Ofs Fitel, LLC v. Epstein, Becker and Green, P.C., No. 07-10200.

• Decision Date: 28 November 2008
• Docket Number: No. 07-10200.
• Citation: 549 F.3d 1344
• Parties: OFS FITEL, LLC, OFS Brightwave, LLC, Plaintiffs-Appellants, v. EPSTEIN, BECKER AND GREEN, P.C., Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

549 F.3d 1344

OFS FITEL, LLC, OFS Brightwave, LLC, Plaintiffs-Appellants, v. EPSTEIN, BECKER AND GREEN, P.C., Defendant-Appellee.

No. 07-10200.

United States Court of Appeals, Eleventh Circuit.

November 28, 2008.

Jeffrey O. Bramlett, David G.H. Brackett, Bondurant, Mixson & Elmore, LLP, Atlanta, GA, for Plaintiffs-Appellants.

Robert B. Wedge, Shapiro, Fussell, Wedge & Martin, LLP, Atlanta, GA, for Defendant-Appellee.

Appeal from the United States District Court for the Northern District of Georgia.

Before TJOFLAT, HULL and WILSON, Circuit Judges.

HULL, Circuit Judge:

In this attorney negligence case, plaintiffs OFS Fitel LLC and OFS BrightWave LLC (collectively, "Fitel") appeal the district court's final judgment of dismissal, contending the district court abused its discretion in imposing discovery sanctions. Defendant Epstein, Becker & Green, P.C. ("EBG") moved to dismiss the appeal for lack of jurisdiction. After review and oral argument, we conclude that jurisdiction exists over the appeal, and we affirm in part and reverse in part the district court's sanctions order and dismissal of Fitel's claims.

I. BACKGROUND

A. Fitel Purchases OFS and Considers No Double Dipping Policy

In November 2001, Fitel's parent company Furukawa Electric Company, Ltd. ("Furukawa") purchased Optical Fiber Solutions ("OFS"), a division of Lucent Technologies, Inc. that supplied fiber optic cable and materials to the telecommunications industry. Furukawa formed Fitel to own and operate OFS after the purchase, and, in connection with the purchase, hired EBG, a law firm, to provide legal advice regarding compliance with American labor and employment law.

Upon consummation of the purchase, many OFS management employees became Fitel's employees. Fitel wished to provide these employees with a variety of benefits, including retirement and severance packages and paid vacation time, which would increase based on their years of service, including their time at Lucent. Some of these employees were already eligible for full retirement benefits from Lucent; these employees generally were older than those who were not yet full-retirement-eligible. Fitel's management preferred not to permit these employees to "double dip" by taking full retirement benefits from Lucent while also having their years of Lucent service increase their benefits from Fitel.

Thus, Fitel adopted a policy giving non-retirement-eligible employees at Fitel full credit for their years of service at Lucent, while treating retirement-eligible employees as newly hired for purposes of calculating their benefits at Fitel. According to Fitel, EBG attorneys researched whether Fitel's proposed "no double dipping" policy might violate the Age Discrimination in Employment Act ("ADEA"), 29 U.S.C. § 621 et seq., but never warned Fitel that the policy could subject Fitel to viable or potentially viable claims or lawsuits under the ADEA.

B. ADEA Claims Against Fitel

During the two years after its OFS purchase, Fitel engaged in a series of layoffs of OFS/Fitel employees. Beginning in July 2003, Fitel received demand letters from several laid-off former OFS/Fitel employees contending that Fitel's less favorable treatment of older workers constituted actionable age discrimination under the ADEA. Fitel retained independent counsel, investigated the claims, and determined the claims had merit. Fitel settled the ADEA claims at a cost of $1.9 million in payments to the employees and approximately $450,000 in legal fees.

C. Fitel Sues EBG

In October 2005, Fitel sued EBG in state court, asserting claims for legal malpractice, breach of fiduciary duty, unjust enrichment, attorney's fees, and punitive damages. The crux of each claim was that EBG, in failing to warn Fitel of the "no double dipping" policy's potential non-compliance with the ADEA, had rendered deficient legal advice and failed to meet the standard of care imposed by the attorney-client relationship. EBG thereby committed malpractice, breached its fiduciary duty, and was unjustly enriched. EBG's professional negligence was a core element of each claim. As Georgia law requires in professional negligence actions, Fitel attached to its complaint an expert's affidavit identifying the defendant's allegedly negligent acts and the factual bases for the charge of negligence. Fitel's expert was Atlanta attorney Nancy Rafuse. Fitel's complaint sought to recover not only the ADEA settlement money and the fees paid to EBG but also Fitel's attorney's fees incurred in bringing the instant action.

EBG removed the case to federal district court because diversity jurisdiction existed. The district court set the close of discovery for August 13, 2006.

EBG served upon Fitel a request for production of "all documents reflecting [Fitel's] fee agreement or other agreements with the attorneys or law firms representing [Fitel] in this Action; all invoices [Fitel] received from such attorneys or law firms and all ... other documents reflecting payment made to such attorneys" (the "Document Request"). Fitel's response objected on privilege, work product immunity, and relevance grounds but, subject to those objections, agreed to "produce documents responsive to [the Document Request] that reflect the amounts of attorneys fees billed to and paid by [Fitel] in connection with this action (redacted, if necessary, to protect privileged information)."

A dispute arose over what documents Fitel would produce and when production would occur. Fitel indicated that it would produce a summary of its counsel's bills, while EBG insisted on the actual bills. Fitel reiterated to EBG its position that a summary was sufficient and stated that it would provide the summary as soon as EBG "confirm[ed] that if we provide the [summary], EBG will not contend that [Fitel's] response is insufficient." Because EBG never agreed that a summary was enough, Fitel never produced it. Fitel never produced the actual bills or a fee agreement either.

Another dispute arose over Rafuse's written expert report due under Federal Rule of Civil Procedure 26. As stated above, Fitel identified Rafuse as its expert on the legal standard of care and attached her expert affidavit to its complaint. Fitel confirmed its designation of Rafuse as its expert witness in its post-removal initial disclosures. On May 18, 2006, Fitel noticed for late June the depositions of four EBG attorneys living in New York.¹ On June 12, 2006, Fitel wrote EBG in an attempt to schedule these depositions by agreement. Fitel's letter informed EBG that Rafuse's expert report would "take into account the deposition testimony" of those EBG attorneys and that "[w]e believe her report can be completed within thirty (30) days of the completion of these four depositions." Throughout this case, Fitel consistently has contended it needed information from the EBG attorneys about what they did in representing Fitel in order for Rafuse to complete her report. As noted later, Rule 26(a)(2)(B) requires that an expert's written report contain not only a statement of her opinions but also, among other things, the "data or other information considered by the witness in forming the opinions."²

On June 14, 2006, EBG filed a motion and brief for extension of discovery from August 13, 2006 until December 13, 2006. EBG's brief argued the discovery extension was needed for several reasons, including that Fitel's expert report would not be prepared until EBG attorneys were deposed and then EBG needed time to depose that expert:

On June 12, 2006, counsel for Plaintiffs informed counsel for defendant that no expert report will be prepared by said expert until approximately thirty days after Plaintiff[s] depose[] certain attorneys employed by EBG (which depositions were originally noticed by Plaintiffs for the week of June 26, 2006 and which are currently the subject of discussion between counsel). Even if those depositions were taken on the dates originally noticed by Plaintiffs, said expert report would not be supplied before August of 2006, with the present discovery deadline being August 13, 2006. Once such an expert report is furnished to it, Defendant will want to depose said expert and evaluate the necessity of identifying an expert to testify in response thereto.

(Citation omitted). Thus, EBG acknowledged it was aware Fitel needed the EBG attorneys' depositions before Fitel would be producing its expert's written report. Shortly thereafter, the parties submitted a consent order, which the district court signed, extending the discovery period until October 31, 2006. The depositions of the EBG attorneys did not take place in June 2006 as originally noticed, and two of the four were delayed until September 2006 for the convenience of the attorneys. After EBG informed Fitel that one of the EBG attorneys' depositions could not be scheduled until September 14, Fitel sent a letter to EBG reminding EBG that it needed the deposition to finalize Rafuse's expert report:

[W]e remind you that we will need approximately thirty (30) days after the completion of the EBG lawyer depositions to finalize our expert report. If these gentlemen cannot find any earlier opening in their schedules, you should not expect our expert report until mid-October.

The last of the four EBG attorneys was deposed on September 27, 2006, and Fitel's counsel obtained the transcript from the court reporter on October 16, 2006. Fitel produced Rafuse's written report on November 3, 2006, which was eighteen days after receiving the last deposition transcript but three days after the close of discovery on October 31, 2006.

D. Discovery Motions, Hearing, and Sanctions Rulings

In late October 2006, EBG filed a series of discovery-related motions. Specifically, EBG moved the district court to, among other things: (1) exclude Fitel's claim for attorney's fees because of its failure to produce the bills from its current legal counsel; and (2) exclude the testimony of...