specifically declined to award fees and costs to either side. Id. at 116.
Also during the hearing on October 17, 2013, Mr. Oertli orally moved to withdraw from
his representation of PDX, suggesting that he had “discussed” that prospect several times with
his client. Id. at 69. Mr. Oertli explained “the client is unhappy with me” and “[t]he feeling is
mutual,” but then declined to provide more particularized grounds for his request. Id. at 70.
This court stated that it would not consider counsel’s motion to withdraw “until all discovery is
complete,” id. at 70, and “I resolve all of the disputes about written discovery.” Id. at 96.
On October 21, 2013, PDX served its Third Supplementation of its Computation of
Damages and Related Third Supplemented Responses to Interrogatory No. 4 (doc. #98). For
several categories of damages, PDX once again claimed it could not provide a “total figure”
without additional information from Dish. Mr. Oertli closed the Third Supplementation with the
following “Statement of Counsel:”
Based on reasonable inquiries, Plaintiff’s counsel certifies to the best of his
knowledge, information, and belief the information in this PLAINTIFF’S
THIRD SUPPLEMENTATION OF ITS COMPUTATION OF DAMAGES;
AND RELATED THIRD SUPPLEMENTED RESPONSES TO
INTERROGATORY NO 4 is complete as of the time it is made and is
consistent with the discovery rules and warranted by existing law, and that is
(sic.) has not been interposed for any improper purpose. Plaintiff’s counsel also
represents that he has engaged in extensive communications with Mr. Paxton
directly, and with Tim Danley indirectly through Mr. Paxton, and has made
9
reasonable inquiries into the accuracy of the information being provided, which
he believes “are reasonable under the circumstances.” Mancia v. Mayflower
Textile Servs. Co., 253 F.R.D. 354, 357 (D. Md. 2008). Plaintiff’s counsel also
represents the relevant circumstances include: “[t]he number and complexity of
the issues”; (ii) “[t]he location, nature, number and availability of potentially
relevant witnesses or documents”; (iii) “[t]he extent of past working relationships
between the attorney and the client”; and (iv) “[t]he time available to conduct an
investigation.” S2 Automation LLC v. Micron Tech., Inc., 2012 WL 3656454,
*31 (D.N.M. Aug. 9, 2012) (citing 6 J. Moore, Moore’s Federal Practice, §
26.154[2][a], at 26-615 (3d ed. 2012).
Id.
William Groh entered his appearance on behalf of PDX on October 24, 2013 and
attended Mr. Paxton’s deposition the next day. At that time, “[i]t was Mr. Groh’s understanding
that PDX’s damages calculation was based on a theory that due to the implied covenant of good
faith and fair dealing, PDX was entitled to compensation for transactions for which Dish agreed
to pay despite its business rules if PDX could demonstrate that it performed the work or provided
services.” Mr. Groh also was “under the impression that while the Third Supplementation did
not take into account the business rules, it set forth all of the transactions and receivers for which
PDX believed it was entitled to payment based on the implied covenant of good faith and fair
dealing.” See William C. Groh’s Response to Defendant’s Supplement to Motion for Allocation
of Sanction Fees (doc. #267) at 5-6.
During the Paxton deposition, counsel for Dish asked whether the deponent would be
surprised “to know that of the 8,000 receivers PDX is claiming it is owed payment on, Dish has
records showing that it has paid on over 5,000 of them.” To verify defense counsel’s reference
to past payments and to further familiarize himself with the case, Mr. Groh undertook to
compare the records previously produced by Dish to PDX’s damage computation. As part of
that investigation, Mr. Groh contacted Tim Danley, a former PDX employee, regarding the
preparation of the spreadsheets produced to Dish pursuant to my October 17 Order. Mr. Groh’s
10
investigation “ultimately determined that in preparing the Third Supplementation, PDX failed to
incorporate data contained” in a spreadsheet previously produced by Dish during discovery. Id.
at 7.
On November 7, 2013, Mr. Groh sent an email to Dish’s counsel advising that “PDX has
discovered there was an error in Plaintiff’s Exhibit A to the Third Supplemental Disclosures of
Damages relating to receivers” and forwarding a revised spreadsheet prepared by Mr. Danley.
See Exhibit 4 attached to the Declaration of William C. Groh (doc. #267-3).
On December 11, 2013, Mr. Groh filed a motion to withdraw as counsel for PDX, citing
“irreconcilable differences with Plaintiff’s primary representative” which made “it impossible to
continue as Plaintiff’s co-counsel.” During a hearing on December 30, 2013, Mr. Oertli (on
behalf of PDX) advised the court that Plaintiff opposed Mr. Groh’s motion to withdraw. See
Transcript of Proceedings on December 30, 2103 (doc. #167), at 8-9. I noted Dish’s recently
filed motion for summary judgment, as well as Defendant’s pending motion for sanctions.
Although the motion for sanctions primarily was directed to discovery conduct that occurred
while Mr. Oertli was PDX’s only attorney, Mr. Groh was co-counsel of record during some
portion of the disputed process. Given that Rule 1.16 of the Colorado Rules of Professional
Conduct permits a lawyer to withdraw from an engagement if it “can be accomplished without
material adverse effect to the interests of the client,” and in light of Plaintiff’s opposition to Mr.
Groh’s motion, this court denied without prejudice Mr. Groh’s request to withdraw.
Mr. Groh filed a Renewed Expedited Motion to Withdraw (doc. #55) on January 22,
2014, stating that he “[has] reached new irreconcilable differences with Plaintiff’s primary
representative.” Counsel withdrew this Renewed Expedited Motion on February 23, 2014. Mr.
11
Groh filed a Third Motion to Withdraw as Plaintiff’s Counsel (doc. #241) on January 31, 2015,
which Judge Jackson granted on March 5, 2015.
On December 16, 2014, Defendant Dish filed a Motion for Sanctions for Disobedience of
Prior Court Orders (doc. #123). In this motion, Dish’s counsel recounted his client’s protracted
and largely unsuccessful efforts to force PDX to comply with its discovery obligations. More to
the point, Dish insisted that Plaintiff’s Third Supplementation had ignored this court’s directive
and “instead once again” blamed Dish for PDX’s failure to provide the information required by
Interrogatory No. 4. Plaintiff’s Response to Defendant’s Motion for Sanctions (doc. #144),
signed by Mr. Oertli, continued to attribute PDX’s discovery shortcomings to “complications”
caused by “Defendant’s own deficiencies and erroneous statements during the discovery phase in
this case.”
At a hearing on February 26, 2014, I specifically found that Plaintiff’s October 21, 2013
supplement referenced 16,910 transactions without providing additional information about those
transactions or the documentation that substantiated PDX’s claimed damages. See Transcript of
Proceedings on February 26, 2014, (doc. #184), at 87-88. This court further found that PDX’s
“woefully inadequate response” violated Fed. R. Civ. P. 37(c) and was not substantially justified
or harmless. Id. at 88.
In comments made from the bench, I recommended as an appropriate
sanction: (1) that PDX be barred from seeking damages for any transactions except the 3,541
transactions listed on Plaintiff’s latest supplemental spreadsheet; (2) that PDX be barred from
referring to or offering into evidence any document not referenced on that same spreadsheet; and
(3) that PDX and its witnesses be precluded from arguing or insinuating to the jury that
Plaintiff’s inability or failure to produce additional documentary evidence in support of its
damages claims was attributable to any fault or inaction by Dish. Id. at 89-91. I further found
12
that the recommended sanctions were “commensurate with the discovery violations” and the
least onerous sanctions that could be imposed “consistent with the rules and prevailing Tenth
Circuit case law.” Id. at 91.
Not surprisingly, given the contentious nature of the litigation, neither side was
particularly happy with my recommendation. Dish argued that the proposed sanctions were not
sufficiently punitive “to clean up the ‘train wreck’ and return Dish to the position it would be in
if PDX had complied with its discovery obligations back in February of 2013, or either of this
Court’s ensuing discovery orders.” See Defendant Dish’s Objections to Magistrate Judge
Shaffer’s Recommendation as to Sanctions (doc. #188). PDX insisted, to the contrary, that my
recommended sanctions were too harsh, particularly given that Plaintiff had “conceded that it
committed errors and oversights in identifying documents related to its damages.” See Plaintiff
PDX’s Objections to Magistrate Judge Shaffer’s Sanctions Recommendations (doc. #190).
Notwithstanding its admitted shortcomings, PDX noted that it had “successfully reduced the
number of transactions at issue in the case,” in part by “withdrawing claims for which PDX was
ultimately unable to obtain supporting documentation in discovery and partially [by]
re-evaluating its legal theory after depositions that occurred in November of 2013.”
With an Order (doc. #196) dated March 27, 2014, the district court rejected the parties’
countervailing arguments and imposed my recommended sanction. As Judge Jackson explained
. . . I find and conclude that the recommendation was a measured and reasonable
response to a difficult situation to which both parties contributed. PDX has been
a difficult customer to put it mildly. Just as it had great difficulty getting its act
together in terms of its own record-keeping and billing procedures, it has had
similar difficulty in responding to discovery in this case. The difficulty has been
compounded by what essentially has been a “moving target” in terms of its claims
and theories. Dish is entitled to know what the claims are and to discover what
evidence PDX has in support of its claims. But Dish has not necessary [sic] been
an easy customer either. PDX has repeatedly contended that Dish has the
documentation that either proves or disproves its claims, but that it has been like
13
pulling teeth to get it. Dish is a demanding litigant and is not shy about seeking
sanctions, including sanctions that would effectively end the case. The record
reflects that Judge Shaffer dealt with these disputes thoughtfully and with
considerable patience. . . . One reason that I labeled the recommendation
“measured” is that Judge Shaffer limited the evidentiary restrictions to PDX’s
damages case. That is, PDX may not refer to or offer in evidence any document
not referenced on the February 25, 2014 spreadsheets to prove specific amounts
of underpayments. Similarly, it cannot argue or insinuate that its inability to
produce additional documentary evidence in support of its damages claims is
attributable to fault, action or inaction by Dish.
See Order, at 5-6.
This case proceeded to trial on March 31, 2014. The jury returned a verdict in favor of
Dish on April 4, 2014, and the district court entered a judgment for Dish Network Service, LLC
on April 7, 2014.
Dish subsequently filed an Application for Attorneys’ Fees and Costs (doc. #212)
pursuant to the terms of its Installation Services Agreement with PDX, which provided that “in
the event of any suit or action to enforce . . . this Agreement,” the prevailing party was entitled to
recover “its costs, expenses and reasonable attorney fees.” After an evidentiary hearing on
March 5, 2015, the district court granted Dish’s motion and awarded attorneys’ fees and costs to
Defendant in the amount of $775,090.35. In entering that award, Judge Jackson acknowledged
the contentious pretrial history of this case.
Recurrent discovery disputes . . . escalated the litigation costs. Much of the
problem centered on Dish’s “Interrogatory 4,” included in a set of interrogatories
served on December 14, 2012. . . Ultimately PDX filed eight responses to this
interrogatory. In its first and second responses PDX did not identify the number of
transactions at issue. In its third response PDX claimed to have been underpaid
for 21,632 transactions. Subsequent responses decreased the number of
transactions to 18,079, then to 16,910, then to 11,481, then to 3,451. Even with
the decreasing number of disputed transactions, PDX was largely unable to
provide the additional information about the claims that Interrogatory 4 requested.
Interspersed with the supplements to Interrogatory 4 were repeated
hearings on unresolved discovery disputes – one before this Court and seven
times before Magistrate Judge Shaffer. Dish filed its first motion for sanctions
14
based upon discovery violations on October 3, 2013. The magistrate judge did
not award sanctions, but he ordered further production and warned PDX and its
counsel that they could face sanctions, and that plaintiff’s recoverable damages
could “drop precipitously,” if PDX did not produce evidence to support its
underpayment claims.
The problems were not resolved. PDX continued to have difficulty
producing evidence supporting its claims. Dish again moved for sanctions on
December 16, 2013. Dish requested either dismissal of the case or “issue
sanctions” plus attorney’s fees and costs. The motion became ripe upon the
filing of Dish’s reply brief on January 23, 2014, and it was heard by Magistrate
Judge Shaffer on February 26, 2014. At the conclusion of the hearing Judge
Shaffer issued a recommendation that this Court impose certain evidentiary
sanctions at trial[.] 7
Judge Shaffer also indicated that he considered PDX’s conduct to be
unreasonable and vexatious, and that after Dish submitted a bill of costs and PDX
responded, he would issue a written order imposing monetary sanctions against
PDX, counsel, or both. At PDX’s request, the magistrate judge postponed the
deadline for Dish to submit a “bill of costs” relating to the monetary sanction until
after the trial. Dish ultimately sought a monetary sanction of a little over
$127,000. There has been no ruling on the monetary sanction and as discussed
below, the present order moots the sanctions issue.
The Court awards attorney’s fees and costs to the defendant, Dish
Network Service, LLC, and against the plaintiff, A PDX Pro Co., Inc., in the
combined total amount of $775,090.35. This order moots the matter of a monetary
sanction for discovery violations.
See Order (doc. # 247), at 3- 5 and 17-18 (internal citations omitted).
7
During the hearing before Judge Jackson on March 5, 2015, counsel for PDX acknowledged that
Judge Shaffer asked [PDX] to go through and let him know where all of these transactions were and using
Dish’s Exhibit KP, we did that. And then, between that time period and when we spoke to you
[on March 26, 2014], we spent considerable hours running all of these transactions through a
formula, it going [sic], is the information that supports this particular transaction. Will it be
admissible, is there evidence that supports this transaction, is it going to be something that had
been prior disclosed, pursuant to Judge Shaffer’s order; and when we spent hours doing that, we
were up a creek.
See Transcript of Proceedings on March 5, 2015 (doc. #270), at 155-56.
15
ANALYSIS
In determining whether, or to what extent, monetary sanctions should be allocated against
Mr. Oertli or Mr. Groh, it is important to emphasis the very narrow scope of this Order. While
it is difficult to persuasively argue that PDX timely and thoroughly complied with Judge
Jackson’s June 6, 2013 directive relating to Interrogatory No. 4, the district court did not award
fees and costs in connection with that specific ruling. It is not my intention to retroactively
impose sanctions predicated on Judge Jackson’s June 6, 2013. Indeed, Judge Jackson
specifically declined to impose a monetary sanction for discovery violations with his Order of
[247].
Similarly, this court cannot impose sanctions against Mr. Oertli or Mr. Groh under Fed.
R. Civ. P. 37(c) based upon Plaintiff’s failure to comply with its Rule 26(a)(1)(A)(ii) disclosure
obligations or its duty to timely supplement or correct disclosures and discovery responses
pursuant to Rule 26(e)(1). The Tenth Circuit recently held that Rule 37(c)(1) does not authorize
monetary sanctions against counsel where there is a failure to disclose required information or to
supplement an earlier discovery response. See Sun River Energy, Inc. v. Nelson, 800 F.3d 1219,
1226-27 (10th Cir. 2015). In the same decision, however, the Tenth Circuit acknowledged that
“counsel are subject to monetary sanctions for unjustified nondisclosures when they certify a
discovery response as complete and correct at the time it is made.” Id. at 1227. The court also
warned that “[t]rial counsel must exercise some degree of oversight to ensure that [a client’s
employees] are acting competently, diligently and ethically in order to fulfill their [discovery]
responsibility to the court.” Id. at 1229 (quoting Bratka v. Anheuser-Busch Co., Inc., 164
F.R.D. 448, 461 (S.D. Ohio 1995). According to the Tenth Circuit, “‘[c]ounsel has an
obligation to assure that the client complies with discovery obligations and court orders’ and,
16
thus, ‘[c]areful inquiry by counsel is mandated in order to determine the existence of
discoverable documents and to assure their production.’” Id. (emphasis in original) (quoting
Resolution Trust Corp. v. Williams, 162 F.R.D. 654, 658 (D. Kan. 1995)).
Moreover, I would be remiss if I did not echo Judge Jackson’s observations during the
parties’ final trial preparation conference:
My impression -- but you correct me if I'm wrong -- is that this is or at least
should have been a fairly straightforward breach-of-contract case where PDX is
saying we performed services over a period of years and we don't think we got
paid everything to which we were entitled.
But it has gotten complicated. It got complicated first because PDX kept lousy
records. It got complicated second because PDX, when it chose to file the
lawsuit, couldn't be satisfied with one claim or two claims, had to file, in shotgun
style, multiple claims.
It's been complicated, third, by the changes of counsel representing PDX over
time. Including even as applied to counsel sitting here. Motions to withdraw,
withdrawals of motions to withdraw, leaving me unsure at times where this case
was going. Complicated, it appears, by some degree of disagreement between
counsel and client on the plaintiff's side. Complicated by discovery disputes that
might result in a sanctions order from Magistrate Judge Shaffer.
And I must say complicated by DISH's litigation strategy and tactics which are
scorched earth all the way. Never met a motion they didn't want to file. Never
met a motion that couldn't be 55 pages instead of 25, et cetera.
See Transcript of Proceedings February 26, 2014 (doc. #227), at 3.
Dish’s counsel conceded during the hearing on September 8, 2015, that the narrow issue
left for this court to decide is whether monetary sanctions should be allocated against Mr. Oertli
or Mr. Groh under Rule 26(g)(3) based upon counsel’s actions or inactions in connection with
supplemental disclosures provided by PDX on October 21, 2013 and November 7, 2013. More
specifically, Dish contends that Mr. Oertli improperly certified supplemental disclosures that
were incomplete or incorrect, particularly in view of the fact that all of the information required
17
to provide full disclosures had long been in PDX’s possession or control. Dish also argues that
Mr. Groh’s production of information on November 7, 2013 violated Rule 26(g).
In response, Mr. Oertli insists that his “efforts to assure that PDX was providing all the
information required by [this court’s] October Order were more than reasonable,” particularly in
light of Mr. Oertli’s repeated warning “that PDX was required to fully identify the documents
PDX was ruling on for its damages.” See Richard Oertli’s Verified Response to Defendant’s
Motion for Allocation of Sanction Fees (doc. #265). Mr. Groh maintains that his November 7,
2013 communication to defense counsel and the referenced revised spreadsheet prepared by Mr.
Danley did not represent a “Fourth Supplemental Disclosure” subject to the Rule 26(g)
certification requirement, but rather documentation responsive to a subpoena duces tecum served
on Mr. Danley. See William C. Groh’s Response to Defendant’s Supplement to Motion for
Allocation of Sanction Fees.
Discovery procedures established under the Federal Rules of Civil Procedure seek to
further the interests of justice by minimizing surprise at trial and ensuring the discovery of
relevant information. United States ex rel. Schwartz v. TRW, Inc., 211 F.R.D. 388, 392 (C.D.
Cal. 2002). To that end, Rule 26(b)(1) authorizes discovery “regarding any non-privileged
matter that is relevant to the claim or defense of any party.” If, however, “primary
responsibility for conducting discovery is to continue to rest with the litigants, they must be
obligated to act responsibly and avoid abuse.” See Fed. R. Civ. P. 26(g), advisory committee’s
note to 1983 amendment. Cf. Qualcomm Inc. v. Broadcom Corp., No,. 05cv1958-B (BLM),
2008 WL 66932, at *7 (S.D. Cal. Jan. 7, 2008) (“Rule 26(g) imposes an affirmative duty to
engage in pretrial discovery in a responsible manner that is consistent with the spirit and
purposes of Rules 26 through 37. . . . This subdivision provides a deterrent to both excessive
18
discovery and evasion by imposing a certification requirement that obligates each attorney to
stop and think about the legitimacy of a discovery request, a response thereto, or an objection.”),
vacated in part, 2008 WL 638108 (S.D. Cal. Mar. 5, 2008); St. Paul Reinsurance Company, Ltd.,
CNA v. Commercial Financial Corp., 198 F.R.D. 508, 516 (N.D. Iowa 2000) (noting that the
Advisory Committee Notes make clear that “Rule 26(g) is designed to curb discovery abuse by
explicitly encouraging the imposition of sanctions”). But see Markey v. LaPolla Industries,
Inc., No. 12-4622(JS)(AKT), 2015 WL 5027522, at *18 (E.D.N.Y. Aug. 25, 2015) (although
“[t]he imposition of sanctions for a violation of Rule 26(g) is mandatory . . . a court has
discretion over ‘which sanction it must impose’”) (emphasis in original).
By signing initial disclosures under Rule 26(a)(1), an attorney or party is certifying to the
best of their “knowledge, information, and belief formed after a reasonable inquiry” that the
disclosure is “complete and correct as of the time it is made.” See Fed. R. Civ. P. 26(g)(1)(A).
Similarly, an attorney signing a discovery response or objection is certifying, in part, that the
response or objection is consistent with the Federal Rules of Civil Procedure and is not intended
for any improper purpose such as “to harass, cause unnecessary delay, or needlessly increase the
cost of litigation.” See Fed. R. Civ. P. 26(g)(1)(B(I) and (ii). 8
The Federal Rules of Civil Procedure impose a “stop and think” obligation on a party
serving initial disclosures, as well as parties serving discovery requests or responses and
objections. Moreover, “[t]he discovery process is subject to the overriding limitation of good
faith. Callous disregard of discovery responsibilities cannot be condoned.” Asea, Inc. v.
Southern Pacific Transportation Co., 669 F.2d 1242, 1246 (9th Cir.1981). Cf. Trading
Technologies International, Inc. v. eSpeed, Inc., No. 04 C 5312, 2006 WL 2506293, at *1
19
(N.D.Ill. Jul. 18, 2006) (noting that “the discovery process depends upon the good faith of the
parties and their counsel”).
As this court noted in Sender v. Mann, 225 F.R.D. 645, 650 (D. Colo. 2004), Rule
26(a)(1) disclosures should be “complete and detailed” and provide the parties “with information
essential to the proper litigation of all relevant facts, to eliminat[e] surprise, and to promot[e]
settlement.”
In short, the Rule 26(a)(1) disclosure requirements should “be applied with
common sense in light of the principles of Rule 1, keeping in mind the salutary
purposes that the rule is intended to accomplish. The litigants should not indulge
in gamesmanship with respect to the disclosure obligations.” Counsel who make
the mistake of treating Rule 26(a)(1) disclosures as a technical formality, rather
than as an efficient start to relevant discovery, do their clients no service and
necessarily risk the imposition of sanctions.
Id. (internal citations omitted).
Mr. Oertli correctly notes that Rule 26(g) did not require him to certify the “truthfulness”
of his client’s factual responses to discovery requests. Rule 26(g) does require counsel to
conduct a reasonable inquiry, as measured by an objective, rather than subjective, standard.
Moreover, counsel’s certification obligation cannot be divorced from their duty to the court.
“As officers of the court, all attorneys conducting discovery owe the court a heightened duty of
candor.” Markey, 29015 WL 5027522, at *516.
Rule 26(g) compliance focuses on the “thoroughness, accuracy and honesty (as far as
counsel can reasonably tell) of the [discovery] responses and the process through which they
have been assembled.” St. Paul Reinsurance Company, Ltd., 198 F.R.D. at 516.
[E]ach signing of a new discovery request, response, or objection must be
evaluated in light of the totality of the circumstances known at the time of
8
“[A]n evasive or incomplete disclosure, answer or response must be treated as a failure to disclose, answer, or
respond.” Fed. R. Civ. P. 37(a)(4).
20
signing. Therefore, the practical import of Rule 26(g) is to require vigilance by
counsel throughout the course of the proceeding.
Id. Moreover, counsel is permitted to rely on the assertions of their client that discovery
responses are accurate and correct “only ‘as long as that reliance is appropriate under the
circumstances.’” HM Electronics, Inc. v. R.F. Technologies, Inc., No. 12cv2884-BAS-MDD,
2015 WL 4714908, at *15 (S.D. Cal. Aug. 7, 21015) (“The point of Rule 26(g) is to hold
someone personally responsible for the completeness and accuracy of discovery responses”).
Therefore, Mr. Oertli’s October 21, 2013 certification must be assessed against the totality of
information available to him and the circumstances known at the time he filed that certification.
On February 11, 2013, Mr. Oertli certified that Plaintiff’s response to Interrogatory No. 4
was proper and consistent with Rule 33(d). Yet, approximately two months later, Mr. Oertli
expressed concern over PDX’s “lack of a paper trail to prove up damages” in a April 26, 2013
email to Mike Paxton. In that same email, Mr. Oertli warned that “action needs to be taken
now, or at some point the door will be closed on proving up damages.” See Exhibits proffered
by Mr. Oertli in connection with the September 8, 2015 hearing. Within a matter of weeks, Mr.
Oertli again expressed concern over PDX’s ability to prove its damages.
When I agreed to represent PDX in the federal litigation, you told me a number of
times that I should not worry about damages because you had everything lined up
and could prove them easily. Recently, I have received the opposite message. I
am very concerned. Without the help of a CPA at some level, PDX may not
have provable and recoverable damages . . .
Id.
On July 3, 2013, Mr. Oertli explained to Mike Paxton that the supplemental discovery
responses required by Judge Jackson should “describe in detail all of PDX’s damages.” Mr.
Oertli renewed his request that Mr. Paxton enlist the services of an accountant because he
(Oertli) was “not capable of describing those damages in sufficient detail.” Only three days
21
before the deadline set by Judge Jackson to supplement Plaintiff’s response to Interrogatory No.
4, Mr. Oertli told Mr. Paxton:
I need from you your best guess on how much you lost in revenue and/or profits
in each year PDX was being punished . . . cut back. I am relying on you and Tim
[Danley] completely for Interrogatory No. 4 . . . . I will add a long section on
Objections and explain why PDX cannot fully identify all of its damages. After
giving this some thought, I think the best option would be to file on Monday
whatever we can complete by then; and say PDX will supplement its damages as
it reviews the native format 9 information (which should be received by tomorrow)
and as it receives additional information from Dish, if any. That puts the onus on
them to complain about PDX being late; and allows us to go to the Judge and give
him an earful.
See Exhibit G (doc. #261-7) to Defendant’s Supplement to Motion for Allocation of Sanction
Fees.
On October 18, 2013, in the wake of this court’s order requiring PDX to provide a “full
and comprehensive” disclosure of its damages and supporting documentation, Mr. Oertli
conceded in an email to his client that
I have no idea how your damages relate to particular documents you sent en
masse months ago. Tim came up with very specific numbers for each claim in
the Second Supp. Now tell me how he came up with those numbers and identify
the documents he used to calculate the numbers. If you do not have supporting
documents for a particular category, just say so.10
See Exhibits proffered by Mr. Oertli in connection with the September 8, 2015 hearing. That
same day, Mr. Oertli reiterated his continued concerns with PDX’s damage claims: “What I
9
On July 10, 2013, Mr. Oertli sent an email to Dish’s counsel acknowledging that “[w]ith respect to the issue of
‘native’ format, I have no idea what that means.” Even more remarkable is Mr. Oertli’s claim that he had “asked
five professional computer experts what the term means, and they have no idea either.” See Exhibit AQ included in
Defendant’s Exhibits for Hearing on Allocation of Sanction Fees. But see In re Porsche Cars Northam America,
Inc. Plastic Coolant Tubes Products Liability Litigation, 279 F.R.D. 447, 448 n.2 (S.D. Ohio 2012) (“‘native
format’ means the format of [electronically stored information] in which it was generated and/or used by the
producing party in the usual course of business and in its regularly conducted activities.”). See also Palgut v. City
of Colorado Springs, No. 067-cv-01142-WDM-MJW, 2006 WL 3483442, at *3 (D. Colo. Nov. 29, 2006).
10
Less than two weeks after he professed ignorance of how PDX’s damages related to documents previously
produced in discovery and questioned how Tim Danley arrived at his damages calculations, Mr. Oertli sent an email
to William Groh in which he insisted that “PDX answered Interrogatory 4 to the best of its ability and then some. . .
22
suspect is really happening is now that the Court and Dish are pressing hard, you realize that it
will soon be obvious that you do not have documents that directly support your claims for
damages, which is a concern I have expressed repeatedly from the outset and over the last
several months, and which I urged you to address by retaining an accountant.” Id.
On October 20, the day before PDX’s supplemental disclosures were due, Mr. Oertli
continued to question the information he was receiving from his client.
To make the precise computations that Tim has made, he had to be looking at
specific documents in which there are entries he added up to come to the total.
You guys must do a better job of describing the documents from which Tim
computed the total for each category.
Id.
Notwithstanding his obvious reservations, the Third Supplementation tendered by Mr.
Oertli on October 21st reiterated PDX’s long-standing position that the total amount of its
damages “cannot be established at this time because [Dish] has provided for limited periods of
time” records that do not “allow PDX to match payment records to actual jobs.”
Mr. Oertli’s relative passivity after the hearing on October 17, 2013 stands in contrast to
Mr. Groh’s efforts to investigate and quantify PDX’s damages. Following Mr. Paxton’s
deposition on October 25, 2013 and in anticipation of Tim Danley’s deposition on November 9,
2013, Mr. Groh began to compare PDX’s damage computations against the records previously
produced by Dish. That investigation disclosed an “error in Plaintiff’s Exhibit A to the Third
Supplemental Disclosures” produced in response to this court’s Order of October 17. Mr. Groh
advised Dish’s counsel of that error in an email sent on November 7, 2013 and provided a
corrected spreadsheet.
I have yet to understand why the responses are deficient.” See Exhibit 8 included in William C. Groh’s Exhibit List
for September 8, 2015 Hearing.
23
On January 21, 2014, Mr. Groh wrote to Mr. Paxton regarding PDX’s ongoing obligation
to supplement its damages claim.
[O]ur continued impasse on what damages should be claimed in this case has
prevented and continues to prevent us from supplementing PDX’s damages
appropriately. We believe continued assertion of PDX’s current damages
calculation would be a violation of Federal Rules of Civil Procedure 26(g) due to
the lack of a legal basis to pursue claims for many of the transactions PDX claims
as damages.11
See Exhibit 6 included in William C. Groh’s Exhibit List for September 8, 2015 Hearing.
On February 9, 2014, Mr. Groh sent another email to Mike Paxton expressing dismay
that he had “never advised me that we had Commpay notes.”12
On the contrary, you continuously advised me that we needed account notes. In
fact, when it became apparent that there were notes present in some of the paper
work orders, you stated that we needed account notes from Dish because they
would have more information. At no point in this case did you tell me that PDX
was sitting on thousands of account notes from Commpay that it had not
identified in discovery, nor did you say anything that would have led me to
believe this was the case. I happened to find this information out in January
during a conversation with Tim [Danley] about another subject entirely.
See Exhibit 9 included in William C. Groh’s Exhibit List for September 8, 2015 Hearing.
On February 20, 2014, Mr. Groh sent a letter to Dish’s counsel with new information
regarding PDX’s damage disclosures. After months of motion practice and protestations from
PDX regarding its lack of documentation, Mr. Groh’s letter conceded that Plaintiff’s prior
responses to Interrogatory No. 4 had been incomplete.
It has come to our attention that in producing his original damage calculation, Tim
Danley relied on account notes contained in PDX’s Commpay system to
11
PDX and its counsel clearly could not agree on the scope of recoverable damages in this case. In an email sent to
Mike Paxton on July 4, 2013, Mr. Oertli noted that “[f]or several weeks, I have advised you to include damages
related to lost profits and revenues, in spite of the provision in the Installment Agreement that purports to prohibit
those types of damages.” See Exhibits proffered by Richard Oertli in connection with the September 8, 2015
hearing.
12
The CommPay website advertises that its software “offers the highest quality service, repair, and fulfillment
business management software on the market” and that “CommPay for DNS provides all the capabilities to run a
Dish Network fulfillment operation.” See http://www.commpay.tv/html/products.html.
24
cross-check his descriptions of events that occurred on certain transactions that
took place while PDX was using Commpay. . . . . At this point, we have been
unable to determine whether or to what extent the Commpay notes ultimately
affected the descriptions provided . . for each individual transaction. PDX began
using Commpay in July of 2007. As such, this omission potentially affects
transactions occurring on or after July of 2007. These Commpay accounts were
produced in discovery as part of the Commpay backup, but were not identified in
PDX’s damage computation. . . . . In generating his computation, Mr. Danley also
indicated in his deposition that he relied on payment information files received
from Dish during the second exception. These documents were not identified by
name in PDX’s prior damage supplementation.
See Exhibit 7 included in William C. Groh’s Exhibit List for September 8, 2015 Hearing.
To impose sanctions under Rule 26(g), the court must find that counsel violated his or her
certification obligation without substantial justification. “[S]ubstantial justification” does not
mean “justified to a high degree, but .. . justified to a degree that could satisfy a reasonable
person.” Sun River Energy, Inc., 800 F.3d at 1127 (quoting Pierce v. Underwood, 487 U.S. 552,
565 (1988)). Cf. Grider v. Keystone Health Plan Central, 580 F.3d 119, (3rd Cir. 2009)
(suggesting that the “substantial justification” is “satisfied if there exists a genuine dispute
concerning compliance”) (citing Tolerico v. Home Depot, 205 F.R.D. 169, 175-76 (M.D. Pa.
2002)); Sender, 225 F.R.D. at 656 (“a party’s failure to disclose is substantially justified where
the non-moving party has a reasonable basis in law and fact, and where there exists a genuine
dispute concerning compliance”).
After considering the available record, I conclude that Mr. Groh’s communication to
defense counsel on November 7, 2013 does not merit sanctions under Rule 26(g). This court
finds that Mr. Groh’s efforts after October 24, 2013 to investigate PDX’s own records and more
accurately quantify his client’s damages were reasonable, particularly given his recent entry of
appearance and direct communications with Mr. Danley.
25
The court further finds that Mr. Groh’s actions were substantially justified.13 Mr. Groh
asserts that he forwarded additional information and documentation to Dish’s counsel on
November 7, 2013 in anticipation of Mr. Danley’s deposition on November 9 and in response to
the subpoena duces tecum served on Mr. Danley. That subpoena required, inter alia, the
production of “all documents, electronically stored information, or tangible things in your
possession, custody, or control that you prepared, relied upon, or reviewed in preparation of
Plaintiff’s Third Supplementation of its Computation of Damages; and Related Third
Supplemental Responses to Interrogatory No. 4, dated October 21, 2013.” See Exhibit 2
attached to the Declaration of William C. Groh (doc. #267-3). Rule 26(g), by its very terms,
applies to a party’s initial disclosures under Rules 26(a)(1) or (3) and every discovery request,
response or objection served on or by a party. On balance, I find that Mr. Groh’s actions had a
reasonable basis in law and fact and that Dish has raised, at best, a genuine dispute as to the
applicability of Rule 26(g) to Mr. Groh’s disclosure on November 7. Accordingly, I will not
allocate any sanctions to Mr. Groh.
Turning to Mr. Oertli, he insists that the certification that accompanied PDX’s Third
Supplementation was “[b]ased on reasonable inquiries,” was “complete as of the time it [was]
made and [was] consistent with” discovery rules and existing law. According to Mr. Oertli, his
certification was based on “extensive communications with Mr. Paxton directly, and with Tim
Danley indirectly through Mr. Paxton,” as well as Mr. Oertli’s “reasonable inquiries into the
13
I acknowledge the available record is open to interpretation. The email sent from Mr. Groh to Dish’s counsel on
November 7 refers to “an error in Plaintiff’s Exhibit A to the Third Supplemental Disclosures of Damages” and
states that the spreadsheets attached to the email were “prepared by Mr. Danley to account for this discrepancy.” In
the same email, Mr. Groh states that the newly prepared documents could be provided to Dish “as a courtesy . . . in
advance of Mr. Danley’s deposition.” See Exhibit 4 attached to the Declaration of William C. Groh (doc. #267-3).
26
accuracy of the information being provided.” I find that Mr. Oertli’s certification is not
supported by the factual record.
On February 11, 2013, Mr. Oertli certified, pursuant to Rule 26(g) and Rule 33(d) that
all the information requested in Interrogatory No. 4 could be found in the computer records
provided by PDX in response to that discovery request. Yet Mr. Oertli’s own emails over
successive months reflect a growing concern that PDX could not properly quantify or
substantiate its damage claims. Mr. Oertli’s October 21st certification asserted that he had
conducted “reasonable inquiries” based on “extensive communications with Mr. Paxton . . . into
the accuracy of the information being provided.” But the emails sent by Mr. Oertli between
October 17 and 21, 2013 reveal a persistent lack of confidence in the information counsel was
receiving from Mr. Paxton and Mr. Danley, and Mr. Oertli’s complete ignorance of his client’s
own records. In view of these concerns, Mr. Oertli’s apparent failure to personally review the
records maintained at PDX’s offices in Beaverton, Oregon and to compare those documents
against the information previously provided Dish is all the more troubling. That omission is
particularly glaring given the investigative efforts undertaken by Mr. Groh within weeks of
entering his appearance in this case. Mr. Oertli would have the court find that he made
“reasonable inquiries to the accuracy of the information being provided,” when his own emails
clearly convey skepticism as to the content and sources of that information. By October 21,
2013, Mr. Oertli could no longer reasonably rely on the representations and incomplete
information provided by Mr. Paxton. Cf. Cache La Poudre Feeds, LLC v. Land O’Lakes, Inc.,
244 F.R.D. 614, 630 (D. Colo. 2007) (nothing that outside counsel “retains an ongoing
responsibility to take appropriate measures to ensure that the client has provided all available
27
information and documents which are responsive to discovery requests”). Yet, Mr. Oertli’s
October 21, 2013 certification suggests just the opposite.
I also cannot find substantial justification for Mr. Oertli’s deficient certification.
Counsel suggests that his ability to comply with Rule 26(g) was hampered by PDX’s refusal to
enlist the services of an outside accountant and by the fact that Mike Paxton prohibited him from
communicating directly with Tim Danley during the period leading up to PDX’s October 21,
2013 supplemental disclosure.14 See Exhibit AD included in Defendant’s Exhibits for Hearing
on Allocation of Sanction Fees. Neither excuse rises to the level of substantial justification.
Mr. Paxton’s disinclination to hire an outside accountant, coupled with his own concern over the
lack of documentation substantiating PDX’s damage claims, should have made Mr. Oertli more
vigilant and less inclined to accept Mr. Paxton’s representations. Cf. Brown v. Tellermate
Holdings Ltd., No. 2:11-cv-1122, 2014 WL 2987051, at *18 and 20 (S.D. Ohio Jul. 1, 2014)
(counsel is expected to “do more than issue a general directive to their client” and “cannot
simply take a client’s representations about [discovery responses] at face value”). But instead,
Mr. Oertli continued to rely exclusively on Mr. Paxton’s “best guess” and strained damage
theory. Mr. Oertli’s less-than-candid certification was motivated by a desire to protect himself,
in lieu of discharging his responsibilities as an officer of the court.
14
In fairness, I note that Mr. Paxton sent an email to Mr. Oertli and Mr. Groh on February 8, 2014, in which he
denied that counsel had ever been precluded from communicating with Mr. Danley. Rather, Mr. Paxton claimed
that counsel were expected to first review their questions with him prior to speaking with Tim Danley since “Tim
was already working on another project for me, and I did not want him to get frustrated.” See Exhibit 9 included in
William C. Groh’s Exhibits for September 8, 2015 Hearing. While the court recognizes the self-serving statements
provided by Mr. Oertli and Mr. Paxton, a ruling on the pending motion does not require me to resolve these seeming
contradictions.
28
Mr. Oertli cannot avoid sanctions under Rule 26(g)(3) by citing an inability to
communicate directly with Mr. Danley.15 Cf. Metropolitan Opera Association, Inc. v. Local
100, Hotel Employees and Restaurant Employees International Union, 212 F.R.D. 178, 223
(S.D.N.Y. 2003) (“given the almost complete disconnect” between counsel and client, “there
[was] simply no way that any discovery response made by counsel could have been based on a
reasonable inquiry under the circumstances”). Assuming that Mr. Oertli’s account is correct, his
claim to have undertaken a “reasonable investigation” rings hollow given the alleged constraints
on his ability to access essential information directly. Cf. HM Electronics, Inc.,, 2015 WL
4714908, at *15 (suggesting that counsel did not act reasonably by speaking only to the client
and not pursuing additional sources of information). While a lawyer “need not routinely assume
the duplicity or gross incompetence” of his client, counsel cannot ignore “clear warnings as to
the accuracy of the data,” particularly when he does not have the capacity to confirm that data
through access to original documents. See also In re Taylor, 655 F.3d 274, 284-85 (3rd Cir.
2011). In light of the foregoing record, I find that Mr. Oertli violated Rule 26(g), without
substantial justification, by certifying the Third Supplementation on October 21, 2013.
Although Rule 26(g)(3) states that the court “must impose” an appropriate sanction when
a violation occurs, the nature or degree of that sanction “is a matter of judicial discretion to be
exercised in light of the particular circumstances.” St. Paul Reinsurance Company, Ltd., 198
F.R.D. at 516. While this court cannot endorse Mr. Oertli’s actions relative to the Third
Supplementation on October 21, 2013, it also cannot ignore counsel’s unsuccessful attempt to
withdraw from this case during the hearing on October 17. At that time, it was clear to the court
15
Mr. Oertli’s argument might be more persuasive if there were any indication in the record that he ever visited
PDX’s office to personally review records maintained by his client or to meet jointly with Mr. Paxton and Mr.
29
that Mr. Oertli’s relationship with Mr. Paxton was strained. With the benefit of the exhibits and
documents provided by Dish, Mr. Oertli and Mr. Groh, it is also clear that Mr. Oertli was
confronted with a client representative who was fixated on a particular view of the case and
disinclined to consider countervailing arguments or legal advice. That can lead to a volatile
attorney-client relationship. Nevertheless, as long as Mr. Oertli remained counsel of record, he
was required to comply with Rule 26(g) and his responsibilities as an officer of the court.
Finally, in determining an appropriate sanction for Mr. Oertli’s improper certification on
October 21, I return to Judge Jackson’s Order of March 5, 2015. The contract between Dish and
PDX allocated the risks and attendant costs of litigation to the non-prevailing party. Judge
Jackson concluded that Dish should recover from PDX the sum of $775,090.35. In view of
Judge Jackson’s order and given the totality of circumstances, I find that the objectives
underlying Rule 26(g) can be advanced effectively by requiring Mr. Oertli to pay to Dish the
sum of $5,000. I believe that monetary sanction, coupled with the admonitions contained in this
Order, appropriately addresses the narrow issue presented for this court’s consideration. Cf.
Heckler & Koch, Inc. v. German Sport Guns GMBH, No. 1:11-cv-01108-SEB-TAB, 2015 WL
4878644, at *11 (S.D. Ind. May 22, 2015) (while noting that counsel’s conduct was objectively
unreasonable and in reckless disregard of their obligations, the court also observed that
“admonishing [counsel] for his shortcomings” could act as a deterrent for future behavior).
Danley. Whether Mr. Oertli truly was laboring under such a restriction remains unclear, particularly given Mr.
Groh’s own interactions with Mr. Danley after October 2014.
30
CONCLUSION
For the foregoing reasons, Defendant’s Motion for Allocation of Sanction Fees (doc.
#229) is denied in all respects as to William Groh and granted in part as to Richard Oertli. Mr.
Oertli is hereby required to pay Dish Network Service, LLC the total sum of $5,000 as a sanction
under Rule 26(g)(3). This court will not impose any other sanction against Mr. Oertli.
DATED this 30th day of November, 2015.
BY THE COURT:
s/ Craig B. Shaffer
United States Magistrate Judge
31
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?