CenturyLink Communications, LLC et al v. Peerless Network, Inc. et al

Filing 248

MEMORANDUM Opinion and Order: Peerless's motion to strike and exclude 222 is granted as set forth in this opinion. Signed by the Honorable Sharon Johnson Coleman on 3/23/2022. Mailed notice. (ym, )

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
CENTURYLINK COMMUNICATIONS,
LLC, et al.
Plaintiffs/Counter-Defendants,
v.
PEERLESS NETWORK, INC., et al.,
Defendants/Counter-Plaintiffs.

)
)
) Case No. 18-cv-03114
)
) Judge Sharon Johnson Coleman
)
)
)
)
)

MEMDORANDUM OPINION AND ORDER
Before the Court is defendants’ motion to strike and exclude pursuant to Federal Rule of
Civil Procedure 37 [222]. For the following reasons, defendants’ motion is granted.
Background
This case stems from disputes over charges related to telecommunications services, which
are at times governed by defendants’ interstate tariffs filed with the Federal Communications
Commission (“FCC”) and other times by written agreements between the parties.
Plaintiffs/Counter-Defendants CenturyLink Communications, LLC et al. (collectively “CTL”) filed
an initial complaint on May 1, 2018, alleging that Defendants/Counter-Plaintiffs Peerless Network,
Inc., et al. (collectively “Peerless”) inappropriately billed CTL for six distinct categories of charges.
(Dkt. 1.) Peerless filed its answer, affirmative defenses, and counterclaims on September 11, 2018.
(Dkt. 23.) CTL, in turn, filed its answer and affirmative defenses to Peerless’s counterclaims. (Dkt.
28.) Pursuant to the Court’s participation in the Mandatory Initial Discovery Pilot Project
(“MIDP”), 1 the parties exchanged mandatory initial disclosures in October and November 2018.

Under the Court’s Mandatory Initial Discovery Pilot Project, parties were required to provide certain discovery responses
without the need for any request from the opposing party. (Dkt. 7.) The MIDP is no longer enforced in this district.

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(Dkts. 29, 35, 222-1, 222-2, 236-2.)
In January 2019, the magistrate judge amended the discovery schedule and set an April 30,
2019 deadline to file any motions to amend the pleadings. (Dkt. 40.) Peerless timely sought to
amend its counterclaims, which the Court granted, and CTL filed its answer and affirmative defenses
to the amended counterclaims on May 31, 2019. (Dkts. 55 & 57.) On July 15, 2019, CTL filed a
motion for leave to file an amended complaint, seeking to add three counts alleging that Peerless’s
billing practices related to “common trunk port charges” in the state of Georgia violate the FCC
benchmark rules. (Dkt. 66.) The Court denied CTL’s motion on October 1, 2019. (Dkt. 74.)
Two months later, CTL filed a motion to amend the complaint to conform to facts
uncovered in discovery and clarify existing charges sought in the original complaint. (Dkt. 104.) As
to three of the proposed amendments, the Court found that CTL had failed to show good cause for
why the amendments were not raised prior to the April 30, 2019 deadline. (Dkt. 139 at 2–4.) This
included a request to modify the complaint to reflect that Peerless had been charging indirect
“dedicated tandem trunk port” (“DTTP”) charges pursuant to Peerless’s interstate tariff, rather than
common trunk port charges. CTL moved for reconsideration on this portion of the Court’s order,
which the Court denied. (Dkts. 143 & 154.)
On July 7, 2020, CTL served its third set of document production requests, which included
requests regarding the rates charged by Peerless in Georgia and Illinois and their relation to the
FCC’s benchmark rules. (Dkt. 169-2.) Peerless objected, and CTL filed a motion to compel
production of the documents on August 7, 2020. (Dkt. 169.) During the last three days of
discovery, CTL served a number of additional disclosures, including supplemental mandatory initial
disclosures, interrogatory responses, and document production. (Dkts. 222-7, 222-8, 222-9, 222-10,
and 222-11.) After fact discovery closed, the magistrate judge denied CTL’s motion to compel
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discovery related to the benchmark issue. (Dkts. 149 & 186 at 6–9.) The parties proceeded with
expert disclosures in September and October 2020, and later took expert depositions in March 2021.
On April 20, 2021, Peerless filed this motion to strike and exclude, which CTL opposes. For
the following reasons, the Court grants Peerless’s motion.
Legal Standards
Federal Rule of Civil Procedure 26(a)(1) requires parties, “without awaiting a discovery
request,” to provide initial disclosures “based on the information then reasonably available to
[them].” Fed. R. Civ. P. 26(a)(1)(A), (E). Under Rule 26(e), a party who has made a disclosure under
Rule 26(a) or who has responded to an interrogatory must supplement or correct its disclosure or
response “in a timely manner if the party learns that in some material respect the disclosure or
response is incomplete or incorrect, and if the additional or corrective information has not otherwise
been made known to the other parties during the discovery process or in writing.” Fed. R. Civ. P.
26(e)(1)(A).
If a party fails to comply with its disclosure obligations under Rule 26(a) or (e), Rule 37(c)
generally prohibits the party from using that information “to supply evidence on a motion, at a
hearing, or at a trial, unless the failure was substantially justified or is harmless.” Fed. R. Civ. P.
37(c)(1). 2 The sanction of exclusion is “automatic and mandatory” unless the party can show that its
violation was substantially justified or harmless. David v. Caterpillar, Inc., 324 F.3d 851, 857 (7th Cir.
2003). District courts have broad discretion to determine whether a violation of Rule 26(a) or (e) is

As noted above, this case was subject to the MIDP, which required the parties to provide certain discovery responses
without the need for any request from the opposing party. Although the parties’ discovery obligations under the MIDP
supersede the disclosures required by Rule 26(a)(1), the standards governing the parties’ MIDP disclosure obligations are
substantively the same as those provided under Rules 26(a) and (e). See Mandatory Initial Discovery Pilot Project Standing
Order, Dkt. 7 at 1–2. Rule 37(c)(1) applies to mandatory discovery responses required by the Court’s MIDP Standing
Order. (Dkt. 7 at 3, ¶ 9.)

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substantially justified, harmless, or warrants sanctions. Dynegy Mktg. & Trade v. Multiut Corp., 648
F.3d 506, 514 (7th Cir. 2011) (citing Caterpillar, 324 F.3d at 857). Although the court “need not
make explicit findings concerning the existence of a substantial justification or the harmlessness of a
failure to disclose,” the following factors guide the court’s determination: “(1) the prejudice or
surprise to the party against whom the evidence is offered; (2) the ability of that party to cure the
prejudice; (3) the likelihood of disruption to the trial; and (4) the bad faith or willfulness involved in
not disclosing the evidence at an earlier date.” Caterpillar, 324 F.3d at 857 (citations omitted).
Discussion
Peerless moves to strike CTL’s August 14, 2020 supplemental mandatory discovery
disclosures and interrogatory responses as untimely and prevent CTL from submitting any evidence
related to allegations in those disclosures. According to Peerless, during the last three days of fact
discovery, CTL asserted several affirmative defenses for the first time under the guise of
supplementing its initial disclosures and discovery responses. This included CTL’s indirect DTTP
and benchmark disputes, despite the Court’s prior orders denying leave to amend to include those
claims. Peerless also claims that CTL’s supplemental disclosures purported to add multiple new
disputes to the case, on which no discovery had been conducted. Peerless argues that CTL’s failure
to timely disclose these claims and defenses was neither substantially justified nor harmless,
warranting exclusion under Rule 37(c)(1).
CTL responds that it has committed no violation of Rule 26 and the fault lies with Peerless.
It maintains that it has always believed that Peerless’s counterclaims “were the exact inverse of
CTL’s claims,” and it made numerous attempts to pin down Peerless’s counterclaims throughout
this case, including through interrogatories, depositions, and emails. (Dkt. 236 at 4.) CTL contends
that, as a result of Peerless’s refusal to explain the scope of its counterclaims, it “had no choice but
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to supplement its discovery responses to protect itself from the unknown.” (Id.) Furthermore,
regardless of the timing of its supplemental disclosures, CTL argues that Peerless was already on
notice of its positions. As to the indirect DTTP charges that it seeks to recover, CTL claims that it
should be allowed to raise the issue as an affirmative claim at trial, because Peerless actively
concealed information from CTL and the Court. CTL claims that the Court’s prior orders do not
foreclose this because these charges “are within the scope of CTL’s claim already,” and Peerless has
known that they were a part of the lawsuit all along. (Id. at 2–3.) CTL also ostensibly argues that its
assertion of various defenses to “miscellaneous charges” for the first time at the close of fact
discovery was warranted, because Peerless refused to clarify the scope of its counterclaims.
Indirect DTTP Charges
The Court begins with the indirect DTTP charges. On December 4, 2019, CTL filed a
motion for leave to amend the complaint to modify one of its categories of charges, known as
“common trunk port charges,” to reflect changes in evidence uncovered during discovery. (Dkt.
104.) In the original complaint, CTL alleged that it was billed common truck port charges. In
seeking leave to amend, CTL claimed it had only recently discovered that Peerless had been charging
indirect DTTP charges pursuant to Peerless’s interstate tariff. According to CTL, Peerless’s invoices
did not make it clear that it was billing indirect DTTP charges. CTL argued that, regardless of which
type of charge Peerless applied, both were unlawful, and it wanted the complaint to accurately reflect
the evidence that had been discovered through the September 2019 deposition of Peerless’s Rule
30(b)(6) representative and CTL’s subsequent investigation into the bills. The Court found that
CTL could have discovered the nature of the charges in the four years it had been billed for them
and denied CTL’s request to amend the complaint as to those charges due to its lack of diligence.
CTL moved for reconsideration. It claimed that Peerless failed to provide information that
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would have led to the correct identification of charges before the deadline for amending the
pleadings had passed. (Dkt. 143.) CTL also argued that the indirect DTTP charges were already at
issue via Peerless’s counterclaims. (Id.) The Court denied CTL’s motion, as it had already found that
CTL could and should have discovered the nature of the charges by properly examining the invoices
that were in its possession for the four years that it was being billed. (Dkt. 154.)
Thereafter, on the last three days of fact discovery, CTL made several disclosures concerning
the indirect DTTP charges. Peerless raises two issues with the disclosures as they relate to indirect
DTTP charges: (1) CTL continues its attempts to affirmatively assert an indirect DTTP claim
despite the Court’s prior orders denying leave to amend, and (2) CTL used its disclosures to also
assert the indirect DTTP dispute as an affirmative defense for the first time at the close of fact
discovery. (Dkt. 222 at 8, 11–13.) CTL responds that it should be permitted to raise the indirect
DTTP charges as an affirmative claim at trial because Peerless “withheld critical information” from
CTL and the Court. (Dkt. 236 at 2–3.) Specifically, CTL claims that Peerless did not tell CTL or the
Court that Peerless initially billed common trunk port charges with common trunk port rates “and
then, mid-stream, changed the rates on invoices while still calling the charges CTP.” (Id. at 3.) CTL
contends that Peerless’s “active concealment” led CTL to believe the charges were common trunk
port charges, rather than indirect DTTP charges, and CTL should be allowed to raise this issue at
trial. (Id.) Additionally, CTL claims that the Court’s prior orders do not change the fact that the
charges are within the scope of CTL’s claims already.
It is apparent that CTL is again seeking to include indirect DTTP charges in this action
however possible. CTL makes two arguments, only one of which is new. First, it contends that it
should be allowed to raise this issue as an affirmative claim at trial because a June 2020 deposition
revealed a new, material fact: that Peerless billed CTL common trunk port charges for two months
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in 2015. Second, CTL again claims that the indirect DTTP issue is merely one of form, and these
charges have been within the scope of the at-issue claims all along. Both arguments are unavailing.
CTL claims that information gleaned from a June 2020 deposition changes the landscape.
Prior to the deposition, CTL claimed the issue was that the indirect DTTP charges were not clearly
described on the bills and that, according to the 2019 testimony of Peerless’s Rule 30(b)(6) witness,
common trunk port rates had never been charged. But the only claimed change in circumstances
following the June 2020 deposition is that Peerless did assess common trunk port charges for two
months in late 2015. This information does not alter the Court’s prior finding that CTL could and
should have discovered the nature of the charges by properly examining the invoices that were in
CTL’s possession for the four years that it was being billed. The Court is likewise unpersuaded by
CTL’s argument, which it already made in the briefing on its motion for leave to amend, that it
should be allowed to raise the indirect DTTP charges because the common trunk port charges have
been a part of this case from the outset. The Court will not recount the variations of this argument
that the Court has already considered and rejected.
Benchmark Claims
As with the indirect DTTP issue, the Court has heard and addressed the parties’ benchmark
arguments previously.
In July 2019, CTL sought leave to amend its complaint to add three counts alleging that
Peerless’s billing practices related to common trunk port charges in the state of Georgia violate the
FCC benchmark rules. (Dkt. 66.) This Court denied CTL’s motion to amend on the ground that it
was untimely, as CTL filed the motion three months after the deadline for amending the pleadings
and nearly eleven months after the alleged interstate tariff change that CTL contended gave rise to
the need to amend. (Dkt. 74.)
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Thereafter, CTL did not seek discovery on the benchmark issue until July 7, 2020, when it
served its third set of document production requests. (Dkt. 169-2.) CTL ultimately brought a
motion to compel production of the documents, which the magistrate judge denied. In that
opinion, the magistrate judge explained, “Beyond the fact that it did not pursue discovery of the
benchmark issue until July 2020, CenturyLink [CTL] did not formally indicate that it intended to
raise the matter as an affirmative defense until the day discovery closed.” (Dkt. 186 at 8.) The
magistrate judge found unpersuasive CTL’s arguments that (1) Peerless had put its rates “at issue”
and CTL was entitled to discovery into the legality of the rates so that it could defend against
Peerless’s counterclaims; and (2) CTL’s ongoing communications with Peerless had put Peerless on
notice that CTL contended that these rates were unlawful. The magistrate judge explained that
“nothing that CenturyLink said or did indicated to Peerless that CenturyLink’s affirmative defense
specifically referred to the benchmark matter” and that CTL “did not plead any specific facts
relating to its affirmative defenses until the final day of discovery.” (Id.) Thus, the magistrate judge
concluded, “We will not allow CenturyLink to bootstrap its defense by filing a last-minute
amendment to its initial disclosures and then arguing that it needs discovery to support those
disclosures.” (Id. at 8–9.)
Miscellaneous Claims
In addition to the indirect DTTP and benchmark allegations, Peerless seeks to exclude
evidence related to other miscellaneous charges on timeliness grounds. See Dkt. 222 at 14–15. CTL
maintains that it tried to determine whether Peerless’s counterclaims covered these miscellaneous
charges “[f]or many months,” but Peerless refused to answer CTL’s requests for clarity. (Dkt. 236 at
2.) CTL claims that it supplemented its disclosures and discovery responses in the last three days of
fact discovery “only out of an abundance of caution because it could not get a straight answer from
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Peerless.” (Id. at 2, 8) CTL concludes that, because Peerless created this problem, Rule 37 sanctions
are unavailable to it.
The Court is unpersuaded by CTL’s arguments. CTL’s arguments flow from a November
20, 2019 email in which CTL listed every dispute that it had against Peerless and specifically noted
the disputes that were involved in the litigation. (Id. at 4–5, 13–15.) CTL claims that it has always
believed that Peerless’s counterclaims were the “exact inverse of CTL’s claims,” as “nothing in
Peerless’s Counterclaims suggested otherwise.” (Id. at 3–4.) However, in the months following the
above email, CTL sought clarity on the scope of Peerless’s counterclaims at several junctures, both
formally through interrogatories and informally through additional emails. CTL claims that
Peerless’s responses left it “confused” and “uncertain” at every turn. (Id. at 5–8.) In fact, CTL
sought court intervention to remedy its confusion—and the magistrate judge granted CTL relief.
The Court ordered Peerless to supplement its responses to certain interrogatories by February 28,
2020. (Dkt. 123 at 7–10.) After receiving the supplemental responses, CTL claims it still lacked the
requisite clarity and again pursued more detail from Peerless via email. (Dkt. 236 at 6–8.) CTL
contends that Peerless’s response “likewise ma[de] no sense.” (Id. at 8.) CTL chose not to seek
court intervention on this issue right away but instead unloaded a bevy of disclosures on Peerless,
adding new facts and legal theories, in the final 72 hours of fact discovery (the overwhelming
majority of which occurred on the last day of discovery). (Id.)
Rule 37 Sanctions Are Warranted
Given the facts discussed above, CTL’s supplemental disclosures and responses provided at
the close of discovery were untimely under Rule 26. Nothing in CTL’s opposition provides support
for serving the supplemental disclosures at the close of fact discovery. In fact, the only alleged latebreaking information was testimony that common trunk port charges were assessed for two months
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in late 2015, when they were previously thought to never have been assessed. Even upon learning
this information, CTL waited more than a month before supplementing its disclosures. As
discussed above, this information has no material effect on any of the Court’s prior decisions
denying CTL leave to amend its pleadings on this or other issues.
Because the Court finds the disclosures were untimely, the sanction of exclusion is
“automatic and mandatory” unless the tardiness was substantially justified or harmless. Caterpillar,
324 F.3d at 857. Although the Court “need not make explicit findings,” it looks to the Caterpillar
factors for guidance and finds the weight of those factors favors exclusion in this case. Id. While
CTL maintains that there was no Rule 26(e) violation, it alternatively argues that its conduct was (1)
substantially justified because Peerless’s actions caused the delay; and (2) harmless because Peerless
“has long known each basis for CTL’s disputes of its charges.” (Dkt. 236 at 14 n.3.) The Court
disagrees.
First, the prejudice to Peerless at having to defend against claims previously and continually
disallowed by the Court, as well as newly-asserted affirmative defenses, would be great and weighs in
favor of exclusion. Not only do the proffered supplemental disclosures belatedly add new defenses
and theories, but they also appear to be an end-run around prior decisions by this Court limiting the
claims allowed by CTL, as enumerated above. The second factor—the ability to cure the
prejudice—also weighs in favor of exclusion. Fact discovery ended more than a year and a half ago,
so any claims, defenses, or theories now placed at issue would not be subject to additional
development and fact-finding between the parties. Thus, any prejudice or surprise that the
disclosures bring will not be tempered by additional discovery. Permitting CTL’s late disclosures
would also likely disrupt trial, which weighs in favor of exclusion. Again, CTL has sought to include
some of these issues before. The Court considered argument from the parties and made decisions.
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The parties no doubt relied on the Court’s decisions in subsequent discovery, including depositions,
as part of their trial preparation. Finally, the Court does not find that CTL provided its
supplemental disclosures in bad faith. However, CTL was presumably aware of its own claimed
confusion as to Peerless’s counterclaims at least by the time Peerless supplemented its interrogatory
responses pursuant to the magistrate judge’s order on CTL’s motion to compel—several months
prior to its supplemental disclosures. CTL had procedural mechanisms available to it other than its
choice to provide its additional disclosures on the last day of discovery, but it chose not to exercise
them. Given the posture and prior filings in this case, particularly regarding the indirect DTTP and
benchmark issues, the Court finds that CTL’s untimely disclosures were neither substantially
justified nor harmless.
Peerless’s motion is granted in accordance with the above. The Court’s sanction is limited to
the new claims, defenses, or theories provided in CTL’s supplemental disclosures and discovery
responses and does not offer an opinion as to the catch-all category listed in No. 8 of Peerless’s
motion. (See Dkt. 222 at 15 (No. 8 seeks to exclude evidence related to “[a]ny other vague claim for
which Plaintiffs have not timely asserted as a claim challenging Peerless’s tariff rates, or for which it
has not disclosed the relevant facts or legal theories supporting any defense.”.)
Conclusion
For the foregoing reasons, Peerless’s motion to strike and exclude [222] is granted as set
forth in this opinion.
IT IS SO ORDERED.
Date: 3/23/2022

Entered: _____________________________
SHARON JOHNSON COLEMAN
United States District Court Judge
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