O & B Inc. v. United States of America, Department of Agriculture, Food and Nutrition Service

Filing 21

Memorandum and Order Denying Defendant's 14 Motion for Discovery Sanction of Dismissal and Limiting Plaintiff's Proofs at Trial. Signed by District Judge Avern Cohn. (SCha)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

O&B, INC.,
Plaintiff,
v.

Case No. 14-10100

UNITED STATES OF AMERICA,

HON. AVERN COHN

Defendant.
_________________________________________/
MEMORANDUM AND ORDER DENYING DEFENDANT’S MOTION FOR DISCOVERY
SANCTION OF DISMISSAL (Doc. 14)
AND LIMITING PLAINTIFF’S PROOFS AT TRIAL
I. Introduction
This is a case seeking judicial review of a final agency decision by the United
States Department of Agriculture suspending plaintiff O&B, Inc. (O&B) from participating
as an authorized retailer in the Supplemental Nutrition Assistance Program (SNAP) for
three (3) years.
Before the Court is the government’s Motion for Discovery Sanction of Dismissal
on the grounds that O&B has failed to comply with discovery. The government says
that dismissal is the only appropriate remedy as a result of O&B’s non-compliance.
The Court held a hearing on the motion on November 12, 2014, at which time it
cautioned counsel for O&B that is must comply with discovery or the Court may impose
sanctions, including dismissal.
Thereafter, the parties filed supplemental papers. The matter is now ready for
decision. For the reasons that follow, the motion is DENIED. However, O&B is limited

to its proofs at trial as described below.
II. Background
A. In General
Congress established the Food Stamp Program, now known as SNAP, to provide
for the nutrition of the underprivileged and to strengthen the nation’s agricultural
economy. See 7 U.S.C. § 2011. The Department of Agriculture (USDA) has been
authorized to “formulate and administer” SNAP. 7 U.S.C. § 2013(a). To oversee this
program, the USDA is obligated to disqualify retailers “when there is evidence that the
store or concern is not adhering to the requirements established in the [Food Stamp
Act].” S. Rep. 88-1124, at 15 (1964), as reprinted in 1964 U.S.C.C.A.N. 3275, 3291.
B.
On January 9, 2014, O&B filed a complaint challenging the three-year withdrawal
of its authorization to participate in SNAP. The Food and Nutrition Service (FNS) of the
USDA withdrew the authorization of O&B under 7 C.F.R. § 278.1(l)(1)(iv) because of
the involvement of a previously disqualified individual in the business.
Thus, a key issue in the case is the nature of the relationship among O&B, the
plaintiff-corporation, its purported owner (Kamal Berro), and the previously disqualified
relative and prior owner who still works at the store (Oussama Berro). In investigating
the complaint, the government believes that the two Berros may also be the sole
members of a limited liability company, O&KB, LLC, which seems to lease property to
O&B.
On April 17, 2014, the government served O&B with written discovery in the form
of requests for production and interrogatories.
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As of June 4, 2014, despite an extension of time, O&B had not provided any
responses.
On June 11, 2014, O&B provided its discovery responses. O&B did not object to
any of the government’s discovery requests. However, the government says its
responses were not complete.
In its document request, the government asked for a variety of documents,
including leasing, sale, and mortgage records and articles of incorporation and business
records for Plaintiff-corporation and another business entity owned by both Berros,
which ostensibly leases property to the store.
O&B responded that it “[w]ill provide” materials to nine of Defendant’s requests
for production. To four other requests, O&B gave no response at all. According to the
government, O&B did not meaningfully respond to 13 of 23 requests for production.
In its interrogatories, the government asked about a variety of information,
including about its corporate ownership and officers, banking, and payments on the
purchase of the corporation and on its lease. For several interrogatories, O&B
responded with “see attached” (or some variant), although no records were attached.
In response to interrogatories about contact information for its employees and
possible witnesses, O&B provided no contact information. When asked for banking
information, O&B gave only the names of two financial institutions, but no account
information. When asked for information about its payment history on its real estate
lease and the purchase of O&B, O&B responded simply, “Mortgage Default.”
The government did not seek the Court’s intervention after being provided with
O&B’s responses. Instead, the government and O&B agreed to extend discovery due
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to O&B’s incomplete discovery responses. On June 16, 2014, the Court entered an
order extending discovery to August 29, 2014. The order states in pertinent part:
That [the government’s] ability to prepare and defend its case is
compromised by not having responses to [O&B’s] still-outstanding discovery;
....
it is hereby ORDERED that [O&B] must PRODUCE complete responses
to ]the government’s] Interrogatories and . . . Requests fo Production of
Documents and Things, on or by June 27, 2014.
(Doc. 12, emphasis in original)
June 27, 2014 came and went and O&B did not provide the requested
information. On July 2, 2014, O&B provided a variety of tax returns, but nothing more.
The government requested a conference with the Court before filing a discovery
motion. At a conference with the parties on July 15, 2014, the government objected that
O&B had not complied with the stipulated order to provide complete discovery. The
Court’s notes indicate that at the conference it directed O&B supplement its discovery
responses within 30 days, i.e. by August 15, 2014.
On August 22, 2014, having received no additional information from O&B, the
government filed the instant motion. The government says it was scheduled to depose
Kamal Berro and Oussama Berro on August 28, 2014, albeit without the benefit of
complete written discovery responses.
As noted above, on November 12, 2014, the parties appeared for a hearing on
the government’s motion. At the hearing, counsel for O&B was formally put on notice
that it must respond to the discovery or the case may be dismissed.
On December 12, 2014, O&B filed a supplemental response to the government’s
motion. (Doc. 19). O&B asserts that it has met the discovery requirements to the extent
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possible. O&B also states that instead of imposing the extreme sanction of dismissal
that O&B be limited at trial as follows:
Prohibiting [O&B] from supporting any claim that (1) the agency had no evidence
of a SNAPP violation or that no violation occurred; (2) Oussama Berro had no
ownership interest in O&B, Inc.; or (3) he had no managerial involvement in O&B,
Inc.
(Doc. 19 at p. 2).
The government filed a reply. (Doc. 20). The government continues to maintain
that dismissal is an appropriate sanction. However, it also says that if the Court
concludes otherwise, it agrees with O&B’s proposal to limit its proofs at trial.
III. Legal Standard
Rule 37 of the Federal Rules of Civil Procedure authorizes the imposition of
sanctions for a party's failure to make Rule 26(a)(1) disclosures, Rule 37(c)(1), or failure
to respond to written discovery requests or to attend one's own deposition, Rule
37(d)(1). A court has wide discretion in determining an appropriate sanction under Rule
37. National Hockey League v. Metropolitan Hockey Club, 427 U.S. 639 (1976);
Regional Refuse Systems v. Inland Reclamation Co., 842 F.2d 150, 154 (6th Cir. 1988).
The exercise of the court's discretion must be informed by four factors:
“The first factor is whether the party's failure to cooperate in discovery is due to
willfulness, bad faith, or fault; the second factor is whether the adversary was
prejudiced by the party's failure to cooperate in discovery; the third factor is
whether the party was warned that failure to cooperate could lead to the
sanction; and the fourth factor in regard to a dismissal is whether less drastic
sanctions were first imposed or considered.”
Doe v. Lexington–Fayette Urban County Government, 407 F.3d 755, 765–66 (6th Cir.
2005) (quoting Freeland v. Amigo, 103 F.3d 1271, 1277 (6th Cir. 1997)). See also
Patton v. Aerojet Ordnance Co., 765 F.2d 604, 607 (6th Cir. 1985) (“Dismissal of action
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for failure to cooperate in discovery is a sanction of last resort that may be imposed only
if the court concludes that a party's failure to cooperate in discovery is due to willfulness,
bad faith, or fault.”).
IV. Analysis
Here, O&B has disregarded two court orders, one entered on the docket and one
verbally issued directly to its counsel at a status conference. The Court is mindful of the
government’s position and frustration. However, dismissal of a case for failing to
comply with discovery is a severe sanction. The Court finds that O&B’s proposal to limit
its trial proofs appropriate under the circumstances. Accordingly, the government’s
motion is DENIED. However, O&B is expressly prohibited at trial from supporting any
claim that (1) the agency had no evidence of a SNAPP violation or that no violation
occurred; (2) Oussama Berro had no ownership interest in O&B, Inc.; or (3) he had no
managerial involvement in O&B, Inc.
The Clerk shall schedule a status conference to chart the course for trial.
SO ORDERED.
S/Avern Cohn
AVERN COHN
UNITED STATES DISTRICT JUDGE

Dated: February 5, 2015
Detroit, MI
I hereby certify that a copy of the foregoing document was mailed to the attorneys of
record on this date, February 5, 2015, by electronic and/or ordinary mail.

S/Sakne Chami
Case Manager, [phone]
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