Orchestratehr, Inc. v. Trombetta

• Decision Date: 18 April 2016
• Docket Number: No. 3:13-cv-2110-P,3:13-cv-2110-P
• Citation: 178 F.Supp.3d 476
• Parties: Orchestratehr, Inc., et al., Plaintiffs, v. Anthony L. Trombetta, et al., Defendants.
• Court: U.S. District Court — Northern District of Texas

178 F.Supp.3d 476

Orchestratehr, Inc., et al., Plaintiffs,

v.Anthony L. Trombetta, et al., Defendants.

No. 3:13-cv-2110-P

United States District Court, N.D. Texas, Dallas Division.

Signed April 18, 2016

Blake L. Beckham, Jose M. Portela, Sarita Anne Smithee, The Beckham Group PC, Dallas, TX, for Plaintiffs.

Sandra Cockran Liser, Grant Liser, Naman Howell Smith & Lee, PLLC, Fort Worth, TX, Anastasia L. Villescas, Stanton Law Firm PC, Addison, TX, Bradley Kent Douglas, Naman Howell Smith and Lee PLLC, Austin, TX, James M. Stanton, Stanton Law Firm PC, Mark Mutschink, Thompson & Knight LLP, Dallas, TX, for Defendants.

MEMORANDUM OPINION AND ORDER ON PLAINTIFFS' MOTIONS FOR SANCTIONS AND TO COMPEL

DAVID L. HORAN, UNITED STATES MAGISTRATE JUDGE

Plaintiffs OrchestrateHR, Inc. and Vivature, Inc. have filed a Motion for Sanctions Against All Defendants [Dkt. No. 232], a Motion for Sanctions Against Anthony L. Trombetta for Spoliation of Evidence [Dkt. No. 240], and an Emergency Motion for Sanctions [Dkt. Nos. 245 & 251]. Chief Judge Jorge A. Solis has referred these motions to the undersigned United States magistrate judge, see Dkt. Nos. 242 & 250, and the undersigned held a hearing on the motions on February 18, 2016, seeDkt. Nos. 274 & 285.

Plaintiffs then filed a Motion to Compel and for Sanctions Against All Defendants, seeDkt. No. 281, which Chief Judge Solis also referred to the undersigned magistrate judge, see Dkt. No. 283.

For the reasons and to the extent explained below, the Court GRANTS in part and DENIES in part the Motion for Sanctions Against All Defendants [Dkt. No. 232], except for the portion of the motion concerning civil contempt for alleged violations of the Agreed Temporary Injunction and Agreed Temporary Restraining Orders, which is addressed in the Findings, Conclusions, and Recommendation of the United States Magistrate Judge dated March 28, 2016 [Dkt. No. 299]; DENIES the Motion for Sanctions Against Anthony L. Trombetta for Spoliation of Evidence [Dkt. No. 240]; GRANTS the Emergency Motion for Sanctions [Dkt. Nos. 245 & 251]; and GRANTS in part and DENIES in part the Motion to Compel and for Sanctions Against All Defendants [Dkt. No. 281]. See generally Brown v. Bridges, No. 3:12–cv–4947–P, 2015 WL 410062, at *1–*4 (N.D.Tex. Jan. 30, 2015)(explaining that, when a district judge refers a motion for sanctions to a magistrate judge, the sanction chosen by the magistrate judge, rather than the sanction sought by the party, governs the determination of whether Federal Rule of Civil Procedure 72(a) or 72(b)applies and that, when the magistrate judge finds that dismissal or another sanction disposing of a claim or defense in unwarranted, the motions should be characterized as non-dispositive and may be ruled on by the magistrate judge).

Background

Defendant Borden-Perlman Insurance Agency, Inc. ("BP") has previously been sanctioned twice under Federal Rule of Civil Procedure 37(a)(5)in this litigation. SeeDkt. Nos. 196 & 237. Although Plaintiffs have argued for additional sanctions previously under Rule 37or the Court's inherent powers, the Court has to this point declined to order sanctions beyond awards of fees and expenses mandated by Rule 37(a)(5). SeeDkt. Nos. 170, 192, & 193.

Plaintiffs now seek additional sanctions in a series of motions.

First, Plaintiffs seek sanctions against Defendants Anthony L. Trombetta, BP, Kelly Myers, and Dave Icenhower and their counsel, Sandra Liser, for Ms. Liser's contacts and attempted contacts with current employees and former employees whom she knew or should have known are represented by Plaintiffs' attorneys. Plaintiffs seek both $50,000 in monetary damages plus expenses and an order prohibiting Defendants' counsel from any further attempts to contact Plaintiffs' current and former employees, requiring Defendants' counsel to provide a detailed summary of all contacts by the attorneys or by anyone (such as private investigation firms) acting at the attorneys' directions, and stating that all information or evidence gathered as a result of the improper contacts with Plaintiffs' employees and former employees is deemed inadmissible. See Dkt. Nos. 245 & 251.

Second, Plaintiffs seek sanctions in the form of an adverse inference jury instruction based on Defendant Anthony Trombetta's destruction of emails shortly before he terminated his employment with Plaintiffs and began working for BP. SeeDkt. No. 240.

Third, in an omnibus motion, Plaintiffs seek sanctions for false deposition testimony by Mr. Trombetta and BP corporate representative Jeff Perlman; for Mr. Myers's preparing documents that contain false information, which Mr. Perlman used at his deposition; for providing to the Court affidavits by Ms. Liser and Mr. Myers that contained false statements; for Defendants' violating the Court's prior discovery order, the July 15, 2015 Order on Pending Discovery Motions [Dkt. No. 170]; for Defendants' violating the Agreed Temporary Restraining Orders and Agreed Temporary Injunction; and for several "other obstreperous acts." Plaintiffs seek $100,000 in monetary sanctions plus expenses and an order allowing a third-party vendor to forensically locate, capture, and copy electronically stored information from both BP and from Mr. Trombetta's personal Hotmail account. Plaintiffs also ask the Court to hold Defendants in civil contempt for violations of the Agreed Temporary Restraining Orders and the Agreed Temporary Injunction. See Dkt. No. 232.

Fourth, Plaintiffs move to compel document production from Defendants in response to Plaintiffs' most recently served requests for production and seek sanctions for Defendants' failure to provide responsive documents and complete responses, including not only attorneys' fees and expenses but also a "significant monetary sanction meant to stop further discovery abuse by Defendants" and "a jury instruction advising the jury that the Court was forced to intervene and order Defendants to respond to discovery and produce documents." Plaintiffs assert that Defendants failed to produce any documents in response to their most recently served requests, that Defendants' responses consist of boilerplate objections, and that Defendants' responses violate the Court's July 15, 2015 Order on Pending Discovery Motions [Dkt. No. 170]. See Dkt. No. 281.

Legal Standards and Analysis

I. Emergency Motion for Sanctions and Request for Order

Plaintiffs seek sanctions against Defendants and their counsel, Sandra Liser, for hiring a private investigation firm to contact Plaintiffs' current and former employees to attempt to obtain confidential and privileged information from those employees after being informed that Plaintiffs' counsel represented former employees and despite an agreement not to contact them. See Dkt. Nos. 245 & 251. Plaintiffs contend that Ms. Liser's conduct was unethical and violated the rules of professional responsibility.

A. Legal Standards

Case law in the Fifth Circuit addressing an attorney's alleged violations of rules of professional responsibility typically arises in the context of motions to disqualify counsel or disciplinary proceedings for attorney misconduct. See, e.g., In re Am. Airlines, Inc., 972 F.2d 605 (5th Cir.1992); N.D. TEX. L. CIV. R . 83.8(e) (defining "Unethical Behavior" as "conduct undertaken in or related to a civil action in this court that violates the Texas Disciplinary Rules of Professional Conduct" for purposes of attorney discipline).

For the reasons discussed below, the Court will not analyze Plaintiffs' request for sanctions under the rubric of a violation of a rule of professional responsibility but rather as an allegation of conduct in the course of this litigation that is sanctionable under the Court's inherent power.

"A district court has the inherent authority to impose sanctions in order to control the litigation before it." Positive Software Solutions, Inc. v. New Century Mortg. Corp., 619 F.3d 458, 460 (5th Cir.2010)(internal quotation marks omitted). This includes "the power to levy sanctions in response to abusive litigation practices." In re Stone, 986 F.2d 898, 902 (5th Cir.1993). Accordingly, "[a] district court has inherent power to sanction attorneys for bad faith conduct in litigation." Crowe v. Smith, 261 F.3d 558, 563 (5th Cir.2001).

But these inherent powers "ought to be exercised with great caution" and are reserved for "conduct which abuses the judicial process." Chambers v. NASCO, Inc., 501 U.S. 32, 43, 44-45, 111 S.Ct. 2123, 115 L.Ed.2d 27 (1991)(internal quotation marks omitted). "The threshold for the use of the inherent power sanction is high." Natural Gas Pipeline Co. of Am. v. Energy Gathering, Inc., 86 F.3d 464, 467 (5th Cir.1996).

Although "the inherent power extends to a full range of litigation abuses," the United States Supreme Court has cautioned that, "[b]ecause of their very potency, inherent powers must be exercised with restraint and discretion." Chambers, 501 U.S. at 44, 46, 111 S.Ct. 2123. "A primary aspect of that discretion is the ability to fashion an appropriate sanction for conduct which abuses the judicial process." Id.at 44–45, 111 S.Ct. 2123.

"A court may assess attorney's fees under its inherent powers when a party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons" but "must make a specific finding that the sanctioned party acted in bad faith in order to impose such sanctions." Matta v. May, 118 F.3d 410, 416 (5th Cir.1997). And any sanctions ordered should be "the least severe sanctions adequate to accomplish the purpose for which the sanction was imposed." Topalian v. Ehrman, 3 F.3d 931, 938 (5th Cir.1993); accord Toon v. Wackenhut Corr. Corp., 250 F.3d 950, 952–53 (5th Cir.2001).

B. Analysis

The evidence before the Court shows that, on August 10 and 16, 2015, Ms. Liser contacted Plaintiffs' counsel about requested depositions, including the deposition of Janey Brown, and, after being informed that Ms. Brown is no longer an employee, asked, "[s...