Kokot v. Maxim Healthcare Services, Inc.

Filing 177

ORDER overruling 156 Objection, denying as moot 89 Motion to Dismiss for Failure to State a Claim, denying as moot 92 Motion to Compel, granting 126 Motion for Sanctions, adopting 150 Report and Recommendation. Entered by Judge Raymond P. Moore on 3/31/2020.

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Raymond P. Moore
Civil Action No. 18–cv–00689–RM–KMT
JEANINE KOKOT, a Colorado resident,
Plaintiff,
v.
MAXIM HEALTHCARE SERVICES, INC., a foreign corporation,
Defendant.
______________________________________________________________________________
ORDER
______________________________________________________________________________
This matter is before the Court on the August 15, 2019, recommendation of United States
Magistrate Judge Kathleen M. Tafoya (ECF No. 150) to grant Plaintiff’s motion for discovery
sanctions (ECF No. 126) and enter default judgment against Defendant. The magistrate judge
also recommended denying as moot Defendant’s motion to dismiss (ECF No. 89) and Plaintiff’s
motion to compel (ECF No. 92). Defendant has filed an objection to the recommendation (ECF
No. 156), Plaintiff has filed a response (ECF No. 167), and Defendant has filed a reply (ECF
No. 173). For the reasons below, the Court overrules the objection, accepts and adopts the
recommendation, grants Plaintiff’s motion for sanctions, and enters default judgment against
Defendant. The recommendation is incorporated herein by reference. See 28 U.S.C.
§ 636(b)(1)(B); Fed. R. Civ. P. 72(b).
I.

LEGAL STANDARDS
Pursuant to Fed. R. Civ. P. 72(b)(3), this Court reviews de novo any part of the

magistrate judge’s recommendation that is properly objected to. An objection is proper only if it

is sufficiently specific “to focus the district court’s attention on the factual and legal issues that
are truly in dispute.” United States v. One Parcel of Real Prop., 73 F.3d 1057, 1060 (10th Cir.
1996). “In the absence of a timely objection, the district may review a magistrate’s report under
any standard it deems appropriate.” Summers v. State of Utah, 927 F.2d 1165, 1167 (10th Cir.
1991).
A district court may issue default judgment as a sanction if a party fails to obey an order
or to provide or permit discovery. Fed. R. Civ. P. 37(b)(2)(A)(vi). To determine if such a severe
sanction is warranted, courts consider the factors set forth in Ehrenhaus v. Reynolds: (1) the
degree of actual prejudice to the party seeking discovery; (2) the amount of interference with the
judicial process; (3) the culpability of the resisting party, (4) whether the court warned the
resisting party in advance that dismissal of the action or default judgment would be a likely
sanction, and (5) the efficacy of lesser sanctions. 965 F.2d 916, 921 (10th Cir. 1992); see also
Klein-Becker USA, LLC v. Englert, 711 F.3d 1153, 1159 (10th Cir. 2013). Default judgment is
generally considered a harsh sanction that should be used only when a party’s noncompliance is
due to willfulness, bad faith, or any fault of the disobedient party, not when a party is unable to
comply with a discovery order; however, no wrongful intent need be shown. Klein-Becker USA,
711 F.3d at 1159.
II.

BACKGROUND
Plaintiff worked for Defendant as an administrative officer and was in charge of its

Colorado Springs facility. After a twenty-two-year employment history, she was terminated in
March 2017, the same month Defendant received an unfavorable audit from Centers of Medicare
and Medicaid Services. Part of Plaintiff’s theory of the case is that Defendant terminated her in
an effort to appease and improve its image with regulators. While employed, Plaintiff earned

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units under Defendant’s Incentive Investment Plan (“IIP”). In April 2017, Defendant informed
Plaintiff that pursuant to the terms of the IIP she would receive an initial payment for twenty
percent of her units followed by another payment in September 2019 for the remaining units.
The total value of the units was about $700,000. However, in May 2017 Defendant informed
Plaintiff that she was ineligible to receive any payment because she was terminated for cause.
Plaintiff filed this lawsuit in March 2018. In her third amended complaint, she asserts
claims for breach of contract, unjust enrichment, statutory violations under Maryland and
Colorado law, and sex and age discrimination. Discovery was drawn out and contentious. The
magistrate judge held two informal discovery conferences and extended the discovery deadline
five times. Plaintiff amended her complaint three times. Defendant filed motions to dismiss
each version of the complaint as well as more than twenty supplemental discovery responses.
In June 2019, Plaintiff moved for sanctions “based on Defendant’s repeated failure to
timely disclose information and fully supplement discovery responses.” (ECF No. 126 at 1.)
Specifically, Plaintiff argued that after identifying only one witness in its initial disclosures—
Plaintiff’s former supervisor, who played no role in the decision not to pay her for her IIP
units—Defendant did not identify until May 2019 four additional witnesses who would testify on
the decision not to pay Plaintiff for her IIP units and other topics relevant to her case. Plaintiff
also argued that Defendant’s written discovery responses were habitually incomplete,
specifically with respect to its failure to identify civil and criminal charges that had been made
against Defendant in the preceding ten years by a state or federal governmental agency and
which resulted in Defendant paying a fine or penalty, which the magistrate judge directly
addressed in a February 2019 order. (See ECF No. 88.) Plaintiff further contended that
Defendant did not provide sufficient information about Plaintiff’s comparators—other

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administrative officers who received unfavorable audits but nonetheless received payment for
their IIP units. Moreover, Plaintiff contended that it was not until April 2019 that Defendant first
disclosed a critical e-mail from its CEO directing that Plaintiff not be paid for her IIP units. Two
months later, Defendant supplemented its response by including other e-mails in the string with
the CEO’s e-mail, but Plaintiff contended that Defendant still did not disclose the entire e-mail
string. Plaintiff sought sanctions of excluding the four witnesses disclosed in June as well as
attorney fees and costs, but she did not request default judgment in her motion.
In response to Plaintiff’s motion, Defendant argued that it had diligently produced
documents responsive to Plaintiff’s “burdensome, irrelevant, and duplicative discovery
requests.” (ECF No. 135 at 13.) It argued that its supplemental responses showed its exhaustive
attempts to complete discovery fully and that it was not acting in bad faith. Defendant also
argued that Plaintiff was responsible for part of the delay because it took her 174 days to respond
to Defendant’s second set of interrogatories. Defendant argued further that sanctions were not
appropriate because there were no allegations of spoliation or destruction of evidence and
because Plaintiff could not show she was prejudiced or surprised by the discovery process. And
Defendant argued that Plaintiff was to blame for her high discovery costs and that her request for
all her costs was unjustifiable because none of those costs were apportioned to Defendant’s
alleged delay.
In her reply, Plaintiff contended that Defendant still had not complied with the Court’s
February 2018 discovery order. After conducting additional research, she had learned that
Defendant had been fined numerous times by various federal and state agencies but still had not
disclosed such fines, thereby directly violating the Court’s order directing that such information
be disclosed. Plaintiff cited eighteen such instances that were not disclosed. She argued that the

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sanctions originally requested would not provide a complete remedy and that default judgment
should be entered.
The magistrate judge held a hearing on the motion for sanctions in August 2019. There,
Defendant presented oral argument as to why it did not believe default judgment was warranted.
The magistrate judge issued the recommendation about a week later. Applying the Ehrenhaus
factors, the magistrate judge determined Defendant had engaged in sanctionable conduct in three
areas. First, the magistrate judge found Defendant had concealed the “smoking gun” in the
case—e-mails indicating that its CEO had intervened to prevent Plaintiff from being paid for her
units. (ECF No. 150 at 20.) The magistrate judge found Plaintiff was prejudiced by the late
disclosure of the e-mails because she was not able to depose the CEO. The magistrate further
determined that the level of interference with the judicial process was manifest and that
Defendant was culpable because it withheld relevant information from its own attorneys. And
the magistrate judge determined no lesser sanction would deter Defendant from engaging in
similar conduct.
Second, the magistrate determined Defendant’s failure to provide information about fines
and penalties levied against it amounted to “open defiance” of the February 2019 discovery
order. (Id. at 24.) The magistrate judge found Plaintiff was prejudiced by the lack of disclosure
because it prevented her from developing necessary comparator evidence with respect to other
instances of either criminal negligence or gross incompetence at Defendant’s facilities. The
magistrate judge determined Defendant’s behavior substantially interfered with the judicial
process and that it was “fully and totally culpable for not providing information that it almost
surely has at its virtual fingertips.” (Id. at 25.) And again, the magistrate determined no lesser
sanction would suffice because it would still be cost effective for Defendant to defy the system.

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Third, the magistrate judge faulted Defendant for its last-minute disclosure of four
witnesses it planned to call. The magistrate judge determined Plaintiff was prejudiced by
Defendant’s “unwarranted gamesmanship” and that Defendant was culpable for purposefully
hindering Plaintiff’s ability to prepare her case. (Id. at 27.) Defendant’s conduct negatively
interfered with the judicial process, the magistrate judge found, and the court’s previous leniency
during discovery conferences had prompted further disrespect for the Court, Plaintiff, and the
discovery process.
The one Ehrenhaus factor that appeared to weigh in Defendant’s favor was the lack of an
explicit warning that default judgment could be levied against it as a sanction. But the
magistrate judge noted that she repeatedly warned Defendant that it was not responding
reasonably to discovery requests. The magistrate judge also noted that the lack of such a
warning did not outweigh the other Ehrenhaus factors under the circumstances of the case.
In its objection to the recommendation, Defendant argues that it was deprived of due
process because the magistrate judge did not warn it that she was considering terminating
sanctions and did not give Defendant the opportunity to respond in writing to Plaintiff’s request
for such sanctions, which was first made in her reply brief. Defendant also argues that
terminating sanctions are not warranted under the circumstances of this case based on the other
Ehrenhaus factors. Neither party objected to the magistrate judge’s recommendation to deny as
moot Defendant’s motion to dismiss and Plaintiff’s motion to compel.
III.

ANALYSIS
A.

Due Process

The hallmarks of due process are notice and an opportunity to respond. See Cleveland
Bd. of Educ. v. Loudermill, 470 U.S. 532, 546 (1985). Because Defendant was provided with

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both, its due process arguments lack merit. Although Plaintiff first requested default judgment in
her reply brief (after learning Defendant’s conduct was more egregious than she previously
thought), Defendant was on notice that the magistrate judge was considering default judgment at
the August 2019 hearing, where it availed itself of the opportunity to be heard on the issue.
Defendant cites no authority for the proposition that due process requires a party facing the
sanction of default judgment to have the opportunity to respond in writing. See id. (“The
opportunity to present reasons, either in person or in writing, why proposed action should not be
taken is a fundamental due process requirement.”). Such a requirement would make little sense
in a case like this, where Defendant already responded in writing to Plaintiff’s motion for
significant sanctions and then responded orally at the hearing on the motion to the argument that
default judgment should be considered. Defendant has not identified any arguments that it
would have raised in writing if it knew it might be facing default judgment as opposed to merely
having to pay over $100,000 in attorney fees and having four of its witnesses excluded as
sanctions for its conduct during discovery. Further, because this matter was referred to a
magistrate judge, Defendant has now twice availed itself of the opportunity to respond in writing
to the recommendation, both in its objection to the recommendation (ECF No. 156) and in its
reply (ECF No. 173). Accordingly, Defendant received notice that default judgment was a
possibility in this case as well as opportunities to respond orally and in writing. Under the
circumstances of this case, the Court discerns no due process violation.
The fact that terminating sanctions are often imposed only after multiple warnings and
the opportunity to respond in writing does not convert these into requirements. There is no
suggestion that counsel for Defendant was not aware the Court has the authority to impose such a
sanction. Defendant was warned before the hearing, when Plaintiff explained in her reply why

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she was requesting default judgment. And again, at the hearing, Defendant responded by
arguing why it did not agree that default judgment was warranted. At that time, Defendant did
not raise any due process concerns. Nor did it argue, as it does in its objection to the
recommendation, that Plaintiff “forfeited any argument for terminating sanctions by failing to
raise it until her reply brief.” (ECF No. 156 at 9.) But this argument also lacks merit. Defendant
cites no authority for the proposition that a court’s authority to sanction parties for discovery
abuse is circumscribed by the relief requested in a party’s initial motion for sanctions. The Court
concludes the magistrate judge’s recommendation to enter default judgment in this case does not
offend due process.
B.

Ehrenhaus Factors

Defendant next argues that the magistrate judge erred in applying the Ehrenhaus factors
and “in her characterization of the facts.” (ECF No. 156 at 10.)
1.

Prejudice

Defendant argues that the magistrate judge erred by concluding Plaintiff was prejudiced
by its production of the CEO e-mails in April and June of 2019. Plaintiff spent over a year trying
to uncover why Defendant decided not to pay her for her IIP units after initially indicating that it
would do so. By the time Defendant disclosed the highly relevant information in these e-mails, it
was too late for Plaintiff to depose the CEO. Regardless of whether these e-mails were
overlooked or purposefully concealed, the prejudice to Plaintiff was the same—she was denied
crucial evidence that would have helped her develop her case. Defendant’s suggestion that the
discovery deadline be extended a sixth time would further prejudice Plaintiff by causing even
more delay and it would not undo Plaintiff’s expenditure of time and money trying develop her
case that was less efficient than it could have been because she was being kept in the dark about

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how Defendant made its decision.
Defendant also argues that the magistrate judge erred by concluding Plaintiff was
prejudiced by its failure to identify civil penalties and fines it was required to pay. Defendant
concedes it “missed certain instances of civil fines and employee criminal charges” (ECF
No. 156 at 14) but argues it did not willfully disobey the February 2019 discovery order.
Defendant also contends Plaintiff “must share in the blame” (id. at 15) for its good faith mistake
because her discovery requests were vague and overbroad. However, the February 2019 order
clarified what Defendant was required to produce. Still, Plaintiff continued to find instances of
fines and penalties after June 2019, when she filed her motion for sanctions. This information,
which should have been easier for Defendant to produce than for Plaintiff to discover through
her own research, was crucial to Plaintiff’s case, as she needed to show that her comparators
were treated differently than she was for comparable conduct. But at the August 2019 hearing,
Defendant was asked about fines by the State of Texas and responded that it was “still looking at
what these are.” (ECF No. 154 at 10.) And this was after Defendant admitted that it overlooked
a $14 million fine by the State of Massachusetts and claimed that was the only instance it had not
disclosed. (Id. at 24.)
Defendant argues the magistrate judge erred by concluding that its late disclosure of four
witnesses prejudiced Plaintiff because it could only have been “for purposes of disadvantaging
Plaintiff and influencing the way in which she prepared her case for trial.” (ECF No. 150 at 27.)
But the fact that Defendant had identified these individuals as having some connection to the
case is not the same as identifying them as witnesses for trial. See Auraria Student Hous. at the
Regency, LLC v. Campus Vill. Apartments, LLC, 2014 WL 2933189, at *2 (D. Colo. June 30,
2014) (unpublished) (“[K]nowledge of the existence of a person is distinctly different from

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knowledge that the person will be relied on as a fact witness.”). Plaintiff spent over a year
conducting discovery based on Defendant’s disclosures and then, in the final week of discovery,
Defendant disclosed four new witnesses it intended to call. At that point, it was too late for
Plaintiff to depose these witnesses. Defendant offers no compelling reason why it could not have
disclosed these individuals—as witnesses—earlier. Plaintiff was undoubtedly prejudiced by her
inability to depose key players in the decision not to pay her for her IIP units. Defendant’s
conduct has clearly not only cost Plaintiff time and money but has deprived her of the ability to
develop her case.
2.

Interference with the Judicial Process

Defendant argues that the magistrate judge erred by finding it took a cavalier approach to
discovery. But given the deficiencies discussed above, the Court agrees with the magistrate
judge’s determination that “[t]he level of interference with the judicial process is manifest.”
Moreover, in light of the magistrate judge’s determination that the court “has no trust or
confidence that all relevant information has been provided even now” (id. at 21), Defendant’s
contention that its missteps were due to inadvertence is unavailing. The discovery process
requires parties to be diligent and thorough. Although Defendant “readily acknowledges its
imperfections in the discovery process,” this does not excuse its conduct in this case.
3.

Culpability

Similarly, Defendant also argues the magistrate judge erred by attributing its imperfect
discovery efforts to willfulness on its part rather than “human error.” (ECF No. 156 at 18.)
Defendant argues there is no evidence that it purposefully concealed the e-mails indicating its
CEO’s involvement in the decision to not pay Plaintiff for her IIP units. But the timing of the
piecemeal disclosures in April and June of 2019 belies Defendant’s argument that it conducted a

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timely, diligent search for documents responsive to Plaintiff’s discovery requests. The fact that
the e-mails were ultimately produced does not show they were never concealed. Defendant
points out that since the recommendation, it has engaged new lead counsel and continued to
search for potentially responsive information. But this is an example of doing too little and
doing it too late.
4.

Advance Warning

As discussed above in the due process section addressing due process, an explicit
warning is not a prerequisite to a terminating sanction. See, e.g., Archibeque v. Atchison, Topeka
& Santa Fe Ry. Co., 70 F.3d 1172, 1175 (10th Cir. 1995); see also Ehrenhaus, 965 F.2d at 922
(“A district court should ordinarily consider and address all of the above factors before imposing
dismissal as a sanction.”). Here, the magistrate judge properly considered and addressed all the
Ehrenhaus factors, and the case law supports the position that the failure to give an explicit
warning about a terminating sanction is not dispositive.
5.

Lesser Sanctions

Finally, Defendant argues that no sanction or a lesser sanction is warranted here. But as
the magistrate judge explained, in light of Defendant’s conduct up to this point, extending the
discovery deadline yet again, awarding monetary sanctions, and excluding Defendant’s witnesses
were not reasonably likely to cure the prejudice Defendant has caused. Even if all of these lesser
sanctions were imposed, Defendant might prevail in the case and still come out ahead
financially. Thus, the Court agrees with the magistrate judge’s assessment that lesser sanctions
would not be effective under the circumstances of this case.
IV.

CONCLUSION
Therefore, the Court OVERRULES the objection (ECF Nos. 156), ACCEPTS and

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ADOPTS the recommendation (ECF No. 150), GRANTS Plaintiff’s motion for sanctions (ECF
No. 126), and DENIES AS MOOT Defendant’s motion to dismiss (ECF No. 89) and Plaintiff’s
motion to compel (ECF No. 92). The Clerk is directed to enter DEFAULT JUDGMENT against
Defendant per the terms of the recommendation.
DATED this 31st day of March, 2020.
BY THE COURT:

____________________________________
RAYMOND P. MOORE
United States District Judge

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