Hester v. Vision Airlines, Inc.

• Decision Date: 18 July 2012
• Docket Number: Nos. 11–15646,11–15761.,s. 11–15646
• Parties: Gerald HESTER, Plaintiff–Appellee, v. VISION AIRLINES, INC., Defendant–Appellant. Gerald Hester, Plaintiff–Appellant, v. Vision Airlines, Inc., Defendant–Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

687 F.3d 1162

83 Fed.R.Serv.3d 122

12 Cal. Daily Op. Serv. 8125

Gerald HESTER, Plaintiff–Appellee,

v.VISION AIRLINES, INC., Defendant–Appellant.

Gerald Hester, Plaintiff–Appellant,

v.Vision Airlines, Inc., Defendant–Appellee.

Nos. 11–15646, 11–15761.

United States Court of Appeals,Ninth Circuit.

Argued and Submitted April 19, 2012.

Filed July 18, 2012.

Edward H. Wasmuth, Jr., Smith, Gambrell & Russell, LLP, Atlanta, GA, for the defendant-appellant-cross-appellee.

David M. Buckner, Grossman, Roth, P.A., Coral Gables, FL, for the plaintiff-appellee-cross-appellant.

Appeal from the United States District Court for the District of Nevada, Roger L. Hunt, Senior District Judge, Presiding. D.C. No. 2:09–cv–00117–RLH–RJJ.

Before: ALFRED T. GOODWIN, STEPHEN REINHARDT, and MARY H. MURGUIA, Circuit Judges.

OPINION

GOODWIN, Circuit Judge:

Appellant Gerald Hester, a former pilot for Vision Airlines, sued Vision on behalf of a Class of other pilots and flight crew employees to recover “hazard pay,” which Hester and the Class alleged Vision had accepted on their behalf and never paid to them. After nearly two years of discovery disputes between Vision and the Class, the district court sanctioned Vision by striking its Answer, entered default judgment against Vision, and held a jury trial to determine damages.

Vision appeals, arguing (1) that the district court abused its discretion by striking Vision's Answer, (2) that the claims in the Complaint are legally insufficient to support the default judgment, and (3) that the district court abused its discretion by certifying the Class. We reject Vision's arguments and affirm those orders. The Class cross-appeals, arguing that the district court erred in dismissing, on the morning of trial, the Class's claim for punitive damages. We agree and reverse the order dismissing the Class's claim for punitive damages.

I. Facts and procedural history

During the U.S. military occupation of Iraq and Afghanistan, the United States established an “air bridge” to deliver supplies through war zones to U.S. posts in Baghdad, Iraq, and Kabul, Afghanistan. The United States contracted with private airlines to deliver supplies to those posts, and it provided “hazard pay” for the pilots and crew members of those airlines.

In 2004, the United States contracted with Capital Aviation to provide bi-weekly flights to Baghdad and Kabul. The contract provided one set of funds for the flight services by Capital Aviation and another set of funds for the hazard pay for the pilots and crew members.

Pursuant to the contract, every pilot, first officer, and international relief officer was to receive $5000 in hazard pay per round-trip flight. Every other crew member on the flights, including attendants and mechanics, was to receive $3000 in hazard pay per round trip.

The contract contained a “pass-through” provision to ensure that the hazard pay actually made it to the pilots and crew members who were risking their lives by transporting supplies through war zones. The pass-through provision required Capital Aviation to pass the hazard pay through to any subcontractors, who were also required to pass the hazard pay through to their employees without taking a cut for themselves.

Capital Aviation subcontracted with Vision Airlines to provide the flights to and from Baghdad and Kabul. For the average round-trip flight, Capital Aviation received from the United States $27,000 in hazard pay on behalf of the pilots and crew members. Capital Aviation then paid that full amount to Vision.

In the summer of 2005, at the beginning of Vision's performance under the contract, Vision did pay some of the hazard pay to its pilots, but by August of that year, Vision stopped paying hazard pay to any of its employees, and it kept the money for its own benefit. In addition to ceasing its intermittent distribution of hazard pay, Vision also fired all pilots and crew members who knew about or had previously received hazard pay, and it replaced them with employees who were unaware that they were entitled to it.

In January 2009, Hester filed a class action Complaint in district court on behalf of Vision's pilots and crew members on the relevant flights. The court certified the Class. The Class's theories included unjust enrichment, money had and received, and conversion. The Complaint alleged that, since September 2005, Vision had received and retained more than $21 million in hazard pay on behalf of its pilots and flight crews, and the Class sought damages in that amount.

In April 2009, the Class sent Vision interrogatories and requests for production, requesting “all communications and documents that relate to hazard pay.” Vision responded by affirming that “Defendant has no documents or communications relating to hazard pay.”

In July, the Class filed a motion to compel Vision to produce the requested documents and to respond to the interrogatories. In October, the court held a hearing on the motion to compel. At the hearing, Vision told the court that it had not produced the requested documents because “there is no hazard pay.” In response, the Class's counsel showed the court some of Vision's invoices, which the Class had obtained by subpoenaing third parties in Virginia. At least one invoice contained line entries such as “hazardous duty bonus,” “hazardous duty flight deck bonus,” “hazardous duty bonus, flight crew,” and “hazardous duty bonus, cabin crew.” Vision claimed that that invoice was merely an “internal document” that Vision had used to calculate the total bid, and because Vision never actually paid a hazardous duty pay differential to any of its flight crews, there was no hazard pay. Vision also told the court that, in the contract between Vision and its upstream contractors, “there is no amount that is separated or allocated for hazard pay.”

At the end of the hearing, the court denied the Class's motion to compel because the court determined that the parties had failed to meet and confer sufficiently to figure out what each side needed to produce. The court granted a 120–day discovery extension.

Vision eventually turned over some documents to the Class, but before doing so, Vision used a black marker to obscure large portions of those documents, redacting what appeared to be text, numbers, and invoice entries. Vision did not provide a privilege log or claim that the redacted information was privileged. Because of the redacted documents, the Class's expert witness was not able to complete his report by the deadline, so the Class filed a motion to extend that deadline.

The Class filed a second motion to compel, and in September 2010, the court granted that motion and ordered Vision to produce the requested documents by September 17, 2010. On September 29, the court held a pretrial conference, at which it learned that Vision still had not produced the documents as ordered. The court again ordered Vision to produce the documents. On October 5, the day after the trial was initially scheduled to begin, Vision still had not complied with the order to produce the documents, so Hester filed a motion for sanctions.

On October 8, the court scheduled a hearing and ordered Vision to show cause why the court should not strike Vision's Answer and enter a default judgment. The court's written order to show cause stated that “[t]he Court believes that Vision's conduct has interfered with the Court's ability to hear this case, delayed litigation, disrupted the Court's timely management of its docket, wasted judicial resources, and threatened the integrity of the Court's orders and the orderly administration of justice.” The written order also warned Vision that “[f]ailure to comply with the Local Rules of Practice, the Federal Rules of Civil Procedure, and the Court's orders may result in sanctions, up to and including case-dispositive sanctions.”

On October 14, Vision responded to the motion for sanctions by providing a few of the requested documents. On October 15 and October 22, Vision filed supplemental responses, both of which contained a few more responsive documents.

On October 25, the court held a hearing on the show cause order. At that hearing, Harold Gewerter, Vision's counsel, affirmed that he had turned over everything that Vision had provided him:

“No, everything that we have has been provided, Your Honor.” “[T]here's been no intentional delays whatsoever on my part and none on behalf of my client, it's just the system and the nature of the program and getting the proper approvals.” “[T]hey have everything that my client has or has access to, Your Honor. And I have made sure that within 24 hours of me receiving anything, I've sent it out.” “[T]hey have every document. There's nothing else out there. There's no surprises that are going to be produced at trial.” “I assure this Court, there has been no intentional delay whatsoever. Everything that's been done is fast as it can be done....” “[T]here are no other documents. I've asked that question ad nauseam to my client and other people.” “We have produced all of the records that we have.” “My client unfortunately doesn't keep a perfect set of records, it's been a problem and—but every record that we did have or do have has been turned over and they now have them.”

At the hearing, the court also discussed Vision's failure to produce a privilege log for the redacted material and the possibility of sanctioning Vision for forcing the Class to litigate with a third party in Virginia to obtain documents that Vision should have produced. The court warned Vision on the record that, based on Vision's intentional discovery violations, the court has the authority to strike Vision's Answer and to enter a default judgment.

At one point in the hearing, the Class identified, as an example of Vision's insufficient production, a document that Vision had produced only in heavily redacted form. That single-page document was marked as “page 20,” although Vision had not produced ...