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Wednesday, June 10, 2009

Ind. Decisions - Judge McKinney imposes major sanctions in a second trial this year

Recall the case of U.S. v. Cinergy, et al. (see list of ILB entries here), where in a Dec. 18th order "Judge McKinney granted Plaintiffs' Motion for a New Trial Due to Party Misconduct, or, in the Alternative, for Expedited Discovery and an Evidentiary Hearing." In a show cause order, Judge McKinney wrote:

Specifically, the Court concluded that Cinergy and its lawyers committed misconduct when they failed to disclose a consulting agreement (the “Agreement”) Cinergy had entered into with one of its fact witnesses, Robert Batdorf (“Batdorf”); when they allowed Batdorf to testify at trial that he was unemployed and emphasized that misstatement in front of the jury; and when Cinergy relied on the misrepresentation as a theme during the trial.
In the end, the Court issued no disciplinary proceedings against the attorneys involved, writing on 1/12/09 (here):
The publishing of this and prior orders is sufficient. Further proceedings would create time consuming litigation threatening to overtake the issues of the case and draw time and energy away from the Court’s and the attorneys’ task of bringing this litigation to a close with as little delay as possible. No disciplinary action is recommended by this Court.
The new trial, however, was required. It concluded May 29th - here is the ILB entry, including a link to the opinion.

All this is only prelude to an Order on Plaintiff's Motion for Sanctions in a different environmental case, 1100 West, LLC v. Red Spot Paint & Varnish Co, issued by Judge McKinney on June 5th. Access the 66-page Order here.

From the Order:

[p. 1] This cause is now before the Court on plaintiff’s, 1100 West, LLC, Motion for Sanctions (Docket No. 448) against defendant, Red Spot Paint & Varnish Co., Inc. (“Red Spot”), and Red Spot’s former attorneys, Bose McKinney & Evans, LLC (“BME”). 1100 West alleges that Red Spot and its attorneys purposely withheld documents that were responsive to discovery requests; that Red Spot, through its Federal Rule of Civil Procedure 30(b)(6) (“Rule 30(b)(6)”) witness, Susan Henry (“Henry”), lied or misrepresented the truth about Red Spot’s use of trichloroethylene (“TCE”) and tetrachloroethylene (also known as “perchloroethylene”, herein “PCE”); and that other Red Spot employees, including former Red Spot President and Chairman of the Board, Charles Storms (“Storms”), lied or misrepresented the truth about Red Spot’s use of the chlorinated solvents. 1100 West argues that the pervasiveness of Red Spot’s discovery abuses deserves the most draconian of sanctions: default judgment, striking of experts, and an award of attorneys’ fees and costs. * * *

On May 6 and 7, 2009, the Court held a hearing on this matter because of the seriousness of 1100 West’s allegations. Now, having considered the parties’ briefs and the evidence contained therein, the testimony and evidence presented at the hearing, and the arguments of counsel, for the reasons stated herein, the Court GRANTS 1100 West’s Motion for Sanctions. * * *

[p. 61] By the end of June 2006, BME had enough collective knowledge that Red Spot likely used TCE or PCE in a lab degreaser or parts washer, which was consistent with 1100 West’s expert’s opinion, and that Red Spot had used Super Ad-It, which contained 10% PCE, in a product at a time after Red Spot had implemented the Provision database, to question Storms’ insistence that the chemicals were never used on the property. In addition, BME attorneys had sat through Henry’s depositions, BME attorneys had questioned the thoroughness of Henry’s production of documents, and a BME attorney had physically visited the room where Henry had searched for documents. Even in the face of Storms’ insistence that Red Spot did not currently use TCE or PCE, there was enough historical information for BME to insist that Red Spot dig deeper. Being a zealous lawyer does not mean zealously believing your client in light of evidence to the contrary. Moreover, when BME obtained the EPA RCRA file, there is no excuse for BME’s failure to ensure that “responsive” documents therein did not get to 1100 West.

The Court notes that it may be unusual to sanction a law firm for conduct that violates the Federal Rules of Civil Procedure. However, in this case, where three partners of the firm had knowledge of its client’s apparent disregard for those rules and failed to properly supervise an associate and paralegal who had knowledge of adverse facts that remained undisclosed to the opposing party, the Court can only conclude that the firm must be held accountable under its inherent authority to deter such conduct in the future. See Chambers, 501 U.S. at 45.

In summary, at least starting in the summer of 2006, BME skated the edge of its responsibility to its client, to 1100 West, and to the Court under the Federal Rules of Civil Procedure to disclose relevant information as well as information likely to lead to relevant information. BME also failed in its responsibility to be candid with the Court by making statements in Court filings that it knew were misrepresentations at best and false at worst.

The Court concludes that Red Spot’s conduct can only be described as contumacious, wilful, and egregious. BME compounded the problem by, like a chameleon, becoming indistinguishable from its client and allowing Red Spot, namely Storms and Henry, to evade the truth. Through its defiant conduct, Red Spot has forfeited the right to have the issues determined on the merits. Therefore, the Court must conclude that only the most onerous sanction, default, can remedy Red Spot’s violation of the rules of discovery; Fed. R. Civil P. 37(b)(2)(A)(vi); 37(c)(1); or can remedy Red Spot’s complete disregard of the legal process as protected by the inherent authority of the Court. Greviskes, 417 F.3d at 758-59. The Court, therefore, GRANTS 1100 West’s Motion for Sanctions.

The Court DECLARES, pursuant to 28 U.S.C. § 2201 and 42 U.S.C. § 6972(a), and by DEFAULT, that defendant, Red Spot Paint & Varnish Co., Inc., is liable for taking all necessary action to abate and otherwise respond to the aromatic contamination plume and the TCE/PCE contamination plume on plaintiffs’, 1100 West, LLC, property. Plaintiff, 1100 West, LLC, shall file its proposed remedial plan on or before Tuesday, August 4, 2009. On or before Monday, October 5, 2009, defendant, Red Spot Paint & Varnish Co., Inc., shall, in writing, SHOW CAUSE why the remedial plan proposed by plaintiff, 1100 West, LLC, should not be ordered as the remedy in this cause. A Show Cause Hearing is hereby SET for Wednesday, November 4, 2009, at 8:30 a.m., in Courtroom 202, Birch Bayh Federal Building and Untied States Courthouse, 46 East Ohio Street, Indianapolis, Indiana. Defendant’s, Red Spot Paint & Varnish Co., Inc., expert(s) shall only testify as to the appropriateness of the remedial plan; they shall not be allowed to testify as to causation at said hearing.

Further, 1100 West shall be entitled to its attorneys’ fees and costs for all discovery dating from May 23, 2006, to the present, including expert discovery within those dates, and for its attorneys’ fees and costs associated with the October 15 and 17, 2008, hearings, and its Motion for Sanctions. 1100 West shall file its brief in support of its accounting of reasonable attorneys’ fees and costs within thirty days of the date of this Order. Red Spot and BME shall have fifteen days to file a brief in opposition to said accounting. Red Spot and BME shall each pay one half of said reasonable attorneys’ fees and costs as they are determined by the Court, pursuant to Federal Rule of Civil Procedure 37(b)(2)(C) and pursuant to the inherent authority of the Court.

Posted by Marcia Oddi on June 10, 2009 08:36 AM
Posted to Environment | Ind Fed D.Ct. Decisions