UNITED STATES OF AMERICA v. Quebe et al

Filing 67

DECISION AND ENTRY - IT IS THEREFORE ORDERED THAT: 1. Defendants must pay Plaintiffs reasonable fees and expenses caused by their failure to comply with the Courts January 23, 2017 Order. Plaintiff is directed to file a declaration documenting its re asonable fees and expenses within 5 days of this Order. Defendants may, but are not required to, respond to Plaintiffs declaration within 5 days after it is filed; 2. Plaintiffs discovery deadline is extended to June 30, 2017; 3. The cut-off date fo r filing summary judgment motions isextended to July 31, 2017; 4. Plaintiff may, but is not required to, depose up to 5 additional witnesses; and 5. Defendants must respond to Plaintiffs Interrogatories 2 and 11 by May 31, 2017. Accordingly, Plaintiffs Motion for Sanctions under Rule 37(b) (Doc. # 61 ) is GRANTED, in part, and DENIED, in part. Signed by Magistrate Judge Sharon L. Ovington on 5/16/15. (pb)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION AT DAYTON
UNITED STATES OF AMERICA,
Plaintiff,
vs.
DENNIS QUEBE, et al.,
Defendants.

: Case No. 3:15-cv-294
:
: District Judge Thomas M. Rose
: Magistrate Judge Sharon L. Ovington
:
:
:
:
:
:

DECISION AND ENTRY
I.

INTRODUCTION
Believing that Defendants failed to adequately respond to its interrogatories,

Plaintiff first moved to compel their responses in June 2016. (Doc. #s 22-23). The
parties subsequently agreed to narrow the scope of discovery, and the Court denied
Plaintiff’s motion without prejudice to renewal. (Doc. #30). Regrettably, this temporary
truce between the parties quickly deteriorated, hope for cooperative discovery dissolved,
and Plaintiff renewed its Motion to Compel. (Doc. #42).
In January 2017, the Court partially granted and partially denied Plaintiff’s Motion
to Compel. (Doc. #59). Doing so, the Court ordered (in part) Defendants to provide
additional responses to Plaintiff’s Interrogatories 2 and 11. Defendants’ additional
responses to these Interrogatories are presently at issue by way of Plaintiff’s Motion for
Sanctions under Rule 37(b) (Doc. #61), Defendants’ Memorandum in Opposition (Doc.

#62), Plaintiff’s Reply (Doc. #64), Defendants’ Sur-Reply (Doc. #65), and Plaintiff’s
Brief in Response (Doc. #66). The Court also views the parties’ arguments in light of the
record as a whole.
This Decision and Entry incorporates by reference the background and substantive
law surrounding the research tax credit set forth in the previously filed Decision and
Entry. (Doc. #59).
II.

DISCUSSION
Plaintiff contends that sanctions are warranted against Defendants due to their

failure to sufficiently answer Interrogatories 2 and 11 and due to their failure to comply
with the Court’s Order. Plaintiff’s requested sanctions include either default judgment
against Defendants or an order barring Defendants from presenting evidence or
contentions absent from their answers to these Interrogatories.
Defendants assert that they have, to the best of their ability, answered Plaintiff’s
discovery requests and complied with the Court’s Order. Additionally, they argue,
“Plaintiff’s requested sanctions are extreme and unwarranted.” (Doc. #62, PageID
#1837).
Before addressing sanctions, the Court must first determine whether Defendants
complied with the Order docketed on January 23, 2017. (Doc. #59).
A.

Plaintiff’s Interrogatory 2

Plaintiff seeks details about the foundation of Defendants’ assertion that they are
entitled to the research tax credit. This is seen in Interrogatory 2’s request for, among
other information, “a detailed description of the specific work [the identified employees]
2

performed … for which QHI reported or claimed [research tax] credits ….” (Doc. #61-2,
PageID #1750).
The Court’s Order examined Defendants’ answer to Interrogatory 2 and
determined that they did not need to provide certain information (birthdates, Social
Security numbers, etc.) to Plaintiff. The Order then required Defendants to “identify
which project each employee worked on and what their jobs entailed.” (Doc. #59,
PageID #1710).
Plaintiff contends that Defendants failed to adequately respond to Interrogatory 2
and failed to comply with the Court’s Order by simply reformatting material they
previously had provided. Plaintiff is correct.
Defendants responded to the Court’s Order by adding information and providing a
table in their answer to Plaintiff’s Interrogatory 2. (Doc. #61-2, PageID #s 1750-55).
However, the Defendants’ answer falls far short of providing the information the Court’s
Order required and fails to constitute a good-faith effort to either comply with the Court’s
Order or respond to Plaintiff’s Interrogatory 2. Defendants’ table contains employees’
names and job titles, general descriptions of their work, and their 2009 and 2010
allocation wages. Id. at 1751-55. Representative samples show the following:

3

***

Id. at 1751, 1754.
The bare-bone, generalized information Defendants provided in their answer and
table does not specifically describe the alleged research that was performed by each
identified employee. Instead, Defendants have, as Plaintiff accurately describes,
“recycled generic title descriptions from the [a]lliantgroup study—descriptions that the
Court has already ruled insufficient.” (Doc. #61, PageID #1724). Defendants’ generic
descriptions, moreover, read more like advertisements for job openings. The descriptions
4

alert the reader to work performed—Project Managers, for instance, “utilized their
construction expertise to develop constructability analyses and value engineering
solutions ….” id. at 1754—but shed no light on the specific work the employee did “for
which QHI reported or claimed [research tax] credits under 26 U.S.C. [§] 641.” Id. at
1750.
Defendants contend that “interrogatories are an inappropriate vehicle to explain
hundreds of thousands of pages of information, describe weeks and months worth of
work, and dissect complicated designs.” (Doc. #62, PageID #1837). They maintain that
they “have complied with the discovery requests and with the discovery order to the best
of their ability.” Id. In addition to providing a table, they allege that they have produced
contemporaneous business records that substantiate their interrogatory responses. Id. at
1848. Specifically, “All the project documents produced (QHI 001-QHI 345417) directly
tie to employee activities.” (Doc. #62-38, PageID #4060). Note well that this refers to
Defendants’ production of over 340,000 pages of documents.
Defendants advanced this same line of argument in response to Plaintiff’s Motion
to Compel. It lacked merit then and does so now. Defendants have repeatedly relied on
their production of over 340,000 pages to Plaintiff in this case. See Doc. #62, PageID
#1837; Doc. #62-1, PageID #1856; Doc. #62-38, PageID #4060. Perhaps Defendants
have been seduced by the magnitude of their own document production. Perhaps they are
attempting to camouflage behind their document dump a barren evidentiary landscape—
one bereft of pertinent, responsive evidence. Whatever their reasons for insisting their
production of over 340,000 pages is sufficient, their document dump does not help them
5

today anymore than it did yesterday. See Scott Hutchison Enter., Inc. v. Cranberry
Pipeline Corp., 318 F.R.D. 44, 54 (S.D.W. Va. 2016) (“The term ‘document dump’ is
often used to refer to the production of voluminous and mostly unresponsive documents
without identification of specific pages or portions of documents which are responsive to
the discovery requests.”) (citation omitted); cf. Stooksbury v. Ross, 528 F. App’x 547,
550 (6th Cir. 2013) (“near 40,000-page discovery submission … was merely a document
dump of mostly unresponsive information ….”).
Accordingly, Plaintiff’s contentions regarding Defendants’ failure to comply with
the Court’s Order and failure to sufficiently answer Interrogatory 2 are well taken.
B.

Plaintiff’s Interrogatory 11

Plaintiff’s Interrogatory 11 asks that, for each of the twelve sample projects,
Defendants, “identify the business component(s) … involved in it, state with specificity
what uncertainty concerning the development or improvement of the business
component(s) existed ….” (Doc. #43-5, PageID #s 1187-88). When granting Plaintiff’s
Motion to Compel additional responses to Interrogatory 11, the Court mandated,
“Defendants must specifically identify the business components and uncertainties for
each of the twelve sample projects.” (Doc. #59, PageID #1705).
In response, Defendants listed each project separately but provided little, if any,
additional information concerning the business components of each project. They
described, for example, the business components involved in the 2009 Middletown
Hospital as follows:

6

The new or improved business components are the improved
electrical design and new process of incorporating the
electrical design into the new construction of the Middletown
Hospital project as described in the contract and scope of
work.
(Doc. #61-2, PageID #s 1175). Remarkably, the new and improved business components
are the same for each project—“the improved electrical design and new process of
incorporating the electrical design into the new … as described in the contract work and
scope”—with changes only to identifiers (project names, goals, and locations). Id. at
1175-81. Such generalized uniformity failed to sufficiently answer Interrogatory 11 and
failed to follow this Court’s order to “specifically identify the business components ... for
each of the twelve sample projects.” (Doc. #59, PageID #1705).
To their credit, Defendants identified some uncertainties for each projects. Again,
for example, for the 2009 Middletown Hospital project, Defendants wrote:
Uncertainties faced by QHI in accomplishing the business
components include, but is [sic] not limited to,
•
•
•
•
•
•

the final appropriate electrical design of the Project,
the best methodology for the electrical distribution
system,
the best methodology to facilitate conduction,
the best methodology to facilitate the proton accelerator,
the best methodology to distribute voltage/current from
the generator, and
the most efficient process for installing the electrical
system.

(Doc. #61-2, PageID #s 1175-76).
Defendants’ use of the phrase “include, but is not limited to …” points to future
information that they might provide to Plaintiff about additional uncertainties inherent in

7

each project. This hints, somewhat oddly, that Defendants are presently uncertain about
all their uncertainties. Whatever this may say about the strength or weakness of their
justifications for asserting the research tax credit, their open-ended answer to
Interrogatory 11 is insufficient and fails to comply with the Court’s Order. (Doc. #59,
PageID #1705) (“Defendants must specifically identify the business components and
uncertainties for each of the twelve sample projects.”); see JPMorgan Chase Bank, N.A.
v. Neovi, Inc., No. 2:06cv00095, 2006 WL 3803152, at *5 (S.D. Ohio Nov. 14, 2006)
(“Parties must respond truthfully, fully and completely to discovery or explain truthfully,
fully and completely why they cannot respond. Gamesmanship to evade answering as
required, is not allowed. If a party is unable to supply the requested information, the
party may not simply refuse to answer, but must state under oath that he is unable to
provide the information and set forth the efforts he used to obtain the information.”)
(internal citations and quotation marks omitted).
Defendants also often speak vaguely or generally about uncertainties,
characterizing them, for example, as “the final appropriate electrical design of the
Project”; “the optimum design and procedure to incorporate multiple systems in the
building”; “how to incorporate different systems from different manufacturers developed
at different times into a functioning landscape”; “the best plan for pathway distribution”;
or “design of an electrical system that accounted for future expansion of the facility.”
(Doc. #61-2, PageID #s 1775-77). When Defendants are more specific—such as their
reference to a “methodology to implement system to disrupt the emulsification of gel
fuel,” id. at 1781—they fail to connect these uncertainties (or, for that matter, their vague
8

or general uncertainties) to the business component they sought to develop or improve to
resolve the uncertainties they faced. See 26 U.S.C. § 41(d)(1)(A).
Accordingly, Plaintiff’s contentions regarding Defendants’ failure to comply with
the Court’s Order and failure to sufficiently answer Interrogatory 11 are well taken.
C.

Federal Rule of Civil Procedure 33(b)

Defendants’ answers to Interrogatories 2 and 11 remain insufficient because they
contain an additional deleterious feature: They begin with the caveat of “[u]pon
information and belief ….” (Doc. #61-2, PageID #s 1750, 1775). This wishy-washy
phrase adds doubt, if not genuine mystery, to the accuracy of the information that
follows. And, this phrase reinforces the open-ended nature of Defendants’ answers, thus
causing Plaintiff prejudice.
Still, Defendants might be attempting to correct or minimize any problem with
their answering “[u]pon information and belief.” At the end of their Second Amended
Answers, Defendant Dennis Quebe indicates that the responses “were prepared by the
counsel of record based on information provided by [QHI].” Id. at 1788. He also
certified pursuant to Federal Rule of Civil Procedure 33 that he “reviewed the responses
and the facts are true and correct to the best of [his] knowledge, information, and belief
….” Id. Defendants’ attorney, Jefferson Read, declares pursuant to Federal Rule of Civil
Procedure 33 that he “reviewed the responses and the legal conclusions and objections
are true and correct to the best of [his] knowledge, information, and belief ….” Id. at
1788.

9

Plaintiff correctly contends that Defendants have failed to verify their responses as
Rule 33(b) requires. Rule 33(b)(1) states, “interrogatories must be answered: (A) by the
party to whom they are directed; or (B) if that party is a public or private corporation, a
partnership, an association, or a governmental agency, by any officer or agent, who must
furnish the information available to the party.” Further, “Each interrogatory must, to the
extent it is not objected to, be answered separately and fully in writing under oath. Fed.
R. Civ. P. 33(b)(3). “The person who makes the answers must also sign them, and the
attorney who objects must sign any objections.” Fed. R. Civ. P. 33(b)(5); see
Hollingsworth v. Daley, No. 2:15-CV-36, 2016 WL 2354797, at *1 (E.D. Ky. Mar. 21,
2016) (“Under Rule 33, answers to interrogatories must be verified and must be signed
by the person answering the interrogatory, not only by the party’s attorney.”) (quoting
Villareal v. El Chile, Inc., 266 F.R.D. 207, 211 (N.D. Ill. 2010)) (internal quotation marks
omitted).
The plain language of Rule 33(b) thus requires Defendant Dennis Quebe—not his
attorney—to answer Plaintiff’s Interrogatories. Although attorneys, as a practical matter,
very likely assist their clients when answering Interrogatories, see In re Asbestos Prods.
Liab. Litig. (No. VI), No. 08- 90234, 2012 WL 5839023 (E.D. Pa. Nov. 16, 2012), Rule
33(b)(3) required Mr. Quebe to answer each interrogatory separately, fully, and under
oath. Defendants’ attorney was required to verify and sign any objections after a
reasonable investigation. See Washington v. City of Detroit, No. 05-CV-72433, 2007 WL
603379, at *2 (E.D. Mich. Feb. 22, 2007) (“‘[t]he signature of the attorney or party
constitutes a certification that to the best of the signer’s knowledge, information, and
10

belief, formed after a reasonable inquiry, the disclosure is complete and correct, as of the
time it is made.’” (quoting Fed. R. Civ. P. 26(g)(1)); see also Watson v. Dillon Cos., No.
08-cv-91, 2008 WL 5104783, at *6 (D. Colo. Dec. 2, 2008) (and cases cited therein).
Instead of complying with these requirements, Mr. Quebe verified “only the facts set
forth above” and his attorney verified (in part) “the legal conclusions.” Defendants’
answers do not provide any insight into how Defendants delineated between facts and
legal conclusions or what portion of Mr. Quebe’s answer contained facts and what
constituted counsel’s legal conclusions.
Defendants’ failure to comply with Rule 33 negates the focus that properly
formulated interrogatory answers and verifications bring to discovery, thus defeating the
utility of interrogatories.
Seeking information through Interrogatories is an efficient
and cost-effective method of discovery and marshaling
evidence for trial. Indeed, the Rules anticipate that it could
lead to the discovery of evidence worthy of admission at trial.
Rule 33(c) provides that Interrogatory answers may be used at
trial “to the extent permitted by the rules of evidence.”
Deviating from the course prescribed by the Rules in any
significant manner or way therefore negates the significant
opportunity to introduce evidence through Interrogatories at
trial.
Saria v. Mass. Mut. Life Ins. Co., 228 F.R.D. 536, 538 (S.D.W. Va. 2005) (emphasis in
original) (quoting Vica Coal Co. v. Crosby, 212 F.R.D. 498, 505 (S.D.W. Va. 2003)).
The ramifications ensuing from Mr. Quebe’s and counsel’s inadequate
verifications are significant. “[I]nterrogatories serve not only as a discovery device but as
a means of producing admissible evidence; there is no better example of an admission of

11

a party opponent, which is admissible because it is not hearsay, than an answer to an
interrogatory.” Melius v. Nat’l Indian Gaming Comm’n, CIV A 98-2210, 2000 WL
1174994, at *1 (D.D.C. July 21, 2000)) (citations omitted); see Saria, 228 F.R.D. at 53839 (“If interrogatory responses may be used at trial, they are nothing short of testimony.
When responses are only signed by an attorney, and not by the client, the attorney has
effectively been made a witness. Likewise, the failure to provide client verification
undermines the dispositive motion process under Rule 56(c) ….”). The verifications
attached to Defendants’ answers essentially disclaim that they are factual admissions
because they claim to be, at least in part, counsel’s statements. Plaintiff, moreover, is
correct that its counsel will be unable to depose Mr. Quebe about portions of the answers
that he did not provide. And, if Mr. Quebe cannot be deposed about those portions of his
answers, Defendants’ Interrogatory responses and verifications would frustrate the truthseeking function of discovery and prejudice Plaintiff due to the limited number of
depositions its counsel may conduct.
Accordingly, Plaintiff’s challenges to the verifications attached to Defendants’
Interrogatory answers are well taken.
D.

Sanctions

Plaintiff contends that sanctions are warranted under Rule 37(b) because
Defendants willfully refused to comply with this Court’s Order. (Doc. #61). Plaintiff
asks the Court to “strike the portion of Defendants’ answer that relates to the research
credit, resulting in a default judgment against Defendants on this issue; or, in the

12

alternative, enter an order barring Defendants from introducing any evidence or
contentions that were not included in their interrogatory responses.” Id. at 1721.
Defendants assert, “It is disingenuous for Plaintiff to seek death penalty sanctions
for Defendant’s alleged failure to provide information which is not within Mr. Quebe’s
personal knowledge ….” (Doc. #62, PageID #1854). Further, “Plaintiff’s requested
sanctions are extreme and unwarranted under the facts given Defendants’ good-faith
effort to comply with discovery requests, continuous production of hundreds of thousands
of documents, and attempts to offer multiple witnesses for numerous deposition dates.”
Id. at 1837.
“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 who
fail to meet these obligations.” Laukus v. Rio Brands, Inc., 292 F.R.D. 485, 500-01 (N.D.
Ohio 2013). A party’s failure to obey a discovery order is subject to sanction under the
plain language of Fed. R. Civ. P. 37(b)(2). Possible sanctions include, at the extreme,
dismissal of the action or default judgment. Fed. R. Civ. P. 37(b)(2)(A)(i)-(vii).
Courts consider 4 factors when determining whether to impose dismissal or
default judgment:
(1) whether the party’s failure is due to willfulness, bad faith,
or fault; (2) whether the adversary was prejudiced by the
dismissed party’s conduct; (3) whether the dismissed party
was warned that failure to cooperate could lead to dismissal;
and (4) whether less drastic sanctions were imposed or
considered before dismissal was ordered.

13

United States v. Reyes, 307 F.3d 451, 458 (6th Cir. 2002) (internal quotation marks
omitted).
The first factor does not favor imposing the most severe sanction on Defendants.
Yes, they failed to adequately respond Plaintiff’s interrogatories and failed to comply
with the Court’s Order as discussed above. Yet the record at present does not reveal that
Defendants have engaged in contumacious conduct or were perversely or stubbornly
resistant to the Court’s authority. See Carpenter v. City of Flint, 723 F.3d 700, 704-05
(6th Cir. 2013) (“willfulness, bad faith, or fault—requires a clear record of delay or
contumacious conduct.”; “Contumacious conduct refers to behavior that is perverse in
resisting authority and stubbornly disobedient.”) (internal quotation marks and citations
omitted). Defendants did not completely fail to respond to Plaintiff’s discovery requests;
their responses to Interrogatories 2 and 11 and to the Court’s Order were simply
inadequate. Cf. Harmon v. CSX Transp., Inc., 110 F.3d 364, 368 (6th Cir. 1997) (much
more serious conduct resulting in sanction of dismissal). That said, the ongoing lack of
substance in their answers to Interrogatories 2 and 11, and in their response to the Court’s
Order, warrants sanctions other than default.
The second factor—prejudice—also favors the imposition of sanctions upon
Defendants but not default judgment. Plaintiff accurately points out:
Defendants appear to be running out the discovery clock. So
far, this tactic has been successful; over one year of discovery
time has passed and the United States is no closer to
understanding Defendants’ claims to the credit.
As
Defendants have repeatedly observed, the burden of proof in
this matter is on the United States. They appear to believe
that if they can filibuster until the close of discovery, they can
14

win this case by default. That is precisely the behavior that
the Federal Rules are designed to prevent. Expert reports are
due shortly, and less than three months remains in discovery.
Even should Defendants respond to this motion by providing
full and complete responses to the interrogatories, the damage
has been done. The United States’ expert has had to prepare a
report analyzing Defendants’ potential research claims
without being able to respond specifically to what they will
ultimately allege. In depositions of Defendants’ employees
taken to date, counsel for the United States have had to cast
around for clues as to what Defendants might claim they were
researching.
(Doc, #61, PageID #s 1735-36).
Defendants’ answers to Interrogatory 2 and 11 and their insufficient responses to
the Court’s Order cause undue prejudice to Plaintiff. Defendants’ generic explanations
of employees’ work activities leave their answer to Interrogatory 2 foggy and unclear.
Likewise, Defendants’ repetitive descriptions of business components along with their
near-complete failure to connect specific descriptions of uncertainties with particular
business components leave their answer to Interrogatory 11 insufficient. Their answer
frustrates the truth-seeking function of discovery by raising the specter of everexpanding, ever-transmogrifying discovery. This, in turn, places Plaintiff in the position
of wondering—as the close of discovery nears and the dispositive motion deadline and
trial date beckon—what will Defendants say next about employees’ work activities along
with the business components and uncertainties inherent in the 12 projects at issue. This
prejudices Plaintiff by forcing them to prepare for a limited number of depositions
without essential information. And, if discovery ends without finality in the specific
employees’ work activities, business components, and uncertainties Defendants must

15

identify, summary judgment or trial by ambush could well emerge, further prejudicing
Plaintiff and further impeding a just, speedy, and inexpensive administration of this case.
Additionally, Plaintiff has been prejudiced by Defendants’ production of over
340,000 pages. Indeed, Defendants’ production is the epitome of a “document dump”
and its attendant ills: misdirection, obfuscation, and delay. See Scott Hutchison Enter.,
Inc., 318 F.R.D. at 54. (“Such a tactic can bury relevant evidence and force the receiving
party to expend considerable time and expenses parsing through documents in order to
glean information which may be relevant.”). Defendants’ continuing reliance on its
massive production of documents strives to take advantage (from their perspective) of
their document dump.
Defendants assert that “all of the project documents produced (QHI 001 – QHI
345417) directly tie to employee activities.” (Doc. #62-28, PageID #4060). It is possible
that Defendants are correct that all of their documents—well over one-quarter million
pages worth—connect to QHI’s employees’ activities. However, their documents do not
all tie to employee activities for the twelve agreed-upon projects in this case. For
example, Defendants produced QHI 239991-241818 to Plaintiff on October 7, 2016, and
attached it as Exhibit 14 to their Opposition to Plaintiff’s Motion for Sanctions. Exhibit
14 contains 1,828 pages. (Doc. #s 62-14, 62-15). It includes 862 pages concerning
employees who worked in 2009 and 2010, the years at issue in this case. The other 966
pages contain irrelevant information about employees who worked in 2005, 2006, 2007,
2008, 2011, 2012, 2013, and 2014.

16

Defendants, moreover, responded to the Court’s discovery Order by
overburdening the record of this case with an unnecessary and grossly excessive number
of irrelevant documents. They attached 2,225 pages to their Memorandum in Opposition.
As explained above, 966 of those pages have no relevance in the present case. Only 4 of
those pages were produced to Plaintiff after the Court’s Order. See Doc. #62-1, PageID
#1856; Doc. #62-18, PageID #s 3907-10. And, these 4 pages do not contain a detailed
description of the specific work the employees performed or the identification of business
components and uncertainties, nor do the other documents produced by Defendants that
are presently available to the Court.
The third factor—whether the party was warned that failure to cooperate could
lead to dismissal and/or default judgment—favors not imposing the extreme sanction of
default upon Defendants. Defendants have not yet been warned that they face default
judgment. See Tung-Hsiung Wu v. T.W. Wang, Inc., 420 F.3d 641, 643 (6th Cir. 2005);
see also Harmon, 110 F.3d at 367. This Order, however, serves as notice to Defendants
that failure to comply with the Court’s Order or discovery obligations under the Federal
Rules of Civil Procedure could result in the imposition of additional sanctions, including
default judgment.
The fourth factor (consideration of less drastic sanctions) favors imposing a
sanction on Defendants that is lesser than default because lesser sanctions have not yet
been considered or imposed against them. Further, alternative sanctions will protect the
integrity of the judicial process. See Freeland v. Amigo, 103 F.3d 1271, 1280 (6th Cir.
1997) (“[I]n the absence of contumacious conduct, an alternate sanction that would
17

protect the integrity of pretrial procedures should be utilized rather than dismissal with
prejudice.”).
As an alternative ground for sanctions, “Federal courts possess certain ‘inherent
powers,’ not conferred by rule or statute, ‘to manage their own affairs so as to achieve the
orderly and expeditious disposition of cases.’” Goodyear Tire & Rubber Co. v. Haeger,
581 U.S. __, 137 S.Ct. 1178, 1186 (2017). The Court’s inherent authority supports the
imposition of sanctions upon Defendants for their failure to comply with the Court’s
Order. See Chambers v. NASCO, Inc., 501 U.S. 32, 50, 111 S.Ct. 2123, 115 L.Ed.2d 27
(1991); see Metz v. Unizan Bank, 655 F.3d 485, 490-91 (6th Cir. 2011) (The Sixth Circuit
reads “Chambers ‘broadly to permit the district court to resort to its inherent authority to
sanction bad-faith conduct, even if the court has not expressly considered whether such
conduct could be sanctioned under all potentially applicable rules or statutes[.]’”)
(quoting First Bank of Marietta v. Hartford Underwriters Ins. Co., 307 F.3d 501, 514
(6th Cir. 2002)).
Plaintiff has, thus far, been unable to obtain all the discoverable information it
requires, and it has been forced to waste time and money in pursuit of the requested
information. Defendants’ failure was not substantially justified and no other
circumstances make the imposition of sanctions unjust. Consequently, in an effort to
minimize the prejudice and remedy the harm suffered by Plaintiff, Defendants must pay
Plaintiff’s reasonable fees and expenses caused by their failure to comply with the
Court’s Order. Plaintiff is directed to file a declaration documenting its reasonable fees
and expenses within 5 days of this Order. Defendants may, but are not required to,
18

respond to Plaintiff’s declaration within 5 days after it is filed. Further, Plaintiff may, but
is not required to, depose up to 5 additional witnesses. The discovery deadline for
Plaintiff alone is extended to June 30, 2017. Defendants’ discovery deadline remains
May 31, 2017. Due to these scheduling changes, the cut-off date for filing summary
judgment motions is extended to July 31, 2017.
In the Court’s Order, Plaintiff was ordered to respond to Defendants’
Interrogatories 1-12, 15-23, and 25 but was permitted to defer its responses until after
Defendants complied with the Order. (Doc. #59, PageID #1697). Given the Defendants’
failure to adequately respond to Plaintiff’s interrogatories and the impending discovery
end date, Plaintiff is not required to respond further to Defendants’ Interrogatories 1-12,
15-23, and 25.
To encourage Defendants’ production and identification of relevant evidence,
Defendants are barred from introducing any new evidence after the close of discovery. In
other words, Defendants must produce all evidence they intend to rely on at trial before
June 30, 2017.
As previously ordered, Defendants must respond to Plaintiff’s Interrogatories 2
and 11 pursuant to Federal Rules of Civil Procedure 26 and 33. Specifically, Defendants
must, for the 12 agreed upon projects, provide a detailed description of the specific work
each employee performed for which QHI claimed research tax credits. Additionally,
Defendants must specifically identify all of the business components and uncertainties for
each of the 12 sample projects. Defendants must provide these responses by May 31,
2017.
19

Defendants are hereby put on notice that failure to comply with this Order, other
discovery orders, or any discovery obligations under the Federal Rules of Civil Procedure
could result in the imposition of additional sanctions, including, but not limited to, the
entry of default judgment against Defendants.
III.

CONCLUSION
It bears reiterating: In this contentious case, counsel for both parties “should strive

to be cooperative, practical and sensible, and should turn to the courts (or take positions
that force others to turn to the courts) only in extraordinary situations that implicate truly
significant interests.” Cable & Computer Tech., 175 F.R.D. 646, 652 (citations and
internal quotations marks omitted); see also Saria, 228 F.R.D. at 539 (“The integrity of
the discovery process rests on the faithfulness of parties and counsel to the rules—both
the spirit and the letter. [T]he discovery provisions of the Federal Rules are meant to
function without the need for constant judicial intervention and … those Rules rely on the
honesty and good faith of counsel in dealing with adversaries.”) (quoting Poole v.
Textron, Inc., 192 F.R.D. 494, 507 (D. Md. 2000)) (citation and internal quotation marks
omitted).

IT IS THEREFORE ORDERED THAT:
1. Defendants must pay Plaintiff’s reasonable fees and expenses
caused by their failure to comply with the Court’s January 23,
2017 Order.
Plaintiff is directed to file a declaration
documenting its reasonable fees and expenses within 5 days of
this Order. Defendants may, but are not required to, respond to
Plaintiff’s declaration within 5 days after it is filed;
2. Plaintiff’s discovery deadline is extended to June 30, 2017;

20

3. The cut-off date for filing summary judgment motions is
extended to July 31, 2017;
4. Plaintiff may, but is not required to, depose up to 5 additional
witnesses; and
5. Defendants must respond to Plaintiff’s Interrogatories 2 and 11
by May 31, 2017.
Accordingly, Plaintiff’s Motion for Sanctions under Rule 37(b) (Doc. #61)
is GRANTED, in part, and DENIED, in part.
May 16, 2017

s/Sharon L. Ovington
Sharon L. Ovington
United States Magistrate Judge

21