Lee v. Max Int'l Llc

• Decision Date: 03 May 2011
• Docket Number: No. 10–4129.,10–4129.
• Parties: Markyl LEE, a/k/a Markyl Angel Lee; Promises to Keep, LLC, a Florida limited liability company, Plaintiffs–Appellants,v.MAX INTERNATIONAL, LLC, a Utah limited liability company, Defendant–Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

638 F.3d 1318

79 Fed.R.Serv.3d 570

Markyl LEE, a/k/a Markyl Angel Lee; Promises to Keep, LLC, a Florida limited liability company, Plaintiffs–Appellants,

v.MAX INTERNATIONAL, LLC, a Utah limited liability company, Defendant–Appellee.

No. 10–4129.

United States Court of Appeals, Tenth Circuit.

May 3, 2011.

Stuart Miller, Laguna Hills, CA, for Plaintiffs–Appellants.James T. Blanch (Erik A. Christiansen and Katherine E. Venti, with him on the brief), Parsons, Behle & Latimer, Salt Lake City, UT, for Defendant–Appellee.Before MURPHY, HARTZ, and GORSUCH, Circuit Judges.GORSUCH, Circuit Judge.

How many times can a litigant ignore his discovery obligations before his misconduct catches up with him? The plaintiffs in this case failed to produce documents in response to a discovery request. Then they proceeded to violate not one but two judicial orders compelling production of the requested materials. After patiently affording the plaintiffs chance after chance, the district court eventually found the intransigence intolerable and dismissed the case as sanction. We affirm. Our justice system has a strong preference for resolving cases on their merits whenever possible, but no one, we hold, should count on more than three chances to make good a discovery obligation.

The case started ordinarily enough. In February 2009, Markyl Lee and his wholly owned company, PTK, filed a complaint alleging that Max International had breached a contract with them. In the usual course discovery followed and Max propounded various document requests. Unsatisfied with the plaintiffs' production, Max filed a motion to compel.

So far, a little off track but nothing out of the ordinary. Soon, however, things got worse. In October 2009, a magistrate judge granted Max's motion and ordered production of a variety of documents. Despite the order, only a trickle of material followed. Plaintiffs still failed to turn over many items Max had requested and the court had ordered produced.

This led Max to file a motion for sanctions seeking dismissal of the case. As happens in these things, much motions practice followed. Eventually, the magistrate judge in January 2010 confirmed that the plaintiffs had “blatant [ly]” and without apparent excuse flouted the October 2009 order. Aplt.App. at 398. Even so, the magistrate stopped short of granting Max's request for dismissal. Instead, the court chose to give the plaintiffs one more chance to produce the requested documents. At the same time, the magistrate warned plaintiffs that “continued non-compliance will result in the harshest of sanctions.” Id. The magistrate gave plaintiffs until February 26, 2010 to produce the requested—and now twice compelled—discovery.

On January 25, 2010, the plaintiffs filed with the court a declaration certifying that they had now produced all the requested documents. But once again Max couldn't find all of the requested documents. So the very next day Max sent a letter claiming that various materials still remained missing. Receiving no reply to its letter, on February 3 Max renewed its motion for sanctions. Two days after Max filed its motion, plaintiffs produced some of the missing records. Later in the month, the plaintiffs sent along yet more discovery materials.

When the magistrate heard arguments on Max's renewed motion for sanctions, she was not well pleased. She issued a report and recommendation to the district court judge finding that the plaintiffs had violated not only her October 2009 but also her January 2010 order—and that the plaintiffs violated the latter order despite having been expressly warned that any further problems could result in dismissal. Pursuant to Rule 37 of the Federal Rules of Civil Procedure, the magistrate recommended to the district court that it grant Max's motion and dismiss the case as sanction for plaintiffs' misconduct. In June 2010, the district court did just that, and it is from this order the plaintiffs now appeal.

We view challenges to a district court's discovery sanctions order with a gimlet eye. We have said that district courts enjoy “very broad discretion to use sanctions where necessary to insure ... that lawyers and parties ... fulfill their high duty to insure the expeditious and sound management of the preparation of cases for trial.” In re Baker, 744 F.2d 1438, 1440 (10th Cir.1984) (en banc); see also Patterson v. C.I.T. Corp., 352 F.2d 333, 336 (10th Cir.1965). The Supreme Court has echoed this message, admonishing courts of appeals to beware the “natural tendency” of reviewing courts, far from the fray, to draw from fresh springs of patience and forgiveness, and instead to remember that it is the district court judge who must administer (and endure) the discovery process. See Nat'l Hockey League v. Metropolitan Hockey Club, 427 U.S. 639, 642, 96 S.Ct. 2778, 49 L.Ed.2d 747 (1976). Commentators, too, have advised us to remember that “the district courts must have latitude to use severe sanctions for purposes of general deterrence.” See Charles Alan Wright, Arthur R. Miller, Mary Kay Kane & Richard L. Marcus, Federal Practice & Procedure § 2284, at 444.

No doubt district judges enjoy such special discretion in this arena because of the comparative advantages they possess. In the criminal sentencing context, the district court receives special deference because it has a better vantage than we to assess the defendant, the crime, the credibility of all involved. And in some sense discovery disputes are analogous. The district court's active participation in the discovery motions practice affords it a superior position than we—with but a cold record to review—for deciding what sanction best fits the discovery “crime,” both as a matter of justice in the individual case and “to deter [others] who might be tempted to [similar] conduct.” Nat'l Hockey League, 427 U.S. at 643, 96 S.Ct. 2778. Discovery disputes are, for better or worse, the daily bread of magistrate and district judges in the age of the disappearing trial. Our district court colleagues live and breathe these problems; they have a strong situation sense about what is and isn't acceptable conduct; by contrast, we encounter these issues rarely and then only from a distance. See Regan–Touhy v. Walgreen Co., 526 F.3d 641, 647 (10th Cir.2008).

We hold that the district court's considerable discretion in this arena easily embraces the right to dismiss or enter default judgment in a case under Rule 37(b) when a litigant has disobeyed two orders compelling production of the same discovery materials in its possession, custody, or control. Plaintiffs in this case were given no fewer than three chances to make good their discovery obligation: first in response to Max's document requests, then in response to the October 2009 order, and finally in response to the January 2010 order. Plaintiffs failed at all three turns. And three strikes are more than enough to allow the district court to call a litigant out. Of course, our legal system strongly prefers to decide cases on their merits. Because of this, we have held that a dismissal or default sanctions order should be predicated on “ ‘willfulness, bad faith, or [some] fault’ ” rather than just a simple “inability to comply.” Archibeque v. Atchison, Topeka & Santa Fe Ry., 70 F.3d 1172, 1174 (10th Cir.1995) (quoting Nat'l Hockey League, 427 U.S. at 640, 96 S.Ct. 2778). Likewise, the Federal Rules protect from sanctions those who lack control over the requested materials or who have discarded them as a result of good faith business procedures. See, e.g., Fed.R.Civ.P. 37(e) (providing a safe harbor for those who “fail[ ] to provide electronically stored information lost as a result of the routine, good-faith operation of an electronic information system”). But a party's thrice repeated failure to produce materials that have always been and remain within its control is strong evidence of willfulness and bad faith, and in any event is easily fault enough, we hold, to warrant dismissal or default judgment.

Back in 1937 the drafters of the Federal Rules promised that their project would help ensure “the just, speedy, and inexpensive determination of every action.” Fed.R.Civ.P. 1. To date, that promise remains elusive, more aspirational than descriptive. But it is surely the case that if court orders can be repeatedly flouted we will only retreat further from the goal. When a party feels at liberty to disobey not just a discovery request but two court orders compelling production of the same material in its control, weeks or months (as in this case) pass without progress in the litigation. Hours, days, weeks of lawyers' time are consumed at great expense. Focus shifts from the merits to the collateral and needless. This is not speedy, inexpensive, or just. Just the opposite. And no doubt tolerating such behavior would encourage only more of it. But there is such thing as discovery karma. Discovery misconduct often may be seen as tactically advantageous at first. But just as our good and bad deeds eventually tend to catch up with us, so do discovery machinations. Or at least that's what Rule 37 seeks to ensure. See Roadway Express, Inc. v. Piper, 447 U.S. 752, 763, 100 S.Ct. 2455, 65 L.Ed.2d 488 (1980) (“Rule 37 sanctions must be applied diligently....”); The Sedona Conference, The Case for Cooperation, 10 Sedona Conf. J. 339, 342 (2009); Final Report on the Joint Project of the American College of Trial Lawyers Task Force on Discovery & The Institute for the Advancement of the American Legal System at 2 (Rev. Apr. 15, 2009), available at http:// www. du. edu/ legalinstitute/ publications% 20rules. html.

Of course, the plaintiffs urge us that theirs isn't a case warranting dismissal.

First, they note, the district court's dismissal order was expressly predicated on a finding that they violated two orders—and this, they say, they simply didn't do. To be more exact, the plaintiffs don't question that they failed to...