What type of discovery abuse would justify a default judgment and entry of a $36 million damage award? In Stooksbury v. Ross, et al., No. 12-5739/12-6042/12-6230 (6th Cir. 2013), the court reviewed a case filed under the federal RICO statute regarding a fraudulent real estate claim. Plaintiff was an investor who lost a considerable amount of money due to the defendants’ actions.
Defendants violated a pretrial order by failing to comply with plaintiff discovery requests, and the magistrate judge recommended the entry of a default judgment (the harshest sanction at the court’s disposal.) The magistrate recommended this after finding the 40,000 page “document dump” without Bates stamps, plus their “total lack of forthrightness,” justified the finding of bad faith and entry of a default judgment. However, the district court declined to enter the default judgment and ordered sanctions for attorney fees as a lesser sanction. This came with an explicit warning that further failures to comply would result in a default judgment.
The defendants continued their attempts to evade their discovery obligations. The supplemental responses still did not have Bates stamps, and although they produced more documents, they were mostly irrelevant. Defendants failed to provide basic discovery documents such as tax returns, financial statements and financial records. The district court then entered the default judgment after determining that:
- Defendants acted willfully in failing to comply with discovery obligations;
- Plaintiffs were prejudiced;
- Defendants were fairly warned that default judgment was a possibility; and
- Less drastic sanctions were unavailing.
The 6th Circuit affirmed the trial courts findings and rulings regarding the default judgment and entry of the large damage award. Although defendants disputed the findings, the 6th Circuit noted that “the contention that they substantially complied is belied by the record.”
ILS – Plaintiff Electronic Discovery Experts