Titan Atlas Manufacturing, Inc. v. Sisk
Filing
328
OPINION AND ORDER granting in part and denying in part motion for discovery sanctions. Signed by Judge James P. Jones on 11/13/2012. (lml)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF VIRGINIA
ABINGDON DIVISION
TITAN ATLAS MANUFACTURING
INC. and STRATA MINE SERVICES,
LLC,
Plaintiffs,
v.
FRANK A. SISK and PRECISION MINE
MINE REPAIR, INC.,
Defendants.
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FRANK A. SISK and PRECISION MINE )
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REPAIR, INC.,
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Plaintiffs,
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v.
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TITAN ATLAS MANUFACTURING
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INC. and STRATA MINE SERVICES,
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INC.,
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Defendants.
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Case No. 1:11CV00012
Case No. 1:11CV00068
OPINION AND ORDER
Mark D. Loftis, Woods Rogers PLC, Roanoke, Virginia, and James A. Gale
and Javier Sobrado, Feldman Gale, P.A., Miami, Florida, and Gregory L. Hillyer
and Michael P. Hogan, Feldman Gale, P.A., Philadelphia, Pennsylvania, for
Frank Sisk and Precision Mine Repair, Inc.; Jonathan T. Blank and Lisa M.
Lorish, McGuire Woods LLP, Charlottesville, Virginia, and Mark Varboncouer,
McGuire Woods LLP, Chicago, Illinois, for Strata Mine Services, LLC;
In these consolidated patent and contract cases, Frank A. Sisk (“Sisk”) and
Precision Mine Repair, Inc. (“PMR”) have moved for discovery sanctions against
opposing party Strata Mine Services, Inc. (“Strata”). For the reasons that follow, I
grant in part and deny in part the motion for sanctions.
I
The substantive issues in this commercial case involve a product used in the
ventilation of underground coal mines. Count One of Sisk and PMR’s Third
Amended Complaint alleges that Strata breached its Distributorship Agreement
with PMR by, among other things, purchasing a substitute part of the product,
called 3-D Panels, from PMR’s competitors.1 PMR and Sisk contend, and Strata
concedes, that Strata failed to produce eleven pages of documents related to this
breach of contract claim in response to PMR’s requests for production of
documents. The missing eleven pages include incriminating emails in which a
Strata employee, Richard Werth, discussed keeping purchases from a competitor of
1
More details of this claim are set forth in an earlier opinion of the court, Titan
Atlas Mfg. Inc. v. Sisk, Nos. 1:11CV00012, 1:11CV00068, 2011 WL 5041322 (W.D. Va.
Oct. 22, 2011).
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fifty of the 3-D Panels “top secret” from PMR and referred to the mines in which
the product was used.
The documents were finally produced to PMR’s counsel approximately a
week after their nonproduction was discovered, which was several weeks before
the date originally set for the start of trial.2 Strata’s counsel asserts that the initial
failure to produce these documents was caused by inadvertent oversight by
temporary contract attorneys engaged in document review in the case and a law
firm associate who was supervising them.
It appears that the eleven pages
constituted five separate documents of the 22,631 documents electronically
produced by Strata to its counsel for pre-production review. It is contended on
Strata’s part that the missing documents were simply erroneously miscoded by its
lawyers as either non-responsive or otherwise “withhold-able.” In fact, of course,
the documents in questions were completely responsive to the request for
production, highly relevant, and non-privileged.3
2
Because of the serious nature of the present issue, I cancelled the scheduled trial
date.
3
According to Strata’s counsel, a large percentage of the 22,631 documents were
not produced, presumably because they were found non-responsive. I will require Strata
to now produce all of these documents for review by Sisk and PMR at Strata’s expense.
Sisk and PMR prefer this as an alternative to a further responsiveness review of the
documents by Strata’s counsel.
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The nonproduction of the incriminating documents was not the only failure.
Strata’s interrogatory responses did not acknowledge the information contained in
the withheld pages. Finally and significantly, two Strata employees, including
Richard Werth, an author of the emails, gave false deposition testimony that was
consistent with the nonexistence of the missing documents.
Specifically, the
witnesses testified that no competitor’s 3-D Panels were purchased during the
relevant time period, even though the newly produced documents indicate that
approximately fifty such panels were purchased and used during that time. Strata
asserts that the witnesses simply forgot about the information that was contained in
the withheld documents, in light of the relatively small number of 3-D Panels
involved, while PMR suggests that it is more likely that the Strata employees
intentionally lied about the undisclosed information in order to help their case.
In their Emergency Motion for Default Sanctions, PMR and Sisk requested
that I grant a default judgment against Strata as to their whole case, and not merely
Count One. Following a hearing on this motion, I declined to enter such a default
judgment but instructed the parties to propose other sanctions.4
Both sides
4
I set forth my reasons orally on the record. Basically, I did not find that the
discovery failure as to this breach of contract claim infected all of the other separate
claims made by Sisk and PMR, which include patent claims, an unfair competition claim,
and other claims unrelated to Count One, all of which are much more significant in terms
of possible damages.
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proposed sanctions that they believe would be fair and adequate to address the
discovery violations, and I have heard oral argument on the proposed sanctions.
While I find that some of the sanctions are not warranted, I agree that certain
sanctions are appropriate in this case to prevent any prejudice to PMR and Sisk as
well as to punish Strata for the very serious circumstances revealed in this case.
II
While no express order of the court was violated by Strata’s failures here,
the court may still “impose sanctions on a party for misconduct in discovery under
its inherent power to manage its own affairs.”
Residential Funding Corp. v.
DeGeorge Fin. Corp., 306 F.3d 99, 106-07 (2d Cir. 2002) (upholding sanctions by
district court for party’s negligent failure to produce certain emails in time for trial)
(citing Chambers v. NASCO, Inc., 501 U.S. 32, 43 (1991)).
The Fourth Circuit has developed a four-factor test for considering discovery
sanctions — (1) whether bad faith was involved; (2) the degree of prejudice
occurring to the adversary; (3) the need for deterrence; and (4) whether less drastic
sanctions are appropriate. Anderson v. Found. for Advancement, Educ. & Emp‘t of
Am. Indians, 155 F.3d 500, 504 (4th Cir.1998).
Strata argues that many of the sanctions requested by Sisk and PMR are
excessive. In their place, Strata offers to pay PMR the amount of damages claimed
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under Count One relating to the fifty non-PMR 3-D Panels, along with certain
attorneys’ fees and costs associated with the motion for sanctions. In addition, in
the event that the court does not grant Strata’s pending motion for summary
judgment as to Count One, Strata offers to pay PMR the entire amount claimed
under Count One relating to all other products, which PMR’s damage expert
opined was $258,547. Strata asserts that these sanctions will be sufficient to make
PMR and Sisk whole. Sisk and PMR object to this offer of resolution.
I do not believe that Strata’s proposed solution is sufficient to address the
conduct of Strata’s witnesses and counsel and deter future violations. While I do
not find that Strata’s counsel acted in bad faith in withholding the documents in
question, I do find that the two Strata witnesses who gave false deposition
testimony likely did so knowingly. Additionally, the very late disclosure of the
documents in question has required me to postpone the trial. In order to prevent
any prejudice to PMR and Sisk, they must be permitted to conduct additional
discovery, and Strata, as the responsible party, must bear the cost of that additional
and necessary discovery. I have considered all of the requested sanctions in light
of the Anderson four-part test, and I find the sanctions that follow to be
appropriate.
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III
For the foregoing reasons, it is ORDERED as follows:
1. Strata must produce as soon as feasible, but not more than 45 days from this
date, all documents not previously produced in response to the requests for
production by Sisk and PMR, excluding any such documents withheld on
account of privilege, together with an appropriate privilege log as to
documents not produced;
2. Sisk and PMR may conduct a review of the documents produced, which
review shall be at the cost of Strata, such cost to include reasonable
attorneys’ fees. Such review must be completed within 45 days of the
production;
3. Sisk and PMR are granted leave to conduct further discovery (1) relating to
non-PMR 3D panels used for seals or (2) relevant to any of the documents
produced, provided that as to the latter, the appropriateness for such
discovery had not been reasonably apparent to Sisk and PMR prior to the
events leading to their motion for sanctions. Such further discovery, which
may include written requests and depositions, shall be at the cost of Strata,
including reasonable attorneys’ fees. Such discovery must be completed not
more than 90 days following the completion of the review of documents by
Sisk and PMR;
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4. Strata must provide to Sisk and PMR at the time of its production of
documents, an affidavit from a responsible officer or employee, with
knowledge of the matters stated therein, setting forth in detail the sources
within Strata or in possession of its officers and employees, of all of the
documents produced, either pursuant to this Order or earlier in the case;
5. The court will consider a motion by Sisk and PMR, made promptly after the
conclusion of the discovery described herein, to amend their pleadings to
assert claims or defenses arising from new information obtained therefrom.
6. The court will consider a request by Sisk and PMR for a particular
instruction to the jury at trial relating to the events described in the motion
for sanctions;
7. Strata must reimburse Sisk and PMR for any reasonable attorneys’ fees and
costs incurred by Sisk and PMR in investigating, preparing, and presenting
their Emergency Motion for Default Sanctions (ECF No. 273), filed October
17, 2012, and their Request for Sanctions (ECF No. 323) filed November 5,
2012;
8. If Strata disputes the reasonableness of any attorneys’ fees and costs sought
by Sisk and PMR, it must promptly file the grounds of its objections for
resolution by the court; and
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9.
Following the deadline for completion of discovery as permitted herein, the
court will arrange a conference with counsel to determine further scheduling
in the case.
ENTER: November 13, 2012
/s/ James P. Jones
United States District Judge
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