The opinion
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
LIBERTY INSURANCE UNDERWRITERS, )
INC., )
)
Plaintiff, )
)
v. ) 1:16CV1377
)
BEAUFURN, LLC, )
)
Defendant. )
MEMORANDUM OPINION AND ORDER
This case comes before the Court on the “Motion to Compel
Production of Documents” (Docket Entry 90) (the “First Motion”) by
Beaufurn, LLC (the “Defendant”) and “Defendant’s Motion to Conduct
In Camera Review, Compel Deposition Testimony, and Exclude Evidence
of Damages” (Docket Entry 110) (the “Second Motion”). For the
following reasons, the Court will grant the Second Motion in part,
deny the Second Motion in part as moot, and deny the First Motion
as moot.1
1 The undersigned United States Magistrate Judge enters an
order rather than a recommendation because “motions to compel
discovery” under the Federal Rules of Civil Procedure constitute
“[n]ondispositive matters [which] may be referred to a magistrate
judge [for rulings] without the parties’ consent,” Mvuri v.
American Airlines, Inc., 776 F. App’x 810, 810-11 (4th Cir. 2019)
(citing Fed. R. Civ. P. 72(a)), cert. denied, ___ U.S. ___, 140 S.
Ct. 1227 (2020). Similarly, as a general proposition, “[an] order
disposing of [a] Rule 37 motion for sanctions is undoubtedly a
nondispositive matter [for purposes of] Rule 72.” Kebe ex rel.
K.J. v. Brown, 91 F. App’x 823, 827 (4th Cir. 2004).
BACKGROUND
The instant dispute arose when Defendant, during discovery,
attempted to obtain documents and information from Liberty
Insurance Underwriters Inc. (the “Plaintiff”), in connection with
Plaintiff’s contractual and equitable-subrogation claims against
Defendant. By way of brief summary, Defendant sold chairs to the
Cheesecake Factory (“TCF”), and Janet Kinzler (“Kinzler”), a TCF
patron, sustained injuries when she fell from one such chair.
(Docket Entry 52 (the “Operative Complaint”), ¶ 11.) Kinzler sued
TCF for negligence (id., ¶ 18), and TCF and Plaintiff, TCF’s
insurer, (as well as another insurer not a party here) ultimately
settled with Kinzler (id., ¶¶ 28–29). In this action, Plaintiff
has sought to recover from Defendant (i) the expenses Plaintiff
incurred by defending TCF in Kinzler’s suit and (ii) the portion of
Kinzler’s settlement that Plaintiff paid on TCF’s behalf. (See
id., ¶¶ 38–41 (contractual indemnity for defense expenses),
¶¶ 42–45 (contractual indemnity for settlement), ¶¶ 46–49
(equitable contribution), ¶¶ 83–88 (breach of contract for defense
expenses), ¶¶ 89–91 (breach of contract for settlement).)2
2 After the parties filed cross-motions for summary judgment,
the Court (per United States District Judge William L. Osteen, Jr.)
denied in part and granted in part both motions. In particular,
Judge Osteen concluded that TCF included with certain purchase
orders “Terms and Conditions” that “required [Defendant] to carry
commercial general liability insurance of a specified amount and
type and to indemnify . . . TCF, for damage ‘arising out of, or in
connection with the use of any Product provided by [Defendant].’”
(continued...)
2
The First Motion challenges Plaintiff’s invocation of
attorney-client privilege and the work-product doctrine in response
to several of Defendant’s requests for production of documents
(“Document Requests”). (See Docket Entry 90, II 4-7; see also
Docket Entries 90-1 (copy of Defendant’s second set of Document
Reguests), 90-2 (copy of Plaintiff’s responses to second set of
Document Requests), 90-3 (privilege log), 92 (supporting
memorandum).) More specifically, Defendant has asserted that its
defense against Plaintiff’s equitable-subrogation claim
necessitates the production of materials that Plaintiff has refused
to provide. (See Docket Entry 92 at 4-5.) In that regard,
Defendant has argued that the protections of the attorney-client
privilege and work-product doctrine remain subject to waiver, given
2(...continued)
(Docket Entry 76 at 4 n.1 (quoting Docket Entry 52-8 (TCF Purchase
Order No. 5616 dated Dec. 3, Z2007)).) However, such
interpretation only applied to purchase orders that TCF sent
Defendant on or before January 15, 2007. (Id. at 24-25 (granting
Plaintiff summary judgment insofar as “the terms and conditions
attached to TCF’s purchase orders controlled the contracts between
TCF and [Defendant]”).) After that date, Defendant used a
“signature sheet [that] made acceptance of TCF’s offers expressly
conditional on TCF’s assent to new terms.” (Id. at 25.) Because
TCF never provided such assent, “no contract was formed until
performance” (id.), and only price and quantity, the “terms on
which the parties had expressly agreed” (id.) governed contracts
after January 15, 2007. (See id. at 25-29 (granting Defendant
“summary judgment for any claims premised upon a breach of
[conflicting insurance and indemnification] provisions”).) Judge
Osteen further clarified that, despite the fact that the Operative
Complaint alleges “equitable contribution” (Docket Entry 52,
Wi 46-49), “Plaintiff intended to bring an equitable[-]subrogation
claim against [Defendant]” (Docket Entry 76 at 33).
that the Document Requests pertain to the reasonableness of the
settlement in the Kinzler suit and whether, as a matter of equity,
Plaintiff may recover that amount from Defendant. (See id. at
5–12.) The parties failed to resolve their dispute by means of a
telephonic “meet and confer” conference on November 5, 2020.
(Docket Entry 90, ¶ 8.) Accordingly, Defendant has
“request[ed] . . . an Order requiring [Plaintiff] to fully respond
to all [Document R]equests . . . regarding settlement, settlement
strategy, legal strategy, and punitive damages from the underlying
suit.” (Docket Entry 92 at 12.)
In response, Plaintiff has contended that the Court should
deny the First Motion because (i) Defendant “fail[ed] to identify
the specific discovery responses and documents at issue” (Docket
Entry 93 at 7 (standard capitalization applied)), (ii) Defendant
sought relief in an untimely manner (id. at 9–11), and
(iii) “Plaintiff provided full and complete responses to [the
relevant Document Requests]” (id. at 12 (standard capitalization
applied)). In doing so, Plaintiff stated:
[T]he crux of Plaintiff’s equitable[-]subrogation claim,
as is relevant here, is that [Defendant] contributed to
the harm suffered by [] Kinzler as a joint tortfeasor
under an equitable[-]indemnification theory. Under this
theory of liability, the “claimed loss” sought to be
shifted from [Plaintiff] to [Defendant] will be
commensurate with the percentage of fault that is
allocated to [Defendant]. This could, but may not
necessarily be, the entire amount Plaintiff paid in
settlement of the Underlying Action. If [Defendant] is
determined to be a joint tortfeasor, no significant
amount of proof will be required to demonstrate that
4
[Defendant] is primarily liable and that justice requires
that its percentage of the amount Plaintiff paid in
settlement should be entirely shifted from Plaintiff to
[Defendant] as it will have been adjudicated to be at
fault.
(Id. at 16–17.) Defendant replied. (See Docket Entry 96.)
The Court (per the undersigned United States Magistrate Judge)
set a hearing on the First Motion for January 27, 2021 (Text Order
dated Jan. 19, 2021), and directed Plaintiff to file a copy of its
initial disclosures (and any supplementation) in advance of that
hearing (Text Order dated Jan. 26, 2021). Plaintiff complied.
(See Docket Entry 102.) As to damages, Plaintiff’s initial
disclosure states as follows: “Plaintiff alleges damages of
$3,803,123.34. [] Kinzler’s claims were settled for the sum of
$4,375,000, of which Plaintiff paid the sum of $3,558,284.39.
Plaintiff paid defense costs of $244,838.95. Pre- and post-
judgment interest at the rate of 10% per annum.” (Id. at 12.)3
During the hearing, the undersigned addressed the scope of the
First Motion, explaining that Defendant appeared to have sought
relief with respect to two different sets of Document Requests:
Document Requests 45, 46, 50, 52, 53, and 54 (from the second set)
as well as Document Request 57 (from the third set). (See Minute
3 In other words, Plaintiff asserted that Defendant should
bear 100 percent of the settlement and defense costs that Plaintiff
incurred in connection with Kinzler’s claims.
5
Entry dated Jan. 27, 2021.)4 Defendant agreed, clarifying that the
Document Requests at issue relate to three aspects of the
underlying litigation: the decision not to involve Defendant in the
Kinzler suit, the decision to have TCF accept liability in that
suit, and the effect of Kinzler’s proposed amended complaint,
including a punitive-damages claim, on the settlement. (See id.)
Thereafter, the undersigned questioned the parties about
Document Request 57, which asks for “[t]he invoices and bills
submitted to [Plaintiff] by the attorneys representing and
defending TCF in the [Kinzler] lawsuit” (Docket Entry 93-1 at 93).
(See Minute Entry dated Jan. 27, 2021.) Plaintiff had objected to
that request on the basis of “the attorney-client privilege, work[-
]product doctrine and/or mediation privileges” and stated that
“[a]ll potentially responsive documents that are subject to such
privileges were listed on Plaintiff’s previously produced
[p]rivilege [l]og.” (Docket Entry 93-1 at 93.) During the
hearing, Defendant acknowledged that it had received some invoices
and bills and represented that, except for Plaintiff’s privilege-
based objections, it lacked any grounds to believe that Plaintiff
had withheld responsive documents. (See Minute Entry dated Jan.
4 The Clerk’s Office audio-recorded the hearing. (See Minute
Entry dated Jan. 27, 2021.) In preparing this Memorandum Opinion,
the undersigned used that recording to confirm exactly what
transpired, including (in some instances) by writing down verbatim
quotations. The description that follows above includes some such
quotations in order to provide as full a picture as possible
without delaying matters to obtain a transcript.
6
27, 2021.) The undersigned orally granted the First Motion in
part, directing Plaintiff to review the privilege log to determine
the existence of documents responsive to Document Request 57. (See
id.) The undersigned further ordered Plaintiff, by February 2,
2021, either to (i) revise its response to Request 57 if it
identified no such documents, or (ii) indicate which privilege log
documents Plaintiff had withheld as concerns Document Request 57.
(See id.) The undersigned directed Defendant, by February 5, 2021,
to file a notice stating whether Defendant continued to seek relief
as to Document Request 57. (See id.)?
Next, the undersigned turned to Document Request 54, which
covers “[a]l1l documents and things regarding, addressing, and/or
discussing why [Plaintiff] is taking a position in the present
lawsuit inconsistent with the... position that it took, or which
the attorneys it hired to represent TCF took and with which
[Plaintiff] agreed, in the [Kinzler] lawsuit” (Docket Entry 90-1 at
9). (See Minute Entry dated Jan. 27, 2021.) Defendant conceded
the overbreadth of Document Request 54 as drafted and explained
that Defendant sought documents concerning why TCF accepted
liability despite its position in the Kinzler suit that neither the
premises nor the chairs qualified as unsafe. (See id.) After
Defendant acknowledged that other Document Requests (particularly
5 The record does not demonstrate the parties’ compliance
with the foregoing orders. (See Docket Entries dated Jan. 27,
2021, to present (lacking any notice filed by Defendant) .)
Document Requests 45 and 53, and perhaps 46) cover that same topic,
the undersigned denied the First Motion as to Document Request 54.
(See id.)
Having identified and narrowed the Document Requests at issue,
the undersigned took up the parties’ arguments in connection with
the First Motion. In particular, the undersigned noted that
Defendant had failed to sufficiently develop its contention that
“[c]orrespondence and communications in the [Kinzler suit] between
TCF and its counsel are not protected by any attorney-client
privilege [Plaintiff] may assert” (Docket Entry 92 at 4) and thus
declined to grant Defendant relief on that ground (see Minute Entry
dated Jan. 27, 2021). As concerns Plaintiff’s arguments, the
undersigned concluded that (i) the meet-and-confer had clarified
the scope of the First Motion, (ii) the privilege log fails to
identify which documents, if any, pertain to which Document
Requests, and (iii) Defendant justifiably had waited to pursue the
First Motion in light of the parties’ agreement to stay discovery
pending resolution of other issues in the case. (See id.) The
undersigned thus elected not to deny the First Motion on any of
Plaintiff’s proffered bases. (See id.) The pertinent question
then became whether the privilege log identifies documents
responsive to Document Requests 45, 46, 50, 52, and 53, as to which
no privilege (or work-product protection) applies. (See id.)
8
After inquiring of Defendant about its positions concerning
the applicability of the attorney-client privilege and the work-
product doctrine, the undersigned questioned Plaintiff about
(i) how Plaintiff intended to preserve the attorney-client
privilege and work-product protection given its inclusion on the
witness list of attorneys involved in the Kinzler suit, and
(ii) why Plaintiff need not disclose its rationale for contending
(as it did in its initial disclosure) that Defendant bears full
responsibility for the entire amount of the Kinzler settlement paid
by Plaintiff. (See id.) On the former subject, Plaintiff
eventually expressed its willingness to remove all attorneys from
its witness list. (See id.) The undersigned ordered Plaintiff to
supplement its initial disclosures consistent with that
stipulation. (See id.)
As far as its damages computation, Plaintiff asserted that
documents relating to its rationale qualify as work product and
that conversations with counsel about such rationale fall within
the scope of the attorney-client privilege. (See id.) However,
Plaintiff declined to explain (in response to repeated questioning
from the undersigned) why Plaintiff need not disclose its basis for
contending Defendant must bear the entire loss (i.e., the full
settlement amount paid by Plaintiff), despite apparently
acknowledging that Defendant merely “contributed” to the loss via
the sale of an allegedly defective chair. (See id.)
9
Following the foregoing exchange, the undersigned stated that
“[Plaintiff wa]s frustrating the discovery process by refusing to
provide information about how and why 100 percent of the settlement
costs should be shifted, as a matter of equitable subrogation, to
[Defendant]” (id.). In that regard, the undersigned stated that
Plaintiff had (i) lodged unsustainable objections during a
deposition pursuant to Federal Rule of Civil Procedure 30(b)(6)
(“Rule 30(b)(6)”), and (ii) provided an inadequate damages
computation in its initial disclosures. (See id.) As to the
latter point, the undersigned quoted from Plaintiff’s initial
disclosures, noting the lack of “any analysis of what facts support
[Plaintiff’s] computation of damages” (id.). To correct those
deficiencies, the undersigned ordered the parties to take the
following “interim steps” (as a precursor to any in camera
inspection of the documents in the privilege log or other relief
Defendant had requested):
(1) “[Plaintiff must] provid[e] a proper disclosure as to the
computation of damages as required by [Federal] Rule [of Civil
Procedure] 26” (“Rule 26”) (id.);
(2) “[Plaintiff must] prepare a new privilege log that
addresses specifically which documents . . . in the [existing]
privilege log . . . are responsive to [Document Requests 45, 46,
50, 52, and 53]” (id. (referring to Docket Entry 90-3)); and
10
(3) “[Defendant may] draft five contention interrogatories
that [Plaintiff] will have to answer” (id.).
The undersigned instructed that Plaintiff’s supplemental
damages computation must explain the basis for the percentage of
settlement costs that, in Plaintiff’s view, Defendant must bear and
that the contention interrogatories should elicit from Plaintiff
“its contentions,” as well as “the factual bases supporting those
contentions” (id.). Underscoring the need for Plaintiff to
“provide a legitimate computation of damages which includes
analysis of how the relevant facts lead to that dollar figure” and
“give legitimate answers to reasonable contention interrogatories,”
the undersigned described possible consequences if Plaintiff failed
to comply, to include “production of documents that are on the
privilege log and . . . a further Rule 30(b)(6) deposition.” (Id.)
The hearing concluded with the undersigned imposing a deadline of
February 5, 2021, for (i) an updated privilege log,
(ii) Plaintiff’s responses to Defendant’s contention
interrogatories, and (iii) Plaintiff’s supplemental initial
disclosures. (See id.) Additionally, the undersigned directed the
parties, by February 8, 2021, “to file a joint status
report . . . identifying any outstanding disputed issues and any
requests they have for a remedy as to those disputes” (id.).
Consistent with the foregoing orders, the parties timely filed
a joint status report (Docket Entry 104) (the “Report”), attaching
11
as exhibits a copy of Defendant’s contention interrogatories with
Plaintiff’s responses (Docket Entry 104-1), updated privilege logs
(Docket Entries 104-2, 104-3), and a copy of Plaintiff’s
supplemental initial disclosures (Docket Entry 104-4). The Report
indicates that the parties “held a telephone conference on February
8, 2021 to discuss th[e] Report and the documents served by
[Plaintiff]” (Docket Entry 104, ¶ 6). “During th[at] discussion,
each party had the opportunity to discuss the appropriateness of
[Plaintiff]’s responses, and the parties could not reach agreement
as to (a) whether the responses were sufficient and appropriate,
(b) whether the responses accorded with the Order of [the
undersigned] . . ., and (c) whether [Plaintiff]’s responses warrant
further involvement from the Court.” (Id., ¶ 7.)
In particular, Defendant asserted that Plaintiff had failed to
“comply with the Court’s orders to respond in good faith” in
answering Defendant’s contention interrogatories and supplementing
the damages computation in its initial disclosures. (Id., ¶ 8.)
Defendant further expressed its “plan[] to request [that] the Court
conduct an in camera review of the responsive documents identified
on [Plaintiff]’s updated privilege log, . . . review [Plaintiff]’s
responses to [Defendant’s] ‘contention interrogatories’ and updated
initial disclosures for appropriateness and sufficiency,
and . . . order a new [Rule] 30(b)(6) deposition of [Plaintiff].”
(Id.) For its part, Plaintiff stated that it had responded
12
appropriately, “contend[ed] that the issue for the Court to
determine is whether [Plaintiff] has waived the attorney-client
privilege and work[-]product protections under the circumstances of
this case,” and maintained that no such waiver had occurred. (Id.,
¶ 9.)
Thereafter, the parties jointly moved to continue the then-
scheduled April 2021 trial (Docket Entry 107, ¶ 1), indicating that
discovery issues remained unresolved (id., ¶¶ 4–7) and expressing
uncertainty about “whether Defendant need[ed] to file a new Motion
to Compel in connection with the Report and the [above-referenced]
dispute[s]” (id., ¶ 7). The undersigned issued a Text Order
(i) noting that Defendant had failed to seek additional relief
despite having stated in the Report its “plan” to do so, and
(ii) establishing a briefing schedule for “any motion regarding
matters addressed in [the] Report.” (Text Order dated Mar. 2,
2021.) Defendant timely filed the Second Motion, which asks
th[e] Court (1) to conduct an in camera review of
responsive but allegedly privileged documents from
Plaintiff, . . . (2) to order production of those same
documents if relevant and appropriate, (3) to order an
additional Rule 30(b)(6) deposition . . . [during which
Plaintiff] is prohibited from instructing its witness not
to answer certain questions, and (4) to exclude evidence
of damages from admission at trial.
(Docket Entry 110 at 1; see also Docket Entry 111 (supporting
memorandum).) Plaintiff responded in opposition (Docket Entry
114), and Defendant replied (Docket Entry 115).
13
DISCUSSION
I. Relevant Standards
A. Computation of Damages
Rule 26 requires that litigants provide initial disclosures to
one another, to include “a computation of each category of damages
claimed by the disclosing party — who must also make available for
inspection and copying as under [Federal] Rule [of Civil Procedure]
34 the documents or other evidentiary material, unless privileged
or protected from disclosure, on which each computation is based,
including materials bearing on the nature and extent of injuries
suffered . . . .” Fed. R. Civ. P. 26(a)(1)(A)(iii); see also
Majdalani v. Legacy Bank, No. 06–1317, 2007 WL 2694043, at *2 (D.
Kan. Sept. 11, 2007) (unpublished) (“The [initial disclosure] shall
include specific dollar amounts and the computations supporting the
amounts requested.”). Although Rule 26 does not define
“computation,” it nonetheless “contemplates some analysis,” City &
Cnty. of San Francisco v. Tutor-Saliba Corp., 218 F.R.D. 219, 221
(N.D. Cal. 2003). In that regard, “courts . . . require more than
a mere dollar amount to satisfy the computation requirement.”
Companion Prop. & Cas. Ins. Co. v. U.S. Bank Nat’l Ass’n, No.
3:15-cv-1300, 2016 WL 3452734, at *1 (D.S.C. June 24, 2016)
(unpublished). “Put summarily, [ P]laintiff needs to provide
[ D]efendant[] with an initial estimate as to [Plaintiff’s] claimed
damages and at least some analysis of how the relevant facts lead
14
to that dollar figure.” Pressman v. Publix Super Mkts., Inc., No.
06-61350-CIV, 2007 WL 9700541, at *1 (M.D. Fla. May 3, 2007)
(unpublished) (internal quotation marks omitted).
B. Sanctions
Federal Rule of Civil Procedure 37 (“Rule 37”) authorizes the
Court to sanction a party for failing to comply with a discovery
order. See Fed. R. Civ. P. 37(b)(2)(A) (“If a party . . . fails to
obey an order to provide or permit discovery, . . . the court where
the action is pending may issue further just orders.”).
“[Although] sanctions imposed pursuant to Rule 37(b) must be in
response to a failure to comply with a court order, such order may
be oral and need not be in writing.” Snead v. Automation Indus.,
Inc., 102 F.R.D. 823, 828–29 (D. Md. 1984).
Appropriate sanctions for violation of a discovery order may
include
(i) directing that the matters embraced in the order or
other designated facts be taken as established for
purposes of the action, as the prevailing party claims;
(ii) prohibiting the disobedient party from supporting or
opposing designated claims or defenses, or from
introducing designated matters in evidence;
(iii) striking pleadings in whole or in part;
(iv) staying further proceedings until the order is
obeyed;
(v) dismissing the action or proceeding in whole or in
part;
(vi) rendering a default judgment against the disobedient
party; or
(vii) treating as contempt of court the failure to obey
any order . . . .
15
Fed. R. Civ. P. 37(b)(2)(A)(i)–(vii) (emphasis added); see also
Fed. R. Civ. P. 37(b)(2)(C) (“Instead of or in addition to the
orders [listed in Rule 37(b)(2)(A)], the court must order the
disobedient party, the attorney advising that party, or both to pay
the reasonable expenses, including attorney’s fees, caused by the
failure, unless the failure was substantially justified or other
circumstances make an award of expenses unjust.”). In deciding
what Rule 37 sanctions to impose, “[t]he [C]ourt must determine
(1) whether the non-complying party acted in bad faith, (2) the
amount of prejudice that noncompliance caused the adversary,
(3) the need for deterrence of the particular sort of
non-compliance, and (4) whether less drastic sanctions would have
been effective.” Anderson v. Foundation for Advancement, 155 F.3d
500, 504 (4th Cir. 1998).
II. Analysis
On February 8, 2021, Plaintiff supplemented the damages
computation in its initial disclosures as follows:
[] Kinzler’s claims were settled for the sum of
$4,375,000, of which Plaintiff paid the sum of
$3,558,284.39.
1. Damages Based on [Defendant]’s Breach of its
Contractual Obligations to Name TCF as an Additional
Insured
[Defendant] breached its contractual obligation to
name . . . TCF . . . as an additional insured on a
liability insurance policy that was required to be
primary and not contributory to TCF’s insurance pursuant
to the parties’ contract created by TCF’s purchase orders
dated January 15, 2007 and earlier. Such coverage was to
16
be in the amount of $2,000,000 per occurrence and was not
to “be cancelable or amended by [Defendant] except upon
thirty (30) days written notice to” TCF by [Defendant]’s
insurer. [Defendant]’s primary liability policy in place
at the time of [] Kinzler’s claim had per occurrence
limits of $1,000,000 and its excess policy had limits of
$4,000,000 per occurrence. Both policies were written by
Cincinnati Insurance Company. [] Kinzler’s case was
resolved for a total of $4,375,000. Of that amount, TCF
paid $316,715.51, [another non-party insurer] paid
$500,000 and [Plaintiff] paid $3,558,284.39.
[Plaintiff]’s post-tender defense costs were $61,554.56.
Had [Defendant] named TCF as an additional insured on its
policy, Plaintiff would have had no indemnity obligation
in the Kinzler matter as the majority of the loss would
have been the obligation of Cincinnati. Accordingly,
Plaintiff’s damages as the result of [Defendant]’s
failure to name TCF as an additional insured were
$3,619,838.95.
In the alternative, if the Court determines that
[Plaintiff]’s damages are limited to [Defendant]’s
contractual obligation to name TCF on a policy of
insurance in the amount of $2,000,000, then the following
damages are claimed. Subsequent to exhaustion of the
$2,000,000 limits, a total of $2,375,000 would have
remained for satisfaction by TCF’s self-insured retention
of $500,000, [the non-party insurer]’s excess policy of
$500,000 and [Plaintiff’s] umbrella policy.
[Plaintiff]’s indemnity obligation would have been
$1,375,000 and thus, its damages with regard to indemnity
were $2,183,284.39 ($3,558,284.39-$1,375,000).
[Plaintiff] also would not have been required to pay
defense costs in the underlying action which totaled
$61,554.56 for total damages of $2,244,838.95.
2. Damages Based on [Defendant]’s Role as a Joint
Tortfeasor
In the alternative, [Plaintiff] seeks damages
commensurate with [Defendant]’s share of liability for []
Kinzler’s economic damages up to a maximum of the
$3,558,284.39 it contributed to the settlement and based
on amounts and allocations to be determined at trial. In
the underlying litigation, [] Kinzler claimed that her
economic losses were $4,036,040.76 broken down as
follows: past and future loss of income $734,434; medical
expenses not paid by workers’ compensation $209,521.48;
17
workers’ compensation lien $119,982.44; out of pocket
expenses $25,921.44; and future costs of health care
$2,946,181.40. For purposes of illustration only, if []
Kinzler’s economic damages are found to have been
$3,000,000 and [Defendant] is found 60% liable for []
Kinzler’s injuries, then [Plaintiff] seeks damages in the
amount of $1,800,000.
Pre- and post- judgment interest at the rate of 10% per
annum.
(Docket Entry 104-4 at 6–8.)
Via the Second Motion, Defendant has challenged the adequacy
of the damages computation in Plaintiff’s supplemental disclosures,
asserting in pertinent part that
[Plaintiff]’s second method of calculating damages
provides no additional information in response to [the
undersigned]’s order. [Plaintiff] avoids specifying the
amount of damages beyond “damages commensurate with
[Defendant]’s share of liability” for [] Kinzler’s
damages. [Plaintiff] attempts to dress up its vague
damages claim by breaking the total amount sought into
its various components, but [Plaintiff] makes no attempt
to address the question [the undersigned] asked of it
during the [January] hearing; namely, what percentage of
fault is [Plaintiff] asserting is attributable to
[Defendant]. As such, [Defendant] moves the Court to
order [Plaintiff] to provide a more specific statement of
damages sought. In the alternative, and as a result of
[Plaintiff]’s failure to comply with [the undersigned]’s
order and repeated failure to disclose the information,
[Defendant] moves the Court to exclude any evidence as to
damages in this action.
(Docket Entry 111 at 3 (internal citations omitted) (quoting Docket
Entry 104-4 at 7).)
In response, Plaintiff has argued that the Court should
decline to consider the Second Motion because Defendant failed to
“certify it arranged the required conference with Plaintiff”
18
(Docket Entry 114 at 5), as mandated by Local Rule, see M.D.N.C. LR
37.1(a) (requiring movant who seeks discovery-related relief to
file certificate attesting to “personal consultation and diligent
attempts to resolve differences”). On the merits, Plaintiff has
contended that the damages computation in its supplemental initial
disclosure complies “with the Court’s instruction” (Docket Entry
114 at 7 (emphasis added)) and Rule 26. (See id. at 6–8.) As
concerns “Defendant’s alternatively requested evidentiary
sanctions” (id. at 8), i.e., the exclusion of Plaintiff’s evidence
on damages, Plaintiff has maintained that “the Court has not
previously issued an order holding that Plaintiff’s revised damages
computation is deficient” (id.), such that Defendant may not seek
sanctions under Rule 37(b)(2)(A). Defendant replied, addressing
only the first of Plaintiff’s arguments by explaining that the
parties conferred telephonically on February 8, 2021, before the
filing of the Report and the Second Motion. (See Docket Entry 115
at 1–3.)
Because Plaintiff’s joint-tortfeasor damages computation does
not comply with the undersigned’s oral order, Rule 37(b)(2)(A)
authorizes sanctions. In that regard, more than once during the
hearing, the undersigned characterized the damages computation in
Plaintiff’s initial disclosures as inadequate. (See Minute Entry
dated. Jan. 27, 2021.) As a result, the undersigned orally ordered
Plaintiff to revise its initial disclosures by, inter alia,
19
explaining the basis for apportioning fault (and some percentage of
the settlement costs) to Defendant and “provid[ing] .. . analysis
of how the relevant facts lead to that dollar figure” (id.).
Notwithstanding Plaintiff’s contrary argument (see Docket Entry 114
at 8), noncompliance with the foregoing directive may result in
sanctions under Rule 37(b) (2) (A), regardless of whether the Court
issued a written order memorializing its instructions. See Snead,
102 F.R.D. at 828-29. Indeed, the parties properly recognized such
instructions as “order[s]” in submitting the Report. (See Docket
Entry 104, 3 (“As ordered by [the undersigned], [Plaintiff]
served . . . revised initial disclosures[] on [Defendant] via
e-mail on February 5, 2021.” (emphasis added)).)
With respect to Plaintiff’s second theory of damages (“based
on [Defendant]’s role as a joint tortfeasor” (Docket Entry 104-4 at
7 (standard capitalization applied))), Plaintiff’s supplementation
falls short because it neither (i) identifies the portion of the
settlement costs that Plaintiff contends Defendant must bear
(whether 100 percent or something less), nor (ii) explains the
factual basis for apportioning any particular percentage of fault
to Defendant, for purposes of Plaintiff’s equitable-subrogation
claim. (See id. at 7-8.) Instead, the supplemental damages
computation merely relates the total settlement amount, as well as
the categories of damages that Kinzler claimed in the underlying
action (see id.), and includes an “illustration” restating that
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Plaintiff has sought to recover from Defendant a share of Kinzler’s
(undetermined) economic damages mirroring Defendant’s (unspecified)
degree of fault (see id. at 8). The vagueness of the foregoing
disclosure (to include the “illustration,” framed as a
hypothetical) contravenes the undersigned’s order to Plaintiff to
provide a concrete damages figure and some analysis in support of
that figure.
As mentioned above, Rule 37 declares that a violation of a
discovery order authorizes the Court to “prohibit[] the disobedient
party from supporting . . . designated claims,” Fed. R. Civ. P.
37(b)(2)(A)(ii), as well as “from introducing designated matters in
evidence,” id. To assess the propriety of such sanction here, the
Court has applied the relevant factors, Anderson, 155 F.3d at 504,
and concludes that (i) Plaintiff has squandered numerous
opportunities to remedy its deficient damages disclosure (thus
evidencing bad faith), (ii) such behavior has significantly
hindered Defendant’s trial preparation, (iii) the Federal Rules of
Civil Procedure do not countenance such obfuscation (which demands
deterrence), and (iv) no lesser sanction appears adequate given
that Plaintiff’s non-compliant supplemental damages computation
followed Plaintiff’s repeated refusal to answer the undersigned’s
questions on that topic (during the hearing) and subsequent
inability to resolve the issue by conferring with Defendant in
connection with the Report.
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Accordingly, because Plaintiff’s supplemental initial
disclosures offer inadequate details and analysis about the second
theory of damages therein (“based on [Defendant]’s [alleged] role
as a joint tortfeasor” (Docket Entry 104-4 at 7 (standard
capitalization applied))), the Court (per the undersigned) will
grant the Second Motion in part6 and “prohibit[ Plaintiff] from
supporting . . . [its joint-tortfeasor, equitable-subrogation]
claim[] . . . or from introducing [a theory that Defendant bears
liability for some percentage of the settlement and defense costs
paid by Plaintiff] in evidence,” Fed. R. Civ. P. 37(b)(2)(A)(ii).
Additionally, because the Court finds no substantial justification
for Plaintiff’s noncompliance and no other circumstances make an
award of expenses unjust, “the [C]ourt must order [Plaintiff], the
attorney advising [Plaintiff], or both to pay the reasonable
expenses, including attorney’s fees, caused by the failure [to
comply],” Fed. R. Civ. P. 37(b)(2)(C) (emphasis added).
6 Rule 37(b) empowers the Court to remedy violations of
discovery orders, regardless of whether a party moves for such
relief. See Fed. R. Civ. P. 37(b)(2)(A) (providing for sanctions
without requiring party to seek relief by motion); see also Fed. R.
Civ. P. 16(f)(1)(C) (describing judicial authority to sua sponte
issue Rule 37(b) sanctions for disobedience of pretrial order). As
a result, contrary to Plaintiff’s argument (see Docket Entry 114 at
4–5), the procedural impropriety of the Second Motion, if any,
poses no bar to sanctioning Plaintiff under Rule 37(b). In any
case, Defendant’s participation in the telephonic conference on
February 8, 2021, during which the parties discussed the issues
pertinent to the Second Motion (see Docket Entry 115 at 1–3),
satisfies any applicable meet-and-confer requirement. Thus, the
Court declines to deny the Second Motion on the grounds that its
filing violated Local Rule 37.1(a).
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The foregoing resolution moots the remainder of Defendant’s
requests in the Second Motion and the whole of the First Motion.
More specifically, the Second Motion asks that the Court review
privilege log documents and order another Rule 30(b)(6) deposition.
(See Docket Entry 110 at 1.) However, the documents that Plaintiff
has withheld and the questions the Rule 30(b)(6) deponent
previously declined to answer (on the instructions of counsel for
Plaintiff) both concern whether and to what extent Plaintiff may
shift the Kinzler settlement costs to Defendant by means of a
joint-tortfeasor, equitable-subrogation claim.7 The First Motion
likewise seeks documents that pertain to Plaintiff’s pursuit of an
equitable-subrogation claim based on apportionment of fault to
Defendant (see Docket Entry 92 at 5–12), which Plaintiff may not
pursue in accordance with this Order.8
7 Consistent with that understanding, Defendant has styled
the evidentiary sanction as an “alternative” request. (See Docket
Entry 111 at 6.)
8 As concerns the first (contractual) theory of damages newly
presented in Plaintiff’s supplemental initial disclosures,
Defendant has argued that “the Court [should] strike [such] method
or theory . . . and enter an Order prohibiting [Plaintiff] from
introducing any evidence regarding a purported breach of a contract
entered into in 2007” (Docket Entry 111 at 3). Because the
asserted deficiencies with the foregoing theory relate to issues
other than Plaintiff’s compliance with the undersigned’s discovery
order (subjecting Plaintiff to Rule 37(b)(2)(A) sanctions), the
Court declines to address them here. Defendant may seek separate
appropriate relief as to that aspect of Plaintiff’s supplemental
damages computation.
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CONCLUSION
Plaintiff’s damages computation in its supplemental initial
disclosures fails to comply with the undersigned’s order directing
Plaintiff to clarify its contention as to the amount of its claimed
damages for equitable subrogation premised on Defendant’s alleged
status as a joint tortfeasor and to provide some analysis to
support that contention.
IT IS THEREFORE ORDERED that the Second Motion (Docket Entry
110) is GRANTED IN PART, such that (A) Plaintiff may not pursue an
equitable-subrogation claim against Defendant based on or introduce
evidence to support a joint-tortfeasor apportionment theory (as
presented in the second part of Plaintiff’s “Computation of
Damages” (Docket Entry 104-4 at 7–8)), and (B) must pay Defendant’s
reasonable expenses, including attorney’s fees, caused by
Plaintiff’s failure to comply with the Court’s order requiring
Defendant to properly supplement its initial disclosure regarding
its damages computation, and DENIED IN PART AS MOOT, as to the
remaining requests for relief therein.
IT IS FURTHER ORDERED that the First Motion (Docket Entry 90)
is DENIED AS MOOT.
IT IS FURTHER ORDERED that, on or before June 1, 2021,
Defendant shall serve Plaintiff with a statement of the reasonable
expenses, including attorney’s fees, caused by Plaintiff’s failure
to comply with the Court’s prior order requiring Plaintiff to
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properly supplement its initial disclosure regarding its damages
computation. Failure by Defendant to comply with this order shall
result in the denial of any expense-shifting.
IT IS FURTHER ORDERED that, on or before June 15, 2021,
Plaintiff shall file EITHER (A) a notice agreeing to pay the
expenses claimed by Defendant in the statement served on Plaintiff,
OR (B) a memorandum of no more than five pages contesting the
reasonableness of the amount of expenses claimed by Defendant,
along with a certification that counsel for Plaintiff, on or before
June 8, 2021, served a written summary of any objections to the
reasonableness of the expenses claimed by Defendant on counsel for
Defendant and that counsel for Plaintiff thereafter consulted in
good faith with counsel for Defendant via telephone or in-person
about those objections but the parties failed to reach agreement
about the amount of Defendant’s reasonable expenses. Failure by
Plaintiff to comply with this order shall result in the awarding to
Defendant of the expenses claimed in the statement served on
Plaintiff, upon Defendant’s filing of that statement with the
Court.
IT IS FURTHER ORDERED that, on or before June 22, 2021,
Defendant shall file any response of no more than five pages to any
memorandum timely filed by Plaintiff. Failure by Defendant to
comply with this order shall result in the denial of an award of
any expenses contested by Plaintiff in its memorandum.
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IT IS FURTHER ORDERED that, on or before June 29, 2021,
Plaintiff may file any reply of no more than three pages to any
response timely filed by Defendant.
/s/ L. Patrick Auld
L. Patrick Auld
United States Magistrate Judge
May 25, 2021
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