General Motors Relies Upon Computer Search that Yields Incomplete Results; Court Orders $700,000 Fine, Strikes 3 Affirmative Defenses, and Restricts Challenge of Expert

Serra Chevrolet, Inc. v. General Motors Corp., No. CV-01-VEH-2682-S (N.D. Ala. May 20, 2005) (Order Granting Motion for Sanctions)

Serra Chevrolet, Inc. (“Serra”) filed a complaint against General Motors Corp. (“GM”) on October 23, 2001. Allegations in this case include claims that GM improperly awarded an additional dealership to Serra’s chief competitor, Edwards Chevrolet, and unduly restricted Serra’s allocation of vehicles.

The court addressed two categories of discovery shortcomings in its May 20, 2005 order granting sanctions against GM. The first category involves vehicle allocation data. GM’s counsel noted that monthly vehicle allocation data was retained for only 36 months and then destroyed. Serra argued that the destruction of any such vehicle allocation data for the period earlier than 36 months prior to Judge Proctor’s order to produce it on January 28, 2004 was in violation of the order. GM argued that it had no reason to believe that it need preserve and produce vehicle allocation data other than that relating to Serra and Edwards Chevrolet. The court disagreed with GM. The Judge’s order evidenced no such exclusivity, comparative data would be relevant to Serra’s allegations, and Serra’s interrogatories and requests for production call for such data.

The second category involves production related to satellite dealerships. In August, 2004, GM was ordered to respond to outstanding discovery requests and produce documents relating to satellite dealerships. These were to be produced by October 27, 2004. The court held GM in contempt on February 3, 2005 and on February 7 granted, in part, Serra’s motion to compel and motion for sanctions. GM was given until February 17 to purge itself of contempt by providing the all documents responsive to these requests. GM was to suffer sanctions of $50,000 per day followed by the striking of defenses should it fail to fully comply.

On May 16, 2005, GM representative Bill Middlekauf (“Middlekauf”) testified regarding the production of documents. On February 11, 2005, he sent an email to regional managers requesting responsive documents. Prior to his sending this email, GM’s search for satellite dealerships had been limited to a computer search. The results of this computer search were incomplete, as evidenced by replies to his email in which three previously undisclosed satellites were revealed. On May 12-13, 2005, 14 paralegals were hired to perform a manual search resulting in the discovery of nine additional satellite dealerships.

“GM has engaged in a pattern of disregarding its discovery obligations, not responding to discovery requests until ordered to do so, and even then totally disregarding this court’s deadlines for complying with its Orders.” Even after learning that its computer search was incomplete (which it did not learn until sending an email only six days before the deadline to purge its contempt), it waited about a month before undertaking a manual search. Also, Middlekauf’s testimony indicates that production of documents from satellite dealerships may still be incomplete.

Even assuming that production is complete and GM has purged itself of contempt by May 16 when the latest satellite dealership records were delivered, it would owe $4,900,000 ($50,000 times 98 days). Instead of imposing that fine, the court exercised its discretion and ordered a fine of $700,000, struck three affirmative defenses, and prohibited GM from challenging Serra’s expert with regards to the expert’s lack of information regarding satellite dealerships during any month on or after January, 2001.

Full text of the order can be found here.

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