Scott et al v. Abernathy Motorcycle Sales, Inc.
Filing
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ORDER GRANTING 75 MOTION FOR SANCTIONS. Signed by Chief Judge S. Thomas Anderson on 2/12/2020. (mbm)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TENNESSEE
EASTERN DIVISION
______________________________________________________________________________
WILSON SCOTT; NOEL SCOTT;
WILSON SCOTT, as father and next
friend of his minor son, JOHN-DAVID
SCOTT; WILSON SCOTT, as father
and next friend of his minor son,
WALKER SCOTT; and STATE AUTO
PROPERTY AND CASUALTY
INSURANCE COMPANY,
Plaintiffs,
v.
ABERNATHY MOTORCYCLE
SALES, INC.,
Defendant.
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No. 1:18-cv-01077-STA-jay
ORDER GRANTING MOTION FOR SANCTIONS
Before the Court is Plaintiff State Auto Property and Casualty Insurance Company’s
Motion for Sanctions (ECF No. 75) filed on January 14, 2020. State Auto seeks an award of
monetary sanctions against Defendant Abernathy Motorcycle Sales, Inc. for the company’s
failure to have a corporate representative or a representative of its insurer in attendance at a
mediation scheduled by the parties for January 7, 2020.
Abernathy opposes an award of
sanctions. For the reasons set forth below, however, State Auto’s Motion is GRANTED.
BACKGROUND
Plaintiffs Wilson and Noel Scott filed this action for property damage they sustained as a
result of allegedly faulty wiring on an ATV Plaintiffs purchased from Defendant Abernathy
Motorcycle Sales, Inc. The Complaint alleges that faulty wiring on a voltage regulator installed
on the ATV caused electrical arcing, which in turn caused the ATV to catch fire. As part of the
Third Amended Scheduling Order (ECF No. 64), the Court ordered the parties to engage in
mediation before January 30, 2020. Plaintiff State Auto, which has indemnified the Scotts for
their property damage and asserts a contractual right to subrogation for any recovery the Scotts
may obtain in this action, now seeks an award of sanctions. For cause State Auto asserts that
Abernathy failed to have a corporate representative or a representative from its insurer present
for the January 7, 2020 mediation. Although the mediation took place, the parties did not reach a
settlement. State Auto argues that the Court’s Plan for Alternative Dispute Resolution requires
all named parties to attend any mediation as well as representatives of an insurer, if the insurer’s
agreement is required for settlement.
State Auto seeks the expenses incurred by its
representative and its attorney to attend the mediation, a total of $1,038.42 of travel expenses.
Abernathy opposes the request for sanctions.
Counsel for Defendant concedes that
neither a corporate representative nor a representative of Abernathy’s insurer attended the
mediation. Counsel explains that their absence was a result of his error. More specifically,
counsel believed that a letter confirming the January 7 mediation had been addressed to the
representatives, when in fact it had not. The representatives did not learn of the mediation until
the night before the mediation was to take place. Counsel adds that the insurer’s representative
was available to participate in the mediation by telephone. Defendant asserts that the mediation
was unsuccessful because of a genuine dispute between the parties, and not because of the
absence of the representatives at the mediation. Under the circumstances, Defendant argues that
the failure to comply with the ADR plan was not willful and therefore should not warrant a
monetary sanction.
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ANALYSIS
The issue presented is whether sanctions are merited for Abernathy’s failure to have a
corporate representative or a representative of its insurer attend the mediation in person. It is
undisputed that the representatives failed to attend the mediation and that the Local Rules of
Court required their personal attendance. Section 5.8(a) of the Court’s Plan for Alternative
Dispute Resolution is clear that all parties to an action must attend mediation in person. For
corporations like Abernathy, that means persons “with authority to settle and who are
knowledgeable about the facts and circumstances of the case and the claims being made.” ADR
Plan § 5.8(a)(1). For an insurance company, that means any person whose “agreement is
necessary to achieve a settlement.” Id. at § 5.8(c). 1 In this case, Abernathy did not produce a
corporate representative with settlement authority and knowledge of the Scotts’ claims against
the company. Abernathy’s insurer made a representative available by telephone. Although the
ADR plan allows a person to attend a mediation by telephone, participation other than in person
attendance is only permitted with advance notice to the mediator and the other parties, which did
not occur in this case. See ADR plan § 5.8(e) & (f). The Court would hasten to add that it
credits counsel for Defendant’s explanation that the representatives’ failure to attend was not
willful or intentional but rather a matter of miscommunication. The fact remains that Abernathy
violated the requirements of the ADR plan by not having its representatives present for the
January 7 mediation. Under the circumstances, some sanction against Abernathy is warranted.
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Defendant argues that the presence of its insurance representative by phone allowed the
parties to attempt a mediation of their dispute. Be that as it may, the personal attendance of an
insurance company’s representative is mandatory if the parties to an action need that person’s
agreement to settle. Defendant does not deny that the agreement of its insurer is needed to settle
in this case or that Defendant did not seek advance approval for the insurer to participate in the
mediation by telephone. It follows that the representative’s attendance was mandatory.
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Section 2.3 of the ADR plan authorizes the Court to impose sanctions for a party’s failure
to comply with the plan, without regard to whether the party’s violation of the plan was
intentional or inadvertent. While it is true that the ADR plan does not spell out what sanctions
are available to the Court, the Federal Rules of Civil Procedure give district courts broad
authority to impose sanctions, particularly an award of costs, for even negligent violations of
court orders and rules. See Fed. R. Civ. P. 16(f) (making an award of attorney’s fees and costs
mandatory for a party’s failure to obey a scheduling order or attend a scheduling or pretrial
conference); Fed. R. Civ. P. 26(g)(3) (requiring a district court to impose sanctions for improper
discovery certifications made without “substantial justification”); Fed. R. Civ. P. 37(b)(2)
(enumerating a list of sanctions available to a district court for a party’s discovery abuse). The
Court finds that an award of State Auto’s costs is proper in this case. State Auto has shown that
its representative and its outside counsel incurred travel expenses in the total amount of
$1,038.42. State Auto has not requested any other monetary sanction such as attorney’s fees or
any other costs associated with the January 7 mediation. An award of travel expenses strikes the
right balance between the need to enforce the personal attendance requirement of the ADR plan
with the fact that Abernathy’s failure to attend was not intentional.
Abernathy argues that an award of costs is not justified. The parties were able to proceed
with mediation despite the representatives’ failure to attend the mediation in person. According
to Abernathy, the absence of these representatives did not alter the outcome of the mediation,
and the parties were unsuccessful only because of their bona fide dispute. But it strikes the Court
that this is perhaps a hindsight evaluation of the prospects for mediation or the effect the
representatives’ absence had on the process. Abernathy’s assessment does not change the fact
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that the representatives did not attend in violation of the ADR plan or make an advance request
to be excused from the personal attendance requirement.
Furthermore, the Court is not persuaded by Abernathy’s argument by analogy to a case
where a Magistrate Judge denied a plaintiff an award of fees and costs against a defendant after
the Court set aside a default judgment. In Jack Tyler Engineering Co. v. Colfax Corp., No. 10cv-02373-STA-cgc, 2012 WL 370563 (W.D. Tenn. Feb. 3, 2012), the United States Magistrate
Judge was initially assigned to the case as the presiding judge and entered a default judgment
against the defendant after the defendant failed to answer the complaint. Once the defendant
successfully moved to set aside the default judgment, in part because the Magistrate Judge
lacked jurisdiction to enter the judgment, the Magistrate Judge denied the plaintiff an award of
fees and costs based on the defendant’s negligent failure to answer the complaint, reasoning that
the defendant’s negligent conduct did not support a sanction. The Court simply finds that the
Jack Tyler Engineering case is factually and procedurally distinguishable and therefore has little
persuasive value here.
Finally, Abernathy has raised the issue of State Auto’s failure to consult with counsel
prior to filing its Motion for Sanctions. As Abernathy correctly notes, Local Rule of Court
7.2(a)(1)(B) requires a party filing a motion first to consult with opposing counsel about the
relief sought.
Local R. 7.2(a)(1)(B).
While the consultation requirement is clear and
unambiguous, denial of the motion for failure to consult is purely discretionary under the Local
Rules. Id. (stating that the failure to consult “may be deemed” good grounds to deny a motion).
In this case both parties have now stated their positions on the record and been heard on the
matter. Conferring with opposing counsel at this juncture, particularly on whether opposing
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counsel should be subject to sanctions, would not further the purposes of the Local Rules’
consultation requirement.
CONCLUSION
State Auto’s Motion for Sanctions is GRANTED. The Court awards State Auto its
travel expenses for the January 7, 2020 mediation in the amount of $1,038.42.
IT IS SO ORDERED.
s/ S. Thomas Anderson
S. THOMAS ANDERSON
CHIEF UNITED STATES DISTRICT JUDGE
Date: February 12, 2020.
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