Mosley et al v. Spartan Freight Systems, Inc. et al
Filing
162
OPINION AND ORDER granting 77 Motion for Sanctions. Defendants are ORDERED to pay the reasonable expenses, including attorney's fees, caused by Defendants' failure to obey a discovery order. The Court AWARDS Plaintiffs' reasonable attorney's fees and costs associated with bringing 77 Motion and the additional efforts Plaintiffs' counsel had to expend to obtain the Lloyds of London insurance policy from Defendants. The monetary sanctions will be in an amount to be decided post judgment. Signed by Magistrate Judge Elizabeth Preston Deavers on March 27, 2019. (jlk) Modified opinion status on 3/27/2019 (ew).
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
ERIN MOSLEY, et al.,
Plaintiffs,
Civil Action 2:16-cv-01197
Judge Michael H. Watson
Chief Magistrate Judge Elizabeth P. Deavers
v.
SPARTAN FREIGHT SYSTEMS, INC., et al.,
Defendants.
OPINION AND ORDER
This matter is before the Court on Plaintiffs’ Motion for Sanctions Against 9052-9025
Quebec, Inc., VTL V-Trans Ltd., and VTL Transport (ECF No. 77), Defendants 9052-9025
Quebec Inc., VTL V-Trans Ltd., and VTL Transport’s Brief in Opposition (ECF No. 81), and
Plaintiffs’ Reply in Support (ECF No. 82.) This matter was referred to the Undersigned by an
Order of District Judge Michael H. Watson. (ECF No. 134.)1 For the reasons that follow,
Plaintiffs’ Motion is GRANTED. (ECF No. 77.)
I. BACKGROUND
Plaintiffs filed their original Complaint on December 22, 2016. (ECF No. 1.) They filed
an Amended Complaint on June 20, 2017 (ECF No. 25) and a Second Amended Complaint on
August 31, 2017. (ECF No. 37.) Plaintiffs then filed a Third Amended Complaint on March 2,
2018 (ECF No. 64) and a Fourth Amended Complaint on July 30, 2018. (ECF No. 96.) The
1
Under the provisions of General Order COL: 14-01, § IV.C.1, the Undersigned has authority to
dispose of this Motion without a formal reference.
only Defendants involved in Plaintiffs’ Motion for Sanctions are 9052-9025 Quebec, Inc., VTL
V-Trans Ltd., and VTL Transport (collectively, “Defendants” or “VTL Defendants”).
Defendants filed their Answer to Plaintiffs’ Fourth Amended Complaint on September 24, 2018.
(ECF No. 117.) Plaintiffs allege that P.H. Glatfelter Company, a paper products manufacturer,
contracted with Defendants to ship a load of paper from a plant in Chillicothe, Ohio to a
customer in Toronto. (ECF No. 96, at pg. 3.) Plaintiffs further allege that Defendants subcontracted the load to Spartan Freight Systems, Inc. for transport. (Id.) The semi-tractor trailer
carrying the load was involved in a car crash with the Plaintiffs’ Chevy Traverse. (Id.) Two
passengers in the Chevy Traverse, Plaintiffs’ two young children, died from injuries sustained in
the crash. (Id. at pg. 3–4.)
Plaintiffs filed the Motion for Sanctions against the above-specified Defendants on May
8, 2018. (ECF No. 77.) An evidentiary hearing on the Motion was scheduled before District
Judge Michael H. Watson for October 2, 2018. (ECF No. 100.) He subsequently vacated the
evidentiary hearing on September 28, 2018. On November 9, 2018, the Motion was referred to
the Undersigned. (ECF No. 134.) The Court then scheduled and conducted an evidentiary
hearing on January 8, 2019. The parties filed no additional briefing on the Motion. Plaintiffs
seek any sanctions the Court deems appropriate under Federal Rules of Civil Procedure Rule
37(b)(2)(A)(i)-(vii). (ECF No. 77, at pg. 3.) Plaintiffs bring the Motion for Sanctions against
Defendants based on the following allegations:
Failure to provide discovery pursuant to the December 1, 2017 Order of this Court,
in which the VTL Defendants were directed to verify whether they carry any excess
insurance, but then improperly denied any excess coverage existed in their
December 18, 2017 discovery responses. This denial was despite the VTL
Defendants having filed a claim under their umbrella policy specifically for the fatal
crash at issue in this litigation approximately six months earlier;
2
Failure to disclose an umbrella insurance policy that applies to the claims herein
until April 10, 2018, despite counsel for Plaintiffs’ specific deposition questions
and discovery requests requesting information on all insurance coverage months
ago;
Failure to supplement discovery responses related to insurance coverage; and
Failure to provide a copy of the policy, declarations pages and all relevant
documents related to the umbrella policy.
(Id. at pg. 1–2.)
II. FACTS
Plaintiffs ask the Court to impose sanctions for the following actions of Defendants:
Failure to provide discovery pursuant to the December 1, 2017 Order of this
Court;
Failure to disclose an umbrella insurance policy;
Failure to supplement discovery responses related to insurance coverage;
Failure to provide a copy of the policy, declarations pages and all relevant
documents related to the umbrella policy.
(ECF No. 77, at pg. 1–2.)2 The December 1, 2017 Order of this Court provides in pertinent part:
Plaintiffs and Defendant VTL Transport and associated Defendants disagree as to
the production of applicable insurance contracts. Plaintiffs maintain that
Defendants have directed them to standardized policies available online, together
with the appropriate declarations page from the operative insurance contract, but
have not provided a copy of the actual insurance policy. Defendants maintain that
they have complied with their obligations to produce, and further understand that
in Canada, where the policy was issued and insurance laws differ from the United
States, the dec page and standardized policy constitute the insurance contract.
Because the Court understands the declaration page of an insurance contract merely
to summarize the pertinent terms of the underlying policy, the Court directed
2
Plaintiffs also requested that this Court order the VTL Defendants to provide Plaintiffs with a
copy of the umbrella policy and June 2017 claim against the policy. (ECF No. 77, at pg. 3.)
Defendants, however, have since represented to the Court that they provided Plaintiffs with a
copy of the excess policy on May 11, 2018, and then provided a certified copy of the excess
policy on May 14, 2018. (ECF No. 81, at pg. 1.)
3
Defendants to again ensure that no other operative documents are responsive to
Plaintiffs’ request. Similarly, Defendants’ counsel will confer with his clients to
verify whether they carry any excess insurance that would be at issue in this
litigation.
(ECF No. 44) (emphasis added). On December 4, 2017, counsel for Defendants emailed counsel
for Plaintiffs the requested copies of the insurance policies, but no excess or umbrella policies.
(ECF No. 77, Exhibit 3.) As discussed more fully below, Plaintiffs eventually discovered a
Lloyds of London umbrella policy after years of asking for it. They also learned there was an
open claim for the Mosley accident that had been filed months before.
On or about December 11, 2017, Defendants provided Plaintiffs with their responses to
Plaintiffs’ Revised Request for Admissions. (Id., Exhibit 5.) Plaintiffs made the following
request for admission:
Admit that on September 16, 2016 you had no insurance coverage that would apply
to any claims related to any load that was being transported by a subcontractor.
(Id., Exhibit 5, at No. 10.) Defendants’ response provided:
Deny.
As of September 16, 2016, VTL V-Trans Ltd., VTL Transport and 9052-9025
Quebec, Inc. were insured by Economical Insurance for Contingent Motor Carrier
Cargo Liability and this coverage was included with the Economical Insurance
policy.
This coverage applies only pursuant to the specific wording of the Contingent
Cargo Liability Coverage Extension Form (attached).
(Id.) Furthermore, counsel for Plaintiffs sent multiple emails regarding insurance discovery
issues to counsel for Defendants spanning a one-year period. (Id., Exhibit 6.) The Court
construes each of these emails to invite an opportunity for Defendants to provide additional
insurance information that became known to them at any point.
4
Counsel for Plaintiffs conducted Rule 30(b)(6) depositions under the Federal Rules of
Civil Procedure of Defendant 9052-9025 Quebec, Inc., requesting those who were to testify to be
fully prepared to testify regarding all information that is known or reasonably available to 90529025 Quebec, Inc.’s organization regarding a number of designated matters, specifically
including the following:
B. INSURANCE ISSUES
8. The identity, job title and duties of all persons who had the authority to
purchase and bind insurance coverage, obtain quotes for insurance, and vet
insurance quotes for coverage for 9052-9025 Quebec, Inc. and any related entity
from 2013 to the present time,
a) Including insurance for:
15)
16)
17)
18)
19)
20)
VTL Transport
VTL V-Trans
VTL V-Trans, Ltd.
7329385 Canada, Inc.
Spartan Freight Systems, Inc.
P.H. Glatfelter Co.
(Id., Exhibit 7.) Plaintiffs deposed Larry Burn, President of the VTL Defendant companies, on
December 13, 2017. (Id., Exhibit 8 [“Burn Depo.”] (an excerpted transcript of the deposition);
ECF No. 91, at pg. 1, 16 [“Full Burn Depo.”] (a full transcript of the deposition).)
Defendants’ counsel stated on the record at the Deposition of Larry Burn that Mr. Burn
was not produced to respond to questions about insurance:
Q. And as it relates to the notice of deposition for the corporate representative, you
haven’t been produced specifically to talk about all of the safety issues related to
VTL. Is that correct?
MR. BELZER [Defendants’ counsel]: That’s incorrect. He is the representative for
everything except for the insurance issues where Lucie was produced.
Burn Depo. at pg. 4; Full Burn Depo. at pg. 196. Plaintiffs also deposed Lucie Bourbeau, CFO
of the VTL Defendant companies, on December 13, 2017. (ECF No. 77, Exhibit 9 [“Bourbeau
5
Depo.”] (an excerpted transcript of the deposition); ECF No. 121 [“Full Bourbeau Depo.”] (a full
transcript of the deposition).) Despite being produced as the 30(b)(6) corporate representative
for the VTL Defendants regarding insurance, Ms. Bourbeau demonstrated that she was
underprepared for the deposition and that she lacked an understanding about basic insurance
issues. The following excerpt of her deposition testimony serves as an example:
Q. Okay. What did you do in preparation for your testimony today as a corporate
representative?
A. I met Mr. Belzer and basically we spoke about - ...
Q. I don’t want to know the substance of what you talked with Mr. Belzer about. I
just want to know what else did you do other than conferring with Mr. Belzer? Did
you look at documents? Did you interview any people?
A. No.
Q. Do I understand - - did you look at the notice of deposition?
A. What notice of deposition?
Q. Okay. Do you know what areas you are going - - you have been produced to
testify about?
A. For this case?
Q. Yes.
A. Yes.
Q. What areas?
A. I know I have to do a deposition for the file that has to do with Spartan carrier.
Q. Okay. Do you know what insurance coverage applies to the claim that involves
the Mosley family?
A. I don’t understand the question. By “coverage” do you mean the type of
insurance?
6
Q. Yes, type of insurance.
A. I don’t really understand the question. I don’t know what you mean by type of
insurance.
...
Q. Do you have any training in insurance coverage?
A. No.
...
Q. Is it your understanding when you purchase insurance that it would apply to
accidents that involve a subcontracted carrier?
A. There is a coverage that covers that.
Q. And do you know specifically what policy would cover that?
A. I couldn’t say specifically, but I know we are covered for that.
Q. How do you know you are covered for that?
A. Because we have a brokerage company and we have to be covered for that
activity.
...
Q. Okay. Do you know what excess insurance coverage is?
A. No. I would have to get more information.
(Full Bourbeau Depo., at pg. 7–9, 11–12.)
Furthermore, Ms. Bourbeau provided inaccurate information regarding the existence of
the excess umbrella insurance policy at issue in Plaintiffs’ Motion for Sanctions. Specifically,
Ms. Bourbeau testified that the only insurance coverage was provided by Economical Insurance
Company, but neglected to mention the Lloyds of London umbrella policy which was in
existence at the time:
7
Q. Who are the insurance carriers that provided coverage in September of 2016 to
VTL or any related entity?
A. So in 2016 the broker was Univesta and the insurance was Economical.
(Full Bourbeau Depo., at pg. 13.)
Ms. Bourbeau also testified at the evidentiary hearing. When Plaintiffs’ counsel
questioned her as to why she did not provide information regarding the Lloyds of London policy,
Ms. Bourbeau repeatedly stated she simply was not aware of the policy. (Tr. at 10, 14.) Ms.
Bourbeau further testified that she knew before the deposition that she would have to answer
questions regarding insurance coverage, despite that fact she admitted that she did not review
any documents or information in preparation for the deposition. (Id. at 11–12.) Rather, Ms.
Bourbeau testified that her only preparation was meeting with Defendants’ counsel, Mr. Belzer,
for maybe ten or fifteen minutes. (Id. at 12.) Furthermore, Plaintiffs’ counsel pointed out to Ms.
Bourbeau that in a June 5, 2017 email she sent to Claudine Carbonneau of Univesta, an insurance
brokerage company for the VTL Defendants, who was VTL’s agent of record, one of the
attachments included referenced the Lloyds of London policy. (Id. at 14–16, 18.) Ms. Bourbeau
testified that perhaps she knew about the Lloyds of London policy at one time and forgot later,
but that she never tried to lie or hide, she simply made a mistake. (Id. at 18.)
Mr. Burn, in his deposition testimony, also provided inaccurate information when he was
directly asked whether the VTL Defendants had an umbrella or an excess policy:
Q. Okay. Did VTL have an excess policy in place in 2015?
A. An excess?
Q. An excess policy through Zurich Insurance Company?
A. I am not aware.
Q. Do you know what an excess policy is?
8
A. Sort of like an umbrella coverage.
Q. Yes.
A. I don’t think so.
Q. Have you ever had an umbrella coverage or an excess coverage?
A. I don’t think so, no.
(Full Burn Depo., at pg. 223.)3 Furthermore, in an Affidavit from Mr. Burn prepared in
Response to the instant Motion, Mr. Burn acknowledges that he failed to check with VTL’s
insurance broker—or anyone else—regarding whether the VTL Defendants had an excess or
umbrella insurance policy. (ECF No. 81, Exhibit 3 at ¶ 5 [“Burn Aff.”].) Mr. Burn states that he
simply “relied upon the information provided to [him] by [his] staff.” (Id.)
Indeed, Mr. Burn testified at the evidentiary hearing that when he initially received notice
about the above-captioned case, he did not review the insurance that might apply. (Tr. at 42.)
Instead, Mr. Burn testified that he only relied on Ms. Bourbeau, but he never asked her what
insurance coverage the companies had or for the documents that showed what insurance the
companies had. (Id. at 44–45.)
Furthermore, during the evidentiary hearing, Plaintiffs’ counsel pointed out to Mr. Burn
that he had been copied on the June 5, 2017 email that Ms. Bourbeau sent to Ms. Carbonneau
that included an attachment referencing the Lloyds of London Policy. (Id. at 45–46.) Mr. Burn
testified that he did not open the attachments. (Id. at 46.) When Mr. Burn was asked by
3
After this exchange, Defendants’ counsel then objected to this line of questioning, arguing that
Ms. Bourbeau was the witness designated for insurance questions, not Mr. Burn. Plaintiffs’
counsel points out, however, that Ms. Bourbeau testified in her deposition that both she and
Mr. Burn are involved in the purchase and procurement of insurance. (Full Burn Depo., at pg.
223–24; Full Bourbeau Depo., at pg. 9.)
9
Plaintiffs’ counsel whether he knew that it was his responsibility as the CEO to provide full and
adequate responses, Mr. Burn answered affirmatively but that he delegated it to his staff
members. (Id. at 48–49.) Plaintiffs’ counsel also inquired of Mr. Burn that in the errata sheet for
his deposition, provided five days after his deposition on December 18, 2017, Mr. Burn admitted
there was a Zurich Insurance policy. (Id. at 51.) When asked how he obtained this information,
Mr. Burn said he could not remember and that the writing on the errata sheet was not his own.
(Id. at 51–53.) Mr. Burn later testified though that the person who filled out the errata sheet
would have discussed the corrections with him before doing so, and that such a conversation
might have occurred but he simply forgot it happened. (Id. at 59–60.)
For his part, Defendants’ counsel indicates in his Affidavit that he undertook the
following actions regarding attempts to provide proper discovery to Plaintiffs:
Without waiving attorney-client privilege, I met with VTL in person to discuss
Plaintiffs’ discovery requests on May 11, 2017 and had multiple discussions with
VTL to confirm its responses prior to submitting VTL’s answers on June 9, 2017.
Prior to December 1, 2017 I received documents from Economical Insurance which
Economical asserted was a certified copy of VTL’s insurance policy and that those
documents were produced to Plaintiffs with the undersigned’s understanding that
those documents represented the entirety of what could be considered VTL’s
insurance policy.
Without waiving attorney-client privilege, I complied with the entirety of this
Court’s December 1, 2017 Order. I requested that VTL check again to see whether
it had an excess policy. The issue was then addressed at the 30(b)(6) deposition of
VTL’s CFO, Lucie Boubeau, who stated that VTL’s policy responsive insurance
was limited to the Economical Insurance Policy.
In addition, as part of my compliance with the Court’s December 1, 2017 Order I
obtained additional documents that could be considered part of Economical’s
insurance policy with VTL and provided those documents to all parties.
...
On April 9, 2018, Plaintiffs counsel informed me of his belief that documents
produced by VTL indicated VTL had an excess/umbrella insurance policy at the
10
time of the events giving rise to suit. I indicated to Plaintiffs’ counsel that this was
the “first I heard of it” and I would check and get back to him. . . .
In my capacity as counsel of record for VTL, I communicated with counsel for
Plaintiffs by both email and telephone on April 10, 2018 to discuss that I learned
on April 10, 2018 that VTL had excess coverage in effect at the time of the events
giving rise to suit.
On that date Plaintiffs requested a copy of the excess policy. Within an hour of that
discussion, I communicated that request to VTL’s excess insurer and was told the
policy would be provided.
[I received emails] from VTL’s excess carrier on May 11, 2018, including the
excess policy and all correspondence relating to the policy.
On May 11, 2018, I provided copies of [the emails] to all counsel of record via email.
On May 14, 2018, VTL’s excess insurer provided me with a certified copy of its
excess policy. I provided copies of that policy to Plaintiffs’ counsel on May 14,
2018.
(ECF No. 81, Exhibit 2, Affidavit of Geoffrey A. Belzer, at ¶¶ 4–7, 11–16 [“Belzer Aff.”].)
Plaintiffs represent that they first discovered the existence of the Lloyds of London policy
when Defendants responded to Plaintiffs’ Second Request for Production of Documents on
March 26, 2018. (ECF No. 77, at pg. 7.) Plaintiffs explain that Defendants produced “thousands
of pages of documents” but failed to disclose that one of the documents produced was the cover
page (written in French) for insurance policy No. 155546, issued by Lloyds of London which
appeared to be in effect when the car crash at issue in the above-captioned case occurred. (Id.;
ECF No. 77, Exhibit 10.) Defendants also produced in their response to Plaintiffs’ Second
Request for Production of Documents on March 26, 2018 paperwork demonstrating that the VTL
Defendants paid over $23,500 CAD4 for that umbrella policy coverage. (ECF No. 77, Exhibit
11.)
4
Canadian Dollars.
11
Upon discovering this information, Plaintiffs’ counsel “immediately emailed counsel for
the VTL Defendants for clarification.” (ECF No. 77, Exhibit 12.) The email exchange reads as
follows:
From Plaintiffs’ counsel on April 9, 2018 at 6:53 AM: Geoffrey, Looks like there
is a Lloyds of London umbrella policy.
From Defendants’ counsel on April 9, 2018 at 8:13 AM: I will check on it. First
I’ve heart of it. Geoff
From Defendants’ counsel on April 10, 2018 at 12:28 PM: Tom, I have confirmed
that there is an umbrella policy and an open claim. I am glad to discuss further.
Please let me know when you want to talk. Thanks! Geoff
(Id.) Plaintiffs learned that “the VTL Defendants did in fact have a $5,000,000 umbrella
coverage policy issued by Lloyds of London on June 27, 2016, and effective until June 27,
2017.” (ECF No. 77, at pg. 7.) Notably, Defendants “confirmed that there was coverage and
that a claim for the Mosley Crash had been opened in June 2017.” (Id.) (emphasis added); ECF
No. 77, Exhibit 13, at ¶ 3 [“Robenalt Aff.”].) Defendants did not provide Plaintiffs with a copy
of the Lloyds of London policy until May 11, 2018, three days after the instant Motion had been
filed. (ECF No. 81, at pg. 1.)
III. STANDARD OF REVIEW
Federal Rule of Civil Procedure 37(b)(2) sets forth a laundry list of sanctions that a court
may impose when a party fails to comply with its discovery orders. Fed. R. Civ. P. 37(b)(2).
Rule 37(b)(2)(A) provides:
(A) For Not Obeying a Discovery Order. If a party or a party’s officer, director, or
managing agent—or a witness designated under Rule 30(b)(6) or 31(a)(4)—
fails to obey an order to provide or permit discovery, including an order under
Rule 26(f), 35, or 37(a), the court where the action is pending may issue further
just orders. They may include the following:
(i) directing that the matters embraced in the order or other designated facts be
taken as established for purposes of the action, as the prevailing party claims;
12
(ii) prohibiting the disobedient party from supporting or opposing designated
claims or defenses, or from introducing designated matters in evidence;
(iii) striking pleadings in whole or in part;
(iv) staying further proceedings until the order is obeyed;
(v) dismissing the action or proceeding in whole or in part;
(vi) rendering a default judgment against the disobedient party; or
(vii) treating as contempt of court the failure to obey any order except an order
to submit to a physical or mental examination.
Fed. R. Civ. P. 37(b)(2)(A)(i)-(vii).
Under the provisions of Rule 37(b)(2)(C), “[i]nstead of or in addition to the orders above,
the court must order the disobedient party, the attorney advising that party, or both to pay the
reasonable expenses, including attorney’s fees, caused by the failure, unless the failure was
substantially justified or other circumstances make an award of expenses unjust.” Fed. R. Civ. P.
37(b)(2)(C). Rule 37(c) adds that a court may order payment of the reasonable expenses,
including attorney’s fees, if a party fails to disclose certain information or fails to supplement an
earlier response. Fed. R. Civ. P. 37(c). In determining an appropriate sanction under Rule 37,
“a court may properly consider both punishment and deterrence.” JPMorgan Chase Bank, N.A.
v. Neovi, Inc., No. 2:06-cv-0095, 2007 WL 1989752, at *4 (S.D. Ohio July 9, 2007). “The
burden of proof is on the sanctioned party to establish that its failure to comply was due to
inability and not to willfulness, bad faith, or any fault of the party.” Id. (internal quotations and
citation omitted). Furthermore, “[f]ault, in this context, includes gross negligence.” Id. (citation
omitted). A court has wide discretion in determining an appropriate sanction under Rule 37.
National Hockey League v. Metropolitan Hockey Club, 427 U.S. 639, 643 (1976).
13
IV. ANALYSIS
The record is clear that Defendants have failed to comply with this Court’s December 1,
2017 Order and have failed to meet their discovery obligations. Indeed, Defendants do not argue
to the contrary regarding their inaccurate responses to Plaintiffs’ discovery requests.5 (See ECF
No. 81, at pg. 1 (Defendants note that they “do not dispute that their responses to Plaintiffs’
discovery requests regarding whether it had an excess policy, and their answers at deposition on
that issue, were incorrect.”) (emphasis in original).) The only issue then is whether sanctions are
appropriate, and if so, which specific sanctions. Under the totality of the circumstances here, the
Court finds that sanctions are appropriate. Defendants were supposedly unaware that the Lloyds
of London insurance policy existed despite making a claim on the policy for the car crash
involving the Mosleys.6 But, ignorance, without diligence, is not an acceptable excuse. The
best-case scenario is that Defendants simply did not make any attempt to determine all the
insurance policies they had, despite their representations and Plaintiffs’ repeated attempts at
obtaining this information. The worst-case scenario is that Defendants caused Plaintiffs to
endure the unreasonable wait knowing all along that they had the Lloyds of London insurance
policy. While the Court is inclined to accept the former as true, either way, Defendants
committed a sanctionable discovery violation.
5
Defendants claim that the Affidavits of Geoffrey Belzer (counsel for Defendants) and Larry
Burn “establish that VTL fully complied with the Court’s December 1, 2017 Order.” (ECF
No. 81, at pg. 4.) Neither Affidavit does as Defendants claim. Rather, the Affiants insinuate
that Defendants were simply unaware of the excess policy, and for this reason, they did not
provide it despite the explicit Order from the Court to investigate further. (ECF No. 81,
Exhibit 2, at ¶ 6 & Exhibit 3, at ¶ 6.) Ignorance on the part of Defendants does not equate to
compliance.
6
Indeed, the Plaintiffs explain this conundrum precisely: “The VTL Defendants were aware
enough of the umbrella policy to have made a claim with Lloyd’s of London after the Mosley
Crash, so to claim the umbrella policy is somehow newly-discovered in April 2018 is difficult
to comprehend.” (ECF No. 77, at pg. 11.)
14
Defendants attempt to explain away the claim regarding the Mosley crash on the Lloyd’s
of London policy by blaming Ms. Carbonneau of Univesta. (See ECF No. 81, at pg. 3.)
Defendants posit that Ms. Carbonneau, based on correspondence with VTL’s primary insurer,
Economical, sent an email on June 6, 2017 to VTL’s excess insurer, Markel, “putting the excess
carrier on notice of a potential claim against the excess policy” but “without providing a ‘cc’
copy to anyone at VTL.” (Id.; ECF No. 81, Exhibit 4, at ¶¶ 16–18.) Defendants further posit
that Ms. Carbonneau “did not discuss the notice to Markel with Mr. Burn or VTL’s CFO, Lucie
Bourbeau.” (Id. at ¶ 20.) However, Defendants go on to declare that Ms. Carbonneau “had full
authority to place Markel on notice without receiving specific consent from VTL to do so.” (ECF
No. 81, at pg. 3 (emphasis added); ECF No. 81, Exhibit 4, at ¶ 19.) For Defendants to claim it is
acceptable that Ms. Carbonneau would have “full authority” and “specific consent from VTL” to
place Markel on notice, but at the same time VTL could remain ignorant of the fact that the
excess insurance policy even existed, and not even bother to inquire of Ms. Carbonneau, is
sanctionable. The court in Brown v. Tellermate Holdings Ltd., No. 2:11-cv-1122, 2014 WL
2987051, at *18 (S.D. Ohio July 1, 2014), adopted as modified, No. 2:11-cv-1122, 2015 WL
4742686 (S.D. Ohio Aug. 11, 2015) is instructive:
One can only guess at why [defendant] was apparently unable or unwilling to ask
the right people the right questions . . . . Perhaps the people [defendant] charged
with interacting with counsel in this case so misunderstood [the situation] that they
did not think to investigate it further; perhaps they knew the truth all along but
feared that the information would help [plaintiffs] and hurt [defendant]. The end
result is the same, however. [Plaintiffs] did not get this discovery timely; they were
forced, unnecessarily, to spend time and money trying to resolve the matter
informally, with the Court, and eventually, by way of motions practice . . . . But
it is not fair to place the entire blame on [defendant], even if it must shoulder the
ultimate responsibility for not telling counsel what, collectively, it knew or should
have known to be the truth . . . . [C]ounsel cannot simply take a client’s
representations about such matters at face value. After all, Rule 26(g) requires
counsel to sign discovery responses and to certify their accuracy based on “a
15
reasonable inquiry” into the facts. [As the court explained in Bratka v. AnheuserBusch Co., Inc., 164 F.R.D. 448, 461 (S.D. Ohio Dec. 11, 1995):]
The Court expects that any trial attorney appearing as counsel of record in
this Court who receives a request for production of documents in a case such
as this will formulate a plan of action which will ensure full and fair
compliance with the request. Such a plan would include communicating with
the client to identify the persons having responsibility for the matters which
are the subject of the discovery request and all employees likely to have been
the authors, recipients or custodians of documents falling within the request.
The plan should ensure that all such individuals are contacted and
interviewed regarding their knowledge of the existence of any documents
covered by the discovery request, and should include steps to ensure that all
documents within their knowledge are retrieved. All documents received
from the client should be reviewed by counsel to see whether they indicate
the existence of other documents not retrieved or the existence of other
individuals who might have documents, and there should be appropriate
follow up. Of course, the details of an appropriate document search will vary,
depending upon the circumstances of the particular case, but in the abstract
the Court believes these basic procedures should be employed by any careful
and conscientious lawyer in every case.
Id. (emphasis added). If Defendants, specifically Mr. Burn or Ms. Bourbeau, had only “ask[ed]
the right people the right questions” regarding excess insurance the Court would not be tasked
with resolving the instant Motion. Furthermore, if Defendants counsel had perused the
documents provided to Plaintiffs that contained the Lloyd’s of London policy cover page,
counsel himself should have recognized that a deeper inquiry into Defendants’ insurance was
necessitated.7
A litigant “is prejudiced by a [party’s] dilatory conduct if the [litigant] is required to
waste time, money, and effort in pursuit of cooperation which [the party] was legally obligated to
provide.” Carpenter v. City of Flint, 723 F.3d 700, 707 (6th Cir. 2013) (internal quotations and
7
Specifically regarding the cover page amidst a mass of documents, Defendants offer that
“VTL’s counsel did not, at the time the production occurred, recognize the importance of these
documents.” (ECF No. 81, at pg. 5.) As the Court has explained above, ignorance without
diligence does not equate to compliance.
16
citation omitted). Furthermore, even if the litigant ultimately receives the sought-after
documents this “ignores the fact that the [litigant was] required to expend time, money, and
effort, to compel the production of these documents that [the party] was legally obligated to
provide in the first place.” Brown v. Tellermate Holdings, Ltd., 2:11-cv-1122, 2015 WL
4742686, *7 (S.D. Ohio Aug. 11, 2015). Moreover, “this, in and of itself, satisfies the prejudice
standard.” Id.
Defendants nevertheless argue that because VTL has denied liability in this matter “from
day one” and has not made a settlement offer based upon its insurance coverage or otherwise,
VTL “did not seek and did not obtain . . . any tactical advantage from its error” and, therefore,
Plaintiffs were not prejudiced. (ECF No. 81, at pg. 2, 11.) Furthermore, Defendants argue that
“because VTL’s insurer has been placed on notice of the claim, Plaintiffs would not/could not
suffer any prejudice arising from late notice to the excess insurer of such a claim.” (Id. at pg.
12.) Defendants’ arguments fall short. Plaintiffs have been required to spend an excessive
amount of time, money, and effort to obtain this insurance policy from Defendants, and “this, in
and of itself, satisfies the prejudice standard.” Brown, 2015 WL 4742686 at *7. If Defendants’
argument that they did not “obtain . . . any tactical advantage” sufficed, in any case where a party
gains no obvious advantage from a lengthy delay in producing discovery then the party put on
wait for the materials would always lose out.8
Defendants argue the Court should look to Howe v. City of Akron, 801 F.3d 718 (6th Cir.
2015) to aid in determining whether sanctions are appropriate. (ECF No. 81, at pg. 12–13.) In
8
It is possible in theory that a party is seeking “to obtain a tactical advantage” by delaying
discovery, but when no obvious advantage plays out they can claim the other party was not
prejudiced. It is not enough, therefore, to rely on obscure “advantages,” but instead a court
must look to the measurable damage done to the other party, such as having to expend time,
money, and effort. Brown, 2015 WL 4742686 at *7.
17
that case, the United States Court of Appeals for the Sixth Circuit adopted a five-factor test
developed by the United States Court of Appeals for the Fourth Circuit in Russell v. Absolute
Collection Servs., Inc., 763 F.3d 385 (4th Cir. 2014). That test involves five factors for a court to
consider in determining whether an omitted or late disclosure is “substantially justified” or
“harmless.” Howe, 801 F.3d at 748. The court in Howe found that plaintiff’s late disclosure,
which occurred during discovery prior to a retrial, was harmless, noting that it was “more likely
the result of negligence, confusion, and lack of information than underhanded gamesmanship.”
Id. at 749. Defendants cite to this sentence (ECF No. 81, at pg. 12), but fail to include important
clarifying language which begins in the next sentence:
Our review of the record suggests that the discovery period before the retrial was a
rushed, confusing nightmare. . . . The record further reveals that the attorneys for
both sides engaged in a childish withholding game, rather than providing necessary
information to determine how best to make the Plaintiffs whole.”
Howe, 801 F.3d at 749–50. This set of facts differs markedly from those at hand in the instant
case. Neither Defendants nor the Court accuse Plaintiffs here of engaging in any “childish”
games while they waited for the Defendants to produce the Lloyd’s of London policy. Of
course, if both sides had engaged in underhanded tactics, the calculus for the Court in
determining whether sanctions are appropriate would differ.
Defendants also rely on Prime Finish, LLC v. ITW Deltar IPAC, 608 F. App’x 310 (6th
Cir. 2015) as support for their assertion that sanctions should not be imposed on them. (ECF No.
81, at pg. 9.) In a parenthetical, Defendants include the following sentence from the case: “On
the facts before us, there is no suggestion of any contumacious conduct, no clear record of delay,
and no intent—deliberate or reckless—to thwart ongoing judicial proceedings.” Prime, 608 F.
App’x at 314. Again, Defendants fail to include important clarifying language in the next
sentence: “The facts suggest only the negligent failure of replacement counsel to give his new
18
client’s case the care and attention it deserved.” Id. In the instant case, the Court cannot
construe that what occurred amounts to anything close to the simple “negligent failure of
replacement counsel to give his new client’s case the care and attention it deserved.” Rather,
Defendants, at every turn, failed to take even the most basic steps to confirm or deny whether an
excess insurance policy existed. For instance, Mr. Burn and Ms. Bourbeau appear to have tried
their best to remain ignorant of whether any such policy existed. When one was found to have
existed—and that a claim for the Mosley crash had been made on that very insurance policy—
each pointed fingers and claimed it was not his or her responsibility to know this information.
Mr. Burn claimed multiple times at the hearing on the Motion that it was only Ms. Bourbeau, not
him, who was responsible for insurance information.9 Ms. Bourbeau claimed she relied on the
insurance brokers and did not bother to clarify information herself, despite being held out as
VTL’s corporate representative for insurance matters. (See generally Bourbeau Depo.) And
Defendants then finally lay the blame on Ms. Carbonneau who supposedly had the “full
authority” and “specific consent of VTL” to place the excess insurance policy company on notice
of the Mosley Crash, yet no one bothered to contact her even in the face of a Court Order to
inquire further. All the while, VTL remained ignorant of the fact that the excess insurance policy
even existed. (ECF No. 81, at pg. 3; ECF No. 81, Exhibit 4, at ¶ 19.)
“[T]he most fundamental responsibility of those engaged in discovery . . . is to provide
honest, truthful answers in the first place and to supplement or correct a previous disclosure
when a party learns that its earlier disclosure was incomplete or incorrect.” Brown, 2014 WL
2987051 at *17 (internal quotations and citation omitted). Furthermore, “[t]he discovery process
9
This assertion is contrary to Ms. Bourbeau’s testimony in her deposition, which was that both
she and Mr. Burn are involved in the purchase and procurement of insurance. (Full Bourbeau
Depo., at pg. 9.)
19
created by the Federal Rules of Civil Procedure is premised on the belief or, to be more accurate,
requirement that parties who engage in it will truthfully answer their opponents’ discovery
requests and consistently correct and supplement their initial responses.” Id. at *17 (citing
Lebron v. Powell, 217 F.R.D. 72, 78 (D.D.C. 2003)). Defendants failed in this regard.
Defendants violated Federal Rule of Civil Procedure Rule 37(b)(2) by failing to produce the
excess insurance policy after a diligent inquiry as ordered by the Court in its December 1, 2017
Order. Defendants violated Federal Rule of Civil Procedure 37(c) by failing to disclose the
insurance information, and by failing to supplement its discovery responses. Indeed, it was not
until after the instant Motion was filed that Defendants finally provided Plaintiffs with a copy of
the Lloyds of London policy, despite the fact that almost one month had passed since Plaintiffs
notified Defendants about the policy. Defendants violated multiple provisions of Federal Rule of
Civil Procedure 26 which requires disclosures be made thirty days after a later-joined defendant
is added to an action, specifically requires a party to provide “any insurance agreement under
which an insurance business may be liable to satisfy all or part of a possible judgment in the
action[,]” and requires that disclosures to be supplemented “in a timely manner.” Fed. R. Civ. P.
26(a)(1)(D), 26(a)(1)(A)(iv), & 26(e)(1)(A).
Despite all of the above, Defendants argue that Plaintiffs’ Motion should be denied
because Plaintiffs have failed to comply with Federal Rules of Civil Procedure Rule 37 and
Southern District of Ohio Local Civil Rule 37.1 regarding “meeting and conferring” with the
opposing party prior to filing a Motion. (ECF No. 81, at pg. 13.) Plaintiffs respond that their
Motion for Sanctions
was pursuant to Federal Rules of Civil Procedure 37(b)(2) and 37(c) and was not a
motion for an order compelling disclosure or discovery pursuant to Federal Rule of
Civil Procedure 37(a). . . . While Rule of Civil Procedure 37(a) requires a
certification that the movant attempted to confer Rules 37(b)(2) and 37(c) do not.
20
(ECF No. 82, at pg. 7.) Plaintiffs then cite to E.E.O.C. v. JP Morgan Chase Bank, N.A., 295
F.R.D. 166, 170–71 (S.D. Ohio 2013) which provides in pertinent part:
Defendant also argues that this Court should not consider the motion for sanctions
because Plaintiff has failed to follow prerequisite procedures mandated by the
Federal Rules of Civil Procedure and the Local Civil Rules. Defendant’s premise
is that because Plaintiff did not confer with Defendant on the substance of the
motion for sanctions, Plaintiff has violated Federal Rule of Civil Procedure
37(d)(1)(B) and S.D. Ohio Civ. R. 37.1.
The Federal Rule provides that “[a] motion for sanctions for failing to answer or
respond must include a certification that the movant has in good faith conferred or
attempted to confer with the party failing to act in an effort to obtain the answer or
response without court action.” Fed. R. Civ. P. 37(d)(1)(B). The Local Civil Rule
in turn provides that
Objections, motions, applications, and requests relating to discovery shall not
be filed in this Court, under any provision in Fed. R. Civ. P. 26 or 37 unless
counsel have first exhausted among themselves all extrajudicial means for
resolving the differences. After extrajudicial means for the resolution of
differences about discovery have been exhausted, then in lieu of immediately
filing a motion under Rules 26 and 37, Fed. R. Civ. P. and S. D. Ohio Civ. R.
37.2, any party may first seek an informal telephone conference with the
judicial officer assigned to supervise discovery in the case.
S.D. Ohio Civ. Rule 37.1. Local Rule 37.1 references Local Rule 37.2, which in
turn provides:
To the extent that extrajudicial means of resolution of differences have not
disposed of the matter, parties seeking discovery or a protective order may
then move for a protective order or a motion to compel discovery pursuant to
Fed. R. Civ. P. 26(c) or 37(a). Such motion shall be accompanied by a
supporting memorandum and by a certification of counsel setting forth the
extrajudicial means which have been attempted to resolve differences. Only
those specific portions of the discovery documents reasonably necessary to a
resolution of the motion shall be included as an attachment to it.
S.D. Ohio Civ. R. 37.2.
On its face, Local Rule 37.1 thus contemplates one mandated step: that the parties
exhaust among themselves all extrajudicial means for resolving any discovery
dispute before filing any Rule 26 or 37 motion. Local Rule 37.1 then contemplates
one discretionary step: that if the inter-party discussions have failed, either party
may but is not required to request an informal telephone conference before filing a
21
motion. Once extrajudicial means have failed, Local Rule 37.2 permits a party
seeking or opposing discovery to file a motion with a supporting memorandum and
certification. As Plaintiff correctly points out, Defendant’s reliance on these rules
is a red herring. Neither the Federal Rules of Civil Procedure nor the Local Civil
Rules require the filing of a certification here.
Plaintiff’s failure to comply with the certification requirement of Rule 37(d)(1)(B)
does not matter here because the requirement is inapplicable to Plaintiff’s motion
for sanctions. Rule 37(d)(1)(B) applies only to a motion for sanctions for failing to
answer or respond under Rule 37(d)(1)(A). Plaintiff originally filed its motion for
sanctions under Rule 37(b) (failure to comply with a court order) and Rule 37(c)
(failure to disclose, to supplement an earlier response, or to admit) . . . . Plaintiff is
pursuing sanctions under a part of Rule 37 to which Rule 37(d)(1)(B) does not
apply.
Local Rule 37.1 also does not provide Defendant protection from the merits of the
motion for sanctions. There is no question that the motion for sanctions is a motion
related to discovery filed under a provision of Rule 37. But there is equally no
question that the parties’ prior dealings indicate that no extrajudicial means exist
for resolving the dispute that lies at the heart of the motion for sanctions. . . . This
exhaustion is enough to satisfy the rule here, regardless of whether the exhaustion
has been memorialized in a certification.
Local Rule 37.1 does not itself impose a certification requirement; rather, the local
rule mandates only that the parties exhaust extrajudicial means. Local Rule 37.2
does contain a certification of exhaustion requirement, but only in regard to the
filing of a motion to compel or a motion for a protective order. The plain[] text of
Local Rule 37.2 makes its inapplicability here obvious in two ways, just as it did in
May v. Pilot Travel Centers LLC, No. 2:05-cv-918, 2006 WL 3827511 (S.D. Ohio
Dec. 28, 2006). The same reasons that this Court identified in May apply here:
First, Plaintiff is not “seeking discovery or a protective order” as Local Rule
37.2 contemplates; rather, Plaintiff is seeking the imposition of sanctions.
Second, the local rule contemplates only motions filed specifically pursuant
to Federal Rules of Civil Procedure 26(c) or 37(a), not a motion under Rule
37(c).
Id. at *3. Thus, Local Rule 37.2 is inapplicable to Plaintiff’s motion under Rule
37(c), and to the extent Defendant seeks to apply the rule in this context, Defendant
errs.
Id. Accordingly, Defendants’ argument fails, given the bases upon which Plaintiffs rely in their
Motion for Sanctions. Furthermore, Defendants claim that Plaintiffs’ failure to discuss the issue
with them is limited to the span of time between when Plaintiffs alerted Defendants about the
22
Lloyd’s of London policy (April 9, 2018) and when Plaintiffs’ filed their Motion (May 8, 2018).
(ECF No. 81, at pg. 6; ECF No. 81, Exhibit 2, Belzer Aff., at ¶ 19.) This assertion, however,
ignores all of the instances in which Plaintiffs specifically sought information on an excess
insurance policy before the Lloyd’s of London policy was discovered. (See e.g., ECF No. 77,
Exhibits 1, 5, & 6.) Defendants’ argument that Plaintiffs’ Motion should be denied because
Plaintiffs have failed to comply with Federal Rules of Civil Procedure Rule 37 and Southern
District of Ohio Local Civil Rule 37.1 fails to persuade.
V. CONCLUSION
For the foregoing reasons, Plaintiffs’ Motion for Sanctions is GRANTED. (ECF No.
77.) Under the provisions of Rule 37(b)(2)(A) and (C), Defendants are ORDERED to pay the
reasonable expenses, including attorney’s fees, caused by Defendants’ failure to obey a
discovery order. The Court AWARDS Plaintiffs’ reasonable attorney’s fees and costs associated
with bringing this Motion and the additional efforts Plaintiffs’ counsel had to expend to obtain
the Lloyds of London insurance policy from Defendants. The monetary sanctions will be in an
amount to be decided post judgment. The Court encourages the parties to reach an agreement
concerning the appropriate amount to be awarded. In the event the parties cannot reach such an
agreement, Plaintiffs shall file a supplemental memorandum within FOURTEEN (14) DAYS
after termination of the above-captioned case in support of the awarded fees and expenses,
setting forth information that would permit the Court to assess the reasonableness of the amount
requested, including the timekeeper, rate, and explanation of work, to the extent counsel may do
so without violating the attorney-client privilege.10
10
The Court notes that, at the evidentiary hearing on the Motion, Plaintiffs specifically
reserved the right for an additional hearing on the matter of monetary sanctions. Accordingly, if
Plaintiffs request another hearing, they will do so in the supplemental memorandum.
23
IT IS SO ORDERED.
Date: March 27, 2019
/s/ Elizabeth A. Preston Deavers_________
ELIZABETH A. PRESTON DEAVERS
CHIEF UNITED STATES MAGISTRATE JUDGE
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