e-Lessons Learned

Objectionable Conduct—Albeit not E-Discovery Related

Greg Mack (“Mack”) set up medical clinics purportedly to treat victims of automobile accidents. He used these clinics, however, to diagnose patients with phony injuries as a way of overcharging their insurers for the unnecessary medical services the clinics provided. Grange Mutual Casualty Company (“Grange”), one of the insurers affected by the scheme, brought suit against Mack, and several corporations he controlled, alleging fraud and violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”).

Objectionable Discovery Conduct

Mack’s objectionable conduct continued from the actions that formed the basis of the suit to discovery misconduct that occurred early in his case. To summarize a laundry list of flagrant conduct, Mack: delayed mandatory disclosures; refused to comply with more than five motions to compel; instructed a witness not to bring requested documents to a deposition; when he did produce evidence, produced it with most of the pages missing; ignored various written requests; continued his overt disobedience after numerous stern warnings and threats to be held in civil contempt.

Objectionable E-Discovery Conduct

As should come as no surprise, Mack’s non-compliance stretched further into the electronic discovery phase of the case. Mack and Grange entered into an Agreed Order with regard to electronic discovery. The Order required Mack to identify all computers used in his business, supply copies of all hard drives, provide lists of all files on each drive, and state specific objections to each file he refused to produce. In response, Mack produced a mere short list of patient files and a general objection that any other files were not relevant. To make matters worse, two years later, Mack still had not complied with the Order.

Additionally, Mack replaced company computers in the course of the litigation. He also refused to produce his home computer, even though he admitted that he used it for business purposes. Finally, although Grange discovered a paper copy of an email sent by Mack’s former business consultant, Mack never produced an electronic copy.

Outcome

The Appellate Court affirmed the District Court’s decision to enter the ultimate discovery sanction—default judgment—against Mack.

Pursuant to Federal Rule of Civil Procedure 37(b)(2)(C), which enables district judges to issue sanctions to abusers of the discovery process, the District Judge issued a default judgment. The Appellate Court reviewed the District Judge’s decision by making several findings.

First, the Appellate Court found obvious, willful disobedience on the part of Mack, himself. The Court further found that Grange suffered prejudice because without production of the requested evidence, Grange was without significant information necessary to its case. Additionally, in its attempts to discover information despite Mack’s noncompliance, Grange suffered a significant detriment in wasted time and money.

Furthermore, several earlier and more than adequate warnings were issued to Mack, including serious admonitions and threats of holding him in contempt, to no avail.

Finally, the Court noted that no lesser sanction would serve as an appropriate punishment for Mack’s actions. The award of attorney’s fees and costs could not adequately compensate Grange for the prejudice it suffered—key evidence was lost and destroyed by Mack and no award of money would serve to recover that information. Although less stringent sanctions could have been issued in the discretion of the District Judge, the Judge would have been equally justified in ending “Mack’s charade” at a much earlier point in time.

E-Discovery Savvy Law Student is a third-year law student at Seton Hall University School of Law. EDSLS will join a firm in Manhattan in the fall.

Article posted on April 2, 2009 at 4:00 AM |              More... 
Tagged as: Sanctions.
View more articles implicating: Miscellaneous
Subscribe to this post's comments through its RSS 2.0 feed.