Short v. Marinas U.S. Ltd. P'ship & Another.1

• Decision Date: 01 March 2011
• Docket Number: No. 10–P–565.,10–P–565.
• Court: Appeals Court of Massachusetts
• Parties: Kenneth F. SHORTv.MARINAS USA LIMITED PARTNERSHIP & another.1

78 Mass.App.Ct. 848

942 N.E.2d 197

Kenneth F. SHORT

v.MARINAS USA LIMITED PARTNERSHIP & another.1

No. 10–P–565.

Appeals Court of Massachusetts, Suffolk.

Argued Dec. 14, 2010.Decided March 1, 2011.

Robert E. Collins, Boston, for the defendants.Joseph J. Coppola, Plymouth, for the plaintiff.Present: MILLS, GRAINGER, & FECTEAU, JJ.GRAINGER, J.

The plaintiff's boat was destroyed by a fire originating on a neighboring boat while both vessels were docked at the defendants' marina in Quincy. As detailed below, a judge of the Superior Court entered a default judgment against the defendants on numerous claims as a sanction for repeated discovery violations. On appeal, the defendants contend that the judge abused his discretion in issuing the default judgment. They further contend that the judge incorrectly applied State law, in lieu of Federal admiralty law, in calculating the plaintiff's damages.

Background. The plaintiff, Kenneth F. Short, filed the suit giving rise to this appeal on February 9, 2006, alleging that, as a direct result of the defendants' negligence, a fire originating on a nearby vessel owned by Michael Hogan was permitted to spread and destroy his boat. Short also named Hogan and Hogan's insurance broker, Old Harbor Insurance Agency (Old Harbor), as codefendants, alleging breach of contract for Old Harbor's failure to procure adequate liability insurance for Hogan—a negligent act which allegedly prevented Short, as a third-party beneficiary, from receiving compensation. Short ultimately settled his claim against Old Harbor for $25,000, and the claim against Hogan was voluntarily dismissed.

Short simultaneously filed a separate lawsuit against his own insurance broker, J. Barry Driscoll Insurance Agency (Driscoll), alleging a breach of contract—similar to that of Old Harbor—for failure to procure adequate insurance on his own boat. He sought damages for his expenditure of attorney's fees and other costs incurred in a coverage dispute with his insurer, OneBeacon America Insurance Company (OneBeacon). The suit against Driscoll subsequently settled for $12,000. After succeeding in the coverage litigation against OneBeacon, Short received an additional $75,000. OneBeacon retained its right to subrogate the claim.

Failing to reach a settlement with the remaining defendants, the plaintiff initiated discovery on May 10, 2007, serving them with notices of deposition and document requests pursuant to Mass.R.Civ.P. 30(b)(6), 365 Mass. 780 (1974).² The defendants responded with general objections, including an objection to the production of any privileged material, but did not object to any of the specific requests. Four months later, after several attempts to compel production from the defendants, the plaintiff filed his first request for sanctions pursuant to Mass.R.Civ.P. 37, as amended, 423 Mass. 1406 (1996). The motion judge granted the plaintiff's motion in part on October 26, 2007, but declined to enter a default judgment against the defendants. Rather, the judge ordered the defendants to “produce all requested documents ... without objection” by November 16, 2007. In what appears to have become a reflexive practice on the part of the defendants, they continued to provide incomplete responses to discovery requests. Witnesses produced to testify on the defendants' behalf were unprepared and unable to confirm the extent to which the defendants had attempted to comply with document requests.

Short filed his second motion for rule 37 sanctions on February 19, 2008, requesting that a default judgment enter against the defendants in view of their continued failure to produce requested documents. Citing “the absence of any evidence that the defendants have knowingly failed to produce any requested documents,” the judge denied the motion.³ The judge noted, however, that were Short to subpoena the files of the defendants' insurance agents or insurers, and discover “relevant, responsive documents that have not heretofore been produced, sanctions against the defendants and/or their counsel would certainly be in order.”

On June 27, 2008, Short served the defendants with a second rule 30(b)(6) notice of deposition and request for production. Utilizing language identical to the first request, Short once again requested “[a]ny and all documents relating to claims, demands, lawsuits, actions, charges or cases by or against Defendant–Marinas, Defendant–Flagship or their insurers relating to the Fire on February 17, 2003.” A subsequent deposition of the defendants' insurer, Chubb Insurance Company (Chubb), revealed several documents within its possession that had not previously been produced. Chubb also produced a privilege log outlining more than one hundred additional documents withheld on the grounds of either attorney-client privilege or work product. These documents had not previously been identified by the defendants as withheld for reasons of privilege and were withheld both before and after the judge's October 26, 2007, order requiring that all documents be produced “without objection.”

On August 5, 2008, Short filed his third motion for sanctions, again requesting that a default judgment enter against the defendants on all claims for their repeated failure to comply with the order dated October 26, 2007. After a hearing, the judge entered a default judgment against the defendants—nearly eighteen months after the initiation of pretrial discovery. In setting forth his findings, the judge noted that “it is clear beyond peradventure that the defendants have failed to comply with the court's Order ... and that their representations to the contrary are untrue.” Concluding that the defendants' failure to comply was “knowing and intentional,” the judge scheduled a hearing for the assessment of damages. Based on evidence introduced at the hearing and applying State law, the judge awarded the plaintiff $83,250 in damages, as well as prejudgment interest at the prescribed State rate.

Discussion. A. Entry of default judgment. Pursuant to Mass.R.Civ.P. 37(b)(2)(C), as amended, 390 Mass. 1208 (1984), a judgment of default may enter against a party who disobeys a discovery order. Our review of discovery sanctions, including defaults, is governed by the well-established abuse of discretion standard. See Greenleaf v. Massachusetts Bay Transp. Authy., 22 Mass.App.Ct. 426, 429, 494 N.E.2d 402 (1986); Keene v. Brigham & Women's Hosp., Inc., 56 Mass.App.Ct. 10, 16, 775 N.E.2d 725 (2002), S.C., 439 Mass. 223, 235, 786 N.E.2d 824 (2003).⁴ “We do not consider [a judge's] discretion abused unless its exercise has been characterized by arbitrary determination, capricious disposition, whimsical thinking, or idiosyncratic choice.” Greenleaf v. Massachusetts Bay Transp. Authy., supra at 429, 494 N.E.2d 402, citing Davis v. Boston Elev. Ry., 235 Mass. 482, 496, 126 N.E. 841 (1920).

When reviewing a judge's decision, “[t]he consideration[s] to be balanced ... are, on the one hand, a concern about giving parties their day in court, and, on the other, not so blunting the [discovery] rules that they may be ignored ‘with impunity.’ ” Greenleaf v. Massachusetts Bay Transp. Authy., supra at 429–430, 494 N.E.2d 402, quoting from Kenney v. Rust, 17 Mass.App.Ct. 699, 703, 462 N.E.2d 333 (1984). To this end, a judge may not impose the sanction of default for failure to comply with a pretrial discovery order “[u]nless the inability to comply ... is the result of wilfulness, bad faith, or fault.” Keene v. Brigham & Women's Hosp., Inc., supra at 18, 775 N.E.2d 725.

In the present case, the defendants' actions provide a proper basis for the imposition of a default judgment. Over the course of eighteen months, they extended the discovery period while simultaneously and repeatedly denying the existence of any relevant and responsive documents.⁵ The judge's initial order of October 26, 2007, denied Short's request for a default judgment but also put the defendants on notice that any subsequent objections to production, including work product and attorney-client privilege, were deemed waived. The judge also denied Short's second request for a default judgment. However, he noted that future evidence of the existence of relevant documents that should have been produced by the defendants, their insurer, or their agent in response to existing subpoenas would result in his revisiting Short's request and would expose the defendants to sanctions. ⁶ Short's eventual depositions of Chubb employees—conducted more than fourteen months after his initial request for production—revealed that the defendants had withheld, and were continuing to withhold, relevant documents (including correspondence between insurer and insured), ostensibly relying on privileges deemed waived by the judge in light of prior discovery violations.

As the defendants contend, a lesser sanction could have been devised; however, it is not our province to substitute our judgment for that of the judge. See Keene v. Brigham & Women's Hosp., Inc., supra at 17, 775 N.E.2d 725. In light of defendants' disregard for the court's order, conduct which the judge rightly found to be “knowing and intentional,” we conclude that the imposition of a default judgment was within the broad range of the judge's discretion.⁷

B. Governing law. 1. Waiver. We must next determine whether the defendants' remedial claims are governed by State law or Federal admiralty law. The plaintiff, citing Clamp–All Corp. v. Foresta, 53 Mass.App.Ct. 795, 763 N.E.2d 60 (2002), argues that the defendants are precluded from asserting on appeal the applicability of admiralty law, raised as an affirmative defense below, in light of the entry of a default judgment against them. We disagree.

“Where Congress has chosen to foreclose non-Federal regulation in a given area, the supremacy clause in art. 6 of the Constitution of the United States prohibits a State from applying its own law to that exclusively Federal...