Sanctions

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In a classic case of overreaching, plaintiffs in the In re Abilify MDL, sought sanctions against the defendant for not preserving emails dating between 2002 and 2006 – more than a decade before the start of the litigation. We have a hard time even contemplating what a duty to preserve that covered those emails would begin to look like. Fortunately, so did the court. Not for lack of argument by plaintiffs. They tried everything from industry-wide events to FDA requirements to alleged breach of a pharmacovigilance agreement between defendants. But this everything plus the kitchen sink approach couldn’t mask the lack of merit of any of their arguments.

Before 2007, defendant had a document retention policy of 60-days for emails. In re Abilify (Aripiprazole) Prods. Liab. Litig., 2018 U.S. Dist. LEXIS 172536 at *3 (N.D. Fla. Oct. 5, 2018).  Plaintiffs argued that destruction of email before that time constituted spoliation and warranted sanctions against defendant. A question that is governed by Federal Rule of Civil Procedure 37(e). Sanctions for failure to preserve electronically stored information (“ESI”) are permissible when ESI should have been preserved “in the anticipation or conduct of the litigation,” and the ESI was lost or destroyed due to the party’s failure to take reasonable steps to preserve and the ESI cannot be restored or replaced. All four of those conditions must be met. Making the only question for the court in this case – whether defendant had to duty to preserve emails from 2002-2006. It did not.

The court cites 11th Circuit precedent that the duty to preserve doesn’t arise until “litigation is pending or reasonably foreseeable.” Id. at *5. So plaintiffs’ first argument was that defendant should have reasonably anticipated the litigation long before the first lawsuit was filed in 2016. Plaintiffs’ argument was that the duty to preserve can be triggered by “industry-wide events, regardless of the status of individual litigation.” Id. at *7. But this theory is too outward focused. The industry-wide events plaintiffs rely on are scientific literature, other lawsuits, and adverse event reports. The early literature pertains to other drugs in the same class as Abilify and the question of whether that literature was sufficient to place defendant on notice of the risk of compulsive gambling is a “hotly contested issue in the case.” Id. at *10. Making it a

quantum leap to conclude that [defendant] had a duty to preserve all of its emails . . . simply because there may have been some scientific literature published in the late 1990’s and early 2000’s that addressed [the class of] drugs and a possible link to compulsive gambling.

Id. Relying on adverse events in clinical trials was similarly insufficient to place defendant on notice of possible litigation. Id. at *12. Other litigation about different drugs was also insufficient to put defendant on notice that it too would be sued a decade later.

The Court is not aware of any case law, which requires a drug manufacturer to preserve all of its documents where the manufacturer has not received any notice of the potential threat of litigation other than simply knowledge that there was other litigation involving a different drug prescribed for different conditions that may fall within the very broad category of dopaminergic drugs. Such an overly broad view of the duty of preservation would impose on every drug manufacturer a duty to preserve all of its documents, without regard to subject matter or time frame. That is at odds with the requirement that a party must preserve documents when it reasonably anticipates litigation.

Id. at *11 (“reasonable anticipation” is more than “mere possibility”).

Plaintiffs’ last industry-wide argument was that defendant should have put a legal hold in place based on a subpoena from the DOJ in an investigation concerning off-label promotion of Abilify. The court quickly pointed out that that investigation did not involve the safety or compulsive gambling information at issue in the MDL, but more importantly a demand from the DOJ at best triggers a duty to preserve that runs to the DOJ. That duty cannot be shifted to be owed to these plaintiffs in a separate action. Id. at *13-14.

Disregarding all of these external events to focus on the case specifics, plaintiffs’ counsel didn’t start advertising for plaintiffs until 2013 and didn’t threaten litigation until 2014. Id. at *8. So, in looking at the action of these plaintiffs, the earliest defendant could have anticipated litigation was 2014. Id.

We’re not done yet. Plaintiffs tried another duty-shifting argument, this time with the FDA.  Drug manufacturers are required to preserve adverse event data, including correspondence, for 10 years. Plaintiffs latched on to the “correspondence” language to argue that there must have been AE-related emails that were deleted. But even if true, “failure to comply with a regulatory obligation does not create a duty to preserve for purposes of a spoliation motion.” Id. at *15-16. The “obligation . . . runs to the FDA and not the plaintiffs in this case.” Id. at *16. The emails at issue were gone a decade before the defendant owed an obligation to the plaintiffs as opposed to the FDA.

Plaintiffs’ last attempt to find an earlier trigger was to point to the pharmacovigilance agreement between defendant and another manufacturer. The agreement required both parties to keep and make available to each other all of their adverse event information, and the language once again included correspondence. Id. at *19. There was no allegation that any manufacturer did not properly maintain their adverse event data, only that if the agreement included correspondence then there “must have been” relevant correspondence in the deleted emails. But putting aside plaintiffs’ obvious twisting of the true meaning of the agreement:

The more fundamental problem with Plaintiff’s argument is that Plaintiffs as non-parties to the Pharmacovigilance Agreement cannot enforce the obligations in the agreement to their benefit.

Id. Plaintiffs attempt to rely on state-law to make their case, but (1) Rule 37(e) prohibits reliance on state law to create a basis for discovery sanctions and (2) even under Florida law, the plaintiff has to be a party to the contract to use its breach as a basis for spoliation. Id. at *21.

Because defendant had “no inkling” in 2004 that potential claimants like plaintiffs even existed, there is no evidence that the auto-delete document policy in effect at that time was anything other than an ordinary business policy. Simply stated, defendants were not acting in bad faith. Id. at *23-24. Even more simply stated, defendants can’t be held to the standard of Carnac the Magnificent.

 

Just two weeks ago, we largely praised an MDL court’s handling of sanctions for a plaintiff’s stonewalling in response to discovery obligations, but thought the plaintiff got off pretty light for some really egregious conduct.  Today, we report on a circuit court’s affirmance of discovery sanctions against a plaintiff counsel’s conduct for being overly aggressive in the pursuit of discovery. In light of the holiday today, we will be extra careful in how we describe the plaintiff’s counsel’s conduct and refrain from drawing any conclusion about what the conduct here says about the counsel. We will leave to the reader to decide whether the sanction imposed here—about $25,000 in costs and fees—will have a sufficient deterrent effect and whether the cost of an appeal of a $25,000 sanction after the plaintiff lost summary judgment was worth it.

As you might expect for a case that got to an appeal on a sanction order, the history of Vallejo v. Amgen, Inc., — F.3d –, 2018 WL 4288360 (10th Cir. Sept. 10, 2018), is complicated. Our summary of the pertinent facts is just a summary, with more flavor in the actual case. The case involves an estate suing over a fatal blood cancer called myelodysplastic syndrome (“MDS”) in a patient taking a well-known biologic for psoriasis. Perhaps because of the track record of the medication and the relative novelty of the claimed injury, the court ordered that the first phase of discovery should focus on whether the medication can cause MDS. (It appears that the medication has been studied in the treatment of MDS in multiple studies among the hundreds completed over decades.) After disputes arose on the scope of such general causation discovery, the magistrate held a hearing at which plaintiff presented an expert, who claimed he needed every clinical trial on the drug and all information relating to possible effects on “red blood cells, white blood cells, platelets, or any precursor cells for these blood cell lines.” The magistrate concluded that the scope of discovery sought by plaintiff was unreasonable. Ignoring that, plaintiff served broad discovery requests and the defendant objected on scope, burden, and proportionality, offering to produce a range of documents focused on the medication and MDS. Plaintiff sought to require the defendant to search adverse events for 206 terms, but the magistrate “limited discovery to 15 search terms that provided the most specificity to MDS.”

Plaintiff also sought discovery on other medications of the same class and the defendant objected. The magistrate ordered the defendant to produce non-public studies on the possible relationship between the medication and MDS. Defendant also offered up a global safety officer for deposition and plaintiff demanded the names of everyone who ever worked on adverse event handling for the medication or who had responsibility for any evaluation of its relationship to MDS. The magistrate allowed the plaintiff to depose the safety officer to find out other witnesses as needed. Because the defendant had not submitted affidavits to prove the burden of coming up with a list of everyone who had worked on the medication over decades, the magistrate advised the parties that they would need to “quantifiably explain the burden of providing the requested information” going forward. Plaintiff sought clarification from the magistrate and appealed the discovery order to the district judge. The district judge denied the appeal, noting the role of proportionality in discovery.

Meanwhile, plaintiff noticed up the safety officer for deposition beyond what the magistrate had ruled was permissible, and the magistrate had to issue a protective order until the district court could rule. When the deposition started after the district court’s ruling, plaintiff sought to question beyond the scope of the rulings. The magistrate suspended the deposition for more briefing and to set a time to supervise the deposition when it reconvened. When that happened, plaintiff’s counsel tried to reargue prior rulings, argued with the magistrate, and “asked the witness questions which were explicitly beyond the scope of discovery as ordered by the court.” Thereafter, the magistrate denied a motion to compel additional depositions and document production, noting that plaintiff’s counsel had plenty of information on causation from what had been produced and from other sources. The magistrate also directed plaintiff to disclose the general causation experts that her counsel had claimed to have when arguing with the magistrate during the safety officer’s deposition. Plaintiff again appealed and the district court again denied it.

After all this and some more jockeying, the defendant moved for sanctions for plaintiff’s counsel’s “repeated attempts to circumvent the court’s limitations on the first stage of discovery and abused the judicial process.” Defendant sought about $141,000 in fees and costs and the magistrate awarded about $25,000 for a variety of sanctionable conduct. The district court came to the same conclusion on its de novo review after appeal. After summary judgment was granted because plaintiff failed to name a causation expert, despite the claims of her counsel that she had retained one, the appeal to the Circuit Court followed. If are not exhausted after that recap, then you have more tolerance for discovery fights than do most courts we know. You might also reflect on the question of whether the burdensome discovery plaintiff sought and the fights that she initiated on discovery issues were part of a scheme to force some kind of settlement before having to prove general causation.

In affirming, the Tenth Circuit not only reinforced the limits on what counsel can do when they keep losing discovery fights, but provided guidance on some recurring issues in discovery. We start with the final word:

Attorneys are entitled to advocate zealously for their clients, but they must do so in accordance with the law, the court rules, and the orders of the court. The district court properly exercised its inherent power to sanction Vallejo’s counsel, and we find no abuse of discretion.

Focusing on the motion to compel that plaintiff filed after the first attempt at deposing the safety officer, this was easily characterized as “relitigation of issues already decided by the court.” It did not matter whether plaintiff had a basis for the positions that it took initially. As the magistrate held—within its discretion per the Circuit Court—“absent any change in circumstances, filing additional motions raising the same arguments was harassing, caused unnecessary delay, and needlessly increased the cost of this litigation.”

On the issue of proportionality, the Circuit Court affirmed that proof of burden can be established by means other than sworn statements. While statements in a brief (signed by counsel) are not proof, a court may consider “common sense” in evaluating the burden part of proportionality. In this case, it also had plaintiff’s counsel’s demonstration of how many hits a small portion of plaintiff’s preferred search terms produced. So, plaintiff’s counsel could not excuse misconduct by claiming no limits should have been imposed in the first place.

Plaintiff’s efforts to turn the focus to alleged misrepresentations by the defendant’s counsel were similarly rejected, as the Circuit Court was “satisfied that the district court did not rely on misrepresented facts by [defendant] in issuing its discovery orders.” Nor could she shift the focus to how the magistrate conducted the discovery hearing in terms of questioning of defendant’s expert, whose core opinion was that the Biologic License Application had relevant information on causation. Among other things, the district court did not rely on the defendant’s expert in limiting the scope of discovery. Plaintiff also tried to claim that she should have had access to all the information FDA might consider in evaluating medical causation, but this was a red herring given the difference between FDA standards and court standards, the absence of any MDS signal, and the court’s discretion to limit discovery on general causation. Plaintiff’s last gasp was to claim her case was prejudiced by the sanctions against her, but it was her counsel’s decision to claim she had general causation experts and her failure to name even one when required, instead trying to get by with a designation of an unspecified employee of one of the companies involved with the medication.

In short, plaintiff’s counsel conduct was sanctionable because the court set limits on discovery within its discretion and then plaintiff’s counsel chose to relitigate them and flaunt them until plaintiff lost for the fundamental reason of having no general causation expert. The fact that plaintiff ultimately lost despite pursuing these tactics reinforces that the tactics were obstructionist rather than excusing the tactics themselves. Even on the defense side, where we have been known to litigate aggressively on issues like the scope of discovery and the sufficiency of general causation, Vallejo can be instructive on the need to respect final rulings as the law of the case.

Stop us if you have heard this before. A novel or movie depicts litigation in which a large corporate defendant is sued for causing a plaintiff or plaintiffs significant injuries through a frivolous or non-beneficial product. In defending the litigation, the corporation and its unscrupulous lawyers hide important documents from the scrappy plaintiff lawyer, who, depending on the fiction’s direction, never discovers or miraculously discovers the key evidence. Perhaps informed by this view of corporate defendants and their lawyers as less than honorable, a number of courts have imposed significant sanctions against defendants when, despite producing millions of pages of documents created well before the litigation started and gathered from around the world, fail to preserve and produce some number of documents that the plaintiffs contend should have been produced. The importance of the documents to the case and the overall merits of the case tend not matter to the award of sanctions. To the contrary, the sanctions can themselves affect the outcome of the litigation. We know you have heard about these litigations, as we have described them in a number of posts through the years.

The situation where a plaintiff is sanctioned for her refusal to disclose information and produce documents in litigation is far less common. Mind you, we do not think the conduct is less common. We think it happens all the time, but rarely goes to motion let alone a published decision about a bellwether plaintiff in a product liability MDL. In re Taxotere (Docetaxel) Prods. Liab. Litig.¸ MDL No. 2740, 2018 WL 4002624 (E.D. La. Aug. 22, 2018), presents a sanctions order that may not signal a trend toward equal treatment for plaintiffs and defendants on discovery obligations and sanctions because this plaintiff’s conduct was just so obviously bad.

The plaintiff was suing over hair loss from a chemotherapy drug for her cancer. She was also a medical doctor and bellwether plaintiff. (We pause just on these facts in case our readers want to ponder how litigation now is different than the “old days,” whenever that might have been.) The MDL had a Plaintiff Fact Sheet requirement and an order explaining discovery obligations for electronically stored information apply to them too. After bringing her suit and for over a year thereafter, the plaintiff treated with, or at least sought advice from, a physician on how to regrow her hair through an unspecified regimen.  She documented her progress with photographs and, when the treating physician asked for permission to use them to promote his treatment, squarely stated she “[w]ould rather not have the lawyers for the other side put two and two together just yet.” She failed to identify this physician on her fact sheet, provide authorizations for him, or identify the treatment she was receiving at his suggestion. When she realized that her produced emails—like we said, the court realized plaintiffs have to produce ESI too—included information about this undisclosed physician, she directed him to resist discovery: “just tell them that you weren’t really my doctor . . . you don’t have any records [and] you never saw me.” Meanwhile, plaintiff (who had a lost wages claim) directed her former employer, a particular Veterans Affairs Medical Center, to refuse to produce any employment or medical records.

The decision focused on the plaintiff’s conduct regarding her undisclosed physician. Plaintiff’s primary defense was that the doctor recommending her a treatment regimen she was utilizing and corresponding with about its progress was not really “her doctor.” She supported this argument with an affidavit from the doctor to the effect that he did not consider the plaintiff to be his patient. This argument did not hold water because the PFS required disclosure not just of treating physicians, but any healthcare provider consulted over the prior eight years, including any “hair loss specialist.” It also required disclosure of “over-the-counter medications, supplements, or cosmetic aides for your hair loss.” We assume it also required production of photographs documenting the extent of any claimed injury (i.e., hair loss over time). It was easy to find that plaintiff had failed to comply with her discovery obligations, especially because “she has encouraged at least [two] potential witness[es] to be less than forthcoming in this litigation.”

What was the sanction? She had to produce the stuff she was supposed to produce anyway, sit for further deposition on the withheld evidence, and pay the defendant’s cost for the motion for sanctions. Yawn. The order was supposed to be a warning for her or “any other plaintiff who might be considering adopting evasive tactics like those discussed in this opinion.” We think she got off light and, particularly in the context of a big MDL—this one has more than 9000 pending cases—the sanction lets plaintiffs and their lawyers make calculated decisions about whether it pays to avoid discovery obligations. We cannot see a defendant in a litigation like this getting off nearly so lightly had it done anything like what plaintiff did here.

 

 

We’re not fans of dinner party chatter, especially when we’re berated for defending alleged corporate deviltry against widows and orphans.  We’d just as soon find another corner of the room and another stiff pour of Lagavulin.  But there is a point that seems to register with even our most self-righteous accusers: for every meritorious case, there are many, many more that are made-up money grabs.  The chattering classes agree that plaintiff lawyers are at least as greedy as occupants of the C-suites, and are, if anything, more prone to playing fast and loose with the facts.  Plaintiff lawyers overreach.  Everyone knows that.  Do courts?

 

Yes, at least some do.  A recent example can be found in Carroll v. E One Inc., et al, 2018 WL 3040757 (3d Cir. June 20, 2018).  Carroll is not a drug or device case, but it contains useful language about plaintiff lawyers who fail to do the minimal homework as to whether their clients actually have a case.  The plaintiffs in Carroll were firefighters who sued the manufacturer of fire sirens, alleging that they suffered occupational hearing loss due to the “omni-directional design” of the sirens, which “unnecessarily exposed the firefighters to dangerous levels of sound.”  This lawsuit was one of several filed around the country, all involving the same plaintiff lawyers, same defendant, and same theories. Results varied in those other cases. The plaintiffs won some, lost some, and dismissed some after it became clear that the cases were flat-out losers.  It became pretty clear pretty early in the Carroll case that it was in the loser category.  First, early discovery revealed the firefighters’ lawsuit to be time-barred. Since the 1990’s, the plaintiffs’ fire department conducted routine annual audiological screenings of all of its firefighters. Nearly all of the plaintiffs in this suit had been advised many years earlier that they had hearing loss that was very probably caused by the loud noises to which they were exposed on the job and that they should be wearing hearing protection. Consequently, the plaintiffs’ claims were “obviously” time-barred when they filed in or around January 2015. Second, one firefighter had not even suffered hearing loss attributable to noise exposure. Oops. As the district court observed, “had Plaintiffs’ counsel spoken with the individual plaintiffs or conducted any other type of investigation prior to commencing this litigation, [counsel] would have learned these facts.”

 

How could the plaintiff lawyers miss the obvious flaws in the case?  Let’s now perform a cinematic flashback and look at how the plaintiff counsel collected their plaintiffs. The firefighters received a notice at their fire departments either on a physical or web-based bulletin board that free hearing screening was being offered at the union hall. Many of those notices were prepared by the plaintiff counsel’s law firm.  Firefighters who decide to avail themselves of the free hearing test went to the union hall, then into a certain room, sometimes two firefighters at a time, where an audiologist puts headphones on them, played tones and directed the firefighters to raise their hands or push a button when they heard the sounds. You have probably heard of such tests before.  The firefighters were not informed of test results until months or sometimes years later, after they became part of a lawsuit. The firefighters were not referred to a doctor or advised to wear hearing protection.  Frequently the first contact a firefighter plaintiff had with someone from the plaintiffs’ counsel law firm was just before or even at their deposition. You have probably heard of this sort of thing before, too. 

 

So maybe it’s not such a surprise that the plaintiff lawyers took a while to catch on to the fact that their clients had no viable case.  Call those lawyers willfully deaf.  Nevertheless, even after learning the truth – and certainly well after they should have learned of the truth — the plaintiff lawyers pressed on.  They did so even after the defendant patiently laid out the defects in the case and invited the plaintiffs to dismiss before undue work was done (e.g., depositions) and undue expenses were incurred.  The plaintiffs said No thanks.  More work was done and more money was spent.  Then the plaintiff lawyers said, Never mind.  They grudgingly agreed to dismiss.  The defendant said Fine, but only if the plaintiffs paid appropriate attorney fees for all the waste.  The plaintiffs’ counsel ignored the counter-offer, and—without seeking leave from the district court—filed a “Notice of Dismissal,” asking the Clerk of Court to “mark the claims of all Plaintiffs as being dismissed without prejudice to all parties in this action.”  Nice try.  This “Notice of Dismissal” was improper under Federal Rule of Civil Procedure 41(a).  By that point, discovery had closed and the complaint had been answered.  The parties had not agreed to a stipulation of dismissal.  Accordingly, the defendant filed a motion seeking fees and costs and contested the plaintiffs’ counsel’s ability to “voluntarily” dismiss the firefighters’ claims without prejudice. The plaintiffs’ counsel continued to back-pedal, consenting to dismissal with prejudice, but still opposing the defendant’s request for fees and costs.

 

And now, we offer a brief primer on basic civil procedure law.  Under Federal Rule of Civil Procedure 41(a)(1), unilateral, voluntary dismissal is available only before the opposing party serves either an answer or motion for summary judgment. It was clearly too late for that in the Carroll case.  Thus, the plaintiffs’ effort to dismiss fell under Rule 41(a)(2), which allows an action to be “dismissed at the plaintiff’s request only by court order, on terms that the court considers proper.” Exercising that broad grant of discretion in the Carroll case, the district court concluded that its terms would include an award of attorneys’ fees and costs. The district court recognized the “general rule [that] defendants are not permitted to recover fees when a plaintiff dismisses an action with prejudice absent exceptional circumstances.”  The plaintiffs’ counsel was banking on that general rule to shield them from attorney’s fees.  But as the district court put it, “this case is unusual and it therefore calls for an unusual solution.” 

 

What was unusual about the Carroll case?  The district court conducted an evidentiary hearing regarding the fee request.  A defense attorney testified.  The plaintiffs put on no evidence.  The district court ended up pointing to the complete failure on the part of plaintiffs’ counsel to spot the weaknesses in their case.  The district court also took into account that the selfsame plaintiffs’ counsel had been similarly asleep at the wheel or indifferent to reality in other cases around the country.  The plaintiff lawyers felt aggrieved by the fee award, so they appealed to the Third Circuit.  They lost. 

 

The Third Circuit acknowledged that attorneys’ fees and costs are typically not awarded when a matter is voluntarily dismissed with prejudice.  But such an award may be granted when “exceptional” circumstances exist. Exceptional circumstances include pushing a case forward with utter indifference as to whether there is any there there.  The plaintiffs’ counsel argued that they were not put on notice of the time-barred nature of their clients’ claims until the deposition of a medical director of the police and fire clinic that provided annual hearing tests to the plaintiff firefighters.  But that evidence turned out to be more damning than exculpatory.  All it did was provide “further evidence of counsel’s failure to conduct a meaningful pre-suit investigation.” The plaintiff lawyer “could simply have asked his clients during a routine interview when they had first discovered that they were suffering from hearing loss attributable to their jobs as firefighters.”  Then came the quote that any decent defense hack might want to tack on the wall for future use: 

“It highlights the importance that counsel treat each individual case in this aggregate litigation as just that, its own individual case.”   

 

Save room on the wall.  There’s more:  

“[T]his case is an example of some of the excesses of modern mass tort litigation – when attention to an individual case is sacrificed for the sake of pursuing mass filings.” 

 

As our nerd friends would say, that sacrifice of paying attention to an individual case is not a bug in the mass tort system in this country, it is a feature.

 

The Third Circuit had no problem with the district court’s consideration of “circumstances that extended beyond the geographic boundaries that make up the Eastern District of Pennsylvania.”  Last minute dismissal of frail cases was arguably part of the plaintiff counsel’s modus operandi in this litigation.  The plaintiff counsel complained that the district court had “appoint[ed] itself the policeman of this nationwide litigation” by “unilaterally usurp[ing] the powers of the other courts.” The Third Circuit put the “overheated rhetoric,” and concluded that the district court had not abused its discretion when it explicitly considered the entirety of the nationwide litigation.  Rather, the district court “properly took notice of how the case before it fit within the larger network of cases brought by Plaintiffs’ counsel throughout the country.”  This pattern and practice of failure “to perform a meaningful pre-suit investigation, and a repeated practice of bringing claims and dismissing them with prejudice after inflicting substantial costs on the opposing party and the judicial system,”  with such failure and infliction of costs being especially egregious and unnecessary in the Carroll case, constituted the sort of “exceptional” circumstances that called for an award of attorney fees even in the wake of a voluntary dismissal with prejudice.

 

Chalk it up as a nice win for the defense.  Nevertheless, a question gnaws at our defense hack noggin:  what if the plaintiff lawyers’ failure to pre-screen the cases for merit really is not so “exceptional”?

 

 

Charges of discovery abuse get thrown around frequently in product liability litigation.  We have not done a scientific survey, but we guess that such charges are levied against the manufacturer defendants more often than against individual plaintiffs.  For one thing, seeking burdensome discovery, and then discovery on discovery, has been in the product liability plaintiff game plan for a long time.  There also tends to be more discovery that a defendant could produce—and, therefore, be accused on wrongfully withholding—than a plaintiff could produce.  There is also the practical consideration that large manufacturers tend to have the financial wherewithal to pay fees when ordered and contingency plaintiffs do not—although the lawyers who front the money for those plaintiffs and make the decisions about how to proceed in discovery typically do.  While there are occasions where courts require plaintiffs and their lawyers to pay substantial defense costs because of bad conduct in discovery or in the litigation more broadly, an argument about how to calculate fees to be awarded for discovery abuse is something that we generally hope to avoid.  It is not quite up there with arguing about the maximum acceptable ratio of punitive to compensatory damages that can be awarded, but it still makes us a little uncomfortable.

The Supreme Court’s decision in Goodyear Tire & Rubber Co. v. Haeger, 581 U.S. __ (2017), slip op., involves a very large award of fees based on the district court’s conclusion that the manufacturer defendant in a product liability case had intentionally withheld important internal testing documents.  The plaintiffs did not learn about the documents until after they had settled, when a reference appeared in a newspaper article about another similar case.  Because the case had resolved, the late application to shift costs and fees appealed to the court’s inherent authority.  Using that authority, the court not only determined that the defendant had engaged in bad faith discovery for years, but that it should pay the plaintiff $2.7 million for all costs and fees since the initial “dishonest discovery response.” Slip op. at 3.  It specifically determined that egregious conduct by a party negates the typical requirement that fees be limited to those caused by the sanctionable conduct. Id. As a back-up in case the Court of Appeals reduced the award, the court determined that the costs and fees excluding what plaintiffs estimated they incurred in pursuing other defendants and in proving medical damages, would be $2 million. Id. at 4.  (We find the whole concept of the fees incurred in the context of a presumably contingency fee representation somewhat bizarre.  Did the plaintiffs’ lawyers actually charge more than $2.7 million in costs and fees to their clients when the proceeds of the settlement(s) were divided up?)  The Court of Appeals affirmed the full amount and the Supreme Court granted cert.

The Haeger Court started by distinguishing between sanctions that compensate and sanctions that punish.  The latter can only be awarded if the trial court provides the “procedural guarantees applicable in criminal cases, such as a ‘beyond a reasonable doubt’ standard of proof.” Id. at 6 (citation omitted).  (As an aside, we are not sure that each state requires such a standard of proof when punitive damages are offered, so maybe this Court would be strict in its evaluation of punitive damages.)  “When (as in this case) those criminal-type protections are missing, a court’s shifting of fees is limited to reimbursing the victim.” Id. Damages to reimburse must have been caused by the sanctionable conduct, not merely come after it started.

The court’s fundamental job is to determine whether a given legal fee—say, for taking a deposition or drafting a motion—would or would not have been incurred in the absence of the sanctioned conduct. The award is then the sum total of the fees that, except for the misbehavior, would not have occurred.

Id. at 7-8 (citation omitted).  The court has some leeway in making large sanction award as long as the touchstone is causation.  A plaintiff can be hit for all costs of a defending case initiated in “complete bad faith,” such as we have seen relatively recently. Id. at 8.  Sanctions can also be based on the court’s assessment of whether failure to disclose “evidence fatal to its position” affected the timing (but not amount) of settlement. Id. at 8-9.

In Haeger, the trial court did not apply a but-for causation test to its damages calculation, so it will have to do it over with the right standard (unless it determines that there was some sort of waiver).  While we do not know what the amount of the sanction will be on remand, we do have an inkling that the damages imposed for discovery misconduct will tend to be less if the Haeger standards are followed in other cases.  In a case where a fundamental lie by the plaintiff—claiming to have used the defendant’s product, claiming legal authority to initiate a suit, claiming no knowledge of the injury or its cause until shortly before bringing suit—caused a case to be brought or stick around, some bold judges can still impose significant sanctions following Haeger’s principles.

 

This is the time of year for Best and Worst lists.  Our own lists of the best and worst drug and device law decisions of 2016 will be coming out soon.  Meanwhile, we have no doubt that the worst moments in our own day-to-day practice consist in litigating about litigation.  That is, whether on offense or defense, it is mind-numbing to fight over, not the merits of the case, but whether some party is complying with the rules of civil procedure.

We said “offense or defense,” but who are we kidding?  Discovery in our cases is wildly asymmetrical.  Plaintiffs grudgingly sign health record authorizations, while our clients are forced to disgorge millions of documents, at an expense many times over what most defendants in other civil litigations who have already been found liable (of course, our clients have thus far not been found liable for anything) end up paying in total. Producing electronically stored information (ESI) is virtually impossible to get fully right, but plaintiffs ask for, and all too frequently get, a requirement that corporate defendants furnish certificates of completion.  Such certificates are not required by any rules.  Somehow, overreaching plaintiffs have managed to persuade some courts to take something as silly and unrealistic as the discovery rules and make them even worse.   Pretty soon, court hearings devolve into plaintiff lawyers ruefully marching to the lectern to complain about alleged gaps in discovery and demand sanctions.  Forget about the fact that this litany of carping is on behalf of an inventory of plaintiffs whose mostly meritless claims go gleefully untested until the defendant waves a white flag and submits to a fairy tale otherwise known as a settlement grid.  Apropos of the season, we say humbug.

It is a pleasant surprise when a court calls an end to the discovery gotcha game.  That happened last week in Small v. Amgen, Inc., No. 2:12-cv-476-FtM-PAM-MRM (Dec. 14,  2016).  We have written on the Small case before.  See here, for example.  The issue teed up most recently in the Small case was the plaintiffs’ motion for sanctions under Federal Rule of Civil Procedure 37 for an alleged failure to comply with the court’s omnibus discovery order.  The Small court held that “[f]or all its sound and fury … Plaintiffs’ Motion fails – utterly – to identify any actual violation” of the court’s prior orders.   That magisterial “utterly” conveys a sense of weariness and frustration.  Yes, we know the feeling.

Continue Reading Good Things Come in Small Packages: M.D. Fla. Rejects Plaintiff’s Discovery Gotcha Gamesmanship