The nuclear option for discovery abuse: default and counsel fees

Red Spot Paint & Varnish Co.'s home page says:

"The history of our company is filled with ups and downs and ups. Our business has, by design, depended on research and development, and with research comes failures...more often than success, usually. " June 5 was a downer.

U.S. District Judge Larry McKinney excoriated Red Spot - and its law firm Bose McKinney & Evans. BME had acted "like a chameleon", assisting an unsupportable denial that its client Red Spot had used two dangerous chemicals, failing to inventory 68 boxes of discovery materials, and failing to counsel its client to make a full disclosure.

For this the defendant/client was adjudged in default, defense experts barred from disputing causation, and liability imposed in an environmental cleanup case. For its lack of professional independence Bose McKinney was ordered to pay half of plaintiff's counsel fees and costs. The full opinion is here. The story and other blog links at ABA Journal are here. An excerpt from the order follows:

The Court concludes that Red Spot’s conduct can only be described as

contumacious, wilful, and egregious. BME compounded the problem by, like a chameleon, becoming indistinguishable from its client and allowing Red Spot, namely Storms and Henry, to evade the truth.

Through its defiant conduct, Red Spot has forfeited the right to have the issues determined on the merits. Therefore, the Court must conclude that only

the most onerous sanction, default, can remedy Red Spot’s violation of the rules of

discovery; Fed. R. Civil P. 37(b)(2)(A)(vi); 37(c)(1); or can remedy Red Spot’s complete disregard of the legal process as protected by the inherent authority of the Court. Greviskes, 417 F.3d at 758-59. The Court, therefore, GRANTS 1100 West’s Motion for Sanctions.

The Court DECLARES, pursuant to 28 U.S.C. § 2201 and 42 U.S.C. § 6972(a), and

by DEFAULT, that defendant, Red Spot Paint & Varnish Co., Inc., is liable for taking all necessary action to abate and otherwise respond to the aromatic contamination plume and the TCE/PCE contamination plume on plaintiffs’, 1100 West, LLC, property.

Plaintiff, 1100 West, LLC, shall file its proposed remedial plan on or before Tuesday, August 4, 2009. On or before Monday, October 5, 2009, defendant, Red Spot Paint & Varnish Co., Inc., shall, in writing, SHOW CAUSE why the remedial plan proposed by plaintiff, 1100 West, LLC, should not be ordered as the remedy in this cause. A Show Cause Hearing is hereby SET for Wednesday, November 4, 2009, at 8:30 a.m., in Courtroom 202, Birch Bayh Federal Building and United States Courthouse, 46 East Ohio Street, Indianapolis, Indiana.

Defendant’s, Red Spot Paint & Varnish Co., Inc., expert(s) shall only testify as to the appropriateness of the remedial plan; they shall not be allowed to testify as to causation at said hearing.

Further, 1100 West shall be entitled to its attorneys’ fees and costs for all discovery dating from May 23, 2006, to the present, including expert discovery within those dates, and for its attorneys’ fees and costs associated with the October 15 and 17, 2008, hearings, and its Motion for Sanctions. 1100 West shall file its brief in support of its accounting of reasonable attorneys’ fees and costs within thirty days of the date of this Order. Red Spot and BME shall have fifteen days to file a brief in opposition to said accounting.

Red Spot and BME shall each pay one half of said reasonable attorneys’ fees and costs as they are determined by the Court, pursuant to Federal Rule of Civil Procedure 37(b)(2)(C) and pursuant to the inherent authority of the Court.