McFadden et al v. Meeker Housing Authority et al

Filing 376

ORDER Denying Plaintiffs' Motion for Default Judgment as a Sanction, Sua Sponte Granting Alternative Sanctions, and Order to Show Cause why Stephen J. Baity should not Be Ordered to pay Attorneys' Fees and Costs. Defendants former counsel, Mr. Stephen L. Baity, is ORDERED TO SHOW CAUSE, on or before July 25, 2018. ORDERED by Judge William J. Martinez on 7/9/2018. (angar, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge William J. Martínez
Civil Action No. 16-cv-2304-WJM-GPG
MEGAN MCFADDEN,
LONNIE WHITE, and
ANTONIO “A.J.” WHITE,
Plaintiffs,
v.
MEEKER HOUSING AUTHORITY, a Property Management Company,
MELINDA PARKER,
MICHELLE BUCKLER,
EDY GEORGE, and,
STACIE KINCHER,
Defendants.

ORDER DENYING PLAINTIFFS’ MOTION FOR DEFAULT JUDGMENT AS A
SANCTION, SUA SPONTE GRANTING ALTERNATIVE SANCTIONS, AND ORDER
TO SHOW CAUSE WHY STEPHEN J. BAITY SHOULD NOT BE ORDERED TO PAY
ATTORNEYS’ FEES AND COSTS

Plaintiff Megan McFadden (“McFadden”) previously resided in the federally
subsidized Karen Court apartment complex in Meeker, Colorado. Plaintiffs Lonnie and
A.J. White (“the Whites”) are current residents of Karen Court. All Plaintiffs claim that
Defendants discriminated against them in violation of the Rehabilitation Act of 1973
(“Rehabilitation Act”), 29 U.S.C. §§ 794 et seq., and the Fair Housing Act (“FHA”), 42
U.S.C. §§ 3601 et seq., based on Defendants’ policy (or former policy) concerning
disability-assistance pets. McFadden, who moved from Karen Court around the time
this lawsuit commenced, also brings a claim under Colorado state law for wrongful
withholding of her security deposit.

Before the Court is Plaintiffs’ Motion for Entry of Judgment and Dismissal Due to
Defendants’ Litigation Misconduct (“Motion”). (ECF No. 288.) The basis of this motion
is Defendants’ alleged non-diligence in, and abuse of, the discovery process. For the
reasons explained below, the Court denies Plaintiffs’ requested remedy to strike
Defendants’ affirmative defenses and counterclaims and to enter default judgment
against Defendants. The Court sua sponte instead excludes certain false testimony,
and will order Defendants’ former counsel, Mr. Stephen L. Baity, 1 to show cause why he
should not be held personally responsible for attorneys’ fees and costs Plaintiffs would
not have incurred but for his non-diligence.
I. LEGAL STANDARD
Although Plaintiffs assert that Defendants’ alleged discovery violations merit
default judgment against them, Plaintiffs do not invoke Federal Rule of Civil Procedure
37(b)(2)(A)(vi), which permits “default judgment against the disobedient party” where
the party has “fail[ed] to obey an order to provide or permit discovery.” Plaintiffs instead
seek entry of default judgment under the Court’s inherent authority to assess sanctions.
(ECF No. 288 at 3.) See also Goodyear Tire & Rubber Co. v. Haeger, 137 S. Ct. 1178,
1186 (2017) (“Federal courts possess certain inherent powers, not conferred by rule or
statute, to manage their own affairs so as to achieve the orderly and expeditious
disposition of cases. That authority includes the ability to fashion an appropriate
sanction for conduct which abuses the judicial process.” (internal quotation marks and
citations omitted)).

1

New counsel for Defendants entered their appearance, and Mr. Baity then withdrew,
after the Motion became ripe. (See ECF Nos. 346–48, 358.) The Court’s criticisms of Mr. Baity
in this order are directed at him alone, not at Defendants’ new counsel.

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For guiding standards, Plaintiffs nonetheless cite to cases analyzing Rule
37(b)(2)(A) sanctions. (See ECF No. 288 at 3 (citing Stichting Mayflower Mountain
Fonds v. City of Park City, Utah, 441 F. App’x 568 (10th Cir. 2011); Lee v. Max Int’l,
LLC, 638 F.3d 1318 (10th Cir. 2011); Ehrenhaus v. Reynolds, 965 F.2d 916, 920 (10th
Cir. 1992)).) Defendants do the same, although asserting that they have not violated
any discovery orders. (See ECF No. 294 at 3–4.) Because the parties appear to agree
that the Court should apply a Rule 37(b)(2)(A) analysis, the Court will do so, reserving
for another day the question of whether and under what conditions a Court’s inherent
authority to sanction extends to dismissal or default judgment.
The standard for imposing default judgment as a discovery sanction is strict:
[D]ismissal represents an extreme sanction appropriate only
in cases of willful misconduct. In many cases, a lesser
sanction will deter the errant party from further misconduct.
Because dismissal with prejudice defeats altogether a
litigant’s right to access to the courts, it should be used as a
weapon of last, rather than first, resort.
Ehrenhaus, 965 F.2d at 920 (internal quotation marks and citations omitted). “If a judge
intends to order a dismissal or default judgment because of discovery violations, the
judge should do so only if the judge is impressed to do so by evidence which is clear
and convincing.” Gates Rubber Co. v. Bando Chem. Indus., Ltd., 167 F.R.D. 90, 108
(D. Colo. 1996).
The Tenth Circuit has prescribed the following factors to consider: (1) the degree
of actual prejudice to the affected party; (2) the amount of interference with the judicial
process; (3) the culpability of the litigant; (4) whether the court warned the culpable
party in advance that dismissal of the action would be a likely sanction for
noncompliance; and (5) the efficacy of lesser sanctions. Ehrenhaus, 965 F.2d at 921.
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The Court will refer to these as the “Ehrenhaus factors.” “These factors do not
constitute a rigid test; rather, they represent criteria for the district court to consider prior
to imposing dismissal as a sanction.” Id. “Only when the aggravating factors outweigh
the judicial system’s strong predisposition to resolve cases on their merits is dismissal
an appropriate sanction.” Id. (internal quotation marks omitted).
II. ANALYSIS
A.

Summary of Accusations and Responses
Before applying the Ehrenhaus factors, the Court will first summarize Plaintiffs’

accusations of discovery misconduct and Defendants’ responses. The Court will
designate each accusation according to the outline numbering employed in the parties’
briefs (e.g., A-1, D-2, etc.). Most of Plaintiffs’ accusations stemmed from a forensic
search of the Meeker Housing Authority’s sole computer, which Defendants agreed to
permit as a compromise to resolve a discovery dispute.
A-1. Plaintiffs propounded discovery requests for documents, including
documents found on digital devices, in any way touching upon Defendants’ pet policies.
Plaintiffs received far fewer documents than they expected, and the forensic search
uncovered more, namely, Internet search histories conducted in June and July 2016
regarding pet policies, and a template of a compliant pet policy obtained in August
2016. (ECF No. 288 at 4–5.) The Court agrees with Plaintiffs that these are documents
Defendants should have produced themselves before the forensic search.
Defendants counter that “Plaintiffs are not prejudiced” because they obtained the
documents “by the discovery methodology they proposed and which was agreed to. . . .
They have the documents they contend support their claims and they obtained them
using the methodology they wanted.” (ECF No. 294 at 5.) This no-prejudice argument
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is a running theme in Defendants’ response to nearly all of Plaintiff’s accusations, so the
Court will not repeat it under each heading, below. The Court addresses it instead in
Part II.C.1.b, below.
Defendants further assert that the uncovered documents are irrelevant, or at
least that Plaintiffs exaggerate their significance. (Id. at 5–6.)
A-2. Plaintiffs claim that forensic imaging and public records requests uncovered
a March 2017 compliance agreement that Meeker Housing Authority entered into with
the U.S. Department of Housing and Urban Development regarding pet policies, thus
supposedly confirming that the pet policies at issue in this lawsuit were unlawful. (ECF
No. 288 at 5–6.) Defendants respond that this document is irrelevant to their knowledge
at the time the pet policies were promulgated, and it is inadmissible under Federal Rule
of Evidence 407 as a subsequent remedial measure. (ECF No. 294 at 6.)
A-3. Through discovery, Plaintiffs requested documents relevant to their claim
that Defendants have retaliated against Plaintiffs for asserting their rights under the Fair
Housing Act. Mr. Baity represented to the Court that Defendants searched for and
produced the single document responsive to that request. But forensic imaging
uncovered 99 responsive e-mails. (ECF No. 288 at 6–7.) Defendants respond that
Plaintiffs misconstrue or exaggerate the significance of what they have found. (ECF No.
294 at 7–9.)
B. Plaintiffs claim that depositions of certain Defendants show that they did not
know or did not care about their duty to preserve and produce documents. (ECF No.
288 at 7–9.) Defendants respond that Plaintiffs have taken the deposition testimony out
of context. (ECF No. 294 at 9–11.)

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C. Accusation “C” is actually twofold.
The first portion of the accusation relates to expert reports. Defendants
designated their regular fair housing consultant, Mike McKenzie, as their rebuttal expert.
At his deposition, Plaintiffs learned that McKenzie had never seen or approved his
rebuttal expert report. It became clear that McKenzie had e-mailed his rebuttal opinions
to Mr. Baity, and Mr. Baity had then reformatted those opinions into a stand-alone
document, at times altering some of the wording to provide context, and removing any
mention of where McKenzie agreed with Plaintiffs’ expert. McKenzie did not see that
document before Mr. Baity sent it to Plaintiffs’ counsel. (ECF No. 288 at 9–10.)
Defendants respond that, “[a]lthough [McKenzie] didn’t see the final draft of his rebuttal
report before it was produced to Plaintiffs, [he] confirmed [that] the opinions in the report
accurately reflect his expert opinions in this case.” (ECF No. 294 at 13.)
The second portion of this accusation relates to McKenzie’s deposition
testimony. Specifically, McKenzie was not willing to be referred to as an expert. 2
Defense counsel then asked for a recess. Upon return, Plaintiffs’ counsel questioned
McKenzie about his conversations with Mr. Baity during the recess, and McKenzie
testified that Mr. Baity “recommended that I put my personal beliefs aside to be able to
answer your question and say that I consider myself an expert in that I can help a jury
understand [a certain topic relevant to this case].” Plaintiffs claim that this constituted
improper witness coaching. (ECF No. 288 at 10.) Defendants respond that McKenzie
had never before testified as an expert witness and so it was proper to help him
understand what Plaintiffs meant when they asked him if he considered himself an
2

His reasoning, which Plaintiffs fail to mention, is that he considered it “arrogant” for
anyone to deem themselves an expert. (See ECF No. 288-33 at 26.)

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expert. Defendants also point out, accurately, that Plaintiffs have not filed any motion to
exclude McKenzie for lack of expert qualifications. (ECF No. 294 at 13–14.)
D-1. Plaintiffs claim that their forensic examination revealed evidence that
Defendants fabricated and/or backdated certain notices that they were required to give
before increasing the Whites’ rent. (ECF No. 288 at 11–13.) Defendants respond that
Plaintiffs have done no more than reveal a factual dispute about authenticity that the
Court cannot resolve on this record. (ECF No. 294 at 14–15.)
D-2. Based on the current claims, affirmative defenses, and counterclaims, one
factual dispute needing resolution is whether McFadden left her apartment in a
damaged and unsanitary state at move-out in early September 2016. Concerning
evidence relating to this dispute, Plaintiffs bring a threefold accusation.
The first portion of the accusation claims that forensic imaging revealed a
document suggesting that a new tenant moved in soon after McFadden moved out—
specifically, a move-in form dated October 1, 2016—contrary to Defendants’
representations that it took about three months to repair McFadden’s apartment. (ECF
No. 288 at 13–14.) Defendants respond that the move-in form was obviously a draft
because it was unsigned. (ECF No. 294 at 16.)
The second portion of the accusation relates to certain photographs. Plaintiffs
claim that photographs Defendants produced supposedly depicting the damage to
McFadden’s apartment were taken about forty minutes after Defendants received notice
of this lawsuit, rather than several days earlier (as Defendants have represented). The
implication is that Defendants retaliated against McFadden by creating the damage
themselves or photographing damage in some other unit, and then representing it to be

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McFadden’s responsibility. Buttressing this argument, Plaintiffs point to the move-out
inspection form, which listed no damage. (ECF No. 288 at 14.) In response,
Defendants stand by the original date they ascribe to those photographs and assert that
Plaintiffs’ evidence suggesting a different date, and the blank move-out inspection form,
create a factual dispute that cannot be resolved on this record. (ECF No. 294 at 16–
17.)
The third portion of this accusation centers on deposition testimony from
Defendant Kincher (the property manager), who testified that McFadden was not
present for her move-out inspection because McFadden had not provided any notice
that she would be moving out. Plaintiffs, however, have discovered an e-mail exchange
between McFadden and Kincher showing that McFadden had indeed given prior notice
of her move-out date and Kincher had confirmed receipt of that notice. (ECF No. 288 at
14–15.) Quite surprisingly, Defendants’ only response is that Plaintiffs’ accusations do
not satisfy the elements of perjury under the Colorado criminal code. (ECF No. 294
at 17.)
D-3. Plaintiffs point to forensic evidence suggesting that the Meeker Housing
Authority’s board of directors reached a particular decision (the details of which are not
relevant for present purposes) in July 2016, contrary to Defendants’ position that the
decision was reached in August 2016. (ECF No. 288 at 17–18.) Defendants respond
that there is “confusing and possibly conflicting evidence” about the date of the decision,
but there is no dispute that the decision was made. (ECF No. 294 at 18–19.)
D-4. Kincher testified on the Meeker Housing Authority’s behalf as its Rule
30(b)(6) deponent. At that deposition, Plaintiff’s counsel specifically asked whether

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Meeker Housing Authority had exchanged e-mails with certain specified parties on
certain specified topics. Kincher testified that no such exchanges took place. Forensic
imaging, subpoenas, and open records requests yielded 37 e-mails involving the
specified parties and topics. (ECF No. 288 at 18.) Defendants respond that the e-mails
contain few substantive statements, are mostly cumulative e-mail chains, and are
generally not relevant. (ECF No. 294 at 20.)
B.

General Observations
The foregoing raises or implies many disputes about admissibility of documents

and testimony, or proper use of such evidence once admitted. The Court makes no
ruling at this time on any of those issues. The Court’s focus is on whether discovery
misconduct occurred, and if so, whether it merits default judgment as a sanction.
On that score, the Court notes that Defendants never argue that the documents
Plaintiffs discovered through their own efforts were not responsive to any discovery
request. Defendants express their opinion that some documents are irrelevant, but
Defendants have not attempted to justify their non-production of any document on
grounds that it does not fall within a discovery request.
In addition, Defendants do not provide any description of their efforts to search
for and preserve documents. Nor do they provide any explanation of how they could
have overlooked the materials Plaintiffs eventually discovered through the forensic
process.
Consequently, the existence of discovery misconduct is unrebutted. The
question is whether default judgment is the proper sanction.
C.

The Ehrenhaus Factors
The Court now turns to the five Ehrenhaus factors.
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1.

Prejudice
a.

Falsified Evidence

The only prejudice Plaintiffs assert in their opening brief is the prejudice inherent
in falsified testimony and documents: “The submission of falsified evidence substantially
prejudices an opposing party by casting doubt on the veracity of all of the culpable
party’s submissions throughout litigation.” Garcia v. Berkshire Life Ins. Co. of Am., 569
F.3d 1174, 1180 (10th Cir. 2009). (See ECF No. 288 at 19.) This is a very serious
matter. However, on the present record, the accusations of fabricated documents are
colorable but not clear and convincing.
As for falsified deposition testimony, however, Defendants’ argument to the effect
of “at least it wasn’t criminal perjury” all but concedes that Kincher testified falsely at her
deposition as to certain matters. Plaintiffs therefore face some prejudice on this
account.
The Court does not agree with Plaintiffs that Mr. Baity fabricated portions of
McKenzie’s expert report. The Court does not condone Mr. Baity’s slapdash approach
to that matter, but the Court has compared McKenzie’s original to the document
Mr. Baity represented to be McKenzie’s expert report. Most of the report is a verbatim
copy of McKenzie’s original words. The alterations are either for clarity (e.g., replacing
pronouns with proper names) or are a fair paraphrase of McKenzie’s words. In the
present circumstances, moreover, the Court sees no significance in Mr. Baity removing
McKenzie’s statements where he expressed agreement with Plaintiff’s expert’s
opinions. McKenzie was a rebuttal expert and so his failure to rebut some portion of
Plaintiff’s expert’s report naturally demonstrates lack of disagreement. Finally, Plaintiffs
do not dispute Defendants’ representation that McKenzie endorsed the Baity-drafted
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document as an accurate reflection of his opinions. The Court therefore sees no
prejudice on this account.
The Court also does not agree with Plaintiffs that Mr. Baity improperly coached
McKenzie at his deposition. It appears McKenzie had a genuine philosophical objection
to declaring himself an expert, and Mr. Baity helped him to understand that he could still
qualify as an expert for testimonial purposes despite his personal beliefs. Accordingly,
Plaintiffs did not suffer prejudice.
b.

The Need to Conduct a Forensic Examination

In their reply brief, Plaintiffs address Defendants’ running argument that Plaintiffs
suffered no prejudice because they obtained the documents they were looking for
through the method they proposed (forensic imaging). Plaintiffs counter that forensic
imaging required “great cost and time” that could have been avoided if Defendants had
simply taken their discovery obligations seriously. (ECF No. 301 at 2–3.) The Court
agrees.
If the instant motions practice demonstrates anything, it is, at least, that Mr. Baity
approached the discovery process with an inexcusable lack of diligence. In particular,
he made no effort to ensure that his clients took their discovery obligations seriously.
Because Plaintiffs’ attorneys ended up doing Mr. Baity’s work for him, Plaintiffs suffered
prejudice in time and expense.
2.

Interference with the Judicial Process

Without question, false testimony and lack of discovery diligence interfere with
the core judicial goal of truth-seeking.
3.

Culpability of the Litigant

To the extent Kincher testified falsely, she bears significant culpability. As for the
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remainder of the prejudice Plaintiffs suffered, the Court, on this record, can only say that
Mr. Baity bears culpability. Again, he made no effort to ensure that his clients took their
discovery obligations seriously, and he himself took a systematic foot-dragging
approach to the discovery process.
4.

Prior Warnings of Dismissal as a Likely Sanction

Defendants have never previously been warned that dismissal was a likely
sanction if their conduct persists.
5.

Efficacy of Lesser Sanctions

By an order awarding attorneys’ fees and costs related to the forensic imaging
process, and incurred in connection with the Motion, Plaintiffs’ monetary prejudice could
be cured.
As for false testimony, the Tenth Circuit has stated that the remedy of exclusion
is “[not] always enough to deter discovery misconduct. Litigants would infer that they
have everything to gain, and nothing to lose, if manufactured evidence merely is
excluded while their lawsuit continues.” Garcia, 569 F.3d at 1180 (internal quotation
marks omitted). Thus, dismissal or default judgment is potentially appropriate. Id.
Nonetheless, exclusion remains an available remedy, and it would cure at least some of
the prejudice Plaintiffs now face.
6.

Synthesis

The Court has given careful consideration to Plaintiffs’ arguments. Although
Plaintiffs’ claims are disturbing, the Court concludes on this record that lesser sanctions
should be employed before considering default judgment, particularly now that
Defendants are represented by new counsel. The Court orders the following alternative
sanctions sua sponte (Plaintiffs have not asked for lesser sanctions in the alternative to
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default judgment).
First, Defendant Kincher will not be permitted to testify that McFadden provided
no notice that she would be moving out. The Court will enforce this exclusion when it
addresses Plaintiffs’ pending summary judgment motion (ECF No. 354), and at trial.
Second, the Court will consider whether Mr. Baity should be held personally
responsible for Plaintiffs’ attorneys’ fees and costs related to the forensic imaging
process, and incurred in connection with the Motion. Because Mr. Baity was not
warned ahead of time that this might be a possible outcome, the Court will not decide
whether to award those fees and costs without first giving him an opportunity to be
heard. The Court will therefore order him to show cause why fees and costs should not
be awarded against him as a sanction for his failure to take his discovery responsibilities
seriously.
III. CONCLUSION
For the reasons set forth above, the Court ORDERS as follows:
1.

Plaintiffs’ Motion for Entry of Judgment and Dismissal Due to Defendants’
Litigation Misconduct (ECF No. 288) is DENIED;

2.

The Court sua sponte orders that Defendant Stacie Kincher (testifying on her
own behalf or on behalf of Defendant Meeker Housing Authority) shall not be
permitted to testify that Plaintiff McFadden failed to provide notice of her moveout; and

3.

Defendants’ former counsel, Mr. Stephen L. Baity, is ORDERED TO SHOW
CAUSE, on or before July 25, 2018, why he should not be ordered to pay
Plaintiffs’ reasonable attorneys’ fees and costs related to Plaintiffs’ efforts to

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forensically image the Meeker Housing Authority computer and to search within
and produce the documents so obtained, and incurred in connection with the
Motion. The Clerk will serve a copy of this Order on Attorney Baity via the
CM/ECF system as an Ad Hoc addressee of this Order.
Dated this 9th day of July, 2018.
BY THE COURT:

______________________
William J. Martinez
United States District Judge

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