Strategic Capital Bancorp Inc et al v. St Paul Mercury Insurance Company et al

Filing 162

ORDER entered by Judge Colin Stirling Bruce on 9/24/15. The Report and Recommendation 155 is accepted by the court. Plaintiff Strategic Capital Bancorp, Inc. is ordered to pay some of the reasonable expenses, including attorneys fees and costs, o f Defendant associated with the motion to compel production of the BuckleySandler records ($31,578.62) and the reasonable expenses, including attorney fees and costs, related to reviewing and indexing the BuckleySandler records produced on or ab out 6/2, 6/3, 6/7, 6/9, and 6/12/15 ($33,167.63) for a total amount of $64,746.45, to be paid by Plaintiff to Defendant on or before 10/1/15. This case remains set for a final pretrial conference before this court on 12/4/15 at 10:30 in Courtroom A, and a jury trial to commence Tuesday, 12/16/15 at 9:30 am in Courtroom A, Urbana. See written Order. (TC, ilcd) Modified on 9/24/15 to add trial dates (TC, ilcd).

E-FILED

Thursday, 24 September, 2015 03:09:32 PM
Clerk, U.S. District Court, ILCD
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF ILLINOIS
URBANA DIVISION
______________________________________________________________________________
STRATEGIC CAPITAL BANCORP, INC.,
)
)
Plaintiff,
)
v.
)
Case No. 10-CV-2062
)
ST. PAUL MERCURY INSURANCE CO.,
)
)
Defendant.
)
ORDER
Magistrate Judge Eric I. Long entered a Report and Recommendation (#155) on
July 30, 2015. Plaintiff, Strategic Capital Bancorp., Inc., filed its Objection (#157 ) to the
Report and Recommendation on August 13, 2015. Defendant, St. Paul Mercury
Insurance Company, filed its Response (#159) to Plaintiff’s Objections on August 24,
2015. Following this court’s careful de novo review of Judge Long’s reasoning and
Strategic’s Objection, this court agrees with and accepts Judge Long’s Report and
Recommendation (#155).
The background to the court’s decision is thoroughly detailed in Magistrate
Judge Long’s well-reasoned and sound Report and Recommendation, so the court will
not restate the background here. The court will, however, address Plaintiff’s Objections.
First, Plaintiff argues that the sanctions are effectively a dismissal and thus, a
disproportionate remedy. Plaintiff notes that the Seventh Circuit has held that
dismissal with prejudice is a harsh sanction which should only be employed in extreme
situations with a clear record of delay or contumacious conduct. Marrocco v. General
Motors Corp., 966 F.2d 220, 224 (7th Cir. 1992). Plaintiff claims that neither Defendant nor
the court have suffered any prejudice and that its arguments against procuring the

documents from BuckleySandler pursuant to the motion to compel were in good faith.
Further, Plaintiff claims it worked hard with BuckleySandler during this time to
produce the requested documents while appealing Judge Long’s motion to compel
order to this court.
First, the court agrees with Defendant and Judge Long that there is prejudice due
to Plaintiff’s delays. The failure to timely turn over information hurt Defendant’s ability
to analyze the legitimacy and reasonableness of the attorney’s fees in question. As
noted by Judge Long, Plaintiff’s conduct has adversely impacted Defendant’s ability to
prepare for depositions, concealed potential litigation strategies that could have been
discovered in the BuckleySandler records, and limited expert review of those records.
Further, there has been prejudice to the court (and Defendant) by virtue of the
manpower and hours spent preparing and litigating the following: (1) initial failure of
Plaintiff to respond to Defendant’s January 2015 discovery requests, necessitating
Defendant’s March 9, 2015 Motion to Compel (#129); (2) Plaintiff’s “Emergency Motion
to Reconsider” (#134) filed on April 21, 2015, which was filed more than a month after
Defendant’s original Motion to Compel, four weeks after Plaintiff’s response date had
passed, and five days after Judge Bernthal had granted the seemingly unopposed Motion
to Compel and entered an Order to Show Cause (#132) for why the case should not be
dismissed for want of prosecution; (3) Plaintiff’s appeal of Judge Bernthal’s denial of the
Emergency Motion to Reconsider; (4) and Defendant’s second Motion to Compel (#141),
filed June 5, 2015, for continuing failure to comply with discovery and earlier orders of
this court, leading to the June 26, 2015 hearing where Judge Long ordered Plaintiff to

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meaningfully comply with discovery and to create an index to make understandable the
80,000 documents dumped on Defendant by Plaintiff in June with less than two months
to go before the close of discovery on August 1, 2015.
The court goes through that laundry list of motions, hearings, and orders not to
recap the exhaustive and thorough documenting of this case by Judge Long in his
Report and Recommendation, but rather to detail for Plaintiff how its actions of delay
spiraled into its own set of mini-litigation apart from the actual merits of this case. The
court is not saying Plaintiff did not have the right to appeal the magistrate judge’s
orders or that it acted in clear bad faith. The court is merely pointing out that Plaintiff’s
actions during this period contributed greatly to the delay in this case that could have
been better spent engaging in meaningful discovery and advancing the case towards
resolution. While Plaintiff may have been working behind the scenes with
BuckleySandler to produce these documents, the actual production of those documents
in June 2015 constituted a classic document dump that provided no workable or
navigable way to search the documents to determine their relevancy and help
Defendant prepare its case. The court finds that the delay, from at least March 9 on, is
clearly attributable to Plaintiff, and thus presents a clear record of delay deserving of
the sanctions imposed. See Marrocco, 966 F.2d at 224.
For the same reasons, the court rejects Plaintiff’s argument that it should not be
subject to monetary sanctions. Federal Rule of Civil Procedure 37(a)(5)(A) states that
the court must, after giving an opportunity to be heard, require the party or deponent
whose conduct necessitated the motion, the party or attorney advising the conduct, or
both to pay the movant’s reasonable expenses incurred in making the motion, including

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attorney’s fees. The court must only not order the payment if the movant filed the
motion before attempting in good faith to obtain the disclosure or discovery without
court action or the opposing party’s nondisclosure or objection was substantially
justified or other circumstances make an award of expenses unjust. The court finds
Plaintiff’s arguments in opposition unavailing. Defendant clearly filed the motion to
compel after it had attempted, in January 2015, to obtain meaningful discovery outside
of court action. Plaintiff attempts to argue that its opposition to turning over the
BuckleySandler records to Defendant was made in good faith. However, that is not the
standard under Rule 37(a)(5)(A). Plaintiff must be “substantially justified” in its
nondisclosure, and the court agrees with Judge Long that Plaintiff was not substantially
justified. The court finds that the monetary sanctions awarded by Judge Long are
reasonable and required under the Federal Rules. The documents produced at the last
hour in June 2015 following the orders of the court were a classic document dump and
were essentially unnavigable. Further, the index provided by Plaintiff following the
court’s June 26, 2015 hearing did not satisfy the court requirement that the index be a
comprehensive guide to the 80,000 or so documents. Judge Long found Plaintiff’s
argument that it produced a “useful” index “utterly absurd.” Having seen the index
produced by Plaintiff, the court agrees with Judge Long’s assessment. Sanctions are
justified in this case.
Plaintiff argues that barring evidence related to the BuckleySandler fees operates
as an effective dismissal of its entire case. While the bulk of the fees and costs concerns
BuckleySandler, per paragraph 75 of Plaintiff’s Amended Complaint (#87) Plaintiff still

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has substantial fees it seeks to recover incurred from Thomas, Mamer & Haugher LLP,
William Markel, Liquidator, Development Specialists, Inc., and Winston & Strawn.
Therefore, the sanctions imposed do not operate as a dismissal.
Finally, Plaintiff relies greatly on the argument that Defendant also has “unclean
hands” in this litigation’s discovery problems. In support, Plaintiff cites to the Seventh
Circuit decision in Rice v. City of Chicago, 333 F.3d 780 (7th Cir. 2003), to argue that
“dismissal” as a sanction is unwarranted because both parties are before the court with
“unclean hands.” In Rice, the Seventh Circuit reversed a district court’s sanction of
dismissal, finding that the district court overlooked the defendant’s problematic
conduct which included disrespectful, careless, negligent, and evasive behavior toward
discovery. Rice, 333 F.3d at 785. The court found that the defendant’s attorney’s
dilatory conduct ultimately resulted in a three month postponement of plaintiff’s
depositions. Rice, 333 F.3d at 784-85. The court also found that both parties were guilty
of flagrantly disregarding discovery timelines and failing to pay heed to court orders.
Rice, 333 F.3d at 786.
In support of its claim of unclean hands, Plaintiff points to Defendant’s ceasing to
communicate with BuckleySandler after issuing the Rule 45 subpoena and scheduling
of deposition issues. Plaintiff also claims Defendant has unclean hands for not
complying with Rule 26(a) disclosures until July 21, 2015.
Plaintiff’s arguments are unconvincing. The court finds Defendant’s actions do
not rise to the level of disrespectful, careless, negligent, and evasive behavior toward
discovery described in Rice. First, with regard to the Rule 45 subpoena, the court has
already determined that it was Plaintiff’s obligation, not Defendant’s, to obtain the

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requested documents from BuckleySandler. Defendant had no duty to obtain Plaintiff’s
own documents. It was incumbent upon Plaintiff to obtain those documents and turn
them over to Defendant per Defendant’s discovery request. Further, as this court noted
in its order affirming Judge Bernthal’s ruling, Plaintiff’s own counsel was clearly
attempting to exercise control over the BuckleySandler documents, evidencing belief
that it was their obligation to procure the documents and provide them to Defendant.
Next, concerning the deposition issue, the court finds Defendant’s explanation
reasonable. The deponent in question, Matthew Previn of BuckleySandler, did not have
any recollection of the underlying litigation and further would not be available for a
deposition until two days after discovery closed on July 23, 2015. Defendant’s decision not
to pursue a deposition of questionable value that would be in violation of the discovery
timetable is not unreasonable. It certainly does not rise to the level of disrespectful,
careless, negligent, and evasive behavior toward discovery described in Rice. Finally, as
noted by Defendant, the July 21, 2015 Rule 26(a) disclosures were supplemental to the
initial Rule 26(a) disclosures made by Defendant on November 7, 2014. The three
documents disclosed by Defendant on July 21 (two of which were presumably in
Plaintiff’s possession- an email and letter from Plaintiff’s former counsel) do not
compare to the 80,000 documents dumped on Defendant by Plaintiff in June, six months
after the initial discovery requests were made by Defendant in January 2015.
The court finds Plaintiff’s attempt to paint Defendant’s conduct during discovery
in the same light as its own unpersuasive. Any “unclean hands” on the part of
Defendant pales in comparison to that of Plaintiff. Plaintiff must keep in mind how
things got to this point: (1) it ignored Defendant’s January 2015 discovery requests; (2) it

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ignored Defendant’s March 2015 motion to compel, causing Judge Bernthal to believe
that Plaintiff had no objection to the motion; (3) it then sought “emergency”
reconsideration of a court order more than five days after the order was entered, raising
arguments that it waived by failing to respond to the motion in the first place; (4) it then
dumped 80,000 unorganized documents on Defendant during the month of June; and,
finally, (5) it did not comply with Judge Long’s order to provide a comprehensive index
so Defendant could make heads or tails of the BuckleySandler records.
Suffice to say, the court believes that it has shown considerable patience and
flexibility in dealing with Plaintiff’s multiple and continuous delays and disregard of
court orders. The court is sympathetic to Plaintiff’s position, and realizes that this will
greatly reduce the recoverable attorneys’ fees sought by Plaintiff in its suit. The court
further realizes that this is a heavy sanction, and does not impose it lightly. However,
the court, as recounted above, believes that Plaintiff has only itself to blame for the
current situation and sanctions. Plaintiff has repeatedly flouted or disregarded court
orders on discovery issues. Plaintiff has engaged in document dumps and delaying
tactics, only responding to court orders after-the-fact when delay had already been
accomplished. The court does not find the “unclean hands” of Defendant to be nearly
as dirty as the hands of the defendant in Rice. The court has not levied the “ultimate
sanction” of dismissal on Plaintiff, but rather a lesser sanction tailored to apply
specifically to the evidence Plaintiff continuously delayed in turning over to Defendant.
As noted, the failures to comply have been frequent since January, are of great
magnitude (BuckleySandler fees and the documents supporting them are large), and
have prejudiced Defendant and required the court to schedule multiple hearings to deal

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with Plaintiff’s discovery delays. See Rice, 333 F.3d at 784. The sanctions imposed by
Judge Long are proportionate to the circumstances surrounding Plaintiff’s failure to
comply with discovery rules and the orders of the court. See Rice, 333 F.3d at 784.
Plaintiff’s actions in this case have demonstrated a certain willfulness and fault, and the
court imposes these sanctions both to penalize and to deter Plaintiff, or others, who
might in the future also ignore discovery orders. Philips Medical Systems International,
B.V. v. Bruetman, 982 F.2d 211, 214 (7th Cir. 1992). For all those reasons, the court adopts
Magistrate Judge Long’s Report and Recommendation (#155) in total.
IT IS THEREFORE ORDERED:
(1) The Report and Recommendation (#155) is accepted by the court.
(2) Plaintiff Strategic Capital Bancorp, Inc., is ordered to pay some of the
reasonable expenses, including attorneys fees and costs, of Defendant associated with
the motion to compel production of the BuckleySandler records ($31,578.62) and the
reasonable expenses, including attorney fees and costs, related to reviewing and
indexing the BuckleySandler records produced on or about June 2, 3, 7, 9, and 12, 2015
($33,167.63) for a total amount of $64,746.45, to be paid by Plaintiff to Defendant on or
before October 1, 2015.
(3) In addition, Plaintiff is barred from presenting at trial any evidence relating to
fees incurred by BuckleySandler during the underlying Miller litigation.

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(4) This case remains set for a final pretrial conference before this court on
Friday, December 4, 2015, 10:30 in Courtroom A, and a jury trial to commence Tuesday,
December 16, 2015, at 9:30 am in Courtroom A, Urbana courthouse.

ENTERED this 24th day of September, 2015.

s/ COLIN S. BRUCE
U.S. DISTRICT JUDGE

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