U-Haul Co. of Nevada, Inc. et al v USA, et al.

Filing 83

ORDER Denying 72 and 73 MOTIONS for Sanctions. Signed by Magistrate Judge Peggy A. Leen on 5/21/2012. (Copies have been distributed pursuant to the NEF - SLR)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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U-HAUL INTERNATIONAL, INC., et al.

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Plaintiffs,
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vs.
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UNITED STATES OF AMERICA,
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Defendant.
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__________________________________________)

Case No. 2:08-cv-00729-KJD-PAL
ORDER
(Mots Bar Evidence - Dkt. ##72, 73)

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Before the court is Defendant’s Motion to Bar Evidence and for Other Sanctions (Dkt. #72), and

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Amended Motion (Dkt. #73). The court has considered the motion, the Plaintiffs’ Response (Dkt. #76)

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and Defendant’s Reply (Dkt. #77).

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BACKGROUND
The Complaint (Dkt. #1) was filed June 5, 2008. It asserts a claim under the Federal Tort Claim

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Act (“FTCA”) for conversion, tortious conspiracy and professional negligence. Plaintiffs’ claims arise

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out of several consolidated unfair labor practice proceedings brought by the National Labor Relations

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Board (“NLRB”) beginning in 2004. Plaintiffs U-Haul Co. of Nevada, Inc. and U-Haul International,

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Inc. (“U-Haul”) allege that its confidential information was disclosed by a paralegal employed by its

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outside law firm, Kamer, Zucker & Abbott (“KZA”) to Nathan Albright, an attorney for the NLRB. U-

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Haul claims the disclosure prejudiced it in defending itself in the NLRB proceedings and seeks “an

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award of damages proximately caused by the acts of the Defendants in an amount to be proven at trial,”

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costs of suit and any further relief the court deems appropriate.

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The district judge granted the government’s motion to dismiss for lack of jurisdiction on June 1,

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2009. See Order (Dkt. #17). Plaintiff appealed and the Ninth Circuit vacated the judgment of the

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district court and remanded it for further proceedings consistent with its decision in the related case of

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U-Haul v. Wilcher, No. 07-16482. See Memorandum/Opinion (Dkt. #33). The Order on Mandate

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(Dkt. #36) was entered December 20, 2010, and gave the Plaintiff until January 21, 2011, to file an

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amended complaint. The Amended Complaint (Dkt. #37) was timely filed and asserts claims for

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conversion, trespass to chattle, professional negligence, tortious conspiracy, and concert of action

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against the United States for the conduct of Mr. Albright, and his supervisor, Mr. Wamser. The district

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judge entered an Order (Dkt. #51) granting Defendant Steven Wamser’s motion to substitute the United

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States as a party Defendant. The district judge also approved the parties’ Stipulation (Dkt. #55) to

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dismiss Defendant Nathan Albright. See Order (Dkt. #58) entered September 23, 2011. This case was

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consolidated for pretrial discovery with Case No. 2:06-cv-00618-RCJ-PAL on December 13, 2011. See

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Order (Dkt. #67). On January 9, 2012, the district judge entered an Order (Dkt. #68) granting the

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United States’ motion for judgment on the pleadings on U-Haul’s claim for negligence, professional

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negligence.

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The parties’ proposed Discovery Plan and Scheduling Order (Dkt. #56) was approved in an

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Order (Dkt. #66) entered December 6, 2011. The plan established a July 31, 2011, discovery cutoff and

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other case management deadlines generally consistent with the requirements of LR 26-1(e). The court

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granted the parties’ Stipulation (Dkt. #70) to amend the discovery plan and scheduling order. The

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current Scheduling Order (Dkt. #71) extended discovery until September 28, 2012, with dispositive

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motions due October 29, 2012, and the joint pretrial order due November 29, 2012.

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In the current motion, the United States seeks an order under Rule 37(c)(1) precluding the

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Plaintiffs from using any evidence that it has failed to provide in initial disclosures required by Rule

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26(a) in support of any motion, hearing or at trial. Additionally, the United States seeks an order

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precluding U-Haul from presenting evidence on the liability issues of any of its claims, or in the

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alternative, an order compelling U-Haul to produce supporting evidence by at time certain and an award

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of costs and attorneys fees incurred for the necessity of filing this motion. The United States asserts

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that U-Haul’s initial disclosures, served December 15, 2011, were deficient. Counsel for the United

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States sent an e-mail to counsel for U-Haul December 16, 2011, contending the initial disclosures were

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deficient because they contained no computation of damages or documents supporting Plaintiff’s

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damages. U-Haul served a supplemental Rule 26(a) disclosure January 25, 2012. The supplemental
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disclosures added additional information regarding damages by providing dollar amounts sought for

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three of the four categories of damages identified. However, U-Haul did not quantify its third category

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of damages, pertaining to the intrinsic value of the memo allegedly given by paralegal Wilcher to

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Attorney Albright containing U-Haul’s confidential information and any other privileged and

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confidential information wrongfully obtained by government representatives. Eleven pages of

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documents supporting the first two categories of damages were produced, but no documents were

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produced to support this third category. The only documents supporting the fourth damages category

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was the formal settlement stipulation which the United States produced in which U-Haul agreed to enter

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a consent order to end the unfair labor practices proceedings before the NLRB.

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Counsel for the United States sent a letter to counsel for U-Haul February 16, 2012,

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complaining that the supplemental disclosures were still deficient in several respects. Counsel for the

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parties met and conferred February 22, 2012. During the meet-and-confer conference, counsel for the

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government reiterated the position taken in the February 16, 2012, letter that the supplemental

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disclosures were deficient.

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On March 16, 2012, U-Haul served a second supplemental initial disclosure producing an

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additional 85-pages of documents. Counsel for the government represents that all 85 pages were

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documents previously filed in either the underlying unfair labor practices proceedings, or in federal

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lawsuits related to these proceedings. None of the documents contain an explanation of how any

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alleged conversion or trespass to chattles committed by Wamser caused any harm to U-Haul’s ability to

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defend itself in the underlying proceedings, or supports any basis for imposing liability on the United

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States for Wamser’s actions.

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U-Haul served a third supplement to its initial disclosures April 6, 2012, which produced the

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same 85 pages attached to the second supplement, but removed the confidential designation from the

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documents.

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Based on this set of facts, the United States requests sanctions under Rule 37(c)(1) for U-Haul’s

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failure to provide information or identify witnesses as required by Rule 26(a) or (e). The United States

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argues that Rule 37(c)(1) sanctions are automatic, and that U-Haul cannot satisfy its burden of

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establishing that its failure to provide disclosures is substantially justified or harmless. The United
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States argues that it cannot initiate deposition discovery until obtaining all of U-Haul’s documentary

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evidence supporting its claims. Additionally, allowing U-Haul more time to comply with its Rule 26

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obligations is an insufficient sanction to insure that U-Haul does not continue to disregard the rules and

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court orders. However, if the court does not agree that evidence preclusion sanctions are warranted, the

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court should sanction U-Haul for the attorneys fees and costs incurred by the United States to compel

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compliance with its Rule 26(a) obligations.

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Plaintiff opposes the motion arguing that with nearly six months left to complete discovery, the

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motion is premature and actually a preemptive strike to distract the court from the government’s failure

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to preserve critical documents. Plaintiff served initial disclosures and supplemented its initial

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disclosures and has provided a computation of damages for three of the four categories of damages

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sought. However, the remaining category includes the “intrinsic value” of the privileged memo

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involved in this case. The intrinsic value is inherently subjective and Plaintiff intends to address the

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value of this damage item in its expert report which is due in June 2012. Rule 26(a)(1)(E) requires a

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party to make initial disclosures based on information reasonably available to it at the time of

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disclosure, and Rule 26(e)(1)(A) anticipates that parties will supplement the initial disclosures.

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Plaintiff will supplement its initial disclosures if and when it obtains additional information.

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During oral argument counsel for the government argued that the primary purpose of this

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motion was to obtain a court order requiring the Plaintiff to produce all of the documents supporting its

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claims by a time certain. After the motion was filed, the Plaintiff served the government with

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additional documents and materials. A chart of the documents produced was presented to the court.

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Counsel for the Plaintiff represented that he had requested that his client provide all of the

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documents in its care, custody and control, and that all of these documents had been produced. Many of

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the critical documents are or were in the possession of the government which failed to preserve them.

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As discovery progresses, the Plaintiff will supplement its initial disclosures as appropriate.

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Having reviewed and considered the moving and responsive papers and the arguments of

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counsel, the court is satisfied that the Plaintiff conducted a diligent search for all responsive documents

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and has produced all responsive documents within its care, custody and control. Counsel for Plaintiff

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signed the Plaintiff’s initial disclosures, Plaintiff’s supplemental disclosures, and responses to requests
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for production of documents. Pursuant to Rule 26(g), by assigning these discovery responses counsel

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certified that to the best of his knowledge, information and belief formed after reasonable inquiry, the

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disclosure was complete and correct as of the time it was made. Accordingly,

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IT IS ORDERED the government’s Motion and Amended Motion to Bar Evidence and for
Sanctions (Dkt. #72, 73) is DENIED.
Dated this 21st day of May, 2012.

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______________________________________
Peggy A. Leen
United States Magistrate Judge

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