Attorneys Who Erroneously Relied on Client’s Defective Search Methods Were Merely Negligent and Not Acting in Bad Faith; Monetary Sanctions Imposed Against Client Only

Finley v. Hartford Life and Acc. Ins. Co., 2008 WL 509084 (N.D. Cal. Feb. 22, 2008)

In this case, plaintiff claimed that defendant wrongfully terminated her disability benefits in violation of ERISA.  Plaintiff also alleged that Hartford violated her right to privacy by causing its agent Dempsey Investigators to trespass onto her land and videotape her and her roommate through the kitchen window of plaintiff’s home.

When Hartford served its Rule 26(a)(1) initial disclosures, it indicated it was disclosing a copy of the administrative record related to plaintiff’s disability claim, and produced among other things copies of the claim file, electronic notes and surveillance videos conducted by Dempsey.  Due to what Hartford calls an "administrative oversight," the videos produced did not contain the footage of plaintiff in her kitchen.  Hartford later produced the “kitchen video” in a supplemental disclosure under Rule 26(e).  Hartford argued that it complied with its usual procedure and that a reasonable search was done, and that as soon as it discovered that the full video had not been disclosed it complied with Rule 26(e) and supplemented its earlier disclosure.

Plaintiff sought sanctions, alleging that Hartford failed to disclose the kitchen video in violation of Rule 26(a); that Hartford’s attorney certified Hartford’s initial and incomplete disclosure in violation of Rule 26(g); and that Hartford failed to produce the kitchen video in response to a particular request for production.  Plaintiff sought sanctions in the amount of the costs and attorney’s fees she spent taking the depositions of Dempsey witnesses and retaining the services of an expert.  She argued that she took these depositions and engaged this expert solely because defendant did not produce the kitchen video in a timely manner, and that she would not have otherwise engaged the expert, or taken the depositions.

The court granted the motion, in part, faulting Hartford’s search for relevant evidence:

Though the Court agrees that an administrative oversight contributed to Hartford’s failure to do its initial disclosures, the Court does not agree that a reasonable search was done.  Hartford cannot escape the fact that it hinged responsibility for these disclosures entirely on the shoulders of an administrative assistant.  When she failed to search the "old database" as Hartford’s own policy required, the kitchen video was not discovered, even though it was not lost or misplaced.  The Court finds it unreasonable for Hartford to rely on a system which contains so few checks and balances that the mere fact that an administrative assistant did not look for a file, in the filing cabinet where that file was normally kept, could undermine Hartford’s entire initial disclosure apparatus.  The file was where it was supposed to be.  It was unreasonable for Hartford not to find it there at the point of its initial disclosures.  Therefore the Court finds that Hartford violated Federal Rule of Civil Procedure 26(a)

Hartford argues that it turned over the video as soon as it was found and therefore complied with Rule 26(e).  Though it is true that Hartford eventually turned over the kitchen tape, it is also true that a reasonable search would have turned up the tape for disclosure in January of 2007 rather than July.

The court found that Hartford failed to make the requisite “reasonable inquiry” required by Rule 26(g), but that its outside attorneys did not deserve sanctions:

The Court finds that Hartford’s attorney should have diligently supervised the methods Hartford used to gather material for discovery.  Doing so may have avoided much of the controversy now before the Court.  The Court further finds that Hartford did not make the requisite "reasonable inquiry" required by Rule 26(g).  However, since Hartford’s attorneys relied, however erroneously, on Hartford’s defective search methods, the Court finds they were negligent but did not act in bad faith in certifying Hartford’s discovery.  In light of the fact that plaintiff did not serve a clear and concise request for the tape from the attorneys before embarking on reconstructing it, the court declines to sanction Hartford’s attorneys in this instance for their negligence.

Plaintiff sought roughly $58,000 in sanctions.  The court rejected plaintiff’s assertion that none of the work done would have been done if the tape had been turned over earlier, and found that a “prudent attorney” would have done much of the discovery, and hired an expert whether or not he or she had access to the tape early in the discovery process.  At the same time, the court stated it had “no doubt” that some of the enumerated costs and fees would not have been necessary if she had earlier access to the kitchen video.  Accordingly, the court exercised its discretion to determine a reasonable sanction, and sanctioned Hartford in the amount of $9,000.

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