Electronic Discovery Law
Florida Court Affirms $75,000 Coercive Civil Contempt Sanction Against Defendants For Prolonged Discovery Abuse
Channel Components, Inc. v. Am. II Electronics, Inc., 915 So. 2d 1278 (Fla. Dist. Ct. App. 2005)
In this case alleging tortious interference and related claims against two former employees, the plaintiff sought intervention by the court several times in order to secure defendants' compliance with their discovery obligations. Plaintiff filed successive motions for contempt and sanctions alleging that defendants had not complied with the discovery requests or the orders of the court compelling discovery.
At the conclusion of one hearing on the matter, the trial court orally pronounced its finding that the defendants had still not complied with the discovery as ordered by the court and thus were in contempt of court. The trial judge indicated he would give the defendants one more week to comply with the discovery ordered. He instructed the defendants to submit, within that time period, an itemized list in response to the items ordered by the court. The list was to designate what items were provided, and if an item was not provided, the defendants were instructed to specifically note on the list that the documents requested did not exist. The trial judge ruled that if the defendants did not provide the discovery as ordered on or before 5 p.m. on April 8, 2003, a coercive fine of $2,500 per day would be imposed for each day the defendants remained in noncompliance, for a maximum of thirty days. If the defendants remained in noncompliance after the thirty-day period, the trial judge indicated he would strike the defendants' pleadings and affirmative defenses.
The defendants sought an extension of time, which was denied. On April 9 and 10, the defendants filed "supplemental discovery" consisting of two pages setting forth the items listed in the trial court's order compelling discovery and indicating that one subset of documents was attached and that three other subsets had already been provided. As to a specific request for correspondence, emails, or notes evidencing conversations between the defendants and the clients they had in common with plaintiff, the defendants indicated for the first time that there were no such documents in existence. Plaintiff, however, had previously taken the depositions of the individual defendants, and they both had referred to a computer software program that they used that tracked correspondence with their customers. Both men also indicated that they sometimes communicated by email with customers and vendors. In light of this, plaintiff filed a motion seeking an order setting a specific amount of the sanctions, pursuant to the earlier ruling imposing a $2,500-per-day fine for the defendants' failure to comply with discovery and seeking an order striking the pleadings and affirmative defenses of the defendants.
Around this same time, the defendants' counsel of record withdrew from the case, and the defendants retained new counsel to represent them. At the hearing on the motion for sanctions, there were disputes over what had been provided to defendants' prior counsel and what had yet to be produced. The trial judge continued the hearing in light of these disputes, and advised the defendants' new counsel to bring to the next hearing every document the defendants had regarding the requested discovery, without regard to whether or not it had been provided before, so that the court and the parties could determine whether all of the available documents had been provided.
At the continued hearings, the defendants delivered the documents requested by the trial court. For the first time, the plaintiffs were provided with emails and correspondence they had sought for over a year and a half - documents that the defendants had just indicated did not exist.
Subsequently, a new presiding judge heard evidence from the defendants and their prior counsel regarding the discovery violations. Plaintiff, armed with the discovery finally provided, presented evidence that the defendants possessed documents all along that were responsive to the discovery requested and ordered by the court on numerous occasions, but the defendants did not turn them over until September 2003.
The defendants presented seemingly contrary arguments in mitigation of their noncompliance. They argued first that when the discovery requests were initially served in 2002, their business was in its infancy and very few documents existed. But they also argued that the discovery requests were extremely burdensome and that they were late because they were struggling to provide all of the documents requested. Counsel for the defendants argued generally that the actual imposition of the $2,500-per-day fine, ordered on April 1 to be imposed for thirty days, would bankrupt his clients. However, the defendants presented no evidence of their financial status or of any imminent insolvency.
Based upon this evidence, the trial court entered judgment against the defendants, jointly and severally, and in favor of the plaintiff, in the amount of $75,000, representing the previously ordered fine of $2,500 per day for a total of thirty days, plus $4,282 for the attorneys' fees incurred by the plaintiff to obtain compliance.
On appeal, the court observed:
The trial judge who entered the final judgment for sanctions in this case held hearings in this matter that, combined, lasted more than six hours. The lengthy history of this discovery dispute is contained in an appellate record containing fifteen volumes, filled almost exclusively with documents regarding the discovery battle. This battle has now been waged for over three years, with no sight of a trial on the merits on the horizon. This case is an extreme example of the abuse of the discovery process. It is perhaps not surprising, then, that it appears this will be the first reported Florida case affirming a discovery sanction fine in this large of an amount.
The court concluded that the trial court scrupulously followed the procedure necessary to impose a coercive civil contempt sanction arising from the violation of the discovery orders. And although the court was unable to find a case upholding a fine of a similarly large amount for violation of discovery orders, it nevertheless deemed the $75,000 sanction appropriate:
[A]ll of the procedural requirements for the imposition of this fine were met, and the defendants were given every opportunity to avoid the imposition of this fine. Indeed, their behavior - which has prolonged the discovery process for over two years and avoided a trial on the merits as to whether they should be enjoined from competing against the plaintiff pursuant to their noncompete agreements-- may have been properly categorized as "contumacious" so as to merit the ultimate sanctions of striking of pleadings or entry of judgment against them.
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