Motion for Sanctions Denied After Finding Defendant Met Discovery Deadlines and Promptly Notified Plaintiff of Errors

17 Apr 2023

In FLUOR FEDERAL SOLUTIONS, LLC v. BAE SYSTEMS ORDNANCE SYSTEMS, INC., Case No. 7:19-cv-698 (W.D. VA, Feb. 7, 2023), Plaintiff sought sanctions against Defendant to recover the fees and costs of re-deposing five witnesses after Defendant produced approximately eighty thousand documents mistakenly withheld due to an e-discovery vendor error.

This complex construction cased involved voluminous document productions, which the parties exchanged on a rolling basis throughout the discovery period. The parties’ discovery exchanges were fraught with accusations and concerns on both sides and resulted in numerous discovery conferences with the court to address issues with document identification, preservation of documents, proper document custodians, document search procedures, and alleged document production deficiencies.

On June 3, 2022, the Court granted Defendant’s motion to amend the scheduling order and continued the discovery deadline from June 16, 2022, to Sept. 16, 2022. Defendant discovered an error on June 13, 2022 by its e-discovery vendor which caused an under-disclosure of a significant number of documents. Defendant promptly notified Plaintiff of this error three days later.

The Court held an informal discovery conference regarding the vendor error and its implications and entered an order on July 14, 2022 requiring the rolling production of the newly discovered documents, with production to be completed by Aug. 1, 2022.

Thereafter, Defendant produced over 79,000 additional documents, all within the Aug. 1, 2022, deadline. Plaintiff sought to recover the fees and costs it incurred to prepare for and take the five depositions, and the fees to prepare and argue the underlying motion for sanctions.

“Determining whether discovery sanctions are appropriate requires a three-step analysis of (1) whether a party violated a discovery order or Federal Rule of Civil Procedure; (2) whether the violation was ‘harmless’ or ‘substantially justified;’ and (3) which sanction is appropriate for the violation.” Vir2us, Inc. v. Invincea, Inc., 235 F.Supp.3d 766, 772 (E.D. Va. 2017).

Rule 26 requires parties to timely disclose relevant information during discovery. Fed. R. Civ. P. 26. “Under Rule 26(e), a party who has made a Rule 26(a) disclosure or responded to discovery must provide timely supplementation ‘if the party learns that in some material respect the disclosure or response is incomplete or incorrect, and if the additional or corrective information has not otherwise been made known to the other parties during the discovery process or in writing.’ Fed. R. Civ. P. 26(e)(1)(A).” Russell v. Absolute Collection Servs., Inc., 763 F.3d 385, 396 (4th Cir. 2014).

Rule 16(f) allows a court to impose sanctions if a party fails to obey a scheduling or other pretrial order. Fed. R. Civ. P. 16(f)(1)(C). A court may also “order the party, its attorney, or both to pay the reasonable expenses—including attorney’s fees—incurred because of any noncompliance with this rule, unless the noncompliance was substantially justified or other circumstances make an award of expenses unjust.” Fed. R. Civ. P. 16(f)(2).

Additionally, a party that fails to properly provide information in discovery as required by the Federal Rules faces sanctions under Rule 37(c)(1), “unless the failure was substantially justified or is harmless.” Fed. R. Civ. P. 37(c)(1). The determination of whether a discovery violation is justified or harmless is entrusted to the broad discretion of the district court. Bresler v. Wilmington Trust Co., 855 F.3d 178, 190 (4th Cir. 2017). The party facing sanctions bears the burden of establishing justifiability or harmlessness. S. States Rack and Fixture, Inc., v. Sherwin-Williams Co., 318 F.3d 592, 596 (4th Cir. 2003).

In Southern States, the Fourth Circuit identified a five-factor test to guide trial courts in determining appropriate sanctions to impose under Rule 37: (1) the surprise to the party against whom the evidence would be offered; (2) the ability of that party to cure the surprise; (3) the extent to which allowing the evidence would disrupt the trial; (4) the importance of the discovery; and (5) the explanation of the non-disclosing party for its failure to provide the discovery. Id. at 597. The first four factors relate primarily to the harmlessness exception, while the last factor, addressing the party’s explanation for its nondisclosure, relates mainly to the substantial justification exception. Bresler, 855 F.3d at 190.

Plaintiff argued that sanctions were appropriate under Rules16(f) and 37(c) because Defendant failed to supplement its document production in a “timely” manner and failed to have reasonable procedures in place to preserve and locate responsive documents.

In support, Plaintiff emphasized that it repeatedly warned Defendant of deficiencies with Defendant’s document production which included pointing out in a letter dated April 11, 2022, that Plaintiff had produced four times as many documents as Defendant and identified multiple custodians with low document counts.

In response, Defendant maintained that it was able to explain each deficiency and did not suspect any vendor discovery issues until June 8. 2022. Defendant argued sanctions were not appropriate under the circumstances because it “did not violate the court’s scheduling order, the order specifically addressing the vendor error, or any other order that could justify the award of sanctions.”

Specifically, Defendant asserted it did not violate a court order, as required for sanctions under Rule 16(f) because it produced the newly discovery documents within the deadline to complete discovery at the time the error was discovered (Sept. 16, 2022), and within the deadline set by the court for production once the vendor error was discovered (Aug. 1, 2022). Defendant stated that because its document production was completed over a month before the close of discovery, it cannot be considered untimely.

Defendant further asserted that it did not violate Rule 26(e)’s duty to supplement its discovery responses and production because it notified Plaintiff and the Court of the production issue within days of the revelation and produced the missing documents well within the discovery period. Thus Defendant asserted that it did not violate a court order or rule of civil procedure and should not be sanctioned under Rules 16 or 37.

Plaintiff countered that the documents were within the “possession” of Defendant, and they were not timely produced due to Defendant’s lack of diligence, unreasonable discovery procedures, and ignored Plaintiff’s warnings. Plaintiff maintains that the supplemental production of the documents after discovery of the vendor was untimely.

The Court agreed with Plaintiff that the eighty thousand documents mistakenly withheld due to Defendant’s vendor error and produced between June and Aug. 2022 were not timely disclosed. Defendant would have produced these documents earlier in litigation, but for the vendor de-duplication error.

Indeed, Defendant acknowledged that the documents at issue were improperly identified as duplications by its vendor, and thus were not produced in Defendant’s regular document production. Ultimately, the vendor error was Defendant’s error and the late document supplementation, although within the discovery deadline, was untimely.

However, applying the Southern States five-factor test to determine the appropriate sanction under Rule 37(c), the Court did not find additional sanctions were warranted. While the document production resulting from the vendor error was a surprise to Plaintiff, Defendant immediately notified Plaintiff of the error, cured any surprise by producing the documents within the deadline set by the Court and allowed Plaintiff to re-depose necessary witnesses.

Plaintiff received the documents within the discovery period and the additional evidence did not disrupt any motion deadlines or the trial date. Plaintiff did not argue that the late production impacted its ability to fully prosecute its case at trial.

Additionally, Defendant promptly notified Plaintiff and the Court of the mistake, provided timely document supplementation, and agreed to the re-deposition of the witnesses identified by Plaintiff. The Court said imposing sanctions in this situation would only serve to discourage parties from disclosing and addressing discovery errors in the future.

The intent of the Federal Rules of Civil Procedure is for parties to immediately address and deal with mistakes or errors in document production, not to punish parties when they promptly inform the opposing party and the court of a disclosure error.

Rule 1 requires the court and the parties “to secure the just, speedy, and inexpensive” resolution of actions. Fed. R. Civ. P. 1. Additional sanctions in this situation neither meet the spirit of Rule 1 nor satisfy any need to sanction BAE beyond those it self-imposed. Accordingly, the Court declined to impose any additional sanctions on Defendant relating to the vendor error, and Plaintiff’s Motion for Sanctions and Request for Attorney’s Fees was denied.