KCI USA, Inc. v. Healthcare Essentials, Inc.

Filing 363

Memorandum of Opinion and Order For the reasons set forth herein, Plaintiff's Omnibus Motions for Sanctions (ECF No. 333 ) is granted. KCI is entitled to attorney fees and costs, in the form or sanctions, from the Cavitch Firm and indiv idual attorneys Michael R. Rasor, Komlavi Atsou, and Eric Weiss. The Court shall conduct a hearing to determine the sanctions on 8/3/2018 at 10:00 a.m. Plaintiff's brief in support of its damages shall be filed not later than 14 days before the hearing. Any responsive brief shall be filed not later than 7 days prior to the hearing. If necessary, Plaintiff may reply not later than 3 days before the hearing. Judge Benita Y. Pearson on 7/16/2018. (JLG)

PEARSON, J.
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION

KCI USA, INC.,
Plaintiff,
v.
HEALTHCARE ESSENTIALS, INC., et al.,

Defendants.

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CASE NO. 1:14CV549

JUDGE BENITA Y. PEARSON

MEMORANDUM OF OPINION AND
ORDER [Resolving ECF No. 333]

Pending is Plaintiff’s Omnibus Motion for Sanctions Against Interested Party, Cavitch
Familo & Durkin Co., LPA (the “Cavitch Firm”). ECF No. 333.
Pursuant to Federal Rules of Civil Procedure 26(g)(3) and 37(b)(2)(C), 28 U.S.C. § 1927,
and the Court’s inherent authority, Plaintiff moves for sanctions against the Cavitch Firm and
certain of its attorneys1 for discovery abuses that occurred during the representation of
Defendants Healthcare Essentials, Inc; Healthcare Essentials, LLC; Healthcare Essentials
Medical Devices, LLC; RT Acquisition, Inc.; Ryan Tennebar, and Colin Tennebar (collectively,

1

Regarding the individual attorney’s, Plaintiff’s Reply states: “For the removal of
any doubt, and as made clear in KCI’s Omnibus Motion, the Court should sanction
Michael Rasor, Komlavi Atsou, and Eric Weiss of the Cavitch firm the same
individuals who submitted affidavits with the Opposition (and, in fact attested to the
statements made in the Opposition) under 28 U.S.C. § 1927 for multiplying these
proceedings unreasonably and vexatiously. (ECF Nos. 341-15, 341-16, 341-17).” ECF
No. 346 at PageID#: 6508 n. 1.

(1:14CV549)
“Defendants”). The Cavitch Firm and counsel oppose the motion. ECF No. 341. KCI has
replied. ECF No. 346.
The Court has been advised, having reviewed the record, the parties’ briefs and the
applicable law.2 For the reasons set forth below, Plaintiff’s motion (ECF No. 333) is granted.
I. Background
Plaintiff KCI USA, Inc. (“KCI”) initiated this action on March 12, 2014, alleging that
Defendants stole its wound-care vacuums (“VACs”) and marketed them as their own. See ECF
No. 1. Since the inception of this suit, KCI’s efforts to litigate the merits of this case have been
hindered by uncooperative behavior, dilatory tactics, and repeated discovery violations by
Defendants and, to some degree, the Cavitch Firm and certain of its counsel. A brief chronology
of the events that led the Court to this finding is instructive.
On March 13, 2015, after having made several discovery requests, KCI moved for its first
order requesting that the Court sanction Defendants “for a pattern of blatant and continuous
discovery abuses.” ECF No. 42 at PageID#: 207. Then, KCI had only Defendant Healthcare
Essentials, Inc. (and possibly its counsel) in its sights, and complained that “Healthcare
Essentials has refused, despite being compelled to do so by successive Orders of this Court and
almost a year into the discovery process, to produce purchase records and KCI serial numbers for

2

The Court has also afforded the parties an opportunity to be heard. The Cavitch
Firm was made aware of the November 9, 2017, Show Cause Hearing, via the Court’s
Electronic Filing System. No representative from the firm participated in the hearing.
The Cavitch Firm did, however, file a (written) Response to Accusations Contained in
Plaintiff’s Bench Brief (ECF No. 329) shortly before the hearing began. To discern
amounts to be paid, for the reasons described herein, the Court will hold an evidentiary
hearing as described later in this writing.
2

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the VACs Defendant possess[ed].” Id. At that time, Plaintiff sought discovery pertaining to:
how Defendant acquired KCI VACs; how many VACs remained in Defendants’ possession; and,
where the VACs were located. See ECF Nos. 42; 42-2 (KCI’s February 16, 2015 letter to Court).
The Cavitch Firm asserted that Defendant Healthcare Essentials had produced complete and
accurate documents of invoices and inventory spreadsheets that identified all of KCI’s VACs
within its control or possession, or presently being leased by Defendant to its customers. ECF
No. 49 at PageID#: 365

370. Based on the Cavitch Firm’s representations certifying that

Defendant had complied with KCI’s discovery requests and produced documents regarding their
KCI VAC inventory, KCI’s motion for sanctions was denied.3 See ECF No. 56.
Unfortunately, KCI’s counsel found it necessary to continue seeking intervention from
the Court about outstanding discovery issues.4 Consequently, on December 4, 2015, KCI moved
for: (1) an order requiring Defendant Healthcare Essentials, Inc. to show cause for why it should
3

Magistrate Judge Baughman articulated “serious concerns about the conduct of
discovery by counsel and the parties on both sides.” ECF No. 56 at PageID # 671. While
he denied the motion, he also outlined expectations for what he hoped would be “the
orderly and expeditious completion of discovery without further dispute and posturing.”
Id. at PageID#: 672. As importantly, the opinion made clear the sanctions likely to befall
the noncompliant client and counsel.
4

See ECF Nos. 153 at PageID#: 2914 (Court Order stating that “[t]he Court is
holding in abeyance ruling on KCI’s request for costs and attorneys’ fees pursuant to L.R.
7.1(i). ECF No. 150 at PageID#: 2850); 154 at PageID#: 2915 (KCI filed an emergency
motion to compel compliance with the Court directed production of discovery); 177 at
PageID#: 3459 (KCI moved for an order to show cause why Defendants should not be
held in contempt and sanctioned for willful violations of the Court’s July 1, 2016
Preliminary Injunction Order); 189 at PageID#: 3732 (KCI filed a motion for interim
relief and second supplemental filing in support of its motion to show cause, requesting
that the Court issue an Order requiring Defendants to immediately deliver all company
hard drives and laptop computers to the Court); 243 at PageID#: 4515 (KCI filed a
motion to show cause for violations of the preliminary injunction orders).
3

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not be held in contempt for continued violations of the Court’s discovery Orders (ECF Nos. 40
and 56); and (2) an order sanctioning Defendant for willful violations of the Court’s discovery
Orders and for its continued pattern of discovery abuses. ECF No. 79. In that motion, KCI
informed the Court that its third-party subpoenas to Defendant Healthcare Essentials’ customers
revealed information that Defendant had failed to produce items, including “previously
undisclosed written contracts between Healthcare Essentials and various healthcare customers
(for VACs), along with HEI’s e-mails containing representations about KCI and the VACs, and
even other communications which included misrepresentations by HEI and its counsel to current
and former KCI customers (about KCI, this litigation, and VACs). (See, e.g., ECF 64-10).” Id. at
PageID#: 1168

69.

KCI’s motion was heard at a January 25, 2016 Status Conference before Magistrate Judge
Baughman.5 See ECF Nos. 96 and 97. During the Status Conference, Magistrate Judge
Baughman discussed, in depth, the Cavitch Firm’s failure to comply with Court’s Order (ECF
No. 56) directing Defendants to:
[I]dentify the [VACs] possessed by Healthcare Essentials and set up a chain of
custody for each of those units from the time of distribution by KCI until those
units came into the possession of Healthcare and then a chain of custody for each
of the units from the time of the possession by Healthcare Essentials to the present
and any documentation in possession of any party regarding the units in dispute.

ECF No. 111 at PageID#: 1850.

5

The case was referred to Magistrate Judge Baughman for general pretrial
supervision by a (now) retired member of the court. See ECF No. 17.
4

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When Magistrate Judge Baughman asked whether a chain of custody as to the VAC units
in Defendants’ possession had been developed, Cavitch Firm Attorney, Komlavi Atsou,
answered in the affirmative. Id. at PageID#: 1851. After further questioning, he expounded that
for each of the units “[w]e bought it, we produced it, we have receipts for them, and we
distributed it to our customers that are using it, your Honor.” Id. at PageID#: 1851

52. When

asked whether the Cavitch Firm had been disclosing and updating their VAC list and initial
disclosures, Atsou again answered in the affirmative, stating that “[w]e produced the units that
we have, the complete list.” Id. at PageID#: 1852

53. Lastly, regarding the serial numbers of

the thirty-five VACs produced by Defendants, the Court asked Atsou: “[D]o you have anything
you haven’t produced yet?” Atsou responded, “No, your Honor. We have produced everything
to them.” Id. at PageID#: 1867

68. Despite Atsou’s assurances that the above-mentioned

discovery had been produced to KCI, Magistrate Judge Baughman, warned the Cavitch Firm of
the significance of compliance:
Well, here is the deal. They are signing under Rule 11 that they have given you
everything that exists that they know of . . . and you are finding that there is other
stuff that you may be able to find that you think they would have, but they don’t.
So they are going to have to answer for that. So it is put up or shut up.”

Id. at PageID#: 1882.
Now, the Cavitch Firm contends that it was not until its March 30, 2016 review of
documents on Defendants’ Jurinov Hard Drive (herein “Defendants’ hard drive”) that “troubling”
information with respect to Defendants’ litigation-related conduct was revealed. See ECF No.
341 at PageID#: 6178

79. Subsequently, on April 8, 2016, Cavitch Firm Attorneys Eric J.

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Weiss, Michael R. Rasor, John Lisy IV, and Atsou, moved to withdraw as counsel for
Defendants, and filed an ex parte memorandum in support of their motion.6 ECF Nos. 135 and
136. In granting the motion to withdraw, the Court put the Cavitch Firm on notice that, “should
the Court find cause for doing so, it may be called upon to clarify, explain, or justify its prior
actions as counsel in this case.” ECF No. 143 at PageID#: 2339

40.

As a result of the continued discovery-related disputes between the parties, KCI filed a
Motion to Show Cause and Request for Discovery Hearing arising out of Defendants’ spoliation
of evidence. ECF No. 269. On November 9, 2017, the Court held a hearing on Plaintiff’s
Motion to Show Cause. See November 9, 2017 Minutes of Proceedings. At the Show Cause
Hearing, KCI presented evidence of Defendants and the Cavitch Firm’s discovery misconduct
including, violations of multiple Court Orders, misrepresentations made to the Court and KCI
regarding the prior document discovery productions, fabrication of documents produced in
discovery, and spoliation of evidence. See ECF No. 331.
Following the Show Cause Hearing, KCI filed its Omnibus Motion for Sanctions against
the Cavitch Firm. ECF No. 333. KCI alleges that the Cavitch Firm repeatedly violated
discovery-related provisions of Rules 26 and 37 of the Federal Rules of Procedure, as well as
various Court Orders, by its:
(1) misrepresentations made to the Court and KCI during in-person hearings
regarding Defendants’ prior document discovery productions;

6

Unfortunately, the Cavitch Firm failed to take full advantage of the ex parte
opportunity to be candid with the Court. The filing reveals no more than could have been
filed without such protection.
6

(1:14CV549)
(2) direct assistance in the creation of fabricated and inaccurate “evidence”
produced to KCI in response to Orders from the Court requiring production;
(3) actual knowledge of additional false and misleading documents produced
in discovery prior to its withdrawal as counsel;
(4) withdrawing from counsel in this case without disclosing any of its
improprieties and without correcting prior, false document productions and
false statements to the Court and KCI.
Id. at PageID#: 5922

23.

As relief, Plaintiff urges the Court to impose sanctions
costs

attorney’s fees and

pursuant to Rules 26(g)(3) and 37(b)(2)(C), and the Court’s inherent authority, 28 U.S.C.

§ 1927, against the Cavitch Firm and/or certain of its attorneys, as permitted and appropriate, for
discovery misconduct during the litigation. ECF No. 333.
The Cavitch Firm and counsel oppose, arguing that they did not knowingly withhold
information; provide direct assistance in the creation of fabricated and inaccurate evidence, nor
have reason to know or suspect that documents produced were other than authentic. ECF No.
341. Furthermore, they assert that under the Fifth Amendment privilege against selfincrimination and the attorney-client privilege, they had a duty to refrain from disclosing the past
discovery misconduct of their former clients. See id.
II. Law and Analysis
In deciding whether to impose sanctions on a law firm and individual attorneys, courts
have several tools with which to work. “Deeply rooted in the common law tradition is the power
of any court to manage its own affairs [which] necessarily includes the [inherent] authority to
impose reasonable and appropriate sanctions upon errant lawyers practicing before it.” Carlucci

7

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v. Piper Aircraft Corp., 775 F.2d 1440, 1147 (11th Cir. 1985) (internal citation omitted). In
addition, a court has the authority to impose sanctions against counsel and law firms for
discovery abuses under Rules 26(g) and 37 of the Federal Rules of Civil Procedure; and, 28
U.S.C. § 1927, permits sanctions to be imposed against individual attorneys. Undoubtedly, when
faced with discovery misconduct that unduly delays the progress of civil litigation, courts may
impose sanctions when warranted. See e.g., Med. Billing, Inc., v. Med. Mgmt. Sci., Inc. v. Reich,
1996 WL 219657, at *3

*4, *7 (N.D. Ohio Apr. 26, 1996) (imposing sanctions, pursuant to

Rules 26 and 37, against the defendant and defense counsel’s law firm based on a history of
discovery abuses that include: failing to timely produce discovery documents; failing to identify
relevant witnesses, altering relevant documents already subject to production requests, and lying
to the court and counsel about all of these things).
A. Sources for Sanctions
1. Rule 26
The Federal Rules of Civil Procedure set forth the discovery obligations of parties and
their attorneys, and authorize federal courts to impose sanctions on those participants whom fail
to meet these obligations. “Federal Rule of Civil Procedure 26(g) requires an attorney or the
party personally to certify that discovery responses and objections are supported by nonfrivolous
argument and are not aimed to harass, cause delay, or drive up litigation costs. The rule requires
a court to impose sanctions for any violation occurring without ‘substantial justification.’” Jones
v. Ill. Cent. R.R. Co., 617 F.3d 843, 854 (6th Cir. 2010) (citing Fed. R. Civ. P. 26(g)). The
signature of counsel or his client certifies that to the best of the “person’s knowledge,

8

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information and belief formed after a reasonable inquiry” the discovery response is complete,
correct, and interposed for a proper purpose. Fed. R. Civ. P. 26(g). The Advisory Committee
Notes for Rule 26 explain:
Rule 26(g) imposes an affirmative duty to engage in pretrial discovery in a
responsible manner that is consistent with the spirit and purposes of Rules 26
through 37. In addition, Rule 26(g) is designed to curb discovery abuse by
explicitly encouraging the imposition of sanctions. The subdivision provides a
deterrent to both excessive discovery and evasion by imposing a certification
requirement that obliges each attorney to stop and think about the legitimacy of a
discovery request, a response thereto, or an objection. The term “response”
includes answers to interrogatories and to requests to admit as well as responses to
production requests.

Fed. R. Civ. P. 26 Advisory Committee Notes (1983 Amendment). The attorney’s signature
“certifies that the lawyer has made a reasonable effort to assure that the client has provided all
information and documents available to him that are responsive to the discovery demand.” Id.
“If a certification violates this rule without substantial justification, the court, on motion or on its
own, must impose an appropriate sanction on the signer, the party on whose behalf the signer was
acting, or both. The sanction may include an order to pay the reasonable expenses, including
attorney’s fees, caused by the violation.” Fed. R. Civ. P. 26(g)(3) (emphasis added).
2. Rule 37
Another rule is relevant to the Court’s consideration of sanctions. Rule 37(b)(2)(A) of
the Federal Rules of Civil Procedure governs the sanctions that may be imposed against the
party’s failure to obey an order to provide or permit discovery. And, Rule 37(b)(2)(C) provides
that the court “must order the disobedient party, the attorney advising that party, or both to pay
reasonable expenses, including attorney’s fees, caused by the failure, unless the failure was
9

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substantially justified or other circumstances make an award of expenses unjust.” (Emphasis
added). The Sixth Circuit has held that a party meets the “substantially justified” standard if
“there is a genuine dispute, or if reasonable people could differ as to the appropriateness of the
contested action.” Doe v. Lexington Fayette Urban Cty. Govt., 407 F.3d 755, 765 (6th Cir.
2005) (citing Pierce v. Underwood, 487 U.S. 552, 565, 108 S.Ct. 2541, 101 L.Ed.2d 490 (1988)).
3. 28 U.S.C. § 1927
Federal statute 28 U.S.C. § 1927 presents yet another avenue for sanctions against
individual counsel. “In addition to the rule-based authority, federal courts have the inherent
power to impose sanctions in order to prevent the abuse of the judicial process.” Laukus v. Rio
Brands, Inc., 292 F.R.D. 485, 502 (N.D. Ohio 2013) (citing Chambers v. NASCO, Inc., 501 U.S.
32, 49, 111 S.Ct. 2123, 115 L.Ed.2d 27 (1991). Under 28 U.S.C. § 1927, “sanctions are
warranted ‘when an attorney has engaged in some sort of conduct that, from an objective
standpoint, ‘falls short of the obligations owed by a member of the bar to the court and which, as
a result, causes additional expense to the opposing party.’” Red Carpet Studios Div. of Source
Advantage, Ltd. v. Sater, 465 F.3d 642, 646 (6th Cir. 2006) (quoting In re Ruben, 825 F.2d 977,
984 (6th Cir. 1987)). See also JPMorgan Chase Bank, N.A. v. Winget, 602 F. App’x 246, 266
(6th Cir. 2015) (“[A] court may sanction an attorney under § 1927 for unreasonably and
vexatiously multiplying the proceedings even in the absence of any ‘conscious impropriety.’”)
(quoting Rentz v. Dynasty Apparel Indus., Inc., 556 F.3d 389, 396 (6th Cir. 2009)). “[Section]
1927 sanctions require a showing of something less than subjective bad faith, but something
more than negligence or incompetence.” Red Carpet Studios, 465 F.3d at 646.

10

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The purpose of imposing sanctions under § 1927 is to “deter dilatory litigation practices
and to punish aggressive tactics that far exceed zealous advocacy.” Id. “Thus, an attorney is
sanctionable when he intentionally abuses the judicial process or knowingly disregards the risk
that his actions will needlessly multiply proceedings.” Id. A court may exercise its inherent
power to sanction when a party has “acted in bad faith, vexatiously, wantonly, or for oppressive
reasons,” or when the conduct was “tantamount to bad faith.” Laukus, 292 F.R.D. at 502 (citing
Metz v. Unizan Bank, 655 F.3d 485, 489 (6th Cir. 2011) (citing Chambers, 501 U.S. at 45 46,
111 S.Ct. 2123; Roadway Express, Inc. v. Piper, 447 U.S. 752, 767, 100 S.Ct. 2455, 65 L.Ed.2d
488 (1980)). See Red Carpet Studios, 465 F.3d at 646 (“[F]ederal courts have the inherent power
to assess attorney’s fees against counsel who willfully abuse judicial processes or who otherwise
act in bad faith.”).
B. Sanctionable Conduct
1. Rule 26
Regarding the imposition of sanctions under Rule 26(g)(3), the Court finds that the
Cavitch Firm and individual attorneys are liable. In signing the responses to KCI’s requests for
production and its former client, Ryan Tennebar’s false affidavit, they certified that, “to the best
of their knowledge, information, and belief after a reasonable inquiry,” Defendants’ responses
were consistent with the discovery rules and laws. See Fed. R. Civ. P. 26(g)(1). This has been
proven false and patently so.
The Cavitch Firm repeatedly represented to the Court and KCI that it had produced all
requested discovery to KCI. See e.g. ECF No. 49 (in Defendants’ Memorandum of Opposition to

11

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KCI’s Motion for Sanctions, Cavitch Firm attorneys argued that sanctions are not warranted
because Defendants had produced all discovery requested by KCI); ECF No. 111 at PageID#:
1851

52 (when asked at the January 25, 2016 hearing on Plaintiff’s motion for sanctions,

whether the Cavitch Firm developed a chain of custody as to the VAC units in Defendants’
possession, Atsou responded, “We bought it, we produced it, we have receipts for them.”); ECF
No. 111 at PageID#: 1852

53 (when asked at the January 25, 2016 hearing on Plaintiff’s

motion for sanctions, whether the Cavitch Firm produced all information pertaining to the thirtyfive VACs, Atsou responded, “We have produced everything to them.”); ECF No. 54-1 (Cavitch
Firm attorneys prepared and filed a false affidavit of its former client, Ryan Tennebar stating that
Defendants had made full and complete production of their records). Yet, KCI’s discovery
documents
access

obtained from a third-party source and which Cavitch attorneys had

credibly contradict these representations. Among the discovery documents retrieved

(from this third-party source) by KCI, was an email, dated January 29, 2016, between Cavitch
Firm Attorney, Atsou, and Defendant Ryan Tennebar, in which Atsou requests that Ryan
Tennebar “immediately” call him so that they “can (1) arrange the imaging of [his] computer . . .
(2) compile the contracts and additional records for the 35 VACs with serial numbers we
disclosed to KCI.”7 ECF No. 333-9 at PageID#: 5993 (alteration added). This email was sent
four days after the hearing on KCI’s first motion to show cause and for sanctions against
Defendant Healthcare Essentials, Inc. (ECF No. 79), in which Atsou assured Magistrate Judge
7

Individual Cavitch Firm attorneys, Michael R. Rasor, Eric J. Weiss, and John
Lisy were copied on the January 29, 2016, February 2, 2016, and February 15, 2016 email
communications between the Cavitch Firm and Defendants. See ECF Nos. 333-9; 33310; and 333-11.
12

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Baughman that the Cavitch Firm had already developed a chain of custody and “produced
everything” to KCI regarding the thirty-five VACs. See ECF No. 111 at PageID#: 1851
1867

52;

88.
Similarly, on February 2, 2016, Cavitch Firm attorney, Rasor, sent Defendant Ryan

Tennebar an email encouraging Defendants to comply (albeit belatedly) with their discovery
obligations to avoid a “[court] order that effectively closes down your business.” Rasor urged
that Defendants produce: “[r]eceipts for all VACs purchased since March 2015,” “serial numbers
for all VACs purchased since March 2015,” and, “[a]ll contracts with every single customer you
have.” ECF No. 333-10 at PageID#: 5997 (alterations added). In the string of emails exchanged
on February 2, 2016, Rasor emphasized the need to scan Defendants’ company hard drive with a
promise that the results would be given to “CAVITCH . . . (not Benesch or KCI)” and that
Cavitch would only “produce the documents that KCI is entitled to see.” See id. at PageID#:
5995

97.
Significantly, these instructions were given after the Cavitch attorneys’ assertions to the

Court and opposing counsel that all relevant and responsive documents had (already) been
produced to KCI. If additional proof of noncompliance were needed, a February 8, 2016 email
between Atsou and Defendants provides it. In this email Atsou writes: “[W]e still need the
purchase records for the following three V.A.C.s, which are part of the original 35 or so V.A.C.s
with serial numbers that we disclosed to KCI in March 2015.” This further documents the
Cavitch Firm’s failure to produce discovery in accordance with Rule 26, ECF No. 333-11 at
PageID#: 6000.

13

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Before doing its due diligence, the Cavitch Firm and its individual attorneys, signed and,
thereby, certified, that to the “best of their knowledge, information, and belief after a reasonable
inquiry, Defendants’ responses to KCI’s requests for production of documents were complete
and correct.” It is now obvious that defense counsel had not made the necessary inquiries or
investigations regarding Defendants’ compliance before certifying their discovery responses; or
submitting their clients’ false affidavit (which stated that all responsive documents had been
produced to the Court and KCI); or, telling the Court, verbally and in writing, on multiple
occasions, that neither an injunction nor sanctions should be imposed on their clients because
they had complied with Rule 26.
The Court finds it equally troubling that even after the Cavitch Firm and its individual
attorneys had good reason to believe that their clients were not in compliance with the Rules of
Civil Procedure and the Court’s orders, they still did not act appropriately.
For the reasons above, the Court finds that the Cavitch Firm and its individual attorneys
failed to meet even the minimal expectations of Rule 26.
2. Rule 37
When measured against the expectations of Rule 37, the Court finds that sanctions
against the Cavitch Firm and individual counsel are appropriate for their failure to comply with
the Court’s discovery orders requiring that Defendants produce all relevant information in their
possession relating to KCI VACs.8 9 See ECF Nos. 39 (Court Order directing counsel for
8

The Rule 26 analysis is incorporated herein and below, when appropriate.

9

Other courts have imposed Rule 37(b)(2)(C) sanctions against a party and its
(continued...)
14

(1:14CV549)
Defendant Healthcare Essentials, Inc. to submit a letter explaining why the discovery at issue had
not been provided); 40 and 41 (Court Order noting that counsel for Defendant Healthcare
Essentials, Inc. did not provide a response to KCI’s letter as ordered by the Court, and directing
Defendants to provide to KCI all of the discovery at issue, as described in KCI’s counsel’s letter);
56 (Court Order requiring that Healthcare Essentials, Inc. provide KCI with the identity of the
VACs it possesses, “chain of custody” of each these units, any documentation that goes to KCI’s
claim that Healthcare Essentials, Inc. does not have a right to possess or distribute the units in
dispute). See also Fed. R. Civ. P. 37 (Rule 37 outlines the sanctions that a court may impose
upon parties and their counsel for failing to fulfill their discovery obligations under Rule 26, and
comply with Court imposed discovery obligations); Nat’l Hockey League v. Metro. Hockey Club,
Inc., 427 U.S. 639, 642, 96 S.Ct. 2778, 2780, 49 L.Ed.2d 747 (1976) (finding that the district
court properly considered the full record of the case in determining that Rule 37 sanctions were

9

(...continued)
counsel for failure to produce discovery and willfully violating a court order. See, e.g.,
Encana Oil & Gas (USA), Inc. v. Zaremba Family Farms, Inc., 2014 WL 12638156, at
*1 *2 (W.D. Mich. Mar. 3, 2014) (justifying the imposition of Rule 37(b)(2)(C)
sanctions against the individual attorneys and law firm, for obstructive behavior and
willful violation of a court order); McLaughlin v. Phelan Hallinan & Schmeig, LLP, 756
F.3d 240, 249 (3d Cir. 2014) (affirming the district court’s finding that, because the law
firm committed a clear violation of the court’s discovery order in failing to produce
responsive documents to the plaintiff, sanctions in the form of attorney’s fees and costs
under Rule 37(b)(2)(C) were warranted); Baldus v. Members of Wis. Gov’t Accountability
Bd., 843 F. Supp. 2d 955, 960 (E.D. Wis. 2012) (finding that the individual attorneys and
law firm were responsible for the “sandbagging, hide-the-ball trial tactics that continue[d]
to be employed,” including their failure to comply with several court orders, and
therefore, the court imposed sanctions in the form of attorney’s fees and costs under Rule
37(b)(2)(C)).
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warranted against the disobedient party and their counsel for failure to comply with discovery
orders).
The Court also finds that sanctions are warranted under Rule 37 based on defense
counsel’s assistance in the creation of fabricated evidence. Specifically, Defendants produced to
KCI and the Court invoices regarding its purchases of KCI VACs, inventory spreadsheets of KCI
VACs within its possession, and product tracking sheets identifying KCI VACs sent to customers
that were fabricated. See ECF Nos. 328-1 at PageID#: 5693

94 (at the November 9, 2017

Show Cause Hearing, KCI presented evidence, via former Healthcare Essentials’ employee, Rose
Edgar’s deposition testimony that Defendants never kept a “tracking system or asset number”
documenting the amount of KCI VACs in Defendants’ inventory, proving the inventory
spreadsheet
Atsou
5954

created by Defendant Ryan Tennebar and Cavitch Firm attorney, Komlavi

of all KCI VACs in Defendants’ possession was fabricated); ECF No. 333-4 at PageID#:
56 (Defendant Ryan Tennebar testified at his September 1, 2016 deposition that, “No

VAC in my possession has ever been logged. I don’t have a master list of every VAC that I
own,” and that the lists of KCI VACs and inventory spreadsheets Defendants and the Cavitch
Firm jointly produced to KCI and submitted to the Court were “not legitimate” and
“fabricated.”).
The Court further finds that Rule 37 sanctions are appropriate based on the Cavitch
Firm’s and its individual attorneys’ lack of candor with the Court in failing to correct its
misrepresentations, and lack of forthrightness about Defendants’ misconduct (even after it had
been) discovered on Defendants’ hard drive. See ECF 341 at PageID#: 6178

16

79 (in this

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opposition, the Cavitch Firm states that, on March 30, 2016, it began its review of Defendants’
mirror-imaged hard drive CD containing “troubling emails” of Defendants’ misconduct, and
therefore, moved to withdraw as counsel). In arguing that sanctions are not warranted, the
Cavitch Firm attempts to justify its actions. It asserts that it is absolved from any wrongdoing by
the attorney-client privilege and its alleged actions to protect its former client’s, Ryan Tennebar,
Fifth Amendment privilege against self-incrimination. See id. The Cavitch Firm’s arguments
fall far short of substantially justifying its behavior.10
The Cavitch Firm and individual attorneys, as former counsel and counsel of record to
Defendants in this case, had a professional responsibility to their clients and the Court. See Ohio
Prof. Cond. Rule 3.3 (explaining that an attorney’s duty to advocate for its client while
maintaining confidences of the client, however, is qualified by the advocate’s duty of candor to
the tribunal). See also Ohio Prof. Cond. Rule 1.6(d) ( “A lawyer shall reveal information relating
to the representation of a client, including information protected by the attorney-client privilege
under applicable law, to the extent the lawyer reasonably believes necessary to comply with Rule
3.3 or 4.1.”). The attorneys at the Cavitch Firm were well aware of their professional duty and
obligations to ensure that their clients complied with the Federal Rules and the Court’s discovery
orders but failed to do so on numerous occasions. On notice of Defendants’ misconduct, counsel
was obligated to inform the Court of information relating to, not only its former clients’
discovery violations, but also, its own discovery violations, and the need for the earlier produced

10

At the evidentiary hearing, the Cavitch Firm and counsel will have an
opportunity to better inform the Court of any effect it believes its client’s status as a
criminal defendant had on their actions.
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discovery to be corrected or otherwise supplemented. See Rule 3.3(a) (a lawyer shall not
knowingly “make a false statement of fact or law to the tribunal or fail to correct a false
statement of material fact or law previously made to the tribunal by the lawyer.”). Instead, the
Cavitch Firm and its attorneys Weiss, Rasor, Atsou, and Lisy IV, filed an ex parte motion that
lacked any material information of its former clients’ misconduct and did nothing to assist the
Court in making a decision in the matter. ECF No. 136. See Rule 3.3(d) (“In an ex parte
proceeding, a lawyer shall inform the tribunal of all material facts known to the lawyer that will
enable the tribunal to make an informed decision, whether or not the facts are adverse.”). And,
when given a second opportunity to better inform the Court, the Cavitch Firm, again, responded
in a manner unhelpful and inconsistent with its obligations under Rule 3.3. See ECF No. 233 at
PageID#: 4218

19 (During the August 5, 2016, Status Conference, the Court admonished the

Cavitch Firm for producing in discovery “that which [it] knew was false and/or fraudulent, and
[it] did not tell the Court[.]”) When given the opportunity to explain, the Cavitch Firm withheld
any material information that would have assisted the Court in resolving the matter. Had
Defendants’ misconduct been revealed to the Court in August 2016

nearly two years ago

the

time, resources, and costs expended by the Court and parties in this case likely would have been
avoided or significantly reduced.
The Court finds that the Cavitch Firm and individual counsel were well aware that
Defendants’ hard drive contained clear evidence of misconduct. The firm and counsel were also,
thereby, made aware of their own discovery misconduct.11 The Cavitch counsel have not
11

At the evidentiary hearing, Cavitch would be well advised to consider
(continued...)
18

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satisfactorily explained why they did not reveal this misconduct to the Court or otherwise act to
mitigate its effect. “An attorney’s duty to a client can never outweigh his or her responsibility to
see that our system of justice functions smoothly.” Malautea v. Suzuki Motor Co., Ltd., 987 F.2d
1536, 1546 (11th Cir.1993). “This concept is as old as common law jurisprudence itself.” Id.
Neither the Cavitch Firm nor counsel can just stick their heads in the sand and cower behind their
client’s disobedience.
For the reasons stated above, the Court finds that the Cavitch Firm and individual counsel
have failed to offer substantial justification for its misconduct, and the Court perceives no
circumstances that would make an award of attorney’s fees and costs unjust.12

11

(...continued)
presenting a timeline to inform the Court of what it knew and when that knowledge was
obtained.
12

See Laukus, 393 F.R.D. at 507 (ordering sanctions against counsel under Rule
26(g), Rule 37(b), and the court’s inherent powers, in finding that the counsel’s argument
that, he should not be sanctioned because his client delayed providing him with the
documents requested by the opposing party, was not substantially justified. In [Laukus],
counsel made misrepresentations to the court and opposing counsel regarding discovery;
failed to make reasonable efforts to determine that all discoverable information and
documents had been identified and searched; failed to investigate whether the client’s
discovery responses were correct; counsel did very little to ensure that it was in
possession of all relevant documents and other evidences before responding to discovery
requests; and, ultimately, failed to meet their obligations as officers of the court). See
also Red Carpet Studios, 465 F.3d at 647 (affirming the district court’s award of
sanctions, under its inherent authority, against counsel who willfully abused the judicial
processes when he unnecessarily multiplied the litigation proceedings, made several
misrepresentations to the court and opposing counsel, and refused to conduct reasonable
discovery processes, that needlessly increased the costs of litigation).
19

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3. 28 U.S.C. § 1927
Lastly, KCI also seeks sanctions against individual Cavitch Firm attorneys: Michael R.
Rasor, Komlavi Atsou, and Eric Weiss, pursuant to 28 U.S.C. § 1927. KCI argues that because
these attorneys specifically orchestrated the above-mentioned falsehoods against the Court and
KCI, they are each uniquely positioned to be singled out for sanctions under § 1927. The Court
agrees.
Based on the record in this case, it is clear that the misconduct of these attorneys
unreasonably multiplied the proceedings in this case, causing additional expenses to KCI and
waste of the Court’s limited resources. See JPMorgan Chase Bank, 602 F. App’x at 266. It must
be presumed that officers of the court, attorneys at law, including the individual attorneys Rasor,
Atsou, and Weiss, were aware of their obligation to present correct and complete information and
evidence to the Court and KCI, pursuant to court orders and rules of discovery. Instead, these
counsel obfuscated by making false assertions and presenting fabricated evidence. The Court
finds that, but for their behavior, especially the false assertions

on which great reliance was

placed when considering KCI’s earlier motions for preliminary injunctions and
sanctions

KCI’s motions likely would have been well taken or unnecessary, allowing the case

to proceed efficiently. Therefore, sanctions against Attorneys Rasor, Atsou, and Weiss, pursuant
to § 1927 are justified for their behavior that unreasonably multiplied the proceedings.

20

(1:14CV549)
III. Conclusion
For the reasons stated above, Plaintiff’s Omnibus Motions for Sanctions (ECF No. 333) is
granted. KCI is entitled to attorney fees and costs, in the form or sanctions, from the Cavitch
Firm and individual attorneys Michael R. Rasor, Komlavi Atsou, and Eric Weiss.
The Court shall conduct a hearing to determine the sanctions on August 3, 2018 at 10:00
a.m. Plaintiff’s brief in support of its damages shall be filed not later than 14 days before the
hearing. Any responsive brief shall be filed not later than 7 days prior to the hearing. If
necessary, Plaintiff may reply not later than 3 days before the hearing.

IT IS SO ORDERED.

July 16, 2018
Date

/s/ Benita Y. Pearson
Benita Y. Pearson
United States District Judge

21